Exhibit 2.2
CONTRIBUTION AGREEMENT
dated as of December 13,
2006
among
CPG INTERNATIONAL HOLDINGS
L.P.
and
CHRISTOPHER BARDASIAN, KEVIN SLOAN, AND LARRY
SLOAN
CONTRIBUTION
AGREEMENT
This CONTRIBUTION AGREEMENT (this
“ Agreement ”), dated as of December 13, 2006,
by and among CPG International Holdings LP, a Delaware limited
partnership (the “ Partnership ”), Christopher
Bardasian, Kevin Sloan, and Larry Sloan (each, a “
Subscriber ” and together, the “
Subscribers ”).
RECITALS
WHEREAS, the Partnership is the
indirect owner of all of the capital stock of CPG International I,
Inc. (“ CPG International ”).
WHEREAS, CPG International has
entered into a Unit Purchase Agreement, dated as of the date hereof
(the “ Purchase Agreement ”), that provides for,
among other things, the purchase by CPG International, or its
designee, of certain of the membership interests of Pro-Cell, LLC,
an Alabama limited liability company (the “ Company
”), from the Subscribers.
WHEREAS, upon the terms and subject
to the conditions set forth in this Agreement, immediately prior to
the closing of the transactions contemplated by the Purchase
Agreement, the Subscribers desire to contribute membership
interests in the Company in an amount specified opposite each
Subscriber’s name in Schedule 1 hereto (the
“ Transferred Units ”) to the Partnership in
exchange for the number of Parent Units set forth opposite each
Subscriber’s name in Schedule 1 hereto (such
contributions by the Subscribers, the “ Contributions
”).
WHEREAS, the parties hereto intend
that the Contributions contemplated by this Agreement will be
treated for income tax purposes as transfers pursuant to
Section 721 of the Internal Revenue Code of 1986, as amended,
and any corresponding provisions of applicable state income or
franchise tax status.
WHEREAS, in connection with the
consummation of the transactions contemplated by this Agreement,
the Subscribers will become parties to an Agreement of Limited
Partnership of the Partnership dated as of March 8, 2005, as
amended, a copy of which is attached hereto as
Exhibit A (the “ Partnership Agreement
”).
WHEREAS, the Partnership and the
Subscribers desire to provide for the Contributions and to
establish certain rights and obligations in connection
herewith.
NOW, THEREFORE, in consideration of
the mutual representations, warranties, covenants and agreements
contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions .
The following terms, whenever used herein, shall have the following
meanings for all purposes of this Agreement.
“ Affiliate ”
means as to any Person (a) any Person which directly or indirectly
controls, is controlled by, or is under common control with such
Person, and (b) any Person who is a director, officer, partner or
principal of such Person or of any Person which directly or
indirectly controls, is controlled by, or is under common control
with such Person. For purposes of this definition, (i)
“control” of a Person shall mean the power, direct or
indirect, to direct or cause the direction of the management and
policies of such Person whether by ownership of voting stock, by
contract or otherwise and (ii) an “Affiliate” of
an individual will be his spouse, children, parents and siblings
and his spouse’s, parents and siblings.
“ Americhem Change of
Control Agreement ” means the change of control
agreement, dated April 1, 2006 among Americhem Inc., the
Company and the Subscribers.
“ Antitrust Laws
” means the HSR Act, the Sherman Act, as amended, the Clayton
Act, as amended, the Federal Trade Commission Act, as amended, and
any other United States federal or state or foreign statutes,
rules, regulations, orders, decrees, administrative or judicial
doctrines or other laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade.
“ Approved Capex
” means the capital expenditures set forth on Schedule
1.1 in the amounts set forth thereon.
“ Benefit Plan ”
means any “employee benefit plan” as defined in ERISA
Section 3(3), including any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an employee pension
benefit plan (as defined in ERISA Section 3(2)), (b) qualified
defined contribution retirement plan or arrangement which is an
employee pension benefit plan, (c) qualified defined benefit
retirement plan or arrangement which is an employee pension benefit
plan, (d) employee welfare benefit plan (as defined in ERISA
Section 3(1)) or material fringe benefit plan or program, or (e)
stock purchase, stock option, restricted stock, performance award,
severance pay, employment, change in control, vacation pay, salary
continuation, sick leave, excess benefit, bonus or other incentive
compensation, life insurance or other employee benefit plan,
contract, program, policy or other arrangement, whether or not
subject to ERISA, and whether written or oral, funded or unfunded,
under which any present or former director, officer, consultant,
independent contractor or employee of the Company has any present
or future right to benefits sponsored or maintained, or in the case
of (a) through (e) sponsored or maintained by the Subscribers, the
Company or any ERISA Affiliate.
“ Business Day ”
means any day that is not a Saturday, Sunday or other day on which
banking institutions in New York, New York are authorized or
required by law or executive order to close.
“ Code ” means
the Internal Revenue Code of 1986, as amended.
“ date hereof ”
and “ date of this Agreement ” means the date
first written above.
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“ Encumbrance ”
means any and all liens, encumbrances, charges, mortgages, options,
pledges, restrictions on transfer, security interests,
hypothecations, easements, rights-of-way or encroachments of any
nature whatsoever, whether voluntarily incurred or arising by
operation of law.
“ ERISA ” means
the Employee Retirement Income Security Act of 1974, as amended,
and the regulations promulgated thereunder.
“ ERISA Affiliate
” means each business or entity which is a member of a
“controlled group of corporations,” under “common
control” or an “affiliated service group” with
the Company within the meaning of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with the Company under
Section 414(o) of the Code, or is under “common
control” with the Company, within the meaning of Section
4001(a)(14) of ERISA.
“ Financial Statements
” means (i) the reviewed balance sheet of the Company for the
fiscal years ended December 31, 2004 and December 31, 2005 (the
“ 2005 Financial Statements ”) including the
notes thereto, and the reviewed statements of income and retained
earnings, stockholders’ equity and cash flow for the period
ended December 31, 2004 and December 31, 2005, (ii) the
unaudited balance sheet of the Company as of October 31, 2006 (the
“ Interim Balance Sheet ”) and the related
unaudited consolidated statements of income, shareholders’
equity and cash flows of the Company for the ten (10) months ended
October 31, 2006 (the “ Interim Financial Statements
”).
“ GAAP ” means
United States generally accepted accounting principles.
“ Governmental
Authority ” means any nation or government, any state,
province or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or
administration functions of or pertaining to government, or any
government authority, agency, department, board, tribunal,
commission or instrumentality of the United State of America, any
foreign government, any state of the United States of America, or
any municipality or other political subdivision thereof, and any
court, tribunal or arbitrator(s) of competent jurisdiction, and any
governmental or non-governmental self-regulatory organization,
agency or authority.
“ HSR Act ” means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.
“ IRS ” means the
United States Internal Revenue Service.
“ Indebtedness ”
means, of any Person, without duplication, (i) indebtedness for
borrowed money or indebtedness issued or incurred in substitution
or exchange for indebtedness for borrowed money, (ii) indebtedness
evidenced by any note, bond, debenture, mortgage or other debt
instrument or debt security, (iii) obligations under any interest
rate, currency or other currency hedging agreement, (iv)
obligations under any performance bond or letter of credit, but
only to the extent drawn or called prior to the Closing, (v) all
capitalized lease obligations as determined under GAAP,
(vi)
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all obligations in respect of
purchase money obligations for the acquisition of equipment and
fixed assets, but in no event including trade payables in the
ordinary course of business, (vii) all obligations secured by an
Encumbrance on any property or asset owned by such Person
regardless of whether the obligations secured thereby shall have
been assumed by that Person or are non-recourse to the credit of
that Person, (viii) all obligations created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person, (ix) all guarantees with respect
to any indebtedness of any other Person of a type described in
clauses (i) through (viii) above, and (x) for clauses (i) through
(ix) above, all accrued interest thereon, if any, and any
termination fees, prepayment penalties, “breakage” cost
or similar payments or contractual charges associated with the
repayments of such Indebtedness on the Closing Date. For the
avoidance of doubt, Indebtedness shall not include any Indebtedness
incurred in connection with Approved Capex or, to the extent in
excess of the amount of Approved Capex, authorized by the
Partnership in writing.
“ Indemnitor ”
means any party hereto from which any Indemnitee is seeking
indemnification pursuant to the provisions of this
Agreement.
“ Interim Balance Sheet
” shall have the meaning as set forth in the definition of
Financial Statements.
“ Interim Financial
Statements ” shall have the meaning as set forth in the
definition of Financial Statements.
“ knowledge of the
Company ” or “ knowledge of the Subscribers
” or any similar phrase means the actual knowledge of each of
the Subscribers after reasonable inquiry.
“ Material Adverse
Effect ” means a material adverse effect on the business,
results of operations, properties or assets of the Company;
provided , however , that “Material Adverse
Effect” shall not include the impact on such business,
results of operations, properties or assets arising out of or
attributable to (except, in the case of clauses (i), (ii), or (iii)
below to the extent disproportionately affecting the Company
relative to all other Persons operating in the same industries as
the Company taken as a whole): (i) conditions or effects that
generally affect the industries in which the Company operates, (ii)
general economic conditions affecting the United States, (iii)
effects arising from changes in laws or GAAP after the date hereof,
(iv) effects relating to the announcement of the execution of this
Agreement or the transactions contemplated hereby, (v) effects
related to the Company’s compliance with and performance of
the terms and conditions of this Agreement or any other agreement
entered into in connection herewith, or (vi) any acts of war, other
hostilities or terrorism involving the United States.
“ Multiemployer Plan
” has the meaning set forth in Sections 3(37) or 4001(a)(3)
of ERISA.
“ Net Revenues ”
means the sales of the Company of composite decking, decking
related trim/rail and specialty Kvaerner extrusions and all other
products and
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services sold as of the date of this
Agreement by the Company, calculated as the sum of all invoiced
sales, plus reimbursable shipping charges, and less any royalties
or similar payments.
“ Parent Units ”
means Class A Units of Parent, as defined in the agreement of
Partnership Agreement.
“ Permitted
Encumbrances ” means, (i) Encumbrances for Taxes,
assessments and other government charges not yet due and payable or
which are being contested in good faith by appropriate proceedings,
(ii) mechanics’, workmens’, repairmens’,
warehousemens’, carriers’ or other like Encumbrances
arising in the ordinary course of business of the Company, (iii)
Encumbrances to be removed prior to or at Closing, (iv) the
Encumbrances set forth on Schedule 1.2 ; (v) other
Encumbrances which are not, individually or in the aggregate,
material in character, amount or extent and which do not materially
detract from the value or materially interfere with the present use
of the assets subject thereto or affected thereby and (vi) any
Encumbrances incurred in connection with any Indebtedness that
Buyer elects not to pay-off at Closing.
“ Person ” means
any individual, corporation (including any not for profit
corporation), general or limited partnership, limited liability
partnership, joint venture, estate, trust, firm, company (including
any limited liability company or joint stock company), association,
organization, entity or Governmental Authority.
“ Pre-Closing Tax
Period ” means any tax period (or the portion of any
Straddle Period) ending on or prior to the Closing Date.
“ Proceeding ”
means any action, suit, litigation, arbitration, proceeding,
hearing, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving,
any Governmental Authority.
“ Representatives
” means any director, officer, agent, employee, general
partner, member, stockholder, advisor or representative of such
Person.
“ Straddle Periods
” In the case of any taxable period that includes (but does
not end on) the Closing Date: (1) the amount of any Taxes of the
Company based on or measured by income or receipts for the
Pre-Closing Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date, provided
that exemptions, allowances, credits or deductions that are
calculated on an annual basis (including, but not limited to,
depreciation and amortization deductions) shall be allocated
between the period ending on the Closing Date and the period after
the Closing Date in proportion to the number of days in each period
and (2) the amount of other Taxes of the Company for the
Pre-Closing Period shall be deemed to be the amount of such Tax for
the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period prior to and
including the Closing Date and the denominator of is the number of
days in the Straddle Period.
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“ Return ” means
with respect to a specified amount, interest thereon at 7.5% per
annum, calculated from the Closing Date to the actual date the
specified amount is paid.
“ Tax Returns ”
means any report, declaration, return, information return, claim
for refund, election, disclosure, estimate or statement required to
be supplied to a taxing authority in connection with Taxes,
including any schedule or attachment thereto, and including any
amendments thereof.
“ Tax ” or
“ Taxes ” means taxes of any kind, levies or
other like assessments, customs, duties, imposts, charges or fees,
including, without limitation, income, gross receipts, ad valorem,
value added, excise, real or personal property, asset, sales, use,
license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, unclaimed or
abandoned property, transfer and gains taxes or other governmental
taxes imposed or payable to the United States, or any state,
county, local or foreign government or subdivision or agency
thereof, and, in each instance, such term shall include any
interest, penalties or additions to tax attributable to any such
Tax or requirement to report information with respect thereto and
in each instance shall include any liability for Taxes of any other
Person in respect of any items described by contract, as a
transferee or successor to another Person, under U.S. Treasury Reg.
Section 1.1502-6 or analogous state, local or foreign provisions or
otherwise.
“ Third Party Claim
” means any claim or demand for which an Indemnitor may be
liable to an Indemnitee hereunder which is asserted by a third
party.
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1.2
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Interpretive Provisions . Unless the express context otherwise
requires:
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(a) the words
“hereof,” “herein,” and
“hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement;
(b) terms defined
in the singular shall have a comparable meaning when used in the
plural, and vice versa;
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(c)
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the terms “dollars” and
“$” mean United States Dollars;
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(d) references
herein to a specific Section, Subsection, Recital, Schedule or
Exhibit shall refer, respectively, to Sections, Subsections,
Recitals, Schedules or Exhibits of this Agreement;
(e) wherever the
word “include,” “includes,” or
“including” is used in this Agreement, it shall be
deemed to be followed by the words “without
limitation”;
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(f) references herein to
any gender shall include each other gender;
(g) references
herein to any Person shall include such Person’s heirs,
executors, personal representatives, administrators, successors and
assigns; provided , however , that nothing contained
in this clause (g) is intended to authorize any assignment or
transfer not otherwise permitted by this Agreement;
(h) references
herein to a Person in a particular capacity or capacities shall
exclude such Person in any other capacity;
(i) references herein to
any contract or agreement (including this Agreement) mean such
contract or agreement as amended, supplemented or modified from
time to time in accordance with the terms thereof;
(j) with
respect to the determination of any period of time, the word
“from” means “from and including” and the
words “to” and “until” each means “to
but excluding”;
(k) references
herein to any law or any license mean such law or license as
amended, modified, codified, reenacted, supplemented or superseded
in whole or in part, and in effect from time to time;
(l) references herein to
any law shall be deemed also to refer to all rules and regulations
promulgated thereunder; and
(m) whenever the last day for
the exercise of any privilege or the discharge of any duty
hereunder shall fall upon a day that is not a Business Day, the
party having such privilege or duty may exercise such privilege or
discharge such duty on the next succeeding day which is a Business
Day.
ARTICLE 2
SUBSCRIPTION AND EARN OUT
CONSIDERATION
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2.1
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Subscription and Earn-Out
.
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(a) Upon the terms
and subject to the conditions set forth herein, (i) each Subscriber
agrees to irrevocably and unconditionally subscribe for, and the
Partnership agrees to issue to each Subscriber the number of Parent
Units set forth opposite each Subscriber’s name in
Schedule 1 in exchange for the amount of Transferred
Units set forth opposite each Subscriber’s name in
Schedule 1 and the Partnership agrees to pay the Unit Earn
Out Consideration (if any) as described in Section 2.1(c)
below.
(b) “Unit
Earn Out Consideration ” means a one-time payment to
the Subscribers as consideration for the Transferred Units, payable
on the later of January
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1, 2008 and 5 Business Days’
after the completion of the CPG International, Inc. audit for the
year ending December 31, 2007, calculated as follows:
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If the Net Revenues for the year ending
December 31, 2007 are:
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(i) at
least $45,000,000 and less than $50,000,000, then the Subscribers
shall receive $945,000 plus the Return thereon in additional Parent
Units valued at $1,832.6667 per Parent Unit;
(ii) at
least $50,000,000 and less $55,000,000, then the Subscribers shall
receive $3,195,000 plus the Return thereon in additional Parent
Units valued at $1,832.6667 per Parent Unit;
(iii) at
least $55,000,000 and less than $70,000,000, then the Subscribers
shall receive an additional $5,445,000 plus the Return thereon in
additional Parent Units valued at $1,832.6667 per Parent
Unit;
(iv) at
least $70,000,000 and less than $75,000,000, then the Subscribers
shall receive an additional $9,945,000 plus the Return on
$5,445,000 in additional Parent Units valued at $1,832.6667 per
Parent Unit;
(v) at
least $75,000,000 and less than $80,000,000, then the Subscribers
shall receive an additional $12,195,000 plus the Return on
$5,445,000 in additional Parent Units valued at $1,832.6667 per
Parent Unit; or
(vi) at
least $80,000,000, then the Subscribers shall receive an additional
$14,445,000 plus the Return on $5,445,000 in additional Parent
Units valued at $1,832.6667 per Parent Unit.
(c) All amounts to
be paid to the Subscribers under this Agreement will, unless
otherwise agreed, be paid one-third to each of them.
ARTICLE 3
THE CLOSING
(a) The closing of
the transactions contemplated by this Agreement (the “
Closing ”) shall take place immediately prior to the
closing of the transactions contemplated by the Purchase Agreement,
at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP,
One New York Plaza, New York, NY, or such other place determined by
the parties.
(b) At the Closing,
(i) each Subscriber shall deliver to the Partnership
Transferred Units in an amount set forth opposite such
Subscriber’s name in
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Schedule 1 and shall become a
party to the Partnership Agreement, and (ii) the Partnership
shall deliver to each Subscriber the number of Parent Units set
forth opposite such Subscriber’s name in
Schedule 1 .
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE SUBSCRIBERS
Each Subscriber hereby represents
and warrants for himself only to the Partnership, as
follows:
4.1
Authority; Execution; Enforceability . The Subscriber has
all requisite capacity, power and authority to (a) execute and
deliver this Agreement and the Purchase Agreement, (b) perform
his obligations hereunder and thereunder, and (c) consummate the
transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Purchase Agreement, the
performance of his obligations hereunder and thereunder, and the
consummation of the transactions contemplated hereby, in each case
by the Subscriber, has been duly authorized by all requisite action
on the part of the Subscriber, and no other action on the part of
the Subscriber is necessary for the execution, delivery and
performance of this Agreement and the Purchase Agreement by the
Subscriber or the consummation of the transactions contemplated
hereby and thereby. Assuming the due authorization, execution and
delivery of this Agreement and the Purchase Agreement by the
Partnership, this Agreement constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the
Subscriber in accordance with their respect terms, subject to (x)
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally and (y)
general principles of equity.
4.2
Restricted Securities . The Subscriber is acquiring the
Parent Units he is acquiring under this Agreement for his own
account and not with a view to their distribution within the
meaning of Section 2(11) of the Securities Act of 1933, as
amended (the “Securities Act ”), in any manner
that would be in violation of the Securities Act. The Subscriber
has not, directly or indirectly, offered any of the Parent Units to
anyone or solicited any offer to buy any of the Parent Units from
anyone, so as to bring the offer and sale of any of the Parent
Units within the registration requirements of the Securities Act.
The Subscriber will not sell, convey, transfer or offer for sale
any of the Parent Units except as provided in the Partnership
Agreement and upon compliance with the Securities Act and any
applicable state securities or “blue sky” laws or
pursuant to any exemption therefrom. The Subscriber understands
that (i) except as provided in the Partnership Agreement, the
Parent Units will not be registered under the Securities Act or any
state securities laws by reason of their issuance by the
Partnership in a transaction exempt from the registration
requirements thereof and (ii) the Parent Units may not be sold
or otherwise disposed of unless such sale or disposition is
registered under the
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Securities Act and applicable state
securities laws or such sale or other disposition is exempt from
registration thereunder.
4.3
Accredited Investor . The Subscriber is an “accredited
investor” (as defined in Rule 501(a) under the
Securities Act). The Subscriber has sufficient knowledge and
experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Parent
Units and is capable of bearing the economic risks of such
investment for an indefinite period of time. The Subscriber has had
an opportunity to ask questions and receive answers concerning the
terms and conditions of the offering of the Parent Units and has
had full access to such other information concerning the
Partnership and its subsidiaries as it has requested.
4.4
No General Solicitation . The Subscriber has received no
general solicitation or general advertisement in connection with
its Contribution or an investment in the Partnership. The
Subscriber has received no other representations or warranties from
the Partnership or any other person acting on behalf of the
Partnership, other than those contained in this
Agreement.
4.5
Consents and Approvals . Except for such filings as are
required under the HSR Act, and the termination of the waiting
period thereunder, no notices, reports, registrations or other
filings are required to be made by the Subscriber with, nor are any
consents, approvals or authorizations required to be obtained by
the Subscriber from, any Governmental Authority or any other Person
under any contract, agreement or other obligation to which the
Subscriber is party or by which its assets are bound, in connection
with the valid execution, delivery or performance of this Agreement
and the Purchase Agreement by the Subscriber or the consummation by
the Subscriber of the transactions contemplated by this Agreement
and the Purchase Agreement, in each case except for such notices,
reports, registrations and other filings the failure of which to
make or obtain, individually or in the aggregate, are not material
to the Subscriber’s ability to perform its obligations
hereunder and would not prohibit or restrict or delay, in any
material respect, the performance by the Subscriber of its
obligations hereunder.
4.6
No Reliance . The Subscriber did not look to, or rely in any
manner upon, the Partnership or its Affiliates, or its or their
respective directors, officers, employees or representatives for
advice about tax, financial or legal consequences of acquiring an
interest in the Partnership, and none of the Partnership or its
Affiliates, or its or their respective directors, officers,
employees or representatives has made or is making any
representations to the Subscriber about, or guaranties of, tax,
financial or legal outcomes of acquiring an interest in or an
investment in the Partnership.
4.7 No Defaults or
Conflicts . The execution and delivery of this Agreement and
the Purchase Agreement and the consummation of the transactions
contemplated hereby and thereby by the Subscriber and performance
by such Subscriber of his obligations hereunder and thereunder (i)
except as set forth on Schedule 4.7 , do not conflict with,
or result in a breach of any of the terms or provisions of, or
constitute a default under any material agreement or instrument to
which the Subscriber is a party or
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by which he is bound or to which his
properties are subject, and (ii) assuming compliance with the
applicable requirements under the HSR Act, do not violate any
existing applicable law, rule, regulation, judgment, order or
decree of any Governmental Authority having jurisdiction over the
Subscriber or any of his properties.
4.8 No Governmental
Authorization Required . Except for applicable requirements of
the HSR Act or similar foreign competition or Antitrust Laws or as
otherwise set forth in Schedule 4.8 , no authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority will be required to be obtained or made by
the Subscriber in connection with the due execution, delivery and
performance by the Subscriber of this Agreement and the Purchase
Agreement and the consummation by the Subscriber of the
transactions contemplated hereby and thereby.
4.9 The Transferred
Units . Schedule 4.9 sets forth the Subscriber’s
record and beneficial percentage interest in the Company. The
Subscriber has good and valid title to the Transferred Units, free
and clear of all Encumbrances, except Encumbrances on transfer
imposed under applicable securities laws. Assuming the Partnership
has the requisite power and authority to be the lawful owner of
such transferred Units, upon transfer to the Partnership at the
Closing of the Transferred Units, and upon receipt of the Parent
Units by the Subscriber, good and valid title to the Transferred
Units will pass to the Partnership, free and clear of any
Encumbrances, other than those arising from acts of the Partnership
or its Affiliates and Encumbrances on transfer imposed under
applicable securities laws. Except as set forth in the
Company’s organizational documents, the Transferred Units are
not subject to any contract restricting or otherwise relating to
the voting, dividend rights, transfer or other disposition of such
Transferred Units.
4.10
Litigation . There is no claim, action, suit, investigation
or legal proceeding pending or, to the knowledge of the Subscriber,
threatened against the Subscriber, before any Governmental
Authority which seeks to prevent, enjoin, alter or materially delay
the Subscriber from consummating the transactions contemplated by
this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
THE SUBSCRIBERS ON BEHALF OF THE COMPANY
The Subscribers jointly and
severally represent and warrant to the Partnership as
follows:
5.1 Organization and
Qualification . The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of Alabama. The Company has all requisite organizational
power and authority to own, lease and operate its properties and
carry on its business as presently owned or conducted, except where
the failure to be so organized, existing and in good standing
or
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to have such power or authority
would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. The Company has been qualified,
licensed or registered to transact business as a foreign
corporation and is in good standing (or the equivalent thereof) in
each jurisdiction in which the ownership or lease of property or
the conduct of their business requires such qualification, license
or registration, except where the failure to be so qualified,
licensed or registered or in good standing (or the equivalent
thereof) would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Subscribers have
delivered to the Partnership true and correct copies of the limited
liability company agreement and certificate of formation for the
Company as in effect on the date hereof.
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5.2
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Capitalization of the Company
.
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(a) Schedule
5.2 sets forth a complete and accurate list of the authorized,
issued and outstanding units of the Company and the percentage
interests beneficially and of record for all membership interests
in the Company. Except as set forth on Schedule 5.2 , there
are no other membership interests of the Company outstanding and no
outstanding or authorized options, warrants, convertible or
exchangeable securities, subscriptions, rights (including any
preemptive rights), calls or commitments of any character
whatsoever, relating to the membership interests of, or other
rights or voting interest in, the Company, to which the Company is
a party or is bound requiring the issuance, delivery or sale of
membership interests of the Company. There are no outstanding stock
or membership interest appreciation, phantom stock, profit
participation or similar rights with respect to the membership
interests of, or other rights or voting interest in, the Company to
which the Company is a party or is bound. The Company has no
authorized or outstanding bonds, debentures, notes or other
indebtedness the holders of which have the right to vote (or
convertible into, exchangeable for, or evidencing the right to
subscribe for or acquire securities having the right to vote) with
the members of the Company on any matter. There are no contracts to
which the Company is a party or by which it is bound to (i) issue
additional membership interests, other securities of the Company,
or other outstanding or authorized options, warrants, convertible
or exchangeable securities, subscriptions, rights (including
preemptive rights), calls or commitments of any character
whatsoever, relating to the membership interests of, or other
equity or voting interest in, the Company, (ii) repurchase, redeem
or otherwise acquire any membership interest of, or other rights or
voting interest in, the Company or (iii) vote or dispose of any
membership interest of, or other rights or voting interest in, the
Company. There are no irrevocable proxies and no voting agreements
with respect to any membership interest of, or other rights or
voting interest in, the Company.
(b) All of the
outstanding membership interests of the Company are duly
authorized, validly issued, fully paid, not in default under the
Company’s limited liability company agreement and
non-assessable and free of any preemptive rights in respect
thereto.
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5.3
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Intentionally Blank .
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12
5.4 No Defaults or
Conflicts . The execution and delivery of this Agreement and
the Purchase Agreement and the consummation of the transactions
contemplated hereby and thereby by the Subscribers and performance
by the Subscribers of their obligations hereunder and thereunder
(i) does not result in any violation of the Company’s limited
liability company agreement, (ii) except as set forth on
Schedule 5.4 , does not conflict with, or result in a breach
of any of the terms or provisions of, require any notice under,
result in the right of termination under, or constitute a default
under any contract, agreement, instrument or Lease to which the
Company is a party or to which its assets, property or business are
bound or subject, or result in the creation of any Encumbrance on
any assets of the Company, and (iii) assuming compliance with the
applicable requirements of the HSR Act, does not violate in any
material respect any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental Authority having
jurisdiction over the Company or any of its properties.
5.5 No Governmental
Authorization Required . Except for applicable requirements of
the HSR Act or similar foreign competition or Antitrust Laws or as
otherwise set forth in Schedule 5.5 , no authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority will be required to be obtained or made by
the Company in connection with the due execution, delivery and
performance by the Subscribers of this Agreement and the Purchase
Agreement and the consummation by the Subscribers of the
transactions contemplated hereby and thereby.
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5.6
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Financial Statements .
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(a) The balance
sheets included in the Financial Statements fairly present, in all
material respects, the financial position of the Company as of
their respective dates, and the other related statements included
in the Financial Statements, in all material respects, fairly
present the results of the Company’s operations and cash
flows for the periods indicated, in each case in accordance with
GAAP applied on a consistent basis, with only such deviations from
such accounting principles and/or their consistent application as
are referred to in the notes to the Financial Statements or in
Schedule 5.6(a) and subject to, in the case of the Interim
Financial Statements, non-material year-end audit adjustments and
the absence of related notes.
(b) Except (i) as
set forth in Schedule 5.6(b) or in the Interim Balance
Sheet, (ii) for liabilities incurred in the ordinary course of
business, consistent with past practice, since October 31, 2006 and
(iii) as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, the Company does not
have any liabilities, Indebtedness, debts or obligations of any
nature whether absolute or contingent, matured or unmatured, or
otherwise; provided, that this subsection (b) shall not apply to
any matters arising under, in connection with or otherwise related
to the Company’s product warranties and/or any claims made
thereunder. The only representations and warranties regarding the
Company’s product warranties are set forth in Section
5.21.
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5.7
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Intellectual Property .
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13
(a) Schedule
5.7(a) sets forth a true and complete list of all
registrations, issuances, filings and applications for all
Intellectual Property Rights (as defined below) owned by, filed by,
or issued or registered to, the Company and all license agreements
relating to Intellectual Property Rights to which the Company is a
party or a beneficiary (other than licenses for “off the
shelf” or other software widely available on generally
standard terms and conditions) (each such license, an “ IP
License ”).
(b) Except as set
forth on Schedule 5.7(b) , the Company owns, or possesses
licenses or other rights to use, all U.S. and non-U.S. patents,
patent applications (including divisions, continuations,
reexamination and reissues thereof), trademarks and service marks
(registered or unregistered), trade dress, trade names (including,
without limitation, the Company’s corporate name and logo),
uniform resource locators and Internet domain names, copyright
applications and registrations therefor, unregistered copyrights,
computer software programs, industrial designs, inventions,
invention disclosures, business methods, data, databases, trade
secrets, know how and other intellectual or industrial property,
whether or not subject to statutory registration or protection
(collectively, “ Intellectual Property Rights
”), that are material to the conduct of the business of the
Company, free and clear of any Encumbrances other than Permitted
Encumbrances. Each IP License to which the Company is a party (i)
is a legal and binding obligation of the Company and to the
knowledge of the Company, the other relevant parties thereto and
(ii) is in full force and effect , and neither the Company
nor, to the knowledge of the Company, any party thereto, is in
default in the performance, observance or fulfillment of any
obligation, covenant or condition or representation or warranties
contained in any IP License, except in each case where any failure
to be valid, binding or in full force and effect or any such
default would not, individually or in the aggregate, reasonably be
expected to be material to the Company.
(c) The validity
and enforceability of the Intellectual Property Rights and the
title or rights to use thereof is not being challenged in any
action, litigation or proceeding to which the Company is a party,
nor to the knowledge of the Company, is any such action, litigation
or proceeding threatened in writing against the Company.
(d) Except as set
forth on Schedule 5.7(d) , to the knowledge of the Company,
no Person is materially infringing upon or violating any of the
Intellectual Property Rights owned by the Company, and the
manufacture, marketing, license, distribution, sale and use of
products currently sold or contemplated to be sold by the Company
does not materially violate any IP License to which the Company is
a party.
(e) The operation
of the businesses of the Company, including the manufacture,
marketing, license, distribution, sale and use of products
currently sold or contemplated to be sold by the Company, and the
use of Intellectual Property Rights in connection therewith, does
not infringe, misappropriate, dilute, violate or otherwise conflict
with the Intellectual Property Rights of any third party in any
material respect, and there is no claim, action or proceeding
pending or threatened against the Company alleging any of the
foregoing. The Company has taken reasonable measures to ensure the
confidentiality and security of its trade secrets and other
confidential and proprietary
14
information. The consummation of the
transactions contemplated by this Agreement will not alter, impair
or diminish in any material respect, or result in the loss of, or
result in any accelerated or additional payment to be made to any
third party with respect to, any rights or interests of the Company
in any Intellectual Property Rights. There are no outstanding
judgments, orders, decrees or settlements that impair, in any
material respect, the Company’s rights to use, or the
validity or enforceability of any Intellectual Property
Rights.
5.8 Compliance with
the Laws . The business of the Company has not been and is not
being conducted in violation of any federal, state, provincial,
county, municipal, local laws, ordinances and regulations, except
such violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse
Effect.
(a) Schedule
5.9 lists or describes, as of the date hereof, and true and
complete copies have been made available to the Partnership
(including all amendments, modifications and supplements thereto),
of all contracts, agreements and instruments (other than Company
Benefit Plans and Leases) to which the Company is a party or to
which its assets, property or business are bound or subject
(collectively, the contracts listed on Schedule 5.9 are
referred to herein as the “ Material Contracts
”):
(i) for
the purchase of materials, supplies, goods, services, equipment or
other assets which (A) provides for annual payments by the Company
of $50,000 or more, (B) has a residual term as of the date hereof
of more than three (3) months and (C) is not terminable by the
Company by notice of not more than 60 calendar days without
penalty;
(ii) for
the sale by the Company of materials, supplies, goods, services,
equipment or other assets, and which (A) provides for a specified
annual minimum dollar sales amount by the Company of $50,000 or
more, (B) has a residual term as of the date hereof of more than
three (3) months and (C) is not terminable by the Company by notice
of not more than 60 calendar days without penalty;
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(iii)
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in respect of any Indebtedness;
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(iv) that
contains a covenant not to compete, or other covenant restricting
the Company or Affiliate thereof from competing with any Person in
any business, or from the development, manufacture, marketing or
distribution of products or services;
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(v)
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with any Governmental Authority;
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(vi) that
relates to the acquisition or disposition of any material business
by the Company;
15
(vii) that
imposes any confidentiality, standstill or similar obligation on
the Company, except for those entered into with customers or
suppliers in the ordinary course of business consistent with past
practice or in connection with the current sale process of the
Company;
(viii) that
contains a right of first refusal, first offer or first
negotiation;
(ix) in
respect of any joint venture, partnership or strategic
alliance;
(x) pursuant
to which the Company has granted any exclusive marketing, sales
representative relationship, franchising, consignment or
distribution right to any third party;
(xi) that
was entered into since December 31, 2005 involving any resolution
or settlement of any actual or threatened litigation, arbitration,
claim, action or other dispute with a value greater than
$50,000;
(xii) that
was entered into outside of the ordinary course of business;
or
(xiii) that
commits the Company to enter into any of the foregoing.
(b) Each Material
Contract is valid, binding and in full force and effect. With
respect to all Material Contracts, neither the Company nor, to the
knowledge of the Company, any other party to any such contract is
in breach thereof or default thereunder and there does not exist
under any Material Contract any event which, with the giving of
notice or the lapse of time, would constitute such a breach or
default by the Company or, to the knowledge of the Company, any
other party, in each case except for such breaches, defaults and
events as to which requisite waivers or consents have been obtained
or which would not, individually or in the aggregate, reasonably be
expected to be material to the Company.
5.10
Litigation . Except as set forth in Schedule 5.10 ,
there are no material claims, actions, investigations or legal
proceedings pending, or to the knowledge of the Company, threatened
against the Company or any material portion of its properties or
assets before any Governmental Authority against or involving the
Company. The Company is not subject to any unsatisfied order,
judgment, injunction, ruling, decision, award or decree of any
Governmental Authority. The Company has not, since January 1, 2005
received any written notice of any claim, action, investigation or
legal proceeding against it alleging any failure to comply with any
order, award, injunction, judgment, decree, ruling, subpoena,
verdict or other decision of any Governmental Authority.
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5.11
|
Taxes . Except as set forth on Schedule 5.11
:
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16
(a) all
Tax Returns required to have been filed by or with respect to the
Company have been timely filed, each such Tax Return has been
properly prepared and is true, correct and complete in all material
respects, and the Company has fully and timely paid all Taxes due
and payable by the Company (whether or not shown on any tax
Return). The Financial Statements contain adequate provisions for
any unpaid Taxes through the date of such Financial
Statements;
(b) The
Company is not currently the subject of a Tax audit, examination,
claim, or administrative or judicial proceeding with respect to
Taxes, nor has any such audit, claim, examination or proceeding
been proposed or threatened in writing;
(c) the
Company has not consented to extend the time, or is the beneficiary
of any extension of time, in which any Tax may be assessed or
collected by any Governmental Authority or in which any Tax Return
may be filed;
(d) no
Governmental Authority with which the Company does not file Tax
Returns has asserted that the Company is or may be required to pay
Taxes to or file Tax Returns with that Governmental
Authority;
(e) the
Company has not (A) participated in any “reportable
transaction” or “listed transaction” within the
meaning of Treasury Regulation Section 1.6011-4 or 1.6011-4T; (B)
been a party to or bound by any tax sharing, tax indemnity, or tax
allocation agreement or arrangement or (C) requested or received
any Tax ruling, transfer pricing agreements, closing agreement or
similar agreements, in either case that would have continuing
effect after the Closing Date;
(f) the
Company will not be required to recognize for tax purposes in a tax
period ending after the Closing Date any income or gain as a result
of (A) using the installment method of accounting or (B) making or
being required to make any change in method of
accounting;
(g) the
Company has withheld from its employees, independent contractors,
creditors, members and third parties and timely paid to the
appropriate taxing authority proper and accurate amounts in all
respects for all periods ending on or before the Closing Date in
compliance with all Tax withholding and remitting provisions of
applicable laws and have each complied in all respects with all Tax
information reporting provisions of all applicable laws;
(h) There
are no liens on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax,
other than liens for Taxes not yet due and payable;
(i) the
Company has made available to the Partnership, at the
Partnership’s request, true, correct and complete copies of
all material income Tax Returns and related examination reports and
statements of deficiency for all taxable periods for which the
applicable statutory periods of limitations have not expired;
and
17
(j) The
Company is and always has been treated as a partnership for U.S.
federal income tax purposes.
5.12
Permits . The Company has all material consents,
authorizations, registrations, waivers, privileges, exemptions,
qualifications, quotas, certificates, filings, franchises,
licenses, notices, permits and rights necessary for the lawful
conduct of the Company’s business as presently conducted, or
the lawful ownership of properties and assets or the operation of
their businesses (collectively, “ Permits ”).
All such Permits are in full force and effect, and there has
occurred no material default under any Permit by the
Company.
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5.13
|
Employee Benefit Plans .
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(a) Schedule
5.13(a) includes a true and complete list of all Benefit Plans
and Multiemployer Plans maintained or contributed to by the Company
or any ERISA Affiliate, and pursuant to which the Company or any
ERISA Affiliate has or may have any liability, contingent or
otherwise (collectively, the “ Company Benefit Plans
”).
(b) Except as set
forth in Schedule 5.13(b) , no Company Benefit Plan is
subject to Section 412 of the Code or Title IV of ERISA. Neither
the Company nor any of its subsidiaries has incurred any liability
under Title IV of ERISA or Section 412 of the Code nor is any such
liability reasonably expected to be incurred.
(c) Each Company
Benefit Plan (other than a Multiemployer Plan) has been established
and administered in all material respects in accordance with its
terms. The Company, and all the Company Benefit Plans (other than a
Multiemployer Plan), are in material compliance with all applicable
provisions of ERISA, the Code, all other applicable laws, orders,
rules, regulations and the terms of all applicable collective
bargaining agreements. With respect to each Company Benefit Plan
(other than a Multiemployer Plan) (i) all material reports,
returns, notices and other documentation that are required to have
been filed with or furnished to the IRS, the Department of Labor or
any other governmental authority, or to the participants or
beneficiaries of such Company Benefit Plan have been filed or
furnished, and (ii) each Company Benefit Plan that is intended to
be qualified within the meaning of section 401(a) of the Code has
received a favorable determination letter from the IRS to the
effect that such Company Benefit Plan satisfies the requirements of
section 401(a) of the Code and that its related trust is exempt
from taxation under section 501(a) of the Code, and no
circumstances exist which would reasonably be expected to adversely
affect this qualification or exemption. There are no investigations
by any Governmental Authority, termination proceedings or other
claims (except routine claims for benefits payable under the
Company Benefit Plans) or actions pending or, to the knowledge of
the Company or any ERISA Affiliate, threatened against or involving
any Company Benefit Plan (other than a Multiemployer Plan) or
asserting any rights to or claims for benefits under any Company
Benefit Plan (other than a Multiemployer Plan) that could give rise
to any material liability.
(d) Except as
provided in Schedule 5.13(d) , neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated
18
hereby will (either alone or in
combination with another event) (i) result in any payment becoming
due, or increase the amount of any compensation due, to any current
or former employee of Company, (ii) increase any benefits otherwise
payable under any Company Benefit Plan, (iii) result in the
acceleration of the time of payment or vesting of any such
compensation or benefits, or (iv) result in the triggering or
imposition of any restrictions or limitations on the right of the
Company or the Partnership to amend or terminate any Company
Benefit Plan and receive the full
