EXHIBIT 99.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
DESA INTERNATIONAL, INC.,
FMI ACQUISITION, INC.,
FIREPLACE MANUFACTURERS, INC.
AND
CERTAIN
STOCKHOLDERS OF
FIREPLACE MANUFACTURERS, INC.
Dated as of May 13, 1998
TABLE OF CONTENTS
ARTICLE 1 THE CLOSING........................................................1
SECTION 1.1 Closing................................................1
SECTION 1.2 Deliveries at Closing..................................1
ARTICLE 2 THE ACQUISITION MERGER.............................................1
SECTION 2.1 Surviving Corporation..................................1
SECTION 2.2 Effective Time; Conditions.............................2
SECTION 2.3 Certificate of Incorporation and By-laws. .............2
SECTION 2.4 Directors and Officers. ...............................3
SECTION 2.5 Effect on Outstanding Shares...........................3
SECTION 2.6 Exchange of Certificates. .............................4
SECTION 2.7 Effect of the Acquisition Merger.......................5
SECTION 2.8 Additional Actions.....................................6
SECTION 2.9 Alternative Merger Structure...........................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................7
SECTION 3.1 Organization and Business; Power and
Authority; Effect of Transaction...................7
SECTION 3.2 Financial and Other Information........................9
SECTION 3.3 Authorized and Outstanding Capital Stock...............9
SECTION 3.4 Changes in Condition..................................10
SECTION 3.5 Liabilities...........................................10
SECTION 3.6 Title to Properties; Leases...........................10
SECTION 3.7 Inventory.............................................13
SECTION 3.8 Accounts and Notes Receivable.........................13
SECTION 3.9 Compliance with Private Authorizations. ..............13
SECTION 3.10 Compliance with Governmental Authorizations
and Applicable Law...................................14
SECTION 3.11 Intangible Assets; Intellectual Property..............15
SECTION 3.12 Related Transactions..................................17
SECTION 3.13 Insurance.............................................17
SECTION 3.14 Tax Matters...........................................18
SECTION 3.15 Employee Retirement Income Security Act of
1974.................................................19
SECTION 3.16 Employment Arrangements...............................20
SECTION 3.17 Material Agreements...................................20
SECTION 3.18 Ordinary Course of Business...........................21
SECTION 3.19 Broker or Finder......................................24
SECTION 3.20 Environmental Matters.................................24
SECTION 3.21 Books and Records.....................................25
SECTION 3.22 Customers and Suppliers...............................25
SECTION 3.23 Officers and Directors................................26
SECTION 3.24 Bank Accounts.........................................26
SECTION 3.25 Anti-takeover Statutes Not Applicable.................26
SECTION 3.26 Proxy Statement.......................................26
SECTION 3.27 Opinion of Financial Advisor..........................26
SECTION 3.28 Litigation............................................26
SECTION 3.29 Product Warranty......................................26
SECTION 3.30 Product Liability.....................................27
SECTION 3.31 Continuing Representations and Warranties.............27
SECTION 3.32 Disclosure............................................27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE MERGER SUBSIDIARY.................................27
SECTION 4.1 Organization and Business; Power and
Authority; Effect of Transaction....................27
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.................29
SECTION 5.1 Ownership.............................................29
SECTION 5.2 Liens.................................................30
SECTION 5.3 Authorization of Agreement............................30
SECTION 5.4 No Governmental Consents..............................30
SECTION 5.5 Information Supplied..................................30
ARTICLE 6 ADDITIONAL COVENANTS..............................................30
SECTION 6.1 Confidentiality; Access to Information................30
SECTION 6.2 Approval of Stockholders..............................31
SECTION 6.3 Agreement to Cooperate................................32
SECTION 6.4 Notification of Certain Matters.......................33
SECTION 6.5 Public Announcements..................................33
SECTION 6.6 Conveyance Taxes......................................33
SECTION 6.7 No Solicitation. .....................................33
SECTION 6.8 Environmental Inspections.............................35
ARTICLE 7 CLOSING CONDITIONS................................................35
SECTION 7.1 Conditions to Each Party's Obligations Under
This Agreement. ....................................35
SECTION 7.2 Conditions to the Obligations of Parent and
the Merger Subsidiary Under This Agreement...........36
SECTION 7.3 Conditions to the Obligations of the Company
and the Stockholders Under This Agreement............38
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER..................................39
SECTION 8.1 Termination...........................................39
SECTION 8.2 Effect of Termination.................................40
SECTION 8.3 Amendment.............................................40
SECTION 8.4 Waiver................................................40
SECTION 8.5 Fees, Expenses and Other Payments.....................40
SECTION 8.6 Effect of Investigation...............................41
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ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION...................................................41
SECTION 9.1 Effectiveness of Representations, etc.................41
SECTION 9.2 Indemnification.......................................41
SECTION 9.3 Procedures Concerning Claims by Third Parties;
Payment of Damages; etc..............................43
SECTION 9.4 Exclusive Remedy......................................45
SECTION 9.5 Net Recovery..........................................45
SECTION 9.6 Indemnification of Officers and Directors.............46
ARTICLE 10 GENERAL PROVISIONS................................................46
SECTION 10.1 Notices..............................................46
SECTION 10.2 Headings.............................................47
SECTION 10.3 Severability.........................................47
SECTION 10.4 Entire Agreement.....................................47
SECTION 10.5 Assignment...........................................47
SECTION 10.6 Parties in Interest..................................47
SECTION 10.7 Governing Law........................................47
SECTION 10.8 Enforcement of the Agreement.........................47
SECTION 10.9 Counterparts.........................................48
SECTION 10.10 Mutual Drafting......................................48
SECTION 10.11 Disclosure Supplements...............................48
ARTICLE 11 DEFINITIONS.......................................................48
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of May 13, 1998 by and
among Desa International, Inc., a Delaware corporation (the "Parent"), FMI
Acquisition, Inc., a Delaware corporation (the "Buyer" or the "Merger
Subsidiary"), Fireplace Manufacturers, Inc., a California corporation (the
"Company"), and the stockholders of the Company who have executed this Agreement
(collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Parties hereto deem it advisable and in their respective
best interests to consummate the business combination provided for herein.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth in this Agreement, the Parties
hereto, intending to be legally bound, agree as follows:
ARTICLE 1
THE CLOSING
SECTION 1.1 Closing. Unless this Agreement shall have been terminated
pursuant to Article 8 hereof, and subject to the satisfaction or, if
permissible, waiver of the conditions set forth in Article 7, the closing of the
Acquisition Merger (the "Closing") will take place on the Closing Date at the
offices of ▇▇▇▇▇▇▇▇ & Worcester LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, unless another date, time or place is agreed to in writing by the
Parties.
SECTION 1.2 Deliveries at Closing. Subject to the provisions of
Articles 7 and 8, at the Closing there shall be delivered by the Parent and the
Company the opinions, certificates and other documents and instruments required
then to be delivered pursuant to Articles 2 and 7 hereof.
ARTICLE 2
THE ACQUISITION MERGER
SECTION 2.1 Surviving Corporation. Unless the Parent shall have duly
elected the Alternative Merger Structure pursuant to Section 2.9, in accordance
with this Agreement, Section 252 of the DGCL and Section 1108 of the CGCL, at
the Effective Time, (i) the Merger Subsidiary shall be merged with and into the
Company and the separate corporate existence of the Merger Subsidiary shall
cease; (ii) the Company shall be the surviving corporation in such merger
and shall continue its corporate existence under the laws of the State of
California; and (iii) the name of the Surviving Corporation shall be "Fireplace
Manufacturers, Inc." If the Parent shall have duly elected the Alternative
Merger Structure pursuant to Section 2.9, in accordance with this Agreement,
Section 252 of the DGCL and Section 1108 of the CGCL, at the Effective Time, (i)
the Company shall be merged with and into the Parent and the separate corporate
existence of the Company shall cease; (ii) the Parent shall be the surviving
corporation in such merger and shall continue its corporate existence under the
laws of the State of Delaware; and (iii) the name of the Surviving Corporation
shall be "DESA International, Inc." The two merging corporations pursuant to
this Section 2.1, pursuant to the Alternative Merger Structure or not as the
case may be, are sometimes collectively referred to herein as the "Constituent
Corporations". The merger transaction referred to in this Section 2.1, pursuant
to the Alternative Merger Structure or not as the case may be, is referred
herein to as the "Acquisition Merger". The corporation which survives in the
Acquisition Merger, pursuant to the Alternative Merger Structure or not as the
case may be, is referred to herein as the "Surviving Corporation".
SECTION 2.2 Effective Time; Conditions. If all of the conditions
precedent set forth in Article 7 hereof have been satisfied or waived (to the
extent permitted hereby and by law), and this Agreement has not otherwise been
properly terminated under Article 8 hereof, (a) the appropriate form of
certificate of merger with respect to the Acquisition Merger shall be prepared
by the Constituent Corporations (as applicable to the form of Acquisition
Merger) and filed and recorded pursuant to Section 252 of the DGCL with the
Delaware Secretary of State (as so filed and recorded, the "Certificate of
Merger") and (b) a certified copy or counterpart of this Agreement and the
officers' certificates of the Constituent Corporations (as applicable to the
form of Acquisition Merger) as required by Section 1108 of the CGCL shall be
prepared and filed pursuant to said Section 1108 with the California Secretary
of State (as so filed and recorded, the "Articles of Merger"). The Acquisition
Merger shall become effective at, and the Effective Time shall be, the time
specified in the Certificate of Merger and the Articles of Merger.
SECTION 2.3 Certificate of Incorporation and By-laws. Except in the
case of the Alternative Merger Structure, the Articles of Incorporation and the
By-Laws of the Company as in effect on the date hereof shall be the Articles of
Incorporation and the By-laws of the Surviving Corporation and shall thereafter
continue to be the Surviving Corporation's Articles of Incorporation and By-Laws
until amended as provided therein or by applicable law. In the case of the
Alternative Merger Structure, the Certificate of Incorporation and the By-Laws
of the Parent as in effect on the date hereof shall be the Certificate of
Incorporation and the By-laws of the Surviving Corporation and shall thereafter
continue to be the Surviving Corporation's Certificate of Incorporation and
By-Laws until amended as provided therein or by applicable law.
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SECTION 2.4 Directors and Officers. Except in the case of the
Alternative Merger Structure, the directors and officers of the Surviving
Corporation shall be the directors and officers of the Merger Subsidiary
immediately prior to the Effective Time and each such director and officer shall
hold office in accordance with the Certificate of Incorporation and By-Laws of
the Surviving Corporation. In the case of the Alternative Merger Structure, the
directors and officers of the Surviving Corporation shall be the directors and
officers of the Parent immediately prior to the Effective Time and each such
director and officer shall hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation.
SECTION 2.5 Effect on Outstanding Shares.
A. Company Common Stock. By virtue of the Acquisition Merger,
whether or not consummated pursuant to the Alternative Merger Structure,
automatically and without any action on the part of the holder thereof, each
share of the Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than (i) any such shares held as treasury stock by the
Company, and (ii) shares as to which dissenters' rights have been demanded and
not forfeited under Chapter 13 of the CGCL, and (iii) shares owned by the Parent
as provided in Section 2.5(C) below) shall become and be converted into the
right to receive the Consideration Per Share. Each such share of Company Common
Stock, when so converted, shall no longer be outstanding and shall be
automatically retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Consideration Per Share for each such
share pursuant to this Section 2.5(A) upon the surrender of such certificate.
B. The Merger Subsidiary Common Stock. Except in the case of
Parent's election of the Alternative Merger Structure, each share of the Merger
Subsidiary Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted as of the Effective Time into one share of
common stock, $1.00 par value per share, of the Surviving Corporation. In the
case of Parent's election of the Alternative Merger Structure, each share of
Parent's Common Stock, $.01 par value per share, immediately prior to the
Effective Time shall continue to be one share of the Surviving Corporation's
Common Stock.
C. Cancellation of Company Common Stock Owned by Parent. At
the Effective Time, all shares of the Company Common Stock that are owned by
Parent will be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
D. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock outstanding
immediately prior to the Effective time and held by a holder who has not voted
in favor of the Acquisition Merger or
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consented thereto in writing and who has demanded appraisal for such shares of
Company Common Stock in accordance with Chapter 13 of the CGCL, if such Chapter
provides for appraisal rights for such shares in the Acquisition Merger
("Dissenting Shares"), shall not be converted into the right to receive the
Consideration Per Share as provided in Section 2.5(A), unless and until such
holder fails to perfect or withdraws or otherwise loses such holder's right to
appraisal and payment under the CGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses such holder's right to appraisal,
such Dissenting Shares shall thereupon be treated as if they had been converted
into the right to receive the Consideration Per Share to which such holder is
entitled, without interest or dividends thereon. The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of shares of
Company Common Stock, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any voluntary payment
with respect to, or settle or offer to settle, any such demands.
SECTION 2.6 Exchange of Certificates.
A. Exchange Agent. At the Closing, Parent will enter into an
Exchange Agreement (the "Exchange Agreement") with a bank or trust company
mutually acceptable to Parent and the Company (the "Exchange Agent"). As of the
Effective Time, Parent will deposit with the Exchange Agent pursuant to the
Exchange Agreement, for the benefit of the shareholders of the Company Common
Stock, for exchange in accordance with this Article 2 and the Exchange
Agreement, the Merger Consideration to be disbursed pursuant to this Article 2
and the Exchange Agreement in exchange for outstanding shares of the Company
Common Stock. All deposits with the Exchange Agent pursuant to this Section
2.6(A) are referred to herein as the "Exchange Fund."
B. Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (individually, a
"Certificate" and collectively, the "Certificates") whose shares were each
converted pursuant to Section 2.5 into the right to receive the Consideration
Per Share for each such share (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 the Company
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for any of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor, promptly upon surrender of such
Certificate, the Consideration Per Share in cash for each share of Company
Common Stock represented by such Certificate. In no event
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will the holder of any such Certificate be entitled to receive interest on the
Merger Consideration. Until surrendered as contemplated by this Section 2.6(B),
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender the Consideration Per Share
in cash for each share of Company Common Stock represented by such Certificate.
In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if Parent shall reasonably
conclude that such affidavit does not adequately protect Parent or the Surviving
Corporation, upon the posting by such person of a bond in such amount as Parent
or the Surviving Corporation may reasonably direct as indemnity against any
claim that may be made against either of them with respect to such Certificate,
the Exchange Agent will distribute, as provided in this Section 2.6(B), in
respect of such lost, stolen or destroyed Certificate the Consideration Per
Share for each share of Company Common Stock represented by such lost, stolen or
destroyed Certificate.
C. Termination of Exchange Fund. Upon the expiration of the
term of the Exchange Agreement, any potion of the Exchange Fund which remains
undistributed to the holders of Company Common Stock shall be delivered to
Parent, upon demand, and any holders of Company Common Stock who have not
previously complied with this Section 2.6 shall thereafter look only to Parent
for payment of their claim for any of the Merger Consideration.
D. Closing of Stock Transfer Books. The stock transfer books
of the Company shall be closed as of the close of business on the first business
day immediately preceding the Closing Date, and thereafter there shall be no
further registration of transfers on the stock transfer books of the Company or
the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to such time. If, after such time, Certificates
are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Section 2.6(D).
E. No Liability. Neither Parent nor the Company shall be
liable to any holder of shares of Company Common Stock for such shares (or
dividends or distributions with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
SECTION 2.7 Effect of the Acquisition Merger.
A. At the Effective Time, all of the estate, property, rights,
privileges, powers and franchises of the Constituent Corporations and all of
their property, real, personal and mixed, and all the debts due on whatever
account to any of them, as well as all stock subscriptions and other choses in
action belonging to any of them, shall be transferred to and vested in the
Surviving
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Corporation, without further act or deed, and all claims, demands, property and
other interest shall be the property of the Surviving Corporation, and the title
to all real estate vested in any of the Constituent Corporations shall not
revert or be in any way impaired by reason of the Acquisition Merger, but shall
be vested in the Surviving Corporation.
B. From and after the Effective Time, the rights of creditors
of any Constituent Corporation shall not in any manner be impaired, nor shall
any liability or obligation, including taxes due or to become due, or any claim
or demand in any cause existing against such corporation, or any stockholder,
director, or officer thereof, be released or impaired by the Acquisition Merger,
but the Surviving Corporation shall be deemed to have assumed, and shall be
liable for, all liabilities and obligations of each of the Constituent
Corporations in the same manner and to the same extent as if the Surviving
Corporation had itself incurred such liabilities or obligations. The
stockholders, directors, and officers of the Constituent Corporations shall
continue to be subject to all liabilities, claims and demands existing against
them as such at or before the Acquisition Merger. No action or proceeding then
pending before any court or tribunal in which any Constituent Corporation is a
party, or in which any such stockholder, director, or officer is a party, shall
▇▇▇▇▇ or be discontinued by reason of the Acquisition Merger, but any such
action or proceeding may be prosecuted to final judgment as though no merger had
taken place, or the Surviving Corporation may be substituted as a party in place
of any Constituent Corporation by the court in which such action or proceeding
is pending.
SECTION 2.8 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Constituent Corporations acquired
or to be acquired by the Surviving Corporation as a result of, or in connection
with, the Acquisition Merger or to otherwise carry out this Agreement, the
officers and directors of the Surviving Corporation shall and will be authorized
to execute and deliver, in the name and on behalf of the Constituent
Corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of the Constituent
Corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or to otherwise carry out the purposes and intent of this Agreement.
SECTION 2.9 Alternative Merger Structure. Parent may, at its election,
designate an alternative structure for the Acquisition Merger whereby the
Company will be merged with and into the Parent, with the parent to be the
Surviving Corporation (the
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"Alternative Merger Structure"). Notice of Parent's election to use the
Alternative Merger Structure shall be given to the Company and the Stockholders
not less than ten (10) days before the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents, warrants and covenants to, and agrees
with, the Parent and the Merger Subsidiary as set forth hereinbelow.
SECTION 3.1 Organization and Business; Power and Authority; Effect of
Transaction.
A. The Company and each Subsidiary:
(i) is a corporation duly organized, validly
existing and in good standing under the laws
of the State of California;
(ii) has all requisite corporate power and
authority to own or hold under lease its
properties and to conduct its business as
now conducted and has in full force and
effect all Governmental Authorizations and
Private Authorizations and has made all
Governmental Filings, to the extent required
for such ownership and lease of its property
and conduct of its business, except to the
extent that the failure to have obtained any
such Governmental Authorization or Private
Authorization or to have made any such
Governmental Filing would not have an
Adverse Effect; and
(iii) has duly qualified and is authorized to do
business and is in good standing as a
foreign corporation in each jurisdiction set
forth in Schedule and, except as otherwise
set forth in Section 3.1(A)(iii) of the
Company Disclosure Schedule, in each
jurisdiction which the character of its
property or the nature of its business or
operations requires such qualification or
authorization, except to the extent the
failure so to qualify or to maintain such
authorizations would not have an Adverse
Effect.
B. The Company and each Subsidiary has all requisite power and
authority (corporate and other) and, other than the filing and termination of
the waiting period pursuant to the HSR Act, has in full force and effect all
Governmental Authorizations and Private Authorizations in order to enable it to
execute and
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deliver, and to perform its obligations under, this Agreement and each
Collateral Document executed or required to be executed by it pursuant hereto or
thereto and to consummate the Acquisition Merger and the Transactions, and the
execution, delivery and performance of this Agreement and each Collateral
Document executed or required to be executed pursuant hereto or thereto have
been duly authorized by all requisite corporate or other action (other than that
of the Company's stockholders). This Agreement has been duly executed and
delivered by the Company and constitutes, and each Collateral Document executed
or required to be executed pursuant hereto or thereto or to consummate the
Acquisition Merger and the Transactions, when executed and delivered by the
Company will constitute, legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement, voidable preference, fraudulent conveyance or other
similar laws relating to or affecting the rights of creditors, and except as the
same may be subject to the effect of general principles of equity. Approval by
the affirmative vote of a majority of the outstanding shares of Company Common
Stock entitled to vote is the only action by the holders of any class or series
of the capital stock of the Company necessary to approve this Agreement, the
Acquisition Merger and the Transactions under Applicable Law and the Company's
Organic Documents.
C. Except as set forth in Section 3.1(C) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, nor the consummation of the Acquisition Merger or the Transactions, nor
compliance with the terms, conditions and provisions hereof or thereof by the
Company or any of the other parties hereto or thereto which is Affiliated with
the Company:
(i) will conflict with, or result in a breach or
violation of, or constitute a default under,
any Applicable Law on the part of the
Company or any Subsidiary or will conflict
with, or result in a breach or violation of,
or constitute a default under, or permit the
acceleration of any obligation or liability
in, or but for any requirement of giving of
notice or passage of time or both would
constitute such a conflict with, breach or
violation of, or default under, or permit
any such acceleration in, any Contractual
Obligation of the Company or any Subsidiary,
(ii) will result in or permit the creation or
imposition of any Lien (except to the extent
set forth in Section 3.1(C) of the Company
Disclosure Schedule) upon any property now
owned or leased by the Company or any
Subsidiary or any such other party, or
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(iii) will require any Governmental Authorization
or Governmental Filing or Private
Authorization, except for filing
requirements under Applicable Law in
connection with the Acquisition Merger and
the Transactions and except pursuant to the
HSR Act.
SECTION 3.2 Financial and Other Information.
A. The Company has heretofore furnished to the Parent copies
of the consolidated financial statements of the Company listed in Section 3.2(A)
of the Company Disclosure Schedule (the "Company Financial Statements"). The
Company Financial Statements, including in each case the notes thereto, have
been prepared in accordance with GAAP (or, with regard to interim period
financial statements, in accordance with SEC rules) applied on a consistent
basis with the Company's past practice throughout the periods covered thereby,
are true and correct in all material respects and, except as otherwise noted
therein, fairly and completely present the consolidated financial condition and
results of operations of the Company and its Subsidiaries on the bases therein
stated, as of the respective dates thereof, and for the respective periods
covered thereby subject, in the case of unaudited Company Financial Statements
to normal nonmaterial year-end audit adjustments and accruals.
B. The Company does not own any capital stock or equity or
proprietary interest in any Entity or enterprise and has no Subsidiaries,
however organized and however such interest may be denominated or evidenced,
except as set forth in Section 3.2(B) of the Company Disclosure Schedule. With
respect to any Subsidiary disclosed in such Section 3.2(B), the Company owns,
and at the Closing will own, 100% of the issued and outstanding capital stock
and all Convertible Securities and Option Securities of such Subsidiary, and all
of such securities are, and at the Closing will be, duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and Liens.
SECTION 3.3 Authorized and Outstanding Capital Stock. The authorized
capital stock of the Company consists of 1,000,000 shares of Preferred Stock,
$1.00 par value, of which no shares are outstanding and 10,000,000 shares of
Common Stock, $.01 par value (the "Company Common Stock"), of which 3,326,775
shares are issued and outstanding. All of such outstanding capital stock has
been duly authorized and validly issued, is fully paid and nonassessable and is
not subject to any preemptive or similar rights. Except as set forth in Section
3.3 of the Company Disclosure Schedule, there is neither outstanding nor has the
Company agreed to grant or issue any additional equity securities or any Option
Security or Convertible Security. Neither the Company nor any Subsidiary is a
party to or bound by any agreement, put or commitment pursuant to which it is
obligated to purchase, redeem or otherwise acquire any equity securities or any
Option Security or Convertible Security. Except as contemplated by this
Agreement, between the date hereof and the Closing, the Company will not, and
will cause its
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Subsidiaries not to, issue, sell or purchase or agree to issue, sell or purchase
any equity securities or any Option Security or Convertible Security of the
Company or any Subsidiary. All of the issued and outstanding shares of capital
stock of the Company and its Subsidiaries have been issued in compliance with
applicable Federal and state securities laws.
SECTION 3.4 Changes in Condition. Since the date of the most recent
audited financial statements forming part of the Company Financial Statements,
except to the extent specifically described in Section 3.4 of the Company
Disclosure Schedule or disclosed in the Company's periodic reports under the
Securities Exchange Act of 1934, as amended, there has been no Adverse Change in
the Company. There is no Event known to the Company which Adversely Affects the
Company, or the ability of the Company to perform any of the obligations set
forth in this Agreement or any Collateral Document executed or required to be
executed pursuant hereto or thereto except for changes in general economic
conditions and to the extent set forth in Section 3.4 of the Company Disclosure
Schedule.
SECTION 3.5 Liabilities. At the date of the most recent balance sheet
forming part of the Company Financial Statements, the Company and its
Subsidiaries had no obligations or liabilities, past, present or deferred,
accrued or unaccrued, fixed, absolute, contingent or other, except as disclosed
in Section 3.5 of the Company Disclosure Schedule (or immaterial items not
required to be disclosed thereon), in such balance sheet, or the notes thereto,
and since such date no such obligations or liabilities have been incurred, other
than obligations and liabilities incurred in the ordinary course of business
consistent with past practice, which do not, in the aggregate, Adversely Affect
the Company except to the extent set forth in Section 3.5 of the Company
Disclosure Schedule.
Neither the Company nor any Subsidiary has Guaranteed, and is not
otherwise primarily or secondarily liable in respect of, any obligation or
liability of any other Person material to the Company, except for endorsements
of negotiable instruments for deposit in the ordinary course of business,
consistent with prior practice, or as disclosed in the most recent audited
balance sheet, or the notes thereto, forming part of the Company Financial
Statements or in Section 3.5 of the Company Disclosure Schedule.
SECTION 3.6 Title to Properties; Leases.
A. The Company (or a Subsidiary) has good, legal and insurable
title, with respect to all real property owned or leased (in fee simple if owned
and leasehold if leased) and good, clear, record and marketable title if owned
(in fee simple), if any, reflected as an asset on the most recent audited
balance sheet forming part of the Company Financial Statements, or held by the
Company (or a Subsidiary) for use in its business if not so reflected, and good
and clear indefeasible and merchantable title to all other assets, tangible and
intangible, reflected on such balance sheet, or (excluding leased property) held
by the Company
10
(or a Subsidiary) for use in its business if not so reflected, or purported to
have been acquired by the Company (or a Subsidiary) since such date, except
inventory sold or depleted, or property, plant and other equipment used up or
retired, since such date, in each case in the ordinary course of business
consistent with past practice, free and clear of all Liens, except (x) such as
are reflected in the most recent audited balance sheet, or the notes thereto,
forming part of the Company Financial Statements, (y) Liens securing taxes,
assessments, governmental charges or levies, or the claims of materialmen,
carriers, landlords and like persons, which are not yet due or payable, or (z)
as set forth in Section 3.6(A) of the Company Disclosure Schedule. Each Lease or
other occupancy or other agreement under which the Company (or a Subsidiary)
holds real or personal property has been duly authorized, executed and delivered
by the Company (or a Subsidiary); each such Lease is a legal and valid
obligation of the Company (or a Subsidiary). The Company (or a Subsidiary) has a
valid leasehold interest in and enjoys peaceful and undisturbed possession under
all Leases pursuant to which it holds any real property or tangible personal
property. All of such Leases are valid and subsisting and in full force and
effect; and neither the Company nor any Subsidiary, nor to the knowledge of the
Company any other party thereto, is in default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any such
Lease.
B. Section 3.6(B) of the Company Disclosure Schedule contains
a true, correct and complete description of all real estate owned or leased by
the Company (or a Subsidiary) and all Leases and an identification of all
material items of fixed assets and machinery and equipment. The real property
(other than land), fixtures, fixed assets and machinery and equipment of the
Company (or a Subsidiary) are in a state of good repair and maintenance and are
in good operating condition, reasonable wear and tear excepted. The Company (or
a Subsidiary) owns, rents or leases all tangible assets necessary for the
conduct of the combined business of the Company and its Subsidiaries as
presently conducted and as presently proposed to be conducted until the Closing.
C. With respect to each parcel of such real property owned by
the Company (or a Subsidiary), except as set forth in Section 3.6(C) of the
Company Disclosure Schedule:
(i) there are no pending or, to the knowledge of
the Company, threatened condemnation
proceedings relating to such parcel, and
there are no pending or, to the knowledge of
the Company, threatened litigation or
administrative actions relating to such
parcel or other matters Adversely Affecting
the use, occupancy or value thereof;
(ii) the buildings and improvements may be used
as of right under applicable zoning and land
use laws for the operation of the business
of the Company (or a Subsidiary) as now
conducted (the "Current
11
Uses") and such buildings and improvements
are located within the boundary lines of the
described parcels of land, are not in
violation of Applicable Laws and do not
encroach on any easement which may burden
the land; the land does not serve any
adjoining property for any purpose
inconsistent with the use of the land; and
such parcel is not located within any flood
plain or subject to any similar type
restriction for which any permits or
licenses necessary to the use thereof have
not been obtained;
(iii) there are no outstanding options or rights
of first refusal to purchase such parcel, or
any portion thereof or interest therein;
(iv) all facilities located on such parcel are
supplied with utilities and other services
necessary for the operation of such
facilities, including gas, electricity,
water, telephone, sanitary sewer and storm
sewer, all of which services are adequate
for the Current Uses and in accordance with
all material Applicable Laws, and are
provided via public roads or via permanent,
irrevocable, appurtenant easements
benefiting such parcel;
(v) such parcel abuts on and has direct
vehicular access to a public road or access
to a public road via a permanent,
irrevocable, appurtenant easement benefiting
such parcel;
(vi) the Company (or a Subsidiary) has received
no written notice of any proposed or pending
proceeding to change or redefine the zoning
classification of all or any portion of the
parcels; and
(vii) each parcel is an independent unit which
does not rely on any facilities (other than
the facilities of public utility and water
companies) located on any other property (a)
to fulfill any zoning, building code, or
other municipal or governmental requirement,
(b) for structural support or the furnishing
of any essential building systems or
utilities, including, but not limited to
electric, plumbing, mechanical, heating,
ventilating, and air conditioning systems,
or (c) to fulfill the requirements of any
lease. No building or other improvement not
included in the parcels relies on any part
of the parcels to fulfill any requirement of
Applicable Laws or for structural support or
the furnishing of any essential building
systems or utilities. Each of the parcels is
assessed by local property assessors as a
tax parcel or parcels separate from all
other tax parcels.
12
D. With respect to each Lease, except as set forth in Section
3.6(D) of the Company Disclosure Schedule:
(i) there are no disputes, oral agreements or
forbearance programs in effect as to any
Lease;
(ii) all facilities occupied under each Lease are
supplied with utilities and other services
necessary for the operation of said
facilities;
(iii) to the knowledge of the Company, the owner
of the facility occupied under each Lease
has good and clear record and marketable
title to the parcel of real property, free
and clear of any Lien, except for recorded
easements, covenants, and other restrictions
which do not impair the Current Uses,
occupancy or value of the property subject
thereto; and
(iv) no Event has occurred which, with notice or
lapse of time, would constitute a breach or
default or permit termination, modification
or acceleration of any Lease.
SECTION 3.7 Inventory. The inventory of the Company and its
Subsidiaries as set forth on the most recent balance sheet in the Company
Financial Statements, was, and the inventory of the Company and its Subsidiaries
on the date hereof is and on the Closing Date will be, in good and merchantable
condition, and in reasonably useable or saleable condition in the ordinary
course of business, except for obsolete or defective materials and any excess
stock items which alone and in the aggregate are not material. Such inventory
does not include any material amounts of any item that was at any prior time
written off or written down by the Company. To the knowledge of the Company,
there is no Adverse condition currently affecting the supply of materials or
inventory available to the Company.
SECTION 3.8 Accounts and Notes Receivable. All accounts and notes
receivable reflected on the most recent balance sheet in the Company Financial
Statements and all accounts and notes receivable arising subsequent to the date
of such balance sheet have or will have arisen in the ordinary course of
business, represent valid obligations to the Company (or a Subsidiary), and have
been collected or will be collected in the aggregate amounts thereof recorded on
the books of the Company, in each case net of the reserve for bad debts
reflected on such balance sheet.
SECTION 3.9 Compliance with Private Authorizations. Section 3.9 of the
Company Disclosure Schedule sets forth a true, correct and complete list and
description of each Private Authorization which individually is material to the
Company and its Subsidiaries taken as a whole, all of which are in full force
and effect. The Company (or a Subsidiary) has obtained all Private
13
Authorizations which are necessary for its ownership of its properties and the
conduct of its business as now conducted, except to the extent that the failure
to have obtained any such Private Authorization would not have an Adverse
Effect. Neither the Company nor any Subsidiary is in breach or violation of, or
in default in the performance, observance or fulfillment of, any Private
Authorization, except for such defaults, breaches or violations, as do not in
the aggregate have any Adverse Effect on the Company or the ability of the
Company (or a Subsidiary) to perform any of the obligations set forth in this
Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto or to consummate the Acquisition Merger and the
Transactions. No Private Authorization is the subject of any pending or, to the
Company's knowledge, threatened attack, revocation or termination.
SECTION 3.10 Compliance with Governmental Authorizations and Applicable
Law.
A. Section 3.10(A) of the Company Disclosure Schedule
contains a description of:
(i) all Legal Actions which are pending or, to
the Company's knowledge, threatened or
contemplated against, and which in any
manner relate Adversely to, the Company or
the business, operations or properties, or
the officers or directors or any Subsidiary
of the Company in connection therewith; and
(ii) each material Governmental Authorization to
which the Company (or any Subsidiary) is
subject and which relates to the business,
operations, properties, prospects, condition
(financial or other), or results of
operations of the Company and its
Subsidiaries, all of which are in full force
and effect.
B. The Company (or a Subsidiary) has obtained all Governmental
Authorizations which are necessary for the ownership or uses of its properties
and the conduct of its business as now conducted or as presently proposed to be
conducted by it or which, if not obtained and maintained, could singly or in the
aggregate, have any Adverse Effect on the Company, except as otherwise described
in Section 3.10(B) of the Company Disclosure Schedule. No Governmental
Authorization is the subject of any pending or, to the Company's knowledge,
threatened attack, revocation or termination. Neither the Company nor any
Subsidiary is, or at any time since January 1, 1994 has been, or is or has
during such time been charged with, or to the Company's knowledge, is threatened
or under investigation with respect to any material breach or violation of, or
default in the performance, observance or fulfillment of any Governmental
Authorization or any Applicable Law, except for such breaches, violations or
defaults as do not have in the aggregate any Adverse Effect on the Company or
the
14
ability of the Company to perform any of the obligations set forth in this
Agreement or any Collateral Document executed or required to be executed
pursuant hereto or thereto, or to consummate the Acquisition Merger and the
Transaction, except as otherwise described in Section 3.10(B) of the Company
Disclosure Schedule.
C. Except as set forth in Section 3.10(C) of the Company
Disclosure Schedule, the Company and each Subsidiary, and the conduct and
operations of its business, is in compliance with all Applicable Laws which (i)
affect or relate to this Agreement or the Transactions or (ii) are applicable to
it or its business, except for any violation of, or default under, any
Applicable Law which reasonably may be expected not to have an Adverse Effect on
the Company.
SECTION 3.11 Intangible Assets; Intellectual Property.
A. Section 3.11 of the Company Disclosure Schedule sets forth
a true, correct and complete description of all Governmental Authorizations
relating to Intangible Assets or Intellectual Property or rights with respect
thereto, that are necessary for the present conduct of the Company's
consolidated business, including without limitation the nature of the Company's
(or a Subsidiary's) interest in each and the extent to which the same have been
duly registered in the offices as indicated therein. The Company (or a
Subsidiary) owns or possesses or otherwise has the right to use all material
Governmental Authorizations, Intangible Assets and Intellectual Property
necessary for the conduct of the Company's business free and clear of all Liens
and without any conflict with the rights of others. Except as otherwise
described in Section 3.11 of the Company Disclosure Schedule, no Governmental
Authorization, Intangible Asset or Intellectual Property has been or is now
involved in any opposition, invalidation, or cancellation, and no Intellectual
Property materially infringes any trade name, trademark or service ▇▇▇▇ of any
third party. Each of the Company and its Subsidiaries has taken all necessary or
desirable action to protect each item of Intellectual Property that it owns or
uses. None of the Company and its Subsidiaries has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Company and its Subsidiaries
has ever received any charge, complaint, claim, or notice alleging any such
knowledge of the Company, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of any of the Company and its Subsidiaries.
B. With respect to each item of Intellectual Property that any
of the Company and its Subsidiaries owns:
(i) the identified owner possesses all right,
title, and interest in and to the item;
15
(ii) the item is not subject to any outstanding
judgment, order, decree, stipulation,
injunction, or charge;
(iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim,
or demand is pending or, to the knowledge of
the Company, is threatened which challenges
the legality, validity, enforceability, use,
or ownership of the item; and
(iv) none of the Company and its Subsidiaries has
ever agreed to indemnify any person or
entity for or against any interference,
infringement, misappropriation, or other
conflict with respect to the item.
C. Section 3.11 of the Disclosure Schedule also identifies
each item of Intellectual Property that any third party owns and that any of the
Company and its Subsidiaries uses pursuant to license, sublicense, agreement or
permission. The Company has supplied the Parent with correct and complete copies
of all such licenses, sublicenses, and permissions (as amended to date). With
respect to each such item of used Intellectual Property:
(i) the license, sublicense, agreement or
permission covering the item is legal,
valid, binding, enforceable and in full
force and effect;
(ii) the license, sublicense, agreement or
permission will continue to be legal, valid,
binding, enforceable and in full force and
effect on identical terms following the
Closing;
(iii) no party to the license, sublicense,
agreement or permission is in material
breach or default, and no event has occurred
which with notice or lapse of time would
constitute a breach or default or permit
termination, modification or acceleration
thereunder;
(iv) no party to the license, sublicense,
agreement or permission has repudiated any
provision thereof;
(v) with respect to each sublicense, the
representation and warranties set forth in
subsections (i) through (iv) above are true
and correct with respect to the underlying
license;
(vi) the underlying item of Intellectual Property
is not subject to any outstanding judgment,
order, decree, stipulation, injunction or
charge;
(vii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim,
or demand is
16
pending, or, to the knowledge of the Company
and the directors and officers (and
employees with responsibility for
Intellectual Property matters) of the
Company and its Subsidiaries, is threatened
which challenges the legality, validity, or
enforceability of the underlying item of
Intellectual property; and
(viii) none of the Company and its Subsidiaries has
granted any sublicense or similar right with
respect to the license, sublicense,
agreement or permission.
SECTION 3.12 Related Transactions. Section 3.12 of the Company
Disclosure Schedule sets forth a true, correct and complete description of any
Contractual Obligation or transaction between the Company and any of its
officers, directors, employees, stockholders, or any Affiliate of any thereof
(other than reasonable compensation for services as officers, directors and
employees and reimbursement for out-of-pocket expenses reasonably incurred in
support of the Company's business), including without limitation any providing
for the furnishing of services to or by, providing for rental of property, real,
personal or mixed, to or from, or providing for the lending or borrowing of
money to or from or otherwise requiring payments to or from, any officer,
director, stockholder or employee, or any Affiliate of any thereof.
SECTION 3.13 Insurance. The Company and its Subsidiaries have been
covered during the past five (5) years by insurance in scope and amount
reasonable for the business in which they have been engaged during such period.
Section 3.13 of the Company Disclosure Schedule lists all insurance policies
maintained by the Company (or a Subsidiary) and includes the insurers' names,
policy numbers, expiration dates, risks insured against, amounts of coverage,
annual premiums, exclusions, deductibles and self-insured retention and
describes in reasonable detail any retrospective rating plan, fronting
arrangement or any other self-insurance or risk assumption agreed to by the
Company (or a Subsidiary) or imposed upon the Company (or a Subsidiary) by any
such insurers, as well as any self-insurance program that is in effect. Neither
the Company nor any Subsidiary is in breach or violation of or in default under
any such policy, and all premiums due thereon have been paid, and each such
policy or a comparable replacement policy will continue to be in force and
effect up to and including the Closing Date. The Company (or a Subsidiary) has
not received any written notice from the insurer disclaiming coverage or
reserving rights with respect to a particular claim or such policy in general.
The Company (or a Subsidiary) has not incurred any material loss, damage,
expense or liability covered by any such insurance policy for which it has not
properly asserted a claim under such policy.
17
SECTION 3.14 Tax Matters.
A. The Company (or a Subsidiary) has in accordance with all
Applicable Laws filed all Tax Returns which are required to be filed, and has
paid, or made adequate provision for the payment of, all material Taxes which
have or may become due and payable pursuant to said Returns and all other
material governmental charges and assessments received to date. All Taxes which
the Company (or a Subsidiary) is required by law to withhold and collect have
been duly withheld and collected, and have been paid over, in a timely manner,
to the proper Authorities to the extent due and payable, except as set forth on
Section 3.14 (A) of the Company Disclosure Schedule. The Company (nor any
Subsidiary) has not executed any waiver to extend, or otherwise taken or failed
to take any action that would have the effect of extending, the applicable
statute of limitations in respect of any Tax liabilities of the Company (or a
Subsidiary) for the fiscal years prior to and including the most recent fiscal
year. Except as set forth in Section 3.14 (A) of the Company Disclosure
Schedule, adequate provision has been made on the most recent balance sheet
forming part of the Company Financial Statements for all Taxes of any kind,
including interest and penalties in respect thereof, whether disputed or not,
and whether past, current or deferred, accrued or unaccrued, fixed, contingent,
absolute or other. Neither the Company nor any Subsidiary is a "consenting
corporation" within the meaning of Section 341(f) of the Code.
B. The Company (or a Subsidiary) has paid all material Taxes
which have become due pursuant to its Returns.
C. From the end of its most recent fiscal year to the date
hereof, the Company and its Subsidiaries have not made any payment on account of
any Taxes except regular payments required in the ordinary course of business,
consistent with prior practice, with respect to current operations or property
presently owned.
D. The information shown on the consolidated Federal income
Tax Returns of the Company and its Subsidiaries (true, correct and complete
copies of which have been furnished by the Company to the Parent) is true,
correct and complete and fairly and accurately reflects the information
purported to be shown. Federal and state income Tax Returns of the Company have
been examined by the IRS or applicable state Authority through the taxable
periods set forth in Section 3.14(D) of the Company Disclosure Schedule, and the
Company has not been notified regarding any pending examination, except as shown
in Section 3.14(D) of the Company Disclosure Schedule.
E. The Company is not a party to any tax sharing agreement or
arrangement, except as set forth in Section 3.14(E) of the Company Disclosure
Schedule.
F. The Company is not and within five years of the date hereof
has not been, a "United States real property holding corporation" as defined in
Section 897 of the Code.
18
SECTION 3.15 Employee Retirement Income Security Act of 1974.
A. The Company (which for purposes of this Section 3.15 shall
include any Subsidiary or ERISA Affiliate with respect to any Plan subject to
Title IV of ERISA) does not contribute to any Plan or sponsor any Plan or
Benefit Arrangement and has not contributed to or sponsored any Plan or Benefit
Arrangement, except as set forth in Section 3.15(A) of the Company Disclosure
Schedule. As to all Plans and Benefit Arrangements listed in Section 3.15(A) of
the Company Disclosure Schedule, and except as disclosed in such Section 3.15(A)
of the Company Disclosure Schedule:
(i) all Plans and Benefit Arrangements comply
and have been administered in all material
respects in form and in operation with all
Applicable Laws, and the Company has not
received any outstanding notice from any
Authority questioning or challenging such
compliance;
(ii) all Plans maintained or previously
maintained by the Company that are or were
intended to comply with Section 401 of the
Code comply and complied in form and in
operation with all applicable requirements
of such Section, and no event has occurred
which will or could reasonably be expected
to give rise to disqualification of any such
Plan under such Section;
(iii) none of the assets of any Plan are invested
in employer securities or employer real
property;
(iv) there are no "prohibited transactions" (as
described in Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan
for which the Company has any liability;
(v) there are no Claims (other than routine
claims for benefits) pending or threatened
involving Plans or the assets of Plans;
(vi) neither the Company nor any ERISA Affiliate
has maintained any Plan that is subject to
Title IV of ERISA;
(vii) to the extent that the most recent balance
sheet forming part of the Company Financial
Statements do not include a pro rata amount
of the contributions which would otherwise
have been made in accordance with past
practices for the Plan years which include
the Closing Date, such amounts are set forth
in Section 3.15(A) of the Company Disclosure
Schedule;
19
(viii) the Company nor any of its directors,
officers, employees or any other fiduciary
has committed any breach of fiduciary
responsibility imposed by ERISA that would
subject the Company or any of its respective
directors, officers or employees to any
material liability under ERISA;
(ix) except as set forth in Section 3.15(A) of
the Company Disclosure Schedule (which
entry, if applicable, shall indicate the
present value of accumulated plan
liabilities calculated in a manner
consistent with FAS 106 and actual annual
expense for such benefits for each of the
last two (2) years) and pursuant to the
provisions of COBRA, the Company maintains
no Plan that provides benefits described in
Section 3(1) of ERISA to any former
employees or retirees of the Company; and
(x) the Company has made available to the Buyer
a copy of the two most recently filed
Federal Form 5500 series and accountant's
opinion, if applicable, for each Plan.
B. The Company is not nor ever has been a party to any
Multiemployer Plan or made contributions to any such plan.
SECTION 3.16 Employment Arrangements.
A. The Company (which term for purposes of this Section 3.16
shall include any Subsidiary) has no obligation or liability, contingent or
other, under any Employment Arrangement (whether or not listed in Section
3.15(A) of the Company Disclosure Schedule), other than those listed or
described in Section 3.16(A) of the Company Disclosure Schedule. The Company is
not now nor during the past three (3) years has been subject to or involved in
or, to the Company's knowledge, threatened with any union elections, petitions
therefor or other organizational activities, except as described in Section
3.16(A) of the Company Disclosure Schedule. None of the employees of the Company
is represented by any labor union or other employee collective bargaining
organization and there are no pending grievances, disputes or controversies with
any union or any other employee collective bargaining organization of such
employees.
B. Except as set forth in Section 3.16(B) of the Company
Disclosure Schedule, no employee shall accrue or receive additional benefits,
service or accelerated rights to payments of benefits under any Employment
Arrangement, including the right to receive any parachute payment, as defined in
Section 280G of the Code, or become entitled to severance, termination allowance
or similar payments as a direct result of this Agreement, the Acquisition Merger
or the Transactions.
SECTION 3.17 Material Agreements. Listed on Section 3.17 of the Company
Disclosure Schedule are all Material Agreements
20
relating to the ownership or operation of the business and property of the
Company (or a Subsidiary) presently held or used by it or to which it is a party
or to which it or any of its property is subject or bound. True, complete and
correct copies of each of the Material Agreements have been furnished by the
Company to the Parent (or, if oral, true, complete and correct descriptions
thereof have been set forth in Section 3.17 of the Company Disclosure Schedule).
All of the Material Agreements are valid, binding and legally enforceable
obligations of the Company (or a Subsidiary) and, to the Company's knowledge,
the other parties thereto (except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement, voidable
preference, fraudulent conveyance and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity), and the Company is validly and lawfully
operating its business and owning its property under each of the Material
Agreements. Except as disclosed in Section 3.17 of the Company Disclosure
Schedule: (i) the Company (or any Subsidiary) is not in default in the payment
or performance of any of its obligations under any Material Agreement; (ii) no
Event which, with the giving of notice or the passage of time, or both,
constitutes an event of default by the Company (or a Subsidiary) under any
Material Agreement has occurred and is continuing; and (iii) to the knowledge of
the Company, no other party to any Material Agreement is in default in any
material respect in the payment or performance of its obligations thereunder and
no Event which, with the giving of notice or the passage of time, or both,
constitutes a material event of default by such other party under any Material
Agreement has occurred and is continuing.
SECTION 3.18 Ordinary Course of Business.
A. The Company (which term for purposes of this Section 3.18
shall include any Subsidiary), from the date of the most recent audited balance
sheet forming part of the Company Financial Statements to the date hereof and
until the Closing Date, except as may be described on Section 3.18(A) of the
Company Disclosure Schedule, disclosed in the Company's periodic reports under
the Securities Exchange Act of 1934, as amended, or as may expressly be required
or permitted by the terms of this Agreement:
(i) has operated, and will continue to operate,
its business in the normal, usual and
customary manner in the ordinary course of
business, consistent with prior practice;
(ii) has not sold or otherwise disposed of, or
contracted to sell or otherwise dispose of,
and will not sell or otherwise dispose of or
contract to sell or otherwise dispose of,
any of its properties or assets, other than
in the ordinary course of business;
21
(iii) except in each case in the ordinary course
of business, consistent with prior practice,
(a) has not incurred and will not incur
any Indebtedness, obligations or
liabilities (fixed, contingent or
other);
(b) has not entered and will not enter
into any commitments;
(c) has not canceled and will not
cancel any debts or claims; and
(d) has not prepaid and will not prepay
any Indebtedness in advance of its
contractual maturity date.
(iv) has not made or committed to make, and will
not make or commit to make, any additions to
its property or any purchases of machinery
or equipment, except for normal maintenance
and replacements;
(v) has not discharged or satisfied, and will
not discharge or satisfy, any Lien and has
not paid and will not pay any obligation or
liability (absolute or contingent) other
than current liabilities or obligations
under contracts then existing or thereafter
entered into in the ordinary course of
business, consistent with prior practice,
and commitments under Leases existing on
that date or incurred since that date in the
ordinary course of business;
(vi) has not created or permitted to be created,
and will not create or permit to be created
any Lien on any of its tangible property;
(vii) has not transferred or created, or permitted
to be created, and will not transfer or
create, or permit to be created, any Lien on
any Intangible Assets;
(viii) except in the ordinary course of business,
consistent with prior practice, has not
increased and will not increase the
compensation payable or to become payable to
any of its directors, officers, employees,
advisers, consultants, salesmen or agents or
otherwise alter, modify or change the terms
of their employment or engagement;
(ix) has not suffered any material damage,
destruction or loss (whether or not covered
by insurance) or
22
any acquisition or taking of property by any
Authority;
(x) has not waived, and will not waive, any
rights of material value without fair and
adequate consideration;
(xi) has not experienced any work stoppage;
(xii) has not entered into, amended or terminated
and will not enter into, amend or terminate
any Lease, Governmental Authorization,
Private Authorization, Material Agreement or
Employment Arrangement or any Contractual
Obligation or transaction with any
Affiliate, except for amendments or
terminations in the ordinary course of
business, consistent with prior practice, in
accordance with the terms thereof, and
except for the termination of all
outstanding option, employment and severance
agreements as of the Effective Date;
(xiii) has not amended or terminated and will not
amend or terminate, and has kept and will
keep in full force and effect including
without limitation renewing to the extent
the same would otherwise expire or
terminate, all insurance policies and
coverage;
(xiv) has not entered into, and will not enter
into, any other transaction or series of
related transactions which individually or
in the aggregate is material to the Company,
except in the ordinary course of business,
consistent with prior practice;
(xv) has not incurred and will not incur any
Indebtedness owing to any Stockholder and
has not made and will not make any loans or
advances to any Stockholder;
(xvi) has not split, combined or reclassified any
of the Company's capital stock or issued or
authorized the issuance of any securities in
respect of, in lieu of or in substitution of
any shares of the Company's capital stock,
and will not do any of the foregoing;
(xvii) has not issued, sold or otherwise disposed
of any of its capital stock, or issued
Option Securities or Convertible Securities
or preemptive rights or other rights to
purchase or obtain any of its capital stock,
and has not declared, set aside, or paid any
dividend or distributions with respect to
its capital stock or redeemed, purchased, or
otherwise acquired any of its capital stock;
23
(xviii) has not amended and will not amend any of
its Organic Documents;
(xix) has not changed and will not change any
method of accounting or accounting practice
or policy, except as required by Applicable
Law or by GAAP; and
(xx) has not accelerated accounts receivable,
delayed accounts payable, or liquidated
inventory, and will not do so, except in the
ordinary course of business consistent with
past practice.
B. From the end of its most recent fiscal year to the date
hereof, except as described in Section 3.18(B) of the Company Disclosure
Schedule, the Company has not, or on or prior to the Closing Date will have,
declared, made or paid, or agreed to declare, make or pay, any Distribution.
SECTION 3.19 Broker or Finder. Other than the Management Resource
Center, Inc., which acted as the financial adviser to the Company, no Person
assisted in or brought about the negotiation of this Agreement, the Acquisition
Merger or the subject matter of the Transactions in the capacity of broker,
agent or finder or in any similar capacity on behalf of the Company (or a
Subsidiary).
SECTION 3.20 Environmental Matters. Except as set forth in Section 3.20
of the Company Disclosure Schedule:
A. As of the date hereof, to the knowledge of the Company, no
underground storage tanks are present under any property that the Company (which
term for purposes of this Section 3.20 shall include any Subsidiary) or any
Affiliate has at any time owned, operated, occupied or leased. As of the date
hereof, to the knowledge of the Company, no material amount of any substance
that has been designated by any federal, state or local governmental agency,
board or authority (a "Governmental Entity") or by applicable federal state or
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCB's, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, (a "Hazardous Material"), but excluding
office and janitorial supplies, are present, as a result of the actions of the
Company or to the knowledge of the Company any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that the Company or any Affiliate
has at any time owned, operated, occupied or leased. The Company is not aware of
any Event which could involve the Company in any environmental
24
litigation or impose upon the Company any environmental liabilities which would
have an Adverse Effect on the Company.
B. To the knowledge of the Company, at no time has the Company
or an Affiliate transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has the Company or any
Affiliate disposed of, transported, sold, or manufactured any product containing
a Hazardous Material (collectively, "Hazardous Materials Activities") in
material violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity, which such violation would have an Adverse Effect
on the Company.
C. To the Company's knowledge, the Company currently holds all
material environmental approvals, permits, licenses, clearances and consents
(the "Environmental Permits") necessary for the conduct of its Hazardous
Material Activities and other businesses as such activities and businesses are
currently being conducted, the absence of which would have an Adverse Effect on
the Company.
D. To the Company's knowledge, no action, proceeding,
revocation proceeding, amendment procedure, writ injunction or claim is pending
or threatened concerning any Environmental Permit or any Hazardous Materials
Activity of the Company.
E. The Company has not performed an environmental site
assessment, nor has such an assessment been conducted by or on behalf of the
Company at any property owned or leased by the Company. The Company has received
a copy of the Phase One Environmental Site Assessment, draft dated May 1, 1998,
by Dames & ▇▇▇▇▇, attached hereto as Exhibit F (the "Dames & ▇▇▇▇▇ Report").
SECTION 3.21 Books and Records. Except as set forth in Section 3.21 of
the Company Disclosure Schedule, the minute books and other similar records of
the Company and its Subsidiaries contain true and complete records of all
actions taken at any meetings of the Company's and Subsidiaries' stockholders,
Board of Directors, members, managers or any committee thereof and of all
written consents executed in lieu of the holding of any such meeting.
SECTION 3.22 Customers and Suppliers. Section 3.22 of the Company
Disclosure Schedule sets forth a list of the ten (10) largest suppliers and a
list of the ten (10) largest customers of the Company and its Subsidiaries based
on dollar values of purchases during the twelve-month period ended March 31,
1998. Neither the Company nor any Subsidiary has any reason to believe that any
customer or supplier listed on Section 3.22 of the Company Disclosure Schedule
has any plan or intention to materially alter its relationship with the Company
or any Subsidiary.
25
SECTION 3.23 Officers and Directors. Section 3.23 of the Company
Disclosure Schedule sets forth a true and complete list of all officers,
directors, members and managers of the Company and its Subsidiaries.
SECTION 3.24 Bank Accounts. Section 3.24 of the Company Disclosure
Schedule sets forth all checking accounts, savings accounts, custodial accounts,
certificates of deposit, safe deposit boxes or other similar accounts maintained
by the Company and its Subsidiaries, together with the name of each person with
signature authority for each such account.
SECTION 3.25 Anti-takeover Statutes Not Applicable. No "fair price",
"moratorium", "control share acquisition" or other form of anti-takeover statute
or regulation is applicable to the Company's or the Stockholders' entering into
this Agreement and consummating the transactions contemplated hereby.
SECTION 3.26 Proxy Statement. The information included in the Proxy
Statement (the "Proxy Statement") to be sent to the stockholders of the Company
in connection with the solicitation of proxies to approve the Acquisition Merger
shall not, on the date the Proxy Statement is first mailed to such stockholders
or at the Effective Time, contain any statement which, at such time and in light
of the circumstances under which it is made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement not false or misleading or
necessary to correct any statement in any earlier communication which has become
false or misleading.
SECTION 3.27 Opinion of Financial Advisor. The financial advisor of the
Company, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Incorporated, has delivered to the Company an
opinion dated April 20, 1998 to the effect that, as of such date, the
Consideration Per Share is fair, from a financial point of view, to the
stockholders of the Company. The Company has provided a true and correct copy of
such opinion to the Buyer.
SECTION 3.28 Litigation. Section 3.28 of the Company Disclosure
Schedule sets forth each instance in which any of the Company and its
Subsidiaries (i) is subject to any unsatisfied judgment, order, decree,
stipulation, injunction, or charge or (ii) is a party or, to the knowledge of
the Company, is threatened to be made a party to any charge, complaint, action,
suit, proceeding or investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator. None of the charges, complaints, actions, suits,
proceedings, hearings, and investigations set forth in Section 3.28 of the
Company Disclosure Schedule could result in any Adverse Change to the Company.
SECTION 3.29 Product Warranty. Each product manufactured, distributed,
sold, or delivered by any of the Company and its Subsidiaries has been in
conformity with all applicable contractual
26
commitments and all express and implied warranties, and none of the Company and
its Subsidiaries has any liability for damages in connection therewith, subject
only to the reserve for product warranty claims set forth in the most recent
audited balance sheet contained in the Company Financial Statements as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company. No product manufactured, sold, distributed,
serviced, leased, or delivered by any of the Company and its Subsidiaries is
subject to any guaranty, warranty, or other indemnity of the company or any
Subsidiary beyond the applicable standard terms and conditions of sale or lease.
SECTION 3.30 Product Liability. Except as set forth in Section 3.28 or
3.30 of the Company Disclosure Schedule, none of the Company and its
Subsidiaries has any material liability arising out of any injury to persons or
property as a result of the ownership, possession, or use of any product
manufactured, distributed, sold, leased, serviced or delivered by any of the
Company and its Subsidiaries.
SECTION 3.31 Continuing Representations and Warranties. Except for
those representations and warranties which speak as of a specific date, all of
the representations and warranties of the Company set forth in this Article
shall be true and correct on the Closing Date with the same force and effect as
though made on and as of that date and those, if any, which speak as of a
specific date shall be true and correct as of such date on the Closing Date.
SECTION 3.32 Disclosure. No representation or warranty by the Company
contained in this Agreement, and no statement contained in the Company
Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of the Company pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or,
to the knowledge of the Company, omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE MERGER SUBSIDIARY
Each of the Parent and the Merger Subsidiary represents, warrants and
covenants to, and agrees with, the Company as follows:
27
SECTION 4.1 Organization and Business; Power and Authority; Effect of
Transaction.
A. Each of the Parent and the Merger Subsidiary:
(i) is a corporation duly organized, validly
existing and in good standing under the laws
of the State of Delaware,
(ii) has all requisite corporate power and
authority to own or hold under lease its
properties and to conduct its business as
now conducted and has in full force and
effect all Governmental Authorizations and
Private Authorizations and has made all
Governmental Filings, to the extent required
for such ownership and lease of its property
and conduct of its business, except to the
extent that the failure to have obtained any
such Governmental Authorization or Private
Authorization or to have made any such
Governmental Filing would not have an
Adverse Effect; and
(iii) has duly qualified and is authorized to do
business and is in good standing as a
foreign corporation in each jurisdiction (a
true and correct list of which is set forth
in Section 4.1(A)(iii) of the Parent
Disclosure Schedule) in which the character
of its property or the nature of its
business or operations requires such
qualification or authorization, except to
the extent the failure so to qualify or to
maintain such authorizations would not have
an Adverse Effect.
B. Each of the Parent and the Merger Subsidiary has all
requisite power and authority (corporate and other) and, other than the filing
and termination of the waiting period pursuant to the HSR Act and as set forth
in Section 4.1(C) of the Parent Disclosure Schedule, has in full force and
effect all Governmental Authorizations and Private Authorizations in order to
enable it to execute and deliver, and to perform its obligations under, this
Agreement and each Collateral Document executed or required to be executed by it
pursuant hereto or thereto and to consummate the Acquisition Merger and the
Transactions, and the execution, delivery and performance of this Agreement and
each Collateral Document executed or required to be executed pursuant hereto or
thereto have been duly authorized by all requisite corporate or other action.
This Agreement has been duly executed and delivered by the Parent and the Merger
Subsidiary and constitutes, and each Collateral Document executed or required to
be executed pursuant hereto or thereto or to consummate the Acquisition Merger
and the Transactions, when executed and delivered by the Company will
constitute, legal, valid and binding obligations of the Parent and the
Subsidiary, enforceable in accordance with their respective
28
terms, except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement, voidable preference, fraudulent
conveyance or other similar laws relating to or affecting the rights of
creditors, and except as the same may be subject to the effect of general
principles of equity.
C. Except as set forth in Section 4.1(C) of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement or any
Collateral Document executed or required to be executed pursuant hereto or
thereto, nor the consummation of the Acquisition Merger or the Transactions, nor
compliance with the terms, conditions and provisions hereof or thereof by the
Parent, the Merger Subsidiary or any of the other parties hereto or thereto
which is Affiliated with the Parent or the Merger Subsidiary:
(i) will conflict with, or result in a breach or
violation of, or constitute a default under,
any Applicable Law on the part of the Parent
or any Subsidiary or will conflict with, or
result in a breach or violation of, or
constitute a default under, or permit the
acceleration of any obligation or liability
in, or but for any requirement of giving of
notice or passage of time or both would
constitute such a conflict with, breach or
violation of, or default under, or permit
any such acceleration in, any Contractual
Obligation of the Parent or any Subsidiary,
or
(ii) will require any Governmental Authorization
or Governmental Filing or Private
Authorization and filing requirements under
Applicable Law in connection with the
Acquisition Merger and the Transactions and
pursuant to the HSR Act.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, for himself or itself only, hereby represents and
warrants to, and agrees with, the Parent and Merger Subsidiary as follows:
SECTION 5.1 Ownership. Such Stockholder is the lawful owner of record
and beneficial owner of the number of shares of Company Common Stock set forth
opposite his or its name in Section 5.1 of the Company Disclosure Schedule. Such
Stockholder is not party to or bound by any agreement or commitment pursuant to
which it is obligated to purchase or otherwise acquire any equity securities,
Option Securities or Convertible Securities of the Company, and (ii) between the
date hereof and the Closing, such Stockholder will not sell or purchase, or
agree to sell or purchase, any equity securities, Option Securities or
Convertible Securities of the Company.
29
SECTION 5.2 Liens. The shares of the Company Common Stock owned by such
Stockholder are free and clear of all Liens, and none of such shares of the
Company Common Stock is subject to any written or oral agreement whatsoever with
respect to the voting thereof, the sale of pledge thereof (including, without
limitation, any option or right of first refusal to sell any such shares) or any
like matter, nor has any proxy been granted to any Person with respect to any
such shares of the Company Common Stock (except as provided in the Voting and
Option Agreement and the Letter of Intent, dated March 19, 1998, between the
Parent and the Company).
SECTION 5.3 Authorization of Agreement. This Agreement has been duly
and validly executed and delivered on behalf of such Stockholder and constitutes
a valid obligation such Stockholder, enforceable in accordance with its terms,
except to the extent that its enforceability may be limited by applicable
insolvency, bankruptcy or similar laws affecting the enforcement of creditors'
rights generally.
SECTION 5.4 No Governmental Consents. Except as set forth in Section
5.4 of the Company Disclosure Schedule, no Governmental Authorization or
Governmental Filing or Private Authorization is required to be obtained or made
by the Company or such Stockholder in connection with the Acquisition Merger and
the Transactions except for filing requirements under Applicable Laws in
connection with the Acquisition Merger and the Transactions and except pursuant
to the HSR Act.
SECTION 5.5 Information Supplied. None of the information specifically
supplied or to be supplied by such Stockholder with respect to such Stockholder
for inclusion or incorporation by reference in the Proxy Statement will, at the
date the Proxy Statement is first mailed to the stockholders of the Company or
at the time of the stockholders' meeting, 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.
ARTICLE 6
ADDITIONAL COVENANTS
SECTION 6.1 Confidentiality; Access to Information.
A. The Company and the Parent acknowledge that the Company and
the Parent have heretofore executed confidentiality letters, dated November 25,
1997 and December 1, 1997 (the "Confidentiality Letters"), which separately and
as incorporated herein shall remain in full force and effect after and
notwithstanding the execution and delivery of this Agreement, and that
information obtained from the Company by the Parent or its Representatives or by
the Company or its Representatives from the Parent, pursuant to Section 6.1(B),
the Confidentiality Letters or
30
otherwise shall be subject to the provisions of the Confidentiality Letters.
B. The Company will afford to the Parent and the Parent's
Representatives full access during normal business hours throughout the period
prior to the Closing Date to all of its properties, books, contracts,
commitments and records (including without limitation Tax Returns) and, during
such period, shall furnish promptly upon request all information relating to the
Company, that the Parent or any of its Representatives reasonably requires.
Subject to the terms and conditions of the Confidentiality Letter which are
expressly incorporated herein by reference thereto for the benefit of the
parties hereto, the Parent shall hold and shall use its best efforts to cause
the Parent's Representatives to hold, and the Company shall hold and shall use
its best efforts to cause its Representatives to hold, in strict confidence all
non-public documents and information furnished (whether prior or subsequent
hereto) to the Parent or the Company, as the case may be, in connection with
this Agreement, the Acquisition Merger and the Transactions.
C. Subject to the terms and conditions of the Confidentiality
Letter, the Parent and the Company may disclose such information as may be
necessary in connection with seeking all Governmental and Private Authorizations
or that is required by Applicable Law to be disclosed. In the event that this
Agreement is terminated in accordance with its terms, the Parent and the Company
shall each promptly redeliver all non-public written material provided pursuant
to this Section or any other provision of this Agreement or otherwise in
connection with the Acquisition Merger and the Transactions and shall not retain
any copies, extracts or other reproductions in whole or in part of such written
material other than one copy thereof which shall be delivered to independent
counsel for such party.
D. No investigation pursuant to this Section 6.1 shall affect
any representation or warranty in this Agreement of any Party hereto or any
condition to the obligations of the Parties hereto; provided, however, that
Parent and the Merger Subsidiary acknowledge and agree that the representations
and warranties of the Company in Section 3.20 are subject to the information
concerning the premises leased by the Company in Santa Ana, California,
contained in the Dames & ▇▇▇▇▇ Report.
SECTION 6.2 Approval of Stockholders. The Company will (a) as promptly
as practicable, take all steps necessary to duly call, give notice of, convene
and hold a meeting of its stockholders for the purpose of approving the
Acquisition Merger and will use best efforts to obtain the necessary approvals
of its stockholders of the Acquisition Merger. In connection therewith, ▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇
▇. ▇▇▇▇▇▇▇ have simultaneously with the execution of this Agreement, executed
and delivered to the Company a Voting and Option Agreement in the form of
Exhibit A hereto (the "Voting and Option Agreement").
31
SECTION 6.3 Agreement to Cooperate.
A. Company Proxy Solicitation. The Parties will cooperate in
connection with the preparation and filing by the Company with the SEC such
proxy or information materials as may be necessary or appropriate relating to
the Acquisition Merger (the "Proxy Statement"), or as shall be necessary or
desirable in order to consummate the transactions contemplated by this
Agreement, each to be undertaken as promptly as practicable, and the Company
will use its best efforts to mail the Proxy Statement to the Company's
stockholders as promptly as practicable.
B. Each of the Parties shall use its 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 under Applicable Law to consummate the
Acquisition Merger and make effective the Transactions, including using its best
efforts (i) to prepare and file with the applicable Authorities as promptly as
practicable after the execution of this Agreement all requisite applications and
amendments thereto, together with related information, data and exhibits,
necessary to request issuance of orders approving the Acquisition Merger and the
Transactions by all such applicable Authorities; (ii) to obtain all necessary or
appropriate waivers, consents and approvals, and (iii) to effect all necessary
registrations, filings and submissions (including without limitation filings
under federal or state securities laws or the HSR Act and any other submissions
requested by the Federal Trade Commission or Department of Justice) and (iv) to
lift any injunction or other legal bar to the Acquisition Merger and the
Transactions (and, in such case, to proceed with the Acquisition Merger and the
Transactions as expeditiously as possible). Each of the Parties recognizes that
the consummation of the Acquisition Merger and the Transactions is subject to
the preacquisition notification requirements of the HSR Act. Each agrees that,
to the extent required by Applicable Law to consummate the Acquisition Merger,
it will file with the Antitrust Division of the Department of Justice and the
Federal Trade Commission a Notification and Report Form in a manner so as to
constitute substantial compliance with the notification requirements of the HSR
Act. Each covenants and agrees to use its best efforts to achieve the prompt
termination or expiration of any waiting period or any extension thereof under
the HSR Act.
C. Each of the Parties agrees to take such actions as may be
necessary to obtain any Governmental Authorizations legally required for the
consummation of the Acquisition Merger and the Transactions, including the
making of any Governmental Filings, publications and requests for extensions and
waivers.
D. The Company will use its best efforts on or prior to the
Closing Date (i) to obtain the satisfaction of the conditions specified in
Sections 7.1 and 7.2; and (ii) if requested by the Parent, to obtain the
consents (to the extent required) to the continued existence in accordance with
its then-stated terms of all
32
long-term debt of each of the Company and each Subsidiary. The Parent will use
its best efforts on or prior to the Closing Date to obtain the satisfaction of
the conditions applicable to it specified in Sections 7.1 and 7.3.
SECTION 6.4 Notification of Certain Matters. The Company shall give
prompt notice to the Parent, and the Parent shall give prompt notice to the
Company, of the occurrence or non-occurrence of any Event the occurrence or
non-occurrence of which would be likely to cause (i) any representation or
warranty of the Company or the Parent (or Merger Subsidiary), as the case may
be, contained in this Agreement to be untrue or inaccurate in any material
respect, or (ii) in the case of the Company, any change to be made in the
Company Disclosure Schedule and any failure of the Company or the Parent (or
Merger Subsidiary), as the case may be, to comply with or satisfy, or be able to
comply with or satisfy, any material covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice hereunder shall not limit or otherwise affect the liability of any
Party giving such notice or the remedies available hereunder to the Party
receiving such notice.
SECTION 6.5 Public Announcements. Except as may be required by
applicable law, the Parties agree that they will consult with each other
concerning any proposed press release or public announcement pertaining to the
transactions contemplated hereby and shall endeavor to agree on the text of such
release or the making of such public announcement. The foregoing shall not
restrict in any way the method and timing of any Party's compliance with
securities or other laws applicable to it, even if the same require a unilateral
public disclosure of the matters addressed in this Agreement or any Collateral
Document. Any Party making any public disclosure of the matters addressed herein
shall give the other Parties prompt notice thereof, in advance of public
disclosure if practicable and legally permissible.
SECTION 6.6 Conveyance Taxes. The Parties shall cooperate with one
another in the preparation, execution and filing of all Returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar Taxes which become
payable in connection with the Transactions that are required or permitted to be
filed on or before the Closing Date. Any such Taxes shall be paid by the Party
required to do so under Applicable Law.
SECTION 6.7 No Solicitation.
A. The Company shall not, and shall cause its Representatives
not to, and no Stockholder shall, during the period commencing on the date
hereof and ending with the earlier to occur of the Closing or the termination of
this Agreement in accordance with its terms, directly or indirectly (i) solicit
or initiate the submission of proposals or offers from any Person for, (ii)
33
participate in any discussions pertaining to, or (iii) furnish any information
to any Person other than the Parent and its Representatives relating to, any
acquisition or purchase of any of the Company Common Stock or all or a material
portion of the assets of the Company, or a merger, consolidation or business
combination of the Company (or a Subsidiary), or any Other Transaction (other
than the Acquisition Merger).
B. Nothing contained in the foregoing shall prevent the
Company or its Board of Directors from furnishing non-public information to, or
entering into discussions or negotiations with, any person or entity in
connection with an unsolicited bona fide written proposal in respect of an Other
Transaction by such person or entity or recommending an unsolicited bona fide
written proposal in respect of an Other Transaction to the shareholders of the
Company, if and only to the extent that the Board of Directors of the Company
determines in good faith by a majority vote, (x) after consultation with its
financial advisor, that such proposal in respect of an Other Transaction would,
if consummated, result in a transaction more favorable to the shareholders of
the Company from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Other Transaction being referred to in
this Agreement as a "Superior Proposal") and (y) based on the written opinion of
outside legal counsel, that failing to take such action would likely result in a
breach of its fiduciary duties to shareholders under applicable law. Nothing
contained in this Agreement shall prevent the Company's Board of Directors from
performing its fiduciary duties, however, such performance of fiduciary duties
shall under no circumstances absolve the Company of its obligations under this
Agreement.
C. The Company will notify Parent immediately (and no later
than 24 hours) after receipt by the Company (or its advisors) of any proposal in
respect of any Other Transaction or any request for non-public information in
connection with any Other Transaction or for access to the properties, books or
records of the Company or any of its subsidiaries by any person or entity that
informs the Company that it is considering making, or has made a proposal
concerning any Other Transaction. Such notice to Parent shall be made orally and
in writing and shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact. The Company
will keep Parent informed of all material developments and the status of any
proposal in respect of any Other Transaction, any negotiations or discussions
with respect to any such proposal in respect of any Other Transaction or any
request for non-public information in connection with any such proposal in
respect of any Other Transaction or for access to the properties, books or
records of the Company or any of its subsidiaries by any person or entity that
is considering making, or has made, a proposal in respect of any Other
Transaction. The Company will provide Parent with copies of all documents
received from or delivered or sent to any person or entity that is considering
making or has made, a proposal in respect of any Other Transaction.
34
SECTION 6.8 Environmental Inspections.
A. Prior to the Closing, the Parent shall have the right to
conduct environmental and other tests, audits, studies and assessments of the
real property owned or leased by the Company (or a Subsidiary) and the buildings
and improvements thereon, and to review such records and documents as may be
required by the Parent to enable it to evaluate the condition of and potential
liabilities affecting such property.
B. If, in the course of the Parent's tests, audits, studies,
assessments and review pursuant to subsection (A) above, the Parent shall
determine that any of the Company's representations and warranties set forth in
Section 3.20 are untrue and such misrepresentations, individually or in the
aggregate, could reasonably be expected to have an Adverse Effect, the Parent
may terminate this Agreement pursuant and subject to Section 8.1(D).
ARTICLE 7
CLOSING CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligations Under This
Agreement. The respective obligations of each Party under this Agreement shall
be subject to the fulfillment at or prior to the Effective Time of the following
conditions, none of which may be waived:
A. Stockholders' Approval. This Agreement, the Acquisition
Merger and the Transactions shall have been approved by the requisite vote of
the stockholders of the Company.
B. Governmental Consents. All authorizations, consents, orders
or approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any governmental or regulatory authority or agency which are
necessary for the consummation of the transactions contemplated by this
Agreement, including without limitation the Acquisition Merger, shall have been
filed, occurred or been obtained (all such authorizations, orders, declarations,
approvals, filings and consents and the lapse of all such waiting periods being
referred to as the "Requisite Regulatory Approvals") and all such Requisite
Regulatory Approvals shall be in full force and effect.
C. No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the transactions contemplated by this Agreement
shall be in effect; nor shall there be any statute, rule or regulation enacted,
enforced or deemed applicable to the Acquisition Merger which makes the
consummation of the Acquisition Merger illegal.
35
D. Exchange Agreement. Parent and the Exchange Agent shall
have executed and delivered the Exchange Agreement.
SECTION 7.2 Conditions to the Obligations of Parent and the Merger
Subsidiary Under This Agreement. The obligations of the Parent and the Merger
Subsidiary under this Agreement shall be further subject to the satisfaction or
waiver by the Parent and the Merger Subsidiary, at or prior to the Effective
Time, of the following conditions:
A. Absence of Material Adverse Changes. There shall not have
occurred any change since December 31, 1997 in the assets, liabilities,
business, operations, results of operations, financial condition or prospects of
the Company which has had, individually or in the aggregate, an Adverse Effect
on the Company.
B. Representations and Warranties; Performance of Obligations.
The obligations of the Company and the Stockholders required to be performed by
it or them at or prior to the Effective Time pursuant to the terms of this
Agreement shall have been duly performed and complied with and the
representations and warranties of the Company and the Stockholders contained in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Effective Time as though made at and as of the
Effective Time (except as otherwise specifically contemplated by this Agreement
and except as to any representation or warranty which specifically relates to an
earlier date) and the Parent shall have received certificates to that effect
signed on behalf of the Company by the chairman or president and the chief
financial officer or chief accounting officer of the Company and by each
Stockholder on behalf of himself. The use of the term "material" in this Section
7.2(B) shall be disregarded when determining whether any representation or
warranty of the Company or the Stockholders contained in this Agreement is true
and correct if the term "material," "materially" or any other similar term is
used in the text of any such representation or warranty.
C. Third-Party (Non-Governmental) Approvals. Any and all
permits, consents, waivers, clearances, approvals and authorizations of or
notices to all non-governmental and non-regulatory third parties which are
necessary in connection with the consummation of the transactions contemplated
by this Agreement and are required to be received, made or obtained by the
Company or the Stockholders, shall have been so received, made or obtained,
other than permits, consents, waivers, clearances, approvals, authorizations and
notices the failure of which to have received, made or obtained would neither
make it impossible to consummate the transactions contemplated by this Agreement
nor result in any Adverse Effect on the Parent after the Effective Time.
D. Burdensome Condition. None of the Requisite Regulatory
Approvals shall impose any term, condition or restriction upon Parent that
Parent in good faith reasonably determines would so materially adversely impact
the economic or business benefits of the transactions contemplated by this
36
Agreement as to render inadvisable in the reasonable judgment of Parent the
consummation of the Acquisition Merger.
E. Legal Opinion. The Parent shall have received the opinion
of Jeffer, Mangels, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to the Company, dated the
Closing Date covering the matters set forth on Exhibit C hereto.
F. Litigation. There shall be no pending or threatened
litigation or proceeding which, in the judgment of the Buyer, makes it
inadvisable to proceed with the Acquisition Merger; nor shall there be issued
and in effect any Injunction limiting or restricting the conduct of the business
of the Company by Parent or Buyer after the Acquisition Merger.
G. Dissenters. The holders of no more than 10% of the
Company's outstanding Common Stock of record shall have asserted dissenters'
rights under Chapter 13 of the CGCL in connection with the Acquisition Merger.
H. Voting and Option Agreement. The Stockholders shall have
executed and shall be in full compliance with the Voting and Option Agreement.
I. Cancellation of Severance Provisions. All contractual
provisions whereby an obligation of the Company to pay severance to any person
may be triggered in whole or in part by a change of control transaction such as
the Acquisition Merger shall be terminated.
J. Cancellation of Options. All outstanding options and other
securities convertible or exchangeable into Company Common Stock shall have been
canceled.
K. Employment Agreements. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ shall have entered into employment agreements with the Company, all such
agreements to be substantially in the form attached hereto as Exhibit D and to
become effective at the closing of the Acquisition Merger.
L. Indebtedness for Borrowed Money. The Company shall have
delivered a certificate executed by an officer representing in reasonable detail
the amount of the Company's Indebtedness for Borrowed Money on the Closing Date.
37
M. Non-Competition Agreements. Parent and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have executed
and delivered non-competition agreements substantially in the form of Exhibit B
hereto, which shall include provisions for one-time non-competition payments of
$1,000,000 to each of Messrs. ▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ and $250,000 to ▇▇.
▇▇▇▇▇▇▇, respectively.
N. Partnership Interest. The Company shall have completed the
transfer, sale and assignment of its entire limited partnership interest in
California Real Estate Partners to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. under terms which (i)
provide for nominal consideration (approximately $25,000) to be paid for such
interest, (ii) are reasonably satisfactory to Parent, Company and ▇▇. ▇▇▇▇▇▇,
and (iii) provide for full indemnification of the Company for any and all Claims
based upon, attributable to or resulting from the Company's ownership, sale,
disposition or transfer of such interest.
In addition to the foregoing, the Company will furnish the Parent with
such additional certificates, instruments or other documents in the name or on
behalf of the Company executed by appropriate officers or others, including
without limitation certificates or correspondence of governmental agencies or
authorities or nongovernmental third parties, to evidence fulfillment of the
conditions set forth in this Section 7.2 as the Parent may reasonably request.
SECTION 7.3 Conditions to the Obligations of the Company and the
Stockholders Under This Agreement. The obligations of the Company and the
Stockholders under this Agreement shall be further subject to the satisfaction
or waiver by the Company, at or prior to the Effective Time, of the following
conditions:
A. Representations and Warranties; Performance of Obligations.
The obligations of the Parent and the Merger Subsidiary required to be performed
by it at or prior to the Effective Time pursuant to the terms of this Agreement
shall have been duly performed and complied with and the representations and
warranties of the Parent and the Merger Subsidiary contained in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made at and as of the Effective
Time (except as otherwise specifically contemplated by this Agreement and except
as to any representation or warranty which specifically relates to an earlier
date) and the Company shall have received a certificate to that effect signed by
the president and chief financial officer (or other authorized officer(s)) of
the Parent.
B. Legal Opinion. The Company shall have received the opinion
of ▇▇▇▇▇▇▇▇ & Worcester LLP, counsel to Parent, dated the Closing Date, in a
form that is customary for transactions of this type.
38
In addition to the foregoing, the Parent will furnish the Company with
such additional certificates, instruments or other documents in the name or on
behalf of the Parent, executed by appropriate officers or others, including
without limitation certificates or correspondence of governmental agencies or
authorities or nongovernmental third parties, to evidence fulfillment of the
conditions set forth in this Section 7.3 as the Company may reasonably request.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date:
A. by mutual consent of the Parent and the Company;
B. by either the Parent or the Company if any permanent
injunction, decree or judgment by any Authority preventing the consummation of
the Acquisition Merger shall have become final and nonappealable;
C. by the Company: (i) in the event of a material breach of
this Agreement by the Parent or the Merger Subsidiary that has not been cured,
or if any representation or warranty of the Parent or the Merger Subsidiary
shall have become untrue in any material respect, which in either case is
incapable of being cured by the Closing Date or will prevent or delay
consummation of the Acquisition Merger by or beyond the Termination Date; or
(ii) if the Closing shall not have occurred on or before the Termination Date by
reason of the failure of any condition precedent under Section 7.1 or 7.3 hereof
(unless the failure results primarily from the Company's or any Stockholder's
breaching any representation, warranty or covenant contained in this Agreement
or any Collateral Document);
D. by the Parent (on behalf of itself and the Merger
Subsidiary): (i) in the event of a material breach of this Agreement by the
Company or the Stockholders that has not been cured, or if any representation or
warranty of the Company or the Stockholders shall have become untrue in any
material respect, which in either case is incapable of being cured by the
Closing Date or will prevent or delay consummation of the Acquisition Merger by
or beyond the Termination Date; or (ii) if the Closing shall not have occurred
on or before the Termination Date by reason of the failure of any condition
precedent under Section 7.1 or 7.2 hereof (unless the failure results primarily
from the Parent's or Merger Subsidiary's breaching any representation, warranty
or covenant contained in this Agreement or any Collateral Document); or
E. by the Parent (on behalf of itself and the Merger
Subsidiary), if (i) the Board of Directors of the Company shall have withdrawn
or modified its recommendation in favor of the
39
Acquisition Merger in a manner adverse to Parent or shall have resolved to do
so; (ii) the Company or its Board of Directors or any Stockholder takes any
action prohibited by Section 6.7; (iii) the Company or its Board of Directors,
in accordance with the provisions of Section 6.7(B), furnishes non-public
information to, or enters into discussions or negotiations with, any Person in
connection with, or the Board of Directors of the Company recommends an
unsolicited bona fide written proposal concerning, an Other Transaction; or (iv)
any of the Stockholders shall have breached any material provision of the Voting
and Option Agreement referenced in Section 6.2.
The use of the term "material" in any provision of this Section 8.1
shall be disregarded when determining whether the breach of any term of this
Agreement has occurred, or whether any representation or warranty of the
Company, Parent, Merger Sub or any Stockholder has become untrue, if the term
"material," "materially" or any other similar term is used in the text of any
such term of this Agreement or representation or warranty.
SECTION 8.2 Effect of Termination. Except as provided in Sections 6.1
and 8.5, in the event of the termination of this Agreement pursuant to Section
8.1, this Agreement shall forthwith become void, there shall be no liability on
the part of any Party, or any of their respective officers or directors, to the
other and all rights and obligations of any Party shall cease; provided,
however, that such termination shall not relieve any Party from liability for
the breach of any of its representations, warranties, covenants or agreements
set forth in this Agreement.
SECTION 8.3 Amendment. This Agreement may be amended by the Parties by
action taken by or on behalf of the respective Boards of Directors thereof at
any time prior to the Closing Date; provided, however, that any such amendment
executed after approval of this Agreement by the Company's stockholders which by
law requires further approval of such stockholders shall be subject to such
further approval. This Agreement may not be amended to impose any additional
material obligation on a Party or to burden or limit a material right of such
Party except by an agreement in writing signed by the Party so affected.
SECTION 8.4 Waiver. At any time prior to the Closing Date, except to
the extent Applicable Law does not permit, either the Parent and the Company may
extend the time for the performance of any of the obligations or other acts of
the other, subject, however, to the terms and conditions of Section 8.1, waive
any inaccuracies in the representations and warranties of the other contained
herein or in any document delivered pursuant hereto, and waive compliance by the
other with any of the agreements, covenants or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an agreement in
writing signed by the Party or Parties to be bound thereby.
SECTION 8.5 Fees, Expenses and Other Payments. Each of the Parent and
the Merger Subsidiary, on the one hand, and the Company,
40
on the other hand, shall be responsible for the filing fees and expenses
incurred by such Party under the HSR Act. In the event of termination of this
Agreement, all costs and expenses, incurred in connection with this Agreement,
the Acquisition Merger and the Transactions, and compliance with Applicable Law
and Contractual Obligations as a consequence hereof and thereof, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by the Parties shall be borne solely and entirely by the
Party which has incurred such costs and expenses.
SECTION 8.6 Effect of Investigation. The right of any Party to
terminate this Agreement pursuant to Section 8.1 shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Party, any Person controlling any such party or any of their respective
Representatives whether prior to or after the execution of this Agreement.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SECTION 9.1 Effectiveness of Representations, etc. Except as set forth
in Section 6.1(D), regardless of any investigation made by or on behalf of any
other party hereto, any Person controlling such party or any of their respective
Representatives whether prior to or after the execution and consummation of this
Agreement, the representations, warranties, covenants and agreements set forth
in Article 3 and Article 4 and Article 5 hereof shall survive the Acquisition
Merger and remain operative and in full force and effect until the date that is
twelve months after the Closing Date, except for (i) those representations and
warranties set forth in Sections 3.20 which shall remain operative and in full
force and effect until the date that is three (3) years after the Closing Date,
(ii) those representations and warranties set forth in Sections 3.3, 3.14 and
3.15, which shall remain operative and in full force and effect until the
expiration of the applicable statute of limitations after the Closing Date, and
(iii) those representations and warranties set forth in Sections 5.1, 5.2, 5.3
and 5.5 which shall remain operative and in full force and effect indefinitely.
SECTION 9.2 Indemnification.
A. The Company and the Stockholders, jointly and severally,
agree to make whole, indemnify and hold the Parent and its Affiliates, agents,
successors and assigns (collectively, the "Parent Indemnified Parties") harmless
as a result of, from or against:
(i) any and all Claims of the Parent Indemnified
Parties or other Persons based upon,
attributable to or resulting from any
inaccuracy in or breach of any
representation or warranty on the part of
41
any one or more of the Company or any
Stockholder under this Agreement or any
Collateral Document;
(ii) any and all Claims of the Parent Indemnified
Parties or other Persons based upon,
attributable to or resulting from the
material breach of any covenant or other
agreement on the part of any one or more of
the Company or any Stockholder under this
Agreement or any Collateral Document;
(iii) any and all Claims of the Parent Indemnified
Parties or other Persons incident to the
foregoing or to the enforcement of this
Section;
(iv) all transaction costs and expenses of the
sort specified in clause (ix) of the
definition of "Indebtedness for Borrowed
Money", set forth in Article 11 hereof, to
the extent such costs and expenses are not
deducted from the Merger Consideration paid
at the Closing; and
(v) any and all Claims of the Parent Indemnified
Parties or other Persons asserted within
three (3) years after the Closing Date based
upon, attributable to or resulting from any
matters set forth in the Dames & ▇▇▇▇▇
Report.
B. The Parent hereby agrees to make whole, indemnify and hold
the Company, the Stockholders and their respective Affiliates, agents, heirs,
successors and assigns (collectively, the "Company Indemnified Parties")
harmless as a result of, from or against:
(i) any and all Claims of the Company
Indemnified Parties or other Persons based
upon, attributable to or resulting from any
inaccuracy in or breach of any
representation or warranty on the part of
the Parent or Merger Sub under this
Agreement or any Collateral Document;
(ii) any and all Claims of the Company
Indemnified Parties or other Persons based
upon, attributable to or resulting from the
material breach of any covenant or other
agreement on the part of the Parent; and
(iii) any and all Claims of the Company
Indemnified Parties or other Persons
incident to the foregoing or to the
enforcement of this Section.
C. Notwithstanding the foregoing:
(i) None of the Company or the Stockholders
shall be required to pay any amount for
indemnification to the Parent Indemnified
Parties except to the
42
extent the aggregate amount of Claims under
this Section 9.2 asserted against the
Company and the Stockholders exceeds Two
Hundred Thousand Dollars ($200,000), and
then only with respect to such Claims in
excess of such sum (the "Deductible"); and
(ii) The aggregate amount that the Company and
the Stockholders shall be required to pay
for indemnification to the Parent
Indemnified Parties under this Section 9.2
shall be limited to One Million Seven
Hundred and Fifty Thousand Dollars
($1,750,000), provided, that such aforesaid
sum shall be increased by up to an
additional Seven Hundred and Fifty Thousand
Dollars ($750,000) (the "Additional Cap") in
respect of, and solely in respect of, Claims
made in connection with Section 9.2(A)(v) or
Section 9.2(A)(i) (solely on account of any
inaccuracy in or breach of any of the
representations and warranties contained in
Section 3.20). All obligations of the
Company and the Stockholders in respect of
the Additional Cap shall terminate upon the
earliest to occur of:
(a) the amendment of Section 4.B of the
lease of the Company's facility in
Santa Ana, California, to provide
in substance as set forth in
Exhibit E hereto; or
(b) the date which is two (2) years
after the Closing Date, provided,
that no notice of any Claim has
been given with respect to the
Additional Cap prior thereto.
(iii) Notwithstanding anything else in this
Article 9, to the extent that any Claim
relates to a breach by a Stockholder of a
representation or warranty contained in
Article V of this Agreement, then only such
breaching Stockholder shall be subject to
this Article 9 with respect to the Claim
resulting from such breach.
(iv) The Deductible and cap set forth in clauses
(i) and (ii) of this Section 9.2(C) shall
not apply to or limit indemnification Claims
under Section 9.2(A)(iv).
SECTION 9.3 Procedures Concerning Claims by Third Parties; Payment of
Damages; etc.
A. In the event that any Legal Action shall be instituted or
asserted by any Person other than such indemnified party in respect of which
payment may be sought hereunder, the indemnified party shall reasonably and
promptly cause written notice of the assertion of any Legal Action of which it
has
43
knowledge which is covered by the indemnities under Section 9.2 to be forwarded
to the indemnifying party. In such event, unless in such indemnified party's
reasonable judgement a conflict of interest between the indemnified party and
the indemnifying party may exist in respect of the Claims, the indemnifying
party shall have the right, at its sole option and expense, to be represented by
counsel of its choice, which must be reasonably satisfactory to the indemnified
party, and to defend against, negotiate, settle or otherwise deal with any Legal
Action which relates to any Claims instituted or asserted by any Person other
than such indemnified party and indemnified against hereunder; provided,
however, that no settlement thereof shall be made without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld, conditioned or delayed. If the indemnifying party elects to defend
against, negotiate, settle or otherwise deal with any Legal Action which relates
to any such Claims, it shall within thirty (30) days (or sooner, if the nature
of the Legal Action so requires) notify the indemnified party of its intent to
do so. If the indemnifying party elects not to defend against, negotiate, settle
or otherwise deal with any Legal Action which relates to any such Claims, fails
to notify the indemnified party of its election as herein provided or contests
its obligation to indemnify the indemnified party for such Claims under this
Agreement, or the indemnified party determines that a conflict of interest may
exist, the indemnified party may defend against, negotiate, settle or otherwise
deal with such Legal Action. If the indemnified party defends any Legal Action,
then the indemnifying party shall reimburse the indemnified party for Claims
incurred in defending such Legal Action upon submission of periodic bills. The
indemnified party may not settle any Legal Action without the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld, conditioned or delayed. If the indemnifying party shall assume the
defense of any Legal Action instituted or asserted by any Person other than an
indemnified party, the indemnified party may participate in the defense of such
Legal Action at such party's own expense.
B. After any final judgment or award shall have been rendered
by a court, arbitration board (which may be engaged as required by law or
contract or upon the consent of each of the indemnifying party and the
indemnified parties) or administrative agency of competent jurisdiction and the
expiration of the time in which to appeal therefrom, or a settlement shall have
been consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement with respect to a Legal Action
hereunder, the indemnifying party shall deliver to the indemnified party, by
wire transfer of immediately available funds, an amount equal to the sums due
and owing to the indemnified party within five business days after the date of
notice of such judgment or award.
C. The failure of the indemnified party to give reasonably
prompt notice of any Legal Action instituted or asserted by any Person other
than such indemnified party and indemnified against hereunder shall not release,
waive or otherwise affect the
44
indemnifying party's obligations with respect thereto except to the extent that
the indemnifying party can demonstrate actual loss or material prejudice as a
result of such failure. The indemnified parties shall not be deemed to have
notice of any Legal Action by virtue of knowledge acquired on or prior to the
Closing Date by an employee or other Representative of the Company or the
Parent.
D. No Legal Action to enforce a claim for indemnity shall be
stayed or dismissed for failure to join one or more indemnifying parties or to
permit an indemnifying party to cross- claim against another indemnifying party,
nor shall the failure to join an indemnifying party be deemed grounds for
preventing a separate or subsequent Legal Action to enforce a Claim for
indemnification against such party, each such Legal Action being deemed a
separate and independent Claim for indemnification.
E. If such claim does not arise from the Claim of a third
party, the indemnifying party shall have forty five (45) days after notice
thereof to either cure the conditions giving rise to such claim or to present
the indemnified party with materials indicating that such Claim is not subject
to indemnity under Section 9.2 hereof before the indemnified party may commence
legal action against the indemnifying party in respect thereof.
F. Notwithstanding anything herein to the contrary, with
respect to any indemnification claim by the Parent for Claims arising out of any
breach or inaccuracy of any representation or warranty made by the Company and
the Stockholders set forth in Section 3.14 hereof with respect to Taxes, the
Stockholders shall have the right to participate in any Tax audit or
administrative, judicial or other proceeding to the extent such audit,
proceeding or determination affects the amount of the Claim for which the
Company and Stockholders are liable under Section 9.2 hereof.
SECTION 9.4 Exclusive Remedy. The indemnification provisions set forth
in this Article 9 shall be the exclusive remedy following and subject to the
Closing for any breaches or alleged breaches of any representation, warranty or
covenant contained in this Agreement or any Collateral Document, except for
breaches arising from intentional fraud or intentional misconduct.
SECTION 9.5 Net Recovery. The amount to which a Parent Indemnified
Party or a Company Indemnified Party may become entitled in respect of any Claim
under this Article 9 shall be reduced by any tax, insurance or other third party
recovery, reimbursement or benefit received in respect of such Claim before the
expiration of two years after payment of such Claim by the indemnifying party.
The amount of any such recovery, less all reasonable costs, charges and expenses
incurred by the relevant Parent Indemnified Party or Company Indemnified Party,
as the case may be, in obtaining such recovery from the third party, shall be
repaid by the relevant Parent Indemnified Party or Company Indemnified Party, as
the case may be, to the relevant indemnifying Party promptly upon the receipt
thereof from the third party.
45
SECTION 9.6 Indemnification of Officers and Directors. From and after
the Effective Date, Parent shall indemnify persons who served as directors,
officers and agents of the Company on or before the Effective Date in accordance
with and subject to the provisions of the Company's current Articles of
Incorporation and By-laws as delivered to the Parent prior to the execution of
this Agreement until the date that is three years after the Closing Date.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.1 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the facsimile number
specified below:
A. If to the Parent or the Merger Subsidiary:
DESA International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇.▇. Childs Associates, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ & Worcester LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esquire
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
B. If to the Company or the Stockholders:
Fireplace Manufacturers, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇.
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
46
with a copy to:
Jeffer, Mangles, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
2121 Avenue of the Stars, 10th Fl
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.2 Headings. The headings contained in this Agreement are for
purposes of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.3 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner Adverse to any
party. Upon determination that any term or other provision is invalid, illegal
or incapable of being enforced, the Parent and the Company shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible to the fullest extent permitted by Applicable Law
in an acceptable manner to the end that the Transactions are fulfilled to the
extent possible.
SECTION 10.4 Entire Agreement. This Agreement (together with the
Company Disclosure Schedule, the Confidentiality Letter and the other Collateral
Documents delivered in connection herewith), constitutes the entire agreement of
the Parties and supersedes all prior agreements (other than the Confidentiality
Letter) and undertakings, both written and oral, between the Parties, or any of
them, with respect to the subject matter hereof.
SECTION 10.5 Assignment. This Agreement shall not be assigned by
operation of law or otherwise and any purported assignment shall be null and
void.
SECTION 10.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each Party, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the substantive laws of the State of Delaware
governing contracts made and to be performed in such jurisdiction, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
SECTION 10.8 Enforcement of the Agreement. Each Party recognizes and
agrees that each other Party's remedy at law for any breach of the provisions of
this Agreement would be inadequate and agrees that for breach of such
provisions, such Party shall, in addition to such other remedies as may be
available to it at law or
47
in equity or as provided in this Agreement, be entitled to injunctive relief and
to enforce its rights by an action for specific performance to the extent
permitted by Applicable Law. Each Party hereby waives any requirement for
security or the posting of any bond or other surety in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
Nothing herein contained shall be construed as prohibiting a Party from pursuing
any other remedies available to such Party for any breach or threatened breach
hereof or failure to take or refrain from any action as required hereunder to
consummate the Acquisition Merger and carry out the Transactions.
SECTION 10.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different Parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 10.10 Mutual Drafting. This Agreement is the result of the
joint efforts of the Parent and the Company, and each provision hereof has been
subject to the mutual consultation, negotiation and agreement of the parties and
there shall be no construction against any Party based on any presumption of
that Party's involvement in the drafting thereof.
SECTION 10.11 Disclosure Supplements. From time to time prior to the
Closing Date, each Party will promptly supplement or amend its respective
Disclosure Schedule delivered in connection herewith with respect to any matter
which, if existing, occurring or known at the date of this Agreement, would have
been required to be set forth or described in such Company Disclosure Schedule
or which is necessary to correct any information in such Company Disclosure
Schedule which has been rendered inaccurate thereby. The making of any such
amendment shall not otherwise affect the liability of any Party delivering such
Amendment or the rights of any Party receiving such amendment.
ARTICLE 11
DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms (or any variant in the form thereof) have the following respective
meanings. Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa, and the reference to any gender shall be
deemed to include all genders. Unless otherwise defined or the context otherwise
clearly requires, terms for which meanings are provided herein shall have such
meanings when used in the Disclosure Schedules and each Collateral Document,
notice, certificate, communication, opinion or other document executed or
required to be executed pursuant hereto or thereto or otherwise delivered, from
time to time, pursuant hereto or thereto.
48
Acquisition Merger shall have the meaning given to it in Section 2.1.
Adverse, Adversely, when used alone or in conjunction with other terms
(including without limitation "Affect," "Change" and "Effect") shall mean, with
respect to the Company, or to the Parent, as the case may be, any Event which
could reasonably be expected to (a) adversely affect the validity or
enforceability of this Agreement or any Collateral Document executed or required
to be executed pursuant hereto or thereto, or (b) adversely affect the business,
properties, assets, results of operations, financial condition or prospects of
the Company and its Subsidiaries taken as a whole or the Parent and its
Subsidiaries, taken as a whole, as the case may be, or (c) impair the ability of
the Company and/or its Subsidiaries or the Parent and Buyer, as applicable, to
fulfill its obligations under the terms of any Collateral Document executed or
required to be executed pursuant hereto or thereto, or (d) adversely affect the
aggregate rights and remedies of the Parent and Buyer or the Company and/or its
Subsidiaries, as the case may be, under this Agreement or any Collateral
Document executed or required to be executed pursuant hereto or thereto, in all
cases, unless otherwise specifically set forth, in a material respect or manner
or to a material degree.
Affiliate, Affiliated shall mean, with respect to any Person, (a) any
other Person at the time directly or indirectly controlling, controlled by or
under direct or indirect common control with such Person, (b) any other Person
of which such Person at the time owns, or has the right to acquire, directly or
indirectly, fifty percent (50%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, fifty percent (50%) or more of any
class of the capital stock or beneficial interest of such Person, (d) any
executive officer or director of such Person, (e) with respect to any
partnership, joint venture or similar Entity, any general partner thereof, and
(f) when used with respect to an individual, shall include any member of such
individual's immediate family or a family trust.
Agreement shall mean this Agreement and Plan of Reorganization as
originally in effect, including unless the context otherwise specifically
requires, all schedules, including the Disclosure Schedules and exhibits hereto,
and as the same may from time to time be supplemented, amended, modified or
restated in the manner herein or therein provided.
Alternative Merger Structure shall have the meaning given to it in
Section 2.9.
Applicable Law shall mean any Law of any Authority, whether domestic or
foreign, including without limitation all federal and state securities laws and
Environmental Laws, to or by which a Person or it or any of its business or
operations is subject or any of its property or assets is bound.
49
Articles of Merger shall have the meaning given to it in Section 2.2.
Authority shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch, bureau,
central bank or comparable agency or Entity, commission, corporation, court,
department, instrumentality, master, mediator, panel, referee, system or other
political unit or subdivision or other Entity of any of the foregoing, whether
domestic or foreign.
Benefit Arrangement shall mean, with respect to any Person, any
material benefit arrangement that is not a Plan, including (i) any employment or
consulting agreement, (ii) any arrangement providing for insurance coverage or
workers' compensation benefits, (iii) any incentive bonus or deferred bonus
arrangement, (iv) any arrangement providing termination allowance, severance or
similar benefits, (v) any equity compensation plan, (vi) any deferred
compensation plan and (vii) any compensation policy and practice.
best efforts shall mean commercially reasonable, good faith
efforts.
Buyer shall have the meaning given in the recitals to this Agreement.
Certificate shall have the meaning given to it in Section 2.7.
Certificate of Merger shall have the meaning given to it in Section
2.2.
CGCL shall mean the California General Corporation Law.
Claim shall mean any debt, liability, obligation, loss, damage,
deficiency, assessment or penalty, together with any Legal Action, pending or
threatened, or any claim or judgment of whatever kind and nature relating
thereto, and all fees, costs, expenses and disbursements (including without
limitation reasonable attorneys' and other legal fees, costs and expenses)
relating to any of the foregoing, provided that in no event shall a change in
the value of Parent Common Stock give rise to or constitute a Claim.
Closing shall have the meaning given to it in Section 1.1.
Closing Date shall mean the date which is (a) five business days after
the later to occur of (i) approval of the Acquisition Merger under the HSR Act
or (ii) approval of the Acquisition Merger by the Company's stockholders, or (b)
upon the agreement of the Parent and the Company, a date or successive dates
subsequent thereto not later than the Termination Date.
50
COBRA shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
Code shall mean the Internal Revenue Code of 1986, as amended.
Collateral Document shall mean any agreement, instrument, certificate,
opinion, memorandum, schedule or other document delivered by a Party pursuant to
this Agreement or in connection with the Acquisition Merger and the
Transactions.
Company shall have the meaning given to it in the recitals of this
Agreement.
Company Common Stock shall have the meaning given it in Section 3.3.
Company Disclosure Schedule shall mean the Company Disclosure Schedule
dated as of the date of this Agreement delivered by the Company to the Parent.
Company Financial Statements shall have the meaning given to it in
Section 3.2.
Company Indemnified Parties shall have the meaning given to it in
Section 9.2(B).
Confidentiality Letter shall have the meaning given to it in Section
6.1(A).
Consideration Per Share shall mean the Merger Consideration divided by
the number of shares of Company Common Stock entitled pursuant to Section 2.5(A)
to be converted into the right to receive the Consideration Per Share.
Constituent Corporations shall have the meaning given to it in Section
2.1.
Contract, Contractual Obligation shall mean, with regard to any Person,
any term, condition, provision, representation, warranty, agreement, covenant,
undertaking, commitment, indemnity or other obligation set forth in the Organic
Documents of such Person or which is outstanding or existing under any
instrument, contract, lease or other contractual undertaking (including without
limitation any instrument relating to or evidencing any Indebtedness) to which
such Person is a party or by which it or any of its business is subject or
property or assets is bound, to the extent that any of the foregoing is material
to such Person.
control (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by
51
contract, arrangement or understanding, or as trustee or executor, by contract
or credit arrangement or otherwise.
Convertible Securities shall mean any evidences of indebtedness, shares
of capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for equity securities, whether or
not the right to convert or exchange thereunder is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence or
existence or non-existence of some other Event, or both.
Current Uses shall have the meaning given to it in Section 3.6(C).
DGCL shall mean the Delaware General Corporation Law, as amended.
Distribution shall mean, with respect to a Party: (a) the declaration
or payment of any dividend (except dividends payable in common stock of such
Party) on or in respect of any shares of any class of capital stock of such
Party or any equity securities of any Subsidiary owned by a Person other than
such Party or a Subsidiary, (b) the purchase, redemption or other retirement of
any shares of any class of capital stock of such Party or any shares of capital
stock of any Subsidiary owned by a Person other than such Party or a Subsidiary,
and (c) any other distribution on or in respect of any shares of any class of
capital stock of such Party or any shares of capital stock of any Subsidiary
owned by a Person other than such Party or a Subsidiary.
Effective Time shall mean the specific time on the Closing Date at
which the Acquisition Merger has become effective pursuant to Delaware and
California law.
Employment Arrangement shall mean, with respect to any Person, any
employment, consulting, retainer, severance or similar contract, agreement,
plan, arrangement or policy (exclusive of any which is terminable within thirty
(30) days without liability, penalty or payment of any kind by such Person or
any Affiliate), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical, dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA.
Entity shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust, estate of a
deceased, insane or incompetent individual,
52
business trust, joint stock company, joint venture or other organization, entity
or business, whether acting in an individual, fiduciary or other capacity, or
any Authority.
Environmental Law shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment.
Environmental Permits shall have the meaning given to it in Section
3.20 (C).
ERISA shall mean the Employee Retirement Income Security Act of 1974,
and the rules and regulations thereunder, all as from time to time in effect, or
any successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
ERISA Affiliate shall mean any Person that is treated as a single
employer under Sections 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA.
Event shall mean the occurrence or existence of any act, action,
activity, circumstance, condition, event, fact, failure to act, omission,
incident or practice, or any set or combination of any of the foregoing.
Exchange Agent, Exchange Agreement and Exchange Fund shall have the
meanings given to in Section 2.7.
GAAP shall mean generally accepted accounting principles as in effect
from time to time in the United States of America.
Governmental Authorizations shall mean, with regard to any Person, all
approvals, concessions, consents, franchises, licenses, permits, plans,
registrations and other authorizations of all Authorities that are material to
such Person.
Governmental Entity shall have the meaning given to it in Section
3.20A.
Governmental Filings shall mean all filings, including franchise and
similar Tax filings, and the payment of all fees, assessments, interest and
penalties associated with such filings, with all Authorities.
Guaranty or Guaranteed shall mean any agreement, undertaking or
arrangement by which a Party guarantees, endorses or otherwise becomes or is
liable, directly or indirectly, contingently or otherwise, upon any Indebtedness
of any other Person including without limitation the payment of amounts drawn
down by beneficiaries of letters of credit (other than by endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business). The amount of the obligor's obligation under any Guaranty shall be
deemed to be the outstanding amount (or
53
maximum permitted amount, if larger) of the Indebtedness directly or indirectly
guaranteed thereby (subject to any limitation set forth therein).
Hazardous Materials shall have the meaning given to it in Section 3.20
(A).
Hazardous Materials Activities shall have the meaning given to it in
Section 3.20 (B).
HSR Act shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of
1976, and the rules and regulations thereunder, all as from time to time in
effect, or any successor law, rules or regulations, and any reference to any
statutory or regulatory provision shall be deemed to be a reference to any
successor statutory or regulatory provision.
Indebtedness shall mean, with respect to a Party, (a) all items, except
items of capital stock or of surplus on the consolidated balance sheet of such
Party, which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Party or
such Subsidiary, (b) all obligations secured by any Lien to which any property
or asset owned or held by such Party is subject, whether or not the obligation
secured thereby shall have been assumed, and (iii) to the extent not otherwise
included, all Contractual Obligations of such Party constituting capitalized
leases and all obligations of such Party with respect to Leases constituting
part of a sale and leaseback arrangement and off-balance sheet financings
(including, without limitation, synthetic leases and other similar financing
arrangements).
Indebtedness for Borrowed Money shall mean, without duplication on a
consolidated basis with its Subsidiaries, all indebtedness of the Company
(without regard to the above definition of Indebtedness) for or under any of the
following: (i) borrowed money, whether current, short-term, or long-term,
secured or unsecured, (ii) the deferred purchase price for purchases of property
(other than trade payables which are not overdue by more than 90 days), (iii)
any conditional sale or other title retention agreement with respect to property
acquired, (iv) all off-balance sheet financings including, without limitation,
synthetic leases and other similar financing arrangements, and excluding the
operating leases described in Note 9 to the most recent audited financial
statements forming part of the Company Financial Statements, (v) any payment
obligations in respect of banker's acceptances or letters of credit (other than
stand-by letters of credit in support of ordinary course trade payables), (vi)
any liability with respect to interest rate swaps, collars, caps and similar
obligation, (vii) any debt paid or prepaid since the date of this Agreement,
which payment or prepayment is a breach of the representations and warranties
set forth in Section 3.18(A)(iii)(d), (viii) any accrued and unpaid interest or
other charges (including any contractual prepayment premiums, penalties or
similar charges resulting from the transactions contemplated
54
hereby or the discharge of such obligations) with respect to any of the
foregoing, and (ix) all costs or expenses incurred by the Company in connection
with the transactions contemplated hereby, including legal fees and
disbursements, and any other payments to any broker, finders, agents or similar
intermediary, which have not been paid on or before the Closing, to the extent
that the Company at the Effective Time does not have on hand cash or cash
equivalents in an amount sufficient to pay such costs and expenses.
Injunction shall have the meaning given to it in Section 7.1.
Intangible Assets shall mean all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means.
Intellectual Property means all (a) patents, patent applications,
patent disclosures, and improvements thereto, (b) trademarks, service marks,
trade dress, logos, tradenames, and corporate names and registrations and
applications for registration thereof, (c) copyrights and registrations and
applications for registration thereof, (d) mask works and registrations and
applications for registration thereof, (e) computer software, data, and
documentation, (f) trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposal, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (g) other proprietary rights, and (h) copies and tangible
embodiments thereof (in whatever form or medium.
knowledge of a Party means actual knowledge after reasonable
investigation (or what such party would have known if reasonable investigation
had been made).
Law shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, guideline, law, injunction, interpretation, judgment, order, ordinance,
policy statement, proclamation, promulgation, regulation, requirement, rule,
rule of law, rule of public policy, settlement agreement, statute, or writ or
any Authority, domestic or foreign; (b) the common law, or other legal or
quasi-legal precedent; or (c) arbitrator's, mediator's or referee's award,
decision, finding or recommendation; including, in each such case or instance,
any interpretation, directive, guideline or request, whether or not having the
force of law including, in all cases, without limitation any particular section,
part or provision thereof.
Lease shall mean any lease or sublease of property, whether real,
personal or mixed, and all amendments thereto.
55
Legal Action shall mean any litigation or legal or other actions,
arbitrations, counterclaims, investigations, proceedings, requests for material
information by or pursuant to the order of any Authority, or suits, at law or in
arbitration, equity or admiralty commenced by any Person, whether or not
purported to be brought on behalf of a party hereto affecting such party or any
of such party's business, property or assets.
Lien shall mean any of the following: mortgage; lien (statutory or
other); preference, priority or other security agreement, arrangement or
interest; hypothecation, pledge or other deposit arrangement; assignment;
charge; levy; executory seizure; attachment; garnishment; encumbrance (including
any easement, exception, variance, reservation or limitation, right of way,
zoning restriction, building or use restriction, encroachment, and the like
except utility and similar easements which do not interfere in any material
respect with the use of the property involved or which materially reduces the
fair market value of such property); conditional sale, title retention or other
similar agreement, arrangement, device or restriction; preemptive or similar
right; any financing lease involving substantially the same economic effect as
any of the foregoing; the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction; restriction on sale,
transfer, assignment, disposition, Lease or other alienation; or any option,
equity, claim or right of or obligation to, any other Person, of whatever kind
and character.
material or materiality for the purposes of this Agreement, shall,
unless specifically stated to the contrary, be determined without regard to the
fact that various provisions of this Agreement set forth specific dollar
amounts.
Material Agreement or Material Commitment shall mean, with respect to a
Party, any Contractual Obligation which (a) was not entered into in the ordinary
course of business, (b) was entered into in the ordinary course of business
which (i) involves the purchase, sale or lease of goods or materials or
performance of services aggregating more than Fifty Thousand Dollars ($50,000),
(ii) extends for more than three (3) months, or (iii) is not terminable on
thirty (30) days or less notice without penalty or other payment, (c) involves
Indebtedness for money borrowed in excess of Fifty Thousand Dollars ($50,000),
(d) is or otherwise constitutes a written agency, dealer, license,
distributorship, sales representative or similar written agreement, or (e) would
account for more than ten percent (10%) of purchases or sales projected to be
made by such Party during its current fiscal year.
Merger Consideration shall mean Twenty Three Million Seven Hundred and
Fifty Thousand Dollars ($23,750,000) minus the Company's Indebtedness for
Borrowed Money at the Effective Time.
Merger Subsidiary shall have the meaning given to it in the recitals of
this Agreement.
56
Merger Subsidiary Common Stock shall mean the common stock, par value
$1.00 per share, of the Merger Subsidiary.
Multiemployer Plan shall mean a "multiemployer plan" within the meaning
of Section 4001(a)3 of ERISA.
Option Securities shall mean all rights, options and warrants, and
calls or commitments evidencing the right, to subscribe for, purchase or
otherwise acquire shares of capital stock or Convertible Securities, whether or
not the right to subscribe for, purchase or otherwise acquire is immediately
exercisable or is conditioned upon the passage of time, the occurrence or
non-occurrence or the existence or non-existence of some other Event.
Organic Document shall mean, (a) with respect to a Person which is a
corporation, its charter, its by-laws and all Company agreements, voting trusts
and similar arrangements applicable to any of its capital stock, (b) with
respect to a Person which is a partnership, its agreement and certificate of
partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof), and (c) with respect to a Person which is a limited liability company,
its certificate of organization and operating agreement, any agreements among
members, and any management and similar agreements between the limited liability
company and any members (or any Affiliate thereof).
Other Transaction shall mean a transaction or series of related
transactions (other than the Acquisition Merger) resulting in (a) any change in
control of the Company, (b) any merger or consolidation of the Company or any
Subsidiary, regardless of which is the surviving Entity, (c) any tender offer or
exchange offer for, or any acquisition of, any securities of the Company, or (d)
any sale or other disposition of assets of the Company or any Subsidiary not
otherwise permitted under Section 3.18 hereof.
Parent shall have the meaning given to it in the recitals of this
Agreement.
Parent Common Stock shall have the meaning given to it in Section 4.3.
Parent Disclosure Schedule shall mean the disclosure schedule dated as
of the date of this Agreement delivered by the Parent to the Company.
Parent Indemnified Parties shall have the meaning given to it in
Section 9.2(A).
Party shall mean a signatory to this Agreement.
Person shall mean any natural individual or any Entity.
57
Plan shall mean, with respect to a Party and at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which such
Party is an "employer" as defined in Section 3(5) of ERISA, other than a
Multiemployer Plan.
Private Authorizations shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to agreements,
leases, contracts, patents, trademarks, service marks, trade names, copyrights,
computer software programs, technology and know-how.
Proxy Statement shall have the meaning given to it in Section 6.3.
Purchase Price shall have the meaning given to it in Section 2.5.
Representatives (of a Party) shall mean the officers, directors,
employees, accountants, counsel, financial advisors, consultants, financing
sources, and other representatives (of such Party or its Affiliates).
Required Regulatory Approvals shall have the meaning given to it in
Section 7.1.
Stockholders shall have the meaning given to it in the recitals of this
Agreement.
Subsidiary shall mean, with respect to a Person, any Entity a majority
of the capital stock ordinarily entitled to vote for the election of directors
of which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
Superior Proposal shall have the meaning given to it in Section 6.7.
Surviving Corporation shall have the meaning given to it in Section
2.1.
Surviving Corporation Common Stock shall mean the common stock of the
Surviving Corporation as provided in Section 2.5(B).
Tax (and "Taxable", which shall mean subject to Tax), shall mean, with
respect to a Party, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other including recapture of any tax items
such as investment tax credits), alternative or add-on minimum tax, gross
income, gross receipts, gains, sales, use, leasing, lease, user, ad valorem,
transfer, recording, franchise, profits, property (real or personal, tangible or
intangible), fuel, license, withholding on amounts paid to or by such Party,
payroll, employment,
58
unemployment, social security, excise, severance, stamp, occupation, premium,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, levies, assessments, charges, penalties, addition to tax or additional
amount imposed by any Taxing Authority, (b) any joint or several liability of
such Party with any other Person for the payment of any amounts of the type
described in (a), and (c) any liability of such Party for the payment of any
amounts of the type described in (a) as a result of any express or implied
obligation to indemnify any other Person.
Tax Return or Returns shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
Taxing Authority shall mean any Authority responsible for the
imposition of any Tax.
Termination Date shall mean September 30, 1998.
Transactions shall mean the other transactions contemplated by this
Agreement or the Acquisition Merger or by any Collateral Document executed or
required to be executed in connection herewith or therewith.
59
IN WITNESS WHEREOF, the Parent, the Merger Subsidiary, the Company and
the Stockholders have caused this Agreement to be executed as of the date first
written above.
DESA INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman, President or VP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary or Assistant Secretary
FMI ACQUISITION, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Chairman, President or VP
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
Secretary or Assistant Secretary
FIREPLACE MANUFACTURERS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman, President or VP
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary or Assistant Secretary
STOCKHOLDERS
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
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EXHIBITS
Exhibit A - Voting and Option Agreement
Exhibit B - Non-competition agreements
Exhibit C - Matters to be addressed in Company counsel opinion
Exhibit D - Form of Employment Agreement
Exhibit E - Form of Lease amendment under Section 9.2(C)
Exhibit F - Phase One Environmental Site Assessment, draft dated
May 1, 1998, by Dames & ▇▇▇▇▇
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SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
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