Exhibit A-1
STOCK PURCHASE AGREEMENT
among
ALLEGHENY VENTURES, INC.,
LEASING TECHNOLOGIES INTERNATIONAL, INC.
and
THE STOCKHOLDERS OF
LEASING TECHNOLOGIES INTERNATIONAL, INC.
December __, 2000
Table of Contents
Page
1. Purchase and Sale 2
1.01 Non-Representing Stockholders 2
1.02 Representing Stockholders 2
1.03 Certain Definitions 3
1.04 Adjustments for Capital Changes 4
1.05 Fractional Shares 4
1.06 Closing 4
1.07 The Company Stock Options 5
1.08 Further Assurances 5
1.09 Escrow Fund 5
2. Right to Additional Shares as Purchase Price 6
2.01 First Additional Shares 6
2.02 Second Additional Shares 7
2.03 EBIT Calculation 7
2.04 Issuance of Parent Shares 9
3. Representations and Warranties of the Company and the
Representing Stockholders 10
3.01 Corporate Status and Authority 10
3.02 Authority; Enforceability. 10
3.03 Authorized Capital of the Company 10
3.04 Noncontravention; Consents 10
3.05 Subsidiaries 11
3.06 Material Adverse Change, Etc. 12
3.07 Compliance with Laws; Governmental
Authorizations 13
3.08 Contracts 14
3.09 Real Property. 16
3.10 Employment Agreements and Benefits, Etc. 16
3.11 Insurance 17
3.12 Intellectual Property 18
3.13 Litigation; Claims; Citations 18
3.14 Property and Assets 19
3.15 Financial Statements 19
3.16 Taxes 19
3.17 Affiliate Interests 20
3.18 Accounts Receivable; Accounts Payable 20
3.19 Books and Records 20
3.20 Bank Accounts and Safe Deposit Arrangements 20
3.21 Insider Transactions 20
3.22 Leased Systems 21
3.23 Full Disclosure 21
3.24 Takeover Statutes 21
3.25 SEC Documents 21
3.26 Brokers and Finders 21
4. Representations and Warranties of the Sellers 22
4.01 Status, Due Execution, Etc. 22
4.02 Validity 22
4.03 Title to Shares 22
4.04 Consents 22
4.05 Brokers and Finders 22
5. Representations and Warranties of the Buyer 23
5.01 Corporate Status and Authority 23
5.02 Due Execution 23
5.03 Litigation 23
5.04 Noncontravention; Consents. 23
5.05 Disclosure 24
5.06 Capitalization 24
5.07 Parent Shares 25
6. Covenants 25
6.01 Interim Operations 25
6.02 The Company Employee Matters 26
6.03 Other Obligations of the Buyer 26
6.04 Public Disclosure 26
6.05 Further Assurances 27
6.06 Registration Statement 27
6.07 Piggyback Rights 30
6.08 Indemnification 31
6.09 Registration Expenses 34
6.10 Financing 34
6.11 Satisfaction of Indebtedness 34
6.12 Right of First Offer 34
6.13 Negotiations with Other Persons 36
6.14 Takeover Statutes 36
6.15 Board of Directors 36
6.16 Stockholder Representatives 36
6.17 Sellers' Expenses 38
6.18 Real Property 38
6.19 Rule 144 38
6.20 Tax Matters 38
6.21 Representing Stockholder Matters 38
7. Conditions to Each Party's Obligations 39
7.01 Litigation 39
7.02 Escrow Agreement 39
8. Conditions to Obligations of the Sellers 39
8.01 Representations, Warranties, Covenants and
Agreement of the Buyer 39
8.02 Officer's Certificate 39
8.03 Opinion of Counsel 39
8.04 Regulatory Approval 39
8.05 Absence of Litigation 40
8.06 Absence of Material Adverse Change on Parent 40
9. Conditions to Obligations of the Buyer 40
9.01 Representations, Warranties, Covenants and
Agreements of the Company, the Representing
Stockholders and the Sellers 40
9.02 Officer's Certificate 40
9.03 Regulatory Approval 40
9.04 Consents 41
9.05 Absence of Material Change 41
9.06 Employment Agreements 41
9.07 Resignations 41
9.08 Receipt of Shares 41
9.09 Company Options 41
10. Termination of Agreement 41
10.01 Termination 41
10.02 Limitation on Right to Terminate; Effect
of Termination 42
11. Survival; Indemnification 43
11.01 Survival of Representations and Warranties 43
11.02 General Indemnity 43
11.03 Conditions of Indemnification for Third
Party Claims 44
11.04 Basket for Damages 45
11.05 Escrow Fund 45
11.06 Indemnification Procedures 45
11.07 Resolution of Conflicts; Arbitration 46
12. Miscellaneous 47
12.01 Modification; Waiver 47
12.02 Entire Agreement 47
12.03 Expenses 47
12.04 Rights and Remedies 47
12.05 Notices 47
12.06 Assignment 49
12.07 Severability 49
12.08 Counterparts; Facsimile 50
12.09 Headings 50
12.10 Governing Law; Submission to Jurisdiction;
Selection of Forum 50
12.11 Construction 50
12.12 Absence of Third-Party Beneficiary Rights 51
12.13 Effect of Schedules 51
12.14 No Joint Venture 51
13. Definitions 51
13.01 AAA 51
13.02 Affiliate 51
13.03 Average Parent Share Price 51
13.04 Balance Sheet 51
13.05 Benefit Plans 51
13.06 Business Day 51
13.07 Buyer 51
13.08 Code 51
13.09 Company 51
13.10 Company Business Plan 52
13.11 Company Options 52
13.12 Company Subsidiary 52
13.13 Contracts 52
13.14 Current Exchange Ratio 52
13.15 Deferred Exchange Ratio 52
13.16 Delay Period 52
13.17 Employee(s) 52
13.18 ERISA 52
13.19 Environmental Law 52
13.20 Escrow Agent 52
13.21 Escrow Agreement 52
13.22 Extraordinary Dividend 52
13.23 Financial Statements 52
13.24 Fiscal Year 52
13.25 GAAP 52
13.26 Governmental Entity 52
13.27 Hazardous Substance 52
13.28 HSR Act 53
13.29 Intellectual Property 53
13.30 Interim Period 53
13.31 Laws 53
13.32 Legal Requirements 53
13.33 Material Adverse Effect or Material Adverse
Change on the Company 53
13.34 Material Adverse Effect or Material Adverse
Change on Parent 53
13.35 Material Contracts 53
13.36 Non-Representing Stockholders 53
13.37 Non-Representing Stockholder Consideration 53
13.38 Parent 53
13.39 Parent Shares 53
13.40 Parties 54
13.41 Permits 54
13.42 Person 54
13.43 Piggyback Registration 54
13.44 Prospectus 54
13.45 Registration Statement 54
13.46 Representing Stockholders 54
13.47 Representing Stockholder Consideration 54
13.48 SEC 54
13.49 Securities Act 54
13.50 Sellers 54
13.51 Shares 54
13.52 Stockholder Representatives 54
13.53 Subsidiary 54
13.54 Switchover Event 54
13.55 Takeover Statute 55
13.56 Taxes 55
13.57 Tax Returns 55
STOCK PURCHASE AGREEMENT
AMONG
ALLEGHENY VENTURES, INC.,
LEASING TECHNOLOGIES INTERNATIONAL, INC.
AND
THE STOCKHOLDERS OF
LEASING TECHNOLOGIES INTERNATIONAL, INC.
_______________________
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made
this ___ day of December 2000, among Allegheny Ventures, Inc.,
a Delaware corporation ("Buyer"), Leasing Technologies
International, Inc., a Delaware corporation (the "Company"),
and the stockholders of the Company who execute counterparts of
this Agreement (such persons listed on Exhibit A being
hereinafter referred to as the "Representing Stockholders",
such persons listed on Exhibit B being hereinafter referred to
as the "Non-Representing Stockholders", and the Representing
Stockholders and the Non-Representing Stockholders are
hereinafter referred to collectively as the "Sellers").
RECITALS
WHEREAS, the Sellers own all of the issued and outstanding
shares of common stock, par value $0.01 per share, of the
Company (the "Shares"), set forth on Exhibit A and Exhibit B;
WHEREAS, the Sellers desire to sell all of the Shares
owned by them to the Buyer;
WHEREAS, the Buyer desires to purchase all of the Shares
from the Sellers and to cause its parent, Allegheny Energy,
Inc., a Maryland corporation ("Parent"), to issue to the
Sellers a certain number of shares of Parent common stock, par
value $1.25 per share (the "Parent Shares"), on behalf of Buyer
as consideration for the Shares;
WHEREAS, notwithstanding anything to the contrary
contained herein, the purchase and sale of the Shares between
the Buyer and the Sellers subject to the terms and conditions
hereinafter set forth is intended to be treated as a non-
taxable reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, and the
rules and regulations promulgated thereunder (the "Code") for
tax purposes;
WHEREAS, as a condition to the Buyer's obligation to
acquire the Shares, the Buyer has required that: (i) any Seller
whose only affiliation with the Company is as a stockholder of
the Company be listed on Exhibit B and thereby be deemed a Non-
Representing Stockholder, (ii) all remaining stockholders of
the Company, which includes employees, members of management
and other principals of the Company, be listed on Exhibit A and
thereby be deemed Representing Stockholders and (iii) any
Optionee (as defined in Section 1.07) who exercises its Company
Options (as defined in Section 1.07) for Shares sign this
Agreement in accordance with the foregoing;
NOW THEREFORE, in consideration of the mutual promises set
forth herein, the parties agree as follows:
1. Purchase and Sale
.
1.01 Non-Representing Stockholders
. On the terms and subject to the conditions contained
herein, at the Closing, each of the Non-Representing
Stockholders agrees to sell, transfer, assign, convey and
deliver to the Buyer, and the Buyer agrees to purchase and
accept from each such Non-Representing Stockholder, the Shares
indicated as owned by it on Exhibit B (which shall include the
net exercise number of any Shares issuable upon exercise of the
Company Options pursuant to Section 1.07), and the Buyer agrees
to cause Parent to issue to each Non-Representing Stockholder
that number of Parent Shares obtained by multiplying each Share
owned by such Non-Representing Stockholder by the Current
Exchange Ratio (as defined in Section 1.03(b) below)
(collectively, the "Non-Representing Stockholder
Consideration").
1.02 Representing Stockholders.
(a) On the terms and subject to the conditions contained
herein, at the Closing, each of the Representing Stockholders
agrees to sell, transfer, assign, convey and deliver to the
Buyer, and the Buyer agrees to purchase and accept from each
such Representing Stockholder, the Shares indicated as owned by
it on Exhibit A (which shall include the net exercise number of
any Shares issuable upon exercise of the Company Options
pursuant to Section 1.07) in consideration for the sum of:
(i) that number of Parent Shares (a number of which
will be placed in escrow pursuant to Section 1.09):
(x) until a Switchover Event occurs, obtained by
multiplying such number of Shares by the Deferred Exchange
Ratio (as defined in Section 1.03(c) below) in effect on the
first, second and third anniversaries of the Closing Date, and
multiplying the result obtained times 0.3538, 0.3333 and
0.3129, respectively; and, if applicable
(y) on and after the occurrence of a Switchover
Event, either:
(A) obtained by multiplying such number of
Shares by the Deferred Exchange Ratio in effect
on the Closing Date, and multiplying the result
obtained by 0.3538, 0.3333 and 0.3129,
respectively, for any of the remaining first,
second and third anniversaries, respectively; or
(B) as equals, when combined with the aggregate
value of the Extraordinary Dividend applicable
to such Parent Shares, based on the Average
Parent Share Price and the fair market value of
the Extraordinary Dividend on any of the
remaining first, second and third anniversaries
of the Closing Date (which fair market value
shall be the Average Stock Price for any
publicly traded securities), $5,223,673.70,
$4,921,001.80, and $4,619,806.40, respectively,
for any of the remaining first, second and third
anniversaries, respectively, multiplied by a
fraction, the numerator of which shall be such
number of Shares and the denominator of which
shall be the sum of all Shares held by the
Representing Stockholders on the Closing Date
(it being understood that this Section
1.02(a)(i)(y)(B) shall in no way affect each
Representing Stockholder's entitlement to
receive and retain any payments distributable to
such Representing Stockholder as a result of its
ownership of the Parent Shares distributed to it
prior to a Switchover Event pursuant to Section
1.02(a)(i)(x) above);
(ii) the right to receive a pro rata portion of a
number of additional Parent Shares determined in accordance
with the provisions of Section 2 (collectively, the
"Representing Stockholder Consideration").
A "Switchover Event" shall be deemed to occur on the date on
which Parent declares an Extraordinary Dividend. An
"Extraordinary Dividend" is any dividend or distribution on the
Parent Shares of cash, securities or other property, other than
regular quarterly cash dividends.
(b) If a Switchover Event occurs, the Buyer shall give notice
of the declaration of the Extraordinary Dividend giving rise to
such Switchover Event to each Representing Stockholder not more
than 5 Business Days after the date on which such
Extraordinary Dividend is declared. Each Representing
Stockholder will be given a one-time opportunity to elect to
receive the number of Parent Shares obtained by either
subsection (i)(y)(A) or (i)(y)(B) of Section 1.02(a), which
election will be binding on such Representing Stockholder.
Each such Representing Stockholder shall deliver its election
notice to the Buyer and the Escrow Agent at least one Business
Day prior to the date the Extraordinary Dividend is payable.
The Escrow Agreement will provide that if a Representing
Stockholder elects to receive Parent Shares specified by
subsection (i)(y)(A), such Representing Stockholder can direct
the Escrow Agent to sell any such Parent Shares in conformity
with Rule 144 of the Securities Act in exchange for cash, which
cash will only be distributed to such Representing Stockholder
at the time the underlying Parent Shares would otherwise have
been distributed to him or her.
(c) The Buyer shall cause Parent to deposit with the Escrow
Agent referred to in Section 1.09 the full amount of the
Extraordinary Dividend applicable to the Parent Shares then
held in the escrow account.
1.03 Certain Definitions.
(a) "Average Parent Share Price" means, as of the applicable
date of determination, the average of the closing prices of
Parent Shares (in U.S. Dollars) as quoted on the New York Stock
Exchange ("NYSE") (or such other principal exchange or
quotation system on which Parent Shares are then traded or
quoted) and reported in The Wall Street Journal over the ten
trading days prior to the date that is one trading day before
the applicable date of determination.
(b) "Current Exchange Ratio" means the quotient obtained by
dividing: (i) $25,000,000 minus 43.69% of the sum of (A) the
amount advanced by the Buyer for the Sellers' expenses under
Section 6.17(a) and (B) the amount owed by the Company as
described in Section 6.17(b), by (ii) the product of (A) the
sum of the number of Shares outstanding immediately prior to
the Closing Date (which shall include any Shares issuable upon
exercise of the Company Options pursuant to Section 1.07) (the
"Outstanding Shares"), and (B) the Average Parent Share Price
on the Closing Date.
(c) "Deferred Exchange Ratio" means the quotient obtained
by dividing: (i) $26,220,000 minus 56.31% of the sum of (A) the
amount advanced by the Buyer for the Sellers' expenses under
Section 6.17(a) and (B) the amount owed by the Company as
described in Section 6.17(b), by (ii) the product of (A) the
Outstanding Shares, and (B) the Average Parent Share Price.
(d) "Average Stock Price" means, as of the applicable
date of determination, the average of the closing prices of such
security (in U.S. Dollars) as quoted on the NYSE or such other
principal exchange or quotation system on which such securities
are then traded or quoted and reported in The Wall Street
Journal over the ten trading days prior to the date that is one
trading day before the applicable date of determination.
1.04 Adjustments for Capital Changes. If, during the
Interim Period (as defined hereinafter), Parent (i) recapitalizes,
either through a split-up of its outstanding shares into a
greater number of shares or through a combination of its
outstanding shares into a lesser number of shares, (ii)
reorganizes, reclassifies or otherwise changes its
outstanding shares into the same or a different number of
shares of other classes (other than through a split-up or
combination of shares provided for in the previous clause), or
(iii) declares a dividend on its outstanding shares payable in
shares or securities convertible into shares of Parent, the
calculation of the Current Exchange Ratio and the Deferred
Exchange Ratio will be adjusted appropriately.
1.05 Fractional Shares. No fractional Parent
Shares will be issued in connection herewith, including
pursuant to any payment from the Escrow Fund or pursuant
to Section 2 but in lieu thereof, the holder of any Shares
who would otherwise be entitled to receive a fraction
of a Parent Share (after aggregating all fractional
Parent Shares that otherwise would be received by such holder)
will receive from Parent on the date the applicable Parent
Shares are distributed to such holder hereunder, an amount of
cash, without interest, equal to the Average Parent Share Price
(a) on the Closing Date with respect to Parent Shares issuable
pursuant to Section 1.01, (b) on the date used to determine the
Deferred Exchange Ratio under Section 1.02(a) with respect to
Parent Shares issuable pursuant to Section 1.02(a), or (c) on
the date of issuance with respect to Parent Shares issuable
pursuant to Sections 2.01 and 2.02, in all cases multiplied by
the fraction of a Parent Share to which such holder would
otherwise be entitled.
1.06 Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at
10:00 a.m., local time, on the last Business Day of the
month in which all of the conditions to Closing contained
in Sections 7, 8 and 9 (other than those conditions that
by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of
those conditions) have been (and continue to be) satisfied or
waived by the Party or Parties permitted to do so. The Closing
shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. The date and time at
which the Closing occurs is referred to herein as the "Closing
Date."
1.07 The Company Stock Options. The Board of
Directors of the Company shall take such
action prior to the Closing Date so that under the terms of the
Company's stock option plan, each outstanding option to
purchase Shares (the "Company Options") will become exercisable
immediately prior to the Closing Date. Assuming each such
holder exercises his or her respective Company Option using the
cashless exercise feature available thereunder, the holders of
the Company Options will receive an aggregate of 259,657 Shares
upon exercise. The Parties recognize that certain holders of
Company Options (the "Optionees") do not currently own any
Shares and have therefore not executed this Agreement. If and
when any such Optionee exercises his or her Company Option, the
Company will require as a condition to issuing such Optionee
any Shares in respect thereof, that such Optionee execute and
become a party to this Agreement as either a Representing
Stockholder or a Non-Representing Stockholder in accordance
with the descriptions set forth in the Recitals to this
Agreement and the placement of his or her name on Exhibit A or
Exhibit B, as applicable. The Sellers acknowledge that any
options accelerated and exercised pursuant to this Section 1.07
shall not increase the numerator contained in the definition of
Current Exchange Ratio or Deferred Exchange Ratio.
1.08 Further Assurances. The Sellers
agree that if, at any time after the Closing Date,
the Buyer reasonably considers or is reasonably
advised that any further deeds, assignments or assurances are
necessary or desirable to vest, perfect, confirm or continue in
the Buyer title to the Shares as provided herein, the Buyer and
any of its officers are hereby authorized by the Sellers to
execute and deliver all such proper deeds, assignments and
assurances and do all other things necessary or desirable to
vest, perfect, confirm or continue title to the Shares in the
Buyer, and otherwise to carry out the purposes of this
Agreement, in the name of the Sellers or otherwise.
1.09 Escrow Fund. (a) At the Closing
the Buyer shall cause Parent to deliver to Mellon
Bank as escrow agent (the "Escrow Agent"), pursuant
to an escrow agreement (the "Escrow Agreement") in
substantially the form attached hereto as Exhibit C, a number
of Parent Shares equal to the product of (i) all of the Shares
owned by the Representing Stockholders immediately prior to the
Closing (which shall include the net exercise number of any
Shares issuable upon exercise of the Company Options pursuant
to Section 1.07) and (ii) the Deferred Exchange Ratio in effect
on the Closing Date (the "Escrow Fund"). As will be set forth
with more particularity in the Escrow Agreement, the Parent
Shares so delivered to the Escrow Agent (together with earnings
and distributions thereon, including any Extraordinary
Dividend, the "Escrow Shares"), shall be delivered to the
Representing Stockholders pro-rata in accordance with their
respective interests in the Company set forth on a schedule to
the Escrow Agreement, less any amounts reserved for
indemnification claims pursuant to Section 11.07, on the first,
second and third anniversaries of the Closing Date in the
amounts set forth in Section 1.02(a). The Buyer agrees to
cause Parent to remove any restrictive legends contained on any
Parent Shares distributed out of the Escrow Fund, within ten
days of receipt by Parent of satisfactory evidence, if
necessary, that such legends are no longer required by Rule
144(e), (f) and (h) of the Securities Act, or on the date of
distribution for distributions occurring on or after the second
anniversary of the Closing Date. If the Parent Shares are not
sufficient or are more than required to satisfy the Buyer's
obligations hereunder, either Parent shall issue additional
Parent Shares to cure the deficiency or the Escrow Agent shall
return the excess Escrow Shares, or the cash resulting from the
previous sale thereof by the Escrow Agent, to Parent, as
applicable. The Representing Stockholders acknowledge that any
additional Parent Shares so issued on the third anniversary
will not be securities registered under the Securities Act.
(b) The Representing Stockholders shall be entitled to receive
all distributions on Parent Shares including, but not limited
to, any Extraordinary Dividend or other earnings, interest,
dividends and share distributions, and any amounts paid or
received in respect of such earnings, interest, dividends and
share distributions, subject to the possible return of a
portion of those distributions in proportion to the amount of
any Parent Shares which might be returned to Parent pursuant to
the terms of Section 1.09(a). The annual fees of the Escrow
Agent shall be borne by the Buyer. Any fees associated with
actions specifically requested by a Representing Stockholder,
including those resulting from the sale of Parent Shares or
other securities by the Escrow Agent in accordance with
Section 1.02(b), shall be borne by such Representing
Stockholder.
(c) The Escrow Agreement will provide that 3% of the Parent
Shares in the Escrow Fund shall be set aside as a fund (the
"Expense Fund") for expenses, if any, of the Stockholder
Representatives (as defined in Section 2.03(a) below). The
Escrow Agreement will further provide that the Stockholder
Representatives shall be entitled to direct the Escrow Agent to
disburse the Expense Fund, to the extent permitted under the
Securities Act, to pay the expenses incurred by the Stockholder
Representatives in the performance of their duties and actions
hereunder and that such payments may be made directly to the
third party to whom such expense is due or as reimbursement to
one or more of the Stockholder Representatives who paid such
expenses.
2. Right to Additional Shares as Purchase Price. As
contemplated under Section 1.02(a), after each of
the first three 12-month periods beginning on the first day of
the first full calendar quarter after the Closing Date (or the
first day of the second full calendar quarter after the Closing
Date, if the Company has not obtained new funding from external
sources consisting of $5 million in equity or subordinated debt
and which results in $20 million in additional senior financing
by February 28, 2001) (each, a "Fiscal Year"), the Representing
Stockholders shall have the right to receive additional Parent
Shares as provided in Section 2.01 and 2.02 below. The
Representing Stockholders acknowledge that any Parent Shares
issued pursuant to this Section 2 will not be securities
registered under the Securities Act, may contain appropriate
restrictive legends and that certain Representing Stockholders
may be required to appoint a Purchaser Representative (as
defined under Rule 501 of the Securities Act) prior to
receiving such Parent Shares.
2.01 First Additional Shares.
(a) If in each or any of the first three Fiscal Years after the
Closing, the Company's EBIT (as defined in Section 2.04(d)) is
at least 75% of the Target EBIT (as defined in Section 2.01(c)
below) for that Fiscal Year, then the Buyer shall cause Parent
to issue to the Representing Stockholders (who may assign their
right to receive such Parent Shares to an entity formed
specifically to hold such Parent Shares), pro-rata in
accordance with their ownership interests set forth on Exhibit
A, a number of Parent Shares equal to the product of (i) the
percentage (but not more than 100%) that the Company's EBIT for
that Fiscal Year represents of the Target EBIT for that Fiscal
Year and (ii) the Possible First Additional Shares (as defined
in Section 2.01(c) below) for that Fiscal Year.
(b) If in any of the first three Fiscal Years, the Company's
EBIT exceeds the applicable Target EBIT, then any such excess
amount at the option of the Stockholder Representatives may be
added to the EBIT for any later year or to the EBIT for any
earlier year for the purpose of achieving the Target EBIT for
such later or earlier year; provided that, any excess amount so
applied shall be subtracted from the Company's EBIT in
Section 2.02 for purposes of the calculation set forth therein.
(c) The "Target EBITs" for the first, second and third Fiscal
Years after the Closing shall be $16,013,000, $25,266,000 and
$33,909,000, respectively. The "Possible First Additional
Shares" for the first, second and third Fiscal Years after the
Closing shall be (i) $1,000,000 divided by the Average Parent
Share Price determined as of the date of issuance, (ii)
$2,000,000 divided by the Average Parent Share Price determined
as of the date of issuance, and (iii) $4,000,000 divided by the
Average Parent Share Price determined as of the date of
issuance, respectively.
2.02 Second Additional Shares.
(a) If in each or any of the first three Fiscal Years after the
Closing, the Company's EBIT is more than 100% of the Target
EBIT for that Fiscal Year, then the Buyer shall cause Parent to
issue to the Representing Stockholders (who may assign their
right to receive such Parent Shares to an entity formed
specifically to hold such Parent Shares), pro-rata in
accordance with their ownership interests set forth in Exhibit
A, a number of Parent Shares equal to the product of (i) a
fraction of which the numerator is the excess, if any, of the
amount of EBIT for that Fiscal Year (but not more than 150% of
the Target EBIT for that Fiscal Year) over the Target EBIT and
the denominator of which is 50% of the Target EBIT for that
Fiscal Year, and (ii) the Possible Second Additional Shares (as
defined in Section 2.02(b) below) for that Fiscal Year.
(b) The "Possible Second Additional Shares" for the first,
second and third Fiscal Years after the Closing shall be (i)
$2,001,625 divided by the Average Parent Share Price determined
as of the date of issuance, (ii) $3,158,250 divided by the
Average Parent Share Price determined as of the date of
issuance, and (iii) $4,238,625 divided by the Average Parent
Share Price determined as of the date of issuance,
respectively.
2.03 EBIT Calculation.
(a) As soon as practicable, but in no event later than 90
calendar days following the end of each of the first three
Fiscal Years, Messrs. F. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇ (collectively, the
"Stockholder Representatives") shall prepare and deliver to the
Buyer a calculation (the "EBIT Calculation") of EBIT for the
foregoing year which shall be prepared in good faith in
accordance with GAAP on a basis consistent with the preparation
of the audited Financial Statements for the year ended
September 30, 2000.
(b) After receipt of the applicable EBIT Calculation, the Buyer
shall have 30 calendar days to review the EBIT Calculation,
together with the workpapers used in the preparation thereof.
The Buyer and its respective accountants shall have full access
to (i) all relevant books, records and employees of the Company
relating to the applicable EBIT Calculation and (ii) the
Stockholder Representatives' accountants and their relevant
supporting workpapers relating to the applicable EBIT
Calculation. Unless the Buyer delivers written notice to the
Stockholder Representatives on or prior to the 30th calendar
day after the receipt by it of the EBIT Calculation, stating
that the Buyer has objections to the EBIT Calculation and
describing in reasonable detail any such objections, the Buyer
shall be deemed to have accepted and agreed to the EBIT
Calculation. If, on or prior to the 30th calendar day after
the delivery of the EBIT Calculation, the Buyer shall give such
notice to the Stockholder Representatives, the Buyer and the
Stockholder Representatives shall, within ten calendar days (or
such longer period as the Parties may agree) following the
giving of such notice (the "Resolution Period"), attempt in
good faith to resolve any objections by the Buyer, and any
resolution by them as to any disputed amounts shall be final,
binding and conclusive.
(c) Any amounts remaining in dispute at the conclusion of the
Resolution Period ("Unresolved Changes") shall be submitted to
Ernst & Young (or any successor thereto) (such firm being
referred to as the "Auditing Firm"), within ten calendar days
after the expiration of the Resolution Period. In the event
that Ernst & Young is unable to act as the Auditing Firm and
the Buyer and the Stockholder Representatives cannot agree on a
mutually acceptable accounting firm, then the Buyer shall
select an accounting firm and the Stockholder Representatives
shall, collectively, select an accounting firm, and the two
accounting firms shall together select a third independent
accounting firm to serve as the Auditing Firm. Each Party
agrees to execute, if requested by the Auditing Firm, an
engagement letter containing reasonable terms. All fees and
expenses relating to the work, if any, to be performed by the
Auditing Firm in accordance with this Section 2.03(c) shall be
borne equally by the Stockholder Representatives and the Buyer.
The Auditing Firm shall be instructed not to apply any
materiality standard in making its determination and shall
endeavor to provide the most accurate answer attainable without
incurring expense that is unreasonable, in light of the amount
in issue. The Auditing Firm shall be instructed to make such
determination in accordance with the provision of this
Agreement. The Auditing Firm's determination of the Unresolved
Changes shall be made within 30 days of the submission of the
Unresolved Changes thereto, shall be set forth in a written
statement delivered to the Buyer and the Stockholder
Representatives and shall be final, binding and conclusive on
the Parties for all purposes.
(d) "EBIT" shall mean, for any period, the consolidated net
income or loss of the Company (including its consolidated
Subsidiaries) as shown in the Company's consolidated statement
of income or loss for that period prepared in the ordinary
course using the accounting principles and procedures that were
used in preparing the financial statements of the Company
during the periods prior to the date of this Agreement, plus
the amount of any interest expenses and the related costs of
obtaining financings and associated legal costs, and any income
Taxes in each case to the extent such items have been deducted
in the determination of net income or loss for that period;
provided, however, that, in determining EBIT for any period,
(i) there shall be excluded (X) any cost or expenses incurred
by the Company in connection with the negotiation, execution,
delivery and performance of this Agreement, (Y) any brokerage
or finder's commission, fees or similar compensation incurred
by the Company and disclosed in Section 3.26 for the
transactions contemplated by this Agreement and (Z) any
expenses of the Company for legal fees and costs related to the
negotiation and consummation of the transactions contemplated
by this Agreement, in the case of (X), (Y) and (Z) up to an
aggregate collective amount of $729,000 and only to the extent
such amount has been paid or is accrued by the Company in the
ordinary course as a pre-paid asset and amortized to expense;
(ii) there shall be excluded any management fees, overhead
charges or similar corporate expenses attributable to Parent's
ownership of the Company whether or not such charges are
actually levied or paid and whether or not such charges are in
accordance with Parent's customary practices; (iii) there shall
be excluded any additional depreciation, amortization or other
expense resulting from the write-up of any asset and any
amortization of goodwill or other intangibles relating to the
acquisition of the Company by the Buyer; (iv) there shall be
excluded any cost or expense incurred with respect to actions
taken by the Company not previously contemplated by its
business plan and that are out of the ordinary course of
business consistent with its past practice, which actions were
approved by the Board of Directors of the Company without the
affirmative vote of F. ▇▇▇▇▇ ▇▇▇▇▇▇, whose affirmative vote
will not be unreasonably withheld; (v) there shall be excluded
any Company costs or expenses resulting from a breach of any
representations or warranties of the Sellers under this
Agreement to the extent the Buyer receives indemnification from
the Representing Stockholders under Section 11 of this
Agreement; (vi) there shall be excluded any amounts accrued
under the cash bonus plan to be instituted by the Company after
the Closing Date which will be based upon the Company's EBIT
exceeding 150% of Target EBIT; (vii) there shall be included
any costs assessed by Parent or the Buyer for services provided
by either of them (such as those associated with the provision
of employee benefits) to the Company which the Company
previously contracted for elsewhere, to the extent such costs
were contemplated by the Company's business plan as set forth
in the Descriptive Memorandum prepared by ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇ LLC and ▇▇▇▇▇▇▇ & Company (the "Company Business Plan");
(viii) there shall be excluded any employment related costs
associated with personnel required by the Buyer to be employed
by the Company that the Company would not otherwise have
employed; and (ix) there shall be excluded any other
adjustments agreed to by the Buyer and the Stockholder
Representatives.
2.04 Issuance of Parent Shares. The Parent Shares
to be issued to the Representing Stockholders pursuant
to Sections 2.01 and 2.02 shall be issued as soon as
reasonably practicable after the EBIT Calculation
has been agreed pursuant to Section 2.03(b), but in no event
later than 10 Business Days after such the EBIT Calculation has
been agreed. If Unresolved Changes exist, however, Parent
Shares shall only be issued, to the extent feasible, with
respect to that portion of the agreed EBIT Calculation less the
amount of any Unresolved Changes, and any Parent Shares to be
issued as a result of the Auditing Firm's resolution of the
Unresolved Changes pursuant to Section 2.03(c) shall be issued
as soon as reasonably practicable after such resolution, but in
no event later than 10 Business Days after such resolution.
3. Representations and Warranties of the Company
and the Representing Stockholders. The Company and
each of the Representing Stockholders hereby represents
and warrants to the Buyer that:
3.01 Corporate Status and Authority. The Company
is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware. The Company has all the requisite corporate power
and authority to carry on its business as it now is being
conducted and to own or lease and to operate its assets, as and
in the places where the Company's business is now conducted or
where its assets are now owned or leased and now operated, and
to carry out its business as currently conducted. The Company
is duly qualified, and is in good standing, to do business in
each jurisdiction where the character of its properties owned
or leased or the nature of its activities makes such
qualification necessary, except to the extent that any such
failure to so qualify would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The
Company has delivered to the Buyer complete and correct copies
of its Certificate of Incorporation and its By-laws, each as
amended to date.
3.02 Authority; Enforceability.
(a) The Company has all requisite corporate power and authority
and has taken all corporate action necessary in order to
execute and deliver this Agreement and to perform its
obligations hereunder.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and
binding obligations of the Company enforceable in accordance
with its terms.
3.03 Authorized Capital of the Company. The
authorized capital stock of the Company consists
solely of (i) 2,000,000 Shares and (ii) 25,000 shares of
preferred stock, $0.01 par value (the "Preferred Stock"). A
total of 1,024,438 Shares are issued and outstanding as of the
date of this Agreement. No Preferred Stock is issued and
outstanding. The Shares have been duly authorized, validly
issued and are fully paid and nonassessable and are not subject
to pre-emptive rights. Except as set forth on Schedule 3.03
there are no shares of capital stock of the Company authorized,
issued or outstanding and there are no preemptive rights or any
outstanding subscriptions, options, warrants, rights,
convertible or exchangeable securities or other agreements,
commitments understandings arrangements or restrictions by
which the Company is bound to issue or sell any additional
shares of its capital stock or other securities of any
character relating to its issued or unissued capital stock or
other securities.
3.04 Noncontravention; Consents. (a) Except
as set forth on Schedule 3.04(a), neither
the execution, delivery and performance of this Agreement by
the Company or the Sellers, nor the consummation by the Company
of the transactions contemplated in this Agreement, will
(i) violate or conflict with, or constitute a default under,
any provision of the certificate of incorporation or by-laws of
the Company, (ii) violate any provision of, or constitute (or
with notice or lapse of time or both would constitute) a
default under, or accelerate or permit the acceleration of the
performance required by, any agreement, lease, contract, note,
mortgage, indenture, instrument, arrangement or other
obligation to which the Company or any Company Subsidiary is a
party or by which any of their respective assets or properties
are bound or subject (collectively, the "Contracts"),
(iii) entitle any party to cancel or terminate, or result in
any change in the rights or obligations of any party under, or
require a consent or waiver by any party to, any Contract,
(iv) result in the creation of a lien, pledge, security
interest, voting trust arrangement, charge, option,
restriction, claim, or other encumbrance on the equity
securities, ownership interests or on the assets of the Company
or any Company Subsidiary, (v) violate any law, statute, rule,
regulation, ordinance, requirement, administrative ruling,
order, judgment, injunction, award, decree or process of any
Governmental Entity (collectively, "Laws") by which or to which
any of the Company's or any Company Subsidiary's assets or
properties are bound or subject, or (vi) result in the loss or
impairment of any approval, authorization, comment, license,
franchise, order or permit of or by, or filing with a Person of
or benefiting the Company or any Company Subsidiary; except in
the case of clauses (ii), (iv), (v), and (vi) of this section,
for such violations, defaults, accelerations, losses or
impairments as, when taken together with all other such
violations, defaults, accelerations, losses and impairments,
would not reasonably be expected to have a Material Adverse
Effect on the Company.
(b) No notices to, consents or approvals of, or filings or
registration with, any Governmental Entity or with any third
party are necessary by the Company in connection with the
consummation of the transactions contemplated hereby, except
for such notices, consents, approvals, filings or
registrations, the failure of which to be made or obtained are
not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Company.
3.05 Subsidiaries.
(a) Schedule 3.05 lists the name of each Subsidiary of the
Company (each, a "Company Subsidiary"), together with the
jurisdiction of its organization. Each Company Subsidiary is
duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each Company
Subsidiary is duly qualified, and is in good standing, to do
business in each jurisdiction where the character of its
properties owned or leased or the nature of its activities
makes such qualification necessary. Other than the entities
listed on Schedule 3.05, the Company does not own, directly or
indirectly, any equity, ownership or voting interest in any
other Person.
(b) Each of the outstanding shares of capital stock and
other equity interest of each of the Company Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and is
owned by the Company free and clear of all liens, charges,
pledges, security interests or other encumbrances. There are
no preemptive rights or any outstanding subscriptions, options,
warrants, rights, convertible or exchangeable securities or
other agreements, commitments, understandings, arrangements or
restrictions by which the Company or any Company Subsidiary is
bound to issue or sell any additional shares of any Company
Subsidiary's capital stock or other securities of any character
relating to its issued or unissued capital stock or other
securities.
(c) The Company Subsidiaries do not, and have not,
conducted any business outside the ordinary course of the
Company's business.
3.06 Material Adverse Change, Etc. Since
September 30, 2000, except as set forth in Schedule
3.06, neither the Company nor any Company Subsidiary has:
(a) suffered any Material Adverse Change, or any material
damage, destruction or loss to any of the Company's or any
Company Subsidiary's assets (whether or not covered by
insurance);
(b) conducted their business not in the ordinary course of
business consistent with past practice;
(c) declared, set aside or paid any dividend or
distribution in respect of the Shares;
(d) purchased or redeemed any of the Shares;
(e) discharged or satisfied any security interest,
lien or encumbrance or pay any indebtedness, obligation or
liability (contingent or otherwise), except (A) current liabilities,
(B) scheduled payments pursuant to obligations under Material
Contracts and (C) in the ordinary course of business consistent
with past practice;
(f) canceled or compromised any debt or claim except
in the ordinary course of business consistent with past practice;
(g) waived or released any rights except in the ordinary
course of business consistent with past practice;
(h) transferred or granted any rights with respect to
know-how or any rights existing under any leases, licenses,
agreements, inventions or any of the Intellectual Property
except in the ordinary course of business consistent with
past practice;
(i) granted or made any contract, agreement, promise or
commitment to grant any wage, salary or employee benefit
increase to, or entered into any employment contract, bonus,
stock option, profit sharing, pension, incentive, retirement or
other similar arrangement or plan with, any officer, employee
or other Person except in the ordinary course of business
consistent with past practice;
(j) entered into any collective bargaining agreement or
made any commitment or incurred any liability to any labor
organization;
(k) made any capital expenditure for capital equipment
to be used directly by the Company at its premises in excess of
$25,000 or entered into any commitment therefor;
(l) changed the nature of its business or its accounting
principles, practices or methods;
(m) terminated or modified, or agreed to the termination
or modification of, any Material Contract;
(n) suffered a loss of any supplier or suppliers, which
loss (individually or in the aggregate) has had, or may have, a
material adverse effect on its financial condition, results of
operations, business, or prospects;
(o) incurred or assumed any indebtedness, obligation or
liability (contingent or otherwise) except in the ordinary
course of business consistent with past practice;
(p) mortgaged, pledged or otherwise subjected to any
lien any of its assets that are necessary for the conduct of its
business, except for liens incurred in the ordinary course of
business consistent with past practice;
(q) sold, assigned, transferred, leased, disposed of
or agreed to sell, assign, transfer, lease or dispose of, any of
its assets or properties that are material to the conduct of its
business, except in the ordinary course of business consistent
with past practice;
(r) entered into any other transaction that is
material to its business except in the ordinary course of business
consistent with past practice; or
(s) suffered any other event, occurrence, change or
development that has resulted or would result in a Material Adverse Effect
on the Company.
3.07 Compliance with Laws; Governmental Authorizations.
(a) None of the Company or any Company Subsidiary has been, or
is, in violation of any Legal Requirements applicable to their
business. No investigation or review by any Governmental
Entity with respect to the Company or any Company Subsidiary is
pending or, to the knowledge of any Representing Stockholder,
threatened, nor has any Governmental Entity indicated an
intention to conduct the same.
(b) Schedule 3.07(b) sets forth all currently effective Permits
issued or entered into by any Governmental Entity and presently
in effect in connection with the Company's and the Company
Subsidiaries business. The Permits listed on Schedule 3.07(b)
are the only Permits necessary to own, operate, use and
maintain the assets of the Company and the Company
Subsidiaries, in the manner in which they are now being
maintained and operated, and to conduct their business as now
being conducted. All such Permits are in full force and effect
and neither the Company nor any Company Subsidiary is in
default under and no condition exists that with notice or lapse
of time or both would constitute a default under the Permits.
There are no proceedings pending or, to the knowledge of the
Company or the Representing Stockholders, threatened that seek
the revocation, cancellation, suspension or any adverse
modification of any such Permits. The execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such revocation,
cancellation, suspension or modification of such Permits.
(c) Except as set forth on Schedule 3.07(c), (i) the
Company's and the Company Subsidiaries' businesses are and
have been in material compliance with all applicable
Environmental Laws; (ii) no property currently or formerly owned
or operated directly or indirectly by the Company or any Company
Subsidiary (including soils, groundwater, surface water, buildings
or other structures) is contaminated with any Hazardous Substance
which could reasonably be expected to result in any material
liability to the Company or any Company Subsidiary under any
Environmental Law; (iii) neither the Company's nor the Company
Subsidiaries' business have been involved in any disposal,
release or threat of release of any Hazardous Substance which
could reasonably be expected to result in material liability
under any Environmental Law; (iv) neither the Company, any
Company Subsidiary or any Representing Stockholder has received
any written notice, demand, letter, claim or request for
information indicating that the Company or any Company
Subsidiary may be in violation of or subject to liability under
any Environmental Law; (v) neither the Company nor any Company
Subsidiary is subject to any order, decree, injunction or other
arrangement with any Governmental Entity or any indemnity or
other agreement with any third party relating to material
liability under any Environmental Law or relating to Hazardous
Substances in connection with its business; and (vi) there are
no other circumstances or conditions involving the Company or
any Company Subsidiary or any entity in which they own a voting
or economic interest that could reasonably be expected to
result in any material liability, or restriction on the
ownership, use, or transfer of any real property owned, leased
or operated pursuant to any Environmental Law.
3.08 Contracts. Schedule 3.08 lists all
Contracts of the following types, to which the Company or
any Company Subsidiary is a party, or by which any of them
or their properties or assets are bound, that are in effect
as of the date hereof ("Material Contracts"):
(a) all leases relating to real property, and all leases
relating to personal property in which the Company is the
lessee providing for annual lease payments in excess of
$25,000;
(b) all licenses, franchises, assignments, options or
other agreements relating to Intellectual Property other than
standard "shrink-wrap" licenses for software programs
obtainable from retailers;
(c) all employment, compensation and consulting
agreements, contracts, understandings or arrangements with
any officer, director, employee, broker, agent, consultant,
salesman or other Person, including the names, starting dates of
employment, term of employment and functions;
(d) all agreements for the purchase, sale or lease (in
which Company is lessor) of goods, materials, supplies, machinery,
equipment, capital assets and services having a cost in excess
of $10,000 in any one instance or in excess of $25,000 in the
aggregate, other than those agreements that have been fully
performed except for a remaining contingent warranty obligation
running to the benefit of the Company and other than those
agreements having to do with the sale or re-leasing of off-rent
equipment in the ordinary course of business, so long as the
underlying purchase and/or lease agreement is listed on
Schedule 3.08;
(e) all agreements and arrangements providing for annual
payments of more than $50,000 with any supplier, distributor,
franchiser, dealer, investment banker, sales agent, broker, or
representative;
(f) any partnership, joint venture or other similar
agreement or arrangement;
(g) any agreement that limits the freedom of the Company
or any Company Subsidiary to compete in the lease financing
business;
(h) any agreement with any Affiliate, director or
officer of the Company or any Company Subsidiary;
(i) all agreements and arrangements for the construction,
modification or improvement of any building or structure having
a cost in excess of $10,000, or the incurrence of any other
capital expenditure involving payments in excess of $25,000,
other than those agreements that have been fully performed
except for a remaining contingent warranty obligation running
to the benefit of the Company;
(j) mortgages, indentures, loan or credit agreements,
security agreements and other agreements and instruments
relating to the borrowing of money or similar extensions of
credit, in each case involving a principal amount of more
than $50,000 and having a remaining term of at least one year;
(k) any nondisclosure or confidentiality agreement
entered into outside the ordinary course of business;
(l) all other Contracts not listed in Schedule 3.08 that
require payment after the date of this Agreement of more than
$50,000 in any calendar year and having a remaining term of at
least one year and which is not terminable by the Company or
any Company Subsidiary on less than three months notice; and
(m) any other Contract not made in the ordinary course of
business that is material to the Company and the Company
Subsidiaries.
Each of the Material Contracts is in full force and effect, is
valid and binding upon the Company and, to the best knowledge
of each of the Representing Stockholders, each of the other
parties thereto, and is fully enforceable by the Company
against the other parties thereto in accordance with its terms.
No Representing Stockholder nor the Company or any Company
Subsidiary has received any notice of, or has any reason to
believe that there is or has been, any actual, threatened or
contemplated termination or modification of any of the Material
Contracts. Except as set forth on Schedule 3.08, neither the
Company, nor, to the best knowledge of each of the Representing
Stockholders, any other party to any Material Contract, is in
breach of or in default thereunder, nor has any event occurred
which, with the lapse of time, notice or election, may become a
breach or default by any party under any Material Contracts.
3.09 Real Property.
(a) Schedule 3.09(a) contains a complete and correct list of
all interests of the Company or any Company Subsidiary in real
property (the "Leased Real Property") pursuant to leases,
licenses or other occupancy or use agreements (collectively,
the "Leases"). The Company or Company Subsidiary, as
applicable, has good, valid and marketable title to, and is in
peaceful undisturbed possession of, the leasehold estates
created under the Leases, free and clear of all liens other
than Permitted Liens. The Company has previously allowed
Parent to examine true, correct and complete copies of the
Leases, together with all amendments and modifications thereof
and supplements thereto. Except as set forth on Schedule
3.09(a), (i) each of the Leases is valid and binding and in
full force and effect and (ii) to the best knowledge of each
Representing Stockholder, no party thereto is in default under
any Lease. Except as set forth on Schedule 3.09(a), each of
the Leases may be assigned by the Company or Company Subsidiary
without the consent or approval of any other person or entity.
The Company has no direct or indirect interest in real property
except the Leased Real Property.
(b) For purposes of this agreement, "Permitted Liens"
shall mean (i) liens for taxes or assessments not yet delinquent
or, if delinquent, that are being contested in good faith,
and (ii) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's and other similar liens or charges
arising in the course of business (x) if they have not been
filed pursuant to law, (y) if filed, they have not yet become
due and payable or payment is being withheld as provided by
law, or (z) if their validity is being contested in good faith
by appropriate action.
3.10 Employment Agreements and Benefits, Etc.
(a) Employment Agreements. Schedule 3.10(a) lists all
currently effective employment, management, consultant or
similar Contracts and all currently effective labor Contracts
and collective bargaining agreements heretofore entered into by
the Company with respect to its business. Except as disclosed
therein, neither the Company nor any Company Subsidiary has any
employment, management, severance, consultant or other similar
Contracts with any Employees.
(b) Employee Relations. There are not occurring nor have
there occurred during the past 5 years any slow downs, pickets,
work stoppages, labor strikes or disputes, walk-outs, lock-outs
or other similar disruptive labor activities on the part of the
Employees, nor, to the knowledge of the Representing
Stockholders, is any such activity threatened. Each of the
Company and each Company Subsidiary has substantially complied
with all laws relating to the employment and safety of labor,
including the National Labor Relations Act and other provisions
relating to wages, hours, benefits, collective bargaining and
all applicable occupational safety and health acts and laws.
Neither the Company nor any Company Subsidiary has engaged in
any unfair labor practice or discriminated on the basis of
race, age, sex, color, national origin, religion, mental or
physical disability, status as a special disabled veteran or
Vietnam-era veteran or otherwise in its employment conditions
or practices with respect to its Employees.
(c) Employment Benefit Plans. As applicable to the
Company and the Company Subsidiaries:
(i) All Benefit Plans that are maintained or
contributed to by the Company or any Company Subsidiary
are listed in Schedule 3.10(c). No other Benefit Plans
are required to be offered by the Company or any
Company Subsidiary either at the present time or in
the future, under any current arrangement, agreement
or understanding. True and complete copies of all such
Benefit Plans listed in Schedule 3.10(c), including, but
not limited to, any trust instruments and insurance
contracts forming a part of any Benefit Plans, and all
amendments thereto have been provided or made available
to the Buyer by the Company.
(ii) All Benefit Plans covering Employees, to the extent
subject to ERISA, are in compliance with ERISA. Each Benefit
Plan which is an "employee pension benefit plan" within the
meaning of section 3(2) of ERISA ("Pension Plan") and which is
intended to be qualified under section 401(a) of the Code, has
received a favorable determination letter from the Internal
Revenue Service with respect to "TRA" (as defined in section 1
of Rev. Proc. 93-39), and no Representing Stockholder is aware
of any circumstances likely to result in revocation of any such
favorable determination letter. There is no material pending
or, to the knowledge of the Representing Stockholders,
threatened litigation relating to the Benefit Plans. Neither
the Company nor any Company Subsidiary has engaged in a
transaction with respect to any Benefit Plan that, assuming the
taxable period of such transaction expired as of the date
hereof, could subject the Company or any Company Subsidiary to
a tax or penalty imposed by either section 4975 of the Code or
section 502(i) of ERISA in an amount which would be material.
(iii) Neither the Company nor any Company Subsidiary nor any
ERISA Affiliate has contributed to a "multi-employer plan,"
within the meaning of section 3(37) of ERISA. No notice of a
"reportable event," within the meaning of section 4043 of ERISA
for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date
hereof (or will be required to be filed in connection with the
transactions contemplated by this agreement).
3.11 Insurance. Schedule 3.11 contains a true and accurate
summary of the insurance coverage of the property, assets or business
liabilities of the Company and the Company Subsidiaries
specifying with respect to each such type of coverage, the term
of the policies or bonds, the limits and layers of liability
and the annual premiums, and (ii) lists any agreements,
arrangements or commitments under which the Company or any
Company Subsidiary indemnifies any other Person or is required
to carry insurance for the benefit of any other Person in an
amount in excess of $500,000 in the aggregate. The policies
and bonds summarized in Schedule 3.11 are in full force and
effect, all premiums due and payable thereon have been paid, no
notice of cancellation or termination has been received with
respect to any policy, and the Company and each Company
Subsidiary has complied with such policies and bonds. Such
policies and bonds will remain in full force and effect through
the respective dates set forth in Schedule 3.11 without the
payment of additional premiums, except in the ordinary course
of business, and will not in any way be affected by, terminate,
or lapse by reason of the transactions contemplated by this
Agreement. Schedule 3.11 lists and summarizes all outstanding
claims which have been made since December 31, 1998, under each
such insurance policy, other than claims for medical benefits
made under and covered by the Company's employee medical
benefits policy. Neither the Company nor any Company
Subsidiary has failed to give any notice or to present any
claim under any such insurance policy in a due and timely
fashion.
3.12 Intellectual Property.
(a) The Company owns (free and clear of any and all liens,
claims or encumbrances) or is licensed or otherwise possesses
sufficient legally enforceable rights to use, all the
Intellectual Property that is material to the conduct of its
and the Company Subsidiaries' businesses. A complete list of
all such material Intellectual Property is set forth on
Schedule 3.12. The Intellectual Property is sufficient for
the continued conduct of the Company's business after the
Closing in substantially the same manner as conducted prior to
the Closing.
(b) The Company's and the Company Subsidiaries' use of
the Intellectual Property does not conflict with, infringe upon,
or violate any intellectual property right of any other person.
None of the Company, any Company Subsidiary or any Representing
Stockholder has received written notice of any material claim
that such Intellectual Property is invalid or conflicts with
the asserted right of any other person.
3.13 Litigation; Claims; Citations.
(a) Except as set forth on Schedule 3.13(a), there are no (i)
civil, criminal or administrative actions, suits, claims,
proceedings or governmental investigations pending, or to the
knowledge of the Representing Stockholders, threatened against
or affecting the Company or any Company Subsidiary, or their
respective businesses or assets or (ii) obligations or
liabilities of the Company or any Company Subsidiary of any
kind whatsoever, whether or not accrued, contingent, absolute,
determined, determinable or otherwise, or any other conditions,
facts or circumstances to the knowledge of the Representing
Stockholders that are reasonably likely to result in any claims
against or obligations or liabilities of the Company or any
Company Subsidiary other than in the case of this clause (ii):
(X) liabilities provided for in the Balance Sheet; (Y)
liabilities disclosed in Schedule 3.13(a); and (Z) other
undisclosed liabilities which, individually or in the
aggregate, are not material to the Company and the Company
Subsidiaries, taken as a whole. There is no outstanding order,
writ, judgment, award, injunction, decree or decision of any
Governmental Entity, any court of competent jurisdiction or any
arbitrator or arbitrators against the Company or any Company
Subsidiary or any of their assets or property.
(b) No citations, fines or penalties have been assessed,
or to the best knowledge of each Representing Stockholder,
threatened or asserted against in connection with the conduct of
the Company's or any Company Subsidiary's business under any
Environmental Law which have not been fully paid and/or
performed as of the date of this Agreement.
(c) There are no actions, suits, proceedings or
governmental investigations pending, or to the best knowledge
of each Representing Stockholder, threatened against the
Company, any Company Subsidiary or any Representing Stockholder
that challenge the validity of this Agreement or seek to enjoin
or otherwise prohibit or limit the transactions contemplated
herein.
3.14 Property and Assets. The Company's and the
Company's Subsidiaries buildings, plants, structures, and
equipment are structurally sound, are in good operating
condition and repair, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs
except for ordinary wear and tear and ordinary routine
maintenance and repairs that are not material
in nature or cost.
3.15 Financial Statements. Attached to
Schedule 3.15 is a true and complete copy of the unaudited
consolidated balance sheet of the Company and
the Company Subsidiaries as of September 30, 2000 and the
consolidated statements of income, cash flows and changes in
stockholders' equity of the Company and the Company
Subsidiaries for the year then ended (the "Unaudited Financial
Statements"). Prior to the Closing, the Company shall deliver
to the Buyer a true and complete copy of the audited
consolidated balance sheet of the Company and the Company
Subsidiaries as of September 30, 2000 and the consolidated
statements of income, cash flows and changes in stockholders'
equity of the Company and the Company Subsidiaries for the year
then ended (the "Financial Statements"). The Unaudited
Financial Statements do, and the Financial Statements will,
fairly present in all material respects the financial condition
and the results of operations, changes in stockholders' equity,
and cash flow of the Company and the Company Subsidiaries as of
the respective dates of and for the periods referred to therein
and have been prepared in accordance with GAAP consistently
applied with prior periods, subject to normal year-end
adjustments. No financial statements of any Person other than
the entities specified in the Financial Statements are required
by GAAP to be included in the Financial Statements.
3.16 Taxes.
(a) All Tax Returns that are required to be filed on
or before the Closing Date (taking into account applicable
extensions) by or with respect to the Company or any Company
Subsidiary have been filed.
(b) All Taxes of the Company and any Company Subsidiary that
are due and payable have been timely paid or adequately
reserved against, other than Taxes that are not yet due or
that, if due, are not delinquent, are being contested in good
faith, or have not been finally determined and for which
appropriate reserves therefore have been established.
(c) Except as set forth in Schedule 3.16(c), there are
no pending or, to the knowledge of any Representing Stockholder,
threatened actions or proceedings for the assessment or
collection of Taxes against the Company or any Company
Subsidiary.
(d) All Taxes required to be withheld from payments to
employees have been withheld and paid to the proper taxing
authority in a timely fashion.
(e) Except as set forth on Schedule 3.16(e), to the
knowledge of the Representing Stockholders, no taxing authorities
are presently conducting any audits or other examinations of any
Tax Returns referred to in clause (a) or Taxes referred to in
clause (b).
(f) Except as set forth on Schedule 3.16(f), there are
no liens for unpaid Taxes on the Company's or any Company
Subsidiary's assets.
(g) Except as set forth on Schedule 3.16(g), no waivers of
statutes of limitations have been given by or requested with
respect to any Taxes of the Company or any Company Subsidiary.
3.17 Affiliate Interests. Except as set forth on
Schedule 3.17, none of the Affiliates of the Company (i) has
any interest in any property, real or personal, tangible or
intangible, of the Company or any Company Subsidiary, except
for interests in the equity securities of the Company and
interests with a value of not greater than $100,000 in the
aggregate and which is described in Schedule 3.17, (ii) has
any cause of action or other claim whatsoever against the Company
or any Company Subsidiary or any of their assets or properties,
or owes any amount to, or is owed any amount by, any of them,
except for claims and indebtedness not in excess of $100,000 in
the aggregate and which is described in Schedule 3.17 or (iii)
owns, directly or indirectly, any debt, equity or other interest
or investment in any person that is a competitor, lessor, lessee,
or supplier of the Company, except securities of any publicly-held
corporation which do not exceed 1% of the outstanding voting
securities of such corporation.
3.18 Accounts Receivable; Accounts Payable.
The amounts shown in the "Rental and Other Receivables,
Net" line item (collectively, the "Accounts Receivable") on the
Company's Balance Sheet as of September 30, 2000 and included
in the Financial Statements (the "Balance Sheet") are bona fide
accounts receivable, the full amount of which was actually owed
to the Company or a Company Subsidiary. The accounts payable
reflected on the Balance Sheet and all accounts payable arising
after the date of the Balance Sheet arose from bona fide
transactions in the ordinary course of the Company's business.
3.19 Books and Records. The Company has made
available to Parent all of its tax, accounting, corporate and
financial books and records. The books and records pertaining
to the Company's business made available to Parent are true,
correct and complete, have been maintained on a current basis,
and fairly reflect the basis for the Company's financial condition
and results of operations as set forth in the Financial Statements.
3.20 Bank Accounts and Safe Deposit Arrangements
. Schedule 3.20 lists all checking accounts, savings
accounts and other bank accounts and safe deposit boxes
maintained by the Company or any Company Subsidiary, and the
names of all persons authorized to withdraw funds or other
property from, or otherwise deal with, such accounts and safe
deposit boxes.
3.21 Insider Transactions. Schedule 3.21 sets forth:
(a) The amounts and other essential terms of indebtedness
or other obligations, agreements, undertakings, liabilities or
commitments (contingent or otherwise) of the Company or any
Company Subsidiary to or from any past or present officer,
director, member, stockholder or any Person related to,
controlling, controlled by or under common control with any of
the foregoing (collectively, "Control Persons"); and
(b) All transactions between each Control Person and the
Company or any Company Subsidiary since the Company's date of
incorporation, and all proposed or contemplated transactions
with each Control Person, together with the essential terms
thereof.
3.22 Leased Systems. The Company and the Company
Subsidiaries have good and marketable title and perfected first
security interests (recorded or registered in accordance with all
statutes requiring the filing, recording or registration thereof)
for all systems, equipment and instruments leased to third parties
or consigned to third parties or otherwise in the possession of
third parties where title has not passed from the Company or
Company Subsidiary. The documentation relating to each such
lease is valid, binding and enforceable upon such lessees, in
accordance with its terms, subject to applicable bankruptcy and
insolvency laws.
3.23 Full Disclosure. To the best knowledge of
each of the Representing Stockholders, there is no fact or
circumstance known to any Representing Stockholder which is
not disclosed in this Agreement which could adversely affect the
accuracy of the representations and warranties contained in this
Agreement or the Company's financial condition, results of operations,
business, or prospects in any material respect.
3.24 Takeover Statutes. The Company has taken all
actions necessary and within its authority such that no restrictive
provision of any "fair price," "moratorium," "control share acquisition,"
"business combination," stockholder protection," "interested shareholder"
or other similar anti-takeover statute or regulation (including
without limitation, Sections 203 of the DGCL) (each a "Takeover
Statute") or a restrictive provision of any applicable
provision in the Certificate of Incorporation or By-Laws of the
Company is, or at the Closing Date will be, applicable to the
Company, Parent, the Buyer, the Shares, or any other
transaction contemplated by this Agreement.
3.25 SEC Documents. None of the information supplied or
to be supplied by the Company or any Seller in writing for the express
purpose of inclusion or incorporation by reference in any documents to
be filed with the SEC in connection with the transactions
contemplated hereby will, at the respective times such
documents are filed and at the time such documents become
effective or at the time any amendment or supplement thereto
becomes effective contain any untrue statement of a material
fact, or omit to state any material fact required or necessary
in order to make the statements therein not misleading.
3.26 Brokers and Finders. Neither the Company nor any
Company Subsidiary, nor any of the their officers, directors,
employees or representatives, has retained any broker or finder or
has incurred any obligation or liability for brokerage fees, commissions
or finder's fees in connection with the transactions contemplated
by this Agreement, except that the Company has retained ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ LLC and ▇▇▇▇▇▇▇ & Company as its
financial advisors, the terms of which engagement have been
disclosed to the Buyer prior to the date hereof.
4. Representations and Warranties of the Sellers.
Each Seller, severally but not jointly, hereby represents and
warrants to the Buyer, as to himself, herself or itself (as the
case may be) only, as follows:
4.01 Status, Due Execution, Etc. Such Seller has
full legal capacity and unrestricted power to execute and deliver
the Agreement and to perform his, her or its obligations hereunder.
4.02 Validity. This Agreement has been duly executed
and delivered by such Seller and constitutes the legal, valid and
binding obligations of such Seller, enforceable against such Seller
in accordance with its respective terms, except to the extent that
its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other Laws affecting the
enforcement of creditors' rights generally or by general
equitable principles.
4.03 Title to Shares. Such Seller is the lawful
holder of record and owner of all of the Shares set forth opposite
the name of such Seller in Exhibit A or Exhibit B, as applicable, in
each case free and clear of any and all pledges, security interests,
liens, charges or other encumbrances of any nature whatsoever. The
delivery by each Seller of the certificates evidencing such
Shares, duly endorsed for transfer or accompanied by stock
transfer powers duly endorsed in blank will transfer valid
record title to and ownership of said Shares to the Buyer, free
and clear of any and all pledges, security interests, liens,
charges or other encumbrances of any nature whatsoever. No such
Seller has entered into any agreement, commitment
understanding, arrangement or restriction which obligates it to
sell, transfer, assign, convey or deliver such Shares to a
Person other than the Buyer.
4.04 Consents. Except for the filing of notification
and report forms with the United States Federal Trade Commission and
the United States Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and the expiration or termination of any applicable waiting
period thereunder, no notices to, consents or approvals of, or
filings or registration with, any Governmental Entity or with
any third party are necessary in connection with the execution
and delivery by the Sellers of this Agreement and the
consummation by the Sellers of the transactions contemplated
hereby, except for such notices, consents, approvals, filings
or registrations, the failure of which to be made or obtained
are not, individually or in the aggregate, reasonably likely to
prevent, materially hinder or materially delay the ability of
the Sellers to consummate the transactions contemplated by this
Agreement.
4.05 Brokers and Finders. No Seller or any representative
of any Seller has directly retained any broker or finder or has incurred
any liability for any brokerage fees, commissions or finders fees
in connections with the transactions contemplated by this
Agreement, except that the Sellers may have benefited by the
Company's retention of the firms set forth in Section 3.26, and
the Sellers have agreed to pay the expenses of the Company for
fees and costs in excess of $729,000 as set forth in Section
6.17 hereof.
5. Representations and Warranties of the Buyer.
The Buyer hereby represent and warrant to the Sellers
as follows:
5.01 Corporate Status and Authority. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Maryland. The Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Buyer has all the
requisite corporate power and authority to carry on its business
as it now is being conducted and to own or lease and to operate
its assets, as and in the places where the Buyer's business is
now conducted or where its assets are now owned or leased and
now operated, and to carry out its business as currently conducted.
The Buyer is duly qualified, and is in good standing, to do business
in each jurisdiction where the character of its properties owned or
leased or the nature of its activities makes such qualification
necessary, except to the extent that any such failure to so
qualify would not be reasonably likely to prevent, materially
delay or materially impair the ability of the Buyer to
consummate the transactions contemplated by this Agreement.
The Buyer has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute
and deliver this Agreement and, subject only to the
governmental authorizations specified in Section 5.04(b), to
perform its obligations hereunder.
5.02 Due Execution. The execution and delivery
of this Agreement by the Buyer and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and the Buyer,
and this Agreement has been duly executed and delivered by the Buyer
and constitutes the legal, valid and binding obligations of the
Buyer enforceable in accordance with its terms, except to the
extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting
the enforcement of creditors' rights generally or by general
equitable principles.
5.03 Litigation. There are no material claims,
actions, suits, proceedings or governmental investigations pending,
or to the knowledge of the Buyer, threatened against Parent or any of
its subsidiaries that challenge the validity of this Agreement,
seek to enjoin or otherwise prohibit or limit the transactions
contemplated herein or would be reasonably likely to impair the
ability of the Buyer to consummate the transactions
contemplated herein.
5.04 Noncontravention; Consents.
(a) Neither the execution, delivery or performance of this
Agreement by the Buyer, nor the consummation by the Buyer of
the transactions contemplated in this Agreement will (a)
violate or conflict with, or constitute a default under, any
provision of the certificate of incorporation, by-laws or
comparable governing instruments of Parent or the Buyer, (b)
violate any provision of, or constitute (or with notice or
lapse of time or both would constitute) a default under, or
accelerate or permit the acceleration of the performance
required by, any material Contract to which Parent or the Buyer
is a party or by which any of their respective assets or
properties are bound or subject (collectively, the "Parent
Contracts"), (c) violate any Law by which or to which any of
its assets or properties are bound or subject; except in the
case of clauses (b) and (c) of this section, for such
violations, defaults, or accelerations as, when taken together
with all other such violations, defaults and accelerations,
would reasonably be expected to have a Material Adverse Effect
on Parent.
(b) Except for (i) the filing of notification and report
forms with the United States Federal Trade Commission and the United
States Department of Justice under HSR Act, and the expiration
or termination of any applicable waiting period thereunder and
(ii) filings and approvals required under the Public Utilities
Holding Company Act of 1935 ("PUHCA"), no notices to, consents
or approvals of, or filings or registration with, and
Governmental Entity or with any third party are necessary in
connection with the execution and delivery by the Buyer of this
Agreement and the consummation by Parent and the Buyer of the
transactions contemplated hereby, except for such notices,
consents, approvals, filings or registrations, the failure of
which to be made or obtained are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect
on Parent or to prevent, materially hinder or materially delay
the ability of the Buyer to consummate the transactions
contemplated by this Agreement.
5.05 Disclosure. The Buyer has furnished to the
Company and the Stockholder Representatives an investor disclosure
package consisting of Parent's annual report on Form 10-K, for the
fiscal year ending December 31, 1999, all Forms 10-Q and 8-K,
as amended, filed by Parent with the SEC since December 31,
1999 and up to the date of this Agreement and all proxy
materials distributed to Parent's shareholders since December
31, 1999 and up to the date of this Agreement, in each case
excluding any exhibits or attachments thereto (the "Parent
Disclosure Package"). The documents in the Parent Disclosure
Package (a) conformed, as of the dates of their respective
filing with the SEC, in all material respects, to the
requirements of the Securities Act of 1933, as amended (the
"Securities Act") and the Securities Exchange Act of 1934, as
amended, and (b) when taken together, do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not
misleading. The financial statements of Parent, including the
notes thereto, included in the documents in Parent Disclosure
Package (the "Parent Financial Statements") fairly and
accurately represented in all material respects the
consolidated financial condition of Parent as of their
respective dates and Parent's consolidated results of
operations for the respective periods specified therein in
conformity with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited statements included in
Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q of
the SEC and subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments).
5.06 Capitalization. (a) The authorized capital
stock of Parent consists of 260,000,000 Parent Shares, of which
110,436,317 shares were issued and outstanding as of December 12,
2000. All of the outstanding Parent Shares have been validly
issued and are fully paid and nonassessable and not subject to
preemptive rights.
(b) Except for (i) outstanding options granted by Parent and
(ii) Parent's right to repurchase any unvested shares under its
stock option plans, there are no outstanding rights,
subscriptions, warrants, calls, unsatisfied preemptive rights,
options or other agreements or arrangements of any kind to
purchase or otherwise to receive from Parent or any of its
subsidiaries any shares of capital stock or any other security
of Parent or any of its subsidiaries, and there are no
outstanding securities of any kind convertible into or
exchangeable for such capital stock.
5.07 Parent Shares. The Parent Shares to be issued
to the Sellers pursuant to this Agreement will be duly authorized,
and when the share certificates in respect of such Parent Shares
are issued in accordance with the terms hereof, will be validly
issued, fully-paid and non-assessable.
6. Covenants.
6.01 Interim Operations. During the Interim Period,
the Company shall conduct its business in the ordinary course
consistent with past practice and shall use its reasonable best
efforts to preserve intact its and the Company Subsidiaries'
business organizations and relationships with third parties and
its present officers and employees. Without limiting the generality
of the foregoing, from the date hereof until the Closing Date, except
as set forth on Schedule 6.01, neither the Company nor any
Company Subsidiary will:
(a) adopt or propose any change in its organizational
documents;
(b) issue, sell, pledge, dispose of or encumber any shares
of its capital stock, or any securities convertible into or
exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, directly or
indirectly, any shares of its capital stock or any other
property or assets;
(c) merge or consolidate with any other Person;
(d) sell, lease, license, mortgage, pledge or otherwise
dispose of or encumber any assets or property in an amount exceeding
$25,000 in the aggregate, except pursuant to existing contracts
or commitments which have been disclosed to Parent or in the
ordinary course consistent with past practice;
(e) make any commitments for, or make or authorize any
capital expenditures outside the ordinary course of business
consistent with past practice, or make any commitments for, or
make or authorize any capital expenditures for capital equipment
for use by the Company at its premises in excess of $10,000
individually or $25,000 in the aggregate, except pursuant to
existing contracts or commitments which have been disclosed to
the Buyer or in the ordinary course consistent with past
practice;
(f) by any means, make any acquisition of, or investment
in, assets or stock of any other Person;
(g) settle or compromise any material claims or litigation
or, modify, amend or terminate any of the Material Contracts or
waive, release or assign any material rights or claims;
(h) permit any insurance policy naming the Company as a
beneficiary or loss-payable payee to be canceled or terminated;
(i) increase the compensation of any employee or amend
any Benefit Plan in a manner which would increase benefits
thereunder except in the ordinary course of business consistent
with past practice;
(j) take any action or omit to take any action that would be
reasonably likely, taking into account the Company's current
credit evaluation practices, to cause any of its
representations and warranties herein to become untrue in any
material and adverse respect; and
(k) agree or commit to do any of the foregoing.
6.02 The Company Employee Matters.
Following the Closing Date, the Buyer shall, subject to
compliance with applicable law, either (i) arrange for each
employee of the Company to participate in any counterpart Buyer
Employee Plan (which shall mean all plans, programs and
arrangements that are maintained by the Buyer or its
Subsidiaries at the Closing Date) in accordance with the
eligibility criteria thereof, provided that (A) such
participants shall receive full credit for years of service
with the Company (and service otherwise credited by the
Company) prior to the Closing Date for all purposes for which
services was recognized under the Company's Benefits Plans
including, but not limited to, eligibility to participate,
vesting and to the extent not duplicative, of benefits received
under such Benefit Plan, the amount of benefits, and (B) the
Buyer shall cause any and all pre-existing condition
limitations, eligibility waiting periods and evidence of
insurability requirements under any group plans to be waived
with respect to such participants and their eligible dependents
and shall provide each such participant with credit for any co-
payments and deductibles prior to the Closing Date for purposes
of satisfying any applicable deductible, out-of-pocket, or
similar requirements under all Buyer Employee Plans in which
such participants are eligible to participate after the Closing
Date or (ii) cause the existing Benefit Plans to be maintained,
in the case of (i) and (ii) to provide the employees of the
Company with benefits in the aggregate that are not less
favorable in any material respect than what they receive as of
the date hereof. Notwithstanding any of the foregoing
provisions of this Section 6.02, none of the provisions of this
section shall operate to duplicate any benefit provided to any
employee of the Company or the funding of any such benefit.
6.03 Other Obligations of the Buyer. During
the Interim Period and to the extent within its
control, the Buyer shall refrain from doing any act or omitting
to do any act which is reasonably likely to cause any of the
representations and warranties of the Buyer contained herein
not to be true and correct in any material respect. During the
Interim Period, the Buyer shall use reasonable best efforts to
obtain any consent of third parties necessary to complete the
transactions contemplated by this Agreement; it being
understood that this shall not in any way obligate Parent to
divest any of its, the Company's or their respective
Subsidiaries' assets or agree to any conditions that would be
unduly burdensome to Parent or any of its Subsidiaries or
adversely affect the benefits expected to be realized by Parent
and the Buyer as a result of the transactions contemplated by
this Agreement.
6.04 Public Disclosure.
(a) During the Interim Period, neither Parent nor the
Buyer on the one hand, or the Company or any Seller on the
other, shall make, or permit any of their respective Affiliates
or representatives to make, any news release pertaining to this
Agreement or the transactions contemplated hereby without the
prior approval of the Stockholder Representatives on the one
hand or the Buyer on the other, as to both form and content,
which approval shall not be unreasonably withheld, delayed or
conditioned, unless impracticable to obtain under the
circumstances. Notwithstanding the foregoing, either Parent,
the Buyer or the Company may make such news release or other
public disclosure which, in the opinion of such Party's
counsel, is required to be made by such Party pursuant to
applicable law, including the federal securities laws, or as
may be required by any national securities exchange.
(b) During the Interim Period, the Buyer shall provide the
Stockholder Representatives with copies of all filings with and
correspondence to and from the SEC related to obtaining PUHCA
approval of the transactions contemplated hereby and with
periodic timely updates of the status of the PUHCA approval.
6.05 Further Assurances.
Subject to the terms and conditions of this Agreement,
each of the Parties hereto will use its reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause
to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement,
including without limitation using its reasonable best efforts
to ensure satisfaction of the conditions precedent to such
Party's obligations hereunder; it being understood that this
shall not in any way obligate Parent to divest any of its, the
Company's or their respective Subsidiaries' assets or agree to
any conditions that would be unduly burdensome to Parent or any
of its Subsidiaries or adversely affect the benefits expected
to be realized by Parent and the Buyer as a result of the
transactions contemplated by this Agreement. Subject to the
terms and conditions of this Agreement, none of the Parties
hereto will, without prior written consent of the other Party,
take or fail to take any action, which would reasonably be
expected to prevent or materially impede, interfere with or
delay the transactions contemplated by this Agreement. It is
understood and agreed that Parent shall bear all costs and
expenses related to all regulatory filings.
6.06 Registration Statement.
(a) Subject to Parent's right to delay a registration
pursuant to Section 6.06(c) and subject to Section 6.07(d), the
Non-Representing Stockholders shall have the right, prior to
the first anniversary of the Closing Date, exercisable by
written notice by the holders of more than 40% of the Parent
Shares issued to the Non-Representing Stockholders on the
Closing Date delivered to the Buyer (the "Demand Notice"), to
require the Buyer to use its best efforts to cause Parent to
file under the Securities Act no later than 30 days after the
receipt by the Buyer of such Demand Notice a registration
statement (the "Registration Statement") on the appropriate
form covering a resale of the Parent Shares issued to the Non-
Representing Stockholders on the Closing Date (the "Resale
Registration") and, subject to Parent' right to delay a
registration pursuant to Section 6.06(c) and subject to Section
6.07(d), to use its reasonable best efforts to cause the
registration statement to become effective under the Securities
Act as promptly as practicable and to keep such registration
statement continuously effective pursuant to Rule 415 under the
Securities Act and or any similar rule that may be adopted by
the SEC for a period of up to 30 days.
(b) In connection with the registration and other obligations
of the Buyer pursuant to and in accordance with Section 6.06(a)
and throughout the period specified in Section 6.06(a), the
Buyer shall cause Parent to:
(i) prepare and file with the SEC such amendments (including
post-effective amendments) to the Registration Statement, and
such supplements to the Prospectus, as may be required by the
Securities Act during the applicable period in accordance with
the intended methods of disposition specified by the Non-
Representing Stockholders set forth in such Registration
Statement and cause the Prospectus as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
(ii) notify Non-Representing Stockholders promptly and (if
requested) confirm such notice in writing, (A) when a
Prospectus or any Prospectus supplement or post-effective
amendment becomes effective, (B) of any request by the SEC for
amendments or supplements to the Registration Statement or
related Prospectus or for additional information regarding the
Non-Representing Stockholders, (C) of the issuance by the SEC
of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any
proceedings for that purpose, (D) of the receipt by Parent of
any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Parent Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (E) of the
happening of any event that requires the making of any changes
in such Registration Statement, Prospectus or documents
incorporated or deemed to be incorporated therein by reference
so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(iii) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement or the lifting of any suspension of the
qualification or exemption from qualification of any of the
Parent Shares for sale in any jurisdiction in the United
States;
(iv) furnish to the Non-Representing Stockholders and not
more than one counsel for all of them, without charge, one
conformed copy of the Registration Statement, as declared
effective by the SEC, and of each post-effective amendment
thereto, and deliver, without charge, such number of copies of
the preliminary Prospectus, any amended preliminary Prospectus,
each final Prospectus and any post-effective amendment or
supplement thereto, as the Non-Representing Stockholders may
reasonably request in order to facilitate the disposition of
the Parent Shares covered by the Registration Statement in
conformity with the requirement of the Securities Act;
(v) upon the occurrence of any event contemplated by clause
(iii)(E) above during any Delay Period, as soon as practicable
after the earlier of expiration of such Delay Period or when
such event has been publicly disclosed, or during any other
period, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference
or file any other required document as promptly as reasonably
possible so that, as thereafter delivered to the purchasers of
the Parent Shares being sold thereunder, such Prospectus will
not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) prior to any resale of the Parent Shares, cooperate
with the Non-Representing Stockholders and their one respective
counsel in connection with the registration and qualification
of the Parent Shares under the securities or blue sky laws of
such jurisdictions as the Non-Representing Stockholders may
reasonably request and do any and take such other reasonable
actions as are necessary to enable the disposition in such
jurisdictions of the Parent Shares covered by the Registration
Statement; provided, however, that Parent shall not be required
to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to
the service of process in suits or to taxation in any
jurisdiction where it is not now so subject; and
(vii) use its reasonable best efforts to list such Parent
Shares on any securities exchange or automated quotation
service on which Parent Shares are then listed.
(c) Notwithstanding any other provision of this Agreement,
Parent shall have the right, exercisable from time to time, to
delay the preparation and filing of the Registration Statement,
refrain from requesting acceleration of the effectiveness
thereof, refrain from performing its obligations under this
Section 6.06, suspend maintaining current the Prospectus
contained in the Registration Statement, or suspend the use of
any Registration Statement (the period of such delay, refrain
or suspension, a "Delay Period"):
(i) if the Board of Directors of Parent determines that in its
good faith judgment the registration and distribution of the
Parent Shares covered or to be covered by such Registration
Statement would materially interfere with any pending or
planned sale of securities of Parent, financing, acquisition or
corporate reorganization or other material transaction
involving Parent or any of its subsidiaries or would require
disclosure of any other material corporate development that the
Board of Directors has determined would not be in the interests
of Parent or its shareholders to disclose; or
(ii) if Parent has filed or intends to file within 60
calendar days a registration statement under the Securities Act
with respect to, or has commenced or intends to commence within
60 calendar days, an underwritten public offering by Parent of
equity securities of Parent or other securities convertible
into or exchangeable for equity securities of Parent.
Parent will promptly give the Non-Representing Stockholders
written notice of the commencement of any Delay Period. The
Non-Representing Stockholders agree to cease all disposition
efforts with respect to all Parent Shares held by them
immediately upon receipt of notice of the beginning of any
Delay Period. Parent shall provide written notice to the Non-
Representing Stockholders of the end of each Delay Period and
shall use its commercially reasonable efforts to end any Delay
Period as soon as practicable.
(d) None of the information supplied or to be supplied by the
Company or any Seller for inclusion or incorporation by
reference in the Registration Statement and any other documents
to be filed with the SEC in connection with the transactions
contemplated hereby (i) will, at the respective times such
documents are filed and at the time such documents become
effective or at the time any amendment or supplement thereto
becomes effective, contain any untrue statement of a material
fact, or omit to state any material fact required or necessary
in order to make the statements therein not misleading and (ii)
cause the (x) Registration Statement or such supplement or
amendment to contain any untrue statement of a material fact,
or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading when it becomes effective or at the time any
amendment or supplement thereto becomes effective or (y) the
Prospectus, when first mailed to the Non-Representing
Stockholders, or any amendment thereof or supplement thereof or
supplement thereto to contain any untrue statement or a
material fact, or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading.
6.07 Piggyback Rights. (a) If (i) the sole reason for a
Delay Period is that Parent proposes to file a registration statement
under the Securities Act with respect to an underwritten offering of
Parent Shares for its own account or the account of others, or
(ii) the Non-Representing Stockholders did not resell all of
their Parent Shares pursuant to the Registration Statement and
Parent proposes to file a registration statement under the
Securities Act prior to the first anniversary of the Closing
Date with respect to an underwritten offering of Parent Shares
for its own account or the account of others, then the Parent
shall give written notice of such proposed filing to the Non-
Representing Stockholders promptly and in any event at least
five Business Days before the anticipated filing date. Such
notice shall offer the Non-Representing Stockholders the
opportunity to register such amount of Parent Shares as the Non-
Representing Stockholders may request (a "Piggyback
Registration"). Subject to this Section 6.07, Parent shall
include in each such Piggyback Registration all Parent Shares
with respect to which Parent has received a written request for
inclusion therein within 7 Business Days after notice has been
given to the Non-Representing Stockholders. The Non-
Representing Stockholders shall be permitted to withdraw all or
part of the Parent Shares from a Piggyback Registration at any
time up to 10 days prior to the effective date of such
Piggyback Registration; provided, however, that any such Non-
Representing Stockholder shall reimburse Parent if such
withdrawal occurs after the filing of the Registration
Statement with respect to such Piggyback Registration, for the
portion of any filing fees payable with respect to the Parent
Shares so withdrawn.
(b) Parent shall permit the Non-Representing Stockholders to
include all such Parent Shares in a Piggyback Registration on
the same terms and conditions as any similar securities of
Parent or any other Persons holding Parent Shares included
therein. Notwithstanding the foregoing, with respect to any
underwritten offering, if Parent or the managing underwriters
participating in such offering advise the Non-Representing
Stockholders that the total amount of securities requested to
be included in such Piggyback Registration by the Non-
Representing Stockholders, Parent, and Persons owning Parent
Shares to be included in such Piggyback Registration, exceeds
the amount which can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of the
offering, including the price per share of the securities to be
sold (an "Adverse Effect"), then the amount of Parent Shares to
be offered for the account of Non-Representing Stockholders
shall be reduced or limited pro-rata to an amount sufficient in
the good faith determination of Parent or such managing
underwriters to remove such Adverse Effect.
(c) Nothing in this Section 6.07 shall create any liability on
the part of Parent or the Buyer if Parent in its sole
discretion should decide not to file a registration statement
proposed to be filed pursuant to Section 6.07 or to withdraw
such registration statement subsequent to its filing or not to
effect any offering, regardless of any action whatsoever that
the Non-Representing Stockholders may have taken, whether as a
result of the issuance by Parent of any notice hereunder or
otherwise.
(d) If the sole reason for a Delay Period was that Parent
proposed to file a registration statement under the Securities
Act with respect to an underwritten offering of Parent Shares
for its own account or the account of others, and Parent gave
written notice of such proposed filing to the Non-Representing
Stockholders and the opportunity to include their Parent Shares
in such Piggyback Registration Statement, it will no longer be
required to file the Registration Statement under Section 6.06.
6.08 Indemnification. In the event any Parent Shares are included
in a registration statement under Section 6.06 or 6.07:
(a) The Buyer shall cause the Parent to indemnify and hold
harmless, to the extent permitted by Law, each Non-Representing
Stockholder, the officers, directors, partners, agents and
employees (if any) of each such Non-Representing Stockholder,
any underwriter (as defined in the Securities Act) for such Non-
Representing Stockholder and each Person, if any, who controls
such Non-Representing Stockholder or underwriter within the
meaning of the Securities Act (collectively, the "Non-
Representing Stockholder Indemnitees"), against any losses,
claims, damages or liabilities (joint or several) to which they
may become subject under the Securities Act or any other
federal or state law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
are based upon any Violation (as defined below). The Buyer
shall or shall cause the Parent to reimburse each Non-
Representing Stockholder Indemnitee for any legal or other
expenses reasonably incurred by such Non-Representing
Stockholder Indemnitee in connection with investigating or
defending any such loss, claim, damage, liability or action.
The indemnity agreement contained in this Section 6.08(a) shall
not apply to amounts paid in settlement of any loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Buyer or Parent (which consent shall
not be unreasonably withheld), nor shall the Buyer or Parent be
liable to any Non-Representing Stockholder Indemnitee in any
such case for any such loss, claim, damage, liability or action
(i) to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection
with such registration by or on behalf of such Representing
Stockholder Indemnitee; or supplied by another Non-Representing
Stockholder or (ii) in the case of a sale directly by a Non-
Representing Stockholder of Parent Shares (including a sale of
such Parent Shares through any underwriter retained by such Non-
Representing Stockholder engaging in a distribution solely on
behalf of such Representing Stockholder), such untrue statement
or alleged untrue statement or omission or alleged omission was
contained in a preliminary prospectus and corrected in a final
or amended prospectus, and such Non-Representing Stockholder
failed to deliver a copy of the final or amended prospectus at
or prior to the confirmation of the sale of the Parent Shares
to the Person asserting any such loss, claim, damage or
liability in any case in which such delivery is required by the
Securities Act and (iii) following delivery of notice by Parent
to such Non-Representing Stockholder Indemnitee of a Delay
Period and such Non-Representing Stockholder Indemnitee uses
the prospectus then in effect at the time of such notice.
(b) Each Non-Representing Stockholder which includes any Parent
Shares in any registration statement (i) will indemnify and
hold harmless Parent, each of its directors, officers and
employees, any underwriter and, each Person, if any, who
controls Parent or underwriter within the meaning of the
Securities Act (collectively, the "Parent Indemnitees"),
against any losses, claims, damages or liabilities (joint or
several) to which any Parent Indemnitee may become subject
under the Securities Act, or any other federal or state law,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity
with written information furnished by or on behalf of such
Representing Stockholder expressly for use in connection with
such registration and (ii) will reimburse any legal or other
expenses reasonably incurred by any Parent Indemnitee in
connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
liability of any Representing Stockholder hereunder shall be
limited to the amount of the gross proceeds received by such
Non-Representing Stockholder in the offering giving rise to the
Violation; and provided, further that the indemnity agreement
contained in this Section shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Non-
Representing Stockholder (which consent shall not be
unreasonably withheld), or for untrue statements or alleged
untrue statements or omissions or alleged omissions contained
in a preliminary prospectus and corrected in a final or amended
prospectus in which Parent failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation of
the sale of the securities to the Person asserting any such
loss, claim, damage or liability in compliance with the
Securities Act.
(c) Promptly after receipt by any Parent Indemnitee or
Representing Stockholder Indemnitee (collectively, the
"Indemnitees") under this Section of notice of the commencement
of any action (including any governmental action), such
Indemnitee will, if a claim in respect thereof is to be made
against any indemnifying party under this Section, deliver to
the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume and control the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that
such Indemnitee shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying
party, if representation of such Indemnitee by the counsel
retained by the indemnifying party would be inappropriate due
to actual or potential differing interests, as reasonably
determined by either party, between such Indemnitee and any
other party represented by such counsel in such proceeding.
The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the
Indemnitee under this Section to the extent of such prejudice,
but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it
may have to such Indemnitee otherwise than under this Section.
(d) The obligations of Parent and the Non-Representing
Stockholders under this Section shall survive the completion of
any offering of Parent Shares in a registration statement
whether under Sections 6.06 or 6.07 or otherwise.
(e) If the indemnification provided for in this Section 6.08 is
unavailable (or insufficient) to a party that would have been
an Indemnitee under this Section in respect of any losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to herein for any reason other than
as specified herein, then each party that would have been an
indemnifying party hereunder shall, in lieu of indemnifying
such Indemnitee, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) in such proportion as is appropriate to reflect the
relative fault of such indemnifying party, on the one hand, and
such Indemnitee, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof). The relative fault shall be determined by reference
to, among other things, whether the Violation relates to
information supplied by such indemnifying party or such
Indemnitee and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such
Violation. The parties agree that it would not be just and
equitable if contribution pursuant to this Section 6.08(e) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the preceding sentence. The
amount paid or payable by a contributing party as a result of
the losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to above in this
Section 6.08(e) shall include any legal or other expenses
reasonably incurred by such Indemnitee in connection with
investigating or defending any such action or claim. No Person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation. The liability of any Non-
Representing Stockholder in respect of any contribution
obligation of such Non-Representing Stockholder arising under
this Section 6.08(e) shall not in any event exceed an amount
equal to the gross proceeds to such Non-Representing
Stockholder from the disposition of the Parent Shares disposed
of by such Representing Stockholder pursuant to such
registration.
(f) "Violation" means, with respect to any registration
statement which includes any of the Parent Shares:
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; or
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in
which they were made, not misleading.
6.09 Registration Expenses. The Buyer will cause the Parent
to pay all costs, fees and expenses incident to the Buyer's and
Parent's performance of or compliance with Sections 6.06 and 6.07
including, without limitation, (a) all registration and filing fees,
including NASD filing fees, (b) fees and expenses of compliance with
securities or blue sky laws, including reasonable fees and
disbursements of Parent's counsel in connection therewith, (c)
printing expenses (including, without limitation, expenses of
printing certificates for Parent Shares and of printing
prospectuses), (d) fees and disbursements of Parent's counsel
and (e) fees and disbursements of all independent certified
public accountants of Parent and all other Persons retained by
Parent in connection with the Registration Statement.
6.10 Financing. Subject to the terms and conditions of the order
granting approval of this acquisition by the SEC under PUHCA,
from time to time after the Closing Date until the end of the
third Fiscal Year after the Closing Date, the Buyer shall
provide the Company with an infusion of growth capital, which
unless otherwise agreed by the Buyer shall be in the form of a
guarantee by it and Parent of the Company's indebtedness, in
such amounts, and only such amounts, that are specifically
contemplated by the Company Business Plan and have been
approved by Parent's board of directors; it being understood,
that the terms of any new credit facility to be entered into by
the Company in accordance with such operating plan must also be
approved by the Company's board of directors.
6.11 Satisfaction of Indebtedness. After the Closing the Buyer
shall use its best efforts to cause up to $85 million of the Company's
Indebtedness for Borrowed Money to be refinanced unless otherwise agreed
by the Buyer and the Representing Stockholders. "Indebtedness for
Borrowed Money" means only those facilities whose principal
terms are accurately described on Schedule 6.11.
6.12 Right of First Offer. (a) The Buyer hereby grants to the
Representing Stockholders collectively the right of first offer
described in Section 6.12(a)(i) through (iii) below exercisable in
connection with any proposed Corporate Transaction (as defined
below) after the Closing Date. As used herein, the term
"Corporate Transaction" shall mean (X) any sale of all of the
capital stock of the Company, (Y) any consolidation or merger
of the Company with or into any other corporation or other
entity, other than any merger or consolidation resulting in
which Parent or an Affiliate of Parent remains the ultimate
owner of the Company, or (Z) any sale or other disposition by
the Company of all or substantially all of its assets. The
right of first offer described herein shall not apply to any
transaction that includes both the Company and other
Subsidiaries or assets of Parent.
(i) If Parent determines to engage in a Corporate Transaction,
it shall give written notice (the "Corporate Transaction
Notice") of such transaction to the Representing Stockholders.
If the Representing Stockholders wish to make an offer for a
Corporate Transaction, they shall, not later than ten Business
Days after the giving of the Corporate Transaction Notice (the
"Offer Period"), give written notice (an "Offer Notice") to
Parent stating the proposed consideration per share, the terms
of payment of such consideration and all material terms of such
Corporate Transaction. The Offer Notice shall constitute a
binding offer by the Representing Stockholders to enter into
the Corporate Transaction described in the Offer Notice with
Parent, subject to the completion of definitive documentation.
(ii) If Parent accepts the offer of the Representing
Stockholders within the Offer Period, Parent and Representing
Stockholders shall use diligent efforts to negotiate a binding
definitive agreement for the Corporate Transaction, on the
terms offered by the Representing Stockholders in the Offer
Notice, within 30 days after the giving of the Offer Notice.
(iii) If the offer stated in the Offer Notice has not been
accepted by Parent within the Offer Period, or if Parent and
the Representing Stockholders are unable to negotiate a binding
agreement for a Corporate Transaction within 30 days after
delivery of the Offer Notice, then Parent shall be free to
consummate a Corporate Transaction with another party at a
price and on other terms not less favorable as to price, and
not materially less favorable as to other terms, to Parent than
the price and other terms described in the Offer Notice;
provided, however, that such transaction must be consummated
within 180 days after expiration of the latest applicable
period specified in Section 6.12(b) above. If such transaction
is not consummated within such 180 day period then Parent shall
be required to comply with the terms of this Section 6.12
again, prior to consummating any Corporate Transaction.
(b) If the Representing Stockholders do not exercise their
collective right of first offer and the Buyer engages in a
Corporate Transaction with a third party, on the date such
third party transaction closes (the "Corporate Transaction
Closing Date"), the Buyer shall direct the Escrow Agent to
distribute the entire Escrow Fund, less any amounts reserved
for indemnification pursuant to Section 11.06, to the
Representing Stockholders, pro-rata in accordance with their
ownership interest set forth in a schedule to the Escrow
Agreement. In such case, the Deferred Exchange Ratio will be
calculated as of the Corporate Transaction Closing Date, if a
Switchover Event has not occurred, or as of the Closing Date,
if a Switchover Event has occurred and a Representing
Stockholder has elected to receive the consideration identified
in Section 1.02(i)(y)(A). If a Switchover Event has occurred
and a Representing Stockholder has elected to receive the
consideration identified in Section 1.02(i)(y)(B), the Escrow
Agent shall deliver the amount specified therein based on the
Average Parent Stock Price and the fair market values as of the
Corporate Transaction Closing Date. In addition, on the
Corporate Transaction Closing Date the Buyer shall cause Parent
to issue to the Representing Stockholders, pro-rata in
accordance with their ownership interest set forth on Exhibit
A, that number of Possible First Additional Shares as would be
issuable assuming that the Company's EBIT equaled the Target
EBIT for any of the remaining Fiscal Years; it being
understood, that there will be no retroactive assumption for
Fiscal Years for which Parent Shares have previously been
issued in accordance with Section 2.01. In such case, the
Average Parent Share Price shall be determined as of the last
day of the most recent Fiscal Year. If necessary, Parent
Shares distributed or issued in accordance with this Section
6.12(b) will contain appropriated restrictive legends and a
Representing Stockholder will appoint a Purchaser
Representative (as defined under Rule 501 of the Securities
Act)
6.13 Negotiations with Other Persons. During the Interim
Period neither the Company or any of the Sellers will, and the
Company will not permit any of its officers, directors or other
representatives, to initiate, encourage the initiation by others,
or participate in any discussions or negotiations or enter an agreement
with any other Persons, relating to the sale or other disposition of any
of the capital stock of the Company or any assets of the
Company, and will promptly notify Parent if any Person
initiates such discussions or negotiations.
6.14 Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition," "business combination," "stockholder
protection," "interested shareholder" or other similar antitakeover statute
or regulation enacted under state or federal law shall become
applicable to the transactions contemplated hereby, each of the
Sellers and the Buyer shall grant such approvals and take such
actions as are necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise use reasonable best
efforts to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby.
6.15 Board of Directors. The Representing Stockholders shall cause
each member of the Board of Directors of the Company and each Company
Subsidiary to resign effective as of the Closing Date.
6.16 Stockholder Representatives. (a) From the date hereof and
without further act of any Seller, the Stockholder Representatives are
hereby appointed as agents and attorneys-in-fact for each Seller, for and
on behalf of each such Seller, with full power and authority to represent
the Sellers and their successors with respect to all matters
arising under this Agreement, the Escrow Agreement and the
Expense Fund, and all actions taken by the Stockholder
Representatives hereunder shall be binding upon such Sellers
and their successors as if expressly ratified and confirmed in
writing by each of them. Without limiting the generality of the
foregoing, the Stockholder Representatives shall have full
power and authority, on behalf of all the Sellers and their
successors, to interpret all the terms and provisions of this
Agreement, to assist the Company in negotiating the terms of
this Agreement, to waive any condition on behalf of the Sellers
under Section 8 hereof, to terminate this Agreement on behalf
of the Sellers pursuant to Section 10 hereof, to incur expenses
in connection with their duties and actions hereunder as
Stockholder Representatives, to expend funds to pay those
expenses, to direct the Escrow Agent to disburse the Expense
Fund to pay those expenses directly or to reimburse one or more
of the Stockholder Representatives who paid such expenses, to
specify the expenses of this transaction to be paid by the
Company and advanced by the Buyer in accordance with Section
6.17,to require additional amounts to be added to the Expense
Fund, to dispute or fail to dispute any claims of Damages
against the Escrow Fund made by an indemnified party, to assert
claims of Damages against any indemnifying party, to negotiate
and compromise any dispute which may arise under this
Agreement, to sign any releases or other documents with respect
to any such dispute, and to authorize delivery of any amounts
pursuant to the Escrow Fund or any other payments to be made
with respect thereto. All determinations of the Stockholder
Representatives shall be decided by a majority thereof.
(b) The Stockholder Representatives, or any successors
hereafter appointed, may resign and shall be discharged of
their duties hereunder upon the appointment of any successor
Stockholder Representatives as hereinafter provided. In case
of such resignation, or in the event of the death or inability
to act of a Stockholder Representative, a successor shall be
named from among the Representing Stockholders by a majority of
the persons listed on Schedule 6.16(b). Each such successor
Stockholder Representative shall have all the power, authority,
rights and privileges hereby conferred upon the initial
Stockholder Representatives, and the term "Stockholder
Representatives" as used herein shall be deemed to include such
successor Stockholder Representatives.
(c) In performing any of their duties under this Agreement, or
upon the claimed failure to perform their duties hereunder, the
Stockholders Representatives shall not be liable to the Sellers
for any damages, losses or expenses which they may incur as a
result of any act, or failure to act under this Agreement;
provided, however, that the Stockholder Representatives shall
be liable to the Sellers for damages arising only out of
actions or omissions that both (i) were taken or omitted not in
good faith and (ii) constituted willful default or gross
negligence under this Agreement. Accordingly, the Stockholder
Representatives shall not incur any such liability to the
Sellers with respect to (i) any action taken or omitted to be
taken in good faith upon advice of their counsel given with
respect to any questions relating to the duties and
responsibilities of the Stockholder Representatives hereunder;
or (ii) any action taken or omitted to be taken in reliance
upon any document, including any written notice or instructions
provided for in this Agreement, the Escrow Agreement or the
Escrow Fund, not only as to its due execution and to the
validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein,
which the Stockholder Representatives shall in good faith
believe to be genuine, to have been signed or presented by the
purported proper person or persons and to conform with the
provisions of this Agreement, the Escrow Agreement and the
Escrow Fund. The limitation of liability provisions of this
Section 6.16(c) shall survive the termination of this Agreement
and the resignation of the Stockholder Representatives but
shall in no way limit the liability of the Sellers towards
Parent or the Buyer under the terms of this Agreement. The
Sellers shall severally indemnify the Stockholder
Representatives and hold them harmless against any loss,
liability or expense (including any expenses of legal counsel
retained by the Stockholder Representatives) incurred without
willful default, gross negligence or bad faith on the part of
the Stockholder Representatives and arising out of or in
connection with the acceptance or administration of their
duties hereunder.
(d) Each Seller acknowledges and agrees that the Buyer is
entitled to rely on, and that the Sellers shall be bound by,
any statement or agreement made by the Stockholder
Representatives on their behalf in accordance with this
Agreement.
(e) Each Representing Stockholder hereby agrees that the
Stockholders Representatives shall be entitled to require an
additional payment to the Escrow Agent of cash to replenish the
Expense Fund in the event that it has been expended in
accordance with Section 1.09(c) and that, within 30 days of
notice of such requirement, each Representing Stockholder shall
pay his or her pro rata share of such additional requirement to
the Escrow Agent.
6.17 Sellers' Expenses. Any prior agreement to the contrary
notwithstanding, the Sellers shall be obligated to pay (a) the fees
and expenses of the Company described in Section 2.03(d)(i)(X),
(Y) and (Z) in excess of $729,000 and (b) the balance of the amount
owed by the Company as a result of the repurchase of Shares in
connection with the settlement of the matter described on
Schedule 3.06(o). The Company shall pay for those fees and
expenses up to of $729,000. On the Closing Date, the Buyer
agrees to advance the payment of those expenses, plus any other
expenses of the Sellers incurred in connection with this
Agreement, in each case which are evidenced as owed to third
parties in excess of $729,000. The Sellers acknowledge that
this amount will be proportionally deducted from what would
have otherwise been the numerators in the definitions of
Current Exchange Ratio and Deferred Exchange Ratio and will
therefore reduce the number of Parent Shares delivered on the
Closing Date to the Non-Representing Stockholders and to the
Escrow Agent on behalf of the Representing Stockholders.
6.18 Real Property. Prior to the Closing, the Company shall
dispose of its interest in ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ LLC.
6.19 Rule 144. With a view to making available to the Representing
Stockholders the benefits of Rule 144 promulgated under the
Securities Act ("Rule 144") and any other rule or regulation of
the SEC that may at any time permit a Representing Stockholder
to sell securities of the Parent to the public without
registration, the Buyer shall cause the Parent to:
(a) use commercially reasonable efforts to make and keep public
information available, as those terms are understood and
defined in Rule 144, at all times; and
(b) use commercially reasonable efforts to file with the SEC in
a timely manner all reports and other documents required of the
Parent under the Securities Act.
6.20 Tax Matters. Each Seller agrees to provide Parent or the Buyer
documentation reasonably requested by Parent or the Buyer in
connection with an audit or inquiry by a taxing authority of
Parent or the Buyer or the parent of any consolidated group of
corporations to which Parent or the Buyer becomes a member
evidencing the payment of all Taxes payable, if any, by such
Seller in respect of the consideration received by such Seller
pursuant to this Agreement. The Buyer and each Seller agrees,
and the Buyer agrees to cause Parent to, to treat the
transaction contemplated by this Agreement as a reorganization
described in Section 368(a)(1)(B) of the Code for federal
income tax purposes.
6.21 Representing Stockholder Matters. The Representing Stockholders
agree that any amounts owed by the Company or the Buyer as a result of
the settlement of the matter described on Schedule 3.06(o) in excess of
those amounts already being paid by the Buyer on behalf of the Sellers
pursuant to Section 6.17, will be deducted pro-rata from the
amount of any additional Parent Shares they are otherwise
entitled to receive pursuant to Section 2.
7. Conditions to Each Party's Obligations. The respective obligation
of each Party to effect the transactions contemplated by this Agreement
shall be subject to the satisfaction on or prior to the Closing Date of
each of the following conditions:
7.01 Litigation. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has
the effect of making illegal, materially restricting or in any
way preventing or prohibiting the transactions contemplated by
this Agreement.
7.02 Escrow Agreement. The Escrow Agreement shall have been executed in
substantially the form attached as Exhibit C.
8. Conditions to Obligations of the Sellers. The obligations of the
Sellers hereunder are subject to the fulfillment or satisfaction, on and as
of the Closing, of each of the following conditions (any one or more of which
may be waived by the Sellers, but only in writing):
8.01 Representations, Warranties, Covenants and Agreement of the Buyer.
The representations and warranties of the Buyer in
Section 5 that are qualified by materiality shall be true and
correct in all respects, and the representations that are not
so qualified shall be true and correct in all material
respects, in all cases as of the date of this Agreement and as
of the Closing Date with the same effect as though made at and
as of the Closing Date, except where the failure to be so true
and correct, individually or in the aggregate, would not have a
Material Adverse Effect on Parent. The Buyer shall have duly
performed and complied in all material respects with all
agreements and covenants contained herein required to be
performed or complied with by it at or before the Closing.
8.02 Officer's Certificate. (a) The Buyer shall have delivered to
the Sellers a certificate dated as of the Closing Date and signed by its
President or a Vice President as to the fulfillment of the
conditions set forth in Section 8.01 hereof.
(b) The Buyer shall deliver a certificate dated as of the
Closing Date and signed by an officer of the Buyer certifying
that attached to such certificate is a true, correct and
complete copy of each order issued by the Securities and
Exchange Commission granting authority to consummate the
transactions contemplated hereby.
8.03 Opinion of Counsel. The Sellers shall have received from
counsel for Parent an opinion regarding the validity of the Parent
Shares to their reasonable satisfaction.
8.04 Regulatory Approval. All regulatory authorizations set
forth in Section 4.04 hereof required for the consummation of the
transactions contemplated by this Agreement shall have been received and
shall be final and shall not contain any terms or conditions
which, individually or in the aggregate, are reasonably likely
to have a Material Adverse Effect on the Company.
8.05 Absence of Litigation. No order, stay, judgment or decree
shall have been issued and be in effect by any court restraining or
prohibiting the Closing and no action, suit or proceeding shall be pending
(or threatened by any governmental or regulatory body) seeking
to restrain or prohibit or questioning the validity or legality
of the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith.
8.06 Absence of Material Adverse Change on Parent.
There shall not have been any Material Adverse Change
on Parent since the date hereof.
9. Conditions to Obligations of the Buyer. The obligations of the
Buyer hereunder are subject to the fulfillment or satisfaction, on and
as of the Closing, of each of the following conditions (any one or more
of which may be waived by the Buyer, but only in writing):
9.01 Representations, Warranties, Covenants and Agreements
of the Company, the Representing Stockholders and the Sellers.
The representations and warranties of the Company,
Representing Stockholders and the Sellers in Sections 3 (other
than Section 3.03) and 4.05 that are qualified by materiality
shall be true and correct in all respects, and the
representations that are not so qualified shall be true and
correct in all material respects, in all cases as of the date
of this Agreement and as of the Closing Date with the same
effect as though made at and as of the Closing Date, except
where the failure to be so true and correct, individually or in
the aggregate, would not have a Material Adverse Effect on the
Company. The representations and warranties of the Sellers in
Sections 4.01, 4.02, 4.03 and 4.04 and of the Company and
Representing Stockholders in Section 3.03 shall be true and
correct as of the date of this Agreement and as of the Closing
Date with the same effect as though made at and as of the
Closing Date. The Company, the Sellers and the Representing
Stockholders shall have duly performed and complied in all
material respects with all agreements and covenants contained
herein required to be performed or complied with by them at or
before the Closing.
9.02 Officer's Certificate. The Sellers and the Representing
Stockholders shall have delivered to the Buyer a certificate, dated the
Closing Date and signed by the Stockholder Representatives, as to the
fulfillment of the conditions set forth in Section 9.01 hereof.
9.03 Regulatory Approval. All regulatory authorizations set forth
in Section 5.04(b) required for the consummation of the transactions
contemplated by this Agreement shall have been received and
shall be final and shall not contain any terms or conditions
which, individually or in the aggregate, are reasonably likely
to have a Material Adverse Effect on the Company or place any
undue burden or adversely affect Parent's businesses, other
than the businesses of the Company, or the benefits expected to
be realized by Parent as a result of the acquisition of the
Company.
9.04 Consents. Any and all consents, permits, approvals and other
actions of any person, required for the consummation of the
transactions contemplated by this Agreement, shall have been
received, and shall be in full force and effect and shall not
contain any terms or conditions which, individually or in the
aggregate, are reasonably likely to have a Material Adverse
Effect on the Company.
9.05 Absence of Material Change. There shall not have been any
Material Adverse Change on the Company since the date hereof, except
as a result of a reduction in financing volume directly and solely
attributable to the length of time associated with the approvals
contemplated under Section 5.04(b)(ii).
9.06 Employment Agreements. The Buyer shall have entered into an
Employment Agreement with each of Messrs. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ in
substantially the form attached as Exhibit D.
9.07 Resignations. The Buyer shall have received evidence to its
satisfaction of the resignations required by Section 6.15.
9.08 Receipt of Shares. The Buyer shall have received from the Sellers
a certificate or certificates evidencing all of the issued and
outstanding Shares, or lost certificate affidavits and if
required by Parent, the posting of a reasonable amount as
Parent may direct as indemnity against any claim that may be
made against it with respect to such lost certificate, as the
case may be, duly endorsed in blank or accompanied by stock
powers duly executed in blank, in proper form for transfer,
with all signatures guaranteed and with any requisite stock
transfer tax stamps properly affixed thereto.
9.09 Company Options. The holder of each outstanding Company Option
shall have exercised such option in full and in the case of the
Optionees, shall have executed and became a party to this
Agreement as either a Representing Stockholder or a Non-
Representing Stockholder in accordance with the descriptions
set forth in the Recitals to this Agreement and the placement
of his or her name on Exhibit A or Exhibit B, as applicable.
10. Termination of Agreement.
10.01 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned upon the occurrence of any of
the following:
(a) At any time prior to the Closing Date by mutual written
consent of the Parties; or
(b) by the Stockholder Representatives if:
(i) the Closing has not occurred on or before the close of
business on April 30, 2001 (the "Termination Date") (provided
that, if the sole reason the Closing has not occurred is the
failure to receive approval or disapproval of the transaction
contemplated by this Agreement from the SEC under PUHCA, then
the Termination Date shall be June 30, 2001, or such later date
as mutually agreed by the Buyer and the Stockholder
Representatives), unless the failure of such occurrence shall
be due to the failure of the Company or any Seller to perform
or observe in any material respect any covenant or agreement to
be performed or observed by it at or before the Closing Date;
(ii) there has been a breach of any representation,
warranty, covenant or agreement made by the Buyer in this
Agreement, or any such representation and warranty shall have
become untrue after the date of this Agreement, such that
Section 8.01 would not be satisfied and such breach or
conditions is not curable or, if curable, is not cured within
30 days after written notice thereof is given by the
Stockholder Representatives to the Buyer; and
(iii) any order permanently restraining, enjoining or
otherwise prohibiting consummation of the transactions
contemplated hereby shall become final and non-appealable.
(c) by the Buyer if:
(i) the Closing has not occurred on or before the Termination
Date (provided that, if the sole reason the Closing has not
occurred is the failure to receive approval or disapproval of
the transaction contemplated by this Agreement from the SEC
under PUHCA, then the Termination Date shall be June 30, 2001,
or such later date as mutually agreed by the Buyer and the
Stockholder Representatives), unless the failure of such
occurrence shall be due to the failure of the Buyer to perform
or observe in any material respect any covenants or agreements
to be performed or observed by it at or before the Closing
Date;
(ii) there has been a breach of any representation,
warranty, covenant or agreement made by the Company or any
Representing Stockholder or Seller in this Agreement, or any
such representation and warranty shall have become untrue after
the date of this Agreement, such that Section 9.01 would not be
satisfied and such breach or condition is not curable or, if
curable, is not cured within 30 days after written notice
thereof is given by the Buyer to the Stockholder
Representatives; or
(iii) any order permanently restraining, enjoining or
otherwise prohibiting consummation of the transactions
contemplated hereby shall become final and non-appealable.
10.02 Limitation on Right to Terminate; Effect of Termination.
If this Agreement is terminated as permitted under
Section 10.01 hereof, this Agreement shall thereafter become
void and have no effect and no Party shall have liability to
any Party, or any shareholder, director, officer, employee,
agent, servant, consultant or representative of such Party
except for the obligations of the Parties hereto contained in
this Section 10.02 and Section 12.03; except to the extent that
such termination results from the willful or intentional breach
by any Party hereto of any representation, warranty, covenant
or agreement hereunder. Notwithstanding the foregoing, if the
Closing does not occur, the Company will be the sole Party
responsible for, and will indemnify the Buyer against, any
willful or intentional breach by any Seller of the
representations and warranties contained in Section 3.
11. Survival; Indemnification.
11.01 Survival of Representations and Warranties.
The representations and warranties set forth in Section
3, Section 4 and Section 5 shall survive the Closing until the
first anniversary of the Closing Date, except that the
representations and warranties contained in Sections 3.03,
3.04(b), 4.01, 4.02, 4.03, 4.04 and 5.02 shall survive forever
and the representations and warranties contained in Sections
3.07(c), 3.13(b) and 3.16 shall survive until 90 days following
the expiration of the applicable statute of limitations. This
Section 11.01 shall not limit any covenants or agreements of
the Parties hereto that by their terms contemplated performance
after the Closing Date.
11.02 General Indemnity. (a) Subject to the terms and conditions
of this Section 11, the Representing Stockholders and, solely with respect
to the representations and warranties contained in sections 4.01,
4.02, 4.03 and 4.04, the Sellers, agree to severally indemnify,
defend and hold the Buyer and its officers, directors,
advisors, Affiliates (including after the Closing, the
Company), agents, employees and each Person, if any, who
controls or may control the Buyer within the meaning of the
Securities Act (the "Buyer Indemnified Group") harmless from
and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses,
including without limitation interest, penalties and reasonable
attorneys' fees and expenses (hereinafter collectively called
"Damages"), asserted against, resulting to, imposed upon or
incurred or suffered by any of the Buyer Indemnified Group, by
reason of, resulting from or arising out of:
(i) a breach of any representation or warranty of the Company
or any Representing Stockholder or Seller contained in or made
pursuant to this Agreement; and
(ii) any breach of any covenant or agreement of the Company
or any Representing Stockholder or Seller contained in or made
pursuant to this Agreement.
The Representing Stockholders acknowledge that the Company
shall not be liable for any Damages resulting from breaches of
any representation or warranty contained in Section 3 and that,
subject to Section 11.04 and 11.05, such Damages shall be the
sole responsibility of the Representing Stockholders.
(b) Subject to the terms and conditions of this Section 11, the
Buyer shall indemnify, defend and hold the Representing
Stockholders harmless from and against all Damages asserted
against, resulting to, imposed upon or incurred by them by
reason of or resulting from or arising out of:
(i) a breach of any representation or warranty of the Buyer
contained in or made pursuant to this Agreement; or
(ii) any breach of any covenant or agreement of the Buyer
contained in or made pursuant to this Agreement.
11.03 Conditions of Indemnification for Third Party Claims.
The respective obligations and liabilities of the
Representing Stockholders and the Sellers, on the one hand, and
the Buyer, on the other hand (herein sometimes called the
"indemnifying party"), to the other (herein sometimes called
the "party to be indemnified" or the "indemnified party") under
Section 11.02 hereof with respect to claims resulting from the
assertion of liability by third parties shall be subject to the
following terms and conditions:
(i) within 30 days after receipt of notice of commencement of
any action or the assertion of any claim by a third party, the
party to be indemnified shall give the indemnifying party
written notice thereof together with a copy of such claim,
process or other legal pleading (provided that failure so to
notify the indemnifying party of the assertion of a claim
within such period shall not affect its indemnity obligation
hereunder except as and to the extent that such failure shall
adversely affect the defense of such claim), and the
indemnifying party, with the approval of the indemnified party,
shall have the right to undertake the defense thereof by
representatives of its own choosing;
(ii) in the event that the indemnifying party, by the 30th
day after receipt of notice of any such claim (or, if earlier,
by the tenth day preceding the day on which an answer or other
pleading must be served in order to prevent judgment by default
in favor of the Person asserting such claim), does not elect to
defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right
to undertake the defense, compromise or settlement of such
claim on behalf of and for the account and risk of the
indemnifying party, subject to the right of the indemnifying
party to assume the defense of such claim at any time prior to
settlement, compromise or final determination thereof with
counsel reasonably acceptable to the indemnified party;
(iii) anything in this Section 11.03 to the contrary
notwithstanding, (i) if there is a reasonable probability that
a claim may materially and adversely affect the indemnified
party other than as a result of money damages or other money
payments, the indemnified party shall have the right, at its
own cost and expense, to compromise or settle such claim, but
(ii) the indemnified party shall not, without the prior written
consent of the indemnifying party, settle or compromise any
claim or content to the entry of any judgment which does not
include as an unconditional term thereof the giving by the
claimant or the plaintiff to the indemnifying party a release
from all liability in respect of such claim; and
(iv) in connection with any such indemnification, the
indemnified party will cooperate in all reasonable requests of
the indemnifying party.
In the event that the "indemnifying party" or the
"party to be indemnified" as described in this Section 11.03 is
the Representing Stockholders as a group, then any notices
required to be given to or by, and all other actions or
decisions required to be taken or made by, such "indemnifying
party" or the "party to be indemnified" as provided in this
Section 11.03, may be given to or by, or may be taken or made
by, the Stockholder Representatives.
11.04 Basket for Damages. Anything to the contrary contained in this
Agreement or any other document or instrument to be executed and delivered
in connection herewith notwithstanding, except with respect to
the representations and warranties contained in Sections 3.03,
4.01, 4.02, 4.03, 4.04, 5.01, 5.02, 5.04(b) and 5.07 for which
the Basket and Cap shall not apply, (i) an indemnifying party
shall not be liable to an indemnified person for breaches of
its representations or warranties herein unless and until all
claims for Damages exceeds $250,000 (the "Basket"), in which
case the indemnified party shall be entitled to indemnification
for Damages in excess of the Basket and (ii) the maximum amount
that may be recovered from the Sellers (including the
Representing Stockholders) on the one hand, or the Buyer on the
other, for Damages resulting from breaches of its
representations and warranties herein shall be $5,000,000 (the
"Cap").
11.05 Escrow Fund. Except for Damages resulting from breaches of the
representations and warranties in Sections 4.01, 4.02, 4.03 or
4.04, any claim for Damages resulting from a breach of any
representation or warranty hereunder, if asserted by any member
of the Buyer Indemnified Group, shall be satisfied solely out
of the Escrow Fund in either Parent Shares or cash as a result
of the sale thereof and in accordance with Section 11.06, pro-
rata in accordance with the ownership interests of each
Representing Stockholder set forth in an exhibit to the Escrow
Agreement. Except for Damages resulting from breaches of the
representations and warranties in Sections 3.03, 4.01, 4.02,
4.03 or 4.04, no Seller (including any Representing
Stockholder) shall have any liability beyond such Seller's
interest in the amount in the Escrow Fund and at such time as
the Escrow Fund has been distributed in accordance with the
terms of this Agreement and the Escrow Agreement the Buyer and
any member of the Buyer Indemnified Group shall have no further
recourse against any Seller for Damages resulting from any
breach of a representation or warranty.
11.06 Indemnification Procedures. For Damages claimed against the
Escrow Fund in accordance with Section 11.05, upon delivery to the
Stockholder Representatives and the Escrow Agent on or before the last day
of the applicable survival period set forth in Section 11.01 of
a certificate signed by the Buyer (an "Indemnity Certificate"):
(a) stating that Damages exist in an aggregate amount greater
than $250,000; and
(b) specifying in reasonable detail the individual items of
such Damages included in the amount so stated, the date each
such item was paid, or properly accrued or arose, and the
nature of the misrepresentation or breach of representation,
warranty, covenant or agreement made by the Sellers or the
Representing Stockholders under this Agreement, the Escrow
Agent shall remove for the benefit of the Buyer, proportionally
from the Parent Shares otherwise distributable on the first,
second and third anniversaries of the Closing Date, a portion
of the Escrow Fund having a value based on the Average Parent
Share Price on the date the claim for indemnity is made equal
to such Damages in accordance with the Escrow Agreement until
there has been a Final Determination of the dispute. A "Final
Determination" shall mean (i) in the case of Damages resulting
from a third party claim, a written compromise or settlement
signed by the parties thereto, or an order, decree, or judgment
of a court of competent jurisdiction, or (ii) in the case of
Damages not resulting from a third party claim (x) if the
Stockholder Representatives have not delivered the objection
notice referred to in Section 11.07(a), such Indemnity
Certificate, or (y) if the Stockholder Representatives have
delivered the objection notice referred to in Section 11.07(a),
either (A) the memorandum setting forth their agreement, (B)
the arbitration award referred to in Section 11.07(b) or (C) an
order, decree or judgment of a court of competent jurisdiction,
as applicable. Upon notice to the Escrow Agent of a Final
Determination setting forth the amount of the damages, the
Escrow Agent shall provide notice of the Final Determination to
the Buyer and the Stockholder Representatives and distribute
fourteen days thereafter to the member of the Buyer Indemnified
Group an amount of Parent Shares, if any, equal to such Final
Determination of Damages and shall release back into the
general Escrow Fund any excess Parent Shares held by it.
11.07 Resolution of Conflicts; Arbitration. (a) In case
the Stockholder Representatives disagree with any claim or claims
asserted in the Indemnity Certificate, they shall deliver to the Buyer
and the Escrow Agent a notice of objection, setting forth in reasonable
detail the reason(s) for the objection, within 15 days after receipt
thereof. The Buyers shall have 15 days after receipt of an objection to
respond in a written statement to the objection. If after such
15 day period there remains a dispute as to any claims, the
Stockholder Representatives and the Buyer shall attempt in good
faith for 30 days to agree upon the rights of the respective
parties with respect to each of such claims. If the
Stockholder Representatives and the Buyer should so agree, a
memorandum setting forth such agreement shall be prepared and
signed by both parties.
(b) If no such agreement can be reached after good
faith negotiation, either the Buyer or the Stockholder
Representatives may, by written notice to the other, demand
arbitration of the matter unless the amount of the damage or
loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and
in either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within 15 days after such
written notice is sent, the Buyer on the one hand and the
Stockholder Representatives on the other shall each select one
arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of the arbitrators as to the
validity and amount of any claim in such Indemnity Certificate
shall be binding and conclusive upon the Parties to this
Agreement.
(c) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction.
Any such arbitration shall be held in Philadelphia,
Pennsylvania under the commercial rules then in effect of the
American Arbitration Association. For purposes of this
Section 11.07, in any arbitration hereunder in which any claim
or the amount thereof stated in an Indemnity Certificate is at
issue, with respect to the fees of each arbitrator, the
administrative fee of the American Arbitration Association and
the expenses, including attorneys' fees and costs, reasonably
incurred by the parties to the arbitration, the Party who is
claiming monetary damages shall be responsible for paying the
percentage of the claimed amount not awarded to that Party, and
the other Party will pay the remaining amount.
12. Miscellaneous.
12.01 Modification; Waiver. This Agreement may be modified,
amended or supplemented only by a written instrument executed by
the Buyer and the Stockholder Representatives. The failure of any
Party to enforce or insist upon compliance with any of the terms or
conditions of this Agreement shall not constitute a general
waiver or relinquishment of any such terms or conditions, but
the same shall be and remain at all times in full force and
effect.
12.02 Entire Agreement. This Agreement including the schedules
and exhibits hereto, constitute the entire agreement of the Parties hereto
with respect to the subject matter hereof and supersedes any
and all other prior understandings, letters, contracts or
agreements, representations or warranties, oral or written,
among the Parties hereto in respect of the subject matter of
this Agreement.
12.03 Expenses. Whether or not the transactions contemplated herein
shall be consummated, each Party shall (except as otherwise
specifically provided herein) pay its own expenses incident to
the preparation and performance of this Agreement, including
broker's fees and commissions.
12.04 Rights and Remedies. The rights and remedies granted under
this Agreement shall not be exclusive rights and remedies, but shall be in
addition to all other rights and remedies available at law or
in equity.
12.05 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be
deemed to be delivered and received by the intended recipient
as follows: (a) if personally delivered, on the Business Day
of such delivery (as evidenced by the receipt of the personal
delivery service), (b) if mailed certified or registered mail
return receipt requested, four (4) Business Days after being
mailed, (c) if delivered by overnight courier (with all charges
having been prepaid), on the Business Day of such delivery (as
evidenced by the receipt of the overnight courier service of
recognized standing), or (d) if delivered by facsimile
transmission, on the Business Day of such delivery if sent by
6:00 p.m. in the time zone of the recipient, or if sent after
that time, on the next succeeding Business Day (as evidenced by
the printed confirmation of delivery generated by the sending
party's telecopier machine). All such notices, requests,
demands and other communications shall be sent to the following
addresses or facsimile numbers as applicable:
If to the
Company:
Leasing Technologies International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: F. ▇▇▇▇▇ ▇▇▇▇▇▇
Fax. No. (▇▇▇) ▇▇▇-▇▇▇▇
Copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
If to the
Sellers, the Representing
Stockholders or the
Stockholder Representatives: F. ▇▇▇▇▇ ▇▇▇▇▇▇
c/o Leasing Technologies
International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax. No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o Leasing Technologies
International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax. No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o Leasing Technologies
International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax. No. (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
c/o Leasing Technologies
International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax. No. (▇▇▇) ▇▇▇-▇▇▇▇
Copies to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
If to the Buyer:
Allegheny Energy, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Allegheny Ventures, Inc.
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Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Allegheny Energy, Inc.
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Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Copies to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
12.06 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, by operation of law
or otherwise, by any Party hereto without the prior written
consent of the other Party. This Agreement and all of the
provisions hereof shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors
and permitted assigns. Except as aforesaid, nothing in this
agreement, express or implied, is intended to confer upon any
person other than the Parties hereto and their said successors
and assigns, any rights, remedies or obligations under or by
reason of this Agreement.
12.07 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any adverse
manner to either Party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being
enforced, the Parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled
to the extent possible.
12.08 Counterparts; Facsimile. This Agreement may be executed in
one or more counterparts, all of which shall constitute one and the same
instrument. This Agreement may be executed by facsimile
signatures(s).
12.09 Headings. The article and section headings in this Agreement are
for convenience of reference only and shall not be deemed to
alter or affect the meaning or interpretation of any provisions
hereof.
12.10 Governing Law; Submission to Jurisdiction; Selection of Forum.
(a) This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of Delaware,
without reference to the conflict of laws principles thereof.
Each party hereto agrees that it shall bring any action or
proceeding in respect of any claim arising out of or related to
this agreement or the transactions contained in or contemplated
by this agreement, whether in tort or contract or at law or in
equity, exclusively in the United States District Court for the
District of Delaware (the "Chosen Court") and (i) irrevocably
submits to the exclusive jurisdiction of the Chosen Court, (ii)
waives any objection to laying venue in any such action or
proceeding in the Chosen Court, (iii) waives any objection that
the Chosen Court is an inconvenient forum or does not have
jurisdiction over any party hereto and (iv) agrees that service
of process upon such party in any such action or proceeding
shall be effective if notice is given in accordance with
Section 12.06 of this Agreement.
(b) Notwithstanding the provisions of Section 12.10(a)
and subject to Section 11.07(c), the Parties agrees to submit
any dispute between them to binding arbitration and such
dispute shall be settled by arbitration conducted by three
arbitrators. The Buyer on the one hand and the Stockholder
Representatives on the other shall each select one arbitrator,
and the two arbitrators so selected shall select a third
arbitrator. The decision of the arbitrators so selected shall
select a third arbitrator. The decision of the arbitrators
shall be binding and conclusive upon the Parties to this
Agreement. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such
arbitration shall be held in Philadelphia, Pennsylvania under
the commercial rules then in effect of the AAA. For purposes
of this Section 12.10(b), in any arbitration hereunder in which
any claim or the amount thereof is at issue, with respect to
the fees of each arbitrator, the administrative fee of the
American Arbitration Association and the expenses, including
attorneys' fees and costs, reasonably incurred by the parties
to the arbitration, the Party who is claiming monetary damages
shall be responsible for paying the percentage of the claimed
amount not awarded to that Party, and the other Party will pay
the remaining amount.
12.11 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship
of any of the provisions of this Agreement. Any item disclosed
in the Company Disclosure Schedule (as defined hereinafter)
under any specific section number thereof or disclosed in
reference to any specific section hereof, shall be deemed to
have been disclosed by the Company for all purposes of this
Agreement in response to other sections of the Company
Disclosure Schedule to the extent but only to the extent that
such disclosure is specifically cross-referenced to such other
section(s).
12.12 Absence of Third-Party Beneficiary Rights. No provisions
of this Agreement are intended, nor will be interpreted, to provide
or create any third-party beneficiary rights or any other rights of
any kind in any client, customer, affiliate, partner or employee of
any party hereto or any other person or entity, unless specifically
provided otherwise herein, and, except as so provided, all
provisions hereof will be personal solely between the parties
to this Agreement.
12.13 Effect of Schedules. Notwithstanding anything to the contrary
contained in this Agreement or in any of the schedules to this Agreement,
any information disclosed in one of such schedules shall be
deemed to be disclosed in any other schedules if in accordance
with Section 12.11.
12.14 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this agreement
authorized as an agent, employee or legal representative of any
other party. No Party will have the power to control the
activities and operations of any other, and the parties' status
is, and at all times, will continue to be, that of independent
contractors with respect to each other. No Party will have any
power or authority to bind or commit any other. No Party will
hold itself out as having any authority or relationship in
contravention of this section.
13. Definitions.
13.01 AAA. As defined in Section 11.07(c).
13.02 Affiliate. As applied to any Person, means any other Person
directly or indirectly controlling, controlled by or under
common control with such Person.
13.03 Average Parent Share Price. As defined in Section 1.03(a).
13.04 Balance Sheet. As defined in Section 3.17.
13.05 Benefit Plans. All bonus, deferred compensation, pension,
retirement, profit-sharing, thrift savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option,
employment and termination agreements, policies or arrangements
covering current or former Employees, including, but not
limited to, "employee benefit plans" within the meaning of
Section 3(3) of ERISA.
13.06 Business Day. Any day other than a Saturday, a Sunday or
a day on which banks in any of Hagerstown, Maryland or New York, New
York are authorized or obligated by law or executive order to
close or a day on which the New York Stock Exchange is not open
for trading.
13.07 Buyer. As defined in the Preamble.
13.08 Code. As defined in the Recitals.
13.09 Company. As defined in the Preamble.
13.10 Company Business Plan. As defined in the Section 2.03(d).
13.11 Company Options. As defined in Section 1.07.
13.12 Company Subsidiary. As defined in Section 3.05(a).
13.13 Contracts. As defined in Section 3.04(a).
13.14 Current Exchange Ratio. As defined in Section 1.03(b).
13.15 Deferred Exchange Ratio. As defined in Section 1.03(c).
13.16 Delay Period. As defined in Section 6.06(c).
13.17 Employee(s). Any current or former employee of the Company
or any Company Subsidiary.
13.18 ERISA. The Employee Retirement Income Security Act of 1974,
as amended.
13.19 Environmental Law. Any federal, state, local or foreign
statute, law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the
protection, investigation or restoration of the environment,
health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of or
exposure to any Hazardous Substance or (C) noise, odor, indoor
air, employee exposure, wetlands, pollution, contamination or
(D) any injury or threat of injury to persons or property
relating to any Hazardous Substance.
13.20 Escrow Agent. As defined in Section 1.09(a).
13.21 Escrow Agreement. As defined in Section 1.09(a).
13.22 Extraordinary Dividend. As defined in Section 1.02(a).
13.23 Financial Statements. As defined in Section 3.14.
13.24 Fiscal Year. As defined in Section 2.
13.25 GAAP. Generally accepted accounting principles in the
United States as of the date of this Agreement, without reference to
changes therein as may otherwise be applicable to subsequent
periods, consistently applied.
13.26 Governmental Entity. Any court, tribunal, arbitrator,
arbitration panel, or any governmental, administrative, or regulatory
authority, agency, commission, or body or similar entity.
13.27 Hazardous Substance. (A) Any substance that is listed,
classified or regulated pursuant to any Environmental Law; (B) any petroleum
or coal product or by-product, any waste or ash, asbestos-
containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive material or radon; and
(C) any other substance which is regulated by any government
entity in connection with any Environmental Law.
13.28 HSR Act. As defined in Section 4.04.
13.29 Intellectual Property. All intellectual property or other
proprietary rights of every kind, including, without limitation, all domestic
or foreign patents, patent applications, inventions (whether or
not patentable), processes, products, technologies,
discoveries, copyrightmark applications and registrations,
brand names, certification marks, service marks and service
▇▇▇▇ applications and registrations, trade names, trade dress,
copyright registrations, domain names, design rights, customer
lists, marketing and customer information, mask works, rights,
know-how, licenses, technical information (whether confidential
or otherwise), software, and all documentation thereof and
tangible and intangible proprietary information or materials.
13.30 Interim Period. The period from the date of this
Agreement until and including the Closing Date.
13.31 Laws. As defined in Section 3.04(a).
13.32 Legal Requirements. Any and all applicable (i) federal,
state, local and foreign laws, statutes, ordinances, requirements, awards,
processes, rules and regulations, (ii) judgments, orders,
writs, injunctions, decrees, administrative rulings and (iii)
contracts or agreements, with any Governmental Entity relating
to compliance with matters described in (i) and (ii).
13.33 Material Adverse Effect or Material Adverse Change on
the Company. A material adverse effect on, or a material adverse
change in, the financial condition, properties, business,
results of operations or strategic business prospects of the
Company and its Subsidiaries as a whole.
13.34 Material Adverse Effect or Material Adverse Change on
Parent. A material adverse effect on, or a material adverse
change in, the financial condition, properties, business or
results of operations of Parent and its Subsidiaries as a
whole, other than (i) effects caused by changes in general
economic or securities market conditions, (ii) regulatory
changes or conditions that affect the energy industry in
general, (iii) changes in GAAP, (iv) changes in PUHCA and (v)
effects resulting from the announcement of this Agreement.
13.35 Material Contracts. As defined in Section 3.07.
13.36 Non-Representing Stockholders. As defined in the Preamble.
13.37 Non-Representing Stockholder Consideration. As defined in
Section 1.01.
13.38 Parent. As defined in the Recitals.
13.39 Parent Shares. As defined in the Recitals.
13.40 Parties. The Buyer, the Company and the Sellers.
13.41 Permits. Any and all permits, authorizations,
certificates, approvals, registrations, variances, rights of way,
franchises, orders or other approvals and licenses relating to
the operations of the Company or any Company Subsidiary (i)
under any (x) Laws or (y) judgment or contract with any
Governmental Entity relating to compliance with any Law, or
(ii) granted by any Governmental Entity.
13.42 Person. Any individual, corporation, partnership,
firm, joint venture, association, joint stock company, trust,
unincorporated organization, governmental or regulatory body or
other entity.
13.43 Piggyback Registration. As defined in Section 6.07(a).
13.44 Prospectus. The prospectus included in any registration
statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part
of an effective registration statement in reliance upon Rule
430A) or for use in any public offering, as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Parent Shares and
all other amendments and supplements to such prospectus,
including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by
reference in such prospectus.
13.45 Registration Statement. As defined in Section 6.06(a).
13.46 Representing Stockholders. As defined in the Preamble.
13.47 Representing Stockholder Consideration. As defined in
Section 1.02.
13.48 SEC. The United States Securities and Exchange Commission.
13.49 Securities Act. As defined in Section 5.05.
13.50 Sellers. As defined in the Preamble.
13.51 Shares. As defined in the Recitals.
13.52 Stockholder Representatives. As defined in Section 2.03(a).
13.53 Subsidiary means, with respect to any Person, any other
Person of which more than 50% of the securities or other ownership
interests having by their terms ordinary voting power to elect
a majority of the board of directors or other persons
performing similar functions, or such other Person is directly
or indirectly owned or controlled by such Person, by one or
more of such Person's Subsidiaries or by such Person and any
one or more of such Person's Subsidiaries.
13.54 Switchover Event. As defined in Section 1.02(a).
13.55 Takeover Statute. As defined in Section 3.24.
13.56 Taxes. All federal, state, local or foreign taxes,
including income, gross receipts, windfall profits, customs duties, value
added, severance, property, trade, consumption, solidarity
surcharge, capital, production, estimated sales, use, license,
excise, franchise, employment, withholding or other taxes of
any kind, together with any interest, additions or penalties
with respect thereto and any interest in respect of such
additions or penalties.
13.57 Tax Returns. All reports and returns required to be
filed with respect to Taxes.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement as of the date first above written.
LEASING TECHNOLOGIES
INTERNATIONAL, INC.
By:
Name:
Title:
ALLEGHENY VENTURES, INC.
By:
Name:
Title:
[Additional Signature Pages Follow]
REPRESENTING STOCKHOLDERS
________________ _______________
▇▇▇▇ ▇▇▇▇▇▇▇ F. ▇▇▇▇▇ ▇▇▇▇▇▇
_________________ ________________
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_________________ _________________
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_________________ _________________
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_________________ _________________
▇▇▇▇▇▇▇ & Co. ▇▇▇▇ ▇. ▇▇▇▇
By:
[Signature Page of Representing Stockholders]
NON-REPRESENTING STOCKHOLDERS
_____________________ _________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
_____________________ _________________
Krohnberg Limited Partnership ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_____________________ ____________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ JAG Partners
By:
_____________________ _____________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Organization Corp.
By:
_________________ _________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Coast Investments Limited B.V.
By:
_____________________ _________________
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
_________________
_________________ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
[Signature Page of Non-Representing Stockholders]
_________________ __________________________
▇▇▇▇▇ ▇▇▇▇▇▇ Oxford Venture Fund II Limited
By:
_______________________ _____________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Trust (1991) Oxford Venture Fund III
By: By:
[Signature Page of Non-Representing Stockholders]
List of Exhibits
Exhibit A - Representing Stockholders
Exhibit B - Non-Representing Stockholders
Exhibit C - Escrow Agreement
Exhibit D - Employment Agreement
List of Schedules
Schedule 3.03
Schedule 3.04(a)
Schedule 3.05
Schedule 3.06
Schedule 3.07(b)
Schedule 3.07(c)
Schedule 3.08
Schedule 3.09(a)
Schedule 3.10(a)
Schedule 3.10(c)
Schedule 3.11
Schedule 3.12
Schedule 3.13(a)
Schedule 3.15
Schedule 3.16(c)
Schedule 3.16(e)
Schedule 3.16(f)
Schedule 3.16(g)
Schedule 3.17
Schedule 3.20
Schedule 3.21
Schedule 6.01
Schedule 6.11
Schedule 6.16(b)
Exhibit A
REPRESENTING STOCKHOLDERS
Current No. of Options
Stockholders Common Granted
F. ▇▇▇▇▇ ▇▇▇▇▇▇*
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇*
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇*
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇*
▇▇▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
505,226 total 211,750 total
Options
Optionees Granted
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
99,000 total
*For estate and financial planning purposes, these individuals
shall be permitted to assign some of the Shares held by them
prior to the Closing to a special purpose entity that remains
in their control.
Exhibit B
NON-REPRESENTING STOCKHOLDERS
Current No. of Options
Stockholders Common Granted
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
JAG Partners
▇▇▇▇ Organization Corp.
Coast Investments Limited
B.V.
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
Oxford Venture Fund II
Limited
Oxford Venture Fund III
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Trust (1991)
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Lmtd.
Ptnshp.
▇▇▇▇▇▇▇ ▇▇▇▇▇
519,212 total 3,000 total
Exhibit B (continued)
NON-REPRESENTING STOCKHOLDERS (CONTINUED)
Options
Optionees Granted
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
Jura ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
60,500 total
Exhibit C
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of _________ (this "Escrow
Agreement"), by and among Allegheny Ventures, Inc., a Delaware
corporation ("Buyer"), the Persons listed on Annex A hereto (the
"Representing Stockholders") and Mellon Bank, [a national banking
association], as escrow agent (the "Escrow Agent"). Capitalized
terms used and not otherwise defined herein shall have the
meaning ascribed to them in that certain Stock Purchase Agreement
(the "Agreement"), dated as of December __, 2000, between the
Buyer, Leasing Technologies International, Inc., a Delaware
corporation (the "Company"), and the stockholders of the Company.
W I T N E S S E T H
WHEREAS, the Agreement provides, among other things, for the
purchase by the Buyer from each of the Representing Stockholders
of all outstanding shares of common stock of the Company owned by
such Representing Stockholder;
WHEREAS, pursuant to the Agreement, the Buyer and the
Representing Stockholders have agreed to enter into this Escrow
Agreement with the Escrow Agent for the purposes of securing
certain of the Buyer's rights under the Agreement and to provide
for the distribution of the Escrow Shares (as defined below) to
the Representing Stockholders;
WHEREAS, pursuant to the terms of the Agreement, Parent is
delivering to the Escrow Agent on the date hereof [___] Parent
Shares (together with earnings and distributions thereon,
including any Extraordinary Dividend, the "Escrow Shares"), which
represent the product of (i) all of the Shares owned by the
Representing Stockholders immediately prior to the Closing (which
shall include the net exercise number of any Shares issuable upon
exercise of the Company Options pursuant to Section 1.07 of the
Agreement) and (ii) the Deferred Exchange Ratio in effect on the
Closing Date, to be held in escrow pursuant to the terms and
subject to the conditions set forth in this Escrow Agreement; and
NOW, THEREFORE, in consideration of the consummation of the
transactions contemplated by the Agreement and the mutual
covenants and agreements set forth herein and therein, each of
the Buyer and the Representing Stockholders agree as follows,
and, in consideration of the mutual covenants set forth herein,
the Escrow Agent agrees as follows:
14. The Escrow Fund.
Set forth opposite each Representing Stockholder's name on
Annex A is the number of Shares owned by such Representing
Stockholder (which shall include the net exercise number of any
Shares issuable upon exercise of the Company Options pursuant to
Section 1.07 of the Agreement). Upon the execution of this
Escrow Agreement, the Buyer shall cause Parent to deliver to the
Escrow Agent [___] Parent Shares, which represents the product of
(i) all of the Shares owned by the Representing Stockholders
immediately prior to the Closing (which shall include the net
exercise number of any Shares issuable upon exercise of the
Company Options pursuant to Section 1.07 of the Agreement) and
(ii) the Deferred Exchange Ratio in effect on the Closing Date.
The receipt of the Escrow Shares will be acknowledged by the
Escrow Agent in the form of a receipt.
15. Release of the Escrow Fund.
The Escrow Agent will hold the Escrow Shares, together with
earning and distributions thereon (collectively, the "Escrow
Fund"), until authorized hereunder to distribute any specified
portion thereof, as follows:
15.01 Until a Switchover Event occurs, the Escrow Agent shall
distribute to each Representing Stockholder on the first, second
and third anniversaries of the Closing Date, respectively, that
number of Parent Shares obtained by multiplying all of the Shares
indicated as owned by it on Annex A (which shall include the net
exercise number of any Shares issuable upon exercise of the
Company Options pursuant to Section 1.07 of the Agreement) by the
Deferred Exchange Ratio in effect on the first, second and third
anniversaries of the Closing Date, and multiplying the result
obtained times 0.3538, 0.3333 and 0.3129, respectively, in each
case less any amounts then set aside for the Expense Fund or
reserved pursuant to Section 3 of this Escrow Agreement with
respect to any unresolved or disputed claims for Damages made by
the Buyer hereunder.
15.02 If a Switchover Event occurs, the Escrow Agent shall
distribute to each Representing Stockholder, according to each
Representing Stockholder's election, either:
(a) on each of the remaining first, second and third
anniversaries of the Closing Date, respectively, that number of
Parent Shares obtained by multiplying all of the Shares indicated
as owned by it on Annex A (which shall include the net exercise
number of any Shares issuable upon exercise of the Company
Options pursuant to Section 1.07 of the Agreement) by the
Deferred Exchange Ratio in effect on the Closing Date, and
multiplying the result obtained times 0.3538, 0.3333 and 0.3129,
respectively; or
(b) as equals, when combined with the aggregate value of the
Extraordinary Dividend applicable to each Parent Share so
distributed, based on the Average Parent Share Price and the fair
market value of the Extraordinary Dividend on any of the
remaining first, second and third anniversaries of the Closing
Date (which fair market value shall be the Average Stock Price
for any publicly traded securities), $5,223,673.70,
$4,921,001.80, and $4,619,806.40, respectively, for any of the
remaining first, second and third anniversaries, respectively,
multiplied by a fraction, the numerator of which shall be such
number of Shares and the denominator of which shall be the sum of
all Shares held by the Representing Stockholders on the Closing
Date (it being understood that this Section (2)(b)(ii) shall in
no way affect each Representing Stockholder's entitlement to
receive and retain any payments distributable to such
Representing Stockholder as a result of its ownership of the
Parent Shares distributed to it prior to a Switchover Event
pursuant to Section 2(a) above;
in each case less any amounts then set aside for the Expense Fund
or reserved pursuant to Section 3 of this Escrow Agreement with
respect to any unresolved or disputed claims for Damages made by
the Buyer hereunder.
15.03 If a Switchover Event occurs, the Buyer shall give notice
of the declaration of the Extraordinary Dividend giving rise to
such Switchover Event to each Representing Stockholder not more
than five Business Days after the date on which such
Extraordinary Dividend is declared. Each Representing
Stockholder will be given a one-time opportunity to elect to
receive the number of Parent Shares obtained by either paragraph
(b)(i) or paragraph (b)(ii) of this Section 2, which election
will be binding on such Representing Stockholder. Each such
Representing Stockholder shall deliver its election notice to the
Buyer and the Escrow Agent at least one Business Day prior to the
date the Extraordinary Dividend is payable. If the Representing
Stockholder elects to receive the Parent Shares specified by
paragraph (b)(i), such Representing Stockholder can direct the
Escrow Agent to sell any such Parent Shares in conformity with
Rule 144 of the Securities Act in exchange for cash, which cash
will only be distributed to such Representing Stockholder at the
time the underlying Parent Share would otherwise have been
distributed to it.
15.04 The Representing Stockholders shall be entitled to
receive all distributions on Parent Shares including, but not
limited to, any Extraordinary Dividend or other earnings,
interest, dividends and share distributions, and any amounts paid
or received in respect of such earnings, interest, dividends and
share distributions, subject to the possible return of a portion
of those distributions in proportion to the amount of any Parent
Shares which might be returned to Parent pursuant to the terms of
Section 2(g) of this Escrow Agreement.
15.05 The Buyer shall cause Parent to deposit with the Escrow
Agent the full amount of the Extraordinary Dividend applicable to
the Parent Shares then held in the escrow account.
15.06 The Buyer agrees to cause Parent to remove any
restrictive legends contained on any Parent Shares distributed
out of the Escrow Fund, within ten days of receipt by Parent of
satisfactory evidence, if necessary, that such legends are no
longer required by Rule 144(e), (f) and (h) of the Securities
Act, or on the date of distribution for distributions occurring
on or after the second anniversary of the Closing Date.
15.07 If the Escrow Shares are not sufficient or are more than
required to satisfy the Buyer's obligations hereunder, either
Parent shall issue additional Parent Shares to cure the
deficiency or the Escrow Agent shall return the excess Escrow
Shares, or the cash resulting from the previous sale thereof by
the Escrow Agent, to Parent, as applicable. The Representing
Stockholders acknowledge that any additional Parent Shares so
issued on the third anniversary will not be securities registered
under the Securities Act.
15.08 The Escrow Agent, upon written request of any
Representing Stockholder and to the extent permitted under the
Securities Act, shall distribute to such Representing Stockholder
cash or cash proceeds derived from the sale of the Parent Shares
sufficient to satisfy any tax liabilities of such Representing
Stockholder arising out of the transactions contemplated by the
Agreement; provided, that any expenses associated therewith shall
be paid by such Representing Stockholder.
15.09 If any of the Employment Agreements entered into pursuant
to Section 9.06 of the Agreement with Messrs. F. ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (each an "Executive") are
terminated, either for Good Reason (as defined in Section 3.3 of
such Employment Agreement) by the Executive who is a party to
such Employment Agreement, or without Cause (as defined in
Section 3.4 of such Employment Agreement) by the Company, such
Executive and the Company shall provide notice to the Escrow
Agent of the termination. Upon receipt of such notice, the
Escrow Agent shall immediately distribute to such Executive the
Parent Shares such Executive would otherwise have been entitled
to receive under Section 2 of this Escrow Agreement on any of the
remaining first, second and third anniversaries of the Closing
Date, less any Shares reserved or reservable for indemnification
under Section 3 of this Escrow Agreement. If a Switchover Event
has not occurred, the Deferred Exchange Ratio shall be the
Deferred Exchange Ratio in effect on the date of termination.
[If a Switchover Event has occurred, the Average Parent Share
Price, the fair market value of the Extraordinary Dividend and
the Average Stock Price, if applicable, shall be calculated as of
the date of termination.]
16. Indemnification Procedures.
16.01 Notwithstanding the provisions of Section 2 of this
Escrow Agreement, upon delivery to the Stockholder
Representatives and the Escrow Agent on or before the last day of
the applicable survival period set forth in Section 11.01 of the
Agreement of a certificate signed by the Buyer (an "Indemnity
Certificate")
(a) stating that Damages exist in an aggregate amount greater
than $250,000, and
(b) specifying in reasonable detail the individual items of such
Damages included in the amount so stated, the date each such item
was paid, or properly accrued or arose, and the nature of the
misrepresentation or breach of representation, warranty, covenant
or agreement made by the Sellers or the Representing Stockholders
under the Agreement,
the Escrow Agent shall remove for the benefit of the Buyer,
proportionally from the Parent Shares otherwise distributable on
the first, second and third anniversaries of the Closing Date, a
portion of the Escrow Fund having a value based on the Average
Parent Share Price on the date the claim for indemnity is made
equal to such Damages and continue to hold such amount in escrow
in accordance with paragraph (b) below. The Escrow Agent shall
have no liability to either the Buyer or the Representing
Stockholders for any shortfall resulting from an incorrect
reservation of moneys in the Escrow Fund unless such shortfall is
caused by the gross negligence or willful misconduct of the
Escrow Agent with respect to such estimation.
16.02 The Escrow Agent shall keep reserved, and not distribute,
that part of the Escrow Fund equal to the amount reserved
pursuant to paragraph (a) above with respect to any Indemnity
Certificate until there has been a Final Determination. Upon
notice to the Escrow Agent of a Final Determination setting forth
the amount of the Damages, the Escrow Agent shall provide notice
of the Final Determination to the Buyer and the Stockholder
Representatives and distribute fourteen days thereafter to the
member of the Buyer Indemnified Group an amount of Parent Shares,
if any, equal to such Final Determination of Damages and shall
release back into the general Escrow Fund any excess Parent
Shares held by it; provided, however, that the maximum aggregate
value of Parent Shares that the Escrow Agent may distribute to
the Buyer Indemnified Parties according to this Section 3 is
$5,000,000.
17. Final Determination.
For the purpose of this Escrow Agreement, a "Final
Determination" shall mean
17.01 in the case of Damages resulting from a third-party
claim, a written compromise or settlement signed by the parties
thereto, or an order, decree or judgment of a court of competent
jurisdiction, or
17.02 in the case of Damages not resulting from a third-party
claim,
(a) if the Stockholder Representatives have not delivered the
objection notice referred to in Section 5(a), such Indemnity
Certificate, or
(b) if the Stockholder Representatives have delivered the
objection notice referred to in Section 5(a), either the
memorandum setting forth their agreement, the arbitration award
referred to in Section 5(b), or an order, decree or judgment of a
court of competent jurisdiction, as applicable.
18. Resolution of Conflicts; Arbitration.
18.01 In case the Stockholder Representatives disagree with any
claim or claims asserted in the Indemnity Certificate, they shall
deliver to the Buyer and the Escrow Agent a notice of objection,
setting forth in reasonable detail the reason(s) for the
objection, within fifteen days after receipt thereof. The Buyer
shall have fifteen days after receipt of an objection to respond
in a written statement to the objection. If after such fifteen
day period there remains a dispute as to any claims, the
Stockholder Representatives and the Buyer shall attempt in good
faith for thirty days to agree upon the rights of the respective
parties with respect to each of such claims. If the Stockholder
Representatives and the Buyer should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both
parties.
18.02 If no such agreement can be reached after good faith
negotiation, either the Buyer or the Stockholder Representatives
may, by written notice to the other, demand arbitration of the
matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter
shall be settled by arbitration conducted by three arbitrators.
Within fifteen days after such written notice is sent, the Buyer
on the one hand and the Stockholder Representatives on the other
shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the
arbitrators as to the validity and amount of any claim in such
Indemnity Certificate shall be binding and conclusive upon the
Parties to the Agreement.
18.03 Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such
arbitration shall be held in Philadelphia, Pennsylvania under the
commercial rules then in effect of the American Arbitration
Association. For purposes of this Section 5, in any arbitration
hereunder in which any claim or the amount thereof stated in an
Indemnity Certificate is at issue, with respect to the fees of
each arbitrator, the administrative fee of the American
Arbitration Association and the expenses, including attorneys'
fees and costs, reasonably incurred by the parties to the
arbitration, the Party who is claiming monetary damages shall be
responsible for paying the percentage of the claimed amount not
awarded to that Party, and the other Party will pay the remaining
amount.
19. Voting Rights.
Each Representing Stockholder shall be entitled to vote
[its] pro-rata portion of the Escrow Shares, and any securities
resulting from an Extraordinary Dividend on such Escrow Shares,
by providing timely notice and voting instructions to the Escrow
Agent; provided, however, that such Representing Stockholder pays
any fees assessed by the Escrow Agent in connection with the
exercise of those voting rights. If any Representing Stockholder
does not exercise its voting rights, the Escrow Agent shall vote
each such Representing Stockholders pro-rata portion of the
Escrow Shares it holds, and any securities resulting from an
Extraordinary Dividend on such Escrow Shares, in the same manner
as the holders of a majority of the outstanding Parent Shares or
a majority of such outstanding securities resulting from an
Extraordinary Dividend, as applicable.
20. Investments.
The Escrow Agent will hold the Escrow Fund. Each of the
Representing Stockholders shall be responsible for all tax
reporting with respect to the Escrow Fund and shall pay any and
all tax liabilities arising with respect to the Escrow Shares, if
any, and income generated by the Escrow Fund pro rata in
proportion to such Representing Stockholder's interest in the
Company as set forth on Annex A. By execution and delivery
hereof the Representing Stockholders hereby direct the Escrow
Agent to invest any cash in the Escrow Fund [only in, or in money
market or mutual funds invested exclusively in, securities or
direct obligations of, or obligations the timely payment of the
principal and interest on which is fully guaranteed by, the
United States of America or its Agencies, and which have an
ending maturity of 397 days or less].
21. Expense Fund.
3% of the Parent Shares in the Escrow Fund shall be set
aside as a fund (the "Expense Fund") for expenses, if any, of the
Stockholder Representatives. The Stockholder Representatives
shall be entitled to direct the Escrow Agent to disburse the
Expense Fund, to the extent permitted under the Securities Act,
to pay the expenses incurred by the Stockholder Representatives
in the performance of their duties and actions under this Escrow
Agreement and the Agreement. Such payments may be made directly
to the third party to whom such expenses are due or as
reimbursement to one or more of the Stockholder Representatives
who paid such expenses.
22. Concerning the Escrow Agent.
22.01 The Escrow Agent shall be entitled to receive such fees
as are reasonable and customary as compensation for its services
hereunder, and shall be reimbursed for all reasonable expense,
disbursements, and advances incurred or made by the Escrow Agent
in performance of its duties hereunder. The annual fees shall be
paid by the Buyer and any fees associated with actions
specifically requested by a Representing Stockholder, including
those resulting from the sale of Parent Shares or other
securities by the Escrow Agent in accordance with Section 2(c) of
this Escrow Agreement shall be borne by such Representing
Stockholder, in each case as per the Fee Schedule (the "Fee
Schedule") attached hereto as Annex B.
22.02 The Escrow Agent may resign and be discharged from its
duties hereunder at any time by giving notice of such resignation
to the Buyer and the Representing Stockholders specifying a date
when such resignation shall take effect. Upon such notice, a
successor Escrow Agent shall be appointed with the consent of the
Buyer and the Representing Stockholders, such successor Escrow
Agent to become Escrow Agent hereunder upon the resignation date
specified in such notice. If the Buyer and the Representing
Stockholders are unable to agree upon a successor Escrow Agent
within thirty days after such notice, the Escrow Agent shall be
entitled to apply to a court of competent jurisdiction for the
appointment of a successor escrow agent, with any expenses to be
shared equally by the Buyer on the one hand and the Representing
Stockholders on the other hand. The Escrow Agent shall continue
to serve until its successor accepts the terms of the escrow and
receives the Escrow Fund. The Buyer and the Representing
Stockholders hereto shall have the right at any time upon their
mutual consent to substitute a new Escrow Agent by giving notice
thereof to the Escrow Agent then acting.
22.03 With the exception of Sections 1.02, 1.09 and 11 of the
Agreement and the related definitions, the Escrow Agent shall not
be charged with knowledge of the Agreement. A copy of the
Agreement has been delivered to the Escrow Agent prior to the
date hereof. The Escrow Agent undertakes to perform such duties
as are specifically set forth herein and no implied duties shall
be read into this Escrow Agreement against the Escrow Agent; the
Escrow Agent may conclusively rely, and shall be protected in
acting or refraining from acting, on any written notice,
instrument, or signature believed by it to be genuine and to have
been signed or presented by the proper Party or Parties duly
authorized to do so; provided, however, in accordance with
Section 6.15 of the Agreement, any action taken or decision made
by the Representing Stockholders hereunder shall be evidenced in
a writing signed by the Stockholder Representatives. The Buyer
and the Representing Stockholders are the only authorized persons
upon which the Escrow Agent may conclusively rely for all
purposes under this Agreement. The Escrow Agent shall have no
responsibility for the contents of any writing contemplated
herein and may rely without any liability upon the contents
thereof.
22.04 The Escrow Agent shall not be liable for any action taken
or omitted by it in good faith and believed by it to be
authorized hereby or within the rights or power conferred upon it
hereunder, nor for any action taken or omitted by it in good
faith, and in accordance with advice of counsel (which counsel
may be of the Escrow Agent's own choosing), and shall not be
liable for any mistake or fact or error of judgment or for any
acts or omissions of any kind unless attributable solely to its
willful misconduct or gross negligence.
22.05 Each Party hereto agrees to indemnify the Escrow Agent
and hold it harmless against any and all liabilities incurred by
it hereunder as a consequence of such Party's action, and the
Parties agree jointly and severally to indemnify the Escrow Agent
and hold it harmless against any and all liabilities incurred by
it hereunder that are not a consequence of any Party's action,
except in either case for liabilities incurred by the Escrow
Agent resulting solely from its own willful misconduct, which
shall include distributing Escrow Shares to any member of the
Buyer Indemnified Group pursuant to Section 3(b) prior to the
expiration of the fourteen day notice period under Section
4(b)(i), or gross negligence.
23. Appointment of Agents.
23.01 The Escrow Agent may appoint one or more agents
(each, an "Agent") which shall be authorized to act on behalf of the
Escrow Agent. An Agent shall have the powers and authority granted to
and conferred upon it hereby and such further powers and
authority to act on behalf of the Escrow Agent as may be mutually
agreed upon by the Escrow Agent and Agent. Each Agent shall be
acceptable to the Buyer and the Representing Stockholders and
shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof
or the District of Columbia. If at any time an Agent shall cease
to be eligible in accordance with the provisions of this section,
such Agent shall resign immediately in the manner and with the
effect specified in this section.
23.02 An Agent may resign at any time by giving written notice
thereof to the Escrow Agent. The Escrow Agent may at any time
terminate the agency of an Agent by giving written notice thereof
to such Agent and to the Buyer and the Representing Stockholders.
24. Miscellaneous.
24.01 This Escrow Agreement shall be construed, performed
and enforced in accordance with the laws of the State of Delaware,
without reference to the conflict of laws principles thereof.
Each party hereto agrees that it shall bring any action or
proceeding in respect of any claim arising out of or related to
this agreement or the transactions contained in or contemplated
by this agreement, whether in tort or contract or at law or in
equity, exclusively in the United States District Court for the
District of Delaware (the "Chosen Court") and
(a) irrevocably submits to the exclusive jurisdiction of the
Chosen Court,
(b) waives any objection to laying venue in any such action or
proceeding in the Chosen Court,
(c) waives any objection that the Chosen Court is an inconvenient
forum or does not have jurisdiction over any party hereto, and
(d) agrees that service of process upon such party in any such
action or proceeding shall be effective if notice is given in
accordance with Section 13 of this Escrow Agreement.
24.02 This Escrow Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective successors and permitted
assigns.
24.03 This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
25. Termination.
This Escrow Agreement may be terminated upon the
distribution of the entire balance of the Escrow Fund pursuant to
the terms hereof, or at any other time, upon the mutual written
consent of the Buyer, the Representing Stockholders and the
Escrow Agent. Upon such termination, the Buyer, the Representing
Stockholders and the Escrow Agent shall be discharged from all
obligations under this Escrow Agreement.
26. Notices.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be delivered
and received by the intended recipient as follows: (a) if
personally delivered, on the Business Day of such delivery (as
evidenced by the recipient of the personal delivery service), (b)
if mailed certified or registered mail return receipt requested,
four Business Days after being mailed, (c) if delivered by
overnight courier (with all charges having been prepaid), on the
Business Day of such delivery (as evidenced by the receipt of the
overnight courier service of recognized standing), or (d) if
delivered by facsimile transmission, on the Business Day of such
delivery if sent by 6:00 p.m. in the time zone of the recipient,
or if sent after that time, on the next succeeding Business Day
(as evidenced by the printed confirmation of delivery generated
by the sending party's telecopier machine). All such notices,
requests, demands and other communications shall be sent to the
following addresses or facsimile numbers as applicable:
26.01 if to the Representing Stockholders or the Stockholder
Representatives:
F. ▇▇▇▇▇ ▇▇▇▇▇▇
c/o Leasing Technologies International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o Leasing Technologies International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o Leasing Technologies International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
c/o Leasing Technologies International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
26.02 if to the Buyer:
Allegheny Energy, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Allegheny Ventures, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Allegheny Energy, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
26.03 if to the Escrow Agent, to:
[Mellon Bank
______________
______________]
or to such other Persons or addresses as may be designated in
writing by the party to receive such notice as provided above.
27. Entire Agreement.
This Escrow Agreement and the Agreement, including the
schedules and exhibits hereto and thereto, constitute the entire
agreement of the Buyer, the Representing Stockholders and the
Escrow Agent with respect to the subject matter hereof and
supersedes any and all other prior understandings, letters,
contracts or agreements, representations or warranties, oral or
written, among the Buyer, the Representing Stockholders and the
Escrow Agent in respect of the subject matter of this Escrow
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the Buyer, the Representing Stockholders and the
Escrow Agent as of the date first above written.
ALLEGHENY VENTURES, INC.
By:
Name:
Title:
[REPRESENTING STOCKHOLDERS]
MELLON BANK,
as Escrow Agent
By:
Name:
Title:
Annex A
[REPRESENTING STOCKHOLDERS AND SHARES OWNED]
Annex B
[FEE SCHEDULE]
EXHIBIT D
EMPLOYMENT AGREEMENT
The parties to this Employment Agreement (this "Agreement")
are Leasing Technologies International, Inc., a Delaware
corporation (the "Company"), Allegheny Ventures, Inc., a Delaware
corporation ("Ventures") and ____________ (the "Executive").
The Executive has previously been employed as an executive
of the Company. The Company is engaged in the leasing business.
The Company and the Executive wish to continue the Executive's
employment with the Company on the terms set forth below.
This Agreement is being entered into simultaneously with the
closing (the "Effective Date") under the stock purchase agreement
between the Company, Ventures and certain stockholders of the
Company (the "Purchase Agreement"). Capitalized terms used
herein and not defined herein shall have the meanings ascribed to
them in the Purchase Agreement.
It is therefore agreed as follows:
SECTION 1. POSITION, TERM AND DUTIES.
27.01 Position. The Company hereby employs the Executive as
____________, and the Executive hereby accepts such employment,
upon the terms and conditions set forth below.
27.02 Employment Term. The term of the Executive's employment
under this Agreement (as such term may be extended pursuant to
this section 1.2, the "Employment Term") shall commence on the
date hereof and, unless extended pursuant to the terms of this
section 1.2 or sooner terminated pursuant to section 3, shall
continue until ________, 2004 (as such date may be extended, the
"Termination Date"). The Employment Term shall be automatically
extended for additional one-year periods unless either the
Company or the Executive delivers to the other a written notice
stating its or his intention not to extend the Employment Term no
later than six months prior to the Termination Date.
27.03 Duties and Office Location. During the Employment Term:
(a) The Executive shall be _____________of the Company
and shall be employed by the Company, a wholly-owned subsidiary
of Allegheny Energy, Inc. ("Allegheny"). The Company shall cause
the Executive to be a member of the board of directors of the
Company (the "Board").
(b) During the Employment Term, the Executive shall
perform all duties and services incidental to and consistent with
the Executive's position with the Company as may from time to
time be reasonably assigned to the Executive by the Board. The
Executive shall report directly to the [President of Allegheny
Ventures, Inc.] [the Board]. Subject to the next sentence and
the immediately following sentence, the Executive shall devote
his entire business time, attention and energy to the business of
the Company. The Executive shall perform the duties and services
referred to above faithfully and to the best of the Executive's
ability; provided however, that the Executive provides the
Company with employment services in substantially the same manner
as other Allegheny Ventures executives. Nothing in this
Agreement shall preclude the Executive from engaging in
charitable, civic, community, educational, religious or trade
group activities or affairs or from managing his personal
investments; provided, that such activities do not materially
interfere with the Executive's performance of his duties and
obligations hereunder; and provided, further, that in the event
the Company sends a written notice pursuant to section 1.2,
during the six month period from the receipt of such notice until
the Termination Date, the Executive may engage in any reasonable
employment search activities.
(c) Subject to the proviso at the end of this
sentence, and the proper directions of the Board, the Executive
shall have general authority for all aspects of the day-to-day
business and operations of the Company; provided, however, that
as long as [either or both of Messrs. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇] (the "Other Executives") are employed by the Company,
the authority provided in this sentence shall be jointly shared
by the Executive with the Other Executives. In the event of a
conflict between the Executive and the Other Executives, two of
the three individuals (who are the Executive and the Other
Executives) shall resolve such conflict; if only one of the Other
Executives remains employed by the Company at such time, then ▇▇.
▇▇▇▇▇▇ shall resolve such conflict.
(d) During the Employment Term, without the prior
written consent of the Executive and the Other Executives (if the
Other Executives are then employed by the Company) the Company
shall not: (i) reorganize, merge, consolidate, combine or
otherwise alter its business structure from a structure
substantially consistent with its business structure in place
immediately prior to the Effective Date; provided that nothing in
this item (i) shall limit the Executive's authority to hire
This requirement shall be applicable to the employment
agreement for Mr. F. ▇▇▇▇▇ ▇▇▇▇▇▇.
additional personnel for the Company as reasonably appropriate
given the needs of its business and consistent with prior
practices of the Company in accordance with the Company's
business plan for the year 2000 set forth in the Descriptive
Memorandum prepared by ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ LLC and ▇▇▇▇▇▇▇
& Company previously furnished by the Company to Allegheny; (ii)
operate any business other than the Business unless otherwise
agreed in writing by the Company and the Executive; (iii) sell or
otherwise transfer any material portion of the business,
personnel or assets of the Company; or (iv) create, acquire or
otherwise permit to exist within or be employed by Allegheny or
any of its affiliates or subsidiaries (the "Allegheny Companies")
any entity, person, group or organization that may be competitive
with the Business (as hereinafter defined); or (v) change the
name of the Company.
(e) During the Employment Term, the Executive shall
perform his duties at the offices of the Company which are
currently located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇. The
Company shall not relocate its offices beyond a 25-mile radius of
its current location without the prior written consent of the
Executive. The Executive shall not be required to move or
relocate to a location beyond a 25-mile radius from the present
location of the Company's offices. The Executive may be required
to travel subject to the reasonable needs of the Business;
provided that such travel shall be consistent with the prior
practices of the Executive.
(f) During the Employment Term, the Company shall
provide the Executive with such office assistance and
administrative support as are reasonable and appropriate for him
to perform the duties and obligations hereunder and which shall
be substantially similar to the Executive's existing
arrangements.
2. Compensation.
2.1 Base Compensation. The Company shall pay to the
Executive for the first year of the Employment Term a base annual
salary of $_________, for the second year of the Employment Term
a base annual salary of $__________ (inclusive of a 6% increase
over the prior year's base annual salary), for the third year of
the Employment Term a base annual salary of $_________ (inclusive
of a 6% increase over the prior year's base annual salary) ("Base
Compensation"). Salary shall be payable in accordance with the
Company's usual payroll practices for executive employees. The
Company shall continue its policy to pay, as deferred
compensation, 20% of the Executive's base annual salary on or
about January 1 of the following year of each of the one-year
periods during the Employment Term ("Deferred Compensation").
2.2. Additional Compensation. The Executive shall be
entitled to participate in any pre-existing or subsequently
established bonus or incentive compensation plans of the Company
in accordance with Exhibit A on a basis consistent with prior
participation in such plans.
2.3. Vacation. For the Employment Term, the Executive shall
be entitled to that number of paid vacation days and holidays as
are provided to other executives of the Company in accordance
with the Company's vacation policy; provided that in any event
the number of paid vacation days to which the Executive shall be
entitled shall not be less than 20 days per calendar year.
2.4 Automobile Allowance. During the Employment Term, the
Company shall provide a monthly automobile allowance not to
exceed $550 per month to the Executive for the lease of an
automobile for the Executive's use consistent with the Company's
prior practices. [If the Company chooses to adopt the benefits
provided by Allegheny Companies, the Executive shall be covered
under the "FAVR" program.][This provision to be revised prior to
execution to reflect the election of benefits packages.]
2.5 Travel; Expenses. Subject to such policies as may from
time to time be established by the Company, the Company shall pay
or reimburse the Executive for all reasonable travel and other
expenses actually and reasonably incurred by the Executive in the
performance of the Executive's duties hereunder, upon
presentation of expense statements or vouchers or such other
reasonable supporting information as is generally required by the
Company in accordance with its expense account policies. With
respect to air travel and hotel accommodations, the Executive
shall be entitled to travel and hotel accommodations at least
equivalent to those provided to other executives of the Allegheny
Companies.
2.6 Other Benefits. During the Employment Term, to the
extent benefits are not duplicated, the Company shall: (i) cause
to be maintained all employee benefits plans of the Company in
effect immediately prior to the Effective Date including, but not
limited to, life insurance with death benefits of $ ____________,
disability insurance with monthly benefits of $ ________ and $
_________ and split-dollar life insurance with benefits of $
____________ , unless mutually agreed by the Company and the
Executive; or (ii) the Executive shall be entitled to participate
in any and all employee benefit plans of the Allegheny Companies
including the Company now existing or established hereafter, on
terms no less favorable than those made available to the other
senior executives of Allegheny Companies, including retirement,
pension, profit-sharing and/or stock option plans, and any group
life insurance, hospitalization, medical, health and accident,
disability or similar plan or program. The foregoing
notwithstanding, the Executive and his family shall be required
to comply with the conditions of coverage attendant to medical
and health plans including, without limitation, all applicable
deductibles.
2.7 Deductions. All of the compensation payable to the
Executive hereunder shall be subject to such deductions as are
required to be withheld by applicable laws and regulations.
2.8 Benefit Plan Election. The choice of whether to
maintain Company benefit plans or to elect the benefits provided
by the Allegheny Companies shall be made by an executive
committee of the Company consisting of Messrs. F. ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. In the event that such
Election would result in the disqualification of Allegheny's
existing Benefit Plan, this provision and the election hereunder
shall not be effective. If the election increases costs above
the Business Plan, such election shall be subject to approval by
the President of Allegheny Ventures
There will be an additional document addressing the Company
incentive compensation plan.
3. Termination of Employment.
3.1. Termination in the Event of Death or Disability.
If the Executive dies or becomes subject to a Permanent
Disability (as hereinafter defined) during the Employment Term,
the Employment Term shall then terminate. The Executive shall be
deemed to have a "Permanent Disability" upon the earlier to occur
of (i) the failure by Executive for a period of 180 consecutive
days during the Employment Term, because of illness or physical
or mental disability, to render the services provided for by this
agreement, or (ii) the submission by the Executive to the Company
of satisfactory medical evidence that he has an illness or
physical or mental disability that is expected to prevent him
from rendering the services provided for by this agreement for a
period of 180 consecutive days or longer. Upon termination of
the Employment Term pursuant to this section 3.1, the Executive
(or his estate or legal representative) shall be entitled to
payment of the Base Compensation plus the pro rata portion of any
payments due under Section 2 and all benefits earned through the
effective date of such termination. The Company shall perform
its obligations to maintain the split-dollar life insurance
and/or disability insurance, as applicable. On termination for
death or disability, the Executive shall be entitled to his pro
rata share of any payments due under section 2 of the Purchase
Agreement through the effective date of such termination and all
payments under section 1 of the Purchase Agreement. In the event
of the death of the Executive payments shall be accelerated to
the Executive's estate as soon as practicable.
3.2 Termination for Cause. The Company may terminate
the Employment Term by written notice to the Executive for Cause
(as defined hereinafter). For purposes of this Agreement,
"Cause" shall mean: (i) the Executive's conviction of a felony;
(ii) actions by the Executive constituting embezzlement of the
Company's property; and (iii) the Executive's gross negligence in
the performance of his duties hereunder; provided, that with
respect to clauses (ii) and (iii) above, the Executive shall have
received a written notice from the Company setting forth the
alleged act or failure to act constituting Cause hereunder, and
the Executive shall not have cured such act or refusal to act
within 30 days after his actual receipt of such notice. Upon
termination of the Employment Term pursuant to this section 3.2,
the Executive shall be entitled to payment of (A) the Base
Compensation (and Deferred Compensation) earned through the
effective date of such termination; and (B) benefits accrued
through the effective date of such termination. On termination
for Cause, the Executive shall be entitled to his pro rata share
of any payments due under section 2 of the Purchase Agreement
through the effective date of such termination and all payments
under section 1 of the Purchase Agreement.
3.3 Termination by the Executive for Good Reason.
The Executive may terminate this Agreement, at his election, ten
days after written notice to the Company in the event that (i)
the Executive's principal office is relocated more than 25 miles
from its current location; (ii) the Executive's titles, duties,
responsibilities or authority as set forth in sections 1.1 and
1.3 are materially diminished or materially altered in a way not
commensurate with any of his titles, duties, responsibilities or
authority immediately before and after the execution and delivery
of this Agreement; provided, however, that any changes in titles,
duties, responsibilities or authority that are made within six
months following the Effective Date and that are reasonable and
appropriate in connection with the integration of the business
operations of the Company with the other operations of Allegheny
Ventures shall not constitute Good Reason so long as the
Executive's titles, duties, responsibilities and authority are
generally consistent with, and not diminished from those in place
immediately prior to the execution and delivery of this
Agreement; (iii) the Company fails to provide the Executive with
such office assistance and administrative support as contemplated
in section 1.3(f); (iv) a breach by the Company of its
obligations hereunder; (v) termination of the Other Executive
without Cause; and (vi) termination of employment with the
Company by either of the Other Executives for the reasons set
forth in sub-sections (i), (ii), (iii), (iv) and (v) of this
section 3.3. Upon termination of the Employment Term pursuant to
this section 3.3, the Executive shall be entitled to payment of
the Base Compensation (and Deferred Compensation) for the
duration of the Employment Term and all benefits for either (X)
the duration of the Employment Term or (Y) for one year,
whichever is greater. In addition, Allegheny shall cause (i) the
maximum number of shares of Allegheny's common stock (except for
the Escrow Shares (as defined in the Purchase Agreement)) to
which such Executive would have been entitled pursuant to section
1 of the Purchase Agreement had this Agreement not been
terminated as determined by the Average Parent Share Price (as
defined in the Purchase Agreement) on the date of such
termination, if a Switchover Event (as defined in the Purchase
Agreement) has not occurred or the Executive has elected to be
governed by section 1.02(a)(i)(y)(B) of the Purchase Agreement or
by the Average Parent Share Price (as defined in the Purchase
Agreement) on the Closing Date if the Executive has elected to be
governed by section 1.02(a)(i)(y)(A) of the Purchase Agreement,
to be immediately released from the Escrow Fund (as defined in
the Purchase Agreement) and delivered to the Executive; and (ii)
Allegheny shall cause the maximum number of shares of Allegheny's
common stock to which such Executive would have been entitled
upon the satisfaction of the conditions set forth in section 2.01
of the Purchase Agreement to be immediately issued and delivered
to the Executive.
3.4 Termination by the Company Without Cause. At any
time after the commencement of this Agreement, the Company may,
without Cause, terminate this Agreement and the Executive's
employment hereunder, effective 30 days after written notice is
provided to the Executive. Upon such termination of the
Employment Term pursuant to this section 3.4, the Executive shall
be entitled to the payment of (A) the Base Compensation (and
Deferred Compensation) for the duration of the Employment Term
and (B) all benefits for either (X) the remaining portion of the
Employment Term or (Y) for one year, whichever is greater. In
addition, Allegheny shall cause (i) the maximum number of shares
of Allegheny's common stock (except for the Escrow Shares) to
which such Executive would have been entitled pursuant to section
1 of the Purchase Agreement had this Agreement not been
terminated as determined by the Average Parent Share Price on the
date of such termination, if a Switchover Event (as defined in
the Purchase Agreement) has not occurred or the Executive has
elected to be governed by section 1.02(a)(i)(y)(B) of the
Purchase Agreement or by the Average Parent Share Price (as
defined in the Purchase Agreement) on the Closing Date if the
Executive has elected to be governed by section 1.02(a)(i)(y)(A)
of the Purchase Agreement, to be immediately released from the
Escrow Fund and delivered to the Executive; and (ii) Allegheny
shall cause the maximum number of shares of Allegheny's common
stock to which such Executive would have been entitled upon the
satisfaction of the conditions set forth in section 2.01 of the
Purchase Agreement to be immediately issued and delivered to the
Executive.
3.5 Life Insurance. If the Company desires to obtain
insurance on the life of the Executive, the Executive shall
cooperate fully with the efforts of the Company to obtain such
insurance, including but not limited to, submitting to a medical
examination. The Executive agrees that the Company has an
insurable interest in the Executive's life.
4. NON-COMPETITION AND CONFIDENTIALITY.
4.1 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Business" shall mean the business of conducting:
(i) venture leasing to early stage emerging growth U.S. companies
supported primarily by venture capitalists; and (ii) vendor
leasing of specified U.S. equipment in which the lease volume for
such equipment exceeds $10,000,000 per annum by the vendor and
its affiliates.
(b) "Key Employee" shall mean any person who is
employed by the Company (including without limitation any former
employee of the Company) in a management, executive, technical,
sales or marketing capacity or any person who is performing any
of the above functions as an independent contractor and whose
annual salary or the independent contractor's fee exceeds
$75,000.
(c) "Restricted Period" shall mean the Employment Term
plus the period of 12 months thereafter except for termination by
the Company without Cause or termination by the Executive for
Good Reason, in which case the provisions of section 4.2 shall
not apply.
4.2 Obligations Not to Compete. During the Restricted
Period, the Executive shall not, without the prior written
consent of the Company, directly or indirectly: (i) as an
individual, partner, shareholder, investor, creditor, director,
officer, principal, agent, employee, trustee, consultant or
advisor, or in any other relationship or capacity, own, manage,
control, operate, invest or acquire an interest in, or act for or
on behalf of or otherwise be associated with, any person whose
principal activity is any business or activity that directly
competes with the Business; (ii) solicit, induce or influence any
customer, supplier, lender, lessor or any other person which has
at that time an exclusive or material business relationship with
the Company to discontinue or reduce the extent of such
relationship, in a manner detrimental to the Company; or (iii)
recruit or solicit any Key Employee to discontinue his, her or
its employment, agency or other relationship with the Company;
provided, however, that nothing herein contained shall be deemed
to prohibit ownership by the Executive of an aggregate of five
(5%) percent or less of the outstanding stock of any class of any
corporation whose shares are publicly traded on a regular basis.
4.3 Proprietary Information. The Executive agrees that all
information, whether or not in writing, of a private, secret or
confidential nature concerning the Business, business
relationships or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the
Company. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods,
techniques, formulas, compositions, compounds, projects,
developments, plans, research data, clinical data, financial
data, personnel data, computer programs, customer and supplier
lists, and contacts at or knowledge of customers or prospective
customers of the Company. The Executive shall not disclose any
Proprietary Information to any person or entity other than
employees of the Company or use the same for any purposes (other
than in the performance of his duties as an employee of the
Company) without written approval by an officer of the Company,
either during or after his Employment with the Company, unless
and until such Proprietary Information has become public
knowledge without fault by the Executive. Nothing contained in
this section 4.3 shall be deemed to grant any protection for or
impose any restriction on the use or disclosure of any
information which (A) is now or hereafter a matter of common
knowledge or public record, (B) is now or hereafter generally
known in the venture leasing industry, (C) is now or hereafter
available to the Executive or other persons without breach of
this agreement or any other valid confidentiality agreement, (D)
has heretofore been or is hereafter developed by the Executive
without breach of this agreement, and/or (E) is, at the time in
question, required to be disclosed by law or judicial process.
4.4 Developments.
(a) The Executive will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods,
developments, and works of authorship, whether or not
copyrightable or patentable, which are created, made, conceived
or reduced to practice by him or under his direction or jointly
with others in connection with his employment by the Company,
whether or not during normal working hours or on the premises of
the Company (all of which are collectively referred to in this
agreement as "Developments").
(b) The Executive agrees to assign and does hereby assign to
the Company (or any person or entity designated by the Company)
all his right, title and interest in and to all Developments and
all related patents, patent applications, copyrights and
copyright applications. However, this section 4.4(b) shall not
apply to developments which do not relate to the present or
planned business or research and development of the Company and
which are made and conceived by the Executive not during normal
working hours, not on the Company's premises and not using the
Company's tools, devices, equipment or Proprietary Information.
The Executive understands that, to the extent this agreement
shall be construed in accordance with the laws of any state which
preclude a requirement in an employee agreement to assign certain
classes of inventions made by an employee, this section 4.4(b)
shall be interpreted not to apply to any invention which a court
rules and/or the Company agrees falls within such classes. The
Executive also hereby waives all claims to moral rights in any
Developments.
(c) The Executive agrees to cooperate fully with the Company,
both during and after this Agreement with the Company (provided
that if the Executive is not then employed, he shall be entitled
to reasonable compensation), with respect to the procurement,
maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and
foreign countries) relating to Developments. The Executive shall
sign all papers, including, without limitation, copyright
applications, patent applications, declarations, oaths, formal
assignments, assignments of priority rights, and powers of
attorney, which the Company may deem necessary or desirable in
order to protect its rights and interests in any Development.
The Executive further agrees that if the Company is unable, after
reasonable effort, to secure the signature of the Executive on
any such papers, any executive officer of the Company shall be
entitled to execute any such papers as the agent and the attorney-
in-fact of the Executive, and the Executive hereby irrevocably
designates and appoints each executive officer of the Company as
his agent and attorney-in-fact to execute any such papers on his
behalf, and to take any and all actions as the Company may deem
necessary or desirable in order to protect its rights and
interests in any Development, under the conditions described in
this sentence.
5. Remedies; Enforceability.
5.1 In the event of a breach or a threatened breach of any of
the covenants contained in section 4 (the "Covenants"), the
Company shall, in addition to the remedies provided by law, have
the right and remedy to have such Covenant specifically enforced
by any court having equity jurisdiction, it being acknowledged
and agreed that any breach of any of the Covenants will cause
irreparable injury to the Company, and that money damages will
not provide an adequate remedy
5.2 The Executive acknowledges and agrees that the Covenants
are reasonable and valid in geographical and temporal scope and
in all other respects. If any court determines that any of the
Covenants, or any parts thereof, are invalid or unenforceable,
the other Covenants and the remainder of any of the Covenants so
impaired shall not thereby be affected and shall be given full
effect, without regard to the invalid portions. If any court
determines that any of the Covenants, or any parts thereof, are
unenforceable because of the duration or geographic scope
thereof, such court shall have the power to reduce the duration
of geographic scope, as the case may be, of such Covenants, and,
in such reduced form, such Covenants shall then be enforceable.
5.3 Return of Documents. Upon the termination of the
Executive's employment with the Company, or at any time upon the
request of the Company, the Executive (or his heirs or personal
representatives) shall deliver to the Company (a) all documents
and materials (including, without limitation, computer files)
containing Proprietary Information, and (b) all documents,
materials and other property (including, without limitation,
computer files) belonging to the Company, which in either case
are in the possession or under the control of the Executive (or
his heirs or personal representatives); provided, that the
Executive shall be entitled to retain his rolodex, however
maintained and on whatever media, and personal files.
6. Miscellaneous.
6.1 Notices. All waivers, notices, consents, demands,
requests, approvals and other communications which are required
or may be given hereunder shall be in writing and shall be deemed
to have been duly given (a) when hand-delivered, (b) when sent by
telecopier (with receipt confirmed), (c) when sent by national
overnight courier service with charges prepaid or billed to the
account of the sender, or (d) 72 hours after mailed by certified
first class mail, return receipt requested, postage prepaid; and
in each case shall be addressed as follows:
(a) Company:
Leasing Technologies International, Inc.
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Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: _________________
(b) Allegheny Ventures, Inc.
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
with copies to:
Allegheny Energy, Inc.
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Allegheny Energy, Inc.
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
(c) Executive:
_____________
_____________
_____________
with a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
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Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
or to such other address or addresses as may be designated by a
party by written notice to the other parties hereto.
6.2 Arbitration. Any controversy or claim arising out of
or relating to this Agreement or the breach of this agreement
that cannot be resolved by the Executive on the one hand and the
Company on the other, including any dispute as to the calculation
of Executive's benefits or any payment hereunder, shall be
conducted in the city of New York, New York by three arbitrators,
in accordance with the commercial arbitration rules of the
American Arbitration Association and, to the maximum extent
applicable, the Federal Arbitration Act (Title 9 of the United
States Code). The determination by the arbitrators shall be
conclusive and binding on the Company and the Executive, and
judgment may be entered on the arbitrators' award in any court
having jurisdiction.
6.3 ASSIGNMENT. THIS AGREEMENT SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF THE HEIRS, EXECUTORS, ADMINISTRATORS,
PERSONAL REPRESENTATIVES, SUCCESSORS AND PERMITTED ASSIGNS OF
EXECUTIVE AND THE ASSIGNS AND SUCCESSORS OF THE COMPANY, BUT
NEITHER THIS AGREEMENT NOR ANY RIGHTS HEREUNDER SHALL BE
ASSIGNABLE OR OTHERWISE SUBJECT TO HYPOTHECATION BY THE EXECUTIVE
(EXCEPT BY WILL OR BY OPERATION OF THE LAWS OF INTESTATE
SUCCESSION) OR BY THE COMPANY.
6.4 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT
CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES OR
TERMINATES ALL PRIOR AGREEMENTS, ORAL AND WRITTEN, REGARDING THE
SUBJECT MATTER HEREOF (INCLUDING ANY HERETOFORE OUTSTANDING
EMPLOYMENT) THIS AGREEMENT MAY NOT BE WAIVED, CHANGED OR MODIFIED
EXCEPT BY AN AGREEMENT IN WRITING IS SOUGHT. EACH PARTY FURTHER
REPRESENTS TO THE OTHER THAT THE EXECUTION, DELIVERY AND
PERFORMANCE BY SUCH PARTY OF THIS AGREEMENT DO NOT AND SHALL NOT
CONFLICT WITH OR RESULT IN A VIOLATION OR BREACH OF, OR
CONSTITUTE A DEFAULT UNDER ANY CONTRACT, AGREEMENT OR
UNDERSTANDING, WHETHER ORAL OR WRITTEN, TO WHICH SUCH PARTY IS A
PARTY.
6.5 BENEFICIARIES; REFERENCES. THE EXECUTIVE SHALL
BE ENTITLED TO SELECT (AND CHANGE, TO THE EXTENT PERMITTED UNDER
ANY APPLICABLE LAW) A BENEFICIARY OR BENEFICIARIES TO RECEIVE ANY
COMPENSATION OR BENEFIT PAYABLE HEREUNDER FOLLOWING THE
EXECUTIVE'S DEATH, AND MAY CHANGE SUCH ELECTION, IN EITHER CASE
BY GIVING THE COMPANY WRITTEN NOTICE THEREOF. IN THE EVENT OF
THE EXECUTIVE'S DEATH OR A JUDICIAL DETERMINATION OF HIS
INCOMPETENCE, REFERENCE IN THIS AGREEMENT TO THE EXECUTIVE SHALL
BE DEEMED, WHERE APPROPRIATE, TO REFER TO HIS BENEFICIARY, ESTATE
OR OTHER LEGAL REPRESENTATIVE. ANY REFERENCE TO THE MASCULINE
GENDER IN THIS AGREEMENT SHALL INCLUDE, WHERE APPROPRIATE, THE
FEMININE.
6.6 SURVIVORSHIP. THE RESPECTIVE RIGHTS AND
OBLIGATIONS OF THE EXECUTIVE AND THE COMPANY HEREUNDER SHALL
SURVIVE ANY TERMINATION OF THIS AGREEMENT TO THE EXTENT NECESSARY
TO THE INTENDED PRESERVATION OF SUCH RIGHTS AND OBLIGATIONS. THE
PROVISIONS OF THIS SECTION 6.6 ARE IN ADDITION TO THE
SURVIVORSHIP PROVISIONS OF ANY OTHER SECTION OF THIS AGREEMENT.
6.7 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF CONNECTICUT WITHOUT REFERENCE TO RULES RELATING TO CONFLICTS
OF LAW.
6.8 WITHHOLDING. THE COMPANY SHALL BE ENTITLED TO
WITHHOLD FROM ANY PAYMENT HEREUNDER ANY AMOUNT OF TAX WITHHOLDING
REQUIRED BY LAW.
6.9 COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN
TWO OR MORE COUNTERPARTS, EACH OF WHICH WILL BE DEEMED AN
ORIGINAL.
IN WITNESS WHEREOF, THE COMPANY, ALLEGHENY VENTURES AND THE
EXECUTIVE HAVE EXECUTED THIS AGREEMENT ON THIS _______ DAY OF
___________, 2001.
LEASING TECHNOLOGIES INTERNATIONAL, INC.
By:___________________________________________
Name:_________________________________________
Title:__________________________________________
ALLEGHENY VENTURES, INC.
By:___________________________________________
Name:_________________________________________
Title:__________________________________________
_______________________________________________
Name:
EXHIBIT A TO EMPLOYMENT AGREEMENT
ANNEX 2
Leasing Technologies International, Inc.
Incentive Compensation Plan
The purpose of this Plan is to give those Employees who
contribute substantially to the success of the operations of
Leasing Technologies International, Inc. ("LTI") and its
Subsidiaries an additional incentive to protect and advance the
best interests of the LTI Companies. To that end, the Plan
provides an opportunity for Employees to participate in the
successful results of operations by permitting Incentive Awards
to Employees in recognition of their outstanding ability,
industry, invention and exceptional service, the amounts of which
Incentive Awards are related to the success of the operations and
the Employees' contributions to that success.
First: Definitions - In this Plan the following terms shall
have the following meanings:
(a) "Plan" means this Incentive Plan;
(b) "LTI" means Leasing Technologies International , Inc.
(c) "Incentive Award" means award in cash or LTI stock or a
combination thereof;
(d) "Board of Directors" or "Board" means the Board of Directors
of LTI;
(e) "Committee of Directors" or "Committee" means the Incentive
Compensation Committee provided for in Paragraph Second;
(f) "Controller" means the Controller of LTI or such other person
as the Committee may designate to make the financial computations
provided for in Paragraph fifth (b);
(g) "Independent Auditors" means, with respect to any year, the
independent public accountants appointed by the stockholders to
certify to the stockholders the financial statements of LTI and
its domestic subsidiaries for that year;
(h) "LTI Companies" means LTI, its divisions and any domestic
subsidiary companies, now or hereafter in existence;
(i) "Subsidiary" means, with respect to any year, any corporation
in which LTI owns a stock interest of more than fifty per cent
and the financial results of whose operations are consolidated
with those of the Corporation in the financial statements
included in the annual report made for that year to stockholders;
(j) "Employee" means any employee regularly employed by any of
the LTI Companies including officers;
(k) "Capital Employed" means, with respect to any year, the sum
of the following as of the close of the preceding year, as shown
by the consolidated balance sheet of the Corporation and its
domestic subsidiaries included in the annual report to
stockholders for that preceding year;
(1) Stated amount of LTI's issued and outstanding
Capital Stock, excluding the stated amount of
shares of stock held in LTI's treasury;
(2) Capital Surplus also known as additional paid-
in capital;
(3) Reinvested Earnings, also known as retained
earnings;
(4) Plus or minus a proportionate allowance for
any increase or decrease during the year in the
amount of Capital Stock, Capital Surplus or
Reinvested Earnings, of the LTI Companies,
resulting from newly-issued or finally retired
Capital Stock (except treasury stock previously
excluded). The amount of such allowance shall be
such proportion of the increase or decrease as the
part of the year after the day of the increase or
decrease bears to the entire year.
Second: Incentive Compensation Committee - (a) The Board
of Directors shall appoint a Committee of not less than
three directors to be known as the Incentive Compensation
Committee, of which at least at least a majority shall be
non-employees of LTI which Committee shall have full power
and authority to interpret and administer the Plan, subject
to regulations not inconsistent with the provisions of the
Plan which the Committee shall make for this purpose and
submit to the Board for its review. No regulation shall
become effective until and unless approved by the Board and
the Board may at anytime alter, amend, or revoke any
existing regulation.
(b) The Board may from time to time remove members from
the Committee or add members thereto, and vacancies in the
Committee, however caused, shall be filled by action of the
Board. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and
places as it may determine. A majority of its members shall
constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or
determination reduced to writing and signed by a majority of
the members of the Committee shall be as fully effective as
if it had been made by a majority vote at a meeting of the
Committee duly called and held.
Third: Eligibility - (a) The Employees eligible to
participate in the Plan in any year shall be those Employees
of the LTI Companies who, in the opinion of the Committee,
contribute substantially to the success of the operations of
one or more of the LTI Companies during that year. Members
of the Board of Directors who are also active Employees
shall be eligible to participate in the Plan. As used in
this paragraph, "Employees," in the Committee's discretion,
may include an Employee who has died during the year, the
Incentive Compensation Award, if any, determined for him for
the year by the Committee shall be paid to his spouse or
legal representatives, as may be determined by the
Committee.
(b) From the Employees eligible to participate in the
Plan each year, the Committee shall choose those who shall
actually participate for that year (such Employees being
referred to in the Plan as "Participants") and shall
determine the amount of the participation of each. For this
purpose, the Committee shall give such consideration to the
positions, responsibilities, and accomplishments of the
eligible Employees, the performance of the eligible
Employees' division or department under the circumstances
existing, the interests of the LTI Companies, and other
pertinent factors, and shall give such weight to these
factors, as the Committee shall determine. The Committee
may also receive and consider recommendations from officers
and department heads of the LTI Companies.
Fourth: Incentive Compensation Formula - (a) Each year
there shall be determined "incentive compensation plan
earnings" representing the amount of pre-tax profit for the
year as shown in the annual report to stockholders before
any provision for creditable incentive compensation and
which provision is not adjusted for taxes. From such
incentive compensation plan earnings, there shall be
deducted an amount equal to the result obtained by
multiplying 20% times the average of the Capital Employed
for the year. The balance remaining shall be the incentive
compensation qualifying amount for the year for the purposes
of the Plan.
(b) The credit to the incentive plan reserve for any
year, provided for in Paragraph fifth, shall equal twenty-
five per cent of such incentive plan qualifying amount.
Fifth: Reserve - (a) Subject to all the terms and
conditions of the Plan, there shall be credited annually to
a reserve known as the incentive compensation plan reserve,
an amount determined by the Committee which shall not exceed
the maximum computed as provided in Paragraph Fourth, and
this amount plus any unawarded balance in such reserve
carried forward from prior years shall be available for the
Committee's use in granting Incentive Compensation Awards
under the Plan.
(b) On or before October 15 of each year the Controller
shall report to the Committee the maximum amount creditable
to the incentive plan reserve for the prior fiscal year
ended September 30, on the basis of the results of
operations for that year. Failure of the Controller to make
such report by October 31 or of the Committee to make such
determination by the end of the year, shall not defeat the
operation of the Plan for the year, but such report and
determination shall be made as soon thereafter as
practicable.
(c) As soon as practicable after the close of the fiscal
year, the amount of incentive compensation plan earnings
creditable, as provided for in Paragraph Fourth to the
incentive compensation plan reserve upon which the incentive
compensation plan is based for such year, shall be audited
and certified by the independent auditors, who shall report
the results of their audit to the Board of Directors, LTI
and the shareholders by virtue of their certification to the
stockholders of the financial statements for LTI and its
domestic subsidiaries for the years. If the amount which
has been credited to the incentive compensation plan reserve
for such year shall prove to have been greater or less than
the amount properly creditable, the Committee may, in its
discretion, order the amount credited either increased or
decreased, as the case may be, by the full amount of such
difference or any part thereof.
(d) Any overstatement of the amount available in the
incentive compensation plan reserve, however occasioned,
shall be corrected only by adjustment of the incentive
compensation plan reserve then, or subsequently available,
and not by recourse to any person.
Sixth: Incentive Awards - The Committee shall determine
the aggregate amount of Incentive Awards for the year and
the amount of the individual Incentive Awards as soon as
practicable after the determination of the amount to be
credited to the incentive compensation plan reserve for the
year, as provided for in Paragraph Fifth, (b). The aggregate
amount of the Incentive Awards shall not exceed the amount
credited to the incentive compensation plan reserve for the
year, plus any unawarded balance carried forward from prior
years. The Committee, however, shall be under no compulsion
to award to the Participants as Incentive Awards for any
year the entire amount available in the incentive
compensation plan reserve. However consistent with the
purpose of this plan, not less than 80% of the maximum
amount creditable to the incentive plan reserve amount for
the year. The balance retained in the incentive compensation
plan reserve in any year shall be carried forward and be
available in a future year or years, except to the extent
otherwise directed by the Committee. In no event shall any
individual Incentive Award for any year exceed fifty (50%)
of total annual compensation for such individual excluding
any Incentive Awards made to such individual pursuant to
this plan.
Seventh: Payment of Incentive Awards - (a) Incentive
Awards may be made in cash or in LTI stock acquired by LTI,
or partly in cash and partly in LTI stock as the Committee
in its discretion may determine. The Committee may order
all of the Incentive Awards of the Participants, for any
year to be paid to the Participants in any year, or the
Committee may, in its discretion order the Incentive Awards
of all of the Participants for any year, or all of the
Participants in such classifications as may be established
by the Committee of that year, to be paid in not more than
three installments of equal or varying fractional parts
thereof, provided that, if the Committee shall so determine,
the obligation to pay each such future installment to a
Participant shall terminate and become null and void if on
or before its due date such Participant's employment shall
have terminated for any reason other than death, or
retirement in accordance with any LTI retirement plans, or
if , on or before its due date, a Participant, whether or
not so retired, shall, without the prior written consent of
the Committee, have materially breached the terms of his or
her employment relationship (of which the Committee shall be
the sole judge). (b) When the
Incentive Award of a Participant for a year is made payable
in installments, the first installment shall be paid to such
a Participant promptly and the remaining installments,
subject to the conditions stated above, in additional
installments in that fiscal year, at dates fixed by the
Committee, until all installments have been paid, provided
that the Committee may direct that the remaining
installments be paid to such a Participant either in
December of the year in which earned, or in the following
year. (c) When a Participant dies before the payment of an
installment or installments of his Incentive Award for any
year or years has become due, and without having forfeited
his right to the payment thereof, such unpaid installment or
installments shall be paid to his spouse or legal
representatives, as may be determined by the Committee.
(d) When a Participant has lost his right to earn an
installment or installments of his Incentive Award, such
unearned installment or installments of such Incentive Award
shall be reinstated into the incentive compensation plan
reserve and shall be available for future rewards restored
to net earnings. (e) With respect
to an Incentive Award which becomes payable partly or wholly
in cash the amount of cash payable at the time of award
shall be paid promptly to the Participant in accordance with
Section 7(b). The remaining cash shall be retained, without
liability for interest, pending its being earned by and paid
to the Participant at the times specified.
(f) With respect to an Incentive Award which becomes payable
partly or wholly in LTI stock, the shares payable at the
time of award shall be delivered promptly to the Participant
in accordance with Section 7(b). Delivery of the remaining
stock shall be deferred, pending its being earned and
delivered to the Participant at the times specified. On
each dividend payment date, the record date for which occurs
after the date of award but prior to the date of the
registration of all such awarded stock in the name of the
Participant, there shall be paid to the Participant, with
respect to any such awarded stock not registered in this
name on or prior to such record date, a dividend equivalent
measured by the value of the dividends which the participant
would have received if such stock had been registered in his
name on such record date. Eighth: Stock
Purchases - (a) The Committee may, from time to time,
recommend to the Board of Directors the purchase of LTI
stock in such amounts as the Committee may determine for the
purpose of accumulating treasury stock for Incentive Awards
payable in stock. The Board shall follow or decline to
follow such recommendation as it shall determine in its
discretion.
(b) Treasury stock used for
Incentive Awards shall be valued for award purposes by the
Board of Directors as of a date immediately preceding the
date of the Committee's determination of individual
Incentive Awards. No fractional shares shall be awarded but
adjustments for such fractional shares shall be paid in
cash. Ninth: Participation by Subsidiaries
- To the extent that Employees of Subsidiaries participate
in the Plan, each of such Subsidiaries shall be charged with
the total of the Incentive Awards of its Employees year by
year. Tenth: Authority of Committee - (a) The
decision of the Committee on any questions concerning the
interpretation or administration of the Plan and the
regulations thereunder provided in Paragraph Second (a)
shall be final and conclusive, and nothing in the Plan or in
any regulation thereunder shall deem to give any officer or
Employee, his legal representatives, or any one else any
right to participate except to such extent, if any, as the
Committee may have determined or approved pursuant to the
provisions of the Plan and the regulations thereunder. The
Board of Directors, in passing on the matters coming before
it, as provided in the Plan, may in its discretion rely upon
the recommendations made by the Committee with respect
thereto. (b) The Committee may consult with
counsel, who may be of counsel to the Corporation and shall
not incur any liability for any action taken in good faith
upon the advise of such counsel.
Eleventh: Termination - The Board of Directors may
discontinue the Plan, in whole or in part, at any time, or
may, from time to time, change the Plan in such respects as
the Board may deem advisable, provided that no such
amendments, prior to approval by the stockholders as
provided herein, shall be effective to withdraw the
interpretation and administration of the Plan and
regulations thereunder from a Committee of Directors, or to
increase the amount creditable to the incentive compensation
plan reserve. The fact that a director is, has been, or
will be, a Participant in the Plan, shall not disqualify him
from voting as a director for or against any change or
discontinuance of the Plan or regulations thereunder. Any
substantial change of or discontinuance in whole or in part
of the Plan shall be reported to the stockholders by the
Board of Directors at the next annual meeting of
stockholders. Twelfth: Expenses -
The expenses of administering the Plan and the dividend
equivalents which become payable thereunder, shall be borne
by the LTI Companies and not charged against the incentive
compensation plan reserve.
EXHIBIT A to employment agreement
ANNEX 1
EBIT Bonus Pool
In the event that the Company achieves EBIT in excess of 150% of
Target EBIT for any of the first, second or third Fiscal Years
following the Closing, certain employees will be entitled to
participate in an additional compensation program (the "EBIT
Bonus Pool"). The EBIT Bonus Pool shall be equal to 25% of the
EBIT achieved in excess of 150% of Target EBIT for any of the
three Fiscal Years following Closing, payable in cash no later
than the distribution date for Second Additional Shares for such
Fiscal Year. The EBIT Bonus Pool will be available to
Participating Employees of the Company, as determined and
approved by the Company's Board of Directors.
_______________________________