EXHIBIT 10
AGREEMENT AND PLAN OF MERGER
AGREEMENT, (hereinafter, together with the Exhibits annexed hereto
the "Agreement") made and entered into as of the 10th day of January, 2000,
by and among JJF GROUP, INC. a Minnesota corporation ("Purchaser"), JJF
ACQUISITION, INC., a corporation and a wholly-owned subsidiary of Purchaser
("Newco"), XXXX X. XXXXX, a resident of Minnesota ("XXXXX") and TSI
INCORPORATED, a Minnesota corporation (the "Company").
RECITALS
The Boards of Directors of Purchaser and Newco and the Board of
Directors of the Company, deeming it advisable for the mutual benefit of
Purchaser, Newco and the Company and their respective stockholders that
Purchaser acquire the Company by the merger of the Company and Newco under
the terms and conditions hereinafter set forth (the "Merger"), have approved
this Agreement and Plan of Merger (the "Agreement").
NOW, THEREFORE, in consideration of mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree
that the Company and Newco shall be merged and that the terms and conditions
of the Merger and the mode of carrying the same into effect shall be as
follows:
SECTION 1. PLAN OF MERGER.
1.1 ACTIONS TO BE TAKEN. Upon performance of all of the covenants and
obligations of the parties contained herein and upon fulfillment (or waiver)
of all of the conditions to the obligations of the parties contained herein,
at the Effective Time of the Merger (as hereinafter defined) and pursuant to
the Business Corporation Act of the State of Minnesota (the "MBCA"), the
following shall occur:
(a) Newco shall be merged with and into the Company, which shall
be the surviving corporation (the "Surviving Corporation"). The separate
existence and corporate organization of Newco shall cease at the Effective
Time of the Merger, and thereupon the Company and Newco shall be a single
corporation, the name of which shall be TSI Incorporated. The Company, as the
Surviving Corporation, shall succeed, insofar as permitted by law, to all of
the rights, assets, liabilities and obligations of Newco in accordance with
the MBCA.
(b) The Articles of Incorporation of Newco shall be the articles
of incorporation of the Surviving Corporation until amended as provided by
law.
(c) The By-Laws of Newco shall be the by-laws of the Surviving
Corporation until amended as provided by law.
(d) Until changed in accordance with the articles of
incorporation and by-laws of the Surviving Corporation, Xxxxx X. Doubles,
Xxxx X. Xxxxx and Xxxx X. Xxxxxxx shall be the directors of the Surviving
Corporation.
(e) Until changed in accordance with the articles of
incorporation and by-laws of the Surviving Corporation, the following persons
shall be the officers of the Surviving Corporation:
Name Office
Xxxx X. Xxxxx Chairman
Xxxxx X. Doubles President & CEO
Xxxxxx X. Xxxxxxx Senior V. P. of Business Development
Xxxxxx X. Xxxxxxxxx Vice President and Chief Financial Officer
Xxxxx Xxxxxxx Vice President of Technology
Xxxxx X. Xxxxxxxx Secretary and Corporate Counsel
(f) As soon as practicable after the terms and conditions of this
Agreement have been satisfied, and upon consummation of the closing referred
to in Section 8 hereof (the "Closing"), articles of merger consistent with
this Agreement in the form prescribed by, and properly executed in accordance
with, the MBCA and the BCL, in form and substance satisfactory to the parties
hereto (the "Articles of Merger"), shall be filed with the Secretary of State
of the State of Minnesota. The Merger shall become effective on the date and
time on which the Articles of Merger are properly filed with such Secretary
of State pursuant to the MBCA, and if the Articles are not filed the same
time then the Merger shall become effective on the later of the two times of
filing, or at such later time as the Company and Purchaser shall agree and
shall specify in the Articles of Merger. As used in this Agreement, the
"Effective Time of the Merger" shall mean such time.
1.2 COMMON STOCK OF SURVIVING CORPORATION. As of the Effective Time of
the Merger, each one share of the issued and outstanding shares of common
stock of Newco shall, by virtue of the Merger and without any action on the
part of Purchaser be converted into one share of the common stock of the
Surviving Corporation. Each share shall be fully paid and non-assessable.
1.3 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) The term "COMPANY COMMON STOCK" shall mean the Company's
common stock of $.10 par value per share.
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(b) The term "STOCKHOLDER" shall mean a holder of the Company
Common Stock, and the term "Stockholders" shall refer to all of the holders
of stock of the Company.
(c) The term "NUMBER OF OUTSTANDING COMMON SHARES" shall be the
number of issued and outstanding shares of the Company Common Stock at the
Effective Time of the Merger.
(d) The term "COMMON PAYMENT" shall mean Fifteen Dollars and
Twenty-Five Cents ($15.25) which is the amount per share of Company Common
Stock which will be paid by Purchaser at Closing for distribution to the
holders of outstanding shares of Company Common Stock after the Effective
Time of Merger.
1.4 CANCELLATION OR CONVERSION OF COMPANY COMMON STOCK. As of the
Effective Time of the Merger, by virtue of the Merger and without any action
on the part of any shareholder of the Company:
(a) TREASURY SHARES. Any share of the Company Common Stock held in
the treasury of the Company, shall be canceled and retired. No cash,
securities or other consideration shall be paid or delivered in exchange for
such Company Common Stock under this Agreement.
(b) CONVERSION. Except as provided herein with respect to
Dissenting Shares (as hereinafter defined) and shares canceled pursuant to
Section 1.4(a) hereof, at the Effective Time of the Merger, each share of
Company Common Stock which is issued and outstanding shall be converted into
the right to receive a cash payment in an amount equal to the Common Payment;
PROVIDED, HOWEVER, that each share of Company Common Stock which is owned by
the Purchaser or Newco as of the Effective Time of the Merger shall be
canceled without any consideration being issued therefor. (Hereinafter the
cash payments to be received by holders of certificates representing shares
of Company Common Stock are sometimes referred to as the "Common Cash
Conversion Amounts".)
(c) SURRENDER OF CERTIFICATES. After the Effective Time of the
Merger, each holder of an outstanding certificate or certificates theretofore
representing shares of Company Common Stock converted pursuant to Section
1.4(b) hereof ("Company Common Stock Certificates"), upon surrender thereof
to Purchaser as provided herein, shall be entitled to receive in exchange
therefor the amounts provided in Section 1.4(b), without interest. Until so
surrendered, each outstanding Company Common Stock Certificate shall be
deemed for all purposes to represent the Common Cash Conversion Amounts for
the shares represented by the Certificate.
Whether or not a Company Common Stock Certificate is surrendered,
from and after the Effective Time of the Merger, such Certificate shall under
no circumstances evidence, represent or otherwise constitute any stock or
other interest whatsoever in the Company, the Surviving Corporation or any
other person, firm or corporation.
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(d) DISSENTERS. The shares of Company Common Stock held by those
shareholders of the Company who have timely and properly exercised their
dissenters' rights in accordance with the provisions of the MBCA applicable
to dissenters' rights (the "Appraisal Laws") are referred to herein as
"Dissenting Common Shares". Each Dissenting Common Share, the holder of
which, as of the Effective Time of the Merger, has not effectively withdrawn
or lost his dissenters' rights under the Appraisal Laws, shall not be
converted into or represent a right to receive the Common Cash Conversion
Amounts in the Merger, but the holder thereof shall be entitled only to such
rights as are granted by the Appraisal Laws. Each holder of Dissenting Common
Shares who becomes entitled to payment for his Company Common Stock pursuant
to the provisions of the Appraisal Laws shall receive payment therefor from
the Surviving Corporation from funds provided by Purchaser (but only after
the amount thereof shall have been agreed upon or finally determined pursuant
to such provisions). If any holder of Dissenting Common Shares shall
effectively withdraw or lose his dissenters' rights under the Appraisal Laws,
such Dissenting Common Shares shall be converted into the right to receive
the Common Cash Conversion Amounts in accordance with the provisions hereof.
1.5 OPTIONS. Prior to the Effective Time of the Merger, all options,
warrants, or other rights (including without limitation rights under the TSI
Incorporated Stock Option Plan of 1992 and the Company's Employee Stock
Purchase Plan) to purchase or acquire shares of Company Common Stock
(hereinafter collectively "Options") which are outstanding and unexercised
shall be exercised, or if not exercised shall be canceled as of the Effective
Time of the Merger, so that at the Effective Time of the Merger there shall
be no outstanding and unexercised outstanding Options with respect to the
Company Common Stock. At the Effective Time of the Merger, the Purchaser and
Newco shall cause the Company to pay to each holder of an Option which has
not been exercised (including Options which were not exercisable or vested
immediately prior to the Effective Time), a payment equal to the difference
per share between the exercise price of the Option and the Common Payment,
and the holder of the Option shall surrender the Option to the Company.
1.6 PAYMENT OF MERGER CONSIDERATION.
(a) At the Closing, and in any event no later than the Effective
Time of the Merger, Purchaser shall deposit with Norwest Bank Minnesota, N.A.
(the "Payment Agent") for the benefit of the holders of Company Common Stock,
in cash (or an irrevocable letter of credit in the form set forth as Schedule
1.6(a) issued by U.S. Bank National Association for the benefit of the
Payment Agent permitting daily draws by the Payment Agent as needed to pay
Stockholders) in an amount equal to the aggregate Common Cash Conversion
Amounts (such cash is hereinafter referred to as the "Payment Fund") payable
in exchange for all outstanding shares of Company Common Stock.
(b) As soon as reasonably practicable after the Effective Time,
the Payment Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"):
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(i) A letter of transmittal, which shall specify that
delivery shall be effected and risk of loss and title to the
Certificates shall pass only upon delivery of the Certificates to the
Payment Agent, and which shall be in such form and have such other
provisions as Purchaser and the Company may reasonably specify; and
(ii) Instructions on how to surrender the Certificates in
exchange for the Common Cash Conversion Amounts. Upon surrender to
the Payment Agent of a Certificate for cancellation, together with
such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a check
representing the Common Cash Conversion Amounts which such holder has
the right to receive pursuant to the provisions of this Section 1.4,
and the Certificate so surrendered shall forthwith be canceled. In the
event that a transfer of ownership of shares of Company Common Stock
is not registered in the transfer of records of the Company, payment
of the Common Cash Conversion Amounts may be made to a transferee if
the Certificate representing such shares is presented to the Payment
Agent accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this Section 1.6,
each Certificate shall be deemed at any time after the Effective Time
of the Merger to represent only the right to receive upon such
surrender the Common Cash Conversion Amounts as contemplated by this
Section 1.6.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, the Payment Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof, such Common
Cash Conversion Amounts may be required pursuant to this Agreement; PROVIDED,
however, that the Purchaser or the Payment Agent may, in its discretion,
require the delivery of a suitable bond or indemnity.
(d) All Common Cash Conversion Amounts paid upon the surrender
for exchange of Company Common Stock in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights
pertaining to such Company Common Stock.
(e) Any portion of the Payment Fund which remains undistributed
to the Stockholders of the Company for six (6) months after the Effective
Time of the Merger shall be delivered to Purchaser upon demand, and any
Stockholders who have not theretofore complied with this Section 1.6 shall
thereafter look only to Purchaser for payment of their claim for the Common
Cash Conversion Amounts.
(f) Neither Purchaser nor the Surviving Corporation shall be
liable to any holder of Company Common Stock for cash from the Payment Fund
delivered to a public official pursuant to applicable abandoned property
escheat or similar law.
(g) No interest will be paid or will accrue on any cash payable
pursuant to Section 1.6.
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(h) The Payment Agent shall invest any cash included in the
Payment Fund as directed by Purchaser on a daily basis, with such investments
to be made only in short-term U.S. government obligations. Any interest or
other income resulting from these investments shall promptly be paid to
Purchaser. Purchaser shall promptly reimburse any losses which may have
resulted from such investments so that at all times Payment Agent shall hold
the full amount necessary to make the payments required hereunder.
(i) Each of the Surviving Corporation and Purchaser shall be
entitled to deduct and withhold from the consideration otherwise payable to
this Agreement to any holder of shares of Company Common Stock such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the provisions of the Internal Revenue Code and the rules and
regulations promulgated thereunder, or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Surviving
Corporation or Purchaser (or Payment Agent at the direction of Purchaser), as
the case may be, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which deduction withholding was made.
(j) Purchaser shall pay all fees and expenses of the Payment
Agent.
l.7 STOCK TRANSFER BOOKS. The stock transfer books of the Company
shall be closed immediately upon the Effective Time of the Merger and there
shall be no further registration of transfers of shares of Company Common
Stock thereafter on the records of the Company.
1.8 FURTHER ASSURANCES. From time to time, on and after the Effective
Time of the Merger, as and when requested by Purchaser or its successors or
assigns, the proper officers and directors of the Company immediately before
the Effective Time of the Merger, the officers and directors of the Surviving
Corporation at the time of the request, or other proper officers or
directors, shall, at Purchaser's expense, and for and on behalf and in the
name of the Company, or otherwise, execute and deliver all such deeds, bills
of sale, assignments and other instruments and shall take or cause to be
taken such further or other reasonable actions as Purchaser or their
respective successors or assigns may deem necessary or desirable in order to
confirm or record or otherwise transfer to the Surviving Corporation title to
and possession of all the properties, rights, privileges, powers, franchises
and immunities of the Company and otherwise to carry out fully the provisions
and purposes of this Agreement.
1.9 VOTING AGREEMENTS. The parties acknowledge that concurrently with
and as a condition to the Purchaser and Newco's willingness to enter into
this Agreement, the Purchaser and Newco have entered into Voting Agreements
(the "Voting Agreements") with certain of the Company's Stockholders, in
their capacity as Stockholders, providing that each of these Stockholders
will vote certain shares of Company Common Stock owned by such Stockholders
in favor of the approval and adoption of this Agreement and the Merger.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
As used herein, the "Disclosure Letter" shall mean the Disclosure Letter
delivered by the Company to Purchaser. The Disclosure Letter shall refer to
the representation or warranty to which exceptions or matters disclosed
therein relate; PROVIDED, however that an exception or matter disclosed with
respect to one representation or warranty shall also be deemed disclosed with
respect to each other warranty to which the exception or matter reasonably
relates. Except as set forth in the Disclosure Letter, the Company hereby
represents and warrants to Purchaser and Newco that all of the statements
contained in this Section 2 are true and correct as of the date of this
Agreement (or if made as of a specified date, as of such date). As provided
in Section 7.2(a), it is a condition precedent to the Purchaser's and Newco's
obligations that such statements are true and correct as of the Closing (or
if made as of a specified date, as of such date), except as qualified by any
amendment to the Disclosure Letter which is acceptable to Purchaser.
The representations and warranties are as follows:
2.1 ORGANIZATION AND QUALIFICATIONS OF THE COMPANY. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota with full corporate power and corporate
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted or proposed to be conducted. The copies of
the Company's Articles of Incorporation as amended to date, certified by the
Minnesota Secretary of State, and the Company's by-laws, as amended to date,
certified by the Company's Secretary, and heretofore delivered to Purchaser,
are complete and correct, and no amendments thereto are pending. The Company
is not in violation of any term of its Articles of Incorporation or bylaws.
The Company is duly qualified to do business as a foreign corporation in the
states listed in the Disclosure Letter and it is not required to be licensed
or qualified to conduct its business or own its property in any other
jurisdiction except where the failure to be so licensed or qualified would
not have a Material Adverse Effect on the Company Group.
2.2 CAPITAL STOCK OF THE COMPANY: BENEFICIAL OWNERSHIP.
(a) The authorized capital stock of the Company consists of
30,000,000 shares of Common Stock, par value $.10 per share, of which, as of
October 28, 1999, 11,339,322 were outstanding, fully paid and non-assessable
and of which 18,660,678 shares are authorized but unissued. No class of
capital stock of the Company is entitled to preemptive rights. Since October
28, 1999 to the date of this Agreement, there have been no issuances of
shares of the Stock of the Company other than issuances of shares pursuant to
options or rights outstanding under the Benefit Plans of the Company as
described in the Disclosure Letter. All issued and outstanding shares of the
Stock of the Company are duly authorized, validly issued, fully paid and
nonassessable. No other classes of stock are authorized.
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(b) Except for the options described in the Disclosure Letter
(the "Outstanding Options"), there now are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any
additional shares of capital stock of any class of the Company. No bonds,
debentures, notes or other indebtedness of the Company having the right to
vote on any matters on which Stockholders may vote are issued or outstanding.
Following the Effective Time of the Merger, no holder of Outstanding Options
will have any right to receive shares of Company Common Stock or any other
consideration upon exercise of such Outstanding Options and all such
Outstanding Options shall cease to exist as of the Effective Time of the
Merger.
(c) None of the Company's capital stock has been issued in
material violation of any federal or state securities laws. Except as set
forth in the Disclosure Letter, there are no voting trusts, voting
agreements, proxies or other agreements, instruments or undertakings with
respect to the voting of the Company Shares to which the Company is a party.
2.3 SUBSIDIARIES. Except for the subsidiaries referenced in the
Disclosure Letter (the "Subsidiaries" and individually a "Subsidiary"), the
Company does not have any direct or indirect subsidiaries. The Company's
foreign Subsidiaries consist of a German Subsidiary and a Swedish Subsidiary
and of the foreign Subsidiaries (the "ESC Foreign Subsidiaries") owned by
Environmental Systems Corporation, all as described in further detail in the
Disclosure Letter. Except as listed in the Disclosure Letter and except for
the shares of stock in the Subsidiaries, the Company does not own any
securities issued by any other business organization or governmental
authority, except United States, state, and municipal government securities,
bank certificates of deposit, or money market accounts acquired as
investments in the ordinary course of its business, and, except as set forth
in the Disclosure Letter, neither the Company nor any of its Subsidiaries
owns or has any direct or indirect ownership interest in or control over any
other corporation, partnership, joint venture, or entity of any kind.
All of the issued and outstanding shares of stock of the Subsidiaries
are owned by the Company, or, where specified in the Disclosure Letter, by a
Subsidiary or in the case of certain foreign Subsidiaries by the persons who
are identified (together with the number of shares of Subsidiary capital
stock owned) in the Disclosure Letter. There are no outstanding options,
warrants, rights, commitments, preemptive rights or agreements of any kind
for the issuance or sale of, or outstanding securities convertible into, any
additional shares of stock of any class of the Subsidiaries.
In the case of each Subsidiary, the Disclosure Letter specifies the
Subsidiary's jurisdiction of incorporation, its authorized capital stock, the
number of shares which are issued and outstanding, and the entity which owes
such shares, whether the Company or another Subsidiary.
Each Subsidiary is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the necessary
corporate power and corporate authority to own or lease its properties,
except for any noncompliance with the foregoing representation which
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may exist in the case of the ESC Foreign Subsidiaries, which noncompliance
will not have a Material Adverse Effect on the Company Group. Copies of each
Subsidiary's organizational documents, as amended to date, have been made
available for review by purchaser. Each Subsidiary (i) is not in violation of
any of the terms of its organizational documents, and (ii) is duly qualified
to do business as a foreign corporation in the jurisdictions listed in the
Disclosure Letter, and is not required to be licensed or qualified to conduct
its business or its property in any other Jurisdiction, except where such
violation, or where the failure to be so licensed or qualified, would not
have a Material Adverse Effect on the Company Group.
In this Agreement the Company and the Subsidiaries are sometimes
referred to as the "Company Group."
2.4 AUTHORITY OF THE COMPANY; CONSENTS; APPROVALS; FAIRNESS OPINION.
(a) The Company has full right, authority and power to enter into this
Agreement and to carry out the transactions contemplated hereby, subject in
the case of consummation of the Merger to the receipt of the Stockholder
Approval as described below. The execution, delivery and performance by the
Company of this Agreement have been duly authorized by all necessary
corporate action, including (i) unanimous approval by the Company's Board of
Directors and (ii) unanimous approval by a special committee of the Company's
Board of Directors formed in accordance with Minn. Stat. 302A.673, subd.
1(d), subject to the approval of this Agreement and the transactions
contemplated hereby by the Stockholders in accordance with the MBCA and the
Articles of Incorporation and by-laws of the Company ("Stockholder
Approval"). This Agreement constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such
enforceability may be limited by general equity principles (regardless of
whether such enforceability is considered in a proceeding at equity or at
law).
The execution, delivery and performance by the Company of this Agreement:
(i) does not and will not violate any provision of the
Articles of Incorporation or by-laws of the Company, or the charter
documents of any Subsidiary;
(ii) except as would not have a Material Adverse
Effect on the Company Group, and subject to obtaining the Required
Consents, as defined below, does not and will not violate any laws of
the United States or any state or other jurisdiction applicable to the
Company Group or require the Company Group to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made (other
than Stockholder Approval); and
(iii) except as would not have a Material Adverse Effect on
the Company Group, and subject to obtaining the Required Consents, and
except as set forth in the Disclosure Letter, does not and will not
result in a breach of, constitute a default under, accelerate any
obligation under, or give rise to a right of termination of any
indenture or loan or credit
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agreement or any other material agreement, contract, instrument,
mortgage, lien, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which any
member of the Company Group is a party or by which the property of any
member of the Company Group is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on the assets of any member of the
Company Group.
(b) Except for filings, consents, permits and approvals that
may be required under, and other requirements under, the Securities Act, the
Exchange Act, the HSR Act and the filing of documentation to effectuate the
Merger (collectively, the "Required Consents"), no filing with or notice to,
and no permit or approval of, any Governmental Entity is necessary for the
execution and delivery by the Company of this Agreement and its performance
of the transactions contemplated hereby (collectively, the "Required
Consents"). All such Required Consents are listed in the Disclosure Letter.
(c) The Company has received a written opinion from Xxxxxxx
Xxxxx & Company LLC which has not been withdrawn (the "Fairness Opinion"), a
copy of which is being provided to Purchaser herewith, to the effect that the
consideration to be received by the Stockholders hereunder is fair to the
Stockholders (other than the Purchaser and Newco) from a financial point of
view, and such Opinion is acceptable in form and substance to the Company's
Board of Directors.
(d) The Company's Board of Directors, at a meeting duly
called and held, has (i) unanimously determined that this Agreement and the
Merger are fair to and in the best interests of the Stockholders, (ii)
unanimously approved the Merger in compliance with the MBCA and any other
applicable law, and (iii) unanimously resolved to recommend that Stockholders
approve this Agreement and the Merger. A committee of the Company's Board of
Directors formed in accordance with Minn. Stat. 302A.673, subd. 1(d) has
unanimously approved the Merger in compliance with Minn. Stat. 302A.673. None
of the aforesaid actions by the Company's Board of Directors or the committee
of the Company's Board of Directors has been amended, rescinded or modified.
2.5 FILINGS WITH THE SEC. The Company has made all filings with the
SEC that it has been required to make since March 31, 1998 under the
Securities Act and the Securities Exchange Act (collectively the "Public
Reports"). Each of the Public Reports complied with the Securities Act and
the Securities Exchange Act in all material respects. None of the Public
Reports, as of their respective dates, contained any untrue statement of a
material fact or omitted 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 Company has delivered to the Purchaser a
correct and complete copy of each Public Report (together with all exhibits
and schedules thereto and as amended to date).
2.6 FINANCIAL STATEMENTS. The Public Reports filed by the Company
include Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30,
1999 and September 30, 1999 (the
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"Most Recent Fiscal Quarter End"), and an Annual Report on Form 10-K for the
fiscal year ended March 31, 1999. The financial statements included in or
incorporated by reference into these Public Reports (including the related
notes and schedules) have been prepared in accordance with the books and
records of the Company and with GAAP applied on a consistent basis throughout
the periods covered thereby and present fairly in all material respects the
financial condition of the Company and its Subsidiaries as of the indicated
dates and the results of operations of the Company and its Subsidiaries for
the indicated periods; PROVIDED, however that the interim statements are
subject to normal year-end adjustments and do not include all footnotes.
Since the Most Recent Quarter End, the Company and its Subsidiaries
conducted their respective businesses only in the ordinary and usual course,
consistent with past practice, and have not incurred any liabilities that are
of a nature that would be required to be disclosed on a balance sheet of the
Company and its Subsidiaries or the footnotes thereto where said balance
sheet was prepared in conformity with GAAP, other than (i) liabilities
incurred in the ordinary course of business, and (ii) liabilities that would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company Group.
2.7 REAL ESTATE. Except as listed in the Disclosure Letter, no member
of the Company Group owns any real estate, and no member of the Company Group
has owned any real estate since March 31, 1996.
In the case of each parcel of real property owned by the Company or any
Subsidiary, except as listed in the Disclosure Letter:
(a) the owner identified on the Disclosure Letter has good and
marketable title to the parcel of real property, free and clear of any
security interest, easement, covenant, or other restriction except for
installments of special assessments not yet delinquent, recorded easements,
covenants and other restrictions, and utility easements, building
restrictions, zoning restrictions and other easements and restrictions which
do not affect materially and adversely the current use or occupancy of the
property subject thereto;
(b) there are no pending, or to the knowledge of the Company,
threatened condemnation proceedings, lawsuits or administrative actions
relating to any such parcel which materially and adversely affect the current
use, occupancy or value thereof;
(c) to the knowledge of the Company, the legal description for
the parcel contained in the deed thereof describes such parcel fully and
adequately, the buildings and improvements are located within the boundary
lines of the described parcels of land and are not in violation of applicable
setback requirements, zoning laws and ordinances where such violation would
materially and adversely affect the current use or occupancy thereof;
(d) there are no leases, subleases, or other agreements granting
to any party or parties the right to use or occupancy of any portion of the
parcel of real property;
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(e) there are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or interest
therein;
(f) there are no parties (other than members of the Company
Group) in possession of the parcel of real property, other than tenants under
any leases disclosed in the Disclosure Letter, which tenants are in
possession of the space to which they are entitled; and
(g) the Company will make available to a representative of the
Purchaser a copy of each material survey or material title insurance policy
that are in the possession of the Company or a Subsidiary for each parcel of
real property owned by the Company or any Subsidiary.
Except for leases to which any ESC Foreign Subsidiary is a party where
the total annual rental payable under any such lease is $25,000 or less, no
member of the Company Group leases any real estate other than pursuant to the
leases (the "Real Estate Leases") listed in the Disclosure Letter. True and
complete copies of the Real Estate Leases have been provided to or made
available to Purchaser for review.
In the case of each Real Estate Lease, the member of the Company Group
party to said Real Estate Lease, and to the knowledge of the Company, the
other party thereto, is not in default under the Real Estate Lease.
Except as set forth in the Disclosure Letter, no consent is required
under any of the Real Estate Leases in connection with the transactions
contemplated by this Agreement.
2.8 TAXES.
(a) The Company has paid or caused to be paid all federal taxes,
and all material state, local, foreign, and other taxes, including, without
limitation, income taxes, estimated taxes, alternative minimum taxes, excise
taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or
in part by net income, and all deficiencies, or other additions to tax,
interest, fines and penalties (collectively, "Taxes"), owed or required to be
paid by any member of the Company Group through the date hereof, and will pay
all Taxes required to be paid by any member of the Company Group through the
Closing Date, except for Taxes not yet due which are properly accrued on the
balance sheet for the Most Recent Fiscal Quarter End in accordance with GAAP.
(b) The Company has in accordance with applicable law filed all
federal, and all material state, local and foreign tax returns required to be
filed by any member of the Company Group through the date hereof, and, to the
knowledge of the Company, all such returns correctly set forth the amount of
any Taxes or losses relating to the applicable period. A list of all federal,
state, local and foreign income tax returns filed with respect to the Company
Group for taxable periods
12
ended on or after March 31, 1996 is set forth in the Disclosure Letter, and
said Letter indicates those returns which have been audited or which
currently are the subject of an audit. For each taxable period of the Company
Group ended on or after March 31, 1996, the Company has made available to
Purchaser correct and complete copies of all federal, state, local and
foreign income tax returns, examination reports and statements of
deficiencies filed by, assessed against or agreed to by the Company.
(c) Neither the Internal Revenue Service (the "IRS") nor any
other governmental authority, domestic or foreign, is now asserting or, to
the knowledge of the Company, threatening to assert, against the Company
Group any deficiency or claim for additional Taxes. Since March 31, 1996 no
claim has been made by any governmental entity in a jurisdiction where any
member of the Company Group does not file reports and returns asserting that
any member of the Company Group is or may be subject to taxation by that
jurisdiction in amounts which would be material to the Company Group. There
are no security interests on any of the assets of any member of the Company
Group that arose in connection with any failure (or alleged failure) to pay
any Taxes. Except as set forth in the Disclosure Letter, since March 31,
1996, no member of the Company Group has ever entered into a closing
agreement pursuant to Section 7121 of the Internal Revenue Code of 1986, as
amended (the "Code").
(d) Except as set forth in the Disclosure Letter, since March 31,
1996, there has not been any audit of any tax return filed by any member of
the Company Group, no such audit is in progress, and no member of the Company
Group has been notified by any tax authority that any such audit is
contemplated or pending. Except as set forth in the Disclosure Letter, no
extension of time with respect to any date on which a tax return was or is to
be filed by any member of the Company Group is in force, and no waiver or
agreement by any member of the Company Group is in force for the extension of
time for the assessment or payment of any Taxes.
(e) Except as set forth in the Disclosure Letter, since March 31,
1996 the Company and each other member of the Company Group has never been
(and has never had any liability for unpaid Taxes because it once was) a
member of an "affiliated group" (as defined in Section 1504(a) of the Code)
other than a group of which the Company is the parent. Except as set forth in
the Disclosure Letter, the Company and each other member of the Company Group
has never filed, and has never been required to file, a consolidated,
combined or unitary tax return with any other entity. No member of the
Company Group is a party to any tax sharing or tax indemnity agreement.
(f) For purposes of this Agreement, all references to Sections of
the Code shall include any predecessor provisions to such Sections.
(g) No member of the Company Group has made an election under
Section 341 (f) of the Code.
2.9 INTELLECTUAL PROPERTY.
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For purpose of this Agreement, "Intellectual Property" shall mean
trademarks and service marks currently used by the Company Group and
applications to register such marks; patents and applications to register
patents; trade names currently used by the Company Group; copyrights;
Internet domain names, trade names, designs and logos; computer software and
the source code and object code related thereto; and confidential
information, know-how, inventions, methodologies and trade secrets held for
use or used in the business of a member of the Company Group. The Disclosure
Letter contains a list identifying each patent, patent application,
registered trademark and registered copyright held by any member of the
Company Group and each material license of Intellectual Property to which any
member of the Company Group is a party (except licenses granted to customers
in the ordinary course of business).
Except as would not have a Material Adverse Effect on the Company Group:
(a) Each of the Company and its Subsidiaries owns or is licensed
or otherwise has the right to use all Intellectual Property used in or
necessary for the conduct of its business as currently conducted;
(b) The use or ownership of any such Intellectual Property by the
Company and its Subsidiaries does not infringe on or otherwise violate the
rights of any third persons, and the products and services provided by the
Company and its subsidiaries and their respective operations do not infringe
the intellectual or proprietary rights of any third persons;
(c) In the case of any license or agreements for material
Intellectual Property, the member of the Company or party to such license
agreements is in compliance therewith in all material respects and is not in
default trader such license agreements;
(d) To the knowledge of the Company, no third party is infringing
upon or challenging the right of any member of the Company Group to material
Intellectual Property of said member; and
(e) Since March 31, 1996, no member of the Company Group has
received any written notice of any pending claim with respect to any
Intellectual Property used by such member.
2.10 MATERIAL CONTRACTS.
(a) The Disclosure Letter attached hereto lists, and the Company
has made available to Purchaser, true and complete copies of all material
contracts or other obligations (the "Material Contracts") to which any member
of the Company Group is a party or by which it is bound, including those of
the following types:
14
(i) Employment agreements and any other material
contracts with or loans to any of the Company Group's shareholders,
officers, directors, employees, consultants, distributors or sales
representatives;
(ii) Any Benefit Plans, except for Benefit Plans
maintained by any of the ESC Foreign Subsidiaries where such Plans
maintained by the ESC Foreign Subsidiaries will not give rise to a
Material Adverse Effect on the Company Group;
(iii) Any material contracts with customers;
(iv) Any deeds of trust, mortgages, conditional sales
contracts, security agreements, pledge agreements, trust receipts, or
any other agreements or arrangements whereby any assets of the Company
Group are subject to a lien, encumbrance, charge or other restriction;
(v) Any loan agreements, letters of credit or lines
of credit;
(vi) Any contracts restricting in a material respect any
member of the Company Group from doing business or competing in any
area;
(vii) Other than purchase orders issued or received in the
ordinary course of business, any contracts calling for aggregate
payments in excess of $100,000 which are not terminable without
material cost or liability on notice of 90 days or less;
(viii) Any joint venture, partnership, limited liability
company or limited partnership agreement;
(ix) Any guarantees of the obligations of any other
party (including other members of the Company Group) except those
resulting from the endorsement of customer checks deposited for
collection;
(x) Any other contracts which may have a material impact
on the Company Group's assets, results of operations or financial
condition; and
(xi) Any commitment to enter into any of the foregoing.
In the case of each Material Contract, the member of the
Company Group party thereto has not received notice of any default under any
such contracts, obligations or commitments, and is not in default under any
such contracts, obligations or commitments, where such default would have a
Material Adverse Effect on the Company Group. To the knowledge of the
Company, no other party to each Material Contract is in default where such
default would have a Material Adverse Effect on the Company Group.
15
Except as set forth in the Disclosure Letter, no consent is
required under any of the Material Contracts in connection with the
transactions contemplated by this Agreement.
2.11 LITIGATION. Except as set forth in the Disclosure Letter or in
the Public Reports, there are no legal, administrative, arbitration or other
proceedings or claims pending or, to the knowledge of the Company, threatened
against any member of the Company Group, nor is any member of the Company
Group subject to any existing judgments, where such proceedings, claims or
judgments are reasonably likely to have a Material Adverse Effect on the
Company Group. No member of the Company Group is operating under or subject
to, or in default with respect to, any order, writ, injunction or decree of
any court or federal, state, municipal or other governmental department,
commission, board, agency or instrumentality, domestic or foreign which has a
Material Adverse Effect on the Company Group.
2.12 COMPLIANCE WITH APPLICABLE LAWS; ENVIRONMENTAL MATTERS.
(a) LAWS. Except as set forth in the Disclosure Letter or as
disclosed in the Public Reports, the operations, assets and properties of
each member of the Company Group are in compliance with all federal, foreign,
state, county, and municipal laws, ordinances, regulations, rules, reporting
requirements, judgments, orders and decrees applicable to the conduct of
business of the Company Group and to the assets owned, used or occupied by it
(collectively referred to hereinafter as the "General Laws"), including
without limitation all applicable foreign, federal, state, county and
municipal laws, ordinances, regulations, rules, reporting requirements,
judgments, orders, decrees and requirements of common law concerning or
relating to the protection of health and the environment (collectively
referred to hereinafter as the "Environmental Laws"), except for
non-compliance that would not have a Material Adverse Effect on the Company
Group. No member of the Company Group has received any notice of violation,
citation, complaint, request for information, order, directive, compliance
schedule or other similar enforcement order, or any other notice from any
administrative or governmental agency or entity, indicating that it was not
or currently is not in compliance with the Environmental Laws and General
Laws, except for noncompliance that would not have a Material Adverse Effect
on the Company Group, and to the knowledge of the Company, no such item is
threatened.
(b) ENVIRONMENTAL LAWS. Except where noncompliance would not
have a Material Adverse Effect on the Company Group, all businesses and
operations of the Company Group are in compliance with any: (i) judgments,
orders, decrees, awards or directives, of any court, arbitrator or
administrative or governmental agency or entity binding any member of the
Company Group and concerning compliance with the Environmental Laws; and (ii)
consent decrees, administrative orders, settlement agreements or other
settlement documents entered into by any member of the Company Group with any
administrative or governmental agency or entity concerning compliance with
the Environmental Laws.
(c) HAZARDOUS MATERIALS. Except where no Material Adverse
Effect on the Company Group would result therefrom, the assets owned, leased
or operated by the Company
16
Group (to the knowledge of the Company in the case of real property leased by
the Company Group, it being understood in addition that no representation is
made with respect to portions of the real property not actually leased and
utilized by a member of the Company Group) are free of all materials
designated as hazardous substances, wastes, hazardous materials, pollutants
or contaminants under any Environmental Laws (collectively, "Hazardous
Materials") other than Hazardous Materials which are properly stored and
licensed as required by applicable law, and are free of physical conditions
which violate any Environmental Laws. Except where no Material Adverse Effect
on the Company Group would result therefrom, no Hazardous Materials used or
generated by any member of the Company Group have been treated, stored,
transported or disposed of in violation of any Environmental Laws.
(d) LICENSES AND PERMITS. The Disclosure Letter lists material
permits, licenses and other authorizations issued by administrative or
governmental agencies or entities under the General Laws and the
Environmental Laws or otherwise required for the conduct of the Company
Group's business as presently conducted which are held by the Company Group
("Licenses and Permits"). The Licenses and Permits include all such permits
which are necessary to the Company Group's business and operations as
presently conducted and the Company Group is and has been in compliance with
the terms and conditions of the Licenses and Permits where noncompliance
would have a Material Adverse Effect on the Company.
2.13 FINDER'S OR INVESTMENT BANKER'S FEE. No agent, broker,
investment banker, financial advisor or similar person is or will be entitled
to any broker's or finder's fee or any other commission or similar fee in
connection with this Agreement or the Merger, other than Xxxxxxx Xxxxx &
Company. The Company has provided to Purchaser a true and complete copy of
all agreements providing for any commission, fee or expense payment to
Xxxxxxx Xxxxx & Company.
2.14 ERISA AND EMPLOYMENT MATTERS.
(a) The Disclosure Letter contains a true and complete list of
all Benefit Plans of the Company Group, except for Benefit Plans maintained
by any of the ESC Foreign Subsidiaries where such Plans maintained by the ESC
Foreign Subsidiaries will not give rise to a Material Adverse Effect on the
Company Group.
(b) The Company has delivered or made available to Purchaser a
current, accurate and complete copy of each Benefit Plan and of any material
agreements or documents related to such Benefit Plan such as trust agreements
or funding instruments, the most recent determination letter, the most recent
summary plan description, and, for the three (3) most recent years, the Form
5500 and attached Schedules.
(c) Except where there would be no Material Adverse Effect on
the Company Group, (i) each Benefit Plan is administered in accordance with
its terms and in compliance in all material respects with the applicable
provisions of ERISA, the Code and other applicable laws, rules and
regulations; (ii) no actions, suits or claims, other than the routine claims
for benefits in the
17
ordinary course of business, are pending against any Plan, or, to the
knowledge of the Company, threatened, except as set forth in the Disclosure
Letter; (in) there have been no prohibited transactions, within the meaning
of the Code and ERISA, which would subject the Company Group to any material
taxes, penalties or other liabilities with respect to any Plan.
(d) Since March 31, 1996 neither the Company nor any other
member of the Company Group has ever maintained or contributed to a defined
benefit pension plan or a multi employer plan (within the meaning of Section
4001(a)(3) of ERISA).
(e) No member of the Company Group maintains any pension plan
within the meaning of Section 3(2)(A) of ERISA, except for the TSI
Incorporated Employee Retirement and Profit Sharing Plan (the "TSI Plan")
which is maintained by TSI and certain Subsidiaries, and for the
Environmental Systems Corporation 401(k) Retirement Plan (the "ESC Plan";
hereinafter the TSI Plan and the ESC Plan are sometimes collectively referred
to as the "Retirement Plans"). The Retirement Plans are qualified within the
meaning of Section 401(a) of the Code.
(f) Except as set forth in the Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not,
alone or together with any other event, (i) entitle any employee of any
member of the Company Group to a bonus, severance pay or any other payment,
or (ii) accelerate the time of payment or vesting of, or increase the amount
of, compensation due to any such employee, except as will or may occur under
the Company's stock option plans, copies of which have been made available to
Purchaser.
2.15 LABOR MATTERS.
(a) No member of the Company Group is delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses, or
other direct compensation for any services performed for it to the date
hereof or amounts required to be reimbursed to such employees.
(b) Except as listed in the Disclosure Letter, there are no
current or, to the knowledge of the Company, threatened, organizational
activities or demands for recognition by labor organizations seeking to
represent employees of any member of the Company Group and no such activities
have occurred during the past twelve (12) months. Except as listed in the
Disclosure Letter, there are no grievances, complaints, or charges that have
been filed against any member of the Company Group under any dispute
resolution procedure that are outstanding that would have a Material Adverse
Effect on the Company Group. No collective bargaining agreement is in effect
or is currently being or is about to be negotiated by any member of the
Company Group. Except where there would be no Material Adverse Effect on the
Company Group, the Company has not received notice to indicate that any of
the employment policies or practices of any member of the Company Group is
currently being audited or investigated by any federal, state, local or
foreign government agency.
18
2.16 AUTHORITY RELATIVE TO AGREEMENTS; ENFORCEABILITY. This
Agreement and the transactions contemplated hereby have been approved by a
majority of the Company's "Continuing Directors" as defined in, and in the
manner required by, Article XI of the Articles of Incorporation of the
Company. The approval of this Agreement and the Merger at the Shareholders
Meeting by the affirmative vote of a majority of all outstanding shares of
Company Common Stock as of the record date for the Shareholders Meeting will
constitute approval of this Agreement and the Merger by the shareholders of
the Company.
2.17 AFFILIATE TRANSACTIONS. Except as disclosed in the Disclosure
Letter, there are no material contracts, commitments, agreements,
arrangements or other transactions between any member of the Company Group
and (i) any officer or director of any member of the Company Group; (ii) any
record or beneficial owner of five (5) percent or more of the voting
securities of the Company; or (iii) any affiliate (as such term is defined in
Regulation 12b-2 promulgated trader the Exchange Act) of any such officer,
director or beneficial owner.
2.18 YEAR 2000 COMPLIANCE. The disclosure contained in the Company's
quarterly report on Form 10-Q for the quarter ended September 30, 1999 does
not contain any material misstatement or omission regrading the status of the
Company's Year 2000 readiness. Except as would not have a Material Adverse
Effect on the Company Group, the products and services supplied by the
Company or its Subsidiaries since January 1, 1999 (i) are "Year 2000
Compliant", in that they will perform in a consistent manner regardless of
whether the date is before, on or after January 1, 2000, or (ii) are not Year
2000 Compliant, but the customer has been advised or is aware of this fact,
and has chosen to purchase the product or service notwithstanding the fact
that it is not Year 2000 Compliant. The Company Group will not suffer a
Material Adverse Effect after September 30, 1999 from customer claims that
the products and services of the Company and Subsidiaries sold or provided
prior to January 1, 1999 are not Year 2000 Compliant.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 MAKING OF COVENANTS AND AGREEMENTS. The Company hereby makes
the covenants and agreements set forth in this Section 3.
3.2 CONDUCT OF BUSINESS. Except as set forth in the Disclosure
Letter, between the date of this Agreement and the Closing Date, the Company
Group, and each member thereof, will, unless consented to in writing by
Purchaser:
(a) conduct its business only in the ordinary course and
consistent with prior practices;
(b) except for capital expenditures provided for in the
Company's fiscal 2000 budget, refrain from making any capital expenditures in
excess of $100,000 in the aggregate, and from mortgaging, pledging,
subjecting to a lien or otherwise encumbering any of its properties or assets;
19
(c) refrain from incurring any contingent liability as a
guarantor or otherwise with respect to the obligations of others, and from
incurring any other obligations or liabilities except in the ordinary course
of business;
(d) refrain from making any change in its Articles of
Incorporation or By-Laws;
(e) refrain from declaring, setting aside or paying any
dividend or other distribution with respect to its capital stock, or making
any direct or indirect redemption, purchase or other acquisition of its
capital stock, except for normal quarterly dividends paid by the Company to
its stockholders or dividends paid by Subsidiaries in the ordinary course of
their business consistent with past practice;
(f) except to the extent required under any existing
agreements and any existing employee and director Benefit Plans (including
existing severance plans or arrangements) as in effect on the date of this
Agreement, refrain from paying bonuses to, or increasing the compensation or
fringe benefits of, any of its directors, officers or employees, except for
increases in salary or wages of employees of the Company Group in the
ordinary course of business in accordance with past practice, and refrain
from granting any severance or termination pay and refrain from entering
into, or amending, any employment, consulting or severance agreement or
arrangement with any present or former director, officer or other employee of
the Company Group;
(g) except as may be required as a result of any change in law
or in GAAP, refrain from changing any of the accounting practices or
principles used by the Company Group;
(h) refrain from making any tax election and from settling or
compromising any material federal, state, local or foreign tax liability or
dispute;
(i) refrain from authorizing for issuance, issuing, selling,
granting, delivering, pledging or encumbering any shares of the Stock or any
other equity or voting security of the Company or any of the Subsidiaries,
except for issuances of stock pursuant to outstanding options in effect on
the date hereof and pursuant to the TSI Incorporated Employee Stock Purchase
Plan of 1994, and refrain from issuing or granting any options, warrants,
calls, commitments, subscriptions for rights to purchase or acquire any
shares or securities from any member of the Company Group, except that after
the date of this Agreement and prior to the Closing the Company may issue in
the ordinary course of business to newly hired employees options to purchase
not more than a total of 15,000 shares of Company Common Stock for all such
newly hired employees, in each case at an exercise price per share which is
not less than the fair market value per share on the date the option is
granted;
(j) refrain from any sale or other transfer of the assets of
any member of the Company Group, except in the ordinary course of business in
a manner consistent with past practice;
20
(k) refrain from reclassifying, combining, splitting,
subdividing or redeeming, purchasing or otherwise acquiring directly or
indirectly any of the Company's capital stock;
(l) refrain from adopting a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring or
recapitalization or other reorganization of any member of the Company Group;
(m) refrain making any change in the Company's borrowing
arrangements;
(n) use its reasonable efforts to prevent any change with
respect to its management and supervisory personnel and banking arrangements;
(o) use its reasonable efforts to keep intact its business
organization, to keep available its present officers and employees and to
preserve the goodwill of all suppliers, customers, independent contractors
and others having business relations with it;
(p) have in effect and maintain at all times all insurance of
the kind, in the amount and with the insurers set forth in the Disclosure
Letter or equivalent insurance with any substitute insurers approved in
writing by Purchaser;
(q) except as required to conform to applicable law, refrain
from entering into or making any change in the Retirement Plans and from
materially amending or terminating any other existing Benefit Plan, or
adopting any new Benefit Plan;
(r) refrain from acquiring control or ownership of any other
corporation, association, joint venture, partnership, limited liability
company, business trust or other business entity, or control or ownership of
all or a substantial portion of the assets of the foregoing, and from
entering into any agreement providing for any of the foregoing;
(s) except in the ordinary course of business, refrain from
entering into any material licensing arrangement or other material contract;
(t) refrain from settling any pending litigation in a manner
that is materially adverse to the Company Group and from commencing any
material litigation; and
(u) refrain from agreeing to or committing in writing to carry
out any action which is prohibited by the foregoing provisions, or which
would cause any of the representations or warranties in this Agreement to be
untrue in any material respect.
3.3 STOCKHOLDERS MEETING. The Company will call a special meeting
of its Stockholders (the "Shareholders Meeting") to be held as soon as
reasonably practicable in order that its Stockholders may consider and vote
upon this Agreement and approval of the Merger in accordance with the MBCA.
21
The Company will prepare and file as promptly as possible with the SEC
preliminary proxy materials under the Securities and Exchange Act relating to
the Shareholders Meeting; PROVIDED that the preliminary proxy materials need
not be filed until the commitment letter referred to in Section 9.1(g) has
been delivered. The Company will use its reasonable best efforts, after
consultation with Purchaser, to respond to the comments of the SEC thereon
and will make any further filings (including amendments and supplements) in
connection therewith that may be necessary. Purchaser agrees to provide the
Company with whatever information and assistance in connection with said
filings that the Company may reasonably request. Except as otherwise
permitted under Section 3.4, the Company will include in the Proxy Statement
the recommendation of the Company's Board of Directors that the Stockholders
of the Company vote in favor of the approval and adoption of this Agreement,
the Merger and the transactions contemplated hereby. The Company will employ
a nationally recognized proxy solicitation firm to assist in disseminating
proxy materials, contacting Shareholders to solicit proxies to vote in favor
of the approval and adoption of this Agreement, and performing the services
customarily performed by such firms in transactions of this type.
The final Company proxy materials will comply with the Exchange Act in
all material respects, and will 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 will
be made, not misleading; PROVIDED, HOWEVER, that the Company makes no
representation or warranty with respect to any information that the Purchaser
will supply specifically for use in said proxy materials.
3.4 EXCLUSIVITY. For purposes of this Agreement, the term "Takeover
Proposal" shall mean any proposal for a merger or other business combination
involving the Company or any Subsidiary, or for the acquisition of a
substantial equity interest in the Company or any Subsidiary, a substantial
portion of the assets of the Company or any Subsidiary or a product line or
line of business of the Company or any Subsidiary, other than as contemplated
by this Agreement. The Company shall promptly advise Purchaser orally and in
writing of any "Takeover Proposal" or of any proposal, or inquiry reasonably
likely to result in a Takeover Proposal.
Each member of the Company Group shall not, directly or indirectly,
whether through its officers, directors, Stockholders, agents,
representatives, or otherwise, engage in any discussions or negotiations
with, or provide any non-public information to, any person or entity making,
proposing to make or believed to be contemplating a Takeover Proposal to the
Company; PROVIDED, HOWEVER, that the Company, its Subsidiaries, and their
directors and officers will remain free to participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner, any effort or attempt by
any third party to do or seek any of the foregoing to the extent required by
the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by a majority of the members thereof following the
receipt of advice of outside legal counsel. In the event that any such
activities result in a Takeover Proposal which the Board of Directors of the
Company reasonably concludes is superior to the transaction contemplated by
this Agreement ("Superior Proposal"), nothing contained in this Agreement
will prevent the Board of Directors of the Company from recommending such
Superior Proposal to the
22
Company's Stockholders, and from withdrawing any recommendation of this
Agreement and the transactions contemplated hereby. In the event that the
Merger contemplated by this Agreement is not consummated because of a
Superior Proposal, and the transaction contemplated by the Superior Proposal
is not consummated, the Board of Directors of the Company agrees to negotiate
in good faith with the Purchaser with a view toward consummating a
transaction with the Purchaser as contemplated by this Agreement; PROVIDED,
HOWEVER, that the obligation created by this sentence shall not apply if the
Company has paid Purchaser the termination fee provided for in Section 9.3.
3.5 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the
Company will use its reasonable best efforts to obtain all authorizations,
consents and permits of others required to permit the consummation by the
Company of the transactions contemplated by this Agreement.
3.6 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon the Company becoming aware of the impending or threatened occurrence of,
any event which would cause or constitute a breach or default, or would have
caused or constituted a breach or default had such event occurred or been
known to the Company prior to the date hereof, of any of the representations,
warranties or covenants of the Company contained in or referred to in this
Agreement, the Company shall give written notice thereof to Purchaser.
3.7 CONSUMMATION OF AGREEMENT. Except as otherwise permitted under
Section 3.4, the Company shall use its reasonable best efforts to perform and
fulfill all conditions and obligations on its part to be performed and
fulfilled under this Agreement, to the end that the transactions contemplated
by this Agreement shall be fully carried out.
3.8 CONFIDENTIALITY. The Company agrees that each of the Company,
the Subsidiaries and the Company's and Subsidiaries' officers, directors and
Representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information obtained from Purchaser with
respect to its business or financial condition except for the purpose of
evaluating, negotiating and completing the transaction contemplated hereby.
Information generally known in Purchaser's industry or which has been
disclosed to the Company by third parties which have a right to do so shall
not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not
consummated, the Company will return to Purchaser (or certify that it has
destroyed) all copies of such data and information, including but not limited
to financial information, customer lists, business and corporate records,
worksheets, test reports, tax returns, lists, memoranda, and other documents
prepared by or made available to the Company in connection with the
transaction.
3.9 ACCESS TO RECORDS AND PROPERTIES. Purchaser may, prior to the
Closing Date, through its employees, agents and representatives, make or
cause to be made a detailed review of the business and financial condition of
the Company Group and make or cause to be made such investigation as it deems
necessary or advisable of the properties, assets, businesses, books and
records of each member of the Company Group. The Company agrees to assist
Purchaser in conducting such review and investigation and will provide, and
will cause its or their representatives and independent public
23
accountants to provide, Purchaser and its employees, agents and
representatives full access to, and complete information concerning, all
aspects of the businesses of the Company Group, including their respective
books, records (including tax returns filed or in preparation), projections,
personnel and premises, and any documents (including any documents filed on a
confidential basis) included in any report filed with any governmental agency
(but excluding records not normally provided by independent public
accountants to third party buyers). Purchaser and Newco shall use their
reasonable best efforts to minimize any disruption to the business of the
Company Group.
3.10 NOTIFICATION REGARDING DISSENTERS' SHARES. The Company shall
give Purchaser (i) prompt notice of any notice of intent to demand fair value
for any shares of Company Common Stock, withdrawals of such notices, and any
other instruments served pursuant to the Appraisal Laws and received by the
Company, and (ii) the opportunity to direct any negotiations and proceedings
with respect to demands for fair value for shares of Company Common Stock
under the Appraisal Laws. The Company shall not, without the prior written
consent of Purchaser, voluntarily make any payment with respect to any
demands for fair value for shares of Company Common Stock or offer to settle
or settle any such demands.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND NEWCO.
4.1 ORGANIZATION OF PURCHASER AND NEWCO. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota with full corporate power and authority to own or lease
its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted by
it. Newco is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota with full corporate power
and authority to own or lease its properties and to conduct its business in
the manner and in the places where such properties are owned or leased or
such business is conducted by it. Each of Purchaser and Newco has delivered
to the Company true and complete copies of its Articles of Incorporation and
Bylaws as currently in effect.
4.2 AUTHORITY OF PURCHASER AND NEWCO. Each of Purchaser and Newco
has full right, authority and power to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by it
pursuant to this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by each of Purchaser and
Newco of this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary corporate action of
Purchaser and Newco and no other action on the part of Purchaser or Newco is
required in connection therewith. This Agreement and each other agreement,
document and instrument executed and delivered by each of Purchaser and Newco
pursuant to this Agreement constitute, or when executed and delivered will
constitute, valid and binding obligations of Purchaser or Newco, as
applicable, enforceable in accordance with their terms, except as such
enforceability may be limited by general equity principles (regardless of
whether such enforceability is considered in a proceeding at equity or at
law).
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The execution, delivery and performance by each of Purchaser and Newco
of this Agreement and each such agreement, document and instrument:
(a) do not and will not violate any provision of the Articles
of Incorporation or Bylaws of each of Purchaser and Newco;
(b) except as would not have a Material Adverse Effect on
Purchaser or Newco, and subject to obtaining the Required Consents, do not
and will not violate any laws, rules, or regulations of the United States or
of any state or any other jurisdiction applicable to Purchaser or Newco or
require Purchaser or Newco to obtain any approval, consent, or waiver of, or
make any filing with, any person or entity (governmental or otherwise) which
has not been obtained or made; and
(c) except as would not have a Material Adverse Effect on
Purchaser or Newco, and subject to obtaining the Required Consents, do not
and will not result in a breach of, constitute a default under, accelerate
any obligation under, or give rise to a right of termination of any
indenture, loan, or credit agreement, or any other agreement, mortgage,
lease, permit, order, judgment, or decree to which Purchaser or Newco is a
party and which is material to the business and financial condition of
Purchaser and its affiliated organizations on a consolidated basis.
4.3 LITIGATION. There is no litigation pending or, to Purchaser's
knowledge, threatened against Purchaser or Newco which would prevent or
hinder the consummation of the transactions contemplated by this Agreement.
4.4 CONSENTS AND APPROVALS. Except for the Required Consents, no
filing with or notice to, and no permit or approval of, any Governmental
Entity is necessary for the execution and delivery by Purchaser and Newco of
this Agreement and their performance of the transactions contemplated hereby.
4.5 FINANCING. Purchaser, Newco and Xxxxx'x financing for the
amounts to be paid under this Agreement will be substantially as set forth in
Xxxxx'x letter dated December 3, 1999 to the Company's Board of Directors.
The equity portion of the financing referred to in that letter will not
involve any guaranty by the Surviving Corporation or pledge of its assets.
SECTION 5. COVENANTS OF PURCHASER.
5.1 MAKING OF COVENANTS AND AGREEMENT. Purchaser hereby makes the
covenants and agreements set forth in this Section 5.
5.2 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, Purchaser
and Newco will use their reasonable efforts to obtain all authorizations,
consents and permits of others required to permit the consummation by
Purchaser and Newco of the transactions contemplated by this Agreement.
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5.3 CONFIDENTIALITY; NONSOLICITATION. Purchaser agrees that, unless
and until the Closing has been consummated:
(a) Purchaser and its officers, directors, and representatives
will hold in strict confidence, and will not use any confidential or
proprietary data or information obtained from the Company Group with respect
to the business or financial condition of the Company Group except for the
purpose of evaluating, negotiating and completing the transaction
contemplated hereby. Information generally known in the industries of the
Company Group or which has been disclosed to Purchaser by third parties which
have a right to do so shall not be deemed confidential or proprietary
information for purposes of this Agreement. If the transaction contemplated
by this Agreement is not consummated, Purchaser will return to the Company
(or certify that it has destroyed) all copies of such data and information,
including but not limited to financial information, customer lists, business
and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to Purchaser in
connection with the transaction.
(b) During the period commencing on the date hereof and ending
three (3) years from the date hereof, Purchaser and its affiliates shall not
employ, nor solicit or make offers of employment to, any individuals who are
presently employed by any member of the Company Group or who become employed
by any member of the Company Group during the time period between the date
hereof and the date of termination of this Agreement.
5.4 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon Purchaser or Newco becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default,
or which would have caused or constitute a breach or default had such event
occurred or been known to Purchaser or Newco prior to the date hereof, of any
of the representations, warranties or covenants of the Purchaser and Newco
contained in or referred to in this Agreement, Purchaser shall given written
notice thereof to the Company.
5.5 CONSUMMATION OF AGREEMENT. Each of Purchaser and Newco shall
use its reasonable efforts to perform and fulfill all conditions and
obligations on the part of either to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement
shall be fully carried out.
5.6 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE.
(a) Purchaser and Newco agree that all rights to
indemnification for acts or omissions occurring prior to the Effective Time
of the Merger now existing in favor of the current and former directors or
officers of the Company Group (the "Indemnified Parties") as provided in the
respective articles or certificates of incorporation or bylaws of the Company
Group, or by statute, shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
(b) For six (6) years from the Effective Time of the Merger,
Purchaser shall maintain in effect (i) the indemnification provisions of the
Company's current articles of
26
incorporation and bylaws as they relate to its current directors and
officers, and (ii) directors and officers liability insurance or insurance
policies with substantially equivalent coverage covering those persons who
are currently covered by the Company's directors and officers liability
insurance policy, a copy of which has been delivered to Purchaser.
(c) This Section 5.6 shall survive the consummation of the
Merger and is intended to benefit the Indemnified Parties, and shall be
binding upon all successors and assigns of the Purchaser and Newco.
5.7 EMPLOYEE BENEFITS. Purchaser agrees that after the Effective
Time of the Merger and until December 31, 2000, the Surviving Corporation
will provide the persons employed by members of the Company Group immediately
prior to the Effective Time, with non-incentive type fringe benefits which in
the aggregate are substantially comparable to those currently provided by the
Company Group, which are described in Section 5.7 of the Disclosure Letter.
With respect to any benefit plans in which any employees of the
Company Group first become eligible to participate on or after the Effective
Time of the Merger ("New Plans") but prior to December 31, 2000, Purchaser
shall (i) waive all pre-existing conditions, exclusions and waiting periods
with respect to participation and coverage requirements under any such New
Plans, to the extent such waiver is permissible under the New Plans of
Purchaser, and (ii) recognize service of the employees of the Company Group
with the Company Group accrued prior to the Effective Time of the Merger in
determining eligibility to participate and vesting credit in any New Plans.
Vacation entitlement of the Company Group employees accrued as of the
Effective Time of the Merger shall not be reduced and will apply after the
Effective Time of the Merger.
Purchaser agrees that after the Effective Time of the Merger the
Surviving Corporation will pay or provide for the fiscal year ending March
31, 2000, to the persons employed by members of the Company Group immediately
prior to the Effective Time, the incentive compensation program benefits
which such persons have or will accrue, or to which they have or will become
entitled, in the ordinary course for that fiscal year under the incentive
compensation programs which are described in Section 5.7 of the Disclosure
Letter; PROVIDED, that the Company Group does not prior to the Effective Time
of the Merger expand such programs or the class or classes of employees
entitled to such programs.
5.8 REDUNDANCIES. Employees of the Company Group whose jobs are
eliminated as a result of the consummation of the transactions contemplated
under this Agreement shall receive severance payments in the amounts due
under the severance policy of Purchaser (but in no event shall the amounts
paid be less than the amounts due under the Company's severance policy as
currently in effect), which is one week of severance pay for each year of
service, except that Messrs. Doubles, Gallagher, Nystrom, Agarwal and Xx.
Xxxxxxxx shall be entitled to the respective benefits provided by the "Stay
in Place Agreements" between each of them and the Company which have been
delivered to the Purchaser.
27
SECTION 6. MUTUAL COVENANTS.
6.1 HSR MATTERS. Each party hereto shall make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable after the date
hereof. Each such filing shall request early termination of the waiting
periods imposed by the HSR Act. Each party hereby agrees to use its
reasonable best efforts to cause a termination of the waiting period under
the HSR Act without the entry by a court of competent jurisdiction of an
order enjoining the consummation of the transactions contemplated hereby at
as early a date as possible. Each party also agrees to respond promptly to
all investigatory requests as may be made by the government. In the event
that a Request for Additional Information is issued under the HSR Act, each
party agrees to furnish all information required and to comply substantially
with such Request as soon as is practicable after its receipt thereof so that
any additional applicable waiting period under the HSR Act may commence. Each
party will keep the other party apprized of the status of any inquiries made
of such party by the Department of Justice, Federal Trade Commission or any
other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby. All
filing fees to be paid by Purchaser or the Company in connection with filing
Notification and Report Forms pursuant to the HSR Act shall be paid one-half
by the Purchaser and one-half by the Company.
6.2 PUBLIC ANNOUNCEMENTS. The parties hereto will consult with one
another before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement,
and shall not issue any such press release or make any such public statement
prior to such consultation, except to the extent that such consultation may
be prohibited by applicable law or that such a disclosure or release is
required by obligations pursuant to law or to any listing agreement with
Nasdaq as determined by the Company.
SECTION 7. CONDITIONS.
7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
each of Purchaser, Newco and the Company to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment, prior to or
at the Closing, of the following conditions precedent:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained the
required Stockholder Approval of this Agreement and the transactions
contemplated hereby.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No Governmental
entity or federal or state court of competent jurisdiction shall have
enacted, issued, enforced or entered any statute, rule, regulation, executive
order, decree, judgment, injunction or other order which is in effect and
which prevents or prohibits consummation of the Merger or any other material
transactions contemplated
28
in this Agreement, and no Governmental entity shall institute any action or
proceeding before any United States court or other Governmental body seeking
to enjoin, restrain or otherwise prohibit consummation of the transactions
contemplated by this Agreement, which action or proceeding remains pending at
what would otherwise be the Closing Date.
7.2 CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND NEWCO. The
obligations of Purchaser and Newco to consummate this Agreement and the
transactions contemplated hereby are subject to the fulfillment, prior to or
at the Closing, of the following conditions precedent:
(a) REPRESENTATIONS; WARRANTIES. Each of the representations
and warranties of the Company contained in Section 2 shall be true and
correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing (it being understood
that representations and warranties that speak as of a particular date must
continue to be thus true and correct as of the date as of which they speak),
except as qualified by any amendment to the Disclosure Letter which is
acceptable to Purchaser, and the Company shall have delivered to the
Purchaser a certificate, dated the Closing Date, signed by the Company's
chief executive officer to the foregoing effect.
(b) COVENANTS. The Company shall, on or before the Closing,
have performed in all material respects all of its obligations hereunder
which by the terms hereof are to be performed on or before the Closing,
except where the failure to perform would not have a Material Adverse Effect
on the Company Group or Purchaser.
(c) NO MATERIAL CHANGE. Since the date of the Most Recent
Fiscal Quarter End, there shall not have occurred any event which has a
Material Adverse Effect on the Company, except as expressly disclosed in this
Agreement or the Disclosure Letter.
(d) CONSENTS. All of the consents, approvals, authorizations,
approvals, orders or permits required to be obtained by the Company,
Purchaser or Newco shall have been obtained, except for those as to which the
failure to obtain the same would not have a Material Adverse Effect on the
Company.
(e) DISSENTING SHARES. As of the Closing Date, no more than 15
percent (15%) of the issued and outstanding shares of Company Common Stock
shall be eligible for treatment as Dissenting Shares hereunder.
(f) LEGAL OPINION. The Purchaser and Newco shall have received
at the Closing an opinion of Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx, P.A., legal
counsel to the Company, addressed to Purchaser and in the form of Schedule
7.2(g) of this Agreement.
(g) NO BREACH OF VOTING AGREEMENTS. The Voting Agreements
shall be in full force and effect and none of the shareholders which are
party to the Voting Agreements shall have
29
breached or given Purchaser and Newco any notice of any intention to breach
the Voting Agreements.
Notwithstanding the foregoing, if within thirty (30) days (the "Cure
Period") following notice to the Company of the existence of any condition
enumerated in this Section 7.2, the condition or conditions disclosed in the
notice have been cured or corrected or otherwise have ceased to exist, then
this Section shall not relieve Purchaser and Newco of their obligations to
proceed with the consummation of this Agreement and the transactions
contemplated hereby.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate this Agreement and the transactions contemplated hereby
is subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) REPRESENTATIONS; WARRANTIES. Each of the representations
and warranties of Purchaser and Newco contained in Section 4 shall be true
and correct in all material respects as though made on and as of the Closing.
(b) COVENANTS. Purchaser shall, on or before the Closing, have
performed all of its obligations hereunder which by the terms hereof are to
be performed on or before the Closing; and Purchaser shall have delivered to
the Company and the Stockholders a certificate of the President of Purchaser
dated on the Closing to such effect.
SECTION 8. CLOSING; CLOSING DATE.
Unless this Agreement shall have been terminated and the Merger herein
contemplated shall have been abandoned pursuant to a provision of Section 9
hereof and subject to compliance with the conditions hereto (but after
extension by any Cure Period provided in Section 7.2, if applicable), a
closing (the "Closing") will be held on the date of the Shareholders Meeting,
or as soon thereafter as the conditions in Section 7 have been satisfied or
waived, or on such other date which is mutually acceptable to Purchaser and
the Company, at the offices of legal counsel to the Purchaser commencing at
11:00 A.M. At the Closing, Purchaser will deliver to the Payment Agent the
irrevocable letter of credit referred to in Section 1.6(a), the Company will
make the payment with respect to Options referred to in Section 1.5, any
documents required hereunder will be exchanged by the parties, and,
immediately thereafter, the Articles of Merger will be filed by Newco and the
Company with the Secretary of State of the State of Minnesota. The date on
which the Closing occurs is herein referred to as the Closing Date.
SECTION 9. TERMINATION.
9.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated
and the Merger may be abandoned before the Effective Time of the Merger,
notwithstanding any approval and adoption of this Agreement by the
shareholders of the Company or Newco:
30
(a) by the mutual consent of the Board of Directors of
Purchaser and the Company; or
(b) by Purchaser or the Company, if the shareholders of the
Company fail to approve the Merger at the Shareholders Meeting; or
(c) subject to the Company's right to cure pursuant to Section
7.2, by Purchaser if there has been a material misrepresentation or material
breach on the part of the Company in the representations, warranties or
covenants of the Company set forth herein, or if there has been any material
failure on the part of the Company to comply with its obligations hereunder;
or by the Company if there has been a material misrepresentation or material
breach on the part of Purchaser or Newco in the representations, warranties
or covenants of Purchaser Newco set forth herein, or if there has been any
material failure on the part of Purchaser or Newco to comply with their
obligations hereunder; or
(d) by Purchaser in the event that the Company's Board of
Directors withdraws its unanimous recommendation that shareholders approve
this Agreement and the Merger; or
(e) by the Company giving written notice to Purchaser at any
time prior to the Shareholder Meeting if the Company has entered into a
definitive agreement in connection with a Superior Proposal as permitted by
Section 3.4 and makes simultaneous payment to Purchaser of the fee referred
to in Section 9.3(b); or
(f) by the Company or the Purchaser if the Merger is not
effective by June 30, 2000, except that a party whose breach of this
Agreement has caused a delay in the consummation of the Merger shall not be
entitled to terminate this Agreement pursuant to this Section 9.1(f); or
(g) by the Company if the Purchaser fails to deliver to the
Company a signed commitment letter addressed to the Purchaser from a
qualified financial institution on or before January 31, 2000 which provides
for debt financing of $115,000,000. The commitment letter shall be in
customary form and reflecting financial terms consistent with the letter of
December 3, 1999 referenced in Section 4.5. In the event of termination of
this Agreement pursuant to this Section 9.1(g), none of the parties shall
have any liability to any of the other parties pursuant to this Agreement or
otherwise.
9.2 TERMINATION PROCEDURES. The power of termination provided for
by this Section 9 may be exercised for Purchaser or the Company only by its
respective President or, in the absence of the President, by a duly acting
Vice President, and will be effective only after written notice thereof,
signed on behalf of the party for which it is given by a duly authorized
officer, shall have been given to the other. If this Agreement is terminated
in accordance with this Section 9, then the Merger shall be abandoned without
further action by the Company, Purchaser and Newco.
31
9.3 LIABILITY UPON TERMINATION. In the event of termination or
abandonment of the Merger pursuant to this Section 9, no party hereto shall
have any liability or further obligation to any other party hereto except
that:
(a) a party that is in material breach of its representations,
warranties or covenants hereunder shall be liable for damages incurred by the
other parties hereto to the extent that such damages are proximately caused
by such breach, and if any legal action is instituted to enforce or interpret
the terms of this Agreement the prevailing party in such action shall be
entitled, in addition to any other relief to such the party is entitled, to
reimbursement of its actual attorneys fees;
(b) in the event that (i) this Agreement is abandoned by the
Company or terminated by the Company pursuant to Section 9.1(e), or (ii) this
Agreement is terminated or abandoned by the Purchaser pursuant to Section
9.1(c) or (d), then the Company shall within five business days pay to
Purchaser by wire transfer in immediately available funds a termination fee
of $5,000,000. Upon payment of such termination fee to Purchaser, the Company
shall have no further obligation or liability to the Purchaser, Newco or
Xxxxx under or related to this Agreement, provided that the provisions of
Sections 3.8 and 5.3 hereof related to confidentiality shall survive and
remain in force; and
(c) in the event that the Merger is not consummated due to the
Purchaser and Newco not obtaining financing for the Common Payment, then this
Agreement shall terminate and Purchaser, Newco and Xxxxx shall be jointly and
severally obligated to pay to the Company a termination fee of $5,000,000.
The payment of such fee in the circumstances provided in the preceding
sentence shall be the sole obligation of Purchaser, Newco and Xxxxx relating
to failure to obtain such financing, and upon payment of such amount
Purchaser, Newco and Xxxxx shall have no further obligation or liability to
the Company under or related to this Agreement for failure to obtain such
financing, PROVIDED that the provisions of Sections 3.8 and 5.3 hereof
concerning confidentiality shall survive such termination and remain in force.
9.4 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 9.1, provided, however,
that (a) the provisions of this Section 9 (Termination), Section 3.8
(Confidentiality), Section 5.3 (Confidentiality), the last sentence of
Section 3.4 (Exclusivity) and Section 10.2 (Fees and Expenses) hereof shall
survive any termination of this Agreement.
9.5 AMENDMENT. This Agreement may be amended by the parties hereto
by action taken or authorized by their respective Boards of Directors at any
time before or after Stockholder Approval, but after Stockholder Approval no
amendment shall be made without the further approval of the Stockholders of
the Company which reduces the consideration payable to the Stockholders
hereunder, changes the form or timing of such consideration or changes any
other terms and
32
conditions of this Agreement if the changes, alone or in the aggregate, will
materially adversely affect the Stockholders of the Company.
This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
9.6 WAIVER. The Company may extend the time for the performance of
any of the obligations or other acts of Purchaser or Newco hereunder, waive
any inaccuracies in the representations and warranties of Purchaser or Newco
contained herein or in any document delivered pursuant hereto, or waive
compliance by Purchaser with any of the agreements or conditions contained
herein, but no such action may be taken without the further approval of the
Stockholders of the Company which reduces the consideration payable to the
Stockholders hereunder, changes the form or timing of such consideration or
changes any other terms and conditions of this Agreement if the changes,
alone or in the aggregate, would materially adversely affect the Stockholders
of the Company. Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the Company. Purchaser may extend, on
behalf of itself and Newco, the time for the performance of any of the
obligations or other acts of the Company hereunder, waive any inaccuracies in
the representations and warranties of the Company contained herein or in any
document delivered pursuant hereto, or waive compliance by the Company with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by
Purchaser.
SECTION 10. MISCELLANEOUS.
10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties, covenants and other agreements in
this Agreement or in any instrument delivered pursuant to this Agreement,
including any rights raising out of any breach of such representations,
warranties, covenants and other agreements, shall survive the Effective Time
of the Merger, except only for those covenants and agreements contained
herein and therein that by their terms apply or are to be performed in whole
or in part after the Effective Time of the Merger.
10.2 FEES AND EXPENSES. Each of the parties will bear its own
expenses in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement, it being understood that if the
Merger is consummated as provided herein Purchaser and the Company will be
responsible for the expenses of the Company.
10.3 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of the State of Minnesota without regard to its
conflict of laws provisions.
10.4 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to
have been given if delivered or sent by facsimile transmission, upon receipt,
or if sent by registered or certified mail, upon the sooner of the date on
which receipt is acknowledged or the expiration of three days after deposit
in United States post office facilities properly addressed with postage
prepaid. All notices to a party will be sent to
33
the addresses set forth below or to such other address or person as such
party may designate by notice to each other party hereunder:
TO PURCHASER: JJF Group, Inc.
000 Xxxxx 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxxxxxx & Xxxxxx P.L.L.P
0000 XXX Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. XxXxxx
Facsimile: (000) 000-0000
TO COMPANY: TSI Incorporated
000 Xxxxxxxx Xxxx
X.X. Xxx 00000
Xx. Xxxx, XX 00000
(for mailing)
000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
(for deliveries and courier services)
Attn: President
Facsimile: (000) 000-0000
With a copy to: Xxxx X. Xxxxxx, Esq.
Xxxx, Plant, Xxxxx, Xxxxx & Xxxxxxx
3400 City Center
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by his counsel
or other authorized representatives.
10.5 ENTIRE AGREEMENT. This Agreement, including the Disclosure
Letter, and the other writings specifically identified herein or contemplated
hereby, is complete, reflects the entire agreement of the parties with
respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings, between the parties hereto in respect
of the transactions contemplated herein.
34
10.6 ASSIGNABILITY; BINDING EFFECT; NO THIRD PARTY BENEFICIARIES.
This Agreement shall only be assignable by Purchaser to a corporation or
partnership controlling, controlled by or under common control with Purchaser
upon written notice to the Company, and such assignment shall not relieve
Purchaser of any liability hereunder. This Agreement may not be assigned by
the Company without the prior written consent of Purchaser. This Agreement
shall be binding upon and enforceable by, and shall inure to the benefit of,
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any third party any right or benefit.
10.7 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of any term or provision hereof. The use in this Agreement of
the masculine pronoun in reference to a party hereto shall be deemed to
include the feminine or neuter, as the context may require.
10.8 EXECUTION IN COUNTERPARTS. For the convenience of the parties
and to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
10.9 SUBMISSION TO JURISDICTION. Each of Purchaser, Newco and the
Company irrevocably agree that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the courts of the State of Minnesota and each of
Purchaser, Newco and the Company hereby irrevocably submits with regard to
any such action or proceeding for itself and in respect to its property,
generally and unconditionally to the nonexclusive jurisdiction of the
aforesaid courts.
10.10 PERSONAL LIABILITY; TIME OF THE ESSENCE. This Agreement shall
not create or be deemed to create or permit any personal liability or
obligation on the part of any direct or indirect stockholder of the Company,
Newco or Purchaser, or any officer, director, employee, agent, representative
or investor of any party hereto; PROVIDED, HOWEVER, that Xxxxx guarantees
that Purchaser and Newco will perform their respective obligations under this
Agreement in all material respects. The parties agree that time is of the
essence with regard to all dates and time periods in this Agreement and the
performance of obligations under this Agreement.
10.11 DEFINITIONS. As used in this Agreement the following terms
shall have the meaning set forth below, and where said meaning, said term
shall be capitalized:
(a) "Benefit Plan" means any employee benefit plan, program,
arrangement and contract of the Company and its Subsidiaries, including
without limitation, any "employee benefit plan" as defined in Section 3(3) of
ERISA and any stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, bonus, incentive, deferred compensation,
and all other employee benefit plans, agreements or arrangements of the
Company and its Subsidiaries.
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(b) "Blue Sky Laws" shall mean state securities laws.
(c) "Business Day" means any day other than a day on which
there is no trading on Nasdaq.
(d) "ERISA" means the Employee Retirement Income Securities
Act of 1974, as amended.
(e) "Exchange Act" means the Securities Exchange Act or 1934,
as amended.
(f) "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
(g) "Governmental Entity" shall mean any court or tribunal or
administrative governmental or regulatory body, agency or authority.
(h) "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
(i) "Material Adverse Effect" means, with respect to any
entity, an effect, individually or in the aggregate, materially adverse to
the business, financial condition or results of operations of such entity and
the other members of its corporate group (which is the Company Group in the
case of the Company and its Subsidiaries), taken as a whole.
(j) "SEC" means the Securities and Exchange Commission.
(k) "Securities Act" means the Securities Act or 1933, as
amended.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to
be executed as of the date set forth above by their duly authorized
representatives.
COMPANY: PURCHASER:
TSI INCORPORATED JJF GROUP, INC.
By /s/ Xxxxx X. Doubles By /s/ Xxxx X. Xxxxx
------------------------------------ --------------------------
Name: Xxxxx X. Doubles Name: Xxxx X. Xxxxx
Title: Chairman, President & CEO Title: Chairman
XXXXX: NEWCO:
JJF ACQUISITION, INC.
/s/ Xxxx X. Xxxxx By /s/ Xxxx X. Xxxxx
-------------------------------------- --------------------------
XXXX X. XXXXX Name: Xxxx X. Xxxxx
Title: Chairman
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