CUSIP NO. ▇▇▇▇▇▇▇▇▇ 13D
EXHIBIT 7(2)
AGREEMENT AND PLAN OF REORGANIZATION DATED NOVEMBER 31, 1997
(attached)
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MIAMI COMPUTER SUPPLY CORPORATION,
MCSC CALIFORNIA ACQUISITION CORPORATION,
MINNESOTA WESTERN/CREATIVE OFFICE PRODUCTS, INC.
AND
THE NAMED STOCKHOLDERS
DATED: NOVEMBER __, 1997
AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
PAGE
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Article 1.0 Certain Definitions. . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Definitions. . . . . . . . . . . . . . . . . . . . . 2
Article 2.0 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Organization of MCAC . . . . . . . . . . . . . . . . . 5
(b) Merger of MW and MCAC. . . . . . . . . . . . . . . . . 5
(c) Effect . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) Articles of Incorporation. . . . . . . . . . . . . . . 5
(e) Capital Stock. . . . . . . . . . . . . . . . . . . . . 6
(f) Directors and Officers . . . . . . . . . . . . . . . . 6
2.2 Effective Time; Closing. . . . . . . . . . . . . . . . . . . 6
2.3 Treatment of Capital Stock . . . . . . . . . . . . . . . . . 6
2.4 Stockholder Rights; Stock Transfers. . . . . . . . . . . . . 11
2.5 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . 11
2.6 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . 12
2.7 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . 12
(a) The Exchange . . . . . . . . . . . . . . . . . . . . . 12
(b) Non-Surrendered Certificates . . . . . . . . . . . . . 12
(c) No Dividends . . . . . . . . . . . . . . . . . . . . . 12
(d) No Obligation to Pay Cash or Issue New MCSC Shares . . 13
2.8 Additional Actions . . . . . . . . . . . . . . . . . . . . . 13
Article 3.0 Representations and Warranties of MW and the Stockholders. . 13
3.1 Capitalization; Status and Qualification . . . . . . . . . . 13
(a) Capitalization . . . . . . . . . . . . . . . . . . . . 13
(b) Status and Qualification . . . . . . . . . . . . . . . 14
3.2 Authorization; Approval. . . . . . . . . . . . . . . . . . . 14
3.3 Financial Statements . . . . . . . . . . . . . . . . . . . . 15
3.4 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . 16
3.5 Absence of Changes . . . . . . . . . . . . . . . . . . . . . 16
3.6 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . 16
(a) Title. . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Condemnation . . . . . . . . . . . . . . . . . . . . . 17
3.7 Real Property. . . . . . . . . . . . . . . . . . . . . . . . 17
3.8 Tangible Personal Property . . . . . . . . . . . . . . . . . 18
3.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . 18
3.10 Litigation; Orders . . . . . . . . . . . . . . . . . . . . . 19
3.11 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Compliance (Non-Environmental) . . . . . . . . . . . . 20
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(b) Compliance (Environmental) . . . . . . . . . . . . . . 20
(c) Definitions. . . . . . . . . . . . . . . . . . . . . . 21
3.12 Status of Contracts. . . . . . . . . . . . . . . . . . . . . 23
(a) Status . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Normality. . . . . . . . . . . . . . . . . . . . . . . 24
(c) Affiliated Agreements. . . . . . . . . . . . . . . . . 24
(d) Power of Attorney. . . . . . . . . . . . . . . . . . . 24
(e) Pension Obligation . . . . . . . . . . . . . . . . . . 25
3.13 Assets; Inventory. . . . . . . . . . . . . . . . . . . . . . 25
3.14 Customers and Vendors. . . . . . . . . . . . . . . . . . . . 25
3.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.16 Employees; Benefit Plans . . . . . . . . . . . . . . . . . . 26
(a) Employees. . . . . . . . . . . . . . . . . . . . . . . 26
(b) Benefit Plans. . . . . . . . . . . . . . . . . . . . . 27
3.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.18 Subsidiaries; Competing Interests. . . . . . . . . . . . . . 28
3.19 No Pending Transactions. . . . . . . . . . . . . . . . . . . 28
3.20 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . 28
3.21 Representations Regarding the Common Stock . . . . . . . . . 28
3.22 Updating of Schedules. . . . . . . . . . . . . . . . . . . . 30
3.23 Ownership of MCSC Common Stock . . . . . . . . . . . . . . . 31
3.24 Transactions with Affiliates . . . . . . . . . . . . . . . . .31
3.25 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . 31
3.26 Correct Information. . . . . . . . . . . . . . . . . . . . . 31
Article 4.0 Representations and Warranties of MCSC . . . . . . . . . . . 32
4.1 Structure; Status. . . . . . . . . . . . . . . . . . . . . . 32
(a) MCSC . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) MCAC . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.2 Authority; No Conflict . . . . . . . . . . . . . . . . . . . 33
4.3 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . 33
4.4 Litigation; Orders . . . . . . . . . . . . . . . . . . . . . 33
4.5 Authorized MCSC Common Stock . . . . . . . . . . . . . . . . 34
4.6 Accuracy and Completeness of Reports . . . . . . . . . . . . 34
4.7 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Article 5.0 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.1 Covenants of MW. . . . . . . . . . . . . . . . . . . . . . . 34
5.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . 37
5.3 Stockholder Approval . . . . . . . . . . . . . . . . . . . . 37
5.4 Access to Information; Confidentiality . . . . . . . . . . . 38
(a) Access to Information. . . . . . . . . . . . . . . . . 38
(b) Confidentiality. . . . . . . . . . . . . . . . . . . . 39
5.5 Consents; Efforts to Consummate. . . . . . . . . . . . . . . 39
5.6 Public Announcements . . . . . . . . . . . . . . . . . . . . 40
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5.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 40
(a) Indemnification by the Stockholders. . . . . . . . . . 40
(b) Indemnification by MCSC. . . . . . . . . . . . . . . . 40
(c) Limitations on Indemnification . . . . . . . . . . . . 41
(d) Notice . . . . . . . . . . . . . . . . . . . . . . . . 41
(e) Defense. . . . . . . . . . . . . . . . . . . . . . . . 42
(f) Exclusive Remedy . . . . . . . . . . . . . . . . . . . 42
5.8 Existence. . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9 Articles of Merger . . . . . . . . . . . . . . . . . . . . . 42
Article 6.0 General Matters. . . . . . . . . . . . . . . . . . . . . . . 43
6.1 Survival of Representations and Warranties and Related
Agreements . . . . . . . . . . . . . . . . . . . . . . . . 43
6.2 Covenant Not to Disclose . . . . . . . . . . . . . . . . . . 43
6.3 Non-Interference Agreement . . . . . . . . . . . . . . . . . 43
6.4 Use of MW's Name . . . . . . . . . . . . . . . . . . . . . . 44
6.5 Benefits Plans and Arrangements. . . . . . . . . . . . . . . 44
(a) Plan Participation . . . . . . . . . . . . . . . . . . 44
(b) Employment . . . . . . . . . . . . . . . . . . . . . . 44
(c) Employment Agreements. . . . . . . . . . . . . . . . . 44
(d) Employee Options . . . . . . . . . . . . . . . . . . . 44
6.6 Failure to Fulfill Conditions. . . . . . . . . . . . . . . . 45
6.7 Common Stock Restrictions. . . . . . . . . . . . . . . . . . 45
6.8 Cooperation; Access. . . . . . . . . . . . . . . . . . . . . 45
6.9 Tax Liability/Benefits . . . . . . . . . . . . . . . . . . . 45
Article 7.0 Conditions to the Obligations of MCSC and MCAC
to Consummate. . . . . . . . . . . . . . . . . . . . . . . 45
7.1 Representations and Warranties . . . . . . . . . . . . . . . 45
7.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . 46
7.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . 46
7.4 Stockholder Approval . . . . . . . . . . . . . . . . . . . . 46
7.5 Delivery of Documents. . . . . . . . . . . . . . . . . . . . 46
7.6 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . 46
7.7 No Material Adverse Change . . . . . . . . . . . . . . . . . 47
Article 8.0 Conditions to Obligations of MW
and the Stockholders to Consummate . . . . . . . . . . . . 47
8.1 Representations and Warranties . . . . . . . . . . . . . . . 47
8.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . 47
8.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . 47
8.4 Officers' Certificate. . . . . . . . . . . . . . . . . . . . 47
8.5 Payment of Cash and the New MCSC Shares. . . . . . . . . . . 47
8.6 Employment Agreements. . . . . . . . . . . . . . . . . . . . .47
8.7 No Litigation. . . . . . . . . . . . . . . . . . . . . . . . 48
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8.8 Delivery of Documents. . . . . . . . . . . . . . . . . . . . 48
8.9 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . 48
8.10 Tax Opinion. . . . . . . . . . . . . . . . . . . . . . . . . 48
Article 9.0 Termination. . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2 Procedure and Effect of Termination. . . . . . . . . . . . . 49
9.3 Payment of Expenses and Termination. . . . . . . . . . . . . 49
Article 10.0 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 49
10.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . 49
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 51
10.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . 51
10.5 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . 51
10.6 Assignment, etc. . . . . . . . . . . . . . . . . . . . . . . 52
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 52
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Schedules:
Schedule 3.2. . . Third Party Consents
Schedule 3.4. . . Undisclosed Liabilities
Schedule 3.5. . . Material Adverse Changes
Schedule 3.6. . . Title to Assets
Schedule 3.7. . . Real Property
Schedule 3.8A . . Significant Tangible Personal Property
Schedule 3.8B . . Leased Personal Property
Schedule 3.8C . . Restricted Personal Property
Schedule 3.9. . . Intellectual Property
Schedule 3.10 . . Litigation
Schedule 3.11A. . Non-Compliance
Schedule 3.11B. . Non-Compliance - Environmental
Schedule 3.12 . . Contracts
Schedule 3.15 . . Taxes
Schedule 3.16A. . Employees
Schedule 3.16B. . Benefit Plans
Schedule 3.17 . . Insurance
Schedule 3.18 . . Competing Interests
Schedule 3.24 . . Transactions with Affiliates
Schedule 3.25 . . Bank Accounts
Schedule 4.4. . . Litigation
Schedule 5.1. . . ▇▇▇▇▇▇ Lease Rent Adjustment
Schedule 5.7. . . Vendor Claims
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Exhibits:
Exhibit A . . . . Employment Agreement of H. ▇▇▇▇▇ ▇▇▇▇▇▇
Exhibit B . . . . Employment Agreement of ▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit C . . . . Employment Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Exhibit D . . . . Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
Exhibit E . . . . Opinion of Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
vi
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into as of November __, 1997 by and among Minnesota Western/Creative Office
Products, Berkeley, California, a California corporation ("MW"), H. ▇▇▇▇▇
▇▇▇▇▇▇, a director, the President and a stockholder of MW ("▇▇. ▇▇▇▇▇▇"),
individually and together with ▇▇▇ ▇. ▇▇▇▇▇▇, his spouse, as Trustees (the
"▇▇▇▇▇▇ Trustees") of the ▇▇▇▇▇▇ Trust (the "▇▇▇▇▇▇ Trust") dated November 5,
1993, ▇▇▇ ▇. ▇▇▇▇▇▇▇, a director, a Vice President and a stockholder of MW ("▇▇.
▇▇▇▇▇▇▇") individually and as Trustee (the "▇▇▇▇▇▇▇ Trustee") of the ▇▇▇▇▇▇▇
Trust (the "▇▇▇▇▇▇▇ Trust") dated November 12, 1992, ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a
director, a Vice President and a stockholder of MW ("▇▇. ▇▇▇▇▇▇▇") individually
and together with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, his spouse, as Trustees (the "▇▇▇▇▇▇▇
Trustees") of the ▇▇▇▇▇▇▇ Trust (the "▇▇▇▇▇▇▇ Trust") dated February 7, 1994,
(Messrs. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, and the ▇▇▇▇▇▇ Trust, the ▇▇▇▇▇▇▇ Trust
and the ▇▇▇▇▇▇▇ Trust hereinafter are collectively referred to as the
"Stockholders"), Miami Computer Supply Corporation, Dayton, Ohio, an Ohio
corporation ("MCSC") and MCSC California Acquisition Corporation, a California
corporation in organization ("MCAC") to be wholly owned by MCSC as of the
Closing Date (as defined in Section 2.2 hereof). Each of MW, the Stockholders,
MCSC and MCAC is referred to herein individually as a "Party" to this Agreement
and are collectively referred to herein as "Parties" to this Agreement.
WITNESSETH:
WHEREAS, MW is in the business of selling projection presentation
products and accessories to end-users and to dealers (the "Business"), which
operations are conducted out of its main office located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Premises");
WHEREAS, the Boards of Directors of MW and MCSC have determined that
it is in the best interests of their respective companies and their shareholders
to consummate the business combination transactions provided for herein,
including the merger of MW with and into MCAC (the "Merger"), subject to the
terms and conditions set forth herein;
WHEREAS, the Parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
WHEREAS, the Parties intend that the Merger constitutes a
"reorganization" within the meaning of section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement constitutes the
"plan of reorganization" within the meaning of the Code; and
PAGE 2
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the Parties hereto hereby agree as
follows:
ARTICLE 1.0 CERTAIN DEFINITIONS.
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement,
certain terms are defined throughout the Agreement and shall have the meanings
given therein. For reference purposes only defined terms are located in this
Agreement as follows:
Defined Terms Location in this Agreement
------------- --------------------------
"Acquisition Proposal" Section 5.2
"Affiliate" and "Affiliated" Section 3.24
"Agreement" First paragraph
"Annual Report" Section 4.6
"Associate" Section 3.24
"Business" First "Whereas" paragraph
"Business Day" Section 2.2
"Business Know-How" Section 3.9
"CERCLA" Section 3.11(c)(i)
"CGCL" Section 2.1(a)
"Closing" Section 2.2
"Closing Date" Section 2.2
"Code" Fourth "Whereas" paragraph
"Confidential Information" Section 5.4(b)
"Damage Claim" Section 5.7(d)
"Damages" Section 5.7(a)(iii)
"Demand Registration" Section 2.3(c)(i)
"Effective Time" Section 2.2
"Environmental Claim" Section 3.11(c)(ii)
"Environmental Law" Section 3.11(c)(iii)
"Environmental Record" Section 3.11(c)(iv)
PAGE 3
"ERISA" Section 3.12
"ERISA Affiliate" Section 3.16(b)
"Extended Premises" Section 3.6(b)
"Financial Statements" Section 3.3
"Form 10-K" Section 4.6
"GAAP" Section 3.3
"▇▇▇▇▇▇ Trust" First paragraph
"▇▇▇▇▇▇ Trustees" First paragraph
"▇▇▇▇▇▇▇ Trust" First paragraph
"▇▇▇▇▇▇▇ Trustees" First paragraph
"Governmental Approval" Section 3.11(c)(v)
"Governmental Authority" Section 3.11(c)(vi)
"Hazardous Substance" Section 3.11(c)(vii)
"Hazardous Substance Activity" Section 3.11(c)(viii)
"Intellectual Property" Section 3.9
"Legal Requirement" Section 3.11(c)(ix)
"Liens" Section 3.2
"Losses" Section 2.3(c)(i)
"Material Adverse Effect" Section 3.1(b)
"MCAC" First paragraph
"MCAC Common Stock" Section 2.3(a)
"MCSC" First paragraph
"MCSC Common Stock" Section 2.3(b)
"MCSC Group" Section 5.7(a)
"MCSC Loss" Section 5.7(a)
"MCSC Preferred Stock" Section 4.1(a)(i)
"MCSC Securities" Section 2.3(c)(i)
"Merger" Second "Whereas" paragraph
"▇▇. ▇▇▇▇▇▇" First paragraph
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"▇▇. ▇▇▇▇▇▇▇" First paragraph
"▇▇. ▇▇▇▇▇▇▇" First paragraph
"Multi-Employer Plan" Section 3.16(b)
"MW" First paragraph
"MW Certificates" Section 2.7(a)
"MW Common Stock" Section 2.3(b)
"MW Group" Section 5.7(b)
"MW Loss" Section 5.7(b)
"New MCSC Shares" Section 2.3(b)
"Party" and "Parties" First paragraph
"▇▇▇▇▇▇▇ Trust" First paragraph
"▇▇▇▇▇▇▇ Trustee" First paragraph
"Permitted Liens" Section 3.6(a)
"Person" Section 3.1(a)
"Piggyback Registration" Section 2.3(c)(i)
"Plans" Section 3.16(b)
"Premises" First Whereas paragraph
"Proxy Statement" Section 4.6
"Purchase Price" Section 2.3(b)
"RCRA" Section 3.11(c)(x)
"Real Property" Section 3.7
"Real Property Leases" Section 3.7
"Registration Deadline" Section 2.3(c)(i)
"Release" Section 3.11(c)(xi)
"Rights" Section 3.1(a)
"Scheduled Conditions" Section 3.11(b)
"SEC" Section 3.21(e)(i)
"SEC Filings" Section 4.6
PAGE 5
"Securities Act" Section 2.3(c)(i)
"Stockholders" First paragraph
"Stock Contract" Section 3.2
"Subsequent Registration
Statement" Section 2.3(c)(i)
"Surviving Corporation" Section 2.1(b)
"Tangible Personal Property" Section 3.8
"Taxes" Section 3.15
"Trade Secrets" Section 3.9
"Trademarks" Section 3.9
ARTICLE 2.0 THE MERGER.
2.1 THE MERGER
(a) ORGANIZATION OF MCAC. Immediately prior to the Closing
Date (as defined in Section 2.2 hereof), MCSC shall have organized, as a wholly
owned subsidiary, MCAC as a California corporation pursuant to Section 202, ET
SEQ. of the California General Corporation Law (the "CGCL").
(b) MERGER OF MW AND MCAC. Subject to the terms and
conditions of this Agreement, at the Effective Time (as defined in Section 2.2
hereof), MW shall be merged with and into MCAC in accordance with the provisions
of Section 1100 ET SEQ. of the CGCL. MCAC shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") of the Merger, and
shall continue its corporate existence under the laws of the State of California
as a wholly owned subsidiary of MCSC. The name of the Surviving Corporation
shall be changed to "Minnesota Western, Inc." promptly following the Merger.
Upon consummation of the Merger, the separate corporate existence of MW shall
terminate.
(c) EFFECT. From and after the Effective Time, the Merger
shall have the effects set forth in Section 1107 of the CGCL.
(d) ARTICLES OF INCORPORATION. The Articles of
Incorporation and Bylaws of MCAC, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation, respectively, until altered, amended or repealed in
accordance with their terms and applicable law.
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(e) CAPITAL STOCK. The authorized capital stock of the
Surviving Corporation shall be as stated in the Articles of Incorporation of
MCAC immediately prior to the Effective Time.
(f) DIRECTORS AND OFFICERS. Except as set forth herein,
the directors and officers of MCAC immediately prior to the Effective Time shall
be the directors and officers of the Surviving Corporation, each of whom shall
hold office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING. The Merger shall become effective
upon the occurrence of the filing of Articles of Merger with the Secretary of
State of the State of California pursuant to the CGCL, unless a later date and
time is specified as the effective time in such Articles of Merger (the
"Effective Time"). A closing of this Agreement (the "Closing") shall take place
immediately prior to the Effective Time at 11:00 a.m., San Francisco, California
Time, on or after the fifth Business Day following the satisfaction or waiver,
to the extent permitted hereunder, of the conditions to the consummation of the
Merger specified in Articles 7 and 8 of this Agreement (other than the delivery
of certificates, opinions and other instruments and documents to be delivered at
the Closing) (the "Closing Date"), at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ White &
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or at such
other place, at such other time, or on such other date (which date shall not be
later than January 31, 1998) as the Parties mutually may agree upon. At the
Closing, there shall be delivered to MCSC, MCAC and MW the opinions,
certificates and other documents, as applicable, required to be delivered under
Articles 7 and 8 hereof. Subject to the fulfillment or waiver at or prior to
the Closing of the conditions to its obligations set forth in Articles 7 and 8,
at the Closing each of MCAC and MW shall execute and deliver Articles of Merger
for filing with the Secretary of State of the State of California. For purposes
of this Agreement, a "Business Day" shall be any day (except a Saturday or a
Sunday) during which banks in the State of California are open for business.
2.3 TREATMENT OF CAPITAL STOCK. Subject to the provisions of
this Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Stockholder:
(a) each share of the common stock, no par value per share,
of MCAC (the "MCAC Common Stock") issued and outstanding immediately prior to
the Effective Time shall be unchanged and shall remain issued and outstanding
and owned beneficially and of record by MCSC; and
(b) subject to Sections 2.5, 2.6 and 2.7 hereof, all of the
shares of the common stock, $10.00 par value per share of MW (the "MW Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
cancelled and become, by operation of law, the right to receive cash in the
amount of twelve million dollars
PAGE 7
($12,000,000.00) and a number of shares of common stock, no par value per share,
of MCSC (the "MCSC Common Stock") as determined pursuant to the next sentence.
The number of shares of MCSC Common Stock to be paid by MCSC to the Stockholders
(the "New MCSC Shares") shall equal the quotient of twelve million dollars
($12,000,000.00) divided by the average per share closing price of the MCSC
Common Stock, as quoted by the Nasdaq National Market System, for the period of
twenty (20) trading days ending on the day immediately prior to the date of the
execution of this Agreement by the Stockholders (the cash payment set forth
above and the New MCSC Shares being collectively referred to herein as the
"Purchase Price").
(c) The New MCSC Shares to be received by the Stockholders
of MW will be subject to restrictions on transferability and resale for a period
of 270 days after the Closing Date.
(i) MCSC shall file one registration statement (the
"Demand Registration") for all of the New MCSC Shares to be received by the
Stockholders hereunder on or before the 271st day subsequent to the Closing Date
(the "Registration Deadline") and shall use its best efforts to cause such
registration statement to become effective and to remain effective for a period
of time ending on the second anniversary of the Closing Date. Notwithstanding
the foregoing, however, should MCSC file a registration statement prior to the
Registration Deadline, whether for a sale of securities for its own account
(except in situations relating to an employee benefit plan or an acquisition of
another entity) or pursuant to a demand for registration by another party (a
"Subsequent Registration Statement"), upon the written request of the
Stockholders, MCSC shall include, for a period of three (3) years following the
day that is the 271st day after the Closing Date, on a PARI PASSU basis with the
other parties having shares registered, a portion of or all of the New MCSC
Shares (the "Piggyback Registration"). MCSC shall not be obligated to file a
registration for the New MCSC Shares if, in the opinion of MCSC's counsel
rendered to the Stockholders, registration is not required for the proposed
transfer of the New MCSC Shares pursuant to Rule 144 or any other applicable
exemption, or if the proposed transfer of the New MCSC Shares is subject to an
effective registration statement that is current under the Securities Act of
1933, as amended (the "Securities Act"). MCSC may delay the filing of the
registration statement for the New MCSC Shares not more than two (2) times in
any calendar year for up to ninety (90) days if (A) MCSC has filed, or has taken
substantial steps toward filing, a registration statement relating to the sale
of any of MCSC's securities (the "MCSC Securities") in an underwritten offering
and the managing underwriter of such offering is of the opinion that the filing
of a registration statement with respect to the Demand or Piggyback Registration
would adversely affect the offering by the MCSC of the MCSC Securities, or (B)
the Board of Directors of MCSC determines in good faith, by resolution, that the
filing of a registration statement, if not so deferred, would materially and
adversely affect a then-proposed or pending financial project, acquisition,
merger or other corporate transaction. In the event that the Piggyback
Registration is an underwritten offering, if the managing underwriter of such
offering advises MCSC and the Stockholders
PAGE 8
in writing that in its reasonable opinion the aggregate amount of New MCSC
Shares requested to be included in such offering is more than can be sold
without materially and adversely affecting the success of such offering, MCSC
will include in such registration first, the securities to be offered by MCSC
(if any), and then only such aggregate amount of New MCSC Shares that in the
reasonable opinion of such managing underwriter can be sold without such
material adverse effect, and such securities shall be allocated among the
Stockholders and any other persons or entities having registration rights pro
rata based on the number of shares of MCSC Common Stock requested to be included
in such registration by all such holders. If any Piggyback Registration is
determined by MCSC, in its sole discretion, to be in the form of an underwritten
offering, then MCSC shall select the investment banker or manager in its sole
discretion. If any Piggyback Registration is to be underwritten, then the
Stockholders shall be parties to the underwriting agreement between MCSC and
such underwriters who may, at their option, require that the Stockholders
provide usual and customary representations and warranties to and for the
benefit of such underwriters. No Stockholder may participate in any
underwritten Piggyback Registration unless such Stockholder (A) agrees to sell
its New MCSC Shares on the basis provided in any underwriting arrangement
approved by MCSC, and (B) completes and executes all questionnaires, powers of
attorney, indemnities regarding written information supplied by the Stockholders
for inclusion in the prospectus, securities escrow agreements, underwriting
agreements and other documents reasonably required under the terms of such
underwriting, and furnishes to MCSC such information as MCSC or the underwriters
may reasonably request in writing for inclusion in the registration statement
(and the prospectus included therein).
(ii) Prior to the third anniversary of the Closing
Date, each Stockholder, whether or not such Stockholder participates in an
underwritten registration, agrees, if so required by the managing underwriter,
and if required of MCSC's directors and officers, not to effect any public sale
or distribution of such New MCSC Shares or sales of such shares pursuant to Rule
144, during the seven (7) days prior to and the ninety (90) days after any firm
commitment underwritten registration has become effective or, if the managing
underwriter advises MCSC in writing that, in its opinion, no such public sale or
distribution should be effected for a specified period longer than ninety (90)
days after such underwritten registration in order to complete the sale and
distribution of securities included in such registration and MCSC gives notice
to such Stockholder of such advice, during a reasonably longer period after such
underwritten registration but in no event longer than one hundred twenty (120)
days, except as part of such underwritten registration.
(iii) Prior to the filing of a Subsequent
Registration Statement, MCSC shall: (A) give to the Stockholders notice thereof
as soon as practicable; and (B) include in such Subsequent Registration
Statement and in any underwriting involved therein, such New MCSC Shares as
permitted herein upon receipt of a request by the Stockholders to do so within
ten (10) days after they receive notice of such proposed filing,
PAGE 9
provided that if at any time after giving such notice, MCSC shall determine for
any reason or for no reason not to register or to delay registration of the
securities to be included in the Subsequent Registration Statement, MCSC may, at
its election, give written notice of such determination to the Stockholders and,
thereupon, (X) in the case of a determination not to register, MCSC shall be
relieved of its obligation to register any of the New MCSC Shares in connection
with such Subsequent Registration Statement, and (Y) in the case of a delay in
registering, shall be permitted to delay registering all of the Stockholders'
New MCSC Shares to be included in the Subsequent Registration Statement for the
same period as the delay in the registering such other securities.
(iv) MCSC will pay all reasonable registration expenses
in connection with any Demand or Piggyback Registration, including without
limitation, all registration and filing fees, fees with respect to filings
required to be made with the National Association of Securities Dealers, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
and fees and expenses of counsel for MCSC and of all independent public
accountants of MCSC (including the expenses of any "comfort" letters or updates
thereof required by or incident to the foregoing) in connection with such
registration except that all underwriting discounts and commissions,
underwriting expenses and transfer taxes, if any relating to the New MCSC Shares
shall be paid by the Stockholders.
(v) MCSC shall immediately notify each Stockholder and
any managing underwriter, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and at the request of the Stockholders promptly will prepare and
furnish to such Stockholders a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made. Each
Stockholder agrees (A) that upon receipt of any notice from MCSC of the
happening of any event of the kind described above, such holder forthwith will
discontinue such holder's disposition of the New MCSC Shares pursuant to the
prospectus relating to such securities until such Stockholder's receipt of the
copies of the supplemented or amended prospectus contemplated above, and if so
directed by MCSC, will deliver to MCSC (at MCSC's expense) all copies then in
such Stockholder's possession of the prospectus relating to such securities
current at the time of receipt of such notice and (B) that it immediately will
notify MCSC, at any time when a prospectus relating to the registration of such
shares is required to be delivered under the Securities Act, of the happening of
any event as a result of which information previously furnished by such
PAGE 10
Stockholder to MCSC in writing for inclusion in such prospectus contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made.
(vi)(A) In the event of any registration of any of
the New MCSC Shares under the Securities Act, each Stockholder shall furnish to
MCSC in writing such information and affidavits as MCSC reasonably requests for
use in connection with such registration statement relating to such Stockholder
and such Stockholder's plan of distribution, and each Stockholder agrees,
severally and not jointly, to indemnify and hold harmless MCSC, its directors,
officers, each underwriter and each controlling person of MCSC, if any, against
any losses, claims, damages or liabilities, joint or several (or actions in
respect thereof), to which MCSC, its directors, officers, such underwriter or
controlling person may be subject under the Securities Act or under any other
statute or at common law, insofar as such losses, claims, damages or
liabilities, joint or several (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement (or alleged untrue statement) of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any selling document or any
amended selling document, or (ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in light of the circumstances in which they were made with
respect to any prospectus) not misleading, and shall reimburse MCSC, its
directors, officers, such underwriter and controlling person for any legal or
other expense reasonably incurred by such person in connection with
investigating or defending any such loss, claim, damage, liability or action; in
each case, to the extent, and only to the extent, that each untrue statement or
omission (or alleged untrue statement or omission) is made in reliance upon
written information furnished to MCSC by such Stockholder expressly for use in
the registration statement.
(B) In the event of the filing of a Demand or
Piggyback Registration, MCSC agrees to indemnify and hold harmless the
Stockholders from and against any and all losses, claims, damages, liabilities,
costs and expenses to which the Stockholders may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities, costs or expenses are caused by an untrue statement or alleged
untrue statement of any material fact contained in the registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; PROVIDED, HOWEVER, that MCSC will not be liable in any such case
to the extent that any such loss, claim, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by or on behalf of any Stockholder in writing specifically for use in the
preparation thereof.
PAGE 11
(C) If the indemnification provided for herein is
determined as a matter of law to be unavailable to an indemnified party in
respect of any matters indemnified hereunder ("Losses"), then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the indemnifying party, on the one hand, and such indemnified party, on
the other hand, in connection with the statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such parties shall be determined by reference to, among other
things, whether any statement or omission relates to information supplied by
such party and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable as a result of any Losses shall be deemed to include any legal
or other fees or expenses incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this paragraph was determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. Notwithstanding
anything to the contrary contained in this paragraph, an indemnifying party that
is a Stockholder shall not be required to contribute any amount which is in
excess of the amount of the total proceeds received by such Stockholder from the
sale of New MCSC Shares sold by such Stockholder (net of all commissions).
Notwithstanding any thing to the contrary contained herein, no party found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any other party who
is found not guilty of such fraudulent misrepresentation.
(D) The Parties hereto will use their best efforts to have
the transaction qualify, with respect to the receipt by the Stockholders of the
New MCSC Shares, as a "tax-free reorganization" within the meaning of
Section 368 of the Code. Consistent with the prior sentence, the Parties hereby
reserve the right to alter the structure of this transaction prior to the
Closing Date for tax or other business reasons.
2.4 STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time,
the holders of the MW Common Stock shall cease to be and shall have no rights as
stockholders of MW, other than to receive the consideration provided under this
Article 2.0. After the Effective Time, there shall be no transfer on the stock
transfer books of MW or the Surviving Corporation of shares of MW Common Stock
and if certificates evidencing such shares are presented for transfer after the
Effective Time, then they shall be cancelled without the payment of any
consideration by the Surviving Corporation or its successor, other than as
provided by this Article 2.0.
2.5 DISSENTING SHARES. By virtue of their execution of this
Agreement, the Stockholders hereby forever waive any right they may have to
dissent from the Merger and demand payment in cash for the fair value of his
shares of MW Common
PAGE 12
Stock under Section 1300 ET SEQ. of the CGCL or any similar or successor
statute, law, rule or regulation and the Stockholders hereby release MCSC, MCAC
and the Surviving Corporation and their successors and assigns from any
obligation to pay such funds to them thereunder.
2.6 FRACTIONAL SHARES. Notwithstanding any other provision
hereof, no fractional shares of MCSC Common Stock shall be issued to the holder
of MW Common Stock. In lieu thereof, the holder of shares of MW Common Stock
entitled to a fraction of a share of MCSC Common Stock shall, at the time of
surrender of the certificate or certificates representing such holder's shares,
receive an amount of cash (without interest) equal to the product arrived at by
multiplying such fraction of a share of MCSC Common Stock by $14.00. No such
holder shall be entitled to dividends, voting rights or any other rights in
respect of any fractional share interest.
2.7 EXCHANGE PROCEDURES.
(a) THE EXCHANGE. On the Closing Date, MCSC shall, upon
the surrender by the Stockholders of the certificates representing 100% of the
issued and outstanding shares of MW Common Stock (the "MW Certificates") at the
Closing Date, issue to the Stockholders the consideration set forth in Section
2.3(b) consisting of cash and New MCSC Shares. The cash shall be paid by
federal wire transfer to an account designated, prior to the Closing, by the
Stockholders or by certified or cashier's check, at the option of the
Stockholders.
(b) NON-SURRENDERED CERTIFICATES. Each outstanding
certificate, which prior to the Effective Time represented MW Common Stock and
which is not surrendered to MCSC in accordance with the procedures provided for
herein, except as otherwise herein provided, until duly surrendered to MCSC
shall be deemed to evidence the right to receive the consideration set forth in
Section 2.3(b) consisting of cash and New MCSC Shares.
(c) NO DIVIDENDS. No holder of a certificate theretofore
representing shares of MW Common Stock shall be entitled to receive any
dividends in respect of MCSC Common Stock into which such shares shall have been
converted by virtue of the Merger until the certificate representing such shares
is surrendered in exchange for a certificate or certificates representing whole
shares of MCSC Common Stock (plus cash in lieu of any fractional share
interest). In the event that dividends are declared and paid by MCSC in respect
of MCSC Common Stock after the Effective Time but prior to the holder's
surrender of certificates representing shares of MW Common Stock, dividends
payable to such holder in respect of whole shares of MCSC Common Stock not then
issued shall accrue (without interest). Any such dividends shall be paid
(without interest) upon surrender of the certificates representing such shares
of MW Common Stock.
PAGE 13
(d) NO OBLIGATION TO PAY CASH OR ISSUE NEW MCSC SHARES.
MCSC shall not be obligated to pay the cash consideration or deliver a
certificate or certificates representing whole shares of MCSC Common Stock (plus
cash in lieu of any fractional share interest) to which the holder of MW Common
Stock otherwise would be entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing the shares of MW Common
Stock for exchange as provided in this Section 2.7, or, in default thereof, an
appropriate affidavit of loss and indemnity agreement and/or a bond in an amount
as may be reasonably required in each case by MCSC.
2.8 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider that any further assignments or
assurances in law or any other acts are necessary or desirable to (i) 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 MW acquired or to be acquired by the Surviving Corporation as a result of, or
in connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement, MW and its Stockholders and its proper officers and directors shall
be deemed hereby to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement;
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name of MW or otherwise to take any and all such action.
ARTICLE 3.0 REPRESENTATIONS AND WARRANTIES OF MW AND THE
STOCKHOLDERS. MW and the Stockholders represent and warrant to MCSC as follows:
3.1 CAPITALIZATION; STATUS AND QUALIFICATION. (a)
CAPITALIZATION The authorized capital stock of MW consists of ten thousand
(10,000) shares of MW Common Stock. As of the date hereof, one thousand and
fifty (1,050) shares of MW Common Stock are issued and outstanding and three
hundred and fifty (350) of such shares are owned beneficially and of record by
the ▇▇▇▇▇▇ Trust, three hundred and fifty (350) of such shares are owned
beneficially and of record by the ▇▇▇▇▇▇▇ Trust and three hundred and fifty
(350) of such shares are owned beneficially and of record by the ▇▇▇▇▇▇▇ Trust.
(▇▇. ▇▇▇▇▇▇ does not represent and warrant only as to the number of shares of MW
Common Stock that are issued and outstanding and as to the beneficial and record
owners of such shares as of the date hereof for purposes of Section 5.7(a)
hereof.) All outstanding shares of MW Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, and none of the outstanding
shares of MW Common Stock has been issued in violation of any law or regulation
of any Governmental Authority (as defined in Section 3.11(c)(vii)), the MW
Articles of Incorporation, Bylaws, the terms of any agreement to which MW or the
Stockholders are a party or are bound or the preemptive rights of any
individual, partnership, proprietorship, corporation, limited liability company,
joint venture,
PAGE 14
trust or other similar entity or governmental agency or court (a "Person").
There are no Rights authorized, issued or outstanding with respect to the
capital stock of MW. For purposes of this Agreement, "Rights" shall mean any
warrants, options, rights, convertible or exchangeable securities and other
arrangements or commitments that obligate an entity to issue or dispose of any
of its capital stock or ownership interests.
(b) STATUS AND QUALIFICATION. (i) MW is a corporation that is duly
organized, validly existing and in good standing under the laws of the State of
California, has the full power and authority to carry on its Business as it
currently is being conducted and to own, lease and operate the property and the
assets that it now owns, leases and operates and to execute, deliver and perform
this Agreement and the transactions contemplated hereby. MW has qualified as a
foreign corporation, is in good standing, has obtained all licenses, permits or
other authorizations and has taken all other actions required by or under the
laws of all jurisdictions and all governmental regulations where the failure to
do so would have a material adverse effect on the business, condition (financial
or otherwise), results of operations, assets or prospects of MW (a "Material
Adverse Effect"). MW heretofore has delivered to MCSC true and complete copies
of its Articles of Incorporation and Bylaws, as amended, as in effect as of the
date hereof, and its stock transfer books.
(ii) Each of the ▇▇▇▇▇▇ Trust, the ▇▇▇▇▇▇▇ Trust and the ▇▇▇▇▇▇▇ Trust
are validly created, subsisting revocable California trusts that have the full
power and authority to own, lease and operate the property and the assets that
they respectively now own, lease and/or operate and, through the trustees named
herein, to execute, deliver and perform this Agreement and the transactions
contemplated hereby. Each of the ▇▇▇▇▇▇ Trustees, the ▇▇▇▇▇▇▇ Trustee and the
▇▇▇▇▇▇▇ Trustees have been validly appointed (which appointment has not been
revoked or rescinded) and are duly authorized to execute, deliver and perform
this Agreement and the transactions contemplated thereby and no other act is
required to be taken by them by law or regulation to do so.
3.2 AUTHORIZATION; APPROVAL. The individual Stockholders and
the ▇▇▇▇▇▇ Trustees, the ▇▇▇▇▇▇▇ Trustee and the ▇▇▇▇▇▇▇ Trustees are adult
residents of the State of California and citizens of the United States of
America and are legally competent to execute, deliver and perform this Agreement
under the laws thereof. Each Stockholder owns and has an unqualified right to
sell and shall transfer to MCSC at the Closing upon surrender of his
certificates therefor, and MCSC and MCAC will receive, good title to the MW
Common Stock, free and clear of any and all mortgages, pledges, security
interests, liens, charges, options, conditional sales agreements, claims,
restrictions, covenants, title defects or other encumbrances or restrictions of
any nature ("Liens"). Other than this Agreement, upon delivery at Closing, the
MW Common Stock will not be subject to any stockholders' agreement or voting
trust agreement or understanding or proxy, whether in writing or oral, including
without limitation, any mortgage, indenture, note, guarantee, lease, license,
contract, deed of trust, purchase, sale or other agreement (a "Stock Contract"),
including any Stock Contract restricting or otherwise relating to the voting or
disposition of
PAGE 15
the MW Common Stock. The execution, delivery and performance of this Agreement
and the transactions contemplated hereby by MW have been duly and effectively
authorized by all necessary action, corporate or otherwise. This Agreement is a
valid, legally binding and enforceable obligation of MW and the Stockholders,
enforceable in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, reorganization, insolvency or other
laws affecting the enforcement of creditors' rights generally or the
availability of equitable remedies subject to the discretion of the court. A
certified copy of the resolutions of the Board of Directors of MW approving this
Agreement and the transactions contemplated hereby has been delivered to MCSC,
and such copy is complete and correct and such resolutions are in full force and
effect on the date hereof and will be in full force and effect on the Closing
Date. Except for the filing and waiting period attendant to notification under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, Section 7A
of the ▇▇▇▇▇▇▇ Act, 15 U.S.C. 18A, as added by Section 201 of ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, if applicable, and except for the payment of
all taxes required to be paid as set forth in SCHEDULE 3.2, or to the California
Franchise Tax Board, the execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby by MW and the
Stockholders will not: (i) require the notice or filing with, or approval or
consent of any governmental or regulatory body not otherwise contemplated by
this Agreement, except for the filing of Articles of Merger with the Secretary
of State of the State of California pursuant to Section 1103 of the CGCL,
provided however, that the Articles of Merger shall not be filed until there has
been filed a certificate of satisfaction of the Franchise Tax Board that all
taxes imposed under California's Revenue and Tax Law have been paid or secured;
(ii) except for the consent of the Stockholders of MW, and except for consents
to assignment of the contracts described in SCHEDULE 3.2, require the approval
or consent of any other person or entity; (iii) violate any provision of such
corporation's Articles of Incorporation or Bylaws, as amended; (iv) violate,
conflict with or otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both, constitute) a
default under, or result in the termination of, or accelerate the performance
required by, or cause the acceleration of the maturity of any liability or
obligation pursuant to, or result in the creation or imposition of any security
interest, lien, charge or other encumbrance upon any property or assets of MW,
under (a) any statute or law or any judgment, decree, order, award, writ,
injunction, regulation or rule of any court, arbitrator or Governmental
Authority (as defined in Section 3.11(c)(vii)), or (b) any note, bond, mortgage,
indenture, deed of trust, license, lease, instrument, contract, commitment,
franchise, permit, understanding, arrangement, agreement or restriction of any
kind or character that is not satisfied or extinguished at or prior to the
Closing; (v) violate any statute, law or regulation as such statute, law or
regulation relates to MW or its Business; or (vi) result in the creation of any
adverse claim on MW or any of its property or assets.
3.3 FINANCIAL STATEMENTS. MW has delivered to MCSC true,
complete, accurate and correct copies of MW's audited balance sheets for the
eleven months ended September 30, 1997 and the years ended October 31, 1996 and
1995, and the related audited
PAGE 16
statements of income, retained earnings and cash flows as well as the notes
thereto (the "Financial Statements"). The Financial Statements present fairly
the financial condition, results of operations, retained earnings and changes in
cash flows of MW at such dates and for such periods in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
indicated. The statements of income included in the Financial Statements do not
contain any items of special or non-recurring income or expense or any other
income not earned or expense not incurred in the ordinary course of business
except as expressly specified therein, and such Financial Statements include all
adjustments (including all normal recurring accruals for unusual or non-
recurring items) considered necessary for a fair presentation, and no
adjustments or restatements are or will be necessary in respect of any items of
an unusual or non-recurring nature, except as expressly specified herein.
Except as described in such Financial Statements there has been no change by MW
in any method of accounting or keeping of its books of account or accounting
practices for the 35 month period ended on September 30, 1997. MW shall
continue to provide to MCSC unaudited balance sheets, statements of income and
cash flows within twenty-five (25) calendar days after the end of each month
prior to the Closing or termination of this Agreement.
3.4 UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
3.4 or as incurred in the ordinary course of business since September 30, 1997,
the Financial Statements reflect and disclose any and all material indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility of any
nature, whether fixed or unfixed, due or to become due, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
of MW required to be disclosed therein. The Stockholders do not know and have
no reason to know of any basis for the assertion against MW of any such
liability or obligation not fully reflected in the Financial Statements.
3.5 ABSENCE OF CHANGES. Except as set forth in SCHEDULE 3.5,
since September 30, 1997, there has not been, other than changes in the ordinary
course of business that in the aggregate have not been adverse, (i) any material
change in the financial position, results of operations, assets, liabilities,
net worth, Business or prospects of MW, or (ii) any other event or condition of
any character (whether or not covered by insurance) that has materially
adversely affected or will or is likely to so affect the properties, Business or
prospects of MW or the financial position, results of operations, or net worth
of MW, apart from events or conditions affecting the economy or the projection
presentation products industry generally. Since such date, MW has conducted its
business only in the ordinary course and has not acquired or disposed of any
material assets or engaged in any material transaction.
3.6 TITLE TO ASSETS.
(a) TITLE. Except as set forth on SCHEDULE 3.6, at the
Closing, MW will own and have good and marketable title to all of its properties
and assets, free and
PAGE 17
clear of restrictions on or conditions to transfer or assignment, liens,
pledges, charges, encumbrances, claims, easements, security interests,
covenants, title defects or objections or restrictions of any kind, including,
without limitation, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements, and other title or interest retention
arrangements or other Liens. After the Closing, MCAC will own and be the legal,
beneficial and registered owner, or have the right to use under a valid lease,
all of the assets of MW, free and clear of any Liens other than Permitted Liens
or Liens disclosed in SCHEDULE 3.6. "Permitted Liens" means (i) liens shown on
the balance sheet in the Financial Statements as securing specified liabilities
(with respect to which no default exists), (ii) liens for current taxes not yet
due, and (iii) minor imperfections of title and encumbrances, if any, which are
not substantial in amount, do not detract from the value of the property subject
thereto or impair the operations of MW, have arisen only in the ordinary course
of business and consistent with past practice and do not preclude or materially
adversely affect the continued use of the property to which they relate as used
in the operation of the Business of MW as currently conducted.
(b) CONDEMNATION. MW has not received any notice from any
Governmental Authority having jurisdiction over the Premises or any other office
or warehouse locations of MW (the Premises and such other office or warehouse
locations being collectively referred to herein as the "Extended Premises") that
the Extended Premises are presently the subject of any condemnation, special
assessment or similar charge or proceeding, and no such condemnation, special
assessment or charge is currently threatened or contemplated.
3.7 REAL PROPERTY. SCHEDULE 3.7 sets forth a list and summary
description of (i) all of the real property which is used in the Business of MW,
including without limitation, all land, buildings and other structures and
improvements and fixtures located on such land (collectively, the "Real
Property"), and a description of each parcel of such land, and a list of (ii)
all leases, subleases or other agreements that allow the use or occupancy of the
Real Property, or any portion thereof, or that give or grant any rights therein
(collectively, the "Real Property Leases"). All of the Real Property Leases,
true and correct copies of which (including all amendments or extensions
thereto) have been delivered to MCSC, are in effect, and MW is not in default
under or with respect to any provision thereof and MW has not received or sent
any notice of any default under or with respect to any provision thereof, and to
the knowledge of the Stockholders, no other party to any thereof is in default
under or with respect to any provision thereof. Other than the landlord's
consent to assignment required under the Real Property Leases, there are no
approvals or consents of any persons or entities which are required in order to
assign any Real Property Leases. The Real Property, or the use thereof, does
not violate the material provisions of any applicable Environmental Laws (as
defined in Section 3.11(c)(iv), or any trade, criminal, building code, fire,
health or safety or other governmental ordinances, orders or regulations and MW
is in material compliance with all applicable laws, regulations, ordinances,
orders, rules and restrictions relating to the Real Property. All structures
and
PAGE 18
improvements located on the Real Property are in workable and useable condition
and repair (excepting ordinary wear and tear) and are suitable for the uses for
which they were intended and are used. The operations conducted on any of the
Real Property, whether now or in the past, do not violate the real property
rights of any Person (as defined in Section 3.1(a)) with respect to such
property or with respect to any other property. The Stockholders have no
knowledge of and have not received any notice in regard to the foregoing and are
not aware of any state of facts or situation which, with notice or the passage
of time or otherwise, would constitute such a violation.
3.8 TANGIBLE PERSONAL PROPERTY. SCHEDULE 3.8A lists each item or
group of items of tangible personal property (other than inventory) owned by MW
having an initial purchase price in excess of $10,000. SCHEDULE 3.8B lists each
item of tangible personal property leased by MW (other than pursuant to
individual leases having an annual rental of less than $5,000 or that are
terminable by MW within ninety (90) days of the date hereof without penalty)
(collectively, the "Tangible Personal Property"). The Tangible Personal
Property, together with other Tangible Personal Property owned constitutes
substantially all of the tangible personal property used in the operation of the
Business of MW and constitutes substantially all of the tangible personal
property necessary to conduct the Business of MW as presently conducted by it.
Except for Permitted Liens and except as set forth in SCHEDULE 3.8C, (i) the
Tangible Personal Property owned by MW and all other personal property, whether
tangible or intangible, owned by MW is free and clear of any and all Liens, and
(ii) all of the Tangible Personal Property is located at the Real Property and
there is no material tangible personal property located at the Real Property
that is not owned or leased by MW. The Tangible Personal Property currently
used in the Business is in all material respects in good working order, ordinary
wear and tear excepted. All of the material Tangible Personal Property has been
maintained in all material respects in accordance with the past practice of MW
and generally accepted industry practice. All of the leased Tangible Personal
Property of MW is in all material respects in the condition required of such
property by the terms of the lease applicable thereto during the term of the
lease and upon the expiration thereof.
3.9 INTELLECTUAL PROPERTY. SCHEDULE 3.9 contains an accurate
and complete list of all (i) registered and unregistered: trademarks, service
marks, trade names, corporate names, company names, fictitious business names,
logos, and other source or business identifiers (the "Trademarks"); patents;
copyrights and tangible trade secrets (the "Trade Secrets") used in or necessary
to conduct the business of MW as currently conducted, and all registrations and
recordings thereof, all applications for registration pending therefor, all
extensions and renewals thereof, in any jurisdiction in which MW operates or
does business, (ii) material licenses, permissions, software and other
agreements used in or necessary to the Business of MW, and (iii) material
licenses, permissions, software and other agreements relating to technology,
Business Know-How or processes used in the Business of MW, which MW is licensed
or authorized to use by others ((i) - (iii) above collectively referred to
herein as the "Intellectual Property"). "Business Know-How" means all books,
PAGE 19
records, technology, formulas, know-how recorded on paper or other media in the
books and records of MW, quality control records, finished product
specifications, packaging supplies specifications, product registrations,
records relating to the adoption and use of the Intellectual Property (as
defined above), marketing plans, sales records and histories, market research
data, promotional advertising and marketing materials, radio, television and
Internet commercials, Internet web sites, print advertisements, customer lists,
label and shipping carton dies, designs, films, earthwork, photography,
mechanical art, color separations, prints, plates, and graphic materials,
permits and licenses, and inventory records, used in or necessary to conduct the
Business as currently conducted. In regard to the Intellectual Property, and
except as set forth on SCHEDULE 3.9, (i) the patents, Trademarks and the
copyrights are valid, subsisting and enforceable, and the patents, the
Trademarks and the copyrights are duly recorded in the name of MW, and can be
recorded in the name of MCAC or the Surviving Corporation, (ii) MW has, and
after the Closing MCAC will have, the sole and exclusive ownership and right,
free from any Liens, to use Intellectual Property and applications therefor set
forth on SCHEDULE 3.9 and the full right to use the trade names, assumed names,
fictitious names, technology, know-how and processes referred to in such lists
and all trade secrets used in or necessary to the conduct of the Business of MW,
and the consummation of the transactions contemplated hereby will not materially
alter or impair any such rights. Except as set forth on SCHEDULE 3.9, within
the last ten (10) years, no claims have been asserted by any entity or person
with respect to the ownership, validity, enforceability or use of or challenging
or questioning the validity or effectiveness of any of the Intellectual
Property. Furthermore, the use or other exploitation of such Intellectual
Property by MW does not infringe the rights of any other entity or person; and
the Stockholders are not able to identify any other entity or person infringing
the rights of MW with respect to such Intellectual Property.
3.10 LITIGATION; ORDERS. Except as set forth on SCHEDULE 3.10,
there are no claims, actions, suits, proceedings, grievances, arbitrations,
investigations or inquiries pending or, to the best knowledge of the
Stockholders, threatened, at law or in equity or before or by any federal,
state, local, foreign or other governmental department, commission, board,
arbitrator(s), agency, instrumentality or authority by or against MW or the
Stockholders (or any one of them) which: (i) restrain or prohibit or which may
restrain or prohibit, or otherwise affect, the consummation of the transactions
contemplated hereby; (ii) materially and adversely affect or which may affect MW
with respect to the Merger; or (iii) materially or adversely affect or might
affect the Business, operations, condition (financial or otherwise),
liabilities, assets, earnings or prospects of MW. Neither MW nor any of its
property or assets is subject to any judgment, arbitration award, order or
decree. There are no petitions pending by, against or on behalf of MW or the
Stockholders under any applicable bankruptcy or insolvency laws.
PAGE 20
3.11 COMPLIANCE.
(a) COMPLIANCE (NON-ENVIRONMENTAL). Except as set forth
in SCHEDULE 3.11A, MW and its officers, directors and employees have all
material licenses, permits, approvals and other authorizations and have made all
material filings and registrations that are necessary in order to enable MW to
conduct its Business as it is now being conducted. MW and its officers,
directors and employees have materially complied and are in material compliance
with all laws, regulations and ordinances that are applicable to MW's Business
as now being conducted or that are applicable to any of its assets or
properties, including, without limitation, all laws, regulations and ordinances
relating to or regulating the safe and proper conduct of business, consumer
protection, trade practices, franchises, licensing requirements, wage and hour,
antitrust, taxes, currency transactions and exchange, equal opportunity, public
accommodation and services, sanitation, fire, zoning, building, labor,
occupational health and safety, pension, securities, trademark or copyright. MW
has not received notification in the last five (5) years of any asserted present
or past failure to so comply; and, to the knowledge of the Stockholders, there
are no actions threatened or likely to be commenced against MW alleging any
material violation of or non-compliance with any of such laws, regulations or
ordinances. Attached as SCHEDULE 3.11A are all of the reports relating to the
Business or the Premises received within the last three (3) years by MW from any
Governmental Authority or from any consultants regarding compliance with the
regulations of the Occupational Safety and Health Administration, the Equal
Employment Opportunity Commission or the U.S. Department of Labor or any
equivalent state agency. The terms and conditions and circumstances of the
employment of employees of MW, including former and inactive employees, comply,
and at all times have complied, to the extent material, with applicable laws and
regulations (including any federal, state or local laws relating to taxation,
employee benefits, wage-hour, health and safety, nondiscrimination and labor
relations).
(b) COMPLIANCE (ENVIRONMENTAL). Except as set forth in
SCHEDULE 3.11B (the "Scheduled Conditions"), MW and the Stockholders represent
and warrant to MCSC that:
(i) to the best knowledge of the Stockholders (without
the benefit of any environmental assessment), MW and the Extended Premises
comply in all material respects with any applicable Environmental Law;
(ii) to the best knowledge of the Stockholders, MW has
obtained all Governmental Approvals required for the operation of MW and the
Extended Premises under any applicable Environmental Law;
(iii) MW has not, and the Stockholders have no
knowledge of any other person who has, created any Release, threatened Release,
or disposal of any Hazardous Substance at the Extended Premises in any material
quantity; no
PAGE 21
threatened Release, or disposal of a Hazardous Substance originating or
emanating from any other property has come to be located on or under the
Extended Premises;
(iv) to the best knowledge of the Stockholders, there
are not now and have not been located on the Extended Premises any: (A)
underground storage tanks, (B) material amounts of asbestos-containing
construction materials, (C) landfills or dumps, (D) hazardous waste treatment,
storage or disposal facilities as defined pursuant to RCRA or any comparable
state law, or (E) sites on or nominated for the CERCLA National Priority List or
any equivalent or comparable state Hazardous Substance Release site list
promulgated or published pursuant to any state law;
(v) MW has used no material quantity of any Hazardous
Substance and has conducted no Hazardous Substance Activity on the Extended
Premises;
(vi) MW has no material liability for remediation,
response or corrective action, natural resource damage, or other harm pursuant
to CERCLA, RCRA, or any comparable state law; MW is not subject to, has no
notice or knowledge of, and is not required to give any notice of any
Environmental Claim involving MW or the Extended Premises; there are no
conditions or occurrences at the Extended Premises that could form the basis for
an Environmental Claim against MW or the Extended Premises;
(vii) the Extended Premises are not subject to and the
Stockholders have no knowledge of, any imminent restriction on the ownership,
occupancy, use, or transferability of the Extended Premises in connection with
any (A) Environmental Law or (B) Release, threatened Release, or (C) disposal of
a Hazardous Substance;
(viii) to the best knowledge of the Stockholders, there
are no conditions or circumstances at the Extended Premises that pose a
significant risk to the environment or to the health and/or safety to or of
Persons; and
(ix) MW has provided or otherwise made available to
MCSC any Environmental Record concerning MW and Extended Premises that MW
possesses or is known to MW and that it could reasonably obtain.
(c) DEFINITIONS. For purposes of this Agreement, the
following terms as used herein shall have the following meanings:
(i) "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 USC 9601 ET SEQ., and any
subsequent amendments.
PAGE 22
(ii) "ENVIRONMENTAL CLAIM" shall mean any
investigation, notice, violation, demand, allegation, action, suit, injunction,
judgment, order, consent decree, penalty, fine, lien, proceeding or claim in
connection with the Extended Premises (whether administrative, judicial, or
private in nature) arising (A) pursuant to, or in connection with, an actual or
alleged violation of, any Environmental Law, (B) in connection with any
Hazardous Substance or actual or alleged Hazardous Substance Activity, or (C)
from any abatement, removal, remedial, corrective, or other response action in
connection with a Hazardous Substance, Environmental Law or other order of a
Governmental Authority.
(iii) "ENVIRONMENTAL LAW" shall mean any current Legal
Requirement pertaining to (A) the protection of health, safety, and the indoor
or outdoor environment, (B) the conservation, management, or use of natural
resources and wildlife, (C) the protection or use of surface water and
groundwater, (D) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, Release, threatened
Release, abatement, removal, remediation or handling of, or exposure to, any
Hazardous Substance or (E) pollution (including any Release to air, land,
surface water, and groundwater), and includes, without limitation, CERCLA, the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 USC 6901 ET
SEQ., Federal Water Pollution Control Act, as amended by the Clean Water Act of
1977, 33 USC 1251 ET SEQ., Clean Air Act of 1966, as amended, 42 USC 7401 ET
SEQ., Toxic Substances Control Act of 1976, 15 USC 2601 ET SEQ., Hazardous
Materials Transportation Act, 49 USC App. 1801 ET SEQ., Occupational Safety and
Health Act of 1970, as amended 29 USC 651 ET SEQ., Oil Pollution Act of 1990, 33
USC 2701 ET SEQ., Emergency Planning and Community Right-to-Know Act of 1986, 42
USC 11001 ET SEQ., National Environmental Policy Act of 1969, 42 USC 4321 ET
SEQ., Safe Drinking Water Act of 1974, as amended, 42 USC 300(f) ET SEQ., and
any similar state law, including but not limited to the Bay Area Air Quality
Management District Act (Health and Safety Code Section 40200 ET SEQ.); the Air
Quality Monitoring Devices Act (Health and Safety Code Section 42700 ET SEQ.);
the ▇▇▇▇▇▇-Cologne Water Control Act (Water Code Section 13200 ET SEQ.); the
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇-▇▇▇▇▇▇ Hazardous Substance Control Act (Health and Safety
Code Section 25300 ET SEQ.); the Clean Waters Act (Fish and Game Code Section
5650 ET SEQ.); and the Hazard Communications Act (8 CCR 5194) and any similar,
implementing or successor law, and any amendment, rule, regulation, order, or
directive issued thereunder.
(iv) "ENVIRONMENTAL RECORD" shall mean any document,
correspondence, pleading, report, assessment, analytical result, Governmental
Approval, or other written record concerning a Hazardous Substance, compliance
with an Environmental Law, and Environmental Claim, or other environmental
subject.
(v) "GOVERNMENTAL APPROVAL" shall mean any permit,
license, variance, certificate, consent, letter, clearance, closure, covenant
not to ▇▇▇, release,
PAGE 23
no further action letter, exemption, decision, action or approval or non-
disapproval of a Governmental Authority.
(vi) "GOVERNMENTAL AUTHORITY" shall mean any federal,
state, regional, county, or local person or body having governmental or quasi-
governmental authority or a sub-division thereof.
(vii) "HAZARDOUS SUBSTANCE" shall mean any substance,
chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant,
contaminant, or material which is classified or regulated as hazardous or toxic
under any Environmental Law, and includes, without limitation, asbestos,
polychlorinated biphenyls, and petroleum (including crude oil or any fraction
thereof).
(viii) "HAZARDOUS SUBSTANCE ACTIVITY" shall mean any
activity, event, or occurrence involving a Hazardous Substance, including,
without limitation, the manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, Release, threatened Release,
abatement, removal, remediation, handling of or corrective or response action to
any Hazardous Substance.
(ix) "LEGAL REQUIREMENT" shall mean any treaty,
convention, statute, law, regulation, ordinance, Governmental Approval,
injunction, judgment, order, consent decree, or other requirement of any
Governmental Authority.
(x) "RCRA" shall mean the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 USC 6901 ET SEQ., and any future amendments.
(xi) "RELEASE" shall mean any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the indoor or outdoor environment or
abandonment of any Hazardous Substance.
3.12 STATUS OF CONTRACTS. (a) STATUS. Except as listed on
SCHEDULE 3.12 and except for purchase orders made in the ordinary course of
business, MW is not party to and is not bound by any contract having a value in
excess of $25,000 per annum or that is not terminable by MW upon thirty (30)
days written notice without penalty, whether or not in the ordinary course of
business, and including, without limiting the generality of the foregoing,
leases, mortgages, union contracts, employment agreements, pension, retirement
or welfare agreements (whether oral or written, formal or informal) or employee
benefit plans within the meaning of the Employment Retirement Security Act of
1975, as amended ("ERISA"), agreements for the sale or distribution of its
services or products, vendor contracts, supply contracts, license agreements,
service agreements and other agreements or instruments. There have been and are
no material defaults by MW under any contract to
PAGE 24
which MW is a party, nor has any event occurred which, after the giving of
notice or, with the passage of time, or both, would constitute a material
default under any such contract. All such contracts are valid and binding and
in full force and effect; MW has complied and will have complied with the
provisions of its contracts in all material respects as of the date hereof and
as of the Closing Date; and no written notice of a claimed breach has been
received by MW. Assuming that MW obtains the consents described in SCHEDULE
3.2, the Merger and the consummation by MW of the transactions herein
contemplated will not conflict with, or result in a breach, violation,
termination or modification of, any of the terms of any material contract,
agreement or other instrument to which MW is a party or by which MW or any of
its properties is or may be bound, or constitute a default thereunder which
would prevent or interfere with the Merger or the consummation of the
transactions herein contemplated.
(b) NORMALITY. No purchase commitment of MW, or by which MW is bound,
is materially in excess of the normal, ordinary and usual requirements of the
Business or, in the opinion of the Stockholders, is at an excessive price.
(c) AFFILIATED AGREEMENTS. Except as set forth in SCHEDULE 3.12, MW
is not a party to or bound by (i) any contract (other than this Agreement) with
the Stockholders or former shareholders or any Person known to the Stockholders
to be an Affiliate or Associate of a Stockholder or former shareholder, (ii) any
contract with officers, employees, agents, consultants, advisors, salesmen,
sales representatives, distributors or dealers that are not cancelable by MW
upon thirty (30) days' notice without liability, penalty or premium, (iii) any
contract providing for the payment of any bonus or commission based on sales or
earnings, (iv) any contract that contains any severance or termination or change
in control pay liability or obligation, (v) any contract for the purchase or
sale of any security (other than this Agreement), (vi) any contract for the
borrowing of money (or guarantee of indebtedness), (vii) any material contract
containing express product or service warranties, (viii) any contract containing
a covenant not to compete by MW or the Stockholders, (ix) any contract granting
a Lien, security interest or other material encumbrance on any property or
assets of MW or on its assets, (x) any contract providing for exclusive
purchases by or from MW or containing a requirement purchase obligation, (xi)
any contract providing for administration, service, utilization review,
adjustment, claims management or similar functions relating to insurance,
litigation or Plans of MW, or (xii) any contract for the sale of any of the
assets, property or rights of MW outside of the ordinary course of business,
except as contemplated by this Agreement.
(d) POWER OF ATTORNEY. MW has not given any power of attorney
(whether revocable or irrevocable) to any Person that is or hereafter may be in
force other than to financial institutions in the ordinary course of business.
No Stockholder has given any power of attorney (whether revocable or
irrevocable) to any Person that is or hereafter may be in force that shall have
any effect on such Stockholder's beneficial or legal ownership of the MW Common
Stock or his right to vote such shares or receive dividends therefrom.
PAGE 25
(e) PENSION OBLIGATION. MW is not paying, nor has it any obligation
to pay, any unfunded pension, deferred compensation or retirement allowance to
any Person, other than obligations to make matching payments under MW's 401(k)
plan.
True, complete and correct copies of each of the contracts set forth in
SCHEDULE 3.12 or expressly referred to in the notes to the Financial Statements
have heretofore been provided to MCSC by MW.
3.13 ASSETS; INVENTORY. Substantially all of the properties and
assets used in the Business, except for such assets that are immaterial to the
business of MW, are workable and useable in the ordinary course of business and
are suitable for the uses for which they were intended and are used. The
inventory of MW reflected in the Financial Statements, after giving effect to
all adjustments thereon has been acquired in the ordinary course of business and
has been and will be reflected on the books of MW in accordance with the GAAP,
consistently applied. The inventory reflected in the Financial Statements,
after giving effect to all adjustments thereon consists of items of a quality
and quantity useable and saleable in the normal course of business at usual and
customary prices including discounts in the ordinary course of business. The
level of the inventory as of the Closing Date is reasonable in light of MW's
business prospects. MW and the Stockholders know of no material adverse
condition affecting MW's ability to obtain inventory in the future in the
quality and quantity as now being obtained.
3.14 CUSTOMERS AND VENDORS. MW has received no notice that, and
no Stockholder has any knowledge or reason to believe that, any vendor or any
customer of MW does not plan to continue to do business with the Surviving
Corporation, or plans to reduce its sales to or volume of orders from the
Surviving Corporation or will not do business on substantially the same terms
and conditions with the Surviving Corporation subsequent to the Closing Date as
such vendor or customer did with MW before such date. Neither MW nor the
Stockholders will take any action to influence its customers or vendors to
change or reduce their volume of business activity with the Surviving
Corporation after the Closing Date.
3.15 TAXES. Except for Taxes that are being contested in good
faith by appropriate proceedings and are listed on SCHEDULE 3.15 and except for
Taxes that are accrued on the balance sheets that are part of the Financial
Statements or are listed on SCHEDULE 3.15 and except as otherwise listed on
SCHEDULE 3.15, MW has paid all Taxes required to be paid by it through the date
hereof. Except as set forth on SCHEDULE 3.15, MW has timely filed all returns,
reports and other documents and furnished all information required or requested
by any federal, state or local governmental agency with respect to its Business
or properties (except for tax returns not yet due), and all such returns,
reports and other documents and all such information are true, correct and
complete in all material respects. No audit of any of the foregoing is in
progress, and no extension of time with respect to the date of filing of any of
the foregoing is in force, other than as set forth on
PAGE 26
SCHEDULE 3.15. No waiver or agreement by MW is in force for the extension of
time for the assessment or payment of any of the Taxes. Except for any being
contested in good faith and set forth and SCHEDULE 3.15, all deficiencies or
other additions to any of the Taxes, including any assessments, interest or
penalties thereon, accrued for, applicable to or arising from any period ending
on or prior to the date of this Agreement have been timely paid when due prior
to the date hereof or have been accrued on the balance sheets which are part of
the Financial Statements. For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, occupation, use, service, service use, value added, license, payroll,
franchise, transfer and recording taxes, fees and charges, including estimated
taxes, imposed by the United States, the State of California, any other state,
the City of Berkeley, or any taxing authority (domestic or foreign), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to any such taxes, charges,
fees, levies or other assessments.
3.16 EMPLOYEES; BENEFIT PLANS.
(a) EMPLOYEES. Listed on SCHEDULE 3.16A are the names of
all officers, directors and employees of MW together with their respective wage
rates and rates of total compensation. MW is not subject to a collective
bargaining agreement. MW has paid in full to its employees, agents and
contractors all wages, salaries, commissions, bonuses and other direct
compensation due for all services performed by them. SCHEDULE 3.16A sets forth
a summary of all grievances, claims, actions, suits, proceedings, arbitrations,
investigations or inquiries instituted or, to the best knowledge of the
Stockholders, threatened within the past five (5) years or currently pending by
or against MW. MW is not liable for any severance pay or other payments on
account of termination of former employees, nor will any severance payments or
other payments (including unemployment compensation, "golden parachute" or
otherwise) become payable as a consequence of the transactions contemplated
herein. MW has complied in all material respects with all applicable federal
and state laws relating to the employment of labor, including the provisions
thereof relating to wages, hours, collective bargaining, discrimination and
civil rights and the withholding and payment of social security and similar
taxes and is not liable for any arrears, wages or any such taxes or penalties
for failure to comply with any of the foregoing. There is no labor strike,
dispute, slowdown, stoppage or lockout pending or threatened against MW. To the
best knowledge of the Stockholders, no representation question exists respecting
the employees or any strike, work stoppage or other labor difficulty. There are
no unfair labor practice charges, complaints or proceedings pending or
threatened against MW; there is no organizing activity involving MW pending or
threatened by a labor union or group of employees; there are no representation
proceedings pending with the National Labor Relations Board and no labor
organization or group of employees has made a pending demand for recognition.
Except as set forth in SCHEDULE 3.16A, MW has had no layoffs or recalls during
the past ten (10) years.
PAGE 27
(b) BENEFIT PLANS. As of the Closing Date: (i) all
"employee benefit plans," as defined in Section 3(3) of ERISA including any
"multi-employer plan," as defined in Section 4001(a)(3) of ERISA (a "Multi-
employer Plan,") or any other employee benefit arrangements or payroll practices
(whether or not qualified for Federal income tax purposes, whether or not
funded, whether formal or informal, whether for the benefit of a single
individual or more than one individual and whether for the benefit of current or
former employees or their beneficiaries), including, without limitation,
severance, pension, retirement, profit sharing, deferred compensation, stock
purchase, stock option, restricted stock, stock appreciation rights, incentive,
bonus or other similar plans, hospitalization, medical, vision, dental or other
health plans, sick leave, vacation pay, salary continuation for disability,
consulting or other compensation arrangements (the "Plans") maintained, or
contributed to, by MW or any trade or business (whether or not incorporated)
that is under common control with MW, or is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") are set forth
on SCHEDULE 3.16B; (ii) each Plan is in compliance in all material respects with
the applicable provisions of ERISA and the Code, including the filing of reports
thereunder, and with respect to each Plan all required contributions and
benefits have been paid when due in accordance with the provisions of each such
Plan and the applicable provisions of ERISA; and (iii) none of the Plans is
subject to Title IV of ERISA and no Plan has been terminated with any
outstanding liability. No Plan that is a "welfare plan," as defined in Section
3(1) of ERISA, provides for continuing benefits or coverage for any participant
or beneficiary of a participant after such participant's termination of
employment (except as may be required by Section 4980B of the Code and at the
sole expense of the participant or the beneficiary of the participant). MW and
each ERISA Affiliate have materially complied with the notice and continuation
requirements of Section 4980B of the Code and the regulations thereunder. The
execution and delivery of this Agreement and the consummation of the
transactions thereby will result in the acceleration of the time of payment or
vesting of Plan benefits as set forth on SCHEDULE 3.16B. SCHEDULE 3.16B also
sets forth the administrative costs due and payable for MW's 401(k) plan as of
the Closing Date.
3.17 INSURANCE. SCHEDULE 3.17 sets forth all policies or
binders of fire, liability, worker's compensation, vehicular, disability,
employee liability, business interruption, product liability, health, or other
insurance (including medical self-insurance) held by MW relating to, on behalf
of or covering the Business of MW (specifying the insurer, the policy number or
covering note number with respect to binders, and describing each pending claim
thereunder of more than $25,000.00). Such policies and binders are in full
force and effect. MW is not in default with respect to any provision contained
in any such policy or binder and has not failed to give any notice or present
any material claim under any such policy or binder in due and timely fashion.
Except for claims set forth in SCHEDULE 3.17, there are no outstanding unpaid
claims under any such policy or binder. MW has not received a notice of
cancellation or non-renewal of any such policy or binder. Neither MW nor any
Stockholder has any knowledge of any inaccuracy in any application for such
policies or binders, any failure to pay premiums when due or any similar state
of
PAGE 28
facts which might form the basis for termination of any such insurance.
SCHEDULE 3.17 also sets forth MW's loss experience for the last three (3) years
relating to product liability, worker's compensation and property damage and
health and medical coverage.
3.18 SUBSIDIARIES; COMPETING INTERESTS. Neither MW nor the
Stockholders, directly or indirectly, own any capital stock or other equity
securities of any corporation, limited liability company, partnership,
association, trust, joint venture or other entity or business or have any direct
or indirect equity, partnership or other ownership interest in any business
except for stock of companies publicly traded on the New York or American Stock
Exchange or the Nasdaq Stock Market, not to exceed 5% of the total outstanding
shares of such companies. Except as set forth in SCHEDULE 3.18, and excluding
stock of publicly traded companies referred to in the preceding sentence,
neither MW nor the Stockholders have any interest, directly or indirectly, in
any corporation, partnership, association, proprietorship, or any other entity
or business which is engaged in a similar business, or is a competitor of, or a
vendor to or customer of, MW.
3.19 NO PENDING TRANSACTIONS. Except for the transactions
contemplated by this Agreement, MW is not a party to or bound by or the subject
of any agreement, undertaking or commitment to: (i) merge or consolidate with,
or acquire all or substantially all of the property and assets of, any other
Person that in any way would affect the Business of MW; or, (ii) sell, lease or
exchange all or substantially all of MW's property and assets to any other
corporation or Person or enter into any other transaction that in any way would
materially adversely affect the Business of MW or the Merger or the transactions
contemplated hereby.
3.20 BROKER'S OR FINDER'S FEES. No agent, broker, Person or
firm acting on behalf of MW or the Stockholders is, or will be, entitled to any
commission or broker's or finder's fees from any of the Parties hereto in
connection with any of the transactions contemplated herein.
3.21 REPRESENTATIONS REGARDING THE COMMON STOCK. The
Stockholders represent, certify and warrant to MCSC that:
(a) they are "accredited investors" as defined by
Regulation D promulgated under the Securities Act;
(b) they have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of the
New MCSC Shares. The Stockholders have received the MCSC 1996 Annual Report to
Stockholders, the proxy statement for the 1997 Annual Meeting of Stockholders,
the Form 10-K for the year ended December 31, 1996 and the Form 10-Q for the
nine months ended September 30, 1997. The Stockholders recognize that
acquisition of the New MCSC Shares involves certain risks and have taken full
cognizance of and understand such risks. In
PAGE 29
deciding whether to acquire the New MCSC Shares pursuant to this Agreement, the
Stockholders have weighed these risks against any perceived benefits of owning
the New MCSC Shares;
(c) the Stockholders have had the opportunity to perform
such due diligence regarding MCSC as they have deemed necessary and to ask
questions of, and receive answers from, management of MCSC and have sought and
received such accounting, legal and tax advice as the Stockholders have
considered necessary to make an informed investment decision with respect to the
New MCSC Shares;
(d) the Stockholders are aware that no federal or state
agency has made any finding or determination as to the fairness of the New MCSC
Shares, nor has any agency made any recommendation or endorsement of the New
MCSC Shares;
(e) during the last five (5) years, no Stockholder has
been:
(i) convicted of nor pleaded NOLO CONTENDERE to any
felony or misdemeanor in connection with the purchase or sale of any security or
in connection with the making of any false filing with the Securities and
Exchange Commission ("SEC") or any state securities administrator, or of any
felony involving fraud or deceit, including but not limited to, forgery,
embezzlement, obtaining money under false pretenses, larceny, conspiracy to
defraud or theft;
(ii) subject to any order, judgment, or decree of any
court of competent jurisdiction temporarily or preliminary restraining or
enjoining, or are subject to any order, judgment, or decree of any court of
competent jurisdiction, permanently restraining or enjoining that person from
engaging in or continuing any conduct or practice in connection with the
purchase or sale of any security or in connection with the making of any false
filing with the SEC or any state securities administrator;
(iii) subject to a United States Postal Service false
representation order; or
(iv) subject to any state administrative order entered
by a state securities administrator in which fraud or deceit was found;
(f) the Stockholders are acquiring the New MCSC Shares for
their own account and not with a view to resale or distribution, and, other than
agreements among the Stockholders restricting their right to transfer the New
MCSC Shares, no agreements, arrangements or understandings exist with respect to
the transfer, sale, voting or disposition of such securities;
PAGE 30
(g) the Stockholders understand that stop transfer
instructions relating to the Common Stock will be placed in MCSC's stock
register and that the certificates representing New MCSC Shares will bear
legends that shall read:
"The shares of Common Stock represented by this certificate
have been issued pursuant to a claim of exemption from the
registration or qualification requirements of federal and
state securities laws and may not be sold or transferred
without registration or qualification or otherwise except
pursuant to an applicable exemption therefrom; the issuer
may require that the availability of an exemption be
evidenced by an opinion of counsel reasonably satisfactory
to the issuer hereof."
"Except with the prior written consent of Miami Computer
Supply Corporation, the shares of Common Stock represented
by this certificate may not be sold, pledged, hypothecated,
gifted or otherwise transferred or disposed of until [THE
DATE WHICH IS 270 DAYS AFTER THE CLOSING DATE.]"
Any Stockholder who is not an Affiliate of MCSC may request that the
foregoing legends be removed after the second anniversary of the Closing Date.
(h) the Stockholders realize that (i) the acquisition of
the New MCSC Shares is a long-term investment; (ii) the Stockholders must bear
the economic risk of such investment until the restrictive holding period
expires and because the New MCSC Shares have not been registered under the
Securities Act or any similar state law, they cannot be sold unless so
registered or an exemption from registration is available; and
(i) the Stockholders believe that an investment in the New
MCSC Shares is suitable for them based upon their investment objectives and
financial needs and the Stockholders have adequate means of providing for their
current financial needs and have no need for liquidity of their investment with
respect to the New MCSC Shares.
3.22 UPDATING OF SCHEDULES. MW and the Stockholders shall
notify MCSC of any changes, additions or events which may cause any change in or
addition to any Schedules delivered by them under this Agreement, promptly after
the occurrence of same and no later than the Closing Date by delivery of updates
of all Schedules, including future quarterly and annual Financial Statements.
No notification made pursuant to this Section 3.22 shall be deemed to cure any
breach of any representation or warranty made in this Agreement or any Schedule
unless MCSC shall specifically agree thereto in writing, nor shall any such
notification be considered to constitute or give rise to a waiver by MCSC of any
condition set forth in this Agreement unless specifically waived in writing by
MCSC.
PAGE 31
3.23 OWNERSHIP OF MCSC COMMON STOCK. As of the date hereof,
neither MW nor any Stockholder nor any of their Affiliates or Associates, (i)
beneficially owns, directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of MCSC Common Stock.
3.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3.24, other than this Agreement, MW is not bound by or a party to any
contract with, does business with or has any obligations or liabilities to any
Stockholder or any Affiliate or Associate of any Stockholder. As used in this
Agreement, an "Affiliate" of, or a Person "Affiliated" with, a specified Person,
is a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. Moreover, as used in this Agreement, the term "Associate" used to
indicate a relationship with any Person, means: (a) any corporation or
organization (other than MW) of which such Person is a director, an officer or
partner or is, directly or indirectly, the beneficial owner of 10 percent or
more of any class of equity securities, (b) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person or who is a director or officer of the corporation or organization
or any of its parents or subsidiaries.
3.25 BANK ACCOUNTS. SCHEDULE 3.25 sets forth the names and
locations of all banks or other financial institutions in which MW has an
account or safe deposit box and the names of all Persons authorized to draw
thereon or to have access thereto. At the Closing, MW will deliver to the
Surviving Corporation copies of all records and will assign such authorization
to the Surviving Corporation and provide evidence satisfactory to MCSC that such
assignment will be effective immediately subsequent to the Closing and, at such
time, no Stockholder or Person determined by the Surviving Corporation to be
unauthorized shall have the authority to access such accounts or safe deposit
boxes or draw on such accounts.
3.26 CORRECT INFORMATION. All representations, warranties,
covenants, schedules, exhibits, documents, certificates, reports or statements
furnished or to be furnished to MCSC by or on behalf of MW or the Stockholders
in connection with this Agreement or the transactions contemplated hereby are
true, complete and accurate in all material respects. Without limiting the
specificity of such representations or warranties made in this Agreement or
information furnished pursuant hereto to MCSC, to the best knowledge of the
Stockholders, neither MW nor any of the Stockholders has failed to disclose to
MCSC any facts material to the Business, operations, condition (financial or
otherwise), liabilities, assets, earnings, working capital or prospects of MW.
PAGE 32
ARTICLE 4.0 REPRESENTATIONS AND WARRANTIES OF MCSC.
MCSC hereby represents and warrants to MW as follows:
4.1 STRUCTURE; STATUS.
(a) MCSC.
(i) The authorized capital stock of MCSC consists of
thirty million (30,000,000) shares of MCSC Common Stock and five million
(5,000,000) shares of MCSC preferred stock, no par value par share (the "MCSC
Preferred Stock"). As of October 8, 1997, there were 4,020,776 shares of MCSC
Common Stock issued and outstanding, and there were no shares of MCSC Preferred
Stock issued and outstanding. All outstanding shares of MCSC Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of MCSC Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. As of the
date hereof, there are no Rights authorized, issued or outstanding with respect
to the capital stock of MCSC, except for (A) shares of MCSC Common Stock
issuable pursuant to the MCSC 1996 Stock Option Plan and the MCSC Non-Employee
Directors Stock Option Plan and (B) by virtue of this Agreement and (C) pursuant
to certain agreements to acquire the stock or assets of other entities as
disclosed to the Stockholders in connection with this Agreement.
(ii) MCSC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, has full
power and authority to carry on its businesses as it is now conducted and to
own, lease and operate the property and assets that it now owns, leases and
operates and to execute and deliver this Agreement and to perform the
transactions contemplated hereby.
(b) MCAC.
(i) At the Closing Date, the authorized capital stock
of MCAC will consist of one thousand (1,000) shares of MCAC Common Stock, all of
which shares will be issued and outstanding and owned beneficially and of record
by MCSC. At the Closing Date, all outstanding shares of MCAC Common Stock will
have been duly authorized and validly issued and will be fully paid and non-
assessable, and none of the outstanding shares of MCAC Common Stock will have
been issued in violation of the preemptive rights of any person, firm or entity.
As of the Closing Date, there will be no Rights authorized, issued or
outstanding with respect to the capital stock of MCAC.
(ii) MCAC will, at the Closing Date, be a corporation
duly organized, validly existing and in good standing under the laws of the
State of
PAGE 33
California, will have the full power and authority to execute and deliver this
Agreement and to enter into the Merger and perform the transactions contemplated
hereby.
4.2 AUTHORITY; NO CONFLICT. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby by MCSC
and MCAC have been (in the case of MCSC) or will be (in the case of MCAC) duly
and effectively authorized by all necessary corporate action of MCSC and MCAC,
respectively, and this Agreement is (in the case of MCSC) and will be (in the
case of MCAC) a valid and legally binding obligation of MCSC and MCAC,
respectively, enforceable in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, reorganization, insolvency or other
laws affecting the enforcement of creditors' rights generally or the
availability of equitable remedies subject to the discretion of the court. A
certified copy of the resolutions of the Boards of Directors of MCSC and MCAC
approving this Agreement and the transactions contemplated hereby will be
delivered to MW, and such copies will be complete and correct and such
resolutions will be in full force and effect on the dates of their respective
adoption. Except for the filing and waiting period attendant to notification
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended,
Section 7A of the ▇▇▇▇▇▇▇ Act, 15 U.S.C. 18A, as added by Section 201 of ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, and the payment of all taxes
required to be paid to the California Franchise Tax Board and, if required by
law or the rules of the Nasdaq Stock Market or the National Association of
Securities Dealers, Inc., the vote of the stockholders of MCSC, the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby by MCSC and MCAC will not: (i) require the
approval or consent of any governmental or regulatory body not otherwise
contemplated by this Agreement, except for compliance with applicable federal
and state ("blue sky") securities laws in connection with the issuance of the
New MCSC Shares pursuant to this Agreement and the filing of Articles of Merger
with the Secretary of State of the State of California pursuant to Section 1103
of the CGCL, provided, however, that the Articles of Merger shall not be filed
until there has been filed a certificate of satisfaction of the Franchise Tax
Board that all taxes imposed under California's Revenue and Tax Law have been
paid or secured; (ii) require the approval or consent of any other person or
entity except for the approval of the Merger by MCSC as the sole stockholder of
MCAC; (iii) violate any provision of MCSC's or MCAC's Articles of Incorporation
or Bylaws; or (iv) violate any statute, law or regulation as such statute, law
or regulation relates to MCSC or MCAC.
4.3 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm
acting on behalf of MCSC or MCAC is, or will be, entitled to any commission or
broker's or finder's fees from any of the Parties hereto in connection with any
of the transactions contemplated herein.
4.4 LITIGATION; ORDERS. Except as set forth on SCHEDULE 4.4,
there are no claims, actions, suits, or proceedings, grievances, arbitrations,
investigations or inquiries
PAGE 34
pending or, to the best knowledge of MCSC, threatened, at law or in equity or
before or by any federal, state, local, foreign or other governmental
department, commission, board, arbitrator(s), agency, instrumentality or
authority by or against MCSC that restrains or prohibits or that may restrain or
prohibit or otherwise affect, the consummation of the transactions contemplated
hereby.
4.5 AUTHORIZED MCSC COMMON STOCK. MCSC has sufficient
authorized shares of common stock in order to issue the MCSC Common Stock to the
Stockholders at the Closing. The MCSC Common Stock to be issued to the
Stockholders pursuant to Section 2.3(b) hereof shall, on the Closing Date, be
duly authorized, validly issued, fully paid and non-assessable and free and
clear of all Liens of MCSC. As of the date hereof and the Closing Date, the
MCSC Common Stock is and will be qualified and listed on the Nasdaq National
Market System and MCSC knows of no restriction on the ability of the MCSC Common
Stock to trade thereon, except for the restrictions set forth herein and those
resulting from applicable law, regulation and the rules of the Nasdaq.
4.6 ACCURACY AND COMPLETENESS OF REPORTS. MCSC has delivered a
true, correct and complete copy of the annual report submitted to its
shareholders for its fiscal year ended December 31, 1996 (the "Annual Report"),
its annual report for such year on Form 10-K (the "Form 10-K"), the Proxy
Statement for the 1997 Annual Meeting of Stockholders ("Proxy Statement") and
each other filing under the Securities Exchange Act of 1934, as amended, since
December 31, 1996 (the Annual Report, the Form 10-K, the Proxy Statement, and
each such other filing collectively are referred to herein as the "SEC
Filings"). The SEC Filings do not contain any untrue statement of a material
fact, and do not omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading.
Article 4.7 SOLVENCY. MCSC shall not take any act that would result
in the insolvency of the Surviving Corporation (within the meaning of applicable
law) immediately following the Closing and the Surviving Corporation shall,
immediately following the Closing, be able to meet its obligations as they
become due assuming in each case the accuracy of the representations made in
Article 3.0 hereof.
ARTICLE 5.0 COVENANTS.
5.1 COVENANTS OF MW. Except as contemplated by this Agreement
or as expressly agreed to in writing by MCSC, during the period from the date of
this Agreement to the Closing Date, MW will conduct its operations according to
its ordinary and usual course of business consistent with past practice, will
use its best efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with licensors, licensees, vendors, employees,
contractors, distributors, customers and others having business relationships
with it. Without limiting the generality of the foregoing and except as
otherwise expressly provided in this
PAGE 35
Agreement, prior to the Closing Date, MW will not, without the prior written
consent of MCSC:
(a) pay any dividends or other distributions (cash or
otherwise) except for federal and state income tax distributions to the
Stockholders, as a Subchapter S corporation, which distributions may be made
only after prior notice to MCSC of the amount and proposed payment date;
(b) redeem or repurchase or otherwise acquire its capital
stock, subdivide or reclassify its shares of capital stock, pay any bonus
(except for year-end bonuses, other bonuses disclosed on SCHEDULE 3.16 and
salary adjustments in the ordinary course of business), increase the wages or
salaries of its employees, increase the fees to its directors, increase
compensation to any consultants or other professionals (except for payments to
MW's accountant), commit itself to any new or renewed collective bargaining
agreement or to any additional pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other compensation or benefit
plan, agreement or arrangement, or to any employment or consulting agreement
with or for the benefit of any person, to amend or make any payment or
contribution (other than in the ordinary course of business and consistent with
past practice) with respect to any of such plans or any of such agreements in
existence on the date hereof except as may be required to comply with applicable
law or the terms of the Plans, notice of which shall be provided to MCSC;
(c) except in the ordinary course of business or as
otherwise contemplated hereby purchase, dispose of, or encumber, or agree to
sell, transfer, mortgage or otherwise dispose of or encumber, any of its
properties or assets or make any capital expenditure in excess of $25,000;
(d) except for "Expod" which shall be subject to a separate
agreement by and among MCSC and the Stockholders and except as otherwise
contemplated hereby, enter into any other agreements, commitments or contracts
that, individually or in the aggregate, are material to MW, except agreements,
commitments or contracts for the purchase, sale or lease of goods or services in
the ordinary course of business, consistent with past practice and not in excess
of current requirements, or otherwise make any material change in the conduct of
its Business or operations of MW;
(e) authorize, recommend, propose or announce an intention
to authorize, recommend, propose, or enter into any agreement in principle or an
agreement with respect to any merger, consolidation or business combination
(except for this Agreement), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or any
material change in its capitalization, or any entry into a material contract or
any amendment or modification of any material contract
PAGE 36
or any release or relinquishment of any material contract rights not in the
ordinary and usual course of business;
(f) incur or guarantee any obligation or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
material to MW or pay, discharge or satisfy any Lien or liability (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
other than liabilities shown or the balance sheet as of September 30, 1997 in
the Financial Statements and liabilities incurred after the date thereof in the
ordinary course of business in normal amounts, and no such payment, discharge or
satisfaction shall be affected other than in accordance with the ordinary
payment terms relating to the liability paid, discharged or satisfied;
(g) permit or allow its properties or assets, real,
personal or mixed, tangible or intangible, to be mortgaged, pledged or subjected
to any Lien, except for Permitted Liens;
(h) cancel any debts or claims except in the ordinary
course of business and consistent with past practice, or waive any rights of
material value;
(i) permit any material Intellectual Property right to
lapse;
(j) issue, grant or sell any shares of its capital stock or
any equity interest or security, or issue, grant or sell any security, option,
warrant, call, subscription or other right of any kind, fixed or contingent,
that directly or indirectly calls for the issuance, sale, pledge or other
disposition of any shares of its capital stock or any equity interest or
security;
(k) make any change in any accounting principles, practices
or methods, including their principles, practices or methods relating to
calculation of reserves for receivables;
(l) pay, loan, or advance any amount to or in respect of,
or sell, transfer or lease any property or assets (real, personal or mixed,
tangible or intangible) to, or enter into any transaction with or for the
benefit of, any Stockholder or any of their respective Affiliates or Associates;
(m) enter into any lease or sub-lease of real property or
material lease of personal property other than in the ordinary course of
business with prior notice to MCSC and other than the amendment of the ▇▇▇▇▇▇
Street Lease to reflect the future rent adjustment as set forth in SCHEDULE 5.1,
which adjustment may be included in the consent to assignment of such lease
contemplated by this Agreement.
PAGE 37
(n) terminate or amend, or fail to perform any of its
obligations or cause any breach under, any contract set forth in SCHEDULE 3.12.
MW will exercise its commercially reasonable efforts to renew each of the
contracts set forth on SCHEDULE 3.12 which is scheduled to terminate prior to
the Closing Date;
(o) use commercially reasonable efforts not permit the
insurance referred to in SCHEDULE 3.17 to lapse, expire, terminate or be
cancelled;
(p) violate in any material respect any laws, regulations,
or orders applicable to it and its properties, operations, Business and
employees;
(q) amend its Articles of Incorporation or Bylaws; or
(r) agree to do any of the foregoing.
5.2 NO SOLICITATION. Neither MW nor the Stockholders shall, and
MW and the Stockholders shall use their best efforts to cause MW's officers,
directors, employees, agents, Affiliates and representatives (including, without
limitation, investment bankers, attorneys and accountants) not to, directly or
indirectly, (i) initiate contact with, solicit or encourage any inquiries or
proposals by, or (ii) except as required by applicable law as advised in writing
by counsel reasonably acceptable to MCSC, enter into any discussions or
negotiations with, or disclose directly or indirectly any information not
customarily disclosed concerning its Business and properties to, or afford any
access to its properties, books and records to, any Person or other entity or
group in connection with any possible proposal (an "Acquisition Proposal")
regarding a sale of MW's capital stock or a merger, consolidation, or sale of
all or a substantial portion of the assets of MW, or any similar transaction.
MW will notify MCSC immediately if any discussions or negotiations are sought to
be initiated, any inquiry or proposal is made, or any such information is
requested, with respect to an Acquisition Proposal or potential Acquisition
Proposal or if any Acquisition Proposal is received or indicated to be
forthcoming. The foregoing restrictions on disclosures shall not apply to
disclosures required to be made by any law, regulation or order of a court or
governmental agency of competent jurisdiction; provided, however, before any
disclosure is made MW shall notify MCSC immediately of any such request for
information and shall take all reasonable action to support any request or
motion MCSC may make for confidential treatment or a protective order.
5.3 STOCKHOLDER APPROVAL. The Stockholders shall, by virtue of
their execution of this Agreement be deemed to have provided their written
consent to the Merger and to have waived any rights they may have under
California law to dissent therefrom and to seek the fair value of their shares
of MW Common Stock in cash. If the approval of the stockholders of MCSC is
required, MCSC shall use its best efforts to promptly obtain such approval.
PAGE 38
5.4 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) ACCESS TO INFORMATION.
(i) Between the date of this Agreement and the earlier of
the Closing Date or the date of the termination of this Agreement, MW shall
provide to MCSC and its representatives full access to its premises, properties,
equipment, books and records as are related to the Business and shall make its
directors, officers, employees and agents available to confer with MCSC and its
representatives; and during such period, MW shall: (i) disclose and make
available to MCSC and its representatives all documents and records relating to
the assets, properties, operations, obligations and liabilities of MW, including
but not limited to, all books of account (including the general ledger), tax
records and returns, minute books of directors', committees', and stockholders'
meetings, organizational documents, material contracts, customer list and
agreements, filings with and communications from any Governmental Authority,
litigation files, accountants' work papers, plans or records relating to
employees and any other business activities of MW as MCSC or its representatives
may require; and (ii) promptly furnish to MCSC all other information concerning
MW's Business, properties and personnel as MCSC may request. During this
period, MCSC may perform any review, analysis or testing that it, in its sole
discretion, deems appropriate. MCSC will use its best efforts not to unduly
interfere with the business operations of MW during such review. Throughout
this period, MW will cause the Stockholders and one or more other designated
representatives to confer with MCSC's representatives on a regular and frequent
basis and to report the general status of MW's ongoing condition and operations.
In addition, MW will permit MCSC to communicate with its agents, customers and
creditors. MW will notify MCSC immediately of any material change in the
ordinary course of its Business or in the operations of its properties or of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or the institution, continuation
or the threat of litigation involving MW or its Affiliates or affiliated persons
and will keep MCSC fully informed of such events.
(ii) Between the date of this Agreement and the earlier of
the Closing Date or the date of termination of this Agreement, MCSC shall
provide to the Stockholders such information concerning MCSC as the Stockholders
may reasonably request relating to the business, condition (financial or
otherwise), results of operations and prospects of MCSC. The Stockholders will
use their best efforts not to unduly interfere with the business operations of
MCSC during such review. Throughout this period, MCSC will cause
Messrs. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to ▇▇▇▇▇▇ with the Stockholders
on a regular and frequent basis and to report the general status of MCSC's
ongoing condition and operations. The Stockholders hereby agree that, as of the
date hereof, they will not buy or sell any shares of MCSC Common Stock during
this period and MW shall take appropriate precautions to prevent any other
director, officer, employee, agent, Affiliate
PAGE 39
or Associate of MW from trading the securities of MCSC if they obtain or possess
knowledge of Confidential Information (as defined below) of MCSC.
(b) CONFIDENTIALITY. The Parties hereto will hold and will
cause their respective employees, officers, directors, consultants and advisors
to hold in strict confidence, unless compelled to disclose by judicial or
administrative process and then only with written notice prior to disclosure to
the disclosing party, all documents and information concerning the disclosing
party furnished to the receiving party in connection with the transactions
contemplated by this Agreement (except to the extent that such information can
be shown to have been (i) previously known by the receiving party other than
through a breach of a confidentiality agreement by a third party; (ii) in the
public domain through no fault of the receiving party; or (iii) later lawfully
acquired by the receiving party from other sources) (the "Confidential
Information"), will not use such Confidential Information except to evaluate and
consummate the Merger (and, if the Merger is consummated, in the business of
MCSC and the Surviving Corporation thereafter) and will not release or disclose
the Confidential Information to any other person, except the receiving party's
auditors, attorneys, financial advisors and other consultants and advisors and
lending institutions (including banks) or lending authorities in connection with
this Agreement (it being understood that such persons shall be informed by the
receiving party of the confidential nature of such information and shall be
directed by the receiving party to treat such information confidentially). If
the transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained for a period of two (2) years from the date of
termination of this Agreement, except to the extent the Confidential Information
comes into the public domain through no fault of the receiving party. If
requested by the disclosing party, the receiving party will return to the
disclosing party, all physical materials furnished by the disclosing party to
the receiving party or their respective agents, representatives or advisors and
all copies thereof, in whatever medium, and all materials prepared by the
receiving party which evaluate or reflect the Confidential Information. It is
understood that the receiving party shall be deemed to have satisfied its
obligation to hold the Confidential Information confidential if it exercises the
same care as it takes to preserve confidentiality for its own similar
information. The disclosing party will be entitled to equitable relief in the
event of a breach by the receiving party of the provisions contained in this
Section 5.4(b).
5.5 CONSENTS; EFFORTS TO CONSUMMATE. MW, the Stockholders and
MCSC will each use their respective best efforts to obtain consents of all third
parties and Governmental Authorities necessary to the consummation of the
transactions contemplated by this Agreement. Each of MW, the Stockholders and
MCSC agree to use all reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, as soon as practicable after the date of this Agreement and after the
Closing Date thereof, the transactions contemplated by this Agreement,
including, without limitation, using reasonable efforts to lift or rescind any
injunction or restraining order or other order
PAGE 40
adversely affecting the ability of the Parties to consummate the transactions
contemplated herein.
5.6 PUBLIC ANNOUNCEMENTS. MW and MCSC will consult with each
other before issuing any press release or otherwise making any public statements
with respect to the Agreement and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by law or judicial or administrative process.
5.7 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE STOCKHOLDERS. Subject to
Section 5.7(c), the Stockholders severally agree to indemnify and hold MCSC, and
its respective officers, directors, employees and agents and their respective
heirs, successors and assigns (collectively, the "MCSC Group"), harmless
against, and to reimburse the MCSC Group for any Damage or Tax imposed on or
incurred by any of the MCSC Group (a "MCSC Loss") because of or arising out of
or related to or in connection with:
(i) any breach of any of MW's or the Stockholders'
representations or warranties or any failure to perform or violation of any
agreement or covenant on the part of MW or the Stockholders under this Agreement
or under any other agreement referred to herein or contemplated hereby to which
MW or the Stockholders is a signatory; and
(ii) any and all actions, suits, proceedings, demands,
assessments, judgments, out-of-pocket costs and reasonable attorneys' fees (in
preparation, at trial and on appeal) of any nature incident to the foregoing.
(iii) "Damages" shall mean all damages, and includes,
without limitation, consequential damages, punitive damages, liabilities, costs,
losses, diminutions in value, fines, penalties, demands, claims, cost recovery
actions, lawsuits, administrative proceedings, orders, response action costs,
compliance costs, investigation expenses, arbitration expenses, consultant fees,
attorneys' and paralegals' fees, and litigation expenses.
(iv) Upon the execution of this Agreement, ▇▇. ▇▇▇▇▇▇▇
and ▇▇. ▇▇▇▇▇▇▇ shall execute and deliver to MCSC an additional indemnity as set
forth in a letter among them.
(b) INDEMNIFICATION BY MCSC. Subject to Section 5.7(c),
MCSC agrees to indemnify and hold the Stockholders and MW's respective officers,
directors, employees and agents and their respective heirs, successors and
assigns (collectively, the "MW Group"), harmless against, and to reimburse MW
Group for any Damage or Tax
PAGE 41
imposed on or incurred by any of MW Group (a "MW Loss") because of or arising
out of or related to or in connection with: (i) any breach of any of MCSC's
representations or warranties or any failure to perform or violation of any
agreement or covenant on the part of MCSC under this Agreement or any other
agreement referred to herein or contemplated hereby; and (ii) any and all
actions, suits, proceedings, demands, assessments, judgments, out-of-pocket
costs and reasonable attorneys' fees (in preparation, at trial and on appeal) of
any nature incident to the foregoing.
(c) LIMITATIONS ON INDEMNIFICATION. No indemnification
payment shall be made by the Stockholders pursuant to this Agreement, until the
amounts that the MCSC Group otherwise would be entitled to receive as
indemnification aggregate at least $150,000.00 and MCSC shall have been unable
to recover such amounts from any applicable insurance MCSC may have, at which
time the MCSC Group shall be entitled to receive payment of all such amounts up
to a maximum aggregate amount of $6.5 million. Each Stockholder shall be
responsible for one-third of any such payment (i.e., up to a maximum of
$2,166,667 per individual stockholder). No indemnification payment shall be
made by MCSC pursuant to this Agreement, until the amounts that the MW Group
would otherwise be entitled to receive as indemnification aggregate at least
$150,000.00 and MW or the Stockholders shall have been unable to recover such
amounts from any applicable insurance MW or the Stockholders may have, at which
time the MW Group shall be entitled to receive payment of all such amounts up to
a maximum aggregate amount of $6.5 million.
(d) NOTICE. The indemnified party promptly shall notify
the indemnifying party of any claim that is reasonably likely to give rise to a
claim for indemnification under this Agreement (a "Damage Claim") asserted by
such party or by a third party, stating, to the extent known, with detailed
specificity the nature and basis of the Damage Claim. The failure to give
promptly any such notice shall not relieve the indemnifying party from any
liability hereunder with respect to the subject matter of any Damage Claim
except to the extent that the indemnifying party actually has been damaged by
such failure. If the indemnifying party shall have confirmed in writing its
obligation to indemnify for any liability asserted in any Damage Claim, then the
indemnifying party shall have, at its election, the right to compromise or
defend such Damage Claim involving the assertion of liability by a third party
at the indemnifying party's sole expense, through counsel chosen by it, provided
that, in conducting such defense, settlement and compromise: (i) the
indemnifying party shall not permit to exist any lien, encumbrance or other
adverse charge upon any asset or business of the indemnified party; (ii) the
indemnifying party shall cause its counsel to consult with the indemnified party
and, if applicable, the indemnified party's counsel and keep them fully advised
of the progress of the defense, settlement and compromise; and (iii) the
indemnifying party promptly shall reimburse the indemnified party for the full
amount of any Damages resulting from such Damage Claim except to the extent
otherwise provided in the next sentence. If the indemnifying party is required
hereunder or elects to conduct the defense of such Damage Claim, the indemnified
party shall cooperate with the indemnifying party in connection therewith and
shall be entitled to
PAGE 42
participate in the defense thereof and to appoint counsel for that purpose,
except that the cost of any such participating counsel shall be solely for the
account of the indemnified party and the indemnifying party shall have no
responsibility therefor unless: (i) the indemnifying party shall not have
notified the indemnified party that it will assume the defense of such Damage
Claim and have designated counsel reasonably acceptable to the indemnified party
within a reasonable time of the notice of such Damage Claim; or (ii) the named
parties to any proceeding with respect to such Damage Claim (including any
impleaded parties) include both the indemnified party and the indemnifying party
and representation of both parties by the same counsel would be, in the opinion
of counsel selected by the indemnifying party, inappropriate due to actual or
potential differing interests between them. As long as the indemnifying party
is contesting any such Damage Claim in good faith in accordance with the
foregoing requirements, the indemnified party shall not pay or settle any such
Damage Claim. Notwithstanding the foregoing, the indemnified party may pay or
settle any such Damage Claim at any time, provided that the indemnified party
waives any right to indemnity therefor by the indemnifying party.
(e) DEFENSE. In the event that the indemnifying party
fails within thirty (30) days after the receipt of notice of such Damage Claim
to notify the indemnified party and to confirm in writing its obligation to
indemnify for any liability in such Damage Claim, the indemnified party shall
have the right to defend, settle or compromise the Damage Claim in its
discretion; provided, however, that the indemnifying party shall have the right
to participate in the defense of such Damage Claim at its own expense. The
indemnifying party shall promptly reimburse the indemnified party for the full
amount of any Damages resulting from such Damage Claim and any defense,
settlement or compromise thereof and all reasonable related costs incurred by
the indemnified party.
(f) EXCLUSIVE REMEDY. Except for breaches of this
Agreement resulting from fraud or intentional misrepresentation, the
indemnification provisions in this Agreement shall be the exclusive remedy for
breach of the representations and warranties set forth herein.
5.8 EXISTENCE. The Stockholders, to the extent within their
control, and MW will take such action as may be necessary to maintain, preserve,
renew and keep in full force and effect MW's existence (corporate or otherwise),
rights and franchises to the Closing Date.
5.9 ARTICLES OF MERGER. MW and MCAC shall, on or prior to the
Closing Date, execute and file Articles of Merger with the Secretary of State of
the State of California to effectuate the Merger and will file Articles of
Amendment to the Articles of Incorporation of MCAC to change the corporate name
of MCAC to "Minnesota Western, Inc."
PAGE 43
ARTICLE 6.0 GENERAL MATTERS.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND RELATED
AGREEMENTS. All of the terms, conditions, warranties, representations,
covenants, indemnities and agreements contained in or made pursuant to this
Agreement shall survive the Closing and the indemnity provisions of Sections 5.7
shall be valid and effective for a period of one (1) year after the Effective
Time, notwithstanding any investigation made by or knowledge of any of the
Parties to this Agreement or any of their respective successors or assigns. All
covenants of the Parties that are to be performed after Closing shall continue
and expire in accordance with their respective terms. If at the end of any of
such period or term, a claim has been asserted hereunder and still is pending or
unresolved, such period or term shall continue to survive until the claim
finally is terminated or otherwise resolved.
6.2 COVENANT NOT TO DISCLOSE. The Stockholders hereby covenant
and agree, that as the owners and operators of the Business of MW, they possess
certain data and knowledge of operations of the Business of MW that are
proprietary in nature and confidential. The Stockholders covenant and agree
that they will not, at any time after the Closing, reveal, divulge or make known
to any person (other than MCSC) or use for their own account or for the account
of any person, firm, corporation or other organization, any confidential or
proprietary customer list, vendor list, sales method, record, data, trade
secret, pricing policy, bid amount, bid strategy, rate structure, personnel
policy, method or practice of soliciting or obtaining or doing business by MW or
any Business Know-How or other confidential or proprietary information
whatsoever relating to MW or, whether or not obtained with the knowledge and
permission of MCSC (exclusive of any information which at the time of disclosure
is generally available to and known by the public, other than as a result of any
unauthorized disclosure by MW or the Stockholders).
6.3 NON-INTERFERENCE AGREEMENT. The Stockholders will not, at
any time after the Closing, directly or indirectly, for whatever reason, whether
for their own account or for the account of any other Person, firm, corporation
or other organization: (i) engage in any activity that would compete with the
business of MCSC or the Surviving Corporation in the market areas in which MW
does business; (ii) solicit, employ or otherwise interfere with any of MW's or
MCSC's existing or potential contracts or relationships with any customer,
affiliate, employee, officer, director, supplier, vendor or any independent
contractor whether the person is employed by or associated with MW or with MCSC
on the Closing Date or at any time thereafter; or (iii) solicit or otherwise
interfere with any existing or proposed contract between MW or MCSC and any
other party whatsoever, in each case, for a period of the later of one (1) year
from the Closing Date or the date of termination of their respective employment
agreements.
PAGE 44
6.4 USE OF MW'S NAME. MW hereby agrees that after the Closing
the Surviving Corporation shall have the right to use MW's name as its corporate
title and MCSC or the Surviving Corporation shall have the right to use MW's
name on products sold by MCSC or the Surviving Corporation following the Closing
Date.
6.5 BENEFIT PLANS AND ARRANGEMENTS
(a) PLAN PARTICIPATION. As soon as administratively
practicable after the Effective Time, MCSC shall take all reasonable action so
that employees of the Surviving Corporation shall be entitled to participate in
the MCSC employee benefit plans of general applicability, and until such time
the employee plans of MW shall remain in effect. For purposes of determining
eligibility to participate in and the vesting of benefits (but not for purposes
of benefit accrual) under the MCSC employee plans, MCSC shall recognize years of
service with MW prior to the Effective Time. MCAC will continue for at least
one (1) year the MW 401(k) plan and shall, for such time as the plan is
continued, contribute 25% of the Surviving Corporation's employees'
contributions up to 5% of the employees salary on an annual basis.
(b) EMPLOYMENT. Unless otherwise agreed by MW and MCSC,
all employees of MW as of the Effective Time are expected to become employees of
the Surviving Corporation as of the Effective Time, provided that, except as set
forth in Section 6.5(c), below, neither MCSC nor the Surviving Corporation shall
have any obligation to continue the employment of any such person and nothing
contained in this Agreement shall give any employee of the Surviving Corporation
a right to continuing employment with the Surviving Corporation after the
Effective Time.
(c) EMPLOYMENT AGREEMENTS. On the Closing Date, the
Surviving Corporation and each of the Stockholders shall execute an employment
agreement in the form as set forth as EXHIBITS A, B AND C, respectively,
attached hereto and made a part hereof, which shall commence upon the Closing
Date. Said employment agreement shall be separate and independent from this
Agreement and such employment agreements shall stand alone and not be connected
in its operation or with respect to the rights and remedies of the Parties
thereto.
(d) EMPLOYEE OPTIONS. At its next regularly scheduled
meeting after the Closing Date, the Compensation Committee of the Board of
Directors of MCSC shall grant to employees of MW as of the Closing Date (and who
continue as employees of the Surviving Corporation) as recommended by ▇▇. ▇▇▇▇▇▇
in writing to the Compensation Committee prior to its meeting, pursuant to
MCSC's 1996 Stock Option Plan, options to purchase, in the aggregate, fifty
thousand (50,000) shares of MCSC Common Stock, which options shall have an
exercise price of $14.00 per share and shall vest in three (3) equal annual
installments on the anniversary date of the Closing.
PAGE 45
6.6 FAILURE TO FULFILL CONDITIONS. In the event that either of
the Parties hereto determines that a condition to its respective obligations to
consummate the transactions contemplated may not be fulfilled on or prior to the
termination of this Agreement, it promptly will notify the other party. Each
party promptly will inform the other party of any facts applicable to it that
would be likely to prevent or materially delay approval of the Merger by any
Governmental Authority or third party or that would otherwise prevent or
materially delay completion of the Merger.
6.7 COMMON STOCK RESTRICTIONS. Except with the prior written
consent of MCSC, the New MCSC Shares to be delivered to the Stockholders at the
Closing shall not be sold, pledged, hypothecated, gifted or otherwise
transferred or disposed of until the date which is the 271st day after the
Closing Date and all certificates representing such shares of Common Stock shall
contain a legend to such effect, as set forth in Section 3.21(g).
6.8 COOPERATION; ACCESS. MCSC and the Surviving Corporation
will permit the Stockholders reasonable access to the records of MW and the
Surviving Corporation relating to matters of income tax for the period prior to
and to the Closing Date, and will permit such access to their professional tax
advisors for legitimate purposes (such as tax planning, return preparation,
audits or other administrative proceedings and litigation with the Internal
Revenue Service or other Taxing Authority) not inconsistent with this Agreement.
MCSC and MCAC will preserve such records for the time periods required by
applicable law and regulation.
6.9 TAXES FOR PRE-CLOSING PERIODS. If, after the Closing Date,
any Governmental Authority proposes any adjustment of Tax against the Surviving
Corporation that, if sustained, would be payable by the Stockholders, the
Surviving Corporation shall promptly notify the Stockholders in writing of such
proposed Tax. The Stockholders shall be responsible for any such Tax
adjustment, but the Stockholders shall not be responsible for the payment of any
such Tax adjustment relating to reserves taken for inventory for the twelve
months ended October 31, 1997, which amounts shall be paid by the Surviving
Corporation. If a majority of the Stockholders so request, the Surviving
Corporation shall contest such tax in good faith, at the Stockholders' expense.
A majority of the Stockholders shall have the right to control any such contest.
In addition, if the Surviving Corporation receives, as the successor to MW, any
refund of any Tax, interest or penalty paid by MW or any of the Stockholders for
any period ending on or prior to the Closing, the Surviving Corporation shall
promptly pay over such amount to the Stockholders. If the Stockholders incur
any liability for any additional Tax as a result of any adjustment for the year
ended December 31, 1997 by any Governmental Authority, and such adjustment
results in a Tax benefit to the Surviving Corporation, then the Surviving
Corporation shall pay to the Stockholders an amount equal to the lesser of (a)
the amount of the additional Tax paid by the Stockholders or (b) the present
value of the Tax benefit received by the Surviving Corporation.
PAGE 46
ARTICLE 7.0 CONDITIONS TO OBLIGATIONS OF MCSC AND MCAC TO CONSUMMATE.
The obligations of MCSC and MCAC to consummate the Agreement are
subject to the satisfaction or, unless prohibited by law, the waiver by MCSC and
MCAC of each of the following conditions:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of MW and the Stockholders contained herein shall be true, complete,
and accurate in all material respects on the date of this Agreement and on the
Closing Date as though such representations and warranties were made at and on
such date.
7.2 PERFORMANCE. MW and the Stockholders shall have performed
and complied with all agreements, obligations and conditions required by this
Agreement to be so performed or complied with by them at or prior to the
Closing.
7.3 CONSENTS AND APPROVALS. All necessary consents and
approvals of any Governmental Authority or any third party required for
consummation of the transactions contemplated by this Agreement shall have been
obtained and all waiting periods shall have expired or been terminated.
7.4 STOCKHOLDER APPROVAL. The Stockholders of MW and, if
necessary, the stockholders of MCSC, shall have approved the Agreement by the
vote required by applicable law after full disclosure of the terms and
conditions of this Agreement and the transactions contemplated thereby.
7.5 DELIVERY OF DOCUMENTS. At or before the Closing, MW and the
Stockholders shall have executed and delivered to MCSC and MCAC certain
documents, including, but not limited to: (i) a certificate dated the Closing
Date executed by the President and Secretary of MW evidencing compliance with
the conditions set forth in this Article 7; (ii) the surrender by the
Stockholders of the certificates representing 100% of the issued and outstanding
shares of MW Common Stock, duly endorsed in blank (or as required by MCSC);
(iii) the Articles of Merger executed by a duly authorized officer of MW; (iv)
the receipt for the delivery of the New MCSC Shares by the Stockholders; (v) the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇, counsel to MW, addressed to the
Board of Directors of MCSC substantially in the form of EXHIBIT D; and (vi) such
other documents as MCSC or its counsel may reasonably require. All such
documents shall be in form and substance satisfactory to MCSC. MW and the
Stockholders agree to use their best efforts to ensure that the conditions set
forth herein are satisfied.
7.6 NO LITIGATION. None of the Parties hereto shall be a party
to, or shall have received notice of, any suit, claim or proceeding or
threatened suit, claim or proceeding to enjoin or restrain any or all of the
transactions contemplated herein or to
PAGE 47
nullify or render ineffective all or any part of such transactions if
accomplished or alleging Damages in connection therewith.
7.7 NO MATERIAL CHANGE. No change, event, development or
combination of developments shall have occurred that, individually or in the
aggregate, has resulted in or could reasonably be expected to result in a
material adverse change in the Business, condition (financial or otherwise) or
prospects of MW.
ARTICLE 8.0 CONDITIONS TO OBLIGATIONS OF MW AND THE STOCKHOLDERS TO
CONSUMMATE.
The obligations of MW and the Stockholders to consummate this
Agreement are subject to the satisfaction or, unless prohibited by law, the
waiver by MW and the Stockholders of each of the following conditions:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of MCSC contained herein shall be true, complete, and accurate in all
material respects on the date of this Agreement and on the Closing Date as
though such representations and warranties were made at and on such date.
8.2 PERFORMANCE. MCSC and MCAC shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be so performed or complied with by it at or prior to the Closing.
8.3 CONSENTS AND APPROVALS. All necessary consents and
approvals of any Governmental Authority or any third party required for
consummation of the transactions contemplated by this Agreement shall have been
obtained and all waiting periods shall have expired or been terminated.
8.4 OFFICERS' CERTIFICATE. MCSC shall have delivered to MW a
certificate signed by a duly authorized officer, dated the Closing Date,
certifying the fulfillment of the conditions specified in Sections 8.1 and 8.2
of this Agreement.
8.5 PAYMENT OF CASH AND THE NEW MCSC SHARES. Against receipt of
the certificates representing 100% of the issued and outstanding shares of MW
Common Stock, MCSC shall have delivered to the Stockholders on the Closing Date
the cash and the New MCSC Shares as set forth in Section 2.3(b) hereof.
8.6 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed the Employment Agreements at the Closing in the form of EXHIBITS A, B
AND C, attached hereto.
PAGE 48
8.7 NO LITIGATION. None of the parties hereto shall be a party
to, or shall have received notice of, any suit, claim or proceeding or
threatened suit, claim or proceeding to enjoin or restrain any or all of the
transactions contemplated herein or to nullify or render ineffective all or any
part of such transactions if accomplished or alleging Damages in connection
therewith.
8.8 DELIVERY OF DOCUMENTS. At or before the Closing, MCSC and
MCAC shall execute and deliver to MW all other documents contemplated by this
Agreement.
8.9 OPINION OF COUNSEL. The individual Stockholders shall have
received the opinion of Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P. substantially in
the form of EXHIBIT E.
8.10 TAX OPINION. The Stockholders shall have received an
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇ to the effect that the non-cash
portion of the Purchase Price qualifies as a tax-free reorganization under the
Code. MCSC and MCAC shall provide such counsel reasonable and customary
representations in connection with such counsel's opinion.
ARTICLE 9.0 TERMINATION.
9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the Stockholders
of MW and, if required, the stockholders of MCSC:
(a) by mutual consent of the Boards of Directors of MCSC
and MW; or
(b) by either MCSC or MW if, without fault of such
terminating party, the Agreement shall not have been consummated on or before
January 31, 1998, unless extended by mutual written consent; or
(c) by MCSC if any condition to its obligations as set
forth in Article 7.0 shall become incapable of fulfillment or have not been
fulfilled prior to or on the Closing Date and shall not have been waived by MCSC
in writing, or by MW if any of the conditions to the obligations of MW and the
Stockholders set forth in Article 8.0 shall have become incapable of fulfillment
or have not been fulfilled prior to or on the Closing Date and shall not have
been waived by MW in writing; provided that neither party may terminate this
Agreement hereunder if it is in material breach of any of its representations,
warranties, covenants or agreements in this Agreement; or
PAGE 49
(d) by MCSC, in the event of a material deterioration of
the assets of MW, in MCSC's sole discretion; or
(e) by MCSC or MW upon a material breach of a
representation or warranty by the other or the failure to perform any covenant
or agreement contained herein, if such breach or failure to perform shall not
have been cured within fifteen (15) calendar days after receipt by the breaching
party of notice of such breach from the non-breaching party.
9.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination and abandonment of the Agreement by MCSC or MW pursuant to Section
9.1, written notice thereof shall forthwith be given to the other and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein, the obligations stated in this
Section 9.2 and in Sections 5.4(b), 5.6, and 9.3 shall survive any such
termination for the periods therein stated, if any. No termination of this
Agreement under Section 9.1(c) or (e) for any reason or in any manner shall
release, or be construed as so releasing, any Party hereto from any liability or
damage to the other Party hereto arising out of, in connection with, or
otherwise relating to, directly or indirectly, such Party's material breach,
such Party's material default or such Party's failure in performance of any of
its material covenants, agreements, duties or obligations arising hereunder.
9.3 PAYMENT OF EXPENSES AND TERMINATION. Other than as
expressly provided elsewhere in this Agreement, whether or not the Agreement
shall be consummated, all costs and expenses, including all Taxes required to be
paid prior to Closing, incurred in connection with this Agreement will be paid
by the Party incurring such expenses.
ARTICLE 10.0 MISCELLANEOUS.
10.1 FURTHER ASSURANCES. From time to time, and without further
consideration, each of the Parties hereto agrees to execute and deliver any and
all further agreements, documents or instruments necessary to effectuate this
Agreement, the Merger and the transactions referred to herein or contemplated
hereby and to vest good, valid and marketable title to the assets transferred in
connection herewith or as reasonably requested by the other Party to perfect or
evidence its rights hereunder. Each Party promptly will notify the other Party
of any information delivered to or obtained by such Party that would prevent the
consummation of the transactions contemplated by this Agreement, or would
indicate a breach of the representations, warranties or covenants of any of the
Parties to this Agreement.
10.2 NOTICES. Any notices hereunder shall be deemed
sufficiently given by one Party to another only if in writing and if and when
delivered or tendered either in
PAGE 50
person or as of one (1) business day after sent by recognized overnight service
for next day delivery, with all costs prepaid, or as of five (5) Business Days
after deposit in the United States mail, registered or certified, with postage
prepaid, addressed as follows:
If to MCSC or MCAC:
Miami Computer Supply Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
and a copy to:
Elias, Matz, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
If to MW:
Minnesota Western/Creative Office Products, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: H. ▇▇▇▇▇ ▇▇▇▇▇▇, President
and a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Stockholders:
▇▇. ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
PAGE 51
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
33701 Brigantine
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other address as the Party addressed shall have previously designated
by written notice to the serving Party, given in accordance with this Section;
provided, however, that a notice not given as above shall, if it is in writing,
be deemed given if and when actually received by the Party to whom it is
required or permitted to be given.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of California.
Except as prohibited by applicable law, each Party hereby waives any right it
may have to a trial by jury in any litigation directly or indirectly arising out
of, under, or in connection with this Agreement. This waiver is knowingly,
intentionally and voluntarily made by each Party, and each Party acknowledges
that no representative, agent or attorney of either Party has made any
representations of fact to induce this waiver of trial by jury or in any way to
nullify or modify its effect. The Parties each hereby agree that this Agreement
constitutes a written consent to waiver of trial by jury.
10.4 SEVERABILITY. Should any term or provision or portion of
such provision of this Agreement be invalid or unenforceable because of the
scope thereof or the period covered thereby or otherwise, such term, provision
or portion of such provision shall be deemed to be reduced and limited to enable
MCSC or MW or the Surviving Corporation to enforce it to the maximum extent
permissible under the laws and public policies applied under the jurisdiction in
which enforcement is sought. If any term or provision of this Agreement is held
or deemed to be invalid or unenforceable, in whole or in part, by a court of
competent jurisdiction, such term or provision shall be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement which shall
be construed to preserve to the maximum permissible extent the intent and
purposes of this Agreement. Any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such terms or
provisions in any other jurisdiction.
10.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
exhibits hereto and the lists, schedules and documents delivered pursuant
hereto) is intended
PAGE 52
by the Parties to and does constitute the entire agreement of the Parties with
respect to the transactions contemplated by this Agreement. This Agreement
supersedes any and all prior understandings, written or oral, between the
Parties, including the Confidentiality Agreement by and between MCSC and MW
dated August 21, 1997 and the non-binding letter of intent by and among MCSC and
MW dated as of October 10, 1997. If there is any question of interpretation or
if there are or appear to be inconsistencies between this Agreement and any
Schedule or Exhibit hereto the terms of this Agreement shall govern. This
Agreement may not be amended, modified, waived, discharged or terminated orally,
but only by an instrument in writing signed by an authorized executive officer
of the Party against which enforcement of the amendment, modification, waiver,
discharge or termination is sought. No waiver of the breach of any provision or
term of this Agreement shall be deemed or construed to be a waiver of other or
subsequent breaches.
10.6 ASSIGNMENT, ETC. Except for the assignment of certain
rights under this Agreement by MCSC to its wholly owned subsidiary MCAC, the
rights and obligations of any of the Parties to this Agreement may not be
assigned without the prior written consent of the other Parties to this
Agreement, and any assignment made in violation of the foregoing shall be void
and have no legal effect. This Agreement shall inure to the benefit of and be
binding upon the Parties hereto and their respective successors, assigns, heirs,
executors and administrators, but nothing herein, express or implied, is
intended to or shall confer any rights, remedies or benefits upon any person
other than the Parties hereto. All section headings used herein are for
convenience and ease of reference only and do not constitute part of this
Agreement and shall not be referred to for the purpose of defining,
interpreting, construing or enforcing any of the provisions of this Agreement.
All pronouns and variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the Party or parties to
this Agreement may require.
10.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, MCSC, MCAC, MW and the Stockholders have caused
this Agreement to be duly executed and delivered under seal, by their respective
authorized officers, on the date first above written.
MINNESOTA WESTERN/CREATIVE OFFICE
PRODUCTS, INC.
Witness: By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇
----------------- ----------------------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇
President
SIGNATURES CONTINUED NEXT PAGE
PAGE 53
STOCKHOLDERS:
▇▇. ▇▇▇▇▇▇
Witness: By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------- ----------------------------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇
Witness: By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇
Witness: By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
THE ▇▇▇▇▇▇ TRUST
Witness: By: /s/ H. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------- ----------------------------------------
H. ▇▇▇▇▇ ▇▇▇▇▇▇,
Trustee
Witness: By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇,
Trustee
THE ▇▇▇▇▇▇▇ TRUST
Witness: By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee
THE ▇▇▇▇▇▇▇ TRUST
Witness: By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee
Witness: _____________________ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee
SIGNATURES CONTINUED NEXT PAGE
PAGE 54
MIAMI COMPUTER SUPPLY CORPORATION
Witness: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Secretary Vice President - Chief Financial
Officer
Witness: MCSC CALIFORNIA ACQUISITION
--------------------- CORPORATION
(In Organization)
Witness: By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------- ----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President - Chief Financial
Officer
