Exhibit 10
AGREEMENT AND PLAN OF MERGER
BETWEEN
MALT ACQUIRING, INC.
AND
THE LION BREWERY, INC.
DATED SEPTEMBER 17, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE 1
The Merger . . . . . . . . . . . -1-
1.1 The Merger . . . . . . . . . . . . . . . . . . . . -1-
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1.2 Effective Time . . . . . . . . . . . . . . . . . . -1-
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1.3 Effects of the Merger . . . . . . . . . . . . . . . -2-
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1.4 Articles of Incorporation and Bylaws; Directors
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and Officers . . . . . . . . . . . . . . . . . . . -2-
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1.5 The Closing . . . . . . . . . . . . . . . . . . . . -2-
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ARTICLE 2
Effect of the Merger on Securities
of the Company . . . . . . . . . . . . . . . . . . . . . . . -2-
2.1 Purchaser Stock . . . . . . . . . . . . . . . . . . -2-
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2.2 Conversion of Common Stock . . . . . . . . . . . . -3-
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2.3 Exchange of Certificates . . . . . . . . . . . . . -4-
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2.4 Closing of Transfer Books . . . . . . . . . . . . . -5-
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2.5 No Further Ownership Rights in Common Stock . . . . -5-
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ARTICLE 3
Representations and Warranties of the Company . . . . . . . . -5-
3.1 Organization, Standing and Power . . . . . . . . . -5-
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3.2 Capital Structure . . . . . . . . . . . . . . . . . -6-
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3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . -6-
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3.4 Other Interests . . . . . . . . . . . . . . . . . . -7-
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3.5 Authority; Non-Contravention . . . . . . . . . . . -7-
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3.6 SEC Documents . . . . . . . . . . . . . . . . . . . -8-
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3.7 Absence of Certain Events . . . . . . . . . . . . . -9-
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3.8 Litigation . . . . . . . . . . . . . . . . . . . . -9-
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3.9 Compliance with Applicable Law . . . . . . . . . . -9-
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3.10 Employee Plans . . . . . . . . . . . . . . . . . -10-
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3.11 Employment Relations and Agreements . . . . . . . -12-
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3.12 Limitation on Business Conduct . . . . . . . . . -12-
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3.13 Title to, and Sufficiency and Condition of,
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Assets . . . . . . . . . . . . . . . . . . . . . -12-
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3.14 Environmental Laws and Regulations . . . . . . . -13-
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3.15 Patents, Trademarks, Copyrights . . . . . . . . . -14-
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3.16 Taxes . . . . . . . . . . . . . . . . . . . . . . -14-
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3.17 Brokers . . . . . . . . . . . . . . . . . . . . . -15-
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ARTICLE 4
Representations and Warranties of
the Purchaser . . . . . . . . . . . . . . . . . . . . . . . -15-
4.1 Organization, Standing and Power . . . . . . . . -15-
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4.2 Authority; Non-Contravention . . . . . . . . . . -16-
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4.3 Financing . . . . . . . . . . . . . . . . . . . . -17-
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4.4 Brokers . . . . . . . . . . . . . . . . . . . . . -17-
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ARTICLE 5
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . -17-
5.1 Alternative Proposals . . . . . . . . . . . . . . -17-
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5.2 Interim Operations of the Company . . . . . . . . -18-
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5.3 Meeting of the Company's Stockholders . . . . . . -20-
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5.4 Filings, Other Action . . . . . . . . . . . . . . -20-
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5.5 Inspection of Records . . . . . . . . . . . . . . -21-
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5.6 Publicity . . . . . . . . . . . . . . . . . . . . -21-
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5.7 Proxy Statement . . . . . . . . . . . . . . . . . -21-
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5.8 Further Action . . . . . . . . . . . . . . . . . -22-
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5.9 Expenses . . . . . . . . . . . . . . . . . . . . -22-
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5.10 Indemnification . . . . . . . . . . . . . . . . . -22-
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5.11 Takeover Statute . . . . . . . . . . . . . . . . -23-
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5.12 Conduct of Business by Purchaser Pending the
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Merger . . . . . . . . . . . . . . . . . . . . . -24-
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5.13 Conveyance Taxes . . . . . . . . . . . . . . . . -24-
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ARTICLE 6
Conditions to Merger . . . . . . . . . . . . . . . . . . . -24-
6.1 Conditions to Each Party's Obligation to Effect
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the Merger . . . . . . . . . . . . . . . . . . . -24-
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6.2 Conditions to Obligation of Company to Effect the
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Merger . . . . . . . . . . . . . . . . . . . . . -25-
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6.3 Conditions to Obligation of Purchaser to Effect
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the Merger . . . . . . . . . . . . . . . . . . . -26-
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ARTICLE 7
Termination . . . . . . . . . . . . . . . . . . . . . . . . -29-
7.1 Termination by Mutual Consent . . . . . . . . . . -29-
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7.2 Termination by Either Purchaser or Company . . . -29-
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7.3 Termination by Company . . . . . . . . . . . . . -29-
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7.4 Termination by Purchaser . . . . . . . . . . . . -30-
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7.5 Effect of Termination and Abandonment . . . . . . -30-
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7.6 Extension, Waiver. . . . . . . . . . . . . . . . -31-
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ARTICLE 8
General Provisions . . . . . . . . . . . . . . . . . . . . -31-
8.1 Nonsurvival of Representations, Warranties and
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Agreements . . . . . . . . . . . . . . . . . . . -31-
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8.2 Notices . . . . . . . . . . . . . . . . . . . . . -31-
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8.3 Assignment; Binding Effect . . . . . . . . . . . -32-
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8.4 Entire Agreement . . . . . . . . . . . . . . . . -32-
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8.5 Amendment . . . . . . . . . . . . . . . . . . . . -32-
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8.6 Governing Law . . . . . . . . . . . . . . . . . . -32-
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8.7 Counterparts . . . . . . . . . . . . . . . . . . -32-
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8.8 Headings . . . . . . . . . . . . . . . . . . . . -33-
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8.9 Interpretation . . . . . . . . . . . . . . . . . -33-
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8.10 Waivers . . . . . . . . . . . . . . . . . . . . . -33-
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8.11 Incorporation of Exhibits and Schedules . . . . . -33-
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8.12 Severability . . . . . . . . . . . . . . . . . . -33-
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8.13 Confidentiality . . . . . . . . . . . . . . . . . -33-
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8.14 Enforcement of Agreement . . . . . . . . . . . . -34-
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DEFINITIONS
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Alternative Proposal . . . . . . . . . . . . . . . . . . . . 16
Articles of Merger . . . . . . . . . . . . . . . . . . . . . . 1
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company SEC Documents . . . . . . . . . . . . . . . . . . . . . 8
Company Benefit Plans . . . . . . . . . . . . . . . . . . . . 10
Company Options . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Permits . . . . . . . . . . . . . . . . . . . . . . . . 9
Department of State . . . . . . . . . . . . . . . . . . . . . . 1
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . 3
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 1
Employment Agreements . . . . . . . . . . . . . . . . . . . . 12
Environmental Laws . . . . . . . . . . . . . . . . . . . . . 13
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . 8
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . 8
Hazardous Material . . . . . . . . . . . . . . . . . . . . . 13
Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . 22
▇▇▇▇▇▇ Options . . . . . . . . . . . . . . . . . . . . . . . . 6
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Material Adverse Change . . . . . . . . . . . . . . . . . . . . 6
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . 6
Meeting of Stockholders . . . . . . . . . . . . . . . . . . . 20
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . 3
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . 11
Option Consideration . . . . . . . . . . . . . . . . . . . . . 3
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . 4
PBCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 6
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . 21
Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Qualifying Alternative Proposal . . . . . . . . . . . . . . . 17
Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Secretary of State . . . . . . . . . . . . . . . . . . . . . 16
June 30 Balance Sheet . . . . . . . . . . . . . . . . . . . . 12
Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . 1
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . 14
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
September 17, 1998, between MALT ACQUIRING, INC., a Pennsylvania
corporation ("Purchaser"), and THE LION BREWERY, INC., a
Pennsylvania corporation (the"Company").
RECITALS
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A. The Boards of Directors of the Purchaser and the
Company have approved, and deem it advisable and in the best
interests of their respective companies and stockholders to
consummate a merger (the "Merger") of Purchaser, with and into
the Company, wherein each issued and outstanding share of Common
Stock, par value $.01 per share, of the Company (the "Common
Stock"), except shares of Common Stock held by holders who comply
with the provisions of Pennsylvania law regarding the right of
stockholders to dissent from the Merger and require appraisal of
their shares of Common Stock, will be converted into the right to
receive $4.70 per share, in cash, without interest.
B. The Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in
connection with the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and
of the representations, warranties, covenants and agreements
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the
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conditions hereof, and in accordance with the Business
Corporation Law of Pennsylvania ("PBCL"), Purchaser shall be
merged with and into the Company at the Effective Time (as
hereinafter defined). Following the Merger, the separate
corporate existence of Purchaser shall cease and the Company
shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and
obligations of Purchaser in accordance with the PBCL.
1.2 Effective Time. The Merger shall become effective when
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Articles of Merger (the "Articles of Merger"), executed in
accordance with the relevant provisions of the PBCL, are accepted
for filing by the Department of State of the Commonwealth of
Pennsylvania (the "Department of State"). When used in this
Agreement, the term "Effective Time" shall mean the later of the
date and time at which the Articles of Merger are accepted for
filing by the Department of State or such later time established
by the Articles of Merger. The filing of the Articles of Merger
shall be made as soon as reasonably practicable (but not later
than the first business day) after the satisfaction or waiver of
the conditions to the Merger set forth herein.
1.3 Effects of the Merger. The Merger shall have the
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effects set forth in the PBCL.
1.4 Articles of Incorporation and Bylaws; Directors and
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Officers.
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(a) Subject to the terms of Section 5.10, the Articles
of Incorporation of the Company, as in effect immediately prior
to the Effective Time, shall be amended by the Articles of Merger
to make such changes regarding the capitalization of the
Surviving Corporation as Purchaser may request and, as so
amended, the Articles of Incorporation and the Bylaws of the
Company shall be the Articles of Incorporation and the Bylaws of
the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
(b) The directors of Purchaser at the Effective Time
shall, from and after the Effective Time, be the initial
directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal, in accordance with the
Surviving Corporation's Articles of Incorporation and Bylaws.
(c) The officers of Purchaser at the Effective Time
and such other persons as designated by Purchaser shall, from and
after the Effective Time, be the initial officers of the
Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal, in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
1.5 The Closing. Subject to the terms and conditions of
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this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place (a) at the
offices of ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, on the first business
day following the day on which the last to be fulfilled or waived
of the conditions set forth in Article 6 shall be fulfilled or
waived in accordance herewith or (b) at such other time, date or
place as the Purchaser and the Company may agree. The date on
which the Closing occurs is hereinafter referred to as the
"Closing Date."
ARTICLE 2
EFFECT OF THE MERGER ON SECURITIES
OF THE COMPANY
2.1 Purchaser Stock. At the Effective Time, each share of
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the common stock of Purchaser outstanding immediately prior to
the Effective Time shall be converted into and become one share
of common stock, par value $.01 per share, of the Surviving
Corporation, and each certificate theretofore representing any
such shares shall, without any action on the part of the holder
thereof, be deemed to represent the same number of shares of the
Surviving Corporation.
2.2 Conversion of Common Stock.
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(a) Subject to Sections 2.2(b) and 2.2(c), at the
Effective Time each issued and outstanding share of Common Stock
shall be converted into the right to receive $4.70, in cash,
without interest (the "Merger Consideration"). All such shares
of Common Stock, when so converted, shall cease to be outstanding
and shall be canceled and retired and shall cease to exist, and
each holder of a certificate or certificates (the "Certificates")
representing any such shares of Common Stock shall thereafter
cease to have any rights with respect thereto, except the right
to receive the Merger Consideration.
(b) Notwithstanding any provision of this Agreement to
the contrary, if required by the PBCL but only to the extent
required thereby, shares of Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are
held by holders of such shares of Common Stock who have properly
exercised appraisal rights with respect thereto in accordance
with the PBCL (the "Dissenting Shares") will not be exchangeable
for the right to receive the Merger Consideration, and holders of
such shares of Common Stock will be entitled to receive payment
of the appraised value of such shares of Common Stock in
accordance with the provisions of the PBCL unless and until such
holders shall fail to perfect or shall effectively withdraw or
shall have lost their rights to appraisal and payment under the
PBCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares
of Common Stock will thereupon be treated as if they had been
converted into and have become exchangeable for, at the Effective
Time, the right to receive the Merger Consideration, without any
interest thereon. The Company will give the Purchaser prompt
notice of any demands received by the Company for appraisals of
shares of Common Stock. The Company shall not, except with the
prior written consent of Purchaser, make any payment with respect
to any demands for appraisal or offer to settle or settle any
such demands.
(c) At or prior to the Effective Time, the Company
shall have made arrangements, the effect of which shall be that
no shares of Common Stock or other capital stock of the Surviving
Corporation shall be issuable pursuant to options or warrants to
purchase shares, or securities convertible into shares, of Common
Stock ("Company Options"). The Company shall (i) cause each
Stock Plan (as defined in Section 3.2) to terminate as of the
Effective Time and (ii) grant no additional Company Options after
the date of this Agreement. The Company shall take all such
actions under the Stock Plans necessary so that each holder of a
Company Option shall be entitled to receive immediately after the
Effective Time, in cancellation and settlement of such Company
Option, for each share of Common Stock subject to such Company
Option an amount in cash equal to the Merger Consideration minus
the per share exercise, purchase or conversion price of such
Company Option as of the date hereof (the "Option
Consideration"). Payment of the Option Consideration with
respect to each Company Option shall be contingent upon
consummation of the Merger and shall be subject to applicable
withholding of income and other taxes. Payment of the Option
Consideration shall be made by the Surviving Corporation to the
holders of the Company Options at or as promptly as practicable
after the Effective Time, without interest. Prior to
consummation of the Merger and as a condition thereof, the
Company shall furnish Purchaser evidence reasonably satisfactory
to Purchaser of the Company's compliance with its obligations
under this Section 2.2(c).
2.3 Exchange of Certificates.
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(a) Prior to the Effective Time, Purchaser shall
appoint a bank or trust company to act as paying agent hereunder,
which shall be American Stock Transfer and Trust Company, or such
other entity as Purchaser and the Company may mutually select
(the "Paying Agent") for the payment of the Merger Consideration
upon surrender of Certificates. All of the fees and expenses of
the Paying Agent shall be borne by the Surviving Corporation.
(b) Purchaser shall take all steps necessary to enable
and cause the Surviving Corporation to provide the Paying Agent
with cash in amounts necessary to pay the Merger Consideration,
when and as such amounts are needed by the Paying Agent.
(c) As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of
record of Common Stock immediately prior to the Effective Time
(excluding any Dissenting Shares) (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery
of such Certificates to the Paying Agent and shall be in such
form and have such other provisions as Purchaser shall reasonably
specify) and (ii) instructions for the use thereof in effecting
the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent or to such other agent or agents as may be
appointed by the Surviving Corporation, together with such letter
of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a
bank check in the amount of cash into which the shares of Common
Stock theretofore represented by such Certificate shall have been
converted pursuant to Section 2.2, and the Certificates so
surrendered shall forthwith be canceled. No interest will be
paid or will accrue on the cash payable upon the surrender of any
Certificate. If payment is to be made to a person other than the
person in whose name the Certificate so surrendered is
registered, it shall be a condition of payment that such
Certificate shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment
shall pay any transfer or other taxes required by reason of the
transfer of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not
applicable.
Until surrendered as contemplated by this Section 2.3, each
Certificate (other than Certificates representing Dissenting
Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the
amount of cash, without interest, into which the shares of Common
Stock theretofore represented by such Certificate shall have been
converted pursuant to Section 2.2.
(d) Purchaser shall have the right to make additional
rules, not inconsistent with the terms of this Agreement,
governing the payment of cash for shares of Common Stock
converted into the right to receive the Merger Consideration.
(e) None of the Purchaser, the Company, the Surviving
Corporation, the Paying Agent or any other person shall be liable
to any former holder of shares of Common Stock for any amount
properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) In the event that any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Purchaser, the
posting by such person of a bond in such reasonable amount as the
Purchaser may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Paying
Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration, deliverable in respect
thereof pursuant to this Agreement.
2.4 Closing of Transfer Books. At or after the Effective
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Time, there shall be no transfers on the stock transfer books of
the Company of the shares of Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for the consideration
deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article 2.
2.5 No Further Ownership Rights in Common Stock. From and
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after the Effective Time, the holders of shares of Common Stock
which were outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of
Common Stock except as otherwise provided in this Agreement or by
applicable law. All cash paid upon the surrender of Certificates
in accordance with the terms hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to the shares
of Common Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that,
except as set forth in schedules hereto specifically referring to
the Sections hereof intended to be so qualified (the
"Schedules"):
3.1 Organization, Standing and Power. The Company is a
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corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on
its business as now being conducted. The Company is duly
qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held
under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so
qualified and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. For
purposes of this Agreement, "Material Adverse Change" or
"Material Adverse Effect" means, when used with respect to
Purchaser or the Company, as the case may be, any change or
effect, either individually or in the aggregate, that is
materially adverse to the business, assets, financial condition
or results of operations of Purchaser, or the Company, as the
case may be.
3.2 Capital Structure. The authorized capital stock of the
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Company consists of 10 million shares of Common Stock and one
million shares of Preferred Stock, par value $.01 per share
("Preferred Stock").
At the date hereof (i) 3,885,052 shares of Common Stock were
issued and outstanding, and (ii) no shares of Common Stock are
held by the Company in its treasury. As of the date hereof there
are no shares of Preferred Stock outstanding. All outstanding
shares of capital stock of the Company are validly issued, fully
paid and nonassessable and not subject to preemptive rights.
At the date hereof there are (i) Company Options outstanding
under the Company's 1996 Employee Stock Option Plan to acquire
238,431 shares of Company Common Stock and (ii) Company Options
issued in 1994 to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. to acquire 57,251 shares
of Company Common Stock (the "▇▇▇▇▇▇ Options").
The foregoing 1996 stock option plan of the Company is
herein called the "Stock Plan." Except for such Company Options
and the ▇▇▇▇▇▇ Options, there are no options, warrants, rights,
commitments, agreements, arrangements or undertakings of any kind
to which the Company is a party or by which it is bound
obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or of any of its
Subsidiaries. Schedule 3.2 sets forth the name of each holder
of a Company Option, the number of shares of Common Stock for
which such Company Option is exercisable and the exercise price
per share of Common Stock subject to such Company Option. Since
July 1, 1996, no shares of the Company's capital stock have been
issued other than pursuant to the exercise of Company Options
already in existence on such date and the Company has not granted
any stock options for any capital stock or other voting
securities of the Company.
3.3 Subsidiaries. The Company has no Subsidiaries.
------------
"Subsidiary" means any corporation, partnership, joint venture or
other legal entity of which Purchaser or the Company, as the case
may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other
legal entity.
3.4 Other Interests. The Company does not own directly or
---------------
indirectly any equity interest or equity investment in, nor is
the Company subject to any obligation or requirement to provide
for or to make any equity investment in, any corporation, limited
liability company, partnership, joint venture, business, trust or
entity.
3.5 Authority; Non-Contravention.
----------------------------
(a) The Board of Directors of the Company has approved
this Agreement and determined that the Merger is fair and in the
best interests of the Company and its stockholders, and the
Company has all requisite corporate power and authority to enter
into this Agreement and, subject to approval of the Merger by the
stockholders of the Company, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company,
subject to such approval of the Merger by the stockholders of the
Company. This Agreement has been duly executed and delivered by
the Company and (assuming the valid authorization, execution and
delivery of this Agreement by the Purchaser) constitutes a valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms. The execution and delivery
of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation, contractually
require any offer to purchase or any prepayment of any debt,
contractually require the payment of (or result in the vesting
of) any severance, golden parachute, change of control or similar
type of payment, or give rise to the loss of a material benefit
under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the
Company under, any provision of:
(i) the Articles of Incorporation or Bylaws of
the Company,
(ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument,
concession, franchise or license (any of the foregoing, an
"Instrument") applicable to the Company or any of its
Subsidiaries (other than Instruments involving aggregate payments
by or to the Company of $100,000 or less), or
(iii) subject to the governmental filings and other
matters referred to in Section 3.5(b) and approval of this
Agreement by the Company's stockholders, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable
to, or Company Permit (as defined in Section 3.9) of or relating
to, the Company or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of
clauses (ii) or (iii), any such conflicts, violations, defaults,
rights, offers, prepayments, payments, losses or liens, that,
individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of
the Company to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
Copies of all contracts, agreements, instruments or other
documents referred to in Schedule 3.5 have been furnished to
Purchaser. Schedule 3.5 lists the amounts payable or that will
or may become payable to directors, officers or employees or
former directors, officers or employees of the Company as a
result of the execution and delivery by the Company of this
Agreement or the consummation of the transactions contemplated
hereby.
(b) No filing or registration with, or authorization,
consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory
or administrative agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to the Company in
connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the
transactions contemplated hereby, except for (i) in connection or
in compliance with the provisions of the Securities Exchange Act
of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) the filing of
the Articles of Merger with the Department of State and
appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, (iii)
such filings and approvals as may be required by any applicable
state securities or "blue sky" laws or state takeover laws, and
(iv) such other consents, orders authorizations, registrations,
approvals, declarations and filings the failure of which to be
obtained or made would not, individually or in the aggregate,
have a Material Adverse Effect on the Company, materially impair
the ability of the Company to perform its obligations hereunder
or prevent the consummation of any of the transactions
contemplated hereby.
3.6 SEC Documents.
-------------
(a) Since May 2, 1996, the Company has filed all
documents with the Securities and Exchange Commission ("SEC")
required to be filed under the Securities Act of 1993, as amended
(including the rules and regulations promulgated thereunder) (the
"Securities Act"), or the Exchange Act (such documents filed with
the SEC on or before the date of this Agreement being the
"Company SEC Documents"). As of their respective dates, (i) the
Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and (ii) none of the Company SEC Documents contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the
case of unaudited statements contained in Quarterly Reports on
Form 10-Q of the Company, as permitted by the Exchange Act)
applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto) and fairly
present in all material respects the financial position of the
Company as at the dates thereof and the results of its operations
and changes in stockholders' equity and cash flow for the periods
then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments
described therein).
(b) Except as set forth in the Company SEC Documents,
the Company has no liability or obligation of any nature (whether
accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet, or in the notes
thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities and obligations
incurred in the ordinary course of business consistent with past
practice since June 30, 1998 which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(c) To the extent there are such, the Company has
heretofore made available to Purchaser a complete and correct
copy of any amendments or modifications which have not yet been
filed with the SEC to agreements, documents or other instruments
which previously have been filed with the SEC pursuant to the
Exchange Act.
3.7 Absence of Certain Events. Since September 30, 1997,
-------------------------
the Company has operated its business only in the ordinary course
consistent with past practice and, except as contemplated by this
Agreement or disclosed in the Company SEC Documents, there has
not occurred (i) any Material Adverse Change in the Company; (ii)
any change by the Company in its accounting methods, principles
or practices; (iii) any amendments or changes in the Articles of
Incorporation or Bylaws of the Company; (iv) any revaluation by
the Company of any of its assets, including, without limitation,
write-offs of accounts receivable or write-offs or write-downs of
inventory, other than in the ordinary course of the Company's
business consistent with past practices; (v) any damage,
destruction or loss with respect to property or assets of the
Company having a book value, individually or in the aggregate, of
in excess of $100,000; (vi) any declaration, setting aside or
payment of any dividend or other distribution with respect to any
shares of capital stock of the Company, or any repurchase,
redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of, or other
ownership interests in, the Company; (vii) any grant of any
severance or termination pay to any director, officer or key
employee of the Company; (viii) any entry into any employment,
deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director,
officer or key employee of the Company; (ix) any increase in
benefits payable under any existing severance or termination pay
policies or employment agreements with any director, officer or
key employee of the Company or any of its Subsidiaries except in
the ordinary course of business consistent with past practice; or
(x) any increase in compensation, bonus or other benefits payable
to directors, officers or key employees of the Company except in
the ordinary course of business consistent with past practice.
3.8 Litigation. Except as set forth in the Company SEC
----------
Documents, there are no actions, suits, proceedings,
investigations or reviews pending against the Company or, to the
knowledge of the Company, threatened against the Company, at law
or in equity, or before or by any federal or state commission,
board, bureau, agency, regulatory or administrative
instrumentality or other Governmental Entity or any arbitrator or
arbitration tribunal.
3.9 Compliance with Applicable Law. The Company holds all
------------------------------
permits, licenses, variances, exceptions, orders and approvals of
all Governmental Entities necessary for the lawful conduct of its
business (the "Company Permits"), except where the failure to
hold any Company Permit, individually or in the aggregate, is not
reasonably likely to result in a Material Adverse Effect on the
Company. The Company is conducting its business in compliance in
all material respects with the terms of the Company Permits. The
business of the Company is not being, and has not been, conducted
in violation in any material respect of any law, Company Permit,
ordinance or regulation of any Governmental Entity.
3.10 Employee Plans.
--------------
(a) Schedule 3.10 to this Agreement sets forth a list
of each of the Company Benefit Plans (as defined below). The
Company has complied with and performed in all material respects
all contractual obligations and all obligations under applicable
federal, state and local laws, rules and regulations required to
be performed by it under or with respect to any of the Company
Benefit Plans or any related trust agreement or insurance
contract. All contributions and other payments required to be
made by the Company to any Company Benefit Plan prior to the date
hereof have been made, all accruals required to be made under any
Company Benefit Plan have been made, and there are no unfunded
benefit obligations with respect to any Company Benefit Plan
which have not been accounted for by reserves or otherwise
properly footnoted in accordance with generally accepted
accounting principles in the financial statements included in the
Company SEC Documents. There is no claim, dispute, grievance,
charge, complaint, restraining or injunctive order, litigation or
proceeding pending, or, to the best knowledge of the Company,
threatened or anticipated (other than routine claims for
benefits) against or relating to any Company Benefit Plan or
against the assets of any Company Benefit Plan. The Company has
not communicated generally to employees or specifically to any
employee regarding any future increase of benefit levels (or
future creations of new benefits) with respect to any Company
Benefit Plan beyond those reflected in the Company Benefit Plans.
Except as indicated on Schedule 3.10 the Company does not
presently sponsor, maintain, contribute to, nor is the Company
required to contribute to, nor has the Company ever sponsored,
maintained, contributed to, or been required to contribute to,
any employee pension benefit plan within the meaning of Section
3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or otherwise.
(b) With respect to each Company Benefit Plan subject
to Title IV of ERISA, (i) no termination of any Company Benefit
Plan has occurred pursuant to which all liabilities have not been
satisfied in full, and no event has occurred and no condition
exists that could reasonably be expected to result in the Company
incurring a liability under Title IV of ERISA or which could
constitute grounds for terminating any pension plan of the
Company ("Pension Plan"); (ii) each such Company Benefit Plan
which is subject to Part 3 of Subtitle B of Title I of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code"), has been maintained in compliance with the minimum
funding standards of ERISA and the Code and no such Company
Benefit Plan has incurred any "accumulated funding deficiency,"as
defined in Section 412 of the Code and Section 302 of ERISA,
whether or not waived; (iii) the Company has not sought or
received a waiver of its funding requirements with respect to any
Company Benefit Plan and all contributions payable with respect
to each Pension Plan have been timely made; (iv) no reportable
event, within the meaning of Section 4043 of ERISA, and no event
described in Section 4062 or 4063 of ERISA, has occurred with
respect to any Company Benefit Plan; and (v) the aggregate of
accumulated benefit obligations of each Company Benefit Plan
subject to Title IV of ERISA (as of the date of the most recent
actuarial valuation prepared for such Company Benefit Plan) does
not exceed the fair market value of the assets of such Company
Benefit Plan (as of the date of such valuation).
(c) The Company has not incurred, nor has any event
occurred which has imposed or is reasonably likely to impose upon
the Company, any withdrawal liability (complete or partial within
the meaning of Sections 4203 or 4205 of ERISA, respectively) in
respect of any multiemployer plan (within the meaning of Section
3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan"), which
withdrawal liability has not been satisfied or discharged in
full. Schedule 3.10 sets forth a description of each
Multiemployer Plan to which the Company has ever had an
obligation to contribute.
(d) The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated
hereby will not result in the imposition of any federal excise
tax under Section 4975 of the Code with respect to any Company
Benefit Plan.
(e) The Company does not maintain or contribute to (or
has maintained or contributed to) any Company Benefit Plan which
provides, or has a liability to provide, life insurance, medical,
severance, or other employee welfare benefits to any employee
upon his retirement or termination of employment, except as may
be required by Section 4980B of the Code.
(f) (i) "Plan" means any bonus, incentive
compensation, deferred compensation, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, stock
appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workers' compensation or other
insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, including, but not
limited to, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA and (ii) "Company Benefit Plan" means any
employee pension benefit plan and any Plan, other than a
Multiemployer Plan, established by the Company or to which the
Company contributes or has contributed (including any such Plans
not now maintained by the Company or to which the Company does
not now contribute, but with respect to which the Company has or
may have any liability). Copies of all Company Benefit Plans
(and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof and the most recent
Forms 5500 required to be filed with respect thereto have been
furnished to Purchaser. Schedule 3.10 sets forth each Plan with
respect to which benefits will be accelerated, vested, increased
or paid as a result of the transactions contemplated by this
Agreement.
3.11 Employment Relations and Agreements.
-----------------------------------
(a) (i) The Company is in compliance with all federal,
state or other applicable laws respecting employment and
employment practices, terms and conditions of employment and
wages and hours, except for any such non-compliance as would not
result, individually or in the aggregate, in a Material Adverse
Effect on the Company; (ii) there is no labor strike, dispute,
slowdown or stoppage pending or, to the best knowledge of the
Company, threatened against or involving the Company; (iii)
except as set forth in Schedule 3.11, the Company is not a party
to any collective bargaining agreement, and no collective
bargaining agreement is being negotiated as of the date of this
Agreement by the Company; and (iv) the Company has not
experienced any material labor difficulty during the last three
years.
(b) The Company does not have any employment, bonus,
severance, "change of control", collective bargaining or similar
agreements ("Employment Agreements") except as disclosed in
Schedule 3.11. Copies of all Employment Agreements and all
amendments thereto have been previously furnished to the
Purchaser.
(c) The insurance policies maintained by the Company
with respect to workers compensation and medical claims are
described in Schedule 3.11. All such insurance policies are in
full force and effect; all premiums due and payable thereunder
have been paid and the Company is otherwise in full compliance in
all material respects with the terms thereof; the Company does
not know of any threatened termination of, or any proposed
material premium increase with respect to any such policy; no
claim or claims by the Company in an aggregate amount greater
than $100,000 have been questioned, denied or disputed by the
underwriter of such policy; and the reserves maintained by the
Company for the uninsured portion of such claims are sufficient
to cover the full liability of the Company for all claims that
have been incurred and are not covered (in whole or in part,
including the deductible thereon) by insurance.
3.12 Limitation on Business Conduct. The Company is not a
------------------------------
party to, or has any obligation under, any contract or agreement,
written or oral, which contains any covenants currently or
prospectively limiting the freedom of the Company to engage in
any line of business or to compete with any entity.
3.13 Title to, and Sufficiency and Condition of, Assets.
--------------------------------------------------
(a) The Company has good and marketable title, or a
valid leasehold interest in, all material items of its assets and
properties, whether real or personal, tangible or intangible, and
including without limitation all assets and properties reflected
on the balance sheet and the notes thereto (other than as covered
by Section 3.15 hereof), included in its June 30, 1998 financial
statements and the notes thereto (the "June 30 Balance Sheet") or
acquired after the date of the June 30 Balance Sheet (except for
assets and properties sold or otherwise disposed of since such
date in the ordinary course of business), free and clear of any
mortgages, security interests, liens and encumbrances ("Liens")
except:
(i) Liens disclosed in the June 30 Balance Sheet;
(ii) Liens for taxes not yet due or being
contested in good faith (and for which adequate reserves are
reflected on the June 30 Balance Sheet);
(iii) Liens arising under financing agreements of
the Company identified in the June 30 Balance Sheet;
(iv) Statutory or common law Liens relating to
obligations of the Company that are not delinquent or are being
contested in good faith;
(v) Purchase money Liens of the Company that are
not delinquent for the purchase of goods in the ordinary course
of business consistent with past practice; or
(vi) Liens which do not materially detract from
the value of such property or assets as now used, or materially
interfere with any present or intended use of such property or
assets. The assets so owned or leased by the Company constitute
all of the material assets, properties and rights of any type
used in or necessary for the conduct of its business.
(b) Except for scheduled capital improvements which
are identified in Schedule 3.13, the plants, structures,
facilities, machinery, equipment, automobiles, trucks, tools and
other properties and assets owned or leased by the Company which
are material to the business of the Company are in good operating
condition and repair, subject to normal wear and use, and useable
in a manner consistent with their current use. All improvements
on real property owned or leased by the Company conform in all
material respects to applicable state and local zoning and other
land use ordinances and building codes.
3.14 Environmental Laws and Regulations.
----------------------------------
(a) The Company is in compliance with all applicable
Environmental Laws, except where such noncompliance, individually
or in the aggregate, is not reasonably likely to result in a
Material Adverse Effect on the Company. The term "Environmental
Laws" means any federal, state, local or foreign statute,
ordinance, rule, regulation, policy, permit, consent, approval,
license, judgment, order, decree, injunction or other
authorization, relating to: (i) pollution or protection of human
health or safety, health or safety of employees, sanitation, or
the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata),
(ii) Releases (as defined in 42 U.S.C.(Section)9601(22)) or
threatened Releases of Hazardous Material (as hereinafter
defined) into the environment or (iii) the generation, treatment,
storage, disposal, use, handling, manufacturing, transportation
or shipment of Hazardous Material.
(b) During the period of ownership or operation by the
Company of any of its current or previously owned or leased
properties, there have been no Releases of Hazardous Material by
the Company, or, to the best of its knowledge, any other party
in, on, under or affecting such properties, which have not been
fully remediated to the extent required by applicable
Environmental Law and the Company has not disposed of any
Hazardous Material or any other substance in a manner that has
led, or could reasonably be anticipated to lead, to a Release.
The Company has not received any notice or claim that it is a
"potentially responsible party" under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42
U.S.C. (Section)9601, et. seq., as amended, or similar,
applicable state or local laws, which claim has not been settled
or otherwise released. There is not currently pending any
notice, summons, complaint, lawsuit, citation, directive, order,
notice letter, or legal or administrative action from any party
or Governmental Entity with respect to alleged liabilities
arising under Environmental Laws. The term "Hazardous Material"
means any pollutants, contaminants, hazardous substances,
hazardous chemicals, toxic substances, hazardous wastes,
infectious and medical wastes, radioactive materials, petroleum
(including crude oil or any fraction thereof), natural gas,
synthetic gas and mixtures thereof, PCBs or materials containing
PCBs, asbestos and/or asbestos-containing materials or solid
wastes, in each case to the extent regulated under any
Environmental Law and all regulations promulgated under each and
all amendments thereto, or any other federal, state or local
environmental law, ordinance, regulations, rule or order.
(c) There are no underground storage tanks in or on
the owned or leased properties of the Company.
(d) There is no friable asbestos or
asbestos-containing materials at, on, or in the owned or leased
properties of the Company, except that which has been
encapsulated or otherwise managed in place and in good repair.
The Company has made available to the Purchaser records
concerning the presence, location and quantity of
asbestos-containing materials and presumed-asbestos containing
materials in such properties to the extent called for in 29 CFR
Section 1910.1001(j).
3.15 Patents, Trademarks, Copyrights. The Company owns or
-------------------------------
possesses adequate licenses or other valid rights to use all
material patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, copyrights, know-how and other
proprietary information used or held for use in connection with
the business of the Company as currently being conducted and, to
the knowledge of the Company, there are no assertions or claims
challenging the validity of any of the foregoing.
3.16 Taxes. (i) The Company has filed all material Tax
-----
Returns required to have been filed on or before the date hereof,
which returns are true and complete in all material respects and
all Taxes shown due thereon have been paid; (ii) no issues that
have been raised by the relevant taxing authority in connection
with the examination of the Tax Returns referred to in clause (i)
are currently pending; (iii) all deficiencies asserted or
assessments made as a result of any examination of the Tax
Returns referred to in clause (i) by a taxing authority have been
paid in full or are being contested in good faith by the Company;
and (iv) a reserve which the Company reasonably believes to be
adequate has been set up for the payment of all such Taxes
anticipated to be payable in respect of periods through the date
hereof. The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the
meaning of Code Sec. 6662. The Company is not a party to any Tax
allocation or sharing agreement. The Company (A) has not been a
member of an affiliated group filing a consolidated federal
income Tax Return or (B) has any liability for the Taxes of any
person under Treas. Reg. (Section) 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise. Neither the Company nor
the Surviving Corporation will be obligated to make a payment to
an individual that would be a "parachute payment" to a
"disqualified individual," as those terms are defined in Section
280G of the Code, without regard to whether such payment is to be
made in the future. For purposes of this Agreement, (a) "Tax"
(and, with correlative meaning, "Taxes" and "Taxable") means any
federal, state, local or foreign income, gross receipts,
property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad
valorem, transfer or excise tax, or any other tax, custom duty,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any
governmental authority, and (b) "Tax Return" means any return,
report or similar statement required to be filed with respect to
any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
3.17 Brokers. No broker, investment banker or other person,
-------
other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated, the fees and expenses of
which will be paid by the Company, is entitled to any broker's,
finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. A copy of the
engagement letter between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated and the
Company setting forth the fees and expenses to be paid by the
Company in connection with the transactions contemplated by this
Agreement has been provided to Purchaser.
3.18 Opinion of Financial Advisor. The Company has received
----------------------------
the opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated, to the effect that,
as of the date hereof, the Merger Consideration in cash to be
received by the holders of shares of Common Stock is fair to such
holders from a financial point of view.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
4.1 Organization, Standing and Power. The Purchaser is a
--------------------------------
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on
its business as now being conducted.
4.2 Authority; Non-Contravention.
----------------------------
(a) The Purchaser has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by the Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on its part. This Agreement has been
duly executed and delivered by the Purchaser and (assuming the
valid authorization, execution and delivery of this Agreement by
the Company) constitutes a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with
its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or
give rise to the loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of
the Purchaser under, any provision of:
(i) the Articles of Incorporation or Bylaws of
the Purchaser,
(ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the
Purchaser, or
(iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to the Purchaser or any of its properties or assets,
other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights, offers, prepayments,
payments, losses or Liens, that, individually or in the
aggregate, would not have a Material Adverse Effect on the
Purchaser, materially impair the ability of the Purchaser to
perform its obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby.
(b) No filing or registration with, or authorization,
consent or approval of, any Governmental Entity is required by or
with respect to the Purchaser in connection with the execution
and delivery of this Agreement by the Purchaser or the
consummation by the Purchaser of the transactions contemplated
hereby, except for (i) compliance with the provisions of the
Exchange Act, (ii) the filing of the Certificate of Merger with
the Department of State and appropriate documents with the
relevant authorities of other states in which the Purchaser is
qualified to do business, (iii) such filings and approvals as may
be required by any applicable state securities or "blue sky" laws
or state takeover laws, and (iv) such other consents, orders,
authorizations, registrations, approvals, declarations and
filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect
on the Purchaser, materially impair the ability of Purchaser to
perform its obligations hereunder or prevent the consummation of
any of the transactions contemplated hereby.
4.3 Financing. Purchaser possesses, or has commitments
---------
for, sufficient funds to enable it to acquire all issued and
outstanding shares of Common Stock on a fully diluted basis
pursuant to the Merger and to pay all fees and expenses payable
by Purchaser related to the transactions contemplated by this
Agreement.
4.4 Brokers. No broker, investment banker or other person,
-------
is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
the Purchaser.
ARTICLE 5
COVENANTS
5.1 Alternative Proposals. Prior to the Effective Time,
---------------------
the Company agrees
(a) that it shall not, nor shall it permit its
officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney
or accountant retained by it) to, initiate, solicit or knowingly
encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of any equity securities
of, the Company or all or any significant portion of the assets
of the Company (any such proposal or offer being hereinafter
referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person or entity
relating to an Alternative Proposal or otherwise take any action
to knowingly facilitate any effort or attempt to make or
implement an Alternative Proposal;
(b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations
with any person or entity conducted heretofore with respect to
any of the foregoing and will take the necessary steps to inform
any such person or entity of the Company's obligations under this
Section 5.1; and
(c) that it will notify the Purchaser immediately if
any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it;
provided, however, that nothing contained in this Section 5.1
shall prohibit the Board of Directors of the Company from (i)
furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an
unsolicited, bona fide, Fully-Financed (as hereinafter defined)
Alternative Proposal which would yield to stockholders a net
price of not less than $4.85 per share in cash and without
reduction of any sort (a "Qualifying Alternative Proposal") and
that the Board of Directors of the Company in good faith
determines (in consultation with its financial advisors)
represents a financially superior transaction for the
stockholders of the Company as compared to the Merger, if, and
only to the extent that, (A) the Board of Directors of the
Company, based upon the advice of outside counsel, determines in
good faith that such action is required for the Board of
Directors to comply with its fiduciary duties imposed by law, (B)
prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the
Company provides written notice to the Purchaser to the effect
that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, and (C)
the Company keeps the Purchaser informed of the status and all
material information with respect to any such discussions or
negotiations; and (ii) to the extent applicable, complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this Section 5.1 shall (A)
permit the Company to terminate this Agreement (except as
specifically provided in Article 7 hereof), (B) permit the
Company to enter into any agreement with respect to an
Alternative Proposal for as long as this Agreement remains in
effect unless the Company shall have given the Purchaser ten
days' prior written notice of its intent to terminate the
Agreement during which period the Purchaser will have the
opportunity to match the consideration offered by any such
Alternative Proposal (if the Purchaser offers to match such
consideration, the Agreement shall be amended to increase the
consideration and, if necessary, to extend time periods to permit
proxy recirculation (it being agreed that for as long as this
Agreement remains in effect, the Company shall not enter into any
agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal), or (C) affect any other
obligation of the Company under this Agreement. For purposes
hereof, a "Fully-Financed" Alternative Proposal shall be one
where the prospective acquiror through its possession of one or
more of (i) marketable securities, cash and cash equivalents,
(ii) undrawn lines of credit from reputable financial
institutions and (iii) commitment letters from one or more
reputable institutions (which may only be subject to completion
of due diligence and other standard conditions), has sufficient
financing to pay in full the consideration provided for in such
Alternative Proposal and any amounts payable pursuant to Section
7.5(a) of this Agreement. Notwithstanding anything to the
contrary contained herein, a Qualifying Alternative Proposal may
be subject to the reasonable due diligence of the prospective
acquiror.
5.2 Interim Operations of the Company.
---------------------------------
(a) From and after the date of this Agreement until
the Effective Time, except as contemplated by any other provision
of this Agreement, unless the Purchaser has consented in writing
thereto, the Company:
(i) Shall conduct its operations according to its
usual, regular and ordinary course in substantially the same
manner as heretofore conducted;
(ii) Shall use its reasonable efforts to preserve
intact its business organization and goodwill, keep available the
services of its officers and employees and maintain satisfactory
relationships with those persons having business relationships
with it;
(iii) Shall not amend its Articles of Incorporation
or Bylaws or comparable governing instruments;
(iv) Shall promptly notify the Purchaser of any
breach of any representation or warranty contained herein or any
Material Adverse Effect with respect to the Company;
(v) Shall promptly deliver to the Purchaser true
and correct copies of any report, statement or schedule filed
with the SEC subsequent to the date of this Agreement;
(vi) (A) Shall not, except pursuant to the
exercise of options, warrants, conversion rights and other
contractual rights existing on the date hereof and disclosed
pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof and (B) shall not
(x) grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any
shares of its capital stock or grant, confer or award any bonuses
or other forms of cash incentives to any officer, director or key
employee, (y) except in the ordinary course of business
consistent with past practice, increase any compensation with any
present or future officers, directors or key employees, grant any
severance or termination pay to, or enter into any employment or
severance agreement with any officer, director or key employee or
amend any such existing agreement in any material respect (other
than pursuant to severance agreements previously delivered to
Purchaser), or (z) adopt any new employee benefit plan (including
any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect;
(vii) Shall not (i) declare, set aside or pay any
dividend or make any other distribution or payment with respect
to any shares of its capital stock or other ownership interests
or (ii) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or make any commitment
for any such action;
(viii) Shall not sell, lease, abandon or otherwise
dispose of any of its assets or acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any business or
any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets,
except in the ordinary course of business consistent with past
practice;
(ix) Shall not incur or guarantee any indebtedness
for borrowed money or make any loans, advances or capital
contributions to, or investments in, any other person, or issue
or sell any debt securities other than borrowings under existing
lines of credit and usual and customary advancement of expenses
in the ordinary course of business;
(x) Shall not mortgage or otherwise encumber or
subject to any Lien any of its properties or assets;
(xi) Shall not make any change to its accounting
(including tax accounting) methods, principles or practices,
except as may be required by generally accepted accounting
principles and except, in the case of tax accounting methods,
principles or practices, in the ordinary course of business of
the Company;
(xii) Shall not make any commitment or enter into
any contract or agreement or make any capital expenditure except
for (x) customer purchase orders and purchases of raw materials
used in the business of the Company agreed to or made in the
ordinary course of business consistent with past practice, (y)
any other commitment, contract and agreement involving aggregate
payments to or by the Company not in excess of $100,000,
providing for termination without notice by the Company on 90 or
fewer days' notice, and made by the Company in the ordinary
course of business consistent with past practice or (z) capital
expenditures that individually or in the aggregate do not exceed
$100,000;
(xiii) Shall not revalue any of its assets,
including, without limitation, writing down the value of its
inventory or writing off notes or accounts receivable, other than
in the ordinary course of business;
(xiv) Shall not make any tax election except
consistent with past practice or settle or compromise any
material income tax liability;
(xv) Shall not settle or compromise any pending or
threatened suit, action or claim relating to the transactions
contemplated hereby;
(xvi) Shall not pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by,
the financial statements (or the notes thereto) of the Company or
incurred in the ordinary course of business consistent with past
practice; or
(xvii) Shall not agree or otherwise commit to take
any of the foregoing actions or take, or agree to take, any
action which would result in a failure of the condition to
Closing set forth in Section 6.3(a).
5.3 Meeting of the Company's Stockholders. The Company
-------------------------------------
will take all action necessary in accordance with applicable law
and its Articles of Incorporation and Bylaws to convene a meeting
of its stockholders (the "Meeting of Stockholders") as promptly
as practicable to consider and vote upon the approval of this
Agreement and the Merger. The Board of Directors of the Company
shall recommend such approval and the Purchaser and the Company
shall each take all lawful action to solicit such approval,
including, without limitation, timely mailing the Proxy Statement
(as defined in Section 5.7); provided, however, that such
recommendation or solicitation is subject to any action
(including any withdrawal or change of its recommendation) taken
(but only in compliance with the proviso in Section 5.1(c)) by,
or upon authority of, the Board of Directors of the Company in
the exercise of its good faith judgment based upon the advice of
outside counsel as to its fiduciary duties imposed by law.
5.4 Filings, Other Action. Subject to the terms and
---------------------
conditions herein provided, the Company and the Purchaser shall:
(a) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made
prior to the Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to
the Effective Time from, governmental or regulatory authorities
of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or
authorizations; and
(b) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If,
at any time after the Effective Time, any further action is
necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of the Purchaser and
the Company shall take all such necessary action.
5.5 Inspection of Records. From the date hereof to the
---------------------
Effective Time, the Company shall (i) allow all designated
officers, attorneys, accountants and other representatives of the
Purchaser reasonable access at all reasonable times upon
reasonable notice to the offices, records and files,
correspondence, audits and properties, as well as to all
information relating to commitments, contracts, titles and
financial position, or otherwise pertaining to the business and
affairs, of the Company, (ii) furnish to the Purchaser's counsel,
financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such
persons may reasonably request, (iii) instruct its employees,
counsel and financial advisors to cooperate with the Purchaser in
the Purchaser's investigation of the business of the Company, and
(iv) make its management personnel available for discussions with
representatives of the Purchaser at mutually convenient times.
5.6 Publicity. The initial press release relating to this
---------
Agreement shall be a joint press release and thereafter the
Company and the Purchaser shall, subject to their respective
legal obligations (including requirements of stock exchanges and
other similar regulatory bodies), consult with each other, and
use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise
making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national
securities exchange (or other similar regulatory body) with
respect thereto.
5.7 Proxy Statement.
---------------
(a) The Company shall prepare and file with the SEC as
soon as practicable but in any event within two weeks from the
date hereof a preliminary form of the proxy statement (the "Proxy
Statement") to be mailed to the holders of Common Stock in
connection with the meeting of such holders in connection with
the Merger. The Company will cause the Proxy Statement to comply
as to form in all material respects with the applicable
provisions of the Exchange Act. The Company will use its
reasonable best efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be cleared by the
SEC. The Company will notify the Purchaser of the receipt of any
comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement
or for additional information and will supply the Purchaser with
copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on
the other hand, with respect to the Proxy Statement prior to its
being filed with the SEC and shall give the Purchaser and its
counsel the opportunity to review all amendments and supplements
to the Proxy Statement and all responses to requests for
additional information and replies to comments prior to their
being filed with, or sent to, the SEC. Each of the Company and
the Purchaser agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement has been cleared by the
SEC, the Company shall mail the Proxy Statement to the
stockholders of the Company. If at any time prior to the
approval of this Agreement by the Company's stockholders there
shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will prepare and
mail to its stockholders such an amendment or supplement.
(b) The Company agrees that the Proxy Statement and
each amendment or supplement thereto at the time of mailing
thereof and at the time of the meeting of stockholders of the
Company will 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, in light of the
circumstances under which they were made, not misleading;
provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or
omission to state a material fact was made by the Company in
reliance upon and in conformity with written information
concerning the Purchaser furnished to the Company by the
Purchaser specifically for use in the Proxy Statement. The
Purchaser agrees that the information concerning the Purchaser
provided by it in writing for inclusion in the Proxy Statement
and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the meeting of stockholders of the
Company will 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, in light of the
circumstances under which they were made, not misleading.
5.8 Further Action. Each party hereto shall, subject to
--------------
the fulfillment at or before the Effective Time of each of the
conditions of performance set forth herein or the waiver thereof,
perform such further acts and execute such documents as may be
reasonably required to effect the Merger.
5.9 Expenses. Whether or not the Merger is consummated,
--------
all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the
party incurring such expenses except as expressly provided
herein.
5.10 Indemnification.
---------------
(a) From and after the Effective Time, Purchaser
agrees to, and to cause the Surviving Corporation to, indemnify
and hold harmless all past and present officers and directors of
the Company and of its Subsidiaries (the "Indemnified Parties")
to the full extent such persons may be indemnified by the Company
pursuant to the Company's Articles of Incorporation and Bylaws as
in effect as of the date hereof for acts and omissions occurring
at or prior to the Effective Time and shall advance reasonable
litigation expenses incurred by such persons in connection with
defending any action arising out of such acts or omissions,
provided that such persons provide the requisite affirmations and
undertakings, as required by applicable law or set forth in the
Company's Bylaws as in effect prior to the Effective Time.
(b) Any Indemnified Party will promptly notify
Purchaser and the Surviving Corporation of any claim, action,
suit, proceeding or investigation for which such party may seek
indemnification under this Section; provided, however, that the
failure to furnish any such notice shall not relieve Purchaser or
the Surviving Corporation from any indemnification obligation
under this Section except to the extent Purchaser or the
Surviving Corporation is prejudiced thereby. In the event of any
such claim, action, suit, proceeding, or investigation, (x) the
Surviving Corporation will have the right to assume the defense
thereof by counsel reasonably acceptable to the Indemnified
Parties, and the Surviving Corporation will not be liable to such
Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred thereafter by such
Indemnified Parties in connection with the defense thereof,
except that all Indemnified Parties (as a group) will have the
right to retain one separate counsel, reasonably acceptable to
such Indemnified Parties and Purchaser, at the expense of the
indemnifying party if the named parties to any such proceeding
include both the Indemnified Parties and the Surviving
Corporation and the representation of such parties by the same
counsel would be inappropriate due to a conflict of interest
between them, (y) the Indemnified Parties will cooperate in the
defense of any such matter, and (z) the Surviving Corporation
will not be liable for any settlement effected without its prior
written consent.
(c) The Articles of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions that are no less
favorable to the past and present officers and directors of the
Company than those set forth as of the date hereof in the
Articles of Incorporation of the Company and the Bylaws of the
Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective
Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the
Effective Time were entitled to indemnification thereunder.
(d) The Surviving Corporation shall use reasonable
commercial efforts to maintain in effect for six years from the
Effective Time directors' and officers' "tail" liability
insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy on
terms comparable to the existing coverage.
(e) This Section 5.10 is intended to benefit the
Indemnified Parties and shall be binding on all successors and
assigns of Purchaser, Purchaser, the Company and the Surviving
Corporation. Purchaser hereby guarantees the performance by the
Surviving Corporation of the indemnified obligations pursuant to
this Section 5.10.
5.11 Takeover Statute. If any "fair price", "moratorium",
----------------
"control share acquisition" or other form of anti-takeover
statute or regulation shall become applicable to the transactions
contemplated hereby, the Company and the members of the Board of
Directors of the Company shall grant such approvals and take such
actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate
or minimize the effects of such statute or regulation on the
transactions contemplated hereby.
5.12 Conduct of Business by Purchaser Pending the Merger.
---------------------------------------------------
Prior to the Effective Time and subject to any applicable
regulatory approvals, the Purchaser shall (a) perform its
obligations under this Agreement in accordance with the terms
hereof and thereof and take all other actions necessary or
appropriate for the consummation of the transactions contemplated
hereby and (b) not engage directly or indirectly in any business
or activities of any type or kind whatsoever and not enter into
any agreements or arrangements with any person or entity, or be
subject to or be bound by any obligation or undertaking which is
not contemplated by this Agreement.
5.13 Conveyance Taxes. The Company and the Purchaser shall
----------------
cooperate in the preparation, execution and filing of all
returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to
be filed on or before the Effective Time.
ARTICLE 6
CONDITIONS TO MERGER
6.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligation of each party to effect the
------
Merger shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated
hereby shall have been approved, in the manner required by
applicable law or by the applicable regulations of any stock
exchange or other regulatory body, as the case may be, by the
holders of the issued and outstanding shares of capital stock of
the Company.
(b) Neither of the parties hereto shall be subject to
any order or injunction of a court of competent jurisdiction
which prohibits the consummation of the transactions contemplated
by this Agreement. In the event any such order or injunction
shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(c) All consents, authorizations, orders and approvals
of (or filings or registrations with) any Governmental Entity
required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made,
except for filings in connection with the Merger and any other
documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such
consent, authorization, order, approval, filing or registration
would not have a Material Adverse Effect on the Purchaser or the
Company following the Effective Time.
6.2 Conditions to Obligation of Company to Effect the
-------------------------------------------------
Merger. The obligation of the Company to effect the Merger shall
------
be subject to the fulfillment at or prior to the Closing Date of
the conditions that:
(a) There shall have been no intentional or willful
non-performance, in any material respect, by the Purchaser of its
agreements contained in this Agreement required to be performed
on or prior to the Closing Date nor shall there have been, in any
material respect, any willfully or intentionally untrue
representation or warranty of the Purchaser contained in this
Agreement or in any document delivered in connection herewith.
(b) The Purchaser shall have performed in all material
respects its agreements contained in this Agreement required to
be performed on or prior to the Closing Date, and the
representations and warranties of the Purchaser contained in this
Agreement and in any document delivered in connection herewith
shall be true and correct as of the Closing Date, except (i) for
changes specifically permitted by this Agreement, (ii) for
non-performance or breaches which, separately or in the
aggregate, would not have a Material Adverse Effect on the
Company or on the ability of the parties to consummate the
transactions contemplated by this Agreement and (iii) that those
representations and warranties which address matters only as of a
particular date shall remain true and correct, in all material
respects, as of such date, and
(c) The Company shall have received a certificate of
the President or a Vice President of the Purchaser, dated the
Closing Date, certifying to the effect of the preceding clauses
(a) and (b).
(d) The Board of Directors of the Company shall have
received a certificate of the President and the Chief Financial
Officer of the Company, dated that Closing Date, certifying to
the effect of clause (a)(ii) of Section 6.3 insofar as it relates
to the representations and warranties of the Company contained in
this Agreement or in any document delivered in connection
herewith.
(e) There shall not have been any action taken, or any
statute, rule, regulation, order, judgment or decree proposed,
enacted, promulgated, entered, issued, or enforced by any foreign
or United States federal, state or local Governmental Entity, and
there shall be no action, suit or proceeding pending (with a
reasonable likelihood of success), which (i) makes this
Agreement, the Merger, or any of the other transactions
contemplated by this Agreement illegal or imposes or may impose
material damages or penalties in connection therewith, or (ii)
otherwise prohibits, restricts, or delays consummation of the
Merger or any of the other transactions contemplated by this
Agreement in any material respect.
(f) The Company shall have received an opinion of
▇▇▇▇▇▇ ▇▇▇▇ & Priest LLC, special counsel for the Purchaser,
dated the Closing Date and in form and substance reasonably
satisfactory to Purchaser and its counsel, to the effect that:
(i) the Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
organization, and has all requisite corporate power and authority
to own, lease and operate its properties, to carry on its
business as then being conducted and to consummate the
transactions contemplated by this Agreement, (ii) all necessary
corporate proceedings of the Board of Directors and the
stockholders of the Purchaser to the extent required by law, the
Articles of Incorporation and the By-laws of the Purchaser or
otherwise, to authorize the execution and delivery of this
Agreement and to consummate the Merger contemplated hereby have
been duly and validly taken, (iii) the Purchaser has corporate
power to execute and deliver this Agreement, and this Agreement
constitutes the legal, duly authorized, valid and binding
obligation of Purchaser, enforceable against the Purchaser in
accordance with its terms, subject to the application of
insolvency, bankruptcy or other laws affecting the enforcement of
creditors rights or limitations on the availability of equitable
remedies, and (iv) execution and performance of this Agreement
and consummation of the Merger and the transactions contemplated
hereunder does not and will not violate or result in a breach of
any provision of any charter or by-law or other organizational or
constitutional document of the Purchaser.
Such opinion shall also state that such counsel
have participated in the preparation of the Proxy Statement and,
on the basis of a general review of the Proxy Statement and
participation in conferences at which the contents of the Proxy
Statement and related matters were discussed, but without
independent verification of the accuracy, completeness or
fairness of the statements contained in the Proxy Statement, such
counsel does not have actual knowledge which would lead them to
believe that the Proxy Statement (except as to the financial
statements and other financial and statistical information
contained therein and material relating to or supplied by Company
for use therein as to which counsel need not comment), as of the
date thereof, contained any untrue statement of a material fact
or omitted to state any material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
In rendering such opinion, such counsel may rely
to the extent specified therein upon certificates of state
officials and officers of the Purchaser as to matters of fact and
upon one or more opinions of local counsel of established
reputation as to all legal matters involving other than Federal
law. Such opinion will also cover such other matters as the
Company may reasonably request.
6.3 Conditions to Obligation of Purchaser to Effect the
---------------------------------------------------
Merger. The obligation of the Purchaser to effect the Merger
------
shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(a) (i) There shall have been no intentional or
willful non-performance, in any material respect, by the Company
of its agreements contained in this Agreement required to be
performed on or prior to the Closing Date nor shall there have
been any willfully or intentionally untrue representation or
warranty of the Company contained in this Agreement or in any
document delivered in connection herewith, (ii) the Company shall
have performed in all material respects its agreements contained
in this Agreement required to be performed on or prior to the
Closing Date, and the representations and warranties of the
Company contained in this Agreement and in any document delivered
in connection herewith shall be true and correct as of the
Closing Date, except (A) for changes specifically permitted by
this Agreement or otherwise accepted in writing by Purchaser, (B)
for non-performance or breaches which, separately or in the
aggregate, would not have a Material Adverse Effect on the
Company or the Purchaser or on the ability of the parties to
consummate the transactions contemplated by this Agreement and
(C) that those representations and warranties which address
matters only as of a particular date shall remain true and
correct, in all material respects, as of such date, and (iii) the
Purchaser shall have received a certificate of the President or a
Vice President of the Company, dated the Closing Date, certifying
to the effect of the preceding clauses (i) and (ii).
(b) From the date of this Agreement through the
Effective Time, there shall not have occurred any Material
Adverse Change with respect to the Company (it being understood
and agreed that the incurrence of capital expenditures set forth
in Schedule 3.13(b) shall not be deemed to be a Material Adverse
Change).
(c) After the Effective Time, no person shall have any
right under any Stock Plan (or any Company Option granted
thereunder) or other plan, program or arrangement to acquire any
equity securities of the Company.
(d) There shall not have been any action taken, or any
statute, rule, regulation, order, judgment or decree proposed,
enacted, promulgated, entered, issued, or enforced by any foreign
or United States federal, state or local Governmental Entity, and
there shall be no action, suit or proceeding pending (with a
reasonable likelihood of success), which (i) makes this
Agreement, the Merger, or any of the other transactions
contemplated by this Agreement illegal or imposes or may impose
material damages or penalties in connection therewith, (ii)
requires the divestiture of a material portion of the business of
the Purchaser, or of the Company or of the Surviving Corporation
taken as a whole, (iii) imposes material limitations on the
ability of the Purchaser effectively to exercise full rights of
ownership of shares of capital stock of the Surviving Corporation
(including the right to vote such shares on all matters properly
presented to the stockholders of the Surviving Corporation) or
makes the holding by the Purchaser of any such shares illegal or
subject to any materially burdensome requirement or condition,
(iv) requires the Purchaser, the Company, the Surviving
Corporation or any of their respective material Subsidiaries or
affiliates to cease or refrain from engaging in any material
business, or (v) otherwise prohibits, restricts, or delays
consummation of the Merger or any of the other transactions
contemplated by this Agreement in any material respect or
increases or may increase in any material respect the liabilities
or obligations of the Purchaser or the Surviving Corporation
arising out of this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement.
(e) Purchaser shall have received an opinion of ▇▇▇▇▇▇
& ▇▇▇▇▇▇, special counsel for the Company, dated the Closing Date
and in form and substance reasonably satisfactory to Purchaser
and its counsel, to the effect that: (i) the Company is a
corporation duly organized, validly existing and in good standing
under the laws of the state of its organization, and has all
requisite corporate power and authority to own, lease and operate
its properties, to carry on its business as then being conducted
and to consummate the transactions contemplated by this
Agreement, (ii) the equity capitalization of the Company is as
set forth in Section 3.2 hereof, (iii) to the knowledge of such
counsel, except as disclosed in Section 3.2, there are not
outstanding any options or agreements binding on the Company to
sell, issue or dispose of any capital stock or other interests of
the Company, (iv) all necessary corporate proceedings of the
Board of Directors and the stockholders of the Company, to the
extent required by law, the Articles of Incorporation and the
Bylaws of the Company or otherwise, to authorize the execution
and delivery of this Agreement and to consummate the Merger
contemplated hereby have been duly and validly taken, (v) the
Company has corporate power to execute and deliver this
Agreement, and this Agreement constitutes the legal, duly
authorized, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
subject to the application of insolvency, bankruptcy or other
laws affecting the enforcement of creditors rights and
limitations on the availability of equitable remedies, and (vi)
execution and performance of this Agreement and consummation of
the Merger and the transactions contemplated hereunder does not
and will not violate or result in a breach of any provision of
any charter or by-law or other organizational or constitutional
document of the Company.
Such opinion shall also state that such counsel
have participated in the preparation of the Proxy Statement and,
on the basis of a general review of the Proxy Statement and
participation in conferences at which the contents of the Proxy
Statement and related matters were discussed, but without
independent verification of the accuracy, completeness or
fairness of the statements contained in the Proxy Statement, such
counsel does not have actual knowledge which would lead them to
believe that the Proxy Statement (except as to the financial
statements and other financial and statistical information
contained therein and material relating to or supplied by
Purchaser for use therein as to which counsel need not comment),
as of the date thereof, contained any untrue statement of a
material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading.
In rendering such opinion, such counsel may rely
to the extent specified therein upon certificates of state
officials and officers of the Company as to matters of fact and
upon one or more opinions of local counsel of established
reputation as to all legal matters involving other than Federal
law. Such opinion will also cover such other matters as
Purchaser or its counsel may reasonably request, and will permit
reliance on such opinion by Purchaser s investors and lenders.
(f) Not more than 10% of the outstanding shares of the
Company entitled to vote at the Meeting of Stockholders shall
have perfected appraisal rights in respect of the Merger.
ARTICLE 7
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be
-----------------------------
terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval of this
Agreement by the stockholders of the Company, by the mutual
consent of the Purchaser and the Company.
7.2 Termination by Either Purchaser or Company. This
------------------------------------------
Agreement may be terminated and the Merger may be abandoned by
action of the Board of Directors of either the Purchaser or the
Company if (a) the Merger shall not have been consummated by
December 31, 1998 (b) the approval of the Company's stockholders
required by Section 6.1(a) shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof, or
(c) a United States federal or state court of competent
jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate
this Agreement pursuant to this clause (c) shall have used all
reasonable efforts to remove such injunction, order or decree;
and provided, in the case of a termination pursuant to clause (a)
above, that the terminating party shall not have breached in any
material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the failure to
consummate the Merger by December 31 1998.
7.3 Termination by Company. This Agreement may be
----------------------
terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the adoption and approval by
the stockholders of the Company referred to in Section 6.1(a), by
action of the Board of Directors of the Company, if (a) there is
a Qualifying Alternative Proposal (as defined in Section 5.1(b))
that the Board of Directors of the Company in good faith
determines (in consultation with its financial advisors)
represents a financially superior transaction for the
stockholders of the Company as compared to the Merger and in the
exercise of its good faith judgment as to its fiduciary duties
imposed by law, as advised by outside counsel, the Board of
Directors of the Company determines that such termination is
required by reason of such being made; provided that the Company
shall (i) notify the Purchaser promptly of its intention to
terminate this Agreement or to enter into a definitive agreement
with respect to any such Qualifying Alternative Proposal (which
notice shall describe the material terms of such definitive
agreement), and (ii) give Purchaser 10 days to increase the
consideration payable hereunder to that payable pursuant to the
Qualifying Alternative Proposal (if so increased this Agreement
may not be terminated) but in no event shall such notice be given
less than 48 hours prior to the public announcement of the
Company's proposed termination of this Agreement; and provided
further that the right to terminate this Agreement pursuant to
this clause shall not be available if there has been a
non-performance or breach by the Company which has or would
reasonably be expected to have resulted in a failure of condition
under Section 6.3(a) hereof, or (b) there has been a
non-performance or breach by the Purchaser which has or would
reasonably be expected to have resulted in a failure of condition
under Section 6.2, which non-performance or breach is not curable
or, if curable, is not cured within 30 days after written notice
of such non-performance or breach is given by the Company to the
Purchaser. Notwithstanding the foregoing, the Company's ability
to terminate this Agreement pursuant to Section 7.2 or this
Section 7.3 is conditioned upon the payment by the Company of any
amounts owed by it pursuant to Section 7.5(a) to the extent owed
thereunder.
7.4 Termination by Purchaser. This Agreement may be
------------------------
terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval by the
stockholders of the Company referred to in Section 6.1(a), by
action of the Board of Directors of the Purchaser, if (i) the
Board of Directors of the Company shall have withdrawn or
modified in a manner materially adverse to the Purchaser its
approval or recommendation of this Agreement or the Merger or
shall have recommended an Alternative Proposal to the Company's
stockholders, or (ii) there has been a non-performance or breach
by the Company which has or would reasonably be expected to have
resulted in a failure of condition under Section 6.3, which
non-performance or breach is not curable or, if curable, is not
cured within 30 days after written notice of such non-performance
or breach is given by the Purchaser to the Company.
7.5 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event that any person shall have made an
Alternative Proposal for the Company and (i) thereafter this
Agreement is terminated pursuant to Section 7.3(a) or clause (i)
of Section 7.4 or (ii) this Agreement is terminated for any other
reason (other than the breach of this Agreement by the Purchaser)
and, in the case of this clause (ii) only, a transaction
contemplated by such Alternative Proposal is consummated within
one year after such termination (either of the foregoing events
being called a "Payment Event"), then the Company shall pay the
Purchaser the sum of Eight Hundred Thousand Dollars ($800,000)
which amount shall be payable by wire transfer of same day funds
either on the date contemplated in the last sentence of Section
7.3 if applicable or, otherwise, within two business days after
such amount becomes due. The Company acknowledges that the
agreements contained in this Section 7.5(a) are an integral part
of the transactions contemplated in this Agreement, and that,
without these agreements, the Purchaser would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the
amount due pursuant to this Section 7.5(a), and, in order to
obtain such payment, the Purchaser commences a suit which results
in a judgment against the Company for the fee set forth in this
Section 7.5(a), the Company shall pay to the Purchaser its costs
and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee at the rate
of 12% per annum.
(b) In the event of termination of this Agreement and
the abandonment of the Merger pursuant to this Article 7, all
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 7.5 and
except for the provisions of Sections 5.9, 8.3, 8.4, 8.6, 8.8,
8.9, 8.12 and 8.13. Moreover, in the event of termination of
this Agreement pursuant to Sections 7.2, 7.3 or 7.4, nothing
herein shall prejudice the ability of the non-breaching party
from seeking damages from any other party for any willful breach
of any material provision of this Agreement, including without
limitation, attorneys' fees and the right to pursue any remedy at
law or in equity.
7.6 Extension, Waiver.
-----------------
At any time prior to the Effective Time, any party hereto,
by action taken by its Board of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any
of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and
----------------------------------------------
Agreements. All representations, warranties and agreements in
----------
this Agreement or in any instrument delivered pursuant to this
Agreement shall be deemed to the extent expressly provided herein
to be conditions to the Merger and shall not survive the Merger,
provided, however, that the agreements contained in Article 2,
Sections 5.9 and 5.10 and this Article 8 shall survive the
Merger.
8.2 Notices. Any notice required to be given hereunder
-------
shall be sufficient if in writing, and sent by facsimile
transmission or by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to the Purchaser: If to the Company:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. ▇▇. ▇.▇. ▇▇▇▇▇▇▇▇▇▇, Chairman
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ High Farms Road, Box 154
▇▇▇▇▇▇ Barre, PA 18705 ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: With copies to:
▇▇▇▇▇▇▇ ▇▇▇▇, Esq. ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally
delivered or mailed.
8.3 Assignment; Binding Effect. Neither this Agreement nor
--------------------------
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall
be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the
contrary, except for the provisions of Section 5.10, nothing in
this Agreement, expressed or implied, is intended to confer on
any person other than the parties hereto or their respective
heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason
of this Agreement.
8.4 Entire Agreement. This Agreement, the Schedules, and
----------------
any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement
shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the
---------
parties hereto, by action taken by their respective Boards of
Directors, at any time before or after approval of matters
presented in connection with the Merger by the stockholders of
the Company, but after any such stockholder approval, no
amendment shall be made which by law requires the further
approval of stockholders without obtaining such further approval.
This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.6 Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with the laws of Pennsylvania
applicable to contracts executed and to be performed entirely
within that State without regard to the conflicts of laws
principles thereof.
8.7 Counterparts. This Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all
of the parties hereto.
8.8 Headings. Headings of the Articles and Sections of
--------
this Agreement are for the convenience of the parties only, and
shall be given no substantive or interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context
--------------
otherwise requires, words describing the singular number shall
include the plural and vice versa, and words denoting any gender
shall include all genders and words denoting natural persons
shall include corporations and partnerships and vice versa.
8.10 Waivers. Except as provided in this Agreement, no
-------
action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action
of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate
or be construed as a waiver of any prior or subsequent breach of
the same or any other provision hereunder.
8.11 Incorporation of Exhibits and Schedules. The Exhibits
---------------------------------------
and Schedules attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
8.12 Severability. Any term or provision of this Agreement
------------
which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be
only so broad as is enforceable.
8.13 Confidentiality. Purchaser agrees to treat
---------------
confidentially all non-public confidential information, trade
secrets and proprietary business practices and concepts (the
"Evaluation Material") disclosed by the Company to the Purchaser
at any time prior to the Closing Date. Purchaser agrees to
transmit the Evaluation Material only to its employees, agents,
financing sources or partners, and others who need to know such
information and who shall be advised by the Purchaser of this
provision and agree to be bound by the terms hereof. In the
event that the Purchaser is required (by oral questions,
interrogatories, requests for information or document subpoena,
civil investigative demand or similar process) to disclose any of
the Evaluation Material, it will provide the Company with prompt
notice of such request(s) so that the Company may seek an
appropriate protective order and/or waive the Purchaser's
compliance with these provisions. It is further agreed that if,
in the absence of a protective order or the receipt of a waiver
hereunder, the Purchaser is nonetheless, in the opinion of its
counsel, compelled to disclose any of the Evaluation Material to
any tribunal or else stand liable for contempt or suffer other
censure or penalty, the Purchaser may disclose such Evaluation
Material to such tribunal without liability hereunder. In the
event that the Merger is not effected after the Purchaser has
been furnished with Evaluation Material, it will promptly upon
the request of the Company deliver to the Company the Evaluation
Material, without retaining any copy thereof. The term
"Evaluation Material" does not include information which (i)
becomes or has been generally available to the public other than
as a result of a disclosure by the Purchaser or its
representatives, (ii) was available to the Purchaser on a non-
confidential basis prior to its disclosure to the Purchaser by
the Company or its representatives, or (iii) becomes available to
the Purchaser on a non-confidential basis from a source other
than the Company or its representatives, provided, however, that
such source is not bound by a confidentiality agreement with the
Company or its representatives.
8.14 Enforcement of Agreement. The parties hereto agree
------------------------
that irreparable damage would occur in the event any provision of
this Agreement was not performed in accordance with its specific
terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to obtain an injunction or
injunctions to prevent breaches of this Agreement, this being in
addition to any other remedy to which they are entitled at law or
in equity. By each party's execution and delivery hereof, such
party hereby irrevocably submits to the jurisdiction of any such
court in connection with any such suit or proceeding, irrevocably
waives any objection, including any objection to the laying of
venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any action or
proceeding in such jurisdiction in respect of this Agreement or
any document related hereto and each waives personal service of
any summons, complaint or other process which may be made by any
other means permitted by Pennsylvania law. The parties hereto
irrevocably consent to service of process in the manner described
in Section 8.2 hereof, AND EACH PARTY HERETO IRREVOCABLY WAIVES
ANY RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR INTERPRET THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf on the
day and year first written above.
The Lion Brewery, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Chairman of the Board
Malt Acquiring, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------
President