EXHIBIT 2.1
MERGER AGREEMENT AND PLAN OF REORGANIZATION
OF
XXXX SECURITY INTERNATIONAL, INC.,
XXXX HOLDINGS, INC.
AND
WASH DEPOT HOLDINGS, INC.
TABLE OF CONTENTS
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PAGE
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RECITALS................................................. 1
ARTICLE I MERGER......................................... 1
ARTICLE II CLOSING AND TERMINATION....................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY....12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT......24
ARTICLE V ADDITIONAL AGREEMENTS OF COMPANY...............32
ARTICLE VI ADDITIONAL AGREEMENTS.........................37
ARTICLE VII CONDITIONS OF PARENT.........................42
ARTICLE VIII CONDITIONS OF COMPANY.......................44
ARTICLE IX INDEMNIFICATION...............................45
ARTICLE X OTHER PROVISIONS...............................49
SCHEDULES
R-1 Wash Depot Subsidiaries
R-2 Locations
1.3(a)(1) Plan and Articles of Merger
1.3(a)(2) Certificate of Incorporation of Surviving Corporation
1.6(a) Officers of Surviving Corporation
1.6(b) Directors of Surviving Corporation
1.6(d) Officers of Parent
1.6(e) Directors of Parent
2.3(c) Opinion of Counsel for Parent
2.4(f) Opinion of Counsel for Company
7.1(h) Stock Sale Restriction Agreement
7.1(i) Xxxxx Proxy
8.1(h) Parent Proxy
8.1(i) Employment Agreement
ENCLOSED IN DISCLOSURE BINDER
3.2 Shareholders
3.2(i) Options and Warrants
3.3 Material Documents
3.5 Operating Contracts
3.6 Real Property Interests
3.6(h) Proceedings which would affect use of the Real Property
3.8(a) Company Debt
3.9 Material events since date of Most Recent Balance Sheet
3.10 Insurance Policies, Performance Bonds and Letters of Credit
3.12(a) Employment Agreements
3.12(b) Benefit Plans
3.13(a) Violations of federal, state or local tax
3.13(b) Environmental violations
3.13(f) Required Governmental Approvals
3.15 Company Required Lender Consents
3.16 Transaction Intermediaries
3.17(a) Registered Rights
3.17(b) Proprietary Rights
3.17(c) Licenses
3.19 List of Investments in Competitors and Others
3.20 Pending and Threatened Litigation
4.2 Rights to Purchase Common Stock
4.4 Parent Required Lender Consents
4.11 Parent Material Documents
4.12 Parent Real Property
4.13 Fiscal Condition of Parent
4.14 Legality of Parent Operation
5.3 Company Permitted Pre-closing Transactions
6.8 Options and Warrants to be converted at Closing
6.11 Parent Permitted Pre-closing Transactions
MERGER AGREEMENT AND PLAN OF REORGANIZATION
This Merger Agreement and Plan of Reorganization ("Agreement") is made
as of March 8, 2000, by and among Wash Depot Holdings, Inc., a Delaware
corporation ("Company"), Xxxx Security International, Inc., a Delaware
corporation ("Parent"), and Xxxx Holdings, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Xxxx Subsidiary").
RECITALS
The Company is the owner directly or indirectly of all of the
outstanding stock of the corporations listed on Schedule R-1 hereto
("Subsidiaries"). Company and the Subsidiaries are in the business of owning
and operating car wash facilities (the "Business") throughout the United States.
Company, through the Subsidiaries, owns certain parcels of real property upon
which the Business is conducted ("Owned Real Property"), and possesses valid
leasehold interests in or at other parcels of real property (the "Leased Real
Property"). The locations of the Owned Real Property and the Leased Real
Property are referred to this Agreement as the "Locations," and are listed on
Schedule R-2 hereto.
In accordance with the provisions of this Agreement, the parties
desire to merge Xxxx Subsidiary into Company with the Company being the
surviving corporation, in exchange for common stock of Parent, all on the terms
contained herein (the "Merger"). The parties intend that the Merger qualify as
a reorganization, within the meaning of Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead appear in a Disclosure Binder prepared by Parent and Xxxx
Subsidiary, on the one hand, and the Company on the other hand, and delivered
each to the other within twenty (20) days after the date of this Agreement. For
purposes of identification, the Disclosure Binder has been identified by the
parties by a written statement executed by the Company and Parent and appearing
as the first page of the Disclosure Binder.
ARTICLE I
MERGER, CONVERSION AND DELIVERY OF CERTIFICATES
SECTION 1.1 Incorporation of Recitals. The recitals set forth above
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are incorporated herein by reference and are a part of this Agreement.
SECTION 1.2 Place for Closing. The Closing under this Agreement
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shall take place at the offices of Parent, 1000 Xxxxxxxx Place, Mount Laurel,
New Jersey, or such other place as the parties hereto may agree upon. The date
that Closing occurs is referred to hereinafter as the "Closing Date" and the act
of closing as "Closing."
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SECTION 1.3 Plan of Merger; Delivery and Holdback.
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(a) At the Closing, pursuant to section 251 of the General
Corporation Law of the State of Delaware ("DGCL"), effective on the Closing
Date, Xxxx Subsidiary shall be merged with and into the Company with the
surviving corporation being the Company (after such merger, the "Surviving
Corporation"). At Closing, Xxxx Subsidiary and Company shall execute the plan
of merger attached hereto as Schedule 1.3(a)(1) ("Plan of Merger"), and the
parties shall file the Plan of Merger with the Secretary of State of the State
of Delaware. The Certificate of Incorporation of the Surviving Corporation,
except for Article One, shall be amended as of the Closing Date to be identical
to the Certificate of Incorporation of Xxxx Subsidiary, as in effect immediately
prior to the Closing Date, and shall be the Certificate of Incorporation of the
Surviving Corporation after the Closing Date, and shall be in substantially
identical form to Schedule 1.3(a)(2). The by-laws of Xxxx Subsidiary as in
effect immediately prior to the Closing Date shall be the by-laws of the
Surviving Corporation after the Closing Date.
(b) At the Closing, and upon filing of the Plan of Merger with the
Delaware Secretary of State, by virtue of the Merger and without any other
action on the part of any party hereto or the holder of any capital stock of
Parent or Company or Xxxx Subsidiary: (i) each share of the outstanding common
stock of Company ("Company Common Stock") shall be automatically converted into
the right to receive, subject to Section 1.3(c) hereinbelow and without
interest, [8,028,000 / the sum of (x) the total of the number of outstanding
shares of Company Common Stock plus (y) the number of shares of Company Common
Stock into which outstanding shares of Preferred Stock, $.001 par value, of the
Company ("Company Preferred Stock") are then convertible, plus (z) the number of
shares of Company Common Stock underlying the Assumed Ad Hoc Options (as defined
in Section 6.8) (the "Exchange Ratio") shares of the common stock of Parent
("Parent Common Stock"); (ii) each share of outstanding Company Preferred Stock
shall be automatically converted into the right to receive, subject to Section
1.3(c) hereinbelow and without interest, the number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock into which each such
share of Company Preferred Stock is then convertible multiplied by the Exchange
Ratio; (iii) each share of the capital stock of the Company held in treasury by
Company or any Subsidiaries at Closing shall be canceled and no consideration
shall be paid in exchange therefor and shall cease to exist from and after the
Closing; (iv) except as provided in Section 6.8 hereto, each unexpired warrant
or option to purchase Company Common Stock that is outstanding at the Closing
Date, whether or not exercisable, shall automatically and without any action on
the part of the holder thereof be converted into a warrant or option to purchase
a number of shares of Parent Common Stock equal to the number of shares of
Company Common Stock that could be purchased under such option or warrant
multiplied by the Exchange Ratio, at a price per share of Parent Common Stock
equal to the per share exercise price of such option or warrant divided by the
Exchange Ratio; and (v) each issued and outstanding share of the common stock of
Xxxx Subsidiary shall be converted into one share of common stock of the
Surviving Corporation. Notwithstanding anything to the contrary contained in
this Agreement, the Exchange Ratio shall not be adjusted or recalculated to
reflect the issuance of Company Common Stock upon: (x) the conversion of an
outstanding promissory note of the Company originally issued to Xxxxx
Enterprises, Inc. dated June 30, 1997 his affiliates into 675,000 shares of
Company Preferred Stock (or Common Stock issuable
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upon subsequent conversion of such Company Preferred Stock), or (y) the exercise
of any option or warrant of the Company listed on Schedule 6.8 hereto, or (z)
the exercise of any Company Option, as defined in Section 6.8 hereinbelow, but
only if and to the extent all such exercises of Company Options exceeds 50,000
shares in the aggregate.
(c) At Closing, the ownership of the Company Common Stock and Company
Preferred Stock shall be deemed to be as set forth in the stock ledgers of the
Company. Also at Closing, each holder of an outstanding certificate which
immediately prior to Closing represented shares of Company Common Stock or
Company Preferred Stock ("Holder") shall surrender same to Parent in accordance
with Section 1.5 hereinbelow, and in exchange therefor, Parent shall deliver
whole shares of Parent Common Stock as set forth in Section 1.5 as follows: (i)
a number of whole shares most nearly equal to ninety percent (90%) of the number
of shares of Parent Common Stock otherwise issuable to such Holder shall be
delivered to such Holder, and (ii) a number of whole shares most nearly equal to
ten percent (10%) of the number of shares of Parent Common Stock otherwise
issuable to such Holder (collectively, "Escrowed Stock") shall be delivered to
Xxxxxx X. Xxxxxx & Associates, P.C., as escrow agent ("Escrow Agent"). If
Parent has not made any claim or claims for indemnification pursuant to Article
IX of this Agreement by the eleventh (11) month anniversary date of the Closing
Date ("Holdback Date"), Escrow Agent shall deliver to each Holder such Holder's
shares of Escrowed Stock. If Parent has made a claim or claims for
indemnification pursuant to Article IX of this Agreement by the Holdback Date,
then Escrow Agent shall be required to deliver to Holders, and each Holder shall
be entitled to receive a number of shares equal to such Holder's pro rata
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portion, to the nearest whole number of shares, of (A) the total number of
shares of Escrowed Stock for all Holders, less (B) a number of shares of Parent
Common Stock having a dollar value equal to the aggregate value of all such
claims for indemnification made by Parent on or before the Holdback Date, each
such share being valued at the closing price of the Parent's common stock on the
Nasdaq Stock Market on the Holdback Date. Any shares of Escrowed Stock held by
Escrow Agent due to a pending claim for indemnification made by Parent on or
before the Holdback Date shall be returned to Parent by Escrow Agent and
distributed to the Holders by Parent, within thirty (30) days after the
arbitrators enter their final ruling on the indemnification demand, in
accordance with Article IX and Section 10.17. The parties hereto agree that,
upon the arbitrators' entry of a final order regarding an indemnification
demand, an amount of retained Escrowed Stock equal to the dollar amount of the
claim upheld by the arbitrators, if any, shall be returned to the Parent for
cancellation and the balance of the retained Escrowed Stock, if any, shall be
returned to Parent by Escrow Agent and distributed by Parent to the Holders pro
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rata in accordance with their relative ownership of the Company immediately
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prior to Closing. The parties further agree that each share of the Escrowed
Stock to be returned to Parent by Escrow Agent for either cancellation or
distribution by Parent to the Holders after the indemnification demand is ruled
upon by the arbitrators, shall be valued at the closing price of the Parent's
common stock on the Nasdaq Stock Market on the day that the final ruling of the
arbitrators is entered. The parties further agree that any indemnification
demand shall be satisfied from the Escrowed Stock and if the Escrowed Stock is
not sufficient, the Holders and the officers and directors of the Company shall
have no further liability to the Parent.
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SECTION 1.4 Escrow Provisions. The following provisions shall govern
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Escrow Agent's obligations and duties under this Agreement:
(a) If there is a dispute between the Company or any of the Holders
and the Parent with regard to the distribution of the Escrowed Stock, the legal
fees, expenses and other costs incurred by the Escrow Agent in connection with
the adjudication of such dispute shall be paid by the party which is not the
prevailing party in such dispute or jointly, if there is no completely
prevailing party.
(b) Escrow Agent may resign at any time upon 5 days' prior notice to
the Company and the Parent and may be removed by the mutual consent of the
Company and the Parent upon 5 days' prior notice to Escrow Agent. Prior to the
effective date of the resignation or removal of Escrow Agent or any successor
escrow agent, the Company and the Parent shall jointly appoint a successor
escrow agent, to hold the Escrowed Stock, and any such successor escrow agent
shall execute and deliver to the predecessor escrow agent an instrument
accepting such appointment, upon which such successor agent shall, without
further act, become vested with all of the rights, powers and duties of the
predecessor escrow agent as if originally named herein. If no successor escrow
agent is appointed prior to the effective date of the termination or resignation
of the Escrow Agent, Escrow Agent may place all of the Escrowed Stock at the
disposal of a court and petition the court to act as the successor escrow agent
or to appoint another entity to act as the successor escrow agent.
(c) The duties of Escrow Agent hereunder are entirely administrative
and not discretionary. Escrow Agent is obligated to act only in accordance with
written instructions received by it as provided in Section 1.3(c) of this
Agreement, is authorized hereby to comply with any orders, judgments or decrees
of any court or arbitration panel and shall not incur any liability as a result
of its compliance with such instructions, order, judgments or decrees. Escrow
Agent may assume the due execution, validity and effectiveness of, and the truth
and accuracy of any information contained in, any instrument or other document
presented to it which Escrow Agent shall in good faith believe to be genuine,
and to have been signed or presented by the persons or parties purporting to
sign or present the same.
(d) Escrow Agent shall have no liability under, or duty to inquire
into, the terms and provisions of any other agreement between any of the parties
hereto. In the event that any of the terms and provisions of any other
agreement conflict or are inconsistent with any of the terms and provisions of
this Agreement, the terms and provisions of this Agreement in respect of Escrow
Agent's rights and duties shall govern and control in all respects.
(e) Escrow Agent shall not be responsible or liable in any manner
whatsoever for the performance of or by Parent and the Company of their
respective obligations under this Agreement nor shall Escrow Agent be
responsible or liable in any manner whatsoever for the failure of the Parent,
the Company or any third party to honor any of the provisions of this Agreement.
(f) If Escrow Agent shall be uncertain as to its duties or rights
hereunder, it shall be entitled to refrain from taking any action other than to
keep safely all property held in escrow pursuant hereto until it shall be
directed otherwise in a writing signed by the Parent and the
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Company, or by an order of a court of competent jurisdiction. Escrow Agent may
consult with counsel of its choice and shall not be liable for any action taken,
suffered to, or omitted by it in accordance with the advice of such counsel.
Escrow Agent shall not be required to institute legal proceedings of any kind
and shall not be required to defend any legal proceedings which may be
instituted against it in respect of the subject matter of this Agreement, unless
requested to do so by another party hereto and indemnified to its reasonable
satisfaction against the costs and expenses of such defense.
(g) The Company and the Parent hereby waive any suit, claim, demand
or cause of action of any kind which either one or both may have to assert
against Escrow Agent arising out of or relating to the execution or performance
by Escrow Agent of this Agreement, unless such suit, claim, demand or cause of
action is based upon the willful misconduct, gross negligence or bad faith of
Escrow Agent. Escrow Agent shall be indemnified and held harmless against any
and all liabilities, including judgments, costs and reasonable counsel fees, for
anything done or omitted by Escrow Agent in the performance of this Agreement,
except as a result of the willful misconduct, bad faith or gross negligence of
Escrow Agent. All such reimbursements and indemnifications shall be paid
equally by the Company and Parent.
(h) Company acknowledges that Escrow Agent is serving as counsel to
Parent in this transaction and its services as the Escrow Agent to facilitate
the Closing shall not prevent or disqualify Escrow Agent from serving as counsel
to Parent now or in the future.
(i) For purposes of this Section 1.4, any action to be taken or right
exercisable by the Company may only be taken or exercised by Xxxxx Xxxxx, as
representative of the Company, or his designee.
SECTION 1.5 Conversion of Certificates.
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(a) Notwithstanding any other provision of this Agreement, (i) until
Holders or transferees of certificates theretofore representing shares of
Company Common Stock have surrendered them for exchange to Parent (or executed
an indemnity of lost certificate with respect thereto), no shares of Parent
Common Stock shall be delivered to them and no dividends or other distributions
shall be paid with respect to any shares represented by such certificates and
(ii) without regard to when such certificates representing shares of Company
Common Stock are surrendered for exchange as provided herein, no interest shall
be paid on any dividends or other distributions.
(b) If any certificate for shares of Parent Common Stock is to be
issued in a name other than that in which the certificate for shares of Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay
any applicable transfer or other taxes required by reason of such issuance.
(c) Within three (3) days after the Closing Date, Parent shall have
available the certificates representing shares of Parent Common Stock required
to effect the exchanges referred to in paragraph 1.3(b) above.
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(d) Within five (5) days after the Closing Date, Parent shall mail to
each holder of record of a certificate or certificates that immediately prior to
the Closing Date represented outstanding shares of Company Common Stock or
Company Preferred Stock (the "Company Certificates") (i) a letter of transmittal
satisfactory to the Company and approved by it prior to Closing (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon actual delivery of the Company
Certificates to the Parent) and (ii) instructions for use in effecting the
surrender of the Company Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of Company Certificates for
cancellation to the Parent, together with a duly executed letter of transmittal
and such other documents as Parent shall reasonably require, the holder of such
Company Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Common Stock or Company Preferred Stock theretofore
represented by the Company Certificates so surrendered shall have been delivered
pursuant to the provisions of Sections 1.3(b) and 1.3(d), and the Company
Certificates so surrendered shall be canceled. Notwithstanding the foregoing,
no party hereto shall be liable to a holder of shares of Company Common Stock or
Company Preferred Stock for any shares of Parent Common Stock or dividends or
distributions thereon delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(e) In the event any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Certificate to be lost, stolen or destroyed, Parent shall
issue in exchange for such lost, stolen or destroyed Company Certificate, the
Parent Common Stock deliverable in respect thereof determined in accordance with
Sections 1.3(b) and 1.3(c). When authorizing such issuance in exchange therefor,
the Board of Directors of the Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Company Certificate to give the Parent and the Surviving Corporation
such indemnity as it may reasonably direct as protection against any claim that
may be made against the Parent and the Surviving Corporation with respect to the
Company Certificate alleged to have been lost, stolen or destroyed.
(f) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Company
Certificates, no dividend or distribution with respect to Parent Common Stock
shall be payable on or with respect to any fractional share and such fractional
share interests will not entitle the owner thereof to any rights of a
stockholder of Parent. All fractional shares shall be rounded to the nearest
whole number.
SECTION 1.6 Directors; Officers. (i) At the Closing, (a) the
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directors of the Surviving Corporation immediately following the Closing shall
be the persons named on Schedule 1.6(a), each of whom will serve until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be, (b) the officers of the
Surviving Corporation immediately following the Closing shall be the persons
named on Schedule 1.6(b), each of whom will serve until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be, (c) the number of directors of Parent shall be
set at seven (7), (d) the directors of Parent immediately following the Closing
shall be the persons set forth in Schedule 1.6(d), provided they agree to serve
as directors, each of whom will
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serve until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be, and
(e) the officers of Parent immediately following the Closing shall be the
persons set forth in Schedule 1.6(e), each of whom shall hold the office set
forth opposite such person's name and all of whom shall serve until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.7 Further Assurances. If, at any time after the Closing,
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Parent shall determine or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation the
right, title or interest in, to or under any of the rights, properties or assets
of the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to carry out this
Agreement, Parent shall be authorized to execute and deliver, in the name and on
behalf of each of Parent, Xxxx Subsidiary and the Company, all such deeds, bills
of sale, assignments and assurances and to take and do, in the name and on
behalf of each of Parent, Xxxx Subsidiary and the Company or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 1.8 Dissenting Shares. Notwithstanding Section 1.3(b)
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hereof, shares of capital stock of the Company issued and outstanding
immediately prior to the Closing and held by a holder (the "Dissenting
Stockholder") who has properly exercised and perfected appraisal rights under
the DGCL (the "Dissenting Shares") shall not be converted into the right to
receive Parent Common Stock, but the holders of Dissenting Shares shall be
entitled to receive such consideration as shall be determined pursuant to the
DGCL; provided, however, that if any such holder shall have failed to perfect or
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shall effectively withdraw or lose his or her right to appraisal and payment
under the DGCL, such holder's shares of capital stock of the Company shall
thereupon be deemed to have been converted as of the Closing into the right to
receive Parent Common Stock as set forth in Sections 1.3(b) and 1.3(c) hereof,
and such shares of the Company's capital stock shall no longer be Dissenting
Shares. The Company shall give Parent prompt notice of any written demands for
appraisal, withdrawals or demands for appraisal and any other related
instruments received by the Company. The Company will not voluntarily make any
payment with respect to any demands for appraisal and will not, except with the
prior written consent of Parent, settle or offer to settle any such demand.
ARTICLE II
CLOSING AND TERMINATION
SECTION 2.1 Closing. Following execution of this Agreement, Parent,
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Xxxx Subsidiary and Company shall be obligated to conclude the Closing within
ten (10) days after the conditions of Closing set forth in Article VII and
Article VIII have been satisfied or waived. If the failure to conclude this
transaction is due to the refusal and failure of Company to perform its
obligations under this Agreement, Parent may seek to enforce this Agreement with
an action of specific performance. In the case of a willful default by Company,
Parent, in addition to the remedy of specific performance, and not in limitation
of any other rights and remedies available to
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Parent under this Agreement or at law or in equity, may recover its actual (but
not consequential) damages resulting from the default of the Company. If the
failure to conclude this transaction is due to the refusal and failure of Parent
to perform its obligations to close under this Agreement, the Company may seek
to enforce this Agreement with an action of specific performance. In the case of
a willful default by Parent, Company, in addition to the remedy of specific
performance, and not in limitation of any other rights and remedies available to
the Company under this Agreement or at law or in equity, may recover its actual
(but not consequential) damages resulting from the default of Parent. Neither
Company not Parent shall be deemed in default hereunder by reason of any failure
of a condition precedent to the obligations of either Company or Parent
hereunder where commercially reasonable efforts have been taken to satisfy such
conditions or where such failure has occurred for reasons beyond the control of
the party unable to satisfy the condition precedent to the other party's
obligations under this Agreement.
SECTION 2.2 Termination. This Agreement may be terminated at any
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time prior to the Closing Date, whether before or after approval by the
stockholders of the Company or Parent, by the mutual written consent of the
Company and Parent or as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) upon a breach of a representation or warranty of Parent
contained in this Agreement which has not been cured in all material respects by
Parent within thirty (30) days after written notice of such breach specifying
such breach in reasonable detail is given to Parent by the Company, and which
has caused any of the conditions set forth in section 8.1 to be incapable of
being satisfied by the Termination Date;
(ii) if Parent (A) fails to perform in any of its material
covenants in this Agreement and (B) does not cure such default in all material
respects within 30 days after written notice of such default specifying such
default in reasonable detail is given to Parent by the Company.
(iii) if the Merger is not completed by September 30, 2000 (the
"Termination Date") (unless due to a delay or default hereunder on the part of
the Company);
(iv) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Company and if the
Company shall have used reasonable efforts to prevent the entry of such order;
(v) if the Company receives a Superior Proposal, as defined in
Section 5.5, and resolves to accept such Superior Proposal, and the Company
shall have given Parent two days' prior written notice of its intention to
terminate pursuant to this provision; provided, however, that such termination
shall not be effective until such time as the payment required by Section 2.3(b)
shall have been received by Parent;
(vi) if (A) a tender or exchange offer is commenced by a Potential
Acquirer (excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) for all outstanding shares of Company
Common Stock, (B) the Company's Board of
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Directors determines, in good faith and after consultation with an independent
financial advisor, that such offer constitutes a Superior Proposal and resolves
to accept such Superior Proposal or recommend to the stockholders that they
tender their shares in such tender or exchange offer and (C) the Company shall
have given Parent two days' prior written notice of its intention to terminate
pursuant to this provision; provided, however, that such termination shall not
be effective until such time as the payment required by Section 2.3(b) shall
have been received by Parent;
(vii) if the Board of Directors of Parent shall have prior to
Closing completed, resolved to accept, or shall have recommended to its
stockholders that they accept, any Business Combination (as defined in Section
2.3 below);
(viii) if the stockholders of the Parent or Company fail to
approve the Merger at a duly held meeting of stockholders called for such
purpose or any adjournment or postponement thereof;
(ix) if Parent shall have failed to deliver to Company the
Disclosure Binder schedules described in Article IV and Section 6.11 ("Parent
Disclosure Schedules") on or before the twentieth (20th) day after the date of
this Agreement; or
(x) if Company notifies Parent within seven (7) days after
Company's receipt of the Parent Disclosure Schedules that Company is not
satisfied in its sole reasonable discretion with the contents of the Parent
Disclosure Schedules in any material respect.
(b) Parent shall have the right to terminate this Agreement:
(i) upon a breach of a representation or warranty of Company
contained in this Agreement which has not been cured in all material respects by
Company within thirty (30) days after written notice of such breach specifying
such breach in reasonable detail is given to Company by Parent, and which has
caused any of the conditions set forth in section 7.1 to be incapable of being
satisfied by the Termination Date;
(ii) if Company (A) fails to perform any of its material
covenants in this Agreement and (B) does not cure such default in all material
respects within 30 days after written notice of such default specifying such
default in reasonable detail is given to Company by Parent.
(iii) if the Merger is not completed by the Termination Date
(unless due to a delay or default hereunder on the part of Parent);
(iv) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of Parent and if Parent
shall have used reasonable efforts to prevent the entry of such order;
(v) if the Board of Directors of the Company shall have resolved
to accept a Superior Proposal as defined in Section 5.5 hereinbelow or shall
have recommended to the stockholders of the Company that they tender their
shares in a tender or an exchange offer
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commenced by a third party (excluding any affiliate of Parent or any group of
which any affiliate of Parent is a member);
(vi) if the stockholders of the Company or Parent fail to approve
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the Merger at a duly held meeting of stockholders called for such purpose or any
adjournment or postponement thereof;
(vii) if Company shall have failed to deliver to Parent the
Disclosure Binder schedules described in Article III and Sections 5.3 and 6.8
("Company Disclosure Schedules") on or before the twentieth (20th) day after the
date of this Agreement; or
(viii) if Parent notifies Company within seven (7) days after
Parent's receipt of the Company Disclosure Schedules that Parent is not
satisfied in its sole reasonable discretion with the contents of the Company
Disclosure Schedules in any material respect.
(c) As used in this Section 2.2, (i) "affiliate" and (ii) "group" have
the meanings set forth in Section 13(d) of the Exchange Act and the rules and
regulations thereunder.
SECTION 2.3 Termination Fee.
---------------
(a) Company agrees to pay to Parent a fee equal to Two Million
Dollars ($2,000,000) if:
(i) Company terminates this Agreement pursuant to clause (v) or
(vi) of Section 2.2(a);
(ii) Parent terminates this Agreement pursuant to clause (v) of
Section 2.2(b); or
(iii) each of the following has occurred: (A) Parent terminates
this Agreement pursuant to clause (vi) of Section 2.2(b); (B) prior to the time
of such termination a proposal relating to a Business Combination had been made
to the Company; and (C) on or prior to the six-month anniversary of the
termination of this Agreement the Company or any of its subsidiaries or
affiliates either (x) enters into an agreement or binding letter of intent with
respect to any Business Combination with any person, entity or group or (y)
consummates any Business Combination with any person, entity or group.
(b) Parent agrees to pay to Company a fee equal to Two Million
Dollars ($2,000,000) if the Company terminates this Agreement pursuant to clause
(vii) of Section 2.2(a).
For purposes of this Section 2.3, "Business Combination" means (i) a merger,
consolidation, share exchange, business combination or similar transaction
involving Parent or the Company, as the case may be, as a result of which such
party's stockholders prior to such transaction in the aggregate cease to own at
least seventy percent (70%) of the voting securities of the entity surviving or
resulting from such transaction (or the ultimate parent entity thereof), (ii) a
sale, lease, exchange, transfer or other
10
disposition of more than thirty percent (30%) of the assets of Parent or
Company, as the case may be, and its subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or (iii) the acquisition, by a
person (other than Parent or any affiliate thereof with respect to an
acquisition involving the Company, or other than the Company or any affiliate
thereof with respect to an acquisition involving Parent), group or entity of
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more
than thirty percent (30%) of the outstanding voting stock of the Company or
Parent, as the case may be, whether by tender or exchange offer or otherwise.
SECTION 2.4 Effect of Termination. In the event of termination of this
---------------------
Agreement by either Parent or the Company pursuant to the provisions of this
Article II, this Agreement shall forthwith become void and there shall be no
liability or further obligation on the part of the Company, Parent, Xxxx
Subsidiary or their respective officers or directors, except that this Section
2.4, Sections 2.2 and 2.3, Article IX, Sections 10.1, 10.2, 10.6, 10.7 and 10.17
shall survive and continue in full force and effect, notwithstanding
termination. Nothing in this Section 2.4 shall relieve any party from
liability for any willful and intentional breach of any covenant or agreement of
such party contained in this Agreement.
SECTION 2.5 Deliveries by Parent. At the Closing, Parent shall
--------------------
deliver, all duly and properly executed (where applicable):
(a) The Plan and Articles of Merger;
(b) A certified copy of the resolutions of the Boards of Directors and
shareholders of Parent and the Xxxx Subsidiary authorizing the execution and
delivery of this Agreement and each other agreement to be executed in connection
herewith (collectively, the "Collateral Documents") and the consummation of the
transactions contemplated herein;
(c) A favorable opinion from counsel for Parent, dated the Closing
Date, in form and substance as attached hereto as Schedule 2.5(c);
(d) The certificate described at Section 8.1(a);
(e) A current certificate of good standing for Parent and the Xxxx
Subsidiary and certified charter documents for Parent and the Xxxx Subsidiary
from each applicable jurisdiction of admittance and incorporation;
(f) The employment agreement between Parent and Xxxxx Xxxxx pursuant
to Section 8.1(i); and
(g) Other documents and instruments required by this Agreement, if
any.
SECTION 2.6 Deliveries by Company. At the Closing, the Company shall
---------------------
deliver, all duly and properly executed (where applicable):
(a) The Plan and Articles of Merger;
11
(b) The written resignations of all officers and directors of the
Company and each Subsidiary as of the time of Closing;
(c) A current certificate of good standing for the Company and each
Subsidiary and certified charter documents for the Company and each Subsidiary
from each applicable jurisdiction of admittance and incorporation;
(d) A certified copy of resolutions of the shareholders and directors
of the Company authorizing the execution and delivery of this Agreement and each
of the Collateral Documents;
(e) The certificate described at Section 7.1(a);
(f) A favorable opinion from counsel for Company, dated the Closing
Date, in form and substance as attached hereto as Schedule 2.6(f);
(g) The books and records of the Company and each Subsidiary,
including, without limitation, all original financial and operating records, the
corporate minute book and seal, the corporate stock ledger, and all title
documents;
(h) The Stock Restriction Agreement described at Section 7.1(h); and
(j) Other documents and instruments required by this Agreement, if
any.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
The representations, warranties and covenants herein contained are
qualified in their entirety by the information set forth on Schedules in the
corresponding section of the Disclosure Binder, whether or not reference to a
Schedule is made herein, provided a cross-reference to the applicable section of
this Agreement is set forth at the beginning of such Schedule. Whenever the
phrase "to Company's knowledge" or any equivalent phrase is used in this
Agreement, the phrase shall mean the actual knowledge of any officer or director
of the Company, and the knowledge such officer or director would or should have
had, if such officer or director exercised reasonable diligence in the conduct
of the Company' business. With knowledge that Parent is relying upon the
representations, warranties and covenants herein contained, Company represents
and warrants to Parent and makes the following covenants for the Parent's
benefit, at and as of the date hereof and the date of Closing:
SECTION 3.1 Organization and Standing. Company and each Subsidiary
-------------------------
is duly organized, legally existing and in good standing under the laws of the
state of its incorporation, with full power and authority to own its properties
and conduct its business as now being conducted, and has been duly admitted and
is in good standing under the laws of each state in which it owns property or
operates a business, except where the failure to be so duly admitted and in good
standing will not, when taken together with all other such failures, have a
material adverse effect on the Business,
12
operations, properties, assets, condition (financial or other) or results of
operations of the Company and the Subsidiaries, taken as a whole. The Company
and the Subsidiaries do not own any stock or ownership interest in any other
corporation, partnership, or other business organization, other than the
Subsidiaries.
SECTION 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of (i)
25,000,000 shares of Company Common Stock and (ii) 5,000,000 shares of Preferred
Stock, $.001 par value, of which 2,498,890 have been designated Series A
Convertible Preferred Stock and 950,000 shares have been designated Series B
Convertible Preferred Stock. On the date hereof: (i) 6,988,865 shares of
Company Common Stock were issued and outstanding, (ii) 984,000 shares of the
Company's Series A Preferred Stock were issued and outstanding, and (iii) no
shares of the Company's Series B Convertible Preferred Stock were issued and
outstanding.
(b) All of the authorized, issued, and outstanding shares of capital
stock and other securities of the Company are owned by the shareholders listed
on Schedule 3.2 attached hereto ("Shareholders") in the amounts listed against
each Shareholders name, including without limitation equity securities, debt
securities and options. All of the authorized, issued, and outstanding shares
of capital stock and other securities of each Subsidiary are either owned by the
Company or owned by a Subsidiary. At Closing, the Shareholders will be the only
owners of the securities of the Company, except for individuals or entities who
exercise options or warrants which currently exist. All of the outstanding
shares of the Company's and each Subsidiary's capital stock have been legally
and validly authorized and issued, are fully paid and nonassessable and free and
clear of all liens, claims and encumbrances of every kind and nature and are not
subject to any agreement or instrument relating to the transfer, disposition or
voting of such securities, except as set forth on Schedule 3.2 attached hereto.
There are no outstanding rights of any kind to acquire additional shares of any
class from the Company nor, to the Company's knowledge, has any person claimed
any such rights, except for the options and warrants listed on Schedule 3.2(i).
Except for the options and warrants set forth on Schedule 3.2(i), as of the date
hereof there were, and at Closing there will be, no outstanding subscriptions,
calls, contracts, commitments, understandings, restrictions, arrangements, or
rights, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating the Company or any Subsidiary to
issue, deliver or sell or repurchase or redeem, or cause to be issued, delivered
or sold, additional shares of the capital stock of the Company or obligating the
Company or any Subsidiary to grant, extend or enter into any such agreement or
commitment. As of the Closing, there will be no shareholder agreements, voting
trusts, proxies or other agreements or understandings to which the Company or
any Subsidiary is a party or is bound with respect to the voting of any shares
of capital stock of the Company or any Subsidiary, except for a proxy delivered
to the Parent pursuant to Section 7.1(g) of this Agreement.
SECTION 3.3 Contracts, Permits and Material Documents. With the
-----------------------------------------
exception of the items described in the last two sentences of this Section 3.3,
the items listed and included in Schedule 3.3, attached hereto, are all of the
following ("Material Documents") with respect to the Company, Business,
Locations or Subsidiaries: (i) leases for real and personal property, (ii) non-
13
governmental licenses or permissions used in connection with the Locations or
the Business, (iii) franchises, (iv) guarantees under which the Company or any
of the Subsidiaries is bound or under which the Company or any of the
Subsidiaries is the beneficiary, (v) collective bargaining agreements, (vi)
patents, trademarks, trade names, copyrights, trade secrets, proprietary rights,
symbols, service marks, and logos, (vii) all permits, licenses, consents and
other approvals from governments, governmental agencies (federal, state and
local) used in or required for the operation of any of the Locations; (viii) all
surety bonds, or letters of credit or any other obligation which the Company or
Subsidiaries have liability for with respect to the Business; (ix) all contracts
to acquire any car wash businesses from third parties; (x) all other contracts,
agreements, instruments, mortgages, deeds of trust, and security agreements not
listed on another Schedule (such as the Operating Contracts listed on Schedule
3.5 and the Company Debt listed on Schedule 3.8(a)) attached to this Agreement
which are binding on the Company or any of the Subsidiaries. The Material
Documents listed on Schedule 3.3 are organized under separate heading for each
of the different types of documents listed and are organized by Location where
the Material Documents relate to a specific Location. Except as set forth on
Schedule 3.3, neither the Company nor any person or party to any of the Material
Documents or bound thereby is in material default or in default known to Company
under any of the Material Documents, and, to the knowledge of Company, no act or
event or knowing default under any of the Material Documents has occurred which
with notice or lapse of time, or both, would constitute such a default. The
Company and the Subsidiaries are not a party to, and the Company's and
Subsidiaries' properties are not bound by, any agreement or instrument which is
material to the continued conduct of business operations of the Company, as now
being conducted, except as listed in Schedule 3.3. The parties hereto agree
that a document shall not be deemed to be a Material Document, if it has a
benefit or burden to the Company or its Subsidiaries of Twenty-five Thousand
Dollars ($25,000) or less per year or if it is a license or permit which is
renewed without substantive review by the issuing authority. Documents which
are not Material Documents shall not be listed on Schedule 3.3.
SECTION 3.4 Personal Property. All items of personal property used
------------------
in the business operations of the Company and the Subsidiaries ("Assets") are
owned by the Company or the Subsidiaries by good and marketable title free and
clear of any mortgages, pledges, liens, encumbrances, leases, charges, claims,
security agreements or title retention or other security arrangements, except as
set forth in Schedule 3.8(a). The Assets are in operable condition, except for
ordinary wear and tear and are sufficient to operate the Business conducted by
the Company and its Subsidiaries.
SECTION 3.5 Operating Contracts. The name and address of each party
-------------------
to each supply, franchise, lease, advertising and other agreements between
Company, Subsidiaries, and their suppliers, customers, landlords and lessors
("Operating Contract") utilized in the operation of any of the Locations is
listed on Schedule 3.5 attached hereto. No person or party to the any of the
Operating Contracts is in material or knowing default thereunder, and no act or
event has occurred which with notice or lapse of time, or both, would constitute
such a default. The Merger contemplated by this Agreement will not create a
default or otherwise affect the parties under any Operating Contract, except as
set forth under Schedule 3.5. The Company or its successors and assigns may
cancel the Company's or the Subsidiaries' obligations under the Operating
Contracts at any time without penalty or premium and without being in default
thereof.
14
SECTION 3.6 Real Property.
-------------
(a) As set forth in the Recitals, the Subsidiaries own the Owned Real
Property and possess a valid leasehold interest in each parcel of Leased Real
Property. The street address of each Location and whether it is Owned Real
Property or Leased Real Property is listed on Schedule 3.6(a) hereto. The
Company and the Subsidiaries have never owned, leased or otherwise occupied, had
an interest in or operated any real property other than the Owned Real Property
and the Leased Real Property (collectively, the "Real Property"), except as
listed on Schedule 3.6(a). The Subsidiaries have a valid leasehold estate
interest in each parcel of the Leased Real Property and have good, marketable
and insurable title to, or a valid and enforceable leasehold interest in, all of
the Real Property. Full and complete copies of all of the leases of the Leased
Real Property, including all modifications and amendments thereof, have been
furnished to Parent. The Company or its Subsidiaries own, with respect to each
parcel of Owned Real Property, an extended coverage owners policy of title
insurance which insures title to the Owned Real Property to be in fee simple in
the Subsidiaries subject only to title exceptions set forth in the title
policies (the "Title Policies"). To the knowledge of the Company, it has an
"as-built" survey relating to each parcel of the Owned Real Property and Leased
Real Property; however, if any such survey cannot be located, Parent, at its
election, may have a survey of the Owned Real Property made at its expense.
Company will cooperate and aid Parent's surveyor in preparing any survey
commissioned by Parent.
(b) The Company shall make available on Parent's reasonable request
all engineering, geologic and other similar reports, documentation and maps
relating to the Real Property in the possession or control of the Company, its
consultants or employed professional firms.
(c) To the Company's knowledge, no party, other than the Company and
the Subsidiaries and the record owners of each parcel of the Leased Real
Property, has a present or future right to possession of all or any part of the
Real Property.
(d) There are no proceedings or amendments pending, or to Company's
knowledge threatened, by any third party, which would result in a change in the
allowable uses of the Real Property or which would modify the right of the
Parent to use the Real Property for its present uses after the Closing Date,
except as set forth in Schedule 3.6(d) attached hereto and incorporated herein
by reference.
SECTION 3.7 Financial Statements. Prior to Closing, Company will
--------------------
deliver to Parent true and correct copies of the following financial statements
of the Company and each of the Subsidiaries (the "Financial Statements"):
(a) A consolidated balance sheet for Company as of December 31, 1997,
as of December 31, 1998, and as of December 31, 1999, and consolidated
statements of income, cash flow and retained earnings for the same periods, all
prepared on an accrual basis.
(b) If requested by the Parent, a consolidated balance sheet for
Company and each of the Subsidiaries as of March 31, 2000 ("Most Recent Balance
Sheet"), and a statement of income, cash flow and retained earnings for the
period ended March 31, 2000 ("Most Recent Income
15
Statement"), both prepared on an accrual basis by the Company. The Most Recent
Balance Sheet and Most Recent Income Statement are hereafter referred to as the
"Most Recent Financial Statements."
The Financial Statements have been prepared by the regular accountants
of Company, in accordance with generally accepted accounting principles
("GAAP"). All notes and contingent labilities required to be stated and
reflected under GAAP are stated and reflected on the Financial Statements.
Each of the Financial Statements (including all footnotes thereto) is true,
complete and correct in all material respects. The balance sheets present fairly
and accurately the financial condition of the Company and the Subsidiaries as of
the dates indicated thereon and the statements of income present fairly and
accurately on an accrual basis the results of the operations of the Company and
the Subsidiaries for the periods indicated thereon. The Company and the
Subsidiaries have not (i) made any material change in their accounting policies
or (ii) effected any prior period adjustment to, or other restatement of, their
financial statements for any period. The Financial Statements are consistent
with the books and records of the Company and the Subsidiaries (which books and
records are correct and complete). Since the December 31, 1999, consolidated
balance sheet, there has not been any material adverse change in the income,
expenses, assets, liabilities or financial condition of the Company and the
Subsidiaries.
SECTION 3.8 Liabilities; Accounts Receivable.
---------------------------------
(a) The Company and the Subsidiaries do not have any liabilities,
fixed or contingent, other than:
(i) liabilities fully reflected in the Most Recent Balance Sheet,
including the Company Debt, as hereinafter defined; and
(ii) accounts payable arising since the date of the Most Recent
Balance Sheet arising during the normal course of business consistent with past
custom and practice.
Schedule 3.8(a) attached hereto sets forth the secured and unsecured debt of the
Company and the Subsidiaries ("Company Debt"), and lists each loan comprising
the Company Debt by amount owed, date incurred, due date, interest rate,
amortization schedule, lender name, the Location or other assets which is
security for each of the loans and any guarantees pertaining to each debt
instrument or agreement listed therein.
(b) Except as set forth in Schedule 3.8(b), all of the accounts
receivable included in the Most Recent Balance Sheet (except those collected
since the dates thereof) and those which have arisen since the date thereof
reflect actual transactions, have arisen in the ordinary course of business,
will not, to the knowledge of the Company, be subject to offset or deduction and
reflect enforceable claims against the account debtor in the amount recorded.
16
SECTION 3.9 Fiscal Condition of Company. Since the date of the
---------------------------
December 31, 1999, consolidated balance sheet, except as set forth on Schedule
3.9, there has not (except as otherwise specifically permitted by this
Agreement) been:
(a) Any material change in the financial condition, business
organization or personnel of the Company and the Subsidiaries or in the
relationships of the Company and the Subsidiaries with suppliers, customers or
others, other than changes occurring in the ordinary course of business;
(b) Any sale or other disposition of any asset owned by the Company
or the Subsidiaries at the close of business on the date of the December 31,
1999, consolidated balance sheet, or acquired by it since that date, other than
in the ordinary course of business, or which individually does not exceed
Twenty-five Thousand Dollars ($25,000), or which in the aggregate do not exceed
Fifty Thousand Dollars ($50,000);
(c) Any expenditure or commitment by the Company or the Subsidiaries
for the acquisition of any single asset having an acquisition price of Fifty
Thousand Dollars ($50,000) or more;
(d) Any damage, destruction or loss (whether or not insured)
adversely affecting the property, business or prospects of the Company and the
Subsidiaries, except damage, destruction or loss which does not exceed Twenty-
five Thousand Dollars ($25,000) in the aggregate;
(e) Any employment contracts, or bonuses or increases in the
compensation payable or to become payable by the Company and the Subsidiaries to
any officer or key employee;
(f) Any loans or advances to the Company and the Subsidiaries other
than renewals or extensions of existing indebtedness; or
(g) Any change in accounting method or practice.
SECTION 3.10 Policies of Insurance. All insurance policies,
---------------------
performance bonds, and letters of credit insuring the Real Property or the
Assets or which the Company and the Subsidiaries have had issued regarding the
Real Property or the Assets and which have not expired are listed on Schedule
3.10 attached hereto. Schedule 3.10 includes the names and addresses of the
beneficiaries, insurers and sureties, policy and bond numbers, types of coverage
or bond, time periods or projects covered and the names and addresses of all
known agents or agencies, issuing banks, and beneficiaries, with respect to each
listed insurance policy, performance bond and letter of credit. The Company's
and Subsidiaries' current insurance policies, performance bonds and letters of
credits relating to any Asset are in force and effect and the premiums thereon
are not delinquent. The Company and the Subsidiaries have not received any
written notification from any insurance carrier denying or disputing any claim
made by the Company and the Subsidiaries or denying or disputing any coverage
for any such claim or denying or disputing the amount of any claim. Except as
set forth on Schedule 3.10, the Company and the Subsidiaries have no claims
against any of their insurance carriers under any policies insuring the Assets
pending or anticipated and, to the Company's knowledge, there has been no
occurrence of any kind which would give rise to any such claim.
17
SECTION 3.11 Tax Returns. The Company and the Subsidiaries have
-----------
filed all federal and other tax returns for all periods on or before the due
date of such return (as may have been extended by any valid extension of time)
and has paid all taxes due for the periods covered by the said returns. The
Company and the Subsidiaries have no liability for taxes incurred by their
operations prior to Closing including, without limiting the generality of the
foregoing, all federal, state and local income, sales, use, payroll, franchise,
excise and property taxes, except for taxes for the current fiscal year in an
amount not exceeding the reserve therefor on the December 31, 1999, consolidated
balance sheet. The Company and each of the Subsidiaries is a Subchapter C
corporation under the Internal Revenue Service Code. The reserves for all taxes
reflected on the December 31, 1999, consolidated balance sheet, if any, are
adequate to cover all taxes, interest and penalties in connection therewith that
may be assessed with respect to the property and business operations for the
period(s) ending on the Closing Date and for all prior periods. The Company and
the Subsidiaries have filed, and will file in a timely manner, all requisite
federal, state, local and other tax returns due for all fiscal periods ended on
or before the date hereof and as of the Closing shall have filed in a timely
manner all such returns due for all periods ended on or before the Closing Date.
No federal, state, local or other tax returns or reports filed by the Company
and the Subsidiaries (whether filed prior to, on, or after the date hereof),
will result in any taxes, assessments, fees or other governmental charges in
excess of the amounts reserved for on the December 31, 1999, consolidated
balance sheet. The Company and the Subsidiaries have duly withheld and
collected all taxes which the Company and the Subsidiaries are required to
withhold or collect by law, have paid over to the proper authorities all such
amounts required to be paid, and have in reserve all amounts so withheld or
collected which have not yet been required to be paid. No taxing authority has
asserted any deficiency for any prior tax period of the Company or the
Subsidiaries, and the Company is not aware of any facts which would constitute
the basis for the assertion of such a deficiency, except as listed on Schedule
3.11 attached hereto.
SECTION 3.12 Employees, Pensions and, ERISA.
------------------------------
(a) Except as set forth on Schedule 3.12(a), no employee of the
Company or any Subsidiary is represented by any union. Except as set forth on
Schedule 3.12(a), no employee of the Company or any Subsidiary has a written
employment agreement with the Company or any Subsidiary. There is no pending
or, to the knowledge of the Company, threatened dispute between the Company or
the Subsidiaries and any of their employees which might materially and adversely
affect the operation of the Locations. The Company and the Subsidiaries are not
deficient or in arrears in contributing to any trust funds the Company or the
Subsidiaries are required to contribute to in accordance with any contracts with
unions, including, without limitation, scholarship funds, legal aid funds,
pension funds and health, welfare or benefit funds ("Trust Funds"). There is no
matter, action, audit, suit or claim pending or to Company's knowledge
threatened relating to contributions of the Company and the Subsidiaries to any
Trust Fund, before any court, tribunal or governmental agency.
(b) Schedule 3.12(b) hereto contains a list of all employee benefit
plans, funds or programs (within the meaning of the Internal Revenue Code of the
United States ("Code") or the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) which are currently maintained and/or were established or
sponsored by the Company (whether or not they are now
18
terminated) or to which the Company or any Subsidiary currently contribute, or
have an obligation to contribute in the future, including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions ("Plans"), whether or not the Plans are or are intended to be (i)
covered or qualified under the Code, ERISA or any other applicable law, (ii)
written or oral, (iii) funded or unfunded, or (iv) generally available to all
employees of the Company or any Subsidiary.
(c) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law applicable to such Plans, and, in all
material respects, have been administered, operated and managed in substantial
accordance with the governing documents of the Plan and the requirements of
ERISA.
(d) There is no matter, action, audit, suit or claim pending or, to
Company's knowledge, threatened relating to any Plan, fiduciary of any Plan or
assets of any Plan, before any court, tribunal or government agency.
(e) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no material adverse
change in the condition of the Plan since the date of the most recent Form 5500,
audited annual financial statement or actuarial valuation report.
(f) The transaction contemplated herein will not accelerate any
liability under the Plans because of an acceleration of any rights or benefits
to which any employee may be entitled thereunder.
SECTION 3.13 Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 3.13(a) to this Agreement, the
Company's and the Subsidiaries' use of the Assets and Real Property is in
material compliance with all federal, state and local laws, rules and
regulations including, without limitation, the following laws: Environmental
Laws (as defined in Section 3.13(b)); land use laws; payroll, employment, labor,
or safety laws; or federal, state or local "anti-trust" or "unfair competition"
laws such as but not limited to the Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx
Act, Federal Trade Commission Act, or Racketeer Influenced and Corrupt
Organization Act ("Law"). Except as disclosed in Schedule 3.13(a), the Company
and each Subsidiary are in material compliance with all permits, franchises,
licenses, and orders that have been issued with respect to the Laws and are or
may be applicable to the Company's and the Subsidiaries' property and
operations, including, without limitation, any
19
order, decree or directive of any court or federal, state, municipal, or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located, federal, state and local permits, orders, franchises and
consents. Except as set forth on Schedule 3.13(a), with respect to any Law,
there are no claims, actions, suits or proceedings pending, or, to the knowledge
of the Company threatened against or affecting the Assets or Real Property, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
wherever located, which would result in a material change in how Parent may use
the Assets or Real Property or which would invalidate this Agreement or any
action taken in connection with this Agreement. Except as disclosed in Schedule
3.13(a), the Company and the Subsidiaries have received no notification of any
past or present failure by the Company or any Subsidiary to comply with any Law
applicable to the Assets or Real Property or affecting the Company's or any
Subsidiary's use of the Assets or Real Property.
(b) Except as disclosed in Schedule 3.13(b) to this Agreement, the
Company and the Subsidiaries are in material compliance with all federal, state
and local laws, rules and regulations relating to environmental issues of any
kind and/or the receipt, transport or disposal of any hazardous or non-hazardous
waste materials from any source ("Environmental Law"). Except as disclosed in
Schedule 3.13(b), with respect to any Environmental Law, the Company and the
Subsidiaries are in material compliance with all permits, licenses, and orders
related thereto or issued thereunder with respect to Environmental Laws, as are
or may be applicable to the Company's and the Subsidiaries' property and
operations, including, without limitation, any order, decree or directive of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever located. Except
as set forth on Schedule 3.13(b), there are no Environmental Law related claims,
actions, suits or proceedings pending, or, to the knowledge of the Company,
threatened against or affecting the Company or the Subsidiaries, at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, wherever
located. Except as set forth on Schedule 3.13(b), the Company and the
Subsidiaries have not transported, stored, treated or disposed, nor has Company
or any Subsidiary allowed any third persons, on its behalf, to transport,
store, treat or dispose waste to or at (i) any location other than a site
lawfully permitted to receive such waste for such purpose or, (ii) any location
currently designated for remedial action pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or any similar
federal or state statute; nor has Company or any Subsidiary performed, arranged
for or allowed by any method or procedure such transportation or disposal in
contravention of state or federal laws and regulations or in any other manner
which may result in liability for contamination of the environment; and the
Company and the Subsidiaries have not disposed of waste, nor has Company or any
Subsidiary knowingly allowed third parties to dispose of waste upon property
owned or leased by the Company or any Subsidiary, or on any other real property,
other than as permitted by, and in conformity with, applicable Environmental
Law. Except as disclosed in Schedule 3.13(b), the Company and the Subsidiaries
have not received notification of any past or present failure by the Company or
any Subsidiary to comply with any Environmental Law applicable to them or their
operations or their assets. Without limiting the generality of the foregoing,
the Company and the Subsidiaries have not received any notification (including
requests for information directed to the Company or any Subsidiary) from any
governmental agency asserting that the Company or any Subsidiary, or any owner,
lessee or operator of the Assets or the Real Property, is or may be a
"potentially responsible
20
person" for a remedial action at a waste storage, treatment or disposal
facility, pursuant to the provisions of CERCLA, or any similar federal or state
statute assigning responsibility for the costs of investigating or remediating
releases of contaminants into the environment.
(c) To the Company's knowledge, no employee, contractor or agent of
the Company or any Subsidiary has, in the course and scope of employment with
the Company or any Subsidiary, been harmed by exposure to hazardous materials,
as defined under the Laws. No liens with respect to environmental liability
have been imposed against the Company or any Subsidiary under CERCLA, any
comparable state statute or other applicable Environmental Law, and to Company's
knowledge no facts or circumstances exist which would give rise to the same.
(d) Schedules 3.13(a) and 3.13(b) list all remedied violations of
Laws and Environmental Laws which existed within the past five (5) years and all
outstanding unremedied notice of violations issued to the Company or any
Subsidiary by any federal, state or local governmental authority involving or
relating to the Assets or the Real Property. There are no outstanding or
unremedied notices of violation from any federal, state or local governmental
authority involving or relating to the Assets or the Real Property.
(e) To the Company's knowledge, no employee, officer, director or
shareholder of the Company is under investigation by the Attorney General of any
state, by the District Attorney of any county of any state, or by any United
States Attorney or any other governmental investigative agency for the violation
of any Laws, including, without limitation, the violation of any anti-trust,
racketeering, or unfair competition laws.
(f) Except as set forth in Schedule 3.13(f), all licenses, approvals,
permits and certificates ("Government Approvals") needed or required for the
operation of the Company's business are set forth on Schedule 3.3. To the
Company's knowledge, all such Government Approvals are in full force and effect,
the Company and the Subsidiaries are in compliance with all such Government
Approvals, and all such Government Approvals have been validly and legally
obtained by the Company.
SECTION 3.14 Corrupt Practices. The Company and the Subsidiaries
-----------------
have not made, offered or agreed to offer anything of value to any employees of
any customers of the Company or any Subsidiary for the purpose of attracting
business to the Company or any Subsidiary or any foreign or domestic
governmental official, political party or candidate for government office or any
of their respective employees or representatives in any manner which would
result in the Company or any Subsidiary being in violation of any Law, nor has
the Company or any Subsidiary otherwise taken any action which would cause it to
be in violation of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 3.15 Legal Authority and Compliance.
------------------------------
(a) The Company has by proper corporate proceedings duly authorized
the execution, and delivery of this Agreement and each other agreement
contemplated to be entered into and no other corporate action is required by law
or the Certificate of Incorporation or by-laws of the
21
Company, except for a vote of the Shareholders. The execution and delivery of
this Agreement has been approved by the Company's Board of Directors.
(b) The execution and delivery of this Agreement by the Company does
not violate, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or any of
its subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or by-laws of the Company or any of its Subsidiaries, (ii)
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its Subsidiaries is now a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets may be bound or
affected. The consummation by the Company of the transactions contemplated
hereby will not result in any violation, conflict, breach, termination,
acceleration or creation of liens under any of the terms, conditions or
provisions described in clauses (i) through (iii) of the preceding sentence,
subject in the case of the terms, conditions or provisions described in clauses
(ii) and (iii) above, to obtaining (prior to the Closing Date) the Company
Required Approvals, as hereinafter defined.
(c) Except for (i) the filings by Company required by the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
affirmative vote of the Shareholders of the Company approving the consummation
of this Agreement, (iii) the making of the Merger Filing with the Secretary of
State of the State of Delaware in connection with the Merger, (iv) the consent
of lenders of the Company and its Subsidiaries, as listed in Schedule 3.15
attached (the filings and approvals referred to in clauses (i) through (iv) are
collectively referred to as the "Company Required Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority, or private party is
necessary for the execution and delivery of this Agreement by the Company of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not, in the aggregate, have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of Company and its subsidiaries,
taken as a whole.
SECTION 3.16 Transaction Intermediaries. Except as disclosed on
--------------------------
Schedule 3.16, no agent or broker or other person acting pursuant to the
authority of Company or any Subsidiary is entitled to any commission or finder's
fee in connection with the transactions contemplated by this Agreement.
22
SECTION 3.17 Trademarks, Patents, Etc.
------------------------
(a) Schedule 3.17(a) attached hereto contains a true and complete
list of all letters patent, patent applications, trade names, trademarks,
service marks, trademark, software and service xxxx registrations and
applications, copyrights, copyright registrations and applications, grants of a
license or right to the Company or any Subsidiary with respect to the foregoing,
both domestic and foreign, claimed by the Company or any Subsidiary or used or
proposed to be used by the Company or any Subsidiary in the conduct of the
Business, whether registered or not (collectively herein, "Registered Rights").
(b) Except as described in Schedule 3.17(b) attached hereto, to the
Company's knowledge, the Company and the Subsidiaries own and have the
unrestricted right to use the Registered Rights and every trade secret, know-
how, process, discovery, development, design, technique, program, code, customer
and supplier list, promotional idea, marketing and purchasing strategy,
invention, process, confidential data and or other information (collectively
herein, "Proprietary Information") required for or incident of the design,
development, manufacture, operation, sale and use of all products and services
sold or rendered or proposed to be sold or rendered by the Company or any
Subsidiary, free and clear of any right, equity or claim of others. The Company
and the Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all Proprietary Information.
(c) Schedule 3.17(c) attached hereto contains a true and complete
list and description of all licenses of or rights to Proprietary Information
granted by the Company or any Subsidiary to others or by others to the Company
or any Subsidiary. Except as described in Schedule 3.17(c), (i) the Company and
the Subsidiaries have not sold, transferred, assigned, licensed or subjected to
any Lien, any Registered Right or Proprietary Information or any interest
therein, and (ii) the Company and the Subsidiaries are not obligated or under
any liability whatever to make any payments by way of royalties, fees or
otherwise to any owner or licensor of, or other claimant to, any Registered
Right or Proprietary Information.
(d) There is no claim or demand of any person pertaining to, or any
action that is pending or, to the knowledge of the Company, threatened, which
challenges the rights of the Company or any Subsidiary in respect of any
Registered Right or any Proprietary Information.
(e) The Company and the Subsidiaries own or have legally licensed all
third-party computer software used in connection with the Business and, to the
Company's knowledge, have not infringed, and are not now infringing, on the
rights of any third parties by their use of computer software.
SECTION 3.18 Disclosure. The representations and warranties of the
----------
Company contained in this Article III or in any Schedule or other document
delivered by the Company pursuant hereto, do not contain any untrue statement of
a material fact, or omit any statement of a material fact necessary to make the
statements contained not misleading. If, prior to Closing, the Company becomes
aware of any inaccuracy, or misrepresentation or omission in any of the
Schedules, it shall immediately advise Parent in writing of the inaccuracy,
misrepresentation or omission, subject to the
23
provisions of Section 6.9, and Company shall have the right, subject to the
provisions of Section 10.14, to update the Disclosure Binder accordingly.
SECTION 3.19 Competition. No salaried officer, shareholder or
-----------
employee of the Company or any Subsidiary, nor any spouse, child or other
relative of any of them, to the Company's knowledge, has any direct or indirect
interest in any competitor of the Company or any Subsidiary within the
geographical area in which the Company or any Subsidiary currently conducts
business, or an interest in any supplier or customer of the Company or any
Subsidiary or in any person from whom or to whom the Company or any Subsidiary
leases any real or personal property, or in any other person with whom the
Company or any Subsidiary is doing business which interest adversely or
materially affects the business of the Company or any Subsidiary, excepting only
those investments of not more than five percent of the capital stock of a
business, the stock of which is traded on a national securities exchange or
over-the-counter, where such investments are set forth on Schedule 3.19 attached
hereto and incorporated herein by reference.
SECTION 3.20 Litigation. All pending or, to Company's knowledge,
----------
threatened litigation, administrative or judicial proceedings or investigations
by any governmental agency or officials involving the Company or any Subsidiary,
the Real Property, the Assets, or the Business, together with a description of
each such proceeding, is set forth on Schedule 3.20 hereto. There is no pending
or, to Company's knowledge, threatened litigation, administrative or judicial
proceedings or investigation involving the Company or any Subsidiary or their
Real Property, Assets, or the Business, except as listed on Schedule 3.20.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
The representations, warranties and covenants herein contained are
qualified in their entirety by the information set forth on Schedules in the
corresponding section of the Disclosure Binder, whether or not reference to a
Schedule is made herein, provided a cross-reference to the applicable section of
this Agreement is set forth at the beginning of such Schedule. Whenever the
phrase "to Parent's knowledge" or any equivalent phrase is used in this
Agreement, the phrase shall mean the actual knowledge of any officer or director
of the Parent, and the knowledge such officer or director would or should have
had, if such officer or director exercised reasonable diligence in the conduct
of the Parent's business. With knowledge that Company is relying upon the
representations, warranties and covenants herein contained, the Parent
represents and warrants to Company and makes the following covenants for the
Company's benefit, at and as of the date hereof and the Closing Date.
SECTION 4.1 Organization and Qualification. Each of Parent and its
------------------------------
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the requisite
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Each of Parent and its
subsidiaries is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not,
24
when taken together with all other such failures, have a material adverse effect
on the business, operations, properties, assets, condition (financial or other)
or results of operations of Parent and its subsidiaries, taken as a whole.
SECTION 4.2 Capitalization.
---------------
(a) As of February 1, 2000, the authorized capital stock of Parent
consisted of 200,000,000 shares of Parent Common Stock and 50,000,000 shares of
preferred stock, par value $.01 per share ("Parent Preferred Stock"). As of
February 1, 2000, (i) 23,390,113 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and free of preemptive rights, (ii) no shares of Parent Preferred Stock were
issued and outstanding, (iii) 52,388 shares of Parent Common Stock and no
shares of Parent Preferred Stock were held in the treasury of Parent, and (iv)
4,735,922 shares of Parent Common Stock were reserved for issuance upon exercise
of outstanding options and warrants to purchase Parent Common Stock.
(b) The authorized capital stock of Xxxx Subsidiary consists of 1,000
shares of common stock having no par value, of which 100 shares are issued and
outstanding, which shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the SEC Reports (as defined in Section
4.7), or as set forth in Schedule 4.2 hereto, or as otherwise contemplated by
this Agreement (including the proxy delivered to Company pursuant to Section
8.1(g) of this Agreement), as of the date hereof, there are no outstanding
subscriptions, calls, contracts, options, warrants, commitments, understandings,
restrictions, arrangements, security, instrument or other agreement, obligating
Parent or any subsidiary of Parent to issue, deliver or sell or repurchase or
redeem, or cause to be issued, delivered or sold, additional shares of the
capital stock of Parent or obligating Parent or any subsidiary of Parent to
grant, extend or enter into any such agreement or commitment. Except as
otherwise disclosed in the SEC Reports, there are no voting trusts, proxies or
other agreements or understandings to which Parent or any subsidiary of Parent
is a party or is bound with respect to the voting of any shares of capital stock
of Parent, other than voting agreements executed in connection with this
Agreement. Except as otherwise disclosed in the SEC Reports or Schedule 4.2
hereto, no person has any registration rights for shares which are not
registered, or preemptive rights, right of first refusal or similar right with
respect to any shares of Parent capital stock.
SECTION 4.3 Subsidiaries. Each direct and indirect corporate
------------
subsidiary of Parent is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted and each subsidiary of Parent is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary; except in all cases where
the failure to be so qualified and in good standing would not, when taken
together with all such other failures, have a material adverse effect on the
business, operations, properties, assets, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole. All of
the outstanding shares of capital stock of each corporate subsidiary of Parent
are validly issued, fully paid, nonassessable and free of preemptive rights,
and
25
are owned directly or indirectly by Parent, free and clear of any liens, claims,
encumbrances, security interests, equities and options of any nature whatsoever,
except where such shares are pledged to secure Parent's credit facilities. There
are no subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting, transfer, ownership or
other rights with respect to any shares of capital stock of or interest in any
subsidiary of Parent, including any right of conversion or exchange under any
outstanding security, instrument or agreement. As used in this Agreement, the
term "subsidiary" shall mean, when used with reference to any person or entity,
any corporation, partnership, joint venture or other entity of which such person
or entity (either acting alone or together with its other subsidiaries) owns,
directly or indirectly, fifty percent (50%) or more of the stock or other voting
interests, the holders of which are entitled to vote for the election of a
majority of the board of directors or any similar governing body of such
corporation, partnership, joint venture or other entity.
SECTION 4.4 Authorization to Proceed with this Agreement.
--------------------------------------------
(a) Parent has by proper corporate proceedings duly authorized the
execution, and delivery of this Agreement and each other agreement contemplated
to be entered into and no other corporate action is required by law or the
Certificate of Incorporation or by-laws of Parent. The execution and delivery
of this Agreement has been approved by the Parent's Board of Directors.
(b) The execution and delivery of this Agreement by each of Parent and
Xxxx Subsidiary do not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its subsidiaries under any of the terms, conditions or
provisions of (i) the respective charters or by-laws of Parent or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Parent or any of its subsidiaries or any of their
respective properties or assets or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of its
subsidiaries is now a party or by which Parent or any of its subsidiaries or any
of their respective properties or assets may be bound or affected. The
consummation by Parent and Xxxx Subsidiary of the transactions contemplated
hereby will not result in any violation, conflict, breach, termination,
acceleration or creation of liens under any of the terms, conditions or
provisions described in clauses (i) through (iii) of the preceding sentence,
subject, in the case of the terms, conditions or provisions described in clause
(ii) and (iii) above, to obtaining (prior to the Closing Date the Parent
Required Approvals, as hereafter defined.
(c) Except for (i) the filings by Parent required by the HSR Act, (ii)
the filing of the Registration Statement and Proxy Statement/Prospectus (as such
terms are defined in Section 4.7) with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, (iii) the making of the Merger Filing
with the Secretary of State of the State
26
of Delaware in connection with the Merger, (iv) any required filings with or
approvals from the Nasdaq National Market, and (v) the consent of lenders of the
Parent and its subsidiaries, as listed in Schedule 4.4 attached (the filings and
approvals referred to in clauses (i) through (v) are collectively referred to as
the "Parent Required Approvals"), no declaration, filing or registration with,
or notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority, or private party is necessary for the execution
and delivery of this Agreement by Parent or the Xxxx Subsidiary of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not, in the aggregate, have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other) or results of operations of Parent and its subsidiaries,
taken as a whole.
SECTION 4.5 Parent Common Stock. The Parent Common Stock to be
-------------------
issued pursuant to this Agreement has been duly authorized and, when issued,
will be validly issued, fully paid and nonassessable, free of preemptive rights
and will be issued in compliance with all applicable securities and other laws.
SECTION 4.6 Absence of Intermediaries. No agent, broker, or other
-------------------------
person acting pursuant to Parent's authority will be entitled to make any claim
against the Company for any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
SECTION 4.7 Commission Filings. Since January 1, 1997, Parent has
------------------
filed with the SEC all forms, statements, reports and documents (including all
exhibits, post-effective amendments and supplements thereto) required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed (or, in the case of filing under the Securities
Act, at the time of effectiveness) in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
Parent has previously delivered or made available to the Company copies
(including all exhibits, post-effective amendments and supplements thereto) of
its (a) Annual Reports on Form 10-K for the fiscal year ended December 31, 1998,
and for the immediately preceding fiscal year, as filed with the SEC, (b) proxy
and information statements relating to (i) all meetings of its stockholders
(whether annual or special) and (ii) actions taken by consent in lieu of a
stockholders' meeting from January 1, 1997, until the date hereof, and (c) all
other reports, including quarterly reports, and registration statements filed by
Parent with the SEC since January 1, 1997 (other than registration statements
filed on Form S-8) (the documents referred to in clauses (a), (b) and (c) filed
prior to the date hereof are collectively referred to as the "SEC Reports"). As
of their respective dates (or, in the case of filing under the Securities Act,
at the time of effectiveness), (A) the SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (B) the SEC
Reports included all required exhibits. The audited consolidated financial
statements of Parent included in the Annual Report on Form 10-K for the year
ended December 31, 1998, and the unaudited consolidated interim financial
statements included in Parent's Quarterly Report on Form 10-Q for the quarter
ending September 30, 1999 (collectively, the "Parent Financial Statements") have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated therein or in the
27
notes thereto) and fairly and accurately present the financial position of
Parent and its subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended
(subject, in the case of unaudited interim financial statements to normal year-
end adjustments, none of which, individually or in the aggregate, would have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole).
SECTION 4.8 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4, as amended or supplemented from time to
time, to be filed under the Securities Act with the SEC by Parent in connection
with the Merger for the purpose of registering the shares of Parent Common Stock
to be issued in the Merger (such registration statement, together with any
amendments thereof, being the "Registration Statement") or (b) the proxy
statement, as amended or supplemented from time to time, to be distributed in
connection with the Parent's meeting of stockholders to vote on this Agreement
and the transactions contemplated hereby (the "Proxy Statement" and, together
with the prospectus included in the Registration Statement, the "Proxy
Statement/Prospectus") will, in the case of the Proxy Statement or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the meetings of stockholders of the Parent to be held in connection with the
transactions contemplated by this Agreement, or, in the case of the Registration
Statement, as amended or supplemented, at the time it becomes effective and at
the time of such meetings of the stockholders of the Parent, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will, as of its mailing date, comply as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by Parent or Xxxx Subsidiary
with respect to information supplied by the Company or the stockholders of the
Company for inclusion therein.
SECTION 4.9 Absence of Undisclosed Liabilities. Except as
----------------------------------
specifically disclosed in the SEC Reports or as heretofore disclosed to the
Company in writing with respect to acquisitions, potential borrowing or
commitments, neither Parent nor any of its subsidiaries had at December 31,
1999, or has incurred since that date and as of the date hereof, any liabilities
or obligations (whether absolute, accrued, contingent or otherwise) of any
nature, except: (a) liabilities, obligations or contingencies (i) which are
accrued or reserved against in the Financial Statements or reflected in the
notes thereto or (ii) which were incurred after December 31, 1999, and were
incurred in the ordinary course of business and consistent with past practices;
(b) liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
Parent and its subsidiaries, taken as a whole or (ii) have been discharged or
paid in full prior to the date hereof; and (c) liabilities and obligations which
are of a nature not required to be reflected in the consolidated financial
statements of Parent and its subsidiaries prepared in accordance with generally
accepted accounting principles consistently applied and which were incurred in
the ordinary course of business.
28
SECTION 4.10 Absence of Certain Changes or Events. Since the date of
------------------------------------
the most recent SEC Report that contains consolidated financial statements of
Parent, there has not been any material adverse change in the business,
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole, except
for changes that affect the industries in which Parent and its subsidiaries
operate generally.
SECTION 4.11 Material Documents. Attached hereto as Schedule 4.11 is
------------------
a complete and accurate list of all of the following ("Parent Material
Documents") with respect to the business of Parent and each of its subsidiaries:
(i) leases for real property, (ii) all contracts to acquire any car wash
businesses from third parties; and (iii) all mortgages, promissory notes,
instruments, mortgages, deeds of trusts, and security agreements granting any
party a security interest in or to any assets of the Parent or any of its
subsidiaries. Except as set forth on Schedule 4.11, neither Parent nor any
person or party to any of the Parent Material Documents or bound thereby is in
material default or in default known to Parent under any of the Parent Material
Documents, and, to the knowledge of Parent, no act or event or knowing default
under any of the Parent Material Documents, has occurred which with notice or
lapse of time, or both, would constitute such a default. Parent has provided the
Company with complete and accurate copies of all Parent Material Documents.
SECTION 4.12 Real Property.
-------------
(a) Schedule 4.12 hereto contains a list of all real property that is
owned or leased by Parent or any of its subsidiaries (collectively, the "Parent
Real Property"). Parent and/or its subsidiaries have a valid leasehold estate
interest or have good, marketable and insurable title to, or a valid and
enforceable leasehold interest in, all of the Parent Real Property. Parent has
furnished to the Company full and complete copies of all of the leases,
including all modifications and amendments thereof, with respect to any of the
Parent Real Property. Parent or its subsidiaries own, with respect to each
parcel of owned Parent Real Property, an extended coverage owners policy of
title insurance which insures title to the owned Parent Real Property to be in
fee simple in Parent's subsidiaries subject only to title exceptions set forth
in the title policies (the "Parent Title Policies"). To the knowledge of Parent
it has an "as-built" survey relating to each parcel of the Parent Real Property;
however, if any such survey can not be located, the Company, at its election,
may have a survey of the owned Parent Real Property made at its expense.
(b) Parent shall make available on the Company's reasonable request
all engineering, geologic and other similar reports, documentation and maps
relating to the Parent Real Property in the possession or control of Parent, its
consultants or employed professional firms.
(c) To Parent's knowledge, no party, other than Parent and its
subsidiaries and the record owners of each parcel of the leased Parent Real
Property, has a present or future right to possession of all or any part of the
Parent Real Property.
29
SECTION 4.13 Fiscal Condition of Parent. Since the date of the last
--------------------------
SEC Report containing a consolidated balance sheet (the "Parent Most Recent
Balance Sheet"), except as set forth on Schedule 4.13, there has not (except as
otherwise specifically permitted by this Agreement) been:
(a) Any material change in the financial condition, business
organization or personnel of Parent and its subsidiaries or in the relationships
of Parent and its subsidiaries with suppliers, customers or others, other than
changes occurring in the ordinary course of business;
(b) Any sale or other disposition of any asset owned by Parent or its
subsidiaries at the close of business on the date of the Parent Most Recent
Balance Sheet, or acquired by it since that date, other than in the ordinary
course of business, or which individually does not exceed Twenty-Five Thousand
Dollars ($25,000), or which in the aggregate do not exceed Fifty Thousand
Dollars ($50,000);
(c) Any employment contracts, or bonuses or increases in the
compensation payable or to become payable by Parent and its subsidiaries to any
executive officer;
(d) Any change in accounting method or practice; or
(e) Any loans or advances to Parent and its subsidiaries other than
renewals or extensions of existing indebtedness and other than indebtedness
incurred in the ordinary course of business.
SECTION 4.14 Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 4.14(a) to this Agreement,
Parent's and its subsidiaries' use of the Parent Assets and Parent Real Property
is in material compliance with all Law. Except as disclosed in Schedule
4.14(a), Parent and each subsidiary are in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to Parent's and its subsidiaries' property and
operations, including, without limitation, any order, decree or directive of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever located, federal,
state and local permits, orders, franchises and consents. Except as set forth
on Schedule 4.14(a), with respect to any Law, there are no claims, actions,
suits or proceedings pending, or, to the knowledge of Parent threatened against
or affecting the Parent Assets or Parent Real Property, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, wherever located, which
would result in a material change in how Parent may use the Parent Assets or
Parent Real Property or which would invalidate this Agreement or any action
taken in connection with this Agreement. Except as disclosed in Schedule
4.14(a), Parent and its subsidiaries have received no notification of any past
or present failure by Parent or any of its subsidiaries to comply with any Law
applicable to the Parent Assets or Parent Real Property or affecting Parent's or
any of its subsidiaries' use of the Parent Assets or Parent Real Property.
30
(b) Except as disclosed in Schedule 4.14(b) to this Agreement, Parent
and its subsidiaries are in material compliance with all Environmental Laws.
Except as disclosed in Schedule 4.14(b), with respect to any Environmental Law,
Parent and its subsidiaries are in material compliance with all permits,
licenses, and orders related thereto or issued thereunder with respect to
Environmental Laws, as are or may be applicable to Parent's and its
subsidiaries' property and operations, including, without limitation, any order,
decree or directive of any court or federal, state, municipal, or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located. Except as set forth on Schedule 4.14(b), there are no
Environmental Law related claims, actions, suits or proceedings pending, or, to
the knowledge of Parent, threatened against or affecting Parent or its
subsidiaries, at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located. Except as set forth on Schedule 4.14(b),
Parent and its subsidiaries have not transported, stored, treated or disposed,
nor has Parent or any of its subsidiaries allowed any third persons, on its
behalf, to transport, store, treat or dispose waste to or at (i) any location
other than a site lawfully permitted to receive such waste for such purpose or,
(ii) any location currently designated for remedial action pursuant to CERCLA or
any similar federal or state statute; nor has Parent or any of its subsidiaries
performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of state or federal laws and
regulations or in any other manner which may result in liability for
contamination of the environment; and Parent and its subsidiaries have not
disposed of waste, nor has Parent or any of its subsidiaries knowingly allowed
third parties to dispose of waste upon property owned or leased by Parent or any
of its subsidiaries, or on any other real property, other than as permitted by,
and in conformity with, applicable Environmental Law. Except as disclosed in
Schedule 4.14(b), Parent and its subsidiaries have not received notification of
any past or present failure by Parent or any of its subsidiaries to comply with
any Environmental Law applicable to them or their operations or their assets.
Without limiting the generality of the foregoing, Parent and its subsidiaries
have not received any notification (including requests for information directed
to Parent or any of its subsidiaries) from any governmental agency asserting
that Parent or any of its subsidiaries, or any owner, lessee or operator of the
Parent Assets or the Parent Real Property, is or may be a "potentially
responsible person" for a remedial action at a waste storage, treatment or
disposal facility, pursuant to the provisions of CERCLA, or any similar federal
or state statute assigning responsibility for the costs of investigating or
remediating releases of contaminants into the environment.
(c) To Parent's knowledge, no employee, contractor or agent of
Parent or any of its subsidiaries has, in the course and scope of employment
with Parent or any of its subsidiaries, been harmed by exposure to hazardous
materials, as defined under the Laws. No liens with respect to environmental
liability have been imposed against Parent or any of its subsidiaries under
CERCLA, any comparable state statute or other applicable Environmental Law, and
to Parent's knowledge, no facts or circumstances exist which would give rise to
the same.
(d) To Parent's knowledge, no employee, officer, director or
shareholder of Parent is under investigation by the Attorney General of any
state, by the District Attorney of any county of any state, or by any United
States Attorney or any other governmental investigative agency for the violation
of any Laws, including, without limitation, the violation of any anti-trust,
racketeering, or unfair competition laws.
31
SECTION 4.15 Corrupt Practices. Parent and its subsidiaries have not
-----------------
made, offered or agreed to offer anything of value to any employees of any
customers of Parent or any of its subsidiaries for the purpose of attracting
business to Parent or any of its subsidiaries or any foreign or domestic
governmental official, political party or candidate for government office or any
of their respective employees or representatives in any manner which would
result in Parent or any of its subsidiaries being in violation of any Law, nor
has Parent or any of its subsidiaries otherwise taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
SECTION 4.16 Disclosure. The representations and warranties of
----------
Parent contained in this Article IV or in any Schedule or other document
delivered by Parent pursuant hereto, do not contain any untrue statement of a
material fact, or omit any statement of a material fact necessary to make the
statements contained not misleading. If, prior to Closing, Parent becomes aware
of any inaccuracy, or misrepresentation or omission in any of the Schedules, it
shall immediately advise the Company in writing of the inaccuracy,
misrepresentation or misrepresentation or omission, subject to the provisions of
Section 6.9, and Parent shall have the right, subject to the provisions of
Section 10.14, to update the Disclosure Binder accordingly.
SECTION 4.17 Litigation. Except as disclosed in the SEC Reports,
----------
there are no claims, suits, actions or proceedings pending or, to the knowledge
of Parent, threatened against, relating to or affecting Parent or any of its
subsidiaries or any of their respective directors or officers, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seek to restrain or enjoin the consummation of the Merger or
which if adversely determined would reasonably be expected, either alone or in
the aggregate with all such claims, actions or proceedings, to materially and
adversely affect the business, operations, properties, assets, condition
(financial or other) or results of operations of Parent and its subsidiaries,
taken as a whole. Except as set forth in the SEC Reports, neither Parent nor any
of its subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or authority or any arbitrator which prohibits or restricts the consummation of
the transactions contemplated hereby or would have any material adverse effect
on the business, operations, properties, assets, condition (financial or other)
or results of operations of Parent and its subsidiaries, taken as a whole.
ARTICLE V
ADDITIONAL AGREEMENTS OF COMPANY
The parties hereto covenant and agree with the other, as applicable,
as follows:
SECTION 5.1 Restrictions on Transfer of Consideration Stock.
----------- -----------------------------------------------
Notwithstanding that the Parent Common Stock delivered to the Holders shall be
registered under the Registration Statement, the following restrictions and
limitations shall be applicable to the Holders' receipt and resale or other
transfer of the Parent Common Stock:
(a) Except as allowed in accordance with Section (b) below, the
Holders shall not, during the period commencing on the Closing
32
Date and ending twenty-four months after the Closing Date, without the prior
written consent of the Parent, (i) offer, sell, contract to sell, sell any
option or contract to purchase, sell any right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any of the Parent
Common Stock or any securities convertible into or exercisable or exchangeable
for Parent Common Stock, or (ii) enter into any swap or other arrangement which
transfers to another person or entity, in whole or in part, any of the economic
consequences of ownership of the Parent Common Stock, whether any such
transaction described in (i) or (ii) above is to be settled by delivery of the
common stock of Parent or other securities, in cash or otherwise.
(b) Beginning on the first day of the thirteenth month following the
Closing Date, each Holder shall have the right to sell shares of Parent Common
Stock in increments of no more than one-twelfth of the shares of Parent Common
Stock received by such Holder at Closing during each calendar month beginning
with the thirteenth calendar month following the Closing Date.
(c) Stop transfer instructions will be imposed with respect to the
Parent Common Stock issued pursuant to this Agreement so as to restrict resale
or other transfer thereof except in accordance with the foregoing provisions of
this Agreement. The following legend will be placed on the certificates
representing shares of Parent Common Stock:
"The shares represented by this certificate may not be transferred or
otherwise disposed of, except pursuant to the terms of the Merger
Agreement and Plan of Reorganization dated March __, 2000."
SECTION 5.2 Access to Records. The Company will give Parent and its
-----------------
representatives, from the date hereof until the Closing Date, full access during
normal business hours upon reasonable notice to all of the properties, books,
contracts, customer lists, documents and records of the Company and the
Subsidiaries, including, without limitation, the books and records, pertaining
to the Real Property and the Assets, and will make available to Parent and its
representatives, experts and advisers all additional financial statements of and
all information with respect to the business, Real Property and the Assets of
the Company and the Subsidiaries that Parent may reasonably request. Parent and
its representatives shall have the right to copy any information or
documentation the Parent is entitled to inspect under this Section 5.2. In the
event that this transaction is not consummated for any reason, all documents and
due diligence materials provided to Parent by Company shall be returned to
Company, and all documents and due diligence materials provided to Company by
Parent shall be returned to Parent.
SECTION 5.3 Conduct of Business by the Company Pending the Merger.
----------- -----------------------------------------------------
Except as otherwise permitted by Schedule 5.3 or otherwise contemplated by this
Agreement, after the date hereof and prior to the Closing Date or earlier
termination of this Agreement, unless Parent shall otherwise agree in writing,
the Company shall, and shall cause its Subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
33
(b) not (i) amend or propose to amend their respective charter or by-
laws, (ii) split, combine or reclassify their outstanding capital stock or (iii)
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise, except for the payment of dividends or distributions to
the Company by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock (provided, however, that nothing herein shall prohibit or restrict the
Company's ability to issue shares upon the exercise of options, warrants or
conversion rights outstanding on the date of this Agreement);
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowing to refinance existing
indebtedness on terms which are reasonably acceptable to Parent, or (B)
assumption of loans of certain leases of equipment in connection with
acquisitions or rollovers of certain leases of equipment in the ordinary course
of business consistent with past practice in amount, (ii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or any
options, warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) notwithstanding
any other provision of this Section 5.3, take or fail to take any action which
action or failure to take action which cause this merger not to qualify as a
reorganization under Section 368(a) of the Code, (iv) make any acquisition of
any assets or businesses other than expenditures for current assets in the
ordinary course of business and expenditures for fixed or capital assets in the
ordinary course of business and other than as set forth in the provisions of
this Section 5.3(d), or (v) sell, pledge, dispose of or encumber any material
assets or businesses other than sales of businesses or assets in the ordinary
course of business;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with customers and others having business relationships
with them;
(f) subject to restrictions imposed by applicable law, confer with one
or more representatives of Parent to report operational matters of materiality
and the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees, except
in the ordinary course of business and consistent with past practice; provided,
however, that the Company and the Subsidiaries shall in no event enter into or
amend any written employment agreement providing for annual base salary in
excess of $35,000 per annum;
(h) not adopt, enter into or amend any pension or retirement plan,
trust or fund, except as required to comply with changes in applicable law and
not adopt, enter into or amend in any
34
material respect any bonus, profit sharing, compensation, stock option, deferred
compensation, health care, employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare of any employees or
retirees generally, other than in the ordinary course of business, except as
required pursuant to an existing contractual arrangement or agreement;
(i) not make, change or revoke any material tax election or make any
material agreement or settlement regarding taxes with any taxing authority; and
(j) not change its accounting principles or practices other than as
required by GAAP.
SECTION 5.4 Continuation of Insurance. The Company shall keep and
-------------------------
shall cause the Subsidiaries to keep in existence all policies of insurance
insuring the Real Property and the Assets and the operation thereof against
liability and property damage, fire and other casualty through the Closing,
consistent with the policies currently in effect.
SECTION 5.5 Standstill Agreement.
--------------------
(a) After the date hereof and prior to the Closing Date or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of its Subsidiaries to, initiate, solicit, negotiate, encourage or provide
confidential information to facilitate, and the Company shall, and shall use its
reasonable efforts to cause any officer, director or employee of the Company, or
any attorney, accountant, investment banker, financial advisor or other agent
retained by it or any of its subsidiaries, not to initiate, solicit, negotiate,
encourage or provide nonpublic or confidential information to facilitate, any
proposal or offer to acquire all or any substantial part of the business or
properties of the Company or any capital stock of the Company, whether by
merger, purchase of assets, tender offer or otherwise, (other than a transaction
permitted pursuant to Section 5.5(d)) whether for cash, securities or any other
consideration or combination thereof (any such transactions being referred to
herein as an "Acquisition Transaction").
(b) Notwithstanding the provisions of paragraph (a) above, (i) the
Company may, in response to an unsolicited written offer or proposal with
respect to a potential or proposed Acquisition Transaction ("Acquisition
Proposal") which the Company's Board of Directors determines, in good faith and
after consultation with its independent financial advisor, could result (if
consummated pursuant to its terms) in an Acquisition Transaction more favorable
to the Company's stockholders than the Merger (any such offer or proposal being
referred to as a "Superior Proposal"), furnish (subject to the execution of a
confidentiality agreement substantially similar to the confidentiality
provisions of this Agreement), confidential or nonpublic information to a
financially capable corporation, partnership, person or other entity or group (a
"Potential Acquirer") and negotiate with such Potential Acquirer if the Board of
Directors of the Company determines in good faith that the failure to provide
such confidential or nonpublic information to or negotiate with such Potential
Acquirer would be reasonably likely to constitute a breach of its fiduciary duty
to the Company's stockholders. It is understood and agreed that negotiations and
other activities conducted in accordance with this paragraph (b) shall not
constitute a violation of paragraph (a) of this Section 5.5.
35
(c) The Company shall promptly (but in any event within two (2)
business days) notify Parent after receipt of any Acquisition Proposal,
indication of interest or request for nonpublic information relating to the
Company or its subsidiaries in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company or any subsidiary by
any person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Parent shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact.
SECTION 5.6 Consents. Company and Parent shall cooperate with each
--------
other and use their best efforts to obtain all approvals, authorizations and
consents required to be obtained to consummate the transaction set forth in this
Agreement, including, without limitation, (i) the consent of the Federal Trade
Commission ("FTC") under the HSR Act; and (ii) the approval of every regulatory
agency of federal, state, or local government that may be required in the
opinion of either Parent or Company.
SECTION 5.7 Audited Financial Statements. Before Closing, Company
----------------------------
agrees to cooperate with Parent to have the Company prepare an audited balance
sheet and statement of income, cash flow and retained earnings for the Company
and the Subsidiaries for the period from and after the date of each Subsidiary's
inception through the end of the most recent calendar quarter ending prior to
the Closing Date (the "Interim Financial Statements"), and to have the Company
prepare audited financial statements for the historical businesses now owned by
the Company as of December 31, 1997, December 31, 1998, and December 31, 1999
("Historical Financial Statements"), as rapidly as possible. Company's
cooperation shall include, without limitation, the execution of standard
representation letters requested by Parent's auditors for periods that the
Subsidiaries have been in operation. The Historical Financial Statements and
the Interim Financial Statements shall be prepared at the Company's expense.
Company shall cause the Company's usual accountants to cooperate with Parent's
accountants.
SECTION 5.8 Lender Approval. After the date of this Agreement,
---------------
Company and Parent shall cooperate with each other to obtain the approval of the
holders of the Company Debt and the holders of the secured debt of the Parent to
the transactions set forth in this Agreement.
SECTION 5.9 Shareholder Vote. This Agreement shall be subject to an
----------------
affirmative vote of the Company's shareholders. The Company shall have the
shareholders meeting as promptly as possible consistent with the Company's
obligations to provide its shareholders notice of the meeting. If Company's
shareholders vote not to approve of this Agreement, Company shall immediately
notify Parent and this Agreement shall be null and void. The Company agrees
that it shall recommend to its shareholders that they approve of the
transactions set forth in this Agreement.
36
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Payment of Expenses. Parent will pay all expenses
-------------------
(including legal fees) incurred by it in connection with the negotiation,
execution and performance of this Agreement. The Company will pay all expenses
incurred by the Company (including legal fees) in connection with the
negotiation, execution and performance of this Agreement that become due and
payable prior to Closing. Expenses of the Company that do not become due and
payable prior to Closing shall become the obligation of the Successor
Corporation after Closing. Parent, in addition to its other expenses, shall pay
the $45,000 initial filing fee required to obtain the consent of the FTC under
the HSR Act. Company, in addition to its other expenses, shall pay any filing
fees beyond the initial filing fee required to obtain the consent of the FTC
under the HSR Act up to $45,000, thereafter, the Company and Parent shall each
pay one half of any additional filing or related fees. In addition, Company
agrees to pay any and all of any processing and assumption fees that may be
assessed in obtaining the consent or approval of lenders to the Company or its
subsidiaries to the transactions contemplated herein to the extent such fees are
due and payable prior to Closing. All costs and expenses incurred in connection
with printing and filing the Proxy Statement/Prospectus shall be shared equally
by Parent and the Company until such costs and expenses total $150,000, and
Parent shall pay all such costs and expenses to the extent they exceed $150,000.
SECTION 6.2 Shareholder Vote. This Agreement shall be subject to an
----------------
affirmative vote of Parent's shareholders. Parent shall have the shareholders
meeting as promptly as possible consistent with Parent's obligations to prepare
and file the Proxy Statement and provide its shareholders notice of the meeting.
If Parent's shareholders vote not to approve of this Agreement, Parent shall
immediately notify Company and this Agreement shall be null and void. Parent
agrees that it shall recommend to its shareholders that they approve of the
transactions set forth in this Agreement.
SECTION 6.3 Registration Statement and Proxy Statement. Parent shall
------------------------------------------
file with the SEC as soon as is reasonably practicable after the date hereof the
Registration Statement and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable.
Parent shall also take any action required to be taken under applicable state
blue sky or securities laws in connection with the issuance of Parent Common
Stock pursuant hereto. Parent and the Company shall promptly furnish to each
other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with the
preceding sentence. The information provided and to be provided by Parent and
the Company, respectively, for use in the Proxy Statement/Prospectus shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
SECTION 6.4 Exchange Listing. Parent shall use its reasonable best
----------------
efforts to effect, at or before the Closing Date, authorization for listing on
the Nasdaq National Market, upon official notice of issuance, of the shares of
Parent Common Stock to be issued pursuant to the Merger or to be reserved for
issuance upon exercise of stock options or warrants.
37
SECTION 6.5 Directors' and Officers' Indemnification.
----------------------------------------
(a) The indemnification provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation as in effect at Closing
shall not be amended, repealed or otherwise modified for a period of six years
from Closing in any manner that would adversely affect the rights thereunder of
individuals who at Closing were directors, officers, employees or agents of the
Company. Parent shall assume, be jointly and severally liable for, and honor,
guaranty and stand surety for, and shall cause the Surviving Corporation to
honor, in accordance with their respective terms each of the covenants contained
in this Section 6.5.
(b) After Closing, each of Parent and the Surviving Corporation shall,
to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee and agent of the
Company or any of its Subsidiaries (each, together with such person's heirs,
executors or administrators, an "Indemnified Person" and collectively, the
"Indemnified Persons") against any costs or expenses (including attorneys fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring or alleged to occur prior to Closing (including, without
limitation, acts or omissions in connection with this Agreement and the
consummation of transactions contemplated hereunder and acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company) or arising out of or pertaining to the transactions contemplated by
this Agreement. In the event of any such actual or threatened claim, action,
suit, proceeding or investigation (whether arising before or after Closing), (i)
the Company or Parent and the Surviving Corporation, as the case may be, shall
pay the reasonable fees and expenses of counsel selected by the Indemnified
Persons, which counsel shall be reasonably satisfactory to the Parent and the
Surviving Corporation, promptly after statements therefor are received and shall
pay all other reasonable expenses in advance of the final disposition of such
action, (ii) the Parent and the Surviving Corporation will cooperate and use all
reasonable efforts to assist in the vigorous defense of any such matter, and
(iii) to the extent any determination is required to be made with respect to
whether an indemnified Party's conduct complies with the standards set forth
under the DGCL and the Parent's or the Surviving Corporation's respective
charters or by-laws such determination shall be made by independent legal
counsel acceptable to the Parent or the Surviving Corporation, as the case may
be, and the Indemnified Person; provided, however, that neither the Parent nor
the Surviving Corporation shall be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld) and
provided further that if Parent or the Surviving Corporation advances or pays
any amount to any person under this paragraph (b) and if it shall thereafter be
finally determined by a court of competent jurisdiction that such person was not
entitled to be indemnified hereunder for all or any portion of such amount, to
the extent required by law, such person shall repay such amount or such portion
thereof, as the case may be, to Parent or the Surviving Corporation, as the case
may be. The Indemnified Persons as a group may not retain more than one law
firm to represent them with respect to each matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Persons.
38
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations of the Surviving Corporation
or the Parent, as the case may be, as set forth in this Section 6.5.
(d) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Person in enforcing the
indemnity and other obligations provided in this Section 6.5.
(e) The rights of each Indemnified Person hereunder shall be in
addition to, and not in limitation of, any other rights such Indemnified Person
may have under the charter or bylaws of the Company, any indemnification
agreement, under the DGCL or otherwise. The provisions of this Section 6.5
shall survive the consummation of the transactions contemplated by this
Agreement and expressly are intended to benefit each of the Indemnified Persons.
SECTION 6.6 Agreement to Cooperate.
----------------------
(a) Subject to the terms and conditions herein provided and subject to
the fiduciary duties of the respective boards of directors of the Company and
Parent, each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all action 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 using its reasonable efforts to obtain all necessary or appropriate
waivers, consents or approvals of third parties required in order to preserve
material contractual relationships of Parent and the Company and their
respective subsidiaries, all necessary or appropriate waivers, consents and
approvals and SEC "no-action" letters to effect all necessary registrations,
filings and submissions and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as expeditiously as
possible).
(b) Without limitation of the foregoing, each of Parent and the
Company undertakes and agrees to file as soon as practicable after the date
hereof, a Notification and Report Form under the HSR Act with the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division").
Each of Parent and the Company shall (i) respond as promptly as practicable to
any inquiries received from the FTC or the Antitrust Division for additional
information or documentation and to all inquiries and requests received from any
State Attorney General or other governmental authority in connection with
antitrust matters and (ii) not extend any waiting period under the HSR Act or
enter into any agreement with the FTC or the Antitrust Division not to
consummate the transactions contemplated by this Agreement, except with the
prior written consent of the other parties hereto. Parent shall take all
reasonable steps necessary to avoid or eliminate impediments under any
antitrust, competition, or trade regulation law that may be asserted by the FTC,
the Antitrust Division, any State Attorney General or any other governmental
entity with respect to the Merger so as to enable the Closing to occur as soon
as reasonably possible. Parent shall not be under any obligation to propose,
negotiate, commit to and effect, by consent decree, hold
39
separate order, or otherwise, the sale, divestiture or disposition of such
assets or businesses of Parent or, effective as of the Closing Date, the
Surviving Corporation whether or not such sale or divestiture is requested by
the FTC, the Antitrust Division, or any State Attorney General in order to avoid
the entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order in any suit or proceeding, which would
otherwise have the effect of preventing or delaying the Closing. Parent or the
Company, as applicable, shall take promptly, in the event that any permanent or
preliminary injunction or other order is entered or becomes reasonably
foreseeable to be entered in any proceeding that would make consummation of the
transactions contemplated hereby in accordance with the terms of this Agreement
unlawful or that would prevent or delay consummation of the transactions
contemplated hereby, any and all steps necessary to vacate, modify or suspend
such injunction or order so as to permit such consummation prior to the
Termination Date. The parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another, in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or in behalf of any party hereto in
connection with proceedings under or relating to the HSR Act or any other
federal, state or foreign antitrust or fair trade law. The parties hereto will
provide to the other copies of all correspondence between it (or its advisors)
and the FTC, the Antitrust Division or any State Attorney General relating to
this Agreement or any of the matters described in this Section 6.6(b). The
parties hereto agree that all material telephonic calls and meetings with the
FTC, the Antitrust Division or any State Attorney General regarding the
transactions contemplated hereby or any of the matters described in this Section
6.6(b) shall include representatives of each of Parent and the Company. Parent
shall coordinate and be the principal spokesperson in connection with any
proceedings or negotiations with any governmental entity relating to any of the
foregoing, provided that it shall afford the Company a reasonable opportunity to
participate therein.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, Parent shall have
the right, at its own expense, to participate therein, and the Company will not
settle any such litigation without the consent of Parent, which consent will not
be unreasonably withheld.
SECTION 6.7 Public Statements. The parties shall consult with each
-----------------
other prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or written public statement prior to such
consultation.
SECTION 6.8 Option Plans. The Company shall take all necessary
------------
actions, including but not limited to obtaining the consent of the option
holders, if necessary, to ensure that, at the Closing Date, all rights with
respect to (i) options granted to employees under the Company's Stock Option
Plan or (ii) except for those ad hoc options to acquire and aggregate of up to
325,000 shares of Company Common Stock at a price per share of $.25 listed in
Schedule 6.8 hereto (the "Assumed Ad Hoc Options") which shall be assumed by
Parent, options granted to current directors, officers or employees of the
Company pursuant to ad hoc stock option grants (collectively, the "Company
Options") which are outstanding on the Closing Date, whether or not such Company
Option has previously vested or become exercisable, shall be canceled. Parent
agrees that any warrant or option granted by the Company which is listed on
Schedule 6.8 hereto, whether or not such Company
40
warrant or option has become exercisable, shall be assumed by Parent in
accordance with Section 1.3(b) of this Agreement.
SECTION 6.9 Notification of Certain Matters. Each of the Company,
-------------------------------
Parent and Xxxx Subsidiary agrees to give prompt notice to each other of, and to
use commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to cause
any of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at the Closing Date and (ii) any material
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.9 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.10 Access to Records. Parent will give Company and its
-----------------
representatives, from the date hereof until the Closing Date, full access during
normal business hours upon reasonable notice to all of the properties, books,
contracts, customer lists, documents and records of Parent and its subsidiaries,
including, without limitation, the books and records, pertaining to its real
property and assets, and will make available to Company and its representatives,
experts and advisers all additional financial statements of and all information
with respect to the business, real property and assets of Parent and its
subsidiaries that Company may reasonably request. Company and its
representatives shall have the right to copy any information or documentation
the Company is entitled to inspect under this Section 6.10. In the event that
this transaction is not consummated for any reason, all documents and due
diligence materials provided to Parent by Company shall be returned to Company,
and all documents and due diligence materials provided to Company by Parent
shall be returned to Parent.
SECTION 6.11 Conduct of Business by Parent Pending the Merger.
------------ ------------------------------------------------
Except as otherwise permitted by Schedule 6.11 or otherwise contemplated by this
Agreement, after the date hereof and prior to the Closing Date or earlier
termination of this Agreement, unless Company shall otherwise agree in writing,
the Parent shall, and shall cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) split, combine or reclassify their outstanding capital
stock or (ii) declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise, except for the payment of dividends or
distributions to the Parent by a wholly-owned subsidiary of the Parent;
(c) not (i) redeem, purchase, acquire or offer to purchase or acquire
any shares of its capital stock or any options, warrants or rights to acquire
any of its capital stock or any security convertible into or exchangeable for
its capital stock, or (ii) issue, sell, pledge or dispose of, or agree to
issue, sell, pledge or dispose of any shares of, or any options, warrants or
rights of any kind to acquire any shares of Parent's Common Stock, at a price
per share (or exercise price in the case of warrants, options, or rights) less
than eighty (80%) of the fair market value of Parent's Common Stock as reported
on the Nasdaq Stock Market at the time the agreement to sell or issue the Common
Stock was made or the option or warrant or other right was granted, or (iii)
notwithstanding any other
41
provision of this Section 6.11, take or fail to take any action which action or
failure to take action which cause this merger not to qualify as a
reorganization under Section 368(a) of the Code;
(d) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with customers and others having business relationships
with them;
(e) subject to restrictions imposed by applicable law, confer with one
or more representatives of Company to report operational matters of materiality
and the general status of ongoing operations;
(f) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees, except
in the ordinary course of business and consistent with past practice; provided,
however, that the Company and the Subsidiaries shall in no event enter into or
amend any written employment agreement providing for annual base salary in
excess of $80,000 per annum;
(g) not change its accounting principles or practices other than as
required by GAAP.
SECTION 6.12 Continuation of Insurance. The Parent shall keep and
-------------------------
shall cause its subsidiaries to keep in existence all policies of insurance
insuring their real property and assets and the operation thereof against
liability and property damage, fire and other casualty through the Closing,
consistent with the policies currently in effect.
ARTICLE VII
CONDITIONS OF PARENT
SECTION 7.1 Conditions of Closing The obligations of Parent to effect
---------------------
the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the time of Closing of each of the following items
which are conditions to the Closing. Parent may not rely on the failure of any
condition set forth in Section 7.1 or 8.1, as the case may be, to be satisfied
if such failure was caused by Parent's failure to use reasonable efforts to
commence or complete the Merger and the other transactions contemplated by this
Agreement. Parent in its sole discretion may waive any of the following
conditions which waiver may be by written notice to Company of Parent's decision
to waive such condition to the Closing; provided, however, that unless otherwise
agreed to in writing, by Closing the Merger, Parent shall be deemed to have
waived any unfulfilled conditions set forth in (c), (e), (f) and (h) below.
(a) The Company shall have performed and complied with all material
obligations and conditions required by this Agreement to be performed or
complied with by Company prior to or at the Closing Date.
42
(b) All representations and warranties of Company contained in this
Agreement shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date, except for
changes expressly permitted by this Agreement, and Parent shall have received a
certificate duly executed by the president of the Company as to the foregoing.
Any failure of a representation and warranty to be true and correct in any
material respect at and as of the Closing Date, without regard to whether or not
such representation or warranty is qualified in any respect by Company's
knowledge in this Agreement, shall be deemed a failure of this condition
precedent.
(c) There shall be no actual or threatened action by or before any
court which seeks to restrain, prohibit or invalidate the transaction
contemplated by this Agreement or which might affect the right of Parent or the
Xxxx Subsidiary to own, operate in its entirety or control any of the Assets,
the Real Property, or the Business or which, as a result of the transaction
contemplated by this Agreement, might affect such right as to Parent or any
affiliate thereof subsequent to the Closing Date and which, in the judgment of
the Board of Directors of Parent, made in good faith and based upon advice of
its counsel, makes it inadvisable to proceed with the transaction contemplated
by this Agreement.
(d) There shall have been no material adverse change in the Assets,
the Real Property, the Business, or the results of operations, financial
condition or business of the Company or any Subsidiary, and the Company and the
Subsidiaries shall have not suffered any material loss or damage or any of their
properties or assets, whether or not covered by insurance, since the date of the
Most Recent Balance Sheet.
(e) All approvals, authorizations and consents required to be
obtained shall have been obtained, including, without limitation, (i) the Parent
Required Approvals; (ii) the consent of the FTC and the Antitrust Division under
the HSR Act; (iii) the approval, if required, of the shareholders of Company and
Parent; and (iv) the approval of every regulatory agency of federal, state, or
local government that may be required in the reasonable opinion of either Parent
or Company. Parent shall have been furnished with appropriate evidence,
reasonably satisfactory to Parent and its counsel, of the granting of such
approvals, authorizations and consents.
(f) The holders of the Company Debt and the holders of any debt owed
by the Parent or its subsidiaries whose consent is required shall have consented
to the transactions set forth in this Agreement, without any change in the terms
of such debt.
(g) Parent shall have obtained the approval of the Parent's
shareholders to consummate the Closing, and the Registration Statement shall be
effective.
(h) Company and Xxxxx Xxxxx shall have entered into the Stock Sale
Restriction Agreement in form and substance as set forth in Schedule 7.1(h)
hereto.
(i) Xxxxx Xxxxx and each of his affiliates shall have granted to
Parent an irrevocable proxy in form and substance as set forth in Schedule
7.1(i) hereto.
43
(j) All Company Options shall have been canceled or exercised, and
there shall be no outstanding warrants or options to purchase Company Common
Stock or Company Preferred Stock except as listed on Schedule 6.8 hereto.
(k) The number of Dissenting Shares at Closing shall constitute less
than twenty percent (20%) of the total of outstanding shares of Company Common
Stock at Closing.
(l) Company and Regency Savings Bank, FSB ("Regency") shall have
entered into a written agreement satisfactory to Parent providing for an
extension of the due dates of all those secured loans made by Regency to Company
or Subsidiaries in the aggregate amount as of the date of this Agreement of
approximately $26,097,813 and currently having due dates between September 2000
and October 2001.
ARTICLE VIII
CONDITIONS OF COMPANY
SECTION 8.1 Conditions of Closing The obligations of the Company to
---------------------
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the time of Closing of each of the following items
which are conditions to the closing. Company may not rely on the failure of any
condition set forth in Section 7.1 or 8.1, as the case may be, to be satisfied
if such failure was caused by Company's failure to use reasonable efforts to
commence or complete the Merger and the other transactions contemplated by this
Agreement. Company in its sole discretion may waive any of the following
conditions which waiver may be by written notice to Parent of Company's decision
to waive such condition to the Closing; provided, however, that unless otherwise
agreed to in writing, by Closing the Merger, Company shall be deemed to have
waived any unfulfilled conditions set forth in (b), (e), (f), (g) (h), (i) and
(j) below.
(a) The Parent and the Xxxx Subsidiary shall have executed the Plan
of Merger.
(b) All approvals, authorizations and consents required to be
obtained by Company shall have been obtained, including, without limitation, (i)
the Company Required Approvals; (ii) the consent of the FTC and the Antitrust
Division under the HSR Act; (iii) the approval, if required, of the shareholders
of Company and Parent; and (iv) the approval of every regulatory agency of
federal, state, or local government that may be required in the reasonable
opinion of either Parent or Company. The Company shall have been furnished with
appropriate evidence, reasonably satisfactory to it and its counsel, of the
granting of such approvals, authorizations and consents.
(c) The Parent shall have performed and complied with all material
obligations and conditions required by this Agreement to be performed or
complied with by Parent prior to or at the Closing Date.
(d) All representations and warranties of Parent contained in this
Agreement shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at
44
and as of the Closing Date, except for changes expressly permitted by this
Agreement, and Company shall have received a certificate duly executed by the
president of the Parent as to the foregoing. Any failure of a representation and
warranty to be true and correct in any material respect at and as of the Closing
Date, without regard to whether or not such representation or warranty is
qualified in any respect by Parent's knowledge in this Agreement, shall be
deemed a failure of this condition precedent.
(e) There shall be no actual or threatened action by or before any
court which seeks to restrain, prohibit or invalidate the transaction
contemplated by this Agreement.
(f) Parent shall have received the resignations of three members of
the Board of Directors of Parent, and Parent's Board of Directors shall have
voted to fill the three vacancies, effective upon completion of the Closing,
with three designees of Company to the Board of Directors of Parent, one of whom
will be Xxxxx Xxxxx and the other two of whom shall qualify as non-management
directors. Any such designees of the Company shall be qualified individuals
with experience in the Business. The Board of Directors of Parent shall have
appointed Xxxxx Xxxxx as Chief Operating Officer and President of Parent,
effective upon completion of the Closing.
(g) The Company shall have obtained the affirmative vote of Parent's
shareholders, and the Registration Statement shall be effective.
(h) Xxxxx X. Xxxxxxx, Xx., and each director and executive officer of
Parent shall have granted to the Company an irrevocable proxy in form and
substance as set forth in Schedule 8.1(h) hereto.
(i) Parent shall have entered into an employment agreement with Xxxxx
Xxxxx in form and substance as set forth in Schedule 8.1(i) hereto.
(j) There shall have been no material adverse change in the assets,
real property, business, or the results of operations, financial condition or
business of the Parent and its subsidiaries taken as a whole.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnification by Company. The Company agrees that it
--------------------------
will indemnify, defend, protect and hold harmless the Parent and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
agents, employees, legal representatives, successors and assigns from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, penalties, costs and expenses whatsoever (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) whether equitable or legal, matured or contingent, known or
unknown to the Company, foreseen or unforeseen, ordinary or extraordinary,
patent or latent, whether arising out of occurrences prior to, at, or after the
date of this Agreement, as a result of or incident to: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the
45
representations and warranties by the Company, set forth in this Agreement or in
the Schedules attached to this Agreement or in the Collateral Documents; (b)
nonfulfillment or nonperformance of any agreement, covenant or condition on the
part of Company made in this Agreement or in the Collateral Documents and to be
performed by Company before or after the Closing Date; and (c) any claim by a
third party that, if true, would mean that a condition for indemnification set
forth in subsections (a), (b), or (c) of this Section 9.1 of this Agreement has
occurred.
SECTION 9.2 Indemnification by Parent. The Parent agrees that it
-------------------------
will indemnify, defend, protect and hold harmless the Company and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, legal representatives, successors and assigns, as
applicable, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses whatsoever
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Parent, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, as a result of or incident to: (a) any
breach of, misrepresentation in, untruth in or inaccuracy in the representations
and warranties of Parent set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Parent
made in this Agreement or in the Collateral Documents and to be performed by
Parent before or after the Closing Date;; and (c) any claim by a third party
that, if true, would mean that a condition for indemnification set forth in
subsections (a), (b), or (c) of this Section 9.2 has occurred.
SECTION 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim
and the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within fifteen business days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party pursuant to the
provisions of Article IX, as applicable, from and against the entirety of any
adverse consequences (which will include, without limitation, all losses,
claims, liens, and reasonable attorneys' fees and related expenses) the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim
46
involves only monetary damages and does not seek an injunction or equitable
relief, (iv) settlement of, or adverse judgment with respect to the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in (but not control) the defense of the Third Party Claim, (ii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (which will not be unreasonably
withheld), and (iii) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which will not be
unreasonably withheld). In the case of (c)(ii) or (c)(iii) above, any such
consent to judgment or settlement shall include, as an unconditional term
thereof, the release of the Indemnifying Party from all liability in connection
therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Party will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Article IX.
SECTION 9.4 Procedure for Non-Third Party Claims. After the Closing
------------------------------------
Date, Xxxxx Xxxxx shall act as the representative of Company and shall have sole
power and authority to act on behalf of the Company and its Shareholders to
settle, pay, prosecute, compromise, defend and negotiate claims for indemnity
under this Article IX. If Parent or Company wishes to make a claim for
indemnity under Section 9.1 or Section 9.2, as applicable, and the claim does
not arise out of a third party notification which makes the provisions of
Section 9.3 applicable, the party desiring indemnification ("Indemnified Party")
shall deliver to the parties from which indemnification is sought ("Indemnifying
Party") a written demand for indemnification ("Indemnification Demand"). The
Indemnification Demand shall state: (a) the amount of losses, damages or
expenses which the Indemnified Party has incurred or has suffered or is expected
to incur or suffer to which the Indemnified Party is entitled to indemnification
pursuant to Section 9.1 or Section 9.2, as applicable; and (b) the nature of the
event or occurrence which entitles the Indemnified Party to receive payment
under Section 9.1 or Section 9.2, as applicable. If the Indemnifying Party
wishes to object to an Indemnification Demand, the Indemnifying Party must send
written notice to the Indemnified Party stating the objections and the grounds
for the objections ("Indemnification Objection"). If no Indemnification
Objection is sent within forty-five (45) days after the Indemnification Demand
is sent, the Indemnifying Party shall be deemed to have acknowledged the
correctness of the claim or
47
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within sixty (60) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty (30)
days of the Indemnification Demand's date, the Indemnified Party may institute
legal proceedings to enforce payment of the indemnification claim contained in
the Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have. Payment of any Indemnification Demand against
Company after the Closing Date shall only be in the form of a reduction in the
amount of Escrowed Stock payable to the Holders, in accordance with Section
1.3(c).
SECTION 9.5 Survival of Claims.
------------------
(a) All of the respective representations, warranties and obligations
of the parties to this Agreement shall survive consummation of the transactions
contemplated by this Agreement until one (1) year from the Closing Date. Upon
the expiration of such one-year period all such representations, warranties and
obligations shall be of no further force or effect and no claim may be made
thereafter or with respect thereto, forever, except with respect to any
obligation which is specifically identified in this Agreement (or the exhibits
and schedules hereto) as having a longer term.
(b) Notwithstanding the provisions of Section 9.5(a) above, which
provide that representations, warranties and obligations expire after a certain
stated period of time, if within the stated period of time, an Indemnification
Demand is given, or a suit or action based upon representation or warranty is
commenced, the Indemnified Party shall not be precluded from pursuing such claim
or action, or from recovering from the Indemnifying Party (whether through the
courts or otherwise) on the claim or action, by reason of the expiration of the
representation or warranty.
SECTION 9.6 Further Limitations on Indemnification. Notwithstanding
--------------------------------------
anything to the contrary contained in this Agreement, no amounts of indemnity
shall be payable, in the case of a claim by Parent under Section 9.1, in an
amount in excess of the fair market value as of the Closing Date of the Parent
Common Stock issued to stockholders of the Company in connection with the
Merger.
SECTION 9.7 Exclusive Remedies. After the Closing, except in respect
------------------
of any fraud or willful misconduct of any party hereto or in respect of the
Termination Fee described in Section 2.3 of this Agreement (which shall be the
exclusive remedy of the party receiving the Termination Fee), the indemnities
set forth in this Article IX shall be the exclusive remedies of the parties
hereto for any misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained in this
Agreement, and the parties shall not be entitled to a rescission of this
Agreement or to any further rights or claims of any nature whatsoever in respect
thereof, all of which the parties hereto hereby waive.
48
ARTICLE X
OTHER PROVISIONS
SECTION 10.1 Nondisclosure by Company. Company recognize and
------------------------
acknowledge that it has in the past, currently has, and in the future will have
certain confidential information of Parent such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Parent. Company agrees that for a period of three (3)
years from the date of this Agreement, and as to any Records received by it
under Section 6.10 of this Agreement, for a period of three (3) years from its
receipt of the Records, it will not disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of the Company, unless
(i) such information becomes known to the public generally through no fault of
Company, or (ii) the Company is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding. In the event of a breach
or threatened breach by Company of the provisions of this Section, Parent shall
be entitled to an injunction restraining Company from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting Parent from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages.
SECTION 10.2 Nondisclosure by Parent. Parent recognize and
-----------------------
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Parent agrees that, for
a period of three (3) years from the date hereof, it will not utilize such
information in the business or operation of Parent, or any of its affiliates or
disclose such confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, unless (i)
such information becomes known to the public generally through no fault of
Parent or any of its affiliates, (ii) Parent is compelled to disclose such
information by a governmental entity or pursuant to a court proceeding, or (iii)
Closing takes place. In the event of a breach or threatened breach by Parent of
the provisions of this Section, the Company shall be entitled to an injunction
restraining Parent from utilizing or disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Company from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages.
SECTION 10.3 Assignment; Binding Effect; Amendment. This Agreement
-------------------------------------
and the rights of the parties hereunder may not be assigned (except by operation
of law by the merger of Parent or Company) and shall be binding upon and shall
inure to the benefit of the parties hereto. This Agreement, upon execution and
delivery, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by all parties hereto.
SECTION 10.4 Entire Agreement. This Agreement, is the final,
----------------
complete and exclusive statement and expression of the agreement among the
parties hereto with relation to the subject
49
matter of this Agreement, it being understood that there are no oral
representations, understandings or agreements covering the same subject matter
as the Agreement. The Agreement supersedes, and cannot be varied, contradicted
or supplemented by evidence of any prior to contemporaneous discussions, or
prior correspondence, or oral or written agreements of any kind. The parties to
this Agreement have relied on their own advisors for all legal, accounting, tax
or other advice whatsoever with respect to the Agreement and the transactions
contemplated hereby.
SECTION 10.5 Counterparts. This Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the same
instrument.
SECTION 10.6 Notices. All notices or other communications required
-------
or permitted hereunder shall be in writing and may be given by depositing the
same in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested, by overnight
courier or by delivering the same in person to such party.
(a) If to Parent or Xxxx Subsidiary, addressed to them at:
President
0000 Xxxxxxxx Xxxxx
Xx. Xxxxxx, XX 00000
(b) If to Company, addressed to them at:
Wash Depot Holdings, Inc.
______________________
Saugus, Massachusetts
Notice shall be deemed given and effective the day personally delivered, one
business day after being sent by overnight courier and three business days after
the deposit in the U.S. mail of a writing addressed as above and sent first
class mail, certified, return receipt requested, or when actually received, if
earlier. Any party may change the address for notice by notifying the other
parties of such change in accordance with this Section 10.6.
SECTION 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
SECTION 10.8 No Waiver. No delay of, or omission in, the exercise of
---------
any right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or in any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach of default occurring before or after that waiver.
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SECTION 10.9 Captions. The headings of this Agreement are inserted
--------
for convenience only, shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
SECTION 10.10 Severability. In case any provision of this Agreement
------------
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
SECTION 10.11 Construction. The parties have participated jointly in
------------
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
SECTION 10.12 Extension or Waiver of Performance. Either the Company
-----------------------------------
or Parent may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the party granting or
approving such extension or waiver.
SECTION 10.13 Liabilities of Third Parties. Nothing in this
----------------------------
Agreement, whether expressed or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties to it and their respective successors, heirs, legal representative and
assigns, nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement, nor
shall any provisions give any third person any rights of subrogation or action
over or against any party to this Agreement.
SECTION 10.14 Disclosure on Schedules. The parties to this Agreement
-----------------------
shall have the obligation to supplement or amend the Schedules being delivered
concurrently with the execution of this Agreement and attached hereto or
incorporated herein with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules. The obligations of the
parties to amend or supplement the Schedules shall terminate on the consummation
of the transaction contemplated by this Agreement at the Closing, or on the date
of termination of this Agreement. Notwithstanding any such amendment or
supplementation, the conditions to Closing set forth in Section 7.1 and 8.1, as
the case may be, shall not be satisfied if the amendment or supplementation of
any Schedule by Company or Parent results in any of Company's or Parent's
representations and warranties changing in a manner which the Parent or Company
in good faith believes is materially adverse to the (i) with respect to the
Parent, the Parent's business, real property or assets, or (ii) with respect to
the Company, the Company's business, real property or assets.
51
SECTION 10.15 Agreement Not Binding Until Fully Executed. This
------------------------------------------
Agreement shall not be binding on any party hereto until the Agreement has been
fully executed.
SECTION 10.16 Publicity. Prior to Closing, except as may be required
---------
by law, no party to this Agreement shall issue any press release or otherwise
make any statement with respect to the transactions contemplated by this
Agreement without the prior consent of the other party, which shall not be
unreasonably withheld.
SECTION 10.17 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in Philadelphia, Pennsylvania, in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, and judgment upon the award rendered in such
arbitration shall be final and binding upon the parties and may be confirmed in
any court having jurisdiction thereof. Notwithstanding the foregoing, this
Agreement to arbitrate shall not bar any party from seeking temporary or
provisional remedies in any Court having jurisdiction if such party can
establish irreparable harm. Notice of the demand for arbitration shall be filed
in writing with the other party to this Agreement, which such demand shall set
forth in the same degree of particularity as required for complaints under the
Federal Rules of Civil Procedure the claims to be submitted to arbitration.
Additionally, the demand for arbitration shall be stated with reasonable
particularity with respect to such demand with documents attached as
appropriate. In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statutes
of limitations.
(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards that would aid
and assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Parent and the Company in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective
52
party in any and all proceedings under this Section or in any other proceeding
(collectively, "Proceedings"). The Parent and the Company, respectively, waive
the right and agree they shall not seek to disqualify any such counsel in any
such Proceedings for any reason, including but not limited to the fact that such
counsel or any member thereof may be a witness in any such Proceedings or
possess or have learned of information of a confidential or financial nature of
the party whose interests are adverse to the party represented by such counsel
in any such Proceedings.
[Remainder of Page Intentionally Blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
PARENT:
Xxxx Security International, Inc.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and Secretary
COMPANY:
Wash Depot Holdings, Inc.
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title: President and CEO
Xxxx Holdings, Inc.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and Secretary
JOINDER BY ESCROW AGENT
-----------------------
The Escrow Agent named and identified as such in the foregoing
Agreement, intending to be legally bound hereby, has joined in the execution
thereof solely for the purposes agreeing to perform its obligations as Escrow
Agent as provided for in Section 1.3 thereof.
Xxxxxx X. Xxxxxx & Associates, P.C.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------
54
