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EXHIBIT 2.1
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RECAPITALIZATION AGREEMENT
BY AND AMONG
PENTAGON TECHNOLOGIES GROUP, INC.,
MPW INDUSTRIAL SERVICES GROUP, INC.,
MPW MANAGEMENT SERVICES CORP.,
PENTAGON MERGER SUB, INC.,
BAIRD CAPITAL PARTNERS III LIMITED PARTNERSHIP,
BCP III SPECIAL AFFILIATES LIMITED PARTNERSHIP
AND
BCP III AFFILIATES FUND LIMITED PARTNERSHIP
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April 25, 2000
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TABLE OF CONTENTS
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Section 1. Recapitalization Transactions.................................................1
1A. The Merger....................................................................1
1B. Redemption Transaction........................................................7
1C. Related Transactions..........................................................7
1D. Closing.......................................................................7
1E. Adjustments...................................................................8
1F. Additional Investment Transaction............................................10
Section 2. Conditions of the Purchasers' Obligations at the Closing.....................11
2A. Representations and Warranties; Covenants....................................11
2B. Shareholders Agreement.......................................................11
2C. Registration Agreement.......................................................11
2D. Transition Services Agreement................................................11
2E. Employment Agreements........................................................11
2F. Management Equity Plan; Management Equity Agreements;
Executive Stock Purchase Agreement...........................................12
2G. Deferred Compensation Agreement..............................................12
2H. Opinion of the Company's and the Seller's Counsel............................12
2I. Litigation...................................................................12
2J. Filings......................................................................12
2K. Third Party Consents and Approvals...........................................12
2L. Governmental Consents and Approvals..........................................13
2M. Material Adverse Change......................................................13
2N. Indebtedness.................................................................13
2O. Shareholder Approval and Dissenting Shares...................................13
2P. Settlement of ACS Claims.....................................................13
2Q. Expenses.....................................................................13
2R. Proceedings..................................................................13
2S. Closing Documents............................................................13
2T. Compliance with Applicable Laws..............................................14
2U. Financing Arrangements.......................................................14
2V. Bank One Release.............................................................15
2W. Waiver.......................................................................15
Section 3. Conditions of the Obligations of the Company and the
Seller at the Closing........................................................15
3A. Representations and Warranties; Covenants....................................15
3B. Shareholders Agreement.......................................................15
3C. Registration Agreement.......................................................15
3D. Redemption Transaction; Related Transactions.................................15
3E. Litigation...................................................................15
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3F. Filings......................................................................15
3G. Third Party Consents and Approvals...........................................16
3H. Governmental Consents and Approvals..........................................16
3I. Closing Certificate..........................................................16
3J. Compliance with Applicable Laws..............................................16
3K. Opinion of the Purchasers' Counsel...........................................16
3L. Waiver.......................................................................16
Section 4. Pre-Closing Covenants and Agreements.........................................16
4A. General......................................................................16
4B. Third Party Notices and Consents.............................................16
4C. Governmental Notices and Consents............................................17
4D. Maintenance of Business......................................................17
4E. Operation of Business........................................................17
4F. Full Access..................................................................18
4G. Compliance with Agreements and Laws..........................................19
4H. Payment of Obligations.......................................................19
4I. Notice of Material Developments..............................................19
4J. Exclusivity..................................................................19
4K. Tax Matters..................................................................20
4L. Actions with Respect to Shares of the Company................................20
4M. Required Pre-Closing Capital Expenditures....................................20
Section 5. Representations and Warranties of the Company and the
Seller.......................................................................20
5A. Organization.................................................................20
5B. Authorization. ..............................................................21
5C. Capital Stock and Related Matters............................................21
5D. Noncontravention.............................................................21
5E. Brokerage....................................................................22
5F. Subsidiaries; Investments....................................................22
5G. Financial Statements.........................................................23
5H. Absence of Undisclosed Liabilities...........................................23
5I. Compliance with Laws; Permits; Certain Operations............................23
5J. Assets.......................................................................24
5K. Real Property................................................................24
5L. Litigation, etc. ............................................................24
5M. Contracts and Commitments....................................................25
5N. Accounts Receivable..........................................................28
5O. Inventory....................................................................28
5P. No Material Adverse Effect...................................................28
5Q. Absence of Certain Developments..............................................29
5R. Tax Matters..................................................................31
5S. Intellectual Property Rights.................................................33
5T. Insurance....................................................................35
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5U. Employees....................................................................35
5V. Employee Benefits............................................................35
5W. Environmental and Safety Matters.............................................36
5X. Affiliated Transactions......................................................37
5Y. Names and Locations..........................................................38
5Z. Suppliers and Customers......................................................38
5AA. Indebtedness.................................................................38
5BB. Disclosure...................................................................39
5CC. Closing Date.................................................................39
Section 6. Representations and Warranties of the Seller.................................39
6A. Capacity; Power and Authority................................................39
6B. Authorization; No Breach. ...................................................39
6C. Title to Shares, etc.........................................................40
6D. Brokerage....................................................................40
6E. Litigation, etc. ............................................................40
6F. Company Transactions.........................................................40
6G. Closing Date. ...............................................................40
Section 7. Representations and Warranties of the Purchasers.............................40
7A. Organization, Power and Authority. ..........................................40
7B. Authorization; No Breach. ...................................................41
7C. Ownership of Merger Sub; Directors and Officers..............................41
7D. Brokerage....................................................................41
7E. Closing Date.................................................................41
Section 8. Representations and Warranties of Sub........................................41
8A. Organization, Power and Authority. ..........................................42
8B. Authorization; No Breach. ...................................................42
8C. Capital Stock and Related Matters............................................42
8D. Litigation, etc..............................................................43
8E. Available Funds..............................................................43
8F. Brokerage....................................................................43
8G. Closing Date.................................................................43
Section 9. Indemnification and Other Agreements.........................................43
9A. Survival of Representations and Warranties...................................43
9B. General Indemnification. ....................................................44
9C. Press Release and Announcements. ............................................48
9D. Non-Compete; Non-Solicitation................................................48
9E. Confidentiality..............................................................50
9F. Intellectual Property Rights Protection......................................50
9G. Dispute Resolution...........................................................51
9H. Further Assurances...........................................................52
9I. ERISA Covenants..............................................................52
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Section 10. Termination..................................................................53
10A. Conditions of Termination....................................................53
10B. Effect of Termination........................................................54
Section 11. Miscellaneous................................................................54
11A. Fees and Expenses............................................................54
11B. Remedies.....................................................................54
11C. Consent to Amendments........................................................55
11D. Successors and Assigns.......................................................55
11E. Severability.................................................................56
11F. Counterparts.................................................................56
11G. Descriptive Headings; Interpretation.........................................56
11H. Entire Agreement.............................................................56
11I. No Third-Party Beneficiaries.................................................56
11J. Schedules....................................................................56
11K. Tax Matters..................................................................57
11L. Schedules and Exhibits.......................................................59
11M. Governing Law................................................................60
11N. Notices......................................................................60
11O. No Strict Construction.......................................................64
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EXHIBITS AND SCHEDULES
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EXHIBITS:
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Exhibit A - Articles of Incorporation of Pentagon Merger Sub, Inc.
Exhibit B - Code of Regulations of Pentagon Merger Sub, Inc.
Exhibit C - Shareholders Agreement
Exhibit D - Registration Agreement
Exhibit E-1 - Form of Employment and Noncompetition Agreement
Exhibit E-2 - Employees
Exhibit F-1 - Management Equity Agreement
Exhibit F-2 - Employees
Exhibit G - Opinion of Counsel for the Company and the Seller
Exhibit H - Opinion of Counsel for the Purchasers
DISCLOSURE SCHEDULES:
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Employee Bonus Schedule Sub Directors & Officers Schedule
Adjustments Schedule Indemnification Schedule
Noncontravention Schedule Contracts Schedule
Organization Schedule Employees Schedule
Capitalization Schedule Assignment of Rights Schedule
Financial Statements Schedule
Liabilities Schedule
Compliance Schedule
Legal Compliance and Permits Schedule
Assets Schedule
Real Property Schedule
Litigation Schedule
Intellectual Property Schedule
Employee Benefits Schedule
Accounts Receivable Schedule
Inventory Schedule
Developments Schedule
Taxes Schedule
Insurance Schedule
Affiliated Transactions Schedule
Names and Locations Schedule
Suppliers and Customers Schedule
Indebtedness Schedule
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INDEX OF DEFINED TERMS
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Actual Net Working Capital........................................................................................9
Additional Closing...............................................................................................10
Affiliate .......................................................................................................18
Affiliated Group.................................................................................................33
Affiliates Fund...................................................................................................1
Agreement.........................................................................................................1
Approved Use.....................................................................................................10
Auditor...........................................................................................................9
Available Shares.................................................................................................10
Base Repurchase Price.............................................................................................7
BCP...............................................................................................................1
Board............................................................................................................10
CERCLA...........................................................................................................37
Certificate of Merger.............................................................................................2
Chemetal Letter..................................................................................................17
Closing...........................................................................................................7
Closing Balance Sheet.............................................................................................8
Closing Date......................................................................................................7
COBRA............................................................................................................36
Code.............................................................................................................33
Company...........................................................................................................1
Company 401(k) Plan..............................................................................................52
Company Common Stock..............................................................................................3
Company Common Stock Merger Consideration.........................................................................3
Company Parties..................................................................................................44
Company Series A Preferred........................................................................................2
Company Series A Preferred Merger Consideration...................................................................2
Company Transaction..............................................................................................19
Constituent Companies.............................................................................................1
Deferred Compensation Plan......................................................................................12
Dissenting Shares.................................................................................................5
Effective Time....................................................................................................2
Employment Agreement.............................................................................................11
Encumbrances.....................................................................................................40
Environmental and Safety Requirements............................................................................37
ERISA............................................................................................................35
Escrowed Shares...................................................................................................6
Estimated Balance Sheet...........................................................................................8
Estimated Net Working Capital.....................................................................................8
Estimated Repurchase Price........................................................................................8
Exchange Agent....................................................................................................3
Executive Stock Agreement........................................................................................12
GAAP.............................................................................................................23
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Indebtedness.....................................................................................................38
Indemnitee.......................................................................................................46
Indemnitor.......................................................................................................46
Institute........................................................................................................51
Intellectual Property Rights.....................................................................................34
Investment.......................................................................................................17
Latest Balance Sheet.............................................................................................23
Leased Real Property.............................................................................................24
Leases...........................................................................................................24
Letter of Transmittal.............................................................................................4
Lien.............................................................................................................22
Litigation.......................................................................................................24
Losses...........................................................................................................44
Management Equity Agreement......................................................................................12
Material Adverse Effect..........................................................................................12
McBride..........................................................................................................12
Merger............................................................................................................2
Net Working Capital...............................................................................................8
New Common Stock..................................................................................................2
New Series A Preferred............................................................................................2
OGCL..............................................................................................................1
Parties...........................................................................................................1
Party.............................................................................................................1
Permitted Indebtedness............................................................................................7
Person...........................................................................................................18
Plan.............................................................................................................35
Purchasers........................................................................................................1
Purchasers Indemnified Parties...................................................................................45
Purchasers' Computations..........................................................................................8
Recapitalization Transactions.....................................................................................1
Redemption Transaction............................................................................................7
Registration Agreement...........................................................................................11
Related Transactions..............................................................................................7
Release..........................................................................................................37
Representatives..................................................................................................51
Repurchased New Common Stock......................................................................................7
Repurchased New Series A Preferred................................................................................7
Repurchased Shares................................................................................................7
Restrictive Covenants............................................................................................49
Seller............................................................................................................1
Seller 401(k) Plan...............................................................................................52
Shareholders Agreement...........................................................................................11
Special Affiliates Fund...........................................................................................1
Sub...............................................................................................................1
Sub Common Stock..................................................................................................3
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Sub Common Stock Merger Consideration.............................................................................3
Sub Series A Preferred............................................................................................3
Sub Series A Preferred Merger Consideration.......................................................................3
Subsidiary.......................................................................................................22
Survival Date....................................................................................................43
Surviving Corporation.............................................................................................2
Target............................................................................................................8
Tax..............................................................................................................33
Tax Return.......................................................................................................33
Third Party Approvals............................................................................................13
Transfer Date....................................................................................................52
Transferred Participants.........................................................................................52
Transition Services Agreement....................................................................................11
Treasury Regulations.............................................................................................33
Unlimited Warranties.............................................................................................44
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RECAPITALIZATION AGREEMENT
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This RECAPITALIZATION AGREEMENT (this "AGREEMENT") is made and
entered into as of April 25, 2000, by and among Pentagon Technologies Group,
Inc., an Ohio corporation (the "COMPANY"), MPW Industrial Services Group, Inc.,
an Ohio corporation ("MPW INDUSTRIAL"), MPW Management Services Corp., an Ohio
corporation ("MPW MANAGEMENT" and together with MPW Industrial, the "SELLER"),
Pentagon Merger Sub, Inc., an Ohio corporation ("SUB"), Baird Capital Partners
III Limited Partnership, a Delaware limited partnership ("BCP"), BCP III Special
Affiliates Limited Partnership, a Delaware limited partnership ("SPECIAL
AFFILIATES FUND"), BCP III Affiliates Fund Limited Partnership, a Delaware
limited partnership ("AFFILIATES FUND," and, collectively with BCP and Special
Affiliates Fund, the "PURCHASERS"). The Company, the Seller, Sub and the
Purchasers sometimes are referred to herein collectively as the "PARTIES" and
individually as a "PARTY." Sub and the Company sometimes are referred to herein
as the "CONSTITUENT COMPANIES."
WHEREAS, the board of directors of each of Sub and the Company
deem it advisable and in the best interest of each respective corporation and
its respective shareholders to effect the transactions contemplated hereby upon
the terms and subject to the conditions set forth herein;
WHEREAS, the board of directors of each of Sub and the Company
have each approved the merger of Sub with and into the Company in accordance
with applicable law, upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the Parties hereto desire to reconstitute the capital
structure of the Surviving Corporation (as defined below) through the redemption
of certain of its equity securities, the repayment of outstanding indebtedness
and the issuance of certain newly-issued equity securities, in each case on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and understandings herein contained, the Parties hereby agree as
follows:
Section 1. RECAPITALIZATION TRANSACTIONS. The parties
acknowledge and agree that the consummation of each of the Merger, the
Redemption Transaction and the Related Transactions (each as described below and
collectively referred to herein as the "RECAPITALIZATION TRANSACTIONS") are
conditioned on the consummation of the other and that the Merger, the Redemption
Transaction and the Related Transactions shall be consummated simultaneously at
the Closing.
1A. THE MERGER.
(i) MERGER. Upon the terms and subject to the
conditions hereof, and in accordance with the provisions of the Ohio
General Corporation Law (the "OGCL"), Sub will be merged with and into
the Company (the "MERGER") at the Effective Time. Immediately upon the
effectiveness of the Merger, the separate corporate existence of Sub
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will cease and the Company shall continue as the surviving corporation
(the "SURVIVING CORPORATION").
(ii) EFFECTIVE TIME. As soon as practicable after the
satisfaction or, to the extent permitted hereunder, waiver of each of
the conditions set forth in Sections 2 and 3, each Constituent
Corporation shall file or cause to be filed a certificate of merger
(the "CERTIFICATE OF MERGER") with the Secretary of State of the State
of Ohio in accordance with the requirements of the OGCL. The Merger
shall become effective when the Certificate of Merger is duly filed
with the Secretary of State of the State of Ohio, or at such later time
as is specified in the Certificate of Merger (the "EFFECTIVE TIME").
(iii) EFFECTS OF THE MERGER. From and after the
Effective Time, the Surviving Corporation shall succeed to all assets,
rights, privileges, power and franchises and be subject to all of the
liabilities, restrictions, disabilities and duties of the Constituent
Corporations, all as provided under the OGCL.
(iv) THE SURVIVING CORPORATION.
(a) ARTICLES OF INCORPORATION AND CODE OF
REGULATIONS. The Articles of Incorporation and Code of
Regulations of Sub, as set forth in EXHIBIT A and EXHIBIT B,
respectively, and as in effect immediately prior to the
Effective Time, shall, in accordance with the terms thereof
and the OGCL, be the Articles of Incorporation and Code of
Regulations of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) DIRECTORS AND OFFICERS. From and after the
Effective Time, until successors are duly elected or appointed
in accordance with applicable law, (i) the directors of Sub at
the Effective Time shall constitute the directors of the
Surviving Corporation, and (ii) the officers of Sub at the
Effective Time shall be the officers of the Surviving
Corporation.
(v) CONVERSION OF SECURITIES. As of the Effective
Time, by virtue of the Merger and without any action on the part of
any shareholder of the Company or Sub:
(a) each share of the Company's Series A Preferred
Stock, without par value ("COMPANY SERIES A PREFERRED"),
issued and outstanding immediately prior to the Effective Time
shall be converted, at the election of the holder thereof,
into either (i) the right to receive (such shares, the
"COMPANY SERIES A PREFERRED MERGER CONSIDERATION") 8.7638
shares of Series A Preferred Stock of the Surviving
Corporation ("NEW SERIES A PREFERRED") and 3,895.0400 shares
of Common Stock of the Surviving Corporation ("NEW COMMON
STOCK") or (ii) (A) $5,842.56 in cash (payable without
interest) or (B) if the aggregate amount of cash paid pursuant
to the foregoing clause (ii)(A) exceeds $1,000,000, an amount
per share equal to $1,000,000 divided by the number of shares
of Company Series A Preferred the holders of which elect to
receive cash pursuant to this Section 1A(v)(a);
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(b) each share of the Company's Common Stock, without
par value ("COMPANY COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time shall be converted
into the right to receive (such shares, the "COMPANY COMMON
STOCK MERGER CONSIDERATION") 8.7638 shares of New Series A
Preferred and 3,895.0400 shares of New Common Stock;
(c) each share of Sub's Series A Preferred Stock,
without par value (the "SUB SERIES A PREFERRED"), issued and
outstanding immediately prior to the Effective Time shall be
converted into the right to receive (such shares, the "SUB
SERIES A PREFERRED MERGER CONSIDERATION") 1.0000 shares of New
Series A Preferred;
(d) each share of Sub's Common Stock, without par
value (the "SUB COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time shall be converted
into the right to receive (such shares, the "SUB COMMON STOCK
MERGER CONSIDERATION") 1.0000 shares of New Common Stock.
The Company Series A Preferred Merger Consideration, the
Company Common Stock Merger Consideration, the Sub Series A
Preferred Merger Consideration and the Sub Common Stock Merger
Consideration to be paid in the Merger in respect of the
Company Series A Preferred, Company Common Stock, Sub Series A
Preferred and Sub Common Stock, respectively, in accordance
with the terms hereof shall be deemed to be in full
satisfaction of all rights pertaining to such shares.
(vi) EXCHANGE OF SHARES.
(a) Prior to the Effective Time, the Purchasers and
the Company shall appoint a mutually acceptable agent (the
"EXCHANGE AGENT"), for the benefit of the holders of Company
Series A Preferred, Company Common Stock, Sub Series A
Preferred and Sub Common Stock, for the purpose of exchanging
certificates representing shares of Company Series A
Preferred, Company Common Stock, Sub Series A Preferred and
Sub Common Stock for New Series A Preferred and New Common
Stock, as appropriate. The Company will make available to the
Exchange Agent replacement stock certificates of the Surviving
Corporation (bearing such legends as may be required under the
Shareholders Agreement) representing the New Series A
Preferred and New Common Stock to be delivered to those
shareholders entitled thereto.
(b) The Company shall furnish a Letter of Transmittal
to all of the shareholders of the Company prior to Closing to
facilitate the exchange of Company Series A Preferred and
Company Common Stock for New Series A Preferred and New Common
Stock, respectively, payable in respect thereof. Prior to the
Closing, the Company shall use its best efforts to obtain duly
executed and delivered Letters of Transmittal from all of its
shareholders. The term "LETTER OF TRANSMITTAL" means a letter
of transmittal for use by the Exchange Agent, in form
acceptable to the
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Purchasers and the Company, which (i) provides instructions as
to the procedures for, and other customary information
concerning, payment of the Company Series A Preferred Merger
Consideration and the Company Common Stock Merger
Consideration, (ii) includes an omnibus signature page for
execution covering the Shareholders Agreement and (iii)
directs the recipient to execute and deliver such omnibus
signature page and to return a signed original thereof with
such person's stock certificates to the Exchange Agent.
(c) Each holder of Company Series A Preferred and
Company Common Stock, upon surrender to the Exchange Agent of
any certificate, together with a duly executed and delivered
Letter of Transmittal covering such certificate, shall be
entitled to receive the Company Series A Preferred Merger
Consideration or the Company Common Stock Merger
Consideration, as appropriate, payable in respect of each
share of Company Series A Preferred or Company Common Stock,
as appropriate, evidenced by such certificate. Until so
surrendered, each such certificate shall, after the Effective
Time, represent for all purposes only the right to receive
such Company Series A Preferred Merger Consideration and
Company Common Stock Merger Consideration. The Company shall
cause the Exchange Agent to deliver to each holder of
certificates who surrenders such certificates (together with a
duly executed and delivered Letter of Transmittal) at the
Closing or as promptly as practicable thereafter the Company
Series A Preferred Merger Consideration or Company Common
Stock Merger Consideration to which such holder is entitled.
(d) If any portion of the Company Series A Preferred
Merger Consideration or the Company Common Stock Merger
Consideration payable in respect of any certificates is to be
paid to a person other than the registered holder represented
by the certificates surrendered, it shall be a condition to
such payment that the certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer
and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a
result of such payment to a person other than the registered
holder of such shares, or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(e) After the Effective Time, the stock transfer
books of each of the Company and Sub shall be closed and there
shall be no further registration of transfer of shares of
Company Series A Preferred, Company Common Stock, Sub Series A
Preferred or Sub Common Stock which were outstanding
immediately prior to the Effective Time.
(f) None of the Purchasers, the Seller, Sub, the
Company or the Surviving Corporation shall be liable to any
holder of Company Series A Preferred or Company Common Stock
for any Company Series A Preferred Merger Consideration or
Company Common Stock Merger Consideration or to any holder of
Sub Series A Preferred or Sub Common Stock for any Sub Series
A Preferred Merger Consideration or Sub Common Stock Merger
Consideration, as the case may be,
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delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) No certificates or scrip representing fractional
New Series A Preferred or New Common Stock shall be issued in
connection with the Merger, and such fractional interests will
not entitle the owner thereof to vote or to any rights of a
shareholder of the Surviving Corporation. Notwithstanding any
other provision of this Agreement, each holder of shares of
New Series A Preferred and New Common Stock who would
otherwise be entitled to receive a fraction of a share of such
stock of the Surviving Corporation in the Merger (after taking
into account all interests, whether directly of record or
through a nominee, in such stock to which such holder would
but for the operation of this provision otherwise be entitled
to receive in the Merger) shall receive, in lieu thereof, a
cash payment (without interest) equal to the sum of (i) the
product obtained by multiplying such holder's fractional
interest in New Series A Preferred times $1,000.00 and (ii)
the product obtained by multiplying such holder's fractional
interest in New Common Stock times $0.25, to be paid by the
Surviving Corporation.
(vii) DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, shares of Company Series A Preferred
and Company Common Stock which immediately prior to the Effective Time
are held by shareholders who have not voted in favor of the Merger or
consented thereto in writing and who have demanded the fair cash value
for such shares of Company Series A Preferred and Company Common Stock,
as the case may be, in accordance with the OGCL (the "DISSENTING
SHARES") shall not be converted into a right to receive the Company
Series A Preferred Merger Consideration or the Company Common Stock
Merger Consideration, as appropriate, unless such shareholder fails to
perfect or withdraws or loses his rights under Sections 1701.84 and
1701.85 of the OGCL. If, after the Effective Time, such shareholder
fails to perfect or withdraws or loses its or his right to appraisal,
such shares shall be treated as if they had been converted as of the
Effective Time into a right to receive the Company Series A Preferred
Merger Consideration or Company Common Stock Merger Consideration, as
appropriate, pursuant to Paragraph 1A(v) above. The Company and the
Seller shall give the Purchasers prompt notice of any demands received
by the Company or the Seller for appraisal of Company Series A
Preferred and/or Company Common Stock, and the Purchasers shall have
the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not settle or compromise any
such demand without the prior consent of the Purchasers.
(viii) LOST CERTIFICATES. In the event any
certificate representing Company Series A Preferred or Company Common
Stock shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be
lost, stolen or destroyed and upon satisfaction of the conditions set
forth below, the holder of such lost, stolen or destroyed certificate
shall be entitled to receive in accordance with the terms of this
Agreement the Company Series A Preferred Merger Consideration or
Company Common Stock Merger Consideration, as the case may be, payable
in respect of the shares
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of New Series A Preferred or New Common Stock, as appropriate,
evidenced by such certificate. When authorizing such payment in
exchange for any lost, stolen or destroyed certificate, the person to
whom the cash is to be paid shall, as a condition precedent to the
payment thereof, indemnify the Surviving Corporation in a manner
satisfactory to the Surviving Corporation against any claim that may be
made against the Purchasers, the Seller, Sub or the Surviving
Corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
(ix) FURTHER ASSURANCES. If at any time after the
Effective Time the Surviving Corporation shall consider or be advised
that any deeds, bills of sale, assignments or assurances or any other
acts or things are necessary, desirable or proper (a) to vest, perfect
or confirm, of record or otherwise, in the Surviving Corporation, its
right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of either of the Constituent
Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and
directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either of the Constituent
Corporations in the Merger, all such deeds, bills of sale, assignments
and assurances and do, in the name and on behalf of such Constituent
Corporations, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to
or under any of the rights, privileges, powers, franchises, properties
or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
(x) ESCROW OF SHARES. At the Closing, the Seller and
the other stockholders set forth on the attached ESCROWED SHARES
SCHEDULE shall place into escrow shares (the "ESCROWED SHARES") of New
Series A Preferred and New Common Stock in the amounts set forth on the
Escrowed Shares Schedule, pursuant to an Escrow Agreement in form and
substance satisfactory to the Purchasers, the Seller and the Surviving
Corporation to be entered into simultaneously with the consummation of
the transactions contemplated hereby. The Escrowed Shares will
available to satisfy the Seller's indemnification obligations (if any)
under item #1 on the INDEMNIFICATION SCHEDULE.
1B. REDEMPTION TRANSACTION.
(i) AUTHORIZATION OF REPURCHASE. Simultaneous with
the Closing of the Merger and the Related Transactions, the Purchasers
shall cause the Surviving Corporation to authorize the repurchase from
MPW Management of an aggregate of 8,859.6000 shares of New Series A
Preferred (the "REPURCHASED NEW SERIES A PREFERRED") and 3,937,600.0000
shares of the New Common Stock (the "REPURCHASED NEW COMMON STOCK," and
together with the Repurchased New Series A Preferred, the "REPURCHASED
SHARES"), together in exchange for an aggregate amount of cash equal to
the result of (I) $9,844,000 MINUS (II) (whether or not negative) an
amount equal to (x) the Company's Indebtedness (other than Permitted
Indebtedness) as of the Closing LESS (y) $12,156,000 (the "BASE
REPURCHASE PRICE"), as adjusted pursuant to Paragraph 1E. As used
herein, "PERMITTED INDEBTEDNESS" means Indebtedness incurred in
connection with the construction of a parts cleaning facility
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in Portland, Oregon in excess of the Required Expenditure (as defined
in Paragraph 4M), as and to the extent approved by the Purchasers up to
$500,000.
(ii) REDEMPTION OF SHARES. On the basis of the
representations, warranties, covenants and agreements set forth herein
and subject to the satisfaction or waiver of the conditions set forth
in Section 3 below and the consummation of the Merger, the Surviving
Corporation shall repurchase from MPW Management, and MPW Management
shall sell to the Surviving Corporation, the Repurchased Shares (the
"REDEMPTION TRANSACTION").
1C. RELATED TRANSACTIONS. Simultaneous with the Closing of the
Merger Transaction and the Redemption Transaction, the Purchasers shall cause
the Surviving Corporation to repay in full all Indebtedness of the Company
outstanding immediately prior to the transactions contemplated herein to be
satisfied and canceled (the "RELATED TRANSACTIONS").
1D. CLOSING. The closing of the Recapitalization Transactions
(the "CLOSING") shall take place at the offices of Kirkland & Ellis, 200 East
Randolph Drive, Chicago, Illinois 60601, or at such other place as may be
mutually agreeable to each of the Parties, at 10:00 a.m., local time, on the
fifth business day following satisfaction or waiver of all of the conditions to
the Closing set forth in Sections 2 and 3 below or such other date as may be
mutually acceptable to each of the Parties (the "CLOSING DATE"). The Merger, the
Redemption Transaction and the Related Transactions each shall constitute a
separate transaction hereunder. At the Closing, the share certificates shall be
issued and exchanged in accordance with Section 1A(v), and the Surviving
Corporation shall pay to MPW Management by wire transfer of immediately
available funds to an account designated by MPW Management the Estimated
Repurchase Price and MPW Management shall deliver to the Surviving Corporation
the stock certificates evidencing the Repurchased Shares held by MPW Management
upon payment of the Estimated Repurchase Price.
1E. ADJUSTMENTS.
(i) Not more than five business days, but in no event
less than two business days, before the Closing Date, the Seller shall
in good faith prepare and deliver to the Purchasers an estimated
unaudited balance sheet of the Company (the "ESTIMATED BALANCE SHEET"),
dated as of the day immediately preceding the Closing Date in
accordance with GAAP and giving effect to the adjustments set forth in
the attached ADJUSTMENTS SCHEDULE, setting forth an estimate of the
result of the Company's current assets over its current liabilities, in
each case determined in accordance with GAAP, subject to the GAAP
Adjustments ("NET WORKING CAPITAL") as of the close of business of the
day immediately preceding the Closing Date. If any item on (or which
should be reflected on) the Latest Balance Sheet is not reflected in
accordance with GAAP in effect as of the Closing Date (based upon
authoritative accounting pronouncements and literature), the Estimated
Closing Balance and the Closing Balance Sheet and Net Working Capital
will nonetheless be computed in accordance with GAAP in effect as of
the Closing Date subject to the GAAP Adjustments. The Seller will make
available to the Purchasers all records and work papers used in
preparing the Seller's estimate of Net Working Capital. The Purchasers
shall notify the Seller of any disagreement with such calculation. If
the Purchasers and the Seller cannot
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<PAGE> 17
agree as to an estimate of the Net Working Capital prior to the Closing
Date, the estimate of the Net Working Capital will be deemed to be
equal to the average of the Seller's and the Purchasers' good faith
determinations thereof. The Net Working Capital as finally estimated
pursuant to this Paragraph 1E(i) is referred to herein as the
"ESTIMATED NET WORKING CAPITAL." At the Closing, if the Estimated Net
Working Capital is less than $4,541,000 (the "TARGET"), then the Base
Repurchase Price will be decreased on a dollar for dollar basis by the
amount of such deficiency, and if the Estimated Net Working Capital is
greater than the Target, then the Base Repurchase Price will be
increased on a dollar for dollar basis by the amount of such excess.
The Base Repurchase Price as adjusted pursuant to this Paragraph 1E(i)
is referred to herein as the "ESTIMATED REPURCHASE PRICE."
(ii) As promptly as practicable, but in no event
later than 120 days after the Closing Date, the Purchasers and their
auditors will conduct a review of the Surviving Corporation and prepare
an audited balance sheet in accordance with GAAP and, based on such
audited balance sheet and subject to the GAAP Adjustments, a balance
sheet of the Company (the "CLOSING BALANCE SHEET") setting forth the
Purchasers' computation of the Net Working Capital, as of the close of
business on the day before the Closing Date (the "PURCHASERS'
COMPUTATIONS") and make available to the Seller and its auditors all
records and work papers used in preparing the Purchasers' Computations.
If the Seller disagrees with the Purchasers' determination of the Net
Working Capital, as reflected in the Purchasers' Computations, the
Seller shall notify the Purchasers in writing of such disagreement
(such notice setting forth the basis for such disagreement in
reasonable detail) within 30 days after the Purchasers' delivery of the
Purchasers' Computations to the Seller. The Seller and the Purchasers
thereafter shall negotiate in good faith to resolve any such
disagreements. If there is an amount as to which the Seller and the
Purchasers are able to agree, such amount shall be paid to the
appropriate party pursuant to Paragraph 1E(iv) below. If the Seller and
the Purchasers are unable to resolve any disagreements about remaining
amounts within 30 days after the Seller's delivery of its notice of
disagreement to the Purchasers, the Seller and the Purchasers shall
submit the dispute to a "Big Five" public accounting firm (or any of
their respective successors) (the "AUDITOR") for resolution; PROVIDED
that if the Seller and the Purchasers are unable to agree upon the
Auditor, the Auditor shall be a "Big Five" public accounting firm (or
any of their respective successors) selected by lot (after the Seller
and the Purchasers each exclude one such accounting firm). The
selection of the Auditor shall be conclusive, final and binding on and
non-appealable by the Parties.
(iii) The Purchasers and the Seller shall use their
best efforts to cause the Auditor to resolve all disagreements over the
Net Working Capital, as soon as practicable, but in any event within 60
days after submission of the dispute to the Auditor. The resolution of
such disagreements and the determination of the Net Working Capital by
the Auditor shall be final and binding on the Parties. The Auditor
shall allocate its costs and expenses between the Purchasers, on the
one hand, and the Seller, on the other hand, based upon the percentage
which the portion of the contested amount not awarded to the
Purchasers, on the one hand, or the Seller, on the other hand, as the
case may be, bears to the amount actually contested by such Party. The
Net Working Capital as finally determined
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<PAGE> 18
pursuant to Paragraphs 1E(ii) and 1E(iii) is referred to herein as the
"ACTUAL NET WORKING CAPITAL."
(iv) Within five days after the Actual Net Working
Capital is finally determined pursuant to Paragraphs 1E(ii) and
1E(iii):
(a) in the event that Estimated Net Working Capital
is greater than Actual Net Working Capital, MPW Management
shall, within five business days after the determination
thereof, pay to the Surviving Corporation an amount in cash
equal to Estimated Net Working Capital MINUS the Actual Net
Working Capital; and
(b) in the event that Actual Net Working Capital is
greater than Estimated Net Working Capital, the Surviving
Corporation shall, within five business days after the
determination thereof, pay to MPW Management, an amount equal
to the Actual Net Working Capital MINUS the Estimated Net
Working Capital.
Any amount payable pursuant to this Paragraph 1E(iv) shall include
simple interest thereon at the rate of 8% per annum, calculated on the
basis of a 365-day year, from the Closing Date through the date of
payment, and shall be payable by a cashier's or certified check, or by
wire transfer of immediately available funds to the accounts designated
by the payee.
1F. ADDITIONAL INVESTMENT TRANSACTION.
The Purchasers, at their discretion, intend to provide additional
equity financing to the Surviving Corporation as the equity portion of the debt
and equity financing necessary to fund acquisitions and for other internal
growth initiatives, in each case as approved by the Board of Directors of the
Surviving Corporation (the "BOARD") and the Purchasers (an "APPROVED USE"). In
order to implement the foregoing, the Purchasers may purchase from time to time
after the Closing, upon the written request of the Board in connection with an
Approved Use, a number of shares of New Series A Preferred and New Common Stock
at a price mutually agreeable to the Board and the Purchasers at the time of the
investment. At the closing of any such purchase (each, an "ADDITIONAL CLOSING"),
the Purchasers, and the Seller (if it purchases shares), shall be entitled to
receive, and the Surviving Corporation shall be obligated to deliver,
satisfactory representations and warranties and all other information and
documentation as the Purchasers may reasonably request.
(i) So long as the Seller owns at least 10% of the
issued and outstanding New Series A Preferred and 10% of the fully
diluted New Common Stock, subject to Paragraph 1F(iv) below,
simultaneously with any purchase by the Purchasers of shares of the New
Series A Preferred and New Common Stock pursuant to Paragraph 1F(i)
above, the Seller may elect to purchase from the Surviving Corporation,
and the Surviving Corporation at the Seller's election will sell to the
Seller, at the same price and on the same terms as purchased by the
Purchasers, up to that number of shares ("AVAILABLE SHARES") of each of
New Series A Preferred and New Common Stock which, after giving effect
to such Additional Closing, would allow the Seller to maintain the same
relative percentage ownership of each class of stock of the Surviving
Corporation in relation to the percentage ownership of the Purchasers
of each class of stock of the Surviving Corporation as existed
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<PAGE> 19
immediately prior to the purchase by the Purchasers of the additional
shares to be purchased by the Purchasers from the Surviving Corporation
at such Additional Closing; PROVIDED that in no event shall the Seller
be entitled to purchase less than one-third of the Available Shares
available to be purchased by the Seller in any Additional Closing;
PROVIDED, FURTHER, that if and to the extent the Seller elects to
purchase Additional Shares at any Additional Closing, the Seller shall
purchase the same class and type of securities in the same relative
proportion as being purchased by the Purchasers.
(ii) At each Additional Closing, the Surviving
Corporation will deliver to each Purchaser and the Seller a certificate
representing the New Series A Preferred and New Common Stock to be
purchased by such Purchaser or the Seller, as the case may be, and such
Purchaser or the Seller, as the case may be, will deliver to the
Surviving Corporation, by wire transfer of immediately available funds,
cash in an aggregate amount equal to the purchase price for such
shares.
(iii) In the event the Seller does not participate in
two Additional Closings in accordance with this Paragraph 1F, the
Seller shall not thereafter be entitled to purchase, and the Surviving
Corporation shall not thereafter be obligated to sell to the Seller,
any shares of New Series A Preferred or New Common Stock in connection
with any subsequent Additional Closing.
Section 2. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT THE
CLOSING. The obligation of the Purchasers and Sub to consummate the
Recapitalization Transactions is subject to the satisfaction as of the Closing
of the following conditions:
2A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties contained in Sections 5 and 6 hereof shall be
true and correct in all material respects (other than the representations and
warranties qualified by materiality, which shall be true and correct in all
respects) at and as of the Closing as though then made (without giving effect to
any disclosures made by the Seller or the Company after the date hereof) and as
though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Company and the Seller
shall have performed all of the covenants required to be performed by the
Company and the Seller hereunder prior to the Closing.
2B. SHAREHOLDERS AGREEMENT. The Seller, each of the
shareholders of the Surviving Corporation after giving effect to the
Recapitalization Transactions (other than the Purchasers) and each of the
employees identified on EXHIBIT F-2 shall have entered into a shareholders
agreement in the form of EXHIBIT C attached hereto (the "SHAREHOLDERS
AGREEMENT"), and the Shareholders Agreement shall be, after giving effect to the
Merger, in full force and effect with respect to Seller and the other parties
thereto as of the Closing and shall not have been amended or modified.
2C. REGISTRATION AGREEMENT. The Seller and each of the other
parties thereto (other than the Purchasers) shall have entered into a
registration agreement in the form of EXHIBIT D attached hereto (the
"REGISTRATION AGREEMENT"), and the Registration Agreement shall be in full force
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<PAGE> 20
and effect with respect to Seller and the other parties thereto after giving
effect to the Merger as of the Closing and shall not have been amended or
modified.
2D. TRANSITION SERVICES AGREEMENT. The Seller shall have
entered into a transition services agreement in form and substance satisfactory
to the Purchasers (the "TRANSITION SERVICES AGREEMENT") pursuant to which the
Seller shall provide certain transitional administrative and support services to
the Surviving Corporation for a period of 30 days following the Closing at no
cost to the Surviving Corporation and thereafter for the periods set forth
therein at the prices set forth therein, and the Transition Services Agreement
shall be in full force and effect with respect to the Seller after giving effect
to the Merger as of the Closing and shall not have been amended or modified.
2E. EMPLOYMENT AGREEMENTS. Each of the Persons listed on
EXHIBIT E-2 attached hereto shall have entered into an employment and noncompete
agreement in the form of EXHIBIT E-1 attached hereto (each, an "EMPLOYMENT
AGREEMENT"), and each Employment Agreement shall, after giving effect to the
Merger, be in full force and effect as of the Closing and shall not have been
amended or modified, and each of the Employees set forth on EXHIBIT E-2 shall be
employed by the Surviving Corporation on the Closing Date on the terms and in
accordance with such employee's Employment Agreement.
2F. MANAGEMENT EQUITY PLAN; MANAGEMENT EQUITY AGREEMENTS;
EXECUTIVE STOCK PURCHASE AGREEMENT. Each of the Employees set forth on EXHIBIT
F-2 shall have entered into a management equity agreement substantially in the
form of EXHIBIT F-1 (each, a "MANAGEMENT EQUITY AGREEMENT"), each Management
Equity Agreement shall be in full force and effect as of the Closing and shall
not have been further amended or modified. Frank A. McBride III ("MCBRIDE")
shall have entered into an executive stock purchase agreement (the "EXECUTIVE
STOCK AGREEMENT") and the Executive Stock Agreement shall be in full force and
effect as of the Closing and shall not have been amended or modified.
2G. DEFERRED COMPENSATION AGREEMENT. The board of directors of
the Surviving Corporation shall have adopted a deferred compensation agreement
(the "DEFERRED COMPENSATION PLAN") and designated McBride a participant
thereunder, and the Deferred Compensation Agreement shall, after giving effect
to the Merger, be in full force and effect as of the Closing and shall not have
been further amended or modified.
2H. OPINION OF THE COMPANY'S AND THE SELLER'S COUNSEL. The
Purchasers shall have received from Jones Day Reavis & Pogue, counsel to the
Company and the Seller, an opinion with respect to the matters set forth in
EXHIBIT G attached hereto, which shall be addressed to the Purchasers, dated as
of the Closing Date and in form and substance reasonably satisfactory to the
Purchasers.
2I. LITIGATION. No suit, action or other proceeding shall be
pending before any court or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit the transactions
contemplated hereby or that could reasonably be expected to have a material and
adverse effect upon the business or its prospects, operations, assets,
liabilities, financial
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condition, operating results, cash flow or net worth of the Company (a "MATERIAL
ADVERSE EFFECT"), and no injunction, judgment, order, decree or ruling with
respect thereto shall be in effect.
2J. FILINGS. The Company shall have made all filings required
to be made by the Company and shall have obtained all permits and other
authorizations required to be obtained by the Company under all applicable laws
(including federal and state securities laws) to consummate the transactions
contemplated by this Agreement in compliance with such laws (other than any
securities law filings required to be made after the Closing, which filings
shall be made promptly after the Closing).
2K. THIRD PARTY CONSENTS AND APPROVALS. The Seller and the
Company shall have received or obtained all third party and shareholder consents
and approvals that are necessary for the consummation of the transactions
contemplated hereby or that are required in order to prevent a breach of or
default under, a termination or modification of, or acceleration of the terms
of, any contract, agreement or document required to be listed on the attached
CONTRACTS SCHEDULE or NONCONTRAVENTION SCHEDULE (collectively, the "THIRD PARTY
APPROVALS"), in each case on terms and conditions reasonably satisfactory to the
Purchasers, and the Seller shall have paid any fees, costs and expenses incurred
in connection with obtaining such consents.
2L. GOVERNMENTAL CONSENTS AND APPROVALS. The Parties shall
have received or obtained all governmental and regulatory consents and approvals
that are necessary for the consummation of the transactions contemplated hereby,
in each case on terms and conditions satisfactory to the Purchasers.
2M. MATERIAL ADVERSE CHANGE. Since December 31, 1999, there
shall have occurred or exist no event or condition that has had or could
reasonably be expected to result in a Material Adverse Effect.
2N. INDEBTEDNESS. Immediately prior to the Merger, the Company
shall not have any outstanding Indebtedness other than (i) intercompany
Indebtedness owed to the Seller and (ii) amounts outstanding under the
Convertible Subordinated Promissory Note, dated August 10, 1999, between Thermal
Coating, Inc. and the Seller, and each of the foregoing shall be satisfied in
full as of the Closing such that no further obligations of the Company shall
exist thereunder after the Closing.
2O. SHAREHOLDER APPROVAL AND DISSENTING SHARES. This Agreement
shall have been approved by the requisite consent of the holders of the capital
stock of the Company. The Company shall not have received notice (that shall not
have been revoked or withdrawn) from the holders of more than 3% of each class
of capital stock of the Company that such holders have exercised or intend to
exercise their rights under Sections 1701.84 and 1701.85 of the OGCL.
2P. SETTLEMENT OF ACS CLAIMS. All claims of Aerospace Coating
Systems against the Company shall have been resolved in a manner satisfactory to
the Purchasers.
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<PAGE> 22
2Q. EXPENSES. At the Closing, the Surviving Corporation shall
have paid or reimbursed the Purchasers for their fees and expenses as provided
in Paragraph 11A below.
2R. PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by the Company and the Seller at or prior to the Closing in
connection with the transactions contemplated hereby shall have been taken and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers and their special counsel.
2S. CLOSING DOCUMENTS. At the Closing, the Company shall have
delivered to the Purchasers all of the following documents:
(i) a certificate of an officer of each of the
Company and the Seller, dated the Closing Date, stating that the
conditions specified in Paragraphs 2A and Paragraphs 2I through 2P,
inclusive, have been fully satisfied;
(ii) certified copies of (a) the resolutions duly
adopted by the Company's and the Seller's respective board of directors
authorizing the execution, delivery and performance of this Agreement
and each of the other agreements contemplated hereby, the Merger, the
Redemption Transaction and the other transactions contemplated hereby
and (b) the resolutions duly adopted by the Company's shareholders
approving the Merger, the Management Equity Plan, the Deferred
Compensation Plan and approving all other transactions contemplated
hereby that require shareholder approval under applicable law;
(iii) certified copies of the Articles of
Incorporation and the Code of Regulations, each as in effect at the
Closing;
(iv) copies of all Third Party Approvals and
Governmental Approvals (including all blue sky law filings and waivers
of all preemptive rights and rights of first refusal);
(v) good standing certificates of the Company from
its jurisdiction of incorporation and each jurisdiction in which the
Company is qualified to do business as a foreign corporation, in each
case dated as of a recent date prior to the Closing Date;
(vi) landlord consents and estoppel certificates and
lien waivers from each of the Company's landlords in form and substance
satisfactory to the Purchasers; and
(vii) such other documents relating to the
transactions contemplated by this Agreement as the Purchasers or its
special counsel may reasonably request.
2T. COMPLIANCE WITH APPLICABLE LAWS. The Recapitalization
Transactions shall not be prohibited by any applicable law or governmental
regulation, shall not subject the Purchasers to any penalty, liability or, in
the Purchasers' sole judgment, other onerous conditions under or pursuant to any
applicable law or governmental regulation, and shall be permitted by laws and
regulations of the jurisdictions to which the Purchasers are subject.
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<PAGE> 23
2U. FINANCING ARRANGEMENTS. The Company shall have obtained on
terms and conditions satisfactory to the Purchasers all debt financing proceeds
necessary to consummate the transactions contemplated hereby, to fund the
ongoing working capital requirements of the Company, to pay the fees and
expenses of this transaction, to retire $2,000,000 of the amounts outstanding
with respect to the Company's existing credit facilities, to finance
construction of the Portland, Oregon parts cleaning facility and to finance the
transactions contemplated by the Chemetal Letter (as defined in PARAGRAPH 4E).
2V. BANK ONE RELEASE. Bank One, N.A. shall have delivered to
the Company a UCC-3 statement with respect to its security interest in the
Seller's shares of the Company's capital stock and all other assets (if any) of
the Company in which it has a security interest and such other releases or
agreements reasonably requested by the Purchasers to evidence the full release
of any and all claims, interest in or rights to such shares or assets.
2W. WAIVER. Any condition specified in this Section 2 may be
waived if consented to in writing by the Purchasers.
Section 3. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY AND
THE SELLER AT THE CLOSING. The obligation of the Company and the Seller to
consummate the transactions contemplated hereby is subject to the satisfaction
as of the Closing of the following conditions:
3A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties contained in Sections 7 and 8 hereof shall be
true and correct in all material respects at and as of the Closing as though
then made and as though the Closing Date was substituted for the date of this
Agreement throughout such representations and warranties, and the Purchasers
shall have performed all of the covenants required to be performed by the
Purchasers hereunder prior to the Closing.
3B. SHAREHOLDERS AGREEMENT. The Purchasers shall have entered
into the Shareholders Agreement, and the Shareholders Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified.
3C. REGISTRATION AGREEMENT. The Purchasers shall have entered
into the Registration Agreement, and the Registration Agreement shall be in full
force and effect as of the Closing and shall not have been amended or modified.
3D. REDEMPTION TRANSACTION; RELATED TRANSACTIONS. The Company
shall have simultaneously redeemed the Repurchased Shares, and the Seller shall
have received payment therefor in full, and the Related Transactions
simultaneously shall have been consummated in the manner set forth in Paragraph
1D above.
3E. LITIGATION. No suit, action or other proceeding shall be
pending before any court or governmental or regulatory official, body or
authority in which it is sought to restrain or
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<PAGE> 24
prohibit the transactions contemplated hereby, and no injunction, judgment,
order, decree or ruling with respect thereto shall be in effect.
3F. FILINGS. The Purchasers and Sub shall have made all
filings required to be made by them and shall have obtained all permits and
other authorizations required to be obtained by them under all applicable laws
(including federal and state securities laws) to consummate the transactions
contemplated by this Agreement in compliance with such laws (other than any
securities law filings required to be made after the Closing, which filings
shall be made promptly after the Closing).
3G. THIRD PARTY CONSENTS AND APPROVALS. The Purchasers and Sub
shall have received or obtained all third party and shareholder consents and
approvals that are necessary and the requisite approval of the holders of the
Company Series A Preferred shall have been obtained for the consummation of the
transactions contemplated hereby by them or that are required in order to
prevent a breach of or default under, a termination or modification of, or
acceleration of the terms of, any contract, agreement or document to which it is
a party.
3H. GOVERNMENTAL CONSENTS AND APPROVALS. The Parties shall
have received or obtained all governmental and regulatory consents and approvals
that are necessary for the consummation of the transactions contemplated hereby.
3I. CLOSING CERTIFICATE. The Purchasers shall have delivered
to the Company and the Seller a certificate of an officer, manager or general
partner of the Purchasers, dated the Closing Date, stating that the conditions
specified in Paragraph 3A have been fully satisfied.
3J. COMPLIANCE WITH APPLICABLE LAWS. The Recapitalization
Transactions shall not be prohibited by any applicable law or governmental
regulation and shall be permitted by laws and regulations of the jurisdictions
to which the Seller is subject.
3K. OPINION OF THE PURCHASERS' COUNSEL. The Seller shall have
received from Kirkland & Ellis, special counsel to the Purchasers, an opinion
with respect to the matters set forth in EXHIBIT H attached hereto, which shall
be addressed to the Seller, dated as of the Closing Date.
3L. WAIVER. Any condition specified in this Section 3 may be
waived if consented to in writing by the Company and the Seller.
Section 4. PRE-CLOSING COVENANTS AND AGREEMENTS. Each of the
Parties agrees as follows with respect to the period between the date of this
Agreement and the Closing:
4A. GENERAL. Each of the Parties shall use reasonable best
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the conditions set forth
in Sections 2 and 3 above).
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<PAGE> 25
4B. THIRD PARTY NOTICES AND CONSENTS. The Company shall, and
the Seller shall cause the Company to, give all required notices to third
parties, obtain any required third party consents and take any actions
reasonably required by a third party whose consent is required, in each case in
connection with the matters contemplated by this Agreement.
4C. GOVERNMENTAL NOTICES AND CONSENTS. Each of the Parties
shall give any notices to, make any filings with, and obtain any authorizations,
consents and approvals of governments and governmental agencies required in
connection with the matters contemplated by this Agreement.
4D. MAINTENANCE OF BUSINESS. The Company shall, and the Seller
shall cause the Company to use its reasonable best efforts to, (i) keep its
business organization and properties substantially intact, including its present
business operations, physical facilities and assets, working conditions and
employees and its present relationships with lessors, licensors, suppliers and
customers and others having business relations with it other than those changes
made in the ordinary course of business consistent with past custom and
practice, (ii) maintain its assets in good operating condition and repair
(normal wear and tear excepted), (iii) maintain insurance reasonably comparable
to that in effect on the date of the Latest Balance Sheet, (iv) maintain its
books, accounts and records in accordance with past custom and practice as used
in the preparation of the Latest Balance Sheet and (v) maintain in full force
and effect the existence of all Intellectual Property Rights.
4E. OPERATION OF BUSINESS. The Company shall, and the Seller
shall cause the Company to, operate its business (including the collection of
receivables, purchase of inventory, provision of services, payment of payables
and incurrence of and payment or financing of capital expenditures) only in the
usual and ordinary course of business consistent with past practice and use
reasonable best efforts to preserve the goodwill and organization of its
business and the relationships with its customers, suppliers, employees and
other Persons having business relations with the Company. Without limiting the
generality of the foregoing, prior to the Closing, the Company shall not (other
than the transactions pursuant to the letter agreement, dated March 21, 2000
between the Company and Chemetal, Inc. (the "CHEMETAL LETTER")), without the
prior consent of the Purchasers:
(i) take or omit to take any action that would
require disclosure under Paragraph 5Q below or that would otherwise
result in a breach of any of the representations, warranties or
covenants made by the Company or the Seller in this Agreement;
(ii) take any action or omit to take any action which
act or omission would reasonably be anticipated to have a Material
Adverse Effect;
(iii) (a) enter into any contract out of the ordinary
course of business or restricting in any material respect the conduct
of its business, (b) make any loans or any direct or indirect purchase
or other acquisition of any notes, obligations, instruments, stock,
securities or ownership interests (including partnership interests and
joint venture interests) of any other Person or any capital
contribution to any other Person (an "INVESTMENT") (other than advances
to the Company's employees in the ordinary course of business
consistent with past custom and practice), (c) increase any officer's
or employee's compensation,
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incentive arrangements or other benefits, except for hourly wage
increases to hourly employees made in the ordinary course of business
consistent with the Company's past custom and practice, (d) act to
dissuade or discourage employees to continue their employment with the
Company after the Closing, (e) redeem, purchase or otherwise acquire
directly or indirectly any of its issued and outstanding capital stock,
or any outstanding rights or securities exercisable or exchangeable for
or convertible into its capital stock, or make any distribution or
dividend to any of its shareholders or other Persons other than as
contemplated by this Agreement, (f) amend its articles of incorporation
or bylaws or issue or agree to issue any capital stock or any rights to
acquire, or securities convertible into or exchangeable for, any of its
capital stock other than as contemplated by this Agreement, (g)
directly or indirectly engage in any transaction, arrangement or
contract with any officer, director, shareholder or other insider or
Affiliate of the Company which is not in the ordinary course of
business consistent with past practice and at arm's length, (h) execute
any guaranty, issue any debt or borrow any money other than
intercompany Indebtedness with the Seller in the ordinary course of
business consistent with past custom and practice, all of which will be
paid at Closing or (i) buy or sell any assets out of the ordinary
course of business consistent with past practice;
(iv) enter into any transaction, arrangement or
contract except on an arm's length basis in the ordinary course of
business consistent with past custom and practice;
(v) enter into any transaction, arrangement or
contract with Applied Materials, Inc. or its subsidiaries other than
those transactions, arrangements or contracts consistent with past
practice; or
(vi) enter into any transaction, arrangement or
contract or incur any expenditure relating to the construction of a
facility in Portland, Oregon without the prior approval of the
Purchasers.
Notwithstanding the foregoing, nothing in this Paragraph 4E shall prohibit the
Company from taking any action or omitting to take any action as required or as
expressly contemplated by this Agreement.
4F. FULL ACCESS. The Seller and the Company shall, and the
Seller shall cause the Company to, afford, and cause its officers, directors,
employees, attorneys, accountants and other agents to afford, to the Purchasers
and their accounting, legal and other representatives and potential lenders, as
well as their respective officers, employees, Affiliates and other agents, full
and complete access at all reasonable times and during normal business hours to
the Company's personnel and to business, financial, legal, tax, compensation and
other data and information concerning the Company's affairs and operations,
whether in the possession of the Seller or the Company. For purposes of this
Agreement, "AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "CONTROL" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise. For purposes of this Agreement,
"PERSON" means an individual, a partnership, a corporation, a limited liability
company,
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an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
4G. COMPLIANCE WITH AGREEMENTS AND LAWS. The Company shall,
and the Seller shall cause the Company to, (i) comply with all material
obligations pursuant to any contract or agreement, whether oral or written,
express or implied and (ii) comply with all applicable laws in all material
respects.
4H. PAYMENT OF OBLIGATIONS. The Company shall, and the Seller
shall cause the Company to, pay and discharge when due and payable all Taxes,
assessments and governmental charges imposed upon its properties or upon the
income or profits therefrom (in each case before the same becomes delinquent and
before penalties accrue thereon unless contested in good faith by appropriate
proceedings) and pay and discharge all claims for labor, materials or supplies
in the ordinary course of business consistent with past practice.
4I. NOTICE OF MATERIAL DEVELOPMENTS. Each Party shall give
written notice to the other Parties immediately upon becoming aware of (i) any
of its representations or warranties to be not true in all material respects
contained in Sections 5,6, 7 or 8 below, as the case may be, (ii) any breach of
any covenant hereunder by such Party and (iii) any other material development
affecting the ability of such Party to consummate the transactions contemplated
by this Agreement.
4J. EXCLUSIVITY. None of the Company, the Seller or any of
their respective Affiliates, representatives, officers, employees, directors, or
agents shall, directly or indirectly, (i) submit, solicit, initiate, encourage
or discuss with any third party any proposal or offer from any Person (other
than the Purchasers in connection with the transactions contemplated hereby) or
enter into any agreement or accept any offer relating to or consummate any (a)
reorganization, liquidation, dissolution or recapitalization of the Company, (b)
merger or consolidation involving the Company, (c) purchase or sale of any
assets or capital stock (or any rights to acquire, or securities convertible
into or exchangeable for, any such capital stock) of the Company (other than a
purchase or sale of inventory or other assets in the ordinary course of business
consistent with past custom and practice), or (d) similar transaction or
business combination involving the Company or its assets (each of the foregoing
transactions described in clauses (a) through (d), a "COMPANY TRANSACTION") or
(ii) furnish any information with respect to, assist or participate in or
facilitate in any other manner any effort or attempt by any Person to do or seek
to do any of the foregoing. The Company and the Seller agrees to notify the
Purchasers immediately if any Person makes any proposal, offer, inquiry or
contact with respect to a Company Transaction. In the event that any of the
Company or the Seller breaches the provisions of this Paragraph 4J and the
transactions contemplated hereby are not consummated as a result of such breach,
the Company shall promptly reimburse the Purchasers and its Affiliates for all
out-of-pocket fees and expenses incurred before or after the date of this
Agreement by the Purchasers and its Affiliates related to the transactions
contemplated hereby, including fees and expenses of legal counsel, accountants
and other consultants and advisors retained by the Purchasers in connection with
the transactions contemplated hereby. The foregoing provisions are in addition
to, and not in derogation of, any statutory or other remedy that the Purchasers
may have for a breach of this Paragraph 4J.
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4K. TAX MATTERS. Without the prior written consent of the
Purchasers, neither the Seller nor the Company shall make or change any
election, change an annual accounting period, adopt or change any accounting
method, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment relating to the Company, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to the Company, or
take any other similar action, or omit to take any action relating to the filing
of any Tax Return or the payment of any Tax, if such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other action or omission
would have the effect of increasing in any material respect the present or
future Tax liability or decreasing in any material respect any present or future
Tax asset of the Company or the Purchasers.
4L. ACTIONS WITH RESPECT TO SHARES OF THE COMPANY. The Seller
agrees that it shall not sell, redeem, convert, assign, exchange, transfer,
pledge or otherwise dispose of or encumber any interest in the shares of capital
stock of the Company (or any options to purchase equity securities of the
Company), except as expressly contemplated by this Agreement. The Company shall
not issue any shares or any rights convertible or exchangeable into or
exercisable for shares of capital stock of the Company and shall cause all
outstanding options to purchase shares of the Company's capital stock to be
forfeited and be deemed canceled as of the Closing without any further
consideration owing with respect thereto, other than (i) options to purchase
75.0 shares of common stock issued to Tom Schmidt and (ii) options to purchase
225.0 shares of common stock issued to Frank A. McBride III, all of which, in
the case of clause (ii), shall have been canceled and deemed forfeited without
cancellation.
4M. REQUIRED PRE-CLOSING CAPITAL EXPENDITURES. The parties
acknowledge that the Seller should have incurred not less than $100,000 in
additional Indebtedness which the Seller has not incurred as of the date hereof
in connection with the construction of the Portland parts cleaning facility (the
"REQUIRED EXPENDITURE") and therefore agree that for purposes of determining the
amount of intercompany Indebtedness as of the Closing (including for purposes of
Paragraph 1B(i)), in addition to amounts otherwise outstanding, the Company
shall be deemed to have made the Required Expenditure as of the Closing although
such amount has not been expended to date and whether or not such amount is
actually expended hereafter.
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SELLER. As a material inducement to the Purchasers to enter into this
Agreement and consummate the Merger, the Company and the Seller hereby represent
and warrant to the Purchasers and Sub as follows:
5A. ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio and is
qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify, except where the failure
to so qualify would not have a Material Adverse Effect, and each such
jurisdiction is set forth on the ORGANIZATION SCHEDULE attached hereto. The
Company possesses all requisite corporate power and authority necessary to own
and operate its properties, to carry on its business as now conducted and
presently proposed to be conducted and, subject to approval of this Agreement by
the Company's shareholders, to perform, carry out and consummate the
transactions contemplated by this Agreement. The copies of the Company's charter
documents and code of
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regulations which have been furnished to the Purchasers' special counsel reflect
all amendments made thereto at any time prior to the date of this Agreement and
are correct and complete.
5B. AUTHORIZATION. The execution, delivery and performance of
this Agreement and all of the other agreements and instruments contemplated
hereby to which the Company is a party, the Merger and the Redemption
Transaction have been duly authorized by the Company. The Board of Directors of
the Company has recommended approval of the foregoing by the Company's
shareholders and has directed that this Agreement be submitted to a vote of
shareholders. This Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms.
5C. CAPITAL STOCK AND RELATED MATTERS. As of the date hereof,
the authorized capital stock of the Company consists of 2,600 shares of Company
Common Stock, of which 1807.5000 shares are issued and outstanding and are held
beneficially and of record by MPW Management as set forth on the CAPITALIZATION
SCHEDULE attached hereto (free and clear of all Encumbrances (other than the
security interest of Bank One, N.A. which will be released at Closing)) and of
which 225.0000 shares are reserved for issuance upon exercise of stock options,
and 500.0000 shares of Company Series A Preferred, of which 400.0000 shares are
issued and outstanding and are held of record by the persons set forth on the
CAPITALIZATION SCHEDULE. Except as set forth in the immediately preceding
sentence and as set forth on the CAPITALIZATION SCHEDULE, the Company does not
have and immediately prior to the Closing will not have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor any rights or options to
subscribe for or to purchase its capital stock or any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock plans. The Company is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to acquire
its capital stock, other than as expressly provided in this Agreement. As of the
date hereof and immediately prior the Closing, all of the outstanding shares of
the Company's capital stock are or shall be validly issued, fully paid and
nonassessable. There are no statutory or contractual shareholder preemptive
rights or rights of first refusal or other similar restrictions with respect to
the Recapitalization Transactions. The Company has not violated any applicable
federal or state securities laws in connection with the offer, sale or issuance
of any of its capital stock and the consummation of the Recapitalization
Transactions. To the Seller's and the Company's knowledge, there are no
agreements or understandings between the Company's shareholders or among any
other Person with respect to the voting or transfer of the Company's capital
stock or with respect to any other aspect of the Company's governance.
5D. NONCONTRAVENTION. Except as set forth on the attached
NONCONTRAVENTION SCHEDULE, the execution and delivery by the Company of this
Agreement and all other agreements and instruments contemplated hereby to which
the Company is a party, the Merger and the Redemption Transaction, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company do not and shall not (i) conflict with or result in a breach of the
terms, conditions or provisions of, (ii) constitute a default under (whether
with or without the passage of time, the giving of notice or both), (iii) result
in the creation of any Lien upon the Company's capital stock or assets pursuant
to, (iv) give any third party the right to modify, terminate or accelerate any
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obligation under, (v) result in a violation of or (vi) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or any court or administrative
or governmental body or agency pursuant to, the Company's articles of
incorporation or code of regulations, or any law, statute, rule or regulation to
which the Company is subject, or any agreement, Lease, contract, instrument,
order, judgment or decree to which the Company is subject. Neither the Company
nor the Seller is a party to or bound by any written or oral agreement or
understanding with respect to a Company Transaction other than this Agreement,
and both have terminated all discussions with third parties (other than the
Purchasers) regarding Company Transactions. For purposes of this Agreement,
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof), any sale of receivables with recourse
against the Company, any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute (other than to
reflect ownership by a third party of property leased to the Company under a
lease which is not in the nature of a conditional sale or title retention
agreement), or any subordination arrangement in favor of another Person.
5E. BROKERAGE. There are and shall be no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement to which the Company or the Seller is a party or to which the Company
or the Seller is subject.
5F. SUBSIDIARIES; INVESTMENTS. The Company does not own,
directly or indirectly, any Subsidiary or hold the right to acquire any stock,
partnership, interest, membership interests, joint venture interest or any other
security or interest in any other Person other than Chemetal, Inc. For purposes
of this Agreement, "SUBSIDIARY" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
5G. FINANCIAL STATEMENTS. Attached hereto as the FINANCIAL
STATEMENTS SCHEDULE are (i) the unaudited balance sheet of the Company as of
December 31, 1998 and as of December 31, 1999 (such balance sheet, the "LATEST
BALANCE SHEET") and the related statement of income and cash flows (or the
equivalent) for the twelve months ended December 31, 1999 and (ii) the unaudited
balance sheet of the Company as of March 31, 2000 and the related statement of
income and cash flows for the three months then ended. Each of the foregoing
financial statements
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(including in all cases the notes thereto, if any), is accurate and complete, is
consistent with the books and records of the Company (which, in turn, are
accurate and complete), fairly presents the financial condition and operating
results of the Company and has been prepared in accordance with United States
generally accepted accounting principles, consistently applied throughout the
periods covered thereby (and, as referred to elsewhere, in a manner consistent
with the Latest Balance Sheet attached hereto, "GAAP"), subject in the case of
the unaudited financial statements to the absence of footnote disclosures (none
of which footnote disclosures would, alone or in the aggregate, be materially
adverse to the business, operations, assets, liabilities, financial condition,
operating results, cash flow, net worth or prospects of the Company).
5H. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
the attached LIABILITIES SCHEDULE, the Company has no obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether due
or to become due and regardless of when asserted) arising out of transactions
entered into at or prior to the date hereof, or any action or inaction at or
prior to the date hereof, or any state of facts existing at or prior to the date
hereof, other than: (i) liabilities set forth on the face of the Latest Balance
Sheet or the notes thereto, (ii) liabilities and obligations which have arisen
after the date of the Latest Balance Sheet in the ordinary course of business
(none of which is a liability resulting from noncompliance with any applicable
laws, breach of contract, breach of warranty (in excess of any warranty reserve
specifically established with respect thereto and included on the Latest Balance
Sheet), tort, infringement, claim or lawsuit) and (iii) other liabilities and
obligations expressly disclosed in the Schedules referred to in this Section 5.
5I. COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS. Except
as set forth on the attached COMPLIANCE SCHEDULE:
(i) The Company has complied and is in compliance
with all applicable laws, ordinances, codes, rules, orders,
requirements and regulations of foreign, federal, state and local
governments and all agencies thereof relating to the operation of its
business and the maintenance and operation of its properties and
assets. No notices have been received by and no claims have been filed
against the Company alleging a violation of any such laws, ordinances,
codes, rules, requirements or regulations.
(ii) The Company holds and is in compliance with all
permits, licenses, approvals, registrations and other authorizations
(including OSHA ratings) of all foreign, federal, state and local
governmental agencies required for the conduct of its business and the
ownership and operation of its properties and assets (including as the
same relate to Environmental and Safety Requirements), and the attached
LEGAL COMPLIANCE AND PERMITS SCHEDULE sets forth a list of all of such
material permits, licenses, approvals, registrations and other
authorizations. No notices have been received by the Company alleging
the failure to hold any of the foregoing. All of such permits,
licenses, bonds, approvals, accreditations, certificates, registrations
and authorizations will be available for use by the Company immediately
after the Closing.
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5J. ASSETS. Except as set forth on the attached ASSETS
SCHEDULE, the Company has good and valid title to, a valid leasehold interest
in, or a valid license to use, the properties and assets, tangible or
intangible, used by it, located on its premises or shown on the Latest Balance
Sheet or acquired thereafter, free and clear of all Liens, except for properties
and assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for Liens disclosed on the Latest Balance Sheet
(including any notes thereto). Except as set forth on the attached ASSETS
SCHEDULE, all of the Company's buildings, equipment, machinery, fixtures,
improvements and other tangible assets (whether owned or leased) are in all
material respects in good condition and repair (ordinary wear and tear
excepted), free from defects and are fit for use in the ordinary course of the
Company's business as presently conducted and as presently proposed to be
conducted. All such assets have been installed and maintained in all material
respects in accordance with all applicable laws, regulations and ordinances.
Except as set forth on the attached ASSETS SCHEDULE, the Company owns, has a
valid leasehold interest in, or has a valid license to use, all of the material
assets, properties and rights, whether tangible or intangible, necessary for the
conduct of its business as presently conducted and as presently proposed to be
conducted.
5K. REAL PROPERTY. The Company does not own any real property
and is not a party to any agreement or option to purchase real property. The
REAL PROPERTY SCHEDULE attached hereto sets forth a list of all of the leases,
subleases and licenses, including all amendments or modifications thereto
("LEASES"), of real property (the "LEASED REAL PROPERTY") in which the Company
has a leasehold, subleasehold and licensed interest. With respect to each Lease
listed on the attached REAL PROPERTY SCHEDULE except as otherwise noted on the
REAL PROPERTY SCHEDULE: (i) such Lease is legal, valid and binding and
enforceable in accordance with its terms and such Lease is in full force and
effect, (ii) there are no disputes, oral agreements, breaches, defaults or
forbearance programs in effect as to such Lease (and no event has occurred
(including the consummation of the transactions contemplated hereby) which, with
the lapse of time or the giving of notice or both, would constitute a breach or
default or permit termination, modification or acceleration under such Lease)
and (iii) the Company has not assigned, transferred, conveyed, mortgaged, deeded
in trust or encumbered any interest in the Lease. Except for the Leased Real
Property, there is no real property which is leased or otherwise used in the
Company's business.
5L. LITIGATION, ETC. Except as set forth on the attached
LITIGATION SCHEDULE, there are no (and, during the two years preceding the date
hereof, there have not been any) outstanding injunctions, judgments, decrees,
rulings, settlements or charges or actions, suits, proceedings (including any
arbitration proceedings), orders, investigations or claims ("LITIGATION")
pending or, to the Seller's or the Company's knowledge, threatened against or
affecting the Company (or to the Seller's or the Company's knowledge, pending or
threatened against or affecting any of the officers, directors or employees of
the Company with respect to its business or proposed business activities), or
pending or threatened by the Company against any Person, at law or in equity, or
before or by any governmental department, commission, board, bureau, agency or
instrumentality (including any actions, suits, proceedings or investigations
with respect to the transactions contemplated by this Agreement); the Company is
not subject to any arbitration proceedings under collective bargaining
agreements or otherwise or any governmental investigations or inquiries; to the
Seller's or the Company's knowledge, there is no basis for any of the foregoing;
and during the five years preceding the date hereof, there has been no material
Litigation. The foregoing includes actions
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pending or threatened involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former employers
or their obligations under any agreements with prior employers. Except as set
forth on the LITIGATION SCHEDULE, the Company is fully insured with respect to
each of the matters set forth on the LITIGATION SCHEDULE. The Company is not
subject to any judgment, order or decree of any court or other governmental
agency, and the Company has not received any opinion or memorandum or advice
from legal counsel to the effect that it is exposed, from a legal standpoint, to
any liability which could have a Material Adverse Effect.
5M. CONTRACTS AND COMMITMENTS.
(i) Except as expressly contemplated by this
Agreement or as set forth on the attached CONTRACTS SCHEDULE, the
attached REAL PROPERTY SCHEDULE, the attached INTELLECTUAL PROPERTY
SCHEDULE, the attached EMPLOYEES SCHEDULE or the attached EMPLOYEE
BENEFITS SCHEDULE, the Company is not a party to or bound by any
written or oral:
(a) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for
deferred or other compensation to employees or any other
employee benefit plan, arrangement or practice, whether formal
or informal;
(b) collective bargaining agreement or any other
contract with any labor union, or severance agreements,
programs, policies or arrangements;
(c) management agreement, contract for the employment
of any officer, individual employee or other Person on a
full-time, part-time, consulting or other basis providing
annual cash or other compensation in excess of $50,000 or
providing for the payment of any cash or other compensation or
benefits upon the consummation of the transactions
contemplated hereby;
(d) contract or agreement requiring the consent of
any party thereto upon a change in control of the Company,
containing any provision which would result in a modification
of any rights or obligations of any party thereunder upon a
change in control of the Company or which would provide any
party any remedy (including rescission or liquidated damages)
in the event of a change in control of the Company;
(e) contract under which it has advanced or loaned
monies to any other Person or otherwise agreed to advance,
loan or invest any funds (other than advances to the Company's
employees in the ordinary course of business consistent with
past practice or amounts less than $50,000 in the aggregate);
(f) agreement or indenture relating to borrowed money
or other Indebtedness or the mortgaging, pledging or otherwise
placing a Lien on any material asset or material group of
assets of the Company or any letter of credit arrangements;
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(g) guaranty of any obligation for borrowed money or
otherwise (other than endorsements made for collection in the
ordinary course of business);
(h) lease or agreement under which the Company is
lessee of or holds or operates any personal property owned by
any other Person, except for any lease of personal property
under which the aggregate annual rental payments do not exceed
$25,000;
(i) lease or agreement under which the Company is
lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the
Company;
(j) nondisclosure or confidentiality agreements;
(k) local service agreements (including cleaning,
guard service, lawn and snow removal) and maintenance
agreements (including vehicle and equipment maintenance
agreements) involving annual payments in excess of $50,000;
(l) contract or group of related contracts with the
same party or group of affiliated parties for the purchase of
raw materials, commodities, supplies, products, equipment or
other personal property or for the receipt of services under
which the undelivered balance of such products and services
has a selling price in excess of $50,000;
(m) contract or group of related contracts with the
same party or group of affiliated parties for the sale of raw
materials, commodities, supplies, products or other personal
property or for the furnishing of services under which the
undelivered balance of such products or services due from the
Company has a selling price in excess of $50,000;
(n) other contract or group of related contracts with
the same party or group of affiliated parties continuing over
a period of more than six months from the date or dates
thereof, not terminable by the Company upon 30 days' or less
notice without penalty or involving more than $50,000;
(o) contract or group of related contracts expressly
requiring the payment of any fee, penalty or liquidated
damages by the Company in the event of any failure to perform
or late performance of such contract or contracts by the
Company;
(p) open purchase orders for the purchase or sale of
equipment or services in excess of $50,000;
(q) contract relating to the marketing, sale,
advertising or promotion of its products;
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(r) agreements relating to the ownership of or
investments in any business or enterprise, including
investments in joint ventures and minority equity investments;
(s) assignment, license, indemnification or other
agreement with respect to any intangible property (including
any Intellectual Property Rights);
(t) agreement under which it has granted any Person
any registration rights (including demand or piggyback
registration rights);
(u) broker, agent, sales representative, sales or
distribution agreement or agreement relating to the export
and/or import of any goods or equipment;
(v) power of attorney or other similar agreement or
grant of agency;
(w) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world;
or
(x) other agreement which is material to its
operations or business prospects or involves an annual
consideration in excess of $50,000, whether or not in the
ordinary course of business.
(ii) All of the contracts, agreements and instruments
set forth or required to be set forth on the attached CONTRACTS
SCHEDULE are, with respect to the Company and, to the knowledge of the
Seller and the Company, with respect to any third party, valid, binding
and enforceable in accordance with their respective terms and shall be
in full force and effect without penalty in accordance with their terms
upon consummation of the transactions contemplated hereby. The Company
has performed all material obligations required to be performed by it
and is not in default under or in breach of nor in receipt of any claim
of default or breach under any contract, agreement or instrument to
which the Company is subject; no event has occurred which with the
passage of time or the giving of notice or both would result in a
default, breach or event of noncompliance by the Company under any
contract, agreement or instrument to which the Company is subject; the
Company has no present expectation or intention of not fully performing
on a timely basis all such obligations required to be performed by the
Company under any contract, agreement or instrument to which the
Company is subject; no partially-filled or unfilled customer purchase
order or sales order is subject to cancellation or any other material
modification by the other party thereto or is subject to any penalty,
right of set-off or other charge by the other party thereto for late
performance or delivery; and neither the Seller nor the Company has any
knowledge of any breach or cancellation or anticipated cancellation by
the other parties to any contract, agreement, instrument or commitment
to which it is a party. The Company is not a party to any contract,
agreement or commitment the performance of which could reasonably be
expected to have a Material Adverse Effect.
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(iii) The Purchasers' special counsel has been
supplied with a true and correct copy of each of the written
instruments, plans, contracts and agreements and an accurate
description of each of the oral arrangements, contracts and agreements
which are referred to on the attached CONTRACTS SCHEDULE, together with
all amendments, waivers or other changes thereto.
5N. ACCOUNTS RECEIVABLE. Except as set forth on the attached
ACCOUNTS RECEIVABLE SCHEDULE, all accounts receivable reflected on the Latest
Balance Sheet and all accounts receivable to be reflected on the Company's books
and records as of the Closing Date (net of allowances for doubtful accounts as
reflected thereon and as determined in accordance with GAAP) are or shall be
valid receivables arising in the ordinary course of business, and are or shall
be current and collectible, subject to no valid counterclaims or setoffs, at the
aggregate recorded amount therefor as shown on the Latest Balance Sheet and on
the Company's records as of the Closing Date, (net of allowances for doubtful
accounts as reflected thereon and as determined in accordance with GAAP). Except
as set forth on the attached ACCOUNTS RECEIVABLE SCHEDULE, no Person has any
Lien on such receivables or any part thereof, and no agreement for deduction,
free goods, discount or other deferred price or quantity adjustment has been
made with respect to any such receivables.
5O. INVENTORY. Except as set forth on the INVENTORY SCHEDULE,
the inventory of the Company shown on the Latest Balance Sheet and the inventory
of the Company to be reflected on the Closing Balance Sheet, net of the reserves
applicable thereto determined in accordance with GAAP, consists (or will
consist) of a quantity and quality usable and saleable in the ordinary course of
the Company's business, is not (or will not be) slow-moving, obsolete or
damaged, is (or will be) merchantable and fit for its intended use, and is not
(or will not be) defective.
5P. NO MATERIAL ADVERSE EFFECT. Since December 31, 1999, there
has occurred no fact, event or circumstance which has had or would reasonably be
expected to have a Material Adverse Effect. Since June 30, 1999, the Company has
conducted its business only in the ordinary course of business consistent with
the Seller's past practice.
5Q. ABSENCE OF CERTAIN DEVELOPMENTS. Except as expressly
contemplated by this Agreement or as set forth on the attached DEVELOPMENTS
SCHEDULE, since December 31, 1999, the Company has not:
(i) issued any notes, bonds or other debt securities
or any capital stock or other equity securities or any securities or
rights convertible, exchangeable or exercisable into any capital stock
or other equity securities;
(ii) borrowed any amount or incurred or become
subject to any material liabilities, except current liabilities
incurred in the ordinary course of business consistent with past
practice;
(iii) discharged or satisfied any material Lien or
paid any material obligation or liability, other than current
liabilities paid in the ordinary course of business;
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(iv) declared, set aside or made any payment or
distribution of cash or other property to any of the Company's
shareholders with respect to such shareholder's capital stock or other
equity securities or purchased, redeemed or otherwise acquired any
shares of its capital stock or other equity securities (including any
warrants, options or other rights to acquire its capital stock or other
equity securities);
(v) mortgaged or pledged any of its properties or
assets or subjected them to any Lien;
(vi) sold, assigned, transferred, leased, licensed or
otherwise encumbered any of its tangible assets, except in the ordinary
course of business consistent with past practice, or canceled any
material debts or claims;
(vii) sold, assigned, transferred, leased, licensed
or otherwise encumbered any Intellectual Property Rights or other
intangible assets, disclosed any material proprietary confidential
information to any Person (other than to the Purchasers and other than
in the ordinary course of business consistent with past practice in
circumstances in which it has imposed reasonable confidentiality
restrictions), or abandoned or permitted to lapse any Intellectual
Property Rights;
(viii) made or granted any bonus or any wage or
salary increase to any employee or group of employees (except as
required by pre-existing contracts described on the attached CONTRACTS
SCHEDULE), or made or granted any increase in any employee benefit plan
or arrangement, or amended or terminated any existing employee benefit
plan or arrangement or adopted any new employee benefit plan or
arrangement;
(ix) suffered any extraordinary losses or waived any
rights of material value (whether or not in the ordinary course of
business or consistent with past practice) in excess of $50,000 in the
aggregate;
(x) made capital expenditures or commitments therefor
that aggregate in excess of $50,000;
(xi) delayed or postponed the payment of any accounts
payable or any other liability or obligation or agreed or negotiated
with any party to extend the payment date of any accounts payable or
accelerated the collection of any accounts or notes receivable;
(xii) made any loans or advances to, guarantees for
the benefit of, or any Investments in, any Persons (other than advances
to the Company's employees in the ordinary course of business
consistent with past practice);
(xiii) made any charitable contributions or pledges
exceeding in the aggregate $50,000;
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(xiv) suffered any damage, destruction or casualty
loss exceeding in the aggregate $50,000, whether or not covered by
insurance;
(xv) made any change in any method of accounting or
accounting policies, other than those required by GAAP which have been
disclosed in writing to the Purchasers, or made any write-down in the
value of its inventory that is material or that is other than in the
usual, regular and ordinary course of business consistent with past
practice;
(xvi) made any Investment in or taken any steps to
incorporate any Subsidiary;
(xvii) amended its articles of incorporation, by-laws
or other organizational documents;
(xviii) entered into any agreement or arrangement
prohibiting or restricting it from freely engaging in any business or
otherwise restricting the conduct of its business;
(xix) entered into any contract other than in the
ordinary course of business consistent with past practice, entered into
any other material transaction, whether or not in the ordinary course
of business or consistent with past practice, or materially changed any
business practice; or
(xx) agreed, whether orally or in writing, to do any
of the foregoing.
Neither the Seller nor any of its stockholders have at any time made any
payments for political contributions or any bribes, kickback payments or other
illegal payments.
5R. TAX MATTERS.
(i) Except as set forth on the attached TAXES
SCHEDULE:
(a) the Company has timely filed all Tax Returns
which it is required to file under applicable laws and
regulations, and all such Tax Returns are true, complete and
accurate and have been prepared in compliance with all
applicable laws and regulations;
(b) the Company has paid all Taxes due and owing by
it (whether or not such Taxes are shown or required to be
shown on a Tax Return) and has withheld and paid over to the
appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee,
shareholder, creditor or other third party;
(c) the Company has not waived any statute of
limitations with respect to any Taxes or agreed to any
extension of time for filing any Tax Return which has not been
filed; and the Company has not consented to extend to a date
later than the
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date hereof the period in which any Tax may be assessed or
collected by any taxing authority;
(d) the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all Tax liabilities of the Company if
its current tax year were treated as ending on the date of the
Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax
income);
(e) since the date of the Latest Balance Sheet, the
Company has not incurred any liability for Taxes other than in
the ordinary course of business;
(f) no action, suit, taxing authority proceeding or
audit is now in progress, pending or, to the Seller's or the
Company's knowledge, threatened against or with respect to the
Company;
(g) no deficiency or proposed adjustment which has
not been settled or otherwise resolved for any amount of Tax
has been proposed, asserted or assessed by any taxing
authority against the Company;
(h) no claim has ever been made by a taxing authority
in a jurisdiction where the Company does not file Tax Returns
that the Company is or may be subject to Taxes assessed by
such jurisdiction;
(i) the Company has not been a member of an
Affiliated Group other than the one of which Seller is the
common parent, or filed or been included in a combined,
consolidated or unitary income Tax Return other than the one
filed by Seller;
(j) the Company is not a party to or bound by any Tax
allocation or Tax sharing agreement other than Tax allocation
and Tax sharing agreements to which no Person other than
members of Seller's Affiliated Group is a party;
(k) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the
Company;
(l) the Company shall not be required to (i) as a
result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date, include any
adjustment in taxable income for any taxable period (or
portion thereof) ending after the Closing Date, (ii) as a
result of any "closing agreement," as described in Section
7121 of the Code (or any corresponding provision of state,
local or foreign income Tax law) executed on or before the
Closing Date, include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date, (iii) as a
result of any sale reported on the installment method where
such sale occurred on or prior to the Closing Date, include
any item of income in, or exclude any item of deduction from,
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<PAGE> 40
taxable income for any taxable period (or portion thereof)
ending after the Closing Date or (iv) as a result of any
prepaid amount received on or prior to the Closing Date,
include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date;
(m) the Company has not made an election under
Section 341(f) of the Code;
(n) the Company has not made any payment, and is not
and will not become obligated (under any contract entered into
on or before the Closing Date) to make any payment, that will
be non-deductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign income Tax
law); and
(o) the Company is not presently liable for the Taxes
of another Person (1) under Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law), (2) as
a transferee or successor or (3) by contract or indemnity or
otherwise.
(ii) For purposes of this Agreement:
(a) "AFFILIATED GROUP" means any affiliated group as
defined in Code ss.1504 that has filed a consolidated return
for federal income tax purposes (or any similar group under
state, local or foreign law) for a period during which the
Company was a member.
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any reference to any particular Code section
shall be interpreted to include any revision of or successor
to that section regardless of how numbered or classified.
(c) "TAX" or "TAXES" means federal, state, county,
local, foreign or other income, gross receipts, ad valorem,
franchise, profits, sales or use, transfer, registration,
excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance,
stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
(d) "TAX RETURN" means any return, information report
or filing with respect to Taxes, including any schedules
attached thereto and including any amendment thereof.
(e) "TREASURY REGULATIONS" means the United States
Treasury Regulations promulgated under the Code, and any
reference to any particular Treasury Regulation section shall
be interpreted to include any final or temporary revision of
or successor to that section regardless of how numbered or
classified.
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5S. INTELLECTUAL PROPERTY RIGHTS.
(i) The attached INTELLECTUAL PROPERTY SCHEDULE
contains a complete and accurate list of all (a) patented or registered
Intellectual Property Rights owned or, to the Seller's or the Company's
knowledge, used by the Company, (b) pending patent applications and
applications for other registrations of Intellectual Property Rights
filed by or on behalf of the Company, and (c) material unregistered
Intellectual Property Rights owned or used by the Company. The attached
INTELLECTUAL PROPERTY SCHEDULE also contains a complete and accurate
list of all licenses, royalty agreements and other rights granted by
the Company to any third party with respect to any Intellectual
Property Rights and all licenses, royalty agreements and other rights
granted by any third party to the Company with respect to any
Intellectual Property Rights, in each case identifying the subject
Intellectual Property Rights. Except as set forth on the INTELLECTUAL
PROPERTY SCHEDULE, the Company owns and possesses all right, title and
interest to, or has the right to use pursuant to a valid and
enforceable license, all Intellectual Property Rights necessary for the
operation of its business as presently conducted and as presently
proposed to be conducted, free and clear of all Liens. Without limiting
the generality of the foregoing, the Company owns and possesses all
right, title and interest in and to all Intellectual Property Rights
created or developed by or under the direction or supervision of the
Seller relating to the business of the Company or to the actual or
demonstratively anticipated research or development conducted by the
Company. To the knowledge of the Seller and the Company, it is not and
will not be necessary to utilize any Intellectual Property Rights of
any of its employees developed, invented or made prior to their
employment by the Company except for any such Intellectual Property
Rights that have previously been assigned to the Company. Except as set
forth on the attached INTELLECTUAL PROPERTY SCHEDULE, the loss or
expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company has not had
and would not reasonably be expected to have a Material Adverse Effect,
and no loss or expiration of any Intellectual Property Right is
threatened, pending or, to the Seller's and the Company's knowledge,
reasonably foreseeable. The Company has taken commercially reasonable
steps to maintain and protect the Intellectual Property Rights which it
owns and uses. To the Seller's and the Company's knowledge, the owners
of any Intellectual Property Rights licensed to the Company have taken
commercially reasonable action to maintain and protect the Intellectual
Property Rights which are subject to such licenses.
(ii) Except as set forth on the attached INTELLECTUAL
PROPERTY SCHEDULE, (a) there have been no claims made against the
Company asserting the invalidity, misuse or unenforceability of any of
the Intellectual Property Rights owned or used by the Company and, to
the Seller's and the Company's knowledge, there is no basis for any
such claim, (b) the Company has not received any notices of, and has no
knowledge of any facts which indicate a likelihood of, any infringement
or misappropriation by, or conflict with, any third party with respect
to any Intellectual Property Rights (including any demand or request
that the Company license any rights from a third party), (c) to the
Seller's and the Company's knowledge, the conduct of the Company's
business has not infringed, misappropriated or conflicted with and does
not infringe, misappropriate or conflict with any Intellectual Property
Rights of other Persons, and (d) to the Seller's and the Company's
knowledge, the
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<PAGE> 42
Intellectual Property Rights owned by or licensed to the Company has
not been infringed, misappropriated or conflicted by other Persons. The
transactions contemplated by this Agreement will have no material
adverse effect on the Company's right, title or interest in and to the
Intellectual Property Rights listed on the INTELLECTUAL PROPERTY
SCHEDULE and all of such Intellectual Property Rights shall be owned or
available for use by the Company on substantially identical terms and
conditions immediately after the Closing.
(iii) For purposes of this Agreement, "INTELLECTUAL
PROPERTY RIGHTS" means all (a) patents, patent applications, patent
disclosures and inventions, (b) Internet domain names, trademarks,
service marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with
all of the goodwill associated therewith, (c) copyrights (registered or
unregistered) and copyrightable works and registrations and
applications for registration thereof, (d) mask works and registrations
and applications for registration thereof, (e) computer software, data,
data bases and documentation thereof, (f) trade secrets and other
confidential or proprietary information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and
production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial and marketing plans and
customer and supplier lists and information), (g) other Intellectual
Property Rights and (h) copies and tangible embodiments thereof (in
whatever form or medium).
5T. INSURANCE. The attached INSURANCE SCHEDULE contains a
description of each insurance policy maintained by the Company with respect to
its properties, assets and business, and each such policy shall be in full force
and effect as of the Closing. The Company is not in default with respect to its
obligations under any insurance policy maintained by it, and the Company has
never been denied insurance coverage. Except as set forth on the attached
INSURANCE SCHEDULE, the Company has no self-insurance or co-insurance programs,
and the reserves set forth on the Latest Balance Sheet are adequate to cover all
anticipated liabilities with respect to any such self-insurance or co-insurance
programs.
5U. EMPLOYEES. To the Seller's and the Company's knowledge, no
executive or key employee of the Company and no material group of employees of
the Company has any plans to terminate employment with the Company. To the
Seller's and the Company's knowledge, the Company has no material labor
relations problems (including any union organization activities, threatened or
actual strikes or work stoppages or material grievances). None of the Company,
the Seller nor, to the Seller's and the Company's knowledge, any of its other
employees or consultants are subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or other agreement or judgment, decree
or order of any court or administrative agency, relating to, affecting or in
conflict with the present or proposed business activities of the Company or such
Person's duties to the Company, except for agreements between the Company and
its present and former employees. The Company has not received any notice
alleging that any violation of any such agreements has occurred.
5V. EMPLOYEE BENEFITS.
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(i) The attached EMPLOYEE BENEFITS SCHEDULE sets
forth an accurate and complete list of each "employee benefit plan" (as
such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and each other employee
benefit plan, program or arrangement at any time maintained, sponsored,
or contributed to by the Company. Each such item listed on the attached
EMPLOYEE BENEFITS SCHEDULE is referred to herein as a "PLAN" and
collectively as the "PLANS."
(ii) The Company does not maintain, contribute to, or
have any liability or potential liability under (or with respect to)
any "defined benefit plan" (as defined in Section 3(35) of ERISA), or
any "multiemployer plan" (as defined in Section 3(37) of ERISA). No
asset of the Company is subject to any lien under ERISA or the Code.
There are no pending or threatened actions, suits, investigations or
claims with respect to any Plan (other than routine claims for
benefits) which could result in material liability to the Company.
(iii) Each Plan that is intended to be qualified
under Section 401(a) of the Code has received a determination from the
Internal Revenue Service that such Plan is so qualified, and nothing
has occurred since the date of such determination that could adversely
affect the qualified status of such Plan.
(iv) Each of the Plans and all related trusts,
insurance contracts and funds have been maintained, funded and
administered in compliance with their terms and in compliance with the
applicable provisions of ERISA, the Code, and any other applicable
laws. With respect to each Plan, all required payments, premiums,
contributions, distributions, or reimbursements for all periods ending
prior to or as of the Closing Date have been made or properly accrued.
(v) Each Plan which is subject to the health care
continuation requirements of Part 6 of Subtitle B of Title I of ERISA
or Section 4980B of the Code ("COBRA") has been administered in
compliance with such requirements. No Plan provides medical or life or
other welfare benefits to any current or future retired or terminated
employee (or any dependent thereof) of the Company other than as
required pursuant to COBRA or applicable State law.
(vi) With respect to each Plan, the Company has
provided the Purchasers with true, complete and correct copies of (to
the extent applicable): (A) all documents pursuant to which the Plan is
maintained, funded and administered (including the plan and trust
documents, any amendments thereto, the summary plan descriptions, and
any insurance contracts or service provider agreements); (B) the three
most recent annual reports (Form 5500 series) filed with the Internal
Revenue Service (with applicable attachments); and (C) the most recent
determination letter received from the Internal Revenue Service.
(vii) For purposes of this Paragraph 5V, the term
"COMPANY" includes all organizations under common control with the
Company pursuant to Section 414 of the Code.
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5W. ENVIRONMENTAL AND SAFETY MATTERS.
(i) The Company has complied with and is in
compliance with all Environmental and Safety Requirements. The Company
has not received any oral or written notice, report or information
regarding any actual or alleged violation of Environmental and Safety
Requirements or any liabilities or potential liabilities relating to it
or its facilities arising under Environmental and Safety Requirements.
Neither this Agreement nor the consummation of the transactions
contemplated hereby will result in any obligations for site
investigation or cleanup, or notification to or consent of any
government agencies or third parties under any Environmental and Safety
Requirements (including any so called "transaction-triggered" or
"responsible property transfer" laws and regulations).
(ii) None of the following exists at any property or
facility owned, occupied or operated by the Company: underground
storage tanks; asbestos-containing material in any form or condition;
materials or equipment containing polychlorinated biphenyls; or
landfills, surface impoundments or other disposal areas.
(iii) The Company has not treated, stored, disposed
of, arranged for or permitted the disposal of, transported, handled or
Released any substance (including any hazardous substance) or owned,
occupied or operated any facility or property (and no such property or
facility is contaminated by any such substance) in a manner that has
given or could give rise to any liabilities (including any liability
for response costs, corrective action costs, personal injury, natural
resource damages, property damage or attorneys fees or any
investigative, corrective or remedial obligations) pursuant to CERCLA
or any other Environmental and Safety Requirements. The Company has
not, either expressly or by operation of law, assumed or undertaken any
liability or corrective, investigatory or remedial obligation of any
other Person relating to any Environmental and Safety Requirements.
(iv) For purposes of this Agreement:
(a) "CERCLA" means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(b) "ENVIRONMENTAL AND SAFETY REQUIREMENTS" shall
mean all federal, state, local and foreign statutes,
regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common
law, in each case concerning public health and safety, worker
health and safety and pollution or protection of the
environment (including, without limitation, all those relating
to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise
regulated materials, substances or wastes, chemical substances
or mixtures, pesticides, pollutants, contaminants, toxic
chemicals,
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petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, radiation or radon), each as amended and as
now or hereafter in effect.
(c) "RELEASE" shall have the meaning set forth in
CERCLA.
5X. AFFILIATED TRANSACTIONS. Except as set forth on the
attached AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, shareholder,
employee or Affiliate of the Company or, to the Seller's and the Company's
knowledge, any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or has any material interest in any material
property used by the Company (including any Intellectual Property Rights).
5Y. NAMES AND LOCATIONS. Except as set forth on the attached
NAMES AND LOCATIONS SCHEDULE, since the inception of the Company, neither the
Company nor any of its former Subsidiaries has used any name or names under
which it has invoiced account debtors, maintained records concerning its assets
or otherwise conducted business. All of the tangible assets and properties of
the Company are based at the locations set forth on the attached NAMES AND
LOCATIONS SCHEDULE.
5Z. SUPPLIERS AND CUSTOMERS. The SUPPLIERS AND CUSTOMERS
SCHEDULE attached hereto accurately sets forth a list of the top ten customers
and suppliers of the Company by dollar volume of sales and purchases,
respectively, for the year ended December 31, 1999. The Company has not received
any indication from any material supplier to the effect that, and the Company
has no reason to believe that, such supplier will stop, materially decrease the
rate of, or materially change the terms (whether related to payment, price or
otherwise) with respect to, supplying materials, products or services to the
Company (whether as a result of the consummation of the transactions
contemplated hereby or otherwise). The Company has not received any indication
from any material customer of the Company to the effect that, and the Company
has no reason to believe that, such customer will stop, or materially decrease
the rate of, buying products of the Company (whether as a result of the
consummation of the transactions contemplated hereby or otherwise).
5AA. INDEBTEDNESS. Except as set forth on the attached
INDEBTEDNESS SCHEDULE, the Company has no Indebtedness. Immediately after the
Closing, the Surviving Corporation shall have no Indebtedness, other than the
obligations under the Surviving Corporation's senior financing arrangements
entered into in connection with the transactions contemplated hereby.
"INDEBTEDNESS" means (i) any indebtedness for borrowed money or issued in
substitution for or exchange of indebtedness for borrowed money (including,
without limitation, indebtedness evidenced by issued but uncashed checks or as
amounts drawn against overdraft lines of credit), (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness guaranteed in any manner by a Person (including, without
limitation, guarantees in the form of an agreement to repurchase or reimburse),
(iv) any indebtedness for the deferred purchase price of property or services
with respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current liabilities incurred
in the ordinary course of business which are not more than three months past
due), (v) any commitment by which a Person assures a
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creditor against loss (including, without limitation, contingent reimbursement
obligations with respect to letters of credit), (vi) any amounts due from the
Company to any Affiliates, (vii) any obligations under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations a Person assures a
creditor against loss, (viii) any fees, penalties (including any prepayment or
similar penalties triggered upon the consummation of the transactions
contemplated hereunder) or accrued and unpaid interest on any of the foregoing,
(ix) any accrued but unpaid expenses of the Seller in connection with the
consummation of the transactions contemplated by this Agreement and (x) any
incurred but unpaid obligations relating to terminated employees.
5BB. DISCLOSURE. Neither this Agreement, any of the Exhibits
or Schedules attached hereto nor any of the written statements, documents,
certificates or other items prepared and supplied to the Purchasers by or on
behalf of the Company or the Seller with respect to the transactions
contemplated hereby, when taken together as a whole, contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein, in light of the circumstances in which
they were made, not misleading. There is no fact which the Company has not
disclosed to the Purchasers in writing and of which any of its shareholders,
officers, directors or executive employees is aware which has had or could
reasonably be expected to have a Material Adverse Effect.
5CC. CLOSING DATE. The representations and warranties of the
Company contained in this Section 5 and elsewhere in this Agreement and all
information contained in any Exhibit, Schedule or attachment hereto or in any
certificate or other writing delivered by, or on behalf of, the Company to the
Purchasers pursuant to this Agreement shall be true and correct on the Closing
Date as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout such representations and warranties except for
those representations and warranties which by their terms are made as of a
specified date.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER. As a
material inducement to the Purchasers and Sub to enter into this Agreement and
to consummate the Merger, the Seller hereby represents and warrants to the
Purchasers, Sub and the Company as follows:
6A. CAPACITY; POWER AND AUTHORITY. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio. The Seller possesses all requisite power and authority necessary
to carry out the transactions contemplated by this Agreement.
6B. AUTHORIZATION; NO BREACH. Except as set forth on the
attached SELLER AUTHORIZATION SCHEDULE, this Agreement and all other agreements
contemplated hereby to which the Seller is a party, when executed and delivered
by the Seller in accordance with the terms hereof, shall each constitute a valid
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms. Except as set forth on the attached SELLER
AUTHORIZATION SCHEDULE the execution and delivery by the Seller of this
Agreement and all other agreements contemplated hereby to which the Seller is a
party, the Merger, the Redemption Transaction and the fulfillment of and
compliance with the respective terms hereof and thereof by the Seller, do not
and shall not
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(i) conflict with or result in a breach of the terms, conditions or provisions
of, (ii) constitute a default under (whether with or without the passage of
time, the giving of notice or both), (iii) result in the creation of any Lien,
security interest, charge or encumbrance upon the Seller's assets pursuant to,
(iv) give any third party the right to modify, terminate or accelerate any
obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or any court or administrative
or governmental body or agency pursuant to, or any law, statute, rule or
regulation to which the Seller is subject, or any agreement, instrument, order,
judgment or decree to which the Seller is subject.
6C. TITLE TO SHARES, ETC. MPW Management is the record and
beneficial owner of, and has good and marketable title to, the Repurchased
Shares, free and clear of all Liens, agreements, voting trusts, proxies and
other arrangements or restrictions of any kind whatsoever (collectively,
"ENCUMBRANCES"), other than the security interest of Bank One, N.A. which will
be released as of the Closing Date. At the Closing, the Seller shall sell to the
Surviving Corporation good and marketable title to the Repurchased Shares free
and clear of all Encumbrances.
6D. BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
the Seller is a party or to which the Seller is subject. The Seller shall pay,
and hold the Company, the Surviving Corporation and the Purchasers harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
6E. LITIGATION, ETC. There are no actions, suits, proceedings
(including any arbitration proceedings), orders, investigations or claims
pending or, to the Seller's knowledge, threatened against or affecting the
Seller in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with the transactions contemplated hereby.
6F. COMPANY TRANSACTIONS. The Seller is not a party to or
bound by any agreement with respect to a Company Transaction other than this
Agreement, and the Seller has terminated all discussions with third parties
(other than the Purchasers) regarding Company Transactions.
6G. CLOSING DATE. The representations and warranties of the
Seller contained in this Section 6 and elsewhere in this Agreement and all
information contained in any Exhibit, Schedule or attachment hereto or in any
certificate or other writing delivered by, or on behalf of, the Seller to the
Purchasers pursuant to this Agreement shall be true and correct on the Closing
Date as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout such representations and warranties except for
those representations and warranties which by their terms are made as of a
specified date.
Section 7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
As a material inducement to the Company and the Seller to enter into this
Agreement, consummate the Redemption Transaction and take the other actions set
forth in Section 1, the Purchasers hereby represent and warrant to the Company
and the Seller as follows:
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7A. ORGANIZATION, POWER AND AUTHORITY. Such Purchaser is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Such Purchaser possesses all requisite power and
authority necessary to carry out the transactions contemplated by this
Agreement.
7B. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which such Purchaser is a party have been duly authorized by such Purchaser.
This Agreement and all other agreements contemplated hereby to which such
Purchaser is a party, when executed and delivered by such Purchaser in
accordance with the terms hereof, shall each constitute a valid and binding
obligation of such Purchaser, enforceable in accordance with its terms. The
execution and delivery by such Purchaser of this Agreement and all other
agreements contemplated hereby to which such Purchaser is a party, the Merger,
the Redemption Transaction and the fulfillment of and compliance with the
respective terms hereof and thereof by such Purchaser, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under (whether with or without the passage of time,
the giving of notice or both), (iii) give any third party the right to modify,
terminate or accelerate any obligation under, (iv) result in a violation of or
(v) require any authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any court or administrative or
governmental body or agency pursuant to, the organizational documents of such
Purchaser, or any law, statute, rule or regulation to which such Purchaser is
subject, or any agreement, instrument, order, judgment or decree to which such
Purchaser is subject.
7C. OWNERSHIP OF MERGER SUB; DIRECTORS AND OFFICERS. The
authorized capital stock of Sub is held beneficially and of record by the
Purchasers (free and clear of all Encumbrances). The directors and officers of
Sub are set forth on the attached SUB DIRECTORS AND OFFICERS SCHEDULE.
7D. BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
such Purchaser is a party or to which such Purchaser is subject. Such Purchaser
shall pay, and hold the Company, the other Purchasers and the Seller harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
7E. CLOSING DATE. The representations and warranties of such
Purchaser contained in this Section 7 and elsewhere in this Agreement shall be
true and correct on the Closing Date as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties.
Section 8. REPRESENTATIONS AND WARRANTIES OF SUB. As a
material inducement to the Company and the Seller to enter into this Agreement,
consummate the Merger and the Redemption Transaction and take the other actions
set forth in Section 1, the Purchasers and Sub hereby represents and warrants to
the Company and the Seller as follows:
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8A. ORGANIZATION, POWER AND AUTHORITY. Sub is duly organized,
validly existing and in good standing under the laws of Ohio. Sub possesses all
requisite power and authority necessary to carry out the transactions
contemplated by this Agreement.
8B. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby to
which Sub is a party have been duly authorized by Sub. This Agreement and all
other agreements contemplated hereby to which Sub is a party, when executed and
delivered by Sub in accordance with the terms hereof, shall each constitute a
valid and binding obligation of Sub, enforceable in accordance with its terms.
The execution and delivery by Sub of this Agreement and all other agreements
contemplated hereby to which Sub is a party, the Merger, the Redemption
Transaction and the fulfillment of and compliance with the respective terms
hereof and thereof by Sub, do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under (whether with or without the passage of time, the giving of notice or
both), (iii) give any third party the right to modify, terminate or accelerate
any obligation under, (iv) result in a violation of or (v) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental body
or agency pursuant to, the organizational documents of Sub, or any law, statute,
rule or regulation to which Sub is subject, or any agreement, instrument, order,
judgment or decree to which Sub is subject.
8C. CAPITAL STOCK AND RELATED MATTERS. Immediately prior to
the Closing, the authorized capital stock of Sub shall consist of 25,000,000
shares of New Common Stock, of which 8,000,000 shares shall be issued and
outstanding and held beneficially and of record by the Purchasers (free and
clear of all Encumbrances), and 50,000 shares of New Series A Preferred, of
which 18,000 shares shall be issued and outstanding and held of record by the
Purchasers. Except as set forth in the immediately preceding sentence, Sub does
not have outstanding any stock or securities convertible or exchangeable for any
shares of its capital stock or containing any profit participation features, nor
any rights or options to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its capital stock or
any stock appreciation rights or phantom stock plans. Sub is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any warrants, options or other rights
to acquire its capital stock, other than as expressly provided in this
Agreement. As of the Closing Date, all of the outstanding shares of Sub's
capital stock are or shall be validly issued, fully paid and nonassessable.
There are no statutory or contractual shareholder preemptive rights or rights of
first refusal or other similar restrictions with respect to the Merger or the
Redemption Transaction. Sub has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of its
capital stock and the Merger and Redemption Transaction hereunder and the grant
of any stock options under the Management Equity Plan. There are no agreements
or understandings between Sub's shareholders or among any other Person with
respect to the voting or transfer of Sub's capital stock or with respect to any
other aspect of Sub's governance.
8D. LITIGATION, ETC. There are no outstanding injunctions,
judgments, decrees, rulings, settlements or charges or actions, suits,
proceedings (including any arbitration proceedings), orders, investigations or
claims pending or, to Sub's knowledge, threatened against or affecting Sub
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(or to Sub's knowledge, pending or threatened against or affecting any of the
officers or directors of Sub with respect to its business or proposed business
activities), or pending or threatened by Sub against any Person, at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality (including any actions, suits, proceedings or
investigations with respect to the transactions contemplated by this Agreement);
Sub is not subject to any arbitration proceedings under collective bargaining
agreements or otherwise or any governmental investigations or inquiries; and, to
Sub's knowledge, there is no basis for any of the foregoing. Sub has not
received any opinion or memorandum or advice from legal counsel to the effect
that it is exposed, from a legal standpoint, to any liability which could have a
Material Adverse Effect.
8E. AVAILABLE FUNDS. The financing contemplated by the
financing proposal delivered by certain banks and other financial institutions
to the Purchasers (assuming the satisfaction of the conditions set forth herein
and therein), together with the equity of Sub, is sufficient to pay the
Estimated Repurchase Price in accordance with the terms and conditions set forth
herein and $12,156,000 of Indebtedness owed to the Seller.
8F. BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
Sub is a party or to which Sub is subject. Sub shall pay, and hold the Company,
the Purchasers and the Seller harmless against, any liability, loss or expense
(including reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
8G. CLOSING DATE. The representations and warranties of Sub
contained in this Section 8 and elsewhere in this Agreement shall be true and
correct on the Closing Date as though then made and as though the Closing Date
was substituted for the date of this Agreement throughout such representations
and warranties.
Section 9. INDEMNIFICATION AND OTHER AGREEMENTS.
9A. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
limitations set forth in this Paragraph 9A, all representations, warranties,
covenants and agreements in this Agreement and the Schedules and Exhibits
attached hereto or in any writing delivered by any Party to another Party in
connection with this Agreement shall survive the Closing, regardless of any
investigation made by any Party or on its behalf, the knowledge of any such
Party's officers, directors, partners, members, employees or agents or the
acceptance of any certificate or opinion. The Seller or the Purchasers, as the
case may be, will not be liable pursuant to Paragraph 9B with respect to any
claim for the breach or inaccuracy of any representation or warranty of the
Company or the Seller unless written notice of a claim thereof is delivered to
the Seller or the Purchasers, as appropriate, prior to the Survival Date. For
purposes of this Agreement, the term "SURVIVAL DATE" shall mean the third
anniversary of the Closing Date, EXCEPT that the Survival Date with respect to
the following Losses shall be as follows: (1) with respect to any Loss arising
from or related to a breach of the representations and warranties of the Company
and/or the Seller set forth in Paragraphs 5I (Compliance with Laws; Permits;
Certain Operations), 5R (Tax Matters) and 5V (Employee Benefits), the Survival
Date shall be the 60th day after expiration of the applicable statute of
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limitations (including any extensions thereto to the extent that such statute of
limitations may be tolled); (2) with respect to any Loss arising from or related
to a breach of the representations and warranties of the Company and/or the
Seller set forth in Paragraph 5W (Environmental, Health and Safety Matters), the
Survival Date shall be the fifth anniversary of the Closing Date; and (3) with
respect to any Loss arising from or related to a breach of the representations
and warranties of the Company and/or the Seller set forth in Paragraphs 5A
(Organization), 5B (Authorization), 5C (Capital Stock and Related Matters)
(other than the last three sentences thereof), 5E (Brokerage), the first
sentence of 5J (Assets) and Section 6, such representations and warranties
(collectively, the "UNLIMITED WARRANTIES") shall not expire. The Parties agree
that so long as written notice is given on or prior to the Survival Date with
respect to such claim, the representations and warranties with respect to such
breach shall continue to survive until such matter is resolved and the Seller
shall be required to indemnify the Company Parties for all Losses (subject to
the limitations set forth in Paragraph 9B below) which the Company Parties may
incur in respect of the matters which are the subject of such claim, regardless
of when incurred.
9B. GENERAL INDEMNIFICATION.
(i) INDEMNIFICATION BY THE SELLER. The Seller shall
indemnify each of the Surviving Corporation and the Purchasers and
their respective Affiliates, shareholders (other than the Seller),
partners, officers, directors, employees, agents, representatives,
successors and permitted assigns (collectively, the "COMPANY PARTIES")
and save and hold each of them harmless against and pay on behalf of or
reimburse such Company Parties as and when incurred for any loss,
liability, demand, claim, action, cause of action, cost, damage,
deficiency, Tax, penalty, fine or expense, whether or not arising out
of third party claims (including interest, penalties, reasonable
attorneys' fees and expenses and all amounts paid in investigation,
defense or settlement of any of the foregoing) (collectively,
"LOSSES"), which any such Company Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental
to or by virtue of: (a) any breach of any representation or warranty of
the Company or the Seller under this Agreement or any of the Schedules
or Exhibits attached hereto, or in any of the certificates or other
instruments or documents furnished by the Company or the Seller
pursuant to this Agreement; (b) any nonfulfillment or breach of any
covenant, agreement or other provision by the Company or the Seller
under this Agreement or any of the Schedules and Exhibits attached
hereto required to be performed or complied with by the Company or the
Seller; (c) any claim by any Person (other than the Purchasers) with
respect to, or arising as a result of, any Company Transaction (other
than the Company Transaction that is the subject of this Agreement); or
(d) any of the matters set forth on the INDEMNIFICATION SCHEDULE
attached hereto; PROVIDED THAT the Seller shall not have any liability
under clause (a) above (other than with respect to the Unlimited
Warranties and the representations and warranties set forth in
Paragraphs 5R(Tax Matters) and 5AA (Indebtedness)) unless the aggregate
of all Losses relating thereto for which the Seller would, but for this
proviso, be liable exceeds on a cumulative basis an amount equal to
$250,000 (at which point the Seller will be obligated to indemnify the
Company Parties from and against all such Losses relating back to the
first dollar); and PROVIDED, FURTHER, that the Seller's aggregate
liability under clause (a) above (other than with respect to the
Unlimited Warranties and the representations and warranties
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set forth in Paragraphs 5W (Environmental, Health and Safety Matters),
5AA (Indebtedness) and 6R(Tax Matters)) shall in no event exceed
$7,500,000 (it being understood, however, that nothing in this
Agreement (including this Paragraph 9B) shall limit or restrict any of
the Company Parties' right to maintain or recover any amounts in
connection with any action or claim based upon fraudulent
misrepresentation or deceit). All indemnification payments under this
Paragraph 9B shall be deemed to be adjustments to the Repurchase Price
set forth in Paragraph 1B above.
(ii) INDEMNIFICATION BY THE PURCHASERS. The
Purchasers shall indemnify the Seller, the Surviving Corporation and
their Affiliates, shareholders, officers, directors, employees, agents,
representatives, successors and permitted assigns (collectively, the
"PURCHASERS INDEMNIFIED PARTIES") and hold them harmless against any
Losses which the Purchasers Indemnified Parties may suffer, sustain or
become subject to, as a result of, in connection with, relating or
incidental to or by virtue of: (a) any breach of any representation or
warranty of the Purchasers or the Merger Sub under this Agreement or
any of the Schedules or Exhibits attached hereto, or in any of the
certificates or other instruments or documents furnished by the
Purchasers pursuant to this Agreement; or (b) any nonfulfillment or
breach of any covenant, agreement or other provision by the Purchasers
or the Merger Sub under this Agreement or any of the Schedules and
Exhibits attached hereto.
(iii) INDEMNIFICATION BY THE SURVIVING CORPORATION.
The Surviving Corporation shall indemnify the Seller and its Affiliates
(collectively, the "SELLER INDEMNIFIED PARTIES") and hold them harmless
against any Losses which the Seller Indemnified Parties may suffer,
sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of any liability or obligation
for payment or performance under the agreements identified on the
attached SELLER INDEMNIFICATION SCHEDULE, but only to the extent such
liability or obligation is attributable to and becomes due and payable
during periods following the Closing (but not including any liability
or obligation arising with respect to noncompliance with law, breach of
contract or warranty, tort, infringement claim or lawsuit).
(iv) MANNER OF PAYMENT. Any indemnification of the
Company Parties or the Purchaser Indemnified Parties pursuant to this
Paragraph 9B shall be effected by wire transfer of immediately
available funds from the Seller or the Purchasers, as the case may be,
to an account designated by any Company Party or Purchaser Indemnified
Party, as the case may be, within 15 days after the determination
thereof. Any such indemnification payments shall include interest at
the Applicable Rate calculated on the basis of the actual number of
days elapsed over 360, from the date any such Loss is suffered or
sustained to the date of payment or, at the discretion of the Surviving
Corporation, by set-off against the New Series A Preferred and New
Common Stock.
(v) DEFENSE OF THIRD PARTY CLAIMS. Any Person making
a claim for indemnification under this Paragraph 9B (an "INDEMNITEE")
shall notify the indemnifying party (an "INDEMNITOR") of the claim in
writing promptly after receiving written notice of any action, lawsuit,
proceeding, investigation or other claim against it (if by a third
party), describing the claim, the amount thereof (if known and
quantifiable) and the basis thereof;
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PROVIDED THAT the failure to so notify an Indemnitor shall not relieve
the Indemnitor of its obligations hereunder except to the extent that
(and only to the extent that) such failure shall have caused the
damages for which the Indemnitor is obligated to be greater than such
damages would have been had the Indemnitee given the Indemnitor prompt
notice hereunder. Any Indemnitor shall be entitled to participate in
the defense of such action, lawsuit, proceeding, investigation or other
claim giving rise to an Indemnitee's claim for indemnification at such
Indemnitor's expense, and at its option (subject to the limitations set
forth below) shall be entitled to assume the defense thereof by
appointing a reputable counsel reasonably acceptable to the Indemnitee
to be the lead counsel in connection with such defense; PROVIDED THAT
prior to the Indemnitor assuming control of such defense it shall first
(a) verify to the Indemnitee in writing that such Indemnitor shall be
fully responsible (with no reservation of any rights) for all
liabilities and obligations relating to such claim for indemnification
and that it shall provide full indemnification (whether or not
otherwise required hereunder) to the Indemnitee with respect to such
action, lawsuit, proceeding, investigation or other claim giving rise
to such claim for indemnification hereunder and (b) enter into an
agreement with the Indemnitee in form and substance satisfactory to the
Indemnitee which agreement unconditionally guarantees the payment and
performance of any liability or obligation which may arise with respect
to such action, lawsuit, proceeding, investigation or facts giving rise
to such claim for indemnification hereunder; and PROVIDED, FURTHER,
that:
(a) the Indemnitee shall be entitled to participate
in the defense of such claim and to employ counsel of its
choice for such purpose; PROVIDED THAT the fees and expenses
of such separate counsel shall be borne by the Indemnitee
(other than any fees and expenses of such separate counsel
that are incurred prior to the date the Indemnitor effectively
assumes control of such defense which, notwithstanding the
foregoing, shall be borne by the Indemnitor or that are
specifically authorized by the Indemnitor);
(b) the Indemnitor shall not be entitled to assume
control of such defense and shall pay the fees and expenses of
counsel retained by the Indemnitee if (1) the claim for
indemnification relates to or arises in connection with any
criminal or quasi-criminal proceeding, action, indictment,
allegation or investigation; (2) the Indemnitee reasonably
believes an adverse determination with respect to the action,
lawsuit, investigation, proceeding or other claim giving rise
to such claim for indemnification would be detrimental to or
injure the Indemnitee's reputation or future business
prospects; (3) the claim seeks an injunction or equitable
relief against the Indemnitee; (4) the Indemnitee has been
advised in writing by counsel that a reasonable likelihood
exists of a conflict of interest between the Indemnitor and
the Indemnitee; or (5) upon petition by the Indemnitee, the
appropriate court rules that the Indemnitor failed or is
failing to vigorously prosecute or defend such claim; and
(c) if the Indemnitor shall control the defense of
any such claim, the Indemnitor shall obtain the prior written
consent of the Indemnitee before entering into any settlement
of a claim or ceasing to defend such claim if, pursuant to or
as a
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result of such settlement or cessation, injunctive or other
equitable relief will be imposed against the Indemnitee or if
such settlement does not expressly and unconditionally release
the Indemnitee from all liabilities and obligations with
respect to such claim, without prejudice.
(vi) CERTAIN WAIVERS AND CONSENTS. The Seller hereby
agrees that it shall not make any claim for indemnification hereunder
against the Surviving Corporation by reason of the fact that it is or
was a shareholder or agent of the Company or the Surviving Corporation
or is or was serving at the request of the Company as a partner,
trustee, director, officer, employee or agent of another entity
(whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses or otherwise) with respect
to any action, suit, proceeding, complaint, claim or demand brought by
any of the Company Parties against the Seller pursuant to this
Agreement and the Seller hereby acknowledges and agrees that the Seller
shall have no claims or right to contribution or indemnity from the
Company or the Surviving Corporation with respect to any amounts paid
by the Seller pursuant to this Paragraph 9B. Nothing in this Paragraph
9B(vi), however, shall prohibit, restrict or modify any right of the
Seller to receive indemnification from the Surviving Corporation to the
extent the Seller is otherwise entitled to indemnification pursuant to
the Articles of Incorporation of the Company or the Surviving
Corporation and applicable law with respect to any claim which does not
give rise to or evidence the existence of a breach of any of the
representations, warranties, covenants or agreements of the Company or
the Seller contained in this Agreement and which does not give rise to
or evidence the existence of an indemnification obligation by the
Seller pursuant to this Paragraph 9B.
(vii) ASSIGNMENT OF CERTAIN RIGHTS. In the event any
Company Party makes an indemnification claim against the Seller for
which such Company Party also has a valid indemnification claim against
a third party under those agreements listed on the attached ASSIGNMENT
OF RIGHTS SCHEDULE, such Company Party shall assign its rights to make
such indemnification claim to the Seller in exchange for the Seller's
satisfaction in full of all of the Company Parties' indemnification
claim against the Seller. The Surviving Corporation shall not, without
the prior written consent of the Seller, amend or modify the
indemnification obligations of any such third party to the Company or
the Seller under the agreements listed on the ASSIGNMENT OF RIGHTS
SCHEDULE in a manner that would be adverse to the Seller after giving
effect to this Paragraph 9B(vii).
9C. PRESS RELEASE AND ANNOUNCEMENTS. Unless and only to the
extent required by law (in which case each Party agrees to consult with the
other Parties prior to any such disclosure as to the form and content of such
disclosure), no press releases or other releases of information (including any
Person's name or identity as an investor in the Surviving Corporation) related
to this Agreement or the transactions contemplated hereby will be issued or
released prior to, at or following the Closing without the consent of the
Company or the Surviving Corporation, as the case may be, the Purchasers and the
Seller.
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9D. NON-COMPETE; NON-SOLICITATION.
(i) The Seller acknowledges that it is familiar with
the trade secrets of the Company and with other confidential
information concerning the Company, including all (a) inventions,
technology and research and development of the Company, (b) customers
and clients and customer and client lists of the Company, (c) products
(including products under development) and services of the Company and
related costs and pricing structures and manufacturing techniques, (d)
accounting and business methods and practices of the Company and (e)
similar and related confidential information and trade secrets of the
Company. The Seller further acknowledges that its services have been
and shall be of special, unique and extraordinary value to the Company
and the Surviving Corporation and that it has been substantially
responsible for the growth and development of the Company and the
creation and preservation of the Company's goodwill. The Seller
acknowledges and agrees that the Company and the Surviving Corporation
would be irreparably damaged if the Seller were to compete with the
Surviving Corporation or engage in a similar business and that such
competition by the Seller would result in a significant loss of
goodwill by the Surviving Corporation. The Seller further acknowledges
and agrees that the covenants and agreements set forth in this
Paragraph 9D were a material inducement to the Purchasers to enter into
this Agreement and to perform their obligations hereunder, and that the
Purchasers would not obtain the benefit of the bargain set forth in
this Agreement as specifically negotiated by the Parties if the Seller
breached the provisions of this Paragraph 9D. Therefore, in further
consideration of the Repurchase Price to be paid to the Seller
hereunder for the Repurchased Shares (which Repurchase Price is being
funded in part with the proceeds from the Merger hereunder) and the
goodwill of the Company sold by the Seller, the Seller agrees that
until the fourth anniversary of the date of the Closing of the
transactions pursuant to this Agreement, the Seller shall not directly
or indirectly own any interest in, manage, control, participate in
(whether as an officer, director, employee, partner, agent,
representative or otherwise), consult with, render services for, or in
any other manner engage anywhere in the world in any business engaged
or involved in providing cleaning and related services in connection
with "clean room" environments including parts cleaning, clean room
cleaning and disaster recovery services as such businesses are
conducted by the Surviving Corporation as of the Closing Date or by the
Company immediately prior to the Closing Date in the semiconductor,
electronics, biotechnology and pharmaceutical industries, in the
manufacture and sale of surface particle detectors and fan filter units
or in the business of data room center cleaning; PROVIDED THAT nothing
herein shall prohibit the Seller's continuing ownership of the
Surviving Corporation or the Seller from being a passive owner of not
more than 2% of the outstanding stock of any class of a corporation
which is publicly traded so long as the Seller has no active
participation in the business of such Person.
(ii) For so long as the Seller has continuing
obligations under Paragraph 9D(i) above, the Seller shall not directly,
or indirectly through another entity, (a) induce or attempt to induce
any employee of the Surviving Corporation or any of its Subsidiaries to
leave the employ of the Surviving Corporation or such Subsidiary, or in
any way interfere with the relationship between the Surviving
Corporation or any of its Subsidiaries and any employee thereof, (b)
hire any person who was a salaried employee of
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the Surviving Corporation or any of its Subsidiaries at any time during
the six month period immediately prior to the date on which such hiring
would take place (it being conclusively presumed by the Parties so as
to avoid any disputes under this Paragraph 9D(ii) that any such hiring
within such six month period is in violation of clause (a) above), or
(c) induce or attempt to induce any customer, supplier, licensee,
licensor or other business relation of the Surviving Corporation or any
of its Subsidiaries to cease doing business with the Surviving
Corporation or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Surviving Corporation or any of its Subsidiaries
(including making any negative statements or communications about the
Surviving Corporation or any of its Subsidiaries).
(iii) If, at the time of enforcement of the covenants
contained in this Paragraph 9D (the "RESTRICTIVE COVENANTS"), a court
shall hold that the duration, scope or area restrictions stated herein
are unreasonable under circumstances then existing, the Parties agree
that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or
area and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area permitted
by law. The Seller has consulted with legal counsel regarding the
Restrictive Covenants and based on such consultation has determined and
hereby acknowledges that the Restrictive Covenants are reasonable in
terms of duration, scope and area restrictions and are necessary to
protect the goodwill of the Surviving Corporation's business and the
substantial investment in the Surviving Corporation made by the
Purchasers hereunder. The Seller further acknowledges and agrees that
the Restrictive Covenants are being entered into by the Seller solely
in connection with the sale by the Seller of the goodwill of the
Surviving Corporation's business and not directly or indirectly in
connection with any other relationship with the Surviving Corporation.
(iv) If the Seller breaches, or threatens to commit a
breach of, any of the Restrictive Covenants, the Surviving Corporation
shall have the following rights and remedies, each of which rights and
remedies shall be independent of the others and severally enforceable,
and each of which is in addition to, and not in lieu of, any other
rights and remedies available to the Surviving Corporation at law or in
equity:
(a) the right and remedy to have the Restrictive
Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened
breach of the Restrictive Covenants would cause irreparable
injury to the Surviving Corporation and that money damages
would not provide an adequate remedy to the Surviving
Corporation; and
(b) the right and remedy to require the Seller to
account for and pay over to the Surviving Corporation any
profits, monies, accruals, increments or other benefits
derived or received by the Seller as the result of any
transactions constituting a breach of the Restrictive
Covenants.
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(v) In the event of any breach or violation by the
Seller of any of the Restrictive Covenants, the time period of such
covenant with respect to the Seller shall be tolled until such breach
or violation is resolved.
9E. CONFIDENTIALITY. The Company or the Surviving Corporation,
as the case may be, and the Seller shall return to the Purchasers and keep
confidential all information and materials regarding any of the Purchasers
(except to the extent (i) disclosure of such information is required by law,
(ii) the information was previously known to the Company or the Seller or (iii)
the information becomes publicly known except through the actions or inactions
of the Company or the Seller). If the transactions contemplated hereby are
consummated, the Seller agrees not to disclose or use at any time, any
confidential information relating to the Purchasers, the Company or the
Surviving Corporation (whether or not such information is or was developed by
the Seller), except to the extent that such disclosure or use is directly
related to and required by the performance of the Seller's duties to the
Company. The Seller further agrees to take all appropriate steps to safeguard
such confidential information relating to the Purchasers, the Company or the
Surviving Corporation and to protect it against disclosure, misuse, espionage,
loss and theft. In the event any Seller is required by law to disclose any
confidential information relating to the Purchasers, the Company or the
Surviving Corporation, the Seller shall promptly notify the Purchasers, if prior
to the Closing, or the Surviving Corporation, if after the Closing, in writing,
which notification shall include the nature of the legal requirement and the
extent of the required disclosure, and shall cooperate with the Surviving
Corporation to preserve the confidentiality of such information consistent with
applicable law.
9F. INTELLECTUAL PROPERTY RIGHTS PROTECTION. The Seller shall
provide the Surviving Corporation and its successors, assigns or other legal
representatives full cooperation and assistance at the Surviving Corporation's
request and expense in the protection of all Intellectual Property Rights used
by the Company or the Surviving Corporation or any of its Subsidiaries against
any claims or demands of invalidity or unenforceability, and in the prosecution
or defense of any interference, opposition, reexamination, reissue, infringement
or other proceeding that may arise in connection with the Company's right, title
and interest in and to such Intellectual Property Rights, including execution
and delivery of any and all affidavits, testimonies, declarations, oaths,
exhibits, assignments, powers of attorney or other documentation as may be
reasonably required.
9G. DISPUTE RESOLUTION.
(i) In the event of any dispute or disagreement
between the Parties following the Closing as to the interpretation of
any provision of this Agreement or the performance of any obligations
hereunder, the matter, upon the written request of any Party, shall be
referred to representatives of the Parties for decision (the
"REPRESENTATIVES"). The Representatives shall promptly meet in a good
faith effort to resolve the dispute. If the Representatives do not
agree upon a decision within 30 calendar days after reference of the
matter to them, each of the Parties shall be free to exercise the
remedies available to it under Paragraph 9G(ii) below.
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(ii) Any controversy, dispute or claim arising out of
or relating in any way to this Agreement or the transactions arising
hereunder that cannot be resolved by negotiation pursuant to Paragraph
9G(i) above shall be settled exclusively by arbitration in Chicago,
Illinois under the Commercial Arbitration Rules of the American
Arbitration Association (the "INSTITUTE") as in effect from time to
time (except as otherwise provided herein) by one independent and
impartial arbitrator who shall be selected by the Seller and the
Purchasers in accordance with such Rules. Notwithstanding anything to
the contrary provided in Paragraph 11M hereof, the arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. Section 1 ET
SEQ. The fees and expenses of the Institute and the arbitrator shall be
shared equally by the two opposing parties actually involved in the
dispute and advanced by them from time to time as required; PROVIDED
THAT at the conclusion of the arbitration, the arbitrator shall award
costs and expenses (including the costs of the arbitration previously
advanced and the fees and expenses of attorneys, accountants and other
experts) and interest at the Applicable Rate to the prevailing Party or
Parties. The arbitrator shall permit and facilitate such discovery as
the Party initiating such claim shall reasonably request. The
arbitrator shall render his or her award within 90 days of the
conclusion of the arbitration hearing. The arbitrator shall be
expressly empowered to determine the amount of any Losses subject to
indemnification hereunder in accordance with the terms and provisions
of this Agreement. Notwithstanding anything to the contrary provided in
this Paragraph 9G(ii) and without prejudice to the above procedures,
any Party may apply to any court of competent jurisdiction for
temporary injunctive or other provisional judicial relief if such
action is necessary to avoid irreparable damage or to preserve the
status quo until such time as the arbitrator is selected and available
to hear such Party's request for temporary relief. The award rendered
by the arbitrator shall be final and not subject to judicial review
(absent manifest error), and judgment thereon may be entered in any
court of competent jurisdiction. Notwithstanding anything to the
contrary provided in Paragraph 9G(i) or this Paragraph 9G(ii), the
Surviving Corporation or the Purchasers may elect to enforce any of the
provisions of Paragraphs 9D or 9E or the Exhibits attached hereto by
application to a court of competent jurisdiction for equitable or legal
relief (including damages or injunctive relief) rather than pursuant to
the above procedures.
9H. FURTHER ASSURANCES. In case at any time after the Closing
any further action is necessary or desirable to carry out the purposes of this
Agreement or the transactions contemplated hereby, each of the Parties will take
such further action (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Paragraph 9B above).
9I. ERISA COVENANTS
(i) Prior to or as of the Closing Date, the Seller shall make
to the "MPW Industrial Services Savings Plan" (the "SELLER 401(k) PLAN") all
salary reduction, employer matching and pro-rated employer profit-sharing
contributions (determined without application of end-of-year service
requirements, if any) attributable to employees of the Company (and
beneficiaries thereof) who are participants in the Seller 401(k) Plan (the
"TRANSFERRED PARTICIPANTS"). On or as soon as
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practicable following the Closing Date, the Surviving Corporation shall
establish a defined contribution plan intended to be qualified under Section
401(a) of the Code (the "COMPANY 401(k) PLAN") which shall contain such
provisions as are necessary so that a transfer of assets from the Seller 401(k)
Plan to the Company 401(k) Plan will comply with Section 411(d)(6) of the Code.
As soon as practicable following the establishment of the Company 401(k) Plan,
in accordance with the applicable provisions of Section 414(l) of the Code, the
Seller shall cause the assets of the Seller 401(k) Plan attributable to the
accounts (whether or not vested) of each Transferred Participant to be
transferred by the trustee of the Seller 401(k) Plan to the trustee of the
Company 401(k) Plan. Except to the extent specifically agreed by the Surviving
Corporation, the transfer of assets from the Seller 401(k) Plan to the Company
401(k) Plan made pursuant to the terms of this Agreement shall be in cash
(except that any promissory notes or other evidences of Indebtedness with
respect to outstanding loans under the Seller 401(k) Plan made to any
Transferred Participant shall also be transferred), and shall be made as of and
as soon as practicable after a valuation date under the Seller 401(k) Plan
occurring coincident with or immediately following the Closing Date, or as of
such later valuation date as may be mutually selected by the Seller and the
Surviving Corporation. Such transfer shall account appropriately for investment
experience during the period from the applicable valuation date to the actual
date of transfer (the "TRANSFER DATE"). From the Closing Date until the Transfer
Date, the Surviving Corporation shall make continuous payroll deductions each
pay period from the pay of each Transferred Participant who has a loan(s)
outstanding from the Seller 401(k) Plan of amounts sufficient to pay the
installment payments of principal and interest on each such loan as required by
the promissory note or other evidence of Indebtedness relating to such loan.
Such deducted amounts shall be paid by the Surviving Corporation to the trustee
of the Seller 401(k) Plan, whom the Seller shall direct to accept such payments
for a credit against such loans.
(ii) Seller shall be solely responsible for satisfying the
continuation coverage requirements of Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code ("COBRA") for all employees and former employees
of the Company (and any dependents of such employees and former employees) who
are receiving COBRA continuation coverage as of the Closing Date or who are
entitled to elect such coverage on account of a qualifying event occurring on or
before the Closing Date; and Seller shall be solely responsible for providing
any and all long-term disability benefits (and all other pension and/or welfare
benefits to which any such person is entitled on account of disability after
becoming eligible for such long-term disability benefits) which become payable
on or after the Closing Date to any employee or former employee of the Company
who was disabled or was in a disability waiting period as of the Closing Date.
Section 10. TERMINATION.
10A. CONDITIONS OF TERMINATION. This Agreement may be
terminated at any time prior to the Closing:
(i) by the mutual written consent of the Parties;
(ii) by the Purchasers if there has been a material
misrepresentation, material breach of warranty or material breach of a
covenant by the Company or the Seller in the representations and
warranties or covenants set forth in this Agreement or the
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Schedules and Exhibits attached hereto, which in the case of any breach
of covenant has not been cured within ten days after written
notification thereof by the Purchasers to the Company and the Seller;
(iii) by the Company and the Seller if there has been
a material misrepresentation, material breach of warranty or material
breach of covenant by the Purchasers in the representations and
warranties or covenants set forth in this Agreement or the Schedules
and Exhibits attached hereto, which in the case of any breach of
covenant has not been cured within ten days after written notification
thereof by the Company and the Seller to the Purchasers;
(iv) by the Purchaser if any Termination Triggering
Event (as defined in ANNEX I hereto) shall have occurred or if the
transactions contemplated hereby have not been consummated by August
25, 2000; or
(v) by the Company and the Seller if the transactions
contemplated hereby have not been consummated by August 25, 2000 and,
as of the date of termination pursuant to this clause (v), no
Termination Triggering Event has occurred;
PROVIDED, FURTHER, THAT the Party electing termination pursuant to clause (iv)
of this Paragraph 10A is not in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the Schedules
and Exhibits attached hereto. In the event of termination by either the
Purchasers or the Company and the Seller pursuant to this Paragraph 10A, written
notice thereof (describing in reasonable detail the basis therefor) shall
forthwith be delivered to the other Parties.
10B. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Purchasers or the Company and the Seller as
provided above, this Agreement shall forthwith become void and of no further
force and effect, except that the covenants and agreements set forth in the last
two sentences of Paragraph 4J and Paragraphs 9E, 10A, 10B, 11A, 11B, 11D, 11E,
11F, 11G, 11H, 11I, 11J, 11L, 11M, 11N and 11O shall survive such termination
indefinitely, and except that nothing in Paragraph 10A or this Paragraph 10B
shall be deemed to release any Party from any liability for any breach by such
Party of the terms and provisions of this Agreement or to impair the right of
any Party to compel specific performance by another Party of its obligations
under this Agreement.
Section 11. MISCELLANEOUS.
11A. FEES AND EXPENSES. Each Party shall pay all of its own
fees and expenses (including fees and expenses of legal counsel, accountants,
investment bankers and other representatives and consultants) in connection with
this Agreement and the consummation of the transactions contemplated hereby; it
being understood that the fees, costs and expenses incurred by the Company or
the Seller, as the case may be, in connection with satisfying the conditions set
forth in Section 2 above (e.g., obtaining permits and authorizations, making
filings or obtaining third party and shareholder consents and approvals pursuant
to such Section) shall be the sole responsibility of the Seller; PROVIDED THAT
(i) upon the consummation of the Closing hereunder, the Surviving
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Corporation shall reimburse the Purchasers for such fees and expenses or (ii) if
this Agreement is terminated pursuant to Section 10A(iv), the Company and the
Seller shall reimburse the Purchasers for such fees and expenses. If any legal
action or other proceeding relating to this Agreement, the agreements
contemplated hereby, the transactions contemplated hereby or thereby or the
enforcement of any provision of this Agreement or the agreements contemplated
hereby is brought against any Party, the prevailing Party in such action or
proceeding shall be entitled to recover all reasonable expenses relating thereto
(including attorneys' fees and expenses) from the Party against which such
action or proceeding is brought in addition to any other relief to which such
prevailing Party may be entitled.
11B. REMEDIES. Each Party shall have all rights and remedies
set forth in this Agreement and the Articles of Incorporation and all rights and
remedies which such Party has been granted at any time under any other agreement
or contract executed in connection with the transactions contemplated hereby
and, with respect to any additional rights the Purchasers may have against the
other, all of the rights which such Party has under applicable law. Each of the
Parties acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, or
any provision of this Agreement may be waived; PROVIDED THAT any such amendment
or waiver shall be binding upon the Company only if set forth in a writing
executed by the Company and referring specifically to the provision alleged to
have been amended or waived, any such amendment or waiver shall be binding upon
the Seller only if set forth in a writing executed by the Seller and referring
specifically to the provision alleged to have been amended or waived, and any
such amendment or waiver shall be binding upon the Purchasers only if set forth
in a writing executed by the Purchasers and referring specifically to the
provision alleged to have been amended or waived. No course of dealing between
or among the Parties shall be deemed effective to modify, amend or discharge any
part of this Agreement or any rights or obligations of any Party under or by
reason of this Agreement.
11D. SUCCESSORS AND ASSIGNS.
(i) This Agreement and all covenants and agreements
contained herein and rights, interests or obligations hereunder, by or
on behalf of any of the Parties hereto, shall bind and inure to the
benefit of the respective successors and permitted assigns of the
Parties hereto whether so expressed or not, except that neither this
Agreement nor any of the covenants and agreements herein or rights,
interests or obligations hereunder may be assigned or delegated by any
party, without the prior written consent of the other parties. The
Seller shall not transfer or assign its rights, duties or obligations
hereunder or any part thereof to any other person or entity without the
prior consent of the other parties hereto; PROVIDED that the Seller
will have the right to assign its rights, duties and obligations
hereunder to an Affiliate controlled by the Seller, on the one hand, or
Monte R. Black and
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Ira O. Kane, on the other hand; PROVIDED, FURTHER, that for any
assignment made pursuant to the first proviso of this sentence the
Seller shall remain liable for all of its obligations hereunder.
(ii) Notwithstanding the foregoing, each Purchaser
may (at any time prior to the Closing), in their sole discretion,
assign in whole or in part its rights but not its obligations pursuant
to this Agreement (including the right to purchase any New Series A
Preferred or New Common Stock) to one or more of its Affiliates or for
collateral security purposes to any lender providing financing to the
purchaser, and the Purchasers may, in their sole discretion, direct the
Company to convey any New Series A Preferred or New Common Stock to one
or more of its Affiliates or such lender subject to compliance with
applicable securities laws. In connection with any such assignment, the
Purchasers shall cause the prospective assignee to execute and deliver
to the Parties a counterpart to this Agreement and the Shareholders
Agreement and an acknowledgment by such Person agreeing to be bound by
all terms and provisions hereof as a "Purchaser" hereunder and as an
"Investor" and "Shareholder" under the Shareholders Agreement. The
Purchasers and, following the Closing, the Surviving Corporation and
its Subsidiaries may assign this Agreement and its rights and
obligations hereunder in connection with a merger or consolidation
involving the Surviving Corporation or any of its Subsidiaries or in
connection with a sale of stock or assets of the Surviving Corporation
or any of its Subsidiaries or other disposition of the Surviving
Corporation or any of its Subsidiaries.
11E. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held to be prohibited by,
illegal or unenforceable under applicable law in any respect by a court of
competent jurisdiction, such provision shall be ineffective only to the extent
of such prohibition or illegality or unenforceability, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11F. COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts (including by means of telecopied signature
pages), any one of which need not contain the signatures of more than one Party,
but all such counterparts taken together shall constitute one and the same
Agreement.
11G. DESCRIPTIVE HEADINGS; INTERPRETATION. The headings and
captions used in this Agreement and the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule or
Exhibit attached hereto and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation." The Parties intend that each
representation, warranty and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or covenant
contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which
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the Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or covenant.
11H. ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to herein contain the entire agreement and understanding
between the Parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, whether written or oral, relating to such
subject matter in any way.
11I. NO THIRD-PARTY BENEFICIARIES. This Agreement is for the
sole benefit of the Parties and their permitted successors and assigns and
nothing herein expressed or implied shall give or be construed to give any
Person, other than the Parties and such permitted successors and assigns, any
legal or equitable rights hereunder.
11J. SCHEDULES. Except as otherwise provided herein, nothing
in any Schedule attached hereto shall be adequate to disclose an exception to a
representation or warranty made in this Agreement unless such Schedule
identifies the exception with particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be
adequate to disclose an exception to a representation or warranty made in this
Agreement, unless the representation or warranty has to do with the existence of
the document or other item itself. Except as otherwise provided herein, no
exceptions to any representations or warranties disclosed on one Schedule shall
constitute an exception to any other representations or warranties made in this
Agreement unless the substance of such exception is disclosed as provided herein
on each such other applicable Schedule or a specific cross-reference to a
disclosure on another Schedule is made.
11K. TAX MATTERS. The following provisions shall govern the
allocation of responsibility as between Purchaser and Seller for certain tax
matters following the Closing Date:
(i) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
Seller shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns of or including the Company for any taxable year
(including any short taxable year) ending on or before the Closing
Date, including, without limitation, all consolidated, combined or
unitary Tax Returns for any group of which Seller was the common parent
and the Company was a member prior to the Closing. All such Tax Returns
shall be prepared in a manner consistent with past practices insofar as
they relate to the Company except to the extent otherwise required by
applicable law. Seller shall pay, and shall indemnify and hold each of
the Company Parties harmless against, all Taxes relating to any taxable
period ending on or before the Closing Date (including, without
limitation, any Taxes arising under Treas. Regs. Sections 1.502-13 or
1.1502-19 (or any corresponding provision of state or local income tax
law) as a result of the Company ceasing to be a member of Seller's
consolidated group) except to the extent such Taxes are reflected as a
liability in Actual Net Working Capital. Seller shall not amend any Tax
Return it is required to file pursuant to this Paragraph 11K(i) if such
amended filing would adversely affect the Tax liability of any of the
Company Parties for any taxable period (or portion thereof) beginning
after the Closing Date, unless each of the
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Company Parties that would be so adversely affected has consented in
writing to such amendment.
(ii) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER
THE CLOSING DATE. Purchaser shall prepare or cause to be prepared and
file or cause to be filed all Tax Returns of or including the Company
for any taxable year (including any short taxable year) ending after
the Closing Date. Any such Tax Return that includes any taxable period
(or portion thereof) ending on or prior to the Closing Date shall be
prepared in a manner consistent with past practices insofar as they
relate to the Company except to the extent otherwise required by
applicable law. Seller shall indemnify and hold each of the Company
Parties harmless against all Taxes of the Company relating to any
taxable period (or portion thereof) ending on or before the Closing
Date except to the extent such Taxes are reflected as a liability in
Actual Net Working Capital, and Seller will promptly reimburse the
Company for the amount of all such Taxes paid by the Company relating
to any such taxable period (or portion thereof). For purposes of this
Paragraph 11K, in the case of any Taxes that are imposed on a periodic
basis and are payable for a taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the
portion of such taxable period ending on the Closing Date shall (A) in
the case of any Taxes other than Taxes based upon or related to income,
be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days
in such taxable period ending on the Closing Date and the denominator
of which is the number of days in the entire taxable period, and (B) in
the case of any Tax based upon or related to income be deemed equal to
the amount which would be payable if the relevant taxable period ended
on the Closing Date.
(iii) COOPERATION ON TAX MATTERS. Except as otherwise
provided herein, the Parties shall at their own cost cooperate fully,
as and to the extent reasonably requested by the other Party, in
connection with the filing of Tax Returns pursuant to this Paragraph
11K and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other
Party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Company and Seller agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified
by the Company or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other party so
requests, the Company or Sellers, as the case may be, shall allow the
other Party to take possession of such books and records.
(iv) TAX CONTROVERSIES.
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(a) TAXES OTHER THAN UNITED STATES FEDERAL INCOME
TAXES. The Purchaser or the Company shall give prompt notice
to Seller of the assertion of any claim, or the commencement
of any suit, action or proceeding with respect to any Tax
liability for which Seller is responsible under Paragraph
11K(i) or (ii), and shall give Seller such information with
respect thereto as Seller may reasonably request. Seller may,
at its own expense, participate in and, upon notice to the
Purchaser, assume the defense of any such suit, action or
proceeding (but only with respect to the contested matter or
matters giving rise to the Tax liability for which Seller is
responsible), PROVIDED THAT (I) Seller's counsel is reasonably
acceptable to the Purchaser, (II) Seller shall thereafter
consult with the Purchaser or the Company upon either such
Party's reasonable request for such consultation from time to
time with respect to such suit, action or proceeding, and
(III) Seller shall not, without the Purchaser's consent, agree
to any settlement with respect to any Tax if such settlement
could adversely affect any Tax liability of any of the Company
Parties with respect to any taxable period (or portion
thereof) beginning after the Closing Date. If Seller assumes
such defense, the Purchaser and the Company shall have the
right (but not the duty) to participate in the defense thereof
and to employ counsel, at their own expense, separate from the
counsel employed by Seller. Seller shall be liable for the
fees and expenses of counsel employed by the Purchaser or the
Company for any period during which Seller has not assumed the
defense thereof. Whether or not Seller chooses to defend or
prosecute any claim, all of the Parties shall cooperate in the
defense or prosecution thereof.
(b) UNITED STATES FEDERAL INCOME TAXES. For any
taxable period in which the Company was properly includable in
the United States federal income Tax consolidated group of
which Seller was the common parent, Seller shall control the
defense of any claim, suit, action, audit, or proceeding with
respect to any liability of the members of such group for
United States federal income Taxes, provided that Seller shall
not, without Purchaser's consent, agree to any settlement with
respect to any such United States federal income Tax if such
settlement could adversely affect any Tax liability of any of
the Company Parties with respect to any taxable period (or
portion thereof) beginning after the Closing Date.
(v) TAXES OF OTHER PERSONS. Seller shall indemnify
and hold each of the Company Parties harmless against any Tax imposed
on the Company by reason of (a) the Company having been a member of any
Affiliated Group on or prior to the Closing Date (including as a result
of the application of Treasury Regulation Section 1.1502-6 or any
corresponding provision of state, local or foreign Tax law) and (b) any
obligation of the Company to pay the Taxes of any other Person as a
result of (I) any agreement or contract to which the Company became a
party prior to the Closing or (II) the Company being a successor to any
other Person.
(vi) TAX SHARING AGREEMENTS. All tax-sharing
agreements or similar agreements with respect to or involving the
Company or any of its Subsidiaries shall be
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terminated as of the Closing Date and, after the Closing Date, the
Company and its Subsidiaries shall not be bound thereby or have any
Liability thereunder.
(vii) CERTAIN TAXES. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection with this
Agreement (including any gains tax, transfer tax and any similar tax
imposed in any state or subdivisions), shall be paid by Seller, and the
Company will, at Seller's expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Buyer will, and will cause its Affiliates
to, join in the execution of any such Tax Returns and other
documentation.
11L. SCHEDULES AND EXHIBITS. All Schedules and Exhibits
attached hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.
11M. GOVERNING LAW. The corporate law of the State of Ohio
shall govern all issues and questions concerning the relative rights and
obligations of the Company and the Surviving Corporation and the holders of
their respective equity securities. All other issues and questions concerning
the construction, validity, enforcement and interpretation of this Agreement and
the Schedules and Exhibits hereto shall be governed by, and construed in
accordance with, the laws of the State of Illinois without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois. In furtherance of the
foregoing, the internal law of the State of Illinois shall control the
interpretation and construction of this Agreement (and all Schedules and
Exhibits hereto), even though under that jurisdiction's choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.
11N. NOTICES. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, one day after being sent to the recipient by
reputable overnight courier service (charges prepaid), upon machine-generated
acknowledgment of receipt after transmittal by facsimile or five days after
being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
shall be sent to the Purchasers, the Seller and the Company at the addresses
indicated below or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party.
57
<PAGE> 67
THE COMPANY (PRIOR TO THE CLOSING):
Pentagon Technologies Group, Inc.
210 Hammond Avenue
Fremont, CA 94539
Attn: Frank A. McBride III
Tel: (800) 379-3361
Fax: (510) 440-0280
WITH A COPY TO:
(which shall not constitute notice to the Company)
MPW Industrial Services Group, Inc.
9711 Lancaster Road S.E.
Hebron, OH 43025
Attn: General Counsel
Tel: (800) 827-8790
Fax:
Jones, Day, Reavis & Pogue
1900 Huntington Center
Columbus, OH 43215
Attn: Randall M. Walters
Rodd B. Lape
Tel: (614) 469-3939
Fax: (614) 461-4198
THE COMPANY (AFTER THE CLOSING):
Pentagon Technologies Group, Inc.
210 Hammond Avenue
Fremont, CA 94539
Attn: Frank A. McBride III
Tel: (800) 379-3361
Fax: (510) 440-0280
WITH COPIES TO:
(which shall not constitute notice to the Company)
MPW Industrial Services Group, Inc.
9711 Lancaster Road S.E.
Hebron, OH 43025
Attn: General Counsel
Tel: (800) 827-8790
Fax: (740) 928-1077
58
<PAGE> 68
Jones, Day, Reavis & Pogue
1900 Huntington Center
Columbus, OH 43215
Attn: Randall M. Walters
Rodd B. Lape
Tel: (614) 469-3939
Fax: (614) 461-4198
Baird Capital Partners
227 West Monroe Street
Suite 2100
Chicago, IL 60606
Attn: Paul J. Carbone
C. Andrew Brickman
Tel: (312) 609-4702
Fax: (312) 609-4707
Baird Capital Partners
401 East Jackson Street
Suite 2900
Tampa, FL 33602
Attn: Brian W. Anderson
Tel: (813) 221-3030
Fax: (813) 273-8279
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: James L. Learner, P.C.
Wendy L. Chronister
Tel: (312) 861-2000
Fax: (312) 861-2200
SELLER:
MPW Management Services Corp.
MPW Industrial Services Group, Inc.
9711 Lancaster Road S.E.
Hebron, OH 43025
Attn: General Counsel
Tel: (800) 827-8790
Fax: (740) 928-1077
WITH A COPY TO:
(which shall not constitute notice to MPW)
59
<PAGE> 69
Jones, Day, Reavis & Pogue
1900 Huntington Center
Columbus, OH 43215
Attn: Randall M. Walters
Rodd B. Lape
Tel: (614) 469-3939
Fax: (614) 461-4198
SUB:
Pentagon Merger Sub, Inc.
c/o Baird Capital Partners
227 West Monroe Street
Suite 2100
Chicago, IL 60606
Attn: Paul J. Carbone
C. Andrew Brickman
Tel: (888) 792-0477
Fax: (312) 609-4707
Baird Capital Partners
401 East Jackson Street
Suite 2900
Tampa, FL 33602
Attn: Brian W. Anderson
Tel: (813) 221-3030
Fax: (813) 273-8279
WITH A COPY TO:
(which shall not constitute notice to Sub)
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: James L. Learner, P.C.
Wendy L. Chronister
Tel: (312) 861-2000
Fax: (312) 861-2200
60
<PAGE> 70
THE PURCHASERS:
Baird Capital Partners
227 West Monroe Street
Suite 2100
Chicago, IL 60606
Attn: Paul J. Carbone
C. Andrew Brickman
Tel: (888) 792-0477
Fax: (312) 609-4707
Baird Capital Partners
401 East Jackson Street
Suite 2900
Tampa, FL 33602
Attn: Brian W. Anderson
Tel: (813) 221-3030
Fax: (813) 273-8279
WITH COPY TO:
(which shall not constitute notice to the Purchasers)
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: James L. Learner, P.C.
Wendy L. Chronister
Tel: (312) 861-2000
Fax: (312) 861-2200
11O. NO STRICT CONSTRUCTION. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
* * * * *
61
<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have executed this
Recapitalization Agreement on the date first written above.
PENTAGON TECHNOLOGIES GROUP, INC.
By: /s/ Daniel P. Buettin
-----------------------------------
Its: Vice President and CFO
-----------------------------------
MPW INDUSTRIAL SERVICES GROUP, INC.
By: /s/ Daniel P. Buettin
-----------------------------------
Its: Vice President and CFO
-----------------------------------
MPW MANAGEMENT SERVICES CORP.
By: /s/ Daniel P. Buettin
-----------------------------------
Its: Vice President and CFO
-----------------------------------
PENTAGON MERGER SUB, INC.
By: /s/ Brian W. Anderson
-----------------------------------
Its: Vice President
-----------------------------------
BAIRD CAPITAL PARTNERS III LIMITED
PARTNERSHIP
By: Baird Capital Partners Management
Company III, L.L.C.
By: /s/ Brian W. Anderson
-----------------------------------
Its: Senior Vice President
-----------------------------------
[Signature Page to Recapitalization Agreement]
<PAGE> 72
BCP III SPECIAL AFFILIATES LIMITED
PARTNERSHIP
By: Baird Capital Partners Management
Company III, L.L.C.
By: /s/ Brian W. Anderson
-----------------------------------
Its: Senior Vice President
-----------------------------------
BCP III AFFILIATES FUND LIMITED
PARTNERSHIP
By: Baird Capital Partners Management
Company III, L.L.C.
By: /s/ Brian W. Anderson
-----------------------------------
Its: Senior Vice President
-----------------------------------
[Signature Page to Recapitalization Agreement]
