Stock
Purchase, Redemption and Contribution Agreement
Compass
Group Diversified Holdings LLC, Norwest Mezzanine Partners I,
LP
and the other
shareholders party hereto
(collectively, the
“Sellers”);
Compass
Group Diversified Holdings LLC
(the
“Sellers’ Representative”);
Crosman
Acquisition Corporation
(“CAC”);
Crosman
Group LLC
(the
“Buyer”)
Dated as
of January 5, 2007
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Page
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1
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2. Sale,
Redemption and Contribution of Shares;
Closing
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2.2 Sale
of Purchased Shares and Redemption of Redeemed
Shares
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2.3 Certain Events Prior to the
Closing
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3. Representations and Warranties of
CAC
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3.1 Organization and Good
Standing
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3.2 Authority; No Conflict
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3.6 Title
to Properties; Encumbrances
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3.7 Condition and Sufficiency of
Assets
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3.12 Compliance with Legal Requirements;
Governmental Authorizations
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3.13 Legal Proceedings;
Orders
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3.14 Absence of Certain Changes and
Events
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3.15 Contracts; No Defaults
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3.17 Environmental Matters
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3.18 Employees; Employee
Matters
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3.19 Intellectual Property
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3.22 Customers and
Suppliers
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3.23 No
Undisclosed Liabilities
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3.24 No
Product Liabilities; Product Warranties
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3.25 Accuracy of
Information
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3A Representations and Warranties of
Sellers
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3A.1 Organization and Good
Standing
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3A.4 Relationships with Related
Persons
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-i-
TABLE OF CONTENTS
(continued)
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Page
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3A.6 Investment
Representations
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4. Representations and Warranties of
Buyer
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4.1 Organization and Good
Standing
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4.2 Authority; No Conflict
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4.3 Securities Act
Representation
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7. Conditions Precedent to Buyer’s
Obligation to Close
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7.1 Accuracy of
Representations
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8. Conditions Precedent to the
Sellers’ Obligation to Close
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8.1 Accuracy of
Representations
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10. Indemnification;
Remedies
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10.2 Indemnification and Payment of Damages
by Seller
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10.3 Indemnification and Payment of Damages
by Buyer
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10.5 Limitations on Amount
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10.6 Procedure for
Indemnification—Third Party Claims
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10.7 Procedure for
Indemnification—Other Claims
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12.2 Public Announcements
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12.4 Termination of Certain Equity Holder
Documents
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-ii-
TABLE OF CONTENTS
(continued)
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Page
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12.8 Entire Agreement and
Modification
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12.9 Assignments, Successors and No
Third-Party Rights
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12.11 Section Headings;
Construction
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12.14 Authority of Sellers’
Representative
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12.15 Provision Regarding Legal
Representation
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12.16 Independence of Covenants and
Representations and Warranties
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Schedule 1.1
Capital Leases
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Schedule 1.2
Pro Rata Percentages
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Schedule 1.3
Working Capital
Methodology
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Schedule 2.1
Rollover Amounts
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Schedule 12.4
Agreements to be
Terminated
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Schedule 12.14
holdback Percentages
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Exhibit A Wire
Transfer Instruction Form
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Exhibit B Amended
and Restated LLC Agreement
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Exhibit C
Amendment to Employment
Agreement
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Exhibit D
Indemnification
Agreement
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-iii-
STOCK PURCHASE, REDEMPTION AND
CONTRIBUTION AGREEMENT
This Stock
Purchase, Redemption and Contribution Agreement (this “
Agreement ”) is made as of January 5, 2007 by and
among COMPASS GROUP DIVERSIFIED HOLDINGS LLC , a Delaware
limited liability company (“ CODI ”), NORWEST
MEZZANINE PARTNERS I, LP , a Minnesota limited partnership
(“ Norwest ”), KENNETH R. D’ARCY
(“ D’Arcy ”), ROBERT BECKWITH
(“ Beckwith ”), STEVE UPHAM (“
Upham ”), DAN SCHULTZ (“ Schultz
”), ROBERT HAMPTON (“ Hampton ”)
(CODI, Norwest, D’Arcy, Beckwith, Upham, Schultz, Hampton and
the other individual shareholders party hereto, collectively
referred to herein as the “ Sellers ”),
CROSMAN ACQUISITION CORPORATION , a Delaware corporation
(“ CAC ”), COMPASS GROUP DIVERSIFIED HOLDINGS
LLC , as representative of the Sellers (in such capacity, the
“ Sellers’ Representative ”), and
CROSMAN GROUP LLC , a Delaware limited liability company
(the “ Buyer ”).
A. This
Agreement provides for (a) the contribution of the Rollover
Shares by the Rollover Shareholders to Buyer in exchange for
$2,316,500 ( the “ Rollover Amount ”) worth of
equity interests of Buyer in a transaction intended to qualify as a
tax-free contribution pursuant to IRC §721, (b) the
contribution of up to $35,683,500 to Buyer (the “ Equity
Financing ”) by Wachovia Capital Partners 2006, LLC
(“ WCP ”) and certain other Persons in exchange
for equity interests of Buyer, (c) the acquisition by Buyer of
the Purchased Shares with the proceeds of the Equity Financing, and
(d) the redemption by CAC of the Redeemed Shares with a
portion of proceeds of Debt Financing Proceeds.
B. The
Rollover Shares, Purchased Shares and Redeemed Shares constitute
all of the issued and outstanding shares of capital stock (the
“ Shares ”) of CAC.
C. CAC is the
sole shareholder of Crosman Corporation, a Delaware corporation
(the “ Company ”).
The parties,
intending to be legally bound, agree as follows:
For purposes of
this Agreement, the following terms have the meanings specified or
referred to in this Section 1:
“Accounts Receivable” shall have the
meaning set forth in Section 3.8.
“Adjusted Current Assets” means the
aggregate amount of the current consolidated assets of the
Companies shown on the Working Capital Closing Statement
as such current
assets are calculated as of the close of business on the business
day immediately preceding the Closing Date in accordance with the
Working Capital Methodology, but including Cash and excluding, to
the extent included in such current consolidated assets,
(a) any deferred or current income tax assets, (b) any
2007 Tax Refund amount, (c) any interest accrued on or
principal of the Promissory Notes, (d) any pre-paid fees or
expenses in connection with the Management Services Agreement, and
(e) any sums due to any of the Companies from any of the other
Companies that appear as “current assets” on the
Working Capital Closing Statement. For purposes of determining the
Adjusted Current Assets, the assets of Diablo shall be excluded for
all purposes, including any asset reflected on the books and
records of any of the other Companies related to an investment in
Diablo; provided, that, the Diablo Receivable shall be included in
the Adjusted Current Assets. For this purpose the “Diablo
Receivable” shall mean the amount payable as of the close of
business on the business day immediately preceding the Closing Date
by Diablo to the Company pursuant to the Diablo Membership
Agreement with respect to the 5% commission payable to the Company
for the provision of management and administrative services to
Diablo.
“Adjusted Current Liabilities” means the
aggregate amount of the current consolidated liabilities of the
Companies shown on the Working Capital Closing Statement as such
current liabilities are calculated as of the close of business on
the business day immediately preceding the Closing Date in
accordance with the Working Capital Methodology, but excluding, to
the extent included in such current consolidated liabilities,
(a) any Indebtedness of the Companies, (b) any sums owed
by any of the Companies to any of the other Companies that appear
as “current liabilities” on the Working Capital Closing
Statement, (c) any deferred or current income tax liabilities,
(d) any 2007 Tax Obligation amount, (e) any of the
Company Transaction Expenses and (f) any D’Arcy Interest
Bonus. For purposes of determining the Adjusted Current
Liabilities, the Liabilities of Diablo shall be excluded for all
purposes. For the avoidance of doubt, the Adjusted Current
Liabilities shall include, to the extent accrued in accordance with
the Working Capital Methodology but not paid as of the Closing,
(i) the 2007 Year End Bonuses and (ii) all employer paid
payroll Taxes due or payable with respect to compensation payable
on or prior to the Closing Date, including with respect to the
D’Arcy Interest Bonus.
“
Adjusted Equity Value ” means $140,000,000
increased or decreased, as the case may be, by the Adjustment
Amount.
“Adjusted Net Working Capital” means the
amount (which amount may be positive or negative) equal to Adjusted
Current Assets less Adjusted Current
Liabilities.
“Adjustment Amount” means the amount
(which amount may be positive or negative) equal to the Adjusted
Net Working Capital less the Reference Net Working
Capital.
“Amended and Restated LLC Agreement”
shall have the meaning set forth in Section 2.4(b).
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“Applicable Contract” means any Contract
(a) under which any of the Companies has or may acquire any
rights, (b) under which any of the Companies has or may become
subject to any obligation or liability, or (c) by which any of
the Companies or any of the assets owned or used by any of them is
or may become bound.
“
Assumed Debt ” means the Indebtedness associated
with the Capitalized Leases as of the Closing Date.
“Balance Sheet” - as defined in
Section 3.4.
“Breach” means a “Breach” of
a representation, warranty, covenant, obligation or other provision
of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been
any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation or other
provision, and the term “Breach” means any such
inaccuracy, breach, failure, claim, occurrence or
circumstance.
“Buyer” - as defined in the first
paragraph of this Agreement.
“Buyer Indemnified Persons” - as defined
in Section 10.2.
“Buyer’s Transaction Expenses”
means all costs and expenses incurred by or on behalf of Buyer and
its affiliates in connection with the preparation, execution and
performance of this Agreement and the other Transaction Documents
and the transactions contemplated hereby and thereby, including,
without limitation, all fees and out of pocket expenses of such
entities’ Representatives, and the fees and expenses due in
connection with any debt or equity financing arranged by or for the
benefit of Buyer.
“CAC” - as defined in the first paragraph
of this Agreement.
“ CAC
Options ” means the options to purchase 30,000 shares
of Common Stock pursuant to that certain Stock Option Agreement
dated February 10, 2004 by and between CAC and
D’Arcy.
“Capitalized Leases” means the
capitalized leases of the Companies set forth on Schedule
1.1 .
“Cash” means the cash and cash
equivalents of the Companies as of the close of business on the
business day immediately preceding the Closing Date as shown on the
Working Capital Closing Statement calculated in accordance with
GAAP. For the avoidance of doubt, Cash shall (i) be reduced by
checks and drafts written by the Companies but not yet cleared,
(ii) exclude any Cash of Diablo and (iii) exclude the
Debt Financing Proceeds.
“
Change of Control Payments ” means all change
in control, stay-pay, bonus or other similar payments to any
current or former employees, officers, directors or
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managers of CAC
or any of its Subsidiaries arising as a result of the transactions
contemplated by this Agreement, (i) including, without
limitation, any of the foregoing obligations of CAC or any of its
Subsidiaries arising under any employment agreement or otherwise
and (ii) excluding the D’Arcy Interest Bonus.
“Claim” shall have the meaning set forth
in Section 12.14.
“Closing” - as defined in
Section 2.4.
“Closing Date” means the date on which
the Closing actually takes place.
“Closing Statement” has the meaning set
forth in Section 2.3(h).
“
CODI ” – as defined in the first paragraph
to this Agreement.
“Common Stock” means the common stock,
par value of $0.01 per share, of CAC.
“Companies” means CAC, the Company and
the Company’s Subsidiaries, collectively.
“Company” - as defined in the Recitals of
this Agreement.
“Company Transaction Expenses” means all
costs and expenses incurred on or prior to the Closing by any of
the Companies on behalf of the Companies or the Sellers in
connection with the preparation, execution and performance of this
Agreement and the other Transaction Documents and the Contemplated
Transactions, including, without limitation, (i) the Harris
Williams Fee Amount, (ii) all fees and out of pocket expenses
of any of the Companies and their respective Representatives and
(iii) the fees and expenses (in an amount not in excess of
$16,000) of Stradling Yocca Carlson & Rauth, but specifically
excluding Buyer’s Transaction Expenses.
“Confidentiality Agreement” means that
certain Confidentiality Agreement, dated as of August 11, 2006,
between CODI and the Buyer, as the same may be amended,
supplemented or otherwise modified from time to time.
“Consent” means any approval, consent,
ratification, license, permit, waiver or other authorization
(including any Governmental Authorization).
“Contemplated Transactions” means all of
the transactions contemplated by this Agreement,
including:
(a) the
contribution of the Rollover Shares to Buyer;
(b) the
purchase of the Purchased Shares by Buyer;
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(c) the
redemption of the Redeemed Shares by CAC; and
(d) the
performance by Buyer, CAC and the Sellers of their respective
covenants and obligations under this Agreement.
“Contingent Securities” shall have the
meaning set forth in Section 3.3.
“Contract” means any agreement, contract,
employment agreement, indenture, note, bond, loan, instrument,
lease, conditional sales contract, mortgage, license, franchise
agreement, commitment, obligation, promise, or undertaking, whether
written or oral, that is legally binding, including all amendments
thereto.
“Credit Agreements” means (i) that
certain Credit Agreement, dated as of the Closing Date, by and
between the Company, as borrower, and Manufacturers and Traders
Trust Company, as lender and (ii) that
certain Note
Purchase Agreement by and among the Companies (other than Diablo),
Blackstone Mezzanine Partners II L.P. and Blackstone Mezzanine
Holdings II L.P.
“Damages” - as defined in
Section 10.2.
“
D’Arcy Interest Bonus” shall mean the
amount payable to D’Arcy pursuant to the last sentence of
Section 2.02 of the Employment and Non-Competition Agreement
by and between D’Arcy and the Company, which amount is
$102,515.36 on the Closing Date.
“Debt
Financing Proceeds” means funds received by the
Companies in connection with the closing of the transactions
contemplated by the Credit Agreements.
“Debt
Payoff Amount” means the amount necessary to fully
discharge the Debt to be Repaid on the Closing Date.
“Debt
to be Repaid” means all Indebtedness of the Companies
(including any pre-payment or repayment fees, penalties and
expenses) outstanding immediately prior to the Closing of the
Companies including, without limitation, under (i) that
certain Credit Agreement, dated as of May 16, 2006, by and between
the Company, and CODI, as lender (as amended through the Closing
Date), (ii) that certain Line of Credit Agreement dated as of
June 7, 2006, by and between the Company and Manufacturers and
Traders Trust Company, as lender (as amended through the Closing
Date) (the “ Line of Credit ”) and
(iii) any other Contract but specifically excluding any
Assumed Debt.
“Diablo” means Diablo Marketing LLC, a
Delaware limited liability company
“
Diablo Loan Agreements ” means (i) that
certain Credit Facility Agreement between Diablo and Manufacturers
and Traders Trust Company dated April 9, 2002 (as amended
through November 17, 2003) and (ii) those certain
Unlimited Guaranty and Indemnity Agreements dated as of
April 9, 2002 by and between each of CAC and the Company and
Manufacturers and Traders Trust Company as reaffirmed in those
certain
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Reaffirmations
of Guaranty with Limitation dated November 17, 2003 by each of
CAC and the Company in favor of Manufacturers and Traders Trust
Company.
“Disclosure Letter” means the disclosure
letter delivered by Sellers to Buyer concurrently with the
execution and delivery of this Agreement.
“Employee Benefit Plan” – as
defined in Section 3.11(a).
“Encumbrance” means any charge, claim,
community property interest, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal lease,
license, easement, restrictive covenant, encumbrance, sublease or
restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of
ownership.
“Environment” means soil, land surface or
subsurface strata, surface waters (including navigable waters,
ocean waters, streams, ponds, drainage basins and wetlands),
groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life and any other
environmental medium or natural resource.
“Environmental, Health and Safety
Liabilities” means any obligations or Liabilities
(including any claims, suits or other assertions of obligations or
liabilities) that are:
(a) related
to environmental, health or safety issues (including on-site or
off-site contamination by Hazardous Materials of surface or
subsurface soil or water); and
(b) based
upon or related to (i) any Environmental Law or (ii) any
Order imposed by any Governmental Body with respect to any
Environmental Law.
“Environmental Law” means any Legal
Requirement that addresses, is related to or is otherwise concerned
with environmental, health or safety issues, including any Legal
Requirement relating to any emissions, releases or discharges of
Hazardous Materials into the Environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, clean-up or control of Hazardous
Materials.
“Equity Financing” – as defined in
the Recitals to this Agreement.
“Equity Value” means an amount equal to
$140,000,000, as further increased or decreased on a
dollar-for-dollar basis for the cumulative net adjustments required
by the following:
(1) The
amount shall be decreased by the Debt Payoff Amount;
(2) The
amount shall be decreased by the amount of the Assumed Debt as of
the Closing Date;
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(3) The
amount shall be increased by the amount, if any, of the Promissory
Notes (including all accrued interest) to the extent remaining
unpaid on the Closing Date;
(4) The
amount shall be increased or decreased, as the case may be, by the
amount that is equal to the Estimated Adjustment Amount (increased
where such amount is positive and decreased where such amount is
negative);
(5) The
amount shall be increased by the amount, if any, of the 2007
Estimated Tax Refund;
(7) The
amount shall be decreased by the amount, if any, of the 2007
Estimated Tax Obligation;
(8) The
amount shall be decreased by the amount of the D’Arcy
Interest Bonus;
(9) The
amount shall be deceased by the Option Termination Payment;
and
(10) The
amount shall be decreased by the Company Transaction Expenses to
the extent remaining unpaid at the Closing.
“ERISA” means the Employee Retirement
Income Security Act of 1974 or any successor law, and regulations
and rules issued pursuant to that Act or any successor law, as may
be amended from time to time.
“ERISA Affiliate” — as defined in
Section 3.11(d).
“Estimated Adjustment Amount” – as
defined in Section 2.3(b).
“Estimated Working Capital Closing
Statement” – as defined in
Section 2.3(b).
“Facilities” means any real property,
leaseholds or other interests currently or formerly owned or
operated by the Companies and any buildings, plants, structures or
equipment (including motor vehicles, tank cars and rolling stock)
currently or formerly owned or operated by the
Companies.
“Federal Tax Audit Amount” means
$128,000, an estimate of the amount due to the IRS in respect of
the federal Tax audit for the year ended June 30,
2004.
“Financial Statements” – as defined
in Section 3.4.
“GAAP” means generally accepted United
States accounting principles.
“Governmental Authorization” means any
Consent issued, granted, given or otherwise made available by or
under the authority of any Governmental Body or pursuant to any
Legal Requirement.
“Governmental Body” means any:
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(a) nation, state,
county, city, town, village, district or other jurisdiction of any
nature;
(b) federal,
state, local, municipal, foreign or other government;
(c) governmental
or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official or entity and any
court or other tribunal);
(d) multi-national
organization or body; or
(e) body
exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or
power of any nature.
“Harris Williams Fee Amount” means the
amount of the fees, expenses and other payments due and owing, or
that may become due and owing, to Harris Williams LLC d/b/a Harris
Williams & Co. pursuant to the engagement letter dated
June 15, 2006 between CAC and Harris Williams & Co. or
otherwise arising out of or in connection with the Contemplated
Transactions.
“Hazardous Activity” means the
distribution, generation , handling, importing, management,
manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in,
on, under, about or from the Facilities or any part thereof into
the Environment.
“Hazardous Materials” means, without
limitation, any combustible substances, ignitable substances,
flammable substances, corrosive substances, reactive substances,
explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum
and petroleum based products, methane, and hazardous materials,
hazardous chemicals, hazardous wastes, pollutants, hazardous or
toxic substances, as defined in or regulated under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601, et. seq.),
the Resource Conservation and Recover Act, as amended (42 U.S.C.
Section 6901, et. seq.), the Toxic Substances Control Act, as
amended (15 U.S.C. Sections 2601, et. seq.), the Federal Water
Pollution Control Act, as amended (33 U.S. C. Sections 1251,
1321(b)(2)(A) and 1362(6)), or any other applicable Environmental
Law, including any mixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing
materials.
“HIPAA” means the Health Insurance
Portability and Accountability Act of 1996.
8
“Holdback Amount” means $50,000, together
with all interest accrued thereon.
“Holdback Percentages” means, with
respect to each Seller (other than CODI and Norwest), the
percentage set forth opposite such Seller’s name on
Schedule 12.14 .
“Indebtedness ” means, with respect to
the Companies, (i) any indebtedness for borrowed money,
whether short term or long term, (ii) any indebtedness arising
under Capitalized Leases, conditional sales contracts and other
similar title retention instruments, (iii) all Liabilities
secured by any Encumbrance on any property owned by the Companies;
(iv) all Liabilities under any interest rate protection
agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement or other similar agreement
designed to protect the Companies against fluctuations in interest
rates, (v) all indebtedness for the deferred purchase price of
property, or the deferred purchase price for services,
(vi) all interest, fees, charges, prepayment premiums and
penalties, and other expenses owed with respect to Indebtedness
described in the foregoing clauses (i) through (v), and
(vii) all Indebtedness referred to in the foregoing clauses
(i) through (vi) which is directly or indirectly guaranteed by
any of the Companies in any manner, including but not limited to,
an agreement, contingent or otherwise, to supply funds to, or in
any other manner invest in, the debtor, or to purchase
Indebtedness, or to purchase and pay for property if not delivered
or pay for services if not performed, primarily or exclusively, for
the purpose of enabling the debtor to make payment of the
Indebtedness or to insure the owners of the Indebtedness against
loss. Notwithstanding the foregoing, (i) any obligations of
the Companies under the Diablo Loan Agreements and (ii) any
obligations of the Companies with respect to the letter of credit
in the amount of $195,000 currently outstanding under the Line of
Credit shall, in each case, not be considered Indebtedness for
purposes of this Agreement.
“Indemnification Basket” – as
defined in Section 10.5(a).
“Indemnification Cap” – as defined
in Section 10.5(a).
“Intellectual Property Assets” - as
defined in Section 3.19(a).
“Intellectual Property Rights” mean
(a) all copyright rights under the copyright laws of the
United States and all other countries for the full term thereof
(and including all rights accruing by virtue of bilateral or
international copyright treaties and conventions), including, but
not limited to, all renewals, extensions, reversions or
restorations of copyrights now or hereafter provided for by law and
all rights to make applications for copyright registrations and
recordations, regardless of the medium of fixation or means of
expression; (b) all rights to and under all new and useful
inventions, discoveries, designs, technology and art, including,
but not limited to, all improvements thereof and all know-how
related thereto, including all letters patent and patent
applications in the United States and all other countries (and all
letters patent that issue therefrom) and all reissues,
reexaminations, extensions, renewals, divisions and continuations
(including continuations-in-part and continuing prosecution
applications) thereof, for the full term thereof; (c) all
trademark and service mark applications and
9
registrations
to issue therefrom under all trademark laws of the United States
and all other countries for the full term thereof;
(d) Internet domain names and applications therefore and URLs;
(e) electronic or other databases, to the extent protected by
intellectual property or other law in any jurisdiction;
(f) all trade secrets; (g) all confidential information;
(h) all know-how; and (i) all worldwide intellectual
property rights, industrial property rights and proprietary rights
not otherwise included in the foregoing, including, without
limitation, all trade dress, algorithms, concepts, processes,
methods and protocols.
“Interim Balance Sheet” - as defined in
Section 3.4.
“IRC” means the Internal Revenue Code of
1986, as amended, or any successor law, and regulations issued by
the IRS pursuant to the Internal Revenue Code or any successor
law.
“IRS” means the United States Internal
Revenue Service or any successor agency and, to the extent
relevant, the United States Department of the Treasury.
“Knowledge” means regarding any matter in
question (i) with respect to the Companies (or any of them),
if any of D’Arcy, Upham, Beckwith or Schultz has actual
knowledge of the matter in question after reasonable investigation
and (ii) with respect to any other Person, if such Person has
actual knowledge of the matter in question after reasonable
investigation.
“Labor Laws” shall have the meaning set
forth in Section 3.18(d).
“Legal Requirement” means any federal,
state, local, municipal, foreign, international, multinational or
other administrative order, constitution, law, ordinance, principle
of common law, regulation, statute or treaty.
“
Liability ” means all liabilities and
obligations (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or
to become due).
“
Management Services Agreement ” means that
certain Management Services Agreement dated as of February 10,
2004 by and between the Company and Kilgore Consulting III LLC (as
assigned to Compass Group Management LLC), as amended.
“Material Adverse Effect” means any
change or effect that, when taken individually or together with all
other adverse changes or effects has or will have a material
adverse effect on the assets, properties, business, results of
operations or financial condition of the Companies, taken as a
whole.
“
Midwest Walnut Claim ” means the matter set
forth as item 2 of Part 3.13(a) of the Disclosure Letter and
any cause of action, suit, demand or claim (whether at law or
equity), Proceeding, filed or to be filed in connection with such
matter, and any Proceeding resulting from a remand, reversal or
appeal related to such matter.
10
“Minimum Funding Plan” – as defined
in Section 3.11(a).
“Multiemployer Plan” – as defined
in Section 3.11(d).
“Norwest” - as defined in the first
paragraph of this Agreement.
“Option Termination Payment” – as
defined in Section 2.3(f).
“Order” means any award, decision,
injunction, judgment, order, ruling, subpoena or verdict entered,
issued, made or rendered by any court, administrative agency or
other Governmental Body or by any arbitrator.
“Ordinary Course of Business” - an action
taken by a Person will be deemed to have been taken in the
“Ordinary Course of Business” only if:
(a) such action is
consistent with the past practices of such Person and is taken in
the ordinary course of such Person’s normal operations and
practices; and
(b) such action is
not required to be authorized by the board of directors of such
Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the
parent company (if any) of such Person.
“Organizational Documents” means, with
respect to any corporation, its articles or certificate of
incorporation and its bylaws and, with respect to any other Person,
its charter or similar document adopted or filed in connection with
its creation, formation or organization, in each case including any
amendments thereto and as currently in effect.
“Owned Real Property” shall have the
meaning set forth in Section 3.6.
“Pension Plan” has the meaning given in
ERISA § 3(2)(A).
“Permitted Encumbrances” means
(i) liens securing current Taxes, assessments, fees or other
governmental charges or levies not yet delinquent; (ii) minor
imperfections of title, easements, encroachments, covenants, rights
of way, minor defects, irregularities or Encumbrances that do not
and would not, individually or in the aggregate, reasonably be
expected to impair in any material respect the operations of the
business of the Companies, taken as a whole; (iii) inchoate
mechanics and materialmen’s liens for construction in
progress; (iv) liens of warehousemen and carriers arising in
the Ordinary Course of Business; (v) liens incurred or
deposits made in the Ordinary Course of Business in connection with
workers’ compensation, unemployment insurance, social
security and other similar laws which are not material,
individually or in the aggregate; (vi) Encumbrances securing
equipment leases arising in the Ordinary Course of Business; and
(vii) such other Encumbrances, if any, identified in that
certain title insurance policy issued by Fidelity National Title
Insurance Company on or about the Closing Date with commitment
number 5506-25202.
11
“Per
Share Equity Value” means the quotient obtained by
dividing (x) the Equity Value by (y) 577,232 (i.e. the number
of Shares outstanding and expressly excluding the aggregate number
of shares of Common Stock into which the CAC Options are
exercisable, in each case, immediately prior to the
Closing).
“Person” means any individual,
corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union or other
entity or Governmental Body.
“Personal Property” – as defined in
Section 3.6(b).
“Privacy Rules” means the privacy rules
set forth in 45 Code of Federal Regulations Parts 160 and 164, as
promulgated under the HIPAA.
“Product Liability Claims” shall have the
meaning set forth in Section 3.24(a).
“Pro
Rata Percentage” means, with respect to each Seller,
the percentage expressed by the quotient obtained by dividing
(x) the total number of Shares owned by such Seller
immediately prior to the Closing by (y) 577,232 (i.e. the
number of Shares outstanding immediately prior to the Closing). The
Pro Rata Percentage of each Seller is set forth on
Schedule 1.2 .
“Proceeding” means any action,
arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or
otherwise involving, any Governmental Body or
arbitrator.
“Promissory Notes” means (i) that
certain Promissory Note dated April 23, 2004 by Beckwith for
the benefit of CAC in the principal amount of $149,987.34,
(ii) that certain Amended and Restated Promissory Note dated
February 10, 2004 by D’Arcy for the benefit of CAC in
the principal amount of $504,763.82, (iii) that certain
Promissory Note dated April 23, 2004 by Schultz for the
benefit of CAC in the principal amount of $149,987.34,
(iv) that certain Promissory Note dated April 23, 2004 by
Upham for the benefit of CAC in the principal amount of
$149,987.34, and (v) that certain Promissory Note dated
November 22, 2005 by Hampton for the benefit of CAC in the
principal amount of $150,000.
“Proprietary Rights Agreement” – as
defined in Section 3.18(b).
“Purchased Shares” means, with respect to
the Shares owned by CODI as set forth in Part 3.3 of the
Disclosure Letter, the quotient obtained by dividing the amount of
the Equity Financing by the Per Share Equity Value as determined on
the Closing Date.
12
“Qualified” means any representation,
warranty, obligation, covenant or other agreement, as applicable,
which is subject to a “materiality”,
“material”, “Material Adverse Effect”,
“in all material respects”, “significant”
or similar qualification.
“Qualified Plan” – as defined in
Section 3.11(d).
“Real
Property Laws” shall have the meaning set forth in
Section 3.6.
“Redeemed Shares” means (i) with
respect to CODI, that number of Shares owned by CODI as set forth
in Part 3.3 of the Disclosure Letter less the number of
Purchased Shares of CODI, (ii) with respect to a Rollover
Shareholder, that number of Shares owned by such Rollover
Shareholder as set forth in Part 3.3 of the Disclosure
Letter less the number of Rollover Shares of such Rollover
Shareholder and (iii) with respect to any Seller other than
CODI and the Rollover Shareholders, that number of Shares owned by
such Seller as set forth in Part 3.3 of the Disclosure
Letter.
“Reference Net Working Capital” means
$27,500,000, which amount has been calculated in accordance with
the Working Capital Methodology. A detailed calculation of the
Reference Net Working Capital is included with the Working Capital
Methodology on Schedule 1.3 .
“Related Person” means with respect to a
particular individual:
(a) each other
member of such individual’s Family;
(b) any Person
that is directly or indirectly controlled by such individual or one
or more members of such individual’s Family;
(c) any Person in
which such individual or members of such individual’s Family
hold (individually or in the aggregate) a Material Interest;
and
(d) any Person
with respect to which such individual or one or more members of
such individual’s Family serves as a director, officer,
partner, executor or trustee (or in a similar capacity).
With respect to a
specified Person other than an individual:
(a) any Person
that directly or indirectly controls, or is directly or indirectly
controlled by, such specified Person;
(b) any Person
that holds a Material Interest in such specified Person;
(c) each Person
that serves as a director, officer, partner, executor or trustee of
such specified Person (or in a similar capacity);
13
(d) any Person in
which such specified Person holds a Material Interest;
(e) any
Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity);
and
(f) any
Related Person of an individual described in clause (b) or
(c).
For purposes of
this definition, (a) the “Family” of an individual
includes (i) the individual, (ii) the individual’s
spouse, (iii) a parent, child, sibling, nephew or niece of the
individual or the individual’s spouse, and (iv) any
other natural person who resides with such individual and (b)
“Material Interest” means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting
interests representing at least 20% of the outstanding voting power
of a Person or equity securities or other equity interests
representing at least 20% of the outstanding equity securities or
equity interests in a Person.
“Release” means any spilling ,
leaking, emitting, discharging, depositing, escaping, leaching,
dumping or other releasing into the Environment, whether
intentional or unintentional.
“Releasee” or
“Releasees” shall have the meaning set
forth in Section 2.6.
“Released Claims” shall have the meaning
set forth in Section 2.6.
“Relevant Period” – as defined in
Section 3.11(a).
“Representative” means, with respect to a
particular Person, any director, officer, employee, agent,
consultant, advisor or other representative of such Person,
including legal counsel, accountants and financial
advisors.
“Rollover Amount” – as defined in
the Recitals of this Agreement.
“Rollover Shareholders” means
D’Arcy, Beckwith, Upham, Schultz, Hampton, Ed Schultz, Danny
Gainor, John Mooney, A. Wesley Bailey, Roy Stefanko, Athena
Jamesson, Kathryn Chapman and John Goff.
“Rollover Shares” means, with respect to
Shares owned by each Rollover Shareholder as set forth on
Part 3.3 of the Disclosure Letter, the quotient
obtained by dividing (x) the amount set forth opposite such
individual’s name on Schedule 2.1 by (y) the
Per Share Equity Value as determined on the Closing
Date.
“Securities Act” means the Securities Act
of 1933, as amended, or any successor law, and regulations and
rules issued pursuant to that Act or any successor law.
“Selected Accounting Firm” - as defined
in Section 2.5(d).
14
“Sellers” - as defined in the first
paragraph of this Agreement.
“Sellers’ Representative” - as
defined in the first paragraph of this Agreement.
“Shares” - as defined in the Recitals of
this Agreement.
“Subsidiary” means, with respect to any
Person (the “Owner”), any corporation or other Person
of which securities or other interests having the power to elect a
majority of that corporation’s or other Person’s board
of directors or similar governing body, or otherwise having the
power to direct the business and policies of that corporation or
other Person (other than securities or other interests having such
power only upon the happening of a contingency that has not
occurred) are held by the Owner or one or more of its Subsidiaries.
Notwithstanding the foregoing, when used without reference to a
particular Person, “Subsidiary” means a Subsidiary of
CAC and, for purposes of this Agreement, the Subsidiaries of CAC
shall include the Company, Crosman Pellets, LLC, a Delaware limited
liability company, Crosman Manufacturing, LLC, a Delaware limited
liability company, and Diablo.
“Tax” or
“Taxes” (and with correlative meaning,
“Taxable” and
“Taxing” ) means (i) any federal,
state, provincial, local, foreign or other income, alternative,
minimum, add-on minimum, accumulated earnings, personal holding
company, franchise, capital stock, net worth, capital, profits,
intangibles, windfall profits, gross receipts, value added, sales,
use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental (including taxes under
Section 59A of the IRC), natural resources, real property,
personal property, ad valorem, intangibles, rent, occupancy,
license, occupational, employment, unemployment insurance, social
security, disability, workers’ compensation, payroll, health
care, withholding, estimated or other similar taxes, duty, levy or
assessment or deficiencies thereof (including all interest and
penalties thereon and additions thereto, whether disputed or not)
and (ii) any transferee Liability in respect of any items
described in clause (i) above.
“Tax
Return” means any return (including any information
return), report, statement, schedule, notice, form or other
document or information filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection
with the determination, assessment, collection or payment of any
Tax or in connection with the administration, implementation or
enforcement of or compliance with any Legal Requirement relating to
any Tax.
“Threat of Release” means a substantial
likelihood of a Release that may require action in order to prevent
or mitigate damage to the Environment that may result from such
Release.
“Threatened” - a claim, Proceeding,
dispute, action or other matter will be deemed to have been
“Threatened” if any demand or statement has been made
orally or
15
in writing or
any notice has been given orally or in writing, or if any other
event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that (i) such a claim,
Proceeding, dispute, action or other matter is likely to be
asserted, commenced, taken or otherwise pursued in the future, or
(ii) if such a claim, Proceeding, dispute, action or other
matter were asserted, commenced, taken or otherwise pursued, it
could reasonably be expected to result in a Material Adverse Effect
on the Companies.
“Threshold” shall have the meaning set
forth in Section 10.5(b).
“Title IV Plans” – as defined in
Section 3.11(d).
“Transaction Documents” means this
Agreement, Amendment No. 1 to the Employment and
Non-Competition Agreement by and between D’Arcy and the
Company, the Amended and Restated LLC Agreement, the
Indemnification Agreements among CAC, the Company and each of
Arthur C. Roselle and Stuart Christhilf, and any other agreements
executed in connection with the Contemplated
Transactions.
“Wire
Transfer Instruction Form” means the wire transfer
instruction form attached hereto as Exhibit A
.
“Working Capital Closing Statement” - as
defined in Section 2.5(a).
“
Working Capital Methodology ” means the
accounting principles, practices and policies used in the
preparation of the 2006 Balance Sheet except as modified as
described on Schedule 1.3 .
“WCP” – as defined in the Recitals
of this Agreement.
“ 2006
Balance Sheet ” means the audited consolidated
balance sheet of the CAC and its Subsidiaries as of June 30,
2006.
“2007
Estimated Tax Obligation” – as defined in
Section 2.3(c).
“2007
Estimated Tax Refund” – as defined in
Section 2.3(c).
“2007
Tax Obligation” – as defined in
Section 11.1(c).
“2007
Tax Refund” – as defined in
Section 11.1(c).
“ 2007
Year End Bonuses ” means any performance bonus,
whether or not discretionary, that would be payable to employees of
the Companies based on individual performance or the performance of
the Companies with respect to any period preceding the
Closing.
16
2.
Sale, Redemption and
Contribution of Shares; Closing
Subject to the
terms and conditions of this Agreement, at the Closing, each of the
Rollover Shareholders, severally and not jointly, shall contribute
his Rollover Shares to Buyer in exchange for the issuance by Buyer
to such Rollover Shareholder of the equity interests of Buyer set
forth opposite such Rollover Shareholder’s name on the
Information Exhibit attached as Exhibit B to the Amended and
Restated LLC Agreement (the “ Rollover Equity
”). The parties hereto acknowledge and agree that the
contribution of the Rollover Shares to Buyer in exchange for the
Rollover Equity is intended to qualify as a tax-free contribution
of property under IRC §721 and the treasury regulations
promulgated thereunder. The Rollover Amount of each Rollover
Shareholder is set forth opposite such Rollover Shareholder’s
name on Schedule 2.1 .
2.2
Sale of Purchased Shares and
Redemption of Redeemed Shares
Subject to the
terms and conditions of this Agreement, at the Closing,
(i) CODI shall sell to Buyer, and Buyer shall purchase from
CODI, the Purchased Shares, and (ii) CAC shall redeem, and
each Seller, severally and not jointly, shall sell to CAC, such
Seller’s Redeemed Shares. The purchase price for each
Purchased Share and each Redeemed Share shall equal the Per Share
Equity Value.
2.3 Certain Events Prior to the
Closing
In addition to
such other actions as may be provided for herein, prior to
Closing:
(a) The
Companies shall obtain payoff letters with respect to the Debt to
be Repaid, which payoff letters shall evidence the Debt Payoff
Amount, and provide Buyer with a schedule of the Assumed Debt
setting forth the amount thereof as of the Closing Date, each in
form and substance reasonably satisfactory to Buyer.
(b) The
Sellers shall cause the Company to determine, in good faith, and
deliver to Buyer prior to the Closing, a statement evidencing
Sellers’ estimation of Adjusted Net Working Capital (the
“ Estimated Working Capital Closing Statement ”)
and, based thereon, a written estimate of the Adjustment Amount
(the “ Estimated Adjustment Amount ”). The final
Adjustment Amount shall be determined and paid in accordance with
the provisions of Section 2.5.
(c) The
Sellers shall cause the Company to determine, in good faith, and
deliver to Buyer prior to the Closing, a statement evidencing
Sellers’ estimation of 2007 Tax Refund (the “ 2007
Estimated Tax Refund ”) or 2007 Tax Obligation (the
“ 2007 Estimated Tax Obligation ”), as the case
may be. The actual 2007 Tax Refund or 2007 Tax Obligation, as the
case may be, shall be determined and paid in accordance with the
provisions of Section 11.1.
17
(d) WCP and
Blackstone Mezzanine Holdings II, L.P. and its Affiliates shall
contribute to Buyer cash in an aggregate amount equal to the Equity
Financing.
(e) Each
Seller shall deliver to Buyer a full and complete Wire Transfer
Instruction Form.
(f) Each CAC
Option that is outstanding immediately prior to the Closing shall
be canceled effective immediately prior to the Closing pursuant to
the terms of this Agreement in exchange for the right to receive at
Closing a cash payment in the amount of $1,973,640 net of
applicable withholding taxes (the “ Option Termination
Payment ”).
(g) Immediately
prior to the Closing, the Companies (other than Diablo) shall, in
consultation with the Buyer, use the maximum amount of their
available Cash to pay down the Indebtedness (other than the Assumed
Debt) to the greatest extent possible; provided, that the failure
to do so shall not result in any liability to the
Sellers.
(h) The
Sellers shall cause the Company to determine, in good faith, and
deliver to Buyer prior to the Closing, (i) the Company
Transaction Expenses, (ii) the aggregate amount of principal
and interest due and payable under the Promissory Notes computed as
of the Closing Date, and (iii) a closing statement (the “
Closing Statement ”) setting forth the Sellers’
good faith estimated calculation of the Equity Value and Per Share
Equity Value, which amounts shall be determined by taking into
account all provisions establishing the basis for such calculation
set forth in this Agreement, be based upon the estimates provided
in this Section 2.3, and shall include each item in the
definition of Equity Value as a separate line item. The Company
shall provide Buyer with such supporting documentation used in
calculating the amounts set forth in this Section 2.3 and such
other documentation as Buyer may reasonably request. Buyer’s
failure to object to any of the items set forth on the Closing
Statement shall not limit or alter any of Buyer’s rights and
remedies under this Agreement.
Subject to the
provisions of Section 7 and Section 8, the purchase,
sale, redemption and contribution of the Shares and other
transactions provided for in this Agreement (the “
Closing ”) will take place at the offices
of Alston
& Bird LLP, 90 Park Avenue, New York, New York 10016, at 10:00
A.M . (local time) on the Closing Date. At the Closing, in addition
to such other actions as may be provided for herein:
(a) Each
Rollover Shareholder shall contribute his Rollover Shares to Buyer
in accordance with Section 2.1 and in connection therewith
shall deliver to Buyer any and all stock certificates representing
the Rollover Shares, duly endorsed (or accompanied by appropriate
stock powers) for transfer to Buyer.
(b) WCP and
each Rollover Shareholder shall enter into the Amended and Restated
LLC Agreement of Buyer, substantially in the form attached hereto
as Exhibit B (the “ Amended and Restated LLC
Agreement ”) providing for the relative
rights,
18
privileges and
obligations of the holders of the equity interests of Buyer,
including the Rollover Equity, following consummation of the
Contemplated Transactions.
(c) The
Company and D’Arcy shall enter into the Amendment to
Employment Agreement substantially in the form attached hereto as
Exhibit C .
(d) The
Sellers and CAC shall deliver to Buyer the certificates required to
be provided by them as set forth in Section 7.1, and Buyer
shall deliver to the Sellers’ Representative the certificates
provided for in Section 8.1.
(e) Each
Rollover Shareholder that is an obligor under a Promissory Note
shall pay its Promissory Note in full (including all principal and
interest accrued through the Closing Date) and, to the extent not
repaid in full, the Companies shall have the right to offset at the
Closing any amounts due such Rollover Shareholder pursuant to this
Agreement by the amount of such Promissory Note (including all
principal and accrued interest) of such Rollover Shareholder on the
Closing Date.
(f) The Buyer
shall use the proceeds of the Equity Financing to acquire the
Purchased Shares from CODI in accordance with Section 2.2 and
CODI shall deliver a certificate or certificates representing the
Purchased Shares, duly endorsed (or accompanied by duly executed
stock powers) for transfer to Buyer. Buyer’s payment for the
Purchased Shares shall be made by wire transfer of immediately
available funds pursuant to wire transfer instructions as set forth
on the Wire Transfer Instruction Form.
(g) Buyer
shall cause the Companies to borrow funds pursuant to the Credit
Agreements.
(h) Buyer
shall cause the Companies to use a portion of the Debt Financing
Proceeds to satisfy in full the Debt to be Repaid.
(i) Buyer
shall cause CAC to use a portion of the Debt Financing Proceeds to
acquire the Redeemed Shares from the Sellers in accordance with
Section 2.2 and each such Seller shall deliver a certificate
or certificates representing such Seller’s Redeemed Shares,
duly endorsed (or accompanied by duly executed stock powers) for
transfer to CAC. The payment due from CAC to each Seller for such
Seller’s Redeemed Shares shall equal to the sum of
(A) the product obtained by multiplying (x) the Per Share
Equity Value, by (y) the aggregate number of Redeemed Shares
owned of record by such Seller as set forth in Part 3.3
of the Disclosure Letter, minus , (B) the product
obtained by multiplying (x) such Seller’s (other than
CODI and Norwest) Holdback Percentage by (y) the Holdback
Amount. CAC’s payment for the Redeemed Shares shall be made
by wire transfer of immediately available funds pursuant to wire
transfer instructions set forth in the Wire Transfer Instruction
Form.
(j) Buyer
shall cause the Company to use a portion of the Debt Financing
Proceeds to pay the Holdback Amount to the Sellers’
Representative which amount shall be held in accordance with
Section 12.14.
19
(k) Buyer
shall cause the Company to use a portion of the Debt Financing
Proceeds to pay the Option Termination Payment to
D’Arcy.
(l) Buyer
shall cause the Company to use a portion of the Debt Financing
Proceeds to pay the Company Transaction Expenses to the extent such
amounts reduce the Equity Value for purposes of determining the
amount payable to the Sellers.
(m) Buyer
shall cause the Company to use a portion of the Debt Financing
Proceeds to pay the Buyer’s Transaction Expenses.
(n) Buyer
shall cause the Company to pay the D’Arcy Interest
Bonus.
(o) CAC and
the Company shall enter into an Indemnification Agreement
substantially in the form attached hereto as Exhibit D
with each of Arthur C. Roselle and Stuart Christhilf.
(p) Each
person (other than D’Arcy) serving as a director on the board
of directors or similar governing body of any the Companies (other
than Diablo) shall resign effective upon the Closing.
(a) Within
sixty (60) days after the Closing Date, Buyer shall cause the
Companies to prepare and deliver to Sellers’ Representative a
statement evidencing its determination of actual Adjusted Net
Working Capital (the “ Working Capital Closing
Statement ”) and, based thereon, the Adjustment Amount,
which Working Capital Closing Statement shall be prepared, and the
Adjusted Net Working Capital determined, on a basis consistent with
the preparation of the Estimated Working Capital Closing Statement
and in accordance with the Working Capital Methodology.
Sellers’ Representative may object to the determination by
Buyer of the Adjustment Amount by delivery of a written statement
of objections (stating the basis of the objections with reasonable
specificity) to Buyer within thirty (30) days following
delivery to Sellers’ Representative of such Working Capital
Closing Statement but only on the basis that the amounts reflected
therein were not arrived at in accordance with this Agreement or
resulted from a mistake of fact or other inaccuracy. If
Sellers’ Representative makes such objection, then Buyer and
Sellers’ Representative shall seek in good faith to resolve
all disagreements set forth in such written statement of objections
within twenty (20) days following the delivery thereof to
Buyer. If Sellers’ Representative does not make such
objection within such 30-day period, such Working Capital Closing
Statement and, based thereon, the Adjustment Amount shall be
considered final and binding upon the parties.
(b) If the
Adjustment Amount as finally determined is:
(i) less than the
Estimated Adjustment Amount, then, within five (5) business
days of final determination of the Adjustment Amount, each Seller
shall pay or cause to be paid to Buyer such Seller’s Pro Rata
Percentage of the amount
20
of such short
fall, by wire transfer of immediately available funds to such bank
account of Buyer as Buyer shall specify to Sellers’
Representative in writing; provided, however, that, to the extent
Beckwith then retains any Holdback Amount, Beckwith shall, to the
extent of the applicable funds, satisfy each such Seller’s
(other than CODI and Norwest) allocable portion of such short fall
therefrom; or
(ii) greater than
the Estimated Adjustment Amount, then, within five
(5) business days of final determination of the Adjustment
Amount, the Buyer shall pay to each Seller such Seller’s Pro
Rata Percentage of the amount of such excess, in immediately
available funds, by wire transfer to such bank account or accounts
of such Seller as Sellers’ Representative shall specify to
Buyer in writing.
(c) After the
Closing, Buyer shall permit Sellers’ Representative and its
Representatives to have reasonable access to, and to examine and
make copies of, the books and records of the Companies as
Sellers’ Representative shall reasonably determine necessary
for purposes of timely reviewing the Working Capital Closing
Statement.
(d) In the
event Buyer and Sellers’ Representative are unable to agree
on the final Adjustment Amount, either party may elect, by written
notice to the other party, to have such disagreement resolved by an
accounting firm of recognized national standing reasonably
acceptable to both Buyer and Sellers’ Representative (the
“ Selected Accounting Firm ”). The Selected
Accounting Firm shall make a final and binding resolution of the
Adjustment Amount. The Selected Accounting Firm shall be instructed
that, in making its final and binding resolution, it must select
either the Adjustment Amount either as proposed by Sellers’
Representative or Buyer. No appeal from such determination shall be
permitted. The Selected Accounting Firm shall be further instructed
to use every reasonable effort to perform its services within
thirty (30) days after submission of the Working Capital
Closing Statement to it, and in any case, as soon as practicable
after such submission. The costs and expenses for the services of
the Selected Accounting Firm shall be borne by the non-prevailing
party. Judgment upon any award or decision by the Selected
Accounting Firm may be enforced by any court having jurisdiction
thereof.
(e) The
parties agree that the purpose of preparing the Working Capital
Closing Statement and determining the final Adjustment Amount is to
measure changes in the components taken into consideration in
determining the Adjusted Net Working Capital, which components were
used in the calculation of the Reference Net Working Capital
attached to the Working Capital Methodology. Such process is not
intended to permit the introduction of different components,
judgments, accounting methods, policies, principles, practices,
procedures, classifications or estimation methodologies for the
purpose of preparing the Working Capital Closing Statement or
determining the final Adjustment Amount from the judgments,
accounting methods, policies, principles, practices, procedures,
classifications or estimation methodologies described in
the
21
Working Capital
Methodology or used in determining the Reference Net Working
Capital.
Effective as of
the Closing, and subject to and in consideration of (i) the
Buyer’s issuance of the Rollover Equity on the Closing Date
and payment for the Purchased Shares and (ii) CAC’s
payment for the Redeemed Shares, in each case, pursuant to this
Agreement, each Seller for itself and (except in the case of
Norwest) its affiliates and its Related Persons, as applicable,
hereby releases and forever discharges the Buyer and the Companies,
and each of the Buyer’s and the Companies’ respective
individual, joint or mutual, past, present and future
representatives, affiliates, principals, officers, employees,
agents, attorneys, representatives, insurers, subrogors, subrogees,
licensees, predecessors, members, directors, managers,
stockholders, limited partners, controlling persons, subsidiaries,
successors and assigns (individually a “ Releasee
” and collectively, the “ Releasees ”)
from any and all claims, demands, Proceedings, causes of action
(including those arising out of or in any way related to any
federal, state or local law prohibiting discrimination on the basis
of age, race, color, religion, disability, sex, national origin,
citizenship or other protected classification, including, without
limitation, claims under Title VII, the Age Discrimination in
Employment Act, the Employee Retirement Income Security Act, and
the Americans With Disabilities Act), suits, Orders, obligations,
rights of indemnification, contribution or subrogation, contracts,
agreements, debts and liabilities whatsoever, whether known or
unknown, by statute, at law and in equity (the “ Released
Claims ”) which such Seller (or, except in the case of
Norwest, any of its affiliates, or Related Persons) now has, has
ever had or may hereafter have against the respective Releasees
(i) arising contemporaneously with or prior to the Closing or
(ii) on account of or arising out of any matter, cause or
event occurring contemporaneously with or prior to the Closing and,
in either case, related to the ownership of the Shares, service as
an officer or director of any of the Companies, or the business and
affairs of any of the Companies, including, without limitation, all
such Released Claims arising under or in connection with any
financing, guaranty or other financial accommodation (and all
subrogation rights that may arise in the future on account
thereof), investment, advance, loan, lease, provision of goods or
services, Contracts (including any Organizational Documents) or
other undertaking or transaction entered into with or on behalf of
the Companies by any such Seller (or, except in the case of
Norwest, any of its affiliates or Related Persons); provided
, however , that nothing contained herein shall operate to
release any obligation (i) of the Companies or the Buyer
arising pursuant to this Agreement or the other Transaction
Documents, (ii) of any of the parties to the Related Person
transactions described or disclosed in Part 3.A4 of the
Disclosure Letter which are not being terminated hereunder at the
Closing pursuant to Section 12.4, or (iii) pursuant to
any employment arrangement (including the Employment and
Non-Competition Agreement dated as of February 10, 2004 by and
between D’Arcy and the Company, as amended) for events
arising on or after the Closing or for accrued salary and benefits
earned through the Closing and such employment arrangements shall
remain in full force and effect pursuant to its respective terms
following the Closing. Each Seller acknowledges that it may
hereafter discover claims or facts in addition to or different from
those which it now knows or believes to exist with respect to the
subject matter of
22
this release
and which, if known or suspected at the time of executing this
release, may have materially affected its willingness to enter into
this release. Nevertheless, each Seller hereby waives any right,
claim, or cause of action that might arise as a result of such
different or additional claims or facts.
3.
Representations and
Warranties of CAC
CAC hereby
represents and warrants to Buyer, as of the date of this Agreement,
as follows:
3.1
Organization and Good
Standing
(a)
Part 3.1 of the Disclosure Letter contains a complete
and accurate list of the exact legal name of each of the Companies,
together with their respective jurisdictions of incorporation or
organization. Each of the Companies is duly organized, validly
existing, and in good standing under the laws of its jurisdiction
of incorporation or organization, with full corporate power and
authority to conduct its business as it is now being conducted, to
own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable
Contracts.
(b)
Part 3.1 of the Disclosure Letter contains a complete
and accurate list of the jurisdictions in which each of the
Companies is authorized to do business as a foreign entity. Each of
the Companies is duly qualified to do business as a foreign entity
and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by
it, requires such qualification, except where the failure to be so
qualified or in good standing would not reasonably be expected to
have a Material Adverse Effect.
(c) Except
for the Companies listed in Part 3.1 of the Disclosure
Letter, neither CAC nor the Company has any Subsidiaries or
ownership interest, directly or indirectly, in any other
Person.
(d) CAC has
delivered or caused to be delivered or otherwise made available to
Buyer true and correct copies of the Organizational Documents of
each of the Companies as currently in effect and as in effect at
the Closing.
3.2
Authority; No
Conflict
(a) This
Agreement constitutes the legal, valid and binding obligation of
CAC, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting creditors’ rights generally and
general principles of equity. CAC has the full power and authority
to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by CAC of this
Agreement and any related agreements to which it is a party and the
consummation by it of the Contemplated Transactions and any
transactions contemplated by such related agreements (to the extent
applicable to it) have been duly authorized and approved and no
other action with respect to CAC is necessary
23
in order to
authorize this Agreement, such related agreements or the
Contemplated Transactions.
(b) Except as
set forth in Part 3.2 of the Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation
or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of
time):
(i) contravene,
conflict with or result in a violation of (A) any provision of
the Organizational Documents of any of the Companies, or
(B) any resolution adopted by the board of directors, the
stockholders or the members, as applicable, of any of the
Companies;
(ii) contravene,
conflict with or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which any of the Companies,
or any of the assets owned or used by any of them, may be
subject;
(iii) contravene,
conflict with or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Companies or that
otherwise relates to the business of, or any of the assets owned or
used by any of the Companies;
(iv) contravene,
conflict with or result in a violation or breach of any provision
of, or give any Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, any material Applicable Contract
of the Companies; or
(v) result in the
imposition or creation of any Encumbrance (other than Permitted
Encumbrances) upon or with respect to any of the assets owned or
used by any of the Companies.
Except as set
forth in Part 3.2 of the Disclosure Letter, none of the
Companies is, or will be, required to give any notice to or obtain
any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
Part 3.3 of the Disclosure Letter contains a complete
and accurate listing of the authorized, issued and outstanding
equity securities, together with, where applicable, the par value
thereof, of each of the Companies. CAC is and will be on the
Closing Date immediately prior to the Closing the record and
beneficial owner and holder of all the equity securities of the
Company, and the Company is and will be on the Closing Date
immediately prior to the Closing the record and beneficial owner
and holder of all the equity securities of the Subsidiaries (other
than Diablo), in each case, free and clear of all
24
Encumbrances on
the Closing Date. The Company is and will be on the Closing Date
immediately prior to the Closing the record and beneficial owner
and holder of 50% of the membership interests of Diablo free and
clear of all Encumbrances on the Closing Date. All of the equity
securities of the Companies have been duly authorized and validly
issued and are fully paid and nonassessable. Part 3.3
of the Disclosure Letter sets forth all options, warrants, calls,
commitments, Contracts or other rights relating to the issuance,
sale, or transfer of any securities of the Companies as are in
effect immediately prior to the Closing (the “ Contingent
Securities ”). Other than as set forth in
Part 3.3 of the Disclosure Letter and other than as may
be established or initiated by Buyer, after giving effect to the
Contemplated Transactions, following the Closing Date there will be
no Contingent Securities outstanding. None of the outstanding
securities of the Companies were issued in violation of the
Securities Act or of any applicable state securities or blue sky
laws. Except as set forth in Part 3.3 of the Disclosure
Letter, there are no Contracts relating to the issuance, sale or
transfer of any equity securities of any of the Companies, and none
of the Companies owns, or has any Contract to acquire, any equity
securities of any Person or any direct or indirect equity or
ownership interest in any other business.
CAC has delivered,
or has caused to be delivered, to Buyer: (a) audited
consolidated balance sheets of the Companies as at each of
June 30, 2006 (the “ Balance Sheet ”),
June 30, 2005 and June 30, 2004 (including, in each case,
the notes thereto), and the related audited consolidated statements
of income, changes in stockholders’ equity, and cash flow for
each of the fiscal years then ended, together with the report
thereon of the independent certified public accountants (the
“ Audited Financial Statements ”), and
(b) unaudited consolidated balance sheet of the Companies as
of December 3, 2006 (the “ Interim Balance Sheet
”) and the related unaudited consolidated statements of
income and cash flow for the approximately five (5) fiscal
months then ended, certified by the Company’s chief financial
officer (collectively, the “ Unaudited Financial
Statements ” and together with the Audited Financial
Statements, the “ Financial Statements ”).
Except as set forth on Part 3.4 of the Disclosure Letter, the
Financial Statements fairly
pres ent
in all material respects the financial condition and the results of
operations, changes in shareholders’ equity, and cash flow of
the Companies as at the respective dates thereof and for the
periods referred to therein, and were prepared in accordance with
GAAP, subject, in the case of the Unaudited Financial Statements,
to normal recurring year-end adjustments (none of which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect) and the absence of notes. The Financial
Statements reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in
the notes thereto or in the Disclosure Letter.
The books of
account, minute books and stock record books of the Companies, all
of which have been made available to Buyer and its Representatives,
are complete and correct in all material respects, and have been
maintained in accordance with sound business practices. Except as
set forth in Part 3.5 of the Disclosure Letter, the
minute
25
books of the
Companies contain accurate and complete records of all meetings
held of, and corporate action taken by, the stockholders or
members, the boards of directors or managers, and committees of
such boards, and no meeting of any such stockholders, board of
directors, or committee has been held for which minutes have not
been prepared and are not contained in such minute books. At the
Closing, all of such books and records will be in the possession of
the Companies.
3.6 Title to Properties;
Encumbrances
(a) Real
Property . Part 3.6 of the Disclosure Letter lists
all the real property owned by the Companies (the “ Owned
Real Property ”) and leased by the Companies. The
Companies have good and valid title to the Owned Real Property,
free and clear of all Encumbrances, except Permitted Encumbrances.
The Real Property is in material compliance with all applicable
building, zoning, subdivision, health and safety and other Legal
Requirements (collectively, the “ Real Property Laws
”). None of the Companies has received any notice of
violation of any Real Property Law and, to CAC’s Knowledge,
there is no basis for the issuance of any such notice or the taking
of any action for any such violation. All water, oil, gas,
electrical, telecommunications, sewer, storm and waste water
systems and other utility services or systems for the Real Property
have been installed and are operational and sufficient for the
operation of the business presently conducted, normal wear and tear
and regularly scheduled maintenance excepted. CAC has delivered or
otherwise made available to Buyer correct and complete copies of
all leases (as amended or modified through the Closing Date) listed
in Part 3.6 of the Disclosure Letter. Each such lease
is legal, valid, binding and enforceable against the Companies and,
to CAC’s Knowledge, against the other parties thereto and is
in full force and effect, in each case subject to proper
authorization and execution of such lease by the other party and
the application of any bankruptcy or creditor’s rights laws
or general principles of equity. Neither the Companies, nor, to
CAC’s Knowledge, any other party to any lease, is in default,
and to CAC’s Knowledge, no event has occurred or circumstance
exists which, with the delivery of notice, the passage of time or
both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such
lease.
(b)
Personal Property . The Companies have good and valid title
to, or a valid leasehold interest in, all of the personal
properties and assets owned by each of them or used in its
respective business, including, without limitation each item of
equipment and other personal property, tangible, intangible or
otherwise included as an asset in the Interim Balance Sheet (other
than inventory and equipment disposed of in the Ordinary Course of
Business since the date of the Interim Balance Sheet), and to each
item of personal property, acquired since the date of the Interim
Balance Sheet (collectively, the “ Personal Property
”), free and clear of any Encumbrances, except Permitted
Encumbrances. With respect to each lease of Personal Property: (i)
such lease is legal, valid, binding and enforceable against the
Companies and, to CAC’s Knowledge, against the other parties
thereto and is in full force and effect, in each case subject to
proper authorization and execution of such lease by the other party
and the application of any bankruptcy or creditor’s rights
laws or general principles of equity, (ii) the Companies have
delivered or made available to the Buyer or its Representatives
true, complete and
26
accurate copies
of each of the leases described in Part 3.6(b) of the
Disclosure Letter, and none of the leases have been modified in any
respect, except to the extent that such modifications are disclosed
by the copies delivered or made available to the Buyer; and
(iii) neither the Companies nor, to CAC’s Knowledge, any
other party to such lease, is in default, and to CAC’s
Knowledge, no event has occurred or circumstance exists which, with
the delivery of notice, the passage of time or both, would
constitute such a breach or default, or permit the termination,
modification or acceleration of payment under such
lease.
3.7 Condition and Sufficiency of
Assets
The buildings,
plants, structures, and equipment of the Companies are structurally
sound, are in good operating condition and in a good state of
maintenance and repair, ordinary wear and tear excepted, and are
adequate for the uses to which they are being put, and none of such
buildings, plants, structures, or equipment is in need of
maintenance or repairs, except for ordinary, routine or
non-material maintenance and repairs. Except as set forth in
Part 3.7 of the Disclosure Letter, the building,
plants, structures, equipment and other tangible assets, intangible
assets and other assets of the Companies will be sufficient for the
continued conduct of the business of the Companies after the
Closing in substantially the same manner as conducted prior to the
Closing.
All accounts
receivable of the Companies that are reflected on the Interim
Balance Sheet or on the accounting records of the Companies as of
the Closing Date (collectively, the “ Accounts
Receivable ”) represent or will represent valid
obligations of the respective account debtors arising from sale
actually made or services actually performed in the Ordinary Course
of Business. Unless paid prior to the Closing Date, the Accounts
Receivable will be current and, to CAC’s Knowledge,
collectible net of the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of
the applicable Acquired Company as of the Closing Date (which
reserves are adequate and calculated consistent with past practice
in accordance with GAAP). There is no contest, claim, or right of
set-off that is not reserved for under any Contract with any
obligor of an Accounts Receivable relating to the amount or
validity of such Accounts Receivable, as so reserved.
All inventory of
the Companies, consists of a quality and quantity usable and
salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Interim
Balance Sheet, on the accounting records of the Companies as of the
Closing Date or pursuant to the Working Capital Methodology,
as
27
the case may
be. All inventories not written off have been priced at the lower
of cost or market on a first in, first out basis.
(a) The
Companies have timely filed or caused to be filed all material Tax
Returns that are or were required to be filed by or with respect to
any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Except as
set forth in Part 3.10(a) of the Disclosure Letter, each of
the Companies has paid, or made provision for the payment of, all
Taxes that have or may have become due pursuant to such Tax
Returns, or pursuant to any assessment received by any of the
Companies, except such Taxes, if any, as are being contested in
good faith. CAC has delivered or made available to Buyer copies of
all such Tax Returns filed as of the date of this Agreement for the
last two (2) fiscal years of the Companies.
(b) Except as
described in Part 3.10(b) of the Disclosure Letter,
since February 10, 2004, none of the Companies:
(i) is or has been
the subject of a Tax audit or examination;
(ii) has 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 taxing
authority; or
(iii) has received
from any taxing authority any written notice of proposed
adjustment, deficiency, underpayment of Taxes or any other such
written notice which has not been satisfied by payment or been
withdrawn.
(c) The
charges, accruals, and reserves with respect to Taxes on the
respective books of the Companies are materially adequate
(determined in accordance with GAAP) with respect to the
Companies’ liability for Taxes. To CAC’s Knowledge,
there exists no proposed material Tax assessment against the
Companies except as disclosed in Part 3.10 of the
Disclosure Letter. To CAC’s Knowledge, all material Taxes
that the Companies are or were required by Legal Requirements to
withhold or collect hav
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