-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C+qPbGNY3FoGNylhcSJkqbgR2TDaVCpd9mSplCMK9N2unG69mpmDZxt1i3kUHJmo tbzIgSievq9QD1OHbWdhug== 0000950137-06-006494.txt : 20060602 0000950137-06-006494.hdr.sgml : 20060602 20060602114228 ACCESSION NUMBER: 0000950137-06-006494 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20060601 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060602 DATE AS OF CHANGE: 20060602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINDSAY MANUFACTURING CO CENTRAL INDEX KEY: 0000836157 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 470554096 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13419 FILM NUMBER: 06882019 BUSINESS ADDRESS: STREET 1: 2707 NORTH 108TH STREET STE 102 CITY: OMAHA STATE: NE ZIP: 68644 BUSINESS PHONE: 4024282131 MAIL ADDRESS: STREET 1: 2707 NORTH 108TH STREET STE 102 CITY: OMAHA STATE: NE ZIP: 68644 8-K 1 c05795e8vk.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 1, 2006 LINDSAY MANUFACTURING CO. (Exact name of registrant as specified in its charter) Delaware 1-13419 47-0554096 (State of Incorporation) (Commission File Number) (IRS Employer Identification Number)
2707 North 108th Street Suite 102 Omaha, Nebraska 68164 (Address of principal executive offices) (Zip Code)
(402) 428-2131 (Registrant's telephone number, including area code) Not applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT The information set forth below under Item 2.03 is hereby incorporated by reference into this Item 1.01. ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS On June 1, 2006, Lindsay Manufacturing Co. ("Lindsay," or the "Company") completed the acquisition of Barrier Systems, Inc. ("BSI") and its subsidiary Safe Technologies, Inc. through the merger of a wholly owned subsidiary of Lindsay with and into BSI (the "Merger"). As a result, BSI has become a wholly-owned subsidiary of Lindsay. BSI is engaged in the manufacture of specialty roadway barriers and traffic flow products that are used to reduce traffic congestion and enhance safety. Total cash merger consideration to be paid to the stockholders of BSI and holders of options to acquire BSI stock was $35,000,000 less (i) approximately $3,796,000 representing liabilities of BSI for borrowed money which were repaid at closing by Lindsay, (ii) approximately $29,0000 representing liabilities of BSI for borrowed money which were not repaid at closing and (iii) approximately $906,000 of transaction costs of BSI. Of the cash merger consideration, $3,500,000 is held in escrow to secure the indemnification obligations of the shareholders and option holders of BSI and $1,000,000 is held in escrow pending calculation of the final merger consideration based on the adjusted net assets of BSI at closing. The Company funded the payment of the merger consideration using a combination of its own working capital and borrowing under the new credit agreement described in Item 2.03 below. Prior to the Merger, certain assets of BSI were conveyed to a limited liability company and the entire equity interests in such company were distributed to the shareholders of BSI as a special dividend. As a result, these assets (consisting primarily of proceeds from the sale of equity interests in Canadian distributors which historically had been accounted for under the equity method), were not acquired by Lindsay through the Merger. The foregoing description of the Merger is qualified in its entirety by reference to the Agreement and Plan of Merger, dated as of May 1, 2006, by and among Lindsay, BSI, LM Acquisition Corporation and QMB Payment Co., LLC, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference. Prior to the Merger, the Company supplied components to BSI used by BSI in its manufacturing process in the ordinary course of business. The Company did not consider this to be a material relationship with BSI or its shareholders. The consolidated statement of operations of BSI for the twelve months ended December 31, 2005 and the trailing twelve months ended April 30, 2006 are set forth below. Complete financial data regarding BSI as required by Item 9.01 of Form 8-K will be provided in an amendment hereto. BARRIER SYSTEMS INC. CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED ------------------------- (AUDITED) (UNAUDITED) DECEMBER APRIL 2005 2006 ----------- ----------- Operating revenues ................................. $16,410,654 $21,321,912 Cost of operating revenues ......................... 8,046,500 10,858,425 ----------- ----------- Gross profit ....................................... 8,364,154 10,463,487 ----------- ----------- Operating expenses ................................. 6,056,267 6,389,158 ----------- ----------- Operating income ................................... $ 2,307,887 $ 4,074,329 =========== ===========
Note: Depreciation and amortization for the twelve-months ended December 31, 2005 and April 30, 2006, was $967,000 and $1,040,000, respectively. ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT In order to finance the Merger described above in Item 2.01, Lindsay entered into an unsecured $30 million Term Note and Credit Agreement, each effective as of June 1, 2006, with Wells Fargo Bank, N.A. (collectively, the "Credit Agreement"). In addition, Lindsay entered into a interest rate swap transaction with Wells Fargo Bank, N.A. Borrowings under the Credit Agreement bear interest at a rate equal to LIBOR plus 50 basis points. However, this variable interest rate has been converted to a fixed rate of 6.05% through the interest rate swap transaction. Principal is repaid quarterly in equal payments of $1,071,428 over a seven year period commencing September, 2006. The Credit Agreement contains certain covenants, including covenants relating to Lindsay's financial condition. Upon the occurrence of any event of default specified in the Credit Agreement, including a change in control of Lindsay (as defined in the Credit Agreement), all amounts due thereunder may be declared to be immediately due and payable. Copies of the Term Note and Credit Agreement are filed as Exhibits 10.2 and 10.3 hereto, respectively, and are incorporated herein by reference. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired. To supplied by amendment no later than August 10, 2006. (b) Pro-forma financial information. To be supplied by amendment no later than August 10, 2006. (d) Exhibits. 10.1 Agreement and Plan of Merger, dated June 1, 2006, by and among the Company, LM Acquisition Corporation, Barrier Systems, Inc. and QMB Payment Co., LLC. 10.2 Term Note, dated June 1, 2006, by and between the Company and Wells Fargo Bank, N.A. 10.3 Credit Agreement, dated June 1, 2006, by and between the Company and Wells Fargo Bank, N.A. 10.4 Amended and Restated ISDA Confirmation dated May 8, 2006, by and between the Company and Wells Fargo Bank, N.A. 10.5 ISDA Master Agreement, dated May 5, 2006, by and between the Company and Wells Fargo Bank, N.A. 10.6 Schedule to the ISDA Master Agreement, Dated May 5, 2006, by and between the Company and Wells Fargo Bank, N.A. 99.1 Press Release, dated June 1, 2006, issued by the Company. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: June 2, 2006 LINDSAY MANUFACTURING CO. By: /s/ David Downing ----------------------------------- David Downing, Vice President and Chief Financial Officer EX-10.1 2 c05795exv10w1.txt AGREEMENT AND PLAN OF MERGER EXHIBIT 10.1 EXECUTION CONVERSION AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is executed on May 1, 2008, by and among Lindsay Manufacturing Co., a Delaware corporation ("Parent"), LM Acquisition Corp., a California corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), Barrier Systems, Inc., a California corporation ("Barrier"), and QMB Payment Co., a California limited liability company ("QMB Payment Co." or "Shareholder Representative"). Parent, Merger Sub, Barrier and Shareholder Representative are referred to collectively herein as the "Parties," and each is sometimes referred to herein as a "Party." RECITALS A. The Boards of Directors of Barrier, Parent and Merger Sub believe it is in the best interests of their respective corporations and the shareholders of their respective corporations that Barrier and Merger Sub combine into a single corporation through the statutory merger of Merger Sub with and into Barrier (the "Merger") and, in furtherance thereof, have approved the Merger. B. By virtue of the Merger, all of the issued and outstanding shares of Barrier's capital stock shall be converted into the right to receive cash as determined herein. C. Barrier, Parent and Merger Sub desire to make certain representations, warranties, covenants and other agreements in connection with the Merger. D. Shareholder Representative is willing to act on behalf of the shareholders of Barrier in determining and settling any indemnification claims that may be made by Parent hereunder and as otherwise provided herein. E. Effective prior to the Closing Date and in connection with the Merger, Barrier intends to distribute (the "QMB Distribution") to the Shareholders in proportion to the Barrier Shares held by each Shareholder immediately prior to the Effective Time 100% of the membership interests (as divided into, represented by and known as voting Common Shares) of QMB Payment Co., LLC, a wholly-owned subsidiary of Barrier formed for the purpose of holding certain ancillary assets of Barrier which are described in Exhibit A attached hereto, and which the Parties, including Parent, desire be excluded from the assets of Barrier prior to the Closing (the "QMB Payment Assets") and to serve as Shareholder Representative. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows. ARTICLE I DEFINITIONS SECTION 1.01. Definitions. For purposes of this Agreement, any undefined terms herein shall have the following meanings: "Adjustment Escrow Account" shall have the meaning set forth in Section 2.7(a) below. "Agreement of Merger" shall mean the Agreement of Merger substantially in the form of Exhibit B attached hereto. "Aggregate Consideration" shall mean the sum of $35,000,000, less the sum of (i) the Payoff Debt, (ii) the Retained Debt, (iii) the Holdback Amount, (iv) the Price Adjustment Holdback Amount, (v) an amount equal to the Transaction Costs, and (vi) an amount equal to the Per Share Closing Consideration multiplied by the number of Dissenting Shares. "Acquisition Proposal" shall have the meaning set forth in Section 5.7(a) below. "Barrier" shall have the meaning set forth in the preamble above. "Barrier Disclosure Schedule" shall have the meaning set forth in Section 4.1 below. "Barrier Common Stock" shall have the meaning set forth in Section 2.3 below. "Barrier Financial Statements" shall have the meaning set forth in Section 4.1 below. "Barrier Option" and "Barrier Options" shall have the meanings set forth in Section 2.4 below. "Barrier Shares" shall have the meaning set forth in Section 2.3 below. "Barrier's Adjusted Net Assets" shall mean the difference between (i) "Total Assets" minus "Cash," (ii) "Total Liabilities" minus "Notes Payable--Current Portion" minus "Lines of Credit" minus "Notes Payable--Long Term," where each of foregoing capitalized terms refers to the amount of the corresponding line item, calculated in accordance with GAAP, as reflected on a balance sheet of Barrier and its consolidated Subsidiaries prepared on a basis consistent with the Most Recent Balance Sheet. For illustrative purposes only, Barrier's Adjusted Net Assets on the Most Recent Balance Sheet were (i) $16,778,662.86 (Total Assets) minus $810,830.22 (Cash) less (ii) $9,587,975.35 (Total Liabilities) minus $1,200,183.36 (Notes Payable--Current Portion) minus $2,600,000 (Lines of Credit) minus $623,163.98 (Notes Payable--Long Term), which equals $10,803,204.63. For the sake of clarity, the Parties acknowledge and agree that, for purposes of calculating Closing Adjusted Net Assets, Barrier's Adjusted Net Assets shall exclude the QMB Payment Assets. "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which banks are required or authorized by Law to be closed in California. "Canadian Companies" shall mean QMB Investments Inc., QMB Barrier Systems, Inc. and Barrier QMB Canada Inc. "Closing" shall have the meaning set forth in Section 3.1 below. "Closing Adjusted Net Assets" shall mean Barrier's Adjusted Net Assets as of the date of the Closing Balance Sheet and as reflected thereon. "Closing Balance Sheet" shall have the meaning set forth in Section 2.7(b) below. "Closing Cash Amount" shall mean, without duplication, the sum of (a) the amount of all cash and time deposits and certificates of deposit with original maturities of three months or less of Barrier as of the close of business on the Business Day preceding the Closing Date (after subtracting therefrom the amount of all checks of Barrier outstanding as of the close of business on the Business Day preceding the Closing Date), (b) the amount of all checks and wire and electronic transfers paid to the order of Barrier and received on or before the Business Day preceding the Closing Date by a bank having a deposit account of Barrier, and (c) the amount of all blank fully negotiable travelers checks owned by, and in the physical possession of, Barrier as of the close of business on the Business Day preceding the Closing Date (net of all amounts payable by Barrier in connection with the acquisition of such travelers checks). "Closing Date" shall have the meaning set forth in Section 3.1 below. "Code" shall mean the Internal Revenue Code of 1986, as amended and in effect. "Comerica Loan Documents" shall mean (i) that certain Loan and Security Agreement, dated as of July 7, 2003, as amended, by and between Barrier and Comerica Bank, (ii) that certain Variable Rate-Fixed Installment Note, dated as of October 24, 2005, by Barrier in favor in Comerica Bank, and (iii) all agreements and documents entered into in connection with the foregoing, including, without limitation, that certain Variable Rate-Fixed Installment Note, dated as of February 27, 2004, by Barrier in favor of Comerica Bank. "Companies" shall mean Barrier and Safe Technologies. "Contracts" shall have the meaning set forth in Section 4.1(n) below. "Damages" shall mean all losses, liabilities, costs, expenses, judgments, assessments, penalties, damages, deficiencies, suits, actions, claims, proceedings, demands and causes of action, including but not limited to reasonable attorney's fees, court costs, and related expenses. "Dissenting Shares" shall have the meaning set forth in Section 2.8 below. "Effective Time" shall have the meaning set forth in Section 3.2 below. "Environmental, Health, and Safety Requirements" shall have the meaning set forth in Section 4.1(s) below. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Escrow Agent" shall mean the Person selected by the Parties to act as escrow agent under the Escrow Agreement. "Escrow Agreement" shall mean the escrow agreement among Parent, Shareholder Representative and the Escrow Agent, substantially in the form attached hereto as Exhibit C. "Final Closing Balance Sheet" shall have the meaning set forth in Section 2.7(b) below. "Fully Diluted Number" shall mean the aggregate number of Barrier Shares and shares of Barrier Common Stock subject to Barrier Options immediately prior to the Effective Time. "GAAP" shall mean United States generally accepted principles of accounting, consistently applied. "Governmental Authority" shall mean any foreign, international, multinational, national, federal, state, provincial, regional, local or municipal court or other governmental, administrative or regulatory authority, agency or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any applicable Law. "Holdback Amount" shall mean an amount equal to $3,500,000. "Indemnifiable Loss" shall have the meaning set forth in Section 8.7 below. "Indemnified Party" shall have the meaning set forth in Section 8.4(a) below. "Indemnifying Party" shall have the meaning set forth in Section 8.4(a) below. "Indemnity Escrow Account" shall have the meaning set forth in Section 2.6 below. "Indemnity Payment" shall have the meaning set forth in Section 8.7 below. "Insurance Policies" shall have the meaning set forth in Section 4.1 (t) below. "Intellectual Property" shall mean (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (c) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith, (d) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (e) all computer software (including source code, executable code, data, databases and related documentation), and (f) all copies and tangible embodiments thereof (in whatever form or medium). "Knowledge," when used below with respect to Barrier, shall mean actual knowledge after reasonable investigation of the following officers or employees of Barrier: Owen Denman and Chris Sanders. "Laws" shall mean any and all foreign, international, multinational, national, federal, state, territorial, provincial, regional, tribal, local, municipal and other administrative laws (including common law), statutes, codes, orders, rules and regulations, constitutions and treaties enacted, promulgated or issued by and put into effect by a Governmental Authority. "Leased Real Property" shall have the meaning set forth in Section 4.1(1) below. "Liability" shall mean and include any liability, obligation, indebtedness, claim, loss, damage, deficiency (including deferred income Tax), cost, expense, guaranty or responsibility, absolute, accrued, contingent or otherwise, and whether due or to become due. "License" shall mean any registration, license, permit, authorization, and other consents or approvals of any Governmental Authority. "Lien" shall mean any lien, attachment, pledge, mortgage, charge, encumbrance, adverse right, claim or security interest of any nature whatsoever. "Material Adverse Effect" shall have the meaning set forth in Section 4.1(a) below. "Merger" shall have the meaning set forth in Recital A above. "Merger Sub" shall have the meaning set forth in the preamble above. "Most Recent Balance Sheet" shall have the meaning set forth in Section 4.1(o) below. "Notice of Claim" shall have the meaning set forth in Section 8.4(a) below. "Optionee" and "Optionees" shall mean the holder(s) of Barrier Options. "Option Spread" shall have the meaning set forth in Section 2.4 below. "Order" shall mean any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award. "Ordinary Course of Business" shall mean the ordinary course of business of the Companies consistent with their past custom and practice (including with respect to quantity, frequency and amount). "Owned Real Property" shall have the meaning set forth in Section 4.1(k) below. "Parent" shall have the meaning set forth in the preamble above. "Parties" and "Party" shall have the meanings set forth in the preamble above. "Payoff Debt" shall mean all Liabilities of the Companies for borrowed money, including principal, interest, fees and other amounts payable with respect thereto, under the Comerica Loan Documents. "Per Share Closing Consideration" shall mean the amount equal to the sum of (i) the Aggregate Consideration (calculated as though there are no Dissenting Shares), divided by the Fully Diluted Number, (ii) $948,000, divided by the Fully Diluted Number. "Percentage Interest" shall mean, with respect to any Shareholder or Optionee, the quotient of (i) the sum of (A) the number of Barrier Shares held by such Shareholder immediately prior to the Effective Time and (B) the number of shares of Barrier Common Stock subject to Barrier Options held by such Optionee immediately prior to the Effective Time, divided by (ii) the Fully Diluted Number, as such Percentage Interest is set forth on Exhibit D, which Exhibit shall be updated by Barrier as of the Closing to reflect the exercise of any employee options to purchase Barrier Common Stock and to exclude any Dissenting Shares from both (i) and (ii) above. "Person" shall mean an individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated association or any other business entity or Governmental Authority. "Price Adjustment" shall have the meaning set forth in Section 2.7(b) below. "Price Adjustment Holdback Amount" shall mean an amount equal to $1,000,000. "QMB Distribution" shall have the meaning set forth in Recital E above. "QMB Payment Assets" shall have the meaning set forth in Recital E above. "QMB Payment Co." shall have the meaning set forth in the preamble above. "QMB Sale" shall mean the sale by Barrier of 100% of its equity interests in each of the Canadian Companies, which sale was consummated on March 31, 2006. "Real Property" shall have the meaning set forth in Section 4.1(k) below. "Real Property Leases" shall have the meaning set forth in Section 4.1(k) below. "Requisite Shareholder Approval" shall have the meaning set forth in Section 5.3(a). "Retained Debt" shall mean all Liabilities of the Companies for borrowed money, including principal, interest, fees and other amounts payable with respect thereto, and all capitalized lease Liabilities of the Companies, other than Payoff Debt, as estimated as of the Closing by Barrier in a certificate delivered to Parent, with reasonable supporting documentation, no less than two (2) Business Days prior to the Closing Date. "Safe Technologies" shall mean Safe Technologies, Inc., a California corporation. "Securities Act" shall have the meaning set forth in Section 4.1(e) below. "Shareholders" shall have the meaning set forth in Section 2.3 below. "Shareholder Representative" shall have the meaning set forth in the preamble above. "Subsidiary" shall mean, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity, whether incorporated or unincorporated, of which at least a majority of the capital stock or other equity interests having by their terms voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation, limited liability company, partnership, association or other business entity is directly or indirectly beneficially owned or controlled by such Person. The term "Subsidiary" shall include all Subsidiaries of any Subsidiary. "Surviving Corporation" shall have the meaning set forth in Section 2.1 below. "Target Adjusted Net Assets" shall mean Barriers Adjusted Net Assets in an amount equal to $9,500,000. "Tax" shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add on minimum, estimated, or other tax or other fiscal charges of any kind whatsoever, including without limitation any interest, penalty, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax Liability of any other Person. "Tax Return" shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including without limitation any schedule or attachment thereto, and any amendment thereof. When used in connection with Tax Returns, the term "delivered" includes physical delivery as well as making available for examination and copying. "Tennessee Real Property" means that certain real property located at 1066 Prosser Lane, Leoma, Tennessee. "Threshold" shall have the meaning set forth in Section 8.2 below. "Transaction Costs" shall mean all unpaid costs incurred by Barrier in connection with the Merger, including, without limitation, the fees and expenses to be paid to The Spartan Group LLC, Collette Erickson Farmer & ONeill LLP, and Armanino McKenna LLP, as estimated as of the Closing by Barrier in a certificate delivered to Parent, with reasonable supporting documentation, no less than two (2) Business Days prior to the Closing Date. "Unaffiliated Firm" shall have the meaning set forth in Section 2.7(c) below. ARTICLE II DESCRIPTION OF TRANSACTION SECTION 2.01. Merger. Effective as of the Effective Time, Merger Sub shall be merged with and into Barrier in accordance with the terms of this Agreement and the provisions of the California Corporations Code. Barrier shall be the corporation surviving the Merger (the "Surviving Corporation"), and the separate existence of Merger Sub shall cease as of the Effective Time. The Articles of Incorporation of Barrier in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation following the Effective Time. The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation following the Effective Time. The directors and officers of Merger Sub in office immediately prior to the Effective Time of the Merger shall become the directors and officers of the Surviving Corporation as of the Effective Time. The effect of the Merger shall be as provided by applicable provisions of the California Corporations Code. SECTION 2.02. Conversion of Merger Sub Shares. Effective as of the Effective Time, each share of capital stock of Merger Sub issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one fully paid and non-assessable share of the common stock of the Surviving Corporation. SECTION 2.03. Conversion of Barriers Shares. Effective as of the Effective Time, each share of common stock of Barrier ("Barrier Common Stock") issued and outstanding immediately prior to the Effective Time (each, a "Barrier Share" and, collectively, the "Barrier Shares") shall, by virtue of the Merger and without any action on the part of the shareholders of Barrier ("Shareholders"), subject to Section 2.5, be canceled and converted into the right to receive the following: (a) The Per Share Closing Consideration in cash payable at the Effective Time. (b) A portion of the Holdback Amount, if, when and to the extent such amount becomes payable in accordance with Section 2.6. (c) A portion of the Price Adjustment Holdback Amount and the amount equal to the positive difference, if any, between Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet, and Target Adjusted Net Assets, in each case if, when and to the extent such amounts become payable in accordance with Section 2.7. All of the Barrier Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist. SECTION 2.04. Stock Options. Effective as of the Effective Time, each employee option to purchase Barrier Common Stock outstanding immediately prior to the Effective Time (each a "Barrier Option" and, collectively, the "Barrier Options") shall be cancelled and cashed-out in accordance with the following terms, which shall be reflected in cash-out agreements entered into between Barrier and each Optionee prior to the Closing: (a) The holder of each Barrier Option shall be paid in respect therefor, out of the Aggregate Consideration, within 10 days of the Effective Time, an amount equal to the Option Spread (as defined below) for such Barrier Option multiplied by the number of shares of Barrier Common Stock subject to such Barrier Option. (b) The holder of each Barrier Option shall be entitled to be paid a portion of the Holdback Amount, the Price Adjustment Holdback Amount and the amount equal to the positive difference, if any, between Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet, and Target Adjusted Net Assets in respect of each Barrier Option in the amounts set forth in Sections 2.6 and 2.7 below, in each case if, when and to the extent such amounts become payable in accordance with such Sections. (c) For purposes hereof, with respect to any Barrier Option, the term "Option Spread" shall mean an amount equal to the difference between the Per Share Closing Consideration and the exercise price per share under such Barrier Option. SECTION 2.05. Delivery and Payment. On the Closing Date, the Parties shall undertake the following: (a) Barrier shall cause to be delivered to Parent all share certificates representing Barrier Shares (except for share certificates in respect of Dissenting Shares), all agreements pertaining to Barrier Options, and written agreements between Barrier and each Optionee, substantially in the form attached hereto as Exhibit E, pursuant to which each Optionee agrees to accept in exchange for its Barrier Options consideration in accordance with Section 2.4 above (which Barrier Options upon such exchange shall be cancelled and retired without further obligation to any Person). In the event that any Shareholder no longer has in his, her or its possession any of such certificates, such holder shall, in lieu of surrendering such certificates, deliver to Barrier an Affidavit of Lost Certificate and Agreement to Indemnify in form reasonably satisfactory to Parent. It shall be a condition to Parent's obligations under Section 2.5(b) that the foregoing be delivered to Parent and that each such surrendered certificate be properly endorsed or otherwise in proper form for transfer. (b) Parent shall deliver (i) an amount equal to the Payoff Debt, payable by wire transfer to the applicable lender(s) thereunder, (ii) the Aggregate Consideration, payable by wire transfer to the Escrow Agent, (iii) the Holdback Amount, payable to the Escrow Agent in accordance with Section 2.6, (iv) the Price Adjustment Holdback Amount, payable to the Escrow Agent in accordance with Section 2.7(a), and (v) an amount equal to the Transaction Costs, payable to the Escrow Agent for distribution in accordance with instructions from the Shareholder Representative. The Aggregate Consideration shall be held by the Escrow Agent until the Effective Time and then shall be distributed by the Escrow Agent, on behalf of the Shareholder Representative, (1) to each Shareholder and Optionee, the Per Share Closing Consideration for each Barrier Share (other than Dissenting Shares) and the Option Spread, net of any employee withholding amounts required to be withheld from such amount under applicable law, for each share of Barrier Common Stock subject to a Barrier Option held by such Shareholder or Optionee immediately prior to the Effective Time, in each case as set forth in Section 4.1(b) of the Barrier Disclosure Schedule, which Section shall be updated by Barrier as of the Closing to reflect the exercise of any employee options to purchase Barrier Common Stock and any Dissenting Shares, and (ii) to Barrier (for remittance to the proper Tax authorities), the aggregate amount of employee withholding amounts withheld pursuant to the preceding clause (i). Subject to Section 2.9 below, neither Parent nor Merger Sub shall have any liability to Barrier or to any Shareholder or Optionee or other Person after the foregoing amounts are paid to the Escrow Agent, including, without limitation, any liability with respect to the distribution thereof by the Escrow Agent. SECTION 2.06. Holdback Amount. On the Closing Date, Parent shall deliver the Holdback Amount to the Escrow Agent by wire transfer of immediately available U.S. Dollars to a bank account designated by the Escrow Agent in writing at least two days prior to the Closing Date (the "Indemnity Escrow Account"), to be held by the Escrow Agent pursuant to this Section 2.6 and the Escrow Agreement. On the date eighteen (18) months after the Effective Time, after any offsets against the Holdback Amount pursuant to Article VIII or Section 2.7(e), any funds remaining in the Indemnity Escrow Account, including proceeds of investment thereof, in excess of $1,750,000, shall be paid by the Escrow Agent (i) to the Shareholders and the Optionees in accordance with their respective Percentage Interests, net, in the case of Optionees, of any employee withholding amounts required to be withheld from such payments under applicable law, and (ii) to Barrier (for remittance to the proper Tax authorities), the aggregate amount of employee withholding amounts withheld pursuant to the preceding clause (i). On the date three (3) years after the Effective Time, after any offsets against the Holdback Amount pursuant to Article VIII or Section 2.7(e), any funds remaining in the Indemnity Escrow Account, including proceeds of investment thereof, shall be paid by the Escrow Agent (i) to the Shareholders and the Optionees in accordance with their respective Percentage Interests, net, in the case of Optionees, of any employee withholding amounts required to be withheld from such payments under applicable law, and (ii) to Barrier (for remittance to the proper Tax authorities) the aggregate amount of employee withholding amounts withheld pursuant to the preceding clause (i). SECTION 2.07. Post-Closing Price Adjustment. (a) Price Adjustment Holdback Amount. On the Closing Date, Parent shall deliver the Price Adjustment Holdback Amount to the Escrow Agent by wire transfer of immediately available U.S. Dollars to a bank account designated by the Escrow Agent in writing at least two days prior to the Closing Date (the "Adjustment Escrow Account"), to beheld by the Escrow Agent pursuant to this Section 2.7 and the Escrow Agreement. (b) Determination of Adjustment. The Aggregate Consideration shall be adjusted dollar for dollar following the Closing Date by the net amount by which the Target Adjusted Net Assets are greater or lesser than the Closing Adjusted Net Assets. The net amount by which the Closing Adjusted Net Assets are greater or lesser than the Target Adjusted Net Assets is hereinafter referred to as the "Price Adjustment." The Price Adjustment shall be determined from a Closing Date balance sheet (the "Closing Balance Sheet") prepared as of 12:01 a.m. on the Closing Date by Parent on a basis consistent with the Most Recent Balance Sheet except as provided on Schedule 2.7(b). Parent shall furnish the Closing Balance Sheet to Shareholder Representative not more than forty-five (45) calendar days after the Closing Date. Parent shall give representatives of Shareholder Representative reasonable access during normal business hours to the premises of the Surviving Corporation and to its books and records for purposes of enabling Shareholder Representative to verify the Closing Balance Sheet and the Price Adjustment, and shall cause appropriate representatives of Parent and the Surviving Corporation to give reasonable assistance to Shareholder Representative and its representatives, at no cost to Shareholder Representative or the Shareholders, in the verification of the Closing Balance Sheet and the Price Adjustment. (c) Disputes. Unless Shareholder Representative notifies Parent in writing that it disagrees with the Closing Balance Sheet or the Price Adjustment (which writing shall contain a statement setting forth in reasonable detail the reasons for such disagreement) within thirty (30) calendar days after receipt thereof, the Closing Balance Sheet and the Price Adjustment shall be conclusive and binding on all Parties. If Shareholder Representative notifies Parent in writing of its disagreement with the Closing Balance Sheet or the Price Adjustment within such 30-day period, then Shareholder Representative and Parent shall attempt to resolve their differences with respect thereto within fifteen (15) calendar days after the date of Shareholder Representative's written notice of disagreement. The Closing Balance Sheet will be deemed to be the final, binding and conclusive Closing Balance Sheet (the "Final Closing Balance Sheet") for all purposes on the 3lst calendar day after delivery thereof by Parent unless Shareholder Representative shall have delivered to Parent a notice of disagreement prior to such date. If Shareholder Representative delivers a written notice of disagreement and any disputes regarding the Closing Balance Sheet or the Price Adjustment are not resolved within the 15-day resolution period discussed above, the unresolved disputes shall be submitted to and resolved by an accounting firm of national standing mutually acceptable to the Parties (the "Unaffiliated Firm"). (d) Unaffiliated Firm. In connection with such engagement, Shareholder Representative and Parent will each execute, if requested by the Unaffiliated Firm, a reasonable engagement letter including customary indemnities. The Unaffiliated Firm will have thirty (30) calendar days to review the Closing Balance Sheet, the notice of disagreement, any response by Parent to the notice of disagreement, and such other books and records as the Unaffiliated Firm may deem appropriate. Within such 30-day period, the Unaffiliated Firm will furnish simultaneously to Parent and Shareholder Representative its written determination with respect to the Closing Balance Sheet. The determination made by the Unaffiliated Firm shall be conclusive and binding upon the Parties and the Closing Balance Sheet, with such changes as determined by the Unaffiliated Firm, shall be deemed the Final Closing Balance Sheet upon delivery by the Unaffiliated Firm. Parent shall pay fifty percent (50%) of the fees and expenses of the Unaffiliated Firm and the Shareholders shall pay the other fifty percent (50%) of the fees and expenses of the Unaffiliated Firm; provided, however, that the portion of such fees and expenses of the Unaffiliated Firm to be paid by the Shareholders will instead be paid by Parent and serve as a reduction in the Closing Adjusted Net Assets on the Final Closing Balance Sheet. (e) Payment of Adjustment. If the Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet (after any reduction pursuant to the last sentence of Section 2.7(d)), shall be greater than the Target Adjusted Net Assets, then (i) the Escrow Agent shall disburse the Price Adjustment Holdback Amount (A) to the Shareholders and the Optionees in accordance with their respective Percentage Interests, net, in the case of Optionees, of any employee withholding amounts required to be withheld from such disbursements under applicable law, and (B) to Barrier (for remittance to proper Tax authorities) the aggregate amount of employee withholding amounts withheld pursuant to the preceding clause (A), and (ii) Parent shall pay to Shareholder Representative, by wire transfer of immediately available U.S. Dollars to a bank account designated by Shareholder Representative in writing within two (2) Business Days of the determination of the Price Adjustment, an amount equal to the difference between Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet, and Target Adjusted Net Assets. Shareholder Representative shall distribute such amount (i) to the Shareholders and the Optionees in accordance with their respective Percentage Interests, net, in the case of Optionees, of any employee withholding amounts required to be withheld from such distributions under applicable law (as determined by Parent and/or Barrier, which determination shall be given in writing by Parent and/or Barrier to Shareholder Representative on or before the date that payment is made to Shareholder Representative pursuant to the preceding sentence), and (ii) to Barrier (for remittance to the proper Tax authorities), the aggregate amount of employee withholding amounts withheld pursuant to the preceding clause (i). Subject to Section 2.9 below, neither Parent nor Merger Sub shall have any liability to any Shareholder or Optionee after Parent pays to Shareholder Representative any amount required to be paid by Parent under this Section 2.7(e), including, without limitation, any liability with respect to such distribution by Shareholder Representative. If the Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet (after any reduction pursuant to the last sentence of Section 2.7(d)), shall be less than the Target Adjusted Net Assets on the Final Closing Balance Sheet, then Escrow Agent shall disburse to Parent from the Adjustment Escrow Account an amount equal to the difference between Target Adjusted Net Assets and Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet. The Escrow Agent shall then distribute any funds remaining in the Adjustment Escrow Account (i) to the Shareholders and the Optionees in accordance with their respective Percentage Interests, net, in the case of Optionees, of any employee withholding amounts required to be withheld from such distributions under applicable law, and (ii) to Barrier (for remittance to proper Tax authorities) the aggregate amount of employee withholding amounts withheld pursuant to the preceding clause (i). In the event that the difference between Target Adjusted Net Assets and Closing Adjusted Net Assets, as reflected on the Final Closing Balance Sheet (after any reduction pursuant to the last sentence of Section 2.7(d)), exceeds the Price Adjustment Holdback Amount, the Escrow Agent will distribute to Parent an amount equal to such excess from the Indemnity Escrow Account. Payment by Parent pursuant to this Section 2.7(e) shall be made not more than five (5) Business Days after the date that the Final Closing Balance Sheet became final. Distribution from the Indemnity Escrow Account pursuant to the preceding sentence shall be made by the Escrow Agent as soon as reasonably practicable following notice to the Escrow Agent in accordance with the Escrow Agreement. In no event shall the Shareholders or the Optionees be required to pay any amount under this Section 2.7 in excess of the sum of the Price Adjustment Holdback Amount and the Holdback Amount. SECTION 2.08. Dissenting Shares. Each Barrier Share held by a Shareholder who has demanded his, her or its right to an appraisal of his, her or its Barrier Shares in accordance with Sections 1300 through 1313 of the California Corporations Code and who has not effectively withdrawn or lost his, her or its right to such appraisal (Dissenting Shares") shall not be converted into or represent the right to receive the consideration represented by such shares of Barrier Common Stock pursuant to Sections 2.3 through 2.7 above, but the holder thereof shall be entitled only to such rights as are granted by Sections 1300 through 1313 of the California Corporations Code. SECTION 2.09. Remittance of Withheld Amounts. Barrier shall, and Parent shall cause Barrier to, remit to the proper Tax authorities when due all employee withholding amounts disbursed or paid to Barrier in accordance with Section 2.5(b), 2.6 or 2.7(e) above. SECTION 2.10. Closing of Stock Transfer Books and Books and Records. The stock transfer books of Barrier shall be closed at the close of business on the Business Day immediately preceding the Closing Date. The books and records of Barrier shall be closed at 12:01 a.m. on the Closing Date. ARTICLE III CLOSING SECTION 3.01. Time and Place of Closing. The closing under this Agreement (herein called the "Closing") shall take place at a place and on a date to be agreed by Parent, Merger Sub and Barrier, which date shall be as soon as practicable but in no event no later than the fourth (4th) Business Day following the later of satisfaction of all conditions to Closing as set forth in Article VI hereof (other than conditions with respect to actions the Parties will take at the Closing itself or at other times specified herein), or at such other place or date as may be mutually agreeable to Parent, Merger Sub and Barrier (the date on which Closing occurs being herein called the "Closing Date"). All transactions at the Closing shall be deemed to take place simultaneously and no transaction shall be deemed to have been completed and no document or certificate shall be deemed to have been delivered until all transactions are completed and all documents delivered, at which time the Closing shall be deemed to have occurred at 12:01 a.m. on the Closing Date. SECTION 3.02. Consummation of the Merger. On the date of the Closing (or on such other date as Parent, Merger Sub and Barrier may agree), the Parties will cause the Merger to be consummated by executing and filing with the California Secretary of State the Agreement of Merger in accordance with Sections 1101 and 1103 of the California Corporations Code. The Merger shall become effective at the date and time the Agreement of Merger is filed with the California Secretary of State (the "Effective Time"). ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties by Barrier. Barrier represents and warrants to Parent and Merger Sub that the statements contained in this Section 4.1 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4.1), except as set forth in the disclosure schedule accompanying this Agreement (the "Barrier Disclosure Schedule"). The Barrier Disclosure Schedule will be arranged in sections corresponding to the lettered Sections contained in this Section 4.1. (a) Organization, qualification, and Corporate Power. Each Company is a corporation duly organized, validly existing, and in good standing under the Laws of the State of California. Each Company is duly licensed or qualified to conduct business and is in good standing under the Laws of each jurisdiction where the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in good standing would not have, individually or in the aggregate, a material adverse effect on the business, operations, results of operations, financial condition or assets of the Companies, taken as a whole, or on the ability of the Parties to consummate the transactions contemplated hereby (a "Material Adverse Effect"). Each Company has full corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. Barrier has delivered to Parent true and complete copies of the articles of incorporation and bylaws of each Company. (b) Capitalization. The entire authorized capital stock of Barrier consists of (i) 5,000,000 shares of Barrier Common Stock, of which 922,384 shares are issued and outstanding and 79,000 shares have been authorized and reserved for issuance upon the exercise of Barrier Options, and (ii) 1,000,000 shares of preferred stock, none of which are issued and outstanding. All of the Barrier Shares have been duly authorized and are validly issued, fully paid, nonassessable and free of preemptive or similar rights. Set forth on Section 4.1(b) of the Barrier Disclosure Schedule is a true and complete list of: the name and address of each Shareholder and Optionee, the number of Barrier Shares held by such Person and the number and exercise price of Barrier Options held by such Person. Other than as set forth on Section 4.1(b) of the Barrier Disclosure Schedule, there are no issued and outstanding shares of capital stock of Barrier and there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other contracts or commitments to issue, sell or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to Barrier. Except as set forth in Section 4.1(b) of the Barrier Disclosure Schedule, as of the date of this Agreement, no Shareholder is party to any agreement regarding the holding, voting, or transfer of Barrier Shares. As of the Closing, no Shareholder will be party to any such agreement. (c) Subsidiaries, Equity Interests. As of the date of this Agreement, Barrier has no Subsidiaries other than Safe Technologies and QMB Payment Co. As of the Closing Date, Barrier will have no Subsidiaries other than Safe Technologies. The entire authorized capital stock of Safe Technologies consists of 100,000 shares of common stock, of which 20,000 shares are issued mid outstanding. Barrier owns all of the issued and outstanding shares of capital stock of Safe Technologies, free and clean of any Liens (other than, as of the date of this Agreement, a Lien granted to Comerica Bank under the Comerica Loan Documents), and all of such shares are duly authorized and validly issued, fully paid, nonassessable and free of preemptive or similar rights. Safe Technologies is not bound by any outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other contracts or commitments to issue, sell or otherwise cause to become outstanding any of its capital stock. Except for the Subsidiaries listed above, the Companies do not own, directly or indirectly, any equity, debt or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity debt or similar interest in, any Person. There are no corporations, partnerships, limited liability companies, associations or joint ventures through which the business of the Companies is conducted. Neither Company is a partner with any other Person, or is subject to any obligation, contingent or otherwise, to provide funds to or make an investment (in the form of a loan, capital contribution or otherwise) in any Person. (d) Authorization of Transaction. Barrier has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and each agreement or document contemplated hereby to which Barrier is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby, subject to obtaining the Requisite Shareholder Approval prior to consummation of the Merger. The execution, delivery and performance by Barrier of this Agreement and each agreement or document contemplated hereby to which Barrier is a party, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by Barrier's Board of Directors and, except for obtaining the Requisite Shareholder Approval, no other corporate action is necessary on the part of Barrier. This Agreement and each agreement or document contemplated hereby to which Barrier is a party has been duly executed and delivered by Barrier and constitutes the valid and legally binding obligation of Barrier, enforceable in accordance with its terms. (e) Noncontravention. Neither the execution and the delivery of this Agreement or any agreement or document contemplated hereby to which Barrier is a party, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any Law, Order or other restriction of any Governmental Authority to which the Companies or any of their assets are subject or any provision of the articles of incorporation or bylaws of either Company or (ii) conflict with, result in a breach of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, License, instrument, or other arrangement to which either Company is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Lien upon any of its assets). Other than in connection with the provisions of the California Corporations Code, the Securities Act of 1933, as amended (the "Securities Act") and state securities laws or as set forth in Section 4.1(e) of the Barrier Disclosure Schedule, neither Company needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority or of any non-governmental Person in order for the Parties to consummate the transactions contemplated by this Agreement or any agreement or document contemplated hereby. (f) Financial Statements. Barrier has delivered to Parent true and complete copies of: (i) the unaudited balance sheet of Barrier and its consolidated Subsidiaries as of March 31, 2006 (the "Most Recent Balance Sheet") and the unaudited statements of earnings and cash flows for Barrier and its consolidated Subsidiaries for the three-month period ended March 31, 2006, and (ii) the audited balance sheet of Barrier and its consolidated Subsidiaries as of December 31, 2003, 2004 and 2005, and the audited statements of earnings and cash flows for the same years ((i) and (ii), collectively, the "Barrier Financial Statements"). Each of the Barrier Financial Statements has been prepared in accordance with GAAP (except as may be indicated therein or in the notes thereto, or for year end adjustments), fairly presents the financial condition, results of operations and cash flows of Barrier and its consolidated Subsidiaries at the dates and for the period indicated, and are consistent with the books and records of Barrier and its consolidated Subsidiaries, which books and records accurately and fairly reflect, in reasonable detail, the transactions and the assets and liabilities of Barrier and its consolidated Subsidiaries; provided, however, that the interim statements are subject to normal year-end adjustments. Except for any reserve for doubtful accounts reflected in the Most Recent Balance Sheet, all accounts receivable reflected in the Most Recent Balance Sheet, and all accounts receivable that have arisen since the date thereof (except receivables that have been collected since such date), are valid and enforceable claims, constitute bona fide accounts receivable resulting from the sale of goods and services in the Ordinary Course of Business and are not subject to any valid defenses, offsets or allowances of any kind. (g) Events Subsequent to Date of Most Recent Balance Sheet. Since December 31, 2005, there has not been any Material Adverse Effect. Except as set forth in Section 4.1(g) of the Barrier Disclosure Schedule, since December 31, 2005, neither Company has taken, or failed to take, any action that would have constituted a breach of Section 5.4 had the covenants therein applied since that date. (h) Undisclosed Liabilities. Neither Company has any Liability (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), including any Liability for Taxes, except for (i) Liabilities set forth in the Most Recent Balance Sheet, (ii) Liabilities which have arisen after the date of the Most Recent Balance Sheet in the Ordinary Course of Business (none of which results from, arises out of, relates to or was caused by any breach of contract, breach of warranty, tort, infringement or violation of Law), and (iii) Liabilities set forth in Section 4.1(h) of the Barrier Disclosure Schedule. As of the Closing, neither Company will have any Liability for the operations of, or otherwise arising from, related to or caused by, QMB Payment Co. or the Canadian Companies before, on or after the Closing Date. (i) Brokers' Fees. Except for amounts payable to The Spartan Group LLC, Barrier has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement. (j) Tax Matters. (i) Barrier is an S corporation within the meaning of Sections 1361 and 1362 of the Code and has been an S corporation continuously since January 1, 1990. Safe Technologies is a qualified subchapter S subsidiary within the meaning of Section 1361(b)(3)(B) of the Code and has been a qualified subchapter S subsidiary continuously at all times during its existence. The Companies have filed all of their Tax Returns in a manner consistent with such classifications. (ii) Each Company has accurately prepared and duly filed or caused to be filed on a timely basis all Tax Returns that it was required to file on or prior to the Closing Date. All such Tax Returns are true and complete in all material respects. All Taxes owed by the Companies in respect of taxable periods of the Companies ending on or before the Closing Date (whether or not shown on the Tax Returns) (i) if due and payable, have been timely paid, (ii) if not yet due and payable, have an adequate reserve established therefor in accordance with GAAP, or (iii) are being contested in good faith by the Companies pursuant to appropriate proceedings which are being diligently pursued, and an adequate reserve therefor has been established in accordance with GAAP. No claim or inquiry with respect to any Taxes has ever been made or would reasonably be expected to be made by any authority in a jurisdiction where the Companies did not file Tax Returns for any period ending on or before the Closing Date that either Company is or may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of the Companies that arise from, are in connection with or relate to any failure (or alleged failure) to pay any Tax. Barrier has no Knowledge of any basis for the assertion of any claims attributable to Taxes which, if adversely determined, would result in any such Lien. (iii) Neither Company has filed a consolidated return or has ever been a member of an "affiliated group" within the meaning of Section 1504(a) (1) of the Code (or any similar group defined under a similar provision of state, local or foreign Law). Neither Company has constituted either a "distributing corporation" or a "controlled corporation" in a distribution of stock intended to qualify for nontaxable treatment under Section 355 of the Code (A) at any time during the two-year period ending immediately prior to the date of this Agreement or (B) in a distribution that could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement. Neither Company is a party to or bound by any Tax sharing agreement, Tax indemnity obligation or similar agreement, arrangement or practice with respect to any income Tax or any other material Tax (including any advance pricing arrangement, closing agreement or other agreement with any Governmental Authority relating to any Tax). Neither Company may be held liable for, or be required to make any contribution with respect to, the material Tax liability of any other Person by reason of Treasury Regulation section 1.1502-6 or any comparable provision of state, local or foreign law. (iv) Barrier has delivered to Parent true and complete copies of the income, franchise, excise, sales, use, property and employment Tax Returns filed by the Companies with any Governmental Authority since January 1, 2001, together with all information document requests, closing agreements, settlement agreements, examination reports and statements of deficiencies assessed, proposed in writing to be assessed against, or agreed to by the Companies. (v) Without limiting the generality of the foregoing, except as set forth in Section 4.1(j) of the Barrier Disclosure Schedule, the Companies have withheld or collected and duly paid all Taxes required to have been withheld or collected and paid in connection with payments to foreign Persons, sales and use Tax obligations with respect to any and all states, amounts paid or owing to any employee, independent contractor, creditor, shareholder or other Person. No Person providing services to the Companies who, for any taxable year or taxable period for which the applicable statute of limitations has not yet expired, was or is being treated by the Companies as an independent contractor for Tax purposes, was or is required to have been classified as an employee for Tax purposes. (vi) The Companies' Tax Returns are not being currently audited or examined by any Governmental Authority, nor have any deficiencies for any Tax been asserted against either Company. Section 4.1 of the Barrier Disclosure Schedule contains a true and complete list of all audits of Tax Returns of the Companies for the past four (4) years, including a reasonably detailed description of the status, nature and, if completed, outcome of each audit. No Tax Return relating to either Company is currently under audit or examination, and no written or unwritten notice of such an audit or examination has been received by either Company. All deficiencies proposed as a result of any completed audits have been paid or settled, or are set forth in the books of the Companies. (vii) There are no outstanding agreements or waivers extending the statute of limitations applicable to any Taxes for which the Companies may be liable. The Companies are not currently the beneficiary of any extension of time within which to file any Tax Return. No power of attorney is currently in effect with respect to any Tax of either Company. (k) Properties. The only real property owned by the Companies (the "Owned Real Property") or leased or subleased by the Companies as lessor or lessee (the "Leased Real Property," and together with the Owned Real Property, the "Real Property") is described in Section 4.1(k) of the Barrier Disclosure Schedule and each such lease or sublease in respect of the Leased Real Property (including the material terms of any oral Real Property Lease) is described thereon (the "Real Property Leases"). The Companies have good, full and marketable title in fee simple in and to the Owned Real Property, valid leasehold interests in and to the Leased Real Property, and good, full and marketable title or valid leasehold interests, as the case may be, in all personal properties and assets that are material to the business of either Company (except real or personal property leases terminated, or personal property sold or otherwise disposed of, in the Ordinary Course of Business or due to obsolescence since the date of the Most Recent Balance Sheet), in each case free and clear of all Liens, except for (A) Liens described in Section 4.1(k) of the Barrier Disclosure Schedule (which shall not, in the case of the Owned Real Property, include any monetary Lien in effect as of the Closing Date), (B) with respect to the Owned Real Property, Liens (other than monetary Liens in effect as of the Closing Date, including without limitation, Liens for Taxes, supplemental Taxes or assessments due or payable and Liens under the Comerica Loan Documents) described in that certain Preliminary Report of First American Title Insurance Company, dated as of February 28, 2006, regarding Owned Real Property located at 180 River Road, Rio Vista, California, (C) Liens for Taxes not yet due and (D) the rights of any lessor under any lease to which either Company is a party. Neither Company has leased, subleased or otherwise granted to any Person the right to use or occupy the Owned Real Property or any portion thereof, and there are no outstanding options, rights of first offer or rights of first refusal to purchase the Owned Real Property or any portion thereof. The Companies have, with respect to the Real Property, received all material approvals of Governmental Authorities (including Licenses) required in connection with the operation thereof and each has been operated and maintained in accordance with applicable Laws, including zoning ordinances and the like. (i) Barrier has delivered to Parent true and complete copies of the Real Property Leases, as amended to date. With respect to the Real Property Leases: (A) The Real Property Leases are each legal, valid, binding, enforceable and in full force and effect; (B) the Real Property Leases will continue to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Merger; (C) neither Company nor, to the Knowledge of Barrier, any other party to any of the Real Property Leases is in breach or default, and, to the Knowledge of Barrier, no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification or acceleration thereunder; (D) no party to any of the Real Property Leases has repudiated any provision thereof; (E) there are no disputes, oral agreements or forbearance programs in effect as to any of the Real Property Leases and neither Company's possession and quiet enjoyment under such Real Property Leases has been disturbed; and (F) none of the Companies has assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in any such leasehold or subleasehold. (ii) All of the Companies' equipment, inventory and other items of tangible property and assets are in good operating condition and repair, subject to normal wear and maintenance, consist of a quality, quantity and condition usable or saleable in the Ordinary Course of Business and conform to all applicable Laws relating to their construction, use and operation in all material respects. (iii) Each building or improvement on any of the Real Property is in good condition and working order (reasonable wear and tear excepted) and suitable for the operation of the business currently being conducted at such Real Property. The real property improvements at the Real Property, and the current use and operation thereof, are in compliance in all material respects with and are authorized by applicable covenants of record and applicable Law, including, without limitation, zoning and other land use regulations. Neither Company has received any notice that any Governmental Authority considers any of the Real Property, or the improvements thereat, to violate any such regulations. There are no proceedings of any Governmental Authority pending or, to the Knowledge of Barrier, threatened, with respect to the Real Property that could adversely affect use or operation of any portion of the Real Property. (l) Intellectual Property. Section 4.1(1) of the Barrier Disclosure Schedule contains a true and complete list of all Intellectual Property rights which are owned by the Companies, or in which the Companies have any interest, or which are used or, to Barriers Knowledge, have been used in connection with, or which relate to, the Companies' businesses (whether or not presently used in connection therewith), and of any pending applications for registration of any Intellectual Property rights by the Companies. Except as set forth in such Section, the Companies own and have the sole and exclusive right to use all of the Intellectual Property rights and all other Intellectual Property used in their business and such items are not subject to any Liens. Except as set forth in such Section, (i) no Person other than the Companies has any rights or interests in or to any of the foregoing, and the Companies pay no royalty to anyone with respect thereto; (ii) to Barrier's Knowledge, the Companies have not infringed, and none of the products the Companies manufacture or sell, or any Intellectual Property the Companies employ in the manufacture of any product, or any service the Companies render, or the marketing or use by the Companies of any such product or service, infringes, any Intellectual Property right of any Person; and (iii) in the past five (5) years, neither Company has received any written claim of infringement with respect to any Intellectual Property used by the Companies. Except as set forth in such Section, Barrier has no Knowledge that any Person is infringing any Intellectual Property right of the Companies. The Companies own, or are licensed or otherwise have the right to use, all Intellectual Property used in or necessary for the conduct of their respective businesses as presently being conducted free and clear of any Liens, and the consummation of the transactions contemplated hereby will not impair any of such rights. All registered patents, trademarks, service marks, copyrights and domain names held by the Companies are in full force and effect, and to the Knowledge of Barrier, there is no pending opposition, interference or cancellation or other proceeding before any court or registration authority in any jurisdictions against such registrations. The Companies have taken all necessary and reasonable action to maintain and protect each item of Intellectual Property they own or use. (m) Inventory. The inventory of the Companies consists of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is obsolete, damaged or defective, subject only to the reserve for inventory write-down on the Most Recent Balance Sheet as such reserve may be adjusted for the passage of time in the Ordinary Course of Business. (n) Contracts. Section 4.1(n) of the Barrier Disclosure Schedule lists all contracts and agreements (which written or oral) to which either Company is a party, and (i) the performance of which involves consideration in excess of $50,000, (ii) which involved in the past two (2) years or may involve in the future the disposition or acquisition of assets or equity interests not in the Ordinary Course of Business; (iii) which provides for the employment or compensation of any current director, manager, officer, employee or consultant of either Company; (iv) which constitutes indebtedness of either Company; (v) which forms partnership or joint venture entities; (vi) which limits or restricts the ability of Parent, its affiliates or the Companies to enter into or engage in any market or line of business; (vii) which is a requirements, take or pay or similar contract; (viii) which contains earn-out provisions or other contingent payment obligations of either Company reasonably expected to exceed $50,000; or (ix) which grants customers of either Company "most favored nations" pricing (collectively, the "Contracts"). Barrier has delivered to Parent a true and complete copy of each of the Contracts. All of the Contracts are in full force and effect and the Company that is party thereto is not in breach thereof or default thereunder and no condition exists that, with notice or lapse of time or both, would constitute a default by such Company or, to the Knowledge of Barrier, any other party to such Contracts. (o) Litigation. Except as set forth in Section 4.1(o) of the Barrier Disclosure Schedule, (i) neither Company nor any of its assets is subject to any outstanding Orders, and (ii) there is no action, suit, proceeding, hearing, arbitration or investigation pending or, to the Knowledge of Barrier, threatened against either Company. (p) Compliance with Laws. Each Company is in material compliance with, and, to Barrier's Knowledge, has at all times in the past three (3) years been in material compliance with, all applicable Laws, Orders and Licenses, and neither Company has received notice in the past five (5) years of any violations thereof. Each Company possesses all Licenses necessary to carry on its business in the manner presently conducted and such Licenses, a true and complete list of which is set forth in Section ____(p) of the Barrier Disclosure Schedule, are in full force and effect. Neither Company nor any of its officers or agents has made any illegal or improper payments to, or provided any illegal or improper benefit or inducement for, any governmental official, supplier, customer or other Person in an attempt to influence such Person to take or refrain from taking any action relating to either Company. (q) Employee Matters. Barrier has delivered to Parent a true and complete list of the names of all employees of the Companies, the rates of annual, or, where appropriate, hourly, compensation payable to each such employee, the bonus paid to each such employee in 2005 and eligible vacation due to each such employee. Each employee of the Companies is at will except as otherwise noted in Section 4.1(q) of the Barrier Disclosure Schedule. Neither Company is a party to or obligated under any collective bargaining agreements, and no written demand has been made for recognition by a labor organization. To Barrier's Knowledge, no union organizing activities are taking place with respect to any employees of the Companies. There is no pending or, to the Knowledge of Barrier, threatened strike or work stoppage by employees of the Companies. There are no pending unfair labor practice charges, grievances or complaints filed or, to the knowledge of Barrier, threatened to be filed with any Governmental Authority based on employment or termination of employment of any individual by the Companies. Except as set forth in Section 4.1(q) of the Barrier Disclosure Schedule, the consummation of the transactions contemplated by this Agreement or any agreement or document contemplated hereby will not result in any contractual or legal obligation of the Companies to make any severance, sale award, "golden parachute," change of control or other payment to directors, officers, employees, or other Persons. (r) Employee Benefits. Section 4.1(r) of the Barrier Disclosure Schedule lists each employee benefit plan within the meaning of Section 3(3) of ERISA, or any other material employee benefit plan, program or arrangement, that the Companies maintain or to which either Company contributes or has any obligation to contribute (each, an "Employee Benefit Plan"). Barrier has delivered to Parent true and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent annual report (Form 5500), and all related trust agreements, insurance contracts and other funding arrangements that implement each Employee Benefit Plan. (i) Each Employee Benefit Plan (and each related trust, insurance contract, or fund) has been maintained, funded and administered in accordance with the terms of such Employee Benefit Plan and complies in form and in operation in all respects with the applicable requirements of ERISA, the Code and any other applicable Laws. (ii) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been made to each Employee Benefit Plan which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA. All premiums or other payments which are due have been paid with respect to each Employee Benefit Plan which is an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA. The Liabilities accrued under each Employee Benefit Plan are reflected on the Most Recent Balance Sheet. (iii) Each Employee Benefit Plan which is intended to meet the requirements of a "qualified plan" under Code Section 401(a) has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Section 401(a) of the Code and, to the Knowledge of Barrier, no event has occurred after the date of such determination that would adversely affect such determination. (iv) None of the Companies has ever maintained or contributed to an Employee Benefit Plan which constitutes a "defined benefit plan" within the meaning of Section 34 of ERISA. No asset of the Companies is subject to any Lien under ERISA or the Code. (v) Neither Company nor any fiduciary, trustee, or administrator of any Employee Benefit Plan has engaged in a "prohibited transaction" as defined in Section 4975 of the Code or a "prohibited transaction" as defined in Section 406 of ERISA that could reasonably be expected to subject either Company to any material Tax imposed by Section 4975 of the Code or any material penalty imposed by Section 502 of ERISA. To the Knowledge of Barrier, there is no current matter, including, without limitation, any matter involving the administration and operation of the Employee Benefit Plans, which could reasonably be expected to result in any Employee Benefit Plan being deemed to be not in full compliance with the pertinent provisions of any applicable Law. There are no pending or, to the Knowledge of Barrier, threatened actions, suits or proceedings (other than routine claims for benefits) by, on behalf of or against any Employee Benefit Plan or any trust related thereto, and Barrier has no Knowledge of any basis for such an action, suit, hearing, arbitration or investigation. (s) Environmental, Health, and Safety Matters. Each Company, and each of its predecessors, has been and is in compliance with all Laws and Licenses concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any substances, wastes or hazardous materials, as such requirements are enacted and in effect on or prior to the Closing Date (collectively, "Environmental, Health, and Safety Requirements"). Each Company possesses all Licenses necessary to carry on its business in the manner presently conducted under Environmental, Health and Safety Requirements, and such Licenses, a true and complete list of which is set forth in Section 4.1(s) of the Barrier Disclosure Schedule, are in full force and effect. Neither Company has received any written notice, written report or other written information regarding any actual or alleged violation of Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), including any investigatory, remedial or corrective obligations, relating to the Companies or their present or former facilities arising under Environmental, Health, and Safety Requirements. To the Knowledge of Barrier, none of the following exists at any property or facility owned or operated by the Companies: (i) underground storage tanks, (ii) asbestos-containing materials, (iii) material or equipment containing polychlorinated biphenyls, or (iv) landfills, surface impoundments or disposal areas. Neither Company nor any agent, employee or representative of either Company, or, to the Knowledge of Barrier, any predecessor or tenant of either Company, has used, installed, generated, produced, stored or released on, in, or about the Real Property or the Tennessee Real Property or transported to or from the Real Property or the Tennessee Real Property any hazardous materials, including any hazardous or toxic substance, material, or waste which is regulated under Environmental, Health, and Safety Requirements, in material breach or violation of Environmental, Health, and Safety Requirements. (t) Insurance. Section 4.1(t) of the Barrier Disclosure Schedule sets forth a true and complete list of all insurance policies of the Companies covering the Companies, any of their assets or any of their directors or officers (in their capacities as such) (collectively, the "Insurance Policies"). During the past three (3) years, neither Company has been denied insurance for any reason with respect to any material insurance policy for which it applied. No notice of cancellation or termination of any Insurance Policy has been received by either Company with respect to any such policy, all premiums due and payable with respect thereto have been paid, each such policy is full force and effect, and no claim is currently pending under any such policy reasonably expected to exceed $25,000. Neither Company is in material breach of or default under any Insurance Policy, and, to the Knowledge of Barrier, no event has occurred which, with notice or lapse of time, would constitute such a breach of or default under, or permit termination, modification or acceleration under, such policy. (u) Related Party Transactions. Except for ownership of the Barrier Shares and Barrier Options, and except as disclosed in Section 4.1(u) of the Barrier Disclosure Schedule, no Shareholder, or any director, officer or employee of either Company, or any member of his or her immediate family or any other of its, his or her affiliates, (i) is or was during the past three (3) years party to, (ii) owns or has a five percent (5%) or more ownership interest in any Person that is or was during the last three (3) years a party to, or (iii) owns or has a five percent (5%) or more ownership interest in any property which is or was during the last three (3) years the subject of, any material contract, agreement or understanding, business arrangement or relationship with either Company. (v) Minute Books. The minute books and corporate records of each Company contain true and complete copies of the minutes of all formal Board of Directors, director committee and shareholders' meetings of such Company, and of all written consents executed in lieu of the holding of a meeting, and fairly and accurately reflect all material actions of such Company's Boards of Directors and shareholders. SECTION 4.02. Representations and Warranties of Parent and Merger Sub. Each of Parent and Merger Sub represents and warrants to Barrier that the statements contained in this Section 4.2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 4.2). (a) Organization. Each of Parent and Merger Sub is a corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation. (b) Authorization of Transaction. Each of Parent and Merger Sub has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and each agreement or document contemplated hereby to which Parent or Merger Sub is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby or thereby. The execution, delivery and performance by Parent and Merger Sub of this Agreement and each agreement or document contemplated hereby to which Parent or Merger Sub is a party, as applicable, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by Parent's and Merger Sub's Boards of Directors and no other corporate action is necessary on the part of Parent or Merger Sub. This Agreement and each agreement contemplated hereby or thereby to which Parent or Merger Sub is party, has been duly executed and delivered by Parent or Merger Sub, as applicable, and constitutes the valid and legally binding obligation of Parent and Merger Sub, as applicable, enforceable in accordance with its terms. (c) Noncontravention. Neither the execution and the delivery of this Agreement or any agreement or document contemplated hereby to which Parent or Merger Sub is a party, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any Law, Order or other restriction of any Governmental Authority to which either Parent or Merger Sub is subject or any provision of the charter or bylaws of either Parent or Merger Sub or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, License, instrument, or other arrangement to which either Parent or Merger Sub is a party or by which it is bound or to which any of its assets is subject. Other than in connection with the provisions of the California Corporations Code, the Securities Act and state securities laws, neither Parent nor Merger Sub needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority or of any non-governmental Person in order for the Parties to consummate the transactions contemplated by this Agreement or any agreement or document contemplated hereby. (d) Brokers' Fees. Except for amounts payable to Myers Capital Partners, neither Parent nor Merger Sub has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement or any agreement or document contemplated hereby. (e) Financial Capability. Parent has, and will have as of the Closing Date and the Effective Time, the financial capability to perform its obligations under this Agreement. ARTICLE V COVENANTS TO BE PERFORMED PRIOR TO THE CLOSING DATE SECTION 5.01. General. From and after the date hereof through and including the Closing Date or the earlier termination of this Agreement, each of the Parties will use its best efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement and any agreement or document contemplated hereby (including satisfaction, but not waiver, of the closing conditions set forth in Article VI). SECTION 5.02. Notices and Consents. Barrier will give any notices, and will use its best efforts to obtain any authorizations, consents and approvals set forth in Section 4.1(e) of the Barrier Disclosure Schedule. SECTION 5.03. Regulatory Matters and Approvals. Each of the Parties will give any notices to, make any filings with, and use its best efforts to obtain any authorizations, consents, and approvals of Governmental Authorities in connection with the Merger. Without limiting the generality of the foregoing, Barrier will seek the approval of its shareholders of this Agreement and the Merger as required by California Corporations Code Sections 1200 through 1203 (the "Requisite Shareholder Approval"), as soon as reasonably practicable following the date of execution of this Agreement by delivering to each Shareholder a solicitation by written consent, together with a disclosure document, each of which shall be in a form reasonably satisfactory to Parent and Merger Sub. SECTION 5.04. Operation of Business. From and after the date hereof through and including the Closing Date or the earlier termination of this Agreement, Barrier will use, and will cause Safe Technologies to use, its best efforts to keep intact its goodwill, keep available the services of its employees, and maintain good relationships with others having business or financial relationships with it. From and after the date hereof through and including the Closing Date or the earlier termination of this Agreement, Barrier will not engage in, and will cause Safe Technologies not to engage in, any practice, take any action, or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, except as set forth in Section 4.1(g) of the Barrier Disclosure Schedule or with the written consent of Parent, Barrier will not, and will cause Safe Technologies not to: (a) Authorize or effect any change in its articles of incorporation or bylaws. (b) Grant any options, warrants, purchase rights, subscription rights, conversion rights, exchange rights or other rights to purchase or obtain any of its capital stock or other equity interests; issue, sell, or otherwise dispose of any of its capital stock (except upon the conversion or exercise of options, warrants, and other rights outstanding as of the date hereof); or grant any stock appreciation, phantom stock, profit participation or similar rights. (c) Redeem, repurchase, or otherwise acquire any of its capital stock. (d) Declare, set aside, or pay any dividend or distribution with respect to its capital stock (whether in cash or in kind), other than (i) cash distributions to Barrier's shareholders in the minimum amount necessary to allow them to pay federal and state income Taxes (including estimated Taxes) arising from them being shareholders in Barrier, as determined pursuant to Section 1366 of the Code and corresponding provisions of applicable state Law, (ii) the Closing Cash Amount, and (iii) the QMB Distribution. (e) Issue any note, bond, or other debt security or create, incur, assume, or guarantee any indebtedness for borrowed money or capitalized lease obligation outside the Ordinary Course of Business. (f) Impose or allow to be imposed any Lien upon any of its assets. (g) Make any capital investment in, make any loan to, or acquire the securities or assets of any other Person. (h) Sell, assign, transfer or otherwise convey any assets of the Companies other than sales of inventory in the Ordinary Course of Business. (i) Make any capital expenditure for additions to property, plant, equipment or intangible property in an aggregate amount in excess of $50,000, except as shown on the Most Recent Balance Sheet. (j) Terminate or amend any Contract, License or Real Property Lease outside the Ordinary Course of Business. (k) Make any change in employment terms for any of its directors, officers, and employees outside the Ordinary Course of Business or materially increase the compensation of any of its directors, officers or employees or materially change, or announce any material changes, to Employee Benefits Plan; provided that, on the Closing Date, immediately prior to the Effective Time, Barrier shall pay to those employees of Barrier listed on Schedule 5.4 bonuses in the amounts set forth on such Schedule. (l) Make any change in any method of accounting or accounting practice or in any Tax procedures or elections. (m) Commit to any of the foregoing. SECTION 5.05. Full Access. From and after the date hereof through and including the Closing Date or the earlier termination of this Agreement, Barrier will permit representatives of Parent to have full access, at all reasonable times, and in a manner so as not to interfere with the normal business operations of Barrier, to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to the Companies. Until the Closing, Parent and Merger Sub will treat and hold as confidential any information it receives from Barrier in the course of the reviews contemplated hereby and will not use any of such information except in connection with this Agreement. If this Agreement is terminated for any reason whatsoever, Parent agrees to return to Barrier all tangible embodiments (and all copies) thereof which are in its possession and that the provisions of this Section 5.5 shall survive termination. SECTION 5.06. Notice of Developments. Each Party will give prompt written notice to the others of any material adverse development causing a breach of any of its own representations and warranties in Article IV. No disclosure by any Party pursuant to this Section 5.6, however, shall be deemed to amend or supplement the Barrier Disclosure Schedule or to prevent or cure any breach of any representation, warranty or covenant. SECTION 5.07. Exclusivity. (a) From and after the date hereof through and including the Closing Date or the earlier termination of this Agreement, the Companies will not solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of all or substantially all of the capital stock or assets of either Company, including any acquisition structured as a merger, consolidation, or share exchange (an "Acquisition Proposal"), and will cease negotiations with respect to any Acquisition Proposals. Notwithstanding the foregoing, Barrier and its directors and officers will remain free to participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing to the extent Barrier's Board of Directors concludes in good faith, after having taken into account the advice of its outside legal counsel, that the fiduciary duties of the directors or officers, as applicable, to the shareholders of Barrier require them to do so; provided, that, the directors and officers shall not take any of the foregoing actions without having given at least three (3) Business Days' advance written notice to Parent. In addition, if any director or officer receives an Acquisition Proposal, Barrier shall promptly inform Parent in writing of the material terms of such proposal and the identity of the Person (or group) making it. (b) It is understood that any violation of the restrictions set forth in this Section 5.7 by any director or officer of the Companies or by any investment banker, financial adviser, attorney, accountant, or other representative of the Companies shall be deemed to be a breach of this Section 5.7 by the Companies. (c) In the event that an Acquisition Proposal shall have been made known to Barrier or shall have been made directly to its shareholders generally or any Person shall have announced an intention (whether or not conditional) to make an Acquisition Proposal, and thereafter this Agreement is terminated by Barrier for any reason and an Acquisition Proposal is consummated within eighteen (18) months of such termination, then Barrier shall pay to Parent, upon the consummation of such Acquisition Proposal, a termination fee equal to $1,000,000 in cash; provided that this Section 5.7(c) shall not apply if this Agreement is terminated pursuant to Section 7.1(d) following a vote of the Shareholders to approve this Agreement and the Merger in which each director of Barrier who is a Shareholder votes his or her Barrier Shares (and any Barrier Shares owned by entities controlled by such director) in favor of this Agreement and the Merger but the Requisite Shareholder Approval is not obtained. SECTION 5.08. Insurance and Indemnification. (a) Parent will provide each individual who served as a director or officer of Barrier at any time prior to the Effective Time with liability insurance for a period of six (6) years after the Effective Time no less favorable in coverage and amount than any applicable insurance in effect immediately prior to the Effective Time. (b) Parent will not take any action to cause the exculpatory or indemnification provisions in the articles of incorporation or bylaws of the Surviving Corporation or of Safe Technologies to be any less favorable to any individual who served as a director or officer of Barrier at any time prior to the Effective Time than were the comparable provisions in the articles of incorporation and bylaws of Barrier or Safe Technologies, as applicable, as in effect immediately prior to the Effective Time. SECTION 5.09. QMB Payment Co. Barrier will effect the QMB Distribution prior to the Closing Date pursuant to documentation reasonably satisfactory to Parent. The QMB Distribution will be effective at least one (1) day prior to the Closing Date, and, following the QMB Distribution, Barrier will own no equity interest in QMB Payment Co. Prior to the QMB Distribution, Barrier will cause QMB Payment Co. to own only the QMB Payment Assets pursuant to documentation reasonably satisfactory to Parent. SECTION 5.10. Tax Matters. If at any time following the Closing there shall be a final determination by the U.S. Tax Court, District Court or Court of Claims, or if the Shareholder Representative shall agree to any final determination by the Internal Revenue Service, that Barrier was not an S corporation within the meaning of Section 1361 of the Code at any time between January 1, 1990 and the Closing, each Shareholder shall be obligated to use his, her or its reasonable efforts and to cooperate with the Surviving Corporation and its designees in attempting to obtain from the appropriate Tax authorities any Tax refunds that may be available to such Shareholder as a result of any difference in pre-Closing Tax liability to that Shareholder resulting from Barrier having been a C corporation rather than an S Corporation; provided, however, that if any Governmental Authority raises the validity of Barrier's pre-Closing S corporation status during any audit or examination regarding Barrier, each Shareholder shall promptly file protective claims for such Tax refunds along with any other documents or filings that Surviving Corporation may prepare in order to preserve each Shareholder's right to claim such Tax refunds. Promptly upon receipt of any such Tax refunds, each such Shareholder shall remit all such Tax refunds (including, for avoidance of doubt, all interest thereon) to the Surviving Corporation to offset the increase in the Surviving Corporation's Tax liability resulting from Barrier having been a C corporation rather than an S corporation. A Shareholder's reasonable efforts pursuant to this Section 5.10, aside from promptly remitting any such Tax refunds to the Surviving Corporation, shall be limited to signing and filing appropriate applications for Tax refunds and any other filings or documents that are necessary to claim such Tax refunds, in each case prepared by the Surviving Corporation, providing information concerning the Shareholder that the Surviving Corporation may reasonably request in preparing any such protective claims or applications for Tax refunds, authorizing the Surviving Company to participate in any negotiations or proceedings necessary to obtain such Tax refunds, and obtaining the approval of the Surviving Corporation (not to be unreasonably withheld) before entering into any settlement or closing agreement that may affect the availability of such Tax refunds. All reasonable expenses arising in connection with the obligations of the Shareholders and the Shareholder Representative under this Section 5.10 shall be paid by the Surviving Corporation. The Shareholder Representative shall use reasonable efforts to ensure each Shareholder's compliance with this Section 5.10. For avoidance of doubt, any costs and expenses incurred by the Surviving Corporation pursuant to this Section 5.10 shall constitute Damages subject to the indemnification provision of Section 8.2(d) below. ARTICLE VI CONDITIONS TO OBLIGATION TO CLOSE SECTION 6.01. Conditions to Obligation of Parent and Merger Sub. The obligation of each of Parent and Merger Sub to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of each of the following conditions (all or any of which may be waived by Parent and Merger Sub in a writing so stating at or prior to the Closing): (a) This Agreement and the Merger shall have received the Requisite Shareholder Approval, and, if Shareholders holding less than one-hundred percent (100%) of the Barrier Shares shall have so approved of this Agreement and the Merger, then thirty (30) days shall have elapsed from the date notice of the Requisite Shareholder Approval is sent to the Shareholders, during which 30-day period Shareholders holding not more than ten percent (10%) of the Barrier Shares shall have demanded their respective rights to an appraisal of their Barrier Shares in accordance with Sections 1300 through 1313 of the California Corporations Code (exclusive of any such Shareholders who have effectively withdrawn or lost their respective rights to such appraisal). (b) The representations and warranties of Barrier set forth in Section 4.1 above shall be true and correct in all material respects as of the Closing Date (other than representations and warranties qualified as to materiality or Material Adverse Effect, which shall be true and correct in all respects as of the Closing Date). (c) Barrier shall have performed and complied with all of its covenants hereunder in all material respects through the Closing. (d) There shall not be any Law or Order in effect preventing consummation of any of the transactions contemplated by this Agreement or any agreement or document contemplated hereby and no Person shall have instituted any action, suit or proceeding that, if adversely determined, could reasonably be expected to have a Material Adverse Effect. (e) Barrier shall have delivered to Parent and Merger Sub a certificate to the effect that each of the conditions specified above in Sections 5.1(a) through 5.1(c) is satisfied in all respects. (f) The Parties shall have received all other authorizations, consents, and approvals referred to in Sections 5.2 and 5.3. (g) Parent and Merger Sub shall have received from counsel to Barrier an opinion in form and substance as set forth in Exhibit F attached hereto, addressed to Parent and Merger Sub, and dated as of the Closing Date. (h) Owen Denman, Arthur Korfin and Chris Sanders each shall have executed and delivered an Employment Agreement in form reasonably acceptable to Parent concurrently with the execution of this Agreement, and each such Employment Agreement shall be in full force and effect. Neither Barrier nor any Shareholder shall have any liability if this Agreement is terminated solely by reason of failure of this condition to be satisfied. (i) Owen Denman, John W. Duckett, Arthur Korfin, William G. Reed and Chris Sanders each shall have executed and delivered a Non-Competition and Confidentiality Agreement in form reasonably acceptable to Parent concurrently with the execution of this Agreement, and such Non-Competition and Confidentiality Agreements shall be in full force and effect. Neither Barrier nor any Shareholder shall have any liability if this Agreement is terminated solely by reason of failure of this condition to be satisfied. (j) Parent, Shareholder Representative and the Escrow Agent shall have executed and delivered the Escrow Agreement. (k) That certain employment agreement, dated as of June 1, 1988, between Barrier and John Duckett, and all of John Duckett's rights under that certain Memorandum, dated February 17, 2004, from Chris Sanders to John Duckett and Owen Denman regarding incentive compensation, shall have been terminated, effective at or prior to the Closing, and all Liabilities thereunder shall have been released, pursuant to documentation reasonably satisfactory to Parent. (l) At least two (2) Business Days prior to the Closing Date, Parent and Merger Sub shall have received a payoff letter and Lien release, in a form reasonably satisfactory to Parent, from each applicable lender with respect to the Payoff Debt. (m) Barrier shall have delivered to Parent evidence, reasonably satisfactory to Parent, of the full and final satisfaction, at or prior to the Closing, of any and all Liabilities under deferred compensation arrangements between Barrier and Arthur Korfin, and the release by Arthur Korfin of all Liabilities with respect thereto. (n) Barrier shall have delivered to Parent an acknowledgment by Diane Denman, in form reasonably satisfactory to Parent, that she transferred the 10,001 shares of common stock of Safe Technologies owned by her to Barrier pursuant to that certain Stock Purchase Agreement, dated as of January 1, 2000, by and between Barrier and Owen S. Denman, and that she owns no capital stock in Safe Technologies. (o) Barrier shall have delivered to Parent evidence, reasonably satisfactory to Parent, of the termination, effective at or prior to Closing, of all agreements regarding the holding, voting, or transfer of Barrier Shares to which any Shareholder is a party. (p) Barrier shall have delivered to Parent a release of Barrier, in form reasonably satisfactory to Parent, from each bonus recipient indicated on Schedule 5.4 as giving a release, effective upon receipt of the applicable bonus set forth on such Schedule. (q) Parent and Merger Sub shall have received the resignations, effective immediately following the Closing, of each director of Safe Technologies. (r) Barrier shall have delivered to Parent evidence, reasonably satisfactory to Parent, that the QMB Distribution has been effected at least one (1) day prior to the Closing Date. (s) Barrier shall have delivered to Parent the deliveries set forth in Section 2.5(a). (t) All actions to be taken by Barrier in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Parent and Merger Sub. SECTION 6.02. Conditions to Obligation of Barrier. The obligation of Barrier to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of each of the following conditions (all or any of which may be waived by Barrier in a writing so stating at or prior to the Closing): (a) This Agreement and the Merger shall have received the Requisite Shareholder Approval. (b) The representations and warranties of Parent and Merger Sub set forth in Section 3.2 shall be true and correct in all material respects as of the Closing Date (other than representations and warranties qualified as to materiality, which shall be true and correct in all respects as of the Closing Date). (c) Each of Parent and Merger Sub shall have performed and complied with all of its covenants hereunder in all material respects through the Closing. (d) There shall not be any Law or Order in effect preventing consummation of any of the transactions contemplated by this Agreement or any agreement or document contemplated hereby. (e) Parent and Merger Sub shall have delivered to Barrier a certificate to the effect that each of the conditions specified above in Sections 6.2(b) through 6.2(c) is satisfied in all respects. (f) Barrier shall have received from counsel to Parent and Merger Sub an opinion in form and substance as set forth in Exhibit G attached hereto, addressed to Barrier, and dated as of the Closing Date. (g) Parent, Shareholder Representative and the Escrow Agent shall have executed and delivered the Escrow Agreement. (h) All actions to be taken by Parent and Merger Sub in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to Barrier. ARTICLE VII TERMINATION SECTION 7.01. Termination of Agreement. Any of the Parties may terminate this Agreement as provided below: (a) The Parties may terminate this Agreement by mutual written consent at any time prior to the Effective Time. (b) Parent and Merger Sub may terminate this Agreement by giving written notice to Barrier at any time prior to the Effective Time (i) in the event Barrier has breached any representation, warranty, or covenant contained in this Agreement in any material respect (or in the case of any representation, warranty or covenant qualified by materiality or Material Adverse Effect, in any respect), Parent or Merger Sub has notified Barrier of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or (ii) if the Closing shall not have occurred on or before June 30, 2006, by reason of the failure of any condition precedent under Section 6.1 (unless the failure results primarily from Parent or Merger Sub breaching any representation, warranty, or covenant contained in this Agreement). (c) Barrier may terminate this Agreement by giving written notice to Parent and Merger Sub at any time prior to the Effective Time (i) in the event Parent or Merger Sub has breached any material representation, warranty, or covenant contained in this Agreement in any material respect (or in the case of any representation, warranty or covenant qualified by materiality, in any respect), Barrier has notified Parent and Merger Sub of the breach, and the breach has continued without cure for a period of thirty (30) days after the notice of breach or (ii) if the Closing shall not have occurred on or before June 30, 2006, by reason of the failure of any condition precedent under Section 6.2 (unless the failure results primarily from Barrier breaching any representation, warranty, or covenant contained in this Agreement). (d) Any Party may terminate this Agreement by giving written notice to the other Parties if this Agreement and the Merger fail to receive the Requisite Shareholder Approval by no later than May 31, 2006. SECTION 7.02. Effect of Termination. If any Party terminates this Agreement pursuant to Section 7.1 above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach); provided, however, that the confidentiality provisions contained in Section 5.5 shall survive any such termination. ARTICLE VIII INDEMNIFICATION SECTION 8.01. Survival of Representations and Warranties. Each of the representations and warranties made by the Parties hereto shall survive the Closing and the consummation of the transactions contemplated hereby for a period of eighteen (18) months following the Effective Time; provided, however, that the representations and warranties in Section 4.1(b), 4.1(c), 4.1(d), 4.1(__), 4.1(s) and 4.2(b) shall the survive the Closing and the consummation of the transactions contemplated hereby for a period of three (3) years following the Effective Time. Each of the covenants and agreements made by the Parties hereto shall survive the Closing and the consummation of the transactions contemplated hereby until said Party has fully performed said covenant and/or agreement in accordance with the terms hereof. SECTION 8.02. Indemnification of Parent. From and after the Closing, the Shareholders and the Optionees shall indemnify and hold harmless Parent and its affiliates, successors and assigns, and the respective officers, directors, managers, employees and agents of each of the foregoing, from and against any and all Damages actually incurred thereby or caused thereto based on, arising out of, or resulting from, or alleged by a third party to be based on or to have arisen out of or resulted from: (a) any breach of any of the representations or warranties made by Barrier in this Agreement or any exhibit, schedule, certificate, instrument, or other document pursuant to this Agreement (without giving effect to any materiality or Material Adverse Effect qualifier therein or any supplement to the Barrier Disclosure Schedule); (b) any breach or violation of, or failure to fully perform, any covenant, agreement or obligation of Barrier in this Agreement or any exhibit, schedule, certificate, instrument, or other document pursuant to this Agreement; (c) failure to pay any Transaction Costs as and when due; (d) any Liabilities for Taxes relating to taxable periods of the Companies ending on or before the Closing Date, and with respect to taxable periods beginning before the Closing Date and ending after the Closing Date, for Taxes imposed on the Companies which are allocable to the portion of such period ending on the Closing Date (including, without limitation, Liabilities disclosed in Section 4.1(h) of the Barrier Disclosure Schedule), but only to the extent any such Liabilities for Taxes are in excess of any reserves or accruals established with respect thereto on the face of the Final Closing Balance Sheet; (e) any Liabilities related to, arising out of or associated with the QMB Sale, the Canadian Companies, QMB Payment Co. or operation of the Canadian Companies and QMB Payment Co. prior to, on and after the Closing Date; (f) any Liabilities related to, arising out of or associated with grants or attempts to grant options to purchase capital stock of Barrier without due authority or otherwise not in compliance with Barrier's Articles of Incorporation or Bylaws or applicable Law, including, without limitation, any claims by the recipients or intended recipients of such options; (g) any Liabilities related to, arising out of or associated with deferred compensation arrangements between Barrier and Arthur Korfin and any payments by Barrier pursuant thereto; (h) any Liabilities related to, arising out of or associated with that certain lease, dated December 29, 1937, by and between California Packing Corporation, as lessor, and Amerada Petroleum Corporation, as lessee; and (i) any Liabilities related to, arising out of or associated with failures to file notices under Section 25102(0 of the California Corporations Code, if any, in connection with the issuance of capital stock of either Company. Notwithstanding the foregoing, (x) no indemnification shall be payable by the Shareholders under clause (a) of this Section 8.2 (except with respect to any breach of any representation or warranty in Section 4.1(j) or 4.1(s)) until the total of all such claims for indemnification exceed $100,000 (the "Threshold"), in which event Parent shall only be entitled to recover the Damages in excess of the Threshold, (y) the aggregate liability for indemnification obligations payable under this Section 8.2 shall not exceed the Holdback Amount and shall be payable solely out of the Indemnity Escrow Account, and (z) no indemnification shall be payable by the Shareholders with respect to any claim under clause (a) of the Section 8.2 unless the Shareholder Representative is notified of such claim prior to the expiration of the applicable representation or warranty in accordance with Section 8.1. As security for the performance by the Shareholders of their indemnification obligations under this Section 8.2, the Holdback Amount shall be deposited into the Indemnity Escrow Account to be held and distributed in accordance with this Agreement and the Escrow Agreement. SECTION 8.03. Indemnification by Parent. From and after the Closing, Parent shall indemnify and hold harmless the Shareholders from and against any and all Damages incurred thereby or caused thereto, based on, arising out of, resulting from or relating to, or alleged by a third party to be based on or to have arisen out of or resulted from: (a) any breach of any of the representations or warranties made by Parent or Merger Sub in this Agreement or any exhibit, schedule, certificate, instrument, or other document pursuant to this Agreement (without giving effect to any materiality qualifier therein); (b) any breach or violation of or failure to fully perform any covenant, agreement or obligation of Parent in this Agreement; and (c) the operation of the business of the Companies from and after the Closing Date. Notwithstanding the foregoing, (x) no indemnification shall be payable by Parent under clause (a) of this Section 8.3 until the total of all such claims for indemnification exceed $100,000 (the "Threshold"), in which event the Shareholders shall only be entitled to recover the Damages in excess of the Threshold, (y) the aggregate liability for indemnification obligations payable under clauses (a) and (b) of this Section 8.3 shall not exceed $3,500,000, and (z) no indemnification shall be payable by Parent with respect to any claim under clause (a) of this Section 8.3 unless Parent is notified of such claim prior to the expiration of the applicable representation or warranty in accordance with Section 8.1. SECTION 8.04. Indemnification Procedures. (a) Promptly upon obtaining knowledge of any claim, event, statement of facts or demand which has given rise to, or could reasonably give rise to, a claim for indemnification hereunder, said party seeking indemnification (an "Indemnified Party") shall give written notice of such claim or demand ("Notice of Claim") to the party from which indemnification is sought (the "Indemnifying Party") setting forth the amount of the claim. The Indemnified Party shall furnish to the Indemnifying Party in reasonable detail, such information as it may have with respect to such indemnification claim (including copies of any summons, complaint or other pleading which may have been served on it and any written claim, demand, invoice, billing or other document evidencing or asserting the same). No failure or delay by the Indemnified Party in the performance of the foregoing shall reduce or otherwise affect the obligation of the Indemnifying Party to indemnify and hold the Indemnified Party harmless, except to the extent that such failure or delay shall have adversely affected the Indemnifying Party's ability to defend against, settle or satisfy any Damages for which the Indemnified Party is entitled to indemnification hereunder. (b) Promptly after receipt of notice of any claim by a third party which might give rise to indemnification hereunder, the Indemnified Party shall notify the Indemnifying Party in writing specifying in reasonable detail the nature and amount of the claim. The Indemnifying Party shall be entitled to assume and have the sole control of the defense and settlement of such action or claim; provided, however, that: (i) the Indemnified Party shall be entitled to participate in the defense of such claim and, in connection therewith, to employ counsel at its own expense; and (ii) without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld, the Indemnifying Party shall not consent to the entry of any judgment or enter into any settlement that requires any action by the Indemnified Party other than the payment of money. In the event that (A) the Indemnifying Party elects to accept a settlement offer from a third party for any such claim, which settlement only requires the payment of money, and (B) the Indemnified Party elects not to accept the settlement proposal, then the indemnification obligations of the Indemnifying Party hereunder shall be limited to the settlement amount so offered and the Indemnified Party shall be responsible for the continued defense of said action or claim. (c) In the event the Indemnifying Party elects to assume control of the defense of any such action in accordance with the foregoing provisions, (i) the Indemnifying Party shall not be liable to the Indemnified Party for any legal fees, costs and expenses incurred by the Indemnified Party in connection with the defense thereof after the date on which the Indemnifying Party notifies the Indemnified Party of such election, and (ii) the Indemnified Party shall fully cooperate with the Indemnifying Party in such defense. If the Indemnifying Party does not assume control of the defense of such claim in accordance with the foregoing provisions, the Indemnified Party shall have the right to defend such claim, in which case the Indemnifying Party shall pay all reasonable costs and expenses of such defense regardless of the outcome of such action. The Indemnified Party shall conduct such defense in good faith and shall have the right to settle the matter with the prior written consent of the Indemnifying Party which consent shall not be unreasonably withheld. (d) Except for third-party claims being defended in good faith, the Indemnifying Party shall satisfy its obligations hereunder within thirty (30) days after the Date of the Notice of Claim except as otherwise contemplated by the Escrow Agreement. SECTION 8.05. Shareholder Representative. Shareholder Representative shall, by virtue of the Closing, be the only Person authorized and empowered to act for and on behalf of the Shareholders, and Parent shall be entitled to transact with only the Shareholder Representative, in connection with the indemnity provisions of this Article VIII and with respect to all matters relating to the Shareholders under this Agreement and the Escrow Agreement, including the payment of the Per Share Closing Consideration on behalf of Barrier, the determination of the Price Adjustment under Section 2.7, the Tax provisions of Section 5.10, the notice provisions of this Agreement and the Escrow Agreement and such other matters as are reasonably necessary for the consummation of the transactions contemplated by this Agreement or the Escrow Agreement and the agreements and documents contemplated hereby or thereby including, without limitation, to act as the representative of the Shareholders to review and authorize all setoffs, claims and other payments authorized or directed by this Agreement or the Escrow Agreement and dispute or question the accuracy thereof, to compromise on their behalf with Parent any claims asserted hereunder or thereunder and to authorize payments to be made with respect thereto and to take such further actions as are authorized in this Agreement or the Escrow Agreement. Upon the filing of a certificate of dissolution of the Shareholder Representative with the Secretary of State of the State of California or upon the resignation of the Shareholder Representative (or upon the dissolution, resignation, death or incapacity of a successor Shareholder Representative), a successor Shareholder Representative shall be elected within thirty (30) days by the vote of holders of a majority of Barrier Shares; provided that if no successor Shareholder Representative shall be elected in such 30-day period, John W. Duckett shall become the successor Shareholder Representative. If the Shareholder Representative applies for or consents to the appointment of a receiver, files a voluntary petition for bankruptcy, makes a general assignment for the benefit of creditors, or makes a written admission of inability to pay debts when they become due, or an order, judgment or decree is entered by any court of competent jurisdiction (or on the application of a creditor) adjudicating the Shareholder Representative bankrupt or insolvent or approving a petition of reorganization of the Shareholder Representative or appointing a receiver, trustee or liquidator of the Shareholder Representative or all or a substantial part of its assets, John W. Duckett shall become the successor Shareholder Representative. The Shareholder Representative shall not be liable to Shareholders or Parent or any other Person with respect to any action taken or omitted to be taken by the Shareholder Representative under or in connection with this Agreement unless such action or omission results from or arises out of fraud, gross negligence, willful misconduct or bad faith on the part of the Shareholder Representative. Parent shall be entitled to rely on such authorization and treat such Shareholder Representative as the duly authorized agent of the Shareholders. The Shareholders shall be deemed to confirm such authority if Barrier shall obtain the Requisite Shareholder Approval. SECTION 8.06. Reduction for Insurance. The amount which an Indemnifying Party is required to pay to, for or on behalf of an Indemnified Party pursuant to this Article VIII shall be reduced (including, without limitation, retroactively) by any insurance proceeds actually recovered by or on behalf of such Indemnified Party in reduction of the related indemnifiable loss (the "Indemnifiable Loss"). An amount required to be paid, as so reduced, is hereinafter sometimes called an "Indemnity Payment." If an Indemnified Party shall have received or shall have had paid on its behalf an Indemnity Payment in respect of an Indemnifiable Loss and shall subsequently receive, directly or indirectly, insurance proceeds in respect of such Indemnifiable Loss, then the Indemnified Party shall pay to the Indemnifying Party or Indemnifying Parties the amount of such insurance proceeds or, if less, the amount of the Indemnity Payment. Any amount required to be paid by Parent pursuant to this Section 8.6 shall be paid to the Shareholder Representative. Parent shall have no liability to any Shareholder or Optionee after such amount is paid to the Shareholder Representative, including, without limitation, any liability with respect to the distribution of such amount by the Shareholder Representative to the applicable Indemnifying Parties. SECTION 8.07. Exclusive Remedies. The Parties hereto hereby acknowledge and agree that, except as otherwise specifically provided in this Agreement, the indemnification rights of the parties under this Article VIII represent the sole and exclusive remedy that the parties hereto have with respect to the breach of any covenant, representation or warranty under this Agreement on the part of any Party hereto. ARTICLE IX MISCELLANEOUS SECTION 9.01. Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Parties; provided, however, that Parent may make public disclosures relating to the subject matter of this Agreement in Current Reports on Form 8-K filed with the Securities and Exchange Commission; and provided, further, that any Party may make any other public disclosure it believes in good faith is required by applicable Law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use its best efforts to advise the other Party prior to making the disclosure). SECTION 9.02. Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof. SECTION 9.03. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties. SECTION 9.04. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. SECTION 9.05. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.06. Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two Business Days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to Barrier: Barrier Systems, Inc. 180 River Road Rio Vista, CA 94571 Attention: President Fax No.: (707) 374-6801 Copy to: Collette Erickson Farmer & ONeill LLP 235 Pine Street, Suite 1300 San Francisco, CA 94104 Attention: John J. ONeill, Esq. Fax No.: (415) 788-4646 If to Shareholder Representative: QMB Payment Co., LLC 4901 Numaga Pass Carson City, NV 89703 Attention: John W. Duckett, Manager Fax No.: (775) 883-6733 Copy to: Collette Erickson Farmer & ONeill LLP 235 Pine Street, Suite 1300 San Francisco, CA 94104 Attention: John J. ONeill, Esq. Fax No.: (415) 788-4646 If to Parent or Merger Sub: Lindsay Manufacturing Co. 2707 N. 108th Street, Suite #102 Omaha, NE 68164 Attention: President Fax No.: (402) 829-6836 Copy to: Munger, Tolles & Olson LLP 355 S. Grand Ave., 35th Floor Los Angeles, CA 90071 Attention: Robert K. Johnson Brett J. Rodda Fax No.: (213) 687-3702 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. SECTION 9.07. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic Laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of California. SECTION 9.08. Amendments and Waivers. The Parties may mutually amend any provision of this Agreement at any time prior to the Effective Time with the prior authorization of their respective boards of directors; provided, however, that any amendment effected subsequent to shareholder approval will be subject to the restrictions contained in the California Corporations Code. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. SECTION 9.09. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. SECTION 9.10. Expenses. Each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the agreements and documents contemplated hereby and the transactions contemplated hereby and thereby. SECTION 9.11. Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context otherwise requires. The word "including" shall mean including without limitation. SECTION 9.12. Incorporation of Exhibits and Schedules. The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above written: Barrier: Parent: Barrier Systems, Inc. By: /s/ Owen S Denman ----------------------------------- Title: President and Chief Executive Officer -------------------------------- Lindsay Manufacturing Co. By: /s/ Richard W. Parod ----------------------------------- Title: President and Chief Executive Officer -------------------------------- Merger Sub: LM Acquisition Corporation By: /s/ Richard W. Parod ----------------------------------- Title: President -------------------------------- Shareholder Representative: QMB Payment Co., LLC By: /s/ John Duckett ----------------------------------- Title: Manager -------------------------------- EX-10.2 3 c05795exv10w2.txt TERM NOTE EXHIBIT 10.2 TERM NOTE $30,000,000.00 Omaha, Nebraska June 1, 2006 FOR VALUE RECEIVED, the undersigned LINDSAY MANUFACTURING CO. ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at 1919 Douglas Street, (1st floor) Omaha, NE 68102, Nebraska, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Thirty Million Dollars ($30,000,000.00), with interest thereon as set forth herein. DEFINITIONS: As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined: (a) "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in Nebraska are authorized or required by law to close. (b) "LIBOR" means the rate per annum and determined pursuant to the following formula: Base LIBOR LIBOR = ------------------------------- 100% - LIBOR Reserve Percentage (i) "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank as of 10:00 a.m. on each Business Day, as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, for the delivery of funds on such Business Day for a period of time equal to one (1) day and in an amount equal to the outstanding principal balance of this Note. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market. (ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for actual changes in such reserve percentage during the applicable Fixed Rate Term. -40- INTEREST: (a) Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a fluctuating rate per annum determined by Bank to be one half of one percent (0.50 %) above LIBOR in effect from time to time. Bank is hereby authorized to note the date, and interest rate applicable to this Note and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. (b) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower. (c) Payment of Interest. Interest accrued on this Note shall be payable following the end of each fiscal quarter of Borrower on the dates set forth on Schedule 1 attached hereto and incorporated herein by this reference, commencing September 11, 2006, and continuing up to and including March 8, 2013, with all remaining unpaid interest due and payable in full on June 10, 2013. (d) Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to two percent (2%) above the rate of interest in effect on the scheduled maturity date of this Note, or any accelerated maturity date. REPAYMENT: (a) Repayment. Principal shall be payable following the end of each fiscal quarter of Borrower on the dates set forth on Schedule 1 attached hereto and incorporated herein by this reference, commencing September 11, 2006, and continuing up to and including March 8, 2013, with a final installment consisting of all remaining unpaid principal due and payable in full on June 10, 2013. (b) Prepayment. Borrower may at any time and from time to time prepay principal and interest accrued on this Note in whole or in part without notice, premium or penalty. -41- (c) Application of Payments. Each payment or prepayment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. EVENTS OF DEFAULT: This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of June 1, 2006, as amended from time to time (the "Credit Agreement"). Any default in the payment of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note. MISCELLANEOUS: (a) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several. (b) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Nebraska. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above. LINDSAY MANUFACTURING CO. By: /s/ Richard W. Parod ---------------------------------- Richard W. Parod, President & Chief Executive Officer -42- SCHEDULE 1 TO TERM NOTE
Principal Payment Date Principal Payment Amount - ---------------------- ------------------------ 09-11-2006 $1,071,428.57 12-08-2006 $1,071,428.57 03-08-2007 $1,071,428.57 06-08-2007 $1,071,428.57 09-11-2007 $1,071,428.57 12-10-2007 $1,071,428.57 03-10-2008 $1,071,428.57 06-09-2008 $1,071,428.57 09-09-2008 $1,071,428.57 12-08-2008 $1,071,428.57 03-09-2009 $1,071,428.57 06-08-2009 $1,071,428.57 09-09-2009 $1,071,428.57 12-08-2009 $1,071,428.57 03-08-2010 $1,071,428.57 06-08-2010 $1,071,428.57 09-09-2010 $1,071,428.57 12-08-2010 $1,071,428.57 03-08-2011 $1,071,428.57 06-08-2011 $1,071,428.57 09-09-2011 $1,071,428.57 12-08-2011 $1,071,428.57 03-08-2012 $1,071,428.57 06-08-2012 $1,071,428.57 09-11-2012 $1,071,428.57 12-10-2012 $1,071,428.57 03-08-2013 $1,071,428.57 06-10-2013 Remaining Balance
EX-10.3 4 c05795exv10w3.txt CREDIT AGREEMENT EXHIBIT 10.3 CREDIT AGREEMENTPHIC THIS CREDIT AGREEMENT (this "Agreement") is entered into as of June 1, 2006, by and between LINDSAY MANUFACTURING CO., a Delaware corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"). RECITALS Borrower has requested that Bank extend credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows: ARTICLE I CREDIT TERMS SECTION 1.1. TERM LOAN. (a) Term Loan. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make a loan to Borrower in the principal amount of Thirty Million Dollars ($30,000,000.00) ("Term Loan"), the proceeds of which shall be used to finance the acquisition of other business operations. Borrower's obligation to repay the Term Loan shall be evidenced by a promissory note dated as of June 1, 2006 ("Term Note"), all terms of which are incorporated herein by this reference. Bank's commitment to fund the Term Loan shall terminate on July 1, 2006 if the conditions set forth in Section 3.1 have not been satisfied or waived on or before such date. (b) Repayment. Principal and interest on the Term Loan shall be repaid in accordance with the provisions of the Term Note. (c) Prepayment. Borrower may prepay principal on the Term Loan solely in accordance with the provisions of the Term Note. SECTION 1.2. INTEREST/FEES. (a) Interest. The outstanding principal balance of the Term Loan shall bear interest at the rate of interest set forth in the Term Note. (b) Computation and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in the Term Note. SECTION 1.3. COLLECTION OF PAYMENTS. Any principal and interest due under the Term Loan shall be paid by Borrower to Bank at the Bank's account, _______________, in U.S. dollars and in immediately available funds; provided, however, that Bank may collect any principal and interest due under the Term Loan that has not been paid by the close of business on the applicable payment date by charging Borrower's deposit account to be opened with Bank. ARTICLE II REPRESENTATIONS AND WARRANTIES Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement. SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly incorporated and existing and in good standing under the laws of Delaware, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which the failure to so qualify, to be so licensed or to be in good standing could reasonably be expected to have a material adverse effect on the financial condition of Borrower. SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and the Term Note (collectively, the "Loan Documents") have been duly authorized, and upon their execution and delivery by Borrower in accordance with the provisions hereof, assuming, in the case of this Agreement, due execution and delivery by Bank, will constitute legal, valid and binding agreements and obligations of Borrower, enforceable against Borrower in accordance with their respective terms. SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation or By-Laws of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower is bound, where such violation, breach or default could reasonably be expected to have a material adverse effect on the financial condition of Borrower. SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could reasonably be expected to have a material adverse effect on the financial condition of Borrower, other than those disclosed by Borrower to Bank in writing prior to the date hereof. SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower dated February 28, 2006, a true copy of which has been delivered by Borrower to Bank prior to the date hereof, (a) is complete and correct and presents fairly the financial condition of Borrower in accordance with generally accepted accounting principles, (b) discloses all liabilities of Borrower that are required to be reflected or reserved against under -2- generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) has been prepared in accordance with generally accepted accounting principles consistently applied. Since the date of such financial statement there has been no material adverse change in the financial condition of Borrower and its subsidiaries, taken as a whole, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except (i) Permitted Liens (as defined below), (ii) in favor of Bank, or (iii) as otherwise permitted by Bank in writing. SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments of its income tax not reflected in its most recent audited balance sheet that could reasonably be expected to have a material adverse effect on the financial condition of the Borrower. SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower's obligations subject to this Agreement to any other obligation of Borrower. SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses all permits, consents, approvals, franchises and licenses and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in material compliance with applicable law. SECTION 2.9. ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles. SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation. SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental and hazardous waste statutes, and any rules or regulations adopted pursuant thereto, which govern or apply to any of Borrower's operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as in effect on the date hereof. Borrower neither has knowledge of nor has received any written notice that its operations are the subject of any federal or state -3- investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment that could reasonably be expected to have a material adverse effect on the financial condition of Borrower. ARTICLE III CONDITIONS SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank's satisfaction of all of the following conditions: (a) Approval of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank's counsel. (b) Documentation. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed: (i) This Agreement. (ii) The Term Note. (iii) Certificate of Incumbency. (iv) Corporate Resolution: Borrowing. (v) Such other documents as Bank may require under any other Section of this Agreement. (c) Financial Condition. There shall have been no material adverse change, as determined by Bank, in the financial condition of Borrower and its subsidiaries, taken as a whole, hereunder. (d) Compliance. The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist. ARTICLE IV AFFIRMATIVE COVENANTS Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing: SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner -4- specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto. SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Bank, at any reasonable time upon reasonable notice, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower. SECTION 4.3. FINANCIAL STATEMENTS. (a) Provide to Bank not later than 90 days after the end of each fiscal year, financial statements of the Borrower, audited by KPMG or another certified public accountant acceptable to Bank, to include balance sheet, income statement, statement of cash flows, management report, auditor's report and footnotes; provided, however, that this covenant shall be deemed to be satisfied upon the electronic filing of the same included within the Borrower's Annual Report on Form 10-K with the Securities and Exchange Commission. (b) Provide to Bank not later than 45 days after the end of each of the first three fiscal quarters in each fiscal year, unaudited financial statements of the Borrower, to include balance sheet, income statement and statement of cash flows; provided, however, that this covenant shall be deemed to be satisfied upon the electronic filing of the same included within the Borrower's Quarterly Report on Form 10-Q with the Securities and Exchange Commission. (c) Provide to Bank all of the following: (i) within ten (10) days of the filing by Borrower of any Annual Report on Form 10-K or Quarterly Report on Form 10-Q with the Securities and Exchange Commission, a certificate of the President or Chief Financial Officer of Borrower that the financial statements filed therewith are accurate and the Borrower is in compliance in all material respects with all covenants in this Agreement and there exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default; and (ii) within ten (10) days of the filing by Borrower of any Current Report on Form 8-K with the Securities and Exchange Commission, written notice of such filing; provided, however, that this covenant shall be deemed to be satisfied upon the electronic filing of such Current Report on Form 8-K with the Securities and Exchange Commission. (iii) from time to time such other information as Bank may reasonably request. SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of Borrower's articles of incorporation and bylaws, as amended from time to time, and with the requirements of all laws, rules, regulations and orders -5- of any governmental authority applicable to Borrower and/or its business, except where the failure to so preserve or maintain or to so comply could not reasonably be expected to have a material adverse effect on the financial condition of Borrower and its subsidiaries, taken as a whole. SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower, including but not limited to fire, extended coverage, public liability, property damage and workers' compensation, with all such insurance carried with reputable insurance companies, and deliver to Bank from time to time at Bank's request schedules setting forth all insurance then in effect. SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower's business in good repair and condition, ordinary wear and tear and maintenance excepted, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained. SECTION 4.7. TAXES. Pay and discharge when due any and all material assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except such (a) as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made adequate reserves in accordance with generally accepted accounting principles. SECTION 4.8. FINANCIAL CONDITION. Maintain Borrower's financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein): (a) Consolidated Funded Debt to EBITDA not greater than 2.5 to 1.0 as of each quarter end, determined on a rolling 4-quarter basis, with "Funded Debt" defined as the sum of all obligations for borrowed money (including subordinated debt) plus that portion of all capital lease obligations reported on the balance sheet of Borrower as a liability, and with "EBITDA" defined as net profit before tax plus interest expense, depreciation expense and amortization expense; provided however that, in the event that an acquisition or disposition permitted by this Agreement shall have been consummated during such four fiscal quarter period, in computing Consolidated EBITDA, net profit (and all other amounts specified in the definition of Consolidated EBITDA ) shall be computed on a pro forma basis giving effect to such acquisition or disposition, as the case may be, as of the first day of such period. (b) Consolidated Fixed Charge Coverage Ratio not less than 1.25 to 1.0 as of each quarter end, determined on a rolling 4-quarter basis, with "Fixed Charge Coverage Ratio" defined as the aggregate of net profit after taxes plus depreciation expense, amortization expense, cash capital equity contributions and increases in subordinated debt minus dividends, distributions and decreases in subordinated debt, divided by the aggregate of the current portion of long term debt and capitalized lease payments. SECTION 4.9. NOTICE TO BANK. Promptly (but in no event more than five (5) days after Borrower becomes aware of the occurrence of each such event or matter) give written -6- notice to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the form of organization of Borrower; or (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan. ARTICLE V NEGATIVE COVENANTS Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank's prior written consent: SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof. SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed assets greater than $7,000,000.00 in any fiscal year. SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Bank, (b) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof, and (c) indebtedness of the Borrower and its subsidiaries in an aggregate amount not to exceed $5,000,000.00. SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other entity (except mergers or consolidations whereby Borrower is the surviving corporation or mergers or consolidations of a subsidiary of Borrower with or into any other subsidiary of Borrower, in each case, so long as immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing); make any substantial change in the nature of Borrower's business as conducted as of the date hereof; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower's assets except in the ordinary course of its business. SECTION 5.5. GUARANTIES. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except (a) any of the foregoing in favor of Bank, and (b) limited recourse guarantees entered into n the ordinary course of business in connection with customer financing transactions. SECTION 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except (a) any of the foregoing existing as of, and -7- disclosed to Bank prior to, the date hereof, (b) trade credit extended in the ordinary course of business, (c) customer financing transactions in the ordinary course of business, (d) loans or advances for travel, expenses, relocation, entertainment or otherwise in connection with their employment or the business of Borrower, (e) certificates of deposit, bank accounts, and investments in cash equivalents, (f) investments in marketable securities, mutual funds and other investments made in the ordinary course of business, (g) investments in subsidiaries existing as of the date hereof, investments in and advances to wholly owned subsidiaries, and acquisitions of subsidiaries permitted hereunder. SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower's assets now owned or hereafter acquired, except (a) any of the foregoing in favor of Bank or that are existing as of, and disclosed to Bank in writing prior to, the date hereof, (b) liens for taxes not delinquent or for taxes and other items being contested in good faith, (c) contractors', carriers', warehousemen's and similar liens, liens of landlords, and workers compensation, unemployment and other similar deposits or pledges, all in the ordinary course of business, (d) liens in respect of capital leases and purchase money obligations, (e) liens securing indebtedness not in excess of $750,000.00 at any time outstanding, (f) attachment, judgment and other similar liens, provided that the execution or enforcement of such lien is stayed and is being contested, or (g) liens existing on any asset of an entity when it becomes a subsidiary or when it is merged or consolidated with or into Borrower or any of its subsidiaries, and, in each case, not created in contemplation of such event. ARTICLE VI EVENTS OF DEFAULT SECTION 6.1. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: (a) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents, and such default shall continue for a period of three (3) days from its occurrence. (b) Any representation or warranty made by Borrower under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made. (c) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those referred to in subsections (a) and (b) above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence. (d) Any default (beyond any applicable cure period) in the payment of any obligation, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan Documents) pursuant to which Borrower has incurred debt for borrowed money in -8- excess of $5,000,000.00 to any person or entity other than Bank or an affiliate of Bank, or in any amount to Bank or an affiliate of Bank. (e) The filing of a notice of judgment lien against Borrower or the recording of an abstract of judgment against Borrower in any county in which Borrower has an interest in real property, in each case, in excess of $5,000,000 over the amount of any insurance proceeds reasonably expected to be received, which remains unsatisfied without entry of a stay of execution within 30 days after the issuance or any writ of execution or similar legal process or the entry of a judgment against Borrower in excess of $5,000,000 over the amount of any insurance proceeds reasonably expected to be received. (f) Borrower shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower and Borrower shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors. (g) The dissolution or liquidation of Borrower; or Borrower or its Board of Directors or its stockholders shall take action to effect the dissolution or liquidation of Borrower. (h) There is a report filed by any person on Schedule 13D (or any successor schedule) pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that such person (for the purposes of Section 6.1(h) only, "person" is as defined in Section 13(d)(3) of the Exchange Act) has become the beneficial owner (for the purposes of Section 6.1(h) only, "beneficial owner" is as defined under Rule 13d-3 under the Exchange Act) of 50% or more of the voting power of Borrower's voting stock then outstanding; provided, however, that a person shall not be deemed beneficial owner of, or to own beneficially (1) any voting stock tendered pursuant to a tender or exchange offer made by or on behalf of such person or its affiliates or associates until such tendered voting stock is accepted for purchase or exchange thereunder, or (2) any voting stock if such beneficial ownership arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation, and is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act. SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary -9- notwithstanding, shall at Bank's option (and without notice in the event of an Event of Default defined in Section 6.1(f)) become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by each Borrower; and (b) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. ARTICLE VII MISCELLANEOUS SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing. SECTION 7.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address: BORROWER: LINDSAY MANUFACTURING CO. 2707 N. 108th Street, Suite 102 Omaha, NE 68154 Attention: Dave Downing Fax No.: (402) 829-6836 BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION Nebraska RCBO / MAC# N8000-01B 1919 Douglas Street (1st floor) Omaha, NE 68102-1310 Attention: Commercial Banking Fax No.: (402) 536-2075 or to such other address or facsimile number as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery or overnight courier service, upon signature by or on behalf of the receiving party; (b) if sent by certified or registered mail, upon the earlier of the date of actual receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by facsimile, upon actual receipt. SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank promptly upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees but exclude -10- allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, (b) the preparation of any amendments and waivers hereto and thereto, (c) the enforcement of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (d) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity; provided that the maximum amount that Borrower shall be obligated to pay to Bank under clause (a) above shall be $5,000. SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest hereunder without Bank's prior written consent and Bank may not assign or otherwise transfer any of its rights or obligations hereunder except in whole to an affiliate of Bank or to a bank or similar financial institution which shall be, in the absence of an Event of Default, reasonably acceptable to Borrower, or by way of a participation permitted under this section 7.4, and any other attempted assignment or transfer shall be null and void. Bank reserves the right to grant participations in all or any part of, or any interest in, Bank's rights and benefits under each of the Loan Documents, provided that Bank's obligations under this Agreement shall remain unchanged and the Borrower shall continue to deal solely with Bank, and provided further that any agreement for such a participation shall provide that Bank shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement. In connection therewith, and subject to the terms of the a confidentiality agreement reasonably satisfactory to Borrower, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business. SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed by each party hereto. SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party. SECTION 7.7. TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents. SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to -11- the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement. SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement. SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Nebraska. SECTION 7.11. ARBITRATION. (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers and directors), whether in tort, contract or otherwise arising out of or relating to in any way (i) the Term Loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Nebraska selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "Rules"). If there is any inconsistency between the terms and procedures hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or any similar applicable state law. (c) No Waiver of Provisional Remedies. The arbitration requirement does not limit the right of any party under applicable law to obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in this paragraph. (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any -12- dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. Each arbitrator will be a neutral attorney licensed in the State of Nebraska or a neutral retired judge of the state or federal judiciary of Nebraska, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator(s) will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator(s) will decide (by documents only or with a hearing at the discretion of the arbitrator(s)) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator(s) shall resolve all disputes in accordance with the substantive law of Nebraska and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator(s) shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator(s) deem(s) necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Nebraska Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator(s) upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available. (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding. (g) Payment Of Arbitration Costs And Fees. The arbitrator(s) may award all costs and expenses of the arbitration proceeding. (h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrator(s) and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or pursuant to its filings with the Securities and Exchange Commission. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the -13- dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties. A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA LAW. TO PROTECT THE PARTIES FROM ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT, PROMISE, UNDERTAKING OR OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY OTHER FINANCIAL ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, OR ANY AMENDMENT OF, CANCELLATION OF, WAIVER OF, OR SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION OF CREDIT, MUST BE IN WRITING TO BE EFFECTIVE. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above. LINDSAY MANUFACTURING CO. WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Richard W. Parod By: /s/ Michael V. Hinrichs ---------------------------------- ----------------------------------- Richard W. Parod, President Michael V. Hinrichs, Vice President and Chief Executive Officer -14- EX-10.4 5 c05795exv10w4.txt AMENDED AND RESTATED ISDA CONFIRMATION EXHIBIT 10.4 AMENDED AND RESTATED ISDA CONFIRMATION TO: Lindsay Manufacturing Co. 2707 North 108th Street Suite 102 Omaha, NE 68154 TELEPHONE: (402) 827-6235 FAX: (402) 829-6836 FROM: Wells Fargo Bank, NA. 417 Montgomery Street, Suite 500 MAC A0108-050 San Francisco, CA 94104 FAX: (415) 986-2604 RE: USD 30,000,000.00 INTEREST RATE SWAP TRANSACTION (89344) DATE: May 26, 2006 Ladies and Gentlemen: The purpose of this letter agreement is to confirm the terms and conditions of the transaction ("Transaction") entered into between Wells Fargo Bank, N.A. ("Party A") and Lindsay Manufacturing Co., a Delaware corporation ("Party B"). This Transaction is effective at, and as of 12:01 a.m., California time, on the Trade Date specified below. The definitions and provisions contained in the 2000 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. ("ISDA")), including the Annex to the 2000 ISDA Definitions (the "Definitions"), are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 1. This Confirmation evidences a complete and binding agreement between Party A and Party B as to the terms of the Transaction to which this Confirmation relates. In addition, Party A and Party B agree to use all reasonable efforts to promptly negotiate, execute and deliver a 1992 ISDA Master Agreement ("Master Agreement"), with such modifications as Party A and Party B will in good faith agree. Upon the execution by Party A and Party B of such Master Agreement, the Confirmation will supplement, form a part of, and be subject to Master Agreement. All provisions contained or incorporated by reference in that Master Agreement upon its execution will govern this Confirmation except as expressly modified below. Until the parties hereto execute and deliver that Master Agreement, this Confirmation, together with all other documents referring to the Master Agreement (each a "Confirmation") confirming transactions (each a "Transaction") entered into between us (notwithstanding anything to the contrary in a Confirmation), shall supplement, form a part of, and be subject to a Master Agreement as if we had executed an agreement in such form on the Trade Date of the first such Transaction between -15- us. In the event of any inconsistency between the provisions of that Master Agreement and this Confirmation, this Confirmation will prevail for the purpose of this Transaction. 2. The terms of the particular Transaction to which this Confirmation relates are as follows: NOTIONAL AMOUNT: USD 30,000,000.00 (Initial Notional Amount - please refer to the attached Schedule I) TRADE DATE: May 5, 2006 EFFECTIVE DATE: June 1, 2006 TERMINATION DATE: June 1, 2013, subject to adjustment in accordance with the Modified Following Business Day Convention. FIXED AMOUNTS FIXED RATE PAYER: Party B FIXED RATE PAYER Five Business Day(s) after the end of each PAYMENT DATES: Calculation Period, beginning with September 11, 2006, continuing up to and including the Termination Date, subject to adjustment in accordance with the designated Business Day Convention. CALCULATION PERIOD: From the 1st day of each March, June, September, and December, up to the 1st day of the following quarter, continuing until the Termination Date, subject to adjustment in accordance with the designated Business Day Convention. The first Calculation Period will be June 1, 2006 to September 1, 2006. FIXED RATE: 6.05% FIXED RATE DAY Actual/360 COUNT FRACTION: BUSINESS DAY Modified Following CONVENTION: FLOATING AMOUNTS FLOATING RATE PAYER: Party A FLOATING RATE PAYER Five Business Day(s) after the end of each PAYMENT DATES: Calculation Period, beginning with September 11, 2006, continuing up to and including the Termination Date, subject to adjustment in accordance with the designated Business Day Convention. CALCULATION PERIOD: From the 1st day of each March, June, September, and December, up to the 1st day of the following quarter, continuing until the Termination Date, subject to adjustment in accordance with the designated Business Day Convention. The first Calculation Period will be June 1, 2006 to September 1, 2006. FLOATING RATE OPTION: USD-Federal Funds-H.15 DESIGNATED MATURITY: 1 Day SPREAD: Plus 0.50% FLOATING RATE DAY COUNT FRACTION Actual/360 FLOATING RATE FOR INITIAL CALCULATION PERIOD: To be determined METHOD OF AVERAGING: Weighted COMPOUNDING: Not Applicable.
-16- BUSINESS DAY CONVENTION: Modified Following BUSINESS DAYS: New York City CREDIT SUPPORT DOCUMENT: NOT APPLICABLE. CREDIT SUPPORT PROVIDER FOR PARTY B: Not Applicable. ACCOUNT DETAILS: PAYMENTS DUE TO Party B will wire settlement payments to the following account: PARTY A: BANK NAME: Wells Fargo Bank, N.A. ABA NUMBER: 121000248 ACCOUNT NAME: Wells Fargo Bank, N.A. ACCOUNT NUMBER: 43756g1755 REFERENCE: 89344 PAYMENTS DUE TO PARTY B: Settlement instructions to be provided CALCULATION AGENT: Party A
3. Please confirm that the foregoing correctly sets forth the terms of our agreement by having an authorized officer sign one copy of this telecopy Confirmation and returning it to us by telecopier to: Wells Fargo Bank, N.A. ATTENTION: Documentation Group FAX: (415) 986-2604 4. Each party represents to the other party hereto that (i) it is not acting as a fiduciary or a financial or investment advisor for the other party; (ii) it is not relying upon any advice, counsel or representations (whether written or oral) of the other party other than the representations expressly set forth in the Master Agreement, any Credit Support Document and herein; (iii) the other party hereto has not given to it any advice or counsel as to the expected or projected success, return, performance, result, consequence or benefit (either legal, regulatory, tax, financial, accounting, or otherwise) of this Transaction; (iv) it has consulted with its own legal, regulatory, tax, business, investment financial and accounting advisors to the extent it has deemed necessary and has made its own investment, hedging, and trading decisions (including decisions regarding the suitability of this Transaction) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party hereto; (v) it has determined that the rates, prices, or amounts and other terms of this Transaction in the indicative quotations (if any) provided by the other party hereto reflect those in the relevant market for similar transactions, and all trading decisions have been the result of arms length negotiations between the parties; (vi) it is entering into this Transaction with a full understanding of all of the terms, conditions and risks thereof (economic and otherwise), and it is capable of assuming and willing to assume (financially and otherwise) those risks; and (vii) it is a sophisticated investor. 5. This Confirmation will be governed by and construed in accordance with the laws of the State of New York without reference to choice of law doctrine. -17- Yours sincerely, Wells Fargo Bank, N.A. By: /s/ Martha Burke --------------------------------- NAME: Martha Burke ITS: Authorized Signatory ACCEPTED AND CONFIRMED AS OF THE TRADE DATE: LINDSAY MANUFACTURING CO., A DELAWARE CORPORATION BY: /s/ Richard W. Parod --------------------------------- NAME: RICHARD W. PAROD ITS: PRESIDENT & CHIEF EXECUTIVE OFFICER -18- EX-10.5 6 c05795exv10w5.txt ISDA MASTER AGREEMENT EXHIBIT 10.5 (ISDA (R) LOGO) International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of May 5, 2006 WELLS FARGO BANK, NATIONAL and LINDSAY MANUFACTURING CO., ASSOCIATION a Delaware corporation have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows:-- 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. -19- (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. -20- (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) NETTING. If on any date amounts would otherwise be payable:-- (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) DEDUCTION OR WITHHOLDING FOR TAX. (i) GROSS-UP. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will:-- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such -21- authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for:-- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of wbether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. (ii) LIABILITY. If: - (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the -22- actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that:-- (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or, to its -23- knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 4. AGREEMENTS Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:-- (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs:-- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, -24- in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) COMPLY WITH LAWS. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) TAX AGREEMENT. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure. (e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:-- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) CREDIT SUPPORT DEFAULT. -25- (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) MISREPRESENTATION. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however -26- described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:-- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:-- -27- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event -28- Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:-- (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):-- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an-amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5 (a)(viii); (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the -29- resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. -30- 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. -31- (iv) RIGHT TO TERMINATE. If:-- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then -32- continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. -33- (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default:-- (1) FIRST METHOD AND MARKET QUOTATION. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event:-- (1) ONE AFFECTED PARTY. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) TWO AFFECTED PARTIES. If there are two Affected Parties:-- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with -34- the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (IV) PRE-ESTIMATE. THE PARTIES AGREE THAT IF MARKET QUOTATION APPLIES AN AMOUNT RECOVERABLE UNDER THIS SECTION 6(E) IS A REASONABLE PRE-ESTIMATE OF LOSS AND NOT A PENALTY. SUCH AMOUNT IS PAYABLE FOR THE LOSS OF BARGAIN AND THE LOSS OF PROTECTION AGAINST FUTURE RISKS AND EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT NEITHER PARTY WILL BE ENTITLED TO RECOVER ANY ADDITIONAL DAMAGES AS A CONSEQUENCE OF SUCH LOSSES.7. TRANSFER Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:-- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. CONTRACTUAL CURRENCY (a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will be -35- made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. -36- 9. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. OFFICES; MULTIBRANCH PARTIES (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a -37- Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 11. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document -38- to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. NOTICES (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:-- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:-- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed -39- by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for anyreason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. DEFINITIONS As used in this Agreement:-- "ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b). "AFFECTED PARTY" has the meaning specified in Section 5(b). "AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. -40- "AFFILIATE" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "APPLICABLE RATE" means:-- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "BURDENED PARTY" has the meaning specified in Section 5(b). "CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "CONSENT" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. "CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b). "CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as such in this Agreement. "CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule. "DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "DEFAULTING PARTY" has the meaning specified in Section 6(a). "EARLY TERMINATION DATE" means the date determined in accordance with Section 6(a) or 6(b)(iv). -41- "EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "ILLEGALITY" has the meaning specified in Section 5(b). "INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "LAW" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "LAWFUL" and "UNLAWFUL" will be construed accordingly. "LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "LOSS" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A -42- party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "MARKET QUOTATION" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was, absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have -43- been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "NON-DEFAULTING PARTY" has the meaning specified in Section 6(a). "OFFICE" means a branch or office of a party, which may be such party's head or home office. "POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "SET-OFF" means set-off, offset, combination of accounts, right of retention or withholding or -44- similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination Date, the sum of:-- (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "SPECIFIED ENTITY" has the meaning specified in the Schedule. -45- "SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "STAMP TAX" means any stamp, registration, documentation or similar tax. "TAX" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "TAX EVENT" has the meaning specified in Section 5(b). "TAX EVENT UPON MERGER" has the meaning specified in Section 5(b). "TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "TERMINATION CURRENCY" has the meaning specified in the Schedule. "TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to -46- the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market -47- value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. WELLS FARGO BANK, NATIONAL LINDSAY MANUFACTURING CO., ASSOCIATION a Delaware corporation By: /s/ Martha Burke By: /s/ Richard W. Parod --------------------------------- ------------------------------------ Name: Martha Burke Name: Richard W. Parod Title: Authorized Signatory Its: President & Chief Executive Officer -48- EX-10.6 7 c05795exv10w6.txt SCHEDULE TO THE ISDA MASTER AGREEMENT EXHIBIT 10.6 SCHEDULE to the ISDA MASTER AGREEMENT This is the Schedule to that certain ISDA Master Agreement dated as of May 5, 2006, between Wells Fargo Bank, National Association ("Party A") and Lindsay Manufacturing Co., a Delaware corporation ("Party B"). PART 1 TERMINATION PROVISIONS In this Agreement: (A) "Specified Entity" means "Affiliates" in relation to Party B, and "not applicable" in relation to Party A. (B) "Specified Transaction" will have the meaning specified in Section 14 of this Agreement. In addition, Specified Transaction shall also include any agreements or obligations between Party A and Party B, including, without limitation, any loan, lines of credit, credit agreement, reimbursement agreement, security agreement or other similar agreement. (C) The "Cross-Default" provisions of Section 5(a)(vi) of this Agreement will apply to Party A and to Party B. "Specified Indebtedness" will have the meaning specified in Section 14; and shall include, with respect to Party B, any indebtedness or obligation owing by Party B to Party A (including, without limitation, any obligations owed by Party B to Party A arising under any account agreement, loan, line of credit, credit agreement, reimbursement agreement, security agreement or other similar agreement); provided, however, with respect to Party A such term shall not include deposits and obligations in respect of deposits received in the ordinary course of Party A's banking business. "Threshold Amount" means with respect to Party A, an amount equal to 3% of the Shareholders Equity (as hereinafter defined) of Party A and with respect to Party B, $5,000,000.00; provided that with respect to obligations owed by Party B to Party A and its Affiliates the Threshold Amount shall mean $0. "Shareholders' Equity" means, with respect to Party A, at any time, the sum (as shown in its most recent annual audited financial statements) of (i) its capital stock (including preferred stock outstanding, taken at par value), (ii) its capital surplus and (iii) its retained earnings, minus -49- (iv) treasury stock, each to be determined in accordance with generally accepted accounting principles. (D) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) of this Agreement will apply to Party A and to Party B. (E) The "Automatic Early Termination" provision of Section 6(a) of this Agreement will not apply to Party A or to Party B. (F) Payments on Early Termination. For the purpose of Section 6(e) of this Agreement: (i) Loss will apply, and (ii) Second Method will apply. (G) "Termination Currency" means United States Dollars. (H) Additional Termination Event will apply. Each of the following shall constitute an Additional Termination Event: (i) Key Agreements. Any promissory note, loan agreement, credit agreement reimbursement agreement or other document or instrument evidencing a credit extension from Party A to Party B is terminated, cancelled, voided, breached or amended in any manner which would affect Party's B ability to perform its obligations under this Agreement, determined by Party A in its sole discretion. Upon the occurrence of such event, Party B shall be deemed to be the sole Affected Party and all Transactions shall be deemed to be Affected Transactions. PART 2 TAX REPRESENTATIONS (A) Payer Representations. For the purpose of Section 3(e) of this Agreement, each party makes the following representation: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause -50- (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (B) Payee Representations. (i) For the purpose of Section 3(f) of this Agreement, Party A represents that it is a national banking association organized under the laws of the United States. (ii) For the purpose of Section 3(f) of this Agreement, Party B represents that it is a corporation established under the laws of the State of Delaware. PART 3 AGREEMENT TO DELIVER DOCUMENTS For the purposes of Section 4(a)(i) and (ii) of this Agreement, the parties agrees that the following documents will be delivered:
COVERED BY PARTY REQUIRED TO DATE BY WHICH SECTION 3(D) DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE TO BE DELIVERED REPRESENTATION - --------------------- ------------------------------------ ------------------------------- -------------- Party B and any Satisfactory evidence of its Upon execution of this Yes Credit Support capacity and ability to enter into Agreement and upon request Provider of Party B this Agreement and any Transaction hereunder Party B and any Certified evidence of the authority, Upon execution of this Yes Credit Support incumbency and specimen signature of Agreement and upon request Provider of Party B each person executing any document on its behalf in connection with this Agreement Party A Party A Designation of Authority and Upon the reasonable request of Yes related extract from Party A's Party B in connection with the By-Laws, certified by the Secretary execution of this Agreement or an Assistant Secretary, authorizing the execution, delivery and performance of derivative instruments of any kind
-51-
COVERED BY PARTY REQUIRED TO DATE BY WHICH SECTION 3(D) DELIVER DOCUMENT FORM/DOCUMENT/CERTIFICATE TO BE DELIVERED REPRESENTATION - --------------------- ------------------------------------ ------------------------------- -------------- Party B Duly executed and completed U.S. Upon execution of this Yes Internal Revenue Service Form W-9 Agreement, promptly upon (or successor thereto). reasonable demand by Party A and promptly upon learning that any such form previously provided by Party B has become obsolete or incorrect
PART 4 MISCELLANEOUS (A) Addresses for Notices. For the purpose of Section 12(a) of this Agreement: Address for notices or communications to Party B: Address: Lindsay Manufacturing Co. 2707 N. 108th Street, Suite 102 Omaha, NE 68154 Facsimile: 402 829 6836 Attention: Dave Downing Address for all notices or communications to Party A: Address: Wells Fargo Bank, National Association 417 Montgomery Street, Suite 500 MAC A0108-050 San Francisco, California 94104 Facsimile: 415 646 9166 Attention: Derivatives Documentation Manager Additional Address for notices or communications for operational purposes (payments and settlements): -52- Address: Wells Fargo Bank, National Association 417 Montgomery Street, Suite 500 MAC A0108-050 San Francisco, California 94104 Facsimile No.: (415) 646-9208 Attention: Back Office Operations - Settlements (B) Process Agent. For the purpose of Section 13(c) of this Agreement, neither Party A nor Party B will appoint a Process Agent. (C) Offices. The provisions of Section 10(a) will apply to this Agreement. (D) Multibranch Party. For the purpose of Section 10(c) of this Agreement: Party A is not a Multibranch Party. Party B is not a Multibranch Party. (E) Calculation Agent. The Calculation Agent is Party A. (F) Credit Support Document. Credit Support Document means, in relation to Party A: None. Credit Support Document means, in relation to Party B: None. (G) Credit Support Provider. Credit Support Provider means in relation to Party A: None. Credit Support Provider means in relation to Party B: None. (H) Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to choice of law doctrine. (I) Netting of Payments. Section 2(c) of this Agreement will apply to each Transaction. (J) "Affiliate" will have the meaning specified in Section 14 of this Agreement; provided, however, that Party A shall not have any Affiliates for purposes of this Agreement. PART 5 OTHER PROVISIONS -53- (A) Confirmations. Notwithstanding anything to the contrary in this Agreement: (i) The parties hereto agree that with respect to each Transaction hereunder a legally binding agreement shall exist from the moment that the parties hereto agree on the essential terms of such Transaction, which the parties anticipate will occur by telephone. (ii) For each Transaction Party A and Party B agree to enter into hereunder, Party A shall promptly send to Party B a Confirmation setting forth the terms of such Transaction. Party B shall execute and return the Confirmation to Party A or request correction of any error within three Business Days of receipt. Failure of Party B to respond within such period shall not affect the validity or enforceability of such Transaction and shall be deemed to be an affirmation of such terms. (B) Definitions. For each Transaction (unless otherwise specified in a Confirmation) all provisions of the 2000 ISDA Definitions (as published by the International Swaps & Derivatives Association, Inc.), including the Annex to the 2000 ISDA Definitions and any supplements thereto, are hereby incorporated by this reference into this Agreement and shall form a part hereof as if set forth in full herein. (C) Additional Representations. Section 3 of this Agreement is hereby amended by adding at the end thereof the following subsections (g) through (l): "(g) ELIGIBLE CONTRACT PARTICIPANT. It is either an "eligible contract participant" as that term is defined in Section 1a(12) of the Commodity Exchange Act (7 U.S.C. 1a(12)) and was not formed solely for the purposes of constituting an "eligible contract participant, or if it is not an eligible contract participant, this Agreement (including each Transaction) is undertaken in conjunction with its line of business (including financial intermediation services) or the financing of its business." "(h) NO AGENCY. It is entering into this Agreement, any Credit Support Document to which it is a party, each Transaction and any other documentation relating to this Agreement or any Transaction as principal (and not as agent or in any other capacity, fiduciary or otherwise)." "(i) CREDITWORTHINESS. The economic terms of this Agreement, and any Credit Support Documents to which it is a party, and each Transaction have been individually tailored and negotiated by it, and the creditworthiness of the other party was a material consideration in its entering into or determining the terms of this Agreement, such Credit Support document, and such Transaction." "(j) INDIVIDUAL NEGOTIATION. This Agreement (including each Transaction) has been subject to individual negotiation by the parties, including individualized creditworthiness determinations." "(k) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts the terms, conditions and risks of this Agreement and each -54- Transaction hereunder. It is also capable of assuming, and assumes, the risks of this Agreement and each Transaction hereunder." "(l) NON-RELIANCE. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction: it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into a Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee of the expected results of that Transaction." (D) Right of Setoff. Section 6 of this Agreement is amended by adding the following new Section 6(f): "(f) SET-OFF. Any amount (the "Early Termination Amount") payable to one party (the Payee) by the other party (the Payer) under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any amount(s) (the "Other Agreement Amount") payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) issued or executed by one party to or in favour of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section 6(f). For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section 6(f) shall be effective to create a charge or other security interest. This Section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise)." -55- (E) Inconsistency Among Definitions or Provisions. In the event of any inconsistency between the definitions or provisions in any of the following documents, the relevant document first listed below shall govern: (i) a Confirmation (with respect only to definitions in such Confirmation; provided, however, that other provisions in a Confirmation will govern over inconsistent provisions in the following documents to the extent that such Confirmation explicitly states its intent to modify the following documents); (ii) the Schedule to the ISDA Master Agreement; (iii) the ISDA Master Agreement; and (v) the 2000 ISDA Definitions. (F) Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of the Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. The parties hereto shall endeavor in good faith negotiations to replace the prohibited or unenforceable provision with a valid provision, the economic effect of which comes as close as possible to that of the prohibited or unenforceable provision. (G) WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY TRIAL OR LITIGATION ARISING OUT OF OR IN CONNECTION WITH ANY TRANSACTION OR THIS AGREEMENT. (H) RISK DISCLOSURE. PARTY B HEREBY ACKNOWLEDGES AND AGREES THAT IT HAS: (X) READ THE RISK DISCLOSURE SET FORTH ON EXHIBIT A; (Y) UNDERSTANDS SUCH RISK DISCLOSURE; AND (Z) HAD AN ADEQUATE OPPORTUNITY TO DISCUSS ANY QUESTIONS OR COMMENTS THAT IT MAY HAVE HAD WITH RESPECT TO SUCH RISK DISCLOSURE PRIOR TO THE EXECUTION OF THIS AGREEMENT. (J) Consent to Recording. Each party (i) consents to the recording of the telephone conversations of trading and marketing personnel of the parties in connection with this Agreement or any potential Transaction, and (ii) agrees to obtain any necessary consents of and give notice of such recording to its personnel, and (iii) consents to the submission of any such tape recording in evidence in any Proceedings. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. Party A Party B WELLS FARGO BANK, NATIONAL LINDSAY MANUFACTURING CO., ASSOCIATION a Delaware corporation -56- By: /s/ Martha Burke By: /s/ Richard W. Parod --------------------------------- ------------------------------------ Name: Martha Burke Name: Richard W. Parod Title: Authorized Signatory Title: President & Chief Executive Officer EXHIBIT A RISK DISCLOSURE AS IS COMMON WITH MANY OTHER FINANCIAL INSTRUMENTS AND TRANSACTIONS, FINANCIAL RISK MANAGEMENT PRODUCTS, IN ADDITION TO PROVIDING SIGNIFICANT BENEFITS, MAY IN CERTAIN CASES INVOLVE A VARIETY OF SIGNIFICANT RISKS. BEFORE ENTERING INTO ANY FINANCIAL RISK MANAGEMENT TRANSACTION, YOU SHOULD CAREFULLY CONSIDER WHETHER THE TRANSACTION IS APPROPRIATE FOR YOU IN LIGHT OF YOUR OBJECTIVES, EXPERIENCE, FINANCIAL AND OPERATIONAL RESOURCES, AND OTHER RELEVANT CIRCUMSTANCES. YOU SHOULD ALSO ENSURE THAT YOU FULLY UNDERSTAND THE NATURE AND EXTENT OF YOUR EXPOSURE TO RISK OF LOSS, IF ANY, WHICH IN SOME CIRCUMSTANCES MAY SIGNIFICANTLY EXCEED THE AMOUNT OF ANY INITIAL PAYMENT MADE BY OR TO YOU. FINANCIAL RISK MANAGEMENT PRODUCTS PERMIT PRECISE CUSTOMIZATION TO ACCOMPLISH PARTICULAR FINANCIAL AND RISK MANAGEMENT OBJECTIVES THAT MIGHT OTHERWISE BE UNACHIEVABLE. THE SPECIFIC RISKS PRESENTED BY A PARTICULAR TRANSACTION NECESSARILY DEPEND UPON THE TERMS OF THAT TRANSACTION AND YOUR CIRCUMSTANCES. COMMON TO ALL, HOWEVER, IS THEIR NATURE AS LEGALLY BINDING CONTRACTUAL COMMITMENTS, WHICH, ONCE AGREED TO, CANNOT BE ALTERED OTHER THAN BY TERMINATION OR MODIFICATION. YOU SHOULD UNDERSTAND THAT SUCH TERMINATION AND/OR MODIFICATION MAY, IN CERTAIN CIRCUMSTANCES, RESULT IN SIGNIFICANT LOSSES. AS IN ANY FINANCIAL TRANSACTION, YOU SHOULD ENSURE THAT YOU UNDERSTAND THE REQUIREMENTS, IF ANY, APPLICABLE TO YOU THAT ARE ESTABLISHED BY YOUR REGULATORS OR BY YOUR BOARD OF DIRECTORS OR OTHER GOVERNING BODY. YOU SHOULD ALSO CONSIDER THE LEGAL, TAX, ACCOUNTING, AND ECONOMIC IMPLICATIONS OF ENTERING INTO ANY FINANCIAL RISK MANAGEMENT TRANSACTION, INDEPENDENTLY AND IF -57- NECESSARY, THROUGH CONSULTATION WITH SUCH ADVISORS AS MAY BE APPROPRIATE TO ASSIST YOU IN UNDERSTANDING THE RISKS INVOLVED. IN ENTERING INTO ANY FINANCIAL RISK MANAGEMENT TRANSACTION WITH, OR ARRANGED BY, US, WELLS FARGO BANK, N.A. (THE "BANK"), YOU SHOULD ALSO UNDERSTAND THAT THE BANK IS ACTING SOLELY IN THE CAPACITY OF AN ARM'S LENGTH CONTRACTUAL COUNTER PARTY AND NOT IN THE CAPACITY OF YOUR FINANCIAL ADVISOR OR FIDUCIARY UNLESS THE BANK HAS SO AGREED IN WRITING AND THEN ONLY TO THE EXTENT SO PROVIDED. THIS BRIEF STATEMENT DOES NOT PURPORT TO DISCLOSE ALL OF THE RISKS OR OTHER RELEVANT CONSIDERATIONS OF ENTERING INTO FINANCIAL RISK MANAGEMENT TRANSACTIONS. -58- EX-99.1 8 c05795exv99w1.txt PRESS RELEASE EXHIBIT 99.1 (LINDSAY MANUFACTURING CO. LOGO) 2707 NO. 108TH ST. OMAHA, NE 68164 TEL: 402-829-6800 FAX: 402-829-6835 FOR FURTHER INFORMATION, CONTACT: LINDSAY MANUFACTURING: HALLIBURTON INVESTOR RELATIONS: David Downing Jeff Elliott or Geralyn DeBusk VP and CFO 972-458-8000 402-827-6235 LINDSAY MANUFACTURING CO. COMPLETES ACQUISITION OF BARRIER SYSTEMS, INC. Omaha, Nebraska--June 1, 2006--Lindsay Manufacturing Co. (NYSE: LNN) ("Lindsay" or the "Company") today announced that it has completed the acquisition of Barrier Systems, Inc. ("BSI") and its subsidiary Safe Technologies, Inc. through the merger of a wholly owned subsidiary of Lindsay with and into BSI. As a result, BSI has become a wholly owned subsidiary of Lindsay. BSI is engaged in the manufacture of specialty roadway barriers and traffic flow products that are used to reduce traffic congestion and enhance safety. "We are pleased to announce the completion of this acquisition," stated Rick Parod, Lindsay's president and chief executive officer. "This business represents a natural extension of our diversified manufacturing segment and is an excellent fit with our overall growth strategy. We are also excited to welcome the strong management team and employees of BSI to the Lindsay family. Additionally, as we previously stated, we expect this acquisition to be accretive to earnings in our fiscal fourth quarter." The total cash merger consideration paid to the stockholders of BSI and holders of options to acquire BSI stock was approximately $35,000,000. The Company funded the transaction using a combination of its own working capital and borrowing under a new credit agreement with Wells Fargo Bank, N.A., which includes an unsecured $30 million term note, credit agreement and interest rate swap transaction. Prior to the merger, the Company supplied components used by BSI in its manufacturing process in the ordinary course of business. The Company did not consider this to be a material relationship with BSI or its shareholders. -more- The consolidated statement of operations of BSI for the twelve months ended December 31, 2005 and the trailing twelve months ended April 30, 2006 are set forth below. BARRIER SYSTEMS INC. CONSOLIDATED STATEMENTS OF OPERATIONS
TWELVE MONTHS ENDED ------------------------- (AUDITED) (UNAUDITED) DECEMBER APRIL 2005 2006 ----------- ----------- Operating revenues .......... $16,410,654 $21,321,912 Cost of operating revenues .. 8,046,500 10,858,425 ----------- ----------- Gross profit ................ 8,364,154 10,463,487 ----------- ----------- Operating expenses .......... 6,056,267 6,389,158 ----------- ----------- Operating income ............ $ 2,307,887 $ 4,074,329 =========== ===========
Note: Depreciation and amortization for the twelve-months ended December 31, 2005 and April 30, 2006, was $967,000 and $1,040,000, respectively. ABOUT LINDSAY MANUFACTURING CO. Lindsay manufactures and markets Zimmatic, Greenfield, Stettyn and Perrot center pivot, lateral move and hose reel irrigation systems and GrowSmart controls, all of which are used by farmers to increase or stabilize crop production while conserving water, energy, and labor. The Company also produces large diameter steel tubing and provides outsourced manufacturing and production services for other companies. At April 6, 2006, Lindsay had approximately 11.5 million shares outstanding, which are traded on the New York Stock Exchange under the symbol LNN. More information on the Company can be found at www.lindsaymanufacturing.com. ABOUT BARRIER SYSTEMS, INC. Founded in 1984 and headquartered in Rio Vista, California, BSI manufactures and markets movable barriers for flexibly adding lanes during rush hour to reduce traffic congestion, improve safety and increase traffic throughput. The company also produces crash cushions and specialty barriers to improve motorist and highway worker safety. More information on the company can be found at www.barriersystemsinc.com. CONCERNING FORWARD-LOOKING STATEMENTS This release contains forward-looking statements that are subject to risks and uncertainties and which reflect management's current beliefs and estimates of future economic circumstances, industry conditions, Company performance and financial results and the likelihood of closing the transactions contemplated by the Merger Agreement. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company and those statements preceded by, followed by or including the words "expectation," "outlook," "could," "may," "should," or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 2 -----END PRIVACY-ENHANCED MESSAGE-----