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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
XXXXXXX INCORPORATED,
FMC ACQUISITION CORPORATION
and
FARGO MFG. COMPANY, INC.
Dated as of November 13, 1996
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TABLE OF CONTENTS
Page
1. The Merger............................................................. 1
1.1 The Merger..................................................... 1
1.2 Effect of the Merger........................................... 2
1.3 Closing; Effective Time of the Merger.......................... 2
1.4 Certificate of Incorporation; By-Laws; Directors and Officers.. 2
2. Determination of Closing Net Worth Amount.............................. 3
2.1 Preparation of Initial Balance Sheet........................... 3
2.2 Preparation of Closing Balance Sheet........................... 3
2.3 Definition of Net Worth Amount................................. 5
3. Status and Conversion of Equity Securities............................. 5
3.1 Conversion of Equity Securities................................ 5
3.2 Exchange of Certificates....................................... 8
3.3 Company Action................................................. 10
3.4 Parent Action.................................................. 11
3.5 Taking of Necessary Action; Further Action..................... 11
4. Representations and Warranties of the Company.......................... 11
4.1 Corporate Organization and Good Standing....................... 11
4.2 Authorization.................................................. 11
4.3 No Violation; Conflicts........................................ 12
4.4 Capitalization of the Company.................................. 13
4.5 Subsidiaries of the Company.................................... 13
4.6 Financial Statements........................................... 13
4.7 Absence of Undisclosed Liabilities............................. 14
4.8 Information Supplied........................................... 14
4.9 Subsequent Events.............................................. 15
4.10 Tangible Personal Property..................................... 17
4.11 Title to Real Property; Encumbrances........................... 18
4.12 Real Property Leases........................................... 19
4.13 Contracts and Commitments...................................... 19
4.14 Environmental Matters.......................................... 21
4.15 Employee Benefit Plans......................................... 24
4.16 Labor Controversies............................................ 26
4.17 Litigation..................................................... 27
4.18 Taxes.......................................................... 27
4.19 Intangible Property............................................ 29
4.20 Licenses, Permits, Authorizations, Etc......................... 30
4.21 Insurance...................................................... 30
4.22 Books and Records.............................................. 31
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Page
4.23 Accounts Receivable and Accounts Payable........................ 31
4.24 Condition of Assets............................................. 31
4.25 Inventory; Return Policy........................................ 31
4.26 Transactions with Affiliates.................................... 31
4.27 Brokers and Finders............................................. 32
4.28 Board Recommendation............................................ 32
4.29 Required Company Vote........................................... 32
5. Representations and Warranties of Parent and the Purchaser.............. 32
5.1 Corporate Organization and Good Standing........................ 32
5.2 Authorization; Binding Agreement................................ 33
5.3 Governmental Approvals.......................................... 33
5.4 Form S-4; Proxy Statement; Other Filings........................ 33
5.5 Parent Common Stock............................................. 33
5.6 Financial Statements and SEC Reports............................ 33
5.7 Capitalization of Parent........................................ 34
5.8 Brokers and Finders............................................. 34
5.9 Ownership of the Purchaser; No Prior Activities.................... 34
6. Covenants............................................................... 34
6.1 Conduct of Business of the Company.............................. 34
6.2 No Solicitation................................................. 37
6.3 Certain Fees and Expenses....................................... 37
6.4 Access to Information........................................... 38
6.5 Reasonable Efforts.............................................. 39
6.6 Supplemental Information........................................ 39
6.7 Proxy Statement; Form S-4; Other Filings........................ 39
6.8 Meeting of Shareholders......................................... 40
6.9 No Inconsistent Activities...................................... 40
6.10 Tax-Free Reorganization Treatment............................... 41
6.11 Securityholder Claims........................................... 41
6.12 Escrow Agreement................................................ 41
6.13 Affiliates...................................................... 41
6.14 Directors' and Officers' Indemnification and Insurance............ 41
6.15 Tax-Free Merger Covenants...................................... 42
6.16 Shareholder Expenses............................................ 42
6.17 Key Management Bonus Pool....................................... 42
6.18 ERISA Matters................................................... 42
6.19 Environmental Matters........................................... 42
7. Indemnification......................................................... 43
7.1 Survival of Representations and Warranties...................... 43
7.2 Indemnification by the Shareholders............................. 43
7.3 Procedures for and Limitations on Indemnification............... 43
7.4 Exclusive Remedy................................................ 44
8. Additional Agreements................................................... 44
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Page
8.1 Expenses................................................................. 44
9. Conditions to the Merger................................................. 45
9.1 Conditions to Each Party's Obligation to Effect the Merger....... 45
9.2 Conditions to the Obligation of Parent and the Purchaser to
Effect the Merger................................................ 45
9.3 Conditions to the Obligation of the Company to Effect the Merger. 47
10. Termination, Amendment and Waiver........................................ 48
10.1 Termination...................................................... 48
10.2 Effect of Termination............................................ 50
10.3 Amendment........................................................ 50
10.4 Waiver........................................................... 50
11. General Provisions....................................................... 50
11.1 Public Statements................................................ 50
11.2 Notices.......................................................... 51
11.3 Interpretation................................................... 51
11.4 Miscellaneous.................................................... 52
11.5 Governing Law.................................................... 52
11.6 Counterparts..................................................... 52
11.7 Validity......................................................... 52
11.8 Construction..................................................... 52
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Exhibits
Exhibit A Escrow Agreement
Exhibit B Form of Affiliate Letter
Exhibit C Affidavit of Loss and Indemnity
Exhibit 6.15(a) Parent and Purchaser Representation Letter
Exhibit 6.15(b) Company Representation Letter
Exhibit 9.3(d) Shareholder Representation Letter
Schedules
Schedule 4.3 No Violations; Conflicts
Schedule 4.5 Subsidiaries of the Company
Schedule 4.6 Financial Statements
Schedule 4.6(A) Conceptual Adjustments to Interim Financial
Statements
Schedule 4.9 Subsequent Events
Schedule 4.13 Contracts and Commitments
Schedule 4.14 Environmental Matters
Schedule 4.14(A) Environmental Permits, Etc.
Schedule 4.15 Employee Benefit Plans
Schedule 4.15(A) ERISA Matters
Schedule 4.16 Labor Controversies
Schedule 4.17 Litigation
Schedule 4.18 Taxes
Schedule 4.19 Intangible Property
Schedule 4.20 Licenses, Permits, Authorizations, Etc.
Schedule 4.21 Insurance
Schedule 4.25(b) Return Policy
Schedule 4.25(c) Inventory Policy
Schedule 4.26 Transactions with Affiliates
Schedule 6.1 Conduct of Business of the Company
Schedule 9.3(d) Certain Shareholders
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 13, 1996, among XXXXXXX INCORPORATED, a Connecticut corporation
("Parent"), FMC Acquisition Corporation, a New York corporation and a wholly
owned subsidiary of Parent (the "Purchaser"), and FARGO MFG. COMPANY, INC., a
New York corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, the
Purchaser and the Company have each unanimously approved this Agreement and the
acquisition of the Company by Parent pursuant to the terms of this Agreement;
WHEREAS, in furtherance of the terms of such acquisition, it
is proposed that the Purchaser be merged with and into the Company (the
"Merger") in accordance with the Business Corporation Law of the State of New
York (the "New York BCL") and the provisions of this Agreement, pursuant to
which Merger (a) each outstanding share (subject to certain exclusions) of the
Company's Common Stock, no par value ("Company Common Stock"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 3.1(a) hereof), and (b) the Company will become a wholly owned
subsidiary of Parent;
WHEREAS, the Board of Directors of the Company has resolved to
recommend the approval and adoption of this Agreement by the holders of the
Company's Common Stock (the "Shareholders") and determined that this Agreement
and the Merger, as contemplated hereby, are in the best interests of the Company
and the Shareholders and fair to the Shareholders;
WHEREAS, the Board of Directors of Parent has authorized the
transfer by Parent of shares of Class B Common Stock (as defined in Section
3.1(a) hereof) contemplated hereby; and
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a tax-free reorganization under the provisions of
Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, Parent, the Purchaser and the Company hereby
agree as follows:
1. The Merger.
1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.3 hereof), in
accordance with the New York BCL, the Purchaser shall be merged with and into
the Company in the Merger, the
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separate corporate existence of the Purchaser shall cease, and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation") under the corporate name it possesses immediately prior to the
Effective Time. At the election of Parent, any direct wholly owned subsidiary of
Parent may be substituted for the Purchaser as a constituent corporation in the
Merger for purposes of this Section 1.1, provided that any such substituted
subsidiary shall also be a New York corporation, and, provided further, that no
such substitution shall be effective until such subsidiary becomes a party to
this Agreement by executing and delivering to the Company a counterpart hereof,
in which case such entity shall be deemed to be the Purchaser for all purposes
hereunder.
1.2 Effect of the Merger. The Merger shall have the effects
provided by the New York BCL, including, but not limited to, Article 9 of the
New York BCL.
1.3 Closing; Effective Time of the Merger. (a) Unless this
Agreement shall have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to the provisions of Section 10.1 hereof, and
subject to the provisions of Section 9 hereof, the closing (the "Closing") of
the Merger shall take place at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the second business day following
the satisfaction or waiver, if applicable, of the conditions to the Merger set
forth in Section 9 hereof (or as soon as practicable thereafter following
satisfaction or waiver of the conditions to the Merger set forth in Section 9
hereof), or at such other place, time and date as the parties may mutually
agree. The date and time of such Closing are herein referred to as the "Closing
Date."
(b) Immediately following the Closing and on the Closing Date,
the parties hereto will cause the Merger to be consummated by filing with the
Department of State of the State of New York a certificate of merger in such
form as required by, and executed in accordance with, the relevant provisions of
the New York BCL (the time of such filing being the "Effective Time").
(c) Notwithstanding any approval of this Agreement by the
Shareholders, no agreement among the parties hereto to change the place, time or
date of the Closing shall require the approval of the shareholders of the
Company, Parent or the Purchaser.
1.4 Certificate of Incorporation; By-Laws; Directors and
Officers. At the Effective Time, the certificate of incorporation of the
Purchaser shall be the certificate of incorporation of the Surviving
Corporation, until thereafter amended as provided therein and under the New York
BCL. At the Effective Time, the by-laws of the Purchaser shall be the by-laws of
the Surviving Corporation, until thereafter amended as provided therein and
under the New York BCL. The directors of the Purchaser immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, and
the officers of the Purchaser immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, in each case to serve
thereafter until their successors are elected and qualified.
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2. Determination of Closing Net Worth Amount.
2.1 Preparation of Initial Balance Sheet. At least three (3)
business days prior to the date of the Shareholders Meeting (as defined below),
the Company shall cause to be prepared and delivered to Parent an unaudited
balance sheet of the Company (the "Initial Balance Sheet"), certified by the
Company's Chief Financial Officer, and a calculation of the Net Worth Amount (as
defined in Section 2.3) as of the last day of the completed calendar month which
immediately precedes the Shareholders Meeting, which meeting shall not be held
later than ten (10) business days following the end of a calendar month, (the
"Estimated Net Worth Amount") derived from the Initial Balance Sheet. The
Initial Balance Sheet shall reflect a liability for Shareholder Expenses (as
defined below), shall include an accrual for the maximum amount of any and all
fees and expenses payable, whether at Closing or at any time prior or subsequent
thereto, to Xxxxxx X. Xxxx Associates, Inc. ("RMHA"), shall be prepared in
accordance with the books and records of the Company and shall comply with
generally accepted accounting principles ("GAAP") applied on a consistent basis.
During the preparation of the Initial Balance Sheet, the Company shall provide
Parent and Parent's authorized representatives during normal business hours with
reasonable access to the books, records, facilities and employees of the
Company, and cooperate fully with Parent and Parent's authorized
representatives. "Shareholder Expenses" shall mean the documented out-of-pocket
fees and expenses of the Company (whether or not incurred prior to the date
hereof) payable by the Company to outside legal counsel, to RMHA and to any
outside accountants or actuaries, in each case arising out of, relating to or
incidental to the discussion, evaluation, negotiation, documentation and closing
or potential closing of the Merger and all transactions contemplated by this
Agreement.
2.2 Preparation of Closing Balance Sheet. Within 120 days
after the Effective Time, Parent shall cause to be prepared and delivered to the
Shareholder Representative (as defined in Section 7.3) an unaudited preliminary
closing balance sheet of the Company as of the close of business on the Closing
Date (the "Preliminary Closing Balance Sheet"), which Preliminary Closing
Balance Sheet shall be non-binding upon the parties and shall be for
illustrative purposes only. Within fourteen (14) months after the Effective
Time, Parent shall cause to be prepared and delivered to the Shareholder
Representative an unaudited balance sheet of the Company as of the close of
business on the Closing Date (the "Closing Balance Sheet") and a calculation of
the Net Worth Amount as of such date (the "Closing Net Worth Amount") derived
from the Closing Balance Sheet. The Closing Balance Sheet shall be prepared in
accordance with the books and records of the Company and shall comply with GAAP
applied on a consistent basis. If the Closing Net Worth Amount set forth in the
Closing Balance Sheet differs from the Estimated Net Worth Amount by $20,000 or
less, then the following provisions of this Section 2.2 (other than Section
2.2(v)) shall not apply and Parent and the Shareholder Representative (on behalf
of the Shareholders) shall mutually agree upon the Final Closing Net Worth
Amount, which determination shall be final and binding on the parties hereto,
absent fraud or manifest error; provided, however, if Parent and the Shareholder
Representative are unable to mutually agree upon the Final Closing Net Worth
Amount, the Final Closing Net Worth Amount shall be the average of the Closing
Net Worth Amount set forth in the Closing Balance Sheet and the Estimated Net
Worth Amount.
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(i) The Shareholder Representative, on behalf of the
Shareholders, shall have a period of thirty (30) days after delivery of the
Closing Balance Sheet to present in writing to Parent any objections the
Shareholder Representative may have to any of the matters set forth therein
which relate to the calculation of the Closing Net Worth Amount, which
objections shall be set forth in reasonable detail. If no objections are raised
within such 30-day period, the Closing Balance Sheet and the calculation of the
Closing Net Worth Amount shall be final and binding on the parties hereto,
absent fraud or manifest error. During such 30-day period, Parent shall cause
the Shareholder Representative and his authorized representatives to be provided
during normal business hours with reasonable access to the facilities,
employees, books and records of the Surviving Corporation which are relevant to
the Closing Balance Sheet, and Parent shall cooperate fully with the Shareholder
Representative and his representatives.
(ii) If the Shareholder Representative shall raise any
objections within the aforesaid 30-day period, the Shareholder Representative
and Parent, together with their respective independent certified public
accountants, shall attempt promptly to resolve the matter or matters in dispute
and, if resolved, such accounting firms shall send a joint notice to the
Shareholder Representative and Parent stating the manner in which the dispute
was resolved, and a confirmation of the original Closing Net Worth Amount or a
revised Closing Net Worth Amount (the "Final Closing Net Worth Amount") based
upon such resolution, whereupon the Final Closing Net Worth Amount shall be
final and binding on the parties hereto, absent fraud or manifest error.
(iii) If such dispute cannot be resolved by the Shareholder
Representative and Parent nor by the aforesaid accounting firms within sixty
(60) days after the delivery of the Closing Balance Sheet, then the specific
matters in dispute shall be submitted to a firm of independent certified public
accountants mutually acceptable to the Shareholder Representative and Parent
(the "Final Arbiter"), which firm shall make a final and binding determination
as to such matter or matters within forty-five (45) days of its appointment. The
Final Arbiter shall send its written determination to the Shareholder
Representative and Parent, together with a confirmation of the Final Closing Net
Worth Amount based upon such determination, whereupon the Final Closing Net
Worth Amount shall be binding on the parties thereto, absent fraud or manifest
error.
(iv) The parties hereto agree to cooperate with each other
and each other's authorized representatives and with the Final Arbiter in order
that any and all matters in dispute shall be resolved as soon as practicable and
that determination of the Final Closing Net Worth Amount shall be made.
(v) After the Effective Time, any adjustment that must be
made to the Merger Consideration as a result of (A) the Estimated Net Worth
Amount being greater than the Final Closing Net Worth Amount shall be made out
of shares of Class B Common Stock on deposit in the Escrow Account (as defined
in Section 3.1(e)), subject to the procedures thereof and (B) the Estimated Net
Worth Amount being less than the Final Closing Net Worth Amount, shall be made
by the deposit of an amount in cash equal to the difference between such amounts
by Parent or the Purchaser with the Exchange Agent (as defined in
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Section 3.2) not more than three business days after the final determination
that the adjustment set forth in this Section 2.2(v)(B) is required, such cash
to be paid to the Shareholders pursuant to the procedures set forth in Section
3.2; provided, that the amount of cash required to be deposited with the
Exchange Agent by Parent or the Purchaser pursuant to this Section 2.2(v)(B)
shall be reduced by the excess of (i) the sum of the amount of cash required to
be paid by Parent or the Purchaser to Dissenting Shares (as defined in Section
3.1(a)) and pursuant to Sections 2.2(v)(B) and 3.1(f) of this Agreement (without
giving effect to this proviso) over (ii) ten percent (10%) of the aggregate
consideration to be paid by Parent or the Purchaser to the Shareholders pursuant
to this Agreement; provided, further, that in no event shall the amount of cash
to be deposited pursuant to this Section 2.2(v)(B) be reduced below zero by the
preceding proviso.
2.3 Definition of Net Worth Amount. The term "Net Worth
Amount" shall mean the amount of the Company's total assets less total
liabilities as determined in accordance with GAAP consistently applied.
3. Status and Conversion of Equity Securities.
3.1 Conversion of Equity Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, the
Purchaser, the Company or the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be
canceled pursuant to Section 3.1(b) hereof and shares held by any
Shareholder who shall have taken the necessary steps under the New York
BCL to seek appraisal of, and demand payment for, such shares and is
otherwise entitled to such payment under the New York BCL, if the New
York BCL provides for such payment in connection with the Merger
("Dissenting Shares")), shall be converted into the right to receive
(i) that number of shares or fraction thereof of Class B Common Stock,
par value $0.01 per share, of Parent ("Class B Common Stock")
determined by dividing (x) the quotient obtained by dividing (A) $45
million plus the amount, if any, by which the Estimated Net Worth
Amount exceeds $9,834,900 (the "Net Worth Target") (or less the amount,
if any, by which the Net Worth Target exceeds the Estimated Net Worth
Amount) (subject to adjustment, if any, after the Closing as set forth
in Section 2.2(v)(A)) by (B) an amount equal to the average closing
price per share of Class B Common Stock (the "Average Price") as
reported on the New York Stock Exchange Composite Tape for a
consecutive fifteen-day trading period ending three business days prior
to the Shareholders Meeting (the "Pricing Period") by (y) the total
number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (excluding all shares of
Company Common Stock held in the Company's treasury) plus (ii)(x) the
amount of cash, if any, required to be deposited by Parent or the
Purchaser with the Exchange Agent pursuant to Section 2.2(v)(B) divided
by (y) the total number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (excluding all
shares of Company Common Stock held in the Company's treasury)
(collectively, the "Merger Consideration").
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Notwithstanding the foregoing, if the Average Price is (i) less than
$34, then the Average Price shall be deemed to be $34 for the purpose
of the above calculation and the Company shall have the right, subject
to the following proviso, to terminate this Agreement pursuant to
Section 10.1(j), provided, however, that if the Average Price is less
than $34, and Parent so elects in its sole discretion and by delivering
written notice to the Company at least one business day prior to the
Closing Date, the Average Price for the purpose of the above
calculation shall be the actual Average Price as so determined without
regard to the preceding provisions of this sentence and the Company
shall not have the foregoing right to terminate this Agreement pursuant
to Section 10.1(j), or (ii) greater than $43, then the Average Price
shall be the actual Average Price so determined and the Company shall
have the right, subject to the following proviso, to terminate this
Agreement pursuant to Section 10.1(j); provided, however, that if the
Average Price is greater than $43, and Parent so elects in its sole
discretion and by delivering written notice to the Company at least one
business day prior to the Closing Date, the Average Price for the
purpose of the above calculation shall be deemed to be $43 and the
Company shall not have the foregoing right to terminate this Agreement
pursuant to Section 10.1(j). Any fraction of a share of Class B Common
Stock, in any case, determined pursuant to this section shall be
limited to the fourth decimal place with such fourth decimal place
being rounded up if the fifth decimal place is a 5 or greater.
(b) Except as otherwise provided herein, each share of Company
Common Stock which is issued and outstanding immediately prior to the
Effective Time and owned by Parent or any direct or indirect subsidiary
of Parent, or by the Company or any of its subsidiaries, shall be
canceled and retired and no payment shall be made with respect thereto.
(c) Each share of common stock, par value $.01 per share, of
the Purchaser issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, no par value, of the Surviving
Corporation.
(d) All notes and other debt instruments of the Purchaser and
the Company which are outstanding at the Effective Time shall continue
to be outstanding subsequent to the Effective Time as debt instruments
of the Surviving Corporation, subject to their respective terms and
provisions.
(e) Subject to the provisions of Section 3.1(f), at Closing,
Parent shall deposit 10% of the number of whole shares of Class B
Common Stock to be issued pursuant to the Merger to each holder of
Company Common Stock (after rounding down to the nearest share in the
case of fractional shares) (the "Escrow Shares") into an escrow account
(the "Escrow Account") maintained with a mutually agreed upon
independent escrow agent (the "Escrow Agent"). Such Escrow Shares will
be held for, and dividends distributed on such Escrow Shares will be
paid to the Escrow Agent for distribution to, the Shareholders as
specified in the escrow agreement (the "Escrow Agreement") to be
executed by the Company and Parent pursuant to Section 6 hereof
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in substantially the form attached hereto as Exhibit A. Parent and the
Shareholders agree that the Escrow Account shall be used solely at the
option of Parent to (i) reimburse Parent to the extent that the
Estimated Net Worth Amount used in determining the Merger Consideration
exceeds the Final Closing Net Worth Amount and (ii) satisfy any
indemnification obligations to the Parent set forth in Section 7. Any
Escrow Shares remaining in the Escrow Account after the earlier of (i)
eighteen (18) months from the Closing Date or (ii) at the completion of
the first full audit cycle for the year commencing on January 1, 1997
during which the Company has been consolidated with Parent and its
Subsidiaries, shall be distributed to the Shareholders based on the
Shareholders' relative holdings of Company Common Stock initially
deposited in the Escrow Account, provided that a number of Escrow
Shares equal in value, as determined in accordance with Section 3.1(a)
hereof, to satisfy any unpaid judgments and settlements and any
outstanding or unsatisfied claims against the Escrow Account shall be
retained in the Escrow Account as more fully set forth therein until
such judgments, settlements and claims have been satisfied and
discharged, and any unused amount remaining after such satisfaction and
discharge shall be promptly paid to the Shareholders. All Escrow Shares
distributed from the Escrow Account shall be deemed to be distributed
pro rata by the Shareholders in accordance with each Shareholder's
percentage interest in the Escrow Account, which interests will be set
forth on Schedule A to the Escrow Agreement, as executed, attached
hereto.
(f) No fractional shares of Class B Common Stock will be
issued in the Merger. Shareholders will not be entitled to receive
fractional shares of Class B Common Stock, but will instead be entitled
to receive a cash payment in lieu of any fraction of a share of Class B
Common Stock, such cash payment to be equal to the fraction of a share
of Class B Common Stock, if any, so determined pursuant to Section
3.1(a) multiplied by the Average Price.
(g) If Parent shall, at any time after the determination
provided for in Section 3.1(a) and before the Effective Time, (i) issue
a dividend in shares of Class B Common Stock, (ii) combine the
outstanding Class B Common Stock into a smaller number of shares, (iii)
subdivide the outstanding Class B Common Stock or (iv) reclassify the
Class B Common Stock, then, in such event, the number of shares of
Class B Common Stock to be delivered to Shareholders who are entitled
to receive Class B Common Stock in exchange for Company Common Stock
shall be adjusted so that each Shareholder shall be entitled to receive
such number of shares of Class B Common Stock as such Shareholder would
have been entitled to receive upon the happening of such event if the
Effective Time had occurred prior to the happening of such event (or,
if applicable, the record date in respect thereof), and appropriate and
proportionate adjustment shall be made to the calculations and number
of shares of Class B Common Stock to be issued as set forth in Section
3.1(a) hereof. Parent shall advise the Company if it determines to
effect any such action prior to the Effective Time. As of the date
hereof, no such action is contemplated.
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Notwithstanding the foregoing provisions or any other provision of this
Agreement to the contrary, Dissenting Shares shall not be converted into the
right to receive the appropriate Merger Consideration at or after the Effective
Time unless and until the holder of such Dissenting Shares withdraws his or her
demand for such appraisal with the consent of the Company, if required, or
becomes ineligible for such appraisal. If a holder of Dissenting Shares shall
withdraw his or her demand for such appraisal with the consent of the Company,
if required, or shall become ineligible for such appraisal (through failure to
perfect or otherwise), then, as of the later of the Effective Time or the
occurrence of such event, such holder's Dissenting Shares shall be automatically
converted into and represent the right to receive the appropriate Merger
Consideration as provided above. The Company shall give Parent (i) prompt notice
of any demands for appraisal, withdrawals of demands for appraisal and any other
instrument served pursuant to Section 623 of the New York BCL received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Section 623 of the New York BCL. 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 demands. Each holder of Dissenting Shares shall have
only such rights and remedies as are granted to such holder under Sections 623
and 910 of the New York BCL. Dissenting Shares shall not, after the Effective
Time, be entitled to vote for any purpose or be entitled to the payment of
dividends or other distributions (except dividends or other distributions
payable to Shareholders of record prior to the Effective Time).
3.2 Exchange of Certificates. (a) As soon as practicable after
the Effective Time, ChaseMellon Shareholder Services, L.P. or any other bank or
trust company to be designated by Parent and reasonably acceptable to the
Company (the "Exchange Agent") shall be authorized, pursuant to an agreement
satisfactory to Parent and the Company, to act as exchange agent in effecting
the exchange for the applicable Merger Consideration of certificates (the
"Certificates") that, prior to the Effective Time, represented shares of Company
Common Stock entitled to conversion into Class B Common Stock pursuant to
Section 3.1 hereof. Upon the surrender of each such Certificate formerly
representing shares of Company Common Stock, the Exchange Agent shall, as
promptly as practicable, distribute to the holder of such Certificate the
applicable Merger Consideration multiplied by the number of shares of Company
Common Stock formerly represented by such Certificate (including cash due in
lieu of fractional shares that but for Section 3.1(f) above would have been
issued and the cash, if any, required to be deposited with the Exchange Agent by
Parent or the Purchaser pursuant to Section 2.2(v)(B), which cash shall be paid
to the Shareholders by the Exchange Agent as soon as practicable after receipt
from Parent or the Purchaser), less such Shareholder's pro rata contribution to
the Escrow Account as determined in accordance with the provisions of Section
3.1(e) above, in exchange therefor and, in accordance with any applicable
instructions from the holder thereof (subject to satisfaction of the conditions
described below with respect to delivery of Merger Consideration to a person
other than the person in whose name the Certificate is registered), and such
Certificate shall forthwith be canceled. Until so surrendered and exchanged,
each such Certificate (other than Certificates representing Dissenting Shares or
shares held by Parent or any direct or indirect subsidiary of Parent, or by the
Company or any of its subsidiaries) shall represent solely the right to receive
the applicable Merger Consideration. No interest shall be paid or accrue on the
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Merger Consideration or on dividends or other payments paid by Parent thereon
and no dividends or other payment payable after the Effective Time with respect
to the Class B Common Stock shall be paid to the holder of any unsurrendered
Certificate formerly representing Company Common Stock until the holder thereof
surrenders such Certificate as set forth in (c) below. If the Merger
Consideration (or any portion thereof) is to be delivered to any person other
than the person in whose name the Certificate representing shares of Company
Common Stock surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the payment of the Merger Consideration to a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Company Common Stock for any
Merger Consideration delivered to a public official to the extent required by
applicable abandoned property, escheat and similar laws. The Exchange Agent
shall be authorized to distribute Merger Consideration (including cash due upon
sale of fractional shares thereof as provided in Section 3.1(f) above and cash
deposited with the Exchange Agent by Parent pursuant to Section 2.2(v)(B)) for
any Certificate which has been lost, stolen or destroyed upon receipt of
satisfactory evidence of the ownership of the Company Common Stock formerly
represented thereby and after receipt of appropriate indemnification. Without
limiting the foregoing, the agreement with the Exchange Agent shall specifically
provide that the execution and delivery by a Shareholder of record to the
Exchange Agent of an "Affidavit of Loss and Indemnity" in substantially the form
of Exhibit C hereto, along with an insurance policy providing coverage
reasonably satisfactory to Parent for any loss, damage or expense that Parent,
the Surviving Corporation, the Exchange Agent or their respective successors or
assigns may sustain arising from the issuance of the Merger Consideration in
respect of such lost, stolen or destroyed certificates, shall constitute
satisfactory evidence and appropriate indemnification for such purpose.
(b) At or before the Effective Time, Parent shall irrevocably
instruct the registrar and transfer agent for the Class B Common Stock to
countersign and deliver to the Exchange Agent such shares of Class B Common
Stock as and when required to deliver the Merger Consideration (less such shares
of Class B Common Stock as shall constitute Escrow Shares pursuant to Section
3.1(e) above). Parent will, at all times from and after the Effective Time,
reserve from shares held in treasury a sufficient number of shares of Class B
Common Stock to provide for all transfers pursuant to this Agreement.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to Class B Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Class B Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any holder pursuant
to Section 3.1(f) until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, upon surrender of any
such Certificate, there shall be paid to the holder of whole shares of Class B
Common Stock, without interest, (i) at the time of such surrender, the amount of
any cash payable with
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respect to a fractional share of Class B Common Stock to which such holder is
entitled pursuant to Section 3.1(f) and the amount of all dividends and
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Class B Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Class B
Common Stock.
(d) All shares of Class B Common Stock (and cash due in lieu
of fractional shares as provided in Section 3.1(f)) issued upon conversion of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock (including any dividends in arrears).
(e) Promptly after the Effective Time, but no later than three
(3) business days thereafter, the Exchange Agent shall send to record holders of
Certificates a transmittal form (the "Transmittal Form") reasonably satisfactory
to the Company containing instructions with respect to the surrender of
Certificates to be exchanged for Merger Consideration.
(f) Promptly following the date which is one year after the
Effective Time, the Exchange Agent shall deliver to Parent all cash,
certificates representing shares of Class B Common Stock and other documents in
its possession relating to the transactions described in this Agreement, and the
Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a share of Company Common Stock may surrender
such Certificate to Parent and (subject to applicable abandoned property,
escheat and similar laws) receive in exchange therefor the applicable Merger
Consideration and any other amounts payable in accordance with (c) above,
without any interest thereon, and such Certificate shall forthwith be canceled.
(g) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any shares of Company
Common Stock.
3.3 Company Action. (a) The Company represents that its Board
of Directors has duly approved the Merger, has resolved to recommend the
approval and adoption of this Agreement and the transactions contemplated herein
by the Shareholders and determined that this Agreement and the transactions
contemplated hereby are in the best interests of the Company and the
Shareholders and fair to the Shareholders.
(b) The Company will promptly furnish Parent or the Purchaser
with mailing labels containing the names and addresses of the Shareholders of
record as of a recent date, and shall furnish Parent or the Purchaser with such
additional information, including updated lists of security holders, mailing
labels and lists of securities positions, and other assistance as Parent or the
Purchaser may reasonably request for the purpose of communicating the terms of
the Merger to the Shareholders. Subject to the requirements of law, and except
for such steps as are necessary to disseminate the Prospectus/Proxy Statement
(as defined in Section 4.8 hereof), each of Parent and the Purchaser shall hold
in confidence
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the information contained in any of such labels and the additional information
referred to in the preceding sentence, will use such information only in
connection with the Merger and, if this Agreement is terminated, will, upon
request, promptly deliver to the Company all such written information and any
copies or extracts thereof then in its possession or under its control.
3.4 Parent Action. The Board of Directors of Parent has
approved this Agreement and authorized the transfer of shares of Class B Common
Stock contemplated hereby.
3.5 Taking of Necessary Action; Further Action. Parent, the
Purchaser and the Company, respectively, shall each use all reasonable efforts
to take all such action as may be necessary or appropriate in order to
effectuate the Merger under the New York BCL as promptly as possible. If, at any
time after the Effective Time, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of either of the constituent corporations, the
officers of such corporation are fully authorized in the name of their
corporation or otherwise to take, and shall take, all such lawful and necessary
action.
4. Representations and Warranties of the Company.
The Company hereby represents and warrants to Parent and the
Purchaser that:
4.1 Corporate Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York, with all requisite corporate power and authority to
own, operate and lease the properties now owned or leased by it and to carry on
its business as it is now being conducted. The Company and each Subsidiary (as
hereinafter defined) is duly qualified or licensed as a foreign corporation and
is in good standing in each jurisdiction in which the failure to be so qualified
would reasonably be likely to have a Material Adverse Effect (as hereinafter
defined). The Company has delivered to Parent true and correct copies of its
restated certificate of incorporation and by-laws as in effect on the date
hereof. "Material Adverse Effect" shall mean any materially adverse change in or
effect on the business, operations, properties, assets, liabilities, condition
(financial or otherwise), results of operations or prospects of the Company and
its Subsidiaries taken as a whole.
4.2 Authorization. (a) The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Company, and the consummation by the Company of the transactions
contemplated hereby, have been duly authorized and approved by the requisite
vote of the Company's Board of Directors and no other corporate action or
proceeding on the part of the Company is necessary for the execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby, except for obtaining the requisite approval of
the Shareholders. This Agreement has been duly and validly executed and
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delivered by the Company and constitutes a valid and legally binding agreement
of the Company and is enforceable against the Company in accordance with its
terms.
(b) Except with respect to expiration of the waiting period
mandated by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act") and the filing
of a certificate of merger pursuant to the New York BCL, no authorization,
order, consent, or approval of, or filing or registration with, any third party
or domestic or foreign governmental or regulatory authority is necessary for or
in connection with the execution and delivery by the Company of this Agreement
or the consummation by the Company of the transactions contemplated by this
Agreement, except such as have been previously obtained and except such third
party consents as to which the failure to obtain would not reasonably be likely
to have a Material Adverse Effect.
4.3 No Violation; Conflicts. (a) Except as set forth on
Schedule 4.3, the Company and each Subsidiary has complied with, and is not in
default in any respect under, any laws, rules, regulations, orders or decrees
applicable to its businesses or properties where failure to so comply or any
such default would reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect. Except as set forth on Schedule
4.3, neither the Company nor any Subsidiary has received notice of any violation
of any applicable federal, state, local or foreign law, rule, regulation, order
or decree relating to its property or the operation of its business which
violation would reasonably be expected, either individually or in the aggregate,
to have a Material Adverse Effect, and the Company is not aware of any
threatened claim of such a violation (including any investigations regarding the
businesses or properties of the Company or any Subsidiary).
(b) The execution and delivery of this Agreement by the
Company does not, and the consummation by the Company of the transactions
contemplated hereby in compliance with the provisions hereof will not (i)
conflict with any provision of the restated certificate of incorporation or
by-laws of the Company or the respective charter document or by-laws of any
Subsidiary; (ii) violate any foreign, United States federal or state law, rule
or regulation, or any judgment, decree or order of any court or other
governmental agency or instrumentality, to which the Company or any Subsidiary
is subject; or (iii) conflict with, or result in a breach or violation of, or
accelerate the performance required by, the terms of any agreement, indenture or
other instrument to which the Company or any Subsidiary is a party or to which
any of their property is subject, or constitute a default or loss of any right
thereunder or an event which, with the lapse of time or action by a third party,
would result in a default or loss of any right thereunder or the creation of any
pledge, claim, lien, charge, encumbrance or security interest of any kind or
nature whatsoever (collectively, "Liens") upon any of the assets or properties
of the Company or any Subsidiary, excluding for purposes of clause (iii) any
conflicts, breaches, violations or defaults which would not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect. Neither the Company nor any Subsidiary is a party to, or subject to or
bound by, any judgment, injunction or decree of any court or governmental
authority which may restrict or interfere with the performance of this
Agreement.
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4.4 Capitalization of the Company. As of the date hereof, the
duly authorized capital stock of the Company consists solely of 360,000 shares
of Company Common Stock. 257,810 shares of Company Common Stock are issued at a
stated value of $1.25 per share, 235,692 shares of which are outstanding with
22,118 shares held as treasury stock at cost. All of the outstanding shares of
the Company Common Stock are duly authorized, validly issued, fully paid and
non-assessable. There are no outstanding subscriptions, warrants, options,
contracts, calls, puts or other rights or agreements of any kind with regard to
any shares of Company Common Stock or any other capital security of the Company
of any kind (i) obligating the Company or any of the Subsidiaries to issue, sell
or transfer any shares of capital stock of the Company, any securities
convertible into or exchangeable for shares of capital stock of the Company, or
any other rights to acquire capital stock of the Company; (ii) obligating the
Company to grant, offer or enter into any of the foregoing; or (iii) relating to
the voting or control of any shares of capital stock of the Company.
4.5 Subsidiaries of the Company. Schedule 4.5 hereto lists the
names of each of the Company's Subsidiaries, and indicates their respective
jurisdictions of incorporation and authorized and outstanding capitalization.
All such Subsidiaries, except for Fargo International Sales Corp. ("FISC"), are
presently inactive. All references in this Agreement to the "Subsidiary" or
"Subsidiaries", "each Subsidiary" or similar references refer only to FISC
(except for references to such terms in Sections 4.5, 4.6 and 4.18, which
references refer to all of the Company's Subsidiaries set forth on Schedule
4.5). FISC is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. All of the issued and
outstanding shares of capital stock of each of the Subsidiaries is duly
authorized, validly issued, fully paid and non-assessable and is owned by the
Company (or by Fargo Mfg. Company (Canada) Ltd. in the case of Fargo Mfg.
Company (Quebec) Ltd.) free and clear of all Liens; and there are no voting
trusts, voting agreements or similar understandings applicable to such shares.
There are no outstanding subscriptions, options, rights, warrants, puts, calls,
registration or other agreements or commitments of any type (i) obligating the
Company or any of the Subsidiaries to issue, sell or transfer any shares of
capital stock of any Subsidiary, any securities convertible into or exchangeable
for shares of capital stock of any Subsidiary, or any other rights to acquire
capital stock of any Subsidiary; (ii) obligating the Company to grant, offer or
enter into any of the foregoing; or (iii) relating to the voting or control of
any shares of capital stock of any Subsidiary. A certified copy of each
Subsidiary's document of incorporation and by-laws, including all amendments
thereto have been (or will be) delivered by the Company to Parent. Other than
the Subsidiaries and except as set forth in Schedule 4.5 hereto, the Company
does not, directly or indirectly, own any equity interest in any business,
corporation, partnership, joint venture or other business association or entity.
4.6 Financial Statements. Attached hereto as Schedule 4.6 are
the consolidated balance sheets and related consolidated statements of income,
stockholders' equity and cash flows of the Company and the Subsidiaries for the
years ended December 31, 1995, 1994 and 1993 (the "Financial Statements") as
audited by D'Arcangelo & Co., LLP. The Financial Statements, together with any
notes thereto, were prepared in accordance with GAAP consistently applied
through the periods involved, and present fairly the consolidated
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financial position and results of operations as of the respective dates and for
the respective periods indicated of the Company and its Subsidiaries. Also
attached to Schedule 4.6 are copies of the unaudited consolidated statement of
financial condition of the Company and its Subsidiaries as of and for the
nine-month period ended September 30, 1996, prepared internally by the Company
(the "Interim Financial Statements"). The Interim Financial Statements have been
prepared in accordance with the Company's standard accounting practices with
respect to interim financial statements (after giving effect to adjustments to
the Interim Financial Statements set forth on Schedule 4.6(A) hereto). The
Interim Financial Statements, together with any notes thereto, were prepared in
accordance with GAAP and on a basis consistent with the Financial Statements and
present fairly the consolidated financial position of the Company and its
Subsidiaries as of the dates indicated and their consolidated results of
operations for the periods indicated (except for the absence of notes thereto
and changes due to normal year-end audit adjustments).
4.7 Absence of Undisclosed Liabilities. Neither the Company
nor any Subsidiary has any liabilities, whether currently due, accrued,
contingent or otherwise (collectively, "Liabilities") of a nature required under
GAAP to be reflected or reserved against on its financial statements or
otherwise reflected or reserved against in the notes or schedules thereto, other
than the following:
(a) Liabilities fully and adequately reflected or reserved
against in the Financial Statements or Interim Financial Statements or
otherwise specifically disclosed in the disclosure schedules furnished
by the Company to Parent simultaneously with the execution and delivery
of this Agreement (the "Schedules"); or
(b) Liabilities incurred in the ordinary course since
September 30, 1996.
4.8 Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion in the prospectus/proxy statement
(including any amendments or supplements thereto, the "Prospectus/Proxy
Statement") to be included in the registration statement on Form S-4 to be filed
with the Securities and Exchange Commission ("SEC") by Parent in connection with
the issuance of Class B Common Stock pursuant to the Merger (including any
amendments or supplements thereto, the "Form S-4") will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, at the date the proxy
statement of the Company included in the Prospectus/Proxy Statement is first
mailed to the Company's Shareholders or at the time of the Shareholders Meeting
(as defined below), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Prospectus/Proxy Statement will comply as to form in
all material respects with the requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), and applicable state law, except that no representation is made
by the Company with respect to statements made therein based on information
supplied by Parent or the Purchaser for inclusion in the Prospectus/Proxy
Statement. For purposes of this Agreement, the parties agree that
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statements made and information in the Form S-4 and the Prospectus/Proxy
Statement (other than information provided by Parent, any Subsidiary of Parent
or any agent of Parent or any such Subsidiary thereof in each case concerning
Parent or such Subsidiary, expressly for inclusion therein) relating to the
federal income tax consequences of the transactions herein contemplated to
Shareholders shall be deemed to be supplied by the Company and not by Parent or
the Purchaser.
4.9 Subsequent Events. Except as described on Schedule 4.9
hereto, since December 31, 1995:
(a) there has been no Material Adverse Effect;
(b) the Company has not declared, set aside or paid any
dividend on, or made any distribution of property or cash in respect
of, any shares of Company Common Stock;
(c) neither the Company nor any Subsidiary has sold, or
directly or indirectly redeemed, purchased or otherwise acquired, any
shares of Company Common Stock;
(d) excluding Shareholder Expenses and other expenses or
liabilities relating to the transactions contemplated by this
Agreement, and expenses incurred by the Company in connection with its
exploration of a possible sale of the Company, neither the Company nor
any Subsidiary has incurred any obligation or liability (fixed or
contingent), except normal trade or business obligations incurred in
the ordinary course of business, which has had a Material Adverse
Effect;
(e) neither the Company nor any Subsidiary has discharged or
satisfied any Lien or paid any obligation or liability (fixed or
contingent), other than in the ordinary course of business;
(f) neither the Company nor any Subsidiary has mortgaged,
pledged or otherwise contractually subjected to a Lien any of its
assets or properties (whether tangible or intangible);
(g) other than in the ordinary course of business, neither the
Company nor any Subsidiary has sold, assigned, transferred, leased or
otherwise disposed of, or agreed to sell, assign, transfer, lease or
otherwise dispose of, any of its assets, or acquired or leased (other
than by a renewal of an existing lease) any assets or made any capital
expenditures or committed to make any capital expenditures which
individually, or in the aggregate with respect to a series of related
capital expenditures, exceeded $20,000;
(h) neither the Company nor any Subsidiary has cancelled or
compromised any debt or claim, other than in the ordinary course of
business;
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(i) neither the Company nor any Subsidiary has waived or
released any claims or rights of material value or, except in the
ordinary course of business, modified any agreement;
(j) neither the Company nor any Subsidiary has made, agreed to
make, or announced any general change in wages, compensation or
employee benefits or any change in the wages, compensation or employee
benefits of any employee whose total annual compensation is in excess
of $50,000, entered into any employment contract with any officer or
employee involving an annual rate of compensation in excess of $50,000
or which is not terminable without liability by it on thirty days'
notice or less, or made any loan to, or entered into any transaction of
any other nature with, any officer, director or Shareholder of the
Company or any Subsidiary;
(k) neither the Company nor any Subsidiary has made any change
in, or materially increased the persons covered by, any bonus,
incentive compensation, deferred compensation, profit-sharing, stock
option, stock purchase, stock award, severance pay, retirement,
pension, group insurance, disability, death benefit or other employee
benefit plans, trust agreements or arrangements;
(l) neither the Company nor any Subsidiary has conducted its
business or entered into any transaction, contract or commitment,
except this Agreement and the transactions contemplated hereby (and
contracts and commitments incidental thereto), other than in the
ordinary course of business, consistent with past management practices
(including, without limitation, management of inventory, collection of
accounts receivable, payment of accounts payable and timing of receipts
and disbursements of cash);
(m) neither the Company nor any Subsidiary has suffered any
casualty loss or damage (whether or not such loss or damage shall have
been covered by insurance) which affects the ability of the Company or
any Subsidiary to conduct its business;
(n) neither the Company nor any Subsidiary has terminated,
discontinued, closed or disposed of any plant, facility or business
operation;
(o) neither the Company nor any Subsidiary has introduced any
material change with respect to the operation of its business,
including its method or practice of accounting (other than adjustments
to the Interim Financial Statements set forth on Schedule 4.6(A)
hereto);
(p) neither the Company nor any Subsidiary has increased the
carrying value of any of its assets (whether tangible or intangible);
(q) neither the Company nor any Subsidiary has suffered any
extraordinary loss (as that term is defined in APB Opinion No. 30);
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(r) neither the Company nor any Subsidiary has issued, sold or
otherwise disposed of any shares of Company Common Stock or any
evidences of indebtedness or other securities of the Company or any
Subsidiary;
(s) neither the Company nor any Subsidiary has granted or made
any options, warrants, calls, rights, commitments or any other
agreements of any character obligating it to issue any shares of
Company Common Stock or evidences of indebtedness or other securities
of the Company or any Subsidiary;
(t) neither the Company nor any Subsidiary has had any
customer or customers terminate its or their relationship with it or
suffered any deterioration in its relationship with any customer or
customers the effect of which individually, or in the aggregate, has
had, or may reasonably be expected to have, a Material Adverse Effect;
(u) neither the Company nor any Subsidiary has made any loans
or advances to any person, firm or corporation including, without
limitation, to any of its officers, directors or Shareholders or any
affiliate thereof, other than loans or advances by the Company to its
Subsidiaries, loans and advances made from time to time by the Company
to its employees (excluding any officer, director or Shareholder of the
Company) which loans and advances, in the aggregate, are immaterial in
amount, and trade credit extended by the Company in the ordinary course
of business;
(v) neither the Company nor any Subsidiary has otherwise taken
any action, which action if taken after the date hereof, would require
consent under Section 6; and
(w) except as otherwise disclosed on the Schedules, neither
the Company nor any Subsidiary has entered into any agreement to do any
of the foregoing.
4.10 Tangible Personal Property. (a) The Company and each
Subsidiary have good and marketable title to their respective tangible personal
properties, including, without limitation, the tangible personal properties
reflected in the Financial Statements (except properties since sold or otherwise
disposed of in the ordinary course of business) free and clear of all Liens,
except (i) as shown on the Financial Statements, (ii) Liens for current taxes
and assessments not yet delinquent or being contested in good faith by
appropriate proceedings, and (iii) such minor imperfections of title and Liens,
if any, which individually or in the aggregate do not have, or would not
reasonably be expected to have, a Material Adverse Effect.
(b) All leases pursuant to which the Company or any Subsidiary
leases as lessor or lessee any material tangible personal property are in good
standing and are valid and binding in accordance with their respective terms,
and there is not under any of such leases any existing default, event of default
or event which with notice or lapse of time or both would constitute a default,
on the part of the Company or any Subsidiary, or, to the best of the knowledge
of the Company, on the part of any other party to such leases. None of the
rights of the Company or any Subsidiary under any of such leases is subject to
termination or modification as the result of the transactions contemplated by
this Agreement.
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4.11 Title to Real Property; Encumbrances. (a) The Company and
each Subsidiary have good and marketable title to their respective real
properties including, without limitation, the properties reflected in the
Financial Statements, free and clear of all Liens except (i) as shown on such
Financial Statements, (ii) Liens for current taxes and assessments not yet
delinquent or being contested in good faith by appropriate proceedings, (iii)
such imperfections of title and Liens, if any, which individually or in the
aggregate do not materially detract from the value of or materially interfere
with the present use of the real properties subject thereto or affected thereby
or otherwise materially impair business operations conducted by the Company or
any Subsidiary and (iv) matters set forth in the title insurance policies or
title commitments which have previously been delivered to Parent.
(b) There is no condemnation proceeding or eminent domain
proceeding of any kind pending or, to the best knowledge of the Company,
threatened, against any such real properties.
(c) None of the Company or any Subsidiary leases any such real
properties to others.
(d) All such real properties are occupied under a valid and
current occupancy permit or the like, and the transactions contemplated by this
Agreement will not require the issuance of any new or amended certificate of
occupancy; to the Company's knowledge, there are no facts which would prevent
any such real properties from being occupied after the Closing in substantially
the same manner as before.
(e) All such real properties are, and all improvements thereon
were, constructed in material compliance with all applicable federal, state or
local statutes, laws, ordinances, regulations, rules, codes, orders or
requirements (including, but not limited to, any building, zoning or
environmental laws or codes) affecting such premises. The removal of any
hazardous material, including any asbestos or trichloroethylene, from such real
properties was done in compliance with all applicable federal, state and local
laws and ordinances, and any certificates of compliance required for such
removal have been obtained.
(f) Such real properties and the present use and condition
thereof do not materially violate any applicable deed restrictions or other
covenants, restrictions, agreements, existing site plan approvals, zoning or
subdivision regulations or urban redevelopment plans applicable to such real
properties as modified by any duly issued variances, and no permits, licenses or
certificates pertaining to the ownership or operation of such real properties,
other than those which are transferable with such real properties, are required
by any governmental agency having jurisdiction over such real properties or
their operation.
(g) All improvements on such real properties are wholly within
the lot limits of the real properties and do not encroach on any adjoining
premises; and there are no encroachments on any such real properties by any
improvements located on any adjoining premises.
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(h) There have been no improvements made to or construction on
such real properties within the period provided by law for the filing of
mechanics' liens.
(i) All buildings and improvements located on such real
properties are in good structural condition and no conditions exist which would
make such real property unsafe or hazardous.
4.12 Real Property Leases. None of the Company or any
Subsidiary leases as lessee any real property.
4.13 Contracts and Commitments. Schedule 4.13 is a complete
and correct list setting forth the following information:
(i) all real property owned of record or beneficially
by the Company or any Subsidiary and all Leases of personal property
(excluding immaterial Leases) to which the Company or any Subsidiary is
a party, with a brief description of the property to which each such
lease relates and the rental terms (including rents, termination dates,
renewal conditions and options to purchase or terminate);
(ii) all policies of insurance in force (with a notation
as to the status of premiums paid or payable thereon) insuring the
properties, buildings, machinery, equipment, fixtures or other assets
of the Company and any Subsidiary, including, without limitation,
product liability insurance;
(iii) (a) all contracts, understandings or binding
commitments, whether oral or written (including, without limitation,
mortgages, leases, indentures and loan agreements) to which the Company
or any Subsidiary is a party, or to which the Company or any Subsidiary
or any assets or properties of the Company or any Subsidiary is
subject, except (x) such contracts, understandings and binding
commitments which are listed on other Schedules required by this
Agreement, (y) contracts, understandings and binding commitments
entered into in the ordinary course of business and which involve, or
which may reasonably be expected to involve, the payment by or to any
one or more of the Company and the Subsidiaries of less than $25,000
with respect to any one contract or commitment or $50,000 with respect
to any related group of contracts or commitments and none of which
involves a commitment in excess of one year and (z) contracts,
understandings or commitments in the nature of purchase and sales
orders entered into by the Company or any Subsidiary in the ordinary
course of business and containing normal terms and conditions
(including those arising out of "alliance" relationships being
cultivated with certain of the Company's customers), and (b) any
contracts, understandings or binding commitments, whether oral or
written, not in the ordinary course of business to which the Company or
any Subsidiary is a party;
(iv) all contracts containing any covenant restricting
the freedom of the Company or any Subsidiary to compete in any line of
business or with any person or to conduct business in any part of the
world;
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(v) all collective bargaining agreements, employment,
consulting and termination agreements, executive compensation plans,
bonus plans or other incentive compensation plans, deferred
compensation agreements, severance pay arrangements, pension plans,
employee retirement plans (whether funded or unfunded), employee stock
purchase, stock ownership, stock option or profit sharing plans, any
other "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended,
("ERISA")), group life insurance or hospitalization insurance and all
trust agreements or other agreements relating to any of the above,
whether any of the above are written or oral;
(vi) the names and current annual compensation rates of
all employees of the Company or any Subsidiary whose current annual
rate of compensation (including bonuses) is $50,000 or more;
(vii) the names of all retired officers and employees of
the Company or any Subsidiary who are receiving or are entitled to
receive any pension or other benefits under any unfunded plan not
qualified under Section 401 of the Internal Revenue Code of 1954, as
amended, their ages and their current annual unfunded pension rates;
(viii) the name of each bank or other financial
institution from which loans, lines of credit or other credit
commitments to the Company or any Subsidiary are outstanding, the
amount of each such line or commitment and the names of all persons
authorized to borrow or to discount debt obligations or otherwise act
on behalf of the Company or any Subsidiary in any dealings with such
bank or financial institution;
(ix) the name of each bank or other financial
institution in which the Company or any Subsidiary has an account or
safe deposit box, the numbers of such accounts or boxes and the names
of all persons authorized to draw thereon or have access thereto;
(x) the names of the ten largest suppliers to, and then
ten largest customers of, the Company and its Subsidiaries as a whole
for the twelve-month period ended December 31, 1995 together with the
appropriate dollar volume by supplier and customer and a general
description of the goods or services provided by each supplier;
(xi) all arrangements respecting loans to, or guarantees
of loans to, employees of the Company or any Subsidiary made by the
Company or any Subsidiary;
(xii) a summary of claims by line of insurance coverage
for the Company and the Subsidiaries for the years 1992 through the
date of this Agreement and a list of all open insurance contracts under
which audit, retrospective or experience adjustments can be made;
(xiii) all outstanding commitments by the Company or any
Subsidiary to make a capital expenditure, capital addition or capital
improvement involving an
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amount in excess of $20,000, together with a description of any
proposal by the Company or any Subsidiary to make or commit to make
any capital expenditure, capital addition or capital improvement
subsequent to the date hereof involving an amount in excess of $20,000;
(xiv) all United States and foreign patents, trademarks,
trade names, service marks, service names, copyrights, logos and brand
names and all pending registrations and applications for any of the
foregoing currently owned or used by, or licensed to, the Company or
any Subsidiary;
(xv) all contracts, agreements or other arrangements
under which the Company or any Subsidiary has granted, or is obligated
to grant, rights to others to use, reproduce, market or exploit any
Intangible Property (as hereinafter defined);
(xvi) any organization described in Section 501(c)(3) of
the Code that normally receives more than one-third of its support in
any taxable year from gifts, grants, or contributions from the Company
and the Subsidiaries and/or their officers and employees; and
(xvii) Any other material contract or binding commitment
not entered into in the ordinary course of business.
True and complete copies of all documents referred to in such
list (the "Contracts") were delivered or made available to Parent and its
counsel, together with all amendments thereto. All of the Contracts set forth on
Schedule 4.13 are valid and binding in accordance with their terms and in full
force and effect, and no breach or default by the Company or any Subsidiary, or
event which, with notice or lapse of time or both, could constitute a breach or
default by the Company or any Subsidiary, exists with respect thereto, and no
party thereto has given notice or asserted to the Company or any Subsidiary that
the Company or any Subsidiary is in default thereunder. To the best of the
Company's knowledge, no party to any Contract has any current intention to (a)
terminate such Contract (prior to its expiration date) or amend the terms
thereof, (b) decrease significantly the volume or nature of the business
conducted with the Company and its Subsidiaries under such Contract, (c) refuse
to renew such Contract upon expiration thereof, or (d) renew such Contract upon
expiration thereof on terms and conditions which are less favorable for the
Company or its Subsidiaries than those pertaining to such Contract.
4.14 Environmental Matters. (a) Except as set forth on
Schedule 4.14:
(i) the Company is in material compliance with all
applicable Environmental Laws, and within the period of all applicable
statutes of limitation has been in such material compliance; and there
are no circumstances that are reasonably likely to prevent or interfere
with such compliance in the future;
(ii) the Company holds all Environmental Permits
necessary to conduct its operations as they are currently conducted;
Schedule 4.14(A) contains a true and
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complete list of all such Environmental Permits and, where applicable,
their expiration dates; the Company has no reason to believe that any
such Environmental Permits (A)will not be renewed, or (B) will be
renewed under terms that are reasonably likely to have a Material
Adverse Effect;
(iii) there are no Materials of Environmental Concern
present at, and no Materials of Environmental Concern are or have been
in any way released or threatened to be released from, any property
currently or formerly owned, leased or otherwise operated by the
Company, or as a result of present or former operations of the Company,
in a manner that is reasonably likely to be in material violation of or
otherwise to give rise to a material liability of the Company under any
Environmental Law;
(iv) no reports of any kind have been made to or
required by any Governmental Authority pursuant to any Environmental
Law concerning spills or any other releases of any kind at, or in any
way from, any property currently or formerly owned, leased or otherwise
operated by the Company, or as a result of present or former operations
of the Company, for which spills, releases, or reports thereof the
Company may have material liability under any Environmental Law; true
and complete copies of all written reports concerning such spills and
other releases have been provided or made available to Parent;
(v) none of the following are or have been on, under,
in or at any property currently or formerly owned, leased or otherwise
operated by the Company: (A) underground or aboveground storage tanks
containing any Materials of Environmental Concern, (B) polychlorinated
biphenyls, (C) asbestos or asbestos-containing materials, (D) septic
tanks, septic fields, dry-xxxxx, or similar structures, (E) lagoons,
impoundments, or other bodies of water to which Materials of
Environmental Concern may have been discharged, (F) landfills, dumping
areas, or similar locations where Materials of Environmental Concern
may have been placed;
(vi) the Company has not received any Environmental
Claim, and, to the Company's knowledge, no Environmental Claim against
the Company has been threatened;
(vii) the Company has not entered into, agreed to, nor is
the Company otherwise subject to, any judgment, decree, order or
similar requirement under any Environmental Law, nor is the Company
negotiating any such judgment, decree, order or requirement;
(viii) the Company has not assumed or retained,
contractually or, to the Company's knowledge, by operation of law, any
liabilities or obligations, contingent or otherwise, in connection with
any Environmental Law;
(ix) there are no past or present actions, activities,
events, conditions or circumstances, including, without limitation, the
release, threatened release, emission,
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discharge, generation, treatment, storage or disposal of Materials of
Environmental Concern, that could reasonably be expected to give rise
to any material liability or obligation of the Company under any
Environmental Laws; and
(x) for purposes of this Agreement, the following terms
shall have the following meanings:
"Environmental Claim" means any written notice by any
governmental agency alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based
on or resulting from (a) the presence, or release into the environment,
of any Material of Environmental Concern at any location, whether or
not owned, leased or otherwise operated by the Company or any of its
Subsidiaries or (b) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law.
"Environmental Laws" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other
legally enforceable requirement (including, without limitation, common
law) of any foreign government, the United States, or any state, local,
municipal or other governmental authority, regulating, relating to or
imposing liability or standards of conduct concerning protection of the
environment or of human health, or employee health and safety.
"Environmental Permit" means any permit, license,
registration, notification, exemption and any other authorization
required under any Environmental Law.
"Governmental Authority" means any federal, state, provincial
or local governmental authority, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.
"Materials of Environmental Concern" means any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation,
asbestos, pollutants, contaminants, radioactivity, and any other
substances or forces of any kind, whether or not any such substance or
force is defined as hazardous or toxic under any Environmental Law,
that is regulated pursuant to or could give rise to liability under any
Environmental Law.
(b) The Company has made available to Parent all reports,
studies, assessments, audits, and other similar documents in the possession or
control of the Company that address any issues of actual or potential
noncompliance with, or actual or potential liability under, any Environmental
Laws that may affect the Company.
(c) Except as set forth on Schedule 4.14, no Environmental Law
requires any permit, license, consent, or other authorization to be obtained
from, or any application,
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filing, or other notice to be given to, any person in connection with this
Agreement or any action contemplated by this Agreement.
(d) None of the matters set forth on Schedule 4.14, or any
aggregation thereof, could reasonably be expected to result in a Material
Adverse Effect.
(e) After having made reasonable inquiry, and subject to any
inconsistencies or inaccuracies stated in the Xxxxxx Letter, the Company is not
aware of any material inaccuracy or omission in the EMC Report. The terms
"Xxxxxx Letter" and "EMC Report" are defined in Schedule 4.14.
4.15 Employee Benefit Plans.
(a) Schedule 4.15 contains a true and complete list of each
"employee benefit plan" (within the meaning of Section 3(3) of ERISA including,
without limitation, multiemployer plans within the meaning of ERISA section
3(37)), stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, collective bargaining, bonus, incentive, deferred compensation
and all other material employee benefit plans, agreements, programs, policies or
other arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result of the
transactions contemplated by this Agreement or otherwise), whether formal or
informal, oral or written, under which any employee or former employee of the
Company, any of its Subsidiaries or any member of its Controlled Group (as
hereinafter defined) has any present or future right to benefits or under which
the Company, any of its Subsidiaries or any member of its Controlled Group has
any present or future liability or obligations (whether primary or secondary).
All such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "Plans". As used herein, "Controlled Group"
shall mean any organization which is a member of a controlled group of
organizations within the meaning of Code sections 414(b), (c), (m) or (o).
(b) With respect to each Plan, the Company has delivered to
Parent a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable, (i) any
related trust agreement, annuity contract or other funding instrument (including
any funding mechanism therefor now in effect or required in the future as a
result of the transactions contemplated by this Agreement or otherwise); (ii)
the most recent determination letter; (iii) any summary plan description and
other oral or written communications by the Company, any of its Subsidiaries, or
any member of its Controlled Group to its employees concerning the extent of the
benefits provided under a Plan; and (iv) for the three most recent years (I) the
Form 5500 and attached schedules; (II) audited financial statements; (III)
actuarial valuation reports; and (IV) attorney's response to an auditor's
request for information.
(c) (i) Except as disclosed on Schedule 4.15(A), each Plan has
been established and administered in accordance with its terms, and in material
compliance with the applicable provisions of ERISA, the Code and other
applicable laws, rules and regulations; (ii) with respect to any Plan, no
actions, suits or claims (other than routine claims for benefits in the
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ordinary course) are pending or, to the Company's knowledge, threatened, and no
facts or circumstances exist which could give rise to any such actions, suits or
claims, and no material change has occurred (and the Company will promptly
notify Parent in writing of any of the foregoing arising between the date hereof
and the Effective Time); (iii) neither the Company nor any other party has
engaged in a prohibited transaction, as such term is defined under Code section
4975 or ERISA section 406, which could reasonably be expected to subject the
Company, any of its Subsidiaries, Parent or the Purchaser to any taxes,
penalties or other liabilities under the Code or ERISA; (iv) no event has
occurred and no condition exists that could reasonably be expected to subject
the Company, either directly or by reason of its affiliation with any member of
its Controlled Group, to any taxes, penalties or other liabilities under ERISA,
the Code or other applicable laws, rules and regulations; (v) all contributions
or premium payments required to be made prior to the Effective Time under the
terms of any Plan, the Code, ERISA or other applicable laws, rules and
regulations have been or will be timely made prior to the Effective Time or, to
the extent not paid, adequate reserves have been provided for on the Financial
Statements for all benefits and contributions relating to service on or prior to
the Effective Time; (vi) other than increases related to changes in
compensation, no Plan provides for an increase in benefits on or after the
Effective Time nor has any such increase been approved or communicated to any
employee of the Company, any member of its Controlled Group or any Subsidiary;
(vii) each Plan may be amended or terminated without material obligation or
liability excluding administrative costs associated therewith (other than those
obligations and liabilities for which specific assets have been set aside in a
trust or other funding vehicle or reserved for on the Financial Statements);
(viii) any defined contribution plan may be amended, terminated, transferred or
otherwise disposed of without obligation, penalties or other liability; and (ix)
for each Plan with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the most recent Form
since the date thereof.
(d) (i) No Plan has incurred any "accumulated funding
deficiency" as such term is defined in ERISA section 302 and Code section 412
(whether or not waived); (ii) no event or condition exists which could be deemed
a reportable event within the meaning of ERISA section 4043 which could result
in a liability to the Company or any member of its Controlled Group and no
condition exists which could subject the Company or any member of its Controlled
Group to a fine under ERISA section 4071; (iii) as of the Effective Time, the
Company and each member of its Controlled Group have made all required premium
payments when due to the Pension Benefit Guaranty Corporation ("PBGC"); (iv)
neither the Company nor any member of its Controlled Group is or expects to be
subject to any liability to the PBGC for any plan termination occurring on or
prior to the Effective Time; (v) no amendment has occurred which has required or
could require the Company or any member of its Controlled Group to provide
security pursuant to Code section 401(a)(29); (vi) neither the Company nor any
member of its Controlled Group has engaged in a transaction which could subject
it to liability under ERISA section 4069; and (vii) with respect to each Plan
(which is not a multiemployer plan within the meaning of section 4001(a)(3) of
ERISA) subject to Title IV of ERISA, as of the Effective Time, the assets of
each such Plan are at least equal in value to the present value of the accrued
benefits (vested and unvested), of the participants in such Plan on a
termination and projected basis, based on the actuarial methods and assumptions
indicated in the most recent actuarial valuation reports.
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(e) Accrued liabilities in respect of foreign plans which
provide pension benefits are recognized and provided for in accordance with the
law and generally accepted accounting principles in the countries where such
plans are maintained.
(f) Neither the Company, its Subsidiaries nor any member of
its Controlled Group has at any time had any obligation to contribute to, or
incurred any liability with respect to, any Plan that is a multiemployer plan
within the meaning of section 4001(a)(3) of ERISA.
(g) Each Plan which is intended to meet the requirements for
tax-favored treatment under the Code or which is intended to be qualified within
the meaning of Code section 401(a), or any trust intending to qualify within the
meaning of Code section 501(c)(9) meets such requirements or is so qualified
and, except as set forth on Schedule 4.15, has received a favorable
determination letter from the Internal Revenue Service with respect thereto; and
nothing has occurred which would cause the loss of any such tax-favored
treatment or qualification.
(h) No Plan exists which could result in the payment to any
employee, officer or director of the Company, any member of its Controlled Group
or any Subsidiary of any money or other property or rights or accelerate or
provide any other rights or benefits to any person as a result of the
transactions contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Code section 280G and
whether or not such payment would require subsequent termination of employment
or any other subsequent event before payment.
4.16 Labor Controversies. Except as set forth on Schedule
4.16, (i) there is no unfair labor practice, charge or complaint pending or, to
the best knowledge of the Company, threatened against or otherwise affecting the
Company or any Subsidiary; (ii) there is no labor strike, slowdown, work
stoppage, dispute, lockout or other labor controversy in effect, or to the
knowledge of the Company, threatened against or otherwise affecting the Company
or any Subsidiary, and neither the Company nor any Subsidiary has experienced
any such labor controversy within the past five years; and (iii) neither the
Company nor any Subsidiary has closed any plant or facility, effectuated any
layoffs of employees or implemented any early retirement, separation or window
program within the past five years, nor has the Company or any Subsidiary
planned or announced any such action or program for the future. The Company and
each of its Subsidiaries have complied in all material respects with all laws
applicable to them relating to the employment of labor, including any provisions
thereof relating to wages, hours, collective bargaining and the payment of
social security and similar taxes, and neither the Company nor any of its
Subsidiaries is liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing. The Company and each of its
Subsidiaries is in compliance with their obligations with respect to employees
pursuant to the Worker Adjustment and Retraining Notification Act of 1988, and
all other notification and bargaining obligations arising under any collective
bargaining agreement, statute or otherwise. There are no collective bargaining
agreements relating to any employees with respect to their employment with the
Company or any of its Subsidiaries except as disclosed on Schedule 4.13.
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4.17 Litigation. Except as set forth on Schedule 4.17, there
are no claims, actions, suits, reviews, inquiries, complaints, charges,
arbitrations, grievances, proceedings, or investigations pending, or, to the
best knowledge of the Company, threatened against or relating to the Company or
any Subsidiary or with respect to the transactions contemplated by this
Agreement, before any court or governmental or regulatory authority or body
which, if decided adversely, could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, nor does the Company know of any
facts which would provide a justifiable basis for any such claim, action,
proceeding or investigation. Neither the Company nor any Subsidiary nor any
property of any of them is subject to any order, judgment, injunction or decree
entered by any foreign or United States federal, state or local court or
governmental agency and outstanding against the Company or any of its
Subsidiaries.
4.18 Taxes. For purposes of this Agreement, "Taxes" shall mean
all United States federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, real estate, excise,
value added, estimated, stamp, alternative or add-on minimum, environmental,
withholding and any other taxes, duties or assessments, together with all
interest, penalties and additions imposed with respect to such amounts, and "Tax
Return" shall mean any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof. Except as disclosed in
Schedule 4.18:
(a) All Tax Returns required to be filed by or with respect to
the Company and each Subsidiary have been timely filed, and all such Tax Returns
are complete and correct in all material respects. The Company and each
Subsidiary (i) have timely paid all Taxes that are due, claimed or asserted by
any taxing authority to be due from or with respect to them for the periods
prior to the date hereof or (ii) will provide for all such Taxes on the balance
sheet included in the Interim Financial Statements. With respect to any period
for which Tax Returns have not yet been filed, or for which Taxes are not yet
due or owing, the Company will make due and sufficient current accruals for such
Taxes on the balance sheet included in the Interim Financial Statements. The
Company and the Subsidiaries do not file any Tax Returns in any jurisdiction
other than those set forth in Schedule 4.18. The Company and the Subsidiaries
file Tax Returns in all jurisdictions where required to file Tax Returns, except
where the failure to so file would not reasonably be likely to have a Material
Adverse Effect.
(b) There are no Liens with respect to Taxes upon any of the
assets or properties of the Company or its Subsidiaries, other than with respect
to Taxes not yet due and payable.
(c) Except as set forth on Schedule 4.18, during the past ten
(10) years, the Tax Returns of the Company and the Subsidiaries and of each
affiliated group (within the meaning of the Code) of which the Company is or has
been a member have not been audited or examined by any taxing authority, and the
statute of limitations for all periods through the respective years specified in
Schedule 4.18 has expired. No issue relating to the Company has been raised in
writing by any taxing authority in any audit or examination which, by
application of the same or similar principles, could reasonably be expected to
result in a
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material deficiency for any subsequent period (including periods subsequent to
the Closing Date). There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitation applicable to any claim for, or the
period for the collection or assessment of, Taxes due from or with respect to
the Company or any Subsidiaries for any taxable period, and no power of attorney
granted by or with respect to the Company or any Subsidiaries relating to Taxes
is currently in force. No closing agreement pursuant to section 7121 of the Code
(or any predecessor provision) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to the Company. The Company
has previously delivered to Parent complete and correct copies of each of (i)
any audit reports issued within the last three years relating to the United
States federal, state, local or foreign Taxes due from or with respect to the
Company or any Subsidiary and (ii) the United States federal income Tax Returns,
and those state, local and foreign income Tax Returns showing Taxes due in
excess of $5,000 for each of the last three taxable years, filed by the Company
or any Subsidiary or (insofar as such returns relate to the Company or any
Subsidiary) filed by any affiliated, consolidated, combined or unitary group of
which Company or any Subsidiary was then a member.
(d) No audit or other proceeding by any court, governmental or
regulatory authority, or similar person is pending or, to the knowledge of the
Company, threatened with respect to any Taxes due from or with respect to the
Company or the Subsidiaries or any Tax Return filed by or with respect to the
Company or the Subsidiaries. No assessment of Tax has been proposed in writing
against the Company or the Subsidiaries or any of their assets or properties.
(e) No consent to the application of section 341(f)(2) of the
Code (or any predecessor provision) has been made or filed by or with respect to
the Company or the Subsidiaries or any of their assets or properties. None of
the assets or properties of the Company or the Subsidiaries is an asset or
property that is or will be required to be treated as being (i) owned by any
other person pursuant to the provisions of section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately before the enactment
of the Tax Reform Act of 1986, or (ii) tax-exempt use property within the
meaning of section 168(h)(1) of the Code.
(f) The Company and each Subsidiary have not been and are not
currently in material violation (or, with or without notice or lapse of time or
both, would be in material violation) of any applicable law or regulation
relating to the payment or withholding of Taxes. The Company and each
Subsidiary, in all material respects, have duly and timely withheld from
employee salaries, wages and other compensation and paid over to the appropriate
taxing authorities all amounts required to be so withheld and paid over for all
periods under all applicable laws and regulations.
(g) As of the Closing, the Company and the Subsidiaries shall
not be a party to, be bound by or have any obligation under, any Tax sharing
agreement or similar contract or arrangement.
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(h) There is no contract or agreement, plan or arrangement by
the Company or any Subsidiary covering any person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by the Company by reason of section 280G of the Code.
(i) The Company and its Subsidiaries are not "foreign persons"
within the meaning of section 1445(b)(2) of the Code and will deliver to Parent
prior to Closing certification of non-foreign status meeting the requirements of
Treasury Regulation Section 1.1445-2. The Company and each Subsidiary have never
been controlled by foreign corporations as defined in section 957 of the Code.
(j) The Company and each Subsidiary have not knowingly
acquired property from or disposed of property for proceeds less than fair
market value thereof to any person with whom it does not deal at arm's length.
(k) All material elections and consents with respect to any
Taxes (or computation thereof) affecting the Company or any Subsidiary as of the
date hereof are obvious from the Tax Returns or are set forth in Schedule 4.18.
After the date hereof, no election or consent with respect to any Taxes (or
computation thereof) affecting the Company or any Subsidiary will be made
without the written consent of Parent.
(l) The Company and each Subsidiary have not agreed to make
and are not required to make any adjustment under section 481(a) of the Code, by
reason of a change in accounting method or otherwise.
(m) The liabilities and/or prepaid asset for Taxes reflected
in the Interim Financial Statements are accurate and the amounts reflected for
Taxes therein are sufficient for the payment of all accrued, unpaid or deferred
Taxes of the Company and its Subsidiaries for all periods ended on or prior to
September 30, 1996.
(n) Without limiting the foregoing representations in any way,
the Company and each Subsidiary have collected all material sales and use Taxes
required to be collected from customers of the Company or such Subsidiary and
have remitted, or will remit on a timely basis, such amounts to the appropriate
governmental authorities, or have been furnished properly completed exemption
certificates. The Company and each Subsidiary represents that (A) it has in its
possession all material records and supporting documents required by all
applicable sales and use Tax statutes and regulations regarding the collection
and payment of all sales and use Taxes required to be collected and paid over
and regarding all exempt transactions for all periods open under the applicable
statute of limitations as of the Closing Date, and (B) it has maintained in all
material respects, all such records and supporting documents in the manner
required by all applicable sales and use Tax statutes and regulations.
4.19 Intangible Property. The consummation of the transactions
contemplated hereby will not alter or impair any rights of the Company with
respect to all United States and foreign patents, trademarks, trade names,
service marks, service names,
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technology, copyrights, logos, brand names, designs, industrial designs,
inventions, trade secrets, secret processes or know-how, and all pending
registrations and applications for any of the foregoing (collectively
"Intangible Property"), owned or used by, or licensed to, the Company or any
Subsidiary. Except as disclosed on Schedule 4.19, neither the Company nor its
Subsidiaries have infringed, misappropriated or misused any Intangible Property
owned by another, and no claim has been asserted by any person alleging the
invalidity, abuse, misuse or unenforceability of any Intangible Property or that
the Intangible Property constitutes an infringement of another person's
intellectual property, or challenging or questioning the validity or
effectiveness of any license or agreement relating thereto to which the Company
or any of its Subsidiaries is a party. Except as disclosed on Schedule 4.19, the
Company has not granted, or obligated itself to grant, any outstanding licenses
or other rights in or to any of the Intangible Property owned by or licensed to
the Company or its Subsidiaries. All U.S. registrations of patents, copyrights
and trademarks included in the Intangible Property are in full force and effect.
4.20 Licenses, Permits, Authorizations, Etc. The Company and
each Subsidiary have, and Schedule 4.20 hereto lists, all approvals,
authorizations, consents, licenses, orders, franchises, certificates of public
convenience, registrations and permits (collectively, "Permits") of all
governmental agencies, whether federal, state or local, United States or
foreign, required to permit the operation of their businesses as presently
conducted. Schedule 4.20 sets forth the expiration date and renewal rights with
respect to each Permit listed thereon. All of the Permits listed on Schedule
4.20 are in full force and effect and the Company is not aware of any impediment
to the renewal of any Permit listed on Schedule 4.20. Neither the Company nor
any Subsidiary has engaged in any activity which would cause revocation or
suspension of any of such Permits, and no action or proceeding looking to or
contemplating the revocation or suspension of any Permit is pending or, to the
best knowledge of the Company, threatened. The Company and each Subsidiary have
made proper application for (or, in the case of applications not yet eligible
for filing, have used their best efforts to make proper preparation for filing)
all such Permits as the Company or any such Subsidiary has deemed will be
required to permit the Company and each Subsidiary to conduct their businesses
in accordance with present plans for expansion, and Schedule 4.20 hereto lists
all such pending (or prepared) applications.
4.21 Insurance. Schedule 4.21 contains a correct and complete
list of all policies of liability, environmental, crime, fidelity, life, fire,
workers' compensation, health, director and officer liability and all other
forms of insurance currently owned or held by the Company or any Subsidiary, and
identifies for each such policy the underwriter, policy number, coverage type,
premium, expiration date and deductible. The Company has delivered or made
available to Parent true and complete copies of all insurance policies listed on
Schedule 4.21. All of the insurance policies listed on Schedule 4.21 are
outstanding and in full force and effect and all premiums with respect to such
policies are currently paid or accrued. No notice of cancellation or termination
has been received with respect to any such policy and the insurance policies to
which the Company is a party insure the Company and its Subsidiaries in such
amounts and against such losses, damages, hazards and risks of a character
usually insured against by persons operating similar properties in the
localities where such properties are located.
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4.22 Books and Records. The books and records of the Company
and each Subsidiary are in all material respects complete and correct, have been
maintained in accordance with good business practices and accurately reflect the
basis for the financial condition and results of operations of the Company and
each Subsidiary set forth in the Financial Statements.
4.23 Accounts Receivable and Accounts Payable. The accounts
receivable of the Company and the Subsidiaries reflected on the Interim
Financial Statements and all accounts receivable arising thereafter and prior to
the date hereof arose from bona fide transactions in the ordinary course of
business and are current and fully collectible, less the applicable allowance
for doubtful accounts. No material counterclaims or offsetting claims with
respect to such accounts receivable are pending or, to the best knowledge of the
Company, are threatened. The accounts payable reflected on the Interim Financial
Statements are complete and accurate and all accounts payable arising thereafter
and prior to the date hereof arose from bona fide transactions in the ordinary
course of business and have been paid or are not yet due and payable.
4.24 Condition of Assets. The assets and properties owned,
operated or leased by the Company and any Subsidiary and used in their
businesses are in a normal state of repair and operating condition, reasonable
wear and tear excepted, and suitable for the uses for which intended.
4.25 Inventory; Return Policy. (a) The inventory of the
Company and the Subsidiaries as reflected on the Interim Financial Statements
and any inventory acquired or produced after that date, consisted of raw
materials and supplies, manufactured and purchased parts, goods in process and
finished goods of a quantity and quality saleable in the ordinary course of
business, and such inventory is fit and sufficient for the purpose for which it
was procured or manufactured. All obsolete or excess items in said inventory
have been written down or written off or otherwise provided for in accordance
with the Company's excess and obsolete inventory policy, as described in Section
4.25(c), which is in accordance with GAAP. Since December 31, 1995, inventories
have been purchased or produced in the ordinary course of business and
consistent with the anticipated requirements of the Company and the
Subsidiaries.
(b) Schedule 4.25(b) includes a description of the return
policy of the Company and the Subsidiaries. Such policy has been in effect,
without material change, for at least three years. The Financial Statements
reflect reserves, which are adequate in accordance with GAAP, for all returns.
(c) Attached as Schedule 4.25(c) is a copy of the Company's
excess and obsolete inventory policy.
4.26 Transactions with Affiliates. Except as disclosed in
Schedule 4.26 hereto and except for intercompany transactions between the
Company and its Subsidiaries, neither the Company nor any Subsidiary is now, nor
during the past three years has been, a party, directly or indirectly, to any
contract, lease, arrangement or transaction, whether for the
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purchase, lease or sale of property, for the rendition of services or otherwise,
with any affiliate of the Company or its Subsidiaries, or any officer, director,
employee, proprietor, partner, shareholder or any "associate" of the Company or
any affiliate of the Company or its Subsidiaries (as the term "associate" is
defined in Rule 405 of the Securities Act), other than a contract, or
arrangement by reason of, which relates to or is in connection with the full or
part time employment of an employee, nor are there now, nor for the past three
years have there been, any loans outstanding to any of such persons from the
Company or any of its Subsidiaries.
4.27 Brokers and Finders. No broker, finder, investment banker
or financial advisor is entitled to any brokerage, finder's, financial advisory
or other fee or commission in connection with this Agreement or the transactions
contemplated hereunder, except for RMHA, whose fees shall be paid by the Company
at the Closing. Except for such obligations to RMHA, neither the Company nor its
Subsidiaries nor any of their officers or directors have incurred any liability
for any brokerage, finder's, financial advisory or other fee or commission or
similar form of compensation in connection with this Agreement or the
transactions contemplated hereby.
4.28 Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted 100% of the directors then in office) (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger and the transactions contemplated thereby, taken together,
are in the best interests of the Company and the Shareholders of the Company and
fair to the Shareholders of the Company, and (ii) resolved to recommend that the
Shareholders approve this Agreement and the transactions contemplated herein,
including the Merger.
4.29 Required Company Vote. The affirmative vote of two-thirds
of the shares of the Company Common Stock is the only vote of the holders of any
class or series of the Company's securities necessary to approve this Agreement,
the Merger and the other transactions contemplated hereby.
5. Representations and Warranties of Parent and the Purchaser.
Parent and the Purchaser (and, if Parent elects to have a
direct wholly owned subsidiary replace the Purchaser as a constituent
corporation in the Merger, representations made by the Purchaser hereunder will
also be deemed to have been made by such wholly owned subsidiary), jointly and
severally, represent and warrant to the Company as follows:
5.1 Corporate Organization and Good Standing. Each of Parent
and the Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of their respective states of incorporation, with all
requisite corporate power and authority to own, operate and lease the properties
now owned or leased by it and to carry on its business as it is now being
conducted. Each of Parent and the Purchaser has delivered to the Company true
and correct copies of its respective certificate of incorporation and by-laws,
each as in effect on the date hereof.
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5.2 Authorization; Binding Agreement. Each of Parent and the
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement by each of Parent and the Purchaser, and the
consummation by Parent and the Purchaser of the transactions contemplated
hereby, have been duly authorized by each of Parent's and the Purchaser's Board
of Directors and no other corporate action or proceeding on the part of Parent,
Parent's security holders or the Purchaser is necessary for the execution,
delivery and performance of this Agreement by Parent and the Purchaser and the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and legally binding agreement of each of Parent and the
Purchaser and is enforceable against each of them in accordance with its terms.
5.3 Governmental Approvals. Except for applicable requirements
of the Securities Act (including, without limitation, with respect to the Form
S-4), the HSR Act, state securities laws, the filing of a certificate of merger
pursuant to the New York BCL and any filings with foreign governments or
governmental agencies, no authorization, order, consent, or approval of, or
filing or registration with, any third party or domestic or foreign governmental
or regulatory authority is necessary for or in connection with the execution and
delivery by Parent and the Purchaser of this Agreement or the consummation by
Parent and the Purchaser of the transactions contemplated by this Agreement.
5.4 Form S-4; Proxy Statement; Other Filings. None of the
information supplied or to be supplied by Parent or the Purchaser for inclusion
or incorporation by reference in the Form S-4 will, at the time the Form S-4 is
filed with the SEC and at any time it is amended or supplemented or at the time
it becomes effective under the Securities Act, or at the date the
Prospectus/Proxy Statement to be included in the Form S-4 is first mailed to the
Shareholders or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Form S-4 will comply as to form in all material respects with the requirements
of the Securities Act and the rules and regulations promulgated thereunder,
except that no representation or warranty is made by Parent or the Purchaser
with respect to statements made therein based on information supplied by the
Company for inclusion in the Form S-4.
5.5 Parent Common Stock. All shares of the Class B Common
Stock which will be transferred in accordance with this Agreement have been duly
authorized and, when transferred as contemplated hereby, will be fully paid and
nonassessable, registered under the Securities Act and the Exchange Act,
registered or exempt from registration under applicable state securities laws,
listed on the New York Stock Exchange and freely transferable (except to the
extent transfers by "affiliates" of the Company are restricted under the
provisions of Rule 145 of the Securities Act).
5.6 Financial Statements and SEC Reports. Parent has timely
filed all required forms, reports, statements and documents with the SEC since
January 1, 1993, all of which have complied in all material respects with all
applicable requirements of the Securities
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Act or the Exchange Act. Parent heretofore has delivered to the Company true and
complete copies of (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 1993, December 31, 1994 and Xxxxxxxx 00, 0000, (xx) its
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1996 and
June 30, 1996, (iii) its proxy statements relating to all meetings of its
shareholders (whether annual or special) held since January 1, 1993, and (iv)
all other reports, statements and registration statements filed or required to
be filed by it with the SEC since January 1, 1993 (the documents referred to in
clauses (i), (ii), (iii) and (iv) being hereinafter referred to as "Parent SEC
Reports"). As of their respective dates, the Parent SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The financial
statements (including any related notes) of Parent included in the Parent SEC
Reports were prepared in conformity with GAAP applied on a consistent basis, and
present fairly the consolidated financial position, results of operations and
cash flows of Parent and its consolidated Subsidiaries as of the dates and for
the periods indicated, subject, in the case of unaudited interim consolidated
financial statements, to the absence of certain notes thereto and normal
year-end audit adjustments.
5.7 Capitalization of Parent. As of September 30, 1996, the
authorized capital stock of Parent consists of 50,000,000 shares of Class A
Common Stock, 150,000,000 shares of Class B Common Stock and 5,891,097 shares of
Parent's preferred stock. As of November 4, 1996, there were issued and
outstanding 11,447,000 shares of Class A Common Stock, 54,541,000 shares of
Class B Common Stock and no other voting securities. All of the outstanding
shares of capital stock have been duly authorized and validly issued, were not
issued in violation of any person's preemptive rights and are fully paid and
nonassessable with no personal liability attaching to the ownership thereof.
5.8 Brokers and Finders. No broker, finder, investment banker
or financial advisor is entitled to any brokerage, finder's, financial advisory
or other fee or commission in connection with this Agreement or the transactions
contemplated hereunder. Neither Parent nor the Purchaser nor any of their
officers or directors have incurred any liability for any brokerage, finder's
financial advisory or other fee or commission or similar form of compensation in
connection with this Agreement or the transactions contemplated hereby.
5.9 Ownership of the Purchaser; No Prior Activities. The
Purchaser (including any substituted entity) was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement. As of the
Effective Time, all of the outstanding capital stock of the Purchaser will be
owned directly by Parent.
6. Covenants.
6.1 Conduct of Business of the Company. Except as otherwise
expressly specified in, or contemplated by, this Agreement, during the period
from the date hereof to the Effective Time each of the Company and its
Subsidiaries will conduct its respective operations only in, and the Company and
its Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice, and each of the Company and its
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Subsidiaries will use all reasonable efforts (without any obligation to pay
additional consideration) to preserve intact its respective business
organization, assets, prospects and advantageous business relationships, to keep
available the services of its key officers and key employees and to maintain
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, customers, business partners and others having business
relationships with the Company and its subsidiaries. Without limiting the
generality of the foregoing, prior to the Effective Time, except as set forth in
Schedule 6.1 or in connection with the transactions contemplated by this
Agreement, neither the Company nor any of its Subsidiaries will, without the
prior written consent of Parent:
(i) split, combine or reclassify any shares of its capital
stock, declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or redeem, purchase or
otherwise acquire, directly or indirectly, any shares of its capital
stock or other securities;
(ii) authorize for issuance, issue, sell, pledge, dispose
of or encumber, deliver or agree or commit to issue, sell, pledge or
deliver (whether through dividend or the issuance or granting of any
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class of the Company or any of its
Subsidiaries or any securities convertible into or exercisable or
exchangeable for shares of stock of any class of the Company or any of
its Subsidiaries;
(iii) other than purchase or sale orders in the ordinary
course of business, voluntarily incur any material liability or
obligation (absolute, accrued, contingent or otherwise) or issue any
debt securities, or incur other indebtedness for borrowed money, or
assume, guarantee, endorse or otherwise as an accommodation become
responsible for, the obligations of any other individual or entity, or
change any assumption underlying, or methods of calculating, any bad
debt, contingency or other reserve;
(iv) notwithstanding anything to the contrary contained
herein, including but not limited to subsection (v) herein, (A) enter
into any employment or similar agreement or arrangement with any
person, except for agreements or arrangements (exclusive of employment
agreements) entered into in the ordinary course of business consistent
with past practice or (B) amend any such agreement or arrangement
except in the ordinary course of business consistent with past
practice;
(v) subject to subsection (iv) herein, take any of the
following actions except in the ordinary course of business consistent
with past practice or as required by existing agreement or law: (a)
grant, or become obligated to grant, any increase in the compensation
of officers or employees; (b) adopt, institute or amend any plan,
agreement, contract, program, policy or other arrangement of the type
referred to in Section 4.15 herein; or (c) take any action with respect
to the grant of any severance or termination pay or with respect to any
increase of benefits payable under its severance or termination pay
policies in effect on the date hereof;
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(vi) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or make any material investment either
by purchase of stock or securities, contributions to capital, property
transfer, or purchase of any material amount of properties or assets of
any other individual or entity;
(vii) except as required by the consummation of the Merger,
pay, discharge or satisfy any claims or liabilities, or settle any
litigation other than the payment, discharge or satisfaction of claims
or liabilities in the ordinary course of business consistent with past
practice;
(viii) amend the restated certificate of incorporation or
by-laws of the Company or the certificate of incorporation or by-laws
(or comparable documents) of any Subsidiary;
(ix) authorize or make any capital expenditures (including
by lease) which in the aggregate are more than the sum of $20,000
(excluding capital expenditures listed on Schedule 4.13);
(x) sell or dispose of, mortgage, encumber or grant an
option for any assets or properties, other than sales of inventory in
the ordinary course of business;
(xi) waive, release, grant or transfer any rights of value
(other than in the ordinary course of business), or modify or change in
any material respect any existing license, lease, or contract;
(xii) except to the extent any such policy is replaced with
comparable coverage, allow or permit any insurance policy naming the
Company as a beneficiary or a loss payable payee to be canceled or
terminated;
(xiii) make any changes in the Company's accounting
methods, principles or practices except as may be required by GAAP;
(xiv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its Subsidiaries, except
as contemplated by this Agreement;
(xv) take any action, except in the ordinary course of
business consistent with past practices, which would result in the
acceleration of collection of any accounts receivable or delay the
payment of any accounts payable; or
(xvi) agree, in writing or otherwise, to take any of the
foregoing actions or any action which would make any representation or
warranty in Section 4 hereof untrue or incorrect.
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6.2 No Solicitation. Neither the Company nor any of its
Subsidiaries shall, and the Company shall use all reasonable efforts to cause
each of its officers, directors, employees, affiliates, representatives, agents
and advisors not to, directly or indirectly, encourage, solicit, initiate,
engage or participate in any discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
other than Parent or an affiliate of Parent (a "Third Party") concerning (or
concerning the business of the Company or any Subsidiary of the Company in
connection with) any tender offer (including a self tender offer), exchange
offer, merger, consolidation, sale of a substantial amount of assets, sale of
securities, acquisition of beneficial ownership of (or options or rights to
purchase or the right to vote) securities of any class or series of debt or
equity securities of the Company, liquidation, dissolution or similar
transactions involving the Company, any of its Subsidiaries or any division of
the Company or a Subsidiary (such proposals, announcements or transactions being
referred to herein as "Acquisition Proposals"). Notwithstanding the foregoing,
in the event a Third Party expresses in writing a bona fide intention to make an
offer to the Company to effect a transaction that is more favorable to the
Company's security holders, taken as a whole, than the transactions contemplated
by this Agreement, the Company may furnish information provided to Parent
concerning its business, properties or assets to such Third Party or conduct
negotiations with such Third Party if (i) the failure to provide such
information or conduct negotiations would cause the members of the Board of
Directors of the Company to breach their fiduciary duties to the Company's
security holders as advised by outside counsel to the Company and (ii) such
Third Party has entered into an appropriate confidentiality agreement with the
Company. The Company will promptly inform Parent of any inquiry, offer or
proposal (including the terms thereof and the identity of the Third Party making
such inquiry, offer or proposal) that it may receive in respect of an
Acquisition Proposal after the date of this Agreement and furnish to Parent a
copy of any such written inquiry, offer or proposal. The Company may take any of
the foregoing actions pursuant to the second preceding sentence if such action
constitutes a withdrawal or modification, in a manner adverse to Parent or the
Purchaser, of the approval or recommendation by the Company's Board of Directors
of the Merger under Section 6.8 only if the Company pays to Parent, prior to or
concurrently with the taking of such action, the Alternative Transaction Fee (as
hereinafter defined) and Transaction Expenses (as hereinafter defined, not to
exceed $750,000), pursuant to Section 6.3.
6.3 Certain Fees and Expenses. (a) In the event that the Board
of Directors of the Company shall (i) withdraw or modify, publicly propose or
announce its intention to withdraw or modify, in a manner adverse to Parent, the
approval or recommendation by such Board of Directors of this Agreement or the
Merger (including by refraining from recommending approval of the Merger under
Section 6.8), (ii) approve or recommend any Acquisition Proposal or (iii)
approve the Company entering into any Acquisition Proposal (including, without
limitation, the commencement of a self tender or exchange offer), or, in the
event (x) the Shareholders in a vote at the Shareholders Meeting called pursuant
to Section 6.8 fail to approve the transactions contemplated hereby and there
shall exist an Acquisition Proposal or (y) this Agreement is terminated (other
than by the Company pursuant to Section 10.1(b), 10.1(d), 10.1(i) or 10.1(j)),
prior to such Shareholders Meeting taking place and before such vote or
termination the Company received or became aware of an Acquisition Proposal or
in the event the Alternative Transaction Fee plus
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Transaction Expenses otherwise become due and payable pursuant to Section 6.2,
then in each such case unless at the time of such action or event the Company is
entitled to terminate this Agreement pursuant to Section 10.1(b) or 10.1(i)) or
Parent or the Purchaser is otherwise in material breach of any material
representation, warranty, covenant or agreement under this Agreement, prior to
or concurrently with the taking of any such action by the Board of Directors of
the Company or within three business days of the occurrence of any such event
that does not involve actions by the Board of Directors of the Company, the
Company shall pay to Parent in immediately available funds $2,250,000 (the
"Alternative Transaction Fee"), plus all of the Transaction Expenses (not to
exceed $750,000), to an account which Parent shall designate prior to the time
such payment is due.
(b) In the event the Shareholders in a vote at the
Shareholders Meeting called pursuant to Section 6.8 do not approve the
transactions contemplated hereby and there shall not exist an Acquisition
Proposal, the Company shall pay to Parent in immediately available funds all of
the Transaction Expenses, to an account which Parent shall designate prior to
the time such payment is due; provided, that the Company shall not be obligated
to pay to Parent the Transaction Expenses pursuant to this Section 6.3(b) in the
event that after the end of the Pricing Period and prior to the vote of the
Shareholders at the Shareholders Meeting, there shall have occurred a material
adverse change in or effect on the business, operations, properties, assets,
liabilities, condition (financial or otherwise), results of operations or
prospects of Parent and its Subsidiaries taken as a whole.
(c) Notwithstanding anything contained in this Agreement to
the contrary, any act or omission referred to in Section 6.2 or 6.3 which
results in the Company being obligated to pay the Alternative Transaction Fee
and/or the Transaction Expenses shall not constitute a breach of this Agreement
by the Company if, prior to or concurrently with such action, the Company pays
the Alternative Transaction Fee and all of the Transaction Expenses or all of
the Transaction Expenses, as the case may be, as required by this Section 6.3.
(d) For the purposes of this Agreement, "Transaction Expenses"
shall mean, with respect to any party, the documented out-of-pocket expenses of
such party (whether or not incurred prior to the date hereof) arising out of,
relating to or incidental to the discussion, evaluation, negotiation,
documentation and closing or potential closing of the Merger and all other
transactions contemplated by this Agreement (including, without limitation, the
fees, disbursements and other expenses of attorneys, accountants, investment
bankers, consultants and any other advisors, and all printing costs and filing
fees incurred in connection with such transactions).
6.4 Access to Information. (a) Between the date hereof and the
Effective Time, the Company will give Parent and its authorized representatives
access at reasonable hours and with reasonable notice to all personnel, plants,
offices, warehouses and other facilities and to all books and records of the
Company and its Subsidiaries and will permit Parent to make such inspections at
reasonable hours and with reasonable notice as Parent may require and will cause
its officers and those of its Subsidiaries to furnish Parent such financial and
operating data and other information with respect to the business and properties
of the Company and its Subsidiaries as Parent may from time to time reasonably
request. Parent
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and its representatives shall use reasonable efforts to minimize disruptions to
the Company's operations. The representations and warranties of the Company
contained in Section 4 or in any certificate or other document delivered to
Parent or the Purchaser shall not be deemed waived or otherwise affected by any
such investigation made by Parent or any of its representatives, subject to
Parent's compliance with the provisions of Section 6.6 hereof.
(b) The confidentiality agreement, dated as of March 26, 1996,
between the Company and Parent (the "Confidentiality Agreement") shall remain in
full force and effect until the Effective Time and shall cover, to the extent
provided therein, information supplied to Parent or the Purchaser under Section
6.4(a).
6.5 Reasonable Efforts. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to 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 to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, and shall use all reasonable efforts to obtain
all waivers, permits, consents and approvals and to effect all registrations,
filings and notices with or to third parties or governmental or public bodies or
authorities that are in the opinion of Parent and the Company necessary or
desirable in connection with the transactions contemplated by this Agreement,
including, without limitation, filings to the extent required under the
Securities Act and the HSR Act. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers or directors of each of the parties hereto shall
take such action. In connection with and without limiting the foregoing, (a) the
Company, Parent and the Purchaser shall use their reasonable efforts to make
promptly any required submissions under the HSR Act which the Company and the
Parent determine should be made, in each case, with respect to the Merger and
the transactions contemplated by this Agreement and (b) the Company, Parent and
the Purchaser shall cooperate with one another in promptly making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such consents, permits, authorizations, approvals or
waivers.
6.6 Supplemental Information. From time to time prior to the
Effective Time, each party will promptly disclose in writing to the other
parties any matter hereafter arising which, if existing, occurring or known at
the date of this Agreement, would have been required to be disclosed to such
other parties or would have been a breach of a representation, warranty or
covenant. No information provided to a party pursuant to this section shall be
deemed to cure any breach of any representation or warranty made in this
Agreement unless the party receiving such information specifically agrees
thereto in writing or such breach is cured prior to the termination of this
Agreement by the non-breaching party, as permitted by Sections 10.1(g) and
10.1(i) hereof, as may be applicable.
6.7 Proxy Statement; Form S-4; Other Filings.
(a) Parent shall prepare and shall file with the SEC promptly,
the Form S-4 (in which the Prospectus/Proxy Statement shall be included) with
respect to the distribution of Class B Common Stock described in Sections 3.1(a)
and 3.2 of this Agreement under the
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Securities Act, and Parent shall use all reasonable efforts to have the Form S-4
declared effective by the SEC as promptly as practicable. Parent shall also take
such action as is reasonably required to be taken under state blue sky or
securities laws. The Prospectus/Proxy Statement shall contain the recommendation
of the Board of Directors of the Company described in Section 3.3 hereof. Parent
and the Company each agree to correct promptly (but in no event later than the
date of the Shareholders Meeting referred to in Section 6.8) any information
provided by it for use in the Prospectus/Proxy Statement included in the Form
S-4 which contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Parent and the Company shall cooperate with each other
in the preparation of the Form S-4 and the Prospectus/Proxy Statement included
therein.
(b) As soon as practicable after the date hereof, the Company,
Parent and the Purchaser shall promptly prepare and file any other filings
required under the Securities Act or any other federal or state securities laws
relating to the Merger and the transactions contemplated herein ("Other
Filings").
(c) Each of Parent and the Purchaser shall notify the Company
promptly of the receipt by such party of any comments of or requests by the SEC
or any other governmental official with respect to the Form S-4 or any Other
Filings and will supply the other parties hereto with correspondence between
such party and its representatives, on the one hand, and the SEC or the members
of its staff or any other appropriate governmental official, on the other hand,
with respect to the Form S-4 and any Other Filings. The Company, Parent and the
Purchaser each shall use all reasonable efforts to obtain and furnish the
information required to be included in the Prospectus/Proxy Statement, the Form
S-4 and any Other Filings, and the Company, Parent and the Purchaser shall each
use all reasonable efforts to respond promptly to any comments made by the SEC
or any other governmental official with respect to the Form S-4 and any Other
Filings and cause the Prospectus/Proxy Statement and related forms of proxy to
be mailed to the Shareholders at the earliest practicable time. Parent will
advise the Company, promptly after it receives notice thereof, of the time when
the Form S-4 has become effective or any supplement or amendment has been filed,
of the issuance of any stop order, of the suspension of the qualification of the
Class B Common Stock issuable in connection with the Merger for offering or sale
in any jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for amendment or supplement of the Form
S-4 or for any additional information.
6.8 Meeting of Shareholders. The Company shall take all action
reasonably necessary, in accordance with the New York BCL and the restated
certificate of incorporation and by-laws of the Company, to convene a special
meeting of its Shareholders as promptly as practicable to consider and vote upon
the Merger (the "Shareholders Meeting"). The Company shall use all reasonable
efforts to solicit from Shareholders proxies in favor of the adoption and
approval of this Agreement.
6.9 No Inconsistent Activities. The Company shall not, without
Parent's prior consent, terminate, make any changes in, or waive any rights
under any contract, agreement, arrangement or understanding to which it is a
party, to the extent such contract,
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agreement, arrangement or understanding governs (i) the conduct of another party
with respect to purchases of shares or the making of proposals for a business
combination with the Company or (ii) the right of another party to make use of
information relating to the Company that is not publicly available. The Company
shall, unless otherwise agreed upon by Parent, use all reasonable efforts to
enforce the terms of any such contract, agreement, arrangement or understanding.
6.10 Tax-Free Reorganization Treatment. None of Parent, the
Purchaser, the Company or any of their respective affiliates shall take or cause
to be taken any action, whether before or after the Effective Time, which would
disqualify the Merger as a tax-free reorganization within the meaning of Section
368(a)(2)(E) of the Code.
6.11 Securityholder Claims. The Company shall not settle or
compromise any claim brought by any present, former or purported holder of any
securities of the Company in connection with the Merger prior to the Effective
Time, without the prior written consent of Parent.
6.12 Escrow Agreement. On or before the Effective Date, Parent
and the Company, on behalf of the Shareholders, shall establish an Escrow
Account pursuant to Section 3.1(e) and shall execute, and shall use their best
efforts to cause a mutually agreed-upon independent escrow agent to execute, an
Escrow Agreement.
6.13 Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the Shareholders, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
its best efforts to cause each such person to deliver to Parent on or prior to
the Closing Date a written agreement substantially in the form attached as
Exhibit B hereto.
6.14 Directors' and Officers' Indemnification and Insurance.
(a) The certificate of incorporation of the Surviving Corporation shall contain
provisions for the indemnification of directors and officers of the Company no
less favorable than the provisions set forth in the certificate of incorporation
of the Company, and Parent and the Purchaser covenant and agree that, for the
benefit of the Company's directors and officers in office prior to the Effective
Time, such provisions shall remain continuously in effect for a period of at
least six (6) years following the Effective Time.
(b) Parent and the Surviving Corporation shall use their
reasonable best efforts to cause to be maintained in effect for one (1) year
from the Effective Time the Company's current policies of directors' and
officers' liability insurance to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance"), if, or to the
extent that, the premium therefor would not be in excess of the current annual
premium paid by the Company, which current annual premium the Company represents
and warrants to be not more than $6,000.
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6.15 Tax-Free Merger Covenants. (a) Parent and the Purchaser
jointly and severally represent, warrant, covenant and agree to the
representations, undertakings, terms and conditions set forth in Exhibit 6.15(a)
hereto. Parent and the Purchaser acknowledge and agree that Xxxxxxx Xxxxxxx &
Xxxxxxxx shall be entitled to rely upon such representations, undertakings,
terms and conditions set forth in Exhibit 6.15(a) hereto for purposes of
rendering the opinion referenced in Section 9.3(d)(v) hereof and that Parent and
the Purchaser will provide to such counsel a representation letter as of the
Effective Time which reaffirms the matters set forth in Exhibit 6.15(a) hereto.
(b) The Company represents, warrants, covenants and agrees to
the representations, undertakings, terms and conditions set forth in Exhibit
6.15(b) hereto. The Company acknowledges and agrees that Xxxxxxx Xxxxxxx &
Xxxxxxxx shall be entitled to rely upon such representations, undertakings,
terms and conditions set forth in Exhibit 6.15(b) hereto for purposes of
rendering the opinion referenced in Section 9.3(d)(v) hereof and that the
Company will provide to such counsel a representation letter as of the Effective
Time which reaffirms the matters set forth in Exhibit 6.15(b) hereto.
6.16 Shareholder Expenses. Prior to the Closing, the Company
shall pay all Shareholder Expenses, a liability for which shall be reflected on
the Initial Balance Sheet delivered pursuant to Section 2.1 hereof.
6.17 Key Management Bonus Pool. Parent and the Purchaser each
hereby agrees and confirms that, to the extent not paid on or prior to the
Effective Time and not subject to any legal defenses, accruals under the
Company's key management bonus pool with respect to fiscal 1996 will constitute
obligations of the Surviving Corporation to the extent of, but only to the
extent of, such accruals and be paid in a manner consistent with the Company's
past practices.
6.18 ERISA Matters. With respect to each Plan specified on
Schedule 4.15(A) hereto, the Company shall take all appropriate actions so that
the Payment Benefit (as such term is defined on Schedule 4.15(A) hereto) with
respect to such Plan is terminated effective January 1, 1998, including, but not
limited to, the dissemination of notices of termination of the Payment Benefit
with respect thereto to each Plan participant within twenty (20) business days
of the date of this Agreement.
6.19 Environmental Matters. During the period from the date
hereof to the Effective Time, neither the Company nor any of its Subsidiaries
shall, without the prior written consent of Parent, initiate any communications
or enter into or make any agreement, understanding or commitment, orally or in
writing, with any governmental agency or representative thereof (collectively,
"Environmental Authorities") concerning any matter, including without limitation
pending matters or matters referred to in the EMC Report or the Xxxxxx Letter,
relating to the Company's or any of its Subsidiaries' compliance with or
liability under any Environmental Law (or permit any agent or other
representative of the Company or any of its Subsidiaries to so initiate, enter
into or make any such agreement, understanding or commitment). During such
period, the Company shall apprise representatives of Parent (as designated by
Parent to the Company) promptly with respect to
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all communications (written or oral) received from any Environmental Authority
and consult with such representatives prior to responding to inquiries or
proposals other than of a ministerial nature. Notwithstanding the foregoing, the
Company, through Xxxxxx, without identifying the Company or any of its
facilities, shall be permitted to verify, in the ordinary course, the need to
obtain any of the permits listed in Section 4.2.5 of the Xxxxxx Letter, and if
so verified, to prepare applications for such permits for submission to the
appropriate Environmental Authorities; provided that Parent's representatives
shall be apprised and consulted throughout the entire permitting process and no
applications for such permits shall be filed without Parent's prior written
consent.
7. Indemnification.
7.1 Survival of Representations and Warranties. The
representations and warranties of the Company contained in Section 4 of this
Agreement or in any certificate or agreement delivered pursuant to this
Agreement shall survive the Closing and shall continue in effect from the
Closing Date to the earlier of the date (i) eighteen (18) months following the
Closing Date or (ii) at the completion of the first full audit cycle for the
year commencing on January 1, 1997 during which the Company has been
consolidated with Parent and its Subsidiaries, notwithstanding any investigation
or access to information by or on behalf of any party.
7.2 Indemnification by the Shareholders. (a) The Shareholders
shall severally to the extent of their respective percentage interests in the
Escrow Account, and in accordance with the procedures set forth in the Escrow
Agreement, be responsible for, shall pay or cause to be paid, and shall
indemnify and hold harmless Parent, its subsidiaries and affiliates (including
the Surviving Corporation), and their respective employees, representatives,
officers, directors, and agents from and against any losses, claims, liabilities
(whether or not arising out of third-party claims), damages, expenses (including
reasonable expenses of investigation and reasonable attorneys' fees and
expenses) or obligations (collectively, "Losses") in any way related to,
attributed to, resulting from, caused by, based upon or arising out of (i) any
inaccuracy of, misrepresentation relating to, breach of, or failure to fulfill
any covenant, agreement, representation or warranty contained in this Agreement
or in any certificate or agreement delivered or entered into pursuant to this
Agreement on the part of the Company or any Subsidiary or (ii), with respect to
each Plan specified on Schedule 4.15(A) hereto, the alteration, termination or
modification of such Plan or any failure by the Company to (x) establish and
administer such Plan in compliance with any applicable provisions of ERISA, the
Code and other applicable laws, rules and regulations or (y) make any required
filings with respect thereto, including, but not limited to, the filing of a
Form 5500.
7.3 Procedures for and Limitations on Indemnification. (a) As
provided in Section 3.1(e) hereof, the Escrow Account shall be the exclusive
means of payment of any obligation of the Shareholders arising under this
Section 7. Any such payment shall be made in accordance with the terms of the
Escrow Agreement. As provided in Section 4 of the Escrow Agreement, Parent shall
give the Shareholder Representative written notice of any claim for
indemnification or payment pursuant to this Section 7, which notice shall
include a
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calculation of the amount of the requested indemnity or other payment and shall
furnish to the Shareholder Representative copies of all books, records and other
information reasonably requested by the Shareholder Representative to the extent
necessary to substantiate such claim and verify the amount thereof. Any dispute
with respect to an indemnification claim made by Parent shall be handled as
provided for in Section 4 of the Escrow Agreement. For purposes of this
Agreement, the Shareholder Representative shall mean Xxxx X. Xxxxx, or such
replacement or successor as shall be designated by Shareholders owning an
aggregate of two-thirds or more of the Company Common Stock.
(b) No indemnification amount shall be payable hereunder
unless and until the aggregate indemnification liability of the Shareholders
hereunder or under the Escrow Agreement shall exceed $130,000, and after
exceeding such amount, such indemnification liability shall not include such
$130,000.
(c) All Escrow Shares distributed to Parent from the Escrow
Account shall be deemed distributed pro rata by the Shareholders in accordance
with each such Shareholder's respective percentage interest in the Escrow
Account, which interests will be set forth in Schedule A to the Escrow
Agreement, as executed.
7.4 Exclusive Remedy. The rights of Parent, the Purchaser and
the other indemnified parties (the "Indemnified Parties") set forth in this
Section 7 are the exclusive remedy and in lieu of any and all other rights and
remedies with respect to Losses arising out of the matters specified in Section
7.2 (other than an action for fraud), and such Losses shall be satisfied solely
from the Escrow Account in accordance with the provisions of this Section 7 and
the provisions of the Escrow Agreement, and Parent and the Purchaser agree that
none of the Indemnified Parties shall have any recourse for the payment of any
Losses of any kind whatsoever arising under Section 7.2 against the past,
present or future stockholders, directors, officers and employees of the
Company, nor shall any of such persons be personally liable for any such Losses
(other than an action for fraud), it being expressly understood that the sole
remedy of the Indemnified Parties shall be against the Escrow Account in
accordance with the Escrow Agreement.
8. Additional Agreements.
8.1 Expenses. Except as provided otherwise in Section 6.3 or
in any agreement entered into pursuant hereto, whether or not the transactions
contemplated hereby are consummated, each of the parties hereto shall pay its
own fees and expenses incident to the negotiation, preparation and execution of
this Agreement and the consummation of the transactions contemplated hereby,
including attorneys', accountants' and other advisors' fees and the fees and
expenses of any broker, finder or agent retained by such party in connection
with the transactions contemplated hereby.
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9. Conditions to the Merger.
9.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
the Merger shall be subject to the following conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the holders of two-thirds of the outstanding shares of
Company Common Stock as required by the restated certificate of
incorporation of the Company and applicable law.
(b) Any waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have expired or been terminated.
(c) No order, statute, rule, regulation, executive order,
stay, decree, judgment, or injunction shall have been enacted, entered,
issued, promulgated or enforced by any court or governmental authority
which prohibits or restricts the consummation of the Merger or any
other material transaction contemplated by this Agreement.
(d) All approvals of third parties required for the
consummation of the Merger shall have been obtained and such approvals
shall be effective and shall not have been suspended, revoked or stayed
by action of any governmental authority.
(e) The Form S-4 shall have been declared effective by the SEC
and shall not be subject to a stop order or any threatened stop order.
9.2 Conditions to the Obligation of Parent and the Purchaser
to Effect the Merger. The obligation of Parent and the Purchaser to effect the
Merger shall be further subject to the fulfillment at or prior to the Effective
Time of the following conditions, any one or more of which may be waived by
Parent and the Purchaser:
(a) The Company shall have performed and complied in all
material respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by it at or prior
to the Effective Time.
(b) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Effective Time (except to
the extent that any representation and warranty is made as of a
specified date, in which case such representation and warranty shall be
true and correct in all material respects as of such date).
(c) There shall not have occurred after the date hereof any
event resulting in a Material Adverse Effect.
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(d) The Company shall have furnished such certificates of its
officers to evidence compliance with the conditions of the Company set
forth in this Section 9.2 as may be reasonably requested by Parent and
the Purchaser.
(e) The Company shall have delivered to Parent an opinion,
dated the Closing Date, satisfactory to counsel for Parent, of Xxxx
Xxxxx & Xxxxxxx LLP, counsel to the Company, to the effect that:
(i) The Company is a corporation duly
incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with requisite
corporate power and authority to own, operate and lease its
properties and to carry on its business as it is now being
conducted.
(ii) The Company has requisite corporate power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company, and the
consummation by the Company of the transactions contemplated
hereby, have been duly authorized by the Company's Board of
Directors and no other corporate action or proceeding on the
part of the Company is necessary for the execution, delivery
and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby, except
for obtaining the requisite approval of the Company's
Shareholders. This Agreement has been duly and validly
executed and delivered by the Company and is a valid and
legally binding obligation of the Company, enforceable against
it in accordance with its terms subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing.
(iii) Although such counsel has not independently
verified the correctness, accuracy, completeness or fairness
of the statements made or included in the Prospectus/Proxy
Statement, such counsel has participated in conferences and
discussions with representatives of the Company and its
Subsidiaries in the course of preparation by the Company and
its Subsidiaries of the Prospectus/Proxy Statement at which
the contents of the Prospectus/Proxy Statement were discussed,
and although such counsel does not pass upon or assume any
responsibility for the correctness, accuracy, completeness or
fairness of such statements, on the basis of the foregoing, no
facts have come to such counsel's attention which give such
counsel reason to believe that the Prospectus/Proxy Statement
(except as to the financial data contained therein, and except
as to information concerning Parent or the Purchaser, as to
which such counsel does not express any belief) contains any
untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they
were made, not misleading.
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(f) Parent shall have received the agreements referred to in
Section 6.13.
9.3 Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any one or more of which may be waived by the Company:
(a) The Purchaser and Parent shall have performed and complied
in all material respects with the agreements and obligations contained
in this Agreement required to be performed and complied with by them at
or prior to the Effective Time.
(b) The representations and warranties of the Purchaser and
Parent contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Effective Time
(except to the extent that any representation and warranty is made as
of a specified date, in which case such representation and warranty
shall be true and correct in all material respects as of such date).
(c) The Purchaser and Parent shall have furnished such
certificates of their officers to evidence compliance with the
conditions of the Company set forth in this Section 9.3 as may be
reasonably requested by the Company.
(d) Parent shall have delivered to the Company an opinion,
dated the Closing Date, satisfactory to counsel for the Company, of
Xxxxxxx X. Xxxxxx, General Counsel of Parent, or Xxxxxxx Xxxxxxx &
Xxxxxxxx, counsel to Parent and the Purchaser, to the effect that:
(i) Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good
standing under the laws of the States of Connecticut and New
York, respectively.
(ii) Each of Parent and the Purchaser has all
requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement by each
of Parent and the Purchaser, and the consummation by Parent
and the Purchaser of the transactions contemplated hereby have
been duly authorized by each of Parent's and the Purchaser's
Board of Directors and no other corporate action or proceeding
on the part of either Parent or the Purchaser is necessary for
the execution, delivery and performance of this Agreement by
Parent and the Purchaser and the consummation of the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and the
Purchaser and is a valid and legally binding obligation of
each of Parent and the Purchaser, enforceable against each of
them in accordance with its terms subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general
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equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and
fair dealing.
(iii) Upon the filing of a certificate of merger
with the Department of State of the State of New York, the
Merger will be effective in accordance with this Agreement and
the New York BCL.
(iv) The shares of Class B Common Stock which will
be transferred in accordance with this Agreement have been
duly authorized and validly issued, have been listed on the
New York Stock Exchange and, when transferred to the
Shareholders, will be fully paid and nonassessable.
(v) The Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section
368(a)(2)(E) of the Code.
provided, that the opinion set forth in clause (v) above shall not be a
condition to Closing if either (i) the sum of the amount of cash
required to be paid by Parent or the Purchaser to Dissenting Shares and
pursuant to Sections 2.2(v)(B) and 3.1(f) of this Agreement (after
giving effect to the first proviso in Section 2.2(v)(B)) exceeds ten
percent (10%) of the aggregate consideration to be paid by Parent or
the Purchaser to the Shareholders pursuant to this Agreement, (ii)
Xxxxxxx Xxxxxxx & Xxxxxxxx does not receive, at the time of the
Closing, representation letters in the form of Exhibit 9.3(d) from
Shareholders listed on Schedule 9.3(d) who, in the aggregate, own on
(x) the date of this Agreement and (y) the Closing Date at least fifty
percent of the issued and outstanding shares of Company Common Stock or
(iii) Xxxxxxx Xxxxxxx & Xxxxxxxx does not receive, at the time of the
Closing, the Company representation letter in the form of Exhibit
6.15(b).
(e) Following a vote of the Shareholders approving the Merger
at the Shareholders Meeting and prior to the Effective Time, there
shall not have occurred a material adverse change in or effect on the
business, operations, properties, assets, liabilities, condition
(financial or otherwise), results of operations or prospects of Parent
and its Subsidiaries taken as a whole.
10. Termination, Amendment and Waiver.
10.1 Termination. This Agreement may be terminated, by written
notice promptly given to the other parties hereto, at any time prior to the
Effective Time, whether prior to or after approval by the Shareholders:
(a) By mutual written consent of the Boards of Directors of
Parent and the Company; or
(b) By either Parent or the Company, if a court of competent
jurisdiction or any governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any
other action, in each case permanently
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restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; or
(c) By Parent, if the Effective Time shall not have occurred
on or before March 15, 1997, unless the absence of such occurrence
shall be due to the failure of the Purchaser or Parent (or their
Subsidiaries or affiliates) to perform in all material respects each of
their respective material obligations under this Agreement required to
be performed by it at or prior to the Effective Time; or
(d) By the Company, if the Effective Time shall not have
occurred on or before March 15, 1997, unless the absence of such
occurrence shall be due to the failure of the Company to perform in all
material respects its material obligations under this Agreement
required to be performed by it at or prior to the Effective Time; or
(e) By Parent, if at the Shareholders Meeting, including any
adjournment thereof, the holders of two-thirds of the outstanding
shares of Company Common Stock do not approve this Agreement and the
Merger, as required by the restated certificate of incorporation of the
Company and applicable law; or
(f) By Parent, if the Company shall have (i) withdrawn,
modified or amended in any material respect its approval or
recommendation of this Agreement, the Merger or the transactions
contemplated herein as set forth in Section 3.4 of this Agreement, (ii)
failed to include such recommendation in the Proxy Statement, or (iii)
taken any public position inconsistent with such recommendation,
including, without limitation, having failed (without the consent of
Parent) to after a reasonable period of time reject or disapprove any
Acquisition Proposal other than the Merger (or after a reasonable
period of time recommend to its Shareholders such rejection or
disapproval); or
(g) By Parent, in the event of a material breach by the
Company of any representation, warranty or agreement contained herein
which has not been cured or is not curable by the earlier of the
Closing Date or the thirtieth day after written notice of such breach
was given to the Company; or
(h) By the Company, if the Company executes or has executed a
definitive agreement for an Acquisition Proposal which its Board of
Directors determines, in the exercise of its fiduciary duties under
applicable law as advised by outside counsel, contains terms that are
more favorable to the Company's security holders, taken as a whole,
than the transactions contemplated by this Agreement and the
Alternative Transaction Fee plus all of the Transaction Expenses have
been paid or are paid concurrently therewith; or
(i) By the Company, in the event of a material breach by
Parent or the Purchaser of any representation, warranty or agreement
contained herein which has not
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been cured or is not curable by the earlier of the Closing Date or the
thirtieth day after written notice of such breach was given to Parent;
or
(j) By the Company, pursuant to the terms of, and subject to
the limitations of, Section 3.1(a) of this Agreement; or
(k) By Parent, if the Alternative Transaction Fee plus the
Transaction Expenses have become payable; or
(l) By the Company, if the Transaction Expenses have become
payable pursuant to Section 6.3(b) and have been paid in full.
10.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 10.1 hereof, this Agreement shall
forthwith become void and there shall be no liability on the part of Parent, the
Purchaser or the Company, except as set forth in this Section 10.2 and in
Sections 6.3, 8.1 and 11.1 hereof; provided, that the foregoing shall not
relieve any party for liability for damages actually incurred as a result of any
breach of this Agreement (whether willful or not); and provided, further, that
the Confidentiality Agreement shall continue in full force and effect.
Notwithstanding anything in this Agreement to the contrary, it is agreed that
the payment in full of the Alternative Transaction Fee and/or Transaction
Expenses, as the case may be, to Parent, in the event such amounts become
payable pursuant to Section 6.2 or 6.3, shall constitute Parent's and the
Purchaser's exclusive remedy with respect to asserted damages based on lost
profits or gain or otherwise relating to their expectations as to what would
have happened if the Merger had been consummated.
10.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto; provided,
however, that after adoption of this Agreement and the Merger by the
Shareholders, no amendment may be made which reduces the Merger Consideration or
changes the form thereof without the further approval of the Shareholders
affected thereby.
10.4 Waiver. At any time prior to the Effective Time, whether
before or after the Shareholders Meeting, any party hereto may (i) extend the
time for the performance of any of the obligations or other acts of any other
party hereto or (ii) waive compliance with any of the agreements of any other
party or with any conditions to its own obligations. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party by a duly
authorized officer.
11. General Provisions.
11.1 Public Statements. Each of the parties hereto promptly
shall advise, consult and cooperate with the other parties hereto prior to
issuing, or permitting any of its Subsidiaries, directors, officers, employees,
agents, representatives or advisors to issue, any press release or otherwise
making any statements to the press or any third party with respect
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to this Agreement or the transactions contemplated hereby, and shall not issue
any press release or make any such statements prior to such consultation, except
as may be required by law or by obligations pursuant to any listing agreement
with any national securities exchange.
11.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered mail, cable, telegram, or overnight courier
service to the parties at the following addresses or at such other addresses as
shall be specified by the parties by like notice:
(a) if to Parent or the Purchaser:
Xxxxxxx Incorporated
000 Xxxxx Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
(b) if to the Company:
Fargo Mfg. Company, Inc.
000 Xxxx Xxxxx Xxxx
Xxxxxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx,
President and Chief Executive Officer
with a copy to:
Xxxx Xxxxx & Xxxxxxx LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
11.3 Interpretation. When a reference is made in this
Agreement to Subsidiaries of Parent, the Purchaser, or the Company or any other
entity, the word "Subsidiaries" means any corporation more than 50 percent of
whose outstanding securities which ordinarily vote for the election of
directors, or any partnership, joint venture or other entity more than 50
percent of whose total equity interest, is directly or indirectly owned by
Parent or the Company or such other entity, as the case may be. When a reference
is made in this Agreement to affiliates of Parent or the Company or any other
entity, the word "affiliates" shall have the meaning provided in Rule 12b-2
promulgated by the SEC under the
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Exchange Act. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
11.4 Miscellaneous. This Agreement (including the documents
and instruments referred to herein) (i) together with the Confidentiality
Agreement and the Escrow Agreement, constitute the entire agreement and
supersede all other prior agreements and undertakings, both written and oral,
among the parties hereto, or any of them, with respect to the subject matter
hereof; (ii) is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder; (iii) may not be assigned, except that
Parent or the Purchaser may assign its rights hereunder in whole or in part to
one or more direct or indirect Subsidiaries or affiliates of Parent which, in
written instruments reasonably satisfactory to the Company, shall agree to
collectively assume all of such party's obligations hereunder and be bound by
all of the terms and conditions of this Agreement; provided, that such
assignment shall not relieve Parent or the Purchaser of any obligation
hereunder.
11.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
11.6 Counterparts. This Agreement may be executed in one or
more counterparts which together shall constitute a single agreement.
11.7 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
11.8 Construction. As used in this Agreement, the phrases "to
the knowledge of the Company", "to the Company's knowledge" and like phrases
mean and refer to the actual knowledge that the (A) President and Chief
Executive Officer, (B) Vice President, Sales and Marketing, (C) Vice President,
Finance and Treasurer, (D) Director of Engineering and (E) Director of
Manufacturing of the Company would have after conducting a due inquiry into the
subject matter in question.
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IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunder duly authorized.
XXXXXXX INCORPORATED
By: /s/ Xxxxx X. Xxxxx
-------------------------
Title: Vice President
FMC ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxx
-------------------------
Title: Vice President
FARGO MFG. COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Title: President
59
EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
ESCROW AGREEMENT
Escrow Agreement (the "Escrow Agreement") dated as of [ ], 1996 among XXXXXXX
INCORPORATED, a Connecticut corporation ("Xxxxxxx"), FARGO MFG. COMPANY, INC., a
New York corporation ("Fargo"), Xxxx X. Xxxxx in his capacity as the person
selected by the Company as the representative (the "Shareholder Representative")
of the former holders of the Common Stock of Fargo (the "Shareholders") and The
Chase Manhattan Bank, as escrow agent (the "Escrow Agent").
(a) Introduction. This is the Escrow Agreement referred to in the Agreement and
Plan of Merger (the "Merger Agreement") dated as of November 13, 1996 among
Xxxxxxx, FMC Acquisition Corporation, a New York corporation and a wholly owned
subsidiary of Xxxxxxx, and Fargo, providing for the acquisition of Fargo by
Xxxxxxx and related transactions (the "Merger"). All capitalized terms used
herein without definition have the meanings specified in the Merger Agreement.
(b) Appointment of Escrow Agent. Xxxxxxx and the Shareholder Representative do
hereby appoint and designate the Escrow Agent as escrow agent for the purposes
set forth herein, and the Escrow Agent does hereby accept such appointment under
the terms and conditions set forth herein.
(c) Establishment of Escrow Account. (a) As promptly as practicable after the
execution of this Escrow Agreement, Fargo shall deliver to the Escrow Agent an
accurate list of the names and mailing addresses of all of the holders of record
of Common Stock, without par value, of Fargo (the "Fargo Common Stock"),
immediately prior to the Closing of the Merger and the number of shares of Fargo
Common Stock held by each Shareholder. Each person or entity on such list shall
be deemed an "Escrow Participant." Each Escrow Participant shall have an
interest in the Escrow Account proportional to his or her percentage ownership
interest in shares of Fargo Common Stock immediately prior to the Closing
(hereinafter referred to individually as an "Interest" and collectively as the
"Interests"), which Interests shall be set forth on Schedule A hereto and made a
part hereof. The Escrow Agent shall be entitled to rely upon such list as most
recently updated in making any distributions to Escrow Participants hereunder.
Dissenting Shares shall be excluded for all purposes hereunder.
(b)Upon execution of this Escrow Agreement, Xxxxxxx shall deposit with the
Escrow Agent a certificate representing the number of whole shares (after
rounding up to the nearest share in the case of fractional shares) of Class B
Common Stock, par value $0.01 per share, of Xxxxxxx (the "Class B Common
Stock"), registered in the name of the Escrow Agent as escrow agent hereunder,
equal to ten percent (10%) of the number of whole shares of Class B Common Stock
to be issued pursuant to the Merger Agreement (the "Escrow Account"). The Escrow
Account shall be used solely at the option of Xxxxxxx to (i) reimburse Xxxxxxx
to the
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extent that the Estimated Net Worth Amount used in determining the Merger
Consideration exceeds the Final Closing Net Worth Amount and (ii) satisfy any
indemnification obligations to Xxxxxxx set forth in Section 7 of the Merger
Agreement.
(c)The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard
and disburse the Escrow Account pursuant to the terms and conditions hereof.
(d) Disbursements from the Escrow Account. (1) In the event that the Estimated
Net Worth Amount exceeds the Final Closing Net Worth Amount (as such amounts are
determined pursuant to Section 2.2 of the Merger Agreement and subject to the
dispute resolution procedures set forth therein), Xxxxxxx may submit to the
Escrow Agent (i) a certificate signed by a duly authorized officer of Xxxxxxx
stating that the Estimated Net Worth Amount exceeded the Final Closing Net Worth
Amount (as finally determined pursuant to Section 2.2 of the Merger Agreement)
and specifying the amount of such excess (the "Excess Net Worth Amount") and
(ii) written instructions to the Escrow Agent signed by a duly authorized
officer requesting that such Excess Net Worth Amount be paid to Xxxxxxx from
shares of Class B Common Stock on deposit in the Escrow Account. The Escrow
Agent shall deliver such Excess Net Worth Amount, in accordance with Section
4(d) hereof, not later than the second business day following receipt of such
written instructions. Xxxxxxx shall send copies of the foregoing documents to
the Shareholder Representative concurrently with the delivery thereof to the
Escrow Agent.
(2) In the event that Xxxxxxx suffers any loss, claim, damage or liability for
which it is entitled to be indemnified pursuant to Section 7 of the Merger
Agreement (each, a "Claim"), Xxxxxxx may submit to the Escrow Agent and the
Shareholder Representative (i) a certificate signed by a duly authorized officer
of Xxxxxxx (A) stating that Xxxxxxx has a Claim and specifying the section or
sections of the Merger Agreement which are the subject of the Claim and (B)
specifying in reasonable detail, with reasonable supporting documentation, the
components of such Claim, including a calculation of the amount of the requested
indemnity or other payment and (ii) written instructions to the Escrow Agent
signed by a duly authorized officer of Xxxxxxx setting forth the amount (the
"Escrow Payment") to be paid to Xxxxxxx from the Escrow Account based upon the
information set forth in such certificate. Xxxxxxx shall furnish the Shareholder
Representative with copies of all books, records and other information
reasonably requested by the Shareholder Representative to the extent necessary
(or reasonably appropriate) to substantiate such Claim. If, within thirty (30)
days (the "Objection Period") of delivery of the certificate pursuant to clause
(i) above and the instructions pursuant to clause (ii) above, the Shareholder
Representative does not object thereto in a writing (the "Objection Notice")
delivered to the Escrow Agent and Xxxxxxx, then the Escrow Agent shall act in
accordance with such instructions and Section 4(d) hereof. If during the
Objection Period, the Shareholder Representative delivers to the Escrow Agent
and Xxxxxxx an Objection Notice, signed by the Shareholder Representative,
specifying in reasonable detail the Shareholder Representative's objection to
such certificate and the portion of the Escrow Payment to which the Shareholder
Representative objects, then the Escrow Agent shall pay to Xxxxxxx only such
portion of the Escrow Payment as is not specifically objected to in such
Objection Notice. The Shareholder Representative and Xxxxxxx shall
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3
negotiate in good faith to determine whether, and to what extent, Xxxxxxx is
entitled to the disputed portion of the Escrow Payment. To the extent such
agreement is reached, Xxxxxxx and the Shareholder Representative shall within
two (2) business days thereof set forth the determination regarding the
remainder of the Escrow Payment, if any, to be paid to Xxxxxxx in written
instructions to the Escrow Agent signed by a duly authorized officer of Xxxxxxx
and by the Shareholder Representative, and the Escrow Agent shall deliver shares
of Class B Common Stock representing such amount to Xxxxxxx in accordance with
Section 4(d). If within thirty (30) days of delivery of the Objection Notice the
Shareholder Representative and Xxxxxxx have not reached agreement as to such
matter, such matter shall be determined by a competent disinterested person
acting as arbitrator, to be selected by mutual agreement of the Shareholder
Representative and Xxxxxxx within ten (10) days after such 30-day period. The
determination of such arbitrator shall be binding and final for all purposes on
Xxxxxxx and the Shareholders and may be enforced as such by any court of
competent jurisdiction. If Xxxxxxx and the Shareholder Representative fail to
agree on the selection of an arbitrator during such period, then each of Xxxxxxx
and the Shareholder Representative shall designate a competent disinterested
person to act as arbitrator within ten (10) days after such 10-day period.
Within thirty (30) days of their appointment, each of the two arbitrators shall
submit to Xxxxxxx and the Shareholder Representative a written report setting
forth its determination and the factors utilized in making such determination.
If the two arbitrators agree as to whether and to what extent Xxxxxxx is
entitled to be indemnified pursuant to Section 7 of the Merger Agreement for
such Claim, such determination shall be binding and final for all purposes on
Xxxxxxx and the Shareholders and may be enforced as such by any court of
competent jurisdiction. If the two arbitrators do not agree as to whether and to
what extent Xxxxxxx is entitled to be indemnified for such Claim, a third
arbitrator shall be selected by the two arbitrators within five (5) days
thereof, and within ten (10) days of such arbitrator's selection such arbitrator
shall select one of the determinations of the two arbitrators as the most
accurate, and the determination so selected shall be binding and final for all
purposes on Xxxxxxx and the Shareholders and may be enforced as such by any
court of competent jurisdiction. Within two business days of a binding
determination made by the first arbitrator, by the two arbitrators or by the
third arbitrator, as the case may be, Xxxxxxx and the Shareholder Representative
shall set forth the determination regarding the remainder of the Escrow Payment,
if any, to be paid to Xxxxxxx in written instructions to the Escrow Agent signed
by a duly authorized officer of Xxxxxxx and by the Shareholder Representative,
and the Escrow Agent shall deliver shares of Class B Common Stock representing
such amount to Xxxxxxx in accordance with Section 4(d). The costs incurred in
retaining the arbitrator selected by mutual agreement of the parties and the
third arbitrator shall be borne one-half by Xxxxxxx and one-half by the
Shareholder Representative on behalf of the Shareholders. The costs incurred in
retaining the arbitrator (x) selected by Xxxxxxx shall be borne by Xxxxxxx and
(y) selected by the Shareholder Representative shall be borne by the Shareholder
Representative on behalf of the Shareholders.
(3)The Escrow Agent shall deliver the Escrow Payment, or any portion thereof, as
instructed, not later than (i) the second business day following receipt of
written instructions signed by a duly authorized officer of Xxxxxxx and by the
Shareholder Representative or (ii) the second business day following the last
day of an Objection Period in the event that the Shareholder
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4
Representative does not deliver an Objection Notice during such period in
response to any certificate and instructions delivered to the Escrow Agent.
(4) Any payment of the Excess Net Worth Amount or of any Claim made by the
Escrow Agent pursuant to this Section 4 shall be paid in shares of Class B
Common Stock deposited in the Escrow Account, such number of shares to be equal
to the quotient (rounded up to the nearest whole share) of (i) the amount of the
payment to be made by the Escrow Agent divided by (ii) the Average Price. The
Escrow Agent shall effect such payment by surrendering the certificate for such
shares to Xxxxxxx'x transfer agent (ChaseMellon Shareholder Services, L.L.C.)
for cancellation upon receipt by the Escrow Agent of a copy of a letter from
Xxxxxxx to Xxxxxxx'x transfer agent, instructing such transfer agent to issue a
new certificate to the Escrow Agent for the shares of Class B Common Stock
remaining in the Escrow Account. In surrendering the shares to the transfer
agent, the Escrow Agent shall instruct the transfer agent to issue a certificate
for the number of shares of Class B Common Stock equal to the Excess Net Worth
Amount or the Claim, as the case may be, to Xxxxxxx. Upon delivery by the Escrow
Agent of shares of Class B Common Stock and such instructions to the transfer
agent, the Escrow Agent shall have no further obligations with respect to the
application of such shares of Class B Common Stock by the recipient thereof. All
shares of Class B Common Stock distributed from the Escrow Account shall be
deemed to be distributed pro rata by the Escrow Participants in accordance with
each Escrow Participant's Interest. If the amount of the Excess Net Worth Amount
or any Claim exceeds the aggregate value of the shares of Class B Common Stock
then on deposit with the Escrow Agent, the Escrow Agent shall have no liability
or responsibility for any deficiency.
(5)In the event that either Xxxxxxx or the Shareholder Representative fails to
select an arbitrator as required in accordance with paragraph (b) of this
Section 4, or if the arbitrator selected by such party in accordance with such
paragraph fails to comply with the provisions of such paragraph, then the
determination made by the arbitrator selected by the other party shall be
binding and final for all purposes on Xxxxxxx and the Shareholders and may be
enforced as such by any court of competent jurisdiction in respect of the matter
to be arbitrated under such paragraph.
(6)Nothing contained herein shall be deemed to obligate the Escrow Agent to pay
or transfer any shares of Class B Common Stock hereunder unless the same shall
have been received by the Escrow Agent pursuant to the provisions of this Escrow
Agreement.
(g)With respect to any Claim for which Xxxxxxx requests indemnity or other
payment pursuant to Section 4(b) above, where such Claim is one arising out of a
third-party claim, the Shareholder Representative will have the right to assume
the defense of such third-party claim. To the extent that the Shareholder
Representative elects not to assume the defense of such third-party claim, the
Shareholder Representative will have the right to participate in or consent to
any settlement of such third-party claim which would result in an Escrow Payment
to Xxxxxxx. Any and all costs or expenses (including, but not limited to,
reasonable costs of investigation, court costs, and attorneys' fees and
disbursements) incurred in such defense, participation, or consent shall be
borne by the Shareholder Representative on behalf of the Shareholders.
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(e) Termination of the Escrow Account. Upon the earlier of (i) eighteen (18)
months from the Closing Date or (ii) at the completion of the first full audit
cycle for the year commencing on January 1, 1997 during which the Company has
been consolidated with Xxxxxxx and its subsidiaries (each a "Termination Date"),
the Escrow Agent shall disburse all shares of Class B Common Stock then in the
Escrow Account to the Escrow Participants based upon each Escrow Participant's
Interest; provided, however, that if the dispute resolution process for
determination of the Final Closing Net Worth Amount is still continuing or if
there are any outstanding or unsatisfied Claims against the Escrow Account as to
which the Escrow Agent has received notice pursuant to Section 4 hereof on or
prior to the Termination Date, this Escrow Agreement shall continue in full
force and effect until the resolution of the Final Closing Net Worth Amount or
all such Claims, as the case may be, and a number of shares of Class B Common
Stock (rounded up to the nearest whole share) equal in value (with each such
share valued at the Average Price) to satisfy the Excess Net Worth Amount or any
outstanding or unsatisfied Claims against the Escrow Account, as the case may
be, shall be retained in the Escrow Account until the Excess Net Worth Amount or
such Claims have been satisfied and discharged, and any unused amount remaining
after such satisfaction and discharge shall be promptly paid to the Escrow
Participants].
(f) Dividends; Voting Rights. (a)Any distributions or dividends ("Dividends")
payable with respect to the Class B Common Stock held in the Escrow Account
shall not be deemed to be part of the Escrow Account and shall be distributed on
the dividend payment date therefor or as soon as practical thereafter by the
Escrow Agent directly to the Escrow Participants in accordance with each such
Escrow Participant's Interest. Dividends shall not be made a part of the Escrow
Account, shall not be deemed to be part of the Escrow Account and shall not be
available hereunder for the payment of the Excess Net Worth Amount or of any
Claims made by Xxxxxxx against the Escrow Account.
(b)The Escrow Participants shall retain all voting rights with respect to the
shares of Class B Common Stock held in the Escrow Account for so long as any
such shares are held by the Escrow Agent hereunder. Upon receipt of any notice,
or other voting or proxy materials, from Xxxxxxx with respect to the Class B
Common Stock, the Escrow Agent shall promptly remit such materials to the Escrow
Participants in order to allow such persons to exercise their respective voting
rights hereunder based on the Interest owned by each such Escrow Participant. On
any matter for which the Class B Common Stock has a vote, the Escrow Agent shall
vote the shares of Class B Common Stock held by it as instructed by the Escrow
Participants in accordance with their Interests. If any Escrow Participant fails
to provide voting instructions to the Escrow Agent, then the Escrow Agent shall
abstain from voting with respect to the shares of Class B Common Stock
represented by the Interest held by such Escrow Participant.
(g) Escrow Agent Expenses. Xxxxxxx and the Shareholder Representative (on behalf
of the Shareholders) hereby agree that the Escrow Agent's fees as set forth on
Schedule B attached hereto and made a part hereof shall be initially advanced by
Xxxxxxx to the Escrow Agent and subsequently reimbursed to Xxxxxxx by the
transfer to Xxxxxxx by the Escrow Agent of a
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6
certificate representing that number of whole shares of Class B Common Stock
equal in value (valued at the Average Price) to the amount of such fees. All
expenses of the Escrow Agent, if any, apart from the fee set forth on Schedule B
hereto, shall be recouped by the Escrow Agent as incurred from time to time
through the sale at fair market value by the Escrow Agent of that number of
whole shares of Class B Common Stock necessary to pay such expenses. Any shares
of Class B Common Stock sold by the Escrow Agent to pay expenses shall be deemed
to be sold pro rata by the Escrow Participants in accordance with each Escrow
Participant's Interest. The Escrow Agent shall notify Xxxxxxx and the
Shareholder Representative of any sale of shares of Class B Common Stock
pursuant to this Section 7, and such notice shall state the amount of the
expenses recouped, the date of the sale and the number of shares of Class B
Common Stock sold. The Escrow Agent shall have no duty to solicit any payments
which may be due it under this Escrow Agreement.
(h) Tax Matters. For purposes of federal and other taxes based on income, the
Escrow Participants will be treated as the owners of the Escrow Account in
proportion to their respective Interests therein. The Escrow Agent shall report
the income, if any, that is earned on, or derived from, the Escrow Account as
income of the Escrow Participants in the taxable year or years in which such
income is properly includible and shall prepare and distribute to the Escrow
Participants Forms 1099 or equivalent tax reporting forms reflecting such
income. The Shareholder Representative will provide the Escrow Agent with the
Tax Identification Numbers (TIN) of the Escrow Participants as assigned by the
Internal Revenue Service. All interest or other income earned under the Escrow
Agreement shall be allocated and paid as provided herein and reported by the
recipient Escrow Participant to the Internal Revenue Service as having been so
allocated and paid.
(i) The Shareholder Representative. The Shareholder Representative shall mean
Xxxx X. Xxxxx, or such replacement or successor as shall be designated by
Shareholders owning an aggregate of a majority of Fargo Common Stock. The
Shareholder Representative shall be entitled to take the actions specified in
this Escrow Agreement and the Merger Agreement without seeking the concurrence
of any Shareholders, except that the voluntary acceptance of a Claim without any
objection whatsoever thereto, which would result in the payment to Xxxxxxx of
shares of Class B Common Stock having a value (based on the Average Price) of
$500,000 or more, shall require the prior concurrence (which may be by written
consent without a meeting) of the holders of a majority of the Interests.
(j) The Escrow Agent. (1) The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein.
(2)The Escrow Agent may rely and shall be protected in acting or refraining from
acting upon any written notice, instruction or request furnished to it hereunder
and reasonably believed by it to be genuine and to have been signed or presented
by the proper party or parties.
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(3)The Escrow Agent shall not be liable for any action taken by it in good faith
and reasonably believed by it to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement, and may consult with counsel of its
own choice and shall have full and complete authorization and protection for any
action taken or suffered by it hereunder in good faith and in accordance with
the opinion of such counsel.
(4)In the event that the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands from any party
hereto which, in its opinion, conflict with any of the provisions of this Escrow
Agreement, it shall be entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow until it shall be
directed otherwise in writing by all of the other parties hereto or by a final
order or judgment of a court of competent jurisdiction.
(5) The Escrow Agent may resign and be discharged from its duties or obligations
hereunder by giving notice in writing of such resignation specifying a date upon
which such resignation shall take effect, which date shall not be less than
sixty (60) days prior to the date such notice is given and provided that such
resignation shall not take effect until a successor Escrow Agent shall have been
appointed jointly by Xxxxxxx and the Shareholder Representative.
(6)This Escrow Agreement expressly sets forth all the duties of the Escrow Agent
with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
The Escrow Agent shall not be bound by the provisions of any agreement among the
other parties hereto except this Escrow Agreement and shall not be deemed to
have knowledge of nor responsibility under the terms of the Merger Agreement.
The Escrow Agent shall be under no duty to inquire into or investigate the
validity, accuracy or content of any such document.
(7)Xxxxxxx and the Shareholder Representative (on behalf of the Shareholders)
hereby agree, jointly and severally, to indemnify and hold harmless the Escrow
Agent against any and all costs, losses, claims, damages, liabilities, expenses,
including reasonable costs of investigation, court costs, and attorneys' fees
and disbursements, which may be imposed upon the Escrow Agent in connection with
its acceptance of appointment as Escrow Agent hereunder, including any
litigation arising from this Agreement or involving the subject matter hereof,
except in the case of the Escrow Agent's own willful default or gross
negligence; 50% of any such amount shall be payable by Xxxxxxx and 50% shall be
payable by the Shareholder Representative on behalf of the Shareholders.
Anything in this agreement to the contrary notwithstanding, in no event shall
the Escrow Agent be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits), even if the
Escrow Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action; provided, however, that this sentence shall
not apply in the case of gross negligence or bad faith on the part of the Escrow
Agent in the performance of its duties as Escrow Agent.
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(k)Interests. Interests will not be represented by any form of certificate or
other instrument and will not be transferable or assignable, other than by will,
the laws of intestacy or other operation of law.
(l)Assignment. Neither this Escrow Agreement nor any right or interest hereunder
may be assigned in whole or in part by any party without the prior consent of
the other parties. This Escrow Agreement shall inure to the benefit of and be
binding upon the parties and their respective successors and assigns.
(m)Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and any action brought
hereunder shall be brought in the courts of the State of New York, located in
the County of New York. Each party hereto irrevocably waives any objection on
the grounds of venue, forum non-conveniens or any similar grounds and
irrevocably consents to service of process by mail or in any other manner
permitted by applicable law and consents to the jurisdiction of said courts.
(n)Amendment. This Agreement cannot be amended or modified except by a writing
signed by Xxxxxxx, the Shareholder Representative and the Escrow Agent.
(o)Notices. (1) All notices and other communications under this Escrow Agreement
shall be in writing and shall be deemed to have been duly given or delivered
when delivered in person, or sent by courier or other overnight delivery
service, or when sent by telecopy (with receipt confirmed) provided that a copy
is then mailed by registered or certified mail, return receipt requested, with
first class postage prepaid; except that, with respect to the Escrow Agent,
notices and other communications under this Escrow Agreement shall be deemed to
have been duly given or delivered on the date received by the Escrow Agent:
(i) If to Xxxxxxx:
Xxxxxxx Incorporated
000 Xxxxx Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
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(ii) If to the Shareholder Representative:
Xxxx X. Xxxxx
00 Xxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
with a copy to:
Xxxx Xxxxx & Xxxxxxx LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
(iii) If to the Escrow Agent:
The Chase Manhattan Bank
Corporate Trust Group
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxxxx Escrow Administration,
15th Floor
000-000-0000 (Fax 000-000-0000/56)
(2)In the event that the Escrow Agent, in its sole discretion, shall determine
that an emergency exists, the Escrow Agent may use such other means of
communications as the Escrow Agent deems advisable.
(p)Counterparts. This Escrow Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute a single agreement.
(q) Termination. This Agreement shall terminate at the time that all shares of
Class B Common Stock held by the Escrow Agent hereunder have been disbursed.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Escrow
Agreement on the date first above written.
XXXXXXX INCORPORATED
By:_________________
FARGO MFG. COMPANY, INC.
By:_________________
THE CHASE MANHATTAN BANK
By:_________________
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SCHEDULE A
TO EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
Shareholder Interests
---------------------
Shareholder Interests
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SCHEDULE B
TO EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
Escrow Agent Fees
$10,000, such fee to be in full payment of the fees of the Escrow Agent for so
long as this Escrow Agreement shall be in effect.
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SCHEDULE C
TO EXHIBIT A
TO AGREEMENT AND PLAN OF MERGER
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
If to Xxxxxxx:
Name Telephone Number
---- ----------------
1. _________________________ _________________________
2. _________________________ _________________________
3. _________________________ _________________________
If to Fargo:
1. _________________________ _________________________
2. _________________________ _________________________
3. _________________________ _________________________
If to Shareholder Representative:
1. Xxxx X. Xxxxx _________________________
Telephone call-backs shall be made to each of Xxxxxxx and Fargo or to Xxxxxxx
and the Shareholder Representative, as the case may be, if joint instructions
are required pursuant to the Agreement.
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EXHIBIT B
TO AGREEMENT AND PLAN OF MERGER
FORM OF COMPANY AFFILIATE LETTER
Gentlemen:
The undersigned, a holder of shares of Common Stock, no par
value ("Company Stock"), of Fargo Mfg. Company, Inc., a New York corporation
(the "Company"), is entitled to receive in connection with the merger (the
"Merger") of the Company with FMC Acquisition Corporation, a New York
corporation, securities (the "Parent Securities") of Xxxxxxx Incorporated
("Parent"). The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933 (the "Act"), although nothing
contained herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the Act,
the undersigned's ability to sell, assign or transfer the Parent Securities
received by the undersigned in exchange for any shares of Company Stock pursuant
to the Merger may be restricted unless such transaction is registered under the
Act or an exemption from such registration is available. The undersigned
understands that such exemptions are limited and the undersigned has obtained
advice of counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sale of such securities of
Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with the
Company that the undersigned will not sell, assign or transfer any of the Parent
Securities received by the undersigned in exchange for shares of Company Stock
pursuant to the Merger except (i) pursuant to an effective registration
statement under the Act, (ii) in conformity with the volume and other
limitations of Rule 144 (to the extent incorporated in Rule 145) or (iii) in a
transaction which, in the opinion of independent counsel reasonably satisfactory
to Parent or as described in a "no-action" or interpretive letter from the Staff
of the Securities and Exchange Commission (the "SEC"), is not required to be
registered under the Act.
In the event of a sale or other disposition by the undersigned
of Parent Securities pursuant to Rule 145, the undersigned will supply Parent
with evidence of compliance with such Rule, in the form of a letter in the form
of Annex I hereto. The undersigned understands that Parent may instruct its
transfer agent to withhold the transfer of any Parent Securities disposed of by
the undersigned, but that upon receipt of such evidence of compliance the
transfer agent shall effectuate the transfer of the Parent Securities sold as
indicated in the letter.
The undersigned acknowledges and agrees that appropriate
legends will be placed on certificates representing Parent Securities received
by the undersigned in the Merger or held by a transferee thereof, which legends
will be removed by delivery of substitute certificates upon receipt of an
opinion in form and substance reasonably satisfactory to Parent
73
from independent counsel reasonably satisfactory to Parent to the effect that
such legends are no longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned has
carefully read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other disposition
of Parent Securities and (ii) the receipt by Parent of this letter is an
inducement and a condition to Parent's obligations to consummate the Merger.
Very truly yours,
Dated:
74
ANNEX I
TO EXHIBIT B
TO AGREEMENT AND PLAN OF MERGER
[NAME] [DATE]
On __________ the undersigned sold the securities ("Securities") of Xxxxxxx
Incorporated (the "Company") described below in the space provided for that
purpose (the "Securities"). The Securities were received by the undersigned in
connection with the merger of FMC Acquisition Corporation with and into Fargo
Mfg. Company, Inc..
Based upon the most recent report or statement filed by the
Company with the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph (e) of
Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Securities were
sold in "brokers' transactions" within the meaning of Section 4(4) of the Act or
in transactions directly with a "market maker" as that term is defined in
Section 3(a)(38) of the Securities Exchange Act of 1934, as amended. The
undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities, and that the
undersigned has not made any payment in connection with the offer or sale of the
Securities to any person other than to the broker who executed the order in
respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
75
EXHIBIT C
TO AGREEMENT AND PLAN OF MERGER
AFFIDAVIT OF LOSS AND INDEMNITY
STATE OF )
)ss.:
COUNTY OF )
I, [name of shareholder], residing at [address of shareholder]
being duly sworn, depose and say:
1. Immediately prior to the effective time of the Merger (as
defined in that Agreement and Plan of Merger dated as of November 13, 1996 (the
"Merger Agreement"), among Xxxxxxx Incorporated ("Xxxxxxx"), FMC Acquisition
Corporation and Fargo Mfg. Company, Inc. ("Fargo"), I was the holder of record
and beneficial owner of ____ shares (the "Shares") of Common stock, no par
value, of Fargo, represented by stock certificate number(s) _________ of Fargo
(collectively, the "Certificate").
2. I have diligently searched for the Certificate but have
been unable to find it. The Certificate was not endorsed for transfer, and I
have not executed any stock power relating to the Certificate.
3. I have not sold, transferred or disposed of the Certificate
or the Shares or any interest therein to any person or entity, except as a
result of the Merger.
4. If I find the Certificate, I shall surrender it forthwith
to the Exchange Agent (or Fargo), as appropriate, for cancellation.
5. I agree to indemnify and hold the Exchange Agent, Fargo,
Xxxxxxx and their respective successors or assigns harmless for any loss, damage
or expense they or their successors or assigns may sustain arising from the
issuance of certificates representing shares of Class B Common Stock of Xxxxxxx
to me pursuant to the Merger Agreement on reliance upon this affidavit, or from
the delivery of the Certificate to any other person and I have attached a
customary insurance policy for this purpose.
______________________
Subscribed and sworn to before me this ____ day of _________, 1996.
______________________
Notary Public
My commission expires ___________
[Seal]
76
EXHIBIT 6.15(a)
TO AGREEMENT AND PLAN OF MERGER
[Xxxxxxx Incorporated Letterhead]
[ ], 1996
Re: Agreement and Plan of Merger dated as of
November 13, 1996 by and between Xxxxxxx
Incorporated, FMC Acquisition Corporation
and Fargo Mfg. Company, Inc.
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The following facts and representations are being furnished to
you in connection with the preparation of your tax opinion to be provided in
connection with the Merger. We understand that you will be relying on such facts
and representations in delivering your opinion and that the delivery of such
opinion is a condition precedent to the Merger. Unless otherwise defined herein,
capitalized terms shall have the meanings ascribed to them in the Agreement and
Plan of Merger, dated as of November 13, 1996, by and between Xxxxxxx
Incorporated ("Parent"), FMC Acquisition Corporation ("Merger Sub") and Fargo
Mfg. Company, Inc., ("Company") (the "Merger Agreement").
Assuming the Merger will be effected in accordance with the
Merger Agreement, the following facts and representations are true and accurate
as of the date hereof and you may assume that such facts and representations
remain true and accurate as of the Effective Time unless we otherwise notify you
in writing:
(a) The fair market value of the Class B Common Stock and other
consideration received by each holder of Company Common Stock will be
approximately equal to the fair market value of the Company Common Stock
surrendered in the Merger.
77
Xxxxxxx Xxxxxxx & Xxxxxxxx -2- [ ], 1996
(b) Following the Merger, Company will hold at least 90 percent
of the fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair market
value of Merger Sub's net assets and at least 70 percent of the fair market
value of Merger Sub's gross assets held immediately prior to the Merger. For
purposes of this representation, amounts paid by Company or Merger Sub to
dissenters, amounts paid by Company or Merger Sub to holders of Company Common
Stock who receive cash or other property, amounts used by Company or Merger Sub
to pay reorganization expenses, and all redemptions and distributions (except
for regular, normal dividends) made by Company, will be included as assets of
Company or Merger Sub, respectively, held immediately prior to the Merger.
(c) Prior to the Merger, Parent will be in control of Merger Sub
within the meaning of Section 368(c) of the Code.
(d) Parent has no plan or intention to cause Company after the
Merger to issue additional shares of its stock that would result in Parent
losing control of Company within the meaning of Section 368(c) of the Code.
(e) Parent has no plan or intention to reacquire any of the Class
B Common Stock issued in the Merger.
(f) Parent has no plan or intention to liquidate Company; to
merge Company with or into another corporation; to sell or otherwise dispose of
Company Common Stock except for transfers of Company Common Stock to
corporations controlled by Parent; or to cause Company to sell or otherwise
dispose of any of its assets or any of the assets acquired from Merger Sub,
except for dispositions made in the ordinary course of business or transfers
described in Section 368(a)(2)(C) of the Code.
(g) Merger Sub will have no liabilities assumed by Company, and
will not transfer to Company any assets subject to liabilities, in the Merger.
(h) Following the Merger, Company will continue its historic
business or use a significant portion of its historic business assets in a
business.
(i) Parent, Merger Sub and Company will pay their respective
expenses, if any, incurred in connection with the Merger.
(j) There is no intercorporate indebtedness existing between
Parent and Company or between Merger Sub and Company that was issued, acquired
or has been settled at a discount.
(k) Parent does not own, nor has it owned during the past five
years, any Company Common Stock.
(l) Neither Parent nor Merger Sub are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
78
Xxxxxxx Xxxxxxx & Xxxxxxxx -3- [ ], 1996
(m) The payment of cash in lieu of fractional shares of Class B
Common Stock was not separately bargained for consideration, and its being made
for the sole purpose of saving Parent the expense and inconvenience of issuing
fractional shares. The fractional share interests of each holder of Company
Common Stock will be aggregated, and no holder of Company Common Stock will
receive cash in an amount greater than the value of one full share of Class B
Common Stock.
(n) None of the compensation received by any stockholder-employee
of Company pursuant to any employment, consulting or similar arrangement is or
will be separate consideration for, or allocable to, any of his/her Company
Common Stock. None of the shares of Class B Common Stock received by any
stockholder-employee of Company pursuant to the Merger is or will be separate
consideration for, or allocable to, any such employment, consulting or similar
arrangement. The compensation paid to any stockholder-employee of Company
pursuant to any such employment, consulting or similar arrangement is or will be
for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services. Parent
acknowledges that your tax opinion may not accurately describe the effects of
the Merger if any of the foregoing facts or representations are inaccurate.
Very truly yours,
Xxxxxxx Incorporated
____________________
By:
Title:
79
EXHIBIT 6.15(b)
TO AGREEMENT AND PLAN OF MERGER
[Fargo Mfg. Company Letterhead]
[ ], 1996
Re: Agreement and Plan of Merger
dated as of November 13, 1996 by and
between Xxxxxxx Incorporated, FMC
Acquisition Corporation and Fargo Mfg.
Company, Inc.
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The following facts and representations are being furnished to
you in connection with the preparation of your tax opinion to be provided in
connection with the Merger. We understand that you will be relying on such facts
and representations in delivering your opinion and that the delivery of such
opinion is a condition precedent to the Merger. Unless otherwise defined herein,
capitalized terms shall have the meanings ascribed to them in the Agreement and
Plan of Merger, dated as of November 13, 1996, by and between Xxxxxxx
Incorporated ("Parent"), FMC Acquisition Corporation ("Merger Sub") and Fargo
Mfg. Company, Inc., ("Company") (the "Merger Agreement").
Assuming the Merger will be effected in accordance with the
Merger Agreement, the following facts and representations are true and accurate
as of the date hereof and you may assume that such facts and representations
remain true and accurate as of the Effective Time unless we otherwise notify you
in writing:
1. The fair market value of the Class B Common Stock and other
consideration received by each holder of Company Common Stock will be
approximately equal to the fair market value of the Company Common Stock
surrendered in the Merger.
2. There is no plan or intention by the holders of Company Common
Stock who own (either directly or through attribution) 1 percent or more of the
Company Common Stock, and to the best of the knowledge of the management of
Company, there
80
Xxxxxxx Xxxxxxx & Xxxxxxxx -2- [ ], 1996
is no plan or intention on the part of the remaining holders of Company Common
Stock to sell, exchange, or otherwise dispose of a number of shares of Class B
Common Stock received in the Merger that would, in the aggregate, reduce the
ownership of Class B Common Stock by the former holders of the Company Common
Stock to a number of shares having a value, as of the Effective Time, of less
than fifty percent (50%) of the value of all the formerly outstanding stock of
Company as of the same date. For purposes of this representation, shares of
Company Common Stock exchanged for cash or other property (including any amounts
received pursuant to section 2.2(v)(B) of the Merger Agreement), surrendered by
dissenters or exchanged for cash in lieu of fractional share interests of Class
B Common Stock will be treated as outstanding Company Common Stock on the date
of the Merger. Moreover, shares of Company Common Stock and Class B Common Stock
held by holders of Company Common Stock and otherwise sold, redeemed or disposed
of prior or subsequent to and as part of the overall plan of Merger will be
considered in making this representation. Except as set forth in Exhibit A to
this letter, to the best of the knowledge of the management of the Company,
there are no holders of Company Common Stock who own 1 percent or more of the
Company Common Stock on the date hereof.
3. Following the Merger, Company will hold at least 90 percent of
the fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets held immediately prior to the Merger. For
purposes of this representation, amounts paid by Company to dissenters, amounts
paid by Company to holders of Company Common Stock who receive cash or other
property, amounts used by Company to pay reorganization expenses, and all
redemptions and distributions (except for regular, normal dividends) made by
Company, will be included as assets of Company held immediately prior to the
Merger.
4. Company and the holders of Company Common Stock will pay their
respective expenses, if any, incurred in connection with the Merger.
5. There is no intercorporate indebtedness existing between
Parent and Company or between Merger Sub and Company that was issued, acquired
or has been settled at a discount.
6. In the Merger, Company Common Stock representing control of
Company (as defined in Section 368(c) of the Code) will be exchanged solely for
voting stock of Parent. For purposes of this representation, Company Common
Stock exchanged for cash or other property originating with Parent (including,
but not limited to, amounts paid to dissenters, amounts paid in lieu of
fractional share interests of Class B Common Stock and amounts paid pursuant to
section 2.2(v)(B) of the Merger Agreement) will be treated as outstanding
Company Common Stock at the time of the Merger.
81
Xxxxxxx Xxxxxxx & Xxxxxxxx -3- [ ], 1996
7. Company does not have outstanding any warrants, options,
convertible securities, or any other type of right pursuant to which any person
could acquire stock in Company that, if exercised or converted, would affect
Parent's acquisition or retention of control of Company within the meaning of
Section 368(c) of the Code.
8. Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
9. The fair market value of the assets of the Company exceeds the
sum of its liabilities, plus the amount of liabilities, if any, to which the
assets are subject.
10. Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
11. The payment of cash in lieu of fractional shares of Class B
Common Stock was not separately bargained for consideration, and its being made
for the sole purpose of saving Parent the expense and inconvenience of issuing
fractional shares.
12. None of the compensation received by any stockholder-employee
of Company pursuant to any employment, consulting or similar arrangement is or
will be separate consideration for, or allocable to, any of his/her Company
Common Stock. None of the shares of Class B Common Stock received by any
stockholder-employee of Company pursuant to the Merger is or will be separate
consideration for, or allocable to, any such employment, consulting or similar
arrangement. The compensation paid to any stockholder-employee of Company
pursuant to any such employment, consulting or similar arrangement is or will be
for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
Company acknowledges that your tax opinion may not accurately
describe the effects of the Merger if any of the foregoing facts or
representations are inaccurate.
Very truly yours,
Fargo Mfg. Company, Inc.
______________________
By:
Title:
82
Exhibit A
TO EXHIBIT 6.15(b)
TO AGREEMENT AND PLAN OF MERGER
Name Approximate Percentage of
Company Common Stock
83
EXHIBIT 9.3(d)
TO AGREEMENT AND PLAN OF MERGER
[Shareholder Representation Letter]
[ ], 1996
Re: Agreement and Plan of Merger
dated as of November 13, 1996 by and
between Xxxxxxx Incorporated, FMC
Acquisition Corporation and Fargo Mfg.
Company, Inc.
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The following representation is being furnished to you in
connection with the preparation of your tax opinion to be provided in connection
with the Merger. I understand that you will be relying on such representation in
delivering your opinion and that the delivery of such opinion is a condition
precedent to the Merger. Unless otherwise defined herein, capitalized terms
shall have the meanings ascribed to them in the Agreement and Plan of Merger,
dated as of November 13, 1996, by and between Xxxxxxx Incorporated ("Parent"),
FMC Acquisition Corporation ("Merger Sub") and Fargo Mfg. Company, Inc.,
("Company") (the "Merger Agreement").
Assuming the Merger will be effected in accordance with the
Merger Agreement, the following representation is true and accurate as of the
date hereof and you may assume that such representation remains true and
accurate as of the Effective Time unless I otherwise notify you in writing:
I have no plan or intention to, directly or indirectly, offer,
sell, transfer, tender, pledge or encumber (except on a recourse basis), assign
or otherwise dispose of, or enter into any contract, option or other arrangement
with respect to, or consent to the sale, transfer, pledge or encumbrance (except
on a recourse basis), assignment or other disposition of ________ shares of the
Class B Common Stock that I receive in the
84
Xxxxxxx Xxxxxxx & Xxxxxxxx -2- [ ], 1996
Merger (the "Restricted Shares").(1) The Restricted Shares were not acquired in
contemplation of the Merger, have been held by me at all times since [insert
date of Merger Agreement], and are not subject to any transaction which would
result in a reduction in the risk of ownership of such Restricted Shares.
I acknowledge that your tax opinion may not accurately describe
the effects of the Merger if the foregoing representation is inaccurate.
Very truly yours,
[Shareholder]
__________________
--------
(1) The amount of Restricted Shares to which each shareholder representation
letter pertains will be determined so that, in the aggregate, the number
of Restricted Shares have a value equal to or greater than fifty percent
of the value of all the formerly outstanding shares of Company Common
Stock.
