EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
Among
EQUITY SECURITIES INVESTMENTS, INC.
REALCO, INC.
And
ESI ACQUISITION SUB, INC.
February 28, 2001
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TABLE OF CONTENTS
Page
RECITALS 1
Article 1THE MERGER............................................................1
Section 1.01 The Merger..........................................1
Section 1.02 Effective Time of the Merger........................1
Section 1.03 Closing.............................................1
Section 1.04 Effects of the Merger...............................2
Section 1.05 Articles of Incorporation and Bylaws................2
Section 1.06 Directors and Officers..............................2
Section 1.07 Conversion of Shares................................2
Section 1.08 Tax Consequences....................................3
Article 2EXCHANGE OF SHARES....................................................3
Section 2.01 Exchange of Certificates............................3
Section 2.02 Adjustments.........................................3
Article 3REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................3
Section 3.01 Organization........................................3
Section 3.02 Capitalization......................................4
Section 3.03 Authority Relative to This Agreement................4
Section 3.04 Consents and Approvals..............................5
Section 3.05 No Conflict.........................................5
Section 3.06 Financial Statements................................5
Section 3.07 Absence of Certain Changes..........................5
Section 3.08 No Undisclosed Liabilities..........................6
Section 3.09 No Default or Violation.............................6
Section 3.10 Litigation..........................................6
Section 3.11 Licenses and Permits................................6
Section 3.12 Taxes...............................................7
Section 3.13 ERISA...............................................7
Section 3.14 Labor and Employment Matters........................8
Section 3.15 Title to Assets.....................................8
Section 3.16 Material Contracts..................................8
Section 3.17 Intellectual Property...............................9
Section 3.18 Change in Control...................................9
Section 3.19 Contracts with Affiliates...........................9
Article 4REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB........10
Section 4.01 Organization.......................................10
Section 4.02 Capitalization.....................................10
Section 4.03 Authority Relative to this Agreement...............11
Section 4.04 Consents and Approvals.............................11
Section 4.05 No Conflict........................................12
Section 4.06 Reports............................................12
Section 4.07 Absence of Certain Changes.........................12
Section 4.08 No Undisclosed Liabilities.........................13
Section 4.09 No Default or Violation............................13
Section 4.10 Litigation.........................................13
Section 4.11 Licenses and Permits...............................13
Section 4.12 Taxes..............................................13
Section 4.13 ERISA..............................................14
Section 4.14 Labor and Employment Matters.......................14
Section 4.15 Title to Assets....................................15
Section 4.16 Material Contracts.................................15
Section 4.17 Intellectual Property..............................16
Section 4.18 Interim Operations of Acquisition Sub..............16
Section 4.19 Change in Control..................................16
Section 4.20 Contracts with Affiliates..........................16
Section 4.21 No Applicable State Takeover Statutes..............16
Article 5COVENANTS............................................................17
Section 5.01 Conduct of Businesses Pending Closing..............17
Section 5.02 Additional Covenants of the Company................19
Section 5.03 Additional Covenants of Parent.....................19
Section 5.04 Access to Information..............................19
Section 5.05 Further Action; Best Efforts.......................20
Section 5.06 Affiliates.........................................20
Section 5.07 Indemnification and Insurance......................20
Section 5.08 Certain Benefits...................................21
Section 5.09 Brokers or Finders.................................22
Article 6CONDITIONS...........................................................22
Section 6.01 Conditions to Each Party's Obligation to Effect the
Merger............................................22
Section 6.02 Conditions of Obligations of Parent and Acquisition
Sub...............................................23
Section 6.03 Conditions of Obligations of the Company...........25
Article 7TERMINATION AND AMENDMENT............................................27
Section 7.01 Termination........................................27
Section 7.02 Effect of Termination..............................27
Section 7.03 Amendment..........................................27
Section 7.04 Extension; Waiver..................................27
Article 8POST CLOSING COVENANTS...............................................28
Section 8.01 Stockholders Meeting...............................28
Section 8.02 Information in Disclosure Documents................28
Section 8.03 Listing of Shares on Nasdaq........................28
Section 8.04 Income Tax Returns.................................28
Article 9MISCELLANEOUS........................................................28
Section 9.01 Non-survival of Representations and Warranties.....28
Section 9.02 Notices............................................28
Section 9.03 Descriptive Headings...............................29
Section 9.04 Counterparts.......................................29
Section 9.05 Entire Agreement; Assignment.......................29
Section 9.06 Governing Law......................................30
Section 9.07 Specific Performance...............................30
Section 9.08 Expenses...........................................30
Section 9.09 Publicity..........................................30
Section 9.10 Parties in Interest................................30
LIST OF DEFINED TERMS
Section Where Found
Acquisition Sub.....................................................Introduction
Articles of Merger..................................................Section 1.02
Closing.............................................................Section 1.03
Closing Date........................................................Section 1.03
Code................................................................Section 1.08
Company.............................................................Introduction
Company Benefit Plans............................................Section 3.13(a)
Company Disclosure Schedule.........................................Section 3.02
Company Financial Statements........................................Section 3.06
Company Intellectual Property.......................................Section 3.17
Company Material Adverse Effect.....................................Section 3.01
Company Permits.....................................................Section 3.11
Company Share....................................................Section 1.07(a)
Company Welfare Plans............................................Section 5.08(b)
Effective Time......................................................Section 1.02
ERISA............................................................Section 3.13(a)
Exchange Act........................................................Section 4.04
Governmental Entity.................................................Section 3.04
HSR Act.............................................................Section 3.04
IRS..............................................................Section 3.13(a)
Managers............................................................Section 5.07
Material Contracts..................................................Section 3.16
MBCA................................................................Section 1.01
Merger..............................................................Section 1.01
NASD................................................................Section 3.04
Parent..............................................................Introduction
Parent Benefit Plans.............................................Section 4.13(a)
Parent Common Shares.............................................Section 4.02(a)
Parent Disclosure Schedule..........................................Section 4.02
Parent Intellectual Property........................................Section 4.14
Parent Material Adverse Effect......................................Section 4.01
Parent Permits......................................................Section 4.11
Parent Preferred Shares..........................................Section 4.02(a)
Parent SEC Reports..................................................Section 4.06
Parent Stock Plans..................................................Section 4.02
Primary Company Opinion..........................................Section 6.02(e)
Primary Parent Opinion...........................................Section 6.03(e)
Proxy Statement.....................................................Section 8.01
Securities Act......................................................Section 3.04
Series D Preferred Shares........................................Section 1.07(a)
Surviving Corporation...............................................Section 1.01
Taxes...............................................................Section 3.12
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of February 28, 2001,
by and among Equity Securities Investments, Inc., a Minnesota corporation (the
"Company"), Realco, Inc., a New Mexico corporation ("Parent"), and ESI
Acquisition Sub, Inc., a Minnesota corporation and a wholly owned subsidiary of
Parent ("Acquisition Sub").
RECITALS
A. The Boards of Directors of Parent and the Company each have determined
that it is in the best interests of their respective companies and shareholders
for Parent to acquire the Company upon the terms and subject to the conditions
set forth in this Agreement.
B. Simultaneously with the execution of this Agreement, the shareholders of
the Company have approved this Agreement and the Merger (as defined in Section
1.01) of Acquisition Sub with and into the Company upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
Article 1
THE MERGER
Section 1.01 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.02), Acquisition
Sub shall be merged with and into the Company in accordance with this Agreement
and the relevant provisions of the Minnesota Business Corporation Act (the
"MBCA"), and the separate existence of Acquisition Sub shall cease (the
"Merger"). The Company shall be the surviving corporation in the Merger
(hereinafter sometimes referred to as the "Surviving Corporation").
Section 1.02 Effective Time of the Merger. Upon the terms and subject to
the conditions hereof, articles of merger (the "Articles of Merger") providing
for the Merger of Acquisition Sub with and into the Company shall be duly
prepared and executed by the Surviving Corporation and delivered to the
Secretary of State of the State of Minnesota for filing on the Closing Date (as
defined in Section 1.03). The Merger shall become effective as of the date and
at such time as the Articles of Merger are filed with the Secretary of State of
the State of Minnesota or at such subsequent date or time as shall be agreed by
the Company and Parent and specified in the Articles of Merger and in accordance
with the MBCA (the time the Merger becomes effective pursuant to the MBCA being
referred to herein as the "Effective Time").
Section 1.03 Closing. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Article 6 hereof, the closing of the Merger
(the "Closing") will take place at 10:00 a.m., Minneapolis, Minnesota time, on a
date to be specified by the parties, which shall be no later than two business
days after the satisfaction or waiver of the conditions to Closing contained in
Article 6 hereof, at the offices of Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P., 0000
XxXxxxx Xxxxx, 000 XxXxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000, unless another
date or place is agreed to in writing by the parties hereto. The date and time
at which the Closing occurs is referred to herein as the "Closing Date."
Section 1.04 Effects of the Merger. The Merger shall have the effects set
forth in the MBCA, including Section 302A.641 of the MBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
properties, rights, privileges, powers and franchises of the Company and
Acquisition Sub shall vest in the Surviving Corporation and all debts,
liabilities and duties of the Company and Acquisition Sub shall become the
debts, liabilities and duties of the Surviving Corporation. As of the Effective
Time the Surviving Corporation shall be a wholly owned subsidiary of Parent.
Section 1.05 Articles of Incorporation and Bylaws
(a) The articles of incorporation of the Company in effect at the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until amended in accordance with the terms thereof and with
applicable laws.
(b) The Bylaws of the Company in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until amended in accordance with the terms
thereof and with applicable laws.
Section 1.06 Directors and Officers
(a) The directors of the Company immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation until their
successors shall have been duly elected or appointed and shall have qualified or
until their earlier death, resignation or removal in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation.
(b) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation until their
successors shall have been duly elected or appointed and shall have qualified or
until their earlier death, resignation or removal in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation.
Section 1.07 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Acquisition Sub, the
Company or the holder of any of the following securities:
(a) Each issued and outstanding share of Class A (voting) Common Stock
par value $.01, of the Company and each issued and outstanding share of Class B
(non-voting) Common Stock, par value $.01, of the Company (each, a "Company
Share") (other than shares to be canceled in accordance with Section 1.07(b)
hereof) shall be converted into the right to receive 689.4587 fully paid and
non-assessable shares of Series D Preferred Stock of Parent ("Series D Preferred
Shares"), i.e., an aggregate of 702 Company Shares shall be converted into the
right to receive an aggregate of 484,000 Series D Preferred Shares of Parent.
Each Series D Preferred Share shall be convertible into three Parent Common
Shares (as defined in Section 4.02(a), but only if and when such conversion is
approved by the stockholders of Parent. The rights, preferences and privileges
of the Series D Preferred Shares shall be a set forth in Appendix A hereto.
(b) Each Company Share held by Parent or any subsidiary of Parent
shall be canceled and retired and cease to exist.
(c) Each issued and outstanding share of the capital stock of
Acquisition Sub shall be converted into and become one fully paid and
non-assessable share of Class A (voting) Common Stock of the Surviving
Corporation.
Section 1.08 Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code.
Article 2
EXCHANGE OF SHARES
Section 2.01 Exchange of Certificates. At the Effective Time, each holder
of record of a certificate or certificates that immediately prior to the
Effective Time represented Company Shares shall surrender such certificate or
certificates to Parent, and Parent shall deliver to each such holder a
certificate or certificates representing the aggregate number of Series D
Preferred Shares of Parent issuable to such holder pursuant to Section 1.07(a)
in exchange for Company Shares.
Section 2.02 Adjustments. If, between the date of this Agreement and the
Effective Time, either the Company Shares, the Series D Preferred Shares or the
Parent Common Shares shall have been exchanged into a different number of shares
or a different class by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within such period, the number of
Series D Preferred Shares of Parent into which the Company Shares will be
converted in the Merger shall be correspondingly adjusted to eliminate the
effects of such event.
Article 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquisition Sub as follows:
Section 3.01 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is duly qualified or licensed and in good standing to do business in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not in the aggregate have a
Company Material Adverse Effect. For purposes of this Agreement, a "Company
Material Adverse Effect" shall mean any change or effect that is materially
adverse to the business, operations or financial condition of the Company taken
as a whole. The Company has heretofore delivered to Parent accurate and complete
copies of the Articles of Incorporation and Bylaws, as currently in effect, of
the Company. The Company has no subsidiaries.
Section 3.02 Capitalization
(a) The authorized capital stock of the Company consists of One
Million (1,000,000) shares of capital stock, of which 250,000 shares are Class A
(Voting) Common Shares, 250,000 shares are Class B (Non-voting) Common Shares,
and 500,000 shares are undesignated as to class or series. At December 31, 2000,
an aggregate of 702 Company Shares were issued and outstanding, of which 85 were
Class A Common Shares and 617 were Class B Common Shares. All the issued and
outstanding Company Shares are validly issued, fully paid and non-assessable and
free of preemptive rights. Except as set forth above or in Section 3.02 of the
Company disclosure schedule previously delivered by the Company to Parent (the
"Company Disclosure Schedule"), as of December 31, 2000, there were no options,
warrants or other rights outstanding to acquire any Company Shares. Since
December 31, 2000, the Company has not issued any shares of its capital stock
(nor securities substantially equivalent to capital stock). Except as set forth
above or in Section 3.02 of the Company Disclosure Schedule, or as contemplated
hereby, there are not now, and at the Effective Time there will not be, any
shares of capital stock (or securities substantially equivalent to capital
stock) of the Company issued or outstanding or any subscriptions, options,
warrants, calls, rights, convertible securities or other agreements or
commitments of any character obligating the Company to issue, transfer or sell
any of its securities.
(b) Except as set forth in Section 3.02 of the Company Disclosure
Schedule, there are not now, and at the Effective Time there will not be, any
voting trusts or other agreements or understandings to which the Company is a
party or is bound with respect to the voting of the capital stock of the
Company. Except as disclosed in Section 3.02 of the Company Disclosure Schedule,
the Company does not own, directly or indirectly, any capital stock or other
equity securities of any corporation or have any direct or indirect equity or
ownership interest in any business. Except as set forth above or in Section 3.02
of the Company Disclosure Schedule, there are no persons or entities in which
the Company has any voting rights or equity interests.
Section 3.03 Authority Relative to This Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of the Company, this
Agreement has been approved and adopted by the shareholders of the Company, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 3.04 Consents and Approvals. Except for applicable requirements of
the Securities Act of 1933 (the "Securities Act"), state Blue Sky laws, the
National Association of Securities Dealers, Inc. (the "NASD"), and the filing
and recordation of the Articles of Merger, as required by the MBCA, no filing
with, and no permit, authorization, consent or approval of, any public body or
authority, including courts of competent jurisdiction, domestic or foreign
("Governmental Entity"), is necessary for the consummation by the Company of the
transactions contemplated by this Agreement. Without limiting the foregoing, no
filing under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") is necessary for the consummation by the Company of the
transactions contemplated by this Agreement.
Section 3.05 No Conflict. Except as set forth in Section 3.05 of the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement by the Company nor the consummation by the Company of the transactions
contemplated hereby nor compliance by the Company with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
Articles of Incorporation or Bylaws of the Company or any of its subsidiaries,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or (iii) violate any order, writ, injunction, decree,
statute, treaty, rule or regulation applicable to the Company, any of its
subsidiaries or any of their properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which are not in the aggregate
material to the business, operations or financial condition of the Company and
its subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated hereby.
Section 3.06 Financial Statements. The Company has heretofore delivered to
Parent copies of the Company's audited financial statements as of December 31,
1999, and for the year then ended, and its unaudited financial statements as of
September 30, 2000, and for the nine months then ended (collectively, the
"Company Financial Statements"). Each of the balance sheets (including the
related notes) included in the Company Financial Statements fairly presents the
financial position of the Company as of the respective dates thereof, and the
other related statements (including the related notes) included therein fairly
present the results of operations and the changes in financial position of the
Company for the respective fiscal periods, except, in the case of interim
financial statements, for year-end audit adjustments, consisting only of normal
year end adjustments. Each of the Company Financial Statements (including the
related notes) has been prepared in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein and except that the unaudited statements do not
include the related notes.
Section 3.07 Absence of Certain Changes. Except as set forth in the Company
Financial Statements or Section 3.07 of the Company Disclosure Schedule, since
December 31, 1999, the Company has not taken any of the actions set forth in
Section 5.01(b) to Section 5.01(h), suffered any adverse changes in its
business, operations or financial condition which are material to the Company
(other than changes generally affecting the industries in which the Company
operates, including changes due to actual or proposed changes in law or
regulation, or changes relating to the transactions contemplated by this
Agreement, including the change in control contemplated hereby) or entered into
any transaction, or conducted its business or operations, other than in the
ordinary and usual course of business and consistent with past practice and
other than in connection with the Company's exploration of alternatives leading
to the execution of this Agreement.
Section 3.08 No Undisclosed Liabilities. Except as and to the extent set
forth in the Company Financial Statements or Section 3.08 of the Company
Disclosure Schedule, the Company did not have at December 31, 1999, any
liabilities not reflected on a balance sheet of the Company. Except as and to
the extent set forth in such Company Financial Statements or such Schedule,
since December 31, 1999, the Company has not incurred any liabilities material
to the business, operations or financial condition of the Company, except
liabilities incurred in the ordinary and usual course of business and consistent
with past practice and liabilities incurred in connection with this Agreement.
Section 3.09 No Default or Violation. Except as set forth in Section 3.09
of the Company Disclosure Schedule, the Company is not in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its Articles of Incorporation or its Bylaws, (ii) any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which the Company is a party or by which it or any of its properties or assets
may be bound or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, which defaults or violations would, in the
aggregate, have a Company Material Adverse Effect or which would prevent or
delay the consummation of the transactions contemplated hereby.
Section 3.10 Litigation. Except as disclosed in Section 3.10 of the Company
Disclosure Schedule, there is no action, suit, proceeding, review or, to the
knowledge of the Company, investigation pending nor, to the knowledge of the
Company, is any such action, suit, proceeding, review or investigation
threatened involving the Company, at law or in equity, or before any
Governmental Entity which in the aggregate are reasonably likely to have a
Company Material Adverse Effect.
Section 3.11 Licenses and Permits. The Company holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of its businesses (the "Company Permits"),
except for failures to hold such Company Permits which would not, in the
aggregate, have a Company Material Adverse Effect. The Company is in compliance
with the terms of the Company Permits, except where the failure so to comply
would not have a Company Material Adverse Effect. The businesses of the Company
are not being conducted in violation of any applicable law, ordinance, rule,
regulation, decree or order of any Governmental Entity, except for violations
which in the aggregate do not and would not have a Company Material Adverse
Effect.
Section 3.12 Taxes. The Company has duly filed all material federal, state,
local and foreign tax returns required to be filed by it, and the Company has
duly paid, caused to be paid or made adequate provision for the payment of all
Taxes (as hereinafter defined) required to be paid in respect of the periods
covered by such returns and has made adequate provision for payment of all Taxes
anticipated to be payable in respect of all calendar periods since the periods
covered by such returns. The federal income tax returns required to be filed by
the Company have not been examined by the IRS, and the period during which any
assessments may be made by the IRS has not expired. All deficiencies and
assessments asserted as a result of such examinations or other audits by
federal, state, local or foreign taxing authorities have been paid, fully
settled or adequately provided for in the Company Financial Statements, and no
issue or claim has been asserted for Taxes by any taxing authority for any prior
period, the adverse determination of which would result in a deficiency which
would have a Company Material Adverse Effect, other than those heretofore paid
or provided for. Except as set forth in Section 3.12 of the Company Disclosure
Schedule, there are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal or foreign income tax return of
the Company. For purposes of this Section 3.12 and Section 4.12 below, "Taxes"
shall mean all taxes, assessments and governmental charges imposed by any
federal, state, county, local or foreign government, taxing authority,
subdivision or agency thereof, including interest, penalties or additions
thereto.
Section 3.13 ERISA
(a) With respect to each employee benefit plan (including without
limitation, any "employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and any
material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan, arrangement or understanding (whether or not legally
binding) (all the foregoing being herein called the "Company Benefit Plans"),
maintained or contributed to by the Company, the Company has made available to
Parent a true and correct copy of, where applicable, (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii)
such Company Benefit Plan, (iii) each trust agreement and group annuity
contract, if any, relating to such Company Benefit Plan and (iv) the most recent
actuarial report or valuation relating to a Company Benefit Plan subject to
Title IV of ERISA. None of the Company Benefit Plans are multi-employer plans
within the meaning of Section 3(37) of ERISA. Each of the Plans covered by ERISA
(a) has been operated in all material respects in accordance with ERISA, (b) has
not engaged in any prohibited transactions (as such term is defined in Section
406 of ERISA) and (c) has met the minimum funding standards of Section 412 of
the Code. No material Reportable Event (within the meaning of Section 4043 of
ERISA) has occurred and is continuing with respect to any Plan. Since the
enactment of ERISA, the Company has not terminated any pension plan or withdrawn
from any multi-employer pension plan.
( b) With respect to the Company Benefit Plans, in the aggregate, no
event has occurred, and to the knowledge of the Company there exists no
condition or set of circumstances which are reasonably likely to occur in
connection with which the Company would be subject to any liability, that would
have a Company Material Adverse Effect (except liability for benefits claims and
funding obligations payable in the ordinary course), under ERISA, the Code or
any other applicable law.
(c) Except as set forth in Section 3.13 of the Company Disclosure
Schedule, with respect to the Company Benefit Plans, in the aggregate, there are
no funded benefit obligations for which contributions have not been made or
properly accrued and there are no unfunded benefit obligations which have not
been accounted for by reserves, or otherwise properly footnoted in accordance
with generally accepted accounting principles, on the Company Financial
Statements, which obligations are reasonably likely to have a Company Material
Adverse Effect.
Section 3.14 Labor and Employment Matters. Except as set forth in Section
3.14 of the Company Disclosure Schedule, (a) the Company is not a party to, or
bound by, any collective bargaining agreement or other contract or understanding
with a labor union or labor organization; and (b) there is no (i) unfair labor
practice, labor dispute (other than routine individual grievances) or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company, (ii) activity or proceeding by a labor union or
representative thereof to organize any employees of the Company, or (iii)
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees.
Section 3.15 Title to Assets
(a) Section 3.15(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all leased and owned real properties of the
Company. The Company has good and marketable title to all of its real and
personal properties and assets reflected on the balance sheet of the Company at
September 30, 2000 (the "September 2000 Balance Sheet"), free and clear of all
liens except for (i) liens which secure indebtedness which is properly reflected
in the September 2000 Balance Sheet; (ii) liens for Taxes accrued but not yet
payable; (iii) liens arising as a matter of law in the ordinary course of
business with respect to obligations incurred after the date of the September
2000 Balance Sheet, provided that the obligations secured by such liens are not
delinquent; and (iv) such imperfections of title and liens, if any, as
individually or in the aggregate would not have a Company Material Adverse
Effect. Except as set forth in Section 3.15(a) of the Company Disclosure
Schedule, the Company owns, or has valid leasehold interests in, all properties
and assets used by it in the conduct of its business, except where the absence
of such ownership or leasehold interests would not individually or in the
aggregate have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.15(b) of the Company Disclosure
Schedule, the Company does not have any legal obligation, absolute or
contingent, to any other person to sell or dispose of any of its assets, other
than orders for sale of inventory in the ordinary course of business, with an
aggregate value in excess of $100,000.
Section 3.16 Material Contracts. Section 3.16 of the Company Disclosure
Schedule sets forth a list as of the date hereof of all (i) contracts for
borrowed money or guarantees thereof, (ii) contracts involving any rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), or any combination of
these transactions (each a "Derivative" and collectively, "Derivatives"), (iii)
contracts containing covenants by the Company restricting its ability or the
ability of any affiliates of the Company to engage in any line of business, (iv)
contracts involving the sale, disposition or licensing of other material assets
of the Company (including intellectual property), (v) contracts involving the
investment, including by way of capital contribution, loan or advance, by the
Company in any other person, firm or entity, other than cash and cash
equivalents and other than investments no longer owned by the Company, and (vi)
other contracts under which the unpaid liability of the Company is $100,000 or
more or are otherwise material (all contracts described in each of the
categories (i) through (vi) above, "Material Contracts"). All Material Contracts
to which the Company is a party or by which any of its assets are bound are
valid and binding, in full force and effect and enforceable against the parties
thereto in accordance with their respective terms, except where the failure to
be so valid and binding, in full force and effect or enforceable would not
individually or in the aggregate have a Company Material Adverse Effect. There
is not under any such Material Contract, any existing default, or event, which
after notice or lapse of time, or both, would constitute a default, by the
Company, or to the knowledge of the Company, any other party, other than any
such defaults or events which, individually or in the aggregate, would not have
a Company Material Adverse Effect.
Section 3.17 Intellectual Property. The Company has and will, after giving
effect to the Merger, have to the same extent and on the same terms as prior to
the Closing, valid rights to use, whether through ownership, licensing or
otherwise, all intellectual property (including, without limitation, patents,
patent rights, patent applications, trademarks, trademark applications, trade
names, copyrights, drawings, trade secrets, know-how and computer software)
necessary to permit the Company to conduct its businesses as now operated (the
"Company Intellectual Property"). Except as set forth in Section 3.17 of the
Company Disclosure Schedule, no claim is pending or, to the knowledge of the
Company, threatened to the effect that the present or past operations of the
Company infringe upon or conflict with the rights of others with respect to any
Company Intellectual Property and no claim is pending or threatened to the
effect that any of the Company Intellectual Property is invalid or
unenforceable. No contract, agreement or understanding with any party exists
which would impede or prevent the continued use by the Company of the entire
right, title and interest of the Company in and to the Company Intellectual
Property.
Section 3.18 Change in Control. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, the Company is not a party to any contract,
agreement or understanding which contains a "change in control" provision or
"potential change in control" provision.
Section 3.19 Contracts with Affiliates. Except as set forth in Section 3.19
of the Company Disclosure Schedule, there are no agreements or understandings
between the Company, on the one hand, and any affiliates of the Company, on the
other hand.
Article 4
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION SUB
Parent and Acquisition Sub represent and warrant to the Company as follows:
Section 4.01 Organization. Each of Parent and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of Parent and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a Parent Material Adverse Effect. For
purposes of this Agreement, a "Parent Material Adverse Effect" shall mean any
change or effect that is materially adverse to the business, operations or
financial condition of Parent and its subsidiaries taken as a whole. Parent has
heretofore delivered to the Company accurate and complete copies of the charter
and bylaws, as currently in effect, of Parent and each of its subsidiaries.
Section 4.02 Capitalization
(a) The authorized capital stock of Parent consists of Fifty Million
(50,000,000) shares of common stock, no par value, ("Parent Common Shares") and
Five Hundred Thousand (500,000) shares of Preferred Stock, no par value ("Parent
Preferred Shares"). At December 31, 2000, there were issued and outstanding an
aggregate of 3,388,142 Parent Common Shares and no Parent Preferred Shares. All
of the issued and outstanding Parent Common Shares are validly issued, fully
paid and non-assessable and free of preemptive rights. As of December 31, 2000,
205,000 Parent Common Shares were issuable upon exercise of options, at a
weighted average exercise price of $3.09 (exercise prices ranged from $2.40 to
$3.45 per share), pursuant to Parent's stock option plan(s) (such plans are
referred to herein collectively as the "Parent Stock Plans"). Section 4.02(a) of
the disclosure schedule previously delivered by Parent to the Company (the
"Parent Disclosure Schedule") sets forth each other share of capital stock (or
security substantially equivalent to capital stock) of Parent issued or
outstanding and each other subscription, option, warrant, call, right,
convertible security or other agreement or commitment of any character
obligating Parent to issue, transfer or sell any security, and, as to each such
security, agreement or commitment, the average conversion or exercise price
thereof, a range of the conversion or exercise prices and the effects of the
Merger and the other transactions contemplated hereby on such security,
agreement or commitment, including pursuant to anti-dilution provisions thereof.
All Series D Preferred Shares that are to be issued pursuant to the Merger or
the other transactions contemplated hereby (and, assuming that the stockholders
of Parent approve the conversion of the Series D Preferred Shares into Parent
Common Shares, all Parent Common Shares issuable upon conversion of the Series D
Preferred Shares) will be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and non-assessable and free
of any preemptive rights in respect thereto. Since December 31, 2000, Parent has
not issued any shares of its capital stock (or securities substantially
equivalent to capital stock) except upon exercise of options pursuant to Parent
Stock Plans granted prior to such date. Except as set forth above or in Section
4.02(a) of the Parent Disclosure Schedule or as contemplated hereby, there are
not now, and at the Effective Time there will not be, any shares of capital
stock (or securities substantially equivalent to capital stock) of Parent issued
or outstanding or any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating Parent to issue, transfer or sell any of its securities.
(b) Section 4.02(b) of the Parent Disclosure Schedule sets forth the
name, jurisdiction of incorporation and capitalization of each subsidiary of
Parent. Except as disclosed in Section 4.02(b) of the Parent Disclosure
Schedule, Parent does not own, directly or indirectly, any capital stock or
other equity securities of any corporation or have any direct or indirect equity
or ownership interest in any business. All of the outstanding shares of capital
stock of each of Parent's subsidiaries have been validly issued and are fully
paid and non-assessable and, except as set forth in Section 4.02(b) of the
Parent Disclosure Schedule, are owned either by Parent or another of its
subsidiaries free and clear of all liens, charges, claims or encumbrances. There
are not now, and at the Effective Time there will not be, any outstanding
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of any of Parent's subsidiaries, or otherwise
obligating Parent or any such subsidiary to issue, transfer or sell any such
securities. Except as set forth in Section 4.02(b), there are not now, and at
the Effective Time there will not be, any voting trusts or other agreements or
understandings to which Parent or any of its subsidiaries is a party or is bound
with respect to the voting of the capital stock of Parent or any of Parent's
subsidiaries. Except as set forth above or in Section 4.02(b) of the Parent
Disclosure Schedule, there are no persons or entities (other than subsidiaries
of Parent) in which Parent or any of its subsidiaries has any voting rights or
equity interests.
Section 4.03 Authority Relative to this Agreement. Each of Parent and
Acquisition Sub has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Parent and Acquisition Sub and by Parent as the sole
stockholder of Acquisition Sub and no other corporate proceedings on the part of
Parent or Acquisition Sub are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of Parent and Acquisition Sub and
constitutes a valid and binding agreement of each of Parent and Acquisition Sub,
enforceable against each of Parent and Acquisition Sub in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors rights generally and by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.04 Consents and Approvals. Except for applicable requirements of
the Securities Act, Securities Exchange Act of 1934 (the ("Exchange Act"), state
Blue Sky laws and the filing and recordation of a Articles of Merger, as
required by the MBCA, no filing with, and no permit, authorization, consent or
approval of, any Governmental Entity, is necessary for the consummation by
Parent of the transactions contemplated by this Agreement. Without limiting the
foregoing, no filing under the HSR Act is necessary for the consummation by
Parent of the transactions contemplated by this Agreement.
Section 4.05 No Conflict. Except as set forth in Section 4.05 of the Parent
Disclosure Schedule, neither the execution and delivery of this Agreement by
Parent or Acquisition Sub nor the consummation by Parent or Acquisition Sub of
the transactions contemplated hereby nor compliance by Parent or Acquisition Sub
with any of the provisions hereof will (i) conflict with or result in any breach
of any provision of the charter or bylaws of Parent or any of its subsidiaries
or Acquisition Sub, (ii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which Parent or any of
its subsidiaries is a party or by which any of them or any of their properties
or assets may be bound or (iii) violate any order, writ, injunction, decree,
statute, treaty, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults which are not in the aggregate
material to the business, operations or financial condition of Parent and its
subsidiaries taken as a whole and which will not prevent or delay the
consummation of the transactions contemplated hereby.
Section 4.06 Reports. Parent has filed all required forms, reports and
documents with the SEC since September 30, 1996 (collectively, the "Parent SEC
Reports"), all of which have complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act. Except as
set forth in Section 4.06 of the Parent Disclosure Schedule, none of such Parent
SEC Reports, including without limitation any financial statements or schedules
included therein, 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 not misleading. Each of the balance sheets
(including the related notes) included in the Parent SEC Reports fairly presents
the consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes) included therein fairly present the results of operations and the
changes in financial position of Parent and its subsidiaries for the respective
fiscal years, except, in the case of interim financial statements, for year-end
audit adjustments, consisting only of normal recurring accruals. Each of the
financial statements (including the related notes) included in the Parent SEC
Reports has been prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein.
Section 4.07 Absence of Certain Changes. Except as set forth in the Parent
SEC Reports or Section 4.07 of the Parent Disclosure Schedule, since September
30, 1999 neither Parent nor any of its subsidiaries has taken any of the actions
set forth in Section 5.01(b) to Section 5.01(h), suffered any adverse changes in
its business, operations or financial condition which are material to Parent and
its subsidiaries taken as a whole (other than changes generally affecting the
industries in which Parent operates, including changes due to actual or proposed
changes in law or regulation) or entered into any transaction, or conducted its
business or operations, other than in the ordinary and usual course of business
and consistent with past practice.
Section 4.08 No Undisclosed Liabilities. Except as and to the extent set
forth in the Parent SEC Reports, neither Parent nor any of its subsidiaries had
at September 30, 1999 any liabilities required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of Parent and its
subsidiaries. Except as and to the extent set forth in such Parent SEC Reports,
since September 30, 1999 neither Parent nor any of its subsidiaries has incurred
any liabilities material to the business, operations or financial condition of
Parent and its subsidiaries taken as a whole, except liabilities incurred in the
ordinary and usual course of business and consistent with past practice and
liabilities incurred in connection with this Agreement.
Section 4.09 No Default or Violation. Except as set forth in Section 4.09
of the Parent Disclosure Schedule, neither Parent nor any of its subsidiaries is
in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter or its bylaws, (ii) any note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
they or any of their properties or assets may be bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or any of
its subsidiaries, which defaults or violations would, in the aggregate, have a
Parent Material Adverse Effect or which would prevent or delay the consummation
of the transactions contemplated hereby.
Section 4.10 Litigation. Except as disclosed in the Parent SEC Reports or
in Section 4.10 of the Parent Disclosure Schedule, there is no action, suit,
proceeding, review or, to the knowledge of Parent or Acquisition Sub,
investigation pending nor, to the knowledge of Parent or Acquisition Sub, is any
such action, suit, proceeding, review or investigation threatened involving
Parent or any of its subsidiaries, at law or in equity, or before any
Governmental Entity which in the aggregate are reasonably likely to have a
Parent Material Adverse Effect.
Section 4.11 Licenses and Permits. Parent and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
business (the "Parent Permits"), except for failures to hold such Parent Permits
which would not, in the aggregate, have a Parent Material Adverse Effect. Parent
and its subsidiaries are in compliance with the terms of the Parent Permits,
except where the failure so to comply would not have a Parent Material Adverse
Effect. The businesses of Parent and its subsidiaries are not being conducted in
violation of any applicable law, ordinance, rule, regulation, decree or order of
any Governmental Entity, except for violations which in the aggregate do not and
would not have a Parent Material Adverse Effect.
Section 4.12 Taxes. Parent and each of its subsidiaries has duly filed all
material federal, state, local and foreign tax returns required to be filed by
it, and Parent has duly paid, caused to be paid or made adequate provision for
the payment of all Taxes required to be paid in respect of the periods covered
by such returns and has made adequate provision for payment of all Taxes
anticipated to be payable in respect of all calendar periods since the periods
covered by such returns. The federal income tax returns required to be filed by
Parent have been examined by the IRS, or the period during which any assessments
may be made by the IRS has expired, for all taxable years through 1996. All
deficiencies and assessments asserted as a result of such examinations or other
audits by federal, state, local or foreign taxing authorities have been paid,
fully settled or adequately provided for in the financial statements contained
in the Parent SEC Reports, and no issue or claim has been asserted for Taxes by
any taxing authority for any prior period, the adverse determination of which
would result in a deficiency which would have a Parent Material Adverse Effect,
other than those heretofore paid or provided for. Except as set forth in Section
4.12 of the Parent Disclosure Schedule, there are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any federal
or foreign income tax return of Parent or its subsidiaries.
Section 4.13 ERISA
(a) With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of ERISA),
and any material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, insurance or other plan, arrangement or understanding (whether
or not legally binding) (all the foregoing being herein called the "Parent
Benefit Plans"), maintained or contributed to by Parent or any of its
subsidiaries, Parent has made available to the Company a true and correct copy
of, where applicable, (i) the most recent annual report (Form 5500) filed with
the IRS, (ii) such Parent Benefit Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Parent Benefit Plan and (iv) the most
recent actuarial report or valuation relating to a Parent Benefit Plan subject
to Title IV of ERISA.
(b) With respect to the Parent Benefit Plans, in the aggregate, no
event has occurred, and to the knowledge of Parent or any of its subsidiaries,
there exists no condition or set of circumstances which are reasonably likely to
occur in connection with which Parent or any of its subsidiaries would be
subject to any liability that would have a Parent Material Adverse Effect
(except liability for benefits claims and funding obligations payable in the
ordinary course), under ERISA, the Code or any other applicable law.
(c) Except as set forth in Section 4.13 of the Parent Disclosure
Schedule, with respect to the Parent Benefit Plans, in the aggregate, there are
no funded benefit obligations for which contributions have not been made or
properly accrued and there are no unfunded benefit obligations which have not
been accounted for by reserves, or otherwise properly footnoted in accordance
with generally accepted accounting principles, on the financial statements of
Parent or any of its subsidiaries, which obligations are reasonably likely to
have a Parent Material Adverse Effect.
Section 4.14 Labor and Employment Matters. Except as set forth in Section
4.14 of the Parent Disclosure Schedule, (a) neither the Parent nor any of its
subsidiaries is a party to, or bound by, any collective bargaining agreement or
other contract or understanding with a labor union or labor organization; and
(b) there is no (i) unfair labor practice, labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending or, to the
knowledge of the Parent, threatened against the Parent or any of its
subsidiaries, (ii) activity or proceeding by a labor union or representative
thereof to organize any employees of the Parent or any of its subsidiaries, or
(iii) lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees.
Section 4.15 Title to Assets
(a) Section 4.15(a) of the Parent Disclosure Schedule sets forth a
complete and accurate list of all leased and owned real properties of Parent and
its subsidiaries. Parent and its subsidiaries have good and marketable title to
all of their respective real and personal properties and assets reflected on the
balance sheet of Parent at September 30, 2000 (the "September 2000 Balance
Sheet"), free and clear of all liens except for (i) liens which secure
indebtedness which is properly reflected in the September 2000 Balance Sheet;
(ii) liens for Taxes accrued but not yet payable; (iii) liens arising as a
matter of law in the ordinary course of business with respect to obligations
incurred after the date of the September 2000 Balance Sheet, provided that the
obligations secured by such liens are not delinquent; and (iv) such
imperfections of title and liens, if any, as individually or in the aggregate
would not have a Parent Material Adverse Effect. Except as set forth in Section
4.15(a) of the Parent Disclosure Schedule, Parent and its subsidiaries own, or
have valid leasehold interests in, all properties and assets used by them in the
conduct of their businesses, except where the absence of such ownership or
leasehold interests would not individually or in the aggregate have a Parent
Material Adverse Effect.
(b) Except as set forth in Section 4.15(b) of the Parent Disclosure
Schedule, neither Parent nor any of its subsidiaries has any legal obligation,
absolute or contingent, to any other person to sell or dispose of any of its
assets, other than orders for sale of inventory in the ordinary course of
business, with an aggregate value in excess of $100,000.
Section 4.16 Material Contracts. Section 4.16 of the Parent Disclosure
Schedule sets forth a list as of the date hereof of all (i) contracts for
borrowed money or guarantees thereof, (ii) contracts involving any rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), or any combination of
these transactions (each a "Derivative" and collectively, "Derivatives"), (iii)
contracts containing covenants by Parent or any of its subsidiaries restricting
its ability or the ability of any affiliates of Parent to engage in any line of
business, (iv) contracts to purchase materials, supplies or other assets, other
than purchase orders entered into in the ordinary course of business consistent
with the customary past practice of Parent and other contracts involving
obligations of less than $25,000 individually and $100,000 in the aggregate, (v)
contracts with distributors, sub-distributors or sales agents for Parent or any
of its subsidiaries or in which Parent or any of its subsidiaries acts as
distributor or sales agent for others, (vi) contracts in which the surviving
liability (including indemnities) of Parent or any of its subsidiaries could
exceed $100,000 and involving the sale or other disposition by Parent or any of
its subsidiaries of one or more business units, divisions or entities (including
former subsidiaries); (vii) contracts involving the sale, disposition or
licensing of other material assets of Parent or any of its subsidiaries
(including intellectual property), other than the sale of inventory in the
ordinary course of business, (vii) contracts involving the investment, including
by way of capital contribution, loan or advance, by Parent or any of its
subsidiaries in any other person, firm or entity, other than cash and cash
equivalents and other than investments no longer owned by Parent or any of its
subsidiaries, and (ix) other contracts under which the unpaid liability of
Parent or any of its subsidiaries is $100,000 or more or are otherwise material
(all contracts described in each of the categories (i) through (ix) above,
"Material Contracts"). All Material Contracts to which Parent or any of its
subsidiaries is a party or by which any of its assets are bound are valid and
binding, in full force and effect and enforceable against the parties thereto in
accordance with their respective terms, except where the failure to be so valid
and binding, in full force and effect or enforceable would not individually or
in the aggregate have a Parent Material Adverse Effect. There is not under any
such Material Contract, any existing default, or event, which after notice or
lapse of time, or both, would constitute a default, by Parent or any of its
subsidiaries, or to the knowledge of Parent, any other party, other than any
such defaults or events which, individually or in the aggregate, would not have
a Parent Material Adverse Effect.
Section 4.17 Intellectual Property. Parent has and will, after giving
effect to the Merger, have to the same extent and on the same terms as prior to
the Closing, valid rights to use, whether through ownership, licensing or
otherwise, all intellectual property (including, without limitation, patents,
patent rights, patent applications, trademarks, trademark applications, trade
names, copyrights, drawings, trade secrets, know-how and computer software)
necessary to permit Parent and its subsidiaries to conduct their businesses as
now operated (the "Parent Intellectual Property"). Except as set forth in
Section 4.17 of the Parent Disclosure Schedule, no claim is pending or, to the
knowledge of Parent, threatened to the effect that the present or past
operations of Parent or any subsidiary of Parent infringes upon or conflicts
with the rights of others with respect to any Parent Intellectual Property and
no claim is pending or threatened to the effect that any of the Parent
Intellectual Property is invalid or unenforceable. No contract, agreement or
understanding with any party exists which would impede or prevent the continued
use by Parent and its subsidiaries of the entire right, title and interest of
Parent and its subsidiaries in and to the Parent Intellectual Property.
Section 4.18 Interim Operations of Acquisition Sub. Acquisition Sub was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
Section 4.19 Change in Control. Except as set forth in Section 4.19 of the
Parent Disclosure Schedule, neither Parent nor any of its subsidiaries is a
party to any contract, agreement or understanding which contains a "change in
control" or "potential change in control" provision.
Section 4.20 Contracts with Affiliates. Except as set forth in Section 4.20
of the Parent Disclosure Schedule, there are no agreements or understandings
between Parent and its subsidiaries, on the one hand, and any affiliates of
Parent (other than subsidiaries of Parent), on the other hand.
Section 4.21 No Applicable State Takeover Statutes. There are no provisions
of the General Corporation Law of the State of New Mexico applicable to the
Merger, this Agreement or the transactions contemplated hereby, and no other
takeover law in effect on the date hereof that could affect the ability of
Parent or Acquisition Sub to consummate the transactions contemplated hereby or
thereby or have, either individually or in the aggregate, a Company Material
Adverse Effect or a Parent Material Adverse Effect.
Article 5
COVENANTS
Section 5.01 Conduct of Businesses Pending Closing. During the period from
the date of this Agreement and continuing until the Effective Time, the Company
and Parent each agree as to itself and its subsidiaries that (except as
expressly contemplated or permitted by this Agreement, Section 5.01 of the
Company Disclosure Schedule or the Parent Disclosure Schedule, as the case may
be, or to the extent that the other party shall otherwise consent in writing):
(a) Each party and its subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course, consistent with past
practice, and use its best efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them. Each party will, and will cause each of its
subsidiaries to, (i) use its best efforts to preserve its business intact, keep
available the services of all of its present officers, employees, agents and
representatives, and preserve the goodwill of all suppliers, customers, clients
and others having business relations with it or any of its subsidiaries; (ii)
maintain its corporate existence and good standing in its state of
incorporation; (iii) keep and maintain in good condition, repair and working
order all buildings, offices, stores and other structures and all machinery,
tools, equipment, fixtures and other property of it and its subsidiaries and
observe and conform to all material terms and conditions upon or under which any
of their properties is held; and (iv) continue and maintain in full force and
effect all insurance now maintained and promptly proceed with the repair,
restoration or replacement of any asset or property damaged or destroyed by fire
or other casualty after the date hereof, whether insured or uninsured, subject
to the rights, if any, of the lessors or mortgagees thereof, covenant, consider
the following:
(b) No party shall, nor shall any party permit any of its
subsidiaries to, nor shall any party or subsidiary propose to, (i) declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of any of its capital stock,
(ii) split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (iii) repurchase, redeem or
otherwise acquire, or permit any subsidiary to repurchase, redeem or otherwise
acquire, any of its securities or any securities of its subsidiaries.
(c) No party shall, nor shall any party permit any of its
subsidiaries to, authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (including indebtedness having the right to
vote) or equity equivalents (including, without limitation, stock appreciation
rights), except as required pursuant to the agreements and instruments
outstanding on the date hereof and disclosed in Section 3.02 and Section 4.02,
or amend in any material respect any of the terms of any such securities or
agreements outstanding on the date hereof, other than the issuance of Company
Shares or Parent Common Shares, as the case may be, upon the exercise of stock
options pursuant to Company Stock Plans or Parent Stock Plans and upon the
exercise or conversion of other Company options, warrants or rights, in each
case outstanding on the date of this Agreement and in accordance with their
present terms.
(d) No party shall amend or propose to amend its charter or bylaws.
(e) No party shall, nor shall any party permit any of its
subsidiaries to, acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business, consistent with past practice,
or any assets which are material to such party and its subsidiaries taken as a
whole, except pursuant to obligations in effect on the date hereof, or enter
into any commitment or transaction outside the ordinary course of business,
consistent with past practice.
(f) No party shall, nor shall any party permit any of its
subsidiaries to, incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until borrowings are
made under such arrangements) any indebtedness for borrowed money or guarantee
any such indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of such party or any of its subsidiaries or
guarantee (or become liable for) any debt of others or make any loans, advances
or capital contributions or mortgage, pledge or otherwise encumber any material
assets or create or suffer any material lien thereupon other than in each case
in the ordinary course of business consistent with prior practice.
(g) No party shall, nor shall any party permit any of its
subsidiaries to 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
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of any party and its consolidated subsidiaries
or incurred in the ordinary course of business consistent with past practice.
(h) No party shall change any of the accounting principles or
practices used by it (except as required by generally accepted accounting
principles).
(i) No party shall, nor shall any party permit any of its
subsidiaries to, agree to take any of the foregoing actions or take or agree to
take any action that would or is reasonably likely to result in any of its
representations and warranties set forth in this Agreement being untrue or in
any of the conditions to the Merger set forth in Article 6 not being satisfied.
(j) Each of the parties shall give prompt notice to the other party
of: (i) any notice of, or other communication relating to, a default or event
which, with notice or the lapse of time or both, would become a default,
received by it or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any agreement, indenture or
instrument material to the financial condition, properties, businesses or
results of operations of it and its subsidiaries, taken as a whole, to which it
or any of its subsidiaries is a party or is subject; (ii) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement, which consent, if required, would breach the representations
contained in Article 3 or Article 4; and (iii) any material adverse change in
the financial condition, properties, businesses, results of operations or
prospects of it and its subsidiaries, taken as a whole.
(k) The parties shall consult with each other before issuing any
press releases 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
with respect thereto.
Section 5.02 Additional Covenants of the Company. During the period from
the date of this Agreement and continuing until the Effective Time, the Company
agrees that it will not, without the prior written consent of Parent, except as
required by law (i)enter into, adopt, amend or terminate any Company Benefit
Plan or other employee benefit plan or any agreement, arrangement, plan or
policy between the Company and one or more of its directors or executive
officers or (ii) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company, increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date hereof or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
Section 5.03 Additional Covenants of Parent
(a) During the period from the date of this Agreement and continuing
until the Effective Time, Parent agrees as to itself and its subsidiaries that
it will not, without the prior written consent of the Company, except as
contemplated by this Agreement or required by law (i) enter into, adopt, amend
or terminate any Parent Benefit Plan or other employee benefit plan or any
agreement, arrangement, plan or policy between Parent and one or more of its
directors or executive officers or (ii) except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to Parent, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
(b) At or prior to the Effective Time, Parent shall cause two
persons designated by the Company to be named to the board of directors of
Parent.
(c) At or prior to the Effective Time, Parent shall enter into
employment or consulting agreements with the persons designated in Section
5.03(c) of the Company Disclosure Schedule, on such terms and conditions as are
reasonably satisfactory to the Company and such persons.
Section 5.04 Access to Information. Upon reasonable notice, the Company and
Parent shall each (and shall cause each of their respective subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the other, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of the Company and Parent
shall (and shall cause each of their respective subsidiaries to) furnish
promptly to the other all information concerning its business, properties and
personnel as such other party may reasonably request. Unless otherwise required
by law or court order, the parties will hold any such information which is
nonpublic in confidence until such time as such information otherwise becomes
publicly available through no wrongful act of either party, and in the event of
termination of this Agreement for any reason each party shall promptly return
all nonpublic documents obtained from any other party, and any copies or
summaries made of such documents, to such other party.
Section 5.05 Further Action; Best Efforts. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement including, without limitation, (i) such actions as may be
required to be taken under the Securities Act and applicable state securities or
Blue Sky laws in connection with the issuance of Series D Preferred Shares of
Parent contemplated hereby and (ii) the preparation and filing of all other
forms, registrations and notices required to be filed to consummate the
transactions contemplated hereby and the taking of such actions as are necessary
to obtain any requisite approvals, consents, orders, exemptions, waivers by any
public or private third party. Each party shall promptly consult with the other
with respect to, provide any necessary information with respect to and provide
the other (or its counsel) copies of, all filings made by such party with any
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
Section 5.06 Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement, substantially in the
form attached as Exhibit 5.07 hereto.
Section 5.07 Indemnification and Insurance
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any of the present or former officers or directors (the
"Managers") of the Company is, or is threatened to be, made a party by reason of
the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, whether before or after the Effective Time, the
parties hereto agree to cooperate and use their best efforts to defend against
and respond thereto. It is understood and agreed that the Company shall
indemnify and hold harmless, and from and after the Effective Time each of the
Surviving Corporation and Parent shall indemnify and hold harmless, as and to
the full extent permitted by applicable law (including by advancing expenses
promptly as statements therefor are received), each such Manager against any
losses, claims, damages, liabilities, costs, expenses (including attorneys'
fees, whether such fees and disbursements were incurred in an action between the
parties to this agreement or in an action brought by or involving a third
party), judgments, fines and amounts paid in settlement in connection with any
such claim, action, suit, proceeding or investigation. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) the Managers may retain counsel satisfactory to
them, and the Company, or the Surviving Corporation and Parent after the
Effective Time, shall pay all fees and expenses of such counsel for the Managers
promptly, as statements therefore are received, and (ii) the Company, or the
Surviving Corporation and Parent after the Effective Time, will use their
respective best efforts to assist in the vigorous defense of any such matter;
provided that neither the Company nor the Surviving Corporation or Parent shall
be liable for any settlement effected without its prior written consent (which
consent shall not be unreasonably withheld); and provided further that the
Surviving Corporation and Parent shall have no obligation hereunder to any
Manager when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and non-appealable,
that indemnification of such Manager in the manner contemplated hereby is
prohibited by applicable law. Any Manager wishing to claim indemnification under
this Section 5.07(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall notify the Company and, after the Effective Time, the
Surviving Corporation and Parent, thereof (provided that the failure to give
such notice shall not affect any obligations hereunder, unless the indemnifying
party is actually and materially prejudiced thereby).
(b) Parent and Acquisition Sub agree that all rights to
indemnification existing in favor of the Managers as provided in the Company's
Articles of Incorporation or Bylaws as in effect as of the date hereof, and in
any agreement between the Company and any Manager with respect to matters
occurring prior to the Effective Time shall survive the Merger and shall
continue in full force and effect for a period of not less than six years.
Parent shall cause to be maintained in effect for not less than six years after
the Effective Time, policies of directors' and officers' liability insurance (of
at least the same coverage and amounts containing terms and conditions which are
no less advantageous than the terms and conditions contained in similar policies
maintained by Parent for Parent's directors and officers) with respect to claims
arising from facts or events which occurred before the Effective Time to the
extent available.
(c) The provisions of this Section 5.07 are intended to be for the
benefit of, and shall be enforceable by, each indemnified party and his or her
heirs and representatives.
Section 5.08 Certain Benefits
(a) Each of Parent and Acquisition Sub acknowledges that
consummation of the transactions contemplated by this Agreement will constitute
a change in control of the Company (to the extent such concept is applicable)
for the purposes of all agreements, contracts, plans, programs, policies or
arrangements of the Company described in Section 5.08 of the Company Disclosure
Schedule or the Company Financial Statements. From and after the Effective Time,
Parent and its subsidiaries (including the Surviving Corporation) will honor in
accordance with their terms all employee benefit plans and employment, severance
and consulting agreements described in Section 5.08 of the Company Disclosure
Schedule or in the Company Financial Statements between the Company or any of
its subsidiaries and any officer, director, or employee of the Company or any of
its subsidiaries in effect prior to the Effective Time; provided, however, that
nothing herein shall preclude any changes effected on a prospective basis to any
employee benefit plan.
(b) Parent shall maintain, or shall cause the Surviving Corporation
to maintain, for a period of two (2) years after the Closing Date, without
interruption, employee compensation and benefit plans, programs, and policies,
and fringe benefits (including post-employment health and welfare benefits) that
will provide benefits to employees who continue employment that are in the
aggregate no less favorable than those provided pursuant to such employee
compensation and benefit plans, programs, and policies, and fringe benefits of
the Company or any of its subsidiaries as in effect on the Closing Date. Parent
agrees to honor, or cause the Surviving Corporation to honor, all Company
Benefit Plans pursuant to their terms. Employees who continue employment shall
be given credit for all service with the Company (or service credited by the
Company for similar plans, programs, or policies) under all employee benefit and
fringe benefit plans, programs, and policies of the Surviving Corporation or
Parent in which they become participants for all purposes other than benefit
accrual under tax-qualified defined parent plans that would provide a
duplication of benefits to employees. If employees of the Company become
eligible to participate in a medical, dental, or health plan of Parent or any of
its subsidiaries, Parent shall cause such plans to (1) waive any preexisting
condition limitations for conditions covered under the applicable medical,
health, or dental plans of the Company (the "Company Welfare Plans") and (2)
honor any deductible and out-or-pocket expenses incurred by the employees and
their beneficiaries under the Company Welfare Plans during the portion of 2000
preceding the date in which they become participants. If employees of the
Company or any of its subsidiaries become eligible to participate in a group
term life insurance plan maintained by Parent or any of its subsidiaries, Parent
shall cause such plan to waive any medical certification for such employees up
to the amount of coverage the employees had under the life insurance plan of the
Company.
Section 5.09 Brokers or Finders. Each of Parent and the Company represents,
as to itself, its subsidiaries and its affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement, and
each of Parent and the Company agree to indemnify and hold the other harmless
from and against any and all claims, liabilities or obligations with respect to
any other fees, commissions or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or its affiliate.
Article 6
CONDITIONS
Section 6.01 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 satisfaction at or prior to the Closing Date of the following conditions:
(a) The issuance of Series D Preferred Shares of Parent pursuant to
the Merger and the other terms of this Agreement shall have been approved by all
necessary corporate action of Parent.
(b) Other than the filing provided fo by Section 1.01, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations or terminations of waiting periods imposed by, any
Governmental Entity, and all required third party consents, the failure to
obtain which would have a Parent Material Adverse Effect (including for this
purpose the Surviving Corporation as a subsidiary of Parent), shall have been
filed, occurred or been obtained. Parent shall have received all state
securities or "Blue Sky" permits and other authorizations necessary to issue the
Parent Common Shares pursuant to the Merger and the other terms of this
Agreement.
(c) No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which prohibits the consummation of the Merger
and shall be in effect.
Section 6.02 Conditions of Obligations of Parent and Acquisition Sub. The
obligations of Parent and Acquisition Sub to effect the Merger are further
subject to the satisfaction at or prior to the Closing Date of the following
conditions, unless waived by Parent and Acquisition Sub:
(a) The representations and warranties of the Company set forth in
this Agreement shall be true and correct as of the date of this Agreement, and
shall also be true in all material respects (except for such changes as are
contemplated by the terms of this Agreement and such changes as would be
required to be made in the exhibits to this Agreement if such schedules were to
speak as of the Closing Date) on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date, except if and to the
extent any failures to be true and correct would not, in the aggregate, have a
Company Material Adverse Effect.
(b) From the date of this Agreement through the Closing Date, except
as set forth in Section 3.07 of the Company Disclosure Schedule, the Company
shall not have suffered any Company Material Adverse Effect (other than changes
generally affecting the industries in which the Company operates, including
changes due to actual or proposed changes in law or regulation, or changes
relating to the transactions contemplated by this Agreement, including the
change in control contemplated hereby).
(c) The Company shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, except
where any failures to perform would not, in the aggregate, have a Company
Material Adverse Effect.
(d) At the Closing, the Company shall have furnished Parent with
copies of (i) resolutions duly adopted by the Board of Directors of the Company
approving the execution and delivery of this Agreement and all other necessary
or proper corporate action to enable the Company to comply with the terms of
this Agreement, and (ii) the resolution duly adopted by the holders of Company
Shares approving and adopting this Agreement and the Merger, such resolutions to
be certified by the Secretary or Assistant Secretary of the Company.
(e) At the Closing, the Company shall have furnished Parent with an
opinion, dated the Closing Date, of counsel to the Company, in form and
substance satisfactory to Parent and its counsel, to the effect that:
(i) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Minnesota;
(ii) the Company has the corporate power to carry on its
businesses as they are being conducted on the Closing
Date;
(iii) the authorized capital stock of the Company consists of
One Million (1,000,000) shares of capital stock, of
which 250,000 shares are Class A (Voting) Common Shares
250,000 shares are Class B (Non-voting) Common Shares,
and 500,000 shares are undesignated as to class or
series, and the 702 Company Shares issued and
outstanding on the date hereof are validly issued and
outstanding, fully paid and non-assessable, and that
between the date hereof and the Closing Date no
additional Company Shares have been issued and none of
such issued and outstanding Shares were issued in
violation of any preemptive rights of shareholders of
the Company;
(iv) the Company has taken all required corporate action to
approve and adopt this Agreement and this Agreement is
a valid and binding obligation of the Company
enforceable against the Company in accordance with its
terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar
laws relating to creditors rights generally and by
general equitable principles (regardless of whether
such enforceability is considered in a proceeding in
equity or at law);
(v) the execution and delivery of this Agreement by the
Company do not, and the consummation of the
transactions contemplated by this Agreement by the
Company will not, constitute (A) a breach or violation
of, or a default under, the charter or bylaws of the
Company, or (B) a breach, violation impairment of, or a
default under, any judgment, decree, order, statute,
law, ordinance, rule or regulation now in effect
applicable to the Company or its properties known to
such counsel, or any agreement, indenture, mortgage,
lease or other instrument of the Company or to which
the Company is subject and in each case known to such
counsel;
(vi) all filings required to be made by the Company prior to
the Effective Time with, and all consents, approvals,
permits or authorizations required to be obtained by
the Company prior to the Effective Time from,
governmental and regulatory authorities of the United
States and the State of Minnesota in connection with
the execution and delivery of this Agreement by the
Company and the consummation of the transactions
contemplated by this Agreement by the Company, have
been so made or obtained, as the case may be;
In rendering the foregoing opinion (the "Primary Company Opinion"), such counsel
may rely on certificates of officers and other agents of the Company and public
officials as to matters of fact and, as to matters relating to the law of
jurisdictions other than Minnesota, upon opinions of counsel of such other
jurisdictions reasonably satisfactory to Parent and its counsel, provided such
reliance is expressly noted in the Primary Company Opinion and the opinions of
such other counsel and the certificates of such officers, agents and public
officials relied on are attached to the Primary Company Opinion.
All actions, proceedings, instruments and documents required to carry out
this Agreement, or incidental hereto, and all other legal matters shall have
been approved by counsel to Parent, and such counsel shall have received all
documents, certificates and other papers reasonably requested by it in
connection therewith.
Section 6.03 Conditions of Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction at or
prior to the Closing Date of the following conditions, unless waived by the
Company:
(a) The representations and warranties of Parent set forth in this
Agreement shall be true and correct as of the date of this Agreement, and shall
also be true in all material respects (except for such changes as are
contemplated by the terms of this Agreement and such changes as would be
required to be made in the exhibits to this Agreement if such schedules were to
speak as of the Closing Date) on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date, except if and to the
extent any failures to be true and correct would not, in the aggregate, have a
Parent Material Adverse Effect.
(b) From the date of this Agreement through the Closing Date, except
as set forth in Section 4.07 of the Parent Disclosure Schedule, Parent shall not
have suffered any Parent Material Adverse Effect (other than changes generally
affecting the industries in which Parent operates, including changes due to
actual or proposed changes in law or regulation).
(c) Parent shall have performed all obligations, including but not
limited to those obligations described in Section 5.03, required to be performed
by it under this Agreement at or prior to the Closing Date, except where any
failures to perform would not, in the aggregate, have a Parent Material Adverse
Effect.
(d) At the Closing, Parent and Acquisition Sub shall have furnished
the Company with copies of resolutions duly adopted by their respective Boards
of Directors approving the execution and delivery of this Agreement and all
other necessary or proper corporate action to enable them to comply with the
terms of this Agreement, such resolutions to be certified by the Secretary or
Assistant Secretary of Parent.
(e) At the Closing, the Parent shall have furnished the Company with
an opinion, dated the Closing Date, of counsel to the Parent and Acquisition
Sub, in form and substance satisfactory to the Company and its counsel, to the
effect that:
(i) Parent is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of New Mexico;
(ii) Acquisition Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Minnesota, and each of Parent's other
subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of
its jurisdiction of incorporation;
(iii) each of Parent and each of its subsidiaries has the
corporate power to carry on its businesses as they are
being conducted on the Closing Date;
(iv) the authorized capital stock of Parent consists of
Fifty Million (50,000,000) Parent Common Shares and
Five Hundred Thousand (500,000) Parent Preferred
Shares. All Parent Common Shares and Parent Preferred
Shares issued and outstanding on the Closing Date
including, without limitation, the Series D Preferred
Shares issued pursuant to the Merger, are validly
issued and outstanding, fully paid and non-assessable
and that between the date hereof and the Closing Date
no additional Parent Common Shares or Parent Preferred
Shares have been issued (except for the Series D
Preferred Shares issued pursuant to the Merger) and
none of such issued and outstanding shares were issued
in violation of any preemptive rights of stockholders
of Parent;
(v) Parent and Acquisition Sub has each taken all required
corporate action to approve and adopt this Agreement
and this Agreement is a valid and binding obligation of
the each, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating
to creditors rights generally and by general equitable
principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law);
(vi) the execution and delivery of this Agreement by each of
the Parent and Acquisition Sub do not, and the
consummation of the transactions contemplated by this
Agreement by each will not, constitute (A) a breach or
violation of, or a default under, the charter or bylaws
of either, or (B) a breach, violation or impairment of,
or a default under, any judgment, decree, order,
statute, law, ordinance, rule or regulation now in
effect applicable to either or their respective
properties known to such counsel, or any agreement,
indenture, mortgage, lease or other instrument of
either or to which either is subject and in each case
known to such counsel;
(vii) all filings required to be made by each prior to the
Effective Time with, and all consents, approvals,
permits or authorizations required to be obtained by
each prior to the Effective Time from, governmental and
regulatory authorities of the United States and the
State of Minnesota in connection with the execution and
delivery of this Agreement by the Company and the
consummation of the transactions contemplated by this
Agreement by each, have been so made or obtained, as
the case may be.
In rendering the foregoing opinion (the "Primary Parent Opinion"), such counsel
may rely on certificates of officers and other agents of Parent or Acquisition
Sub and public officials as to matters of fact and, as to matters relating to
the law of jurisdictions other than New Mexico, upon opinions of counsel of such
other jurisdictions reasonably satisfactory to Parent and its counsel, provided
such reliance is expressly noted in the Primary Parent Opinion and the opinions
of such other counsel and the certificates of such officers, agents and public
officials relied on are attached to the Primary Parent Opinion.
All actions, proceedings, instruments and documents required to carry out
this Agreement, or incidental hereto, and all other legal matters shall have
been approved by counsel to the Company, and such counsel shall have received
all documents, certificates and other papers reasonably requested by it in
connection therewith.
Article 7
TERMINATION AND AMENDMENT
Section 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of Parent:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated before March 31, 2001 (unless the failure to consummate the
Merger by such date shall be due to the action or failure to act of the party
seeking to terminate this Agreement); or
(c) by either Parent or the Company if (i) the conditions to such
party's obligations shall have become impossible to satisfy or (ii) any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
non-appealable.
Section 7.02 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.01 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, directors, officers or stockholders,
other than the provisions of Section 5.04 and Section 5.09. Nothing contained in
this Section 7.02 shall relieve any party from liability for any breach of this
Agreement.
Section 7.03 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Parent, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.04 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto 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
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
Article 8
POST CLOSING COVENANTS
Section 8.01 Stockholders Meeting. As soon as practicable after the Closing
Date, Parent shall duly call, give notice of, convene and hold a meeting of its
stockholders (which meeting shall be held no more than 75 days after the Closing
Date) for the purpose of voting upon the conversion of the Series D Preferred
Shares into Parent Common Shares and related matters and the issuance of Parent
Common Shares upon conversion of the Series D Preferred Shares. Parent agrees to
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to obtain the approval of Parent's stockholders of the
conversion of the Series D Preferred Shares into Parent Common Shares and
related matters and the issuance of Parent Common Shares upon conversion of the
Series D Preferred Shares including, without limitation, (i) the prompt
preparation and filing with the SEC of a Proxy Statement with the SEC relating
to the meeting of Parent's stockholders to be held in connection with the
conversion of the Series D Preferred Shares into Parent Common Shares and
related matters (the "Proxy Statement"), and (ii) such actions as may be
required to have the Proxy Statement cleared by the SEC as promptly as
practicable, including by responding promptly to any SEC comments with respect
thereto. Parent shall, through its Board of Directors, recommend to its
stockholders approval of such matters, shall use its best efforts to hold such
meeting as soon as practicable after the Closing Date, and shall use its best
efforts to secure the approval of its stockholders for such matters.
Section 8.02 Information in Disclosure Documents. Parent covenants that the
Proxy Statement will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder (including that it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make statements
therein not misleading).
Section 8.03 Listing of Shares on Nasdaq. After the Closing, Parent agrees
to use its best efforts to cause the Parent Common Shares issuable upon
conversion of the Series D Preferred Shares to be listed on the Nasdaq National
Market, subject to official notice of issuance.
Section 8.04 Income Tax Returns. In filing federal tax returns at any time,
each of Parent, the Company and Acquisition Sub will take consistent filing
positions to the effect that for federal income tax purposes the Merger
qualifies as a "reorganization" within the meaning of Section 368(a)(1)(A) of
the Code, and no shareholder is required to recognize income gain or loss with
respect thereto.
Article 9
MISCELLANEOUS
Section 9.01 Non-survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 9.02 Notices. All notices and other communications hereunder shall
be in writing (and shall be deemed given upon receipt) if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Acquisition Sub, to
Realco, Inc.
0000 Xxxxxxxxxx Xxxx. XX, Xxxxx 0-000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company, to
Equity Securities Investments, Inc.
000 Xxxxxxxx Xxxx , Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx and
Xxxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to
Xxxx X. Xxxxxx, Esq.
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 9.03 Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
Section 9.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.05 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, including without limitation the Letter of Agreement dated October 9,
2000 between the Parent and the Company (other than any confidentiality
agreement between the parties; any provisions of such agreements which are
inconsistent with the transactions contemplated by this Agreement being waived
hereby) and (b) shall not be assigned by operation of law or otherwise, provided
that Parent may cause Acquisition Sub to assign its rights and obligations to
Parent or any other wholly owned subsidiary of Parent, but no such assignment
shall relieve Acquisition Sub of its obligations hereunder if such assignee does
not perform such obligations.
Section 9.06 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New Mexico without regard to any
applicable principles of conflicts of law.
Section 9.07 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 9.08 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 costs and
expenses.
Section 9.09 Publicity. Except as otherwise required by law or the rules of
any national securities exchange, for so long as this Agreement is in effect,
neither the Company nor Parent shall, or shall permit any of its subsidiaries
to, issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Agreement
without prior consultation with the other party.
Section 9.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person or
persons any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except pursuant to Section 5.07 and Section 5.08
hereof. Parent shall cause Acquisition Sub to perform its obligations hereunder.
IN WITNESS WHEREOF, the Company, Parent and Acquisition Sub have caused
this Agreement and Plan of Merger to be signed by their respective officers
thereunto duly authorized as of the date first written above.
EQUITY SECURITIES INVESTMENTS, INC.
By /s/ Xxxxxx X. Xxxxx
-----------------------
Name: Xxxxxx X. Xxxxx
Title: President
REALCO, INC.
By /s/ Xxxxx X. Xxxxx
----------------------
Name: Xxxxx X. Xxxxx
Title: President, Chief Executive Officer and
Chairman of the Board of Directors
ESI ACQUISITION SUB, INC.
By /s/ Xxxxx X. Xxxxx
--------------------
Name: Xxxxx X. Xxxxx
Title: President
