EXHIBIT 10.9
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AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
DATED AS OF OCTOBER 4, 1997
BY AND AMONG
DI ACQUISITION CORP.
AND
THE STOCKHOLDERS LISTED ON
SCHEDULE 1 HERETO
AND
DETAILS, INC.
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SCHEDULES AND ANNEXES
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I - Securities
II - Security Ownership
1.3(a) - Terms of Class A and Class L Common Stock
1.5(a) - Aggregate Merger Consideration Calculation
1.11 - Executive Bonuses
2 - Documents
3.1(b) - Consents
3.1(c) - Equity Investments
3.1(e) - Financial Statements
3.1(f) - Undisclosed Liabilities
3.1(g) - Changes
3.1(h) - Contracts, Agreements, and Purchase Orders
3.1(i) - Litigation and Claims
3.1(j) - Real Property
3.1(1) - Intellectual Property
3.1(m) - ERISA Matters
3.1(n) - Transactions with Affiliates
3.1(o) - Insurance Policies
3.1(p) - Taxes
3.1(q) - Compliance with Laws
3.1(r) - Environmental Matters
3.1(s) - Customers and Suppliers
3.1(t) - Blank Accounts
4.2 - Contracts to be Terminated At Closing
4.7 - Terms of Shareholders' Agreement
EXHIBITS
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EXHIBIT A-1 - Forms of Opinions of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
EXHIBIT A-2 - Form of Opinion of Special California Counsel
EXHIBIT B - Form of Opinion of Counsel for MergerCo
DEFINITIONS
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The following capitalized terms, which may be used in more than one Section
or other location of this Agreement, are defined in the following Sections or
other locations:
TERM SECTION
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Aggregate Merger Consideration.............................. 1.5(a)
Agreement................................................... Preamble
Acquisition Proposal........................................ 4.6
Affiliate................................................... 3.1(n)
Applicable Merger Consideration ............................ 1.6(a)
Audited Balance Sheet....................................... 3.1(e)
Audited Financial Statements................................ 3.1(e)
▇▇▇▇........................................................ 1.5(e)
By-Laws..................................................... 3.1(a)
California Corporations Code................................ Preamble
Cash Shares................................................. Preamble
Certificate ................................................ 1.6(a)
Charter..................................................... 3.1(a)
Class A Common Stock........................................ 1.5(d)
Class L Common Stock........................................ 1.5(d)
Closing..................................................... Article II
Closing Date................................................ Article II
Code........................................................ 3.1(m)
Common Stock................................................ Preamble
Common Stock Unit(s) ....................................... 1.5(e)
Company..................................................... Caption
Competitive Business ....................................... 4.10
Confidentiality Agreement................................... 8.3(a)
Contract(s)................................................. 3.1(h)
Document(s)................................................. 3.1(b)
Effective Time.............................................. 1.2
Employee Option Plan ....................................... 1.5(c)
Employee Plan............................................... 3.1(m)(ii)
Encumbrances................................................ 3.1(k)
Environmental Laws.......................................... 3.1(r)(i)
Environmental Permits....................................... 3.1(r)(i)
Equity Commitment........................................... 3.3(c)(ii)
ERISA ...................................................... 3.1(m)
ERISA Affiliate............................................. 3.1(m)
Escrow Agent................................................ 1.11(a)
Executive Bonuses........................................... 1.11(a)
Executive Option Exercise................................... 1.11(a)
Executives.................................................. 1.11(a)
Financial Statements........................................ 3.1(e)
Financing Letters........................................... 3.3(c)(i)
GAAP........................................................ 3.1(e)
Governmental Authority...................................... 3.1(b)
Hazardous substance......................................... 3.1(r)(iv)
HSR Act..................................................... 4.5(b)
Indebtedness................................................ 3.1(h)
TERM SECTION
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Indemnified Party......................................... 6.7
Intellectual Property..................................... 3.1(k)
Intellectual Property Licenses............................ 3.1(k)
Interim Balance Sheet..................................... 3.1(e)
Interim Financial Statements ............................. 3.1(e)
Laws...................................................... 3.1(g)(i)
Leased Real Property...................................... 3.1(j)(i)(A)
Leases.................................................... 3.1(j)(i)(B)
Listed Intellectual Property.............................. 3.1(1)
Loss(es).................................................. 6.2(a)
Management Members........................................ 4.10
Management Stock Option................................... 1.5(c)
Material Adverse Effect................................... 3.1(a)
Material Contract(s)...................................... 3.1(h)
Material Intellectual Property............................ 3.1(1)
Merger.................................................... Preamble
MergerCo.................................................. Caption
Minimal Amount............................................ 6.4
Options................................................... Preamble
Ordinary Course of Business............................... 3.1(f)
Ownership Percentage...................................... 1.11(a)
Per Share Merger Consideration............................ 1.5(a)
Performance Option Plan................................... 1.11(a)
Permits .................................................. 3.1(q)(ii)
Permitted Encumbrances.................................... 3.1(k)
Person.................................................... 3.1(b)
Preferred Stock........................................... Preamble
Pro Rata Share............................................ 1.11(b)
Retained Share(s)......................................... Preamble
Returns................................................... 3.1(p)(i)
Securities................................................ Preamble
Shares.................................................... Preamble
Shareholders' Agreement................................... 4.7
Company Transaction Expenses.............................. 1.5(a)
Stockholder(s)............................................ Caption
Stockholder Indemnitees................................... 6.1(a)
Surviving Corporation..................................... 1.1
Surviving Corporation Indemnitees......................... 6.1(b)
Tax Savings............................................... 1.11(a)
Tax(es)................................................... 3.1(p)
Termination Date.......................................... 7.1(u)
Warrants.................................................. 3.1(d)
AMENDED AND RESTATED
RECAPITALIZATION AGREEMENT dated as of
October 4, 1997 (this "Agreement"), among
DI ACQUISITION CORP., a California
corporation ("MergerCo"), each of the
persons or entities identified on Annex I
(each, a "Stockholder" and collectively,
the "Stockholders"), and DETAILS, INC., a
California corporation (the "Company").
The Stockholders are the only stockholders of the Company, with each
Stockholder (a) owning that number of shares of the Common Stock, no par value
(the "Common Stock"), and/or Series A Preferred Stock, no par value (the
"Preferred Stock"), as is set forth opposite each such Stockholder's name on
Annex I, and/or (b) holding stock options and/or warrants (collectively, the
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"Options") to purchase that number of shares of Common Stock as is set forth
opposite each such Stockholder's name on Annex I. The shares of Common Stock and
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Preferred Stock owned or to be owned by the Stockholders are collectively
referred to herein as the "Securities" or the "Shares."
The Boards of Directors of the Company and MergerCo have each determined
that it is advisable to effect a recapitalization of the Company by means of a
merger of MergerCo with and into the Company (the "Merger") upon the terms and
subject to the conditions set forth herein;
In furtherance of the Merger, the Boards of Directors of the Company and
MergerCo have each approved the merger of MergerCo with and into the Company in
accordance with the applicable provisions of the General Corporation Law of the
State of California (the "California Corporations Code"); and
Immediately prior to the Effective Time, each outstanding share of Preferred
Stock shall be converted into one share of Common Stock;
In the Merger, all Shares for which an election to retain such Shares has
been made (the "Retained Shares") as provided in Section 1.5(f) shall be
converted into the right to receive the Common Stock Units, as described in
Section 1.5(e) and all Shares for which no election has been made to retain such
Shares (the "Cash Shares") shall be entitled to receive a cash payment equal to
the Per Share Merger Consideration.
NOW, THEREFORE, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
1.1. The Merger.
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At the Effective Time (as defined in Section 1.2 below): MergerCo shall
merge with and into the Company; the corporate existence of the Company shall
continue; and the separate corporate existence of MergerCo shall cease. The
corporate identity, existence, name, purposes, franchises, powers, rights and
immunities of the Company shall continue unaffected and unimpaired by the
Merger, and the corporate identity, existence, purposes, franchises, powers,
rights and immunities of MergerCo shall be merged into the Company which shall
be fully vested therewith. The Company shall be subject to and shall assume all
of the debts and liabilities of MergerCo as if the Company had itself incurred
them, and all rights of creditors and all liens upon the property of each of the
Company and MergerCo shall be preserved unimpaired, provided that such liens, if
any, upon the property of MergerCo shall be limited to the property affected
thereby immediately prior to the Effective Time. The Company as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2. Effective Time.
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As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article V, the parties hereto shall cause the Merger to
be consummated by filing an Agreement of Merger with an officer's certificate of
each of the Company and MergerCo as required by Section 1103 of the California
Corporations Code in the office of the California Secretary of State (the record
time of such filing being the "Effective Time").
1.3. Articles of Incorporation By-Laws.
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(a) Articles of Incorporation. Upon such Merger, the Articles of
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Incorporation of the Surviving Corporation shall be amended and restated to
provide for, among other things, the Class A Common Stock and Class L Common
Stock described on Schedule 1.3(a) and shall be the Articles of Incorporation of
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the Surviving Corporation.
(b) By-Laws. The By-Laws of MergerCo, as in effect immediately prior to the
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Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the California Corporations Code, the
Articles of Incorporation of the Surviving Corporation and such By-Laws.
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1.4. Directors and Officers.
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The directors of MergerCo immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and By-Laws of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
1.5. Effect on Common Stock.
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At the Effective Time, by virtue of the Merger and without any action on
the part of the Company, MergerCo or the holders of any of the following
securities:
(a) Conversion of Securities. Each Share issued and outstanding immediately
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prior to the Effective Time (other than the Retained Shares) shall be converted
into the right to receive the Per Share Merger Consideration (as defined below).
The "Aggregate Merger Consideration" will be calculated in accordance with
Schedule 1.5(a) and shall be equal to $311,974,901.56 million less (i) all
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Indebtedness of the Company at the close of business on October 24, 1997
(including any prepayment penalties payable in respect thereof), less (ii) in
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the event the bridge loan is taken down $1.5 million, plus (iii) the amount of
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cash and cash equivalents of the Company at the close of business on October
24, 1997, plus (iv) the exercise price of all Performance Options outstanding
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immediately prior to the Effective Time, plus (v) the exercise price of all
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Employee Stock Options outstanding immediately prior to the Effective Time or
canceled pursuant to Section 1.5(c), less (vi) the amount of the Company
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Transaction Expenses. The additions and deductions to the "Aggregate Merger
Consideration" shall not be duplicative. The "Per Share Merger Consideration"
will be equal to (a) the Aggregate Merger Consideration divided by (b) the
number of shares of Common Stock outstanding immediately prior to the Effective
Time (including the number of shares issuable upon exercise of the warrants
pursuant to Section 1.5(d)) plus the number of Shares subject to Performance
Options outstanding at the Effective Time and the number of Shares subject to
Employee Stock Options outstanding immediately prior to the Effective Time or
canceled pursuant to Section 1.5(c). The "Company Transaction Expenses" shall
mean the expenses incurred in connection with the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby on
behalf of the Stockholders and the Company. The Company shall provide to
MergerCo on or prior to the Closing Date a schedule setting forth the Company
Transaction Expenses.
(b) Cancellation. Each Share held in the treasury of the Company and each
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Share owned by any direct or indirect wholly
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owned subsidiary of the Company immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) Stock Rights. As soon as practicable following the date hereof but in
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no event later than the Effective Time, the Company (or, if appropriate, the
Board of Directors of the Company or any committee administering the Employee
Option Plan (as defined below)) shall take action, including by adopting
resolutions or taking any other actions, subject to and contingent upon
receiving approval by the Stockholders in accordance with Section 280G(b) (5) of
the Code, to (i) accelerate as of the Effective Time the options to purchase
Shares (each an "Employee Stock Option") outstanding immediately prior to the
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Effective Time heretofore granted to certain employees of the Company (each a
"Manager") under the 1996 Employee Stock Option Plan (the "Employee Option
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Plan") set forth opposite such Manager's name on Annex II hereto under the
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heading "Accelerated Options" and (ii) to cancel as of the Effective Time, the
Employee Stock Options which are outstanding immediately prior to the Effective
Time set forth opposite each Manager's name on Annex II under the heading
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"Canceled Options", whether or not such Employee Stock Options to be canceled
are then exercisable. In exchange for each canceled Employee Stock Option, a
Manager shall be entitled to receive an amount in cash, payable at the time of
such cancellation, equal to the product of (x) the number of Shares subject to
such Employee Stock Option immediately prior to the Effective Time and (y) the
excess of the Per Share Merger Consideration over the per Share exercise price
of such Employee Stock Option net of all applicable withholding taxes.
(d) Warrants. As soon as practicable following the date hereof but prior
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to the Effective Time, each Stockholder holding a warrant shall exercise such
warrant for the number of shares of Common Stock set forth opposite such
Stockholder's name on Annex II under the heading "Warrant Shares".
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(e) Capital Stock of MergerCo. Each share of class A common stock, no par
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value, of MergerCo issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of class A common stock, no par value, of the Surviving
Corporation having the terms set forth in Schedule 1.3(a) (the "Class A Common
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Stock") and each share of class L common stock, no par value, of MergerCo issued
and outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable share of
class L common stock, no par value, of the Surviving Corporation having the
terms set forth on Schedule 1.3(a) (the "Class L Common Stock"). A "Common Stock
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Unit" will consist of one share of class L Common Stock and a number of
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shares of Class A Common Stock equal to the number of shares of class A common
stock of MergerCo. purchased by affiliates of ▇▇▇▇ Capital, Inc. ("▇▇▇▇")
divided by the number of shares of class L common stock of Merger Co. purchased
by affiliates of ▇▇▇▇ (other than any class A common stock or class L common
stock purchased in connection with the debt financing contemplated by the
Financing Letters).
(f) Retained Shares. Each Retained Share shall be converted into and
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exchanged for a number of validly issued, fully paid and nonassessable shares
constituting Common Stock Units as shall equal the Per Share Merger
Consideration divided by the price paid by affiliates of ▇▇▇▇ which are parties
to the Equity Commitment for a Common Stock Unit. Each Stockholder, by executing
this Agreement, irrevocably elects to retain a number of Shares calculated by
dividing the dollar amount set forth opposite such Stockholders name on Annex II
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under the heading "Retained Amount" by the Per Share Merger Consideration.
1.6. Exchange of Certificates.
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At the Closing, each Stockholder shall deliver certificates which
immediately prior to the Effective Time represented outstanding Shares of the
Company (each, a "Certificate"). Upon surrender of a Certificate for
cancellation to the Surviving Corporation at the Closing, the Certificate so
surrendered shall forthwith be canceled and the holder of such Certificate shall
be entitled to receive in exchange therefor (A) an amount of cash for each Cash
Share equal to the Per Share Merger Consideration, and (B) for each Retained
Share, the Common Stock Units due in respect thereof calculated in accordance
with Section 1.5(f). In the event of a transfer of ownership of shares of
Company Stock which is not registered in the transfer records of the Company as
of the Effective Time, the Applicable Merger Consideration may be paid in
accordance with this Article I to a transferee if the Certificate evidencing
such Shares is presented to the Surviving Corporation, accompanied by all
documents required to evidence and effect such transfer pursuant to this Section
1.6(a) and by evidence that any applicable stock transfer taxes have been paid.
Anything herein to the contrary notwithstanding, no interest or dividends shall
accrue or be payable or paid on any portion of the Applicable Merger
Consideration payable to any person hereunder. At and after the Effective Time,
each holder of a Certificate to be canceled pursuant to this Section 1.6 shall
cease to have any rights as a stockholder of the Company, except for the right
to surrender Certificates in the manner prescribed by this Section 1.6 in
exchange for payment of the Applicable Merger Consideration. All required cash
payments to the Stockholders shall be paid by wire transfer of immediately
available funds at the Closing to the accounts specified by the Stockholders not
later than two days prior to the Closing Date.
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1.7. Stock Transfer Books.
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At the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration of transfers of Shares
thereafter on the records of the Company.
1.8. No Further Ownership Rights in Company Stock.
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The Applicable Merger Consideration delivered upon the surrender of each
Certificate in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such Shares. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Article I.
1.9. Lost, Stolen or Destroyed Certificates.
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In the event any Certificates shall have been lost, stolen or destroyed,
the Surviving Corporation shall issue in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that fact by the
holder thereof and delivery of bond in such sum as the Surviving Corporation may
reasonably direct as indemnity against any claim that may be made against the
Surviving Corporation with respect to the Certificates alleged to have been
lost, stolen or destroyed, such Applicable Merger Consideration as may be
required pursuant to Section 1.6.
1.10. Further Action.
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If, at any time after the Effective Time, any further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and MergerCo,
the officers and directors of the Company and MergerCo immediately prior to the
Effective Time are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action.
1.11. Additional Merger Consideration.
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(a) Prior to the Effective Time, any options granted under the Company's
1996 Performance Option Plan (the "Performance Option Plan") which have not
heretofore vested shall, subject to and contingent upon receiving approval by
the Stockholders in accordance with Section 280G(b) (5) (B) of the Code, be
accelerated by the Company and vest in full. Each holder (each an "Executive"
and collectively, the "Executives") of the options granted under the Performance
Option Plan shall
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exercise (the "Executive Option Exercise") the options granted under the
Performance Option Plan to purchase the number of Shares set forth opposite his
name on Annex II under the heading "Purchased Option Shares" prior to the
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Effective Time. Immediately prior to the Effective Time, the Company, subject to
and contingent upon receiving approval by the Stockholders in accordance with
Section 280G(b) (5) of the Code, shall pay to each of the Executives the bonus
set forth on Schedule 1.11 opposite such Executive's name (the "Executive
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Bonuses"), net of all applicable withholding taxes. The Aggregate Merger
Consideration (including the amount of Indebtedness and cash and cash
equivalents) shall be determined after giving effect to the payment of the
Executive Bonuses as though such payment had occurred on the close of business
on October 24, 1997. The Company shall promptly file amended Tax Returns for
1996 and Tax Returns and refund claims for 1997 reflecting the compensation
expenses associated with the Executive Option Exercise (and the disposition of
the Shares received upon such exercise), the cancellation, for cash, of certain
Employee Stock Options, pursuant to Section 1.5(c) and the Executive Bonuses
(the "Executive Deductions"). The Aggregate Merger Consideration includes $1.1
million of consideration ("Tax Payment") that relates to the tax savings
realized by the Company when it elected not to make estimated tax payments in
anticipation of a reduction of its 1997 taxable income as a result of Tax
Savings (as defined below). On December 15, 1997, the Company shall pay $1.0
million ("December Payment") to an escrow agent selected by mutual agreement of
the MergerCo and a majority of the Stockholders (the "Escrow Agent") reflecting
an additional tax savings that will result from the Company's election not to
make a fourth quarter estimated tax payment in anticipation of a reduction of
its 1997 taxable income as a result of Tax Savings. Neither the Tax Payment nor
the December Payment shall be treated as a Tax Savings for purposes of this
Agreement it being understood that the Tax Savings allocated pursuant to clause
(i) below shall be Tax Savings in lieu thereof. When, as and if the Company
realizes any Tax Savings (as defined below), it shall allocate such Tax Savings
as follows:
(i) All Tax Savings realized from time to time shall be retained by
the Company (rather than paid to the Escrow Agent) until $2.1 million of
Tax Savings have been allocated pursuant to this clause (i) and such Tax
Savings shall have either (a) not been reversed or (b) if reversed, the
Company shall have received payments from the Stockholders pursuant to
Section 6.1(d) equal to the amounts so reversed; then
(ii) All Tax Savings realized from time to time shall be paid by the
Company to the Escrow Agent until the earlier of (a) such time as $7.9
million of Tax Savings have been allocated pursuant to this clause (ii) and
have not been reversed or (b) March 31, 1999; then
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(iii) All Tax Savings shall be paid by the Company to the
Stockholders, pro rata based on their respective Ownership Percentages (as
defined below), until such time as $7.9 million of Tax Savings have been
allocated pursuant to clause (ii) and this clause (iii) and have not been
reversed
Any reversal of Tax Savings will be allocated first to reverse
allocations of Tax Savings made pursuant to clauses (ii) and (iii), and then to
reverse allocations made pursuant to clause (i)
Each date on which the Company files a tax return or a request for a
refund of taxes previously paid by it is referred to herein as a "Measurement
Date." On or promptly after each Measurement Date, the Company will determine
the amount of any Tax Savings for the tax period to which such tax return or
request for refund relates by performing two hypothetical calculations of its
income tax liability. The first calculation (the "Without Calculation") will be
done without giving effect to all Executive Deductions. The second calculation
(the "With Calculation") will give effect to all Executive Deductions that have
been incurred, have not been disallowed and have not previously given rise to
Tax Savings.
If the Company would have been required to pay a tax for the relevant
period pursuant to the Without Calculation (a "Without Tax") and would have been
entitled to receive a tax refund for the relevant period pursuant to the With
Calculation (a "With Tax Refund"), then the Company will be deemed to have
realized a Tax Savings (x) on the date it files such tax return equal to such
Without Tax and (y) on the date it receives the requested refund (or would have
received such refund, had it not elected to apply such refund against any tax
liability) equal to such With Tax Refund.
If the Company would have been required to pay a tax for the relevant
period pursuant to the Without Calculation (a "Without Tax") and would have been
required to pay a tax for the relevant period pursuant to the With Calculation
(a "With Tax"), then the Company will be deemed to have realized a Tax Savings
on the date it files such tax return equal to the amount of such Without Tax
minus the amount of such With Tax.
If the Company would have been entitled to a tax refund for the
relevant period pursuant to the Without Calculation (a "Without Tax Refund") and
would have been entitled to receive a tax refund for the relevant period
pursuant to the With Calculation (a "With Tax Refund"), then the Company will be
deemed to have realized a Tax Savings on the date it receives the requested
refund (or would have received such refund, had it not elected to apply such
refund against any tax liability) equal to
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the amount of such With Tax Refund minus the amount of such Without Tax Refund.
Notwithstanding anything to the contrary herein, once a Tax Savings has
been deemed realized, such Tax Savings will not be subsequently reversed as a
result of the carryback of any losses generated in any subsequent taxable year.
Likewise, any Executive Deductions that have not given rise to any Tax Savings
shall be carried forward and properly taken into account in subsequent years,
but once such Executive Deduction generates a Tax Savings, it will not be
utilized again.
In the event any Tax Savings is disallowed, the parties to this
Agreement shall have the rights specified in Sections 6.1(d) and (e).
In the event the Company engages in any transactions out of the
ordinary course of business after the Effective Time and prior to the end of
1997 (other than transactions contemplated by the Recapitalization Agreement and
refinancing of the Company's bridge indebtedness), the net losses resulting from
such transactions will not reduce any Tax Savings that have been, or otherwise
would be, realized in 1996 or 1997, but will be taken into account in
determining any Tax Savings for any tax period after 1997.
The amounts to be held in escrow, as described above shall be released
to the Surviving Corporation to the extent necessary to satisfy any indemnity
claims under Section 6.1(d). All funds held in escrow that are not requested to
be disbursed to the Surviving Corporation prior to March 31, 1999, will be
distributed to the Stockholders, pro rata based upon their proportionate share
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of ownership of Shares on a fully-diluted basis assuming the exercise of all
options and warrants outstanding as of October 4, 1997 (the "Ownership
Percentage").
(b) As used herein, "Pro Rata" means, with respect to each Stockholder
the amount set forth opposite such Stockholders name under the heading "Pro Rata
Share" on Annex I hereto.
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1.12. Authorization of Merger and this Agreement; Waiver of Dissenter's Rights.
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(a) The execution and delivery of this Agreement by each Stockholder,
shall constitute the approval and adoption of the Merger, this Agreement, the
Agreement of Merger and the transactions contemplated hereby and thereby by the
stockholders of the Company, in accordance with Section 1201 of the California
Corporations Code.
(b) By the execution and delivery of this Agreement by the Stockholders,
each Stockholder electing to receive a cash payment equal to the Per Share
Merger Consideration hereby waives
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any dissenter's rights which such stockholder may have against the Company
pursuant to Section 1300 of the California Corporations Code.
ARTICLE II
THE CLOSING
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP,
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place as shall
be mutually agreeable to the parties hereto, on or prior to October 24, 1997 or
if, despite all commercially reasonable efforts of the parties hereto, the
conditions to the Closing set forth herein have not been satisfied by such date,
as soon as possible thereafter (the "Closing Date"). The parties recognize that
the timing of the Closing is a significant issue and shall exercise all
commercially reasonable efforts to satisfy all Closing Conditions by October 24,
1997 or as soon as possible thereafter, including (i) utilizing the bridge
financing described in the Financing Letters and (ii) requesting early
termination in the event of a filing under the HSR Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company.
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The Company hereby represents and warrants to MergerCo as follows:
(a) Organization, Good Standing, Qualification and Power. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as presently conducted. The Company has delivered to MergerCo correct and
complete copies of the Company's Charter and By-Laws (as hereinafter defined),
as in effect on the date hereof. The Company is duly qualified and in good
standing to do business in each jurisdiction where the conduct of its business
requires such qualification, except where the failure to be so qualified has not
had and could not reasonably be expected to have a material adverse effect on
the assets, properties, rights, obligations, liabilities, condition (financial
or otherwise), operations or business of the Company, taken as a whole (a
"Material Adverse Effect"). As used in this Agreement, the terms "Charter" and
"By-Laws" respectively mean, with respect to any corporation,
-10-
those instruments that, among other things, (A) define its existence, as filed
or recorded with the applicable Governmental Authority (as hereinafter defined),
including such corporation's Articles or Certificate of Incorporation,
Organization or Association and (B) otherwise govern its internal affairs, in
each case as amended, supplemented, or restated.
(b) Authority. Enforceability. No Violation. Etc. The Company has all
--------------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and the other agreements, instruments, certificates and documents listed on
Schedule 2 (together with this Agreement, each a "Document" and, collectively,
----------
the "Documents") to which it is a party, to consummate the transactions
contemplated hereby and thereby and to perform its obligations under each
Document. The execution and delivery by the Company of each of the Documents to
which it is or will be a party and the performance by the Company of its
obligations thereunder have been duly and validly authorized by all necessary
corporate action on the part of the Company. Each of the Documents to which the
Company is or will be a party is, or upon its execution and delivery will be, a
valid and binding obligation of the Company, enforceable against it in
accordance with the terms thereof, except to the extent that such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors, rights generally and to general principles
of equity. Except as set forth on Schedule 3.1(b), neither the execution or
---------------
delivery by the Company of any of the Documents to which it is or will be a
party, the consummation by the Company of the transactions contemplated hereby
and thereby nor the performance by the Company of its obligations hereunder and
by both its board of directors and stockholders thereunder will (i) conflict
with or result in a breach of any provision of the Company's Charter or By-Laws,
(ii) violate any law, statute, rule or regulation or judgment, order, writ,
injunction or decree of any Governmental Authority, in each case applicable to
the Company or its assets, properties or rights, (iii) result in the imposition
or creation of any Encumbrance upon or with respect to any of the assets,
properties or rights owned or used by the Company, or (iv) violate, conflict
with or constitute (with notice or lapse of time or both) a default or give rise
to any right of termination, cancellation or acceleration under any of the
terms, conditions or provisions of, or result in the creation of any Encumbrance
upon any of the assets or properties of the Company pursuant to the terms of,
any material note, bond, lease, mortgage, indenture, license, agreement or other
material instrument or obligation to which the Company is a party or by which it
or any of its properties or assets may be bound except any such violation,
conflict, or default which is not reasonably likely to have a Material Adverse
Effect. Except as set forth on Schedule 3.1(b), no material filing with, and no
---------------
material permit, authorization, consent or approval of, any individual,
corporation, association, partnership, joint venture or other
-11-
entity or organization of any kind or Governmental Authority (collectively, a
"Person") is necessary for the Company's execution and delivery of the
Documents, the consummation by the Company of the transactions contemplated
thereby or the Company's performance of its obligations thereunder. As used in
this Agreement, the term "Governmental Authority" means any federal, state,
local or foreign government, authority, instrumentality, department commission,
board, bureau, agency or court.
(c) Equity Investments. Except as otherwise set forth on Schedule 3.1(c),
------------------ ---------------
the Company does not have any subsidiaries and does not, directly or indirectly,
own or have the right to acquire any capital stock of, or other ownership
interest in, any Person. For purposes of Article III (other than the first
sentence of Section 3.1(d)) and Section 4.4, the term "Company" shall include
Details, Inc. and each of its majority-owned subsidiaries, taken as a whole.
(d) Capital Structure of the Company. Title to Securities. Etc. The
-----------------------------------------------------------
authorized capital stock of the Company consists of 100,000 shares of Common
Stock and 100,000 shares of Preferred Stock, of which (i) 9,631.2 shares of
Common Stock and 6,600.8 shares of Preferred Stock are validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights, and are
held of record by the Stockholders in the amounts listed on Annex I, (ii) 1,809
-------
shares are reserved for issuance pursuant to options granted under the 1996
Performance Option plan (the "Performance Options"), (iii) 260 shares are
reserved for issuance pursuant to Employee Stock Options granted under the
Employee Option Plan and (iv) 565.3 shares are reserved for issuance pursuant to
the warrants (the "Warrants") described on Schedule 3.1(h), 8,162 shares of
---------------
Common Stock and no shares of Preferred Stock are held in the Company's
treasury. Except for the Performance Options, the Employee Stock Options and the
Warrants, there are no outstanding options, warrants, rights, calls, agreements,
convertible securities or other commitments or rights to purchase or acquire any
unissued stock or other securities from the Company (including securities held
in treasury) and no other securities of the Company are reserved for any
purpose. Except for any Option or agreement relating to the Securities listed on
Schedule 4.2, there are no contracts, commitments, voting trusts, proxies
------------
(coupled with an interest or otherwise) agreements, understandings, arrangements
or restrictions to which, directly or indirectly, the Company is a party which
relate to the Securities
(e) Financial Information. Annex A to Schedule 3.1(e) contains complete and
--------------------- --------------------------
accurate copies of (i) the audited balance sheet of the Company as of December
31, 1996 (the "Audited Balance Sheet"), and the related audited statements of
income and cash flows for the year then ended (together with the Audited Balance
Sheet, the "Audited Financial Statements"), together with the report thereon of
the Company's independent certified public
-12-
accountants, and (ii) the unaudited balance sheet of the Company as of June 30,
1997 (the "Interim Balance Sheet") and the related unaudited statements of
income and cash flows for the six-month period then ended (together with the
Interim Balance Sheet, the "Interim Financial Statements"). The Audited
Financial Statements and the Interim Financial Statements are collectively
called the "Financial Statements." Except as set forth on Schedule 3.1(e), the
---------------
Financial Statements (i) were prepared in accordance with the books and records
of the Company, (ii) fairly present, in all material respects, the financial
position of the Company at and as of the dates indicated and the results of
operations of the Company for the periods indicated (subject, in the case of the
Interim Balance Financial Statements, to normal year-end adjustments which will
not, in the aggregate, be material and to the lack of footnotes), and (iii) have
been prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied throughout the periods covered thereby,
subject, in the case of Interim Financial Statements, to normal year-end
adjustments which will not, in the aggregate, be material and to the lack of
footnotes.
(f) Absence of Undisclosed Liabilities. The Company does not have any
----------------------------------
liabilities or obligations (accrued, absolute, contingent or otherwise) of a
type required to be reflected on a balance sheet prepared in accordance GAAP
that were not disclosed or reflected on the Interim Balance Sheet except (i)
those liabilities incurred in the ordinary course of business consistent with
past custom and practice (including with respect to quantity, frequency and
timing) ("Ordinary Course of Business") since the date of the Interim Balance
Sheet and (ii) liabilities disclosed on Schedule 3.1(f).
---------------
(g) Absence of Changes. Since the date of the Interim Balance Sheet there
------------------
has been no event or circumstance which has had or could reasonably be expected
to have a Material Adverse Effect. Further, the business of the Company has been
operated in the Ordinary Course of Business and, except as set forth on Schedule
--------
3.1(g), there has been no (i) deviation from historical methods of accounting,
------
including any change in accounting practices concerning slow selling inventory,
or material deviations from other practices in connection with the maintenance
of the Company's books and records, (ii) damage, destruction or loss which is
not fully covered by insurance and which has had or can reasonably be expected
to have a Material Adverse Effect on the Company, (iii) declaration or payment
of any dividend or other distribution on or with respect to the shares of
capital stock of the Company, or any direct or indirect redemption, purchase or
other acquisition of any of such shares, (iv) increase in or prepayment of
compensation payable or to become payable by the Company to any of its senior
executives, or the making of any bonus payment or similar arrangement to or with
any of them, except in the Ordinary Course of Business or pursuant to any
contract identified on the Schedules, (v)
-13-
cancellation of material indebtedness due to the Company from others (other than
the write-off of accounts receivable in the Ordinary Course of Business), (vi)
material change in the manner in which the Company extends discounts or credits
to customers, (vii) material change in the manner in which the Company markets
inventory, (viii) sale, transfer or other disposition of a material portion of
the assets of the Company, except in the Ordinary Course of Business and for
fair value, or scrapping of a material portion of the assets of the Company as
obsolete, (ix) binding commitments for capital expenditures of the Company in
excess of $2,500,000 in the aggregate, or (x) change in the Company's policies
with respect to the payment of accounts payable or other current liabilities and
the collection of accounts receivable, including any acceleration or deferral of
the payment or collection thereof, as applicable.
(h) Agreements. Etc. Schedule 3.1(h) sets forth an accurate and complete
---------------- ---------------
list of each contract or agreement whether written or oral (including any and
all amendments thereto) to which the company is a party or by which the Company
is bound (each such contract or agreement, a "Material Contract," and
collectively, the "Material Contracts") and which:
(i) relates to Indebtedness (including a letter of credit or similar
arrangement issued for the account or benefit of the Company) or a
guarantee of any Indebtedness of any other Person;
(ii) relates to the purchase, maintenance or acquisition, or sale or
furnishing of materials, supplies, merchandise, machinery, equipment, parts
or any other property or services (excluding any such contract made in the
Ordinary Course Business of the Company and which is expected to be fully
performed within twelve (12) months of the date hereof or which involves
revenues or expenditures of less than $1,000,000);
(iii) is a collective bargaining agreement or contract with any labor
union;
(iv) prohibits or restricts the Company from competing with any
business, or obligates the Company to conduct any business with only
certain parties, or otherwise restrains or prevents the Company from
carrying on any lawful business in any geographic area;
(v) relates to the use and protection of confidential information and
Intellectual Property of the Company's customers and end-users;
(vi) relates to employment, compensation, severance, or consulting
between the Company and any of its respective
-14-
officers, directors, employees or consultants who are entitled to
compensation thereunder (including any profit-sharing, bonus, stock option,
pension, retirement, savings, stock purchase, stock appreciation,
hospitalization insurance or similar plan or agreement, formal or informal,
providing benefits to any current or former officers, directors, employees or
consultants);
(vii) is a purchase agreement, conditional sales agreement, occupancy
agreement, license, lease or sublease for real property, which in the case of a
license, lease or sublease has a term of more than twelve (12) months, and
involves annual payments in excess of $500,000;
(viii) is a lease, sublease or other title retention agreement or
conditional sales agreement involving payments aggregating in excess of
$1,000,000 for any machinery, equipment, vehicle or other tangible personal
property (whether the Company is a lessor or lessee);
(ix) is a contract for capital expenditures or the acquisition or
construction of fixed assets involving payments in excess of $1,000,000;
(x) is a joint venture or partnership contract or other contract
involving the sharing of profits, losses, costs or liabilities; or
(xi) is material to the assets, business, operations or financial
condition of the Company.
Except as set forth on Schedule 3.1(h), (A) all of the Material Contracts are in
---------------
full force and effect and enforceable in all material respects by the Company in
accordance with their terms except to the extent that such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights generally and to general principles of
equity, (B) the Company is not in breach of or default under (and no event has
occurred which with notice or the passage of time or both would constitute a
breach or default under) any Material Contract listed, and (C) the Company has
not given nor, to the Company's knowledge, has it received from any other
Person, at any time since July 1, 1997, any notice or other communication
regarding any breach of, or default under, any Material Contract which has not
been cured or waived.
For purposes of this Agreement, "Indebtedness" of any Person means all
obligations of such Person (i) for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) under capital leases (the
capitalized amount of which determined in accordance with GAAP, together with
accrued but unpaid interest thereon, shall be reflected as
-15-
Indebtedness) or (iv) in the nature of guarantees of the obligations described
in clauses (i) through (iii) above of any other Person.
(i) Litigation. Except as set forth on Schedule 3.1(1), there is
---------------
no action, suit, claim, audit, investigation or legal, administrative or
arbitration proceeding pending or, to the Company's knowledge, threatened
against the Company, whether at law or in equity, whether civil or criminal in
nature and whether before or by any Governmental Authority, excluding workers
compensation claims incurred in the Ordinary Course of Business. Except as set
forth on Schedule 3.1(1), there are no judgments, decrees, injunctions or orders
---------------
of any Governmental Authority binding upon the Company. The Company is not in
default under any such judgment, decree, injunction or order.
(j) Real Property.
-------------
(i) The Company does not own, directly or indirectly, any real
property or improvements thereon. Set forth on Schedule 3.1(j) is:
---------------
(A) a list of all real property leased (the "Leased Real
Property") by the Company; and
(B) the date of each lease agreement and any amendments
thereto or modifications thereof (whether written or oral) (collectively, the
"Leases"), and whether there is any requirement to obtain the consent of any
Person under each Lease to the transactions contemplated by this Agreement
(including the placement of Encumbrances on such Lease or the property subject
thereto).
(ii) The Company does not own or hold and is not obligated under
or a party to any option, right of first refusal or other contractual right to
purchase, acquire, sell or dispose of any parcel of Leased Real property or any
portion thereof or interest therein except as provided in the Master Lease
Agreement dated January 1, 1996 between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
as trustees of the ▇▇▇▇▇▇▇ Family Trust, lessor, and Details, Inc., lessee. The
Company is not a lessor, sublessor or grantor under any contract granting to
another Person any right to the possession, use, occupancy or enjoyment of any
parcel of Leased Real property.
(k) Title to Assets. properties and Rights and Related Matters. The
----------------------------------------------------------
Company has marketable title to (i) all the properties, interests in properties
and assets, real, personal or mixed, reflected as being owned on the Interim
Balance Sheet by the Company (except for those sold or otherwise disposed of in
the ordinary Course of Business since the Interim Balance Sheet Date), and to
those acquired by the Company after the Interim
-16-
Balance Sheet Date and not sold or otherwise disposed of since their
acquisition, free and clear of all Encumbrances of any kind or character, except
(i) liens for current taxes not yet due and payable, (ii) Encumbrances securing
taxes, assessments, governmental charges or levies or the Encumbrances of
materialmen, carriers, landlords and like persons, all of which are not yet due
and payable, (iii) minor Encumbrances of a character which are not reasonably
expected to have a Material Adverse Effect on the Company, or (iv) Encumbrances
that will be released and discharged at or prior to the Closing ("Permitted
Encumbrances"). As used herein, the term "Encumbrances" shall mean and include
any security interests, mortgages, liens, pledges, charges, easements,
reservations, restrictions, rights of way, servitudes, options, rights of first
refusal, rights of first offer, community property interests, restrictions of
any kind and all other encumbrances, whether or not relating to the extension of
credit or the borrowing of money.
(1) Intellectual Property. Part A of Schedule 3.1(1) sets forth an
--------------------- ---------------
accurate and complete list of all material patents, pending patent applications,
trademarks, service marks, pending trademark or service ▇▇▇▇ applications and
trade names licensed to, assigned to, applied for or registered in the name of,
the Company, or which the Company uses in its business, and all material
copyright registrations or pending applications for copyright registrations of
the Company, or which the Company uses in its business, including the nature
(e.g., patent, trademark, etc.) of such intellectual property, the application
----
or registration number, the jurisdiction and the record owner (all such,
Intellectual Property which is or should have been listed on Part A of Schedule
--------
3.1(1) being referred to as the "Listed Intellectual Property"). Part B of
------
Schedule 3.1(1) also sets forth all material licenses (other than licenses for
---------------
"shrink wrapped" off-the-shelf software) to which the Company is a party and
that directly relate to the Listed Intellectual Property or any other material
intellectual property rights (including inventions, drawings, mask works, trade
secrets, customer lists, software, technical information, data, process
technology, plans, blueprints, know-how and confidential information) currently
used by the Company or necessary to permit the Company to conduct its business
as now conducted (the Listed Intellectual Property and the other intellectual
property rights are collectively called the "Material Intellectual Property").
Except as set forth on Part C of Schedule 3.1(1):
---------------
(i) no registration, patent or other governmental document
relating to the Material Intellectual Property has lapsed, expired or been
abandoned or canceled or is the subject of cancellation proceedings or otherwise
held invalid or unenforceable with respect to the Material Intellectual
Property;
-17-
(ii) the Company owns or possesses adequate and enforceable
licenses, assignments, or other authorizations (free of Encumbrances other than
Permitted Encumbrances and free of any obligation to make payment to any third
party for the use thereof) to use all Material Intellectual Property;
(iii) the Company has not infringed on or misappropriated, and is
not now infringing on or misappropriating, any intellectual property right
belonging to any Person based on the operations of the Company within the last
three years, and no claim has been made or is pending or, to the knowledge of
the Company, threatened to the effect that any Material Intellectual Property is
invalid, unenforceable or infringes on or misappropriates the rights of any
other Person;
(iv) to the Company's knowledge, no Person is infringing upon,
misappropriating or violating any of the Intellectual Property in any material
respect;
(v) the Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of its and its customers' trade secrets,
proprietary processes and formulae, inventions, know-how, customer lists and
other confidential and proprietary information; and
(vi) the Company has not licensed or granted rights to any third
party to use any of the Material Intellectual Property, other than customers in
the Ordinary Course of Business.
(m) Benefit Plans; ERISA Matters.
----------------------------
(i) All Employee Plans (as defined below) have been operated and
administered in all material respects in accordance with applicable law
(including ERISA and the Code);
(ii) except as set forth in Schedule 3.1(m), neither the Company
---------------
nor any of its ERISA Affiliates has maintained, currently maintains, is
obligated to make any contributions to or has any liability with respect to any
Employee Plan;
(iii) neither the Company nor any of its ERISA Affiliates, any
other "disqualified person" or "party in interest" (as defined in Section 4975
of the Code and Section 3 of ERISA respectively) with respect to an Employee
Plan has breached the fiduciary rules of the ERISA or engaged in a prohibited
transaction which could subject the Company or its ERISA Affiliates to any tax
or penalty
-18-
imposed under Sections 495 of the Code or Section 502(i), (j) or (1) of ERISA;
(iv) all reporting and disclosure obligations imposed under ERISA
and the Code have been satisfied in all material respects with respect to each
Employee Plan;
(v) each Employee Plan which is a "group health plan" within the
meaning of Section 5000 of the Code has been maintained in all respects in
compliance with Section 4980B of the Code and Title I, Subtitle B, Part 6 of
ERISA and no tax payable on account of Section 4980B of the Code has been or
would reasonably be expected to be incurred;
(vi) except as set forth in Schedule 3.1(m), no benefit payable or
---------------
which may become payable by the Company or its ERISA Affiliates pursuant to any
Employee Plan shall constitute an "excess parachute payment," within the meaning
of Section 280G of the Code, which is or may be subject to the imposition of an
excise tax under Section 4999 of the Code or which would not be deductible by
reason of Section 280G of the Code;
(vii) no Employee Plan currently maintained by the Company or its
ERISA Affiliates is or was a "multiple employer plan" (within the meaning of
Section 413 of the Code);
(viii) neither the Company nor any of its ERISA Affiliates is or
ever has been obligated to contribute to any "multi-employer plan" (within the
meaning of Section 3 of ERISA) or other plan subject to Title IV of ERISA; and
(ix) other than as required under Section 601 et seq. of ERISA, no
------
Employee Plan provides benefits or coverage following retirement or termination
of employment.
As used in this Agreement, "Employee Plan" means any "employee benefit plan" (as
that term is defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), as well as any other plan, program or
arrangement involving direct and indirect compensation, whether covering a
sing1e individual or a group of individuals, under which the Company, or any
entity that is a member of a "controlled group of corporations" with, or is
under "common control" with, the Company as defined in Section 414(b) or (c) of
the Internal Revenue Code of 1986, as amended (the "Code) (an ERISA Affiliate"),
has or may have any present or future obligations or liability on behalf of its
employees or former employees, contractual employees or their dependents or
beneficiaries. The Company has delivered to MergerCo correct and complete copies
of all Employee Plans and related documents. MergerCo acknowledges
-19-
and agrees that the only representations and warranties of the Company herein as
to any ERISA matters are those contained in this Section 3.1(m).
(n) Transactions with Affiliates. Except as set forth in Part A of
----------------------------
Schedule 3.1(n) and except for employment arrangements entered into in the
---------------
Ordinary Course of Business and which are disclosed on Schedule 3.1(h), since
---------------
February 1, 1996, the Company has not purchased, acquired or leased any property
or services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from or entered into or
been subject to any management, consulting or similar agreement with,
Affiliates. The term "Affiliate," with respect to any Person, means any
stockholder of such Person or any other Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. Except as set forth in Part B of Schedule
--------
3.1(n), no Affiliate of the Company is indebted to the Company for money
------
borrowed or other loans or advances (except for advances of business expenses in
the Ordinary Course of Business).
(o) Insurance. Schedule 3.1(o) contains an accurate and complete list
--------- ---------------
and a brief description of all material insurance policies currently in effect
which are presently owned or held by the Company, insuring the products,
properties, assets, business and operations of the Company and its potential
liabilities to third, parties, copies of which have been delivered to MergerCo.
As of the date of this Agreement, all premiums due have been paid and no notice
of cancellation or termination or intent to cancel has been received by the
Company with respect to any such policy. To the knowledge of the Company, the
Company is not in material default under any such insurance policies.
(p) Taxes. Except as set forth on Schedule 3.1(p):
-----
(i) The Company has filed all material returns, declarations
of estimated tax, tax reports, information returns and statements required to be
filed by it prior to the Closing Date relating to any material Taxes with
respect to any income, assets or operations of the Company, other than those for
which extensions shall have been granted prior to the Closing Date
(collectively, the "Returns");
(ii) the Returns are true and correct in all material respects;
(iii) the Company has paid, or made adequate provision in
accordance with GAAP for the payment of all Taxes for the periods ending on
or before the Effective Time;
(iv) the Company has not waived any statute of limitations
affecting any Tax liability or agreed to any
-20-
extension of time during which a Tax assessment or deficiency assessment may be
made;
(v) except as set forth on Schedule 3.1(p), there are no pending
---------------
examinations by any taxing authority of any Returns of the Company and the
Company has not received written notice of any unresolved questions or claims
concerning its Tax liability;
(vi) the Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
shareholder, employee, creditor, independent contractor, or other third party;
(vii) other than Encumbrances for Taxes not yet due and payable,
there are no Encumbrances on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax; and
(viii) the unpaid Taxes of the Company do not exceed the reserve
for Tax liability set forth on the Interim Balance Sheet as adjusted for the
passage of time including any Tax liability incurred in the Ordinary Course of
Business since the date of the Interim Balance Sheet established in accordance
with GAAP.
The term "Tax" or "Taxes" means, with respect to any Person, all income taxes
(including any tax on or based upon net income, gross income, or income as
specially defined, or earnings, profits, or selected items of income, earnings
or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment or windfall profits taxes, alternative
or add-on minimum taxes, imposts or customs duties together with any interest
and any penalties, additions to tax or additional amounts imposed by any taxing
authority on such Person. The Company is not a party to any Tax sharing
agreement. MergerCo acknowledges and agrees that the only representations and
warranties of the Company herein as to any Tax matters (other than ERISA
matters, which are covered by Section 3.1(m) above) are those contained in this
Section 3.1(p).
(q) Compliance with Laws. Except as set forth on Schedule 3.1(q):
-------------------- ---------------
(i) the Company is (and since January 31, 1996 has been) in
material compliance with all applicable laws, rules, regulations, ordinances,
decrees and orders of any Governmental Authority (other than Environmental Laws,
which are covered by Section 3.1(r)) (collectively, "Laws") and has not received
any notice of any alleged claim or threatened claim, violation of or liability
under any such
-21-
Law which has not heretofore been cured or for which there no remaining
liability;
(ii) the Company has all governmental permits, licenses, consents,
approvals, franchises and other authorizations necessary for the conduct of its
business as presently conducted ("Permits");
(iii) all of the Permits are valid, binding, and in full force and
effect;
(iv) no loss or expiration of any such Permit is, pending or
reasonably foreseeable or to the knowledge of the Company threatened; and
(v) the Company is in compliance with the material terms of such
Permits.
(r) Environmental Matters.
---------------------
(i) The Company has all Permits (collectively, the "Environmental
Permits") which are required in connection with the ownership of its assets and
properties and the operation of its business under all federal, state and local
statutes, laws, codes, regulations, ordinances, rules, principles of common law,
judgments, orders, decrees, injunctions, concessions, grants, franchises,
agreements or governmental restrictions relating to the environment, including
relating to health or safety, pollution or the generation handling, storage,
transport, disposal, discharge or release of any materials or substances into
the environment except for those failures which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect (collectively,
"Environmental Laws");
(ii) all such Environmental Permits are in full force and effect,
and no action or proceeding is pending or to the knowledge of the Company
threatened to revoke, rescind, limit or otherwise modify any Environmental
Permit;
(iii) the Company is in compliance in all material respects with
the terms and conditions of all Environmental Permits and other limitations,
restrictions, conditions, rules and regulations, standards, prohibitions,
requirements, obligations, schedules and timetables contained in or issued,
entered or promulgated under or pursuant to any Environmental Law applicable to
it or its business;
(iv) the Leased Real Property is free of contamination from any
toxic or hazardous substance or
-22-
waste, including any petroleum or petroleum-derived substance or waste or any
asbestos containing material, as defined in any applicable Environmental Laws (a
"Hazardous Substance") except for such contamination that could not reasonably
be expected to have a Material Adverse Effect;
(v) the Company:
(A) has not discharged or released any Hazardous Substance
except for discharges or releases which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect;
(B) is not liable or responsible for clean up costs, remedial
work or damages (including any natural resource damages) in connection with
the generation, handling, storage, transport, disposal, discharge or
release if any Hazardous Substance prior to the Closing Date;
(C) has not received any notice under any environmental Laws of
any asserted violation, proceeding, investigation or lawsuit arising out of
or related to the operation, of the business of the Company or any-claim
for clean-up costs, remedial work or damages from any Person in connection
with the generation, handling, storage, transport, disposal, discharge or
release of any Hazardous substance except for those which, in the aggregate
could not reasonably be expected to have a Material Adverse Effect;
(D) has not entered into any agreement with any person pursuant
to which the Company has assumed responsibility for, either directly or
indirectly as a guarantor or surety, or otherwise agreed to contribute to,
the remediation of any condition arising from or relating to the
generation, handling, storage, transport, disposal, discharge or release of
any Hazardous Substance; and
(E) has not filed any notice under any applicable Environmental
Law reporting any past or present generation, handling, storage, transport,
disposal, discharge or release of any Hazardous Substance.
The Company has delivered to MergerCo, correct and complete copies of all
environmental studies, reports, audits, or analyses in the Company's possession
relating to the assets and properties owned or leased by the Company, including
the Environmental Health and Safety Assessment dated August, 1997 prepared by
Pilko & Associates, Inc. MergerCo acknowledges and agrees that the only
representations and warranties of the Company herein as to any environmental
matters are those contained in this Section 3.1(r).
-23-
(s) Customers and Suppliers. Except as set forth on Schedule 3.1(s),
----------------------- ---------------
since the December 31, 1996, no significant customer (or group of customers
which in the aggregate is significant) or any distributor of the Company has
given the Company notice that such customer (or group of customers) or
distributor will cease to purchase products or services or reduce significantly
the amount of products and services purchased from the Company or materially
adversely change the price or terms at which it purchases such products and
services, and (B) no significant supplier or vendor (or group of suppliers or
vendors which in the aggregate is significant) of the Company has given the
Company notice that such supplier or vendor (or group of suppliers or vendors)
will cease to supply or restrict the amount supplied or adversely change its
price or terms to the Company of any material products or services.
(t) Banking Facilities. Schedule 3.1(t) sets forth a true, correct
------------------ ---------------
and complete list of:
(i) each bank, savings and loan or similar financial
institution in which the Company has an account or safety deposit box or
other arrangement, and any number or other identifying codes of such
accounts, safety deposit boxes or other arrangements; and
(ii) the names of all persons authorized to draw one such
account or have access to any such safety deposit facility or such other
arrangement.
(u) Labor Relations; Employees. There is no pending or, to the
--------------------------
knowledge of the Company, threatened unfair labor practices complaint against
the Company before the National Labor Relations Board or any comparable
governmental authority. There is no labor strike, dispute, slowdown or stoppage
pending or, to the knowledge of the Company, threatened against the Company. No
representation question currently exists respecting the employees of the
Company. No collective bargaining agreement is currently in force or is being
negotiated by the Company.
(v) Brokers. Other than Chase Securities Inc., no agent, broker,
-------
investment banker or other Person acting on behalf of the company or under the
authority of the Company is or will be entitled to any fee or commission
directly or indirectly from the Company in connection with any of the
transactions contemplated hereby.
(w) NO ADDITIONAL REPRESENTATIONS. THE COMPANY IS NOT MAKING ANY
-----------------------------
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER WITH
RESPECT TO THE COMPANY, INCLUDING ANY OF THE ASSETS, PROPERTIES OR RIGHTS OF THE
COMPANY, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN
THIS SECTION 3.1, AND EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION
-24-
3.1, THE CONDITION OF THE ASSETS, PROPERTIES AND RIGHTS OF THE COMPANY, SHALL BE
"AS IS" AND "WHERE IS."
3.2. Several Representations and Warranties of the Stockholders.
----------------------------------------------------------
Each Stockholder, severally as to himself or itself only and not jointly or
as to any other Stockholder or the Company, represents and warrants to MergerCo
as follows:
(a) Authority, Enforceability, No violation. Etc. Such Stockholder has the
--------------------------------------------
full and absolute power to enter into each Document to which it is or will be a
party and perform its other obligations under each such Document. The execution
and delivery by such Stockholder of each Document to which it is or will be a
party and the performance by such Stockholder of its obligations thereafter
have been duly and validly authorized by all necessary action (corporate or
otherwise) on the part of such Stockholder. Each document to which such
Stockholder is or will be a party has been, or upon its execution and delivery
will be, duly and validity executed and delivered by such Stockholder and is, or
upon its execution and delivery will be, a valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except to the extent that such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors, rights generally and to general principles of equity. Neither the
execution or delivery by such Stockholder of any Document to which it is or will
be a party, the consummation by such Stockholder of the transactions
contemplated hereby and thereby nor the performance by such Stockholder of its
obligations thereunder will (i) conflict with or result in a breach of any
provision of such Stockholder's Charter or By-Laws, (ii) violate any material
law, statute, rule or regulation or judgment, order, writ, injunction or decree
of any Governmental Authority, in each case applicable to such Stockholder or
the Securities owned by such Stockholder, or (iii) conflict with or result in a
default or breach of any provision of any material contract or agreement to
which Stockholder is a party or by which the Securities owned by such
Stockholder may be bound and which would, have a material adverse effect on such
Stockholder's ability to perform its obligations under the Documents to which
such stockholder is or will be a party. No material filing with, and no
material permit, authorization, consent or approval of, any Person is necessary
for the consummation by the Stockholder of the transactions contemplated by the
Documents.
(b) Ownership. Such Stockholder is the lawful owner, of record and
---------
beneficially, of the Securities owned by such Stockholder (which are those
Securities listed opposite such Stockholder's name on Annex I) and has good
-------
title to such Securities, free and clear of any and all Encumbrances (except for
the Encumbrances granted by certain of the Stockholders under
-25-
the Shareholder Pledge Agreement, dated as of January 31, 1997) other than liens
for taxes not yet due and payable.
(c) Brokers. Other than Chase Securities Inc., no agent, broker,
-------
investment banker or other Person acting on behalf of such Stockholder or under
the authority of such Stockholder is or will be entitled to any fee or
commission directly or indirectly from MergerCo or the Company in connection
with any of the transactions contemplated hereby.
(d) NO ADDITIONAL REPRESENTATIONS. SUCH STOCKHOLDER IS NOT MAKING ANY
-----------------------------
REPRESENTATION OR WARRANTY, JOINT OR SEVERAL, EXPRESS OR IMPLIED, OF ANY NATURE
WHATSOEVER WITH RESPECT TO ITSELF (EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS SECTION 3.2), OR WITH RESPECT TO ANY OTHER
STOCKHOLDER OR THE COMPANY (INCLUDING AS TO ANY OF THE ASSETS, PROPERTIES OR
RIGHTS OF THE COMPANY).
3.3. Representations and Warranties of MergerCo.
------------------------------------------
MergerCo hereby represents and warrants to the Company and the Stockholders
as follows:
(a) Authority, Enforceability, No Violation. Etc. MergerCo has all
--------------------------------------------
requisite corporate power and authority to execute and deliver each of the
Documents to which it is or will be a party as contemplated hereby and to
perform its obligations under each such Document. The execution and delivery by
MergerCo of each of the Documents to which it is a party and the performance by
MergerCo of its obligations thereunder have been duly and validly authorized by
all necessary action (corporate or otherwise) on the part of MergerCo. Each of
the Documents to which MergerCo is a party has been, or upon its execution and
delivery will be, duly and validly executed and delivered by MergerCo and is, or
upon its execution and delivery will be, a valid and binding obligation of
MergerCo, enforceable against it in accordance with its terms, except to the
extent that such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and to general principles of equity. Neither the execution or delivery
by MergerCo of any of the Documents to which it is or will be a party, nor the
performance by MergerCo of its obligations thereunder, nor compliance by
MergerCo with any of the provisions thereof will (i) conflict with or result in
a breach of any provision of MergerCo's Charter or By-Laws, (ii) violate any
material law, statute, rule or regulation or judgment, order, writ, injunction
or decree of any Governmental Authority, in each case applicable to MergerCo or
its assets, or (iii) conflict with or result in a default or breach of any
provision of any material contract or agreement to which MergerCo is a party or
by which its assets may be bound. Except as contemplated by this Agreement, no
material filing with, and no material permit, authorization, consent or approval
-26-
of, any Person is necessary for the consummation by MergerCo of the transactions
contemplated by the Documents.
(b) Brokers. Other than ▇▇▇▇, no agent, broker, investment banker, or
-------
other Person acting on behalf of MergerCo or under the authority of MergerCo is
or will be entitled to any fee of commission directly or indirectly from the
Stockholders (or the Company in the event the transactions contemplated hereby
do not occur) in connection with any of the transactions contemplated hereby.
(c) Financing.
---------
(i) MergerCo has delivered to the Company true and correct copies
of signed letters received by MergerCo with respect to the financing (the
"Financing Letters") required for the consummation of the transactions
-----------------
contemplated hereby. MergerCo has no knowledge of any facts or circumstances
which would prevent the financing contemplated thereunder to be obtained. A copy
of each Financing Letter is set forth in Exhibit 3.3(c).
--------------
(ii) MergerCo has delivered to the Company an equity Commitment
Letter from ▇▇▇▇ Capital Fund V, L.P. and ▇▇▇▇ Capital Fund V-B, L.P. (the
"Equity Commitment") to provide equity capital to MergerCo.
ARTICLE IV
COVENANTS
4.1. Waiver of Rights of First Refusal Under Shareholders' Agreement.
---------------------------------------------------------------
Each of the Stockholders party to the Shareholders' Agreement, dated as of
January 31, 1996, among the Company and the shareholders of the Company party
thereto hereby waives the application of the provisions of Section 3.4 thereof
in connection with the transactions contemplated by the Documents.
4.2. Termination of Certain Agreements.
---------------------------------
Concurrently with the Closing, each of the Contracts and option plans
listed on Schedule 4.2 shall be automatically terminated without any further
------------
action by the parties thereto or any further liability of the Company
thereunder.
-27-
4.3. Access to Information.
---------------------
From and after the date hereof until the Closing, the Company will afford
to MergerCo, its counsel and authorized representatives free and full access
upon reasonable notice and during normal business hours (but without
unreasonable interruption of the Company's business) to all of its facilities,
management and books and records relating to the Company's business (including
tax returns filed and in preparation) as MergerCo may reasonably request.
4.4. Operation of Business.
---------------------
(a) From and after the date hereof until the Closing, except as otherwise
consented to in writing by MergerCo, the Company (and in the case of clause
(iv), each Stockholder) will:
(i) conduct the business of the Company only in the Ordinary Course
of Business;
(ii) not dispose of any assets of the Company with a fair market
value of $100,000 individually or $500,000 in the aggregate, except sales
of inventories in the Ordinary Course of Business;
(iii) use commercially reasonable efforts to maintain the Company's
business, assets, properties and rights in accordance with past custom and
practice;
(iv) except as described in Article I, not reclassify, combine,
split, subdivide, or pay or declare a dividend in respect of, or redeem or
otherwise repurchase any capital stock of the Company, or issue, deliver,
pledge or encumber any additional capital stock or other securities
equivalent to or exchangeable for capital stock;
(v) not acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock,
partnership interests or assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof;
(vi) not pay, discharge or satisfy any material claims, liabilities
or obligations (whether absolute, accrued, contingent or otherwise), other
than the payment, discharge or satisfaction of liabilities in the Ordinary
Course of Business and payments of the Indebtedness of the Company;
(vii) not change the accounting methods or practices followed by the
Company, including any change in any
-28-
assumption underlying, or method of calculating, any bad debt,
contingency or other reserve, except as may be required by changes in
GAAP; and
(viii) not amend or modify in any way the Charter or By-Laws of
the Company.
(b) MergerCo expressly agrees and acknowledges that nothing herein shall
prohibit the Company from (i) accelerating the vesting of the Options, (ii)
paying the Executive Bonuses, (iii) permitting the cashless exercise of any
Options or Warrants, (iv) consummating the transactions contemplated by Article
I hereof or (v) paying or prepaying any Indebtedness or borrowing under existing
credit facilities.
4.5. Efforts to Consummate; Cooperation.
----------------------------------
(a) Subject to the terms and conditions of this Agreement, each party
hereto shall use commercially reasonable efforts to take or cause to be taken
all actions and do or cause to be done all things required under applicable
laws, regulations and ordinances in order to consummate the transactions
contemplated hereby, including (i) obtaining all material permits,
authorizations, consents and approvals (other than any of the stockholders'
consents under Section 280G(b) (5) referenced in this Agreement) of any
Governmental Authority which are required for or in connection with the
consummation of the transactions contemplated hereby and by the other Documents,
(ii) taking any and all reasonable actions necessary to satisfy all of the
conditions to the other party's obligations hereunder as set forth in Article V,
(iii) executing and delivering all agreements and documents required by the
terms hereof to be executed and delivered by such party on or prior to the
Closing and (iv) obtaining the financing under the Financing Letters and the
Equity Commitment if the conditions specified therein are satisfied.
(b) Each party hereto agrees to cooperate with each other in determining
whether any filings are required to be made or consents required to be obtained
in any jurisdiction in connection with the consummation of the transactions
contemplated by this Agreement and in making or causing to be made any such
filings as promptly and in seeking to obtain timely any such consents,
including, without limitation, any filings required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvement Act of 1976, as amended (the "HSR Act").
4.6. No-shop Agreement.
-----------------
From the date of this Agreement until the earlier of the Closing or the
termination of this Agreement pursuant to Section 7.1, the Stockholders
(severally but not jointly) and the Company
-29-
shall not and shall cause their respective officers, directors, employees and
other agents not to, directly or indirectly, (i) take any action to solicit or
initiate any Acquisition Proposal (as hereinafter defined), or (ii) continue,
initiate or engage in negotiations or discussions with, enter into any
agreement with, or provide any information relating to the Company to, or afford
access to any Person (other than MergerCo and its Affiliates and
representatives) in connection with any Acquisition Proposal. The term
"Acquisition Proposal" as used herein means any offer, proposal or indication of
interest in (A) the acquisition or recapitalization (whether by merger or
otherwise) of the Company, (B) a merger, consolidation or other business
combination, or (C) the acquisition of any of the capital stock of the Company.
4.7. Shareholders' Agreement.
-----------------------
Each Stockholder holding Retained Shares agrees to execute and deliver,
on or prior to the Closing Date, a Shareholders' Agreement having the terms set
forth in Schedule 4.7 (the "Shareholders' Agreement").
------------
4.8. Indemnification. Exculpation.
----------------------------
(a) All rights to indemnification and exculpation (including the
advancement of expenses) from liabilities for acts or omissions occurring at or
prior to the Effective Time (including with respect to the transactions
contemplated by this Agreement) existing as of the date hereof in favor of the
current or former directors or officers of the Company as provided in its
Certificate of Incorporation, its By-laws and the indemnification agreements set
forth in Schedule 4.8 shall be assumed by the Surviving Corporation, without
------------
further action, as of the Effective Time and shall survive the Merger and shall
continue in full force and effect without amendment, modification or repeal in
accordance with their terms for a period of not less than six years after the
Effective Time; provided however, that if any claim's are asserted or made
-------- -------
within such period, all rights to indemnification (and to advancement of
expenses) hereunder in respect of any such claims shall continue, without
diminution, until disposition of any and all such claims. Notwithstanding the
foregoing, no Stockholder Indemnitee will be entitled to make any claim for
indemnification against the Surviving Corporation by reason of the fact that he,
she or it (or any of his, her or its officers, directors, agents or other
representatives) was a controlling person, director, officer, employee, agent or
other representative of the Company or of any of its subsidiaries or was serving
as such for another Person at the request of any the Company or any of its
shareholders, subsidiaries or other Affiliates (whether such claim is pursuant
to any statute, charter, by-law, contractual obligation or otherwise) with
respect to any action brought by the Surviving Corporation
-30-
against any Stockholder (whether such action is pursuant to this Agreement,
applicable law, or otherwise).
(b) The provisions of this Section 4.8 intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and his
or her representatives.
4.9. Confidentiality.
---------------
Each Stockholder agrees that it shall keep confidential all proprietary
and confidential information regarding the Company and agrees that it will not
use such information in any way detrimental to the Company except (i) to the
extent such information presently is or hereafter becomes available to the
Stockholders from a source other than the Company, (ii) to the extent disclosure
is required by law, regulation or judicial order or (iii) required by bank
regulators or auditors.
4.10. Noncompetition.
--------------
Each of the Stockholders employed by the Company on the date hereof (but
not including ▇▇▇▇▇▇ ▇. ▇▇▇▇▇) (the "Management Members") acknowledges that
MergerCo would not enter into this Agreement or effect the transactions
contemplated hereby from which the Management Members will derive substantial
personal economic benefit if such Management Member did not agree to the
provisions of this Section 4.10. Each of the Management Members further agrees
that these restrictions, and the restrictions contained in his employment
agreement, on his activities during and after his employment are necessary to
protect the goodwill, confidential information and other legitimate interests of
the Surviving Corporation and its Affiliates:
(a) In the event any Management Member shall refuse to work for the
Surviving Corporation or shall be discharged for cause as hereafter defined,
such Management Member shall not, at any time prior to the Expiration Date,
directly or indirectly: (i) discuss, seek or obtain employment or consulting
arrangements with any other electronic component manufacturer who is engaged or
intends to engage in product manufacture of the type engaged in by the Surviving
Corporation (collectively: "competitive business"), (ii) indirectly engage in
any competitive business as a partner, stockholder, officer or director thereof,
(iii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Surviving Corporation and any other
person, including without limitation, any customer, supplier or employee of the
Surviving Corporation, or (iv) induce any employee of the Surviving Corporation
to terminate employment or to engage in any competitive business. For this
purpose, the term employment shall include any consultation with, or the
provision of advice or other services, to another electronic component
manufacturer, directly or indirectly, whether or not for compensation, which
advice or services may be used for
-31-
purposes competitive with the business of the Company. The term "Expiration
Date" shall mean the earlier of (x) the third anniversary of the Effective Time
or (y) if the employment agreement between such Management Member and the
Company is not amended or superseded prior to the Effective Time, December 31,
1998.
In addition to all remedies which may be available at law to the Company
arising from any breach of this section, each Management Member agrees that his
services to be rendered are of a special, unique, extraordinary and intellectual
character, giving them a peculiar value, the loss of which cannot be adequately
or reasonably compensated in damages in any action at law, and that a breach by
such Management Member of any of the terms hereof will cause the Company to
suffer irreparable injury and damage. Each Management Member hereby expressly
agrees that the Company shall be entitled to the remedies of injunction,
specific performance and other equitable relief in connection with a breach or
potential breach of this agreement by such Management Member.
4.11. Special Meeting.
---------------
In order to consummate the Merger, the Board of Directors of MergerCo,
in accordance with the provisions of the California Corporations Law, at the
earliest practicable date, shall duly call, give notice of, convene and hold a
special meeting of the stockholders of MergerCo (the "Special Meeting") for the
purposes of considering, adopting and approving this Agreement, the Merger and
the transactions hereby.
4.12. Tax Returns.
-----------
From and after the Closing, the Company will provide a representative
(the "Tax Representative") selected by a majority of the Stockholders on each
Measurement Date with a copy of the With Calculation and Without Calculation and
a determination of the realization of any Tax Savings, and with any supporting
information reasonably requested by the Tax Representative. The Tax
Representative will review such calculations and will raise any disagreements
concerning such calculations that (i) could generate an indemnification
liability of the Stockholders with respect to Tax Savings or (ii) affect the
realization of any Tax Savings pursuant to this Agreement. The Company and the
Tax Representative will attempt, in good faith, to resolve any such
disagreement.
-32-
ARTICLE V
CONDITIONS OF CLOSING
5.1. General Conditions.
------------------
The respective obligations of each party to perform this Agreement is
subject to the satisfaction at or prior to the Closing Date of the following
conditions, unless waived by each party hereto:
(a) HSR Act. Any waiting period (and any extension thereof) applicable
-------
to the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(b) No Litigation or Legislation. There shall not be any statute, rule
----------------------------
or regulation that could reasonably be expected to have the effect of
preventing, delaying or making the transactions contemplated by any of the
Documents illegal or otherwise prohibited or any pending or threatened
investigation, hearing, order, decree or judgment enjoining or seeking to enjoin
the performance of any of the Documents or the transactions contemplated hereby
or thereby or involving any challenge to, or seeking damages, or other relief in
connection with such transactions.
5.2. Conditions to Obligation of MergerCo.
------------------------------------
The obligation of MergerCo to perform this Agreement is subject to the
satisfaction of the following conditions, unless waived by MergerCo:
(a) Authorization. All corporate or other action necessary to authorize
-------------
the execution, delivery and performance of this Agreement and the other
Documents by the Company and the Stockholders and the consummation of the
transactions contemplated by this Agreement and the other Documents shall have
been duly and validly taken by the company and the Stockholders and the Company
and the Stockholders shall have full power and authority to enter into and
consummate the transactions contemplated by this Agreement and the other
Documents.
(b) Performance of Obligations of the Company and Stockholders. The
----------------------------------------------------------
Company and each of the Stockholders shall have performed and complied in all
material respects with all agreements and obligations and satisfied all
conditions to be performed, complied with and satisfied by it under this
Agreement and the other Documents prior to or at the Closing and the Company
shall have supplied MergerCo with a certificate to such effect with respect to
the Company.
-33-
(c) Secretary Certificate. MergerCo shall have received a certificate,
---------------------
dated as of the Closing Date, signed by the Secretary of the Company and
certifying as to:
(i) the Charter, By-Laws, incumbency of officers executing each of the
Documents to which the Company is a party; and
(ii) resolutions of the Board of Directors of the Company authorizing
the execution, delivery and performance by the Company of each of the Documents
to which the Company is a party.
(d) Representations and Warranties.
------------------------------
(i) the representations and warranties of the Company set forth in
Section 3.1 shall be true and correct as of the date of this Agreement and as of
the Closing Date except in the case of such representations and warranties not
qualified by materiality, for those failures which in the aggregate have not had
and which could not reasonably be expected to have a Material Adverse Effect as
though made on and as of the Closing Date (other than any representation or
warranty that expressly relates to a specific date, which representation and
warranty shall be correct in all material respects on the date so specified) and
the MergerCo shall have received a certificate of the President of the Company
to such effect; and
(ii) the representations and warranties of each Stockholder set
forth in Section 3.2 shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date except
in the case of such representations and warranties not qualified by materiality,
for those failures which could not reasonably be expected to have a Material
Adverse Effect.
(e) Consents. The Company shall have received all consents set forth on
--------
Schedule 3.1(b).
---------------
(f) Stockholder Certificates. MergerCo shall have received from each
------------------------
Stockholder the certificates representing the Securities referred to in Section
1.6.
(g) Funding. MergerCo and the Surviving Corporation shall have received
-------
debt financing substantially on the terms of the Financing Letters and Equity
Commitment.
(h) Opinions of Counsel to the Company. MergerCo shall have received an
----------------------------------
opinion dated the Closing Date from ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, special
counsel to the Company, in a form reasonably satisfactory to MergerCo.
-34-
(i) Shareholders' Agreement. Each of the Stockholders holding Retained
-----------------------
Shares shall have executed and delivered the Shareholders' Agreement.
5.3. Conditions to Obligation of the Company and Stockholders.
--------------------------------------------------------
The obligation of the Company and Stockholders to perform this Agreement is
subject to the satisfaction of the following conditions, unless waived by the
Stockholders:
(a) Authorization. All corporate or other action necessary to authorize
-------------
the execution, delivery and performance of this Agreement and the other
Documents by MergerCo and the consummation of the transactions contemplated by
this Agreement and the other Documents shall have been duly and validly taken by
MergerCo and MergerCo shall have full power and authority to enter, into and
consummate the transactions contemplated by this Agreement and the other
Documents.
(b) Performance of Obligations of MergerCo. MergerCo shall have
--------------------------------------
performed and complied in all material respects with all agreements and
obligations and satisfied all conditions to be performed, complied with and
satisfied by it under this Agreement and the other Documents prior to or at the
Closing and shall have supplied the Company with a certificate to such effect.
(c) Payment of Aggregate Merger Consideration. MergerCo shall have made
-----------------------------------------
the payments required by Section 1.6.
(d) Secretary Certificate. The Company and the Stockholders shall have
---------------------
received a certificate dated as of the Closing Date, signed by the Secretary of
MergerCo and certifying as to:
(i) the Charter, By-Laws, incumbency of officers executing each of the
Documents to which MergerCo is a party; and
(ii) the resolutions of the Board of Directors of MergerCo authorizing
the execution, delivery and performance by MergerCo of each of the Documents to
which MergerCo is a party.
(e) Representations and Warranties. The representations and warranties
------------------------------
of MergerCo set forth in Section 3.3 shall be correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except in the case of such representations and warranties not qualified by
materiality for those failures which have not had and could not reasonably be
expected to have a Material Adverse Effect and the Company and the Stockholders
shall have received a certificate of the president of the MergerCo to such
effect.
-35-
(f) Opinion of Counsel to MergerCo. The Company and the Stockholders
------------------------------
shall have received an opinion dated the Closing Date of Ropes & ▇▇▇▇, counsel
to MergerCo, reasonably acceptable to the Company.
(g) Shareholders Agreement. The Surviving Corporation and the
----------------------
stockholders of MergerCo (other than the Stockholders) shall have entered into
the Shareholders' Agreement.
ARTICLE VI
INDEMNIFICATION
6.1. Indemnification.
---------------
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless, to the fullest extent permitted by law, subject to
the limitations set forth in Sections 6.3, 6.5 and 6.6, the Stockholders and
their respective officers, directors, employees and agents (collectively, the
"Stockholder Indemnitees") from, against and in respect of any liability, loss,
cost, damage, deficiency, demand, claim, suit, action or cause of action, fine,
penalty, cost or expense, including the cost or expense of any and all
investigations or proceedings, settlements, compromises (including reasonable
attorney's fees and expenses) (being referred to herein as, "Losses") arising
from, related to or in connection with any of the following:
(i) any breach or default in performance by the Surviving Corporation
of any covenant or agreement of the Surviving Corporation contained in this
Agreement to be preformed after the Closing; or
(ii) any breach of any representation or warranty made by MergerCo in
this Agreement.
(b) From and after the Effective Time, each Stockholder shall, on a
several and not joint basis, indemnify and hold harmless, to the fullest extent
permitted by law and subject to the limitations set forth in Sections 6.2, 6.3,
6.4, 6.5 and 6.6 the Surviving Corporation and its officers, directors,
employees and agents (collectively, the "Surviving Corporation Indemnitees")
---------------------------------
from, against and in respect of such Stockholders' Pro Rata Share of any Losses
arising from, related to or in connection with any of the following:
(i) any breach or default in performance by the Company prior to the
Effective Time of any covenant or agreement of the Company contained in this
Agreement; or
-36-
(ii) any breach of any representation or warranty made by the Company
in this Agreement (as each such representation or warranty would read if all
qualifications as to materiality (including without limitation in the definition
of Material Adverse Effect) were deleted therefrom); or
(iii) the amount of any expenses of the Stockholders and the Company
incurred in connection with the transactions contemplated by this Agreement and
actually paid by the Company and the Surviving Corporation for which there was
no reduction in the Aggregate Merger Consideration (it being understood that the
Surviving Corporation shall have no obligation to pay any such expenses incurred
after the Effective Time).
(c) From and after the Effective Time each Stockholder shall, on a several
and not a joint basis, indemnify and hold harmless, to the fullest extent
permitted by law, subject to the limitations set forth in Sections 6.3, 6.4,
6.5, 6.6 and the last sentence of Section 6.2(a), the Surviving Corporation
Indemnitees from, against and in respect of Losses arising from, related to or
in connection with (i) any breach or default in performance by such Stockholder
of any covenant or agreement of such Stockholder contained in this Agreement or
(ii) any breach of any representation or warranty made by such Stockholder in
this Agreement.
(d) From and after the Effective Time, each Stockholder shall, on a several
and not joint basis, indemnify and hold harmless, to the fullest extent
permitted by law, the Surviving Corporation Indemnities from, against and in
respect of such Stockholder's Ownership Percentage of any Losses arising from
the inability of the Surviving Corporation to retain the benefit of any Tax
Savings which have theretofore been realized by the Surviving Corporation or,
where realized prior to the Effective Time by the Company, and has been
previously allocated pursuant to clauses (i), (ii), or (iii) of Section 1.11(a).
It is the intention of the parties that the indemnity provided for pursuant to
this Section 6.1(d) shall be the sole and exclusive remedy of the Surviving
Corporation Indemnitees with respect to any Loss arising from, related to or in
connection with the Surviving Corporation's inability to retain the benefit of
any Tax Savings.
(e) From and after the Effective Time, each Executive shall, on a several
and not joint basis, indemnify and hold harmless, to the fullest extent
permitted by law, each of the Stockholders from, against and in respect of 50%
of any Losses arising from the failure by the Company or the Surviving
Corporation to realize or retain tax savings (as a result of the compensation
expenses related to such Executive's Executive Option Exercise (or disposition
of the Shares received on such exercise) or the payment to such Executive of his
Executive
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Bonus), in an amount of savings which are equal to or larger than the
aggregate amount of such Executive's Executive Bonus; provided, however, that
-------- -------
the aggregate amount of indemnification payable by such Executive hereunder
shall not exceed an amount for such Executive equal to $1,500,000 multiplied by
a fraction, the numerator of which shall be the Executive Bonus received by such
Executive and the denominator of which shall be the aggregate amount of the
Executive Bonuses.
6.2. Monetary Limitations.
--------------------
(a) Except as provided in Section 6.2(b) below, the Stockholders shall not
have any obligation to indemnify any Surviving Corporation Indemnitee pursuant
to Section 6.1(b) (ii) unless and until (and then only to the extent that) the
aggregate of all individual Losses for which indemnity is not precluded by
Section 6.4 incurred or sustained by the Surviving Corporation Indemnitees in
respect of Section 6.1(b) (ii) exceeds $4,000,000. The aggregate liability of
each Stockholder to indemnify the Surviving Corporation Indemnitees for Losses
in respect of Section 6.1(b) (ii) shall in no event exceed such Stockholders'
Pro Rata Share of $25,000,000. In addition, the aggregate liability of any
Stockholder to indemnify the surviving Corporation Indemnitees for Losses in
respect of this Article VI shall in no event exceed the cash consideration
received by such Stockholder in the transactions contemplated hereby.
(b) Notwithstanding the foregoing, (i) the minimum dollar limitation set
forth in the first sentence of Section 6.2(a) and the provisions of Section 6.4
shall not apply to Losses arising from, related to or in connection with any
claim with respect to the representations and warranties contained in the first
sentence of Section 3.1(a) and the first three sentences of Section 3.1(b) and
(ii) the minimum dollar limitation set forth in the first sentence of Section
6.2(a) shall not apply to Losses arising from any claim with respect to the
representations and warranties contained in Section 3.1(p).
6.3. Calculation of Losses.
---------------------
The amount of any Loss as to which indemnification exists under this
Agreement shall be calculated by taking into account (i) the present value,
based on a discount rate equal to the mid-term applicable federal rate as
determined under Section 1274(d) of the Code at that time, of any Tax benefit
actually realized by the Indemnified Party in connection with or as a result of
the occurrence of such Loss and (ii) any insurance proceeds actually received by
the Indemnified Party (and not applied by the Indemnified Party against any
portion of a Loss that is not indemnified hereunder) and increased insurance
costs incurred in connection with or as a direct result of the occurrence of
such Loss. If the amount to be netted pursuant to this Section 6.3 against any
payment by the Indemnifying Party of
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any amount otherwise required to be paid pursuant to this Article VI shall be
undetermined, the Indemnified Party shall repay to the Indemnifying Party,
promptly after such determination, any amount that the Indemnifying Party would
not have had to pay pursuant to this Article VI had such determination been made
at the time of such payment.
6.4. Small Claims Threshold.
----------------------
The Surviving Corporation shall not be entitled to seek indemnification
under Section 6.1(b) (ii) or Section 6.1(c) (ii) in respect of any Loss unless
the amount of such Loss incurred exceeds $50,000 (the "Minimal Amount"). If a
Loss exceeds the Minimal Amount, the Surviving Corporation Indemnitee or
Stockholder Indemnitee, as the case may be, shall be entitled to seek
indemnification, subject to the other limitations in this Section 6, for the
full amount of such Loss. Notwithstanding the foregoing, any Surviving
Corporation Indemnitee shall be entitled to seek indemnification under Section
6.1(b) (ii) or 6.1(c) (ii) in respect of an individual Loss which does not
exceed $50,000 if the claim in respect of such Loss is one of more than one
claim based on the same or related set of facts, circumstances or occurrences,
or the same or a series of related transactions giving rise to an
indemnification claim and such claims taken together involve a Loss in excess of
$50,000.
6.5. Nature and Survival; Time Limits.
--------------------------------
(a) Regardless of any investigation made at any time by or on behalf of any
party hereto or of any information any party may have in respect thereof, all
representations and warranties made herein or pursuant hereto or in connection
with the transactions contemplated hereby shall survive the Closing and continue
in effect until March 31, 1999, except for (i) representations and warranties
contained in the first sentence of Section 3.2(a), the first three sentences of
Section 3.2(b), the first three sentences of Section 3.3(a) and Section 3.3(b)
which shall continue in full force and effect indefinitely, (ii) representations
and warranties in Section 3.1(p) which shall survive the Closing and continue in
effect until 30 days after the running of the applicable statute of limitations
and (iii) representations and warranties contained in Sections 3.1(r) which
shall survive the Closing and continue in effect until December 31, 1999. Any
claim for indemnification pursuant to this Article VI as a result of any breach
of representation or warranty must be made within the period of time during
which such representation or warranty survives the Closing pursuant to this
Section 6.5(a). Any claim described in the preceding sentence made within the
applicable time period (and, to the extent of such claim, any representation or
warranty upon which such claim is based) shall survive thereafter until such
claim is finally resolved. For purposes of this Article VI (except to the extent
otherwise set forth in Section 6.7), any claim for
-39-
indemnification shall be duly made by giving written notice of such claim to the
Indemnifying Party.
(b) The covenants and agreements of the parties set forth in this Agreement
shall survive indefinitely.
6.6. Limitation on Remedies.
----------------------
After the Closing Date, the indemnification provided in this Article VI,
subject to the limitations set forth in this Agreement shall be the exclusive
remedy available to any Indemnified Party for any breach of any representation,
warranty or covenant to be performed prior to the Effective Time.
6.7. Third Party Claims.
------------------
Promptly after the receipt by any party entitled to indemnification (the
"Indemnified Party") pursuant to this Article VI of notice of the commencement
of any action against such Indemnified Party by a third party, such Indemnified
Party shall if a claim with respect thereto is to be made against any party
obligated to provide indemnification (the "Indemnifying Party") pursuant to this
Article VI, give such Indemnifying Party written notice thereof in reasonable
detail in light of the circumstances then known to such Indemnified Party. The
failure to give such notice shall not relieve any Indemnifying Party from any
obligation hereunder except where, and then solely to the extent that, such
failure actually and materially prejudices the rights of such Indemnifying
Party. Such Indemnifying Party shall have the right to defend such claim, at
such Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnified Party, provided that the Indemnifying Party
conducts the defense of such claim actively and diligently. If the Indemnifying
Party assumes the defense of such claim, the Indemnified Party agrees to
reasonably cooperate in such defense so long as the Indemnified Party is not
materially prejudiced thereby. So long as the Indemnifying Party is conducting
the defense of such claim actively and diligently, the Indemnified Party may
retain separate co-counsel at its sole cost and expense and may participate in
the defense of such claim, and neither any Indemnifying Party nor any
Indemnified Party will consent to the entry of any judgment or enter into any
settlement with respect to such claim without the prior written consent of the
other, which consent will not be unreasonably withheld. In the event the
Indemnifying Party does not or ceases to conduct the defense of such claim
actively and diligently, (x) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, such claim in any manner it may reasonably deem to be appropriate, (y) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against such claim, including attorneys'
fees and expenses, and (z) the Indemnifying Party will remain responsible for
any Losses the Indemnitee may
-40-
suffer as a result of such claim to the full extent provided in this Article VI.
If the Company shall fail to diligently prosecute any proceeding or action to
recover Tax Savings or any benefit related to the Executive Option Exercise or
the Executive Bonuses, the stockholders shall be permitted to pursue the same
for and on behalf of the Company.
6.8. Actions by Stockholders.
-----------------------
Any actions required to be taken by the Stockholders pursuant to this
Article VI shall be taken with the consent of the Stockholders holding a
majority of the Shares determined in accordance with each Stockholder's Pro Rata
Share; provided, however, that any actions under Sections 6.1(d) or (e) shall be
-------- -------
taken with consent of stockholders with a majority of the financial risk in such
matters.
ARTICLE VII
TERMINATION
7.1. Right of Termination.
--------------------
This Agreement may be terminated at any time prior to the Closing by:
(i) the mutual written consent of MergerCo and the Stockholders; or
(ii) by either the Stockholders or MergerCo in writing, without
liability to the terminating party on account of such termination (except as
otherwise provided in Section 7.2), if the Closing shall not have occurred on or
before November 7, 1997 (the "Termination Date"); or
(iii) by either the Stockholders or MergerCo if (A) the conditions to
such party's obligations shall have become impossible to satisfy on or before
the Termination Date (after giving effect to any potential actions the non-
terminating party may propose to take to cure such failure of condition after
reasonable notice from the party proposing to terminate this Agreement),
provided that no party shall be entitled to terminate this Agreement pursuant to
this clause (iii) if the reason for such impossibility is due to a breach by the
party proposing to terminate this Agreement or (B) any permanent injunction or
other order of a Governmental Authority preventing the consummation of the
transactions contemplated hereby shall have become final and non-appealable.
-41-
7.2. Effect of Termination.
---------------------
Termination of this Agreement pursuant to Section 7.1 shall terminate all
obligations of the parties hereunder, except for the obligations under the
Confidentiality Agreement described in Section 8.3(a) and this Section 7.2,
provided that nothing herein shall relieve any party from liability for breach
hereof or of any other Document prior to termination.
ARTICLE VIII
MISCELLANEOUS
8.1. Interpretive Provisions; Certain Definitions.
--------------------------------------------
(a) Whenever used in this Agreement, "to the Company's knowledge" or "to
the knowledge of the Company" shall mean the actual knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
the President and Chief Operating Officer of the Company, ▇▇▇▇▇▇ ▇▇▇▇▇, the Vice
President of Finance and Chief Financial Officer of the Company. The inclusion
of any information on any Schedule shall not be deemed to be an admission or
acknowledgment by the Company, in and of itself, that such information is
required to be listed on such Schedule or is material to or outside the ordinary
course of the business of the Company or any of its Subsidiaries, as applicable.
Nothing contained herein or in any of the Exhibits or Schedules hereto shall
constitute an admission of liability or an admission against the Company's
interest.
(b) The use in this Agreement of the term "including" means "including,
without limitation." The words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole, including the schedules
and exhibits, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to sections,
schedules and exhibits mean the sections of this Agreement and the schedules and
exhibits attached to this Agreement, except where otherwise stated. The title of
and the section and subsection headings in this Agreement are for convenience of
reference only and shall not govern or affect the interpretation of any of the
terms or provisions of this Agreement. The use herein of the masculine, feminine
or neuter forms shall also denote the other forms and any reference to the
singular or plural shall include the other, in each case unless the context
otherwise requires.
(c) Unless expressly provided otherwise, the measure of a period of one
month or year for purposes of this Agreement shall be that date of the following
month or year corresponding to the starting date, provided that if no
corresponding date exists, the measure shall be that date of the following month
or year
-42-
corresponding to the next day following the starting date. For example, one
month following February 18th is March 18th, and one month following March 31 is
May 1.
8.2. Expenses.
--------
Except as otherwise expressly provided in this Agreement, all costs and
expenses, including all legal fees and expenses, incurred in connection with
each of the Documents and the transactions contemplated hereby and thereby shall
be paid by the parties incurring such expenses. Notwithstanding the foregoing,
MergerCo shall pay the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing fees, if such filings are
required under applicable laws (as determined jointly by counsel for MergerCo
and counsel for the Stockholders having a majority in interest of the Shares).
8.3. Entire Agreement; Amendment.
---------------------------
(a) This Agreement, the other Documents and the Exhibits and Schedules
attached hereto and thereto, and the Confidentiality Agreement (the
"Confidentiality Agreement") previously entered into between the Company and
▇▇▇▇ Capital, Inc. contain the entire agreement among the parties with respect
to the transactions contemplated hereby and supersede all prior agreements and
understandings among the parties with respect thereto.
(b) This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by each of the parties hereto.
8.4. Severability.
------------
It is the desire and intent of the parties hereto that the provisions of
this Agreement be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement shall be adjudicated
by a court of competent jurisdiction to be invalid, prohibited or unenforceable
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
-43-
8.5. Public Announcements.
--------------------
The parties will consult with each other before issuing any press release
or otherwise making any public statements with respect to this Agreement and the
transactions contemplated hereby, and no party will issue any such press release
or any such public statement prior to such consultation and the agreement of the
other parties, except as may be required by law.
8.6. Notices.
-------
All notices or other communications which are required hereunder or
otherwise delivered in connection herewith shall be in writing and shall be
deemed to have been duly given if delivered personally or if sent by nationally-
recognized overnight courier, by facsimile, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
if to MergerCo, to:
▇▇▇▇ Capital, Inc.
Two ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
in each case with a copy to:
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇▇ Malt
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to:
Details, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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and, if to any Stockholders, to such Stockholder at the address set
forth on Annex I.
in each case with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of delivery, (b) in the case of a nationally-
recognized overnight courier, day after sent, (c) in the case of facsimile
transmission, when received, and (d) in the case of f mailing, on the fifth
business day following that on which the piece of mail containing such
communication is posted.
8.7. Counterparts.
------------
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one and the same agreement.
8.8. Governing Law.
-------------
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAWS OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION
OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT
OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY. NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 8.8, THOSE
PROVISIONS OF THIS AGREEMENT THAT RELATE TO THE INTERNAL GOVERNANCE OF THE
COMPANY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
-45-
8.9 Consent to Jurisdiction and Service of Process.
----------------------------------------------
(a) EACH OF THE PARTIES HEREBY:
(i) IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
DOCUMENTS OR THE SUBJECT MATTER HEREOF OR THEREOF AND BROUGHT BY ANY OTHER
PARTY;
(ii) WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE
OR OTHERWISE, IN ANY SUCH ACTION OR PROCEEDING, ANY CLAIM THAT (A) IT IS NOT
PERSONALLY SUBJECT OF THE JURISDICTION OR SUCH COURTS, (B) THE ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR (C) THE VENUE OF THE ACTION OR
PROCEEDING IS IMPROPER; AND
(iii) AGREES THAT, NOTWITHSTANDING ANY RIGHT OR PRIVILEGE IT MAY
POSSESS AT ANY TIME, SUCH PARTY AND ITS PROPERTY ARE AND SHALL BE GENERALLY
SUBJECT TO SUIT ON ACCOUNT OF THE OBLIGATIONS ASSUMED BY IT HEREUNDER.
(b) EACH PARTY AGREES THAT SERVICE IN PERSON OR BY CERTIFIED OR REGISTERED
U.S. MAIL TO ITS ADDRESS SET FORTH IN SECTION 8.6 SHALL CONSTITUTE VALID IN
PERSONAM SERVICE UPON SUCH PARTY AND ITS SUCCESSORS AND ASSIGNS IN ANY ACTION
--------
OR PROCEEDING WITH RESPECT TO ANY MATTER AS TO WHICH IT HAS SUBMITTED TO
JURISDICTION HEREUNDER.
(c) EACH PARTY HEREBY ACKNOWLEDGES THAT THIS IS A COMMERCIAL TRANSACTION,
THAT THE FOREGOING PROVISIONS FOR CONSENT TO JURISDICTION AND SERVICE OF PROCESS
HAVE BEEN READ, UNDERSTOOD AND VOLUNTARILY AGREED TO BY EACH PARTY AND THAT BY
AGREEING TO SUCH PROVISIONS EACH PARTY IS WAIVING IMPORTANT LEGAL RIGHTS.
8.10. Benefits of Agreement.
---------------------
All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by the Stockholders
without the consent of MergerCo or by MergerCo without the consent of the
Stockholders; provided, however, that MergerCo may transfer part of its rights
-------- -------
and obligations hereunder to Persons who provide financing in connection with
the transactions contemplated by this Agreement and the other Documents;
provided further, however, that no such transfer shall relieve MergerCo of any
-------- -------
obligations hereunder or thereunder.
-46-
IN WITNESS HEREUNDER, each of the parties has caused this Amended and
Restated Recapitalization Agreement to be executed on the day and year first
written above.
DI ACQUISITION CORP.
By: /S/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------
Name:
Title:
DETAILS, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------
Name:
Title: President
Stockholders:
CHASE MANHATTAN CAPITAL, L.P.
By: Chase Manhattan Capital
Corporation, a general partner
By: /s/ [ILLEGIBLE]
---------------------------------------
Name:
Title:
BASEBALL PARTNERS
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: General Partner
▇▇▇▇▇▇▇ FAMILY TRUST
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Co-Trustee
under declaration of trust
dated December 15, 1983
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Co-Trustee
under declaration of trust
dated December 15, 1983
[Amended and Restated Recapitalization Agreement Signature Page]
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇
-------------------------------------------
▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ & CO.
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:
Title:
PARIDIAS FINANCIAL, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:
Title:
[Amended and Restated Recapitalization Agreement Signature Page]
Schedules to the Amended and Restated Recapitalization Agreement dated as of
October 4, 1997 (the "Recapitalization Agreement"), among DI Acquisition Corp.,
the Stockholders named therein and Details, Inc. Capitalized terms used herein
without definition, are used herein as defined in the Recapitalization
Agreement.
List of Schedules
-----------------------------------------------
Annex I -- Securities Ownership
Annex II -- Security Ownership
Schedule 1.3(a) -- Terms of Class A and Class L Common Stock
Schedule 1.5(a) -- Aggregate Merger Consideration Calculation
Schedule 1.11 -- Executive Bonuses
Schedule 2 -- Documents
Schedule 3.1(b) -- Consents
Schedule 3.1(c) -- Equity Investments
Schedule 3.1(e) -- Financial Statements
Schedule 3.1(f) -- Undisclosed Liabilities
Schedule 3.1(g) -- Changes
Schedule 3.1(h) -- Contracts, Agreements and Purchase Orders
Schedule 3.1(i) -- Litigation and Claims
Schedule 3.1(j) -- Leased Real Property
Schedule 3.1(l) -- Intellectual Property
Schedule 3.1(m) -- ERISA MATTERS
Schedule 3.1(n) -- Transactions with Affiliates
Schedule 3.1(o) -- Insurance Policies
Schedule 3.1(p) -- Taxes
Schedule 3.1(q) -- Compliance with Laws
Schedule 3.1(r) -- Environmental Matters
Schedule 3.1(s) -- Customers and Suppliers
Schedule 3.1(t) -- Bank Accounts
Schedule 4.2 -- Contracts to be Terminated at Closing
Schedule 4.7 -- Terms of Shareholders' Agreement