SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 22, 1997
Safety Components International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-23938
(State or other jurisdiction of (Commission File Number)
incorporation)
33-0596831
(IRS Employer Identification Number)
3190 Pullman Street, Costa Mesa, CA 92626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 662-7756
Not Applicable
(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) Pursuant to a definitive Stock Purchase Agreement, dated as of
May 22, 1997, Safety Components International, Inc., a Delaware corporation (the
"Company"), acquired (the "Valentec Acquisition") all of the outstanding stock
of Valentec International Corporation, a Delaware corporation ("Valentec") from
Robert A. Zummo, Francis X. Suozzi and the Valentec International Corporation
Employee Stock Ownership Plan. Valentec is a high volume manufacturer of stamped
and precision machine products in the automotive, commercial and defense
industries, including the manufacture of belted links for small to medium
caliber ammunition and other defense-related industries. Valentec was the
Company's largest shareholder immediately prior to the Valentec Acquisition
owning approximately 27% of the issued and outstanding shares of the Company's
Common Stock. Immediately prior to the Valentec Acquisition, Robert A. Zummo,
the President and Chief Executive Officer of the Company, was also the
President, Chief Executive Officer and majority shareholder of Valentec, and
Francis X. Suozzi, a consultant to and a director of Valentec and a director of
the Company, was a minority shareholder of Valentec. The consideration paid to
the shareholders of Valentec in connection with the Valentec Acquisition
consisted of an aggregate of 1,369,200 newly issued shares of common stock, $.01
par value per share (the "Common Stock"), of the Company, which is approximately
equal to the number of shares of Common Stock held by Valentec. The shares of
Common Stock held by Valentec have become treasury shares and are not considered
outstanding. Therefore, there has been no increase in the Company's outstanding
shares as a result of the Valentec Acquisition. Robert A. Zummo now beneficially
owns, directly, approximately 20% of the outstanding Common Stock of the
Company. Valentec's indebtedness was approximately $11.7 million as of May 22,
1997 of which approximately $7.6 million has been repaid or will be repaid in
the near term. The sources of the funds used by the Company and Valentec to pay
such $7.6 million of indebtedness consisted of funds obtained under the
Company's revolving line of credit with Keybank National Association, a mortgage
financing on the Company's Czechoslovokian facility, a capital lease financing
with Transamerica Business Credit Corp. and working capital.
The purchase price for the Valentec Acquisition was negotiated
between Valentec and a special committee consisting of independent members of
the Board of Directors of the Company. The special committee was advised by
independent legal counsel and an independent financial advisor. The Company's
Board of Directors received an opinion from the special committee's financial
advisor as to the fairness from a financial point of view of the consideration
received by the Company to the Company's shareholders other than Valentec.
(b) Valentec is a high volume manufacturer of stamped and precision machine
products in the automotive, commercial and defense industries, including the
manufacture of belted links for small to medium caliber ammunition and other
defense-related industries. The Company currently intends that Valentec will
continue in the same businesses.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The financial statements required to be filed by Item 7(a) of this
Form 8-K will be filed by the Company within 60 days after the
date that this Form 8-K is filed with the Securities and Exchange
Commission.
(b) The pro forma financial information required to be filed by Item
7(b) of this Form 8-K will be filed by the Company within 60 days
after the date that this Form 8-K is filed with the Securities and
Exchange Commission.
(c) Exhibits.
10.31 Stock Purchase Agreement, dated as of May
22, 1997, by and among Robert A. Zummo,
Francis X. Suozzi, the Valentec
International Employee Stock Ownership
Plan and Safety Components
International, Inc.
10.32 Registration Rights Agreement, dated as of
May 22, 1997, by and among Robert A.
Zummo, Francis X. Suozzi, the Valentec
International Employee Stock Ownership
Plan and Safety Components International,
Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SAFETY COMPONENTS INTERNATIONAL, INC.
By: /s/ JEFFREY J. KAPLAN
-------------------------------------
Name: Jeffrey J. Kaplan
Title: Executive Vice President and
Chief Financial Officer
Date: June 6, 1997
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INDEX TO EXHIBITS
Exhibit No. Page No.
10.31 Stock Purchase Agreement, dated as of May 22, 1997,
by and among Robert A. Zummo, Francis X. Suozzi, the
Valentec International Employee Stock Ownership
Plan and Safety Components International, Inc.
10.32 Registration Rights Agreement, dated as of May 22,
1997, by and among Robert A. Zummo, Francis X. Suozzi,
the Valentec International Employee Stock Ownership
Plan and Safety Components International, Inc.
EXHIBIT 10.31
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STOCK PURCHASE AGREEMENT
dated as of May 22, 1997,
by and among
ROBERT A. ZUMMO,
FRANCIS X. SUOZZI,
VALENTEC INTERNATIONAL
CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
and
SAFETY COMPONENTS INTERNATIONAL, INC.
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TABLE OF CONTENTS
Page
1. Definitions..........................................................1
1.1 Defined Terms...............................................1
1.2 Use of Defined Terms........................................6
1.3 Accounting Terms............................................6
1.4 Sections, Exhibits and Schedules............................6
1.5 Miscellaneous Terms.........................................6
2. Purchase and Sale....................................................6
2.1 Purchase and Sale of Stock..................................6
2.2 The Closing.................................................6
3. Representations and Warranties of Zummo and Suozzi...................8
3.1 Organization and Qualification..............................8
3.2 Capitalization..............................................9
3.3 Authority Relative to this Agreement........................9
3.4 Compliance..................................................9
3.5 Consents...................................................10
3.6 Company Financial Statements...............................10
3.7 Absence of Undisclosed Liabilities.........................10
3.8 Absence of Specified Changes...............................10
3.9 Taxes......................................................11
3.10 Insurance..................................................12
3.11 Contracts..................................................13
3.12 Real Property..............................................14
3.13 Environmental Matters......................................14
3.14 Intellectual Property......................................15
3.15 Tangible Property..........................................15
3.16 Employee Benefit Plans.....................................15
3.17 Labor Matters..............................................17
3.18 Compliance with Laws.......................................17
3.19 Licenses and Permits.......................................17
3.20 Legal Proceedings..........................................17
3.21 No Brokers.................................................17
3.22 Investment Representations.................................17
3.23 Insilco Obligations........................................18
4. Representations and Warranties of the Trustee.......................18
4.1 Status.....................................................18
4.2 Authority Relative to this Agreement.......................18
4.3 Compliance.................................................18
4.4 Ownership of the Stock.....................................18
4.5 Consents...................................................19
4.6 Compliance with Laws.......................................19
4.7 Legal Proceedings..........................................19
4.8 Investment Representations.................................19
4.9 Acknowledgment as to Information...........................19
4.10 Experience of Trustee......................................20
4.11 No Brokers.................................................20
5. Representations and Warranties of the Purchaser.....................20
5.1 Organization and Qualification.............................20
5.2 Capitalization.............................................20
5.3 Authority Relative to this Agreement.......................21
5.4 Compliance.................................................21
5.5 Consents...................................................21
5.6 No Brokers.................................................21
5.7 Fairness...................................................21
6. Covenants and Other Agreements......................................22
6.1 Consents...................................................22
6.2 Director and Officer Indemnification.......................22
6.3 Additional Agreements......................................22
7. Conditions Precedent to the Purchaser's Obligations.................22
7.1 Accuracy of Zummo's and Suozzi's Representations and
Warranties..............................................22
7.2 Accuracy of the ESOP's Representations and Warranties......22
7.3 Performance by Zummo and Suozzi............................23
7.4 Deliveries by the ESOP at Closing..........................23
7.5 Deliveries by Zummo and Suozzi at Closing..................23
7.6 Consents of Zummo and Suozzi...............................23
7.7 Consents of the ESOP.......................................23
7.8 Changes in the Business....................................23
7.9 Opinion of the Sellers' Counsel............................23
7.10 Absence of Litigation......................................23
7.11 Proceedings and Documents..................................23
7.12 Sale of VIL................................................24
7.13 Pledge Agreement...........................................24
7.14 Resignations...............................................24
7.15 Tax-Free Transaction.......................................24
8. Conditions Precedent to the Sellers' Obligations....................24
8.1 Accuracy of the Purchaser's Representations and Warranties.24
8.2 Performance by the Purchaser...............................24
8.3 Deliveries by the Purchaser at Closing.....................24
8.4 Consents...................................................24
8.5 Opinion Regarding Adequacy of Consideration to ESOP........24
8.6 Changes in the Business....................................25
8.7 Absence of Litigation......................................25
8.8 Proceedings and Documents..................................25
8.9 Intercompany Notes.........................................25
8.10 Registration Rights Agreement..............................25
8.11 Insilco Obligations........................................25
8.12 Tax-Free Transaction.......................................25
9. Survival of Representations and Warranties; Indemnification.........25
9.1 Survival of Representations and Warranties.................25
9.2 Indemnification............................................26
10. Miscellaneous.......................................................28
10.1 Publicity..................................................28
10.2 Headings...................................................28
10.3 Notices....................................................28
10.4 Successors and Assigns.....................................30
10.5 Governing Law..............................................30
10.6 Entire Agreement...........................................30
10.7 Counterparts...............................................30
10.8 Severability...............................................30
10.9 No Prejudice...............................................30
10.10 No Third Party Beneficiaries...............................30
10.11 Amendment and Modification.................................30
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Exhibits
Exhibit A Forms of Opinions of the Sellers' Counsel
Exhibit B Form of Pledge Agreement
Exhibit C Form of Assumption
Exhibit D Form of Registration Rights Agreement
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into as
of May 22, 1997, by and among Robert A. Zummo ("Zummo"), Francis X. Suozzi
("Suozzi"), Valentec International Corporation Employee Stock Ownership Plan
(the "ESOP," and together with Zummo and Suozzi, the "Sellers") and Safety
Components International, Inc., a Delaware corporation (the "Purchaser").
WHEREAS, Zummo, Suozzi and the ESOP collectively own 2,160,000 shares
(the "Stock") of common stock, $.01 par value per share, of Valentec
International Corporation, a Delaware corporation (the "Company"), which Stock
constitutes all of the issued and outstanding capital stock of the Company;
WHEREAS, Valentec International Limited., a United Kingdom corporation
("VIL") is an 88.8% owned subsidiary of the Company;
WHEREAS, the capital stock of VIL owned by the Company will be acquired
by Zummo prior to the Closing (as hereinafter defined) (the "VIL Transaction");
WHEREAS, the Sellers wish to sell the Stock to the Purchaser, and the
Purchaser desires to purchase the Stock from the Sellers, on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, this Agreement is intended to constitute an "Agreement and
Plan of Reorganization" within the meaning of Treasury Regulation Section
1.368-2(g), and qualify as a tax-free "reorganization" within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended and the regulations
promulgated thereunder (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound, hereby agree as follows:
1.0 Definitions
1.1 As used herein, the following terms shall have the
following meanings (such definitions to be equally applicable to both the
singular and plural forms of the terms defined):
Affiliate: Any director or officer of a Person and any member
of the immediate family of any such director or officer and any other Person who
or which, directly or indirectly, controls, is controlled by, or is under common
control with such Person.
Agreement: Defined in the prologue of this Agreement.
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Benefit Plan or Benefit Plans: Defined in Section 3.16.
Business Day: Any day of the year on which banks are not
required or authorized to be closed in the State of New York.
Citicorp Option: The option of Citicorp USA, Inc. to purchase
an aggregate of 10,000 shares of the common stock, $.01 par value per share, of
the Purchaser from the Company , which was issued to Citicorp USA, Inc. in
connection with a Credit Facility between Citicorp USA, Inc. and the Company,
dated as of January 6, 1995.
Closing: Defined in Section 2.2.
Closing Date: Defined in Section 2.2.
Code: Defined in the prologue of this Agreement.
Company: Defined in the prologue of this Agreement.
Company Financial Statements: Defined in Section 3.6.
Congress Indebtedness: (i) all of the obligations and
indebtedness of the Company under or with respect to the Accounts Financing
Agreement [Security Agreement] dated April 27, 1993 between the Company and
Congress Financial Corporation (Western) and the other Financing Agreements (as
defined therein) together with (ii) the Term Note in the original principal
amount of $1,200,000, the Limited Continuing Guaranty and Waiver by Zummo and
other agreements and documents entered into in connection with such credit
facility, each as amended from time to time.
Consents: All governmental and third party consents, permits,
approvals, orders, authorizations, qualifications, and waivers necessary to be
received by a Person for the consummation of the transactions contemplated by
this Agreement.
Contract: Any contract, agreement, mortgage, deed of trust,
bond, indenture, lease, license, note, franchise, certificate, option, warrant,
right, instrument or other similar document or agreement, whether written or
oral.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
ERISA Affiliate: Any trade or business (whether incorporated
or unincorporated) which is a member of a group described in Section 414(b),
(c), (m) or (o) of the Code, of which the Company also is a member.
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ERISA Affiliate Title IV Plan: Defined in Section 3.16.
ESOP: Defined in the prologue of this Agreement.
Financial Advisor: Defined in Section 5.6.
GAAP: Generally accepted accounting principles set forth in
the opinions and pronouncements of the Financial Accounting Standards Board,
applied on a consistent basis and consistent with past practices.
Governmental Authority: Any United States or foreign
governmental authority, including all agencies, bureaus, commissions,
authorities or bodies of the federal government or any state, county, municipal
or local government, including any court, judge, justice or magistrate.
Insilco: Insilco Corporation, a Delaware corporation.
Insilco Purchase Agreement: Defined in Section 8.11.
Intellectual Property: All registered patents, trademarks,
product designations, service marks, copyrights, and applications for any of the
foregoing, used, licensed, leased or owned, by a Person which is material to the
operations of such Person.
Intercompany Notes: The promissory notes of the Company, in
the principal amounts of $2,000,000 and $800,000, each payable to VIL.
Judgment: Any judgment, writ, order, injunction,
determination, award or decree of or by any Governmental Authority.
Law: Any statute, ordinance, code, rule, regulation, order or
other law enacted, adopted, promulgated, applied or followed by any Governmental
Authority.
Licenses and Permits: All licenses, permits, certificates,
approvals, franchises, registrations, accreditations or authorizations (i)
required by Law or (ii) issued to a Person or its Subsidiaries by a Governmental
Authority and used in their respective businesses.
Lien: Any security agreement, financing statement (whether or
not filed), security or other like interest, conditional sale or other title
retention agreement, lease or consignment or bailment given for security
purposes, lien, mortgage, deed of trust, indenture, pledge, constructive or
other trust or attachment.
Losses: Defined in Section 9.2(a)(i).
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Material Adverse Effect: With respect to any Person and its
Subsidiaries, any change or effect that is or is reasonable likely (i) to be
materially adverse to the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets or liabilities of such
Person and its Subsidiaries, taken as a whole or (ii) to materially adversely
affect the ability of such Person to consummate the transactions contemplated
hereby. For purposes of Articles 3, 4 and 7, the term "Material Adverse Effect"
shall be deemed to refer solely to the Company. For purposes of Articles 5 and
8, the term "Material Adverse Effect" shall be deemed to refer solely to the
Purchaser and its Subsidiaries.
Permitted Liens: Any (a) Liens of warehousemen, mechanics,
common carriers and landlords arising by operation of law or otherwise, for
amounts that are not yet due and payable or which are being diligently contested
in good faith by the Company by appropriate proceedings; (b) Liens for taxes,
fees, assessments or other governmental charges not yet due and payable or which
are being diligently contested in good faith by the Company by appropriate
proceedings promptly instituted, provided that in any such case an adequate
reserve is being maintained on the books of the Company in accordance with GAAP;
(c) Liens (other than Liens imposed by environmental Laws or by ERISA) on the
property of the Company imposed by law, or pledges or deposits required by law
pursuant to worker's compensation, unemployment insurance and other social
security legislation; (d) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business if, in the
aggregate, such items are not substantial in amount and do not constitute and
cannot reasonably be expected to result in a Material Adverse Effect; and (e)
deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a similar nature incurred in the ordinary course of the Company's business.
Person: Any individual, trustee, corporation, general or
limited partnership, limited liability partnership, limited liability company,
joint venture, joint stock company, bank, firm, Governmental Authority, trust,
association, organization or unincorporated entity of any kind or nature
whatsoever.
Plan Administrator: The Plan Administrator appointed pursuant
to Section 12.4 of the ESOP.
Pledge Agreement: The Pledge Agreement dated as of the Closing
Date by and among the Purchaser and Zummo.
Purchaser: Defined in the prologue of this Agreement.
Purchaser Common Stock: Defined in Section 2.1.
Real Property: All realty, fixtures, easements, rights-of-way
and other interests (excluding Tangible Property) in real property, buildings,
improvements and construction-in-progress.
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Registration Rights Agreement: The Registration Rights
Agreement dated as of the Closing Date by and among, the Purchaser, Zummo,
Suozzi and the ESOP.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
Sellers: Defined in the prologue of this Agreement.
Stock: Defined in the prologue of this Agreement.
Subsidiary: With respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the issued and outstanding stock or equivalent thereof having ordinary voting
power is owned or controlled by such Person, by one or more Subsidiaries or by
such Person and one or more Subsidiaries or which a Person otherwise has the
power to control the management thereof.
Suozzi: Defined in the prologue of this Agreement.
Tangible Property: All material cash, furnishings, machinery,
equipment, computer systems and software, supplies, inventories, vehicles, books
and records and other material tangible personal property and facilities of any
nature owned, leased, used or held for use, directly or indirectly, by or on
behalf of a Person.
Taxes: All foreign, federal, state, county, local, municipal
and other taxes, levies, impositions, deductions, charges and withholdings,
including income, sales and use taxes, and shall include any interest, penalties
or additions thereto.
Tax Returns: All returns, declarations and reports filed with
a taxing authority and all information returns and statements of any kind or
nature whatsoever filed with a taxing authority.
To the knowledge of Zummo and Suozzi: Defined in Section 3.1.
Trust: The trust established by the Trust Agreement.
Trustee: W. Hardy Myers, as trustee under the Trust Agreement
for the ESOP.
Trust Agreement: Agreement entitled Valentec International
Corporation Employee Stock Ownership Trust, which was entered into effective as
of January 1, 1996 between the Company and the Trustee, and all amendments and
extensions to or renewals thereof.
VIL: Defined in the prologue of this Agreement.
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VIL Transaction: Defined in the prologue of this Agreement.
Zummo: Defined in the prologue of this Agreement.
1.2 Use of Defined Terms. Any defined term used in the plural
shall refer to all members of the relevant class, and any defined term used in
the singular shall refer to any one or more of the members of the relevant
class. The use of any gender shall be applicable to all genders.
1.3 Accounting Terms. All accounting terms not otherwise
defined in this Agreement shall be construed in conformity with GAAP.
1.4 Sections, Exhibits and Schedules. References in this
Agreement to Sections, Exhibits and Schedules are to Sections, Exhibits and
Schedules of and to this Agreement. The Exhibits and Schedules to this Agreement
are hereby incorporated herein by this reference as if fully set forth herein.
1.5 Miscellaneous Terms. The term "or" shall not be exclusive.
The terms "herein," "hereof," "hereto," "hereunder" and other terms similar to
such terms shall refer to this Agreement as a whole and not merely to the
specific article, section, paragraph or clause where such terms may appear. The
term "including" shall mean "including, but not limited to."
2.0 Purchase and Sale.
2.1 Purchase and Sale of Stock. At the Closing and subject to
the terms and conditions of this Agreement, each Seller, severally and not
jointly, agrees to sell, transfer, convey, assign and deliver to the Purchaser,
and the Purchaser agrees to purchase from such Seller, the number of shares of
Stock set forth opposite the name of such Seller in Schedule 2.1 annexed hereto,
in exchange for the number of shares of common stock, $.01 par value per share
("Purchaser Common Stock"), set forth opposite the name of such Seller in
Schedule 2.1 annexed hereto.
2.2 The Closing. (a) Subject to the terms and conditions of
this Agreement, the closing (the "Closing") of this Agreement and the
transactions contemplated hereunder shall take place at the offices of Shereff,
Friedman, Hoffman & Goodman, LLP, New York, New York, simultaneously with the
execution of this Agreement and after the satisfaction or waiver of all
conditions to consummation of the transactions contemplated hereby (the day on
which the Closing takes place is referred to herein as the "Closing Date").
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(b) At the Closing, the Sellers shall deliver to the
Purchaser, against receipt of the shares of Purchaser Common Stock specified in
Schedule 2.1 annexed hereto, the following:
(1) certificates representing the Stock, duly endorsed
for transfer in blank or accompanied by a stock power duly endorsed in blank by
each Seller with any requisite documentary or stock transfer taxes affixed
thereto;
(2) the certificates required by Sections 7.4 and 7.5
hereof;
(3) the legal opinion required by Section 7.9 hereof;
(4) certificates issued by appropriate Governmental
Authorities evidencing, as of a recent date, the good standing and tax status of
the Company in the State of Delaware;
(5) a copy of the Certificate of Incorporation and all
amendments thereto of the Company, certified by the Secretary of State of the
State of Delaware;
(6) a copy of the By-laws, including all amendments
thereto, of the Company;
(7) the Consent of any third party required for the
consummation by the Sellers of the transactions contemplated hereby;
(8) all books and records relating to the business of the
Company which are not maintained at the offices of the Company, including
without limitation, the minute books, stock books, stock ledger and corporate
seals, corporate operation manuals, policy manual, bank and checking account
records, checks, deposit slips and signature cards, copies of the Company's
financial statements and balance sheets and copies of the Tax Returns for the
Company required to be filed with all the appropriate taxing bodies for the last
three (3) years;
(9) a copy of resolutions adopted by the Board of
Directors of the Company authorizing the transactions contemplated hereby; and
(10) documentation evidencing consummation of the VIL
Transaction.
(c) At the Closing, the Purchaser shall deliver to each of the
Sellers the following:
(1) certificates representing the number of shares of
Purchaser Common Stock set forth next to such Seller's name in Schedule 2.1
annexed hereto;
(2) the certificates required by Section 8.3 hereof;
(3) a copy of resolutions adopted by the Board of
Directors of the Purchaser authorizing the transactions contemplated hereby,
certified by the Secretary of the Purchaser;
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(4) certificates issued by appropriate Governmental
Authorities evidencing, as of a recent date, the good standing and tax status of
the Purchaser in the State of Delaware;
(5) a copy of the Certificate of Incorporation, and all
amendments thereto, of the Purchaser, certified by the Secretary of State of the
State of Delaware;
(6) certificate of the Secretary of the Purchaser to the
effect that there have been no amendments to the charter documents referred to
in Section 2.2(c)(5) hereof since the date of the certification referred to in
such subsection;
(7) a copy of the By-laws, including all amendments
thereto, of the Purchaser, certified by the Secretary of the Purchaser; and
(8) the Consent of any third party required for the
consummation by the Purchaser of the transactions contemplated hereby.
(d) Each of the parties hereto shall deliver all other
documents and instruments required to be delivered by any of them at or prior to
the Closing Date pursuant to this Agreement or as otherwise required herein.
3.0 Representations and Warranties of Zummo and Suozzi
Each of Zummo and Suozzi, severally (as to themselves) and not
jointly, represents and warrants to the Purchaser as follows:
3.1 Organization and Qualification. The Company is a
corporation duly incorporated, organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation, and the Company has the
requisite corporate power to own its properties and carry on its business as now
being conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each other jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except to the extent that any
such failure to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect. As of the date hereof, the Company has no Subsidiaries
other than VIL, and at the Closing Date, will have no Subsidiaries, other than
inactive corporations having no liabilities and assets of less than $1,000.
Other than VIL, except as set forth on Schedule 3.1 annexed hereto, to the
knowledge of Zummo and Suozzi, the Company does not control, directly or
indirectly, or have any direct or indirect equity participation in, any Person.
As used in this Agreement, the term "to the knowledge of Zummo and Suozzi" shall
mean the actual knowledge of any of Zummo, Suozzi, W. Hardy Myers, Kathy S.
Krumwiede, Paul Betz, Paul Sullivan and Victor Guadagno after due inquiry, and
does not include matters as to which such persons could be deemed to have
constructive knowledge.
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3.2 Capitalization. (a) The authorized, issued and outstanding
capital stock of the Company are set forth on Schedule 3.2 annexed hereto. All
issued and outstanding shares of the Stock are duly authorized, validly issued,
fully paid, non-assessable and free of preemptive rights. There are no options,
warrants, subscriptions, calls or other rights, agreements or commitments
obligating the Company to issue any shares of its capital stock or securities
convertible into its capital stock. After the Closing, the Company will continue
to be obligated to issue 10,000 shares of the common stock, $.01 par value per
share, of the Purchaser owned by the Company under the terms of the Citicorp
Option.
(b) Each of Zummo and Suozzi owns on the Closing Date the
number of shares of Stock set forth next to such Seller's name on Schedule 3.2
annexed hereto, free and clear of all Liens other than Liens arising out of,
under or in connection with this Agreement. At the Closing, each of Zummo and
Suozzi shall convey to the Purchaser good title to the Stock, free and clear of
all Liens.
3.3 Authority Relative to this Agreement. Each of Zummo and
Suozzi has all requisite power and authority to enter into this Agreement and to
perform all of his obligations under this Agreement. This Agreement has been
duly executed and delivered by Zummo and Suozzi, and assuming due authorization,
execution and delivery by the ESOP and the Purchaser, and subject to the
satisfaction of the conditions applicable to Zummo and Suozzi as set forth
herein, this Agreement constitutes the valid and binding agreement of each of
Zummo and Suozzi, enforceable in accordance with its terms, except as may be
limited by bankruptcy, moratorium and insolvency Laws and other Laws affecting
the rights of creditors' generally and except as may be limited by the
availability of equitable remedies.
3.4 Compliance. Neither the execution and delivery of this
Agreement by Zummo or Suozzi, nor the consummation by Zummo or Suozzi of the
transactions contemplated hereby, nor compliance by Zummo or Suozzi with any of
the provisions hereof, will (i) violate, conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of Zummo or Suozzi or,
to the knowledge of Zummo and Suozzi, of the Company, under, any of the terms,
conditions or provisions of (x) the organizational documents of the Company or
(y) any material Contracts to which the Company, Zummo or Suozzi is a party or
to which any of their assets may be subject or (z) any other Contracts to which
the Company, Zummo or Suozzi is a party or to which any of their assets may be
subject; or (ii) violate any Judgment or Law applicable (x) to Zummo or Suozzi
or any of their assets, or (y) to the knowledge of Zummo and Suozzi, to the
Company or any of its assets, except for termination of the Congress
Indebtedness which is contemplated to be discharged at the Closing, and except
for in the case of clause (i)(z) above, such violations, conflicts, breaches,
defaults, terminations, accelerations or Liens as would not, individually or in
the aggregate, have a Material Adverse Effect or except as set forth on Schedule
3.4 annexed hereto.
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3.5 Consents. Other than as set forth on Schedule 3.5 annexed
hereto, no filing or registration with, or Consent of, any Person is required by
or with respect to Zummo, Suozzi, or, to knowledge of Zummo and Suozzi, the
Company, in connection with the execution and delivery of this Agreement by
Zummo and Suozzi or is necessary for the consummation by Zummo or Suozzi of the
transactions contemplated by this Agreement.
3.6 Company Financial Statements. The Company has delivered or
made available to the Purchaser true and complete copies of (i) the audited
balance sheets of the Company as at March 31, 1996 and 1995, and the related
statements of operations and retained earnings and cash flows for the years then
ended, and (ii) the unaudited balance sheet of the Company as at February 28,
1997 and the related unaudited statements of operations and retained earnings
and cash flows of the Company for the 11-month period ended February 28, 1997
(collectively, the "Company Financial Statements"). To the knowledge of Zummo
and Suozzi, the Company Financial Statements (including the accompanying notes),
as of their respective dates, were complete and correct in all material respects
and present fairly the financial condition of the Company as of such dates and
the results of its operations for periods then ended, and were prepared in
accordance with GAAP applied on a consistent basis during the periods indicated
(except, in each case, as may be indicated therein or in the notes thereto),
subject, in the case of unaudited financial statements, to the absence of
footnotes and to normal year-end adjustments, and subject further to any
liabilities or contingent obligations identified on a Schedule to this
Agreement.
3.7 Absence of Undisclosed Liabilities. To the knowledge of
Zummo and Suozzi, except as and to the extent reflected or reserved against in
the most recent financial statements contained in the Company Financial
Statements and since February 28, 1997, the Company has not incurred any
liabilities of any kind whatsoever, whether absolute, accrued, contingent,
determined, determinable or otherwise, other than: (a) liabilities incurred in
the ordinary course of business in accordance with past practice since December
31, 1996; (b) liabilities that have been repaid, discharged or otherwise
extinguished; (c) liabilities under or contemplated by this Agreement, including
transaction expenses; (d) liabilities of a type not required to be recorded or
disclosed in accordance with GAAP; (e) other liabilities in an amount not to
exceed $100,000; and (f) liabilities described on any Schedule to this
Agreement.
3.8 Absence of Specified Changes. Except as set forth on
Schedule 3.8 annexed hereto, or with respect to the VIL Transaction, and except
as would not have a Material Adverse Effect, since February 28, 1997, to the
knowledge of Zummo and Suozzi, there has not been with respect to the Company
any:
(a) transactions not in the ordinary course of business
consistent with past practice, which transactions have a value individually in
excess of $100,000 or in excess of $250,000 in the aggregate;
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(b) sale or transfer of any assets or properties, except in
the ordinary course of business consistent with past practice;
(c) damage, destruction or loss, whether or not insured,
adversely affecting its properties, assets, business or prospects;
(d) failure to maintain in full force and effect adequate
insurance coverage for destruction, damage to, or loss of any of its assets;
(e) change in accounting principles, methods or practices or
investment practices;
(f) declaration, setting aside, or payment of a dividend or
other distribution in respect of its capital stock, or any direct or indirect
redemption, purchase or other acquisition of any shares of its capital stock;
(g) issuance or sale of any shares of its capital stock or of
any other equity security or of any security convertible into or exchangeable
for its equity securities, except as described in Section 3.2;
(h) amendment to its organizational documents;
(i) granting or filing of any material Lien against any of its
shares of capital stock or any of its properties or assets, real, personal or
mixed, tangible or intangible;
(j) sale, transfer or lease of any properties or assets (real,
personal or mixed, tangible or intangible) to, or execution of any agreement
with, its officers or directors;
(k) personal injury on any of its premises or in connection
with its business that may give rise to a material claim in excess of the
applicable insurance coverage;
(l) increase in the compensation payable to or to become
payable by it to any of its officers, employees or agents, except for normal
compensation adjustments to salaries or wages to its non-officers, and to its
officers as required by an applicable employment agreement, in each case made in
the ordinary course of business consistent with past practice; or
(m) agreement or understanding legally obligating it to take
any of the actions described above in this Section 3.8.
3.9 Taxes. To the knowledge of Zummo and Suozzi, since April
27, 1993, except as set forth on Schedule 3.9 annexed hereto:
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(a) The Company has filed or obtained timely extensions to
file all Tax Returns which are required to be filed prior to the date of this
Agreement, and such filed returns were true, complete and correct in all
material respects. The Company has paid all Taxes and other charges due or
claimed to be due (whether or not requiring the filing of a return) to the
extent that such Taxes are due prior to the date of this Agreement. The Tax
Returns filed reflected all Taxes due and payable by the Company with respect to
the periods covered thereby and not one of the Company or any Subsidiary has any
liabilities for Taxes with respect to such periods.
(b) The Company has not obtained an extension of time within
which to file any Tax Return which has not yet been filed. The Company has not
received written notice from any Governmental Authority in a jurisdiction in
which it does not file a Tax Return stating that it is subject to taxation by
that jurisdiction.
(c) The amounts accrued as liabilities for Taxes on the books
of the Company and reflected on financial statements included in the Company
Financial Statements are adequate to satisfy all material unpaid liabilities for
Taxes of the Company through the date of such financial statements. There is no
agreement, waiver or other document extending, or having the effect of
extending, the period for assessment or collection of any Taxes of the Company,
which extension or waiver is still in effect. The Company has delivered or made
available to the Purchaser correct and complete copies of all examination
reports, statements or deficiencies and similar documents prepared by any Tax
authority that relate to the income, operations or business of the Company with
respect to any period ending on or after April 27, 1993. The Company is not a
party to any tax sharing arrangement with any entity. The Company: (i) is not a
member of an affiliated group filing a consolidated federal Tax Return other
than the affiliated group of which the Company is the common parent; and (ii)
has no liability for Taxes of any Person other than the Company under Treasury
Regulation Section 1.1502-6 or any similar provision of state law, or as a
transferee or successor, by contract or otherwise.
3.10 Insurance. To the knowledge of Zummo and Suozzi, except
as set forth on Schedule 3.10 annexed hereto, all insurance maintained by the
Company is of such types and in such amounts and for such risks, casualties and
contingencies as are customarily insured against by enterprises in operations
similar to the business of the Company, as currently conducted or as proposed by
the Company to be conducted. To the knowledge of Zummo and Suozzi, the Company
has provided or made available a list of all material claims (including but not
necessarily limited to workers' compensation, automobile and general liability
and products liability) filed by or on behalf of the Company for insured losses
prior to the date hereof which are pending and have not been disposed of and
that are for amounts in excess of the applicable policy limits. To the knowledge
of Zummo and Suozzi, the Company is not in default with respect to any material
provisions or requirements of any insurance policy, nor has it failed to give
any material notice or present any material claim thereunder in a due and timely
fashion. To the knowledge of Zummo and Suozzi, the Company has not received any
notice of cancellation or termination in respect of any of its insurance
policies that currently are in force. To the knowledge of Zummo and Suozzi, no
material litigation is presently pending against the Company which is being
defended by any insurance carrier under reservation of rights.
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3.11 Contracts. Except: (i) with respect to contracts or
agreements with the Purchaser or the Purchaser's Subsidiaries, or (ii) as set
forth on Schedule 3.11 annexed hereto, to the knowledge of Zummo and Suozzi, the
Company is not a party to or bound by any:
(a) contract or agreement involving amounts payable to the
Company during any 12-month period that will aggregate $100,000 or more;
(b) management, consultant or employment contract under which
there are amounts payable by the Company during any 12-month period that will
aggregate $75,000 or more;
(c) contract obligating the Company to make severance or
similar payments to any employee or officer of the Company upon termination of
employment or to make payments to any officer or employee of the Company in
excess of the officer's or employee's regular salary and reimbursement of
ordinary business expenses;
(d) contract or agreement with any distributor, dealer or
sales representative that is not cancelable without liability to the Company on
a maximum of thirty (30) days notice and under which there are amounts payable
by the Company during any 12-month period that will aggregate $100,000 or more;
(e) contract or agreement of any nature whatsoever between the
Company, on the one hand, and any past or present director or officer of the
Company or any of its Affiliates, on the other hand;
(f) contract or agreement relating to any loan, factoring or
credit line;
(g) lease of Real Property other than those described on
Schedule 3.12 annexed hereto;
(h) lease of Tangible Property under which the Company is a
lessor or lessee involving payments by or to the Company in excess of $100,000
in any 12-month period;
(i) purchase commitments, requirements or similar contracts
(or series of related purchase commitments, requirements or similar contracts)
involving amounts payable by the Company during any 12-month period that will
aggregate $100,000 or more;
(j) outstanding guaranty, subordination or other similar type
of agreement, whether or not entered into in the ordinary course of business;
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<PAGE>
(k) material contract concerning non-competition;
(l) material contract concerning confidentiality, except in
the ordinary course of business;
(m) joint venture, partnership, cooperative arrangement or any
other contract involving a sharing of profits;
(n) material contract with any Governmental Authority
(including any conciliation agreement, consent decree or letter of commitment);
or
(o) proposed arrangement or contract which the Company
reasonably believes to be near consummation and of a type that if entered into
would be a contract described in subsections (a) through (n) above.
Accurate and complete copies of each such documents have been delivered by the
Company and/or Zummo or Suozzi to the Purchaser or made available to the
Purchaser at the Company's offices.
To the knowledge of Zummo and Suozzi, each material contract
to which the Company is a party is in full force and effect and is enforceable
by the Company in accordance with its terms against all other parties thereto,
subject as to enforceability to bankruptcy, insolvency and similar laws
affecting creditors' rights generally. To the knowledge of Zummo and Suozzi, the
Company has not received any notice of a default under any such contract listed
on Schedule 3.11 or Schedule 3.12 annexed hereto and, to the knowledge of Zummo
and Suozzi, no event or condition has happened or presently exists which
constitutes a default or, after notice or lapse of time or both, would
constitute a default under any such contract listed on Schedule 3.11 annexed
hereto.
3.12 Real Property. The Company does not own any Real
Property. To the knowledge of Zummo and Suozzi, Schedule 3.12 annexed hereto
sets forth an accurate and complete list (including the name of the landlord,
term and annual rental) of all Real Property leased or subleased by the Company.
To the knowledge of Zummo and Suozzi, the Company has been in all material
respects in peaceable possession of the premises covered by each Real Property
lease or sublease since the commencement of the original term of such lease or
sublease.
3.13 Environmental Matters. To the knowledge of Zummo and
Suozzi, except as disclosed on Schedule 3.13 annexed hereto: (i) the operations
of the Company comply in all material respects with all applicable federal,
state or local environmental, health and safety statutes and regulations; (ii)
none of the operations of the Company is the subject of any judicial or
administrative proceeding alleging the violation of any federal, state or local
environmental, health or safety statute or regulation; (iii) none of the
operations of the Company is the subject of a federal or state investigation
evaluating whether any remedial action is needed to respond to a release of any
hazardous or toxic waste, substance or constituent, or other substance into the
environment; (iv) the Company has not filed any notice under any federal or
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state law indicating past or present treatment, storage or disposal of a
hazardous waste or reporting a spill or release of a hazardous or toxic waste,
substance or constituent, or other substance into the environment; and (v) the
Company has no contingent liability in connection with any release of any
hazardous or toxic waste, substance or constituent, or other substance into the
environment.
3.14 Intellectual Property. To the knowledge of Zummo and
Suozzi, Schedule 3.14 annexed hereto sets forth an accurate and complete list of
all Intellectual Property. To the knowledge of Zummo and Suozzi, the Company
owns, is licensed or otherwise has the right to use, all Intellectual Property
used in the business of the Company, as presently conducted or as proposed by
the Company to be conducted. To the knowledge of Zummo and Suozzi, the use of
the Intellectual Property by the Company does not infringe upon or otherwise
violate the rights of any third party in or to such Intellectual Property, and
no claim has been asserted with respect thereto. To the knowledge of Zummo and
Suozzi, no employee of the Company has a right to receive a royalty or similar
payment, or has any other monetary rights, in respect of any item of
Intellectual Property of the Company.
3.15 Tangible Property. To the knowledge of Zummo and Suozzi,
the Company owns all of the Tangible Property, free and clear of all Liens other
than Permitted Liens and except as set forth on Schedule 3.15 annexed hereto.
3.16 Employee Benefit Plans.
(a) To the knowledge of Zummo and Suozzi, except as disclosed
on Schedule 3.16 annexed hereto, the Company does not provide, nor has an
obligation to provide, or make, contributions to provide compensation or
benefits of any kind or description whatsoever (whether current or deferred and
whether paid in cash or in kind) to, or on behalf of, one, or more than one,
current or former employees or directors of the Company or any of its current or
former Affiliates or any of their dependents, other than any plans, programs or
other arrangements which only provide for the payment of cash compensation
currently from the general assets of the Company on a payday by payday basis as
base salary or hourly wages for current services and other than policies for
vacation and sick days (individually, a "Benefit Plan," and collectively, the
"Benefit Plans"). To the knowledge of Zummo and Suozzi, each of the Benefit
Plans is listed on Schedule 3.16 annexed hereto.
(b) To the knowledge of Zummo and Suozzi, except as disclosed
on Schedule 3.16 annexed hereto:
(1) No ERISA Affiliate (other than the Company) provides,
or has an obligation to provide, contributions, compensation or benefits of or
under any plan, program or arrangement which is subject to Title IV of ERISA
("ERISA Affiliate Title IV Plan").
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<PAGE>
(2) The Company has furnished or made available to the
Purchaser a true, complete and current copy of each written Benefit Plan and any
amendments thereto, a summary of each other Benefit Plan, and all Internal
Revenue Service, Department of Labor or Pension Benefit Guaranty Corporation
rulings or determinations, annual reports, summary plan descriptions, actuarial
and other financial reports and such other documentation with respect to any
Benefit Plan as was reasonably requested by the Purchaser.
(3) No assets have been set aside in a trust or other
separate account to pay directly or indirectly any benefits under any Benefit
Plan or to the extent assets have been set aside, all assets are shown on the
books and records of such trust or separate account at their fair market value
as of the date of any report last provided with respect to such trust.
(4) Since April 27, 1993, each Benefit Plan and each
ERISA Affiliate Title IV Plan has been established, maintained and administered
in compliance in all material respects with all applicable laws. The Company has
no duty or obligation to indemnify or hold any other person or entity harmless
for any liability attributable to any acts or omissions by such person or entity
with respect to any Benefit Plan or ERISA Affiliate Title IV Plan, other than
indemnification obligations to (i) Insilco and (ii) Benefit Plan fiduciaries
under the terms of the Benefit Plan documents and corporate charters, bylaws and
state corporate law.
(5) Since April 27, 1993, the Company has not incurred
any material liability for any tax or penalty with respect to any Benefit Plan,
ERISA Affiliate Title IV Plan or any group health plan (as described in Section
5000 of the Code) of an ERISA Affiliate including, without limitation, any tax
or penalty under ERISA or under the Code.
(6) Since April 27, 1993, the Company has not terminated
or withdrawn from, or sought a funding waiver with respect to, any Benefit Plan
which is subject to Title IV of ERISA.
(7) There is no proposed or actual audit or investigation
by any Governmental Authority with respect to any Benefit Plan or ERISA
Affiliate Title IV Plan.
(8) The Company has no obligation to make, or reimburse,
another employer, directly or indirectly, for making, contributions to a multi
employer plan as described in Title IV of ERISA.
(9) Section 280G of the Code shall not apply to any
payments made by the Company as a result of the transactions contemplated by
this Agreement, and there are no additional payments to or increase in vesting
for any current or former employee or director or their dependents under any
Benefit Plan which will be triggered as a result of the change in the control of
the Company contemplated by this Agreement.
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3.17 Labor Matters. The Company is not a party to, or bound
by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union organization. To the knowledge of Zummo and
Suozzi, there is no unfair labor practice or material labor arbitration
proceeding pending or threatened against the Company. To the knowledge of Zummo
and Suozzi, there are no organizational efforts with respect to the formation of
a collective bargaining unit presently being made or threatened involving
employees of the Company. To the knowledge of Zummo and Suozzi, there is no
material labor controversy in existence with respect to the Company's business
and operations.
3.18 Compliance with Laws. To the knowledge of Zummo and
Suozzi, the Company is in compliance in all material respects with all Laws
applicable to it, its business and its assets.
3.19 Licenses and Permits. To the knowledge of Zummo and
Suozzi, the Company holds all Licenses and Permits which are material to the
operation of its business as currently conducted. To the knowledge of Zummo and
Suozzi, all such Licenses and Permits are valid and in full force and effect and
there are no pending or threatened proceedings which could result in the
termination, revocation, limitation or impairment of any of such Licenses and
Permits.
3.20 Legal Proceedings. To the knowledge of Zummo and Suozzi,
except as set forth on Schedule 3.20 annexed hereto, no Judgments are
outstanding against the Company and there is no material litigation, claim,
action, suit, proceeding, complaint, charge, Tax or other audit, investigation
or arbitration (whether or not from a Governmental Authority) pending or
threatened against the Company or its property or assets.
3.21 No Brokers. Except as set forth on Schedule 3.21 annexed
hereto, neither Zummo, Suozzi nor the Company has entered into any contract,
arrangement or understanding with any Person or incurred any liability which
could result in the obligation of any Person to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with this Agreement
or the consummation of the transactions contemplated hereby.
3.22 Investment Representations. Each of Zummo and Suozzi is
acquiring the Purchaser Common Stock for his own account, for investment, and
not with a view to, or for sale in connection with, the distribution thereof or
of any interest therein, in violation of state or federal law. Each of Zummo and
Suozzi are "accredited investors" within the meaning of Regulation D under the
Securities Act and are intimately familiar with the business and operations of
the Purchaser as members of the board of directors and in Mr. Zummo's case, as
chief executive officer. Each of Zummo and Suozzi understands that the Purchaser
Common Stock has not been registered under the Securities Act by reason of its
issuance in a transaction exempt from the registration requirements of the
Securities Act, that the Purchaser Common Stock has not been registered under
applicable state securities laws by reason of its issuance in a transaction
exempt from such registration requirements, and that the Purchaser Common Stock
may not be sold or otherwise disposed of unless registered under the Securities
Act and applicable state securities laws (the Purchaser being under no
obligation so to register such Purchaser Common Stock except as set forth in the
Registration Rights Agreement) or exempted from registration.
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3.23 Insilco Obligations. To the knowledge of Zummo and
Suozzi, there is no litigation or claim for indemnification by the Company
pending or threatened in connection with the Insilco Purchase Agreement.
4.0 Representations and Warranties of the Trustee.
The Trustee represents and warrants to the Purchaser as follows:
4.1 Status. The Trust is a duly established and existing trust
under the laws of the State of California. Accurate and complete copies of the
organizational documents of the ESOP have been delivered by the Trustee to the
Purchaser or made available to the Purchaser at the Company's offices.
4.2 Authority Relative to this Agreement. The Trustee's
execution and delivery of, and the performance by the Trustee of the Trustee's
and the Trust's obligations under, this Agreement have been duly authorized by
the Plan Administrator. Assuming due authorization, execution and delivery by
Zummo, Suozzi and the Purchaser, and subject to the satisfaction of the
conditions applicable to the ESOP as set forth herein, this Agreement
constitutes the valid and binding agreement of the ESOP, the Trust and the
Trustee, enforceable in accordance with its terms, except as may be limited by
bankruptcy, moratorium and insolvency Laws and other Laws affecting the rights
of creditors' generally and except as may be limited by the availability of
equitable remedies.
4.3 Compliance. Neither the execution and delivery of this
Agreement by the Trustee, nor the consummation by the ESOP of the transactions
contemplated hereby, nor compliance by the ESOP with any of the provisions
hereof will (i) violate, conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or
cancellation of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of the ESOP under, any of the terms, conditions
or provisions of any Contracts to which the ESOP is a party or to which its
assets may be subject; or (ii) violate any Judgment or Law applicable to the
ESOP or any of its assets, except, in the case of each of clauses (i) and (ii)
above, such violations, conflicts, breaches, defaults, terminations,
accelerations or Liens as would not, individually or in the aggregate, have a
Material Adverse Effect.
4.4 Ownership of the Stock. The ESOP owns on the Closing Date
the number of shares of Stock set forth next to the ESOP's name on Schedule 3.2
annexed hereto, free and clear of all Liens other than Liens arising out of,
under or in connection with this Agreement. At the Closing, the ESOP shall
convey to the Purchaser good title to the Stock, free and clear of all Liens.
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<PAGE>
4.5 Consents. Other than as set forth on Schedule 4.5 annexed
hereto, no filing or registration with, or Consent of, any Person is required by
or with respect to the ESOP or the Trustee in connection with the execution and
delivery of this Agreement by the Trustee or is necessary for the consummation
by the ESOP of the transactions contemplated by this Agreement.
4.6 Compliance with Laws. The ESOP is in compliance in all
respects with all Laws applicable to it, its business and its assets.
4.7 Legal Proceedings. Except as set forth on Schedule 4.7
annexed hereto, no Judgments are outstanding against the ESOP and there is no
material litigation, claim, action, suit, proceeding, complaint, charge, Tax or
other audit, investigation or arbitration (whether or not from a Governmental
Authority) pending or, to the knowledge of the Trustee, threatened against the
ESOP or its property or assets.
4.8 Investment Representations. The ESOP is acquiring the
Purchaser Common Stock for its own account, for investment, and not with a view
to, or for sale in connection with, the distribution thereof or of any interest
therein, in violation of state or federal law. The Trustee understands that the
Purchaser Common Stock has not been registered under the Securities Act by
reason of its issuance in a transaction exempt from the registration
requirements of the Securities Act, that the Purchaser Common Stock has not been
registered under applicable state securities laws by reason of its issuance in a
transaction exempt from such registration requirements, and that the Purchaser
Common Stock may not be sold or otherwise disposed of unless registered under
the Securities Act and applicable state securities laws (the Purchaser being
under no obligation so to register such Purchaser Common Stock except as set
forth in the Registration Rights Agreement) or exempted from registration.
4.9 Acknowledgment as to Information.
(a) The ESOP and its representatives have received from
the Purchaser such information including the Schedules and Exhibits to this
Agreement and such documents referred to herein and therein as they have
requested, with respect to the Purchaser as the ESOP has deemed necessary and
relevant in connection with the transactions contemplated hereby, and the ESOP
has had the opportunity, directly or through such representatives, to ask
questions of and receive answers from persons acting on behalf of the Purchaser
necessary to verify the information so obtained.
(b) The Trustee is an executive officer, and until
February 11, 1997 was a director, of the Purchaser, and in such capacity, has
received and is intimately familiar with (i) the financial statements of the
Purchaser, including proforma financial statements which give effect to the
transactions contemplated hereby and (ii) any and all reports and documents
required to be filed by the Purchaser under sections 13(a), 14(a), 14(c) or
15(d) of the Exchange Act since the Purchaser's initial public offering.
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4.10 Experience of Trustee. The Trustee is an "accredited
investor" within the meaning of Regulation D under the Securities Act and has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of an investment in the Purchaser
Common Stock.
4.11 No Brokers. Except as set forth on Schedule 4.11 annexed
hereto, the ESOP has not entered into any contract, arrangement or understanding
with any Person or incurred any liability which could result in the obligation
of any Person to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with this Agreement or the consummation of the
transactions contemplated hereby.
5. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to Zummo, Suozzi and the ESOP as follows:
5.1 Organization and Qualification. Each of the Purchaser and
its Subsidiaries is a corporation duly incorporated, organized, validly existing
and in good standing under the Laws of its jurisdiction of incorporation, and
each of the Purchaser and its Subsidiaries has the requisite corporate power to
own its properties and carry on its business as now being conducted. Each of the
Purchaser and its Subsidiaries is duly qualified as a foreign corporation to do
business, and is in good standing, in each other jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except to the extent that any
such failure so to qualify would not, individually or in the aggregate, have a
Material Adverse Effect.
5.2 Capitalization. The authorized capital stock of the
Purchaser consists of (i) 10,000,000 shares of Purchaser Common Stock, $.01 par
value, and (ii) 2,000,000 shares of preferred stock, $.10 par value. As of the
date hereof, 5,025,383 shares of Purchaser Common Stock and no shares of
preferred stock of the Purchaser are issued and outstanding. As of the date
hereof, 550,000 shares of Purchaser Common Stock are reserved for issuance upon
exercise of outstanding stock options and 104,400 shares of Purchaser Common
Stock are reserved for issuance upon exercise of outstanding warrants. Except as
set forth in the prior sentence, there are no options, calls, subscriptions,
warrants or other rights, agreements or commitments obligating the Purchaser to
issue any shares of its capital stock or securities convertible into its capital
stock. All outstanding shares of Purchaser Common Stock are validly issued,
fully paid and nonassessable and such shares are not subject to preemptive
rights. All of the shares of Purchaser Common Stock issuable hereunder, when
issued, will be duly authorized, validly issued, fully paid, non-assessable and
free of preemptive rights. All the outstanding capital stock of each of the
Subsidiaries of the Purchaser is duly authorized, validly issued, fully paid and
non-assessable and is owned by the Purchaser, free and clear of any Lien and not
subject to preemptive rights. Except as disclosed in filings of the Purchaser
with the Securities and Exchange Commission, there are no existing options,
warrants, calls or other rights, agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of any
Subsidiary of the Purchaser.
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<PAGE>
5.3 Authority Relative to this Agreement. The Purchaser has
all requisite corporate power and authority to enter into this Agreement and to
perform all of its obligations under this Agreement. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Purchaser.
This Agreement has been duly executed and delivered by the Purchaser and,
subject to the satisfaction of the conditions applicable to it as set forth
herein and assuming due authorization, execution and delivery by Zummo, Suozzi
and the ESOP, this Agreement constitutes the valid and binding agreement of the
Purchaser, enforceable in accordance with its terms, except as may be limited by
bankruptcy, moratorium and insolvency Laws and other Laws affecting the rights
of creditors' generally and except as may be limited by the availability of
equitable remedies.
5.4 Compliance. Neither the execution and delivery of this
Agreement by the Purchaser, the consummation by the Purchaser of the
transactions contemplated hereby, nor compliance by the Purchaser with any of
the provisions hereof will (i) violate, conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any Lien upon any of the properties or assets of the Purchaser or
any of its Subsidiaries under, any of the terms, conditions or provisions of (x)
the organizational documents of the Purchaser or any of its Subsidiaries, or (y)
any contracts to which the Purchaser or any of its Subsidiaries is a party or to
which the Purchaser or any of its Subsidiaries or their respective assets may be
subject; or (ii) violate any Judgment or Law applicable to the Purchaser or any
of its Subsidiaries or their respective assets, except for, in the case of each
of clauses (i)(y) and (ii) above, such violations, conflicts, breaches,
defaults, terminations, accelerations or Liens as are set forth on Schedule 5.4
annexed hereto or as would not, individually or in the aggregate, have a
Material Adverse Effect.
5.5 Consents. Other than as set forth on Schedule 5.5 annexed
hereto, no material filing with, or Consent of, any Person is required by or
with respect to the Purchaser or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Purchaser or is necessary for
the consummation by the Purchaser of the transactions contemplated by this
Agreement.
5.6 No Brokers. Except for Friedman, Billings, Ramsey & Co.
(the "Financial Advisor"), none of the Purchaser or its Subsidiaries has entered
into any Contract, arrangement or understanding with any Person which could
result in the obligation of any Person to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with this Agreement or
consummation of the transactions contemplated hereby.
5.7 Fairness. The Board of Directors of the Purchaser has
received an opinion of the Financial Advisor to the effect that the
consideration to be received by the Purchaser hereunder is fair to the
stockholders of the Purchaser (other than the Company) from a financial point of
view.
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<PAGE>
6. Covenants and Other Agreements.
The parties hereto covenant and agree as follows:
6.1 Consents. Zummo and Suozzi shall use reasonable diligence
to cause the Company to give any notices, make any filings, and obtain any
Consents set forth on Schedule 3.5 annexed hereto. The Purchaser shall use
reasonable diligence to give any notices, make any filings and obtain any
Consents set forth on Schedule 5.5 annexed hereto.
6.2 Director and Officer Indemnification. It is understood and
agreed that the Purchaser shall cause the Company to indemnify and hold harmless
each present and former director and officer of the Company, and any present and
former trustees and fiduciaries of any Benefit Plan or any other plan for the
benefit of the employees of the Company against all losses, claims, damages or
liabilities arising out of actions or omissions occurring at or prior to the
Closing Date, whether or not with respect to the transactions contemplated by
this Agreement, to the same extent as such Person is currently indemnified under
the Company's Certificate of Incorporation or By-laws in effect on the date
hereof.
6.3 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, and to
cooperate with each other in connection with the foregoing.
7. Conditions Precedent to the Purchaser's Obligations.
The obligations of the Purchaser are subject to the
satisfaction, at or before the Closing, of the conditions set forth below. The
benefit of these conditions is for the Purchaser only and may be waived in
writing by the Purchaser at any time in its sole discretion.
7.1 Accuracy of Zummo's and Suozzi's Representations and
Warranties. The representations and warranties of Zummo and Suozzi set forth
herein shall be true and correct as of the date hereof, except where the failure
of any such representation or warranty to be true and correct does not have a
Material Adverse Effect. Any matter which would otherwise constitute a breach of
a representation or warranty by Zummo or Suozzi hereunder shall not be deemed to
be such a breach if the Purchaser has consented to the same in writing.
7.2 Accuracy of the ESOP's Representations and Warranties. The
representations and warranties of the ESOP set forth herein shall be true and
correct as of the date hereof, except where the failure of any such
representation or warranty to be true and correct does not have a Material
Adverse Effect. Any matter which would otherwise constitute a breach of a
representation or warranty by the ESOP hereunder shall not be deemed to be such
a breach if the Purchaser has consented to the same in writing.
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<PAGE>
7.3 Performance by Zummo and Suozzi. Zummo and Suozzi shall
have performed, satisfied and complied in all material respects with all
covenants, agreements, and conditions required to be performed by them.
7.4 Deliveries by the ESOP at Closing. At the Closing, in
accordance with Section 2.2(b)(2) hereof, the ESOP shall have delivered to the
Purchaser a certificate to the effect that the conditions specified in Section
7.2 have been satisfied.
7.5 Deliveries by Zummo and Suozzi at Closing. At the Closing,
in accordance with Section 2.2(b)(2) hereof, each of Zummo and Suozzi shall have
delivered to the Purchaser certificates to the effect that the conditions
specified in Sections 7.1, 7.3, 7.6, 7.8 and 7.10 have been satisfied.
7.6 Consents of Zummo and Suozzi. Zummo and Suozzi shall have
obtained and delivered to the Purchaser all Consents set forth in Schedule 3.5
annexed hereto.
7.7 Consents of the ESOP. The ESOP shall have obtained and
delivered to the Purchaser all Consents set forth in Schedule 4.5 annexed
hereto.
7.8 Changes in the Business. There shall have occurred no
event relative to the business of the Company which would, individually or in
the aggregate, have a Material Adverse Effect.
7.9 Opinion of the Sellers' Counsel. The Purchaser shall have
received the opinion, dated the Closing Date, of Shereff, Friedman, Hoffman &
Goodman LLP, counsel to the Company and Zummo, substantially in the form annexed
hereto as Exhibit A-1. The Purchaser shall have received the opinion, dated the
Closing Date, of Jeffer, Mangel, Butler & Marmaro LLP, counsel to the ESOP,
substantially in the form annexed hereto as Exhibit A-2.
7.10 Absence of Litigation. There shall not be pending before
any Governmental Authority any action, suit or proceeding which, is reasonably
likely to (i) make the purchase by the Purchaser of the Stock, or the purchase
by the Sellers of the Purchaser Common Stock, illegal or (ii) would impose
limitations on the ability of the Purchaser to effectively exercise full rights
of ownership of the Stock or business of the Company as a result of the
transactions contemplated hereby.
7.11 Proceedings and Documents. All legal and corporate
proceedings in connection with the transactions contemplated by this Agreement
shall be in form and substance reasonably satisfactory to the Purchaser and its
counsel, and the Purchaser shall have received all such counterpart originals or
certified or other copies of such documents and proceedings in connection with
such transactions as the Purchaser shall reasonably request.
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<PAGE>
7.12 Sale of VIL. Zummo and/or Suozzi shall deliver to the
Purchaser documentation evidencing the VIL Transaction.
7.13 Pledge Agreement. Zummo shall have executed and delivered
the Pledge Agreement, substantially in the form attached hereto as Exhibit B.
7.14 Resignations. The Sellers shall deliver to the Purchaser
resignations of any directors and officers of the Company requested by the
Purchaser, effective as of the Closing Date.
7.15 Tax-Free Transaction. The Purchaser shall have received
an opinion of Price Waterhouse, LLP, reasonably satisfactory to it, that the
transactions contemplated by this Agreement constitute a tax-free
"reorganization" within the meaning of Section 368 of the Code.
8. Conditions Precedent to the Sellers' Obligations.
The obligations of the Sellers are subject to the satisfaction, at or before the
Closing, of the conditions set forth below. The benefit of these conditions is
for the Sellers only and may be waived by the Sellers in writing at any time in
their sole discretion.
8.1 Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser set forth herein
shall be true and correct as of the date hereof, except, in either case, where
the failure of any such representation or warranty to be true and correct does
not have a Material Adverse Effect. Any matter which would otherwise constitute
a breach of a representation or warranty by the Purchaser hereunder shall not be
deemed to be such a breach if the Sellers have consented to the same in writing.
8.2 Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required to be performed by it.
8.3 Deliveries by the Purchaser at Closing. At the Closing, in
accordance with Section 2.2(c)(2), the Purchaser shall have delivered to the
Sellers certificates to the effect that the conditions specified in Sections
8.1, 8.2, 8.4, 8.6, 8.7, and 8.9 have been satisfied.
8.4 Consents. The Purchaser shall have obtained and delivered
to the Sellers all Consents set forth in Schedule 5.5 annexed hereto.
8.5 Opinion Regarding Adequacy of Consideration to ESOP. The
ESOP shall have received an opinion from its financial advisor that the
consideration to be received by the ESOP hereunder constitutes "adequate
consideration" within the meaning of ERISA.
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<PAGE>
8.6 Changes in the Business. There shall have occurred no
event relative to the business of the Purchaser which would, individually or in
the aggregate, have a Material Adverse Effect.
8.7 Absence of Litigation. There shall not be pending before
any Governmental Authority any action, suit or proceeding which is reasonably
likely to (i) make the purchase by the Purchaser of the Stock, or the purchase
by the Sellers of the Purchaser Common Stock, illegal or (ii) would impose
limitations on the ability of the Purchaser to effectively exercise full rights
of ownership of the Stock or business of Company as a result of the transactions
contemplated hereby.
8.8 Proceedings and Documents. All legal and corporate
proceedings in connection with the transactions contemplated by this Agreement
shall be in form and substance reasonably satisfactory to the Sellers and their
counsel, and the Sellers shall have received all such counterpart originals or
certified or other copies of such documents and proceedings in connection with
such transactions as the Sellers shall reasonably request.
8.9 Intercompany Notes. VIL shall have received the assumption
by the Purchaser of the five year Intercompany Note in the principal amount of
$2,000,000 in the form of Exhibit C annexed hereto, together with a wire
transfer in the amount of $800,000 U.S. in satisfaction of the Intercompany Note
in the principal amount of $800,000.
8.10 Registration Rights Agreement. The Purchaser shall have
executed and delivered the Registration Rights Agreement, substantially in the
form attached hereto as Exhibit D.
8.11 Insilco Obligations. The Sellers shall have received
documentation evidencing (i) the assumption by the Purchaser of the indemnity
obligations of the Company to Insilco under the Stock Purchase Agreement dated
as of April 27, 1993 (the "Insilco Purchase Agreement") by and among Insilco,
Zummo and RAZ Acquisition Corporation, and (ii) the consent by Insilco to such
assumption and the transactions contemplated hereby.
8.12 Tax-Free Transaction. The Sellers shall have received an
opinion of Price Waterhouse LLP, reasonably satisfactory to them, that the
transactions contemplated by this Agreement constitute a tax-free
"reorganization" within the meaning of Section 368 of the Code.
9. Survival of Representations and Warranties; Indemnification.
9.1 Survival of Representations and Warranties.
All representations and warranties contained in this Agreement
(other than in Section 3.2) or in any other document provided to any party
hereto in connection with the transactions contemplated hereby shall terminate
on the later to occur of (a) June 30, 1998 or (b) the date the Purchaser's
accountants have completed their audit of the Purchaser's consolidated financial
statements for fiscal year ending March 31, 1998, and shall thereafter be of no
further force or effect.
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<PAGE>
9.2 Indemnification.
(a) Agreement to Indemnify.
(i) From and after the Closing Date, each of Zummo and
Suozzi hereby severally covenant and agree to indemnify, on a pro rata basis, up
to the limits set forth in Section 9.2(b)(ii), the Purchaser and its successors
and assigns and hold them harmless from and against any and all losses, claims,
liabilities, obligations, fines, penalties, damages and expenses, including
reasonable attorneys fees (collectively, "Losses") incurred by any of them
resulting from or arising out of any breach of any of the representations or
warranties made by Zummo or Suozzi in this Agreement. For purposes of this
Section 9.2(a), such representations and warranties shall be considered as
though made without any "material" or "Material Adverse Effect" qualification,
notwithstanding the presence thereof. The pro rata indemnification by Zummo and
Suozzi referred to above shall be made in proportion to their relative ownership
of the Company (i.e., Zummo shall be responsible for 77.78% of the
indemnification obligations and Suozzi shall be responsible for 22.22% of the
indemnification obligations); provided, however, that Zummo and Suozzi shall
each be solely responsible, up to the limits set forth above, for the breach of
a representation or warranty contained in Article 3 hereof to the extent that
such breach relates solely to Zummo or Suozzi, as the case may be.
(ii) From and after the Closing Date, the ESOP hereby
covenants and agrees to indemnify, up to the limit set forth in Section
9.2(b)(ii), the Purchaser and its successors and assigns and to hold them
harmless from and against any Losses incurred by any of them resulting from or
arising out of any breach by the Trustee of the representations or warranties
made by the Trustee in Section 4.4.
(iii) From and after the Closing Date, the Purchaser
hereby covenants and agrees to indemnify, up to the limits set forth in Section
9.2(b)(iii), each of Zummo, Suozzi and the ESOP and each of their respective
successors, assigns, heirs and personal representatives and to hold them
harmless from and against any Losses incurred by any of them resulting from or
arising out of (x) any breach by the Purchaser of any of the representations or
warranties made by the Purchaser in this Agreement and (y) any liability or
obligation of the Company to Insilco which is assumed by the Purchaser as
contemplated by Section 8.11 of this Agreement.
(b) Limitation on Indemnity.
(i) No breach of any individual representation or
warranty (other than in Section 3.2) shall be deemed to have occurred within the
meaning of Section 9.2(a)(i) or (iii) unless and until the dollar amount of all
Losses resulting from such breach exceeds one hundred thousand dollars
($100,000). No claim for indemnification (except as a result of a breach of any
representation or warranty contained in Section 3.2) may be brought under
Section 9.2(a)(i) or (iii)(x) unless the claims sought to be indemnified exceed
$500,000 in the aggregate, and then the claim for indemnification may be brought
only for the amount of such Losses above $500,000.
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<PAGE>
(ii) The maximum indemnification obligations of Zummo and
Suozzi under Section 9.2(a)(i) shall be $1,555,600 and $444,400, respectively.
The indemnification obligation of Zummo under Section 9.2 shall be secured by a
pledge of all of the capital stock of VIL owned by Zummo pursuant to the Pledge
Agreement. The Purchaser and its successors and assigns agree not to seek to
enforce such indemnity obligations with respect to any claim against Zummo
personally for a period of 90 days after such claim can first be asserted,
during which time the Purchaser or its successors or assigns, as the case may
be, shall take reasonable steps to satisfy such claim through exercise of
remedies available under the Pledge Agreement. If, after such 90 day period has
elapsed, the Purchaser or its successors or assigns, as the case may be, has
been unable to satisfy its claim in spite of such efforts, it may enforce the
claim personally against Zummo. The maximum indemnification obligations of the
ESOP under Section 9.2(a)(ii) shall be $100,000.
(iii) The maximum indemnification obligations of the
Purchaser under Section 9.2(a)(iii) shall be $2,000,000. To the extent that a
claim for indemnification is brought by more than one stockholder of the
Company, indemnification payments by the Purchaser to such stockholders shall be
in proportion to their current ownership interests in the Company (i.e., 74.18%
for Zummo; 21.19% for Suozzi and 4.63% for the ESOP).
(c) Indemnification Procedure.
(i) An indemnified party shall provide written notice to
each indemnifying party of any claim of such indemnified party for
indemnification under this Agreement promptly after the date on which such
indemnified party has actual knowledge of the existence of such claim. Such
notice shall specify the nature of such claim in reasonable detail and the
indemnifying parties shall be given reasonable access to any documents or
properties within the control of the indemnified party as may be useful in the
investigation of the basis for such claim. The failure to so notify the
indemnifying parties shall not constitute a waiver of such claim but an
indemnified party shall not be entitled to receive any indemnification with
respect to any Losses that occurred directly as a result of the failure of such
indemnified party to give such notice.
(ii) In the event any indemnified party seeks
indemnification hereunder based upon a claim asserted by a third party, the
indemnifying parties shall have the right (without prejudice to the right of any
indemnified party to participate at its expense through counsel of its own
choosing) to defend or prosecute such claim at its expense and through counsel
of its own choosing if it gives written notice of its intention to do so no
later than twenty (20) days following notice thereof by an indemnified party or
such shorter time period as required so that the interests of the indemnified
party would not be materially prejudiced as a result of its failure to have
received such notice; provided, however, that, if the indemnified party shall
have reasonably concluded that separate counsel is required because a conflict
of interest would otherwise exist, the indemnified party shall have the right to
select separate counsel (but not more than one law firm together with local
counsel, if necessary) to participate in the defense of such action on its
behalf, at the expense of the indemnifying party. If the indemnifying party does
not so choose to defend or prosecute any such claim asserted by a third party
for which any indemnified party would be entitled to indemnification hereunder,
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<PAGE>
then the indemnified party shall be entitled to recover from the indemnifying
party (subject to the limitations set forth in Section 9.2(b)), all of the
reasonable attorney's fees and other costs and expenses of litigation of any
nature whatsoever incurred in the defense of such claim. Notwithstanding the
assumption of the defense of any claim by an indemnifying party pursuant to this
paragraph, the indemnified party shall have the right to approve the terms of
any settlement of a claim (which approval shall not be unreasonably delayed or
withheld).
(iii) The indemnifying party and the indemnified party
shall cooperate in furnishing evidence and testimony and in any other manner
which the other may reasonably request, and shall in all other respects have an
obligation of good faith dealing, one to the other, so as not to unreasonably
expose the other to undue risk of loss.
10. Miscellaneous.
10.1 Publicity. The parties shall agree with each other as to
timing and content prior to issuing any announcement, press release, public
statement or other information to the press or any third party with respect to
this Agreement or the transactions contemplated hereby; provided, however, that
nothing herein shall prohibit any party to this Agreement from making any public
disclosure regarding this Agreement and the transactions contemplated hereby if,
in the opinion of counsel to such party, such disclosure is required by Law or
by valid judicial process.
10.2 Headings. Section headings contained in this Agreement
are included for convenience only and shall not affect the interpretation of any
provisions of this Agreement.
10.3 Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served or on the date after transmission if sent via
overnight mail, (ii) on the third day after mailing if mailed to the party to
whom notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid or (iii) on the date sent if sent by facsimile, to
the parties at the following addresses or facsimile numbers with a copy sent by
mail as aforesaid on the same date (or at such other address or facsimile number
for a party as shall be specified by like notice):
If to Zummo, to:
Robert A. Zummo
9963 N. 79th Place
Scottsdale, Arizona 85258
Fax No.: (602) 483-3468
with a copy to:
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<PAGE>
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Richard A. Goldberg, Esq.
Fax No.: (212) 758-9526
If to Suozzi, to:
Francis X. Suozzi
112 Brown Avenue
Spring Lake, NJ 07662
If to the ESOP, to:
Valentec International Corporation Employee Stock Ownership Plan
3190 Pullman Street
Costa Mesa, California 92626
Attention: Robert J. Torok
Fax No.: (714) 662-7649
with a copy to:
Jeffer Mangel Butler & Marmaro LLP
2121 Avenue of the Stars
Los Angeles, CA 90067
Attention: Robin Schachter, Esq.
Fax No.: (310) 203-0567
If to the Purchaser, to:
Safety Components International, Inc.
3190 Pullman Street
Costa Mesa, California 92626
Attention: Robert J. Torok
Fax No.: (714) 662-7649
- - 29 -
<PAGE>
with a copy to:
Skadden Arps Slate Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Thomas H. Kennedy, Esq.
Fax No.: (212) 735-2000
10.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. None of the parties hereto shall assign any rights or
delegate any duties hereunder without the prior written consent of the other
parties hereto, and any assignment made without such consent shall be void and
constitute a default hereunder.
10.5 Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
10.6 Entire Agreement. This Agreement, including the Exhibits
and Schedules, sets forth the entire understanding and agreement of the parties
with respect to their subject matter and supersedes any and all prior
understandings, negotiations or agreements among the parties hereto, both
written and oral, with respect to such subject matter.
10.7 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
10.8 Severability. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, in whole or in part, the
validity of the remaining provisions shall not be affected and the remaining
portion of any provision held to be invalid, illegal or unenforceable shall in
no way be affected, prejudiced or disturbed thereby.
10.9 No Prejudice. This Agreement has been jointly prepared
and negotiated by the parties hereto and the terms hereof shall not be construed
in favor of or against any party on account of its participation in such
preparation.
10.10 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and permitted assigns.
10.11 Amendment and Modification. This Agreement may be
amended or modified only by written agreement executed by all parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.
- -------------------------
Robert A. Zummo
- -------------------------
Francis X. Suozzi
VALENTEC INTERNATIONAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
By:
-----------------------
Name: W. Hardy Myers
Title: Trustee
SAFETY COMPONENTS INTERNATIONAL, INC.
By:
-------------------------
Name: Jeffrey J. Kaplan
Title: Executive Vice President
and Chief Financial Officer
EXHIBIT 10.32
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
May 22, 1997, by and among Safety Components International, Inc., a Delaware
corporation (the "Company"), Robert A. Zummo ("Zummo"), Francis X. Suozzi
("Suozzi") and Valentec International Corporation Employee Stock Ownership Plan
(the "ESOP").
W I T N E S S E T H:
WHEREAS, Zummo, Suozzi, the ESOP and the Company have entered
into that certain Stock Purchase Agreement, dated as of the date hereof (the
"Stock Purchase Agreement"), pursuant to which, among other things, Zummo,
Suozzi and the ESOP have agreed to receive as consideration under the Stock
Purchase Agreement an aggregate of 1,369,200 shares of common stock, par value
$.01 per share, of the Company;
WHEREAS, the Company desires to grant Zummo, Suozzi and the
ESOP registration rights with respect to such shares of common stock of the
Company; and
WHEREAS, it is a condition precedent to the consummation of
the transactions contemplated under the Stock Purchase Agreement that the
parties enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and conditions contained herein, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1 Definitions.
All terms not defined herein or below shall have the meaning
set forth in the Stock Purchase Agreement.
"Advice" shall have the meaning set forth in Section 3.1
hereof.
"Beneficiary" shall have the meaning set forth in the ESOP.
"Commission" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
<PAGE>
"Common Stock" means the shares of common stock, par value
$.01 per share, of the Company, acquired by Zummo, Suozzi and the ESOP pursuant
to the terms of the Stock Purchase Agreement.
"Company" shall have the meaning set forth in the preamble of
this Agreement.
"Controlling Persons" shall have the meaning set forth in
Section 4.1 hereof.
"Damages" shall have the meaning set forth in Section 4.1
hereof.
"Deferral Date" shall have the meaning set forth in Section
2.4 hereof.
"Demand Registration" shall have the meaning set forth in
Section 2.1(a) hereof.
"ESOP" shall have the meaning set forth in the preamble of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" means each Initial Holder and any person who shall
hereafter acquire and hold Registrable Securities; provided, however, that a
Person who hereafter acquires Registrable Securities representing less than 5%
of the outstanding common stock of the Company (based on the number of Shares
outstanding on the date hereof) shall not be considered a Holder and shall not
be entitled to exercise any registration rights hereunder; provided, further,
however that Participants and their Beneficiaries under the ESOP shall have the
rights as Holders hereunder to the extent that they receive a distribution from
the ESOP which falls within the definition of Registrable Securities at the time
of the exercise of any such rights.
"Indemnified Party" shall have the meaning set forth in
Section 4.3 hereof.
"Indemnifying Party" shall have the meaning set forth in
Section 4.3 hereof.
"Initial Holder" means each of Zummo, Suozzi and the ESOP.
"Inspectors" shall have the meaning set forth in Section
3.1(h) hereof.
"NASD" means the National Association of Securities Dealers,
Inc.
"Participant" shall have the meaning set forth in the ESOP.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union or association.
<PAGE>
"Piggy-Back Registration" shall have the meaning set forth in
Section 2.2 hereof.
"Records" shall have the meaning set forth in Section 3.1(h)
hereof.
"Registrable Securities" means the shares of Common Stock and
any additional shares of common stock of the Company acquired by the Holder in
respect of the Registrable Securities by way of a dividend, stock split,
recapitalization, reclassification or other distribution. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to such
securities has been declared effective by the Commission (which may be on a Form
S-8 to the extent available) and such securities have thereafter been disposed
of, (ii) written opinion(s) to the effect that such Registrable Securities may
be sold under Rule 144 of the rules and regulations adopted under the Securities
Act without restriction as to the volume and timing of such sale shall have been
received from counsel to the Company, (iii) with respect to Persons holding
Registrable Securities representing less than 1% of the outstanding common stock
of the Company, written opinion(s) shall have been received from counsel to the
Company to the effect that (A) the exemption from the Securities Act
registration under Rule 144(d) of the rules and regulations adopted under the
Securities Act is available for sale of such Registrable Securities, or (B) such
Registrable Securities are not deemed to be "restricted securities" within the
meaning of Rule 144(a) of the rules and regulations adopted under the Securities
Act or (iv) they shall have ceased to be outstanding.
"Registration Expenses" shall have the meaning set forth in
Section 3.2 hereof.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
"Stock Purchase Agreement" shall have the meaning set forth in
the preamble of this Agreement.
"Suozzi" shall have the meaning set forth in the preamble of
this Agreement.
"Suspension Notice" shall have the meaning set forth in
Section 3.1(f) hereof.
"Trustee" shall have the meaning set forth in the ESOP.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as part
of such dealer's market-making activities.
<PAGE>
"Withdrawal Election" shall have the meaning set forth in
Section 2.3(b) hereof.
"Zummo" shall have the meaning set forth in the preamble of
this Agreement.
ARTICLE 2.
REGISTRATION RIGHTS
SECTION 2.1 Demand Registration.
(a) Request for Registration by Holders of Registrable
Securities. Each Initial Holder may make up to one written request on the
Company for the registration of the Common Stock under the Securities Act, such
requests hereinafter referred to as a Demand Registration ("Demand
Registration"). Any such request shall specify the number of shares of
Registrable Securities proposed to be sold and shall also specify the intended
method of disposition thereof. The Company shall give written notice of such
registration request within 10 days after the receipt thereof to all other
Holders of Registrable Securities and shall use its best efforts to effect the
Demand Registration within 45 days after the giving of such written notice.
Within 20 days after receipt of such notice by any such Holder, such Holder may
request in writing that Registrable Securities be included in such registration
and the Company shall include in the registration statement for such Demand
Registration the Registrable Securities of all Holders requested to be so
included. Each such request by such other Holders shall specify the number of
shares of Registrable Securities proposed to be sold and the intended method of
disposition thereof. Unless the intended method of distribution is through an
underwritten offering, the Company shall have the right to elect to include all
Registrable Securities covered by this Agreement in such registration statement.
Any holder who declines after receipt of notice from the Company of such
election to have all of the Registrable Securities owned by him in such
registration statement shall forfeit his or its Demand Registration hereunder.
Whenever the Company shall effect a Demand Registration
pursuant to Section 2.1(a) in connection with an underwritten offering of
Registrable Securities, no securities other than the Registrable Securities
requested to be included shall be included among the securities covered by such
registration unless (i) the managing Underwriter or Underwriters of such
offering shall have advised the Holder of Registrable Securities to be covered
by such registration in writing that the inclusion of other securities would not
adversely affect such offering, in which case, securities to be issued by the
Company and any Persons who currently have registration rights under another
agreement with the Company may be included or (ii) all Holders of Registrable
Securities to be covered by such registration shall have consented in writing to
the inclusion of securities to be issued by the Company or securities held by
other stockholders of the Company. Whenever the Company shall effect a Demand
Registration pursuant to Section 2.1(a) other than in connection with an
underwritten offering of Registrable Securities, no securities held by
stockholders of the Company other than Holders of Registrable Securities may be
covered by such registration unless all Holders of Registrable Securities to be
covered by such registration shall have consented thereto in writing.
<PAGE>
(b) Effective Registration. A registration will not be deemed
to have been effected as a Demand Registration unless it has been declared
effective by the Commission and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto;
provided that if, after it has become effective, the offering of shares of
Common Stock pursuant to such registration is or becomes the subject of any stop
order, injunction or other order or requirement of the Commission or any other
governmental or administrative agency, or if any court prevents or otherwise
limits the sale of the shares of Common Stock pursuant to the registration at
any time after the effective date of the registration statement, such
registration will be deemed not to have been effected. If a registration
requested pursuant to this Section 2.1 is deemed not to have been effected, then
the Company shall continue to be obligated to effect such registration pursuant
to this Section 2.1. The Holders of Registrable Securities shall be permitted to
withdraw all or any part of the Registrable Securities from a Demand
Registration at any time prior to the effective date of such Demand
Registration, but shall forfeit any future right to a Demand Registration
hereunder.
(c) Selection of Underwriter. If the Selling Holders so elect,
the offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of an underwritten offering. The Selling Holders owning a
majority-in-interest of Common Stock to be sold shall select one or more
recognized firms of investment bankers reasonably acceptable to the Company to
act as Underwriter or Underwriters in connection with such offering.
(d) Deferral of Registration. Notwithstanding any other
provision of this Section 2, the Company shall not be obligated to effect the
filing of a registration statement pursuant to Section 2(a) hereof (i) during
any period when there exists an effective registration statement covering the
Registrable Securities, or (ii) if the Company shall furnish to the holders of
Registrable Securities requesting a registration statement under Section 2(a)
hereof a certificate, signed by the Company, stating that in the good faith
judgment of the board of directors of the Company it would be detrimental to the
best interests of the Company and its stockholders generally for such
registration statement to be filed at that time. The Company shall have the
right to defer the filing of a registration statement as provided in clause (ii)
of this Section 2(d) only twice in any 12-month period and only for a period not
later than the Deferral Date; provided that in such event, the Selling Holders
initiating the request for registration will be entitled to withdraw such
request.
<PAGE>
SECTION 2.2 Piggy-Back Registration.
If at any time the Company proposes to file a registration
statement under the Securities Act with respect to an offering by the Company
for its own account or for the account of any of its respective security holders
(other than a registration statement on Form S-4 or S-8 (or any substitute form
that may be adopted by the Commission) or a Demand Registration pursuant to
Section 2.1), then the Company shall give prompt written notice of such proposed
filing to the Holders of Registrable Securities as soon as practicable (but in
no event less than 20 days before the anticipated filing date), and such notice
shall offer such Holders the opportunity to register such number of Registrable
Securities as each such Holder may request (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof) (a "Piggy-Back Registration"). The
Company shall use its best efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to this Section 2.2 by giving written notice to the Company
of its request to withdraw, provided that in the event of such withdrawal, such
Holder shall be responsible for all fees and expenses (including fees and
expenses of Holder's own counsel) incurred by such Holder prior to such
withdrawal unless such withdrawal has been made in accordance with Section
2.3(b). The Company may withdraw a Piggy-Back Registration at any time prior to
the time it becomes effective.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligation to effect a registration upon the request of Holders
pursuant to Section 2.1, and no failure to effect a registration under this
Section 2.2 and to complete the sale of Registrable Securities in connection
therewith shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2 and
4.1).
SECTION 2.3 Reduction of Offering.
(a) Piggy-Back Registration. Notwithstanding anything to the
contrary contained herein, if the managing Underwriter or Underwriters of any
underwritten offering described in Section 2.2 have informed, in writing, the
Holders of the Registrable Securities requesting inclusion in such offering that
it is their opinion that the total number of shares which the Company, Holders
of Registrable Securities and any other Persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, then the number of shares to be
offered shall be reduced or limited in the following order of priority: (x)
first, the securities proposed by the Company to be sold for its own account;
and (y) second, to the extent necessary to reduce the total number of shares as
recommended by such managing Underwriters, the number of shares to be offered
for the account of the Holders and any other persons who currently have
registration rights under any other agreement to which the Company is a party
shall be reduced or limited on a pro rata basis in proportion to the relative
number of Registrable Securities of the Holders or securities of such persons
participating in such registration.
<PAGE>
(b) Withdrawal Election. If, as a result of the proration
provisions of this Section 2.3, any Holder shall not be entitled to include at
least 50% of the Registrable Securities in a Piggy-Back Registration that such
Holder has requested to be included, such Holder may elect to withdraw his
request to include Registrable Securities in such registration (a "Withdrawal
Election"); provided, however, that a Withdrawal Election shall be irrevocable
and, after making a Withdrawal Election, a Holder shall no longer have any right
to include Registrable Securities in the Piggy Back Registration as to which
such Withdrawal Election was made.
SECTION 2.4 Conflicting Company Activity. If after the filing
but prior to the effectiveness of a registration statement filed by the Company
pursuant to Section 2(a) hereof, (i) the Company shall become a party to an
agreement or filed materials with the Commission contemplating a material
business acquisition by the Company, and if in the good faith judgment of the
Company it is impracticable for the Company to have become effective a
registration statement prior to the consummation of the acquisition and, if such
proposed acquisition were consummated, the Company would be required to include
in such registration statement financial statements and/or other information
concerning the business of any other party to such proposed acquisition prior to
the time that such financial statements are otherwise required to be filed with
the Commission in accordance with the current Report on Form 8-K and the
subsequent Form 8 (75 days after the closing of any such acquisition); (ii) the
Company shall have become a party to an agreement or letter of intent
contemplating a merger or consolidation of the Company into or with, or a sale
or transfer of all or substantially all of the business and assets of the
Company to, any other corporation or entity, and if in the good faith judgment
of the Company it is impracticable for the Company to file and have become
effective a registration statement prior to the consummation of such merger,
consolidation or sale; or (iii) the Company shall have determined in good faith
based on written advice of counsel that such registration statement is required
to contain information with respect to the Company or its business and plans
which has not been publicly disclosed, and the disclosure of which, in the
Company's good faith judgment, would not be in the best interest of the Company,
then the Company shall not be deemed to have breached its agreement to use its
best efforts to cause such registration statement to become effective if it does
not use its best efforts to cause such registration statement to become
effective for a period of not more than sixty (60) days from the date on which
the Company was required to use its best efforts to cause such registration
statement to become effective (or as soon as practicable after the filing of
such Form 8 referred to in (i) above, if any) (the "Deferral Date"), or, in the
case of (ii) above the transaction contemplated by such agreement or letter of
intent (x) becomes effective, in which case the Company shall have no obligation
to cause such registration statement to become effective or (y) is abandoned, in
which case the Company shall recommence the use of its best efforts to cause
such registration statement to become effective as soon as practicable but in no
event later than the Deferral Date.
ARTICLE 3.
REGISTRATION PROCEDURES
SECTION 3.1 Filings; Information.
Whenever the Company is required to effect or cause the
registration of Registrable Securities pursuant to Section 2.1, the Company will
use its best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and in
connection with any such request:
<PAGE>
(a) Registration Statements. The Company will prepare and file
with the Commission a registration statement with respect to such securities and
use best efforts to cause such registration statement to become and remain
effective until the completion of the distribution or until all Registrable
Securities covered thereby cease to be Registrable Securities.
(b) Amendments and Supplements. The Company will prepare and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for the period specified in Section
3.1(a) and to comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such registration
statement in accordance with the intended method of disposition set forth in
such registration statement for such period.
(c) Copies for Review. The Company will, as far in advance as
practical, prior to filing a registration statement or prospectus or any
amendment or supplement thereto, furnish copies of such registration statement
as proposed to be filed, together with exhibits thereto, to (i) each Selling
Holder, (ii) not more than one counsel representing all Selling Holders, to be
selected by a majority-in-interest of such Selling Holders, and (iii) each
Underwriter, if any, of the Registrable Securities covered by such registration
statement, which documents will be subject to review and approval by the
foregoing, and thereafter as far in advance as practical, furnish to such
Selling Holders, counsel and Underwriters, if any, for their review and comment
such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), the prospectus included in such registration
statement (inducing each preliminary prospectus) and such other documents or
information as such Selling Holders, counsel or Underwriters may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Selling Holders.
(d) Stop Orders. After the filing of the registration
statement, the Company will promptly notify each Selling Holder of Registrable
Securities covered by such registration statement of any stop order issued or
threatened by the Commission and use its best efforts to prevent the entry of
such stop order or to remove it if entered.
<PAGE>
(e) Blue Sky. The Company will use its best efforts to (i)
register or qualify the Registrable Securities under such other securities or
blue sky laws of such jurisdictions in the United States as any Selling Holder
reasonably (in light of such Selling Holder's intended plan of distribution)
requests, and (ii) cause such Registrable Securities to be registered with or
approved by such other governmental agencies or authorities in the United States
as may be necessary by virtue of the business and operations of the Company and
do any and all other acts and things that may be reasonably necessary or
advisable to enable such Selling Holder to consummate the disposition of the
Registrable Securities owned by such Selling Holder; provided, that the Company
will not be required to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph (e),
(B) subject itself to taxation in any such jurisdiction or (C) consent to
general service of process in any such jurisdiction.
(f) Certain Events. The Company will immediately notify each
Selling Holder of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the Holders of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly make
available to each Selling Holder any such supplement or amendment.
Upon receipt of any such notice (a "Suspension Notice") from
the Company of the happening of any event of the kind described in this Section
3.1, each Holder shall forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until Holder is advised in writing (the "Advice") by the Company that
the use of the prospectus covering such Registrable Securities may be resumed,
and has received copies of any supplements or amendments to the prospectus or a
notice that the prospectus has been supplemented by a filing which is
incorporated by reference thereby, and, if so directed by the Company, such
Holder will, or will request the underwriters, if any, to, deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the stale prospectus covering such
Registrable Securities current at the time of receipt of such notice; provided,
however, that the Company shall use its best efforts to limit the period from
the date on which any Holder receives a Suspension Notice to the date on which
any Holder receives the Advice not to exceed 60 days.
(g) Agreements. The Company and the Selling Holders will enter
into customary agreements including, if applicable, an underwriting agreement in
customary form and which is reasonably satisfactory to the Company (which shall
not require the Selling Holder to indemnify the underwriter with respect to
misstatements or omissions in the registration statement other than such
misstatements or omissions in written material supplied by such Selling Holder
expressly for inclusion in the registration statement) and, if requested by the
underwriter(s), an agreement appointing one Person approved by a
majority-in-interest of the Holders whose Registrable Securities are to be
included in the registration, to act as attorney-in-fact for the Holder and as
escrow agent for the Registrable Securities to be included in the offering in
customary form. The Company and the Selling Holders will also take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and the Selling Holders may, at
their option, require that any or all of the representations, warranties and
covenants of the Company to or for the benefit of such Underwriters also be made
to and for the benefit of such Selling Holders.
<PAGE>
(h) Due Diligence. The Company will make available to each
Selling Holder (and his counsel) and each Underwriter, if any, subject to
restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all correspondence between the Commission and
the Company, its counsel or auditors and will also make available for inspection
by any Selling Holder, any Underwriter participating in any disposition pursuant
to such registration statement and any attorney, accountant or other
professional retained by any such Selling Holder or Underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
registration statement. Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such registration
statement or (ii) the disclosure or release of such Records is requested or
required pursuant to oral questions, interrogatories, requests for information
or documents or a subpoena or other order from a court of competent jurisdiction
or other process; provided, that prior to any disclosure or release pursuant to
clause (ii), the Inspectors shall provide the Company with prompt notice of any
such request or requirement so that the Company may seek an appropriate
protective order or waive such Inspectors' obligation not to disclose such
Records; and, provided further, that if failing the entry of a protective order
or the waiver by the Company permitting the disclosure or release of such
Records, the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which counsel
has advised the Inspectors that the Inspectors are compelled to disclose. Each
Selling Holder of such Registrable Securities agrees that information obtained
by it solely as a result of such inspections (not including any information
obtained from a third party who, insofar as is known to the Selling Holder after
reasonable inquiry, is not prohibited from providing such information by a
contractual, legal or fiduciary obligation to the Company) shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company or its affiliates unless and until
such information is made generally available to the public. Each Selling Holder
of such Registrable Securities further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
(i) Sales Efforts. In connection with an underwritten
offering, the Company will participate, to the extent reasonably requested by
the managing Underwriter for the offering or the Selling Holders, in customary
efforts to sell the securities under the offering, including, without
limitation, participating in "road shows."
<PAGE>
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection with
such registration including, without limitation, all such information as may be
requested by the Commission or the NASD. The Company may exclude from such
registration any Holder who fails to provide such information.
SECTION 3.2 Registration Expenses.
In connection with any Demand Registration pursuant to Section
2.1 hereof and any Piggy-Back Registration under Section 2.2 hereof, the Company
shall pay the following registration expenses incurred in connection with the
registration thereunder (the "Registration Expenses"): (i) all registration and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities), (iii) processing,
duplicating and printing expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities, (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company (including the expenses of any comfort letters or costs associated with
the delivery by independent certified public accountants of a comfort letter or
comfort letters requested but not the cost of any audit other than a year end
audit), (vii) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration and (viii) any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities. The Company shall have no obligation to pay any other underwriting
fees, discounts or commissions attributable to the sale of Registrable
Securities, the costs of counsel to the Holder or Holders or the cost of any
special audit required, such costs to be borne by the Holder or Holders making
the request.
<PAGE>
ARTICLE 4.
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 Indemnification by the Company.
The Company shall, to the full extent permitted by law,
indemnify and hold harmless each Selling Holder, its partners, officers,
directors, employees and agents, and each Person, if any, who controls such
Selling Holder within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, together with the partners, officers, directors,
employees and agents of such controlling Person (collectively, the "Controlling
Persons"), from and against any loss, claim, damage, liability, reasonable
attorneys' fees, cost or expense and costs and expenses of investigating and
defending any such claim, joint or several, and any action in respect thereof
(collectively, the "Damages") to which such Selling Holder, its partners,
officers, directors, employees and agents, and any such Controlling Person may
become subject under the Securities Act or otherwise, insofar as such Damages
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities or any amendment or supplement
thereto, or arises out of, or are based upon, any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading or any violation by the Company of
any federal or state securities laws or any rule or regulation thereof, except
insofar as the same are based upon information furnished in writing to the
Company by a Selling Holder expressly for use therein, and shall reimburse each
Selling Holder, its partners, officers, directors, employees and agents, and
each such Controlling Person for any legal and other expenses reasonably
incurred by that Selling Holder, its partners, officers, directors, employees
and agents, or any such Controlling Person in investigating or defending or
preparing to defend against any such Damages or proceedings; provided, however,
that the Company shall not be liable to any Selling Holder to the extent that
any such Damages (or action or proceeding in respect thereof) arise out of or
are based upon an untrue statement or omission made in any preliminary
prospectus if (i) such Selling Holder failed to send or deliver a copy of the
final prospectus with or prior to the delivery of written confirmation of the
sale by such Selling Holder to the Person asserting the claim from which such
Damages arise, and (ii) the final prospectus would have corrected such untrue
statement or such omission; provided further, that the Company shall not be
liable to any Selling Holder in any such case to the extent that any such
Damages arise out of or are based upon an untrue statement or omission in any
prospectus if (x) such untrue statement or omission is corrected in an amendment
or supplement to such prospectus, and (y) having previously been furnished by or
on behalf of the Company with copies of such prospectus as so amended or
supplemented, such Selling Holder thereafter fails to deliver such prospectus as
so amended or supplemented prior to or concurrently with the sale of a
Registrable Security to the Person asserting the claim from which such Damages
arise. The Company also agrees to indemnify any Underwriters of the Registrable
Securities, their officers and directors and each Person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Selling Holders provided in this Section 4.1.
<PAGE>
SECTION 4.2 Indemnification by Selling Holders.
Each Selling Holder shall, to the full extent permitted by
law, severally but not jointly, indemnify and hold harmless the Company, its
officers, directors, employees and agents and each Person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, together with the partners, officers, directors, employees
and agents of such controlling Person, to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with reference to
information related to such Selling Holder, or its plan of distribution,
furnished in writing by such Selling Holder or on such Selling Holder's behalf
expressly for use in any registration statement or prospectus relating to the
Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus and the aggregate amount which may be recovered from any
Selling Holder of Registrable Securities pursuant to the indemnification
provided for in this Section 4.2 in connection with any registration and sale of
Registrable Securities shall be limited to the total proceeds received by such
Holder from the sale of such Registrable Securities. In case any action or
proceeding shall be brought against the Company or its officers, directors,
employees or agents or any such controlling Person or its officers, directors,
employees or agents, in respect of which indemnity may be sought against such
Selling Holder, such Selling Holder shall have the rights and duties given to
the Company, and the Company or its officers, directors, employees or agents, or
such controlling Person, or its officers, directors, employees or agents, shall
have the rights and duties given to such Selling Holder, by the preceding
paragraph. Each Selling Holder also agrees to indemnify and hold harmless any
Underwriters of the Registrable Securities, their officers and directors and
each Person who controls such Underwriters on substantially the same basis as
that of the indemnification of the Company provided in this Section 4.2. The
Company shall be entitled to receive indemnities from Underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above, with
respect to information so furnished in writing by such Persons specifically for
inclusion in any prospectus or registration statement.
<PAGE>
SECTION 4.3 Conduct of Indemnification Proceedings.
Promptly after receipt by any person in respect of which
indemnity may be sought pursuant to Section 4.1 or 4.2 (an "Indemnified Party")
of notice of any claim or the commencement of any action, the Indemnified Party
shall, if a claim in respect thereof is to be made against the Person against
whom such indemnity may be sought (an "Indemnifying Party"), notify the
Indemnifying Party in writing of the claim or the commencement of such action;
provided, that the failure to notify the Indemnifying Party shall not relieve it
from any liability which it may have to an Indemnified Party otherwise than
under Section 4.1 or 4.2 and except to the extent of any actual prejudice
resulting therefrom. If any such claim or action shall be brought against an
Indemnified Party, and it shall notify the Indemnifying Party thereof, the
Indemnifying Party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified Indemnifying Party, to
assume the defense thereof with counsel reasonably satisfactory to the
Indemnified Party. After notice from the Indemnifying Party to the Indemnified
Party of its election to assume the defense of such claim or action, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal or
other expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof other than reasonable costs of investigation; provided, that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for fees
and expenses that are not reasonable. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such claim or proceeding. Whether or not the defense of any claim or action
is assumed by the Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its consent, which
consent will not be unreasonably withheld.
SECTION 4.4 Contribution.
If the indemnification provided for in this Article 4 is
unavailable to the Indemnified Parties in respect of any Damages referred to
herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Damages (i) as between the Company and the Selling Holders
on the one hand and the Underwriters on the other (subject to the terms of a
customary underwriting agreement), in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling Holders on
the one hand and the Underwriters on the other from the offering of the
Registrable Securities, or if such allocation is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits but also the relative fault of the Company and the Selling Holders on
the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such Damages, as well as any other
relevant equitable considerations, and (ii) as between the Company on the one
hand and each Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of the Company and of each Selling Holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Holders on the one hand and the Underwriters on the other (subject to
the terms of a customary underwriting agreement) shall be deemed to be in the
same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and the Selling Holders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of the Company and the Selling
Holders on the one hand and of the Underwriters on the other (subject to the
terms of a customary underwriting agreement) shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Selling Holders or by the
Underwriters. The relative fault of the Company on the one hand and of each
Selling Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
<PAGE>
The Company and the Selling Holders agree that it would not be
just and equitable if contribution pursuant to this Section 4.4 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of the
Damages referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 4.4, the maximum obligation of each Selling Holder for contribution
relating to a registration hereunder shall be limited to the proceeds received
by it from the sale of Registrable Securities pursuant to such registration. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. Each Selling Holder's
obligations to contribute pursuant to this Section 4.4 is several in the
proportion that the proceeds of the offering received by such Selling Holder
bears to the total proceeds of the offering received by all the Selling Holders
and not joint.
ARTICLE 5.
MISCELLANEOUS
SECTION 5.1 Participation in Underwritten Registrations.
No Person may participate in any underwritten registration
hereunder unless such Person (a) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and these registration rights.
SECTION 5.2 Lock-up Agreement.
For so long as the Holder has the right to have Registrable
Securities included in any registration pursuant to this Agreement, the Holder
agrees in connection with any registration of the Company's securities, upon the
request of the underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, pledge, grant any option for
the purchase of or otherwise dispose of any Registrable Securities without the
prior written consent of the Company or such underwriters, as the case may be,
during a lock-up period as the underwriters may reasonably specify. This
provision shall apply only if any Registrable Securities of the Holder are
included in the offering.
SECTION 5.3 Rule 144 and 144A.
The Company covenants that it will file any reports required
to be filed by it under the Securities Act and the Exchange Act and that it will
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable Holders to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 or Rule 144A under the Securities Act, or
(b) any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
SECTION 5.4 Amendment and Modification.
This Agreement may not be amended, modified or supplemented,
except by written agreement among the parties.
<PAGE>
SECTION 5.5 Binding Effect; Entire Agreement.
This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns and executors, administrators and heirs. This Agreement
sets forth the entire agreement and understanding among the parties as to the
subject matter hereof and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
SECTION 5.6 Severability.
In the event that any provision of this Agreement or the
application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
SECTION 5.7 Notices.
Any notice, demand, request, waiver, or other communication
under this Agreement shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given (i) on the date of service
if personally served or on the date after transmission if sent via overnight
mail, (ii) on the third day after mailing if mailed to the party to whom notice
is to be given, by first class mail, registered, return receipt requested,
postage prepaid or (iii) on the date sent if sent by facsimile, to the parties
at the following addresses or facsimile numbers with a copy sent by mail as
aforesaid on the same date (or at such other address or facsimile number for a
party as shall be specified by like notice):
(1) If to the Company, to:
Safety Components International, Inc.
3190 Pullman Street
Costa Mesa, California 92626
Attention: Jeffrey J. Kaplan
Telephone: (714) 662-7756
Telecopy: (714) 662-7649
(2) If to the Holder, at the most current address, and
with a copy to be sent to each additional address,
given by such Holder to the Company in writing,
with copies (which shall not constitute notice) to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, NY 10022
Attention: Richard A. Goldberg, Esq.
Telephone: (212) 891-9221
Telecopy: (212) 758-9526
<PAGE>
Jeffer Mangels Butler & Marmaro LLP
2121 Avenue of the Stars
Los Angeles, CA 90067
Attention: Robin Schachter, Esq.
Telephone: (310) 201-3592
Telecopy: (310) 203-0567
SECTION 5.8 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND
GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
SECTION 5.9 Headings.
The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
SECTION 5.10 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original instrument and all of which
together shall constitute one and the same instrument.
SECTION 5.11 Further Assurances.
Each party shall cooperate and take such action as may be
reasonably requested by another party in order to carry out the provisions and
purposes of this Agreement and the transactions contemplated hereby.
SECTION 5.12 Remedies.
In the event of a breach or a threatened breach by any party
to this Agreement of its obligations under this Agreement, any party injured or
to be injured by such breach will be entitled to specific performance of its
rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, inducing
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
SECTION 5.13 Pronouns.
Whenever the context may require, any pronouns used herein
shall be deemed also to include the corresponding neuter, masculine or feminine
forms.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
SAFETY COMPONENTS INTERNATIONAL, INC.
By:
-------------------------------------
Name: Jeffrey J. Kaplan
Title: Executive Vice President
and Chief Financial Officer
-------------------------------------
Robert A. Zummo
-------------------------------------
Francis X. Suozzi
VALENTEC INTERNATIONAL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
By:
-------------------------------------
Name: W. Hardy Myers
Title: Trustee
