TABLE OF CONTENTS

 

ARTICLE I. DEFINITIONS
1.1	CERTAIN DEFINITIONS
1.2	CERTAIN ADDITIONAL DEFINITIONS
ARTICLE II. THE MERGER
2.1	THE MERGER
2.2	CLOSING
2.3	EFFECTIVE TIME
2.4	EFFECTS OF THE MERGER
2.5	CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS
2.6	CONVERSION OF SECURITIES
2.7	SURRENDER OF CERTIFICATES
2.8	NO FURTHER OWNERSHIP RIGHTS IN SHARES OF COMPANY COMMON OR PREFERRED STOCK
2.9	[RESERVED]
2.10	ISSUABLE CONTINGENT STOCK.
2.11	LOST, STOLEN OR DESTROYED CERTIFICATES
2.12	DISSENTING SHARES
2.13	OPTIONS
2.14	WARRANTS
2.15	TAKING OF NECESSARY ACTION; FURTHER ACTION
2.16	WITHHOLDING
2.17	INCOME TAX TREATMENT
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1	AUTHORITY
3.2	ORGANIZATION
3.3	CAPITALIZATION
3.4	COMPANY SUBSIDIARIES.
3.5	CONFLICTS
3.6	CONSENTS, APPROVALS, ETC.
3.7	FINANCIAL STATEMENTS
3.8	UNDISCLOSED LIABILITIES
3.9	[RESERVED]
3.10	TAX MATTERS
3.11	LITIGATION AND GOVERNMENTAL ORDERS
3.12	COMPLIANCE WITH LAWS
3.13	PERMITS
3.14	TANGIBLE PROPERTY
3.15	INTELLECTUAL PROPERTY

 

 

3.16	CERTAIN CONTRACTS
3.17	EMPLOYEE BENEFIT MATTERS
3.18	LABOR MATTERS
3.19	ENVIRONMENTAL MATTERS
3.20	BROKERS
3.21	ABSENCE OF CERTAIN CHANGES OR EVENTS
3.22	INSURANCE MATTERS
3.23	ACCOUNTS RECEIVABLE
3.24	CUSTOMERS
3.25	SUPPLIERS
3.26	AFFILIATE TRANSACTIONS
3.27	COMPANY SEC REPORTS
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SIGNING STOCKHOLDERS
4.1	AUTHORIZATION
4.2	NO CONFLICT OR VIOLATION; CONSENTS
4.3	SECURITIES LAWS
4.4	RESALE RESTRICTIONS
4.5	LEGENDS
4.6	EXPERIENCE; ACCREDITED INVESTOR STATUS
4.7	TITLE TO SHARES
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
5.1	AUTHORITY
5.2	ORGANIZATION
5.3	CAPITALIZATION
5.4	PARENT SUBSIDIARIES
5.5	CONFLICTS
5.6	CONSENTS, APPROVALS, ETC.
5.7	FINANCIAL STATEMENTS
5.8	UNDISCLOSED LIABILITIES
5.9	[RESERVED]
5.10	TAX MATTERS
5.11	LITIGATION AND GOVERNMENTAL ORDERS
5.12	COMPLIANCE WITH LAWS
5.13	PERMITS
5.14	TANGIBLE PROPERTY
5.15	INTELLECTUAL PROPERTY
5.16	CERTAIN CONTRACTS
5.17	EMPLOYEE BENEFIT MATTERS
5.18	LABOR MATTERS
5.19	ENVIRONMENTAL MATTERS
5.20	INSURANCE MATTERS
5.21	ACCOUNTS RECEIVABLE

 

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5.22	CUSTOMERS
5.23	SUPPLIERS
5.24	BROKERS
5.25	NO PRIOR ACTIVITIES
5.26	ABSENCE OF CERTAIN CHANGES OR EVENTS
5.27	AFFILIATE TRANSACTIONS
5.28	PARENT SEC REPORTS
ARTICLE VI. COVENANTS PRIOR TO CLOSING DATE
6.1	CONDUCT OF THE COMPANY’S BUSINESS
6.2	CONDUCT OF PARENT’S BUSINESS
6.3	NO NEGOTIATIONS
6.4	ACCESS AND INVESTIGATION
6.5	CONFIDENTIALITY
6.6	EFFORTS: REQUIRED APPROVALS
6.7	[INTENTIONALLY OMITTED]
6.8	FURTHER ACTION
6.9	PUBLIC ANNOUNCEMENTS
6.10	TERMINATION OF AFFILIATE AGREEMENTS
6.11	NOTIFICATION
6.12	DIRECTORS’ AND OFFICERS’ INDEMNIFICATION
6.13	DEBT RESTRUCTURING
6.14	2004 AUDIT
6.15	AMENDMENT TO COMPANY CERTIFICATE OF INCORPORATION
6.16	REPURCHASE
6.17	EMPLOYMENT AGREEMENTS; SEPARATION AGREEMENTS; STOCKHOLDER RELEASES AND OTHER ANCILLARY AGREEMENTS
ARTICLE VII. CONDITIONS TO CLOSING
7.1	CONDITIONS TO EACH PARTY’S OBLIGATIONS.
7.2	CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
7.3	CONDITIONS TO OBLIGATIONS OF THE COMPANY
ARTICLE VIII. [RESERVED]
ARTICLE IX. COMPANY STOCKHOLDER REPRESENTATIVE; STOCKHOLDER CONSENTS
9.1	COMPANY STOCKHOLDERS REPRESENTATIVES; POWER OF ATTORNEY
9.2	COMPANY STOCKHOLDER CONSENT
9.3	TERMINATION OF AFFILIATE AGREEMENTS
ARTICLE X. TERMINATION
10.1	RIGHT OF TERMINATION
10.2	EFFECT OF TERMINATION
ARTICLE XI. GENERAL PROVISIONS
11.1	REPRESENTATIONS AND WARRANTIES

 

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11.2		EXPENSES
11.3		NOTICES
11.4		INTERPRETATION
11.5		SEVERABILITY
11.6		ENTIRE AGREEMENT
11.7		ASSIGNMENT
11.8		NO THIRD PARTY BENEFICIARIES
11.9		WAIVERS AND AMENDMENTS
11.10		NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
11.11		GOVERNING LAW; CONSENT TO JURISDICTION
11.12		PARENT’S CONSENT TO MERGER
11.13		WAIVER OF JURY TRIAL
11.14		COUNTERPARTS
11.15		ATTORNEYS’ FEES
EXHIBITS
Exhibit A	–		[Reserved]
Exhibit B	–		Company Certificate Amendment
Exhibit C	–		Registration Rights Agreement
Exhibit D	–		Shareholder Rights Agreement
Exhibit E	–		Certificate of Merger
Exhibit F	–		Directors of Surviving Corporation
Exhibit G	–		Officers of Surviving Corporation
Exhibit H	–		Management Services Agreement
Exhibit I	–		Stockholder Releases
Exhibit J	—		Unaccredited Investors
Exhibit K-1 – Weller Employment Terms
Exhibit K-2 – Cirar Employment Terms
Exhibit L-1 – Tallering Separation Terms
Exhibit L-2 – Mueller Separation Terms
Exhibit M – Amendment to Begel Separation Agreement
ANNEXES
Annex I – Signing Stockholders
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
Schedule 1.1 – 2004 EBITDA Add-backs
Schedule 6.1 – Company Actions
Schedule 6.2 – Parent Actions
Schedule 6.10 – Affiliate Agreements Not Terminated
Schedule 7.2(f) – Director Resignations
Schedule 7.2(h) – Required Consents

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (as amended from time to time pursuant to the terms hereof, this “ Agreement ”) is made and entered into as of December 24, 2004 by and among Accuride Corporation, a Delaware corporation (“ Parent ”), Amber Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“ Merger Sub ”), Transportation Technologies Industries, Inc., a Delaware corporation (the “ Company ”), those Persons listed on Annex I hereto (the “ Signing Stockholders ”), and Andrew Weller, Jay Bloom and Mark Dalton, as the Company Stockholders Representatives.

 

RECITALS

 

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each determined that the merger of Merger Sub with and into the Company (the “ Merger ”) is advisable and in the best interests of their respective stockholders, and such Boards of Directors have approved this Agreement and the Merger, upon the terms and subject to the conditions set forth in this Agreement, pursuant to which each share of Series A Preferred Stock, Series C Preferred Stock (other than Series C Repurchased Shares), Series D Preferred Stock, Series E Preferred Stock (other than Series E Repurchased Shares) and Company Common Stock (other than Repurchased Common Stock) issued and outstanding immediately prior to the Effective Time, other than shares owned or held directly or indirectly by the Company and other than Dissenting Shares, will be converted solely into the right to receive Parent Stock, upon the terms and subject to the conditions set forth herein;

 

WHEREAS, the Signing Stockholders, representing all of the holders (other than two holders of Company Warrants to purchase 1,530 shares of Company Common Stock) of the Company’s capital stock, Company Options and Company Warrants, have adopted and approved this Agreement and the Merger and Parent, as sole stockholder of Merger Sub, has adopted and approved this Agreement and the Merger;

 

WHEREAS, it is intended that the Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code (a “ Reorganization ”); and

 

WHEREAS, Parent, Merger Sub, the Signing Stockholders, the Company and the Company Stockholders Representatives desire to make certain representations, warranties, covenants and agreements in connection with the transactions contemplated hereby.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants, promises and agreements hereinafter set forth, the mutual benefits to be gained by the performance thereof, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the parties hereto hereby agree as follows:

 

 

ARTICLE I .

DEFINITIONS

 

1.1                                  Certain Definitions .  As used in this Agreement, the following terms shall have the following respective meanings:

 

“ Accredited Signing Stockholder ” means each Signing Stockholder other than those set forth on Exhibit J .

 

“ Action ” means any action, suit, proceeding, complaint, charge, inquiry, investigation, prosecution, arbitration or mediation before or by a Governmental Authority or any arbitrator or arbitration panel or any mediator or mediation panel.

 

“ Affiliate ” means, when used with respect to a specified Person, another Person that either directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified.  For purposes of this definition, “control” (and its derivatives) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of equity, voting or other interests, as trustee or executor, by contract or otherwise.

 

“ Ancillary Agreements ” means the Employment Agreements, Separation Agreements, Shareholder Rights Agreement, Registration Rights Agreement, the Management Services Agreement and Stockholder Releases.

 

“ Assets ” means the right, title and interest of the Company and the Company Subsidiaries or Parent and the Parent Subsidiaries, as applicable, in properties, assets and rights of any kind, whether tangible or intangible, real or personal, including without limitation the right, title and interest in the following:

 

(a)                                   all Contracts and Contract rights;

 

(b)                                  all Fixtures and Equipment;

 

(c)                                   all Inventory;

 

(d)                                  all Books and Records;

 

(e)                                   all Proprietary Rights;

 

(f)                                     all Permits;

 

(g)                                  all return and other rights under or pursuant to all warranties, representations and guarantees made by suppliers and other third parties in connection with the Assets or services furnished to the Company or the Company Subsidiaries or Parent or the Parent Subsidiaries, as applicable;

 

(h)                                  all cash, accounts receivable, deposits and prepaid expenses; and

 

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(i)                                      all goodwill.

 

“ Book and Records ” means (a) all product, business and marketing plans, sales and promotional literature and artwork relating to the Assets, the Business or the Parent Business, as applicable, (b) all books, records, lists, ledgers, financial data, files, reports, product and design manuals, plans, drawings, technical manuals and operating records of every kind relating to the Assets, the Business or the Parent Business, as applicable (including records and lists of customers, distributors, suppliers and personnel), and (c) all telephone and fax numbers used in the Business or the Parent Business, as applicable, in each case whether maintained as hard copy or stored in computer memory and whether owned by the Company or its Affiliates or the Parent or its Affiliates, as applicable.

 

“ Business ” means the business and operations of the Company and the Company Subsidiaries, as conducted as of the date hereof.

 

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by Law to be closed in the State of New York.

 

“ Cash Repurchase Amount ” means the sum of (i) the product of the number of Series E Repurchased Shares issued and outstanding immediately prior to the Repurchase multiplied by the Series E Repurchase Amount, (ii) the product of the number of Series C Repurchased Shares issued and outstanding immediately prior to the Repurchase multiplied by the Series C Repurchase Amount, (iii) the product of the number of Repurchased Common Stock issued and outstanding immediately prior to the Repurchase multiplied by the Common Stock Repurchase Amount, and (iv) the product of the number of Series D Repurchased Shares issued and outstanding immediately prior to the Repurchase multiplied by the Series D Repurchase Amount.

 

“ Change of Control ” shall mean (i) a sale of all or substantially all of the assets of Parent and its Subsidiaries to a Person in which the stockholders of Parent immediately prior to such transaction do not hold more than 50% of the voting power immediately following the transaction, (ii) a sale of Parent Stock by Parent or Parent’s stockholders resulting in more than 50% of the voting power of Parent being held by a Person other than the stockholders of Parent immediately prior to such sale, or (iii) a merger or consolidation of Parent with or into another Person, if and only if, after such merger or consolidation, the stockholders of Parent immediately prior to such transaction do not hold more than 50% of the voting power immediately following the transaction.

 

“ Common Share Exchange Ratio ” means the quotient, rounded to fourth decimal place, of (A) 1.978, divided by (B) the number of shares of Company Common Stock outstanding immediately prior to the Effective Time, but immediately following the Repurchase.

 

“ Common Stock Repurchase Amount ” means $0.01 per share of Common Stock.

 

“ Company Certificate Amendment ” means, collectively, those certain amendments to the Series A Certificate of Designations, Series C Certificate of Designations, Series D Certificate of Designations and Series E Certificate of Designations, in substantially the forms attached hereto as Exhibit B .

 

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“ Company Common Stock ” means the Company’s common stock, par value $0.01 per share.

 

“ Company Employee ” means each employee of the Company or any Company Subsidiary.

 

“ Company Options ” means all outstanding options to purchase or otherwise acquire shares of Company Common Stock, whether vested or unvested.

 

“ Company Preferred Stock ” means the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.

 

“ Company Stockholders’ Agreement ” means the Stockholders’ Agreement dated as of March 9, 2000 by and among Caravelle Investment Fund, L.L.C., CIBC WMC Inc., Albion Alliance Mezzanine Fund, L.P., Albion Alliance Mezzanine Fund II, L.P., Transportation Technologies Industries, Inc. and the persons listed on Exhibit A thereto, as amended to the date hereof.

 

“ Company Warrants ” means warrants to purchase 913,953 shares of Company Common Stock.

 

“ Confidentiality Agreements ” means those confidentiality letter agreements between Parent and the Company.

 

“ Contracts ” means all agreements, contracts, subcontracts, leases (whether for real or personal property), purchase orders, undertakings, understandings, covenants not to compete, employment agreements, confidentiality agreements, licenses, instruments, notes, obligations, options, warranties and commitments to which, in the case of the Company or the Company Subsidiaries, the Company or one of the Company Subsidiaries is a party or by which the Company or one of the Company Subsidiaries or any of the Company’s or the Company Subsidiaries’ Assets are bound or affected, whether written or oral, or, in the case of Parent or the Parent Subsidiaries, Parent or one of the Parent Subsidiaries is a party or by which Parent or one of the Parent Subsidiaries or any of Parent’s or the Parent Subsidiaries’ Assets are bound or affected, whether written or oral.

 

“ Debt Restructuring ” means (i) the execution and delivery of the definitive financing documents with Parent contemplated by the commitment letter, dated December 23, 2004 from Citicorp USA, Inc., Citigroup Global Markets Inc., Lehman Commercial Paper Inc., Lehman Brothers Inc. and UBS Loan Finance LLC (the “ Commitment Letter ”) related to commitments for senior debt facilities in the aggregate principal amount of $740,000,000, (ii) the repayment and termination of all obligations under the Company’s Senior Credit Facility, consisting of a $50,000,000 first lien revolving credit facility, a $115,000,000 first lien term loan facility and a $100,000,000 second lien term loan facility, (iii) the repayment and termination of all obligations under Parent’s Third Amended and Restated Credit Agreement dated as of June 13, 2003, and (iv) the discharge and satisfaction of the Company’s 12 1/2% Senior Subordinated Notes due March 31, 2010 in an aggregate principal amount of $100,000,000 as contemplated by Section 9.1

 

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of the Indenture related to such Senior Subordinated Notes. “ DGCL ” means the General Corporation Law of the State of Delaware.

 

“ EBITDA ” means, with respect to a period, the sum of the net income, plus income taxes, plus net interest, plus depreciation and amortization of the Company on a consolidated basis for such period, all as determined in accordance with GAAP, applied consistently with the Unaudited Company Financial Statements plus, with respect to EBITDA for the calendar year 2004, the items set forth on Schedule 1.1 .

 

“ Employment Agreements ” means the agreements relating to Parent’s employment of Andrew Weller and James Cirar following the Closing, in each case, on substantially the terms set forth on Exhibit K-1 and Exhibit K-2 , respectively.

 

“ Encumbrance ” means any security interest, pledge, mortgage, lien, charge, adverse claim of ownership or use, restriction on transfer (such as a right of first refusal or other similar rights), defect of title, or other encumbrance of any kind or character.

 

“ Environmental Claims ” means all written notices of violation, liens, claims, demands, suits, information requests, notices of citizen suit or causes of action for any damage, including, without limitation, personal injury, property damage (including, without limitation, any depreciation or diminution of property values), lost use of property or consequential damages, arising directly or indirectly out of Environmental Conditions or Environmental Laws.  By way of example only (and not by way of limitation), Environmental Claims include (i) violations of or obligations under any contract related to Environmental Laws or Environmental Conditions between the Company or any Company Subsidiary or Parent or any Parent Subsidiary , as applicable, and any other Person, (ii) actual or threatened damages to natural resources, (iii) claims for nuisance or its statutory equivalent, (iv) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, monitoring, response or remedial actions under any Environmental Laws, (v) requirements to implement “corrective action” pursuant to any order or Permit issued pursuant to the Resource Conservation and Recovery Act, as amended, or similar provisions of applicable state law, (vi) claims related to Environmental Laws or Environmental Conditions for restitution, contribution, or indemnity, (vii) fines, penalties or liens of any kind against property related to Environmental Laws or Environmental Conditions, (viii) claims related to Environmental Laws or Environmental Conditions for injunctive relief or other orders or notices of violation from federal, state or local agencies or courts, and (ix) with regard to any present or former employees or third parties, claims relating to exposure to or injury from Environmental Conditions.

 

“ Environmental Conditions ” means the state of the environment, including natural resources ( e.g. , flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or ambient air, including all indoor and outdoor workplaces at any Facility, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, migrating, disposal, dumping or threatened release of Hazardous Substances by, with respect to the Company, the Company, any Company Subsidiary or any of their predecessors in interest, or by its respective agents, representatives, employees or independent contractors when acting in such capacity on behalf of the Company or any Company

 

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Subsidiary, or, with respect to Parent, Parent any Parent Subsidiary or any of their predecessors in interest, or by their respective agents, representatives, employees or independent contractors when acting in such capacity on behalf of Parent or any Parent Subsidiary.  With respect to Environmental Claims by third parties, Environmental Conditions also include the exposure of persons to Hazardous Substances at the work place or the exposure of persons or property to Hazardous Substances migrating from or otherwise emanating from or located on property owned or occupied by the Company or any Company Subsidiary or Parent or any Parent Subsidiary, as the context requires.

 

“ Environmental Laws ” means all applicable federal, state, district and local laws, all rules or regulations promulgated thereunder, and all orders, consent orders or decrees, judgments, notices, Permits (including the terms and conditions of any such Permits) or demand letters issued, and any conditions thereunder, promulgated or entered pursuant thereto, relating to pollution or protection of the environment (including ambient air, surface water, ground water, drinking water supply, land surface, or subsurface strata), including, without limitation, those relating to (i) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, industrial materials, wastes or other substances in or into the environment, (ii) the identification, generation, manufacture, processing, distribution, use, treatment, storage, disposal, recovery, transport or other handling of pollutants, contaminants, chemicals, industrial materials, wastes or other substances, and (iii) Environmental Conditions. Environmental Laws shall include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“ CERCLA ”), the Toxic Substances Control Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended (“ RCRA ”), the Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety and Health Act, as amended, and all analogous laws promulgated or issued by any state or other Governmental Authority.

 

“ Environmental Reports ” means any and all written analyses, summaries, explanations or data in the possession or control of the Company or the Company Subsidiaries or Parent or the Parent Subsidiaries, as the context requires, prepared within the ten (10) years prior to the date of this Agreement for the purpose of analyzing or assessing (a) any Environmental Conditions in, on or about the properties of the Company and the Company Subsidiaries or Parent and the Parent Subsidiaries, as applicable, (b) the Company’s and each Company Subsidiary’s or Parent’s and each Parent Subsidiary’s compliance with Environmental Laws, or (c) any pending or, to the knowledge of the Company or Parent, as applicable, threatened litigation against the Company and the Company Subsidiaries or Parent and the Parent Subsidiaries, as applicable, regarding any Environmental Law.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

 “ Facilities ” means all offices, warehouses, administration buildings and all real property and related facilities owned, leased or operated, as of the Effective Time, by the Company or any Company Subsidiary or Parent or any Parent Subsidiary, as applicable.

 

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“ Fifth Anniversary ” shall mean the fifth anniversary of the Closing Date.

 

“ First Threshold Percentage ” means:

 

(a) if EBITDA for the calendar year 2004, based upon the Company’s audited financial statements to the extent then available, is equal to or greater than $53.5 million, then:

 

(i) if the aggregate principal amount of indebtedness outstanding under the Company’s first lien revolving credit facility as of December 31, 2004 is equal to or less than $14.9 million, then the First Threshold Percentage equals 0.3228; and

 

(ii) if the aggregate principal amount of indebtedness outstanding under the Company’s first lien revolving credit facility as of December 31, 2004 is greater than $14.9 million, then the First Threshold Percentage equals 0.1614; and

 

(b) if EBITDA for the calendar year 2004, based upon the Company’s audited financial statements to the extent then available, is less than $53.5 million, then:

 

(i) if the aggregate principal amount of indebtedness outstanding under the Company’s first lien revolving credit facility as of December 31, 2004 is equal to or less than $14.9 million, then the First Threshold Percentage equals 0.1614; and

 

(ii) if the aggregate principal amount of indebtedness outstanding under the Company’s first lien revolving credit facility as of December 31, 2004 is greater than $14.9 million, then the First Threshold Percentage equals zero (0).

 

“ Fixtures and Equipment ” means all of the furniture, fixtures, furnishings, machinery, computer hardware, and other tangible personal property owned by the Company and the Company Subsidiaries or Parent and the Parent Subsidiaries, as applicable, wherever located.

 

“ Former Properties ” means all plants, offices, manufacturing facilities, stores, warehouses, administration buildings and all real property and related facilities owned, leased or operated by the Company or any Company Subsidiary or Parent or any Parent Subsidiary, as the context requires, or any predecessor prior to the date hereof, but excluding the Facilities.

 

“ GAAP ” means generally accepted accounting principles in the United States.

 

“ Governmental Authority ” means any government, any governmental entity, department, commission, board, agency or instrumentality, and any court, tribunal, or judicial body, whether federal, state, county, local or foreign.

 

“ Governmental Order ” means any order, judgment, injunction, decree, stipulation or determination issued, promulgated or entered by or with any Governmental Authority of competent jurisdiction.

 

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“ Hazardous Substances ” means all pollutants, contaminants, chemicals, wastes, any other carcinogenic, ignitable, corrosive, reactive, toxic or otherwise hazardous substances or any other materials or substances (whether solids, liquids or gases) subject to regulation, control or remediation, or which could give rise to liability under Environmental Laws.  By way of example only, the term Hazardous Substances includes petroleum, urea formaldehyde, flammable, explosive and radioactive materials, PCBs, asbestos, acids, metals, mold, solvents and waste waters.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, any successor statute thereto, and the rules and regulations promulgated thereunder.

 

“ Initial Public Offering ” shall mean, after the date hereof, Parent’s initial sale of Parent Stock to the general public in an firmly committed underwritten public offering pursuant to an effective registration statement on Form S-1, or any successor form, under the Securities Act.

 

“ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended from time to time, any successor statute thereto, and the rules and regulations promulgated thereunder from time to time.

 

“ Inventory ” means all merchandise owned and intended for resale.

 

“ IRS ” means the United States Internal Revenue Service, and any successor agency thereto.

 

“ Issuable Contingent Stock ” shall mean the aggregate number of shares of Parent Stock issuable to holders of the Series A Preferred Stock and Series C Preferred Stock pursuant to Section 2.6(a) as determined pursuant to Section 2.10.

 

“ Knowledge ” or “ known ” and any other phrases of similar import means, with respect to a Person, to the extent of matters which are actually known, after reasonable inquiry, by such Person or, if such Person is not a natural Person, the executive officers of such Person and such Person’s Subsidiaries.

 

“ Law ” means any federal, state, county, local or foreign statute, law, ordinance, regulation, rule, code, order or rule of common law.

 

“ Liability ” means any and all debts, liabilities and obligations of any kind or nature, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable.

 

“ Management Option Agreement ” shall mean the Option Agreement dated as of February 28, 2001, by and among the individuals listed on Schedule 1 thereto and each of Transportation Investment Partners, L.L.C. and Caravelle Investment Fund, L.L.C.

 

“ Management Services Agreement ” means that certain Management Services Agreement by and between Parent and each of Trimaran Fund Management, LLC, and Kohlberg Kravis Roberts & Co., L.P., in substantially the form attached hereto as Exhibit H .

 

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“ Material Adverse Effect ” or “ Material Adverse Change ” means, with respect to any Person, any effect on or condition (or worsening thereof), event, development or change (a) that has been, or that could reasonably be expected to be, materially adverse to the condition (financial or otherwise), assets, Liabilities, properties, results of operations, prospects or business, of such Person and its Subsidiaries, taken as a whole, or (b) that has had or could reasonably be expected to have, a material adverse effect on the ability of such Person to consummate the transactions contemplated by this Agreement, in each case, excluding changes or effects directly relating to (i) economic conditions affecting North American truck components industry or the U.S. economy as a whole, provided that such changes or effects do not disproportionately effect such Person, or (ii) any change in accounting requirements or principles required by changes in GAAP.

 

“ Maximum Contingent Stock ” shall mean 2,025.80 shares of Parent Stock, as adjusted pursuant to Section 2.10(f).

 

“ Merger Shares ” means the shares of Parent Stock issued in connection with the Merger as a result of the conversions provided for in Sections 2.6(a).

 

“ Monitoring Agreement ” shall mean the Amended and Restated Monitoring Services Agreement, dated as of May 17, 2004, by and among the Company, Transportation Investment Partners, L.L.C., Caravelle Investment Fund, L.L.C., Albion Alliance Mezzanine Fund, L.P., Albion Mezzanine Fund II, L.P., Trimaran Fund Management, L.L.C. and Albion Alliance, LLC.

 

“ Most Recent Company Financial Statements ” means the consolidated balance sheets of the Company as of September 30, 2004 and the related consolidated statements of income, changes in stockholders’ equity and cash flows, of the Company for the nine (9) month period then ended.

 

“ Most Recent Parent Financial Statements ” means the consolidated balance sheets of Parent as of September 30, 2004 and the related consolidated statements of income, changes in stockholders’ equity and cash flows, of Parent for the nine (9) month period then ended.

 

“ Net Working Capital ” means, as of a specified date, the current assets of the Company, less the current liabilities of the Company, on a consolidated basis as of such date, determined in accordance with GAAP, applied consistently with the Unaudited Company Financial Statements.

 

“ Parent Business ” means the business and operations of Parent and the Parent Subsidiaries, as conducted as of the date hereof.

 

“ Parent Convertible Securities ” shall mean (i) any debt or equity securities of Parent that are convertible into or exchangeable, directly or indirectly, for Parent Stock, and (ii) any rights, warrants or options to subscribe for or purchase Parent Stock or any securities described in clause (i).

 

“ Parent Employee ” means each employee of Parent or any Parent Subsidiary.

 

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“ Parent Fully Diluted Capitalization ” means, as of immediately prior to the Effective Time, the number of shares of Parent Stock (i) then outstanding, and (ii) issuable upon exercise of all Parent Options then outstanding, whether or not exercisable, and (iii) issued or issuable upon exercise or conversion of any other equity or debt security of Parent then outstanding, whether or not then exercisable.

 

“ Parent Fully-Diluted Shares ” means the number of shares of Parent Stock (i) then outstanding, (ii) issued or issuable upon exercise of all warrants exercisable for shares of Parent Stock then outstanding, whether or not then exercisable, which would exercised based upon the Parent Stock Value, (iii) issuable upon exercise of all options to purchase shares of Parent Stock then outstanding, whether or not then exercisable, which would exercised based upon the Parent Stock Value, and (iv) issued or issuable upon exercise, conversion or exchange of other Parent Convertible Security then outstanding, whether or not then exercisable, which would exercised, converted or exchanged based upon the Parent Stock Value.

 

“ Parent Option Plan ” means the Accuride Corporation 1998 Stock Purchase and Option Plan, as amended to the date hereof.

 

“ Parent Options ” means all outstanding options to purchase or otherwise acquire shares of Parent Stock, whether vested or unvested, granted pursuant to the Parent Option Plan.

 

“ Parent Stock ” means the common stock of Parent, par value $0.01 per share.

 

“ Parent Stock Value ” shall mean a dollar amount per share of Parent Stock determined in accordance with Section 2.10(b).

 

“ Per Share Distribution Amount ” means the per share fair market value (as adjusted for Parent Stock splits, Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock), determined in good faith by Parent’s board of directors, of extraordinary dividends and distributions, excluding cash dividends and distributions which are paid out of, or which do not exceed, Parent’s cash flow from operations during the relevant period, declared and paid by Parent per share of Parent Stock after the date of the Closing and on or prior to the Contingent Stock Determination Event.

 

“ Permit ” means, when applicable to the Company or any Company Subsidiary, any license or permit with any Governmental Authority required by applicable Law for the operation of the Business as conducted by the Company and the Company Subsidiaries as of the date of this Agreement, and, when applicable to Parent or any Parent Subsidiary, any license or permit with any Governmental Authority required by applicable Law for the operation of the Parent Business as conducted by Parent and the Parent Subsidiaries as of the date of this Agreement.

 

“ Permitted Encumbrances ” means with respect to any Person: (a) statutory liens of landlords, liens of carriers, warehousepersons, mechanics and materialpersons incurred in the ordinary course of business for sums (i) not yet due and payable, or (ii) being contested in good faith, if, in either such case, an adequate reserve, shall have been made therefor in the Most Recent Company Financial Statements or Most Recent Parent Financial Statements, as applicable, (b) liens incurred or deposits made in connection with workers’ compensation,

 

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unemployment insurance and other similar types of social security programs or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, in each case in the ordinary course of business, consistent with past practice, (c) easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case, which do not interfere with the ordinary conduct of business of such Person and do not materially detract from the value of the property upon which such encumbrance exists, and (d) liens for Taxes, assessments and governmental charges not yet due and payable.

 

“ Person ” means any individual, general or limited partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a group under Section 13(d)(3) of the Exchange Act, any successor statutes thereto, and the rules and regulations promulgated thereunder.

 

“ Proprietary Rights ” means all (a) U.S. and foreign patents and patent applications and disclosures relating thereto (and any patents that issue as a result of those patent applications), and any renewals, reissues, reexaminations, extensions, continuations, continuations-in-part, divisions and substitutions relating to any of the patents and patent applications, as well as all related foreign patent and patent applications that are counterparts to such patents and patent applications, (b) U.S. and foreign trademarks, service marks, trade dress, logos, trade names and corporate names and the goodwill associated therewith and registrations and applications for registration thereof, (c) U.S. and foreign copyrights and rights under copyrights, including moral rights, and registrations and applications for registration thereof, (d) U.S. and foreign mask work rights and registrations and applications for registration thereof, (e) Trade Secrets, (f) URL and domain name registrations, (g) inventions (whether or not patentable) and improvements thereto, (h) all works of authorship (whether or not copyrightable), (i) all Software, (j) all claims and causes of action arising out of or related to infringement or misappropriation by any of the foregoing, (k) other proprietary rights, (l) copies and tangible embodiments thereof (in whatever form or medium) and (m) licenses (whether or not labeled as such) from third parties granting any rights with respect to any of the foregoing.

 

 “ Registration Rights Agreement ” means that certain Registration Rights Agreement, by and among Parent, Hubcap Acquisition L.L.C., TTI Securities Acquisition, L.L.C., Albion/TTI Securities Acquisition, L.L.C., and each other Signing Stockholder who is receiving Merger Shares in the Merger, in substantially the form attached hereto as Exhibit C .

 

“ Related Party ” means (i)  each Person who owns of record or beneficially at least five percent of the outstanding capital stock of the Company or Parent, as applicable, as of the date of this Agreement;  (ii)  each individual who is, or who has at any time since January 1, 2001 been, an officer or director of the Company or Parent, as applicable; (iii) each Affiliate of the Persons referred to in clauses “(i)” and “(ii)” above; (iv) any trust or other entity (other than the Company or Parent, as applicable) in which any one of the Persons referred to in clauses “(i)”, “(ii)” and “(iii)” above holds (or in which more than one of such Persons collectively hold), beneficially or otherwise, a material voting, proprietary or equity interest; and (v) any trust or other entity (other than the Company or Parent, as applicable) with which any of such Persons is affiliated.

 

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“ Repurchase ” means the repurchase of the Series E Repurchased Shares, Series D Repurchased Shares, Series C Repurchased Shares and Repurchased Common Stock pursuant to Section 6.16 hereof.

 

 “ SEC ” means the Securities and Exchange Commission.

 

“ Second Threshold Percentage ” means 0.3332 plus the First Threshold Percentage.

 

“ Second Trigger Price ” means $8,814.00 (as adjusted for Parent Stock splits, Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock) unless the First Threshold Percentage equals zero (0), in which case it means $8,500.00 (as adjusted for Parent Stock splits,  Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock).

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Separation Agreements ” means the agreements relating to the Company’s employment and/or termination of Ken Tallering and Don Mueller following the Closing, in each case, on substantially the terms set forth on Exhibit L-1 and L-2 , respectively.

 

“ Series A Exchange Ratio ” means the quotient, rounded to fourth decimal place, of (A) 7,491.86, divided by (B) the number of shares of Series A Preferred Stock, or issuable upon exercise or conversion of all options or warrants for, securities convertible into, or other rights to acquire Series A Preferred Stock, outstanding immediately prior to the Effective Time.

 

“ Series A Percentage ” means the quotient, rounded to the fourth decimal place, of (A) the quotient of 1,910.51 divided by 2,025.8, divided by (B) the number of shares of Series A Preferred Stock, or issuable upon exercise or conversion of all options or warrants for, securities convertible into, or other rights to acquire Series A Preferred Stock, outstanding immediately prior to the Effective Time.

 

“ Series A Preferred Stock ” means the Series A Redeemable Preferred Stock of the Company, par value $0.01 per share.

 

“ Series C Exchange Ratio ” means the quotient, rounded to the fourth decimal place, of (A) 451.57, divided by (B) the number of shares of Series C Preferred Stock, or issuable upon exercise or conversion of all options or warrants for, securities convertible into, or other rights to acquire Series C Preferred Stock, outstanding immediately prior to the Effective Time but immediately following the Repurchase.

 

“ Series C Percentage ” means the quotient, rounded to the fourth decimal place, of (A) the quotient of 115.29 divided by 2,025.8, divided by (B) the number of shares of Series C Preferred Stock, or issuable upon exercise or conversion of all options or warrants for, securities convertible into, or other rights to acquire Series C Preferred Stock, outstanding immediately prior to the Effective Time but immediately following the Repurchase.

 

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“ Series C Preferred Stock ” means the Series C Preferred Stock of the Company, par value $0.01 per share.

 

“ Series C Repurchase Amount ” means $307.68 per share of Series C Preferred Stock.

 

“ Series D Exchange Ratio ” means the quotient, rounded to the fourth decimal place, of (A) 0.420, divided by (B) the number of shares of Series D Preferred Stock, or issuable upon exercise or conversion of all options or warrants for, securities convertible into, or other rights to acquire Series D Preferred Stock, outstanding immediately prior to the Effective Time but immediately following the Repurchase.

 

 “ Series D Preferred Stock ” means the Series D Preferred Stock of the Company, par value $0.01 per share.

 

“ Series D Repurchase Amount ” means $0.10 per share of Series D Preferred Stock.

 

“ Series E Exchange Ratio ” means the quotient, rounded to the fourth decimal place, of (A) 6,550.55, divided by (B) the number of shares of Series E Preferred Stock, or issuable upon exercise or conversion of all options or warrants for, securities convertible into, or other rights to acquire Series E Preferred Stock, outstanding immediately prior to the Effective Time, but immediately following the Repurchase.

 

“ Series E Preferred Stock ” means the Series E Redeemable Preferred Stock of the Company, par value $0.01 per share.

 

“ Series E Repurchase Amount ” means $1,508.94 per share of Series E Preferred Stock.

 

“ Shareholder Rights Agreement ” means that certain Shareholder Rights Agreement, by and among Parent and the Signing Stockholders, in substantially the form attached hereto as Exhibit D .

 

“ Software ” means computer software, programs and databases in any form, including Internet web sites, web content and links, source code, executable code, tools, developers kits, utilities, graphical user interfaces, menus, images, icons, and forms, and all versions, updates, corrections, enhancements and modifications thereof, and all related documentation, developer notes, comments and annotations related thereto.

 

“ Stockholder ” means each stockholder of the Company and “ Stockholders ” means all stockholders of the Company, in each case as determined immediately prior to the Effective Time.

 

“ Stockholders’ Agreement ” shall mean the Stockholders’ Agreement dated as of March 9, 2000, as amended on February 28, 2001 and December 19, 2003, by and among Caravelle Investment Fund, L.L.C., CIBC WMC Inc., Albion Alliance Mezzanine Fund, L.P., Albion Alliance Mezzanine Fund II, L.P., the Company as the surviving corporation in the Merger and the persons listed on Exhibit A attached thereto.

 

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“ Subsidiary ” means, with respect to a Person, any corporation or other organization, whether incorporated or unincorporated, (i) of which such Person or any other Subsidiary of such Person is a general partner (excluding partnerships, the general partnership interests of which held by such Person or any Subsidiary of such Person do not have a majority of the economic interests in such partnership) or (ii) at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

 

“ Tax ” or “ Taxes ” means any federal, state, local or foreign income, gross receipts, license, payroll, excise, severance, occupation, windfall profits, environmental, social security, unemployment, disability, transfer, registration, value added, sales, use, employment, estimated, franchise, profits, property, capital stock, premium, minimum and alternative minimum or other taxes, fees, stamp taxes and duties, assessments or charges of any kind whatsoever (whether payable directly or by withholding), together with any interest and any penalties, additions to tax or additional amounts imposed by any Taxing Authority with respect thereto, whether disputed or not.

 

“ Tax Return ” means any report, return, declaration, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“ Taxing Authority ” means any Governmental Authority responsible for the imposition of any Tax.

 

“ Trade Secrets ” means all trade secrets and confidential business information (including ideas, formulas, compositions, know-how, research and development information, software, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans marketing mailing and e-mail lists, and customer and supplier mailing and e-mail lists and information).

 

“ Transaction Fee ” means the amount payable to each of Kohlberg Kravis Roberts & Co., L.P. and Trimaran Fund Management, LLC for negotiating the transaction, conducting due diligence, arranging the Debt Restructuring and taking other necessary or desirable actions in connection with the transactions contemplated by this Agreement, which shall be equal to $5,000,000 to each or such other lesser amount as may be determined jointly by Kohlberg Kravis Roberts & Co., L.P. and Trimaran Fund Management, LLC prior to the Closing, so long as such Transaction Fee is an equal amount for each of Kohlberg Kravis Roberts & Co., L.P. and Trimaran Fund Management, LLC.

 

1.2                                  Certain Additional Definitions .  As used in this Agreement, the following terms shall have the respective meanings ascribed thereto in the respective sections of this Agreement set forth opposite each such term below:

 

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Term			Section
Affiliate Agreements			3.26
Agreement			Preamble
Audited Company Financial Statements			3.7
Audited Parent Financial Statements			5.7
Balance Sheet Date			3.7
Business Insurance Policies			3.22(a)
Certificate of Merger			2.3
Certificates			2.7(a)
Closing			2.2
Closing Date			2.2
Company			Preamble
Company Benefit Plan(s)			3.17(a)
Company Bylaws			3.2
Company Certificate of Incorporation			3.2
Company Disclosure Schedule			Article III Preamble
Company Financial Statements			3.7
Company Multiemployer Plan			3.17(a)
Company SEC Reports			3.27
Company Stockholder Approval			3.1
Company Stockholders Representatives			9.1
Company Subsidiar(y)/(ies)			3.4(a)
Company Subsidiary Shares			3.4(a)
Company Title IV Plan			3.17(a)
Contingent Stock Determination Event			2.10(a)
Current Balance Sheet			3.7
Determination Notice			2.10(c)
Dissenting Shares			2.12(a)
Effective Time			2.3
Leased Real Property			3.14(a)
Listed Contract(s)			3.16(a)
Majority Holders			2.10(c)
Merger			Recitals
Merger Sub			Preamble
Objection Notice			2.10(c)
Outside Closing Date			10.1(c)
Owned Real Property			3.14(a)
Parent			Preamble
Parent Affiliate Agreements			5.27
Parent Benefit Plan(s)			5.17
Parent Bylaws			5.2
Parent Certificate of Incorporation			5.2
Parent Disclosure Schedule			Article V Preamble
Parent Financial Statements			5.7
Parent Insurance Policies			5.20

 

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Term			Section
Parent Leased Real Property			5.14(a)
Parent Listed Contract			5.16
Parent Multiemployer Plan			5.17(a)
Parent Owned Real Property			5.14(a)
Parent SEC Reports			5.28
Parent Stock Fair Market Value			2.10(c)
Parent Stock Value			2.10(b)
Parent Subsidiar(y)/(ies)			5.4
Parent Subsidiary Shares			5.4
Parent Title IV Plan			5.17(a)
PBGC			3.17(f)
Reorganization			Recitals
Repurchase Closing			6.16
Repurchased Common Stock			6.16
Series A Preferred Stock Certificate of Designations			9.2
Series C Preferred Stock Certificate of Designations			9.2
Series C Repurchased Shares			6.16
Series D Preferred Stock Certificate of Designations			9.2
Series D Repurchased Shares			6.16
Series E Preferred Stock Certificate of Designations			9.2
Series E Repurchased Shares			6.16
Signing Stockholders			Preamble
Stockholder Releases			7.2(j)
Surviving Corporation			2.1
Transmittal Letter			2.7(a)
Unaudited Company Financial Statements			3.7
Unaudited Parent Financial Statements			5.7

 

ARTICLE II .

THE MERGER

 

2.1                                  The Merger .  Upon the terms and subject to the conditions hereof, and in accordance with the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time.  Following the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation (the “ Surviving Corporation ”) and shall succeed to and assume all the rights and obligations of Merger Sub in accordance with the DGCL.

 

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2.2                                  Closing .  The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of Latham & Watkins, LLP, 885 Third Avenue, Suite 1000, New York, New York, on the date that is two Business Days following the satisfaction or waiver (subject to applicable Law) of the conditions (excluding conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) set forth in Article VII, or at such other time and place as the parties may agree (such date hereinafter, the “ Closing Date ”).

 

2.3                                  Effective Time .  At the Closing, Parent, Merger Sub and the Company shall cause a Certificate of Merger substantially in the form attached hereto as Exhibit E (the “ Certificate of Merger ”), executed in accordance with the relevant provisions of the DGCL, to be filed with the Secretary of State of the State of Delaware, and shall take all such other and further actions as may be required by Law to make the Merger effective.  The Merger shall become effective as of the Effective Time.  When used in this Agreement, the term “ Effective Time ” shall mean the time at which the Certificate of Merger is filed with the Secretary of State of the State of Delaware or such other time as set forth in the Certificate of Merger.

 

2.4                                  Effects of the Merger .  At and after the Effective Time, the Merger shall have the effects set forth in Section 259 of the DGCL.

 

2.5                                  Certificate of Incorporation and Bylaws; Directors and Officers .

 

(a)                                   At the Effective Time and without any further action on the part of the Company or Merger Sub, the Company Certificate of Incorporation shall be amended to read in its entirety as the certificate of incorporation of Merger Sub reads as in effect immediately prior to the Effective Time, until thereafter changed or amended as provided therein or applicable Law, provided that such certificate of incorporation shall reflect as of the Effective Time “Transportation Technologies Industries, Inc.” as the name of the Surviving Corporation.  The Bylaws of the Surviving Corporation shall be amended to read in their entirety as the Bylaws of Merger Sub prior to the Effective Time until thereafter changed or amended as provided therein or the Surviving Corporation’s certificate of incorporation and applicable Law.

 

(b)                                  The individuals specified in Exhibit F hereto shall be the directors of the Surviving Corporation as of the Effective Time, until the earlier of their resignation or removal or otherwise ceasing to be a director or until their respective successors are duly elected and qualified.

 

(c)                                   The individuals specified in Exhibit G shall be the officers of the Surviving Corporation as of the Effective Time, until the earlier of their resignation or removal or otherwise ceasing to be an officer or until their respective successors are duly elected and qualified.

 

2.6                                  Conversion of Securities .

 

(a)                                   At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any Stockholder:

 

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(i)                   Common Stock .  Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than Repurchased Common Stock, shares to be cancelled pursuant to Section 2.6(a)(iii) or Dissenting Shares (as provided in Section 2.12)) shall be converted into the right to receive, and become exchangeable for such number of shares of Parent Stock as equals the Common Share Exchange Ratio.

 

(ii)                Preferred Stock .

 

(A)            Each share of Series A Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled pursuant to Section 2.6(a)(iii) or Dissenting Shares (as provided in Section 2.12)) shall be converted into the right to receive, and become exchangeable for (i) such number of shares of Parent Stock as equals the Series A Exchange Ratio; and (ii) the Series A Percentage of the Issuable Contingent Stock, if any.

 

(B)              Each share of Series C Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Series C Repurchased Shares, shares to be cancelled pursuant to Section 2.6(a)(iii) or Dissenting Shares (as provided in Section 2.12)) shall be converted into the right to receive, and become exchangeable for (i) such number of shares of Parent Stock as equals the Series C Exchange Ratio; and (ii) the Series C Percentage of the Issuable Contingent Stock, if any.

 

(C)              Each share of Series D Preferred Stock issued and outstanding immediately prior to the Effective Time (other than shares to be cancelled pursuant to Section 2.6(a)(iii) or Dissenting Shares (as provided in Section 2.12)) shall be converted into the right to receive, and become exchangeable for such number of shares of Parent Stock as equals the Series D Exchange Ratio.

 

(D)             Each share of Series E Preferred Stock issued and outstanding immediately prior to the Effective Time (other than Series E Repurchased Shares, shares to be cancelled pursuant to Section 2.6(a)(iii) or Dissenting Shares (as provided in Section 2.12)) shall be converted into the right to receive, and become exchangeable for such number of shares of Parent Stock as equals the Series E Exchange Ratio.

 

(iii)             Cancellation .   Each share of Company Common Stock and Company Preferred Stock held in the treasury of the Company or by any Company Subsidiary immediately prior to the Effective Time (including without limitation the Series C Repurchased Shares and the Series E Repurchased Shares) shall, by virtue of the Merger and without any action on the part of the holder thereof, automatically cease to be outstanding, be canceled and retired without payment of any consideration therefor and cease to exist.

 

(iv)            Restrictions on Company Common Stock and Preferred Stock .  If any shares of Company Common Stock or Company Preferred Stock outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase

 

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agreement or other agreement with the Company, then the shares of Parent Stock issued in exchange for such shares, if any, will also be unvested and subject to the same repurchase option, risk of forfeiture or other condition, and the certificates representing such shares of Parent Stock may accordingly be marked with appropriate legends.  The Company shall take all action that may be necessary to ensure that, from and after the Effective Time, Parent is entitled to exercise any such repurchase option or other right set forth in any such restricted stock purchase agreement or other agreement.

 

(b)                                  Merger Sub Stock .  Each share of common stock, par value $.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, automatically be converted into and thereafter represent one (1) validly issued, fully paid and nonassessable common share, par value $.001 per share, of the Surviving Corporation, so that thereafter Parent will be the sole and exclusive owner of the capital stock of the Surviving Corporation.

 

2.7                                  Surrender of Certificates .

 

(a)                                   Distribution of Transmittal Letter .  As soon as practicable after the Effective Time, Parent shall cause to be mailed to each record holder of certificates or certificates evidencing Company Common Stock, Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (the “ Certificates ”) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to Parent or its designated representative and shall be in such form and have such other provisions as Parent shall reasonably specify) (the “ Transmittal Letter ”) and instructions for such holder’s use in effecting the surrender of the Certificate and the exercise of the rights of such holder to obtain its Merger Shares.

 

(b)                                  Delivery of Certificates .  Upon surrender to Parent or its designated representative of any Certificates for cancellation, together with a duly-executed and completed Transmittal Letter, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing the number of shares of Parent Stock to which such holder is entitled pursuant to Section 2.6.  Holders of Certificates may request that a separate certificate representing shares of Parent Stock be issued with respect to each Certificate duly surrendered by such holder to the Company pursuant to this Section 2.7.

 

(c)                                   Cancellation of Company Common Stock and Preferred Stock .  Upon surrender of each Certificate and delivery by Parent of the Merger Shares to be delivered in exchange therefor, such Certificate shall forthwith be canceled.  Until so surrendered, each Certificate (other than Certificates representing Dissenting Shares) shall be deemed for all corporate purposes to evidence only the right to receive upon such surrender the aggregate number of Merger Shares into which the Company Common Stock, Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock represented thereby shall have been converted in accordance with the terms and upon the conditions of this Agreement.

 

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(d)                                  Distributions With Respect to Unexchanged Shares of Company Common Stock and Company Preferred Stock .  No dividends or other distributions with respect to Parent Stock declared or made after the Effective Time and with a record date after the Effective Time will be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Stock represented thereby until the holder of record of such Certificate shall surrender such Certificate.  Subject to applicable law, promptly following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Parent Stock issued in exchange therefor, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time, if any, theretofore payable with respect to such whole shares of Parent Stock.

 

(e)                                   No Liability .  Notwithstanding anything to the contrary herein, none of Parent, the Company, Merger Sub or the Surviving Corporation shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Law.

 

2.8                                  No Further Ownership Rights in Shares of Company Common or Preferred Stock .  The shares of Parent Stock delivered upon the surrender for exchange of Company Common Stock, Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Common Stock, Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, including rights to all dividends, whether accrued, declared, unpaid or otherwise, and there shall be no further registration of transfers of Company Common Stock, Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock which were outstanding immediately prior to the Effective Time on the records of the Surviving Corporation.  If, after the Effective Time, the Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article II.

 

2.9                                  [ Reserved ]

 

2.10                            Issuable Contingent Stock .

 

(a)                                   Amount of Issuable Contingent Stock .  Initially, the Issuable Contingent Stock shall equal zero percent (0%) of the Maximum Contingent Stock.  Upon the earliest to occur of (i) a Change of Control, (ii) an Initial Public Offering, and (iii) the Fifth Anniversary (such earliest to occur referred to as the “ Contingent Stock Determination Event ”), if the Parent Stock Value, as determined pursuant to Section 2.10(b) with respect to the Contingent Share Determination Event is:

 

(i)                                      An amount per share of Parent Stock less than or equal to $7,908.00 minus the Per Share Distribution Amount (each as adjusted for Parent Stock splits,  Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock), then the number of shares of Issuable Contingent Stock shall be zero percent (0%) of the Maximum Contingent Stock;

 

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(ii)                                   An amount per share of Parent Stock (x) greater than $7,908.00 minus the Per Share Distribution Amount, but (y) less than or equal to the Second Trigger Price minus the Per Share Distribution Amount (in each case as adjusted for Parent Stock splits,  Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock), then the number of shares of Issuable Contingent Stock shall be the First Threshold Percentage of the Maximum Contingent Stock;

 

(iii)                                An amount per share of Parent Stock (x) greater than the Second Trigger Price minus the Per Share Distribution Amount, but (y) less than or equal to $9,689.00 minus the Per Share Distribution Amount (in each case as adjusted for Parent Stock splits,  Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock), then the number of shares of Issuable Contingent Stock shall be the Second Threshold Percentage of the Maximum Contingent Stock; or

 

(iv)                               An amount per share of Parent Stock greater than $9,689.00 minus the Per Share Distribution Amount (in each case as adjusted for Parent Stock splits,  Parent Stock dividends on Parent Stock, combinations of Parent Stock, recapitalizations of Parent Stock and the like with respect to the Parent Stock), then the number of shares of Issuable Contingent Stock shall be 100% of the Maximum Contingent Stock.

 

(b)                                  Parent Stock Value .  The “ Parent Stock Value ” with respect to a Contingent Stock Determination Event shall equal:

 

(i)                                      In the case of a Contingent Stock Determination Event which is a Change of Control, the fair market value, as of the date the definitive documents with respect to such Change of Control are entered into, of the consideration received by a holder with respect to one share of Parent Stock upon consummation of the Change of Control, determined in accordance with Section 2.10(c);

 

(ii)                                   In the case of a Contingent Stock Determination Event which is an Initial Public Offering, the price at which one share of Parent Stock is offered for sale to the public pursuant to the Registration Statement for such Initial Public Offering without giving effect to any underwriting discounts or sales commissions; and

 

(iii)                                In the case of a Contingent Stock Determination Event which is the Fifth Anniversary, the fair market value of one share of Parent Stock, on a fully diluted basis, on such Fifth Anniversary, determined in accordance with Section 2.10(c).

 

(c)                                   Determination of Share Valuation.

 

(i)                                      Change of Control .  The fair market value of the consideration received with respect to a share of Parent Stock upon consummation of a Change of Control, determined as of the date the definitive documents with respect to such Change of Control are entered into, shall equal:

 

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(A)                               With respect to consideration which is cash, the amount of such cash.

 

(B)                                 With respect to securities which are freely tradeable (other than due to the status of the holder as an Affiliate of the issuer) for which market quotations are readily available, the closing sales price on the date of determination on the principal securities exchange or on which such securities are traded or if such securities are not listed on a securities exchange, the closing sales price on the date of determination on the NASDAQ System, or, if on such date of determination there has been no sales on any such exchange or NASDAQ System, the average of the bid and asked prices on the primary exchange on which such security is listed at the end of such day of determination, or, if on any day such security is not so listed, the average of the bid and asked prices quoted in the NASDAQ System at the end of such day of determination.

 

(C)                                 With respect to any other securities or assets the value, as of the date of determination, as determined in good faith by Parent’s board of directors, subject to the provisions of this clause (C).  Parent shall deliver written notice of such determination to the holders who are entitled to receive Issuable Contingent Stock, which notice shall provide in reasonable detail the basis of its determination (the “ Determination Notice ”). Such determination shall become final and binding upon all the parties, unless within 15 days of the date of such notice, holders who are entitled to receive a majority of the Maximum Contingent Stock (the “ Majority Holders ”) deliver written notice to Parent objecting to such determination, which notice shall set forth in reasonable detail the basis for such objection (the “ Objection Notice ”).  Upon receipt of an Objection Notice from the Majority Holders, Parent and the Majority Holders shall negotiate in good faith to reach an agreement on the fair market value of such securities or assets.  If by the 30th day after the date of delivery of the Determination Notice, Parent and the Majority Holders are unable to reach agreement on such fair market value, such fair market value will be determined by an independent appraiser jointly selected by Parent and the Majority Holders. If Parent and the Majority Holders are unable to mutually agree upon an appraiser, each of Parent, on the one hand, and the Majority Holders, on the other hand, shall select an appraiser, and the two appraisers shall select a third appraiser to determine the fair market value of such securities or assets, as of the date of determination, which appraised value shall be binding on all parties.  Fair market value of such securities or assets as determined by appraisal shall be determined by the 45 ^th day after the date of delivery of the Determination Notice. The fees and expenses of the appraisers shall be paid equally by Parent and the holders who deliver an Objection Notice to Parent.

 

(ii)                                   Fifth Anniversary .

 

(A)                               The fair market value of a share of Parent Stock, on a fully diluted basis, shall be determined as of the Fifth Anniversary, and shall equal the quotient of:

 

(1)                                   The aggregate price that would be paid in cash for all of the Parent Stock and Parent Convertible Securities that are outstanding on the date of determination on a going-concern basis between a willing buyer and a willing seller (neither acting under compulsion), using valuation techniques then prevailing in the securities industry and assuming

 

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full disclosure and understanding of all relevant information and a reasonable period of time for effecting such sale; divided by

 

(2)                                   The number of Parent Fully-Diluted Shares (such quotient referred to as the “ Parent Stock Fair Market Value ”).

 

For purposes of determining the aggregate price in clause (A)(1) above, (i) the exercise price of all options and warrants to acquire Parent Stock or Parent Convertible Securities which would be expected to be exercised based upon the Parent Stock Value shall be deemed to have been received by the Company, and (ii) the liquidation preference or indebtedness (as the case my be) represented by Parent Convertible Securities which are outstanding as of the date of determination which would be expected to be exercised, converted or exchanged based upon the Parent Stock Value shall be deemed to have been eliminated.

 

(B)                                 The Parent Stock Fair Market Value shall be determined in good faith by Parent’s board of directors, subject to the provisions of this clause (C).  Parent shall deliver a Determination Notice to the holders who are entitled to receive Issuable Contingent Stock.  Such determination shall become final and binding upon all the parties, unless within 15 days of the date of such notice, the Majority Holders deliver an Objection Notice to Parent.  Upon receipt of an Objection Notice from the Majority Holders, Parent and the Majority Holders shall negotiate in good faith to reach an agreement on the Parent Stock Fair Market Value.  If by the 30th day after the date of delivery of the Determination Notice, Parent and the Majority Holders are unable to reach agreement on the Parent Stock Fair Market Value, such fair market value will be determined by an independent appraiser jointly selected by Parent and the Majority Holders. If Parent and the Majority Holders are unable to mutually agree upon an appraiser, each of Parent, on the one hand, and the Majority Holders, on the other hand, shall select an appraiser, and the two appraisers shall select a third appraiser to determine the Parent Stock Fair Market Value, which appraised value shall be binding on all parties.  The Parent Stock Fair Market Value shall be determined by the 60 ^th day after the date of delivery of the Determination Notice. The fees and expenses of the appraisers shall be paid equally by Parent and the holders who deliver an Objection Notice to Parent.

 

(d)                                  Issuance of Contingent Stock .  If after the determination of the Parent Stock Value with respect to a Contingent Stock Determination Event, the Issuable Contingent Stock is a positive number, then the Company, as promptly as practicable, shall issue and deliver, to each holder of Series A Preferred and Series C Preferred Stock who has complied with the exchange procedures set forth in Section 2.7, a certificate or certificates for the number of fully paid and non-assessable shares of Parent Stock as provided by Section 2.6(a), in such name or names as may be designated by each such holder, plus shares of Parent Stock with a value, based upon the Parent Stock Value, equal to the Per Share Distribution Amount; provided that the holder of such shares of Issuable Contingent Stock shall not be entitled to receive the dividends or distributions included in the Per Share Distribution Amount.

 

(e)                                   Non-Transferable .  The rights of the holders of Series A Preferred Stock and Series C Preferred Stock to receive Issuable Contingent Stock, if any, are personal to each holder thereof and shall not be transferable for any reason other than (i) by operation of law, or (ii) by

 

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will or the laws of descent and distribution.  Any attempt to transfer such rights by any such holder (other than as permitted by the immediately preceding sentence) shall be null and void.

 

(f)                                     Adjustments .  In the event Parent (i) declares a dividend on Parent Stock payable in shares of Parent Stock, (ii) subdivides the outstanding Parent Stock into a larger umber of shares of Parent Stock, (iii) combines the outstanding Parent Stock into a smaller number of shares of Parent Stock, or (iv) takes any similar action, the Maximum Contingent Stock shall be appropriately adjusted.

 

2.11                            Lost, Stolen or Destroyed Certificates .  In the event any Certificates shall have been lost, stolen or destroyed, Parent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, such shares of Parent Stock as may be required pursuant to Section 2.6; provided, however, that Parent may, in its sole discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver an indemnity and/or bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent with respect to the Certificates alleged to have been lost, stolen or destroyed.

 

2.12                            Dissenting Shares .

 

(a)                                   Notwithstanding any provision of this Agreement to the contrary, any shares of Company Common Stock or Company Preferred Stock held by a holder who has demanded and perfected dissenters’ rights for such shares in accordance with the DGCL and who, as of the Effective Time, has not effectively withdrawn or lost such dissenters’ rights (“ Dissenting Shares ”) shall not be cancelled or converted into or represent a right to receive Parent Stock pursuant to Section 2.6, but the holder thereof shall only be entitled to such rights as are granted by the DGCL.

 

(b)                                  Notwithstanding the provisions of subsection (a) above, if any holder of shares of Company Common Stock or Company Preferred Stock who demands dissenters’ rights for such shares under the DGCL shall effectively withdraw or lose (through failure to perfect or otherwise) the right to dissenters’ rights, then, as of the later of (i) the Effective Time or (ii) the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive Parent Stock as provided in Section 2.6, without interest thereon, upon surrender of the certificate representing such shares.

 

(c)                                   The Company shall give Parent (i) prompt notice of its receipt of any written demands for dissenters’ rights for any shares of Company Common Stock or Company Preferred Stock, withdrawals of such demands, and any other instruments relating to the Merger served pursuant to the DGCL and received by the Company and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for dissenters’ rights under the DGCL.  The Company shall not, except with the prior written consent of Parent or as may be required under applicable law, voluntarily make any payment with respect to any demands for dissenters’ rights for Company Common Stock or Company Preferred Stock or offer to settle or settle any such demands.  All cash payments made to dissenters shall be made by the Company, and not by Parent.

 

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2.13                            Options .  Each Signing Stockholder which holds a Company Option, whether vested or unvested, acknowledges and agrees that upon the Effective Time each such Company Option shall be cancelled and, without any action on the part of the holder thereof, automatically cease to be outstanding, be canceled and terminated without payment of any consideration therefor and cease to exist.  The Company shall take all actions necessary to cancel all Company Options outstanding as of immediately prior to the Effective Time, such that immediately after the Effective Time all Company Options shall have been cancelled and terminated without the payment of any consideration therefor.

 

2.14                            Warrants .  Each Signing Stockholder which holds a Company Warrant acknowledges and agrees that upon the Effective Time each such Company Warrant shall be cancelled and, without any action on the part of the holder thereof, automatically cease to be outstanding, be canceled and terminated without payment of any consideration therefor and cease to exist.  The Company shall take all actions necessary to cancel all Company Warrants outstanding as of immediately prior to the Effective Time, such that immediately after the Effective Time all Company Warrants shall have been cancelled and terminated without the payment of any consideration therefor.

 

2.15                            Taking of Necessary Action ; Further Action .  Each of Parent, Merger Sub, the Company and the Signing Stockholders will take all such reasonable lawful action as may be necessary or appropriate in order to effect the Merger in accordance with this Agreement as promptly as practicable.  If, at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest Parent with full right, title and possession to all the property, rights, privileges, power and franchises of the Company, the officers and directors of Merger Sub, Parent and the Company immediately prior to the Effective Time are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action.

 

2.16                            Withholding .  Parent and the Company shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Stockholder such amounts as Parent or the Company is required to deduct and withhold under the Internal Revenue Code, or any Tax law, with respect to the making of such payment.  To the extent that amounts are so withheld by Parent or the Company, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Stockholders in respect of whom such deduction and withholding was made by Parent or the Company.

 

2.17                            Income Tax Treatment .  It is intended by the parties hereto that the Merger qualify as a Reorganization.  The parties hereto hereby adopt this Agreement as a “plan of reorganization” within the meanings of Sections 1.368-2(g) and 1.368-3(a) of the Treasury Regulations promulgated under the Internal Revenue Code.  None of Parent, the Company or the Stockholders shall take any position inconsistent therewith on any Tax Returns or for any tax purpose (unless required by law).

 

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ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

On or prior to the date of the execution and delivery of this Agreement, the Company shall deliver to Parent and Merger Sub a disclosure schedule with numbered sections corresponding to the relevant sections in this Agreement (the “ Company Disclosure Schedule ”).  Any exception or qualification set forth in the Company Disclosure Schedule with respect to a particular representation, warranty or covenant contained herein shall be deemed to be an exception or qualification with respect to all other applicable representations, warranties and covenants contained in this Agreement to which such exception or qualification is reasonably apparent on its face to be applicable, whether or not such exception or qualification is so numbered.  Nothing in the Company Disclosure Schedule is intended to broaden the scope of any representation or warranty of the Company contained herein.  Subject to the exceptions and qualifications set forth in the Company Disclosure Schedule, the Company hereby represents and warrants to Parent and Merger Sub as follows:

 

3.1                                  Authority .  The Company has all requisite corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder, and the consummation by the Company of the transactions contemplated hereby, including the filing of the Company Certificate Amendment prior to the Effective Time, have been duly authorized by the Board of Directors of the Company and its stockholders, and no other corporate action or approval under the Company Stockholders’ Agreement on the part of the Company or approval under the Company Stockholders’ Agreement is necessary to authorize the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated hereby.  The affirmative votes of a majority in voting power of the outstanding Company Common Stock, 75% in voting power of the Preferred Investor Common Stockholders (as defined in the Company Stockholders’ Agreement), a majority in voting power of the outstanding Series A Preferred Stock, 98% in voting power of the Series E Preferred Stock, and a majority of the voting power of each of the Series C Preferred Stock and Series D Preferred Stock are the only votes of the holders of any Company capital stock necessary in connection with the consummation of the Merger and the transactions contemplated hereby (the “ Company Stockholder Approval ”).  This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement constitutes a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by principles of public policy, and subject to (i) the effect of any applicable Law of general application relating to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights and relief of debtors generally, and (ii) the effect of Laws and general principles of equity, including, Laws and general principles of equity governing specific performance, injunctive relief and other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

 

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3.2                                  Organization .  The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it, and to carry on its business in all material respects as currently conducted by the Company.  The Company is duly qualified to do business as a foreign corporation, and is in good standing, under the Laws of each jurisdiction in which the character of its properties owned, operated or leased, or the nature of its activities, makes such qualification necessary, except in those jurisdictions where the failure to be so qualified or in good standing, when taken together with all other failures by the Company to be so qualified or in good standing, would not reasonably be expected to have a Material Adverse Effect with respect to the Company.  Each jurisdiction in which the Company is qualified to do business as a foreign corporation is set forth on Section 3.2 of the Company Disclosure Schedule.  True and complete copies of the Certificate of Incorporation (the “ Company Certificate of Incorporation ”) and Bylaws (the “ Company Bylaws ”) of the Company, each as amended and in effect as of the date of this Agreement, have been provided to Parent.

 

3.3                                  Capitalization .

 

(a)                                   Authorized Capitalization .  As of the date of this Agreement, the authorized capitalization of the Company consists of 20,000,000 shares of Company Common Stock, par value $0.01 per share and 400,000 shares of Company Preferred Stock, par value $0.01 per share, of which 173,000 shares are designated Series A Preferred Stock, 14,000 shares are designated Series C Preferred Stock, 42,000 shares are designated Series D Preferred Stock and 41,475 shares are designated Series E Preferred Stock.  As of the date of this Agreement, 1,860,464 shares of Company Common Stock are issued and outstanding, 138,394 shares of Series A Preferred Stock are issued and outstanding, 14,000 shares of Series C Preferred Stock are issued and outstanding, 42,000 shares of Series D Preferred Stock are issued and outstanding, and 41,475 shares of Series E Preferred Stock are issued and outstanding, and no additional shares of capital stock of the Company will be issued after the date hereof except for shares issued in connection with the exercise of Company Options and the Company Warrants outstanding on the date hereof.  The Company has no other capital stock authorized, issued or outstanding.  Section 3.3(a) of the Company Disclosure Schedule sets forth the name of each holder of shares of Company Common Stock and Company Preferred Stock, as well as the number of shares of Company Common Stock and Company Preferred Stock held by each such holder.  As of the date hereof and as of the Effective Time, there are no declared but unpaid dividends or distributions on any of the capital stock of the Company.

 

(b)                                  Options .  As of the date of this Agreement, 10,000 shares of Company Common Stock are reserved for issuance upon the exercise of outstanding Company Options.  Section 3.3(b) of the Company Disclosure Schedule sets forth the name of each holder of Company Options, as well as the number of the Company Options held by each such holder, the number of shares of Company Common Stock for which each such Company Option is exercisable, the date upon which each such Company Option becomes exercisable and the price per share of Common Stock for which each such Company Option is exercisable (without taking into account whether or not such Company Option is in fact exercisable on the date hereof).  The

 

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Company has delivered to Parent accurate and complete copies of each Company Option, including all amendments thereto.

 

(c)                                   Warrants .  As of the date of this Agreement, 913,953 shares of Company Common Stock are reserved for issuance upon exercise of the Company Warrants.  Section 3.3(c) of the Company Disclosure Schedule sets forth the name of each holder of Company Warrants, as well as the number of shares of Company Common Stock for which such holder’s Company Warrants are exercisable.

 

(d)                                  No Other Capital Stock, Options, Warrants or Other Rights .  Except for the Company Options and Company Warrants referred to above, there are no outstanding options, warrants, convertible securities or rights of any kind to purchase or otherwise acquire any shares of capital stock or other securities of the Company.  Except for the aggregate of 10,000 shares of Company Common Stock reserved for issuance upon exercise of the Company Options and 913,953 shares of Company Common Stock reserved for issuance upon exercise of the Company Warrants, no shares of capital stock of the Company are reserved for issuance.  There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights relating to the equity of the Company, whether or not settled in cash or in equity securities.

 

(e)                                   Valid Issuances .  All outstanding shares of Company Common Stock and Company Preferred Stock are, and any shares of Company Common Stock issued upon exercise of any Company Option or Company Warrant will be, validly issued, fully paid and non-assessable and not subject to any preemptive rights created by statute, the Company’s Certificate of Incorporation or Bylaws, or any Contract, and have been or will be issued in compliance with all federal and state corporate and securities laws.  The Company Options and Company Warrants have been issued in compliance with all federal and state corporate and securities laws.  Assuming termination of the Company Stockholders’ Agreement, there are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect to the issuance or sale of capital stock of the Company.

 

(f)                                     Stockholder Agreements .  Except as set forth on Section 3.3(f) of the Company Disclosure Schedule, there are no stockholder agreements, voting trusts, proxies or other arrangements, agreements or understandings which affect, restrict or relate to voting, giving of written consents, dividend rights or transferability of shares with respect to the capital stock of the Company.

 

3.4                                  Company Subsidiaries .

 

(a)                                   Section 3.4(a) of the Company Disclosure Schedule sets forth (i) the legal name and jurisdiction of organization of each Subsidiary of the Company (each, a “ Company Subsidiary ” and, collectively, the “ Company Subsidiaries ”), (ii) the authorized capital stock or other equity interest of each Company Subsidiary, (iii) the number and designation of all issued and outstanding shares of capital stock or other equity interest of each Company Subsidiary (collectively, the “ Company Subsidiary Shares ”), and (iv) the current, direct and indirect, percentage ownership of the outstanding Company Subsidiary Shares by the Company.  Other than the Company Subsidiaries set forth in Section 3.4(a) of the Company Disclosure Schedule,

 

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there are no other Persons in which the Company or any Company Subsidiary owns, of record or beneficially, any direct or indirect equity interest or any right (contingent or otherwise) to acquire such an equity interest.  Except as set forth in Section 3.4(a) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary is a member of any partnership or limited liability company, nor is the Company or any Company Subsidiary a participant in any joint venture or similar arrangement constituting a legal entity.

 

(b)                                  Each of the Company Subsidiaries is duly organized or formed and validly existing under the laws of its respective jurisdiction of organization, and has the requisite organizational power and authority to own, operate or lease the respective properties and assets now owned, operated or leased by it, and to carry on its respective business in all material respects as currently conducted by each such Company Subsidiary.  Each of the Company Subsidiaries is duly qualified to do business as a foreign organization, and is in good standing, under the Laws of each jurisdiction in which the character of its properties owned, operated or leased, or the nature of its activities, makes such qualification necessary, except in those jurisdictions where the failure to be so qualified or in good standing, when taken together with all other failures by the Company and other Company Subsidiaries to be so qualified or in good standing, would not reasonably be expected to have a Material Adverse Effect with respect to the Company.  True and complete copies of the organizational documents of each Company Subsidiary, each as amended and in effect as of the date of this Agreement, have been made available to Parent.

 

(c)                                   As of the date hereof, there are no outstanding options, warrants, calls, rights of conversion or other rights, agreements, arrangements or commitments of any kind or character, whether written or oral, to which the Company or any Company Subsidiary is a party, or by which any of them are bound, obligating the Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, any shares of capital stock or other equity interests of any Company Subsidiary.

 

(d)                                  There are (i) no rights, agreements, arrangements or commitments of any kind or character, whether written or oral, to which the Company or any Company Subsidiary is a party, or by which any of them are bound, obligating the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any issued and outstanding Company Subsidiary Shares, (ii) no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to any Company Subsidiary, and (iii) to the Knowledge of the Company, except as set forth in their respective organizational documents, no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect to which the Company or any Company Subsidiary is a party, or by which any of them are bound, with respect to the governance of any Company Subsidiary or the voting or transfer of any Company Subsidiary Shares.

 

3.5                                  Conflicts .  Assuming all consents, approvals, authorizations, filings and notifications and other actions set forth in Section 3.6 have been obtained or made, and except as set forth in Section 3.5 of the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder, and the consummation by the Company of the transactions contemplated hereby, does not and will not (i) conflict with or result in a violation of the Company Certificate of Incorporation or

 

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Company Bylaws, (ii) conflict with or result in a violation of any Governmental Order or Law applicable to the Company or its assets or properties, or (iii) result in a material breach of, or constitute a material default (or event which with the giving of notice or lapse of time, or both, would become a material default) under, or give rise to any rights of termination, amendment, modification, acceleration or cancellation of or loss of any benefit under, or result in the creation of any Encumbrance on any of the assets or properties of the Company or any Company Subsidiary pursuant to, any Contract to which the Company or any Company Subsidiary is a party, or by which any of the assets or properties of the Company or any Company Subsidiary is bound or affected, except, in the case of clauses (ii) and (iii) of this Section 3.5 , as would not reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

3.6                                  Consents, Approvals, Etc.   No consent, waiver, approval, authorization, order or permit of, or declaration, filing or registration with, or notification to, any Governmental Authority or other Person is required to be made or obtained by the Company or any Company Subsidiary in connection with the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder, or the consummation by the Company of the transactions contemplated hereby, except (i) as set forth in Section 3.6 of the Company Disclosure Schedule, (ii) the filing of the Certificate of Merger pursuant to the DGCL, (iii) applicable requirements, if any, under the DGCL, federal or state securities or “blue sky” Laws, (iv) the requirements of the HSR Act and any Laws of foreign jurisdictions relating to anti-trust or competition, and (v) where the failure to obtain such consent, approval, authorization or action, or to make such filing or notification would not, when taken together with all other such failures by the Company or any Company Subsidiary, reasonably be expected to have a Material Adverse Effect with respect to the Company or any Company Subsidiary.

 

3.7                                  Financial Statements .

 

(a)                                   Financial Statements .  The Company has prepared, or caused to be prepared, and provided to Parent the audited consolidated financial statements of the Company (including the balance sheet and the related statements of income and cash flows) as of and for each of the twelve month periods ended December 31, 2002 and December 31, 2003, respectively (the “ Audited Company Financial Statements ”), and unaudited financial statements of the Company (including the balance sheet and the related statements of income and cash flows) as of and for the nine month period ended September 30, 2004 (the “ Unaudited Company Financial Statements ” and, together with the Audited Company Financial Statements, the “ Company Financial Statements ”).  Except as set forth therein, the Company Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated therein and with each other (except that the Unaudited Company Financial Statements may not contain all of the notes required by GAAP), and present fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company as of the respective dates and during the respective periods indicated therein, subject in the case of the Unaudited Company Financial Statements to normal recurring year-end adjustments.  The balance sheet of the Company as of September 30, 2004 shall be referred to herein as the “ Current Balance Sheet ” and the date thereof shall be referred to herein as the “ Balance Sheet Date .”

 

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(b)                                  Internal Controls .  The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed with management’s authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s authorization and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(c)                                   Books and Records .  The Books and Records, taken as a whole, fairly reflect in all material respects the activities of the Company and the Business.

 

(d)                                  All Accounts Recorded .  The Company has not engaged in any transaction, maintained any bank account or used any corporate funds except for transactions, bank accounts or funds which have been and are reflected in the normally maintained Books and Records.

 

(e)                                   Corporate Records .  The stock records and minute books of the Company that have been provided to Parent fully reflect all minutes of meetings, resolutions and other material actions and proceedings of its stockholders, trustees and board of directors and all committees thereof, all issuances, transfers and redemptions of capital stock of which the Company is aware and contain true, correct and complete copies of its respective Certificate of Incorporation and Bylaws and all amendments thereto through the date hereof.

 

3.8                                  Undisclosed Liabilities .  Neither the Company nor any Company Subsidiary has any material Liability that is required to be reflected on the face of a balance sheet prepared in accordance with GAAP, except as (i) reflected in, reserved against or disclosed in the Company Financial Statements, (ii) disclosed in Section 3.8 of the Company Disclosure Schedule or in any of the documents set forth in the Company Disclosure Schedule, (iii) incurred in the ordinary course of business since the Balance Sheet Date, or (iv) would not have a Material Adverse Effect with respect to the Company.

 

3.9                                  [ Reserved ].

 

3.10                            Tax Matters .

 

(a)                                   Filing of Tax Returns .  Except as set forth on Section 3.10(a) of the Company Disclosure Schedule, the Company and each Company Subsidiary have timely filed with the appropriate Taxing Authorities all material Tax Returns required to be filed.  The Tax Returns filed are complete and accurate in all material respects.  Except as set forth on Section 3.10(a) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary is the beneficiary of any extension of time within which to file any material Tax Return.

 

(b)                                  Payment of Taxes .  The unpaid Taxes of the Company and the Company Subsidiaries (i) did not, as of the Balance Sheet Date, materially exceed the reserve for Tax Liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Current Balance Sheet, and (ii) will not materially exceed that reserve as adjusted for operations and transactions through the Closing

 

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Date in accordance with the past custom and practice of the Company and the Company Subsidiaries in filing their Tax Returns.  Since the Balance Sheet Date, neither the Company nor any Company Subsidiary has incurred any material Liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.

 

(c)                                   Audits, Investigations or Claims .  Except as set forth in Section 3.10(c) of the Company Disclosure Schedule, no material deficiencies for Taxes of the Company or the Company Subsidiaries have been claimed, proposed or assessed in writing by any Taxing Authority.  Except as set forth on Section 3.10(c) of the Company Disclosure Schedule, there are no material pending or ongoing audits of any Tax Returns of the Company or any Company Subsidiary by the relevant Taxing Authorities.  Except as set forth on Section 3.10(c) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has waived any statute of limitations in respect of material Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency.

 

(d)                                  Liens .  There are no material Encumbrances for Taxes (other than for current Taxes not yet due and payable) on any of the assets of the Company or the Company Subsidiaries.

 

(e)                                   Prior Affiliated Groups .  Except as set forth in Section 3.10(e) of the Company Disclosure Schedule, the Company and each Company Subsidiary is not and has not been, during any year for which the applicable statute of limitations with respect to the payment of Taxes has not yet expired, a member of an affiliated group of corporations within the meaning of Section 1504 of the Internal Revenue Code or of any group that has filed a combined, consolidated or unitary state, local or foreign Tax Return, other than a group in which the Company or any Company Subsidiary is the common parent.

 

(f)                                     Tax Sharing Agreements .  Except as set forth in Section 3.10(f) of the Company Disclosure Schedule, there are no Tax sharing or Tax indemnity agreements or similar arrangements with respect to or involving the Company or the Company Subsidiaries.

 

(g)                                  Other Entity Liability .  Except as set forth in Section 3.10(g) of the Company Disclosure Schedule, neither the Company nor any of the Company Subsidiaries has any material Liability for the Taxes of any Person (other than Taxes of the Company or the Company Subsidiaries) under Treasury regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by Contract or otherwise.

 

(h)                                  Tax Elections .  None of the Company or any of the Company Subsidiaries has (i) consented at any time under former Section 341(f)(1) of the Internal Revenue Code to have the provisions of former Section 341(f)(2) of the Internal Revenue Code apply to any disposition of any of its assets; (ii) agreed, or is required, to make any adjustment under Section 481(a) of the Internal Revenue Code by reason of a change in accounting method or otherwise; (iii) made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Internal Revenue Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Internal Revenue Code; (iv) acquired or owns any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Internal Revenue Code;

 

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(v) made or will make a consent dividend election under Section 565 of the Internal Revenue Code; or (vi) made any of the foregoing elections or is required to apply any of the foregoing rules under any comparable state, local or foreign Tax provision.

 

(i)                                      Listed Transactions and Tax Shelters .  Neither the Company nor any Company Subsidiary has entered into or participated in any listed transaction within the meaning of Treasury Regulation Section 1.6011-4(b)(2) or any confidential corporate tax shelter within the meaning of Treasury Regulation Section 301.6111-2.

 

(j)                                      United States Real Property Holding Corporation .  The Company has not been a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Internal Revenue Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.

 

(k)                                   Reorganization .  The Company is not aware of any reason why the Merger will not qualify as a Reorganization.

 

3.11                            Litigation and Governmental Orders .  Except as set forth in Section 3.11 of the Company Disclosure Schedule, (i) there are no Actions pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary, any of the assets or properties of the Company or any Company Subsidiary, or any of the directors and officers of the Company or any Company Subsidiary in their capacity as directors or officers of the Company or any Company Subsidiary, and (ii) the Company, each Company Subsidiary and their respective assets and properties, are not subject to any Governmental Order relating specifically to the Company, any Company Subsidiary or any of their respective assets or properties.

 

3.12                            Compliance with Laws .  To the Knowledge of the Company, the Company and each Company Subsidiary has conducted its respective part of the Business in material compliance with applicable Law.  Neither the Company nor any Company Subsidiary has received any notice to the effect that, or has otherwise been advised that, it is not in compliance with any such Laws, and the Company has no reason to anticipate that any existing circumstances are likely to result in any material violation of any of the foregoing.

 

3.13                            Permits .  The Company and the Company Subsidiaries has all material Permits required to allow the Company and the Company Subsidiaries to conduct the Business.  As of the date hereof, all of the Permits held by or issued to the Company and the Company Subsidiaries are in full force and effect, and the Company and the Company Subsidiaries are in material compliance with each such Permit held by or issued to it.

 

3.14                            Tangible Property .

 

(a)                                   Section 3.14(a) of the Company Disclosure Schedule contains a true, correct and complete list of (i) each item of real property (excluding leasehold improvements) owned, as of the date hereof, by the Company or any Company Subsidiary (“ Owned Real Property ”), (ii) each item of real property leased from a third party, as of the date hereof, by the Company or any Company Subsidiary (“ Leased Real Property ”), the name of the third party

 

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lessor(s) thereof, the date and term of the lease contract and the rental rate relating thereto and all amendments thereof.  Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, either the Company or a Company Subsidiary has (i) legal, valid and marketable title to, and enjoys peaceful and undisturbed possession of, all Owned Real Property owned by it, and (ii) a valid and subsisting leasehold interest in, and enjoys peaceful and undisturbed possession of, all Leased Real Property leased by it, in each case free and clear of all Encumbrances, other than Permitted Encumbrances.  There are no pending or, to the knowledge of the Company, threatened condemnation proceedings relating to, or any pending or, to the knowledge of the Company, threatened Actions relating to, the Company’s leasehold interests in such Leased Real Property or any portion thereof.  Except as set forth in Section 3.14(a) of the Company Disclosure Schedule, (i) each lease to which the Company or any Company Subsidiary is a party with respect to the Leased Real Property is in full force and effect and represents a legally valid and binding obligation of the Company or the Company Subsidiary which is a party thereto, and to the Knowledge of the Company, represents a legally valid and binding obligation of the other parties thereto, (ii) each of the Company and the Company Subsidiaries has performed, in all material respects, all obligations required to be performed by it under each of the leases with respect to the Leased Real Property to which it is a party, (iii) neither the Company or any Company Subsidiary is in material breach or violation of, or material default under, any of the leases with respect to the Leased Real Property to which it is a party, nor has the Company or any Company Subsidiary received any written notice that it has breached, violated or defaulted under any of such leases, and (iv) to the Knowledge of the Company, there is no breach by any other party or parties to any of the leases with respect to the Leased Real Property.

 

(b)                                  Except as set forth in Section 3.14(b) of the Company Disclosure Schedule, the Company and the Company Subsidiaries have legal and valid title to, or in the case of leased assets and properties, valid and subsisting leasehold interests in, all of the material tangible personal assets and properties used or held for use by the Company or any Company Subsidiary in connection with the conduct of the Business, free and clear of all Encumbrances other than Permitted Encumbrances.  All material personal property is in good condition, ordinary wear and tear excepted.

 

3.15                            Intellectual Property .

 

(a)                                   Section 3.15(a) of the Company Disclosure Schedule contains a true, correct and complete list of all material Proprietary Rights owned by the Company or any Company Subsidiary, including: (i) for each material patent and patent application (including, without limitation, petty patents and utility models and applications therefor, as applicable), the number, issue date, title and priority information for each country in which such patent has been issued, or the application number, date of filing, title and priority information for each country in which a patent application is pending, (ii) for each material registered trademark, tradename or service mark, the application serial number or registration number thereof, if applicable, the class of goods or the description of the goods or services covered thereby, the countries in which such tradename or trademark is registered, and the expiration date for each country in which such trademark or tradename has been registered, and (iii) for each material registered copyright, the number and date of registration thereof for each country in which a copyright has been registered.

 

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(b)                                  Except as set forth in Section 3.15(b) of the Company Disclosure Schedule, (i) the Company and the Company Subsidiaries own or have a valid right to use the material Proprietary Rights used by them in connection with the normal conduct of the Business as presently conducted by the Company and the Company Subsidiaries, and (ii) such Proprietary Rights will not cease to be valid rights of the Company and the Company Subsidiaries by reason of the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder, or the consummation by the Company of the transactions contemplated hereby.

 

(c)                                   As of the date hereof, neither the Company nor any Company Subsidiary has received since December 31, 2002 any written notice of (i) any alleged invalidity with respect to any of the material Proprietary Rights owned or used by the Company or any Company Subsidiary in connection with the normal conduct of the Business as presently conducted by the Company and the Company Subsidiaries, or (ii) any alleged material infringement of any rights of others due to any activity by the Company or any Company Subsidiary.  To the Knowledge of the Company, the use by each of the Company and each Company Subsidiary of the material Proprietary Rights owned and used by the Company and the Company Subsidiaries in connection with the normal conduct of the Business as presently conducted by the Company and the Company Subsidiaries do not infringe upon the valid Proprietary Rights of any third party.  To the Knowledge of the Company, no other Person is infringing in any way upon any material Proprietary Rights owned by the Company or a Company Subsidiary.

 

(d)                                  Except as set forth in Section 3.15(d) of the Company Disclosure Schedule, the Company and the Company Subsidiaries do not h