1
AGREEMENT AND PLAN
OF MERGER
by and between
▇▇▇▇▇▇ & COMPANY
and
SERVISTAR COAST TO COAST CORPORATION
140358_9
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TABLE OF CONTENTS
ARTICLE I THE MERGER 1
1.1 The Merger 1
1.2 Effective Time of the Merger 1
1.3 Objectives of the Merger 2
ARTICLE II THE CONTINUING CORPORATION 2
2.1 Certificate of Incorporation 2
2.2 By-laws 2
2.3 Directors and Officers of TruServ 2
ARTICLE III CONVERSION OF SECURITIES and MEMBERSHIP AGREEMENTS 3
3.1 ▇▇▇▇▇▇ Shares, Etc. 3
3.2 SCC Shares, Etc. 5
3.3 Patronage Dividends 6
3.4 No Fractional Shares 6
3.5 Closing of SCC Transfer Books 6
3.6 Closing 7
3.7 Stock Increase 7
3.8 Membership Agreements 7
3.9 SCC Dissenters' Rights 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SCC 8
4.1 Organization 9
4.2 Capitalization 9
4.3 Authority Relative to this Agreement 10
4.4 Consents and Approvals; No Violations 10
4.5 Reports, Financial Statements and Inventory 11
4.6 Absence of Certain Changes or Events 11
4.7 Information in Registration Statement and Joint Proxy
Statement 12
4.8 Litigation 12
4.9 Contracts 12
4.10 Employee Benefit Plans 13
4.11 Tax Matters 15
4.12 Compliance With Applicable Law 17
4.13 Subsidiaries 18
4.14 Interested Party Transactions 18
4.15 Labor and Employment Matters 18
4.16 Insurance 18
4.17 Contracts with Physicians, Hospitals, HMOs and Third
Party Providers 18
4.18 Environmental Protection 18
4.19 Intellectual Property Rights 20
4.20 Real Property 20
4.21 Complete Copies of Requested Documents 21
4.22 Representations Complete 21
4.23 Takeover Statutes 21
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇ 21
5.1 Organization 22
5.2 Capitalization 22
5.3 Authority Relative to this Agreement 23
5.4 Consents and Approvals; No Violations 23
5.5 Reports and Financial Statements 24
5.6 Absence of Certain Changes or Events 24
5.7 Information in Registration Statement and Joint Proxy
Statement 24
5.8 Litigation 25
5.9 Contracts 25
5.10 Employee Benefit Plans 26
5.11 Tax Matters 28
5.12 Compliance With Applicable Law 30
5.13 Subsidiaries 30
5.14 Interested Party Transactions 30
5.15 Labor and Employment Matters 30
5.16 Insurance 31
5.17 Contracts with Physicians, Hospitals, HMOs and Third
Party Providers 31
5.18 Environmental Protection 31
5.19 Intellectual Property Rights 32
5.20 Real Property 33
5.21 Complete Copies of Requested Documents 33
5.22 Representations Complete 33
5.23 Certain Employee Benefit Plans Matters 34
5.24 Share Ownership 34
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER 34
6.1 Conduct of Business by SCC and ▇▇▇▇▇▇ Pending the
Merger 34
6.2 Compensation Plans 35
6.3 Current Information 36
6.4 Letters of SCC's and ▇▇▇▇▇▇'▇ Auditors 36
6.5 Advice of Changes; Government Filings 36
6.6 New Franchises 37
ARTICLE VII ADDITIONAL AGREEMENTS 37
7.1 Access and Information 37
7.2 No Solicitation of Transactions 37
7.3 Registration Statement 38
7.4 Joint Proxy Statement; Stockholder Approval 38
7.5 Post Merger Signage, Etc. 39
7.6 Store Competition 39
7.7 Antitrust Laws 40
7.8 Takeover Statutes 40
7.9 Director and Officer Indemnification, Etc. 40
7.10 Public Announcements 40
7.11 Expenses 41
7.12 Additional Agreements 41
7.13 FIRPTA 41
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ARTICLE VIIICONDITIONS TO CONSUMMATION OF THE MERGER 42
8.1 Conditions to Each Party's Obligation to Effect
the Merger 42
8.2 Conditions to Obligation of SCC to Effect the Merger 43
8.3 Conditions to Obligation of ▇▇▇▇▇▇ to Effect the Merger 44
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 45
9.1 Termination 45
9.2 Effect of Termination 46
9.3 Amendment 46
9.4 Extension; Waiver 47
ARTICLE X GENERAL PROVISIONS 47
10.1 Survival of Representations, Warranties and Agreements 47
10.2 Brokers 47
10.3 Notices 47
10.4 Descriptive Headings 48
10.5 Entire Agreement 48
10.6 Governing Law 48
10.7 Jurisdiction and Venue 49
10.8 Counterparts 49
10.9 Validity 49
10.10 Investigation 49
10.11 Consents 49
10.12 Material Adverse Effect Defined 49
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of December 9,
1996 is made and entered into by and among ▇▇▇▇▇▇ & Company, a
Delaware corporation ("▇▇▇▇▇▇"), and SERVISTAR COAST TO COAST
Corporation, a Pennsylvania corporation ("SCC").
WHEREAS, the Boards of Directors of ▇▇▇▇▇▇ and SCC each have
determined that a strategic business combination between ▇▇▇▇▇▇
and SCC is in the best interests of their respective companies
and stockholders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits,
and accordingly have agreed to effect the merger provided for
herein upon the terms and subject to the conditions set forth
herein; and
WHEREAS, for federal income tax purposes, it is intended
that the merger contemplated herein shall qualify as a
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined in Section 1.2
hereof), SCC shall be merged with and into ▇▇▇▇▇▇, ▇▇▇▇▇▇ shall
be the surviving corporation (herein referred to as the
"Continuing Corporation") and the separate existence of SCC shall
thereupon cease (the "Merger"). The Continuing Corporation will
operate under the name "TruServ Corporation" ("TruServ") from and
after the Merger. The Merger shall be a statutory merger and have
the effects set forth in Section 259 of the General Corporation
Law of the State of Delaware (the "DGCL") and Section 1929 of the
Pennsylvania Business Corporation Law (the "PBCL"). TruServ will
carry on business on and following the Effective Time of the
Merger operating as a cooperative under Subchapter T of the Code.
As of the Effective Time of the Merger all of the members of SCC
("SCC Members") shall become members of TruServ, and all
agreements between SCC and the SCC Members shall be dealt with in
accordance with the provisions of Section 3.8 below.
1.2 Effective Time of the Merger. The Merger shall
become effective when properly executed Articles and a
Certificate of Merger (as defined in the DGCL and PBCL.
respectively) are duly filed with the Secretary of State of the
State of Delaware and the Secretary of the Commonwealth of the
Commonwealth of Pennsylvania, which filings shall be made as soon
as practicable after the closing of the transactions contemplated
by this Agreement in accordance with Section 3.6 hereof upon
satisfaction or waiver of the conditions set forth in Article
VIII. When used in this Agreement, the term
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"Effective Time" shall mean the date and time at which such
Articles and Certificate of Merger are so filed in both Delaware
and Pennsylvania or suchlater date and time for effectiveness of
the Merger as may be specified therein.
1.3 Objectives of the Merger. The parties hereby express
their mutual desire to achieve the following objectives as a
result of the Merger (it being expressly understood that these
objectives represent the present, good faith intentions of the
parties, and the parties acknowledge that facts, circumstances
and business necessities may change, resulting in modifications
or alterations to these objectives and therefore agree that
failure to reach or implement any particular objective or
objectives shall not constitute a breach of this Agreement by
either party hereto). The objectives of the parties are to
develop a common retail system and improve both retail and
wholesale market positions, realizing growth potential and
purchasing leverage of all members of both constituent
corporations; to develop a mutually beneficial advertising
system; to preserve and strengthen the individual identities of
the stores; to develop a common and mutually beneficial pricing
structure and patronage dividend formula, within two years; to
develop as soon as reasonably practical common programs which
emphasize the strengths and market expertise of all members; to
improve service levels and lower costs of operation for the joint
benefit of all members by various economies of scale, including
combination of functions and departmental restructuring; to
achieve greater efficiencies in manufacturing facilities, with
faster development of retail and wholesale technology and
improved technical support by emphasizing greater cooperation and
synergy among all members and management; to develop a common
approach to transportation of merchandise within two years,
taking into account the unique needs of the various members; and
to develop capital structures with greater financial strength and
resources and improved asset utilization for all members.
ARTICLE II
THE CONTINUING CORPORATION
2.1 Certificate of Incorporation. The Certificate of
Incorporation of TruServ shall be in the form of Exhibit 2.1
hereto.
2.2 By-laws. The By-laws of TruServ shall be in the
form of Exhibit 2.2 hereto.
2.3 Directors and Officers of TruServ.
(a) The initial directors of TruServ shall be as set
forth on Exhibit 2.3(a) hereto and shall hold office from the
Effective Time until their respective successors are duly elected
or appointed and qualified in the manner provided in the
Certificate of Incorporation and By-laws of TruServ, or as
otherwise provided by law.
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(b) The initial executive officers of TruServ at the
Effective Time shall be as set forth on Exhibit 2.3(b) hereto and
shall hold office from the Effective Time until removed or until
their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of
Incorporation and By-laws of TruServ, or as otherwise provided by
law.
ARTICLE III
CONVERSION OF SECURITIES and MEMBERSHIP AGREEMENTS
3.1 ▇▇▇▇▇▇ Shares, Etc.
(a) At the Effective Time, ▇▇▇▇▇▇'▇ capital stock will
consist of two classes of common stock: Voting Class A Common
Stock, par value $100 per share ("Class A Common Stock") and Non-
Voting Class B Common Stock, par value $100 per share ("Class B
Common Stock" and together with the Class A Common Stock, "▇▇▇▇▇▇
Stock"). At the Effective Time, without any action on the part
of the holders thereof, all outstanding shares of the Class A
Common Stock and the Class B Common Stock shall continue
unchanged.
(b) Prior to the Effective Time, each ▇▇▇▇▇▇ member
("▇▇▇▇▇▇ Member") has paid or is obligated to pay an amount equal
to the par value, $100.00, for each share of his or her ▇▇▇▇▇▇
Class A Common Stock, or an aggregate of $1,000.00 for such
▇▇▇▇▇▇ Member's required ten share ownership of ▇▇▇▇▇▇ Class A
Common Stock, which is the pre-Merger required level of ownership
of Class A Common Stock.
(c) Upon the Effective Time, each ▇▇▇▇▇▇ Member will be
required to own sixty (60) shares of Class A Common Stock, par
value $100.00 per share, for each separate retail location
("Store") up to a maximum of five (5) Stores or three hundred
(300) such shares in the aggregate. Therefore, upon the
Effective Time, each ▇▇▇▇▇▇ Member will be required to purchase
fifty (50) additional shares of TruServ Class A Common Stock at
their par value ($100.00 per share) or an aggregate of $5,000.00,
for such Member's first Store and sixty (60) additional shares of
TruServ Class A Common Stock at their par value ($100.00 per
share) or an aggregate of $6,000.00, for each of his or her
second, third, fourth and fifth Stores. No additional TruServ
Class A Common Stock will be required to be purchased by such
Member for any Stores above five (5) in number. Payment for any
such additional shares of TruServ Class A Common Stock may be
made as set forth in subsection (d) below.
(d) Payment of any amounts required under subparagraph (c)
above may be made as follows, at the election of the purchasing
▇▇▇▇▇▇ Member: (i) in cash and in full immediately upon the
Effective Time or (ii) by surrendering Class B Common Stock (at
its par value of $100 per share), and, to the extent such
purchasing ▇▇▇▇▇▇ Member does not possess sufficient Class B
Common Stock to satisfy such obligation, by surrendering ▇▇▇▇▇▇
patronage dividend subordinated
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promissory notes ("Patronage Dividend Promissory (Subordinated)
Notes") at
their principal amount. If not otherwise elected by the Cotter
Member in writing prior to the Effective Time, such ▇▇▇▇▇▇ Member
will be deemed to have elected to surrender Class B Common Stock,
to the extent available therefor, and in satisfaction of any
deficiency, to surrender Patronage Dividend Promissory
(Subordinated) Notes. In the event any ▇▇▇▇▇▇ Member does not
have sufficient Patronage Dividend Promissory (Subordinated)
Notes or Class B Common Stock sufficient to satisfy his or her
obligations under this Section 3.1 (d), any remaining deficiency
shall be paid in cash in sixty (60) equal monthly installments.
(e) In the event, at any time between the Effective Time of
the Merger and the fifth anniversary thereof, of any dissolution
of TruServ, termination of corporate existence of TruServ, sale
of substantially all of its assets or acquisition of a majority
of TruServ's Class A Common Stock by any one person (including
for such purposes, all affiliates of such person), including,
without limitation, by reason of a future merger, consolidation
or combination, all Patronage Dividend Promissory (Subordinated)
Notes as are outstanding as of the Effective Time and held by a
▇▇▇▇▇▇ member and remain outstanding at the time of such event
may, at the election of the holder thereof, be converted into an
equal amount of Class B Common Stock (on the basis of the
principal amount of and any accrued but unpaid interest on such
Patronage Dividend Promissory (Subordinated) Notes and the par
value of such Class B Common Stock, disregarding any fractional
shares, in lieu of which cash shall be paid to such electing
holders);
(f) The parties have agreed that as soon as practical after
the Effective Time TruServ shall redeem $17 million of TruServ
Class B Common Stock (based on the par value thereof) held by
▇▇▇▇▇▇ Members immediately prior to the Effective Time (the
"Redemption"). The Redemption shall be effected on a pro rata
basis, with each holder of ▇▇▇▇▇▇ Class B Common Stock
immediately prior to the Effective Time having an amount thereof
redeemed equal to $17 million multiplied by a fraction, the
numerator of which is the number of shares of ▇▇▇▇▇▇ Class B
Common Stock then held by such stockholder and the denominator of
which is the total number of shares of ▇▇▇▇▇▇ Class B Common
Stock held by all ▇▇▇▇▇▇ Members immediately prior to the
Effective Time. Anything herein to the contrary notwithstanding,
only ▇▇▇▇▇▇ Class B Common Stock held by ▇▇▇▇▇▇ Members
immediately prior to the Effective Time shall be entitled to
participate in the Redemption.
(g) Any shares of TruServ Class B Common Stock which are
redeemed pursuant to the Redemption will also be applied as a
credit towards the minimum investment requirements set forth on
Exhibit 3.2(c) referred to below and applicable to the ▇▇▇▇▇▇
Member from whom such shares were redeemed.
(h) Commencing on the fifth anniversary of the Effective
Time of the Merger, any stockholder of TruServ Class B Common
Stock which was redeemed pursuant to the Redemption and who is
still a Member of TruServ will be
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required during the ensuing two year period, ending on the
seventh anniversary of the Effective Time, to purchase from
TruServ, at a price equal to the par
value thereof and in such amounts as TruServ may from time to
time determine, an aggregate number of shares of TruServ Class B
Common Stock equal to the number of shares of TruServ Class B
Common stock so redeemed, provided however, that any such
stockholder who after such redemption nonetheless holds more than
the then required amount of Class B Common Stock will not be
required to purchase any additional shares thereof. See Exhibit
3.2(c).
3.2 SCC Shares, Etc. Prior to the Effective Time, each SCC
Member has or is obligated to have the following investment in
SCC Common Stock, par value $100.00 per share ("SCC Common
Stock") and SCC Series A Stock, par value $100.00 per share ("SCC
Series A Stock"): (i) for each such Member's first five stores,
eight (8) shares of SCC Common Stock and fifty-two (52) shares of
SCC Series A Stock, for an aggregate investment of $6,000.00 per
store; and (ii) for stores in excess of five, eight (8) shares of
SCC Common Stock per store, for an aggregate common stock
investment of $800.00 per store. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder
thereof:
(a) All shares of SCC Common Stock owned by any SCC Member
in excess of forty (40) shares (i.e. common stock relating to
more than five stores owned by any one SCC Member) shall be
canceled and the holder thereof shall be entitled to payment
therefor at the par value of such shares, provided however that
any amounts to which such Member is so entitled shall be first
offset against and reduce any outstanding obligation of such
Member to SCC for any purchase of SCC Common Stock or shares of
SCC Series A Stock. Section 1906 of the PBCL shall apply to
the plan of merger described herein with respect to the special
treatment provided to the holders of SCC Common Stock, holding in
excess of forty (40) shares, as described in this Section 3.2(a).
(b) After the cancellation of SCC Common Stock contemplated
by subsection (a) above, each remaining outstanding share of SCC
Common Stock (eight shares per store) and each outstanding share
of SCC Series A Stock (52 shares per store) shall be converted at
the Effective Time into the right to receive one (1) share of
TruServ Class A Common Stock, with the result that each SCC
Member shall have the right to receive sixty (60) shares of
TruServ Class A Common Stock for each store owned by such Member,
up to a maximum of five stores.
(c) Each two (2) outstanding shares of SCC Preferred Stock,
par value $50 per share ("SCC Preferred", and together with the
SCC Common Stock and SCC Series A Stock, sometimes herein
collectively referred to as the "SCC Stock") shall be converted
into the right to receive one share of TruServ Series B Common
Stock. All such TruServ Series B Common Stock held by a former
SCC Member as a result of such conversion, and any TruServ Series
B Common Stock held by a former ▇▇▇▇▇▇ Member, which exceeds the
investment requirements
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specified in Exhibit 3.2(c) shall be convertible, at the option
of the holder (exercised within sixty (60) days of the Effective
Time) and at the par value thereof, into unsecured promissory
notes due five (5) years after such conversion.
(d) Any obligations of SCC Members to pay for SCC Stock
purchased prior to the Effective Time but not yet fully paid for
at such time, shall survive the Merger and remain in effect as an
obligation to TruServ, subject to any offset pursuant to
subsection (a) above.
3.3 Patronage Dividends. During the time between the
execution of this Agreement and the Effective Time, and for a
period of not less than one year after the Effective Time, the
methodologies of computing and distributing patronage dividends
of each of the constituent corporations for their respective
members shall be as set forth on Exhibit 3.3 hereto. During
such period of time, TruServ will diligently and in good faith
develop a common patronage dividend methodology for use
thereafter by all members of TruServ. During such period of
time, new members who join TruServ will have their patronage
dividend computed and distributed in accordance with the method
used by the constituent corporation offering the retail program
prior to the Effective Time which is elected by such new member.
3.4 No Fractional Shares. No fractional shares of
TruServ Class A Common Stock or TruServ Class B Common Stock
shall be issued pursuant to the Merger. In lieu of the issuance
of any such fractional share thereof, cash adjustments will be
paid to holders of SCC Stock in respect of any fractional share
of TruServ Class A Common Stock or TruServ Class B Common Stock
that would otherwise be issuable.
3.5 Closing of SCC Transfer Books. At the Effective
Time, the stock transfer books of SCC shall be closed and no
transfer of shares of SCC Stock shall thereafter be made. If,
after the Effective Time, certificates or other evidence of
ownership of SCC Stock are presented to TruServ, they shall be
canceled and exchanged for the TruServ securities, cash in lieu
of fractional shares or other payment to which they are entitled
in accordance with the terms hereof. At and after the Effective
Time, the holders of shares of SCC Stock to be exchanged pursuant
to this Agreement shall cease to have any rights as stockholders
of SCC, except for the right to surrender such Certificates or
other evidence of ownership in exchange as provided hereunder or
such rights as are provided under Pennsylvania law as to
dissenters' rights.
3.6 Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 9:00 a.m., local time, on the first
business day (the "Closing Date") after the later of (a) the date
on which the SCC and ▇▇▇▇▇▇ stockholders' meetings referred to in
Section 7.4 hereof shall have occurred, and (b) the day on which
all of the conditions set forth in Article VIII hereof are
satisfied or waived, or at such other date, time and place as
▇▇▇▇▇▇ and SCC shall agree.
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3.7 Stock Increase. Prior to the Effective Time, and as
part of the approval of the Merger, it is contemplated that
▇▇▇▇▇▇ and its stockholders shall approve an amendment to
▇▇▇▇▇▇'▇ Certificate of Incorporation increasing the number of
authorized shares of Class A Common Stock to not less than
750,000 shares and an increase in Class B Common Stock to an
aggregate of not less than 4,000,000 shares.
3.8 Membership Agreements.
(a) Each ▇▇▇▇▇▇ Member's membership agreement ("▇▇▇▇▇▇
Membership Agreement") in effect at the Effective Time of the
Merger shall be automatically amended and restated in the form
attached hereto as Exhibit 3.8, which provides among other things
that each ▇▇▇▇▇▇ Member shall be required to own 60 shares of
Class A Common Stock of TruServ for each store owned by such
▇▇▇▇▇▇ Member (up to a maximum of 300 shares for five or more
stores); and after the Effective Time of the Merger, members of
TruServ shall continue to conduct their businesses under the True
Value, Servistar or Coast to Coast names (or other affiliated
names or marks) used by such members immediately prior to the
Effective Time, unless use of a different name or ▇▇▇▇ is
permitted by TruServ.
(b) The Member Agreement of each SCC Member ("SCC
Membership Agreements") voting to approve the Merger, including
any related transactions contemplated thereby, shall also be
automatically terminated and superseded by the form attached
hereto as Exhibit 3.8 and the hardware/lumber operations of such
Member will after the Effective Time be conducted as part of the
cooperative activities of TruServ and be governed by the
Certificate of Incorporation, By-Laws and Retail Member Agreement
of TruServ as in effect from time to time. License/franchise
operations of any such Member other than with respect to his or
her hardware/lumber operations will be dealt with as set forth in
subsection (e) below.
(c) The SCC Membership Agreement of each SCC Member voting
against the Merger and any related transactions contemplated
thereby, or not voting at all with respect thereto, together with
any related license or franchise agreements, shall be assigned by
SCC to TruServ without further action, subject to any
terminations and replacements as may be agreed upon between each
such SCC Member and TruServ.
(d) If the Merger is approved, each Member of TruServ
(whether or not any individual Member voted for, against or
abstained from voting on the Merger) will thereafter be governed
by the Certificate of Incorporation of TruServ and TruServ's By-
Laws, including the provision of such By-Laws (Article IX,
Section 2(b)) which requires each such Member to take patronage
dividends received into account at the stated dollar amounts of
certain specified written notices of allocation, all in
accordance with Sections 1385 and 1388 of the Internal Revenue
Code of 1986, as amended.
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(e) As soon as practical after the Effective Time, all
licenses and
franchise agreements referred to in subsections (b) or (c) above
may be
assigned by TruServ to a new majority owned subsidiary or other
affiliate which may be created for the purpose of continuing to
operate any license or franchise activities which may be
continued in that format after the Effective Time. After the
Effective Time, TruServ will review any retail activities which
continue to be carried out as franchises. It is anticipated that
after the Effective Time additional licenses may be entered into
periodically with respect to the ▇▇▇▇▇▇ Rental Center, Grand
Rental Station, Home & Garden Showplace and Induserve Supply
retail programs. The parties expect that after the Effective
Time it is less likely that any additional franchise or license
agreements will be entered into with respect to the other retail
programs operated as franchises by SCC prior to the Merger.
3.9 SCC Dissenters' Rights. If any holders of SCC Stock
are entitled to dissent from the Merger and demand appraisal of
any such SCC Stock in accordance with the provisions of Section
1906 of the PBCL (each person electing to exercise such rights, a
"Dissenting Holder"), any shares of SCC Stock held by a
Dissenting Holder as to which appraisal has been so demanded
("Excluded Shares") shall not be converted as described in
Section 3.2, but shall from and after the Effective Time
represent only the right to receive such consideration as may be
determined to be due such Dissenting Holder pursuant to the PBCL
provided, however, that each share of SCC Stock held by a
Dissenting Holder who shall, after the Effective Time, withdraw
his demand for appraisal or lose his right of appraisal with
respect to such shares of SCC Stock, in either case pursuant to
the PBCL, shall not be deemed an Excluded Share but shall be
deemed to be converted, as of the Effective Time, into the right
to receive TruServ stock (and cash in lieu of canceled or
fractional shares) in accordance with the terms of this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCC
Except as set forth in the disclosure letter delivered to
▇▇▇▇▇▇ at or prior to the execution of this Agreement ("SCC
Disclosure Schedule"), in the financial statements referred to
in Section 4.5 below (the "SCC Financial Statements") or in the
basic form of SCC Franchise Offering Circular dated July 1, 1996
and heretofore delivered to ▇▇▇▇▇▇ (the "Offering Circular"), SCC
represents and warrants to ▇▇▇▇▇▇ as of the date hereof as
follows:
4.1 Organization. SCC is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power to carry
on its business as it is now being conducted. SCC is duly
qualified as a foreign corporation to do business, and is in good
standing (to the extent the concept of good standing exists), in
each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such
qualification necessary,
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except where the failure to be so qualified or in good standing
will not in the aggregate have a Material Adverse Effect (as
hereinafter defined). Each subsidiary of SCC is a corporation
duly organized, validly existing and in good standing (to the
extent the concept of good standing exists) under the laws of its
jurisdiction of incorporation or organization, has the corporate
power to carry on its business as it is now being conducted and
is duly qualified as a foreign corporation to do business, and is
in good standing (to the extent the concept of good standing
exists), in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the
failure to be so duly organized, validly existing and in good
standing, to have such corporate power or to be so qualified will
not in the aggregate have a Material Adverse Effect. SCC has
delivered to ▇▇▇▇▇▇ or its counsel complete and correct copies of
its Articles of Incorporation and Bylaws.
4.2 Capitalization.
(a) As of October 31, 1996, the authorized capital stock
of SCC consisted of the following: 600,000 shares of common stock
(250,000 shares of SCC Common Stock and 350,000 shares of SCC
Series A Stock) and 3,000,000 shares of SCC Preferred. As of
such date, the issued and outstanding capital stock of SCC
consisted of the following: 38,136 share of SCC Common Stock,
231,140 shares of SCC Series A Stock and 2,322,051 shares of SCC
Preferred Stock. There are no stock options or similar rights to
acquire any shares of SCC Stock. No changes have occurred in
such capitalization since October 31, 1996 that, in the
aggregate, would be material to SCC. All of the issued and
outstanding shares of SCC Stock are validly issued, fully paid,
nonassessable and free of preemptive rights or similar rights
created by statute, the Articles of Incorporation or Bylaws of
SCC or any agreement to which SCC or any of its subsidiaries is a
party or by which SCC or any of its subsidiaries is bound.
(b) There are not now, and at the Effective Time there will
not be, any shares of capital stock of SCC issued or outstanding
or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments
obligating SCC to issue, transfer or sell any shares of its
capital stock. Except as provided in this Agreement, after the
Effective Time, SCC will have no obligation to issue, transfer or
sell any shares of its capital stock pursuant to any employee
benefit plan or otherwise. All outstanding shares of the capital
stock of SCC's subsidiaries are validly issued, fully paid,
non-assessable and owned by SCC or one of its subsidiaries free
and clear of any liens, security interest, pledges, agreements,
claims, charges or encumbrances of any nature whatsoever. There
are no voting trust or other agreements or understandings to
which SCC is a party with respect to the voting of the capital
stock of SCC or any of its subsidiaries. None of SCC or its
subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of SCC, or any of its
subsidiaries, respectively, as a result of the transactions
contemplated by this Agreement.
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4.3 Authority Relative to this Agreement. SCC has the
corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement by SCC and the consummation by SCC of the transactions
contemplated hereby have been duly authorized by SCC's Board of
Directors and, except for the favorable vote of a majority of the
votes cast by the holders of each class or series of shares of
outstanding capital stock of SCC voted thereon at a stockholders
meeting at which a quorum is present in accordance with Section
1924 of the PBCL, no other corporate proceedings on the part of
SCC are necessary to approve this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by SCC and constitutes a valid and binding
agreement of SCC, enforceable against SCC in accordance with its
terms.
4.4 Consents and Approvals; No Violations. Except for
applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), state or foreign
laws relating to takeovers, if applicable, state franchise,
securities or blue sky laws, and the filing and recordation of a
Certificate or Articles of Merger, as the case may be, as
required by the PBCL and the DGCL, no filing with, and no permit,
authorization, consent or approval of, any public or governmental
body or authority is necessary for the consummation by SCC of the
transactions contemplated by this Agreement except where a
failure to make such filing or to obtain such permit,
registration, authorization, consent or approval will not in the
aggregate have a Material Adverse Effect. Neither the execution
and delivery of this Agreement by SCC, nor the consummation by
SCC of the transactions contemplated hereby, nor compliance by
SCC with any of the provisions hereof, will (a) conflict with or
result in any breach of any provisions of the Articles of
Incorporation or By-laws of SCC or any of its subsidiaries, (b)
result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation, acceleration or
change in the award, grant, vesting or determination) under, or
give rise to creation of any lien, charge, security interest or
encumbrance upon any of the respective properties or assets of
SCC or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, lease, agreement, arrangement
or other instrument or obligation to which SCC or any of its
subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or affected or (c) violate any
order, writ, injunction, decree, statute, rule or regulation of
any court or government authority applicable to SCC, any of its
subsidiaries or any of their properties or assets, except in the
case of clauses (b) and (c) for violations, breaches, defaults
(or rights of termination, cancellation, acceleration or change),
liens, charges, security interests or encumbrances which would
not in the aggregate have a Material Adverse Effect.
4.5 Reports, Financial Statements and Inventory. SCC
has delivered to ▇▇▇▇▇▇ true, accurate and complete copies of
its audited financial
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statements for the fiscal year ended June 30, 1996 and the three
preceding fiscal years, together with the accompanying opinions
of Coopers & ▇▇▇▇▇▇▇ L.L.P. ("C&L"), and all unaudited interim
financial statements for any subsequent quarterly or monthly
periods ending after June 30, 1996 and prior to the execution of
this Agreement. Prior to the Effective Time, SCC will deliver
the physical inventory to be performed by SCC pursuant to Section
7.1(d) below.
None of such SCC Financial Statements, as of their
respective dates (as amended through the date hereof), contained
or, with respect to any SCC financial statements prepared after
the date hereof, will contain any untrue statement of a material
fact or omitted or will omit to state a material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Each of the balance sheets (including the related
notes) included in the SCC Financial Statements fairly presents
the consolidated financial position of SCC and its subsidiaries
as of the date thereof, and the other related statements
(including the related notes) included therein fairly present the
results of operations and the changes in cash flows of SCC and
its subsidiaries for the respective periods set forth therein,
all in conformity with generally accepted accounting principles
consistently applied during the periods involved, except as
otherwise noted therein and except for unaudited interim
financial statements which are not prepared in conformity with
generally accepted accounting principles and subject, in the case
of any unaudited interim financial statements, to (i) normal year
end adjustments which would not in the aggregate be material in
amount or effect; and (ii) the permitted exclusion of all
footnotes that would otherwise be required by generally accepted
accounting principles.
4.6 Absence of Certain Changes or Events. Except as
disclosed in the SCC Financial Statements or otherwise disclosed
in writing to ▇▇▇▇▇▇, since June 30, 1996 neither SCC nor any of
its subsidiaries has: (a) taken any of the actions prohibited in
Section 6.1 or Section 6.2 hereof; (b) incurred any material
liability, except in the ordinary course of its business,
consistent with past practices; (c) suffered any change, or any
event involving a prospective change, in its business, assets,
financial condition or results of operation which has had, or is
reasonably likely to have, in the aggregate a Material Adverse
Effect, or (d) subsequent to the date hereof, except as permitted
by Section 6.1 or Section 6.2 hereof, conducted its business and
operations other than in the ordinary course of business and
consistent with past practices.
4.7 Information in Registration Statement and Joint Proxy
Statement. The information relating to SCC and its subsidiaries
to be contained in (a) the Registration Statement on Form S-4 to
be filed with the United States Securities and Exchange
Commission ("SEC") by ▇▇▇▇▇▇ under the Securities Act for the
purpose of registering the shares of ▇▇▇▇▇▇ Class A Common Stock
to be issued in the Merger or pursuant to this Agreement (the
"Registration Statement") and (b) the joint proxy statement to
be distributed in connection
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with SCC's and ▇▇▇▇▇▇'▇ meetings of stockholders to vote upon
this Agreement
and related matters (the "Joint Proxy Statement"), will not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
4.8 Litigation. As of the date of this Agreement, (a)
there is no material action, suit, judicial or administrative
proceeding, arbitration or investigation pending or, to the best
knowledge of SCC, threatened against or involving SCC or any of
its subsidiaries; and (b) there is no judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding
against SCC or any of its subsidiaries, except in each case for
such thereof as would not individually or in the aggregate have a
Material Adverse Effect.
4.9 Contracts.
(a) Each of the material contracts, instruments, mortgages,
notes, security agreements, leases, agreements or understandings,
whether written or oral, to which SCC or any of its subsidiaries
is a party that relates to or affects the assets or operations of
SCC or any of its subsidiaries or to which SCC or any of its
subsidiaries or its or their respective assets or operations may
be bound or subject is a valid and binding obligation of SCC and
in full force and effect with respect to SCC or such subsidiary
and, to the knowledge of SCC, with respect to all other parties
thereto; and except to the extent that the consummation of the
transactions contemplated by this Agreement may require the
consent of third parties, there are no existing defaults by SCC
or any of its subsidiaries thereunder or, to the knowledge of
SCC, by any other party thereto, and no event of default has
occurred, and no event, condition or occurrence exists, that
(whether with or without notice, lapse of time, the declaration
of default or other similar event) would constitute a default by
SCC or any of its subsidiaries thereunder, other than defaults
that would not in the aggregate have a Material Adverse Effect.
Section 4.9(a) of the SCC Disclosure Schedule lists all consents
of third parties required for the consummation of the
transactions contemplated by this Agreement, except where the
failure to obtain such consent will not, individually or in the
aggregate, have a Material Adverse Effect.
(b) Except for this Agreement, as of the date of this
Agreement neither SCC nor any of its subsidiaries is a party to
any oral or written agreement that restricts any of them from
engaging in a line of business.
(c) SCC has no agreements or arrangements to sell or
otherwise dispose of, or lease, acquire or otherwise invest in,
any property, lines of business or other assets that are in the
aggregate material to the business of SCC and its subsidiaries
taken as a whole other than agreements and arrangements for such
sale, disposition, lease, acquisition or investment that are in
the ordinary course of SCC's business.
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(d) Copies of all documents referred to in this Agreement,
furnished or to be furnished by SCC in connection with the
transaction contemplated hereby, are or will be true, correct and
complete copies thereof in all material respects and include all
amendments, supplements and modifications thereto and all waivers
thereunder.
4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the SCC Disclosure Schedule sets
forth a true and complete list of each (i) employee benefit plan
(including, without limitation, any "employee benefit plan" as
defined in Section 3 (3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) policy, (iii)
trust agreement or (iv) agreement (including, without limitation,
any employment agreement or severance agreement) that is
maintained (all of the foregoing, the "SCC Plans"), or is or was
contributed to by SCC or pursuant to which SCC is still
potentially liable for payments, benefits or claims. A copy of
each SCC Plan as currently in effect and, if applicable, the most
recent Annual Report, Actuarial Report or Valuation, Summary Plan
Description, Trust Agreement and a Determination Letter issued by
the IRS for each SCC Plan have heretofore been delivered to
▇▇▇▇▇▇ or its counsel. Neither SCC nor any trade or business,
whether or not incorporated (an "ERISA Affiliate"), which
together with SCC would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, has maintained or contributed
to any plan subject to Title IV of ERISA or Section 412 of the
Code (including any "multiemployer plan," as defined in Section
3(37) of ERISA ("Multiemployer Plan")) during the six calendar
years preceding the date of this Agreement.
(b) Each SCC Plan which is an "employee benefit plan," as
defined in Section 3(3) of ERISA, complies by its terms and in
operation with all applicable legal requirements, including but
not limited to ERISA and the Code, and all reports, forms and
other documents required to be filed with any government entity
(including without limitation, summary plan descriptions, Forms
5500 and summary annual reports) have been timely filed and are
accurate, except for instances of noncompliance or failure to
file that would not in the aggregate have a Material Adverse
Effect. None of the officers, directors, employees or agents of
SCC or any "disqualified persons" (as defined in Section 3 of
ERISA and Section 4975 of the Code) has engaged in or been a
party to any "prohibited transaction" (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA with respect to
any SCC Plan, which is not exempt under ERISA and the Code and
which would result in material liability, nor has any such party
who is a "fiduciary" (as such term is defined in Section 3 of
ERISA) committed any breach of any duty or responsibility imposed
by ERISA in connection with which SCC, any director, officer, or
employee of SCC or any SCC Plan or related funding medium could
be subject to any material liability under Title 1 of ERISA or a
tax imposed by Section 4975 of the Code.
(c) Each SCC Plan intended to qualify under Section 401 (a)
of the Code has been determined by the Internal Revenue Service
to so qualify after January
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1, 1989, and each trust maintained pursuant thereto has been
determined by the
Internal Revenue Service to be exempt from taxation under Section
501 of the
Code. Nothing has occurred since the date of the Internal Revenue
Service's favorable determination letter that could adversely
affect the qualification of the SCC Plan and its related trust,
except such adverse effects as would not in the aggregate
constitute a Material Adverse Effect. SCC and each ERISA
Affiliate of SCC have timely and properly applied for a written
determination by the Internal Revenue Service on the
qualification of each such SCC Plan and its related trust under
Section 401 (a) of the Code, as amended by the Tax Reform Act of
1986 and subsequent legislation enacted through the date hereof,
and Section 501 of the Code.
(d) All contributions or other amounts payable by SCC or
its subsidiaries as of the Effective Time with respect to each
SCC Plan and in respect of current or prior plan years have been
or will be (prior to the Effective Time) either paid or accrued
on the Financial Statements of SCC in accordance with past
practice and the recommended contribution in any actuarial
report.
(e) SCC has provided or has caused to be provided a true
and accurate summary to ▇▇▇▇▇▇ of (i) all benefits, whether or
not insured, provided by any SCC Plan; (ii) insurance payments
paid with respect to the five preceding plan years for all SCC
Plans, (iii) any benefit liabilities exceeding the assets of any
SCC Plan, and (iv) any completely or partially terminated SCC
Plan. SCC is not aware of any reason why the SCC Plans cannot be
combined with the ▇▇▇▇▇▇ Plans referred to in Section 5.10 below.
(f) With respect to each SCC Plan, (i) no prohibited
transactions (as defined in Section 406 or 407 of ERISA or
Section 4975 of the Code) have occurred for which a statutory
exemption is not available and (ii) no reportable event (as
defined in Section 4043 of ERISA) has occurred as to which a
notice would be required to be filed with the Pension Benefit
Guaranty Corporation.
(g) Neither SCC nor any ERISA Affiliate of SCC has any
liability or is threatened with any liability (whether joint or
several) (i) for the termination of any single employer plan
under Sections 4062 or 4064 of ERISA or any multiple employer
plan under Section 4063 of ERISA, (ii) for any lien imposed under
Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for
any interest payments required under Section 302 (e) of ERISA or
Section 412 (m) of the Code, (iv) for any excise tax imposed by
Sections 4971, 4972, 4975, 4976, 4977 or 4979 of the Code, (v)
for any minimum funding contributions under Section 302(c) (11)
of ERISA or Section 412(c)(11) of the Code, (vi) to a fine under
Section 502 of ERISA, (vii) for any transaction within the
meaning of Section 4069 of ERISA, (viii) any multiple group
withdrawal liability under Section 4063 of ERISA or (ix) any tax
on reversion of qualified plan assets
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under Section 4980 of the Code, except in each case for such
liabilities that would not in the aggregate have a Material
Adverse Effect.
(h) SCC has not incurred any withdrawal liability with
respect to any Multiemployer Plan within the meaning of Sections
4201 and 4204 of ERISA, and no liabilities exist with respect to
withdrawals from any Multiemployer Plans which could subject SCC
to any controlled group liability under Section 4001 (b) of
ERISA, except in each case for such liabilities that would not in
the aggregate have a Material Adverse Effect.
(i) All of the SCC Plans, to the extent applicable, are in
compliance with the continuation of group health coverage
provisions contained in Section 4980B of the Code and Section 601
through 609 of ERISA, except for such instances of noncompliance
which would not in the aggregate have a Material Adverse Effect.
(j) SCC has delivered copies off all employment and benefit
contracts and arrangements for its employees in effect as of the
date hereof. No SCC Plan, or other plan, contract, agreement or
arrangement provides any officer or employee of SCC benefits or
compensation or altered or guaranteed terms of employment, which
is contingent upon the consummation of the Merger and the amount
of any of which after the Merger would be material in comparison
to the amount of such compensation or benefits immediately prior
to the Merger.
(k) There is no lien in favor of the Pension Benefit
Guaranty Board ("PBGC") on any assets of any SCC Plan under
Section 4068 of ERISA.
(l) No multi-employer plan which includes any SCC Plan is
or has been in reorganization under Section 418(A) through (E) of
the Code.
(m) None of the participants in any SCC Plan have made any
health or welfare plan contribution in excess of the maximum
amounts allowed therefor under the limits imposed by Sections 419
or 419A of ERISA.
4.11 Tax Matters. SCC makes the following representations
and warranties with respect to tax matters.
(a) Definitions. For purposes of this Section 4.11, the
following definitions shall apply:
(i) The term "SCC Group" shall mean, individually and
collectively, (A) SCC and (B) any individual, trust, corporation,
partnership or any other entity as to which SCC is liable for
Taxes incurred by such individual or entity either as a
transferee, or pursuant to Treasury Regulations Section 1.1502-6,
or pursuant to any other provision of federal, territorial,
state, local or foreign law or regulations.
(ii) The term "Taxes" shall mean all taxes, however
denominated,
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including any interest, penalties or other additions to tax that
may become payable in respect thereof, imposed by any federal,
territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all
income or profits taxes (including, but not limited to, federal
income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes,
sales and use taxes, ad valorem taxes, excise taxes, franchise
taxes, gross receipts taxes, business license taxes, occupation
taxes, real and personal property taxes, stamp taxes, transfer
taxes, workers' compensation, Pension Benefit Guaranty
Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the
foregoing, which the SCC Group is required to pay, withhold or
collect.
(iii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection
with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third
parties.
(b) Returns Filed and Taxes Paid. (i) All Returns required
to be filed by or on behalf of members of the SCC Group have been
duly filed on a timely basis and such Returns are true, complete
and correct in all material respects, (ii) all Taxes shown to be
payable on the Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and (iii) no
other Taxes, the payment of which would have a Material Adverse
Effect, are payable by the SCC Group with respect to items or
periods covered by such Returns (whether or not shown on or
reportable on such Returns) or with respect to any period prior
to the Effective Time. Each member of the SCC Group has withheld
and paid over all Taxes required to have been withheld and paid
over, except for such Taxes which the failure to withhold or pay
over would not in the aggregate have a Material Adverse Effect on
SCC, and complied with all information reporting and backup
withholding requirements, including maintenance of required
records with respect thereto, in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other
third party. There are no liens on any of the assets of any
member of the SCC Group with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that a member of
the SCC Group is contesting in good faith through appropriate
proceedings and for which appropriate reserves have been
established.
(c) Tax Reserves. The amount of SCC's liability for unpaid
Taxes for all periods ending on or before the date of this
Agreement does not in the aggregate exceed the amount of the
current liability accruals for Taxes (excluding reserves for
deferred Taxes) reflected on the consolidated balance sheet of
SCC included in the SCC Financial Statements for the quarter
ending closest to the date of this Agreement, and the amount of
SCC's liability for unpaid Taxes for all periods ending on or
before the Effective Time shall not
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in the aggregate exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes), as
such accruals are reflected on the consolidated balance sheet of
SCC included in the SCC Financial Statements for the quarter
ending closest to the Effective Time (plus additions thereto
accrued through the Effective Time which are consistent with the
ordinary course), except in each case for any excess which does
not have a Material Adverse Effect on SCC.
(d) Consolidated Returns Furnished. ▇▇▇▇▇▇ has been
furnished by SCC true and complete copies of (i) income tax audit
reports, statements of deficiencies, closing or other agreements
received by the SCC Group or on behalf of the SCC Group relating
to federal income taxes, and (ii) all federal income tax returns
for the SCC Group, in each case for all periods ending on and
after June 30, 1993. SCC has never been a member of an affiliated
group filing consolidated returns other than a group of which SCC
was the common parent.
(e) Tax Deficiencies; Audits; Statutes of Limitations. No
deficiencies exist or have been asserted (either in writing or
verbally, formally or informally) or are expected to be asserted
with respect to Taxes of the SCC Group that would cause SCC's
reserves for taxes to be understated by an amount which would
have a Material Adverse Effect on SCC. No tax returns of the SCC
Group are currently under audit, and no waiver or extension of
the statute of limitations is in effect with respect to any tax
returns.
(f) Tax Sharing Agreements. SCC is not (nor has it ever
been) a party to any tax sharing agreement.
(g) Special Tax Status. SCC operates as a cooperative
organization under Subchapter T of the Code and is not aware of
any reason why, after the Effective Time of the Merger, TruServ
will not continue to so operate.
4.12 Compliance With Applicable Law. SCC and each of
its subsidiaries holds all licenses, franchises, permits,
variances, exemptions, orders, approvals and authorizations
necessary for the lawful conduct of its business under and
pursuant to, and the business of each of SCC and its subsidiaries
is not being conducted in violation of, any provision of any
federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization
or approval applicable to SCC or any of its subsidiaries, except
to the extent that the failure or violation would not in the
aggregate have a Material Adverse Effect.
4.13 Subsidiaries. Exhibit 4.13 hereto lists all the
subsidiaries of SCC as of the date of this Agreement and
indicates for each such subsidiary the jurisdiction of
incorporation or organization, capitalization and share
ownership.
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4.14 Interested Party Transactions. Neither SCC nor any
of its subsidiaries is indebted to any director, officer,
employee or agent of SCC or any of its subsidiaries (except for
amounts due as normal salaries and benefits and in reimbursement
of ordinary expenses), and no such person is indebted to SCC or
any of its subsidiaries, except for amounts the failure of which
to pay or collect would not have a Material Adverse Effect.
4.15 Labor and Employment Matters.
(a) Except for such matters that would not in the aggregate
have a Material Adverse Effect, SCC is and its subsidiaries are
and have been in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours and are not engaged in and have
not engaged in any unfair labor practice.
(b) Except for benefits provided under agreements and plans
described in the SCC Financial Statements, the SCC Disclosure
Schedule or the Offering Circular in the event of termination of
the employment of any officers, directors, employees or agents of
SCC or any of its subsidiaries, neither SCC, any of its
subsidiaries, ▇▇▇▇▇▇, TruServ, nor any other subsidiaries of
▇▇▇▇▇▇, will pursuant to any agreement or by reason of anything
done prior to the Effective Time by SCC or any of its
subsidiaries be liable to any of said officers, directors,
employees or agents for so-called "severance pay" or any other
similar payments or benefits, including, without limitation, post-
employment healthcare (other than pursuant to COBRA) or insurance
benefits.
4.16 Insurance. As of the date hereof, SCC and each of
its subsidiaries are insured by insurers reasonably believed by
SCC to be of recognized financial responsibility against such
losses and risks and in such amounts as are customary in the
businesses in which they are engaged.
4.17 Contracts with Physicians, Hospitals, HMOs and Third
Party Providers. SCC has made available to representatives of
▇▇▇▇▇▇ a list of all outstanding agreements between SCC or any of
its subsidiaries and any third-party health care provider that
is material to its business.
4.18 Environmental Protection.
(a) To the knowledge of SCC and its subsidiaries, none of
SCC, SCC's subsidiaries or any SCC Property (as defined in
subsection (d) below) is or has been in violation of any federal,
state or local law, ordinance or regulation concerning industrial
hygiene or environmental conditions, including, but not limited
to, soil and groundwater conditions ("Environmental Laws"), the
violation of which would have a Material Adverse Effect on
TruServ.
(b) Neither SCC nor any of its subsidiaries has reported
any, or has had knowledge of any circumstances giving rise to any
reporting requirement under applicable Environmental Laws as to
any, spills or releases of any
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Hazardous Material, nor has SCC or any of its subsidiaries
received any notices of spills or releases of Hazardous
Materials, the consequences of which would have a Material
Adverse Effect on TruServ. "Hazardous Material" shall mean any
substance, chemical, waste or other material which is listed,
defined or otherwise identified as hazardous, toxic or dangerous
under any applicable law; as well as any petroleum, petroleum
product or by-product, crude oil, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas useable for
fuel, and "source," "special nuclear," and "byproduct" material
as defined in the Atomic Energy Act of 1954, 42 U.S.C. 2011 et
seq.
(c) To the knowledge of SCC, there is no proceeding or
investigation pending or threatened by any governmental entity or
other person with respect to the presence of Hazardous Material
on SCC Properties or the migration thereof from or to other
property. Neither SCC nor any of its subsidiaries has ever been
required by any governmental entity to treat, clean up, or
otherwise dispose of, remove or neutralize any Hazardous Material
from or on any SCC Property.
(d) Neither SCC, any current or former subsidiary of SCC,
nor to SCC's knowledge, any other person, has engaged in any
activity that might reasonably be expected to involve the
generation, use, manufacture, treatment, transportation, storage
in tanks or otherwise, or disposal of Hazardous Material on or
from any property that SCC or any of its current or former
subsidiaries now owns or leases or has previously owned or leased
or in which SCC or any such subsidiary now holds or has
previously held any security interest, mortgage, or other lien or
interest ("SCC Property") which generation, use, manufacture,
treatment, transportation, storage or disposal would in the
aggregate have a Material Adverse Effect, and there is no failure
to obtain any required permits or approvals of any governmental
entity or violation of any terms or conditions of such permits,
or any other violation of Environmental Laws other than those
that would not have a Material Adverse Effect. There are no
pending, or to SCC's knowledge, threatened claims or
investigations relating to any of the foregoing.
(e) To the knowledge of SCC, there are no substances or
conditions in or on SCC Property which may support claims or
causes of action under any applicable Environmental Law, which
would, if adversely determined, have a Material Adverse Effect on
TruServ.
(f) For purposes of this Section 4.18, the term "Material
Adverse Effect" as defined in Section 10.12 hereof also includes
(i) any material injunction or criminal action or proceeding
against or involving SCC and (ii) any requirement that executive
officers of ▇▇▇▇▇▇ or SCC be subjected to a consent decree or
become individually involved in any proceeding in clause (i)
above.
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4.19 Intellectual Property Rights.
(a) Section 4.19(a) of the SCC Disclosure Schedule sets
forth an accurate and complete list of all (i) patents,
applications for patents, registrations of trademarks (including
service marks) and applications therefor and registrations of
copyrights and applications therefor that are owned by SCC or any
of SCC's subsidiaries; (ii) other material Intellectual Property
Rights (as defined below) that are owned by SCC or SCC's
subsidiaries; (iii) unexpired licenses (other than to or with
present or former SCC Members) relating to SCC Intellectual
Property Rights (as defined below) that have been granted to or
by SCC or any of SCC's subsidiaries; and (iv) other material
agreements relating to Intellectual Property Rights.
(b) As used in this Agreement, the term "Intellectual
Property Rights" means intellectual property rights, including,
without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks,
service ▇▇▇▇ applications, copyrights, copyright applications,
publication rights, computer programs and other computer software
(including source codes and object codes), inventions, know-how,
trade secrets, technology, proprietary processes and formulae.
As used in this Agreement, the term "SCC Intellectual Property
Rights" means all Intellectual Property Rights that are part of
the conduct of the business of SCC.
(c) SCC and SCC's subsidiaries collectively own and have
the right to use, and to license others to use, all SCC
Intellectual Property Rights, free and clear of, and without
liability under, all claims and rights of third parties.
(d) Neither SCC nor any of SCC's subsidiaries (i) is
infringing in the conduct of SCC's business, and the execution,
delivery and performance of this Agreement by SCC, and the
consummation by SCC of the transactions contemplated hereby, will
not infringe, any right or claimed right of any other party with
respect to any Intellectual Property Rights known to SCC, or (ii)
has knowledge of any alleged or claimed infringement by any
product or process manufactured, used, sold or under development
by or for SCC or SCC's subsidiaries in the conduct of their
business.
4.20 Real Property.
(a) Section 4.20(a) of the SCC Disclosure Schedule lists
all of the real property owned or currently used by SCC or any
subsidiary in the course of its business (the "SCC Real
Property"). Section 4.20(a) of the SCC Disclosure Schedule also
lists all material real property owned or used by SCC in the
course of SCC's business at any time since June 30, 1993, other
than SCC's Real Properly.
(b) All SCC Real Property, including without limitation,
all buildings, structures, fixtures and other improvements
thereon, is in all material
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respects suitable and adequate for the uses for which it is
currently devoted. SCC has good and marketable title in fee
simple absolute to SCC Real Property indicated on Section 4.20(a)
of the SCC Disclosure Schedule to be owned by it, and to the
buildings, structures and improvements thereon, and a valid
leasehold interest in all other SCC Real Property, in each case
free and clear of all material claims, liens or encumbrances.
4.21 Complete Copies of Requested Documents. SCC has
delivered or made available true and complete copies of each
document that has been reasonably requested by ▇▇▇▇▇▇ or its
counsel in connection with their legal and accounting review of
SCC and its subsidiaries.
4.22 Representations Complete. None of the
representations or warranties made by SCC herein or in any
Schedule hereto, including the SCC Disclosure Schedule, or
certificate furnished by SCC pursuant to this Agreement, or the
SCC Financial Statements, contain or will contain at the
Effective Time any untrue statement of a material fact or omits
or will omit at the Effective Time to state any material fact
necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were
made, not misleading. To the extent such representations permit
omissions of items otherwise required to be disclosed because
they are not material or do not or would not have a Material
Adverse Effect on SCC, such omissions in the aggregate would not
and do not have a Material Adverse Effect on SCC.
4.23 Takeover Statutes. No "fair price,"
"moratorium," "control share acquisition" or other similar
antitakeover statute (each, a "Takeover Statute") is applicable
to the Merger, except for such statutes or regulations as to
which all necessary action has been taken by SCC and its Board of
Directors to permit the consummation of the Merger in accordance
with the terms hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
Except as set forth in the disclosure letter delivered to
SCC at or prior to the execution of this Agreement ("▇▇▇▇▇▇
Disclosure Schedule") or in the ▇▇▇▇▇▇ SEC Reports (as
hereinafter defined), ▇▇▇▇▇▇ represents and warrants to SCC as of
the date hereof as follows:
5.1 Organization. ▇▇▇▇▇▇ is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and has the corporate power to carry on its business
as it is now being conducted. ▇▇▇▇▇▇ is duly qualified as a
foreign corporation to do business, and is in good standing (to
the extent the concept of good standing exists), in each
jurisdiction where the character of its properties owned or held
under lease or the nature of its activities makes such
qualification necessary, except where
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the failure to be so qualified or in good standing will not in
the aggregate have a Material Adverse Effect. Each subsidiary of
▇▇▇▇▇▇ is a corporation duly organized, validly existing and in
good standing (to the extent the concept of good standing exists)
under the laws of its jurisdiction of incorporation or
organization, has the corporate power to carry on its business as
it is now being conducted and is duly qualified to do business,
and is in good standing (to the extent the concept of good
standing exists), in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the
failure to be so duly organized, validly existing and in good
standing, to have such corporate power or to be so qualified will
not in the aggregate have a Material Adverse Effect. ▇▇▇▇▇▇ has
delivered to SCC or its counsel complete and correct copies of
its Certificate of Incorporation and Bylaws.
5.2 Capitalization.
(a) As of June 29, 1996, the authorized capital stock of
▇▇▇▇▇▇ consisted of the following: 100,000 shares of ▇▇▇▇▇▇ Class
A Common Stock and 2,000,000 shares of Class B Common Stock. As
of such date, the issued and outstanding capital stock of ▇▇▇▇▇▇
consisted of the following: 49,640 shares of such Class A Common
Stock and 1,079,508 shares of such Class B Common Stock. No
changes in such capitalization have occurred since June 30, 1996
that, in the aggregate, would be material to ▇▇▇▇▇▇. All of the
issued and outstanding shares of ▇▇▇▇▇▇ Stock are validly issued,
fully paid, nonassessable and free of preemptive rights or
similar rights created by statute, the Certificate of
Incorporation or By-Laws of ▇▇▇▇▇▇ or any agreement to which
▇▇▇▇▇▇ or any of its subsidiaries is a party or by which ▇▇▇▇▇▇
or any of its subsidiaries is bound. All of the shares of ▇▇▇▇▇▇
Stock issuable in exchange for shares of SCC Stock at the
Effective Time in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and
nonassessable.
(b) Except as set forth in the ▇▇▇▇▇▇ SEC Reports, there
are not now, and at the Effective Time there will not be, any
shares of capital stock of ▇▇▇▇▇▇ issued or outstanding or any
options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating ▇▇▇▇▇▇
to issue, transfer or sell any shares of its capital stock.
Except as provided in this Agreement, ▇▇▇▇▇▇ will have no
obligation to issue, transfer or sell any shares of its capital
stock pursuant to an employee benefit plan or otherwise. All
outstanding shares of the capital stock of ▇▇▇▇▇▇'▇ subsidiaries
are validly issued, fully paid, non-assessable and owned by
▇▇▇▇▇▇ or one of its subsidiaries free and clear of any liens,
security interest, pledges, agreements, claims, charges, or
encumbrances of any nature whatsoever. There are no voting trust
or other agreements or understandings to which ▇▇▇▇▇▇ is a party
with respect to the voting of the capital stock of ▇▇▇▇▇▇ or any
of its subsidiaries. None of ▇▇▇▇▇▇ or its subsidiaries is
required to redeem, repurchase or otherwise acquire shares of
capital stock of ▇▇▇▇▇▇, or any of
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its subsidiaries, respectively, as a result of the transactions
contemplated by this Agreement.
5.3 Authority Relative to this Agreement. ▇▇▇▇▇▇ has the
corporate power to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement by ▇▇▇▇▇▇ and the consummation by ▇▇▇▇▇▇ of the
transactions contemplated hereby have been duly authorized by the
Board of Directors of ▇▇▇▇▇▇ and, except for the favorable vote
of a majority of the shares of outstanding capital stock of
▇▇▇▇▇▇ entitled to vote thereon in accordance with Section 252 of
the DGCL, no other corporate proceedings on the part of ▇▇▇▇▇▇
are necessary to approve this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by ▇▇▇▇▇▇ and constitutes a valid and
binding agreement of ▇▇▇▇▇▇, enforceable against ▇▇▇▇▇▇ in
accordance with its terms.
5.4 Consents and Approvals; No Violations. Except for
applicable requirements of the HSR Act, Securities Act, Exchange
Act, state or foreign laws relating to takeovers, if applicable,
state securities or blue sky laws, and the filing and recordation
of Articles or a Certificate of Merger as required by the PBCL
and the DGCL, no filing with, and no permit, authorization,
consent or approval of, any public or governmental body or
authority is necessary for the consummation by ▇▇▇▇▇▇ of the
transactions contemplated by this Agreement, except where a
failure to make such filing or to obtain such permit,
registration, authorization, consent or approval will not in the
aggregate have a Material Adverse Effect. Neither the execution
and delivery of this Agreement by ▇▇▇▇▇▇, nor the consummation by
▇▇▇▇▇▇ of the transactions contemplated hereby, nor compliance by
▇▇▇▇▇▇ with any of the provisions hereof, will (a) result in any
breach of the Certificate of Incorporation or By-Laws of ▇▇▇▇▇▇
or any of its subsidiaries, (b) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination,
cancellation, acceleration or change in the award, grant, vesting
or determination) under, or give rise to creation of any lien,
charge, security interest or encumbrance upon, any of the
respective properties or assets of ▇▇▇▇▇▇ or any of its
subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license,
contract, lease, agreement, arrangement, or other instrument or
obligation to which ▇▇▇▇▇▇ or any of its subsidiaries is a party
or by which any of them or any of their properties or assets may
be bound or affected, or (c) violate any order, writ, injunction,
decree, statute, rule or regulation of any court or government
authority applicable to ▇▇▇▇▇▇, any of its subsidiaries, or any
of their properties or assets, except in the case of clauses (b)
and (c) for violations, breaches, defaults (or rights of
termination, cancellation, acceleration or change), liens,
charges, security interests or encumbrances that would not in the
aggregate have a Material Adverse Effect.
5.5 Reports and Financial Statements. ▇▇▇▇▇▇ has filed all
reports required to be filed with the SEC pursuant to the
Exchange Act since December
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30, 1991, including, without limitation, an Annual Report on Form
10-K for the years ended December 31, 1994 and December 30, 1995
and Quarterly Reports on Form 10-Q for the quarters ended March
30 and June 29, 1996 and any subsequent Quarterly Reports on Form
10-Q for quarterly periods ending after June 29, 1996 and prior
to the execution of this Agreement (all such reports and
amendments thereto, collectively, the "▇▇▇▇▇▇ SEC Reports"), and
has previously furnished or made available to SCC true and
complete copies of all ▇▇▇▇▇▇ SEC Reports filed with respect to
periods beginning after December 31, 1992 (including any exhibits
thereto) and will promptly deliver to SCC any ▇▇▇▇▇▇ SEC Reports
filed between the date hereof and the Effective Time. None of
such ▇▇▇▇▇▇ SEC Reports, as of their respective dates (as amended
through the date hereof), contained or, with respect to the
▇▇▇▇▇▇ SEC Reports filed after the date hereof, will contain any
untrue statement of a material fact or omitted or, with respect
to the ▇▇▇▇▇▇ SEC Reports filed after the date hereof, will omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the balance sheets (including the related notes) included in the
▇▇▇▇▇▇ SEC Reports fairly presents the consolidated financial
position of ▇▇▇▇▇▇ and its subsidiaries as of the date thereof,
and the other related statements (including the related notes)
included therein fairly present the results of operations and the
changes in cash flows of ▇▇▇▇▇▇ and its subsidiaries for the
respective periods set forth therein, all in conformity with
generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein
and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments which would not in the
aggregate be material in amount or effect.
5.6 Absence of Certain Changes or Events. Except as
disclosed in the ▇▇▇▇▇▇ SEC Reports or otherwise disclosed in
writing to SCC, since June 29, 1996, neither ▇▇▇▇▇▇ nor any of
its subsidiaries has: (a) taken any of the actions prohibited in
Section 6.1 or Section 6.2 hereof; (b) incurred any material
liability, except in the ordinary course of its business,
consistent with past practices; (c) suffered any change, or any
event involving a prospective change, in its business, assets,
financial condition or results of operation which has had, or is
reasonably likely to have, in the aggregate a Material Adverse
Effect, or (d) subsequent to the date hereof, except as permitted
by Section 6.1 or Section 6.2 hereof, conducted its business and
operations other than in the ordinary course of business and
consistent with past practices.
5.7 Information in Registration Statement and Joint Proxy
Statement. The information relating to ▇▇▇▇▇▇ and its
subsidiaries to be contained in the Registration Statement and
the Joint Proxy Statement will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading.
5.8 Litigation. As of the date of this Agreement, (a)
there is no
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material action, suit, judicial or administrative proceeding,
arbitration or investigation pending or, to the best knowledge of
▇▇▇▇▇▇, threatened against or involving ▇▇▇▇▇▇ or any of its
subsidiaries; and (b) there is no judgment, decree, injunction,
rule or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against ▇▇▇▇▇▇
or any of its subsidiaries, except in each case for such thereof
as would not individually or in the aggregate have a Material
Adverse Effect.
5.9 Contracts.
(a) Each of the material contracts, instruments, mortgages,
notes, security agreements, leases, agreements or understandings,
whether written or oral, to which ▇▇▇▇▇▇ or any of its
subsidiaries is a party that relates to or affects the assets or
operations of ▇▇▇▇▇▇ or any of its subsidiaries or to which
▇▇▇▇▇▇ or any of its subsidiaries or its or their respective
assets or operations may be bound or subject is a valid and
binding obligation of ▇▇▇▇▇▇ and in full force and effect with
respect to ▇▇▇▇▇▇ or such subsidiary and, to the knowledge of
▇▇▇▇▇▇, with respect to all other parties thereto; except to the
extent that the consummation of the transactions contemplated by
this Agreement may require the consent of third parties, there
are no existing defaults by ▇▇▇▇▇▇ or any of its subsidiaries
thereunder or, to the knowledge of ▇▇▇▇▇▇, by any other party
thereto, and no event of default has occurred, and no event,
condition or occurrence exists, that (whether with or without
notice, lapse of time, the declaration of default or other
similar event) would constitute a default by ▇▇▇▇▇▇ or any of its
subsidiaries thereunder, other than defaults that would not in
the aggregate have a Material Adverse Effect. Section 5.9(a) of
the ▇▇▇▇▇▇ Disclosure Schedule lists all consents of third
parties required for the consummation of the transactions
contemplated by this Agreement, except where the failure to
obtain such consent will not, individually or in the aggregate,
have a Material Adverse Effect.
(b) Except for this Agreement, as of the date of this
Agreement neither ▇▇▇▇▇▇ nor any of its subsidiaries is a party
to any oral or written agreement that restricts any of them from
engaging in a line of business.
(c) ▇▇▇▇▇▇ has no agreements or arrangements to sell or
otherwise dispose of, or lease, acquire or otherwise invest in,
any property, lines of business or other assets that are in the
aggregate material to the business of ▇▇▇▇▇▇ and its subsidiaries
taken as a whole other than agreements and arrangements for such
sale, disposition, lease, acquisition or investment that are in
the ordinary course of ▇▇▇▇▇▇'▇ business.
(d) Copies of all documents referred to in this Agreement,
furnished or to be furnished by ▇▇▇▇▇▇ in connection with the
transaction contemplated hereby, are or will be true, correct and
complete copies thereof in all material respects and include all
amendments, supplements and modifications thereto and all waivers
thereunder.
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5.10 Employee Benefit Plans.
(a) Section 5.10(a) of the ▇▇▇▇▇▇ Disclosure Schedule sets
forth a true and complete list of each (i) employee benefit plan
(including, without limitation, any "employee benefit plan" as
defined in Section 3 (3) of ERISA, (ii) policy (iii) trust
agreement or (iv) agreement (including, without limitation, any
employment agreement or severance agreement) that is maintained
(all of the foregoing, the "▇▇▇▇▇▇ Plans"), or is or was
contributed to by ▇▇▇▇▇▇ or pursuant to which ▇▇▇▇▇▇ is still
potentially liable for payments, benefits or claims. A copy of
each ▇▇▇▇▇▇ Plan as currently in effect and, if applicable, the
most recent Annual Report, Actuarial Report or Valuation, Summary
Plan Description, Trust Agreement and a Determination Letter
issued by the IRS for each ▇▇▇▇▇▇ Plan have heretofore been
delivered to SCC or its counsel. Neither ▇▇▇▇▇▇ nor any ERISA
Affiliate, which together with ▇▇▇▇▇▇ would be deemed a "single
employer" within the meaning of Section 4001 of ERISA, has
maintained or contributed to any plan subject to Title IV of
ERISA or Section 412 of the Code (including any Multiemployer
Plan) during the six calendar years preceding the date of this
Agreement.
(b) Each ▇▇▇▇▇▇ Plan which is an "employee benefit plan,"
as defined in Section 3(3) of ERISA, complies by its terms and in
operation with all applicable legal requirements, including but
not limited to ERISA and the Code, and all reports, forms and
other documents required to be filed with any government entity
(including without limitation, summary plan descriptions, Forms
5500 and summary annual reports) have been timely filed and are
accurate, except for instances of noncompliance or failure to
file that would not in the aggregate have a Material Adverse
Effect. None of the officers, directors, employees or agents of
▇▇▇▇▇▇ or any "disqualified persons" (as defined in Section 3 of
ERISA and Section 4975 of the Code)has engaged in or been a party
to any "prohibited transaction" (as such term is defined in
Section 4975 of the Code or Section 406 of ERISA with respect to
any ▇▇▇▇▇▇ Plan, which is not exempt under ERISA and the Code and
which would result in material liability, nor has any such party
who is a "fiduciary" (as such term is defined in Section 3 of
ERISA) committed any breach of any duty or responsibility imposed
by ERISA in connection with which ▇▇▇▇▇▇, any director, officer,
or employee of ▇▇▇▇▇▇ or any ▇▇▇▇▇▇ Plan or related funding
medium could be subject to any material liability under Title 1
of ERISA or a tax imposed by Section 4975 of the Code.
(c) Each ▇▇▇▇▇▇ Plan intended to qualify under Section 401
(a) of the Code has been determined by the Internal Revenue
Service to so qualify after January 1, 1989, and each trust
maintained pursuant thereto has been determined by the Internal
Revenue Service to be exempt from taxation under Section 501 of
the Code. Nothing has occurred since the date of the Internal
Revenue Service's favorable determination letter that could
adversely affect the qualification of the ▇▇▇▇▇▇ Plan and its
related trust, except such adverse effects as would not in the
aggregate constitute a Material Adverse Effect. ▇▇▇▇▇▇ and each
ERISA Affiliate of ▇▇▇▇▇▇ have timely and properly applied for a
written
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determination by the Internal Revenue Service on the
qualification of each such ▇▇▇▇▇▇ Plan and its related trust
under Section 401 (a) of the Code, as amended by the Tax Reform
Act of 1986 and subsequent legislation enacted through the date
hereof, and Section 501 of the Code.
(d) All contributions or other amounts payable by ▇▇▇▇▇▇ or
its subsidiaries as of the Effective Time with respect to each
▇▇▇▇▇▇ Plan and in respect of current or prior plan years have
been or will be (prior to the Effective Time) either paid or
accrued on the financial statements of ▇▇▇▇▇▇ contained in the
SEC Reports in accordance with past practice and the recommended
contribution in any actuarial report.
(e) ▇▇▇▇▇▇ has provided or has caused to be provided a true
and accurate summary to SCC of (i) all benefits, whether or not
insured, provided by any ▇▇▇▇▇▇ Plan; (ii) insurance payments
paid with respect to the five preceding plan years for all ▇▇▇▇▇▇
Plans, (iii) any benefit liabilities exceeding the assets of any
▇▇▇▇▇▇ Plan, and (iv) any completely or partially terminated
▇▇▇▇▇▇ Plan. ▇▇▇▇▇▇ is not aware of any reason why the ▇▇▇▇▇▇
Plans cannot be combined with the SCC Plans referred to in
Section 4.10 below.
(f) With respect to each ▇▇▇▇▇▇ Plan, (i) no prohibited
transactions (as defined in Section 406 or 407 of ERISA or
Section 4975 of the Code) have occurred for which a statutory
exemption is not available and (ii) no reportable event (as
defined in Section 4043 of ERISA) has occurred as to which a
notice would be required to be filed with the Pension Benefit
Guaranty Corporation.
(g) Neither ▇▇▇▇▇▇ nor any ERISA Affiliate of ▇▇▇▇▇▇ has
any liability or is threatened with any liability (whether joint
or several) (i) for the termination of any single employer plan
under Sections 4062 or 4064 of ERISA or any multiple employer
plan under Section 4063 of ERISA, (ii) for any lien imposed under
Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for
any interest payments required under Section 302 (e) of ERISA or
Section 412 (m) of the Code, (iv) for any excise tax imposed by
Sections 4971, 4972, 4975, 4976, 4977 or 4979 of the Code, (v)
for any minimum funding contributions under Section 302(c) (11)
of ERISA or Section 412(c)(11) of the Code, (vi) to a fine under
Section 502 of ERISA, (vii) for any transaction within the
meaning of Section 4069 of ERISA, (viii) any multiple group
withdrawal liability under Section 4063 of ERISA or (ix) any tax
on reversion of qualified plan assets under Section 4980 of the
Code, except in each case for such liabilities that would not in
the aggregate have a Material Adverse Effect.
(h) ▇▇▇▇▇▇ has not incurred any withdrawal liability with
respect to any Multiemployer Plan within the meaning of Sections
4201 and 4204 of ERISA, and no liabilities exist with respect to
withdrawals from any Multiemployer Plans which could subject
▇▇▇▇▇▇ to any controlled group liability under
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Section 4001 (b) of ERISA, except in each case for such
liabilities that would not in the aggregate have a Material
Adverse Effect.
(i) All of the ▇▇▇▇▇▇ Plans, to the extent applicable, are
in compliance with the continuation of group health coverage
provisions contained in Section 4980B of the Code and Section 601
through 609 of ERISA, except for such instances of noncompliance
which would not in the aggregate have a Material Adverse Effect.
(j) ▇▇▇▇▇▇ has delivered copies of all employment and
benefit contracts and arrangements for its employees in effect as
of the date hereof.
(k) There is no lien in favor of the PBGC on any assets of
any ▇▇▇▇▇▇ Plan under Section 4068 of ERISA.
(l) No multi-employer plan which includes any ▇▇▇▇▇▇ Plan
is or has been in reorganization under Section 418(A) through (E)
of the Code.
(m) None of the participants in any ▇▇▇▇▇▇ Plan have made
any health or welfare plan contribution in excess of the maximum
amounts allowed therefor under the limits imposed by Sections 419
or 419A of the Code.
5.11 Tax Matters. ▇▇▇▇▇▇ makes the following
representations and warranties with respect to tax matters.
(a) Definitions. For purposes of this Section 5.11, the
following definitions shall apply:
(i) The term "▇▇▇▇▇▇ Group" shall mean, individually
and collectively, (A) ▇▇▇▇▇▇ and (B) any individual, trust,
corporation, partnership or any other entity as to which ▇▇▇▇▇▇
is liable for Taxes incurred by such individual or entity either
as a transferee, or pursuant to Treasury Regulations Section
1.1502-6, or pursuant to any other provision of federal,
territorial, state, local or foreign law or regulations.
(ii) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions
to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any
agency or political subdivision of any such government, which
taxes shall include, without limiting the generality of the
foregoing, all income or profits taxes (including, but not
limited to, federal income taxes and state income taxes), payroll
and employee withholding taxes, unemployment insurance, social
security taxes, sales and use taxes, ad valorem taxes, excise
taxes, franchise taxes, gross receipts taxes, business license
taxes, occupation taxes, real and personal property taxes, stamp
taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and
other obligations of the same or
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of a similar nature to any of the foregoing, which the ▇▇▇▇▇▇
Group is required to pay, withhold or collect.
(iii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements
and returns relating to, or required to be filed in connection
with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third
parties.
(b) Returns Filed and Taxes Paid. (i) All Returns required
to be filed by or on behalf of members of the ▇▇▇▇▇▇ Group have
been duly filed on a timely basis and such Returns are true,
complete and correct in all material respects, (ii) all Taxes
shown to be payable on the Returns or on subsequent assessments
with respect thereto have been paid in full on a timely basis,
and (iii) no other Taxes, the payment of which would have a
Material Adverse Effect, are payable by the ▇▇▇▇▇▇ Group with
respect to items or periods covered by such Returns (whether or
not shown on or reportable on such Returns) or with respect to
any period prior to the Effective Time. Each member of the
▇▇▇▇▇▇ Group has withheld and paid over all Taxes required to
have been withheld and paid over, except for such Taxes which the
failure to withhold or pay over would not in the aggregate have a
Material Adverse Effect on ▇▇▇▇▇▇, and complied with all
information reporting and backup withholding requirements,
including maintenance of required records with respect thereto,
in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are
no liens on any of the assets of any member of the ▇▇▇▇▇▇ Group
with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that a member of the ▇▇▇▇▇▇ Group is
contesting in good faith through appropriate proceedings and for
which appropriate reserves have been established.
(c) Tax Reserves. The amount of ▇▇▇▇▇▇'▇ liability for
unpaid Taxes for all periods ending on or before the date of this
Agreement does not in the aggregate exceed the amount of the
current liability accruals for Taxes (excluding reserves for
deferred Taxes) reflected on the consolidated balance sheet of
▇▇▇▇▇▇ included in the ▇▇▇▇▇▇ SEC Report for the quarter ending
closest to the date of this Agreement, and the amount of ▇▇▇▇▇▇'▇
liability for unpaid Taxes for all periods ending on or before
the Effective Time shall not in the aggregate exceed the amount
of the current liability accruals for Taxes (excluding reserves
for deferred Taxes), as such accruals are reflected on the
consolidated balance sheet of ▇▇▇▇▇▇ included in the ▇▇▇▇▇▇ SEC
Report for the quarter ending closest to the Effective Time (plus
additions thereto accrued through the Effective Time which are
consistent with in the ordinary course), except in each case for
any excess which does not have a Material Adverse Effect on
▇▇▇▇▇▇.
(d) Consolidated Returns Furnished. SCC has been furnished
by ▇▇▇▇▇▇ true and complete copies of (i) income tax audit
reports, statements of deficiencies, closing or other agreements
received by the ▇▇▇▇▇▇ Group or on
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behalf of the ▇▇▇▇▇▇ Group relating to federal income taxes, and
(ii) all federal income tax returns for the ▇▇▇▇▇▇ Group, in each
case for all periods ending on and after June 30, 1993. ▇▇▇▇▇▇
has never been a member of an affiliated group filing
consolidated returns other than a group of which ▇▇▇▇▇▇ was the
common parent.
(e) Tax Deficiencies; Audits; Statutes of Limitations. No
deficiencies exist or have been asserted (either in writing or
verbally, formally or informally) or are expected to be asserted
with respect to Taxes of the ▇▇▇▇▇▇ Group that would cause
▇▇▇▇▇▇'▇ reserves for taxes to be understated by an amount which
would have a Material Adverse Effect on ▇▇▇▇▇▇. No tax returns of
the ▇▇▇▇▇▇ Group are currently under audit, and no waiver or
extension of the statute of limitations is in effect with respect
to any tax returns.
(f) Tax Sharing Agreements. ▇▇▇▇▇▇ is not (nor has it ever
been) a party to any tax sharing agreement.
(g) Special Tax Status. ▇▇▇▇▇▇ operates as a cooperative
organization under Subchapter T of the Code and is not aware of
any reason why, after the Effective Time of the Merger, TruServ
will not continue to so operate.
5.12 Compliance With Applicable Law. Except as
disclosed in the ▇▇▇▇▇▇ SEC Reports filed prior to the date of
this Agreement, ▇▇▇▇▇▇ and each of its subsidiaries holds all
licenses, franchises, permits, variances, exemptions, orders,
approvals and authorizations necessary for the lawful conduct of
its business under and pursuant to, and the business of each of
▇▇▇▇▇▇ and its subsidiaries is not being conducted in violation
of, any provision of any federal, state, local or foreign
statute, law, ordinance, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to ▇▇▇▇▇▇ or
any of its subsidiaries, except to the extent that the failure or
violation would not in the aggregate have a Material Adverse
Effect.
5.13 Subsidiaries. Exhibit 5.13 hereto lists all the
subsidiaries of ▇▇▇▇▇▇ as of the date of this Agreement and
indicates for each such subsidiary the jurisdiction of
incorporation or organization, its capitalization and share
ownership.
5.14 Interested Party Transactions. Neither ▇▇▇▇▇▇ nor
any of its subsidiaries is indebted to any director, officer,
employee or agent of ▇▇▇▇▇▇ or any of its subsidiaries (except
for amounts due as normal salaries and benefits and in
reimbursement of ordinary expenses), and no such person is
indebted to ▇▇▇▇▇▇ or any of its subsidiaries, except for amounts
the failure of which to pay or collect would not have a Material
Adverse Effect.
5.15 Labor and Employment Matters.
(a) Except for such matters that would not in the aggregate
have a
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Material Adverse Effect, ▇▇▇▇▇▇ is and its subsidiaries are and
have been in compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment and wages and hours and are not engaged in and have
not engaged in any unfair labor practice.
(b) Except for benefits provided under agreements and plans
described in the ▇▇▇▇▇▇ SEC Reports or the ▇▇▇▇▇▇ Disclosure
Schedule, in the event of termination of the employment of any
officers, directors, employees or agents of ▇▇▇▇▇▇ or any of its
subsidiaries, neither ▇▇▇▇▇▇, any of its subsidiaries, ▇▇▇▇▇▇,
TruServ, nor any other subsidiaries of ▇▇▇▇▇▇, will pursuant to
any agreement or by reason of anything done prior to the
Effective Time by ▇▇▇▇▇▇ or any of its subsidiaries be liable to
any of said officers, directors, employees or agents for
so-called "severance pay" or any other similar payments or
benefits, including, without limitation, postemployment
healthcare (other than pursuant to COBRA) or insurance benefits.
5.16 Insurance. As of the date hereof, ▇▇▇▇▇▇ and each
of its subsidiaries are insured by insurers reasonably believed
by ▇▇▇▇▇▇ to be of recognized financial responsibility against
such losses and risks and in such amounts as are customary in the
businesses in which they are engaged.
5.17 Contracts with Physicians, Hospitals, HMOs and Third
Party Providers. ▇▇▇▇▇▇ has made available to representatives of
SCC a list of all outstanding agreements between ▇▇▇▇▇▇ or any of
its subsidiaries and any third-party health care provider that
is material to its business.
5.18 Environmental Protection.
(a) To the knowledge of ▇▇▇▇▇▇ and its subsidiaries, none
of ▇▇▇▇▇▇, ▇▇▇▇▇▇'▇ subsidiaries or any ▇▇▇▇▇▇ Property (as
defined in subsection (d) below) is or has been in violation of
any Environmental Laws, the violation of which would have a
Material Adverse Effect on TruServ..
(b) Neither ▇▇▇▇▇▇ nor any of its subsidiaries has reported
any, or has had knowledge of any circumstances giving rise to any
reporting requirement under applicable Environmental Laws as to
any, spills or releases of any Hazardous Material, nor has ▇▇▇▇▇▇
or any of its subsidiaries received any notices of spills or
releases of Hazardous Materials, the consequences of which would
have a Material Adverse Effect on TruServ.
(c) To the knowledge of ▇▇▇▇▇▇, there is no proceeding or
investigation pending or threatened by any governmental entity or
other person with respect to the presence of Hazardous Material
on ▇▇▇▇▇▇ Properties or the migration thereof from or to other
property. Neither ▇▇▇▇▇▇ nor any of its subsidiaries has ever
been required by any governmental entity to treat, clean up, or
otherwise dispose of, remove or neutralize any Hazardous Material
from or on any ▇▇▇▇▇▇ Property.
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36
(d) Neither ▇▇▇▇▇▇, any current or former subsidiary of
▇▇▇▇▇▇, nor to ▇▇▇▇▇▇'▇ knowledge, any other person, has engaged
in any activity that might reasonably be expected to involve the
generation, use, manufacture, treatment, transportation, storage
in tanks or otherwise, or disposal of Hazardous Material on or
from any property that ▇▇▇▇▇▇ or any of its current or former
subsidiaries now owns or leases or has previously owned or leased
or in which ▇▇▇▇▇▇ or any such subsidiary now holds or has
previously held any security interest, mortgage, or other lien or
interest ("▇▇▇▇▇▇ Property") which generation, use, manufacture,
treatment, transportation, storage or disposal would in the
aggregate have a Material Adverse Effect, and there is no failure
to obtain any required permits or approvals of any governmental
entity or violation of any terms or conditions of such permits,
or any other violation of Environmental Laws other than those
that would not have a Material Adverse Effect. There are no
pending, or to ▇▇▇▇▇▇'▇ knowledge, threatened claims or
investigations relating to any of the foregoing.
(e) To the knowledge of ▇▇▇▇▇▇, there are no substances or
conditions in or on ▇▇▇▇▇▇ Property which may support claims or
causes of action under any applicable Environmental Law, which
would, if adversely determined have a Material Adverse Effect on
TruServ.
(f) For purposes of this Section 5.18, the term "Material
Adverse Effect" as defined in Section 10.12 hereof also includes
(i) any material injunction or criminal action or proceeding
against or involving ▇▇▇▇▇▇ and (ii) any requirement that
executive officers of ▇▇▇▇▇▇ or SCC be subjected to a consent
decree or become individually involved in any proceeding in
clause (i) above.
5.19 Intellectual Property Rights.
(a) Section 5.19(a) of the ▇▇▇▇▇▇ Disclosure Schedule sets
forth an accurate and complete list of all (i) patents,
applications for patents, registrations of trademarks (including
service marks) and applications therefor and registrations of
copyrights and applications therefor that are owned by ▇▇▇▇▇▇ or
any of ▇▇▇▇▇▇'▇ subsidiaries; (ii) other material Intellectual
Property Rights (as defined below) that are owned by ▇▇▇▇▇▇ or
▇▇▇▇▇▇'▇ subsidiaries; (iii) unexpired licenses (other than to
present or former ▇▇▇▇▇▇ Members) relating to ▇▇▇▇▇▇ Intellectual
Property Rights (as defined below) that have been granted to or
by ▇▇▇▇▇▇ or any of ▇▇▇▇▇▇'▇ subsidiaries; and (iv) other
material agreements relating to Intellectual Property Rights.
(b) As used in this Agreement, the term "Intellectual
Property Rights" means intellectual property rights, including,
without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks,
service ▇▇▇▇ applications, copyrights, copyright applications,
publication rights, computer programs and other computer software
(including source codes and object codes), inventions, know-how,
trade secrets, technology, proprietary processes and formulae. As
used in this Agreement, the
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term "▇▇▇▇▇▇ Intellectual Property Rights" means all Intellectual
Property Rights that are part of the conduct of the business of
▇▇▇▇▇▇.
(c) ▇▇▇▇▇▇ and ▇▇▇▇▇▇'▇ subsidiaries collectively own and
have the right to use, and to license others to use, all ▇▇▇▇▇▇
Intellectual Property Rights, free and clear of, and without
liability under, all claims and rights of third parties.
(d) Neither ▇▇▇▇▇▇ nor any of ▇▇▇▇▇▇'▇ subsidiaries (i) is
infringing in the conduct of ▇▇▇▇▇▇'▇ business, and the
execution, delivery and performance of this Agreement by ▇▇▇▇▇▇,
and the consummation by ▇▇▇▇▇▇ of the transactions contemplated
hereby, will not infringe, any right or claimed right of any
other party with respect to any Intellectual Property Rights
known to ▇▇▇▇▇▇, or (ii) has knowledge of any alleged or claimed
infringement by any product or process manufactured, used, sold
or under development by or for ▇▇▇▇▇▇ or ▇▇▇▇▇▇'▇ subsidiaries in
the conduct of their business.
5.20 Real Property.
(a) Section 5.20(a) of the ▇▇▇▇▇▇ Disclosure Schedule lists
all of the real property owned or currently used by ▇▇▇▇▇▇ or any
subsidiary in the course of its business (the "▇▇▇▇▇▇ Real
Property"). Section 5.20(a) of the ▇▇▇▇▇▇ Disclosure Schedule
also lists all material real property owned or used by ▇▇▇▇▇▇ in
the course of ▇▇▇▇▇▇'▇ business at any time since December 30,
1993, other than ▇▇▇▇▇▇'▇ Real Properly.
(b) All ▇▇▇▇▇▇ Real Property, including without limitation,
all buildings, structures, fixtures and other improvements
thereon, is in all material respects suitable and adequate for
the uses for which it is currently devoted. ▇▇▇▇▇▇ has good and
marketable title in fee simple absolute to ▇▇▇▇▇▇ Real Property
indicated on Section 5.20(a) of the ▇▇▇▇▇▇ Disclosure Schedule to
be owned by it, and to the buildings, structures and improvements
thereon, and a valid leasehold interest in all other ▇▇▇▇▇▇ Real
Property, in each case free and clear of all material claims,
liens or encumbrances.
5.21 Complete Copies of Requested Documents. ▇▇▇▇▇▇
has delivered or made available (through public sources or
directly) true and complete copies of each document that has been
reasonably requested by SCC or its counsel in connection with
their legal and accounting review of ▇▇▇▇▇▇ and its subsidiaries.
5.22 Representations Complete. None of the
representations or warranties made by ▇▇▇▇▇▇ herein or in any
Schedule hereto, including the ▇▇▇▇▇▇ Disclosure Schedule, or
certificate furnished by ▇▇▇▇▇▇ pursuant to this Agreement, or
the ▇▇▇▇▇▇ SEC Reports, contain or will contain at the Effective
Time any untrue statement of a material fact or omits or will
omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in
light of the circumstances under
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which they were made, not misleading. To the extent such
representations permit omissions of items otherwise required to
be disclosed because they are not material or do not or would not
have a Material Adverse Effect on ▇▇▇▇▇▇, such omissions in the
aggregate would not and do not have a Material Adverse Effect on
▇▇▇▇▇▇.
5.23 Certain Employee Benefit Plans Matters. It is
▇▇▇▇▇▇'▇ present intent to provide to those employees of SCC and
its subsidiaries immediately prior to the Effective Time who
continue in such capacity immediately thereafter, employee
benefit programs that in the aggregate are generally not less
favorable to such employees than those being provided to ▇▇▇▇▇▇'▇
employees at the Effective Time. All such qualified benefit
programs are fully funded and able to accept new participants. To
the extent the ▇▇▇▇▇▇ employee benefit programs provide medical
or dental benefits after the Effective Time, ▇▇▇▇▇▇ shall cause
all pre-existing condition exclusions and actively at work
requirements to be waived, and ▇▇▇▇▇▇ shall provide that any
expenses incurred on or before the Effective Time shall be taken
into account under the ▇▇▇▇▇▇ employee benefit programs for
purposes of satisfying the applicable deductible, coinsurance and
maximum out-of-pocket provisions for such employees and their
covered dependents. ▇▇▇▇▇▇ currently expects that it will cause
the merger of SCC's 401 (k) Plan with ▇▇▇▇▇▇'▇ 401 (k) Plan after
the Merger. ▇▇▇▇▇▇ currently expects to make its two non-
qualified benefit plans for its senior executives available to
those persons serving in equivalent positions with SCC
immediately prior to the Effective Time.
5.24 Share Ownership. As of the date hereof, to
▇▇▇▇▇▇'▇ knowledge there are no stockholders with beneficial
ownership (as defined in the Exchange Act) of more than 5% of the
▇▇▇▇▇▇ Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by SCC and ▇▇▇▇▇▇ Pending the
Merger. During the period from the date of this Agreement and
continuing until the Effective Time, except as set forth in this
Agreement, as agreed to in writing by the other party hereto or
as set forth in Section 6.1 of the SCC Disclosure Schedule or
▇▇▇▇▇▇ Disclosure Schedule, ▇▇▇▇▇▇ and SCC shall conduct their
respective business in the ordinary, normal and usual course,
consistent with past practices. Without in any way limiting the
foregoing,
(a) Neither ▇▇▇▇▇▇ nor SCC (i) shall make any amendment to
its Bylaws or Articles of Incorporation; (ii) change or agree to
change its capitalization as of the date hereof; (iii) dispose of
any Intellectual Property Rights; (iv) enter into any operating
leases as lessor in excess of an aggregate of $750,000 per year
and for more than five (5) years; (v) discharge or satisfy any
claim, liability or obligation in excess of $3 million in any
one case or $3 million
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in the aggregate; or (vi) materially reduce the amount of any
material insurance coverage provided by existing insurance
policies;
(b) SCC shall use its best efforts to (i) preserve intact
the business organization of SCC and its subsidiaries and to keep
available the services of its and its subsidiaries' present
officers and key employees; (ii) preserve the goodwill of those
having business relationships with it and its subsidiaries; (iii)
pay and cause its subsidiaries to pay debts and taxes when due
subject to good faith disputes thereof, and pay or perform other
obligations when due; and (iv) give all notices and other
information required to be given to the employees of SCC, any
collective bargaining unit representing any group of employees of
SCC, and any applicable government authority under the WARN Act,
the National Labor Relations Act, the Code, the Consolidated
Omnibus Budget Reconciliation Act, and other applicable law in
connection with the transactions provided for in this Agreement;
(c) ▇▇▇▇▇▇ shall use its best efforts to (i) preserve
intact the business organization of ▇▇▇▇▇▇ and its subsidiaries
and to keep available the services of its and its subsidiaries'
present officers and key employees; (ii) preserve the goodwill
of those having business relationships with it and its
subsidiaries; (iii) pay and cause its subsidiaries to pay debts
and taxes when due subject to good faith disputes thereof, and
pay or perform other obligations when due; and (iv) give all
notices and other information required to be given by any
applicable law in connection with the transactions provided for
in this Agreement;
(d) Neither ▇▇▇▇▇▇ nor SCC nor any of their respective
subsidiaries shall (i) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof; (ii) make or change any
material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Return
or any amendment to a material Return (except as required by
law), enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or
assessment in respect to Taxes; (iii) revalue any of its
assets, including without limitation, writing down the value of
inventory or writing off notes or accounts receivable; or change
its fiscal year or its methods of accounting in effect at June
30, 1996, except as required by generally accepted accounting
principles as concurred in by such party's independent auditors;
or (iv) make any material change in its accounting principles;
(e) During the time between the execution of this Agreement
and the Effective Time, the separate pre-merger methodologies of
computing, determining the payment date and distributing
patronage dividends of each of the constituent corporations for
their respective members shall be maintained; and
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(f) SCC shall not purchase or dispose of any material long
term assets.
6.2 Compensation Plans. During the period from the
date of this Agreement and continuing until the Effective Time,
SCC agrees as to itself and its subsidiaries that it will not,
without the prior written consent of ▇▇▇▇▇▇ (except as required
by applicable law or pursuant to existing contractual
arrangements or solely to the extent necessary to make
compensation increases in the ordinary course of business
consistent with past practices or make available existing benefit
arrangements to new or promoted employees in the ordinary course
of business consistent with past practice): (a) enter into, adopt
or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation. employment, severance
or other employee benefit plan, agreement, trust, plan, fund or
other arrangement between SCC and one or more of its officers,
directors or employees (collectively, "Compensation Plans"), (b)
institute any new employee benefit, welfare program or
Compensation Plan, (c) make any change in any Compensation Plan
or other employee welfare or benefit arrangement or enter into
any written employment or similar agreement or arrangement with
any employee, or (d) enter into or renew any contract, agreement,
commitment or arrangement providing for the payment to any
director, officer or employee of compensation or benefits
contingent, or the terms of which are materially altered in favor
of such individual, upon the occurrence of any of the
transactions contemplated by this Agreement.
6.3 Current Information. From the date of this
Agreement to the Effective Time, each party will cause one or
more of its designated representatives to confer on a regular and
frequent basis (not less than semimonthly) with representatives
of the other party and to report the general status of its
ongoing operations and to deliver to each other (not less than
quarterly) unaudited consolidated balance sheets and related
consolidated statements of income, changes in stockholders equity
and changes in financial position for the period since the last
such report. Each party will promptly notify the other of any
material change in the normal course of its or its subsidiaries'
business or in its or its subsidiaries' properties.
6.4 Letters of SCC's and ▇▇▇▇▇▇'▇ Auditors. SCC shall
use all reasonable efforts to cause to be delivered to ▇▇▇▇▇▇ a
letter of C&L and ▇▇▇▇▇▇ shall use all reasonable efforts to
cause to be delivered to SCC a letter of Ernst & Young LLP
("E&Y"), ▇▇▇▇▇▇'▇ independent auditors, each such letter dated a
date within two business days before the date on which the
Registration Statement shall become effective and addressed to
▇▇▇▇▇▇ or SCC, as applicable, in form and substance reasonably
satisfactory to such recipient, and in scope and substance
consistent with applicable professional standards for letters
delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
Each of SCC and ▇▇▇▇▇▇ shall use reasonable efforts to cause to
be delivered to the other an update, dated the Closing Date, of
the letter of its independent auditors described in the preceding
sentence.
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6.5 Advice of Changes; Government Filings. Each party
shall confer on a regular and frequent basis with the other,
report on operational matters and shall promptly advise the other
both orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, could have, a
Material Adverse Effect on such party or which would cause or
constitute a material breach of any of the representations,
warranties or covenants of such party contained herein. ▇▇▇▇▇▇
and SCC shall make all UFOC filings, file all reports required to
be filed by each of them with the SEC between the date of this
Agreement and the Effective Time and shall deliver to the other
party copies of all such reports promptly after the same are
filed. Except where prohibited by applicable statutes and
regulations, and subject to Section 7.1 hereof, each party shall
promptly provide the other (or its counsel) with copies of all
other filings made by such party with any state or federal
government entity in connection with this Agreement or the
transactions contemplated hereby.
6.6 New Franchises. Nothing herein contained shall
restrict the ability of either party to add new members and/or
enter into licensing of additional retail programs, consistent
with historical practice.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access and Information.
(a) SCC and ▇▇▇▇▇▇ and their respective subsidiaries shall
each afford to the other and to the other's financial advisors,
legal counsel, accountants, consultants and other representatives
access during normal business hours throughout the period from
the date hereof to the Effective Time to all of its books,
records, properties, facilities, personnel commitments and
records (including but not limited to Returns) and, during such
period, each shall furnish promptly to the other all information
concerning its business, properties and personnel as such other
party may reasonably request. No investigation pursuant to this
Section 7.1 shall affect any representations or warranties made
herein or the conditions to the obligations of the respective
parties to consummate the Merger.
(b) All information furnished by SCC to ▇▇▇▇▇▇ or furnished
by ▇▇▇▇▇▇ to SCC pursuant hereto shall be treated as the sole
property of the party furnishing the information until
consummation of the Merger contemplated hereby. The parties will
hold any such information which is nonpublic in confidence.
(c) SCC and ▇▇▇▇▇▇ and their respective subsidiaries shall
each afford to the other and its representatives the opportunity
to perform such due diligence with respect to environmental
matters as it may determine, including
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without limitation such Phase I and Phase II and other
investigations and examinations as each of them deems necessary
or desirable.
(d) Prior to the Effective Time, SCC will perform a
physical inventory and deliver a true, accurate and complete copy
thereof.
7.2 No Solicitation of Transactions. Except as noted on
Section 7.2 of the SCC Disclosure Schedule or Section 7.2 of the
▇▇▇▇▇▇ Disclosure Schedule, from the date hereof until the
earlier of termination of this Agreement or consummation of the
Merger, neither SCC nor ▇▇▇▇▇▇ nor any of their subsidiaries
will, directly or indirectly, whether through any director,
officer, employee, financial advisor, legal counsel, accountant,
other agent or representative (as used in this Section 7.2,
"affiliates") or otherwise, (a) initiate, solicit or encourage,
or take any other action to facilitate any inquiries or the
making of any proposal with respect to, or (b) except to the
extent required in the exercise of the fiduciary duties of its
Board of Directors under applicable law as advised by independent
counsel in connection with an unsolicited proposal, engage or
participate in negotiations concerning, provide any nonpublic
information or data to, or have any discussions with, any person
other than a party hereto or their affiliates relating to, any
(i) acquisition, (ii) tender offer (including a self-tender
offer), (iii) exchange offer, (iv) merger, (v) consolidation,
(vi) acquisition of beneficial ownership of (or the right to vote
securities representing) 10% or more of the total voting power of
such entity or any of its subsidiaries, (vii) dissolution, (viii)
business combination, (ix) purchase of all or any significant
portion of the assets or any division of (or any equity interest
in) such entity or any subsidiary, or (x) any similar transaction
other than the Merger (such proposals, announcements, or
transactions being referred to as "Acquisition Proposals"). Each
party will notify the other orally (within one business day) and
in writing (as promptly as practicable) if any such Acquisition
Proposals (including the identity of the persons making such
proposals and, subject to the fiduciary duties of its Board of
Directors, the terms of such proposals) are received and furnish
a copy of any written proposal relating thereto.
7.3 Registration Statement. As promptly as practicable
after resolving SEC comments on the preliminary Joint Proxy
Statement/Prospectus, ▇▇▇▇▇▇ and SCC shall cooperate and use
reasonable efforts to have the Registration Statement declared
effective. ▇▇▇▇▇▇ shall also use reasonable efforts to take any
action required to be taken under state securities or blue sky
laws in connection with the issuance of the shares of TruServ
stock pursuant hereto. SCC shall furnish ▇▇▇▇▇▇ with all
information concerning SCC and the holders of its capital stock
and shall take such other action as ▇▇▇▇▇▇ may reasonably request
in connection with such Registration Statement and issuance of
shares of TruServ stock.
7.4 Joint Proxy Statement; Stockholder Approval. Each of
SCC and ▇▇▇▇▇▇, acting through their respective Boards of
Directors, shall, in
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accordance with applicable law and their respective Certificates
or Articles of Incorporation and By-Laws:
(a) promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the
Registration Statement becomes effective a meeting of its
stockholders for the purpose of voting to approve and adopt this
Agreement and shall use its best efforts, except to the extent
required in the exercise of the fiduciary duties of the Board of
Directors of SCC or ▇▇▇▇▇▇, as applicable, under applicable law
as advised by independent counsel, to obtain such stockholders
approval;
(b) except to the extent required in the exercise of the
fiduciary duties of the Board of Directors of SCC or ▇▇▇▇▇▇, as
applicable, under applicable law as advised by independent
counsel, recommend approval and adoption of this Agreement by the
stockholders of SCC or ▇▇▇▇▇▇, as applicable, and include in the
Joint Proxy Statement such recommendations, and take all lawful
action to solicit such approvals.
In addition, ▇▇▇▇▇▇ shall present to its stockholders such
increase in authorized ▇▇▇▇▇▇ Stock as may be necessary to
consummate the transactions contemplated hereby for the
stockholders' approval. The vote of ▇▇▇▇▇▇ stockholders required
to approve this Agreement shall be the favorable vote of a
majority of the shares of outstanding capital stock of ▇▇▇▇▇▇
entitled to vote thereon, and the vote of ▇▇▇▇▇▇ stockholders
required to approve the increase in authorized ▇▇▇▇▇▇ Stock shall
be the favorable vote of a majority of the shares of outstanding
capital stock of ▇▇▇▇▇▇ entitled to vote thereon.
As promptly as practicable, the parties shall prepare and
file with the SEC a preliminary Joint Proxy Statement and, after
consultation with each other, respond to any comments of the SEC
with respect to the preliminary Joint Proxy Statement and cause
the definitive Joint Proxy Statement to be mailed to SCC and
▇▇▇▇▇▇ stockholders. Whenever any event occurs which should be
set forth in an amendment or a supplement to the Joint Proxy
Statement or any filing required to be made with the SEC, each
party will promptly inform the other and will cooperate in filing
with the SEC and/or mailing to stockholders such amendment or
supplement. The Joint Proxy Statement, and all amendments and
supplements thereto, shall comply in all material respects with
applicable law and be in form and substance satisfactory to
▇▇▇▇▇▇ and SCC.
7.5 Post Merger Signage, Etc. After the Effective Time of
the Merger, members of TruServ shall continue to conduct their
businesses under the True Value, Servistar or Coast to Coast
names and marks (or other affiliated names and marks) used by
such members immediately prior to the Effective Time, unless use
of a different name or ▇▇▇▇ is permitted by TruServ. Members of
TruServ shall be permitted, to the extent determined by TruServ
to be feasible and practical, to cross order merchandise
manufactured or bearing any of the names utilized by ▇▇▇▇▇▇ or
SCC prior to the Merger and attendant services and
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systems necessary thereto, provided however that use of each
retail program's trade labels for paint, mowers and outdoor power
equipment will be limited to Members either previously associated
with that retail program or, if a new Member, electing to
affiliate with that retail program.
7.6 Store Competition. SCC and ▇▇▇▇▇▇ acknowledge that in
certain areas, there will be both ▇▇▇▇▇▇ and SCC stores operating
after the Effective Time of the Merger and specifically
acknowledge that none of such competing stores will be required
to relocate, terminate or otherwise alter or amend their
businesses, as a result of the Merger.
7.7 Antitrust Laws. As promptly as practicable, SCC and
▇▇▇▇▇▇ shall make all filings and submissions under the HSR Act
as may be reasonably required to be made in connection with this
Agreement and the transactions contemplated hereby. Subject to
Section 7.1 hereof, SCC will furnish to ▇▇▇▇▇▇, and ▇▇▇▇▇▇ will
furnish to SCC, such information and assistance as the other may
reasonably request in connection with the preparation of any such
filings or submissions. Subject to Section 7.1 hereof, SCC will
provide ▇▇▇▇▇▇, and ▇▇▇▇▇▇ will provide SCC, with copies of all
correspondence, filings or communications (or memoranda setting
forth the substance thereof) between such party or any of its
representatives, on the one hand, and any governmental agency or
authority or members of their respective staffs, on the other
hand, with respect to this Agreement and the transactions
contemplated hereby, except to the extent that ▇▇▇▇▇▇ or SCC is
advised by independent counsel that the provision of such
information would be inadvisable under applicable antitrust laws.
7.8 Takeover Statutes. If any Takeover Statute shall
become applicable to the transaction contemplated hereby, SCC and
the members of the Board of Directors of SCC shall grant such
approvals and take such actions as are necessary so that the
Merger and the transactions contemplated hereby may be commenced
as promptly as practicable in the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such
statute or regulation in the transaction contemplated hereby,
except, in each such case, as would not be consistent with the
fiduciary obligations of the Board of Directors as determined by
independent counsel.
7.9 Director and Officer Indemnification, Etc. ▇▇▇▇▇▇
agrees that for acts occurring prior to the Effective Time, all
rights to indemnification and advancement of expenses existing in
favor of the directors and officers of SCC (the "Indemnified
Parties") under the provisions existing on the date hereof of the
Articles of Incorporation, Bylaws and indemnification agreements
of SCC and its current and former subsidiaries shall survive the
Effective Time, and ▇▇▇▇▇▇ agrees to indemnify and advance
expenses to the Indemnified Parties to the full extent required
or permitted under the provisions existing on the date hereof of
SCC's Articles of Incorporation and Bylaws and indemnification
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agreements of SCC. The provisions of this Section 7.9 shall be
binding on ▇▇▇▇▇▇'▇ successors and assigns.
7.10 Public Announcements. The initial press release
relating to this Agreement shall be a joint press release and
thereafter, so long as this Agreement is in effect, ▇▇▇▇▇▇ and
SCC agree that they will each obtain the approval of the other
party prior to issuing any press release or any other written
communication (including any written communication to employees)
and that they will use their best efforts to consult with one
another before otherwise making any public statement or
responding to any press inquiry with respect to this Agreement or
the transactions contemplated hereby, except as may be required
by law, any governmental agency or in connection with any lawsuit
or legal process in connections with this Agreement or the
transactions contemplated hereby.
7.11 Expenses. If the Merger is consummated, TruServ
will pay up to $2 million of SCC's particular and peculiar
expenses incurred in connection therewith. If the Merger is not
consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be
paid by the party or parties incurring such expenses, except that
▇▇▇▇▇▇ and SCC shall share equally the expenses incurred in
connection with filings under the HSR Act, printing and mailing
the Joint Proxy Statement, all aspects of the Registration
Statement, including any registration or filing fees relating
thereto, both federal and state, the investment banking fee of
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, LLC, the human resources consulting fee
of Towers, Perrin, and any other expenses incurred for the mutual
benefit of both parties to the transaction.
7.12 Additional Agreements.
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using
all reasonable efforts to obtain all necessary waivers, consents
and approvals, and to effect all necessary registrations and
filings.
(b) ▇▇▇▇▇▇ and SCC each will cooperate with one another and
use all reasonable efforts to prepare all necessary documentation
to effect promptly all necessary filings and to obtain all
necessary permits, consents, approvals, orders and authorizations
of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by
this Agreement.
(c) Each party will keep the other party apprised of the
status of any inquiries made of such party by the Department of
Justice, the Federal Trade Commission, the SEC, or any other
governmental agency or authority or members
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of their respective staffs with respect to this Agreement or the
transactions contemplated herein.
(d) If at any time after the Effective Time, any further
assignments or assurances in law or any other things are
necessary or desirable to vest or to perfect or confirm of record
in TruServ the title to any property or rights of SCC, or
otherwise to carry out the provisions of this Agreement, the
officers and directors of TruServ are hereby authorized and
empowered on behalf of SCC, in the name of and on behalf of SCC,
to execute and deliver any and all things necessary or proper to
vest or to perfect or confirm title to such property or rights in
TruServ, and otherwise to carry out the purposes and provisions
of this Agreement.
7.13 FIRPTA. SCC shall, prior to the Effective Time,
provide ▇▇▇▇▇▇ with a properly executed Foreign Investment and
Real Property Tax Act of 1980 ("FIRPTA") Notification Letter
which states that shares of capital stock of SCC do not
constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying ▇▇▇▇▇▇'▇
obligations under Treasury Regulation Section 1.1445-2(c) (3). In
addition, simultaneously with delivery of such Notification
Letter, SCC shall have provided ▇▇▇▇▇▇, as agent for SCC, a form
of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) along
with written authorization for ▇▇▇▇▇▇ to deliver such notice form
to the Internal Revenue Service on behalf of SCC upon the Closing
of the Merger.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions, any one of which may
be waived by both SCC and ▇▇▇▇▇▇:
(a) Any waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been
terminated.
(b) The Registration Statement shall have become effective
in accordance with the provisions of the Securities Act, and
shall be effective at the Effective Time, and no stop order
suspending effectiveness of the Registration Statement shall have
been issued, no action, suit, proceedings or investigation by the
SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under
state securities laws relating to the issuance of the TruServ
Stock to be issued to SCC stockholders in connection with the
Merger shall have been received.
(c) This Agreement and the transactions contemplated hereby
shall have been approved and adopted (i) by the favorable vote of
a majority of the votes
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cast by the holders of each class or series of shares of
outstanding capital stock of SCC entitled to vote thereon at a
stockholders meeting at which a quorum is present in accordance
with the PBCL, and (ii) by the favorable vote of a majority of
the shares of outstanding capital stock, or where applicable,
classes thereof, of ▇▇▇▇▇▇ entitled to vote thereon.
(d) No preliminary or permanent injunction or other order
by any federal, state or foreign court of competent jurisdiction
which prohibits the consummation of the Merger shall have been
issued and remain in effect. No statute, rule, regulation,
executive order, stay, decree, or judgment shall have been
enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the
consummation of the Merger. Other than the filing of the Articles
and Certificate of Merger with the Secretaries of State of
Delaware and Pennsylvania, all authorizations, consents, orders
or approvals of, or declarations or filings with, and all
expirations of waiting periods imposed by, any governmental
entity (all of the foregoing, "Consents") which are necessary for
the consummation of the Merger, other than Consents the failure
to obtain which would not materially, adversely affect the
consummation of the Merger or in the aggregate have a Material
Adverse Effect on TruServ and its subsidiaries, taken as a whole,
shall have been filed, occurred or been obtained (all such
permits, approvals, filings and consents and the lapse of all
such waiting periods being referred to as the "Requisite
Regulatory Approvals") and all such Requisite Regulatory
Approvals shall be in full force and effect. ▇▇▇▇▇▇ shall have
received all state securities or blue sky permits and other
authorizations necessary to issue the shares of TruServ stock in
exchange for the shares of SCC Stock and to consummate the
Merger.
(e) There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any federal or state governmental
entity which, in connection with the grant of a Requisite
Regulatory Approval, imposes any condition or restriction upon
TruServ or its subsidiaries (or, in the case of any disposition
of assets required in connection with such Requisite Regulatory
Approval, upon ▇▇▇▇▇▇ or its subsidiaries or SCC or its
subsidiaries), including, without limitation, requirements
relating to the disposition of assets, which in any such case
would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger.
(f) The parties have a received a letter from ▇▇▇▇▇▇▇ ▇▇▇▇▇
& Company to the effect that, based upon and subject to certain
assumptions, it is their opinion as investment bankers that as of
the date of such letter, the exchange of TruServ stock for SCC
Stock is fair from a financial point of view to the holders of
such ▇▇▇▇▇▇ Stock and SCC Stock.
(g) SCC shall have received a favorable IRS private letter
ruling to
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the effect that the proposed Merger will comply with the
continuity of interest requirements for a tax free reorganization
under Section 368 of the Code.
8.2 Conditions to Obligation of SCC to Effect the Merger.
The obligation of SCC to effect the Merger shall be further
subject to the satisfaction at or prior to the Effective Time of
the following additional conditions, which may be waived by SCC:
(a) ▇▇▇▇▇▇ shall have performed in all material respects
its obligations under this Agreement required to be performed by
it at or prior to the Effective Time and the representations and
warranties of ▇▇▇▇▇▇ contained in this Agreement shall be true
and correct in all material respects at and as of the Effective
Time as if made at and as of such time, except as contemplated by
this Agreement, and SCC shall have received a certificate of the
President or an Executive Vice President of ▇▇▇▇▇▇ as to the
satisfaction of this condition.
(b) SCC shall have received the opinion, dated the Closing
Date, of ▇▇▇▇▇▇▇▇ & ▇▇▇▇, counsel for ▇▇▇▇▇▇, covering the
matters set forth in Exhibit 8.2 (b).
(c) There shall not have occurred following the date of
this Agreement and prior to the Closing Date any change, or any
event involving a prospective change, in ▇▇▇▇▇▇'▇ business
assets, financial condition or results of operation which has
had, or is reasonably likely to have, in the aggregate a Material
Adverse Effect (other than as a result of changes or proposed
changes in federal or state health care (including health care
reimbursement) laws or regulations of general applicability or
interpretations thereof, changes in generally accepted accounting
principles and changes that could, under the circumstances,
reasonably have been anticipated in light of disclosures made in
writing by ▇▇▇▇▇▇ to SCC prior to the execution of this
Agreement).
(d) The results of any environmental investigation
performed by SCC pursuant to Section 7.1(c) shall not have
revealed any condition likely to have a Material Adverse Effect
on TruServ.
8.3 Conditions to Obligation of ▇▇▇▇▇▇ to Effect the
Merger. The obligation of ▇▇▇▇▇▇ to effect the Merger shall be
further subject to the satisfaction at or prior to the Effective
Time of the following additional conditions, which may be waived
by ▇▇▇▇▇▇:
(a) SCC shall have performed in all material respects its
obligations under this Agreement required to be performed and
complied with by it at or prior to the Effective Time and the
representations and warranties of SCC contained in this Agreement
shall be true and correct in all material respects at and as of
the Effective Time as if made at and as of such time, except as
contemplated by this Agreement, and ▇▇▇▇▇▇ shall have received a
Certificate of
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the President or a Vice President of SCC as to the satisfaction
of this condition.
(b) (i) SCC shall have obtained the consent or approval of
each person whose consent or approval shall be required in order
to permit the succession by TruServ pursuant to the Merger to any
obligation, right or interest of SCC or any subsidiary under any
loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not
materially adversely affect the consummation of the transactions
contemplated hereby or in the aggregate have a Material Adverse
Effect on TruServ and its subsidiaries taken as a whole; and (ii)
▇▇▇▇▇▇ shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit
consummation of the Merger and the transactions contemplated
hereby in connection therewith, except those for which failure
to obtain such consents and approvals would not materially
adversely affect the consummation of the transactions
contemplated hereby or in the aggregate have a Material Adverse
Effect on TruServ and its subsidiaries taken as a whole;
(c) ▇▇▇▇▇▇ shall have received the opinion, dated the
Closing Date, of Springer, ▇▇▇▇ & ▇▇▇▇▇, counsel for SCC,
covering the matters set forth in Exhibit 8.3(c).
(d) There shall not have occurred following the date of
this Agreement and prior to the Closing Date any change, or any
event involving a prospective change, in SCC's business, assets,
financial condition or results of operation which has had, or is
reasonably likely to have, in the aggregate a Material Adverse
Effect (other than as a result of changes or proposed changes in
federal or state health care (including health care
reimbursement) laws or regulations of general applicability or
interpretations thereof, changes in generally accepted accounting
principles and changes that could, under the circumstances,
reasonably have been anticipated in light of disclosures made in
writing by SCC to ▇▇▇▇▇▇ prior to the execution of this
Agreement).
(e) The results of any environmental investigation
performed by ▇▇▇▇▇▇ pursuant to Section 7.1(c) shall not have
revealed any condition likely to have a Material Adverse Effect
on TruServ.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby abandoned at any time prior to the
Effective Time, whether before or after approval by the
stockholders of SCC or ▇▇▇▇▇▇:
(a) by mutual written consent of ▇▇▇▇▇▇ and SCC;
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(b) by either ▇▇▇▇▇▇ or SCC if the Merger shall not have
been consummated on or before December 31, 1997;
(c) by SCC if there shall have been any material breach of
a representation or warranty or material obligation of ▇▇▇▇▇▇
hereunder and, if such breach is curable, such default shall have
not been remedied within 10 days after receipt by ▇▇▇▇▇▇ of
notice in writing from SCC specifying such breach and requesting
that it be remedied; provided, that such 10 day period shall be
extended for so long as ▇▇▇▇▇▇ shall be making all reasonable
attempts to cure such breach, unless the breach is not
susceptible of a cure;
(d) by ▇▇▇▇▇▇ if there shall have been any material breach
of a representation or warranty or material obligation of SCC
hereunder and, if such breach is curable, such default shall not
have been remedied within 10 days after receipt by SCC of notice
in writing from ▇▇▇▇▇▇ specifying such breach and requesting that
it be remedied; provided, that such 10 day period shall be
extended for so long as SCC shall be making all reasonable
attempts to cure such breach, unless the breach is not
susceptible of a cure;
(e) (i) by ▇▇▇▇▇▇ if the Board of Directors of SCC shall
have (1) withdrawn or modified in a manner adverse to ▇▇▇▇▇▇ its
approval or recommendation (or failed to make such
recommendation) of this Agreement or the Merger, or shall have
resolved to do any of the foregoing, or (2) recommended an
Acquisition Proposal other than the Merger; and (ii) by SCC if
the Board of Directors of ▇▇▇▇▇▇ shall have (1) withdrawn or
modified in a manner adverse to SCC its approval or
recommendation (or failed to make such recommendation) of this
Agreement or the Merger, or shall have resolved to do any of the
foregoing, or (2) recommended an Acquisition Proposal other than
the Merger.
(f) by either ▇▇▇▇▇▇ or SCC if any court of competent
jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or any
other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement
pursuant to this clause (f) shall have used all reasonable
efforts to remove such order, decree or ruling;
(g) by ▇▇▇▇▇▇ or SCC, upon written notice to the other
party, if any approval of the stockholders of SCC required for
the consummation of the Merger submitted for approval shall not
have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any
adjournment thereof; or
(h) by SCC or ▇▇▇▇▇▇, upon written notice to the other
party, if any approval of the stockholders of ▇▇▇▇▇▇ required for
the consummation of the Merger submitted for approval shall not
have been obtained by reason of the
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failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment thereof.
9.2 Effect of Termination. In the event of termination of
this Agreement as provided above, this Agreement shall forthwith
become of no further effect and, except for a termination
resulting from a breach by a party to this Agreement, there shall
be no liability or obligation on the part of either ▇▇▇▇▇▇ or SCC
or their respective officers or directors (except as set forth in
Section 7.1 (b) hereof and except for Sections 7.11, 10.2, 10.6,
10.7, 10.8, 10.9 and 10.11 hereof which shall survive the
termination). Moreover, in the event of termination of this
Agreement pursuant to Section 9.1 (c) or 9.1(d), nothing herein
shall prejudice the ability of the non-breaching party from
seeking damages from any other party for any breach of this
Agreement, including, without limitation, attorneys' fees and the
right to pursue any remedy at law or in equity. Upon request
therefor, each party will redeliver or, at the option of the
party receiving such request, destroy all documents, work papers
and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing same.
9.3 Amendment. This Agreement may be amended by action
taken by ▇▇▇▇▇▇ and SCC at any time before or after approval
hereof by the stockholders of SCC or ▇▇▇▇▇▇, but, after any such
approval, no amendment shall be made which alters the terms of
conversion of SCC and ▇▇▇▇▇▇ securities herein provided, which
alters any term of the Certificate of Incorporation of TruServ as
set forth on Exhibit 2.1 hereto, or which in any way materially
adversely affects the rights of such stockholders, without the
further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto may (a) extend the time for
the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with
any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Such waiver shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties and Agreements.
No representations or warranties contained herein shall survive
beyond the Effective Time.
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10.2 Brokers.
(a) SCC represents and warrants to ▇▇▇▇▇▇ that no broker or
finder is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of SCC.
(b) ▇▇▇▇▇▇ represents and warrants to SCC that no broker or
finder is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of ▇▇▇▇▇▇.
10.3 Notices. Each notice, consent, request or other
communication required or permitted by this Agreement shall be in
writing and shall be deemed "given" to a party on the first to
occur of any of the following: (i) when delivered by hand to such
party, (ii) on the third business day after deposit in the U. S.
Mail, postage prepaid and certified, addressed to the party to
whom it is to be given at the address set forth below or (iii) on
the first business day after proper and timely deposit, charges
prepaid, with a nationally recognized next day delivery service
providing next day service to the location of the recipient, to
such party at the address set forth below:
(a) If to ▇▇▇▇▇▇, to:
▇▇▇▇▇▇ & Company
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) If to SCC, to:
Servistar Coast to Coast Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Springer, ▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Any party at any time may change the address at which he, she or
it is to be given notice by giving notice to the other party
thereof in the foregoing manner.
10.4 Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
10.5 Entire Agreement. This Agreement (including the
Exhibits, Schedules and other documents and instruments referred
to herein) constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral,
among the parties or any of them, with respect to the subject
matter hereof and thereof; and (b) except for Sections 5.23 and
7.9, is not intended to confer upon any other person any rights
or remedies hereunder.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without giving effect to the provisions thereof relating to
conflicts of law.
10.7 Jurisdiction and Venue. Each party hereto hereby
irrevocably submits to the jurisdiction of any Illinois state
court sitting in ▇▇▇▇ County or United States District Court
sitting in Chicago, Illinois in any action or proceeding arising
out of or relating to this Agreement, and each hereby irrevocably
agrees that all claims in respect of such action or proceeding
may be heard and determined in any such state or federal court.
Each party hereto hereby irrevocably waives any venue objection
it may have to any such action or proceeding arising out of or
relating to this Agreement in any Illinois state or United States
District Court sitting in Chicago, Illinois and any objection on
the grounds that any such action or proceeding in any such court
has been brought in an inconvenient forum.
10.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same
agreement.
10.9 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not effect the validity or
enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.
10.10 Investigation. The respective representations and
warranties of ▇▇▇▇▇▇ and SCC contained herein or in the
certificates or other documents delivered prior to the Closing
shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
10.11 Consents. For purposes of any provision of this
Agreement requiring, permitting or providing for the consent of
▇▇▇▇▇▇ or SCC, the written consent of the Chief Executive Officer
of ▇▇▇▇▇▇ or SCC, as the case may be, shall be sufficient to
constitute such consent.
10.12 Material Adverse Effect Defined. As used in this
Agreement, (a) the term "Material Adverse Effect" means, with
respect to SCC or ▇▇▇▇▇▇, as the case may be, a material adverse
effect on the business, assets, operations or
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54
results of operation or condition (financial or otherwise) of SCC
or ▇▇▇▇▇▇, in each case including its subsidiaries taken as a
whole, or on its ability to perform its obligations hereunder,
and (b) the word "subsidiary" when used with respect to any party
means any corporation or other organization, whether incorporated
or unincorporated, of which such party or any other subsidiary of
such party is a general partner (excluding partnerships the
general partnership interests of which held by such party or any
subsidiary of such party do not have a majority of the voting
interests in such partnership) or of which at least a majority of
the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such
corporations or other organizations is directly or indirectly
owned or controlled by such party and/or by any one or more of
the subsidiaries.
IN WITNESS WHEREOF, each of ▇▇▇▇▇▇ and SCC has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
▇▇▇▇▇▇ & COMPANY SERVISTAR COAST TO COAST
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Title: President and
Chief Executive Officer Chief Executive Officer
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