AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAVALIER HOMES, INC.,
CRIMSON ACQUISITION CORP.
AND
BELMONT HOMES, INC.
August 14, 1997
TABLE OF CONTENTS
ARTICLE I THE MERGER
1.1 The Merger...................................................2
1.2 Effective Time...............................................2
1.3 Effects of the Merger........................................2
1.4 Articles of Incorporation and By-laws........................2
1.5 Directors and Officers.......................................2
1.6 Parent Board Seats...........................................3
1.7 Additional Actions...........................................3
ARTICLE II CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock..................................3
2.2 Exchange Ratio; Fractional Shares............................4
2.3 Exchange of Certificates.....................................5
2.4 Treatment of Stock Options and Warrants......................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT
AND SUB
3.1 Organization and Standing....................................9
3.2 Subsidiaries.................................................9
3.3 Corporate Power and Authority...............................10
3.4 Capitalization of Parent....................................10
3.5 Conflicts, Consents and Approvals...........................11
3.6 Absence of Certain Changes..................................12
3.7 Parent SEC Documents........................................12
3.8 Taxes.......................................................12
3.9 Compliance with Law.........................................13
3.10 Registration Statement......................................14
3.11 Litigation..................................................14
3.12 Brokerage and Finder's Fees.................................14
3.13 Opinion of Financial Advisor................................14
3.14 Accounting Matters..........................................14
3.15 Tax-Free Reorganization.....................................15
3.16 Employee Benefit Plans......................................15
3.17 Contracts...................................................17
3.18 Labor Relations.............................................18
3.19 Permits.....................................................18
3.20 Environmental Matters.......................................18
3.21 No Undisclosed Liabilities..................................19
3.22 Restrictions on Business Activities.........................19
3.23 Title to Property...........................................20
3.24 Condition of Property.......................................20
3.25 Intellectual Property.......................................20
3.26 Interested Party Transactions...............................21
3.27 Insurance...................................................21
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3.28 Full Disclosure.............................................22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
4.1 Organization and Standing...................................22
4.2 Subsidiaries................................................22
4.3 Corporate Power and Authority...............................23
4.4 Capitalization of the Company...............................23
4.5 Conflicts; Consents and Approvals...........................24
4.6 Absence of Certain Changes..................................25
4.7 Company SEC Documents.......................................25
4.8 Taxes.......................................................25
4.9 Compliance with Law.........................................26
4.10 Registration Statement......................................26
4.11 Litigation..................................................27
4.12 Brokerage and Finder's Fees.................................27
4.13 Opinion of Financial Advisor................................27
4.14 Accounting Matters..........................................27
4.15 Tax-Free Reorganization.....................................27
4.16 Employee Benefit Plans......................................27
4.17 Contracts...................................................29
4.18 Labor Relations.............................................30
4.19 Permits.....................................................30
4.20 Environmental Matters.......................................30
4.21 Parent Stock Ownership......................................31
4.22 State Takeover Laws.........................................31
4.23 No Undisclosed Liabilities..................................31
4.24 Restrictions on Business Activities.........................32
4.25 Title to Property...........................................32
4.26 Condition of Property.......................................32
4.27 Intellectual Property.......................................33
4.28 Interested Party Transactions...............................34
4.29 Insurance...................................................34
4.30 Full Disclosure.............................................34
ARTICLE V COVENANTS OF THE PARTIES
5.1 Mutual Covenants............................................35
5.2 Covenants of Parent.........................................38
5.3 Covenants of the Company....................................39
ARTICLE VI CONDITIONS
6.1 Mutual Conditions...........................................43
6.2 Conditions to Obligations of the Company....................44
6.3 Conditions to Obligations of Parent and Sub.................46
ARTICLE VII TERMINATION AND AMENDMENT
7.1 Termination.................................................48
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7.2 Effect of Termination.......................................51
7.3 Amendment...................................................52
7.4 Extension; Waiver...........................................53
ARTICLE VIII MISCELLANEOUS
8.1 Survival of Representations and Warranties..................53
8.2 Notices.....................................................53
8.3 Interpretation..............................................54
8.4 Counterparts................................................54
8.5 Entire Agreement............................................55
8.6 Third Party Beneficiaries...................................55
8.7 Governing Law...............................................55
8.8 EXCLUSIVE REMEDIES. ........................................55
8.9 Assignment..................................................55
8.10 Expenses....................................................55
8.11 Incorporation of Disclosure Schedules.......................56
8.12 Severability................................................56
8.13 Subsidiaries................................................56
8.14 WAIVER OF JURY TRIAL........................................56
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made
and entered into as of the 14th day of August, 1997, by and among Cavalier
Homes, Inc., a Delaware corporation ("Parent"), Crimson Acquisition Corp., a
Mississippi corporation and a wholly owned subsidiary of Parent ("Sub"), and
Belmont Homes, Inc., a Mississippi corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Parent desires to combine with the business and
operations of the Company through the merger (the "Merger") of Sub with and into
the Company, with the Company as the surviving corporation, pursuant to which
each share of Company Common Stock (as defined in Section 4.4) outstanding at
the Effective Time (as defined in Section 1.2) will be converted into the right
to receive shares of Parent Common Stock (as defined in Section 3.4) as more
fully provided herein; and
WHEREAS, the Company desires to combine its business and
operations with the businesses of Parent and to become a wholly owned subsidiary
of Parent and for the holders of shares of Company Common Stock ("Company
Shareholders") to have a continuing equity interest in the combined businesses
of Parent and the Company; and
WHEREAS, the parties intend that the Merger constitute a
tax-free "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties intend that the Merger be accounted for
as a pooling-of-interests for financial reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share of the
Company's Common Stock, $0.10 par value per share (the "Company Common Stock"),
except shares of Company Common Stock held by persons who object to the Merger
and comply with all provisions of Mississippi law concerning the right of
holders of Company Common Stock to dissent from the Merger and obtain payment of
the fair value of their shares of Company Common Stock ("Dissenting
Shareholders"), shall be converted into the right to receive Parent Common Stock
and be exchanged for Parent Common Stock pursuant to the Exchange Ratio (as
defined in Section 2.1(b)), upon the terms and subject to the conditions set
forth herein; and
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have unanimously determined that the Merger in the manner
contemplated herein is fair to and in the best interests of their respective
stockholders and shareholders and, by duly adopted resolutions, have unanimously
approved and adopted this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
mutual and
dependent covenants and agreements hereinafter set forth,
Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
I.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of Section 79-4-11.01 et seq. of
the Mississippi Business Corporation Act (the "MBCA"), Sub shall be merged with
and into the Company as soon as practicable following the satisfaction or waiver
of the conditions set forth in Article VI, but in no event later than two
business days thereafter (the date of such merger being referred to herein as
the "Closing Date"), unless otherwise mutually agreed to by the parties hereto.
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue its existence under the laws of the State of
Mississippi. The Company, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
I.2 Effective Time. The Merger shall be consummated by
filing with the Secretary of State of the State of Mississippi (the "Mississippi
Secretary of State") articles of merger (the "Articles of Merger") in such form
as is required by and executed in accordance with the MBCA. The Merger shall
become effective (the "Effective Time") when the Articles of Merger have been
filed with the Mississippi Secretary of State or at such later time as may be
agreed by Parent and the Company and specified in the Articles of Merger.
Immediately prior to the filing referred to in this Section 1.2, a closing (the
"Closing") shall be held at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, PLLC
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, or such other place as the parties
may agree.
I.3 Effects of the Merger. The Merger shall have the
effects set forth in the MBCA.
I.4 Articles of Incorporation and By-laws.
The Restated Articles of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall remain the Articles of Incorporation of the
Surviving Corporation. The By-laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation.
I.5 Directors and Officers. From and after the Effective
Time, the officers of the Company shall be the officers of the Surviving
Corporation, and the directors of Sub shall be the directors of the Surviving
Corporation, in each case until their respective successors are duly elected and
qualified.
I.6 Parent Board Seats. Parent shall cause its Board of
Directors to be expanded by two seats as of the Effective Time, and such
directorships shall, as of such time, be filled by A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. and
▇▇▇▇ ▇▇▇▇▇▇▇ for a term expiring at Parent's next annual meeting of stockholders
following the Effective Time, subject to being renominated as a director at the
discretion of Parent's Board of Directors.
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I.7 Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that
any further deeds, assignments or assurances in law or any other acts are
necessary or desirable to carry out the provisions of this Agreement, the proper
officers and directors of Parent and the Company shall take all such necessary
action.
ARTICLE II
CONVERSION OF SECURITIES
II.1 Conversion of Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, Sub or the
Company:
(a) Each share of common stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted
into one share of common stock of the Surviving Corporation. Such
shares shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Each share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(c) and shares
subject to Section 2.1(d)) issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive 0.80
shares of Parent Common Stock (the "Exchange Ratio"), together with the
associated Parent Rights (as defined in Section 3.4; unless the context
otherwise requires, all references herein to Parent Common Stock
include the associated Parent Rights).
(c) Each share of capital stock of the Company held
in the treasury of the Company or held by Parent or any of its
subsidiaries shall be canceled and retired and no payment shall be made
in respect thereof.
(d) Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding Company Common Stock held by a
Dissenting Shareholder shall not be converted as described in Section
2.1(b) but shall become solely the right to receive payment of the fair
value of his shares in such amount as may be determined to be due to
such Dissenting Shareholder pursuant to the dissent provisions of the
MBCA; provided, however, that the Company Common Stock outstanding
immediately prior to the Effective Time of the Merger and held by a
Dissenting Shareholder who shall, after the Effective Time of the
Merger, withdraw his demand for appraisal or lose his, her or its right
of appraisal, in either case pursuant to the MBCA, shall be deemed to
be converted as of the Effective Time of the Merger into the right to
receive the Parent Common Stock at the Exchange Ratio. The Company
shall give Parent (i) prompt notice of any written notices of any
intent to demand payment and any written demands for payment of Company
Common Stock received by the Company and (ii) the opportunity to direct
all offers of payment, negotiations and proceedings with respect to any
such demands, provided that in such event Parent agrees to assume the
settlement or payment obligations of the Company. The Company shall
not, without the prior written consent of Parent, voluntarily make any
payment with respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
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(e) As of the Effective Time, all shares of Company
Common Stock not canceled pursuant to Section 2.1(c) shall no longer be
outstanding and shall cease to exist, and each holder of a certificate
or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive (i)
in the case of Shares subject to Section 2.1(b), (A) certificates
representing the number of whole shares of Parent Common Stock into
which such shares have been converted pursuant to Section 2.1(b), (B)
cash in lieu of fractional shares of Parent Common Stock in accordance
with Section 2.2, without interest, and (C) certain dividends and other
distributions in accordance with Section 2.3(c), without interest; and
(ii) in the case of shares subject to Section 2.1(d), payment of the
fair value of their shares in such amount as may be determined to be
due a Dissenting Shareholder pursuant to the dissent provisions of the
MBCA.
II.2 Exchange Ratio; Fractional Shares. No
certificates for fractional shares of Parent Common Stock shall be issued as a
result of the conversion provided for in Section 2.1(b). To the extent that an
outstanding share of Company Common Stock would otherwise have become a
fractional share of Parent Common Stock, the holder thereof, upon presentation
of such fractional interest represented by an appropriate certificate for
Company Common Stock to the Exchange Agent pursuant to Section 2.3, shall be
entitled to receive a cash payment therefor in an amount equal to the value
(determined with reference to the closing price of Parent Common Stock on the
New York Stock Exchange Composite Tape ("NYSE") on the last full trading day
immediately prior to the Effective Time) of such fractional interest. Such
payment with respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not a separately bargained for,
consideration. If more than one certificate representing shares of Company
Common Stock shall be surrendered for the account of the same holder, the number
of shares of Parent Common Stock for which certificates have been surrendered
shall be computed on the basis of the aggregate number of shares represented by
the certificates so surrendered. In the event that prior to the Effective Time
Parent or the Company shall declare a stock dividend or other distribution
payable in shares of its common stock or securities convertible into shares of
its common stock, or effect a stock split, reclassification, combination or
other change with respect to its common stock, the Exchange Ratio shall be
adjusted to reflect such dividend, distribution, stock split, reclassification,
combination or other change.
II.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time,
Parent shall make available to an exchange agent designated by Parent
and reasonably acceptable to the Company (the "Exchange Agent"),for the
benefit of Company Stockholders, for exchange in accordance with this
Section 2.3, certificates representing shares of Parent Common Stock
issuable pursuant to Section 2.1 in exchange for outstanding shares of
Company Common Stock and shall from time-to-time deposit cash in an
amount reasonably expected to be paid pursuant to Section 2.2 (such
shares of Parent Common Stock and cash, together with any dividends or
distributions with respect thereto, being hereinafter referred to as
the "Exchange Fund").
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(b) Exchange Procedures. Promptly after the
Effective Time, Parent shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 2.1(b) hereof (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and Company agree are reasonably necessary, and (ii)
instructions for effecting the surrender of the Certificates in exchange for
certificates repre- senting shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal, the holder of such Certificate shall be entitled
to receive in exchange therefor (x) a certificate representing that number of
shares of Parent Common Stock which such holder has the right to receive
pursuant to Section 2.1 and (y) a check representing the amount of cash in lieu
of fractional shares, if any, and unpaid dividends and distributions, if any,
which such holder has the right to receive pursuant to the provisions of this
Article II, after giving effect to any required withholding tax, and the shares
represented by the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on the cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, payable to holders of
shares of Company Common Stock. In the event of a transfer of ownership of
shares of Company Common Stock which is not registered on the transfer records
of the Company, a certificate representing the proper number of shares of Parent
Common Stock, together with a check for the cash to be paid in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, may
be issued to such transferee if the Certificate representing such shares of
Company Common Stock held by such transferee is presented to the Exchange Agent,
properly endorsed or otherwise in proper form for the transfer, accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer or other nonincome taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such Certificate have been paid. Until surrendered as contemplated by
this Section 2.3, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon surrender a
certificate representing shares of Parent Common Stock and cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, or
the right to receive payment of the fair value of his, her or its shares in such
amount as may be determined to be due to a Dissenting Shareholder pursuant to
the dissent provisions of the MBCA, in each case as provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared or made after the Effective Time with
respect to shares of Parent Common Stock having a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate, and no cash payment in lieu of fractional shares shall be
paid to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Subject to the effect of
Applicable Law (as defined in Section 3.9), following
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surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Parent Common Stock and
not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date subsequent
to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
shares of Parent Common Stock, less the amount of any withholding taxes
which may be required thereon.
(d) No Further Ownership Rights in Company Common
Stock.
All shares of Parent Common Stock issued upon surrender of Certificates
in accordance with the terms hereof (including any cash paid pursuant
to this Article II) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common
Stock represented thereby, and from and after the Effective Time there
shall be no further registration of transfers on the stock transfer
books of the Company of shares of Company Common Stock. If, after the
Effective Time, Certificates are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in
this Section 2.3.
(e) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to Company Shareholders for
six months after the Effective Time shall be delivered to Parent or the
Surviving Corporation, upon demand thereby, and holders of shares of
Company Common Stock who have not theretofore complied with this
Section 2.3 shall thereafter look only to Parent for payment of any
claim to shares of Parent Common Stock, cash in lieu of fractional
shares thereof, or dividends or distributions, if any, in respect
thereof.
(f) No Liability. None of Parent,
the Surviving Corporation or the Exchange Agent shall be liable to any
person in respect of any shares of Company Common Stock (or dividends
or distributions with respect thereto) or cash from the Exchange Fund
required to be delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered immediately prior to such
date on which any cash, any cash in lieu of fractional shares or any
dividends or distributions with respect to whole shares of Company
Common Stock in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Authority (as defined in
Section 3.5), any such cash, dividends or distributions in respect of
such Certificate shall, to the extent permitted by Applicable Law and
without any further action on the part of any party, become the
property of Parent, free and clear of all claims or interest of any
person previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange Fund, as directed by
Parent in a manner consistent with Parent's investment of its own funds,
on a daily basis. Any interest and other income
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resulting from such investments shall be paid to
Parent. In the event the Exchange Fund shall realize a loss on any such
investment, Parent shall promptly thereafter deposit, or cause to be
deposited, in such Exchange Fund on behalf of the Surviving Corporation
cash in an amount equal to such loss.
II.4 Treatment of Stock Options and Warrants.
(a) At the Effective Time, each unexpired and
unexercised option or right to purchase shares of Company Common Stock
granted (or subject to being granted on a contingent basis) under the
Company's various stock option plans in effect on the date hereof to
current or former directors, officers, employees, consultants or
independent contractors of the Company or its subsidiaries (each, a
"Company Option" and collectively, "Company Options") shall be assumed
by Parent and converted, without further action, into an option (an
"Adjusted Option") to acquire, on the same terms and conditions as were
applicable under the Company Options and the plans under which they
were issued, prior to the Effective Time (including without limitation
any provisions for acceleration), that number of shares of Parent
Common Stock equal to the number of shares of Company Common Stock
issuable immediately prior to the Effective Time upon exercise of the
Company Options (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exercise
price equal to the exercise price which existed under the corresponding
Company Options divided by the Exchange Ratio. In addition,
notwithstanding the foregoing, each Company Option which is an
"incentive stock option" shall be adjusted as required by Section 424
of the Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within
the meaning of Section 424(h) of the Code. As of the Effective Time,
all references to the Company in each Company Option shall be deemed to
be references to Parent, where appropriate, and Parent shall assume the
obligations of the Company under the Company's 1994 Incentive Stock
Plan, as amended, but not under the 1994 Non-qualified Stock Option
Plan for Non-Employee Directors, which plan will be terminated as of
the Effective Time (but without adversely affecting the holders of
outstanding options under such plan). On the Closing Date, Parent will
deliver to the holders of Company Options appropriate notices setting
forth such holders' rights pursuant thereto together with written
evidence of Parent's acceptance and assumption of all Company Options.
(b) At the Effective Time, that certain warrant to
purchase 75,000 shares of Company Common Stock at $14.67 per share
issued to The ▇▇▇▇▇▇▇ Companies, a Florida corporation, on October 25,
1996 (the " ▇▇▇▇▇▇▇ Warrant"), shall be assumed by Parent and shall
become a warrant (the "Adjusted Warrant") to acquire, on the same terms
and conditions as were applicable to the ▇▇▇▇▇▇▇ Warrant prior to the
Effective Time, that number of shares of Parent Common Stock equal to
the number of shares of Company Common Stock issuable immediately prior
to the Effective Time upon exercise of the ▇▇▇▇▇▇▇ Warrant (without
regard to actual restrictions on exercisability) multiplied by the
Exchange Ratio, with an exercise price per share equal to $14.67
divided by the Exchange Ratio. As of the Effective Time, all references
to the Company in the ▇▇▇▇▇▇▇ Warrant shall be deemed to be references
to Parent, where appropriate.
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(c) In connection with the issuance of Adjusted
Options and the Adjusted Warrant, Parent shall (i) reserve for issuance
the number of shares of Parent Common Stock that will become subject to
Adjusted Options and the Adjusted Warrant pursuant to this Section 2.4
and (ii) from and after the Effective Time, upon exercise of Adjusted
Options and the Adjusted Warrant, make available for issuance all
shares of Parent Common Stock covered thereby, subject to the terms and
conditions applicable thereto. Parent agrees to file with the
Securities and Exchange Commission (the "Commission") as soon as
reasonably practicable after the Closing Date, an amendment to a
registration statement on Form S-8, or a new registration statement on
Form S-8, or other appropriate form under the Securities Act of 1933
(together with the rules and regulations thereunder, the "Securities
Act") to register the issuance of the shares of Parent Common Stock
issuable upon exercise of the Adjusted Options and use its reasonable
efforts to cause such registration statement to remain effective until
the exercise or expiration of such options. In addition, Parent will
cause that certain Registration Rights Agreement between the Company
and The ▇▇▇▇▇▇▇ Companies, dated October 25, 1996, to be complied with
respecting shares of Parent Company Stock issuable pursuant to the
Adjusted Warrant, and will, on or prior to or immediately after the
Effective Time, file a resale registration statement with the
Commission concerning shares of Parent Common Stock issuable upon
exercise of the ▇▇▇▇▇▇▇ Warrant.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
In order to induce the Company to enter into this Agreement,
Parent and Sub hereby represent and warrant to the Company that the statements
contained in this Article III are true, correct and complete.
III.1 Organization and Standing. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation with full power and
authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
Parent and its subsidiaries is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on Parent. The copies
of the Amended and Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and the Amended and Restated By-laws (the
"By-laws") (or similar organizational documents) of Parent and each of its
subsidiaries, which have previously been made available to the Company, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
III.2 Subsidiaries.
(a) As of the date hereof, other than immaterial interests,
Parent does not own, directly or indirectly, any equity or other ownership
interest in any corporation, partnership, joint
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venture or other entity or enterprise, except as set forth in
Section 3.2 to the disclosure schedule (the "Parent Disclosure Schedule")
delivered by Parent to the Company and dated the date hereof. Section 3.2 to the
Parent Disclosure Schedule sets forth as to each subsidiary of Parent: (i) its
name and jurisdiction of incorporation or organization, (ii) its authorized
capital stock or share capital, and (iii) the number of issued and outstanding
shares of its capital stock or share capital. Except as set forth in Section 3.2
to the Parent Disclosure Schedule, each of the outstanding shares of capital
stock of each of Parent's subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned, directly or indirectly, by Parent free and
clear of all liens, pledges, security interests, claims or other encumbrances,
other than liens imposed by law which could not reasonably be expected to have,
in the aggregate, a material adverse effect on Parent. All of the outstanding
shares of the capital stock of Sub are directly owned by Parent. Other than as
set forth in Section 3.2 to the Parent Disclosure Schedule, there are no
outstanding shares of capital stock or subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer of any securities of any
subsidiary of Parent, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of any
subsidiary of Parent; and no subsidiary of Parent has any obligation of any kind
to issue any additional securities or to pay for securities of any subsidiary of
Parent or any predecessor thereof. As used in this Section 3.2, "capital stock"
shall include capital stock or other ownership interests having by their terms
ordinary voting power to elect directors or others performing similar functions
with respect to such entity.
(b) Neither Parent nor any Affiliate (as defined in Section
79-25-3(a) of the Mississippi Shareholder Protection Act) of Parent is an
Interested Shareholder (as defined in Section 79-25-3(l) of the Mississippi
Shareholder Protection Act) with respect to the Company.
III.3 Corporate Power and Authority.
(a) Parent has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of the Share Issuance (as
defined below) by the requisite votes of the stockholders of Parent
(the "Parent Stockholders") in accordance with the rules of the NYSE
and this Agreement. The execution and delivery of this Agreement by
Parent and the consummation by Parent of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of
Parent. The Board of Directors of Parent has directed that the issuance
of Parent Common Stock pursuant hereto (the "Share Issuance") be
submitted to the Parent Stockholders for approval at a stockholders
meeting and, except for the approval of the Share Issuance by the
Parent Stockholders in accordance with the rules of the NYSE, no other
corporate approvals on the part of Parent are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Parent
and constitutes a valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms.
(b) Sub has full corporate power and authority
to execute and deliver
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this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Sub and the consummation by Sub of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Sub
and by Parent as the sole stockholder of Sub, and no other corporate
proceedings on the part of Sub are necessary to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Sub and constitutes a valid and
binding obligation of Sub, enforceable against Sub in accordance with
its terms.
III.4 Capitalization of Parent. Parent's authorized capital
stock consists solely of (a) 50,000,000 shares of common stock, $0.10 par value
per share ("Parent Common Stock"), and (b) 500,000 shares of preferred stock,
$0.01 par value per share ("Parent Preferred Stock"), of which 200,000 shares
have been designated as Series A Junior Participating Preferred Stock (the
"Parent Series A Preferred Stock"). As of August 11, 1997, (i) 12,283,127 shares
of Parent Common Stock were issued and outstanding, (ii) 1,457,985 shares of
Parent Common Stock were issuable upon the exercise or conversion of options,
warrants or convertible securities granted or issuable by Parent, and (iii) no
shares of Parent Preferred Stock were issued and outstanding. Since August 11,
1997, Parent has not issued any shares of its capital stock except upon the
exercise of such options, warrants or convertible securities. Each outstanding
share of Parent capital stock is, and all shares of Parent Common Stock to be
issued in connection with the Merger will be at the time of issuance, duly
authorized and validly issued, fully paid and nonassessable and free of any
preemptive rights. As of the date hereof, other than the rights ("Parent
Rights") issued under the rights agreement, dated as of October 23, 1996,
between Parent and ChaseMellon Shareholder Services, L.L.C. (the "Parent Rights
Agreement"), and other than as set forth above, in the Parent SEC Documents (as
defined in Section 3.7) or in Section 3.4 to the Parent Disclosure Schedule,
there are no outstanding shares of capital stock or subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or transfer by Parent of
any securities of Parent, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of Parent; and
Parent has no obligation of any kind to issue any additional securities or to
pay for securities of Parent or any predecessor. Parent has no outstanding
bonds, debentures, notes or other similar obligations the holders of which have
the right to vote generally with holders of Parent Common Stock.
III.5 Conflicts, Consents and Approvals. Neither the execution
and delivery of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will:
(a) conflict with or violate any provision of the
Certificate of Incorporation or By-laws (or any similar organizational
document) of Parent or any subsidiary of Parent;
(b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any party (with the giving of
notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the termination,
acceleration or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its subsidiaries under, any of the terms,
conditions or provisions of any
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note, bond, mortgage, indenture, deed of trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by
which any of their respective properties or assets may be bound;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by Parent or any of its affiliates
with, any third party or any court, arbitral tribunal, administrative
agency or commission or other governmental or regulatory body, agency,
instrumentality or authority (a "Governmental Authority"), other than
(i) approval of the Share Issuance by Parent Stockholders, (ii)
approval of the listing of the shares of Parent Common Stock to be
issued in the Merger on the NYSE, subject to official notice of
issuance, (iii) actions required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and (iv) registrations or other
actions required under federal and state securities laws as are
contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 3.5 to the Parent Disclosure Schedule and, in the case of (b),
(c) and (d), for any of the foregoing that would not, in the aggregate, have a
material adverse effect on Parent or that would not prevent or delay the
consummation of the transactions contemplated hereby.
III.6 Absence of Certain Changes. Except as set forth in
the Parent SEC Documents filed with the Commission as of the date hereof, since
December 31, 1996, (i) each of Parent and its subsidiaries has conducted its
business in the ordinary course, consistent with past practice, (ii) no event
has occurred which has or which would reasonably be expected to have, in the
aggregate, a material adverse effect on Parent (but, excluding for such
purposes, events that are generally applicable in Parent's and the Company's
industry or industries and the United States economy), and (iii) neither Parent
nor any of its subsidiaries has taken any action which would be prohibited by
Section 5.2(a).
III.7 Parent SEC Documents. Each of Parent and its
subsidiaries has timely filed with the Commission all forms, reports,
schedules, statements, exhibits and other documents required to be filed by it
since December 31, 1994 under the Securities Exchange Act of 1934 (together with
the rules and regulations thereunder, the "Exchange Act") or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Parent SEC Documents"). The Parent SEC Documents, including,
without limitation, any financial statements or schedules included therein, at
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements (including the related notes) of Parent
included in the Parent SEC Documents were prepared in accordance with generally
accepted accounting principles
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applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and fairly present (subject
in the case of unaudited statements to the absence of footnotes and to normal,
recurring and year-end audit adjustments) in all material respects the
consolidated financial position of Parent as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended.
III.8 Taxes. Except as set forth in the Parent SEC Documents,
and except with respect to any such matters that would not, in the aggregate,
have a material adverse effect on Parent, (i) each of Parent and its
subsidiaries has duly filed all federal and state income tax returns and all
other material tax returns (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by Parent
or any of its subsidiaries prior to the date hereof and will file, on or before
the Effective Time, all such returns which are required to be filed after the
date hereof and on or before the Effective Time, (ii) all of the foregoing
returns and reports are true and correct in all material respects, and each of
Parent and its subsidiaries has paid or, prior to the Effective Time, will pay
all taxes required to be paid in respect of the periods covered by such returns
or reports to any federal, state, foreign, local or other taxing authority,
(iii) each of Parent and its subsidiaries has paid or made adequate provision
(in accordance with generally accepted accounting principles) in the financial
statements of Parent included in the Parent SEC Documents for all taxes payable
in respect of all periods ending on or prior to June 30, 1997, (iv) neither
Parent nor any of its subsidiaries will have any material liability for any
taxes in excess of the amounts so paid or reserves so established and neither
Parent nor any of its subsidiaries is delinquent in the payment of any material
tax, assessment or governmental charge and none of them has requested any
extension of time within which to file any returns in respect of any fiscal year
which have not since been filed, (v) no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed in writing
(tentatively or definitely), in each case, by any taxing authority, against
Parent or any of its subsidiaries for which there are not adequate reserves in
its financial statements (in accordance with generally accepted accounting
principles), (vi) as of the date of this Agreement, there are no extensions or
waivers or pending requests for extensions or waivers of the time to assess or
collect any such tax, (vii) the federal income tax returns of Parent have not
been audited, and the federal income tax returns of its subsidiaries have not
been audited, since fiscal year ended December 31, 1991, (viii) neither Parent
nor any of its subsidiaries is or has been a party to any tax sharing agreement
with any corporation which is not currently a member of the affiliated group of
which Parent is currently a member, (ix) there are no liens for taxes on any
assets of Parent or any of its subsidiaries (other than statutory liens for
taxes not yet due or liens for which adequate reserves have been established in
its financial statements in accordance with generally accepted accounting
principles), (x) Parent and its subsidiaries have withheld and paid (and until
the Effective Time will withhold and pay) all income, social security,
unemployment, and all other material payroll taxes required to be withheld
(including, without limitation, pursuant to Sections 1441 and 1442 of the Code
or similar provisions under foreign law) and paid in connection with amounts
paid to any employee, independent contractor, stockholder, creditor or other
third party, and (xi) Parent has not filed an election under Section 341(f) of
the Code to be treated as a consenting corporation. For purposes of this
Agreement, the term "tax" shall include all federal, state, local and foreign
taxes including interest and penalties thereon and additions to tax. In
addition, the term "tax return" shall mean any return, declaration, statement,
report, schedule, certificate, form information return, or any other document
(including any related or supporting
E-12
information) required to be supplied to, or filed with, a
taxing authority (foreign or domestic) in connection with taxes.
III.9 Compliance with Law. Each of Parent and its
subsidiaries is in compliance with, and at all times since December 31,
1993 has been in compliance with, all applicable laws, statutes, orders, rules,
regulations, policies or guidelines promulgated, or judgments, decisions or
orders entered by any Governmental Authority (collectively, "Applicable Law")
relating to it or its business or properties, except for any such failures to be
in compliance therewith which, in the aggregate, would not have a material
adverse effect on Parent.
III.10 Registration Statement. None of the information
provided by Parent or any of its subsidiaries for inclusion in the registration
statement on Form S-4 to be filed with the Commission by Parent under the
Securities Act, including the prospectus (as amended, supplemented or modified,
the "Prospectus") relating to shares of Parent Common Stock to be issued in the
Merger and the joint proxy statement and form of proxies relating to the vote of
Company Shareholders with respect to the Merger and the Parent Stockholders with
respect to the Share Issuance (collectively and as amended, supplemented or
modified, the "Proxy Statement") contained therein (such registration statement
as amended, supplemented or modified, the "Registration Statement"), at the time
the Registration Statement becomes effective or, in the case of the Proxy
Statement, at the date of mailing, will 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. Each of the
Registration Statement and Proxy Statement (except for such portions thereof
that relate only to or were supplied by the Company and its subsidiaries as to
which no representation is made hereby), will comply in all material respects
with the provisions of the Securities Act and the Exchange Act.
III.11 Litigation. Except as set forth in the Parent SEC
Documents or Section 3.11 of the Parent Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation (an "Action") pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries which
could reasonably be expected to have a material adverse effect on Parent.
Neither Parent nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree which could reasonably be expected to have a material
adverse effect on Parent.
III.12 Brokerage and Finder's Fees. Except for Parent's
obligation to Equitable Securities Corporation ("Parent Broker") (a copy of the
agreement relating to such obligation having previously been provided to the
Company), Parent has not incurred and will not incur, directly or indirectly,
any brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement. Other than the foregoing obligation to Parent
Broker and the obligation of the Company to the Company Broker (as hereinafter
defined), Parent is not aware of any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiation of this Agreement or in connection with the transactions
contemplated hereby.
III.13 Opinion of Financial Advisor. Parent has received
the opinion of Parent Broker to the effect that, as of the date hereof, the
Exchange Ratio is fair to Parent from a
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financial point of view.
III.14 Accounting Matters. To the best knowledge of Parent,
neither Parent nor any of its affiliates has taken or agreed to take any
action that (without giving effect to any actions taken or agreed to be taken by
the Company or any of its affiliates) would prevent Parent from accounting for
the business combination to be effected by the Merger as a pooling-of-interests
for financial reporting purposes in accordance with Accounting Principles Board
Opinion No. 16, the interpretative releases issued pursuant thereto, and the
pronouncements of the Commission thereon.
III.15 Tax-Free Reorganization. To the best knowledge of
Parent, neither Parent nor any of its subsidiaries has taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
III.16 Employee Benefit Plans.
(a) For purposes of this Agreement, the following
terms have the definitions given below: "Controlled Group Liability"
means any and all liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code, and (v) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the
Parent Plans with respect to Parent, or Company Plans (as defined
below) with respect to the Company.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is a member
of a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
"Parent Plans" means all employee benefit plans,
programs, policies, practices, and other arrangements providing
benefits to any employee or former employee or beneficiary or dependent
thereof, whether or not written, and whether covering one person or
more than one person, sponsored or maintained by Parent or any of its
subsidiaries or to which Parent or any of its subsidiaries contributes
or is obligated to contribute. Without limiting the generality of the
foregoing, the term. "Parent Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of ERISA and all
employee pension benefit plans within the meaning of Section 3(2) of
ERISA.
(b) Section 3.16 to the Parent Disclosure Schedule
lists all Parent Plans. With respect to each Parent Plan, Parent has
made available to the Company a true, correct and complete copy of: (i)
each writing constituting a part of such Parent Plan,
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including without limitation all plan documents,
benefit schedules, trust agreements, and insurance contracts and other
funding vehicles; (ii) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (iii) the current summary plan
description, if any; (iv) the most recent annual financial report, if
any; and (v) the most recent determination letter from the IRS, if any.
(c) Except as set forth in Section 3.16(c) to the
Parent Disclosure Schedule, the Internal Revenue Service has issued a
favorable determination letter or opinion letter with respect to each
Parent Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code (a "Qualified Parent Plan") and
there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Qualified
Parent Plan or the related trust.
(d) All contributions required to be made to any
Parent Plan by Applicable Law or by any plan document or other
contractual undertaking, and all premiums due or payable with respect
to insurance policies funding any Parent Plan, for any period through
the date hereof have been timely made or paid in full and through the
Closing Date will be timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof or the Closing
Date, as applicable, have been or will be fully reflected in Parent's
financial statements contained in the Parent SEC Documents.
(e) Except as set forth in Section 3.16(e) to the
Parent Disclosure Schedule, Parent and its subsidiaries have complied,
and are now in compliance, in all material respects, with all
provisions of ERISA, the Code and all laws and regulations applicable
to the Parent Plans. There is not now, and there are no existing,
circumstances that standing alone could give rise to any requirement
for the posting of security with respect to a Parent Plan or the
imposition of any lien on the assets of Parent or any of its
subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 3.16(f) to the
Parent Disclosure Schedule, no Parent Plan is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code. Except as set
forth in Section 3.16(f) to the Parent Disclosure Schedule, no Parent
Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan"), nor has Parent or any of its subsidiaries or any of
their respective ERISA Affiliates, at any time within five years before
the date hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no
existing, circumstances that could result in, any Controlled Group
Liability that would be a liability of Parent or any of its
subsidiaries following the Closing, other than normal funding
responsibilities. Without limiting the generality of the foregoing,
neither Parent nor any of its subsidiaries nor any of their respective
ERISA affiliates has engaged in any transaction described in Section
4069 or Section 4204 of ERISA.
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(h) Except as set forth in Section 3.16(h) to the
Parent Disclosure Schedule and except for health continuation coverage
as required by Section 4980B of the Code or Part 6 of Title I of ERISA,
neither Parent nor any of its subsidiaries has any liability for life,
health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
(i) Except as set forth in Section 3.16(i) to the
Parent Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any employee
or director or former employee or former director of Parent or any of
its subsidiaries, pursuant to a "change in control" or "change of
control" or otherwise. Without limiting the generality of the foregoing
and except as set forth in Section 3.16(i) to the Parent Disclosure
Schedule, no amount paid or payable by Parent or any of its
subsidiaries in connection with the transactions contemplated hereby
either solely as a result thereof or as a result of such transactions
in conjunction with any other events will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Parent
Plans, any fiduciaries thereof with respect to their duties to the
Parent Plans or the assets of any of the trusts under any of the Parent
Plans which could reasonably be expected to result in any material
liability of Parent or any of its subsidiaries to the Pension Benefit
Guaranty Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
III.17 Contracts. Section 3.17 of the Parent Disclosure
Schedule lists all agreements, arrangements, guaranties, leases, contracts and
understandings, whether written or oral, to which Parent or its subsidiaries, or
any of their respective assets, business, or operations, is a party, or is bound
or affected by, or receives benefits under, but not including the following: (i)
those cancelable without penalty on notice of ninety (90) days or less and
pursuant to which aggregate annual payments do not exceed $50,000; (ii) those
with a remaining term of less than one year and pursuant to which aggregate
annual payments do not exceed $50,000; (iii) those for the purchase and sale of
raw materials and supplies and finished goods and repurchase agreements with
dealers' floor plan lenders (forms of which have been provided to the Company)
in the ordinary course of business on terms customary in the industry and
consistent with past practices; (iv) those that do not require the Company to
make aggregate annual payments of more than $25,000; and (v) as otherwise
reflected in Parent SEC Documents (the "Parent Contracts"). With respect to each
Parent Contract and each such agreement, arrangement, guaranty, lease, contract
or understanding excluded from the definition of Parent Contract, and except as
set forth in Section 3.17 of the Parent Disclosure Schedule, none of the Parent,
any of its subsidiaries, or, to the knowledge of the Parent, any other party
thereto is in violation of or in default in respect of, nor has there occurred
an event or condition which with the passage of time or giving of notice (or
both) would constitute a default by the Parent under, any Parent Contract to
which it is a party, except such violations or defaults under such Parent
Contracts which, in the aggregate,
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would not have a material adverse effect on the Parent.
III.18 Labor Relations. There is no unfair labor practice
complaint against Parent or any of its subsidiaries pending before the NLRB and
there is no labor strike, dispute, slowdown or stoppage, or any union organizing
campaign, actually pending or, to the knowledge of Parent, threatened against or
involving Parent or any of its subsidiaries, except for any such proceedings
which would not have a material adverse effect on Parent. Except as disclosed in
the Parent SEC Documents or Section 3.18 to the Parent Disclosure Schedule,
neither Parent nor any of its subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. To the knowledge of Parent, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of Parent
or any of its subsidiaries.
III.19 Permits. Each of Parent and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
(collectively, "Permits") necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted, except for any such
Permits the failure of which to possess, in the aggregate, would not reasonably
be expected to have a material adverse effect on Parent.
III.20 Environmental Matters.
(a) As used herein, the term "Environmental Laws"
means all applicable federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances
or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all applicable authorizations, codes, decrees,
injunctions, judgments, licenses, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder to the extent
applicable to the specific operations of Parent or the Company, as
applicable.
(b) Except as set forth in the Parent SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys conducted with respect to the facilities
operated by Parent and its subsidiaries, copies of which have been made
available to the Company, there are, with respect to Parent, its
subsidiaries or any predecessor of the foregoing, no past or present
violations of Environmental Laws, nor any releases of any materials
into the environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state or local laws, other than those which,
in the aggregate, would not reasonably be expected to have a material
adverse effect on Parent, and none of Parent
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and its subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or
threatened in connection with any of the foregoing that, if adversely
determined, could reasonably be expected to have a material adverse
effect on Parent.
(c) Except as set forth in the Parent SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys conducted with respect to the facilities
operated by Parent and its subsidiaries, copies of which have been made
available to the Company, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by Parent or
any of its subsidiaries and no Hazardous Materials were released on or
about any real property previously owned, leased or used by Parent or
any of its subsidiaries during the period the property was so owned,
leased or used, except in the normal course of Parent's business, other
than those which, in the aggregate, would not reasonably be expected to
have a material adverse effect on Parent.
III.21 No Undisclosed Liabilities. Except as set forth in
Section 3.21 of the Parent Disclosure Schedule or the Parent SEC Documents,
neither Parent nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in Parent's audited balance sheet (including any related
notes thereto) for the fiscal year ended December 31, 1996, included in Parent's
1996 Annual Report to Stockholders (the "1996 Balance Sheet"), (b) incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected on the 1996 Balance Sheet, (c) in the
aggregate adequately provided for in Parent's unaudited balance sheet (including
any notes thereto) for the period ended June 27, 1997, included in Parent's
Quarterly Report on Form 10-Q for such period or incurred since December 31,
1996 in the ordinary course of business and consistent with past practice, (d)
incurred in connection with this Agreement, or (e) which would not reasonably be
expected to have a material adverse effect on Parent.
III.22 Restrictions on Business Activities. Except for this
Agreement, or as set forth in Section 3.22 of the Parent Disclosure Schedule or
the Parent SEC Documents, to the best of Parent's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon Parent or any of
its subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing any business practice of Parent or any of its
subsidiaries, acquisition of property by Parent or any of its subsidiaries or
the conduct of business by Parent or any of its subsidiaries as currently
conducted or as proposed to be conducted by Parent, except for any prohibition
or impairment as would not reasonably be expected to have a material adverse
effect on Parent.
III.23 Title to Property. Except as set forth in Section 3.23
of the Parent Disclosure Schedule, Parent and each of its subsidiaries have good
and marketable title to all of their properties and assets, real and personal,
tangible and intangible, free and clear of all liens, charges and encumbrances,
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which
would not reasonably be expected to have a material adverse effect on Parent;
and, to the knowledge of Parent, all leases pursuant to which
E-18
Parent or any of its subsidiaries lease from others material
amounts of real or personal property are in good standing, valid and effective
in accordance with their respective terms, and there is not, to the knowledge of
Parent, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default), except where the lack of such good standing, validity and
effectiveness or the existence of such default or event of default would not
reasonably be expected to have a material adverse effect on Parent.
III.24 Condition of Property.
(a) Except as set forth in Section 3.24 of the Parent
Disclosure Schedule, each of the buildings, improvements and structures
located upon any real property and land owned by Parent or any of its
subsidiaries ( collectively, the "Owned Property"), and each of the
buildings, structures and premises leased by the Parent or any of its
subsidiaries (the "Leased Premises"), is in reasonably good repair and
operating condition, and Parent has not received any notice of or
writing referring to any requirements by any insurance company that has
issued a policy covering any part or any Owned Property or Lease
Premises or by any board of fire underwriters or any other body
exercising similar functions, requiring any repairs or work to be done
on any part of any Owned Property or Leased Premises, except as would
not reasonably be expected to have a material adverse effect on Parent.
(b) Except as set forth in Section 3.24(b) of the
Parent Disclosure Schedule, all structural or material mechanical
systems in the buildings upon the Owned Property and Leased Properties
are in good working order and working condition, and adequate for the
operation of the business of Parent and its subsidiaries as heretofore
conducted, except as would not reasonably be expected to have a
material adverse effect on Parent.
III.25 Intellectual Property.
(a) Parent and/or each of its subsidiaries owns, or
is licensed or otherwise possesses legally enforceable rights to use,
all patents, trade secrets, trademarks, trade names, service marks,
copyrights, and any applications therefor, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are used in the business of
Parent and its subsidiaries as currently conducted, except as would not
reasonably be expected to have material adverse effect on Parent.
(b) Except as disclosed in Section 3.25(b) of the
Parent Disclosure Schedule or the Parent SEC Documents or as would not
reasonably be expected to have a material adverse effect on Parent (i)
Parent is not, nor will it be as a result of the execution and delivery
of this Agreement or the performance of its obligations hereunder, in
violation of any licenses, sublicenses and other agreements as to which
Parent is a party and pursuant to which Parent is authorized to use any
third-party patents, trademarks, service marks and copyrights
("Third-Party Intellectual Property Rights"); (ii) no claims
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with respect to the patents, registered and material
unregistered trademarks and service marks, registered copyrights, trade
names and any applications therefor owned by Parent or any of its
subsidiaries (the "Parent Intellectual Property Rights"), any trade
secret material to Parent, or Third Party Intellectual Property Rights
to the extent arising out of any use, reproduction or distribution of
such Third Party Intellectual Property Rights by or through Parent or
any of its subsidiaries, are currently pending or, to the knowledge of
Parent, are overtly threatened by any person; and (iii) Parent does not
know of any valid ground for any bona fide claims (A) to the effect
that the manufacture, sale, licensing or use of any product as now
used, sold or licensed or proposed for use, sale or license by Parent
or any of its subsidiaries, infringes on any copyright, patent,
trademark, service ▇▇▇▇ or trade secret; (B) against the use by Parent
or any of its subsidiaries, of any programs and applications used in
the business of Parent or any of its subsidiaries, of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how
or computer software programs and applications used in the business of
Parent or any of its subsidiaries as currently conducted or as proposed
to be conducted; (C) challenging the ownership, validity or
effectiveness of any of the Parent Intellectual Property Rights or
other trade secret material to Parent; or (D) challenging the license
or legally enforceable right to use of the Third Party Intellectual
Rights by Parent or any of its subsidiaries.
(c) To Parent's knowledge, all material patents,
registered trademarks, service marks and copyrights held by Parent are
valid and subsisting. Except as set forth in Section 3.25(c) of the
Parent Disclosure Schedule or the Parent SEC Documents, to Parent's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Parent Intellectual Property by any
third party, including any employee or former employee of Parent or any
of its subsidiaries.
III.26 Interested Party Transactions. Except as set forth in
Section 3.26 of the Parent Disclosure Schedule or the Parent SEC Documents or
for events as to which the amounts involved do not, in the aggregate, exceed
$100,000, since the date of Parent's proxy statement dated March 31, 1997 (the
"1997 Parent Proxy Statement"), no event has occurred that would be required to
be reported as a Certain Relationship or Related Transaction, pursuant to Item
404 of Regulation S-K promulgated by the Commission.
III.27 Insurance. Except as set forth in Section 3.27 of the
Parent Disclosure Schedule, all material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by Parent or any of its subsidiaries are with
reputable insurance carriers, and provide adequate coverage for all normal risks
incident to the business of Parent and its subsidiaries and their respective
properties and assets, except as would not reasonably be expected to have a
material adverse effect on Parent.
III.28 Full Disclosure. No statement contained in this
Agreement or any certificate or schedule furnished or to be furnished by Parent
or Sub or its subsidiaries to the Company in, or pursuant to the provisions of,
this Agreement when considered with all other statements made in or in
connection with this Agreement, contains or shall contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary,
in the light of the circumstances under which it was made, in order to make the
statements herein or therein
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not misleading, except where the material fact so misstated or
omitted to be stated would not reasonably be expected to have a material adverse
effect on Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Sub to enter into this
Agreement, the Company hereby represents and warrants to Parent and Sub that the
statements contained in this Article IV are true, correct and complete.
IV.1 Organization and Standing. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation with full power and
authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
the Company and its subsidiaries is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on the Company. The
copies of the Restated Articles of Incorporation and Bylaws (or similar
organizational documents) of the Company and each of its subsidiaries, which
have previously been made available to Parent, are true, complete and correct
copies of such documents as in effect as of the date of this Agreement.
IV.2 Subsidiaries. As of the date hereof, other than
immaterial interests, the Company does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except as set forth in Section 4.2 to the
disclosure schedule (the "Company Disclosure Schedule") delivered by the Company
to Parent and dated the date hereof. Section 4.2 to the Company Disclosure
Schedule sets forth as to each subsidiary of the Company: (i) its name and
jurisdiction of incorporation or organization, (ii) its authorized capital stock
or share capital and (iii) the number of issued and outstanding shares of its
capital stock or share capital. Except as set forth in Section 4.2 of the
Company Disclosure Schedule, each of the outstanding shares of capital stock of
each of the Company's subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned, directly or indirectly, by the Company
free and clear of all liens, pledges, security interests, claims or other
encumbrances, other than liens imposed by law which could not reasonably be
expected to have, in the aggregate, a material adverse effect on the Company.
Other than as set forth in Section 4.2 to the Company Disclosure Schedule, there
are no outstanding shares of capital stock or subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale or transfer of any securities of any
subsidiary of the Company, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of any
subsidiary of the Company; and no subsidiary of the Company has any obligation
of any kind to issue any additional securities or to pay for securities of any
subsidiary of the Company or any predecessor thereof. As used in this Section
4.2, "capital stock" shall include capital stock or other ownership interests
having by their terms ordinary voting power to elect directors or others
performing similar functions with respect to such entity.
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IV.3 Corporate Power and Authority. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, subject to the approval of the
Merger and the adoption and authorization of this Agreement by the Company
Shareholders in accordance with the MBCA and this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company. The Board of Directors of the Company has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Company Shareholders for adoption at a shareholders meeting
and, except for the adoption of this Agreement by the affirmative vote of the
holders of a majority of shares of Company Common Stock in accordance with the
Applicable Law, no other corporate approvals on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
IV.4 Capitalization of the Company. The Company's
authorized capital stock consists solely of (a) 20,000,000 shares of common
stock, $0.10 par value per share ("Company Common Stock") and (b) 5,000,000
shares of preferred stock, no par value per share ("Company Preferred Stock").
As of June 30, 1997, (i) 9,466,486 shares of Company Common Stock were issued
and outstanding, (ii) 450,000 shares of Company Common Stock were issuable upon
the exercise or conversion of outstanding options, warrants or convertible
securities granted or issuable (on a contingent basis or otherwise) by the
Company, and (iii) no shares of Company Preferred Stock were issued and
outstanding. Since June 30, 1997, the Company has not issued any shares of its
capital stock except upon the exercise of such options, warrants or convertible
securities. Each outstanding share of Company capital stock is duly authorized
and validly issued, fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, other than as set forth above, in the Company SEC
Documents (as defined in Section 4.7) or in Section 4.4 to the Company
Disclosure Schedule, there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer by the Company of any securities of the Company, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of the Company; and the Company has no obligation of any
kind to issue any additional securities or to pay for securities of the Company
or any predecessor. The Company has no outstanding bonds, debentures, notes or
other similar obligations the holders of which have the right to vote generally
with holders of Company Common Stock.
IV.5 Conflicts; Consents and Approvals. Neither the
execution and delivery of this Agreement by the Company, nor the consummation
of the transactions contemplated hereby will:
(a) conflict with or violate any provision
of the Restated Articles of Incorporation or Bylaws (or any similar
organizational document)of the Company or any subsidiary of the Company;
E-22
(b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any party (with the giving of
notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the termination,
acceleration or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease or
other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of their respective properties
or assets may be bound;
(c) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any
of its subsidiaries or any of their respective properties or assets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by the Company or any of its
affiliates with any third party or any Governmental Authority, other
than (i) authorization of the Merger and the transactions contemplated
hereby by Company Shareholders, (ii) actions required by the HSR Act
and (iii) registrations or other actions required under federal and
state securities laws as are contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 4.5 of the Company Disclosure Schedule and, in the case of (b),
(c) and (d), for any of the foregoing that would not, in the aggregate, have a
material adverse effect on the Company or that would not prevent or delay the
consummation of the transactions contemplated hereby.
IV.6 Absence of Certain Changes. Except as set forth in the
Company SEC Documents filed with the Commission as of the date hereof, since
December 31, 1996, (i) each of the Company and its subsidiaries has conducted
its business in the ordinary course, consistent with past practice, (ii) no
event has occurred which has or which would reasonably be expected to have, in
the aggregate, a material adverse effect on the Company (but, excluding for such
purposes, events that are generally applicable in Parent's and the Company's
industry or industries and the United States economy), and (iii) except as
listed on Section 4.6 of the Company Disclosure Schedule neither the Company nor
any of its subsidiaries has taken any action which would be prohibited by
Section 5.3(a).
IV.7 Company SEC Documents. Each of the Company and its
subsidiaries has timely filed with the Commission all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since
December 21, 1994 under the Exchange Act or the Securities Act (such documents,
as supplemented and amended since the time of filing, collectively, the "Company
SEC Documents"). The Company SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of registration statements and proxy statements, on the dates of
effectiveness and the
E-23
dates of mailing, respectively) (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be. The financial statements (including
the related notes) of the Company included in the Company SEC Documents were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto), and fairly present (subject in the case of unaudited
statements to the absence of footnotes and to normal, recurring and year-end
audit adjustments) in all material respects the consolidated financial position
of the Company as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended.
IV.8 Taxes. Except as set forth in the Company SEC Documents
and except with respect to any such matters that would not, in the aggregate,
have a material adverse effect on the Company or as listed in Section 4.8 to the
Company Disclosure Schedule, (i) each of the Company and its subsidiaries has
duly filed all federal and state income tax returns and all other material tax
returns (including, but not limited to, those filed on a consolidated, combined
or unitary basis) required to have been filed by the Company or any of its
subsidiaries prior to the date hereof and will file, on or before the Effective
Time, all such returns which are required to be filed after the date hereof and
on or before the Effective Time, (ii) all of the foregoing returns and reports
are true and correct in all material respects, and each of the Company and its
subsidiaries has paid or, prior to the Effective Time, will pay all taxes
required to be paid in respect of the periods covered by such returns or reports
to any federal, state, foreign, local or other taxing authority, (iii) each of
the Company and its subsidiaries has paid or made adequate provision (in
accordance with generally accepted accounting principles) in the financial
statements of the Company included in the Company SEC Documents for all taxes
payable in respect of all periods ending on or prior to June 30, 1997, (iv)
neither the Company nor any of its subsidiaries will have any material liability
for any taxes in excess of the amounts so paid or reserves so established and
neither the Company nor any of its subsidiaries is delinquent in the payment of
any material tax, assessment or governmental charge and none of them has
requested any extension of time within which to file any returns in respect of
any fiscal year which have not since been filed, (v) no deficiencies for any
tax, assessment or governmental charge have been proposed, asserted or assessed
in writing (tentatively or definitely), in each case, by any taxing authority,
against the Company or any of its subsidiaries for which there are not adequate
reserves in its financial statements (in accordance with generally accepted
accounting principles), (vi) as of the date of this Agreement, there are no
extensions or waivers or pending requests for extensions or waivers of the time
to assess or collect any such tax, (vii) the federal income tax returns of the
Company have not been audited and the federal income tax returns of its
subsidiaries have not been audited, since December 31, 1994, (viii) neither the
Company nor any of its subsidiaries is or has been a party to any tax sharing
agreement with any corporation which is not currently a member of the affiliated
group of which the Company is currently a member, (ix) there are no liens for
taxes on any assets of the Company or any of its subsidiaries (other than
statutory liens for taxes not yet due or liens for which adequate reserves have
been established in its financial statements in accordance with generally
accepted accounting principles), (x) the Company and its subsidiaries have
withheld and paid (and until the Effective Time will withhold and pay) all
income, social security, unemployment, and all other material payroll taxes
required to be withheld (including,
E-24
without limitation, pursuant to Sections 1441 and 1442 of the
Code or similar provisions under foreign law) and paid in connection with
amounts paid to any employee, independent contractor, stockholder, creditor or
other third party, and (xi) the Company has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation.
IV.9 Compliance with Law. Each of the Company and its
subsidiaries is in compliance with, and at all times since December 31, 1993 has
been in compliance with, all Applicable Laws relating to it or its business or
properties, except for any such failures to be in compliance therewith which, in
the aggregate, would not have a material adverse effect on the Company.
IV.10 Registration Statement. None of the information provided
by the Company or any of its subsidiaries for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Proxy
Statement, at the date of mailing, will 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. Each of the
Registration Statement and Proxy Statement (except for such portions thereof
that relate only to or were supplied by Parent and its subsidiaries as to which
no representation is made hereby), will comply in all material respects with the
provisions of the Securities Act and the Exchange Act.
IV.11 Litigation. Except as set forth in the Company SEC
Documents or Section 4.11 of the Company Disclosure Schedule, there is no action
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which could reasonably be expected to have a material
adverse effect on the Company. Neither the Company nor any of its subsidiaries
is subject to any outstanding order, writ, injunction or decree which could
reasonably be expected to have a material adverse effect on the Company.
IV.12 Brokerage and Finder's Fees. Except for the
Company's obligation to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Refsnes, Inc. ("Company Broker') (a copy
of the written agreement relating to such obligation having previously been
provided to Parent), the Company has not incurred and will not incur, directly
or indirectly, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Other than the foregoing obligation
to Company Broker and the obligation of Parent to the Parent Broker, the Company
is not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiation of this
Agreement or in connection with the transactions contemplated hereby.
IV.13 Opinion of Financial Advisor. The Company has received
the opinion of Company Broker to the effect that, as of the date hereof, the
Exchange Ratio is fair to the Company Shareholders from a financial point of
view.
IV.14 Accounting Matters. To the best knowledge of the
Company, neither the Company nor any of its affiliates has taken or agreed to
take any action that (without giving effect to any actions taken or agreed to be
taken by Parent or any of its affiliates) would prevent Parent from accounting
for the business combination to be effected by the Merger as a
E-25
pooling-of-interests for financial reporting purposes in
accordance with Accounting Principles Board Opinion No. 16, the interpretative
releases issued pursuant thereto, and the pronouncements of the Commission
thereon.
IV.15 Tax-Free Reorganization. To the best knowledge of the
Company, neither the Company nor any of its subsidiaries has taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
IV.16 Employee Benefit Plans.
(a) For purposes of this Agreement, "Company Plans"
means all employee benefit plans, programs, policies, practices, and
other arrangements providing benefits to any employee or former
employee or beneficiary or dependent thereof, whether or not written,
and whether covering one person or more than one person, sponsored or
maintained by the Company or any of its subsidiaries or to which the
Company or any of its subsidiaries contributes or is obligated to
contribute. Without limiting the generality of the foregoing, the term
"Company Plans" includes all employee welfare benefit plans within the
meaning of Section 3(1) of ERISA and all employee pension benefit plans
within the meaning of Section 3(2) of ERISA.
(b) Section 4.16 to the Company Disclosure Schedule
lists all Company Plans. With respect to each Company Plan, the Company
has made available to Parent a true, correct and complete copy of: (i)
each writing constituting a part of such Company Plan, including
without limitation all plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii)
the most recent Annual Report (Form 5500 Series) and accompanying
schedule, if any; (iii) the current summary plan description, if any;
(iv) the most recent annual financial report, if any; and (v) the most
recent determination letter from the IRS, if any.
(c) Except as set forth in Section 4.16(c) to the
Company Disclosure Schedule, the Internal Revenue Service has issued a
favorable determination letter or opinion letter with respect to each
Company Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code (a "Qualified Company Plan") and
there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Qualified
Company Plan or the related trust.
(d) All contributions required to be made to any
Company Plan by Applicable Law or by any plan document or other
contractual undertaking, and all premiums due or payable with respect
to insurance policies funding any Company Plan, for any period through
the date hereof have been timely made or paid in full and through the
Closing Date will be timely made or paid in full or, to the extent not
required to be made or paid on or before the date hereof or the Closing
Date, as applicable, have been or will be fully reflected in the
Company's financial statements contained in the Company SEC Documents.
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(e) Except as set forth in Section 4.16(e) to the
Company Disclosure Schedule, the Company and its subsidiaries have
complied, and are now in compliance, in all material respects, with all
provisions of ERISA, the Code and all laws and regulations applicable
to the Company Plans. There is not now, and there are no existing,
circumstances that standing alone could give rise to, any requirement
for the posting of security with respect to a Company Plan or the
imposition of any lien on the assets of the Company or any of its
subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 4.16(f) to the
Company Disclosure Schedule, no Company Plan is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code. No Company
Plan is a Multiemployer Plan (as defined in Section 3.16) or a Multiple
Employer Plan (as defined in Section 3.16), nor has the Company or any
of its subsidiaries or any of their respective ERISA Affiliates, at any
time within five years before the date hereof, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan.
(g) There does not now exist, and there are no
existing, circumstances that could result in, any Controlled Group
Liability that would be a liability of the Company or any of its
subsidiaries following the Closing, other than normal funding
responsibilities. Without limiting the generality of the foregoing,
neither the Company nor any of its subsidiaries nor any of their
respective ERISA Affiliates has engaged in any transaction described in
Section 4069 or Section 4204 of ERISA.
(h) Except as set forth in Section 4.16(h) to the
Company Disclosure Schedule and except for health continuation coverage
as required by Section 4980B of the Code or Part 6 of Title I of ERISA,
neither the Company nor any of its subsidiaries has any liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
(i) Except as set forth in Section 4.16(i) to the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any employee
or director or former employee or former director of the Company or any
of its subsidiaries, pursuant to a "change in control" or "change of
control" or otherwise. Without limiting the generality of the foregoing
and except as set forth in Section 4.16(i) to the Company Disclosure
Schedule, no amount paid or payable by the Company or any of its
subsidiaries in connection with the transactions contemplated hereby
either solely as a result thereof or as a result of such transactions
in conjunction with any other events will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Company
Plans, any fiduciaries thereof with respect to their duties to the
Company Plans or the assets of any of the trusts under any of the
Company Plans which could reasonably be expected to result in any
material liability of the Company or
E-27
any of its subsidiaries to the Pension Benefit
Guaranty Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
IV.17 Contracts. Section 4.17 of the Company Disclosure
Schedule lists all agreements, arrangements, guaranties, leases, contracts and
understandings, whether written or oral, to which the Company or its
subsidiaries, or any of their respective assets, business, or operations, is a
party, or is bound or affected by, or receives benefits under, but not including
the following: (i) those cancelable without penalty on notice of ninety days or
less and pursuant to which aggregate annual payments do not exceed $50,000; (ii)
those with a remaining term of less than one year and pursuant to which
aggregate annual payments do not exceed $50,000; (iii) those for the purchase
and sale of raw materials and supplies and finished goods and repurchase
agreements with dealers' floor plan lenders (forms of which have been provided
to Parent) in the ordinary course of business on terms customary in the industry
and consistent with past practices; (iv) those that do not require the Company
to make aggregate annual payments of more than $25,000; and (v) except as
otherwise reflected in the Company SEC Documents (the "Company Contracts"). With
respect to each Company Contract and each such agreement, arrangement, guaranty,
lease, contract or understanding excluded from the definition of Company
Contract, and except as set forth in Section 4.17 of the Company Disclosure
Schedule, none of the Company, any of its subsidiaries, or, to the knowledge of
the Company, any other party thereto is in violation of or in default in respect
of, nor has there occurred an event or condition which with the passage of time
or giving of notice (or both) would constitute a default by the Company under,
any Company Contract to which it is a party, except such violations or defaults
under such Company Contracts which, in the aggregate, would not have a material
adverse effect on the Company.
IV.18 Labor Relations. There is no unfair labor practice
complaint against the Company or any of its subsidiaries pending before the
NLRB and there is no labor strike, dispute, slowdown or stoppage, or any union
organizing campaign, actually pending or, to the knowledge of the Company,
threatened against or involving the Company or any of its subsidiaries, except
for any such proceedings which would not have a material adverse effect on the
Company. Except as disclosed in the Company SEC Documents or Section 4.18 to the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. To the
knowledge of the Company, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or threatened
involving employees of the Company or any of its subsidiaries.
IV.19 Permits. Each of the Company and its subsidiaries is in
possession of all Permits necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted, except for any such
Permits the failure of which to possess, in the aggregate, would not reasonably
be expected to have a material adverse effect on the Company.
IV.20 Environmental Matters.
(a) Except as set forth in the Company SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys with respect to the facilities operated
by the Company and its subsidiaries, copies of which
E-28
have been provided to Parent, there are, with respect
to the Company, its subsidiaries or any predecessor of the foregoing,
no past or present violations of Environmental Laws, nor any releases
of any materials into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal,
state, local or foreign laws, other than those which, in the aggregate,
would not reasonably be expected to have a material adverse effect on
the Company and its subsidiaries, taken as a whole, and none of the
Company and its subsidiaries has received any notice with respect to
any of the foregoing, nor is any action pending or threatened in
connection with any of the foregoing that, if adversely determined,
could reasonably be expected to have a material adverse effect on the
Company.
(b) Except as set forth in Section 4.20 to the
Company Disclosure Schedule or set forth in the Company SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys conducted in connection with the
transactions contemplated by this Agreement with respect to the
facilities operated by the Company and its subsidiaries, copies of
which have been provided to Parent, no Hazardous Materials are
contained on or about any real property currently owned, leased or used
by the Company or any of its subsidiaries and no Hazardous Materials
were released on or about any real property previously owned, leased or
used by the Company or any of its subsidiaries during the period the
property was so owned, leased or used, except in the normal course of
the Company's business, other than those which, in the aggregate, would
not reasonably be expected to have a material adverse effect on the
Company.
IV.21 Parent Stock Ownership. Except as set forth in
Section 4.21 to the Company Disclosure Schedule, neither the Company nor any of
its "affiliates" or "associates" "owns" (as each of such terms is defined in
Section 203 of the Delaware General Corporation Law) any shares of Parent Common
Stock or other securities convertible into Parent Common Stock.
IV.22 State Takeover Laws. Prior to the date hereof, the
Board of Directors of the Company has taken all action necessary to exempt
under or make not subject to any applicable takeover laws: (i) the execution of
this Agreement, (ii) the Merger and (iii) the transactions contemplated hereby.
As used herein, "takeover laws" means any "moratorium," "control share," "fair
price," "business combination" or similar anti-takeover statutes or regulations
of the State of Mississippi or any other law, or any provision of the Company's
Restated Articles of Incorporation or Bylaws, that purports to limit or restrict
business combinations or the ability to acquire or vote shares that would
otherwise be applicable to this Agreement and the transactions contemplated
hereby.
IV.23 No Undisclosed Liabilities. Except as is disclosed in
Section 4.23 of the Company Disclosure Schedule and the Company SEC Documents,
neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in the Company's balance sheet (including any
E-29
related notes thereto) as of December 31, 1996 included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "1996 Balance Sheet"), (b) incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected on
the 1996 Balance Sheet, (c) in the aggregate adequately provided for in the
Company's unaudited balance sheet (including any notes thereto) for the period
ended June 30, 1997, included in the Company's Quarterly Report on Form 10-Q for
such period or incurred since December 31, 1996 in the ordinary course of
business and consistent with past practice, (d) incurred in connection with this
Agreement, or (e) which would not reasonably be expected to have a material
adverse effect on the Company.
IV.24 Restrictions on Business Activities. Except for this
Agreement, or as set forth in Section 4.24 of the Company Disclosure Schedule or
the Company SEC Documents, to the best of the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of the Company or
any of its subsidiaries, any acquisition of property by the Company or any of
its subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted or as proposed to be conducted by the
Company, except for any prohibition or impairment as would not reasonably be
expected to have a material adverse effect on the Company.
IV.25 Title to Property. Except as set forth in Section 4.25
of the Company Disclosure Schedule, the Company and each of its subsidiaries
have good and marketable title to all of their owned properties and assets, real
and personal, tangible and intangible, free and clear of all liens, charges and
encumbrances, except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which would not reasonably be expected to have a material adverse effect on the
Company; and, to the Company's knowledge, all leases pursuant to which the
Company or any of its subsidiaries lease from other material amounts of real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of the Company, under
any of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would not
reasonably be expected to have a material adverse effect on the Company.
IV.26 Condition of Property.
(a) Except as set forth in Section 4.26(a) of the
Company Disclosure Schedule, each of the buildings, improvements and
structures located upon any real property and land owned by Company or
any of its subsidiaries (collectively, the "Owned Property"), and each
of the buildings, structures and premises leased by the Company or any
of its subsidiaries (the "Leased Premises"), is in reasonably good
repair and operating condition, and the Company has not received any
notice of or writing referring to any requirements by any insurance
company that has issued a policy covering any part of any Owned
Property or Leased Premises or by any board of fire underwriters or
other body
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exercising similar functions, requiring any repairs
or work to be done on any part of any Owned Property or Leased
Premises, except as would not reasonably be expected to have a material
adverse effect on the Company.
(b) Except as set forth in Section 4.26(b) of the
Company Disclosure Schedule, all structural or material mechanical
systems in the buildings upon the Owned Property and Leased Properties
are in good working order and working condition, and are adequate for
the operation of the business of the Company and its subsidiaries as
heretofore conducted, except as would not reasonably be expected to
have a material adverse effect on the Company.
IV.27 Intellectual Property.
(a) The Company and/or each of its subsidiaries owns,
or is licensed or otherwise possesses legally enforceable rights to
use, all patents, trade secrets, trademarks, trade names, service
marks, copyrights, and any applications therefor, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are used in the business of
the Company and its subsidiaries as currently conducted, except as
would not reasonably be expected to have a material adverse effect on
the Company.
(b) Except as disclosed in Section 4.27(b) of the
Company Disclosure Schedule or the Company SEC Documents or as would
not reasonably be expected to have a material adverse effect on the
Company: (i) the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which the Company is authorized to use any third-party patents,
trademarks, service marks and copyrights ("Third-Party Intellectual
Property Rights"); (ii) no claims with respect to the patents,
registered and material unregistered trademarks and service marks,
registered copyrights, trade names and any applications therefor owned
by the Company or any of its subsidiaries (the "Company Intellectual
Property Rights"), any trade secret material to the Company, or Third
Party Intellectual Property Rights to the extent arising out of any
use, reproduction or distribution of such Third Party Intellectual
Property Rights by or through the Company or any of its subsidiaries,
are currently pending or, to the knowledge of the Company, are overtly
threatened by any person; and (iii) the Company does not know of any
valid grounds for any bona fide claims (A) to the effect that the
manufacture, sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by the Company or any of
its subsidiaries infringes on any copyright, patent, trademark, service
marks or trade secret; (B) against the use by the Company or any of its
subsidiaries of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and
applications used in the business of the Company or any of its
subsidiaries as currently conducted or as proposed to be conducted; (C)
challenging the ownership, validity or effectiveness of any part of the
Company Intellectual Property Rights or other trade secret material to
the Company; or (D) challenging the license or legally enforceable
right to use of the Third Party Intellectual
E-31
Rights by the Company or any of its subsidiaries.
(c) To the Company's knowledge, all material patents,
registered trademarks and copyrights held by the Company are valid and
subsisting. Except as set forth in Section 4.27(c) of the Company
Disclosure Schedule or the Company SEC Documents, to the Company's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any
third party, including any employee or former employee of the Company
or any of its subsidiaries.
IV.28 Interested Party Transactions. Except as set forth in
Section 4.28 of the Company Disclosure Schedule or the Company SEC Documents or
for events as to which the amounts involved do not, in the aggregate, exceed
$100,000, since the date of the Company's proxy statement dated May 6, 1997, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the Commission.
IV.29 Insurance. Except as disclosed in Section 4.29 of the
Company Disclosure Schedule, all material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by the Company or any of its subsidiaries are with
reputable insurance carriers, and provide adequate coverage for all normal risks
incident to the business of the Company and its subsidiaries and their
respective properties and assets, except as would not reasonably be expected to
have a material adverse effect on the Company.
IV.30 Full Disclosure. No statement contained in this
Agreement or in any certificate or schedule furnished or to be furnished by the
Company to Parent in, or pursuant to the provisions of, this Agreement, when
considered with all other statements made in or in connection with this
Agreement, contains or will contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading, except where the material fact so misstated or omitted
to be stated would not reasonably be expected to have a material adverse effect
on the Company.
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period
from and after the execution of this Agreement.
V.1 Mutual Covenants.
(a) General. Each of the parties shall use
its reasonable efforts to take all action and to do all things
necessary, proper or advisable to consummate the Merger and the
transactions contemplated by this Agreement as promptly as possible
(including,
E-32
without limitation, using its reasonable efforts to
cause the conditions set forth in Article VI for which they are
responsible to be satisfied as soon as reasonably practicable and to
prepare, execute and deliver such further instruments and take or cause
to be taken such other and further action as any other party hereto
shall reasonably request).
(b) HSR Act. As soon as practicable, and in any event
no later than ten business days after the date hereof, each of the
parties hereto will file any Notification and Report Forms and related
material required to be filed by it with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice
under the HSR Act with respect to the Merger, will use its reasonable
efforts to obtain an early termination of the applicable waiting
period, and shall promptly make any further filings pursuant thereto
that may be necessary, proper or advisable.
(c) Other Governmental Matters and Consents. Each of
the parties shall use its reasonable efforts to take any additional
action that may be necessary, proper or advisable in connection with
any other notices to, filings with, and authorizations, consents and
approvals of any Governmental Authority or other person or entity that
it may be required to give, make or obtain.
(d) Pooling-of-Interests. Each of the parties
shall use its reasonable efforts to cause the Merger to qualify
for pooling-of-interests accounting treatment for financial reporting
purposes.
(e) Tax-Free Treatment. Each of the parties
shall use its reasonable efforts to cause the Merger to constitute a
tax-free "reorganization" under Section 368(a)of the Code and to permit
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & White LLP to issue its opinion provided for in
Section 6.2(d).
(f) Public Announcements. Unless otherwise
required by Applicable Law or requirements of the NYSE or The Nasdaq
Stock Market, at all times prior to the earlier of the Effective Time
or termination of this Agreement pursuant to Section 7.1, Parent and
the Company shall consult with each other before issuing any press
release with respect to the Merger and shall not issue any such press
release prior to such consultation except as may be required by law
or by obligations pursuant to any listing agreement with any national
securities exchange or the National Association of Securities Dealers,
Inc.
(g) Access. Subject to Applicable Law, from and after
the date of this Agreement until the Effective Time (or the termination
of this Agreement), Parent and the Company shall permit representatives
of the other to have reasonable access to the other's officers,
employees, premises, properties, books, records, contracts, tax records
and documents. Information obtained by Parent and the Company pursuant
to this Section 5.1(g) shall be subject to the provisions of the
confidentiality agreement between them dated July 11, 1997 (the
"Confidentiality Agreement"), which agreement remains in full force and
effect.
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(h) Stockholders and Shareholders Meetings.
Each of Parent and the Company shall duly call, give notice of, convene and hold
a meeting of its respective stockholders and shareholders, to be held as
promptly as practicable following the date hereof for the purpose of obtaining
the requisite stockholder and shareholder approvals and adoptions in connection
with this Agreement, the Share Issuance and the Merger, and each shall use
reasonable efforts to cause such meetings to occur on the same date. Subject to
compliance with their respective fiduciary duties to their shareholders and
stockholders under Mississippi and Delaware law, respectively, the Board of
Directors of each of Parent and the Company will (i) recommend that its respect-
ive stockholders and shareholders approve such matters and (ii) use reasonabl
efforts to obtain any necessary approvals by its respective stockholders and
shareholders.
(i) Preparation of Proxy Statement and Registration
Statement. Each of Parent and the Company shall cooperate to, and
shall, as soon as is reasonably practicable, prepare and file the Proxy
Statement with the Commission on a confidential basis. Each of Parent
and the Company shall cooperate to prepare and file, and Parent shall
prepare and file, the Registration Statement with the Commission as
soon as is reasonably practicable following clearance of the Proxy
Statement by the Commission and each of Parent and the Company shall
cooperate to, and shall, use all reasonable efforts to have the
Registration Statement declared effective by the Commission as promptly
as practicable and to maintain the effectiveness of the Registration
Statement through the Effective Time. Parent shall advise the Company
promptly after it receives notice of (i) the Registration Statement
being declared effective or any supplement or amendment thereto being
filed with the Commission, (ii) the issuance of any stop order in
respect of the Registration Statement, and (iii) the receipt of any
correspondence, comments or requests from the Commission in respect of
the Registration Statement. If at any time prior to the Effective Time,
any information pertaining to the Company contained in or omitted from
the Registration Statement makes statements contained in the
Registration Statement false or misleading, the Company shall promptly
so inform Parent and provide Parent with the information necessary to
make such statements contained therein not false and misleading. Each
of Parent and Company shall also cooperate to, and shall, take such
other reasonable actions (other than qualifying to do business in any
jurisdiction in which it is not so qualified) required to be taken
under any applicable state securities laws in connection with the Share
Issuance.
(j) Notification of Certain Matters.
Each of Parent and the Company shall give prompt notice to the other
party of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or
warranty contained in this Agreement made by such party to be untrue or
inaccurate at or prior to the Effective Time and (ii) any material
failure of such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this
Section 5.1(j) shall not limit or otherwise affect the remedies
available hereunder to any party, nor will it override the provisions
of Sections 6.2 and 6.3, as applicable.
(k) Affiliates. Each of Parent and the Company
shall use its reasonable
E-34
efforts to cause each such person who may be at the
Effective Time or was on the date hereof an "affiliate" of such party
within the meaning of Rule 145 under the Securities Act, to execute and
deliver to Parent no less than 35 days prior to the date of the meeting
of such party's respective stockholders and shareholders written
undertakings in the form attached hereto as Exhibit 5.1(k).
(l) Injunctions. Each of Parent and the Company
shall cooperate with one another in order to lift any injunctions or remove any
other impediment to the consummation of the transactions contemplated by this
Agreement.
(m) Tax Representation Letters. Each of
Parent and the Company shall cooperate with one another in obtaining the opinion
of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Rose & White LLP, counsel to Parent, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and no gain or loss will be recognized by
Company Shareholders with respect to shares of Parent Company Stock received in
the Merger in exchange for shares of Company Common Stock, except with respect
to cash received in lieu of fractional shares of Parent Common Stock. In
connection therewith, each of Parent and the Company shall deliver to ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ & White LLP representation letters substantially in the form attached
hereto as Exhibit 5.1(m).
(n) Additional Reports. Parent and the Company
shall each furnish to the other copies of any reports of the type referred to in
Sections 3.7 and 4.7 which it files with the SEC on or after the date hereof,
and Parent and the Company, as the case may be, represents and warrants that, as
of the respective dates thereof, such reports will not contain any untrue
statement of a material fact or 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. Any unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present in all material respects
the financial position of Parent and its consolidated subsidiaries or the
Company and its consolidated subsidiaries, as the case may be, as of the dates
thereof and the results of operations and changes in financial position or other
information included therein for the periods or as of the dates then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and generally accepted accounting principles
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto).
V.2 Covenants of Parent.
(a) Conduct of Parent's Operations. From the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, Parent covenants and agrees that it
shall (x) continue to conduct its business and the business of its
subsidiaries in a manner designed in its reasonable judgment to enhance
the long-term value of the Parent Common Stock and the business
prospects of the Parent and its subsidiaries and (y) take no action
which would (i) materially adversely affect the ability to obtain any
consents required for the transactions contemplated hereby, or (ii)
materially adversely affect the ability of any party hereto to perform
its covenants and agreements under this Agreement; provided, that the
foregoing shall not prevent the Parent or any of
E-35
its subsidiaries from discontinuing or disposing of
any of their respective properties or business if such action is, in
the judgment of Parent, desirable in the conduct of the business of
Parent and its subsidiaries.
(b) Indemnification. Parent and Sub agree that
all rights to exculpation and indemnification for acts or omissions
occurring prior to the Effective Time now existing in favor of the
current or former directors or officers (the "Indemnified Parties") of
the Company as provided by law or in its Restated Articles of
Incorporation, Bylaws or in any agreement shall survive the Merger and
shall continue in full force and effect in accordance with their
terms. For six years from the Effective Time, Parent shall not amend,
repeal, or otherwise modify the Restated Articles of Incorporation,
Bylaws or any such agreement as any of them relate to indemnification
in any manner that would adversely affect the rights thereunder of the
Indemnified Parties, unless such modification is required by law, and
Parent further shall indemnify the Indemnified Parties to the same
extent as such Indemnified Parties are entitled to indemnification
pursuant to the preceding sentence. In addition, from and after the
Effective Time, Parent and the Surviving Corporation shall indemnify
and hold harmless each officer and director of the Company to the
extent such person would be entitled to indemnification pursuant to
the first sentence of this Section 5.2(b) against any costs or
expenses (including attorneys' fees), losses, damages or amounts paid
in settlement in connection with any claim, action, suit or proceeding
arising out of or pertaining to the transactions contemplated by this
Agreement, provided that the Indemnified Party agrees that, in the
event that it is ultimately determined that such Indemnified Party is
not entitled to the payment of such expenses, for any reason, such
Indemnified Party shall reimburse Parent or the Surviving Corporation
for such expenses paid in advance. The Surviving Corporation or
Parent, as the case may be, shall only be required to pay for one law
firm for all Indemnified Parties (unless the use of one law firm for
all Indemnified Parties would present such law firm with a conflict of
interest). Neither the Surviving Corporation nor Parent shall be
liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld or delayed). Parent
will maintain in effect the Company's directors' and officers'
liability policy for the current term of such policy.
(c) Listing Application. Parent shall, as soon as
practicable following the date hereof, prepare and submit to the NYSE a
subsequent listing application covering the shares of Parent Common
Stock issuable in the Merger, and shall use its reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such
shares of Parent Common Stock, subject to official notice of issuance.
(d) Employee Benefits. Following the Effective Time,
except as otherwise provided in this Section 5.2, Parent shall provide
generally to officers and employees of the Company and its subsidiaries
employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of Parent Common
Stock), on terms and conditions which are not materially less favorable
than those currently provided by the Company and its subsidiaries to
their similarly situated officers and employees. Company officers and
employees shall be entitled to receive credit for time of service to
the Company or any of its subsidiaries for such purposes.
E-36
Parent and Company further agree that the Belmont
Homes, Inc. 401(k) Profit Sharing Plan (the "BH 401(k)") will either be
(i) merged into the Cavalier Homes, Inc. Employees 401(k) Retirement
Plan (the "CH 401(k)"), (ii) terminated as of such date prior to, on or
after the Effective Time or (iii) continued (with such changes as
Parent from time to time shall determine), all as Parent shall
determine and specify consistent with the requirements of the Code and
ERISA. In the event of the merger or termination of the BH 401(k) as
contemplated by clauses (i) and (ii) above, then from and after (i)
January 1 following the termination of the BH 401(k) or (ii) the merger
of the BH 401(k) into the CH 401(k), for purposes of determining
eligibility to participate in, and vesting in accrued benefits under
the CH 401(k), employment by the Company or its subsidiaries shall be
credited as if it were employment by Parent, except to the extent
otherwise required by applicable law, but such service shall not be
credited for purposes of determining benefit accrual under the CH
401(k).
(e) Accountant's "Comfort" Letter. Parent shall use
its reasonable efforts to cause to be delivered to the Company
"comfort" letters of Deloitte & Touche LLP, its independent public
accountants, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, respectively, and
addressed to the Company, in form and substance reasonably satisfactory
to the Company and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement and
transactions such as those contemplated by this Agreement.
V.3 Covenants of the Company.
(a) Conduct of the Company's Operations.
During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its subsidiaries to, conduct
its operations in the ordinary course except as expressly contemplated
by is Agreement and the transactions contemplated hereby and shall use
its reasonable efforts to maintain and preserve its business
organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships
with customers, suppliers and other third parties to the end that
their goodwill and ongoing business shall not be impaired in any
material respect. The Company shall confer at such times as Parent may
reasonably request with one or more representatives of Parent to
report material operational matters and the general status of on-going
operations (to the extent Parent reasonably requires such
information). Furthermore, the Company shall notify Parent of any
emergency or other change in the normal course of its or its
subsidiaries respective businesses or in the operation of its or its
subsidiaries respective properties and of any complaints,
investigations or hearings (or communications that threaten the same)
of any governmental body or authority if such emergency, charge,
complaint, investigation or hearing would have a material adverse
effect on the Company. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the
Effective Time or the earlier termination of this Agreement pursuant
to Section 7.1, the Company shall not, and shall cause its
subsidiaries to not, except as otherwise expressly contemplated by
this Agreement and the transactions contemplated hereby, without the
prior written consent of Parent:
E-37
(i) do or effect any of the following
actions with respect to its securities or the securities of
any of its subsidiaries: (A) adjust, split, combine or
reclassify its capital stock, (B) make, declare or pay any
dividend or distribution on, or directly or indirectly redeem,
purchase or otherwise acquire any of its securities, (C) grant
any person any right or option to acquire any of its
securities, (D) issue, deliver or sell or agree to issue,
deliver or sell any additional securities (except pursuant to
the exercise of outstanding options to purchase Company Common
Stock or the ▇▇▇▇▇▇▇ Warrant) or amend the terms of any of its
securities, or (E) enter into any agreement, understanding or
arrangement with respect to the sale or voting of its capital
stock;
(ii) sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property
or assets which are material, in the aggregate, other than in
the ordinary course of business consistent with past practice;
(iii) make or propose any changes in its
Restated Articles of Incorporation, as amended, or Bylaws, or
other organizational documents;
(iv) merge or consolidate with any other
person or acquire a material amount of assets or capital stock
of any other person or enter into any confidentiality
agreement with any person except in the circumstances
permitted in Section 5.3(b) below, other than in connection
with this Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise
become liable for indebtedness for borrowed money, other than
in the ordinary course of business consistent with past
practice, or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for obligations of
any other individual, corporation or other entity, other than
in the ordinary course of business consistent with past
practice;
(vi) enter into or modify any employment,
severance, termination or similar agreements or arrangements
with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or
employee other than salary increases and bonuses granted to
employees who are not officers or directors in the ordinary
course of business consistent with past practice, or otherwise
increase the compensation or benefits provided to any officer,
director, consultant or employee except as may be required by
Applicable Law, this Agreement, any applicable collective
bargaining agreement or a binding written contract in effect
on the date of this Agreement, or adopt any new employee
benefit plan (or grant any options or awards thereunder);
(vii) change its method of doing business or
change any method or principle of accounting in a manner that
is inconsistent with past practice;
E-38
(viii) settle any actions or claims, whether
now pending or hereafter made or brought, involving an amount
in excess of $25,000;
(ix) modify, amend or terminate, or waive,
release or assign any material rights or claims with respect
to, any Company Contract to which the Company is a party or
any confidentiality agreement to which the Company is a party
(except in the case of a confidentiality agreement to the
extent permitted by Section 5.3(b) below), or enter into any
new Company Contract;
(x) incur or commit to any capital
expenditures, obligations or liabilities in respect thereof or
any acquisitions of any other business or any material portion
thereof, other than in the ordinary course of business
consistent with past practice;
(xi) subject to the terms of Section 5.3(b)
of this Agreement, conduct its business in a manner or take,
or cause to be taken, any other action that could reasonably
be expected to prevent or materially delay the Company from
consummating the transactions contemplated by this Agreement
(regardless of whether such action would otherwise be
permitted or not prohibited hereunder), including without
limitation, any action that may materially limit or delay the
ability of the Company to consummate the transactions
contemplated by this Agreement as a result of antitrust or
securities laws or other regulatory concerns;
(xii) make any material tax election or
settle or compromise any material tax liability, other than in
connection with currently pending proceedings or other than in
the ordinary course of business;
(xiii) pay, discharge or satisfy any
material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice
of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports filed prior to
the date of this Agreement or incurred in the ordinary course
of business and consistent with past practice; or
(xiv) agree to take any action prohibited
by the foregoing.
(b) No Solicitation. The Company agrees that,
during the term of this Agreement, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or its
subsidiaries' directors, officers, employees, agents, financial
advisors, investment bankers, attorneys, accountants or other
representatives, directly or indirectly, to (i) solicit, initiate or
encourage (including by way of furnishing non-public information) any
inquiries or the making of any proposal with respect to any
recapitalization, merger, tender offer or exchange offer,
consolidation or other business combination involving the Company, or
acquisition or disposition of any capital stock (whether or not then
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outstanding except in connection with the exercise of
options or warrants, as permitted in Section 5.3(a)) or any material
portion of the assets of the Company (except for acquisitions or
dispositions of assets in the ordinary course of business consistent
with past practice), or any combination of the foregoing or other
similar transaction (a "Company Competing Transaction"), (ii) negotiate
or otherwise engage in discussions with any person (other than Parent,
Sub or their respective directors, officers, employees, agents,
financial advisors, investment bankers, attorneys, accountants and
other representatives) with respect to any Company Competing
Transaction or (iii) enter into any agreement, arrangement or
understanding with respect to a Company Competing Transaction, or that
requires it to abandon, terminate or fail to consummate the Merger, or
that directly results in impeding, interfering with or frustrating the
Merger. Notwithstanding anything in this Agreement to the contrary, the
Company may (x) furnish non-public or other information to (subject to
a confidentiality agreement in reasonably customary form, but in no
event on terms materially less favorable to the Company than the
Confidentiality Agreement), and negotiate or otherwise engage in
discussions with, any party who delivers an unsolicited bona fide
proposal for a Company Competing Transaction (as further defined in the
last sentence of Section 7.1 below) if and so long as the Board of
Directors of the Company determines in good faith, after consultation
with its outside legal counsel, that not taking such action would
reasonably be expected to result in the violation by the Board of
Directors of the Company of its fiduciary duties to its shareholders
under Mississippi law, and (y) take a position with respect to a
Company Competing Transaction, or amend or withdraw such position, in
compliance with Rule 14e-2 promulgated under the Exchange Act with
regard to a Company Competing Transaction; provided, however, that the
Company shall take a position recommending against such Company
Competing Transaction unless it determines in good faith, after
consultation with its outside legal counsel, that to take such a
position would reasonably be expected to constitute a violation of the
fiduciary duties of the Board of Directors of the Company to its
shareholders under Mississippi law. The Company will immediately cease
all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any Company Competing Transaction.
From and after the execution of this Agreement, the Company shall
immediately advise Parent orally, to be followed by a confirmation in
writing, of the receipt, directly or indirectly, of any inquiries,
discussions, negotiations, or proposals relating to a Company Competing
Transaction (including, unless prohibited by law from doing so, the
status of the negotiations and the transaction and reasonable details
with respect thereto), and shall, unless prohibited by law from doing
so keep Parent advised on a current basis of the status and the
reasonable details with respect to any such proposals or inquiries and
any discussions or negotiations. Unless prohibited by law the Company
shall also promptly furnish to Parent a copy of any such proposal or
inquiry in addition to any information provided to or by any third
party relating thereto.
(c) Accountant's "Comfort" Letters. The Company shall
use its reasonable efforts to cause to be delivered to Parent "comfort"
letters of KPMG Peat Marwick LLP, its independent public accountants,
dated the date on which the Registration Statement shall become
effective and as of the Effective Time, respectively, and addressed to
Parent, in form and substance reasonably satisfactory to Parent and
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reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement and
transactions such as those contemplated by this Agreement.
ARTICLE VI
CONDITIONS
VI.1 Mutual Conditions. The obligations of the parties
hereto to consummate the Merger shall be subject to fulfillment of the
following conditions:
(a) No temporary restraining order, preliminary or
permanent injunction or other order or decree which prevents the
consummation of the Merger shall have been issued and remain in effect,
and no statute, rule, regulation or executive order shall have been
enacted, entered or promulgated by any Governmental Authority which
prohibits the consummation of the Merger substantially on the terms
contemplated hereby.
(b) All waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all other material consents, approvals, permits or
authorizations required to be obtained prior to the Effective Time from
any Governmental Authority in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been obtained.
(c) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the affirmative vote of
a majority of the outstanding shares of Company Common Stock entitled
to vote thereon, in accordance with Applicable Law, at the Company's
shareholder meeting, and the Share Issuance shall have been approved by
the Parent Stockholders in accordance with the rules of NYSE.
(d) The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been initiated or, to the
knowledge of Parent or the Company, threatened by the SEC or any other
Governmental Entity.
(e) No action shall be instituted by any Governmental
Authority which seeks to prevent consummation of the Merger or which
seeks material damages in connection with the transactions contemplated
hereby which continues to be outstanding.
(f) The shares of Parent Common Stock to be issued in
the Merger shall have been authorized for listing on the NYSE, subject
to official notice of issuance.
(g) All consents, waivers and approvals of third
parties required in connection with the transactions contemplated
hereby shall have been obtained, except where the failure to obtain
such consents, waivers or approvals, in the aggregate, would not
reasonably be expected to result in a material adverse effect on Parent
or the
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Company, as the case may be, provided that a party
which has not used all reasonable efforts to obtain a consent, approval
or waiver may not assert this condition with respect to such consent,
approval or waiver.
VI.2 Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
the Company:
(a) The representations and warranties of each of
Parent and Sub shall be true and correct on the date hereof and on and
as of the Closing Date as though made on and as of the Closing Date
(except for representations and warranties made as of a specified date,
which need be true and correct only as of the specified date), other
than such breaches of representations and warranties which would not
have or which would not be reasonably expected to have, in the
aggregate, a material adverse effect on Parent.
(b) Each of Parent and Sub shall have performed in
all material respects each obligation and agreement and shall have
complied in all material respects with each covenant to be performed
and complied with by it hereunder at or prior to the Effective Time.
(c) Parent and Sub shall have delivered to the
Company a certificate, dated as of the Closing Date and signed by its
Chairman, Chief Executive Officer and President or a Senior Vice
President, certifying as to the satisfaction of the matters described
in (a) and (b) above.
(d) The Company shall have received an opinion dated
as of the date of the mailing of the Proxy Statement of ▇▇▇▇▇▇▇ ▇▇▇▇▇
Rose & White LLP, which opinion has not been withdrawn or modified in
any material way, substantially in the form of Exhibit 6.2(d), to the
effect that (1) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and (2) no gain or loss will be
recognized by Company Shareholders with respect to shares of Parent
Common Stock received in the Merger in exchange for shares of Company
Common Stock, except with respect to cash received in lieu of
fractional shares of Parent Common Stock; and the Company shall further
have received an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & White LLP dated as of
the Closing Date, in form reasonably satisfactory to the Company, to
the effect that, (A) each of Parent and Sub are corporations duly
organized, existing and in good standing under the laws of their
respective states of incorporation, (B) this Agreement was duly
authorized by Parent and Sub and constitutes a valid and binding
agreement enforceable against each of Parent and Sub in accordance with
its terms, and (C) the shares of Parent Common Stock to be issued in
the Merger have been duly authorized and are validly issued, fully paid
and nonassessable, have been registered under the Securities Act
pursuant to a registration statement that has been declared effective
and as to which, to the best of its knowledge, no stop order has been
issued or is threatened. In rendering the tax opinions referenced in
(1) and (2) above, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Rose & White LLP, may require and rely
on representations contained in certificates of Parent, the Company,
Sub and others and in the tax representation letters provided for in
Section 5.1(m) above, as
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they deem reasonably appropriate. In the corporate
opinions referred to in (A), (B) and (C) above, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ &
White LLP may rely on representations contained in certificates of
Parent, the Company, Sub and others, on certificates of public
officials, and on opinions of local legal counsel, as it deems
appropriate, and shall be entitled to render the opinion in such form
and with such qualifications as is customary for such firm in rendering
similar opinions in transactions of this nature.
(e) The Company shall have received a letter, in form
and substance reasonably satisfactory to the Company, from KPMG Peat
Marwick LLP, dated the date of the Proxy Statement and confirmed in
writing at the Effective Time, stating that the Merger will qualify as
a pooling of interests transaction under Opinion 16 of the Accounting
Principles Board.
(f) The Company shall have received from Parent the
"comfort" letters of Deloitte & Touche LLP described in Section 5.2(e).
(g) The Company shall have received an opinion from
the Company Broker dated as of the date of mailing of the Proxy
Statement to the effect that, as of the date thereof, the Exchange
Ratio is fair to the Company Shareholders from a financial point of
view.
VI.3 Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate the Merger and the other
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions unless waived by each of Parent and Sub:
(a) The representations and warranties of the Company
shall be true and correct on the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need
be true and correct only as of the specified date), other than such
breaches of representations and warranties which would not have or
which would not be reasonably expect to have, in the aggregate, a
material adverse effect on the Company.
(b) The Company shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with
by it hereunder at or prior to the Effective Time.
(c) The Company shall have delivered to Parent a
certificate, dated as of the Closing Date and signed by its Chairman,
Chief Executive Officer and President or a Senior Vice President
certifying as to the satisfaction of the matters described in (a) and
(b) above.
(d) Each person who may be at the Effective Time or
was on the date of this Agreement an "affiliate" of the Company within
the meaning of Rule 145 under the Securities Act, shall have executed
and delivered to Parent a written undertaking in the form attached
hereto as Exhibit 5.1(k).
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(e) Parent shall have received a letter, in form and
substance reasonably satisfactory to Parent, from Deloitte & Touche
LLP, dated the date of the Proxy Statement and confirmed in writing at
the Effective Time, stating that the Merger will qualify as a pooling
of interests transaction under Opinion 16 of the Accounting Principles
Board.
(f) Parent shall have received from the Company the
"comfort" letters of KPMG Peat Marwick LLP described in Section 5.3(c).
(g) Each of ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇ who, contemporaneously with the execution of this Agreement,
entered into Non-Competition and Non-Solicitation Agreements by and
between Parent, Company and certain subsidiaries of the Company (the
"Non-Compete Agreements") shall have remained employees of the Company
and/or its subsidiaries, as the case may be, and there shall have been
no breach or repudiation of the Non-Compete Agreements by the Company
or the employees and the Non-Compete Agreements shall be in full force
and effect.
(h) The tax opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Rose & White LLP
referenced in 6.2(d)(1) and (2) shall have been delivered to the
Company and shall not have been withdrawn by such firm.
(i) Parent shall have received an opinion of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, a Professional Limited Liability Company, dated
as of the Closing Date, in form reasonably satisfactory to Parent, to
the effect that (1) the Company and its subsidiaries are corporations
existing and in good standing under the laws of their respective states
of incorporation, and (2) this Agreement was duly authorized by the
Company and constitutes a valid and binding agreement enforceable
against the Company in accordance with its terms, and an opinion of
▇▇▇▇▇▇ & Tutor, P.A. dated as of the Closing Date, in form reasonably
satisfactory to Parent, to the effect that the Company is a corporation
duly organized under the laws of the State of Mississippi. In rendering
these opinions, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, a Professional Limited
Liability Company, and ▇▇▇▇▇▇ & Tutor, P.A., may rely on
representations contained in certificates of Parent, the Company, Sub
and others, on certificates of public officials, and on opinions of
local legal counsel, as it deems appropriate, and shall be entitled to
render the opinion in such form and with such qualifications as is
customary for such firm in rendering similar opinions in transactions
of this nature.
(j) The holders of not more than 7% of the
outstanding Company Common Stock shall have elected to exercise their
right to dissent from the Merger in accordance with the MBCA.
(k) Parent shall have received the opinion of Parent
Broker to the effect that, as of the date of mailing of the Proxy
Statement, the Exchange Ratio is fair to Parent from a financial point
of view.
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ARTICLE VII
TERMINATION AND AMENDMENT
VII.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the Merger
by the shareholders of the Company or the Share Issuance by the stockholders of
Parent:
(a) by mutual written consent duly authorized
by the Boards of Directors of Parent and the Company;
(b) by either Parent or the Company if (i) a statute,
rule, regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Merger substantially on
the terms contemplated hereby, or (ii) any permanent injunction or
other ruling, order or decree of a court or other competent
Governmental Authority preventing the consummation of the Merger shall
have become final and nonappealable; provided, that the party seeking
to terminate this Agreement pursuant to this clause 7.1(b)(ii) shall
have used all reasonable efforts to resist and to remove such
injunction, ruling, order or decree;
(c) by either Parent or the Company if the Merger
shall not have been consummated before December 31, 1997, unless
extended by mutual written consent duly authorized by the Boards of
Directors of both Parent and the Company (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to perform any material covenant
or obligation or whose breach of a representation or warranty under
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(d) by Parent or the Company if at the meeting of
Company Shareholders held for such purpose (including any adjournment
or postponement thereof) the requisite vote of the Company Shareholders
to approve the Merger and the transactions contemplated hereby shall
not have been obtained;
(e) by Parent or the Company if at the meeting of
Parent Stockholders held for such purpose (including any adjournment or
postponement thereof) the requisite vote of the Parent Stockholders to
approve the Share Issuance shall not have been obtained;
(f) by Parent or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall
have been a material breach of any of the covenants or agreements or
any of the representations or warranties set forth in this Agreement on
the part of the other party, which breach is not cured within 30 days
following written notice given by the terminating party to the party
committing such breach, or which breach, by its nature, cannot be cured
prior to the Closing, but only if such breach would constitute a
failure of a condition contained in Section 6.2 or Section 6.3, as
applicable; provided,
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however, that any right of termination under this
Section 7.1(f) with respect to any breach of a representation or
warranty occurring as a result of a notification delivered pursuant to
Section 5.1(j), excluding any such breach related to pending or
threatened litigation or governmental investigations or proceedings
involving the Company or one or more of its subsidiaries, shall be
waived unless the terminating party gives written notice of termination
to the breaching party within 10 days (subject to extension by mutual
written agreement of Parent, Sub and the Company) after each of the
following has occurred: (i) the breaching party has given written
notice of such breach to the terminating party, (ii) the cure period
with respect to such breach has expired, and (iii) the terminating
party has had a reasonable opportunity and amount of time to
investigate the facts and circumstances surrounding, and the effect on
the Company and (following the Merger) Parent as a result of, such
breach;
(g) by Parent or the Company if the Board of
Directors of the Company shall determine that the failure to engage in
a Company Competing Transaction would result in a breach of the
fiduciary duties of the Board of Directors of the Company and shall
further determine to engage in a Company Competing Transaction;
provided, however, that the Company may not terminate this Agreement
pursuant to this clause (g) unless (i) the Company shall have delivered
to Parent a written notice of the determination by the Company Board of
Directors to terminate this Agreement pursuant to this Section 7.1(g),
setting forth (unless the Company is prohibited by law from doing so)
the status of and the reasonable details related to the Company
Competing Transaction and the identity of the other parties involved
therein, (ii) five business days shall have elapsed after delivery to
Parent of the notice referred to above, during which time the Company
cooperates with Parent in good faith with the intent of enabling Parent
to agree to a modification of the terms and conditions of this
Agreement, (iii) at the end of such five business-day period the
Company Board of Directors shall continue to believe that the failure
to engage in such Company Competing Transaction would result in a
breach of the fiduciary duties of the Board of Directors of the Company
(after giving effect to any adjustment to the terms and conditions of
the transactions contemplated by this Agreement proposed by Parent in
response to such Company Competing Transaction), and (iv) as soon as
reasonably practical thereafter the Company shall enter into a
definitive acquisition, merger or similar agreement to effect, or shall
effect, such Company Competing Transaction;
(h) by Parent if the Board of Directors of the
Company shall not have recommended the Merger to the Company
Stockholders, or shall have resolved not to make such recommendation,
or shall have materially modified or rescinded its recommendation of
the Merger to the Company Stockholders, or shall have modified or
rescinded its approval of this Agreement, or shall have resolved to do
any of the foregoing;
(i) by Parent if a tender offer or exchange offer for
25% or more of the outstanding shares of capital stock of the Company
is commenced by any person (including the Company or any of its
subsidiaries or affiliates), and the Board of Directors of the Company
fails to recommend against acceptance of such tender offer or exchange
offer by its shareholders (including by taking no position with respect
to the acceptance of
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such tender offer or exchange offer by its
stockholders) within the time period presented by Rule 14e-2 under the
Exchange Act, or if the Board of Directors of the Company shall have
recommended to the shareholders of the Company any Company Competing
Transaction or shall have resolved to do so; or
(j) by the Company if the Average Closing Price (as
hereinafter defined) on the seventh business day before the date of the
Company Shareholders meeting held to approve the Merger, and on the
last trading day before such meeting, shall be less than 75% of the
Average Closing Price of Parent Common Stock on the date of this
Agreement (the "Floor Value"), subject, however, to the following:
1) If the Company elects to terminate
this Agreement pursuant to this Section 7.1(j), it shall give prompt
(but in no event longer than the close of business on the sixth business
day before the date of such meeting) written notice thereof to Parent.
2) During the five business day period
commencing with its receipt of such notice, the Company and Parent
shall cooperate with each other to enable Parent to propose a
modification to the terms of this Agreement that are acceptable to the
Company.
3) If the Company and Parent agree
to a modification to the terms of this Agreement, no termination shall
have occurred pursuant to this Section 7.1(j), and this Agreement
shall remain in effect in accordance with its terms (except as the
Exchange Ratio shall have been so modified), and any references in
this Agreement to "Exchange Ratio" shall thereafter be deemed to refer
to the Exchange Ratio as adjusted pursuant to this Section 7.1(j).
4) In the event the Average Closing
Price is not less than the Floor Value on the last trading day before
the Company's Shareholders meeting, no termination of this Agreement
shall have occurred pursuan to this Section 7.1(j), and this
Agreement shall remain in effect in accordance with its original
terms, including the original Exchange Ratio.
For purposes of this Section 7.1(j), "Average Closing Price" shall mean the
average per share closing price of the Parent Common Stock as reported by the
NYSE for the ten consecutive trading days ending at the close of trading on the
applicable date. For purposes of this calculation, all share prices shall be
rounded to three decimals.
For purposes of this Section 7.1 and Section 7.2 below, the
terms "Company Competing Transaction" and "Parent Competing Transaction" shall
mean any such transaction or series of related transactions involving, or
constituting any purchase of, more than 50% of the assets, voting power or then
outstanding Common Stock of the Company or Parent, as the case may be.
VII.2 Effect of Termination.
(a) In the event of the termination of this
Agreement pursuant to
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Section 7.1, this Agreement, except for the
provisions of the last sentence of Section 5.1(g) and the provisions of
Sections 7.2, 8.8, and 8.10, shall become void and have no effect,
without any liability on the part of any party or its directors,
officers, employees, shareholders or stockholders.
(b) If this Agreement is terminated
(i) (A) by Parent or the Company pursuant to
Section 7.1(d) or 7.1(g), (B) by Parent pursuant to Section
7.1(f), 7.1(h) or 7.1(i), (C) by Parent pursuant to Section
7.1(c), or otherwise, as a result of the, failure of the
conditions set forth in Section 6.3(j) in a circumstance where
a termination fee would otherwise be payable under Section
7.2(c) below, or (D) by Parent or the Company pursuant to
Section 7.2(c), or otherwise, as a result of a failure of the
conditions set forth in Section 6.2(g) in a circumstance where
the conditions set forth in Section 6.3(k) would be met and a
termination fee would otherwise be payable under Section
7.2(c) below, then the Company will pay to Parent in cash by
wire transfer in immediately available funds to an account
designated by Parent the reasonable documented out-of-pocket
expenses, up to $600,000, incurred by Parent in connection
with the transactions contemplated hereby, including the
negotiation and execution of this Agreement; provided,
however, that if such termination is by Parent pursuant to
Section 7.1(f) as a result of a breach of the representation
and warranty of the Company set forth in Section 4.25, then
the maximum amount of such reimburseable out-of-pocket
expenses of Parent shall be $300,000 rather than $600,000; or
(ii) by Parent or the Company pursuant to
Section 7.1(e), or by the Company pursuant to Section 7.1(f),
then Parent will pay to the Company in cash by wire transfer
in immediately available funds to an account designated by the
Company the reasonable documented out-of-pocket expenses, up
to $600,000, incurred by the Company in connection with the
transactions contemplated hereby, including the negotiation
and execution of this Agreement.
(c) If this Agreement is terminated by Parent
pursuant to Section 7.1(f), 7.1(h) or 7.1(i), or by Parent or the
Company pursuant to Section 7.1(d) or 7.1(g), or pursuant to the
circumstances described in Section 7.2(b)(i)(C) or (D) above, and if in
each case either (A) the Company shall enter into a definitive
agreement with respect to a Company Competing Transaction prior to
termination or within twelve months following such termination and such
Company Competing Transaction is thereafter consummated, or (B) a
Company Competing Transaction is consummated prior to termination or
within twelve months following such termination, then, in any such
case, the Company will pay to Parent in cash by wire transfer in
immediately available funds to an account designated by Parent a
termination fee in an amount equal to two million dollars ($2,000,000),
less any amounts paid or payable pursuant to Section 7.2(b) hereof (the
"Termination Fee"). Such payment shall be made within one business day
following the consummation of such Company Competing Transaction.
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(d) If this Agreement is terminated by (i) the
Company pursuant to Section 7.1(f), or (ii) by Parent or the Company
pursuant to Section 7.1(e), and if in each case either (A) Parent shall
enter into a definitive agreement with respect to a Parent Competing
Transaction (as defined below) prior to termination or within twelve
months following such termination and such Parent Competing Transaction
(as it may be amended) is thereafter consummated, or (B) a Parent
Competing Transaction is consummated prior to termination or within
twelve months following such termination, then, in any such case,
Parent will pay to the Company in cash by wire transfer in immediately
available funds to an account designated by the Company a Termination
Fee in an amount equal to two million dollars ($2,000,000), less any
amounts paid or payable pursuant to Section 7.2(b) of this Agreement.
Such payment shall be made within one business day following the
consummation of the Parent Competing Transaction.
(e) As used herein, the term "Parent Competing
Transaction" shall have the same meaning with respect to Parent as the
term "Company Competing Transaction" has with respect to the Company,
with such changes in the definition thereof as are appropriate to
contemplate Parent in lieu of the Company.
(f) As used herein, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(g) The Company and Parent agree that the Termination
Fee and expenses provided in Section 7.2(b), (c) and (d) are fair and
reasonable in the circumstances. If a court of competent jurisdiction
shall nonetheless, by a final, nonappealable judgment, determine that
the amount of any such Termination Fee and expenses exceeds the maximum
amount permitted by law, then the amount of such Termination Fee and
expenses shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by such court of competent jurisdiction.
VII.3 Amendment. This Agreement may be amended by the parties
hereto, at any time before or after adoption of this Agreement by Company
Stockholders or authorization of the Share Issuance by Parent Stockholders, but
after such approval or authorization, no amendment shall be made which by law or
its terms requires further approval or authorization by the Company Shareholders
or Parent Stockholders, as the case may be, without such further approval or
authorization. Notwithstanding the foregoing, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
VII.4 Extension; Waiver. At any time prior to the Effective
Time, Parent (with respect to the Company) and the Company (with respect to
Parent and Sub) may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of such party, (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 a
written instrument signed on behalf of such party.
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ARTICLE VIII
MISCELLANEOUS
VIII.1 Survival of Representations and Warranties. None of the
representations, warranties, covenants or agreements made or incorporated herein
(or in any instrument or documents delivered pursuant to this Agreement) by the
parties hereto shall survive the Effective Time, except for those covenants and
agreements contained herein or therein which by their terms contemplate
performance after the Effective Time, and provided that the parties acknowledge
and agree that any rights or remedies otherwise available to a party hereunder
shall not be affected by any investigation conducted with respect to or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Effective Time, with
respect to the accuracy or inaccuracy of or compliance with any such
representation, warranty, covenant or agreement. Notwithstanding the foregoing,
it is understood that factual matters set forth in a party's disclosure schedule
to this Agreement shall be exceptions to such party's representations and
warranties under this Agreement.
VIII.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon receipt if delivered
personally, telecopied (which is confirmed) or dispatched by a nationally
recognized overnight courier service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub:
Cavalier Homes, Inc.
Highway ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇▇ ▇▇▇▇▇ Rose & White LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
Belmont Homes, Inc.
Highway ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
E-50
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, PLLC
Nashville City Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇ ▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
VIII.3 Interpretation. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article
or Section of this Agreement unless otherwise indicated. The headings and the
table of contents contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
For the purposes of this Agreement, a "material adverse effect" shall mean, as
to any party, any change, effect or circumstance that, individually or when
taken together with all other such changes, effects or circumstances that have
occurred prior to the date of determination of the occurrence of the material
adverse effect, is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), liabilities, results of
operations, or financial condition of such party and its subsidiaries, taken as
a whole, or on such party's ability to consummate the transactions contemplated
hereby.
VIII.4 Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
VIII.5 Entire Agreement. This Agreement (including the
documents, agreements and the instruments referred to herein) and the
Confidentiality Agreement constitute the entire agreement among the parties and
supersede all prior agreements and understandings, agreements or representations
by or among the parties, written and oral, with respect to the subject matter
hereof and thereof.
VIII.6 Third Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended or shall be construed to create any
third party beneficiaries, except for the provisions of Sections 1.6, 2.1, 2.3,
2.4, 5.2(b), and 5.2(d), which may be enforced by the beneficiaries thereof.
VIII.7 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, except that
Mississippi law shall govern the Merger, without regard to principles of
conflicts of law.
VIII.8 EXCLUSIVE REMEDIES. PARENT, SUB AND THE COMPANY
HEREBY EXPRESSLY AGREE THAT, AS BETWEEN SUCH PARTIES TO THIS AGREEMENT (BUT
NOT AS TO THE THIRD PARTY BENEFICIARIES OF THIS AGREEMENT), THE REMEDIES
PROVIDED IN SECTION 7.2 OF THIS AGREEMENT CONSTITUTE LIQUIDATED DAMAGES AND DO
NOT CONSTITUTE A PENALTY.
E-51
PARENT, SUB AND THE COMPANY HEREBY EXPRESSLY AGREE THAT SUCH
LIQUIDATED DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY FOR ANY CLAIM ARISING
OUT OF OR RELATING TO THIS NEGOTIATION, EXECUTION, DELIVERY OR PERFORMANCE OF
THIS AGREEMENT OR THE MERGER. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS
SECTION 8.8 SHALL RELIEVE ANY PARTY TO THIS AGREEMENT OF LIABILITY FOR A WILLFUL
AND INTENTIONAL BREACH OF ANY PROVISION OF THIS AGREEMENT.
VIII.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
VIII.10 Expenses. Subject to the provisions of Section 7.2,
Parent and the Company shall pay their own costs and expenses associated with
the transactions contemplated by this Agreement; provided, that the costs of
environmental audits (whether Phase I or Phase II environmental audits)
conducted by Parent of the facilities, operations, business or properties of the
Company or its subsidiaries shall be borne by the Company, if, in the case of
Phase II environmental audits, such audits were approved in advance by the
Company in writing.
VIII.11 Incorporation of Disclosure Schedules. The Company
Disclosure Schedule and the Parent Disclosure Schedule are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
VIII.12 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
VIII.13 Subsidiaries. As used in this Agreement, the
word "subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, of which such
party directly or indirectly owns or controls 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 corporation or other organization, or any
organization of which such party is a general partner.
VIII.14 WAIVER OF JURY TRIAL. EACH OF PARENT, SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, Parent, Sub and the Company have executed
and delivered this Agreement on the date first written above.
CAVALIER HOMES, INC.
By ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
--------------------------
Its President
-------------------------
CRIMSON ACQUISITION CORP.
By ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Its Vice President
-------------------------
BELMONT HOMES, INC.
By ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Its President
--------------------------
E-53
EXHIBIT 5.1(k)
FORM OF AFFILIATE LETTER
Cavalier Homes, Inc.
Highway ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Gentlemen:
This letter agreement (this "Agreement") is being delivered in
accordance with Section 6.3(d) of the Agreement and Plan of Merger, dated as of
August , 1997 (the "Merger Agreement"), by and among Cavalier Homes, Inc., a
Delaware corporation ("Parent"), Crimson Acquisition Corp., a Mississippi
corporation and a wholly owned subsidiary of Parent ("Sub"), and Belmont Homes,
Inc., a Delaware corporation (the "Company"). The Merger Agreement provides,
among other things, for the merger of Sub with and into the Company (the
"Merger"), pursuant to which each share of the common stock of the Company, par
value $0.10 per share ("Company Common Stock"), will be converted into shares of
common stock of Parent, par value $0.10 per share ("Parent Common Stock"), on
the basis described in the Merger Agreement.
1. The undersigned ("Shareholder") hereby represents, warrants,
covenants and agrees as follows:
(a) Shareholder has full power to execute this Agreement and
to make the representations, warranties, covenants and agreements
herein and to perform its obligations hereunder.
(b) Shareholder understands that as of the date of this letter
it may be deemed to be an "affiliate" of the Company as such term is
(i) used in Rule 145 of the General Rules and Regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933 (the "Securities Act"), or (ii) used
in and for purposes of Accounting Series, Releases 130 and 135 of the
SEC (an"Affiliate").
(c) Shareholder is the beneficial or record owner of shares of
Company Common Stock and/or options, warrants or other rights
exercisable for or convertible into shares of Company Common Stock
(collectively, the "Rights"), (all such shares and Rights, including
any hereafter acquired, the "Shares").
(d) Shareholder will not sell, transfer or otherwise dispose
of or offer or agree to sell, transfer or dispose of or in any other
way reduce Shareholder's risk of ownership or investment in (any of the
foregoing, a "Disposition") any of the shares of Parent Common Stock
issued to the undersigned in the Merger pursuant to the terms of the
Merger Agreement (the "Parent Shares") in violation of the Securities
Act or the Rules and Regulations.
(e) Shareholder understands that the issuance of Parent
Common Stock
E-54
pursuant to the Merger will be registered with the SEC under
the Securities Act on a Registration Statement on Form S-4 and that,
because at the time the Merger Agreement is submitted to a vote of the
shareholders of the Company, Shareholder may be deemed to be an
Affiliate of the Company and the distribution by Shareholder of any
shares of Parent Common Stock has not been registered under the
Securities Act, Shareholder may not make any Disposition of the Parent
Shares unless (i) such Disposition has been registered under the
Securities Act, (ii) such Disposition is made in conformity with Rule
145 promulgated by the SEC under the Securities Act, including (a) the
filing of reports by Parent under the Securities Exchange Act of 1934,
as amended, (b) compliance with certain limitations on the volume of
Parent Common Stock sold for Shareholder's account during a three-month
period, and (c) the sale of the Parent Common Stock in "brokers'
transactions" as that term is defined by Section 4(4) of the Securities
Act, or (iii) Parent has received an opinion of counsel, which opinion
and counsel shall be reasonably acceptable to Parent, to the effect
that such Disposition is otherwise exempt from registration under the
Securities Act. Shareholder understands that Parent is under no
obligation to register the sale, transfer or other disposition of the
Parent Common Stock by Shareholder, or on Shareholder's behalf, under
the Securities Act or to take any other action necessary in order to
make compliance with an exemption from such registration available.
(f) Shareholder understands that stop transfer instructions
will be given to all transfer agents for the Parent Common Stock (with
respect to Parent Shares) and that there will be placed on the
certificates evidencing the Parent Shares, or any replacements or
substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED AUGUST , 1997, BETWEEN THE REGISTERED HOLDER
HEREOF AND CAVALIER HOMES, INC., A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF CAVALIER HOMES, INC.
(g) Shareholder also understands that unless a Disposition of
the Parent Shares has been registered under the Securities Act or is
made in conformity with the provisions of Rule 145, Parent reserves the
right to put the following legend on the certificates evidencing any of
the Parent Shares issued to any transferee of Shareholder:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF
E-55
THE SECURITIES ACT OF 1933.
(h) It is understood and agreed that the legends set forth in
Sections 1(f) and 1(g) above shall be removed by delivery of substitute
certificates without such legend if Shareholder has delivered to Parent
(i) an opinion of counsel (or other evidence), which opinion and
counsel (or such other evidence) shall be reasonably satisfactory to
Parent, or a letter from the staff of the SEC, to the effect that such
legend is not required for purposes of the Rules and Regulations or the
Securities Act or (ii) evidence or representations satisfactory to
Parent that the Parent Shares represented by such certificates are
being or have been sold in a transaction made in conformity with Rule
145.
2. Shareholder understands that the Merger will be accounted for using
the "pooling-of-interests" method and that such treatment for financial
accounting purposes is dependent upon the accuracy of certain of the
representations and warranties, and the compliance by Shareholder with certain
of the covenants and agreements, set forth herein. Accordingly, Shareholder
further hereby covenants and agrees (in addition to the other covenants and
agreements in this Agreement) that it will not make any Disposition: (i) of the
Shares in the 30-day period immediately preceding the Effective Time or (ii) of
the Parent Shares after the Effective Time until Parent shall have publicly
released a report including the combined financial results of Parent and the
Company for a period of at least 30 days of combined operations of Parent and
the Company. Shareholder understands that stop transfer instructions will be
given to the transfer agents of Parent and the Company in order to prevent any
breach of the covenants and agreements made by Shareholder in this Section 2,
although such stop transfer instructions will be promptly rescinded upon the
publication of the financial report referred to in clause (ii) of the
immediately preceding sentence.
3. Shareholder further understands and agrees that the representations,
warranties, covenants and agreements of Shareholder set forth herein are for the
benefit of Parent, the Company and the Surviving Corporation (as defined in the
Merger Agreement) in the Merger and will be relied upon by such entities and
their respective counsel and accountants.
4. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
Shareholder and any pledgees holding the Shares as collateral. If the Merger
Agreement is terminated in accordance with its terms prior to the Effective
Time, this Agreement will thereupon automatically terminate.
Very truly yours,
Name: ---------------------------------
Address: ------------------------------
------------------------------------------
------------------------------------------
Agreed to and accepted:
CAVALIER HOMES, INC.
By: ------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
E-56
EXHIBIT 5.1(m)(i)
_________, 1997
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & White LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In connection with the proposed merger of Crimson Acquisition
Corp., a Mississippi corporation ("Subsidiary"), with and into Belmont Homes,
Inc., a Mississippi corporation ("Belmont"), pursuant to the terms of that
certain Agreement and Plan of Merger dated August ____, 1997 (the "Merger
Agreement") by and among Belmont, Cavalier Homes, Inc., a Delaware corporation
("Cavalier"), Subsidiary and Belmont, as described in more detail in the Merger
Agreement and the Registration Statement on Form S-4 filed by Cavalier with the
Securities and Exchange Commission on , 1997, (the "Registration Statement"), as
counsel to Cavalier you have been asked to render certain opinions pursuant to
the requirements of Item 21(a) of Form S-4 under the Securities Act of 1933, as
amended, and pursuant to Section 6.2(c) of the Merger Agreement, with respect to
the federal income tax treatment of the Merger under the Internal Revenue Code
of 1986, as amended (the "Code"). Capitalized terms used herein and not
otherwise defined herein have the meanings given to them in the Merger
Agreement.
Pursuant to the Merger Agreement, Subsidiary will be merged
with and into Belmont in accordance with Section 79-4-11.01 et seq. of the
Mississippi Business Corporation Act and Belmont will be the surviving
corporation, and all Belmont shares other than those held as treasury stock by
Belmont, or held by Cavalier or any of its subsidiaries, which will be canceled
and retired, and other than those Belmont shares for which the holders have
dissented from the Merger, demanded and perfected demand for payment of the
"fair value" in accordance with the Mississippi Business Corporation Act, shall
be converted into the right to receive eight tenths (0.8) shares of common stock
of Cavalier. The Merger Agreement and the Registration Statement describe other
transactions that will be effected or undertaken in connection with the
transactions contemplated by the Merger Agreement, including, without
limitation, the treatment of Belmont's employee benefit plans and the treatment
of certain options issued by Belmont, and other matters relating to the
employees of Belmont. In connection with the opinions which you have been asked
to render, you are entitled to rely upon the descriptions in the Merger
Agreement and the Registration Statement as being a complete and accurate
description of all the transactions to be effected and undertaken pursuant to
the Merger Agreement.
In connection with the opinions which you have been asked to
render, and recognizing that you will rely on this letter in rendering said
opinions, the undersigned, a duly authorized officer of Belmont and acting in
such capacity, hereby certifies that, to the best
E-57
knowledge of the management of Belmont, the following
statements are correct and complete in all material respects as of the date
hereof, and further certifies that the following statements will be correct and
complete in all material respects as of the date on which the Proxy
Statement/Prospectus which is part of the Registration Statement is mailed to
the shareholders of the Company. Insofar as such certification pertains to any
person (including Cavalier or any of its subsidiaries) other than Belmont and
any of its subsidiaries, such certification is only as to the knowledge of the
undersigned without specific inquiry.
i. The Merger will be consummated in compliance with the
material terms of the Agreement and, except as
described in the attached schedule, none of the
material terms and conditions therein have been
waived or modified and Belmont has no plan or
intention to waive or modify further any such
material condition.
ii. The ratio for the exchange of shares of Belmont
Common Stock for shares of Cavalier Common Stock was
negotiated through arm's length bargaining.
Accordingly, the fair market value of the Cavalier
Common Stock to be received by Belmont shareholders
in the Merger will be approximately equal to the fair
market value of the Belmont Common Stock surrendered
by such shareholders in exchange therefor.
iii. There is no plan or intention by any of the
shareholders of Belmont who own one percent (1%) or
more of the Belmont Common Stock, and to the best of
the knowledge of the management of Belmont, there is
no plan or intention on the part of the remaining
shareholders of Belmont to sell, exchange, or other-
wise dispose of a number of shares of Cavalier Common
Stock to be received by them in the Merger that would
reduce the Belmont shareholders' ownership of
Cavalier Common Stock to a number of shares having
a value, as of the Effective Time of the Merger, of
less than fifty percent (50%) of the value of all
of the formerly outstanding shares of Belmont Common
Stock as of the same date. For purposes of the
foregoing statement, shares of Belmont Common Stock
exchanged for cash or other property by Dissenting
Shareholders, if any, or exchanged for cash in lieu
of fractional shares of Cavalier Common Stock have
been considered as outstanding Belmont Common Stock
as of the Effective Time of the Merger. In addition,
the management of Belmont is not aware of any
transfers of Belmont Common Stock by any holders
thereof (including any sales, redemptions or other
dispositions) prior to the Effective Time which
were made in contemplation of the Merger.
iv. Immediately after the Merger, Belmont will hold no
less than ninety percent (90%) of the fair market
value of the net assets and no less than seventy
percent (70%) of the fair market value of the gross
assets of
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Belmont held by Belmont immediately prior to the
Merger, and no less than ninety percent(90%) of the
fair market value of the net assets and no less than
seventy percent (70%) of the fair market value of
the gross assets of Subsidiary held by Subsidiary
immediately prior to the Merger. For purposes of
this certification, amounts used by Belmont or by
Subsidiary to pay Dissenting Shareholders or to pay
reorganization expenses, and all redemptions and
distributions (except for regular, normal and
recurring dividends) made by Belmont or by
Subsidiary immediately prior to the Merger will be
considered as assets held by Belmont or
Subsidiary, respectively, immediately prior to the
Merger. Belmont has not redeemed any of the
Belmont Common Stock, made any distribution with
respect to any of the Belmont Common Stock, or
disposed of any of its assets in anticipation of or
as part of a plan for the acquisition of Belmont
by Cavalier.
v. The liabilities of Belmont and the liabilities to
which the assets of Belmont are subject were incurred
by Belmont in the ordinary course of Belmont's
business. None of the shares of Belmont to be
surrendered in exchange for Cavalier Common Stock in
the Merger will be subject to any liabilities
following such exchange.
vi. Cavalier, Subsidiary and Belmont each will pay their
respective expenses, if any, incurred in connection
with the Merger. None of Cavalier, Subsidiary or
Belmont will pay any of the expenses of the
shareholders of Belmont, if any, incurred in
connection with the Merger.
vii. There is no intercorporate indebtedness existing
between Cavalier and Belmont or between Subsidiary
and Belmont that was issued, acquired, or which will
be settled at a discount.
viii. Belmont is not an investment company as
such term is defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
ix. Belmont is not under the jurisdiction of a
court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
x. As of the Effective Time of the Merger, the fair
market value of the assets of Belmont will exceed the
sum of the liabilities of Belmont (including any
liabilities to which its assets are subject).
xi. The payment of cash in lieu of fractional
shares of Cavalier Common Stock is not separately
bargained-for consideration and is being made solely
for the purpose of saving Cavalier the expense and
E-59
inconvenience of issuing fractional shares.
Furthermore, the total cash consideration paid to
shareholders of Belmont in lieu of fractional shares
of Cavalier pursuant to the Merger Agreement will
not exceed one percent (1%)of the total consideration
issued in the Merger to the Belmont shareholders in
exchange for their shares of Belmont Common Stock,
and no Belmont shareholder will receive cash for
fractional share interests in an amount equal to or
greater than the value of one full share of Cavalier
Common Stock.
xii. None of the compensation received by any
shareholder-employee of Belmont pursuant to any
employment, consulting or similar arrangement
(including a covenant not to compete) is or will be
separate consideration for, or allocable to, any of
such shareholder-employee's shares of Belmont Common
Stock. None of the shares of Cavalier Common Stock
received by any shareholder-employee of Belmont
pursuant to the Merger are, or will be, separate
consideration for, or allocable to, any such
employment, consulting or similar arrangement. The
compensation paid to any shareholder-employees of
Belmont pursuant to any such employment, consulting or
similar arrangement (including a covenant not to
compete) is or will be for services actually rendered
and performed, and will be commensurate with amounts
paid to third parties bargaining at arms' length for
similar services.
This letter is being furnished to you solely for your benefit
and for use in rendering your opinions, and is not to be used, circulated,
quoted or otherwise referred to for any other purpose (other than inclusion or
use in your opinions) without the express written consent of Belmont.
Sincerely,
BELMONT HOMES, INC.
By:
-------------------------
Its:
-------------------------
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EXHIBIT 5.1(m)(ii)
_______________ ____, 1997
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & White LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In connection with the proposed merger of Crimson Acquisition
Corp., a Mississippi corporation ("Subsidiary"), with and into Belmont Homes,
Inc., a Mississippi corporation ("Belmont"), pursuant to the terms of that
certain Agreement and Plan of Merger dated August , 1997 (the "Merger
Agreement") by and among Cavalier Homes, Inc., a Delaware corporation
("Cavalier"), Subsidiary and Belmont, as described in more detail in the Merger
Agreement and the Registration Statement on Form S-4 filed by Cavalier with the
Securities and Exchange Commission on__________ , 1997, (the "Registration
Statement"), as counsel to Cavalier you have been asked to render certain
opinions pursuant to the requirements of Item 21(a) of Form S-4 under the
Securities Act of 1933, as amended, and pursuant to Section 6.2(c) of the Merger
Agreement, with respect to the federal income tax treatment of the Merger under
the Internal Revenue Code of 1986, as amended (the "Code"). Capitalized terms
used herein and not otherwise defined herein have the meanings given to them in
the Merger Agreement.
Pursuant to the Merger Agreement, Subsidiary will be merged
with and into Belmont in accordance with Section 79-4-11.01 et seq. of the
Mississippi Business Corporation Act and Belmont will be the surviving
corporation, and all Belmont shares other than those held as treasury stock by
Belmont, or held by Cavalier or any of its subsidiaries, which will be canceled
and retired, and other than those Belmont shares for which the holders have
dissented from the Merger, demanded and perfected demand for payment of the
"fair value" in accordance with the Mississippi Business Corporation Act, shall
be converted into the right to receive eight tenths (0.8) shares of common stock
of Cavalier. The Merger Agreement and the Registration Statement describe other
transactions that will be effected or undertaken in connection with the
transactions contemplated by the Merger Agreement, including, without
limitation, the treatment of Belmont's employee benefit plans and the treatment
of certain options issued by Belmont, and other matters relating to the
employees of Belmont. In connection with the opinions which you have been asked
to render, you are entitled to rely upon the descriptions in the Merger
Agreement and the Registration Statement as being a complete and accurate
description of all the transactions to be effected and undertaken pursuant to
the Merger Agreement.
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In connection with the opinions which you have been asked to
render, and recognizing that you will rely on this letter in rendering said
opinions, the undersigned, a duly authorized officer of Cavalier and acting in
such capacity, hereby certifies that, to the best knowledge of the management of
Cavalier, the following statements are correct and complete in all material
respects as of the date hereof, and further certifies that the following
statements will be correct and complete in all material respects as of the
Effective Time of the Merger. Insofar as such certification pertains to any
person (including Belmont or any of its subsidiaries) other than Cavalier and
any of its subsidiaries, such certification is only as to the knowledge of the
undersigned without specific inquiry.
i. The Merger will be consummated in compliance with the
material terms of the Agreement and, except as
described in the attached schedule, none of the
material terms and conditions therein have been
waived or modified and Cavalier has no plan or
intention to waive or modify further any such
material condition.
ii. The ratio for the exchange of shares Belmont Common
Stock for Cavalier Common Stock was negotiated
through arm's length bargaining. Accordingly, the
fair market value of the Cavalier Common Stock to be
received by Belmont shareholders in the Merger will
be approximately equal to the fair market value of
the Belmont Common Stock surrendered by such
shareholders in exchange therefor.
iii. Immediately after the Merger, Belmont will
hold no less than ninety percent(90%)of the fair market
value of the net assets and no less than seventy
percent (70%) of the fair market value of the gross
assets of Belmont held by Belmont immediately prior to
the Merger, and no less than ninety percent (90%) of
the fair market value of the net assets and no less
than seventy percent (70%) of the fair market value of
the gross assets of Subsidiary held by Subsidiary
immediately prior to the Merger. For purposes of this
certification, amounts used by Belmont or by Subsidiary
to pay Dissenting Shareholders or to pay reorganization
expenses, and all redemptions and distributions (except
for regular, normal and recurring dividends) made by
Belmont or by Subsidiary immediately prior to the
Merger will be considered as assets held by Belmont or
Subsidiary, respectively, immediately prior to the
Merger. The management of Cavalier is not aware of
Belmont having redeemed any of the Belmont Common
Stock, having made any distribution with respect to any
of the Belmont Common Stock, or having disposed of any
of its assets in
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anticipation of or as part of a plan for the
acquisition of Belmont by Cavalier.
iv. Prior to the Merger, Cavalier will be in
control of Subsidiary within the meaning of Section
368(c) of the Code.
▇. ▇▇▇▇▇▇▇▇ has no plan or intention to cause Belmont
after the Merger to issue additional shares of
Belmont capital stock which would result in Cavalier
losing control of Belmont within the meaning of
Section 368(c) of the Code.
vi. Cavalier has no plan or intention to reacquire any
of its stock issued in the Merger.
vii. Cavalier is the owner of all of the outstanding
capital stock of Subsidiary, and Cavalier has no plan
or intention after the Merger to liquidate Belmont,
to merge Belmont into another corporation, to make
any extraordinary distribution in respect of its
stock in Belmont, to sell or otherwise dispose of the
capital stock of Belmont or to cause Belmont to sell
or otherwise dispose of any of the assets of Belmont
held by Belmont immediately prior to the Merger,
except for dispositions in the ordinary course of
business or transfers described in Section
368(a)(2)(C) of the Code.
viii. Following the Merger, Belmont will continue
its historic business or will use a significant
portion of its historic assets in a business.
ix. Cavalier, Subsidiary, Belmont and the shareholders of
Belmont each will pay their respective expenses, if
any, incurred in connection with the Merger. None of
Cavalier, Subsidiary or Belmont will pay any of the
expenses of the shareholders of Belmont, if any,
incurred in connection with the Merger.
x. There is no intercorporate indebtedness existing
between Cavalier and Belmont or between Subsidiary
and Belmont that was issued, acquired, or which will
be settled at a discount.
xi. Neither Cavalier nor Subsidiary is an
investment company as such term is defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
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xii. Neither Cavalier nor Subsidiary is under the
jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A)of the
Code.
xiii. Other than the approximately ______ shares of common
stock of Belmont currently owned by Cavalier,
Cavalier does not own, and Cavalier has not owned at
any time during the past five years, any shares of
the capital stock of Belmont.
xiv. As of the Effective Time of the Merger, the fair
market value of the assets of Belmont will exceed the
sum of the liabilities of Belmont (including any
liabilities to which its assets are subject).
xv. No stock of Subsidiary will be issued in the Merger.
xvi. The payment of cash in lieu of fractional shares of
Cavalier Common Stock is not separately bargained-
for consideration and is being made solely for the
purpose of saving Cavalier the expense and
inconvenience of issuing fractional shares.
Furthermore, the total cash consideration paid to
shareholders of Belmont in lieu of fractional shares
of Cavalier pursuant to the Merger Agreement
will not exceed one percent (1%) of the total
consideration issued in the Merger to the Belmont
shareholders in exchange for their shares of Belmont
Common Stock, and no Belmont shareholder will receive
cash for fractional share interests in an amount
equal to or greater than the value of one full share
of Cavalier Common Stock.
xvii. None of the compensation received by any shareholder
-employee of Belmont pursuant to any employment,
consulting or similar arrangement with Cavalier
(including a covenant not to compete) is or will be
separate consideration for, or allocable to, any
of such shareholder-employees' shares of Belmont
Common Stock. None of the shares of Cavalier Common
Stock received by any shareholder-employee of Belmont
pursuant to the Merger are, or will be, separate
consideration for, or allocable to, any such
employment, consulting or similar arrangement. The
compensation paid to any shareholder-employees
of Belmont pursuant to any such employment,
consulting or similar arrangement (including a
covenant not to compete) is or will be for services
actually rendered and performed, and will be
commensurate with amounts paid to third parties
bargaining at arms' length for similar services.
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This letter is being furnished to you solely for your benefit
and for use in rendering your opinions, and is not to be used, circulated,
quoted or otherwise referred to for any other purpose (other than inclusion or
use in your opinions) without the express written consent of Belmont.
Sincerely,
CAVALIER HOMES, INC.
By
Its
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EXHIBIT 6.2(d)
______________ ____, 1997
Belmont Homes, Inc.
Highway ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Agreement and Plan of Merger by and among Cavalier Homes, Inc.,
Crimson Acquisition Corp. and Belmont Homes, Inc.
Ladies and Gentlemen:
We have been requested to render certain opinions with respect
to the transactions contemplated by that certain Agreement and Plan of Merger
dated as of August , 1997 (the "Merger Agreement"), by and among Belmont Homes,
Inc., a Mississippi corporation ("Belmont"), Cavalier Homes, Inc., a Delaware
corporation ("Cavalier"), and Crimson Acquisition Corp., a Mississippi
corporation and a direct, wholly-owned subsidiary of Cavalier ("Subsidiary").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given them in the Merger Agreement.
In rendering the opinions set forth below, we have examined
and relied upon the originals or copies of the Merger Agreement and the
representations given to us by letter of even date with this opinion by Belmont,
and by letter of even date with this opinion by Cavalier, each as contained and
described in the representations section of this letter, and such other
documents and materials as we have deemed necessary as a basis for such
opinions. In connection with such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents, agreements and instruments
submitted to us as originals, the conformity to original documents, agreements
and instruments of all documents, agreements and instruments submitted to us as
copies or specimens and the authenticity of the originals of such documents,
agreements and instruments submitted to us as copies or specimens, and, as to
factual matters, the veracity of written statements made by officers and other
representatives of Belmont and Cavalier.
In rendering this opinion, we have made such investigation of
law and facts as we have deemed necessary, including examination of the relevant
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated pursuant thereto by the Department of the Treasury and
the IRS, and applicable judicial decisions, all of which are subject to change.
Neither Cavalier, Subsidiary, nor Belmont has requested or will receive an
advance ruling from the Internal Revenue Service ("IRS") as to any of the
federal income tax effects of the
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Merger to holders of Belmont Common Stock (as hereinafter
defined), or of any of the federal income tax effects to Cavalier, Subsidiary or
Belmont of the Merger. Our opinion is not binding on the IRS and there can be no
assurance, and none is hereby given, that the IRS will not take a position
contrary to one or more positions reflected herein or that the opinion will be
upheld by the courts if challenged by the IRS.
The Proposed Transaction
Immediately prior to the Merger, Cavalier will own 100% of the
capital stock of Subsidiary. Pursuant to the Merger Agreement, among other
things, (i) Subsidiary will be merged with and into Belmont (the "Merger") in
accordance with applicable provisions of the Mississippi Business Corporation
Act (the "Corporation Law"), and (ii) except for those shares for which the
holder exercises the right of dissent afforded under the Corporation Law (such
holders being hereinafter referred to as the "Dissenting Shareholders"), each
outstanding share of common stock, par value $0.10 per share, of Belmont (the
"Belmont Common Stock") will be converted into eight tenths (0.8) shares of
common stock of Cavalier, par value $0.10 per share (the "Cavalier Common
Stock") (the "Exchange Ratio"). No fractional shares will be issued; Cavalier
will pay cash in lieu of issuing fractional shares. No stock of Subsidiary will
be issued in the Merger.
All options and warrants to acquire shares of Belmont Common
Stock granted by Belmont (the "Belmont Options") which are outstanding and
unexercised at the time of the Merger will be assumed by Cavalier, and will be
converted into options to acquire shares of Cavalier Common Stock subject to the
same terms and conditions applicable to the Belmont options immediately prior to
the Merger, except that the number of shares subject to each option and the
exercise price thereof will be appropriately adjusted to give effect to the
Exchange Ratio.
Representations
Belmont has made the following representations:
(a) The Merger will be consummated in compliance with the
material terms of the Agreement and, except as described in the attached
schedule, none of the material terms and conditions therein have been waived or
modified and Belmont has no plan or intention to waive or modify further any
such material condition.
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(b) The ratio for the exchange of shares of Belmont Common
Stock for shares of Cavalier Common Stock was negotiated through arm's length
bargaining. Accordingly, the fair market value of the Cavalier Common Stock to
be received by Belmont shareholders in the Merger will be approximately equal to
the fair market value of the Belmont Common Stock surrendered by such
shareholders in exchange therefor.
(c) There is no plan or intention by any of the shareholders
of Belmont who own one percent (1%) or more of the Belmont Common Stock, and to
the best of the knowledge of the management of Belmont, there is no plan or
intention on the part of the remaining shareholders of Belmont to sell,
exchange, or otherwise dispose of a number of shares of Cavalier Common Stock to
be received by them in the Merger that would reduce the Belmont shareholders'
ownership of Cavalier Common Stock to a number of shares having a value, as of
the Effective Time of the Merger, of less than fifty percent (50%) of the value
of all of the formerly outstanding shares of Belmont Common Stock as of the same
date. For purposes of the foregoing statement, shares of Belmont Common Stock
exchanged for cash or other property by Dissenting Shareholders, if any, or
exchanged for cash in lieu of fractional shares of Cavalier Common Stock have
been considered as outstanding Belmont Common Stock as of the Effective Time of
the Merger. In addition, the management of Belmont is not aware of any transfers
of Belmont Common Stock by any holders thereof (including any sales, redemptions
or other dispositions) prior to the Effective Time which were made in
contemplation of the Merger.
(d) Immediately after the Merger, Belmont will hold no less
than ninety percent (90%) of the fair market value of the net assets and no less
than seventy percent (70%) of the fair market value of the gross assets of
Belmont held by Belmont immediately prior to the Merger, and no less than ninety
percent (90%) of the fair market value of the net assets and no less than
seventy percent (70%) of the fair market value of the gross assets of Subsidiary
held by Subsidiary immediately prior to the Merger. For purposes of this
certification, amounts used by Belmont or by Subsidiary to pay Dissenting
Shareholders or to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal and recurring dividends) made by
Belmont or by Subsidiary immediately prior to the Merger will be considered as
assets held by Belmont or Subsidiary, respectively, immediately prior to the
Merger. Belmont has not redeemed any of the Belmont Common Stock, made any
distribution with respect to any of the Belmont Common Stock, or disposed of any
of its assets in anticipation of or as part of a plan for the acquisition of
Belmont by Cavalier.
(e) The liabilities of Belmont and the liabilities to which
the assets of Belmont are subject were incurred by Belmont in the ordinary
course of Belmont's business. None of the shares of Belmont to be surrendered in
exchange for Cavalier Common Stock in the Merger will be subject to any
liabilities following such exchange.
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(f) Cavalier, Subsidiary and Belmont each will pay their
respective expenses, if any, incurred in connection with the Merger. None of
Cavalier, Subsidiary or Belmont will pay any of the expenses of the shareholders
of Belmont, if any, incurred in connection with the Merger.
(g) There is no intercorporate indebtedness existing between
Cavalier and Belmont or between Subsidiary and Belmont that was issued,
acquired, or which will be settled at a discount.
(h) Belmont is not an investment company as such
term is defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(i) Belmont is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(j) As of the Effective Time of the Merger, the fair market
value of the assets of Belmont will exceed the sum of the liabilities of Belmont
(including any liabilities to which its assets are subject).
(k) The payment of cash in lieu of fractional shares of
Cavalier Common Stock is not separately bargained-for consideration and is being
made solely for the purpose of saving Cavalier the expense and inconvenience of
issuing fractional shares. Furthermore, the total cash consideration paid to
shareholders of Belmont in lieu of fractional shares of Cavalier pursuant to the
Merger Agreement will not exceed one percent (1%) of the total consideration
issued in the Merger to the Belmont shareholders in exchange for their shares of
Belmont Common Stock, and no Belmont shareholder will receive cash for
fractional share interests in an amount equal to or greater than the value of
one full share of Cavalier Common Stock.
(l) None of the compensation received by any
shareholder-employee of Belmont pursuant to any employment, consulting or
similar arrangement (including a covenant not to compete) is or will be separate
consideration for, or allocable to, any of such shareholder-employee's shares of
Belmont Common Stock. None of the shares of Cavalier Common Stock received by
any shareholder-employee of Belmont pursuant to the Merger are, or will be,
separate consideration for, or allocable to, any such employment, consulting or
similar arrangement. The compensation paid to any shareholder-employees of
Belmont pursuant to any such employment, consulting or similar arrangement
(including a covenant not to compete) is or will be for services actually
rendered and performed, and will be commensurate with amounts paid to third
parties bargaining at arms' length for similar services.
Cavalier has made the following representations:
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(ii) The Merger will be consummated in compliance with the
material terms of the Agreement and, except as described in the attached
schedule, none of the material terms and conditions therein have been waived or
modified and Cavalier has no plan or intention to waive or modify further any
such material condition.
(iii) The ratio for the exchange of shares Belmont Common
Stock for Cavalier Common Stock was negotiated through arm's length bargaining.
Accordingly, the fair market value of the Cavalier Common Stock to be received
by Belmont shareholders in the Merger will be approximately equal to the fair
market value of the Belmont Common Stock surrendered by such shareholders in
exchange therefor.
(iv) Immediately after the Merger Belmont will hold no less
than ninety percent (90%) of the fair market value of the net assets and no less
than seventy percent (70%) of the fair market value of the gross assets of
Belmont held by Belmont immediately prior to the Merger, and no less than ninety
percent (90%) of the fair market value of the net assets and no less than
seventy percent (70%) of the fair market value of the gross assets of Subsidiary
held by Subsidiary immediately prior to the Merger. For purposes of this
certification, amounts used by Belmont or by Subsidiary to pay Dissenting
Shareholders or to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal and recurring dividends) made by
Belmont or by Subsidiary immediately prior to the Merger will be considered as
assets held by Belmont or Subsidiary, respectively, immediately prior to the
Merger. The management of Cavalier is not aware of Belmont having redeemed any
of the Belmont Common Stock, having made any distribution with respect to any of
the Belmont Common Stock, or having disposed of any of its assets in
anticipation of or as part of a plan for the acquisition of Belmont by Cavalier.
(v) Prior to the Merger, Cavalier will be in control of
Subsidiary within the meaning of Section 368(c) of the Code.
(vi) Cavalier has no plan or intention to cause Belmont after
the Merger to issue additional shares of Belmont capital stock which would
result in Cavalier losing control of Belmont within the meaning of Section
368(c) of the Code.
(vii) Cavalier has no plan or intention to reacquire any of
its stock issued in the Merger.
(viii) Cavalier is the owner of all of the outstanding capital
stock of Subsidiary, and Cavalier has no plan or intention after the Merger to
liquidate Belmont, to merge Belmont into another corporation, to make any
extraordinary distribution in respect of its stock in Belmont, to sell or
otherwise dispose of the capital stock of Belmont or to cause Belmont to sell
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or otherwise dispose of any of the assets of Belmont held by
Belmont immediately prior to the Merger, except for dispositions in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the Code.
(ix) Following the Merger, Belmont will continue its historic
business or will use a significant portion of its historic assets in a business.
(x) Cavalier, Subsidiary, Belmont and the shareholders of
Belmont each will pay their respective expenses, if any, incurred in connection
with the Merger. None of Cavalier, Subsidiary or Belmont will pay any of the
expenses of the shareholders of Belmont, if any, incurred in connection with the
Merger.
(xi) There is no intercorporate indebtedness existing between
Cavalier and Belmont or between Subsidiary and Belmont that was issued,
acquired, or which will be settled at a discount.
(xii) Neither Cavalier nor Subsidiary is an investment company
as such term is defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(xiii) Neither Cavalier nor Subsidiary is under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(xiv) Other than the approximately ______ shares of the common
stock of Belmont currently owned by Cavalier, Cavalier does not own, and
Cavalier has not owned at any time during the past five years, any shares of the
capital stock of Belmont.
(xv) As of the Effective Time of the Merger, the fair market
value of the assets of Belmont will exceed the sum of the liabilities of Belmont
(including any liabilities to which its assets are subject).
(xvi) No stock of Subsidiary will be issued in the Merger.
(xvii) The payment of cash in lieu of fractional shares of
Cavalier Common Stock is not separately bargained-for consideration and is being
made solely for the purpose of saving Cavalier the expense and inconvenience of
issuing fractional shares. Furthermore, the total cash consideration paid to
shareholders of Belmont in lieu of fractional shares of Cavalier pursuant to the
Merger Agreement will not exceed one percent (1%) of the total consideration
issued in the Merger to the Belmont shareholders in exchange for their shares of
Belmont Common Stock, and no Belmont shareholder will receive cash for
fractional share interests in an amount equal to or greater than the value of
one full share of Cavalier Common Stock.
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(xviii) None of the compensation received by any
shareholder-employee of Belmont pursuant to any employment, consulting or
similar arrangement with Cavalier (including a covenant not to compete) is or
will be separate consideration for, or allocable to, any of such
shareholder-employees' shares of Belmont Common Stock. None of the shares of
Cavalier Common Stock received by any shareholder-employee of Belmont pursuant
to the Merger are, or will be, separate consideration for, or allocable to, any
such employment, consulting or similar arrangement. The compensation paid to any
shareholder-employees of Belmont pursuant to any such employment, consulting or
similar arrangement (including a covenant not to compete) is or will be for
services actually rendered and performed, and will be commensurate with amounts
paid to third parties bargaining at arms' length for similar services.
Opinion
Upon the basis of the foregoing facts, representations and
assumptions, and solely for purposes of the Code, we are of the opinion that:
(1) Provided that pursuant to the Merger Belmont shareholders
exchange solely for Cavalier Common Stock an amount of Belmont Common Stock
constituting "control" of Belmont within the meaning of section 368(c) of the
Code, the proposed transaction will constitute a reorganization within the
meaning of section 368(a)(1)(A). The reorganization is not disqualified by
reason of the fact that Cavalier Common Stock is used in the transaction
(section 368(a)(2)(E)). Cavalier, Subsidiary, and Belmont each will be "a party
to a reorganization" within the meaning of section 368(b).
(2) No gain or loss will be recognized by the shareholders of
Belmont upon the exchange of Belmont Common Stock (including fractional share
interests, if any) solely for Cavalier Common Stock.
(3) The basis of the Cavalier Common Stock (including
fractional share interests, if any) to be received by Belmont shareholders will,
in each case, be the same as the basis of the Belmont Common Stock surrendered
in exchanged therefor.
(4) The holding period of Cavalier Common Stock (including
fractional share interests, if any) to be received by the shareholders of
Belmont will include the period during which the Belmont Common Stock exchanged
therefor was held by them, provided that such Belmont Common Stock was held as a
capital asset on the date of the exchange.
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(5) Where solely cash is received by Dissenting Shareholders
in exchange for their Belmont Common Stock, the cash payment will be treated as
received by the shareholder as a distribution in redemption of such Belmont
Common Stock subject to the provisions and limitations of section 302 of the
Code.
(6) The payment of cash in lieu of fractional share interests
of Cavalier Common Stock will be treated as if the fractional share was
distributed as part of the exchange and then redeemed by Cavalier. These
payments will be treated as having been received as distributions in full
payment in exchange for stock redeemed as provided in section 302(a) of the
Code.
This opinion is rendered solely with respect to certain
federal income tax consequences of the Merger under the Code, and does not
extend to the income or other tax consequences of the Merger under the laws of
any state or any political subdivision of any state. Furthermore, no opinion is
expressed as to the federal or state tax treatment of the transaction under any
other provisions of the Code and regulations, or about the tax treatment of any
conditions existing at the time of, or effects resulting from, the transaction
that are not specifically covered by the above opinions. We express no opinion
as to the federal or state income tax consequences to the holders of Belmont
Options or to the issuing corporations of the proposed assumption and conversion
of such Options into the equivalent options to acquire shares of Cavalier Common
Stock.
We hereby consent to the inclusion of this opinion as an
exhibit to the Registration Statement on Form S-4 filed by Cavalier with the
Securities and Exchange Commission relating to the Merger, as amended (the
"Registration Statement"), and we further consent to the references to this
opinion in the Registration Statement. This opinion is being provided solely for
the use of the Belmont and the shareholders of Belmont. No other party or person
shall be entitled to rely on this opinion without our express written consent.
Sincerely yours,
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