Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
October 17, 2002
by and between
PAK MAIL CENTERS OF AMERICA, INC.
and
PAK MAIL ACQUISITION CORP.
TABLE OF CONTENTS
Page
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BACKGROUND ............................................................... 1
ARTICLE I - THE MERGER ................................................... 1
Section 1.1 The Merger ................................................ 1
Section 1.2 The Closing ............................................... 1
Section 1.3 Effective Time ............................................ 1
Section 1.4 Effects of the Merger ..................................... 2
Section 1.5 Organizational Documents .................................. 2
Section 1.6 Directors and Officers .................................... 2
Section 1.7 Conversion of Shares ...................................... 2
Section 1.8 Purchaser Common Stock .................................... 3
ARTICLE II - PAYMENT ..................................................... 3
Section 2.1 Surrender of Certificates ................................. 3
Section 2.2 Exchange Agent; Certificate Surrender Procedures .......... 3
Section 2.3 Transfer Books ............................................ 4
Section 2.4 Termination of Funds ...................................... 4
Section 2.5 Lost Certificates ......................................... 4
Section 2.6 No Rights as Shareholder .................................. 5
Section 2.7 Withholding ............................................... 5
Section 2.8 Options ................................................... 5
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY .............. 5
Section 3.1 Corporate Existence and Power ............................. 5
Section 3.2 Corporate Authorization; Approvals ........................ 6
Section 3.3 Governmental Authorization ................................ 6
Section 3.4 Non-Contravention ......................................... 7
Section 3.5 Capitalization ............................................ 7
Section 3.6 Subsidiary ................................................ 7
Section 3.7 SEC Documents ............................................. 8
Section 3.8 Financial Statements; Liabilities ......................... 8
Section 3.9 Information to Be Supplied ................................ 9
Section 3.10 Absence of Certain Changes ............................... 9
Section 3.11 Litigation and Legal Compliance .......................... 9
Section 3.12 Taxes ................................................... 10
Section 3.13 Contracts ............................................... 11
Section 3.14 Employee Benefit Plans; Labor Matters ................... 11
Section 3.15 Intellectual Property ................................... 12
Section 3.16 Real Property ........................................... 12
Section 3.17 Brokers' Fees; Opinion of Financial Advisor ............. 12
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ............ 12
Section 4.1 Corporate Existence and Power ............................ 12
Section 4.2 Corporate Authorization; Approvals ....................... 13
Section 4.3 Share Ownership .......................................... 13
Section 4.4 Governmental Authorization ............................... 13
Section 4.5 Non-Contravention ........................................ 13
Section 4.6 Information To Be Supplied ............................... 13
Section 4.7 Litigation ............................................... 13
Section 4.8 Availability of Funds .................................... 14
Section 4.9 Brokers' Fees ............................................ 14
ARTICLE V - COVENANTS ................................................... 14
Section 5.1 Reasonable Best Efforts .................................. 14
Section 5.2 Interim Operations ....................................... 15
Section 5.3 Shareholder Meeting ...................................... 15
Section 5.4 Certain Filings .......................................... 15
Section 5.5 Director and Officer Liability ........................... 16
Section 5.6 Public Announcements ..................................... 18
Section 5.7 Access to Information .................................... 18
Section 5.8 Notice of Developments ................................... 18
ARTICLE VI - CONDITIONS TO THE CONSUMMATION OF THE MERGER ............... 18
Section 6.1 Conditions to the Obligations of Each Party .............. 18
Section 6.2 Conditions to the Obligations of the Company ............. 18
Section 6.3 Conditions to the Obligations of the Purchaser ........... 19
ARTICLE VII - TERMINATION ............................................... 19
Section 7.1 Termination .............................................. 19
Section 7.2 Effect of Termination .................................... 20
Section 7.3 Fees and Expenses ........................................ 20
ARTICLE VIII - MISCELLANEOUS ............................................ 21
Section 8.1 Nonsurvival of Representations and Warranties ............ 21
Section 8.2 Successors and Assigns ................................... 21
Section 8.3 Amendment ................................................ 21
Section 8.4 Severability ............................................. 21
Section 8.5 Extension of Time; Waiver ................................ 21
Section 8.6 Counterparts ............................................. 21
Section 8.7 Descriptive Headings ..................................... 21
Section 8.8 Notices .................................................. 21
Section 8.9 No Third-Party Beneficiaries ............................. 22
Section 8.10 Entire Agreement ........................................ 22
Section 8.11 Governing Law ........................................... 22
TABLE OF DEFINED TERMS
Affiliates Section 3.9
Agreement Preamble
Articles of Merger Section 1.3
Certificate Section 2.1
Closing Section 1.2
Closing Date Section 1.2
Colorado Business Corporation Act Background
Company Preamble
Constituent Corporations Section 1.1
Contracts Section 3.13(a)
Disclosure Schedules Article III
Dissenting Shares Section 1.7(c)
Effective Time Section 1.3
Employee Plan Section 3.14(a)
ERISA Section 3.14(a)
Exchange Act Section 3.2(b)
Exchange Agent Section 2.2
Financial Advisor Section 3.17(a)
Financial Statements Section 3.8(a)
GAAP Section 3.8(a)
Governmental Entity Section 3.3
Indemnified Parties Section 5.5(a)
Intellectual Property Section 3.15
Knowledge of the Company Section 3.11(a)
Laws Section 3.11(a)
Lien Section 3.6
Material Adverse Effect Section 3.1
Merger Background
Merger Consideration Section 1.7(a)
Options Section 2.8(a)
Option Plans Section 2.8(a)
Outside Date Section 7.1
Purchaser Preamble
Preferred Shares Section 3.5(a)
Proxy Statement Section 5.4(a)
Recommendation Section 5.3
SEC Section 3.7
SEC Documents Section 3.7
Securities Act Section 3.3
Shareholder Approval Section 3.2(c)
Shareholder Meeting Section 5.3
Shares Section 1.7(a)
Subsidiary Section 3.1
Surviving Corporation Section 1.1
Tax Section 3.12(a)
Tax Returns Section 3.12(a)
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of October
17, 2002 is made by and between Pak Mail Centers of America, Inc., a Colorado
corporation (the "Company"), and Pak Mail Acquisition Corp., a Colorado
corporation (the "Purchaser").
BACKGROUND
The Board of Directors of each of the Company and the Purchaser deem it
advisable and in the best interests of their respective companies and
shareholders to consummate the merger of the Purchaser with and into the
Company, upon the terms and subject to the conditions set forth herein (the
"Merger"), and have adopted resolutions in accordance with Articles 101 to
117 of Title 7 of the Colorado Revised Statutes, as amended (the "Colorado
Business Corporation Act"), adopting and approving this Agreement, the Merger
and the other transactions contemplated herein.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Agreement, and for other good and valuable consideration, the value,
receipt and sufficiency of which are acknowledged, the parties agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3) the Purchaser
will be merged with and into the Company in accordance with the provisions of
the Colorado Business Corporation Act. Following the Merger, the Company
will continue as the surviving corporation (the "Surviving Corporation") and
the separate corporate existence of the Purchaser will cease. The Purchaser
and the Company are sometimes referred to collectively as the "Constituent
Corporations."
Section 1.2 The Closing. Unless this Agreement has been terminated
pursuant to Section 7.1, the closing of the transactions contemplated by this
Agreement (the "Closing") will take place at 10:00 a.m., local time, on a
date to be specified by the parties that is no later than the third business
day following satisfaction or waiver of the conditions set forth in Article
VI (the "Closing Date"), at the offices of Jenner & Block, LLC, ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, unless another date, time or place is agreed to in
writing by the parties.
Section 1.3 Effective Time. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date (or on such other date as
the parties may agree) the Company will file with the Colorado Secretary of
State appropriate articles of merger (the "Articles of Merger") and make all
other filings or recordings required by the Colorado Business Corporation Act
in connection with the Merger. The Merger will be consummated on the later
of the date on which the Articles of Merger have been filed with the Colorado
Secretary of State or such time as is agreed upon by the parties and
specified in such Articles of Merger. The time the Merger becomes effective
in accordance with the Colorado Business Corporation Act is referred to in
this Agreement as the "Effective Time."
Section 1.4 Effects of the Merger. The Merger will have the effects
set forth in this Agreement and Article 111 of the Colorado Business
Corporation Act. Without limiting the generality of the foregoing, as of the
Effective Time, the Surviving Corporation will succeed to all the properties,
rights, privileges, powers, franchises and assets of the Constituent
Corporations, and all debts, liabilities and duties of the Constituent
Corporations will become debts, liabilities and duties of the Surviving
Corporation.
Section 1.5 Organizational Documents. At the Effective Time, the
articles of incorporation and bylaws of the Company (as in effect immediately
prior to the Effective Time), will become the articles of incorporation and
bylaws of the Surviving Corporation until thereafter amended in accordance
with their respective terms and the Colorado Business Corporation Act.
Section 1.6 Directors and Officers. The directors and the officers of
the Company at the Effective Time will be the initial directors and officers
of the Surviving Corporation and will hold office from the Effective Time in
accordance with the articles of incorporation and bylaws of the Surviving
Corporation until their respective successors are duly elected or appointed
and qualified.
Section 1.7 Conversion of Shares. As of the Effective Time, by virtue
of the Merger and without any action on the part of the Company or the
Purchaser or their respective shareholders:
(a) each share of the Company's common stock, par value $0.001 per
share, issued and outstanding immediately prior to the Effective Time (the
"Shares"), other than Shares owned by the Purchaser that are to be canceled
pursuant to (b) below and Dissenting Shares (as defined in (c) below) will be
converted into the right to receive, upon the surrender of the certificate
formerly representing such Share in accordance with this Agreement, $0.0516
in cash, without interest (the "Merger Consideration");
(b) each Share owned immediately prior to the Effective Time by the
Purchaser will be canceled and extinguished; and
(c) notwithstanding anything in this Agreement to the contrary, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has complied with all of the relevant provisions of Article 113 of the
Colorado Business Corporation Act regarding appraisal for such Shares
("Dissenting Shares"), will not be converted into a right to receive the
Merger Consideration, unless such holder fails to perfect or withdraws or
otherwise loses its right to appraisal. The Company will give the Purchaser
prompt written notice of any and all demands for appraisal rights, withdrawal
of such demands and any other communications delivered to the Company
pursuant to Article 113 of the Colorado Business Corporation Act, and the
Company will give the Purchaser the opportunity, to the extent permitted by
applicable Law (as defined in Section 3.11), to participate in all
negotiations and proceedings with respect to such demands. Except with the
prior written consent of the Purchaser, the Company will not voluntarily make
any payment with respect to any demand for appraisal rights and will not
settle or offer to settle any such demand. Each holder of Dissenting Shares
who becomes entitled to payment for such Dissenting Shares under the
provisions of Article 113 of the Colorado Business Corporation Act, will
receive payment thereof from the Surviving Corporation and such Dissenting
Shares will no longer be outstanding and will automatically be canceled and
retired and will cease to exist.
(d) At the Effective Time, each issued and outstanding share of Series
C preferred stock, par value $1,000 per share, of the Company will become one
issued and outstanding share of Series C preferred stock, par value $1,000
per share, of the Surviving Corporation.
Section 1.8 Purchaser Common Stock. Each share of common stock, par
value $0.001 per share, of the Purchaser outstanding immediately prior to the
Effective Time will be automatically canceled at the Effective Time, and the
holders thereof shall receive in exchange therefore, one share of common
stock in the Surviving Corporation for each such canceled share.
ARTICLE II
PAYMENT
Section 2.1. Surrender of Certificates. From and after the Effective
Time, each holder (except for Purchaser) of a certificate that immediately
prior to the Effective Time represented an outstanding Share (a
"Certificate") will be entitled to receive in exchange therefor, upon
surrender thereof to the Exchange Agent (as defined in Section 2.2), the
Merger Consideration into which the Shares evidenced by such Certificate were
converted pursuant to the Merger. No interest will be payable on the Merger
Consideration to be paid to any holder of a Certificate irrespective of the
time at which such Certificate is surrendered for exchange.
Section 2.2 Exchange Agent; Certificate Surrender Procedures.
(a) On or prior to the Effective Time, the Purchaser and the Company
will designate (and enter into an agreement with) an institution or trust
company to act as exchange agent for the Merger Consideration (the "Exchange
Agent"). As soon as reasonably practicable after the Effective Time, the
Surviving Corporation will deposit with the Exchange Agent, for the benefit
of the holders of Shares, the aggregate Merger Consideration required to be
paid hereunder. Pending payment of such funds to the holders of
Certificates, the Merger Consideration will be held and may be invested by
the Exchange Agent as the Surviving Corporation directs (so long as such
directions do not impair the rights of holders of Shares) in direct
obligations of the United States for which the full faith and credit of the
United States is pledged to provide for the payment of principal and
interest, or commercial paper rated of the highest quality by ▇▇▇▇▇'▇
Investors Services, Inc. or Standard & Poor's Corporation. Any net profit
resulting from, or interest or income produced by, such investments will be
payable to the Surviving Corporation or its designee, in the Surviving
Corporation's sole discretion. The Purchaser will promptly replace any funds
lost through any investment made pursuant to this section. The Exchange
Agent will, pursuant to irrevocable instructions, deliver to each holder of
Shares under and in accordance with (b) below, the Merger Consideration
payable to each such holder. The Merger Consideration deposited with the
Exchange Agent will not be used for any purpose other than as set forth in
this Agreement.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation will instruct the Exchange Agent to mail to each record
holder of a Certificate (i) a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to such Certificates
will pass, only upon delivery of Certificates to the Exchange Agent, and will
be in such form and have such other provisions as the Surviving Corporation
will reasonably specify) and (ii) instructions for use in effecting the
surrender of Certificates for the Merger Consideration. Upon the surrender
to the Exchange Agent of such Certificates together with a duly executed and
completed letter of transmittal and all other documents and other materials
required by the Exchange Agent to be delivered in connection therewith, the
holder will be entitled to receive the Merger Consideration into which the
Certificates so surrendered have been converted in accordance with the
provisions of this Agreement. Until so surrendered, each outstanding
Certificate will be deemed from and after the Effective Time, for all
corporate purposes, to evidence the right to receive the Merger Consideration
into which the Shares represented by such Certificate have been converted in
accordance with the provisions of this Agreement.
Section 2.3 Transfer Books. The stock transfer books of the Company
will be closed at the Effective Time, and no transfer of any Shares will
thereafter be recorded on any of the stock transfer books. In the event of a
transfer of ownership of any Shares prior to the Effective Time that is not
registered in the stock transfer records of the Company at the Effective
Time, the Merger Consideration into which such Shares have been converted in
the Merger will be paid to the transferee in accordance with the provisions
of Section 2.2 only if the Certificate is surrendered as provided in Section
2.1 and accompanied by all documents required to evidence and effect such
transfer (including evidence of payment of any applicable stock transfer
taxes).
Section 2.4 Termination of Funds. Any portion of the Merger
Consideration that remains undistributed one hundred eighty (180) days after
the Effective Time will be delivered to the Surviving Corporation upon
demand, and each holder of Shares who has not previously surrendered
Certificates in accordance with the provisions of this Article II will
thereafter look only to the Surviving Corporation for satisfaction of any
claims for the Merger Consideration such holder may have. Notwithstanding
the foregoing, neither the Purchaser nor the Surviving Corporation will be
liable to any former holder of Shares for any portion of the Merger
Consideration delivered to any public official pursuant to any applicable
abandoned property, escheat or similar Law.
Section 2.5 Lost Certificates. If any Certificate has been lost,
stolen or destroyed, upon the making of an affidavit (in form and substance
reasonably acceptable to the Exchange Agent and the Surviving Corporation) of
that fact by the person making such a claim, and, if required by the
Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against or with respect to such
Certificate, and after fulfillment of any other conditions required by the
Exchange Agent or the Surviving Corporation, the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration pursuant to Section 2.2.
Section 2.6 No Rights as Shareholder. From and after the Effective
Time, the holders of Certificates will cease to have any rights as
shareholders of the Surviving Corporation except as otherwise expressly
provided in this Agreement or by applicable Laws, and the Surviving
Corporation will be entitled to treat each Certificate that has not yet been
surrendered for exchange solely as evidence of the right to receive the
Merger Consideration into which the Shares evidenced by such Certificate have
been converted pursuant to the Merger.
Section 2.7 Withholding. The Surviving Corporation will be entitled to
deduct and withhold from the Merger Consideration otherwise payable to any
former holder of Shares all amounts required by Law to be deducted or
withheld therefrom. To the extent that amounts are so withheld by the
Surviving Corporation, such withheld amounts will be treated for all purposes
of this Agreement as having been paid to the holder of the Shares in respect
of which such deduction and withholding was made by the Purchaser.
Section 2.8 Options.
(a) As soon as reasonably practicable following the date of this
Agreement, the Company's Board of Directors and any committee administering
any Option Plan (as defined in (b) below), will adopt such resolutions and/or
take such other actions as may be required or appropriate in the reasonable
discretion of the Company to effect the provisions of this section. Each
option to purchase Shares under any Option Plan unexercised and outstanding
immediately prior to the Effective Time (the "Options"), whether or not
vested or exercisable, will at the Effective Time be canceled and
extinguished and will cease to exist.
(b) Prior to the Effective Time, the Purchaser and the Company will use
their reasonable best efforts to take all actions (including, if appropriate,
amending the terms of the Company's 1999 Incentive and Non-statutory Employee
Stock Option Plan, as amended prior to the date hereof (collectively, the
"Option Plans") or stock option or compensation plans or arrangements of the
Purchaser) that are necessary to give effect to the transactions contemplated
by, and the terms contained in, this section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the disclosure schedules of the Company (the
"Disclosure Schedules") or the SEC Documents (as defined in Section 3.7), the
Company represents and warrants to the Purchaser as follows:
Section 3.1 Corporate Existence and Power. The Company and the
Subsidiary are each corporations duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions of incorporation,
and have all requisite corporate power and authority to own, lease and
operate their respective properties and assets and to carry on their
respective businesses as presently being conducted. The Company and the
Subsidiary are each duly qualified or licensed to conduct business as a
foreign corporation in each jurisdiction where such qualification or
licensing is necessary, except where the failure to be so qualified would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (as defined below). For purposes of this Agreement,
the term "Material Adverse Effect" means any change, effect, occurrence or
state of facts that is materially adverse to the business, financial
condition, operations or results of operations of the Company and Pak Mail
Crating & Freight Service, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company (the "Subsidiary"), taken as a whole, or the
Purchaser, as the case may be; provided, however, that the following are
excluded from the definition of "Material Adverse Effect" and from the
determination of whether such a Material Adverse Effect has occurred: (i) any
change, effect or occurrence that is generally applicable to the shipping,
receiving and packaging industry or the economy in general; or (ii) changes
in Laws (as defined in Section 3.11) (including common law, rules and
regulations or the interpretation thereof) or applicable accounting
regulations and principles.
Section 3.2 Corporate Authorization; Approvals.
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby are within the Company's corporate powers and, except for
the Shareholder Approval (as defined in (c) below), have been duly authorized
by all necessary corporate action. Assuming that this Agreement constitutes
the valid and binding obligation of the Purchaser, this Agreement constitutes
a valid and binding agreement of the Company, enforceable in accordance with
its terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar Laws
of general applicability relating to or affecting creditors' rights, or by
general equity principles, including principles of commercial reasonableness,
good faith and fair dealing).
(b) The Company's Board of Directors, or an appropriate committee
thereof, has taken (or will take prior to the Merger) all action necessary so
that the exemption contemplated by Rule 16b-3(e) promulgated pursuant to the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act") is applicable to the
disposition of Shares and Options in or in connection with the Merger by all
directors and/or officers of the Company.
(c) The affirmative vote of the holders of a majority of the
outstanding Shares on the applicable record date (the "Shareholder Approval")
is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger and the consummation of the
transactions contemplated hereby.
Section 3.3 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not require any filing or
registration with, notification to, or authorization, consent or approval of,
any federal, state or local governmental authority, court, administrative or
regulatory agency or commission (each a "Governmental Entity"), other than:
(a) the filing of (i) the Articles of Merger with the Secretary of State of
Colorado in accordance with the Colorado Business Corporation Act and (ii)
appropriate documents with the relevant authorities of other states or
jurisdictions in which the Company or the Subsidiary is qualified to do
business; (b) compliance with any applicable requirements of the Securities
Act of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), and the Exchange Act; (c) such actions as
may be required under any applicable state securities or blue sky Laws; and
(d) such other actions or filings that, if not obtained or made, would not,
individually or in the aggregate, reasonably be expected to have either a
Material Adverse Effect, or to prevent or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement.
Section 3.4 Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not (a) contravene or conflict with the
Company's articles of incorporation or bylaws, or (b) violate, result in a
breach of, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination
of, accelerate the performance required by, result in the creation or
imposition of any Lien (as defined in Section 3.6) upon any of the properties
or assets of the Company under, or require any consent, approval, notice or
filing under, any of the Contracts (as defined in Section 3.13), other than
any of the foregoing that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 3.5 Capitalization.
(a) The authorized capital stock of the Company consists of 200,000,000
Shares and 10,000,000 shares of the Company's preferred stock, without par
value, of which 1,500 are designated as Series A preferred stock, 1,000 are
designated as Series B preferred stock and 2,500 are designated as Series C
preferred stock. As of the close of business on October 15, 2002, (i)
3,650,921 Shares were issued and outstanding and no Shares were held in
treasury and (ii) no shares of Series A Preferred Stock were issued,
outstanding or held in treasury, (iii) no shares of Series B Preferred Stock
were issued, outstanding or held in treasury and (iv) 2,216.668 shares of
Series C Preferred Stock (the "Preferred Shares") were issued and outstanding
and no Preferred Shares were held in treasury. As of the close of business
on October 15, 2002, Options to acquire an aggregate of 172,227 Shares are
outstanding under the Option Plans. All outstanding shares of the capital
stock of the Company have been duly authorized and validly issued, and are
fully paid, non-assessable and free of preemptive rights.
(b) Except as described above, as of the date hereof there are no
outstanding (i) shares of capital stock or other voting securities of the
Company; (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company; or (iii)
options, warrants or other rights to acquire from the Company, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company. There are no outstanding
obligations of the Company to repurchase, redeem or otherwise acquire any
Shares.
Section 3.6 Subsidiary.
(a) All of the outstanding shares of capital stock of the Subsidiary
are owned directly by the Company free and clear of any Liens and free of any
other limitation or restriction, including any limitation or restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership interest (other than any of the foregoing that may exist under the
Securities Act or any state securities Laws) with such exceptions as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. For purposes of this Agreement, "Lien" means any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of an asset, provided, however, that the term "Lien" will not
include (i) liens for water and sewer charges and current Taxes (as defined
in Section 3.12) not yet due and payable or being contested in good faith,
(ii) mechanics', carriers', workers', repairers', materialmen's,
warehousemen's and similar liens, (iii) purchase money liens and liens
securing rental payments under capital lease arrangements and (iv) other
liens arising in the ordinary course of business and not incurred in
connection with the borrowing of money.
(b) All outstanding shares of the capital stock of the Subsidiary have
been duly authorized and validly issued, and are fully paid and non-
assessable.
(c) The Subsidiary does not own or control directly or indirectly, or
have any direct or indirect equity participation in, any corporation,
partnership, limited liability company, joint venture or other entity.
Section 3.7 SEC Documents. The Company has filed all material forms,
reports and documents required to be filed by it with the Securities and
Exchange Commission ("SEC") after January 1, 2000 and prior to the date of
this Agreement (together with the amendments and supplements to such filings,
the "SEC Documents"). Each SEC Document, as of its filing date (or if
amended, as of the date of its last amendment) complied as to form in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be. No SEC Document filed pursuant to the
Exchange Act or the Securities Act, as of its filing date or effective date,
as applicable (or if amended or supplemented, as of the filing date or
effective date, as applicable, of its last amendment or supplement),
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
Section 3.8 Financial Statements; Liabilities.
(a) Each of the consolidated balance sheets included in the SEC
Documents fairly presents in all material respects the consolidated financial
position of the Company and the Subsidiary as of the respective dates
thereof, and the other related consolidated financial statements (including
the notes thereto) included therein fairly present in all material respects
the results of operations and cash flows of the Company and the Subsidiary
for the respective periods or as of the respective dates set forth therein
(collectively, the "Financial Statements"). As of the respective filing date
for the applicable SEC Document in which it was included, each of the
Financial Statements (including the notes thereto) complied in all material
respects with the then-applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, and was prepared in
accordance with accounting principles generally accepted in the United States
("GAAP") applied on a consistent basis during the periods or as of the
respective dates involved, except as otherwise noted therein and subject, in
the case of unaudited interim financial statements, to normal year-end
adjustments.
(b) There are no material liabilities or obligations of the Company or
the Subsidiary of any kind whatsoever, whether accrued or unaccrued,
absolute or contingent, liquidated or unliquidated, or due or to become due,
in each case, other than liabilities or obligations referenced (whether by
value or otherwise) or reflected in the SEC Documents, the Financial
Statements or disclosed in the notes thereto (i) incurred since November 30,
2001 in the ordinary course of business; (ii) under this Agreement or in
connection with the transactions contemplated hereby; (iii) of the Company
and the Subsidiary under the agreements, Contracts, leases, or licenses to
which they are parties; and (iv) which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.9 Information to Be Supplied. The information to be supplied
by the Company expressly for inclusion or incorporation by reference in the
Proxy Statement (as such term is defined in Section 5.4) will comply with the
applicable provisions of Section 5.4. The Proxy Statement will (with respect
to the Company) comply as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.
Notwithstanding the foregoing, the Company makes no representations or
warranties with respect to any information supplied by, or related to, the
Purchaser or any of its Affiliates (as such term is defined in Rule 12b-2 of
the regulations promulgated under the Exchange Act, "Affiliates") or advisors
that is contained in, or incorporated by reference into, the Proxy Statement.
Section 3.10 Absence of Certain Changes. Except as otherwise
contemplated by this Agreement, since November 30, 2001 the Company and the
Subsidiary have conducted their businesses in the ordinary course consistent
with past practice, and there has not been (a) any damage, destruction or
other casualty loss (whether or not covered by insurance) affecting the
business or assets of the Company or the Subsidiary that would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect
or (b) any action, event, occurrence, development or state of circumstances
or facts that would, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
Section 3.11 Litigation and Legal Compliance.
(a) As of the date hereof, there are no claims, actions, suits,
proceedings or investigations pending or to the actual knowledge of the
executive officers of the Company ("Knowledge of the Company"), threatened by
or against the Company or the Subsidiary that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. For
purposes of this Section 3.11, routine litigation with franchisees that do
not involve significant dollar amounts and that are in the ordinary course
for a franchisor, will not be deemed to have a Material Adverse Effect.
Neither the Company nor the Subsidiary is subject to any outstanding
judgment, injunction, order or decree of any Governmental Entity that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There are no judicial or administrative actions, proceedings
or investigations pending, or to the Knowledge of the Company, threatened,
which question the validity of this Agreement or any action taken or to be
taken by the Company in connection with this Agreement.
(b) To the Knowledge of the Company, except for instances of
noncompliance that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, the Company and the Subsidiary
are in compliance with each federal, state and local law, statute, rule,
regulation, ordinance, permit, order or writ (collectively "Laws") to which
the Company, the Subsidiary or any of their respective assets or properties
is subject.
(c) To the Knowledge of the Company, each of the Company and the
Subsidiary has all permits, licenses, approvals, authorizations of, and
registrations with and under all Laws, and from all Governmental Entities
required by the Company and the Subsidiary to carry on their respective
businesses as currently conducted, except where the failure to have any of
the foregoing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 3.12 Taxes.
(a) To the Knowledge of the Company, the Company and the Subsidiary
have each filed (after taking into account any extensions) all material
reports, returns, declarations or other filings required by any taxing
authority (collectively, the "Tax Returns") relating to any federal, local
and state income, sales, use, transfer, real property, personal property,
social security, unemployment, disability, payroll, employee or other
withholding or other tax ("Tax") required by any applicable Laws relating to
Taxes. All such Tax Returns were correct and complete in all material
respects when filed, and all Taxes shown to be owed by the Company or the
Subsidiary on such Tax Returns have been paid. Other than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
treatment, the Company has made accruals for Taxes on the Financial
Statements that are adequate to cover, in all material respects, any Tax
liability of the Company and the Subsidiary determined in accordance with
GAAP through the date of the Financial Statements.
(b) To the Knowledge of the Company, the Company and the Subsidiary
have each withheld with respect to its employees, creditors, independent
contractors, shareholders or other parties, all material federal and state
income taxes, FICA, FUTA and other Taxes required to be withheld.
(c) To the Knowledge of the Company, there is no Tax deficiency
outstanding, assessed, or to the Knowledge of the Company, proposed against
the Company or the Subsidiary, except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Neither
the Company nor the Subsidiary has executed or requested any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any material federal or material state Tax that is still in
effect. There are no liens for Taxes on the assets of Company or of the
Subsidiary other than with respect to Taxes not yet due and payable.
(d) To the Knowledge of the Company, no claim has ever been made by a
Governmental Entity in a jurisdiction where any of the Company and the
Subsidiary do not file Tax Returns that it is or may be subject to Taxes in
that jurisdiction.
(e) No material federal or state Tax audit or other examination of the
Company or the Subsidiary is presently in progress, nor has the Company or
the Subsidiary been notified either in writing or, to the Knowledge of the
Company, orally of any request for any such federal or state Tax audit or
other examination.
Section 3.13 Contracts.
(a) Each material contract of the Company or the Subsidiary (each, a
"Contract") is a valid, binding and enforceable obligation of the Company,
and, to the Knowledge of the Company, of the other party or parties thereto
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar Laws
of general applicability relating to or affecting creditors' rights, or by
general equity principles, including principles of commercial reasonableness,
good faith and fair dealing), and to the Knowledge of the Company, each
Contract is in full force and effect.
(b) Neither the Company nor, to the Knowledge of the Company any other
party thereto, is in breach of or default under any term of any Contract or
has repudiated any term of any Contract, except for such breaches, defaults
or repudiations that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(c) The Company has not received any notice of termination,
cancellation or non-renewal with respect to any Contract, and to the
Knowledge of the Company, no other party to a Contract plans to terminate,
cancel or not renew any such agreement.
Section 3.14 Employee Benefit Plans; Labor Matters.
(a) Schedule 3.14(a) of the Disclosure Schedules contains an accurate
and complete list of each material "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), each employment, severance or similar contract, plan,
arrangement or policy and each other plan or arrangement providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, health or
medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits and post-employment or retirement benefits which is
maintained or contributed to by the Company or the Subsidiary and covers any
employee or former employee of the Company or the Subsidiary ("Employee
Plan"). The Company has complied in all material respects with ERISA and all
other applicable Laws in connection with the Employee Plans.
(b) Neither the Company nor the Subsidiary is a party to a collective
bargaining agreement or other labor union agreement and, as of the date
hereof, with respect to the Company and the Subsidiary, (i) to the Knowledge
of the Company, there is no union organizing activity currently underway;
(ii) no complaints of discrimination (including charges relating to sex, age,
race, national origin, disability or veteran status) are pending before any
Governmental Entity; and (iii) no work stoppage or labor dispute is pending.
(c) None of the Employee Plans will obligate the Company or the
Subsidiary to pay any separation, severance, termination or similar benefit
solely as a result of any transaction contemplated by this Agreement or
solely as a result of a change in control or ownership within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended.
(d) There are no pending or, to the Knowledge of the Company,
threatened actions, suits, investigations or claims with respect to any
Employee Plan (other than routine claims for benefits) which would reasonably
be expected to result in any material liability to the Company or the
Subsidiary (whether direct or indirect), and to the Knowledge of the Company,
there are no facts which would reasonably be expected to give rise to any
such actions, suits, investigations or claims.
Section 3.15 Intellectual Property. The Company and the Subsidiary own
or have adequate rights to use all patents, trademarks, service marks, trade
names, copyrights, trade secrets and other intellectual property rights
(collectively, the "Intellectual Property") necessary to carry on their
respective businesses as currently conducted, except where the failure to own
or have adequate rights would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Neither the
Company nor the Subsidiary has received any written notice of infringements
of or conflict with, the rights of others with respect to the use of any
Intellectual Property, other than such as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.16 Real Property. Neither the Company nor the Subsidiary
owns any real property.
Section 3.17 Brokers' Fees; Opinion of Financial Advisor.
(a) Except for Duff & ▇▇▇▇▇▇, LLC (the "Financial Advisor"), there is
no investment banker, broker or finder that has been retained by, or is
authorized to act on behalf of, the Company or the Subsidiary who might be
entitled to any fee or commission from the Company, the Subsidiary or the
Purchaser upon consummation of the transactions contemplated by this
Agreement.
(b) The Company has received (i) a report of the Financial Advisor
dated July 11, 2002 that, as of May 31, 2002 and based on and subject to the
assumptions, qualifications and limitations of such opinion, the fair market
value of the Shares on a controlling interest basis is reasonably stated in
the range of $50,000 to $250,000, and (ii) an opinion from the Financial
Advisor dated October 17, 2002 that the Merger Consideration is fair to the
Company's shareholders, other than the Purchaser and its affiliates, from a
financial point of view.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
Section 4.1 Corporate Existence and Power. The Purchaser is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of Colorado, and has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as presently being conducted. The Purchaser is duly qualified
or licensed to conduct business as a foreign corporation in each jurisdiction
where such qualification or licensing is necessary, except where the failure
to be so qualified would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on its ability to consummate the
transactions contemplated by this Agreement. Since the date of its
incorporation, the Purchaser has not engaged in any activities other than in
connection with or as contemplated by this Agreement.
Section 4.2 Corporate Authorization; Approvals. The execution,
delivery and performance by the Purchaser of this Agreement and the
consummation by the Purchaser of the transactions contemplated hereby are
within the Purchaser's corporate powers and have been duly authorized by all
necessary corporate action. Assuming that this Agreement constitutes the
valid and binding obligation of the Company, this Agreement constitutes a
valid and binding agreement of the Purchaser, enforceable in accordance with
its terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar Laws
of general applicability relating to or affecting creditors' rights, or by
general equity principles, including principles of commercial reasonableness,
good faith and fair dealing).
Section 4.3 Share Ownership. 2,897,078 Shares are owned directly by
the Purchaser free and clear of any Liens with such exceptions as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 4.4 Governmental Authorization. The execution, delivery and
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby do not require any filing
or registration with, notification to, or authorization, consent or approval
of any Governmental Entity on behalf of the Purchaser, other than (a) the
filing of the Articles of Merger in accordance with the Colorado Business
Corporation Act; (b) compliance with any applicable requirements of the
Securities Act and the Exchange Act; (c) such actions as may be required
under any applicable state securities or blue sky Laws, and (d) such other
actions or filings that, if not obtained or made, would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the ability of the Purchaser to consummate the transactions contemplated by
this Agreement.
Section 4.5 Non-Contravention. The execution, delivery and performance
by the Purchaser of this Agreement and the consummation by the Purchaser of
the transactions contemplated hereby do not contravene or conflict with the
Purchaser's articles of incorporation or bylaws in any manner which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the ability of the Purchaser to consummate the transactions
contemplated by this Agreement.
Section 4.6 Information To Be Supplied. The information to be supplied
by the Purchaser expressly for inclusion or incorporation by reference in the
Proxy Statement will comply with the applicable provisions of Section 5.4.
The Proxy Statement will (with respect to the Purchaser) comply as to form in
all material respects with the applicable requirements of the Securities Act
and the Exchange Act. Notwithstanding the foregoing, the Purchaser makes no
representations or warranties with respect to any information supplied by, or
related to, the Company or any of its advisors that is contained in, or
incorporated by reference into, any of the foregoing documents.
Section 4.7 Litigation. As of the date hereof, there are no claims,
actions, suits, proceedings or investigations pending or to the knowledge of
the Purchaser, threatened by or against the Purchaser that would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on its ability to consummate the transactions contemplated by
this Agreement. The Purchaser is not subject to any outstanding judgment,
injunction, order or decree of any Governmental Entity that would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on its ability to consummate the transactions contemplated by
this Agreement. There are no judicial or administrative actions, proceedings
or investigations pending, or to the knowledge of the Purchaser, threatened,
which question the validity of this Agreement or any action taken or to be
taken by the Purchaser in connection with this Agreement.
Section 4.8 Availability of Funds. The Purchaser has, or has received
a financing commitment pursuant to which it will have, sufficient funds
available to enable it to consummate the transactions contemplated by this
Agreement as of the Effective Date of the Merger.
Section 4.9 Brokers' Fees. No investment banker, broker or finder has
been retained by, or is authorized to act on behalf of, the Purchaser, or
might be entitled to any fee or commission from the Purchaser, the Company or
the Subsidiary upon consummation of the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS
Section 5.1 Reasonable Best Efforts.
(a) Subject to the terms and conditions hereof, each party will use its
reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable to consummate
the transactions contemplated by this Agreement as promptly as reasonably
practicable, provided that nothing in this section will require the Company
to take any action which would be inconsistent with the fiduciary duties of
its Board of Directors as such duties would exist under applicable Law in the
absence of this section.
(b) Prior to the Closing Date, each of the parties will (i) give all
required notices to third parties and Governmental Entities and use its
reasonable best efforts to obtain all third party and governmental consents
and approvals that it is required to obtain in connection with this
Agreement, the Merger and the other transactions contemplated hereby and (ii)
use its reasonable best efforts to prevent any preliminary or permanent
injunction or other order by a Governmental Entity that seeks to modify,
delay or prohibit the consummation of the transactions contemplated by this
Agreement and, if issued, to appeal any such injunction or order through the
appellate court or body for the relevant jurisdiction. In connection with
the foregoing, each party (y) will promptly notify the other party in writing
of any communication received by that party or its Affiliates from any
Governmental Entity, and subject to applicable Law, provide the other party
with a copy of any such written communication (or written summary of any oral
communication), and (z) not participate in any substantive meeting or
discussion with any Governmental Entity in respect of any filing,
investigation or inquiry concerning the transactions contemplated by this
Agreement unless it consults with the other party in advance, and to the
extent permitted by such Governmental Entity, give the other party the
opportunity to attend and participate thereat.
(c) In connection with and without limiting the foregoing, the
Purchaser and the Company will (i) take all action reasonably necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement or any of the other
transactions contemplated hereby and (ii) if any such statute or regulation
becomes applicable hereto, take all action reasonably necessary to ensure
that the Merger and the other transactions contemplated hereby may be
consummated as promptly as reasonably practicable on the terms contemplated
by this Agreement and otherwise to minimize or eliminate the effect of such
statute or regulation on the Merger and the other transactions contemplated
by this Agreement. The Company and the Purchaser will each furnish to one
another and to their respective counsel all such information as may be
required in order to accomplish the foregoing actions.
Section 5.2 Interim Operations. Except as set forth in Schedule 5.2 of
the Disclosure Schedules or as otherwise expressly contemplated or permitted
hereby or as consented to in writing by the Purchaser, from the date hereof
until the Effective Time, the Company will, and will cause the Subsidiary to,
conduct its business in all material respects in the ordinary course
consistent with past practice and will use its reasonable best efforts to
preserve intact its present business organization, assets, licenses, permits,
Contracts and relationships with suppliers, customers and others having
business relations with it.
Section 5.3 Shareholder Meeting. As soon as reasonably practicable,
the Company will duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Shareholder Meeting") for the purpose of
obtaining the Shareholder Approval. The Company will set the date for the
Shareholder Meeting. Except as required in order to satisfy the fiduciary
duties of the Company's Board of Directors under applicable Law, the
Company's Board of Directors will recommend approval by its shareholders of
this Agreement (the "Recommendation"), will take all lawful action to solicit
the Shareholder Approval and will not withdraw the Recommendation.
Section 5.4 Certain Filings.
(a) As promptly as reasonably practicable, the Company will prepare and
file with the SEC a proxy statement relating to the Shareholder Meeting
(together with any amendments thereof or supplements thereto, the "Proxy
Statement"). Each of the Company and the Purchaser will furnish all
information concerning it and the holders of its capital stock as the other
may reasonably request in connection with the preparation of the Proxy
Statement. The Company will mail the Proxy Statement to its shareholders as
promptly as reasonably practicable and, if necessary, after the Proxy
Statement has been so mailed, promptly circulate amended, supplemental or
supplemented proxy material, and, if required in connection therewith,
resolicit proxies.
(b) No amendment or supplement to the Proxy Statement will be made by
the Company without the approval of the Purchaser. The Company will advise
the Purchaser, promptly after it receives notice thereof, of any request by
the SEC for amendment of the Proxy Statement, or comments thereon and
responses thereto, or requests by the SEC for additional information. The
Company will use its reasonable best efforts to prepare and file any such
amendments and/or respond to any such requests as promptly as reasonably
practicable.
(c) The Company agrees that the information supplied by the Company for
inclusion in the Proxy Statement will not, at (i) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the shareholders of the Company; (ii) the time of the Shareholder Meeting;
and (iii) the Effective Time, 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 were made, not misleading.
(d) The Purchaser agrees that the information supplied by the Purchaser
for inclusion in the Proxy Statement will not, at (i) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the shareholders of the Company; (ii) the time of the Shareholder Meeting;
and (iii) the Effective Time, 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 were made, not misleading.
(e) If at any time prior to the Effective Time, the Company or the
Purchaser discovers any information relating to either party or any of their
respective officers or directors that should be set forth in an amendment or
supplement to the Proxy Statement, so that such document would not include
any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party that discovers such
information will promptly provide written notice to the other party hereto
and the Company will prepare an appropriate amendment or supplement
describing such information that will be promptly filed with the SEC and, to
the extent required by Law, disseminated to the shareholders of the Company.
Section 5.5 Director and Officer Liability.
(a) From and after the Closing Date, the Purchaser will cause the
Surviving Corporation to indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the Effective Time, a director or
officer of the Company or the Subsidiary (collectively, the "Indemnified
Parties") from and against all losses, claims, damages and expenses
(including reasonable attorney's fees and expenses) arising out of or
relating to actions or omissions, or alleged actions or omissions, occurring
at or prior to the Effective Time to the fullest extent permitted from time
to time by the Colorado Business Corporation Act.
(b) Any initial determination required to be made with respect to
whether any Indemnified Party may be entitled to indemnification will, if
requested by such Indemnified Party, be made by independent legal counsel
selected by the Indemnified Party and reasonably satisfactory to the
Surviving Corporation.
(c) Subject to the remainder of this section, to the fullest extent
permitted from time to time under the Colorado Business Corporation Act, the
Purchaser will cause the Surviving Corporation to pay on an as-incurred basis
the reasonable fees and expenses of each Indemnified Party (including
reasonable attorney's fees and expenses) in advance of the final disposition
of any action, suit, proceeding or investigation that is the subject of the
right to indemnification, subject to reimbursement in the event such
Indemnified Party is not entitled to indemnification.
(d) The provisions providing for director and officer indemnification,
abrogation of liability and advancement of expenses set forth in the articles
of incorporation or bylaws of the Company or any other applicable existing
agreement in effect as of the date hereof, will apply to each Indemnified
Party with respect to all matters occurring on or prior to the Effective
Time. The foregoing will not be deemed to restrict the right of the
Surviving Corporation to modify the provisions of its articles of
incorporation relating to director and officer indemnification, abrogation of
liability or advancement of expenses with respect to events or occurrences
after the Closing Date, but such modifications will not adversely affect the
rights of the Indemnified Parties hereunder. The Purchaser will cause the
Surviving Corporation to honor the provisions of this subsection.
(e) Subject to any requirements pursuant to applicable insurance
policies that might conflict with the provisions of this subsection, in the
event any action, suit, investigation or proceeding is brought against any
Indemnified Parties and under applicable standards of professional conduct
there is a conflict of interest on any significant issue between the position
of the Purchaser (or the Surviving Corporation) and an Indemnified Party, the
Indemnified Parties may retain counsel, which counsel will be reasonably
satisfactory to the Purchaser, and the Purchaser will cause the Surviving
Corporation to pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, provided,
however, that (i) the Purchaser or the Surviving Corporation will have the
right to assume the defense thereof (which right will not affect the right of
the Indemnified Parties to be reimbursed for separate counsel as specified in
the preceding sentence); (ii) the Purchaser and the Indemnified Parties will
cooperate in the defense of any such matter; and (iii) neither the Purchaser
nor the Surviving Corporation will be liable for any settlement effected
without its prior written consent which requires either such party to pay any
sum of money.
(f) Upon learning of any loss, claim, damage or expense that may give
rise to a claim for indemnity hereunder, any Indemnified Party will promptly
notify the Purchaser thereof in writing, but any failure to give such notice
will not affect the indemnification obligations of any party under this
section unless such failure jeopardizes or prejudices the Purchaser or the
Surviving Corporation in any material respect.
(g) The rights of each Indemnified Party hereunder will be in addition
to any other rights such Indemnified Party may have under the articles of
incorporation or bylaws of the Surviving Corporation or any of their
respective subsidiaries, under the Colorado Business Corporation Act, under
agreements in effect as of the date hereof or otherwise. Notwithstanding
anything to the contrary contained in this Agreement or otherwise, the
provisions of this section will survive the consummation of the Merger, and
each Indemnified Party will, for all purposes, be a third party beneficiary
of the covenants and agreements contained in this section and, accordingly,
will be treated as a party to this Agreement for purposes of the rights and
remedies relating to enforcement of such covenants and agreements and will be
entitled to enforce any such rights and exercise any such remedies directly
against the Purchaser and the Surviving Corporation.
Section 5.6 Public Announcements. The initial press releases, if any,
issued by each party announcing the Merger and the transactions contemplated
by this Agreement will be in a form that is mutually acceptable to the
Purchaser and the Company. Thereafter, the Purchaser and the Company will
consult with one another before issuing any press releases or otherwise
making any public announcements (including communications with employees)
with respect to the transactions contemplated by this Agreement, and except
as may be required by fiduciary duties, applicable Law or by the rules and
regulations of the SEC or of the National Association of Securities Dealers
in connection with the trading of the Shares on the over-the-counter market,
will not issue any such press release or make any such announcement prior to
such consultation.
Section 5.7 Access to Information. The Company will, and will cause
the Subsidiary to, afford the Purchaser and its officers, employees, agents
and representatives full access to all premises, properties, employees,
information, books, records, Contracts and documents of or pertaining to the
Company and the Subsidiary.
Section 5.8 Notice of Developments. The Company and the Purchaser will
each give prompt written notice to the other of the occurrence of any event
that would reasonably be expected to result in a Material Adverse Effect on
either party. Each of the Company and the Purchaser will give prompt written
notice to the other of the occurrence or failure to occur of an event that
would, or, with the lapse of time would reasonably be expected to cause any
condition to the consummation of the Merger not to be satisfied.
ARTICLE VI
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Section 6.1 Conditions to the Obligations of Each Party. The
respective obligations of each party to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction at or prior
to the Closing Date of each of the following conditions:
(a) the Company will have obtained the Shareholder Approval; and
(b) no order, decree, ruling, judgment or injunction will have been
enacted, entered, promulgated or enforced by any Governmental Entity of
competent jurisdiction that prohibits the Merger and the consummation of the
transactions contemplated by this Agreement substantially on the terms
contemplated hereby, and continue to be in effect.
Section 6.2 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction at or prior
to the Closing Date of each of the following conditions, any of which may be
waived by the Company:
(a) the representations and warranties of the Purchaser set forth in
Article IV will be true and correct in all material respects, in each case as
of the Effective Time (except to the extent expressly made as of an earlier
date, in which case, as of such date);
(b) the Purchaser will have performed or complied with in all material
respects all covenants and obligations required to be performed or complied
with by it under this Agreement at or prior to the Effective Time; and
(c) the Purchaser will have delivered to the Company a certificate,
dated as of the Closing Date and signed by an executive officer, certifying
the satisfaction of the conditions set forth.
Section 6.3 Conditions to the Obligations of the Purchaser. The
obligations of the Purchaser to consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction at or prior
to the Closing Date of each of the following conditions, any of which may be
waived by the Purchaser:
(a) the representations and warranties of the Company set forth in
Article III will be true and correct in all material respects, in each case
as of the Effective Time (except to the extent expressly made as of an
earlier date, in which case, as of such date);
(b) the Company will have performed or complied with in all material
respects all obligations required to be performed or complied with by it
under this Agreement at or prior to the Effective Time;
(c) from the date of this Agreement to the Effective Time, there will
not have been any event or development that has or could, individually or in
the aggregate, have a Material Adverse Effect with respect to the Company;
(d) the Company will have delivered to the Purchaser a certificate,
dated as of the Closing Date and signed by an executive officer, certifying
the satisfaction of the conditions set forth above; and
(e) no new claim, action, suit, proceeding or investigation will be
pending or threatened against the Company or the Subsidiary that relates to
the transactions contemplated by this Agreement or that otherwise may
reasonably be expected to have a Material Adverse Effect with respect to the
Company.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written agreement of the Purchaser and the Company;
(b) by either the Purchaser or the Company, if:
(i) the Merger has not been consummated by January 31, 2002 (the
"Outside Date") provided that the party seeking to terminate this Agreement
pursuant to this clause has not breached in any material respect its
obligation under this Agreement in any manner that has substantially
contributed to the failure to consummate the Merger on or before the Outside
Date;
(ii) (A) an order, decree, ruling, judgment or injunction has been
entered by a Governmental Entity of competent jurisdiction permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Merger and such order, decree, ruling, judgment or injunction has become
final and non-appealable, and (B) the party seeking to terminate this
Agreement pursuant to this clause has used its reasonable best efforts to
remove such order, decree, ruling, judgment or injunction; or
(iii) at the Shareholder Meeting (including any adjournment or
postponement thereof), the Shareholder Approval will not have been obtained,
unless such failure to obtain the Shareholder Approval is the result of a
material breach of this Agreement by the party seeking to terminate this
Agreement;
(c) by the Company if (i) the Purchaser (A) breaches or fails to
perform or comply with any of its material covenants and agreements contained
herein, or (B) breaches its representations and warranties in any material
respect such that the conditions in Section 6.1 or 6.2 would not be
satisfied, and such breach is not cured within 20 days after written notice
of such breach is given by the Company, or (ii) subject to compliance with
the provisions of Section 5.3, if the Company's Board of Directors has
withdrawn the Recommendation; and
(d) by the Purchaser if (i) the Company (A) breaches or fails to
perform or comply with any of its material covenants and agreements contained
herein, or (B) breaches its representations and warranties in any material
respect such that the conditions in Section 6.1 or 6.3 would not be
satisfied, and such breach is not cured within 20 days after written notice
of such breach is given by the Purchaser, (ii) the Company's Board of
Directors has withdrawn the Recommendation, or (iii) a claim, action, suit,
proceeding or investigation is filed, instituted, commenced or threatened
against the Company or the Subsidiary on or after the date of this Agreement
that relates to the transactions contemplated by this Agreement or that
otherwise may reasonably be expected to have a Material Adverse Effect with
respect to the Company.
Section 7.2 Effect of Termination. If any party terminates this
Agreement pursuant to Section 7.1, all rights and obligations of the parties
hereunder will terminate without any liability of any party to any other
party, except for any liability of any party then in breach, provided that
the provisions of this section, Section 7.3 and Article VIII will remain in
full force and effect and survive any termination of this Agreement.
Section 7.3 Fees and Expenses. All fees and expenses incurred in
connection with the transactions contemplated hereby will be paid by the
party incurring such expenses, whether or not the Merger is consummated.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any
certificate, instrument or other writing delivered pursuant to this Agreement
will survive the Merger or the termination of this Agreement. Only the
covenants contained in Article I and Article II, Section 5.5, Section 7.2,
Section 7.3 and Article VIII will survive the Effective Time.
Section 8.2 Successors and Assigns. Neither this Agreement nor any of
the rights, interests or obligations provided by this Agreement will be
assigned by any of the parties (whether by operation of Law or otherwise)
without the prior written consent of the other parties; provided, however,
that the Purchaser may assign all or any portion of its rights, interests or
obligations hereunder to one or more Affiliates of the Purchaser. Subject to
the preceding sentence, this Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
Section 8.3 Amendment. This Agreement may be amended by the execution
and delivery of a written instrument by or on behalf of the Purchaser and the
Company at any time before or after the Shareholder Approval, provided that
after obtaining the Shareholder Approval, no amendment to this Agreement will
be made without the approval of the shareholders of the Company if and to the
extent such approval is required under the Colorado Business Corporation Act.
Section 8.4 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable Law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable Law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 8.5 Extension of Time; Waiver. At any time prior to the
Effective Time, the parties may extend the time for performance of or waive
compliance with any of the covenants, agreements or conditions of the other
party to this Agreement, and may waive any breach of the representations or
warranties of such other party. No agreement extending or waiving any
provision of this Agreement will be valid or binding unless it is in writing
and is executed and delivered by or on behalf of the party against which it
is sought to be enforced.
Section 8.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all such
counterparts taken together will constitute one and the same Agreement.
Section 8.7 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and will not constitute a part of
this Agreement.
Section 8.8 Notices. Any notice, request, instruction or other
document to be given hereunder will be in writing and delivered personally or
sent by registered or certified mail (postage prepaid) or by facsimile,
according to the instructions set forth below. Such notices will be deemed
given: at the time delivered by hand, if personally delivered; three
business days after being sent by registered or certified mail; and at the
time when receipt is confirmed by the receiving facsimile machine if sent by
facsimile, as follows:
If to the Purchaser, to: Pak Mail Acquisition Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which will
not constitute notice), to: Jenner & Block, LLC
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, to: Pak Mail Centers of America, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: P. ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which will
not constitute notice), to: ▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or to the attention of such other party that the
recipient party has specified by prior written notice to the sending party in
accordance with the preceding.
Section 8.9 No Third-Party Beneficiaries. Except as provided pursuant
to Section 5.5, the terms and provisions of this Agreement will not confer
third-party beneficiary rights or remedies upon any person or entity other
than the parties hereto and their respective successors and permitted
assigns.
Section 8.10 Entire Agreement. This Agreement, the Disclosure
Schedules and the other documents referred to herein collectively constitute
the entire agreement among the parties and supersede any prior and
contemporaneous understandings, agreements or representations by or among the
parties, written or oral, that may have related in any way to the subject
matter hereof.
Section 8.11 Governing Law. THIS AGREEMENT AND THE DISCLOSURE
SCHEDULES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF COLORADO, WITHOUT GIVING EFFECT TO ANY LAW OR RULE THAT WOULD
CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF COLORADO TO BE
APPLIED.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first
set forth above.
PAK MAIL CENTERS OF AMERICA, INC.
By: /s/ E. ▇▇▇▇ ▇▇▇▇▇
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Its: President and Chief
Executive Officer
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PAK MAIL ACQUISITION CORP.
By: /s/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Its: President
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