EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
Dated as of December 18, 1998
By and Among
XXXXXX CHEMICAL, INC,
( "Parent ")
SII ACQUISITION COMPANY,
("Acquisition")
and
XXXXXXXX INDUSTRIES, INC.
("Company")
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - THE MERGER; CONVERSION AND EXCHANGE OF SECURITIES . . . . . . 5
Section 2.1 The Merger . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Closing . . . . . . . . . . . . . . . . . . . . . 6
Section 2.3 Consummation of the Merger . . . . . . . . . . . 6
Section 2.4 Effects of the Merger . . . . . . . . . . . . . . 6
Section 2.5 Articles of Incorporation; Bylaws . . . . . . . . 6
Section 2.6 Directors and Officers . . . . . . . . . . . . . 7
Section 2.7 Conversion of Securities . . . . . . . . . . . . 7
Section 2.8 Exchange of Shares and Certificates . . . . . . . 9
Section 2.9 Dissenting Shareholders . . . . . . . . . . . . . 13
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . . . . 14
Section 3.1 Organization. Standing and Corporate Power . . . 14
Section 3.2 Subsidiary . . . . . . . . . . . . . . . . . . . 15
Section 3.3 Capital Structure . . . . . . . . . . . . . . . . 15
Section 3.4 Authority; Noncontravention . . . . . . . . . . . 17
Section 3.5 SEC Documents; Undisclosed Liabilities . . . . . 20
Section 3.6 Information Supplied . . . . . . . . . . . . . . 21
Section 3.7 Absence of Certain Changes or Events . . . . . . 22
Section 3.8 Litigation . . . . . . . . . . . . . . . . . . . 27
Section 3.9 Absence of Changes in Benefit Plans . . . . . . . 28
Section 3.10 ERISA Compliance . . . . . . . . . . . . . . . . 28
Section 3.11 Voting Requirements . . . . . . . . . . . . . . . 32
Section 3.12 Brokers: Schedule of Fees and Expenses . . . . . 32
Section 3.13 Opinions of Financial Advisors . . . . . . . . . 32
Section 3.14 Taxes . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.15 Compliance with Laws . . . . . . . . . . . . . . 34
Section 3.16 Environmental Matters . . . . . . . . . . . . . . 34
Section 3.17 Labor Matters . . . . . . . . . . . . . . . . . . 38
Section 3.18 Certain Contracts . . . . . . . . . . . . . . . . 38
Section 3.19 Contract Defaults . . . . . . . . . . . . . . . . 38
Section 3.20 Board Recommendation . . . . . . . . . . . . . . 39
Section 3.21 State Takeover Statute . . . . . . . . . . . . . 39
Section 3.22 Settlement Agreement . . . . . . . . . . . . . . 40
Section 3.23 Industrial Revenue Bonds . . . . . . . . . . . . 40
Section 3.24 Waiver and Agreement; Mutual Release . . . . . . 41
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . 42
Section 4.1 Organization, Standing and Corporate Power . . . 42
Section 4.2 Authority: Noncontravention . . . . . . . . . . . 43
Section 4.3 Information Supplied . . . . . . . . . . . . . . 45
Section 4.4 Litigation . . . . . . . . . . . . . . . . . . . 46
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Section 4.5 Financial Ability to Pay Merger Consideration . . 46
Section 4.6 No Ownership of Company Common Stock . . . . . . 46
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . 47
Section 5.1 Conduct of Business by Company . . . . . . . . . 47
Section 5.2 Other Actions . . . . . . . . . . . . . . . . . . 52
Section 5.3 Advice of Changes . . . . . . . . . . . . . . . . 52
Section 5.4 No Solicitation . . . . . . . . . . . . . . . . . 53
ARTICLE VI - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 56
Section 6.1 Preparation of the Proxy Statement;
Shareholders Meeting . . . . . . . . . . . . 56
Section 6.2 Access to Information; Confidentiality . . . . . 58
Section 6.3 Best Efforts; Notification . . . . . . . . . . . 59
Section 6.4 Public Announcements . . . . . . . . . . . . . . 61
Section 6.5 Benefit Plans . . . . . . . . . . . . . . . . . . 62
Section 6.6 Indemnification . . . . . . . . . . . . . . . . . 62
Section 6.7 Payment of Fees and Expenses . . . . . . . . . . 65
Section 6.8 Promissory Note from the Xxxxxxxx Family Limited
Partnership . .. . . . . . . . . . . . . . . . 66
Section 6.9 Stop Transfer Order . . . . . . . . . . . . . . . 67
Section 6.10 No Acquisition of Common Stock Prior to Effective
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 6.11 Buy-Out of Plant A Lease . . . . . . . . . . . . 67
ARTICLE VII - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 68
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.2 Conditions to Obligations of Parent and
Acquisition . . . . . . . . . . . . . . . . . . 69
Section 7.3 Conditions to Obligation of Company . . . . . . . 74
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . 76
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . 76
Section 8.2 Effect of the Termination . . . . . . . . . . . . 79
Section 8.3 Amendment . . . . . . . . . . . . . . . . . . . . 83
Section 8.4 Extension; Waiver . . . . . . . . . . . . . . . . 83
Section 8.5 Procedure for Termination, Amendment, Extension or
Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE IX - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.1 Nonsurvival of Representations and Warranties . . 85
Section 9.2 Notices . . . . . . . . . . . . . . . . . . . . . 85
Section 9.3 Interpretation . . . . . . . . . . . . . . . . . 87
Section 9.4 Counterparts . . . . . . . . . . . . . . . . . . 87
Section 9.5 Entire Agreement; No Third-Party Beneficiaries . 87
Section 9.6 Governing Law. . . . . . . . . . . . . . . . . . 88
Section 9.7 Assignment . . . . . . . . . . . . . . . . . . . 88
Section 9.8 Enforcement . . . . . . . . . . . . . . . . . . . 88
Section 9.9 Waivers . . . . . . . . . . . . . . . . . . . . . 90
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Section 9.10 Severability . . . . . . . . . . . . . . . . . . 90
Section 9.11 Definitions of Certain General Terms . . . . . . 90
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement")dated as of December
18, 1998 by and among XXXXXX CHEMICAL, INC., a Delaware corporation
("Parent"), SII ACQUISITION COMPANY, a Virginia corporation and a wholly-
owned subsidiary of Parent ("Acquisition"), and XXXXXXXX INDUSTRIES, INC., a
Virginia corporation ("Company").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Parent and Acquisition
have approved the merger of Acquisition with and into Company (the "Merger")
upon the terms and subject to the conditions set forth in this Agreement, and
have approved this Agreement;
WHEREAS, the Board of Directors of Company has approved the Merger
upon the terms and subject to the conditions set forth in this Agreement, and
has approved this Agreement;
WHEREAS, the Merger and this Agreement require the vote of a majority
of the voting power of the outstanding shares of the Common Stock of Company
for the approval thereof;
WHEREAS, as a condition to their willingness to enter into this
Agreement and consummate the transactions contemplated hereby, Parent and
Acquisition have required that Xxxxxx X. Xxxxxxx, Xxxxxxxxx X. Xxxxxxx, the
Xxxxxxxx Family Corporation, the Xxxxxxxx Family Limited Partnership, the
Trustees Under Xxxxxx X. Xxxxxxxx, Stockholder. Declaration of Living Trust
Dated December 17, 1998, and the Trustees Under Xxxxxx X. Xxxxxxxx,
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Stockholder. Declaration of Living Trust Dated December 17, 1998 (each, a
"Principal Shareholder") agree, among other things, to vote the shares of
Common Stock of Company beneficially owned by each of them in accordance with
the Voting Agreement, dated of even date herewith, entered into with Parent
(the "Voting Agreement") and to comply with the other provisions of the
Voting Agreement; and
WHEREAS, Parent and Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the
meaning specified in the Section indicated (such meanings to be equally
applicable to both the singular and plural terms of the terms defined.
Acquisition Recitals
affiliate Section 9.11
Agreement Recitals
Approved Matters Section 5.1
Benefit Plans Section 3.9
CERCLA Section 3.16
Certificates Section 2.8
Closing Section 2.2
Closing Date Section 2.2
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Code Section 3.10
Common Stock Section 2.7
Company Recitals
Company Disclosure Letter Section 3.2
Company Material Adverse Effect Section 3.1
Company Plans Section 3.10
Company Stock Options Section 2.7
Confidentiality Agreement Section 5.4
Contracts Section 3.4
Controlled Group Section 3.10
D. B. Western Section 6.11
Derivative Suit Section 7.2
Dissenting Shareholders Section 2.9
Effective Time Section 2.3
Environmental Law Section 3.16
Environmental Permits Section 3.16
ERISA Section 3.10
Exchange Act Section 3.4
Exchange Agent Section 2.8
Expenses Section 8.2(a)
Fee Section 8.2(a)
Filed SEC Documents Section 3.7
Governmental Authority Section 3.4
Hazardous Material Section 3.16
HSR Act Section 3.4
3
Indemnified Parties Section 6.6
Insurance Amount Section 6.6
knowledge Section 9.11
Liens Section 3.2
Material Breach Section 8.1
Merger Recitals
Merger Consideration Section 2.7
Mutual Release Section 3.7(k)
Nepera Section 7.2(i)
Nepera Contract Section 7.2(i)
Neste-Nepera Proceeding Section 7.2(i)
Notice of Takeover Proposal Section 5.4(c)
Parent Recitals
Parent Material Adverse Effect Section 4.1
Partnership Section 6.8
person Section 9.11
Plant A Lease Section 6.11
Pledge Agreement Section 6.8
Preferred Stock Section 3.3
Principal Shareholders Recitals
Proxy Statement Section 3.4
Release Section 3.16
Remedial Action Section 3.16
Securities Act Section 3.5
SEC Section 3.5
SEC Documents Section 3.5
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Settlement Agreement Section 7.2(d)
Shareholder Approval Section 3.4
Shareholders Meeting Section 6.1
subsidiary Section 9.11
Subsidiary Section 3.1
Subsidiary Note Section 6.8
Surviving Corporation Section 2.1
takeover proposal Section 5.4
Tax Returns Section 3.14
Taxes Section 3.14
Third Party Section 8.2(a)
Third Party Acquisition Section 8.2(a)
Voting Agreement Recitals
VSCA Section 2.1
Waiver and Agreement Section 3.7(k)
ARTICLE II
THE MERGER; CONVERSION AND EXCHANGE OF SECURITIES
Section 2.1 The Merger. Subject to and in accordance with the
terms and conditions of this Agreement and in accordance with the Virginia
Stock Corporation Act (the "VSCA") at the Effective Time, Acquisition shall
be merged with and into Company. As a result of the Merger, the separate
corporate existence of Acquisition shall cease and Company shall continue as
the surviving corporation (sometimes referred to herein as the "Surviving
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Corporation") and shall succeed to and assume all of the rights and
obligations of Acquisition in accordance with the SCA.
Section 2.2 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by Parent and
Company (the "Closing Date"), which (subject to satisfaction or waiver of the
conditions set forth in Sections 7.2 and 7.3) shall be no later than the
third business day after satisfaction of the conditions set forth in Section
7.1, at the offices of Williams, Mullen, Christian & Xxxxxxx, 0000 Xxxx Xxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, unless another time, date or place is
agreed to in writing by the parties hereto.
Section 2.3 Consummation of the Merger. On the Closing Date,
the parties hereto will cause the Merger to be consummated by filing with the
Virginia State Corporation Commission articles of merger, in form reasonably
satisfactory to Company, Parent and Acquisition, executed in accordance with
the relevant provisions of the VSCA, and shall make all other filings or
recordings required under the VSCA. The "Effective Time" as that term is used
in this Agreement shall mean the date and time specified in the articles of
merger filed in accordance with the VSCA.
Section 2.4 Effects of the Merger. The Merger shall have the
effects set forth in Section 13. 1-721 of the VSCA
Section 2.5 Articles of Incorporation; Bylaws. The Articles of
Incorporation of Company, as in effect immediately prior to the Effective
Time, shall be amended and restated at the Effective Time so as to read in
its entirety in the form set forth as Exhibit A hereto and, as so amended,
shall be the Articles of Incorporation of the Surviving Corporation until
6
thereafter amended or changed as provided therein and under the VSCA. The
Bylaws of Acquisition, as in effect immediately prior to the Effective Time,
shall become, from and after the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended or changed as provided therein or under
the VSCA.
Section 2.6 Directors and Officers. The directors of
Acquisition at the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified. The officers of
Acquisition at the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office until their respective successors
are duly elected or appointed and qualified.
Section 2.7 Conversion of Securities. Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue of the Merger
and without any action on the part of Company, Parent, Acquisition or their
respective shareholders:
(a) Except as otherwise provided in (i) Section 2.7(b)
with respect to shares in Company held by Company or the Subsidiary or (ii)
in Section 2.9 with respect to shares held by Dissenting Shareholders, each
issued and outstanding share of no par value common stock of Company ("Common
Stock") shall automatically be cancelled and cease to exist and shall be
converted into the right to receive, in cash from the Surviving Corporation,
a per share amount equal to $3.40 (subject to possible downward adjustments
pursuant to Section 6.7 and Section 6 11 hereof) and each outstanding stock
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option granted to any current or former employee or director pursuant to the
Company's 1995 Stock Incentive Plan (the "Company Stock Options"), whether or
not then exercisable, shall be cancelled and converted into the right to
receive, in cash from the Surviving Corporation, an amount equal to $3.40
(subject to possible downward adjustments pursuant to Section 6.7 and Section
6.11 hereof) per option share, reduced by the applicable exercise price of
such option and further reduced by the amount of any withholding or other
taxes required by law to be withheld. The aggregate consideration payable as
described above in this Section 2.7(a) shall be referred to herein as the
"Merger Consideration."
(b) Each share of Common Stock owned by Company or by
the Subsidiary as of the Effective Time (if any) shall automatically be
cancelled and extinguished and cease to exist at the Effective Time without
any conversion thereof and no payment of any portion of the Merger
Consideration or other consideration shall be made with respect thereto.
(c) At the Effective Time, each holder of an outstanding
certificate that prior thereto represented Common Stock (other than shares of
Common Stock referred to in Section 2.7(b) or Section 2.9) shall cease to
have any rights with respect thereto, except the right, upon surrender
thereof to the Exchange Agent in accordance with Section 2.8 hereof, to
receive in exchange therefor such holder's appropriate portion of the Merger
Consideration (as described in Section 2.7(a)).
(d) At the Effective Time, each holder of an outstanding
Company Stock Option that prior thereto represented an option to acquire one
or more shares of Common Stock shall be entitled, upon delivery to the
8
Exchange Agent in accordance with Section 2.8 of all necessary documentation
evidencing the cancellation and surrender of such Company Stock Options (such
documentation to be in form and substance mutually satisfactory to Company
and Parent), to receive in exchange therefor such holder's appropriate
portion of the Merger Consideration (as described in Section 2.7(a)).
(e) At or prior to the Effective Time, Company shall
take all such action as is necessary to amend each option agreement with
current or former employees or directors relating to outstanding Company
Stock Options in order to provide for the automatic cancellation of each such
Company Stock Option at the Effective Time and its conversion into the right
to receive the appropriate portion of the Merger Consideration in accordance
with Section 2.7(a).
(f) Each share of common stock, no par value per share,
of Acquisition issued and outstanding immediately prior to the Effective Time
shall automatically, without any action on the part of the holder thereof, be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
Section 2.8 Exchange of Shares and Certificates. (a) As of the
Effective Time of the Merger, Acquisition (or Parent, acting on its behalf)
shall deposit the Merger Consideration with First Union National Bank or such
other bank or trust company as may be mutually agreed upon by Company and
Parent (the "Exchange Agent"), for the benefit of the holders of the Common
Stock and the Company Stock Options, each for exchange in accordance with
this Article II.
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(b) As soon as reasonably practical after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
issued and outstanding shares of Common Stock (the "Certificates") (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to a Certificate shall pass, only upon delivery of
the Certificate to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the
applicable share of the Merger Consideration. As soon as reasonably practical
after the Effective Time, the Exchange Agent shall mail to each holder of a
Company Stock Option (i) a letter of transmittal and (ii) instructions for
use in surrendering such Company Stock Options in exchange for the applicable
share of the Merger Consideration. After the Effective Time, upon surrender
to the Exchange Agent of a Certificate or Company Stock Option, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
or Company Stock Option shall be entitled to receive in exchange therefor a
check in an amount equal to the product of $3.40 (subject to possible
downward adjustments pursuant to Section 6.7 and Section 6.11 hereof)
multiplied by the number of shares of Common Stock represented by such
Certificate or the number of shares of Common Stock to which options are
granted by such Company Stock Option, and the Certificate or Company Stock
Option so surrendered shall be cancelled, the foregoing sum to be reduced in
the case of a Company Stock Option by the aggregate exercise price of the
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stock options represented by such Company Stock Option and by any applicable
withholding taxes as provided in Section 2.7(a). After the Effective Time,
there are the records of Company or its transfer agent of Certificates
representing shares of Common Stock which have been converted pursuant to
this Agreement into the right to receive an applicable share of the Merger
Consideration, and if such Certificates are presented to Company for
transfer, they shall be canceled against delivery of the applicable share of
the Merger Consideration as provided in this Article II. In the event of a
transfer of ownership of Common Stock which is not registered in the transfer
records of Company, a payment of the applicable portion of the Merger
Consideration may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be
properly endorsed, with signature guaranteed, or otherwise be in proper form
for transfer and the person requesting such payment shall pay any transfer or
other taxes required to be paid on account of such transfer or establish to
the satisfaction of the Surviving Corporation that such tax has been paid or
is not applicable. Until surrendered as contemplated by this Section 2.8,
each Certificate and each Company Stock Option shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the pro rata portion of the Merger Consideration as contemplated by
this Section 2.8. No interest shall be paid or accrue on the Merger
Consideration so payable.
(c) No dividends or other distributions with respect to
the Common Stock with a record date after the Effective Time shall be paid to
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the holder of any unsurrendered Certificate with respect to the shares of
Common Stock represented thereby.
(d) Any portion of the Merger Consideration which
remains undistributed to the holders of the Certificates or the Company Stock
Options for six months after the Effective Time shall be delivered by the
Exchange Agent to the Surviving Corporation, upon demand, and any holders of
the Certificates or Company Stock Options who have not theretofore complied
with this Section 2.8 shall thereafter look solely to the Surviving
Corporation as general creditors thereof with respect to the payment of their
claim to a share of such Merger Consideration.
(e) None of Parent, Acquisition or Company shall be
liable to any person in respect of any sums from the Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates representing shares of Common
Stock shall not have been surrendered prior to one year after the Effective
Time (or immediately prior to such earlier date on which any sums from the
Merger Consideration would otherwise escheat to or become the property of any
Governmental Authority), any such sums payable in respect of such
Certificates shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(f) The Exchange Agent shall invest the Merger
Consideration in an interestbearing account, as directed by the Surviving
Corporation (within guidelines proposed by Parent and approved by the Company
prior to Closing, which approval shall not be unreasonably withheld). Any
12
interest resulting from such investment shall be paid to the Surviving
Corporation. The Surviving Corporation shall be responsible for all costs and
fees of the Exchange Agent and such costs and fees shall not be deducted from
the Merger Consideration.
Section 2.9 Dissenting Shareholders. Notwithstanding anything
in this Agreement to the contrary, but only to the extent required by the
VSCA, shares of Common Stock that are issued and outstanding immediately
prior to the Effective Time and are held by shareholders who comply with all
the provisions of the VSCA concerning the right of shareholders to dissent
from the Merger and require appraisal of their shares of Common Stock (
"Dissenting Shareholders") shall not be converted into the right to receive
the Merger Consideration but shall become the right to receive such
consideration as may be determined to be due such Dissenting Shareholder
pursuant to the law of the Commonwealth of Virginia; provided, however, that
(i) if any Dissenting Shareholder shall subsequently deliver a written
withdrawal of his or her demand for appraisal (with the written approval of
the Surviving Corporation, if such withdrawal is not tendered within 60 days
after the Effective Time), or (ii) if any Dissenting Shareholder fails to
establish and perfect his or her entitlement to appraisal rights as provided
by applicable law, then such Dissenting Shareholder or Shareholders, as the
case may be, shall forfeit the right to appraisal of such shares and such
shares shall thereupon be deemed to have been converted into the right to
receive, as of the Effective Time, the applicable share of the Merger
Consideration, without interest, in accordance with this Article II, and such
shares shall no longer be Dissenting Shares. Company shall give Parent prompt
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notice of any demands for appraisal, withdrawals of demands for appraisal and
any other related instruments received by Company and, after consultation
with Parent, shall have the right to direct all negotiations and proceedings
with respect to demands for appraisal. Without the prior written consent of
Parent, Company will not voluntarily make any payment with respect to any
demands for appraisal and will not settle or offer to settle any such demand
or approve any withdrawal of any such demand.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to each of Parent and Acquisition as
follows:
Section 3.1 Organization. Standing and Corporate Power. Each of
Company and Xxxxxxxx Adhesives, Inc. (the "Subsidiary") is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has the requisite power and authority to own,
lease and operate its property and carry on its business as now being
conducted. Each of Company and the Subsidiary is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed (individually or in the aggregate)
would not have a material adverse effect on the business, properties, assets,
condition (financial or otherwise), results of operations or prospects of
Company and the Subsidiary, taken as a whole, or on the ability of Company to
perform its obligations hereunder or to consummate the transactions
contemplated hereby, including the Merger (a "Company Material Adverse
14
Effect"). Company has delivered or previously made available to Parent
complete and correct copies of the Articles of Incorporation and Bylaws of
each of Company and the Subsidiary, in each case as amended to the date of
this Agreement. Neither Company nor the Subsidiary is in violation of any
provision of its respective Articles of Incorporation or Bylaws.
Section 3.2 Subsidiary. The Subsidiary is wholly owned by
Company and is the only subsidiary of Company. All the outstanding shares of
capital stock of the Subsidiary have been duly authorized, validly issued and
are fully paid and nonassessable and, except as set forth in Section 3.2 of
the letter delivered by Company to Parent and Acquisition concurrently with
the execution and delivery of this Agreement (the "Company Disclosure
Letter"), are owned by Company free and clear of all pledges, claims, liens,
charges, agreements, limitations on voting rights, encumbrances and security
interests of any kind or nature whatsoever (collectively, "Liens"). Except
for the capital stock of the Subsidiary and except for the ownership
interests set forth in Section 3.2 of the Company Disclosure Letter, Company
does not own, directly or indirectly, any capital stock or other ownership
interest, in any corporation, partnership, limited liability company, joint
venture or other entity.
Section 3.3 Capital Structure.
(a) The authorized capital stock of Company consists of
50,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, no
par value (the "Preferred Stock"). As of the date of this Agreement, (i)(A)
6,578,639 shares of Common Stock are outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable and free of
15
preemptive (or similar) rights and (B) no shares of Preferred Stock were
issued or outstanding; (ii) 210,000 shares of Common Stock are issuable upon
the exercise of the Company Stock Options (with an average exercise price of
$0.5167 per share). Except as set forth above and except for the up to 50,000
shares of Common Stock to be issued by Company pursuant to the Settlement
Agreement, as of the date of this Agreement, no shares of capital stock or
other voting securities of Company are issued, reserved for issuance or
outstanding. As of the date of this Agreement, there are no outstanding
bonds, debentures, notes or other indebtedness or securities of Company
having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Company may vote. Except as set forth in this Section 3.3 or in Section 3.3
of the Company Disclosure Letter, there are not and at the Effective Time
there will not be, any securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Company or the Subsidiary is a party or by which either of them is bound
relating to the issued or unissued capital stock of Company or the
Subsidiary, or obligating Company or the Subsidiary to issue, deliver,
transfer, grant or sell any shares of capital stock of, or other equity or
voting interests in, or securities convertible into or exchangeable or
exercisable for any capital stock or other equity or voting interests in,
Company or the Subsidiary or obligating Company or the Subsidiary to issue,
grant, extend or enter into any such option, warrant, agreement, arrangement or
undertaking. All shares of Common Stock subject to issuance upon exercise of
Company Stock Options as aforesaid, upon issuance on the terms and conditions
16
specified in the instruments pursuant to which they are issuable, will be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive (or similar) rights. Except as set forth in Section 3.3 of the
Company Disclosure Letter, there are not any outstanding obligations of
Company or the Subsidiary to repurchase, redeem or otherwise acquire, or make
any payment in respect of, any shares of capital stock of Company or the
Subsidiary, or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other person.
(b) Company has previously delivered to Parent a true
and complete list of the holders of Company Stock Options and will cause
Company's transfer agent for its Common Stock to deliver to Parent and the
Exchange Agent as soon as reasonably possible following the Closing a true
and complete list of the holders of record of the Common Stock as of the
Effective Time.
Section 3.4 Authority; Noncontravention. Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the holders of a majority of the
voting power of the outstanding Common Stock (the "Shareholder Approval"), to
perform its obligations under this Agreement and to consummate the
transactions contemplated by this Agreement. The execution, delivery and
performance of this Agreement by Company and the consummation by Company of
the transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Company, subject to the
Shareholder Approval. This Agreement has been duly executed and delivered by
Company and constitutes a valid and binding obligation of Company,
17
enforceable against Company in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, and general equitable principles (whether considered in a
proceeding in equity or at law). Except as set forth in Section 3.4 of the
Company Disclosure Letter, the execution, delivery and performance of this
Agreement by Company do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Company or the Subsidiary under, (i) the
respective Articles of Incorporation or Bylaws of Company or the Subsidiary,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
(collectively, "Contracts") applicable to Company or the Subsidiary or their
assets, or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Company or the Subsidiary or
their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights or Liens
that individually or in the aggregate could not be reasonably expected to (x)
have a Company Material Adverse Effect, (y) prevent Company from performing
its obligations under this Agreement in any material respect or (z) prevent
18
or delay in any material respect the consummation of the transactions
contemplated by this Agreement. No consent, approval, order, action or
authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative agency or commission
or other governmental authority or agency, domestic or foreign (a
"Governmental Authority"), is required by or with respect to Company or the
Subsidiary in connection with the execution, delivery and performance of this
Agreement by Company or the consummation by Company of the transactions
contemplated by this Agreement, except for (i) the filing of a premerger
notification and report form by Company under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 0000 (xxx "XXX Xxx"), (xx) the filing with the SEC of a
proxy statement pursuant to the applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), relating to the
meeting of Company's shareholders to be held in connection with the Merger
and the transactions contemplated by this Agreement (as amended or
supplemented from time to time, the "Proxy Statement"), (iii) the filing of
articles of merger and a plan of merger and other appropriate documents, if
any, with the Virginia State Corporation Commission and appropriate documents
with the relevant authorities of other states in which Company is qualified
to do business, and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings which, if not
obtained or made, could not be reasonably expected to prevent or delay in any
material respect the consummation of the transactions contemplated by this
Agreement or otherwise prevent Company from performing its obligations under
19
this Agreement in any material respect or have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.5 SEC Documents; Undisclosed Liabilities. Company has
filed all required reports, schedules, forms, statements and other documents
with the Securities Exchange Commission (the "SEC") since December 31, 1995
(the "SEC Documents"; such term, when used with respect to such documents
filed prior to the date of this Agreement, shall mean such documents as
amended prior to the date of this Agreement). As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent such statements
have been modified or superseded by a later Filed SEC Document (as defined in
Section 3.7). Except to the extent that information contained in any SEC
Document has been modified or superseded by a later Filed SEC Document, none
of the SEC Documents filed since December 31, 1995, contains any untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Except
to the extent modified or superseded by a later Filed SEC Document, the
consolidated financial statements of Company included in the SEC Documents
20
(including, in each case, the notes and schedules, if any, thereto) comply as
to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited stated-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present, in all material respects, the
consolidated financial position of Company and the Subsidiary as of the dates
thereof and the consolidated results of their operations and cash flows for
the periods; then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in (i) the
consolidated balance sheet of Company and the Subsidiary at December 31, 1997
which is included in Company's Annual Report on Form 10-K for the year ended
December 31, 1997, (ii) the Filed SEC Documents which were filed after
December 31, 1997, or (iii) Section 3.5 of the Company Disclosure Letter,
neither Company nor the Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) which,
individually or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect.
Section 3.6 Information Supplied. None of the information
supplied or to be supplied by Company for inclusion or incorporation by
reference in the Proxy Statement will, at the date the Proxy Statement is
first mailed to Company's shareholders or at the time of the Shareholders
Meeting (as defined in Section 6.1), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
21
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form, in all material respects, with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder, except
that no representation is made by Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
Parent specifically for inclusion or incorporation by reference in the Proxy
Statement. For purposes of this Agreement, the parties agree that statements
made and information in the Proxy Statement relating to the Federal income
tax consequences of the transactions herein contemplated to holders of Common
Stock shall be deemed to be supplied by Company and not by Parent or
Acquisition.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed and publicly available prior to the date
of this Agreement (the "Filed SEC Documents") or as set forth in Section 3.7
of the Company Disclosure Letter, since the date of the most recent annual
audited financial statements of Company included in the Filed SEC Documents,
each of Company and the Subsidiary has conducted its business only in the
ordinary course consistent with past practice, and there has not been:
(a) any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in a
change or effect) which, individually or in the aggregate, has had or
is likely to have, a Company Material Adverse Effect;
(b) (i) any declaration, setting aside or payment of any
dividends on, or making of any other distributions in respect of, any
22
of its capital stock, other than dividends and distributions by the
Subsidiary to Company, (ii) any split, combination, reclassification
or taking of similar action with respect to any of its capital stock
or any issuance or authorization of the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (iii) any purchase, redemption or other
acquisition of any shares of capital stock of Company or the
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(c) any authorization for issuance, issuance, delivery,
sale, pledge or other encumbrance of, or any agreement or commitment
by Company or Subsidiary to issue, deliver, sell, pledge or otherwise
encumber, any shares of its capital stock, any other voting
securities or equity equivalents (including, without limitation,
stock appreciation rights) or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities, equity equivalents or convertible securities (whether
through the granting or issuance of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) (other than (i) the
issuance of shares of Common Stock upon the exercise of outstanding
Company Stock Options, in accordance with their then terms, and (ii)
the execution and delivery of the Settlement Agreement providing for
the issuance of up to 50,000 shares of Common Stock by Company);
(d) any amendment to its articles of incorporation,
Bylaws or other comparable organizational documents;
23
(e) any acquisition or agreement to acquire (i) by
merger or consolidation with, or by purchase of a substantial portion
of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof or
(ii) any assets that were material, individually or in the aggregate,
to Company and the Subsidiary taken as a whole;
(f) any sale, lease, license, mortgage or other
encumbrance or subjection to any Lien, or any other disposition, of
any of its properties or assets, other than sales of inventory, sales
or other dispositions of other assets that did not exceed $100,000 in
the aggregate, and mortgages or other encumbrances or Liens that, in
each instance, were transacted or incurred in the ordinary course of
business;
(g) (i) any incurrence of any indebtedness for borrowed
money or any guarantee of any such indebtedness of another person,
any issuance or sale of any debt securities or warrants or other
rights to acquire any debt securities of Company or the Subsidiary,
any guarantee of any debt securities of another person, any entry
into any "keep well" or other agreement to maintain any financial
statement condition of another person or any entry into any
arrangement having the economic effect of any of the foregoing,
except for short-term borrowings under existing lines of credit or
replacements thereof incurred in the ordinary course of business
consistent with past practice, or (ii) any making of any loans,
24
advances (other than advances to employees not to exceed $50,000 in
the aggregate) or capital contributions to, or investments in, any
other person, either by purchase of stock or securities, property
transfer or purchase of any material amount of property or assets,
other than to Company or the Subsidiary;
(h) any making or change of any Tax election, adoption
or change of any method of accounting with respect to any Taxes,
except to the extent required to do so by law, or any settlement or
compromise of any Tax liability or refund in excess of $10,000;
(i) any adoption of a plan of complete or partial
liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization of Company or the Subsidiary other
than in connection with the consummation of the Merger pursuant to
this Agreement;
(j) any change in any assumption underlying, or method
of calculating, any bad debt, contingency or other reserve, or any
change of any other material accounting principles or practices used
by it (except changes necessary or appropriate in order to comply
with a change in generally accepted accounting principles);
(k) any payment, discharge or satisfaction of any
material claims, liabilities or obligations (absolute, accrued,
contingent or otherwise) other than the payment, discharge or
satisfaction of (A) liabilities in the ordinary course consistent
with past practices (including current payments due under outstanding
00
xxxx xxxx xxxx), (X) costs relating to this Agreement and the
transactions contemplated hereby, (C) accrued and current legal,
accounting and other professional fees and expenses incurred by
Company or the Subsidiary and (D) claims or liabilities paid,
discharged or satisfied in accordance with the Settlement Agreement,
the Mutual Release, dated November 24, 1998, entered into among
Xxxxxxx X. Xxxxxxxxx, Xxxx Xxxxxx, Corporate Strategies, Inc.,
Company and the Subsidiary (the "Mutual Released"), or the Waiver and
Agreement, dated November 30, 1998, entered into among Xxxxxx X.
Xxxxxxxx, Xx., Company and the Subsidiary (the "Waiver and
Agreement");
(l) except as required by employment agreements or
Company Plans existing on the date of this Agreement, or as required by
applicable law, (i) any increase in the compensation payable or to become
payable to its executive officers or employees, (ii) any grant of any
severance or termination pay to, or entered into any employment or severance
agreement with, any director, executive officer or employee of Company or the
Subsidiary, other than employment agreements providing for annual
compensation of $50,000 or less, having a term of no more than one year and
entered into in the ordinary course of business consistent with past
practice, or (iii) any establishment, adoption, entering into or amendment in
any material respect or action taken to accelerate any rights or benefits
under any collective bargaining agreement, stock option plan, Company Plan,
or other employee benefit plan, agreement or policy;
26
(m) any waiver, release, grant or transfer of any rights
of material value or any termination, modification or change in any material
respect of any existing license, lease, contract or other agreement which is
material to the business of Company and the Subsidiary, taken as a whole; or
(n) authorized any of, or committed, agreed, arranged or
contracted to take any of the foregoing actions.
Section 3.8 Litigation. Except as disclosed in the Filed SEC
Documents or in Section 3.8 of the Company Disclosure Letter, there is no
suit, action or proceeding pending or, to the knowledge of Company,
threatened against or affecting Company or the Subsidiary (and Company does
not have knowledge of any basis for any such suit, action or proceeding)
that, individually or in the aggregate, could reasonably be expected to (a)
have a Company Material Adverse Effect or (b) delay or prevent Company from
performing its obligations under this Agreement in any material respect, and
there is not any judgment, decree, injunction, rule or order of any
Governmental Authority or arbitrator outstanding against Company or the
Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future could reasonably be expected to have, any Company Material Adverse
Effect or could prevent or delay in any material respect the consummation of
the transactions contemplated by this Agreement. As of the date of this
Agreement, except as disclosed in the Filed SEC Documents or in Section 3.8
of the Company Disclosure Letter, there was no suit, action or proceeding
pending, or, to the knowledge of Company, threatened, against or affecting
Company or the Subsidiary (and Company does not have knowledge of any basis
for any such suit, action or proceeding) that, individually or in the
27
aggregate, could reasonably be expected to prevent or delay in any material
respect the consummation of the transactions contemplated by this Agreement.
Section 3.9 Absence of Changes in Benefit Plans. Except as
disclosed in Section 3.9 of the Company Disclosure Letter, since the date of
the most recent audited financial statements included in the Filed SEC
Documents, there has not been any adoption or amendment in any material
respect by Company or the Subsidiary of any collective bargaining agreement
or any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, change in control, disability, death
benefit, hospitalization, medical or other plan, policy, program, agreement,
arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of Company or
the Subsidiary or under which Company or the Subsidiary has any present or
future liability (collectively, "Benefit Plans").
Section 3.10 ERISA Compliance.
(a) Section 3.10 of the Company Disclosure Letter
contains a true and complete list of: (i) each Benefit Plan, and (ii) each
change in control, employment, or severance agreement, program or policy
under which any employee or former employee of Company or the Subsidiary has
any present or future right to benefits or under which Company or the
Subsidiary has any present or future liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"Company Plans."
28
(b) With respect to each Company Plan, Company has made
available to Parent a current, accurate and complete copy thereof (or, to the
extent no such copy exists, an accurate description thereof) and, to the
extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent determination letter; (iii) any summary plan
description and other written communications (or a description of any oral
communications) by Company or the Subsidiary to their employees concerning
the extent of the benefits provided under a Company Plan; and (iv) for the
three most recent years (A) the Form 5500 and attached schedules, (B) audited
financial statements, (C) actuarial valuation reports and (D) attorney's
response to an auditor's request for information.
(c) Except as described in Section 3.10 of the Company
Disclosure Letter, (i) each Company Plan which is intended to be qualified
within the meaning of Code section 401(a) is so qualified and has received a
favorable determination letter as to its qualification, and nothing has
occurred, whether by action or failure to act, that could reasonably be
expected to cause the loss of such qualification, (ii) no event has occurred
and no condition exists that would subject Company or the Subsidiary, either
directly or by reason of their affiliation with any member of their
"Controlled Group" (defined as any organization which is a member of a
controlled group of organizations within the meaning of Code sections 414(b),
(c), (m) or (o)), to any tax, fine, lien, penalty or other liability (other
than normal funding of a Company Plan) imposed by ERISA, the Code or other
applicable laws, rules and regulations; (iii) for each Company Plan with
respect to which a Form 5500 has been filed, no material change has occurred
29
with respect to the matters covered by the most recent Form since the date
thereof; (iv) no "reportable event" (as such term is defined in ERISA section
4043), "prohibited transaction" (as such term is defined in ERISA section 406
and Code section 4975) or "accumulated funding deficiency" (as such term is
defined in ERISA section 302 and Code section 412 (whether or not waived))
has occurred with respect to any Company Plan; and (v) no Company Plan
provides retiree welfare benefits and neither Company nor the Subsidiary has
any obligations to provide any retiree welfare benefits.
(d) With respect to each of the Company Plans that is
not a multiemployer plan within the meaning of section 4001(a)(3) of ERISA
but is subject to Title IV of ERISA, as of the Closing Date, the assets of
each such Company Plan are at least equal in value to the present value of
the accrued benefits (vested and unvested) of the participants in such
Company Plan on a termination and projected benefit obligation basis, based
on the actuarial methods and assumptions indicated in the most recent
actuarial valuation reports.
(e) With respect to any multiemployer plan (within the
meaning of ERISA section 4001(a)(3)) to which Company, the Subsidiary or any
member of their Controlled Group has any liability or contributes (or has at
any time contributed or had an obligation to contribute): (i) none of
Company, the Subsidiary or any member of their Controlled Group has incurred
any withdrawal liability under Title IV of ERISA or would be subject to such
liability if, as of the Closing Date, Company, the Subsidiary or any member
of their Controlled Group were to engage in a complete withdrawal (as defined
in ERISA section 4205) or partial withdrawal (as defined in ERISA section
30
4205) from any such multiemployer plan; and (ii) no such multiemployer plan
is in reorganization or insolvent (as those terms are defined in ERISA
sections 4241 and 4245, respectively).
(f) With respect to any Company Plan, (i) no actions,
suits or claims (other than routine claims for benefits in the ordinary
course) are pending or threatened, (ii) no facts or circumstances exist that,
in so far as reasonably can be foreseen, could reasonably be expected to give
rise to any such actions, suits or claims, and (iii) no written or oral
communication has been received from the PBGC in respect of any Company Plan
subject to Title IV or ERISA concerning the funded status of any such plan or
any transfer of assets and liabilities from any such plan in connection with
the transactions contemplated herein.
(g) Except as described in Section 3.10 of the Company
Disclosure Letter (i) all Benefit Plans, including any such plan that is an
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), have been established and administered
in accordance with their terms and are in compliance with all applicable
requirements of law, including ERISA and the Internal Revenue Code of 1986,
as amended (the "Code"), and (ii) neither Company nor the Subsidiary has any
liabilities or obligations with respect to any Company Plans (other than
normal funding of such Company Plans), nor, to the knowledge of Company, are
any such liabilities or obligations expected to be incurred. Except as set
forth in Section 3.10 of the Company Disclosure Letter, the execution of, and
performance of the transactions contemplated in, this Agreement will not
constitute an event under any benefit plan, policy, arrangement or agreement
31
or any trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any employee. The only severance agreements or severance
policies applicable to Company or the Subsidiary are the agreements and
policies specifically referred to in Section 3.10 of the Company Disclosure
Letter.
Section 3.11 Voting Requirements. The Shareholder Approval is
the only vote of the holders of any class or series of Company's capital
stock necessary to approve this Agreement and the transactions contemplated
by this Agreement, including the Merger. There is no vote of the holders of
any class or series of Company's securities necessary to approve the Voting
Agreement.
Section 3.12 Brokers: Schedule of Fees and Expenses. Except as
set forth in Section 3.12 of the Company Disclosure Letter, no broker,
investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Company. The fees incurred and to be
incurred by Company in connection with this Agreement and the transactions
contemplated by this Agreement for the persons listed in Section 3.12 of the
Company Disclosure Letter are set forth in Section 3.12 of the Company
Disclosure Letter. Company has furnished to Parent true and complete copies
of all the agreements referred to in Section 3.12 of the Company Disclosure
32
Letter and all indemnification and other agreements related to the engagement
of the persons so listed.
Section 3.13 Opinions of Financial Advisors. Company has
received the opinion of Xxxxxxxxx & Company, LLC to the effect that, as of
the date of such opinion the consideration to be received by Company's
shareholders in the Merger is fair to Company's shareholders from a financial
point of view, a signed copy of which opinion has been delivered to Parent.
Section 3.14 Taxes.
(a) Company and the Subsidiary have timely filed (or
have had timely filed on their behalf) or will file or cause to be timely
filed, all material Tax Returns required by applicable law to be filed by
either of them prior to or as of the Effective Time. All such Tax Returns
are, or will be at the time of filing, true, complete and correct in all
material respects.
(b) Company and the Subsidiary have paid (or have had
paid on their behalf), or where payment is not yet due, have established (or
have had established on their behalf and for their sole benefit and
recourse), or will establish or cause to be established on or before the
Effective Time, an adequate accrual for the payment of, all material Taxes
due with respect to any period (or portion thereof) ending prior to or as of
the Effective Time.
(c) For purposes of this Agreement, the following terms
shall have the following meanings:
33
(i) "Taxes" shall mean all Federal, state,
local and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto.
(ii) "Tax Returns" shall mean all Federal,
state, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended tax
return relating to Taxes.
Section 3.15 Compliance with Laws. Neither Company nor the
Subsidiary has violated or failed to comply with, or received any written
notice from any Governmental Authority asserting a failure to comply with,
any statute, law, ordinance, regulation, rule, judgment, decree or order of
any Governmental Authority applicable to its business or operations, except
for violations and failures to comply that could not, individually or in the
aggregate, reasonably be expected to result in a Company Material Adverse
Effect. Each of Company and the Subsidiary has and is in compliance with all
permits, licenses and franchises from Governmental Authorities required to
conduct its business as now being conducted, except to the extent that the
failure to have or comply with such permits, licenses and franchises could
not, individually or in the aggregate, reasonably be expected to result in a
Company Material Adverse Effect.
Section 3.16 Environmental Matters.
(a) Each of Company and the Subsidiary has obtained all
material licenses, permits, authorizations, approvals and consents
("Environmental Permits") from all Governmental Authorities that are required
34
in respect of its business or operations under any applicable Environmental
Law, and each of such Environmental Permits is in full force and effect.
(b) Each of Company and the Subsidiary is and has been
in compliance with the terms and conditions of all such Environmental Permits
and with all applicable Environmental Laws, except for such failures that,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect.
(c) (i) Except as disclosed in the Filed SEC Documents,
no site or facility now or previously owned, operated or leased by Company or
the Subsidiary is listed or proposed for listing on the National Priorities
List or CERCLIS, promulgated pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1989, as amended ("CERCLA"), and
the rules and regulations thereunder or on any similar state or local list of
sites requiring investigation or Remedial Action.
(ii) Except as set forth in Section 3.16 of the
Company Disclosure Letter, neither Company nor the Subsidiary has received
any written notice of any actual or alleged material violation of any
Environmental Law with respect to any of its facilities.
(iii) Except as provided in Section 3.16 of the
Company Disclosure Letter, neither Company nor the Subsidiary is subject to
any material outstanding agreements with or orders of any Governmental
Authority or other person respecting (A) Environmental Laws, (B) Remedial
Action or (C) any Release of a Hazardous Material.
(iv) Neither Company nor the Subsidiary has
received any written notice or request for information pertaining to a
35
response or removal action (as defined by CERCLA), with respect to any of its
sites or facilities now or previously owned, operated or leased by it.
(d) No liens have arisen under or pursuant to any
Environmental Law on any site or facility owned, operated or leased by
Company or the Subsidiary, other than liens that individually or in the
aggregate could not reasonably be expected to have a Company Material Adverse
Effect.
(e) There have been no material environmental
investigations, studies, audits, tests, reviews or other analyses conducted
by, or that are in the possession of, Company or the Subsidiary in relation
to any site or facility owned, operated or leased by Company or the
Subsidiary, except those reports that have been made available to Parent
prior to the execution of this Agreement.
(f) Except as could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect,
no Hazardous Material has been Released, disposed of or arranged to be
disposed of at, about or from any site or facility now or previously owned,
operated or leased by Company or the Subsidiary.
(g) As used herein:
(i) "Environmental Law" means any law or order
relating to the environment or to emissions, discharges or Releases of
pollutants, contaminants, or chemicals, or industrial, toxic or hazardous
substances or wastes, into the environment (including structures, ambient
air, soil, surface water, ground water, wetlands, land or subsurface strata),
or otherwise relating to the manufacture, processing, distribution, use,
36
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes;
(ii) "Hazardous Material" means (A) any
chemicals or other materials or substances that are defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "pollutants," "contaminants," or words of similar import
under any Environmental Law, including petroleum, friable asbestos, PCBs and
CFCs; and (B) any other chemical, material or substance, the presence of or
exposure to which is prohibited, limited or regulated by any Governmental
Authority under any Environmental Law;
(iii) "Release" means any actual or threatened
(as defined under CERCLA) release, spill, effluent, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the environment or any structure; and
(iv) "Remedial Action" means all actions,
including any capital expenditures, required by a Governmental Authority,
required under any Environmental Law or voluntarily undertaken to (A) clean
up, remediate, remove, treat or in any other way ameliorate or address any
Hazardous Material Released into the environment; (B) prevent the Release, or
minimize the further Release of any Hazardous Material so it does not
endanger or threaten to endanger public health or the environment; (C)
perform pre-remedial studies and investigations or post-remedial monitoring
37
and care relating to a Release; or (D) bring the applicable party into
compliance with any Environmental Law.
Section 3.17 Labor Matters. There are no strikes or other
disputes or controversies pending or, to the knowledge of Company, threatened
between Company or the Subsidiary and any representatives of its employees
and, to the knowledge of Company, there are no organizational efforts
underway involving employees of Company or the Subsidiary.
Section 3.18 Certain Contracts. Except as disclosed in Section
3.18 of the Company Disclosure Letter, there is no Contract for the purchase
of real property, plant, facilities or any other assets acquired outside the
ordinary course of business pursuant to which Company or the Subsidiary is
obligated to make payments which are reasonably likely to exceed $50,000 in
the aggregate.
Section 3.19 Contract Defaults. Neither Company nor the
Subsidiary nor, to the knowledge of Company, any other party thereto is in
breach or violation of, or in default in the performance or observance of any
term or provision of, and no event has occurred that, with notice or lapse of
time or both, could reasonably be expected to result in a default under, any
Contract to which Company or the Subsidiary is a party or by which Company or
the Subsidiary or any of their respective assets or properties is bound,
except (i) for those breaches, violations or defaults set forth in Section
3.19 of the Company Disclosure Letter or (ii) for such breaches, violations
or defaults which could not reasonably be expected to result in a Company
Material Adverse Effect.
38
Section 3.20 Board Recommendation. The Board of Directors of
Company, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted 100% of the directors then in office) (a)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the
shareholders of Company, (b) duly approved and adopted this Agreement and the
transactions contemplated hereby, including the Merger, and approved and
consented to the execution and performance of the Voting Agreement, in each
case prior to the execution of such agreement, and (c) resolved to recommend
that the holders of shares of Common Stock approve this Agreement and the
transactions contemplated hereby, including the Merger.
Section 3.21 State Takeover Statute. No state takeover statute
or similar statute or regulation of the Commonwealth of Virginia applies to
this Agreement, the Merger, the Voting Agreement or any of the other
transactions contemplated hereby and thereby. No provision of the Articles of
Incorporation, Bylaws or other governing instruments of Company or the
Subsidiary would directly or indirectly restrict or impair the ability of
Parent or Acquisition or their respective affiliates to vote, or otherwise to
exercise the rights of a shareholder with respect to, securities of Company
and the Subsidiary that are acquired or controlled by Parent or Acquisition
or their respective affiliates pursuant to the Merger or permit any
shareholder to acquire securities of Company on a basis not available to
Parent or Acquisition in the event that Parent or Acquisition were to acquire
securities of Company pursuant to the Merger, and neither Company nor the
39
Subsidiary has any rights plan, preferred stock or similar arrangement which
have any of the aforementioned consequences in connection with the Merger.
Section 3.22 Settlement Agreement. A true and correct copy of
the Settlement Agreement (as defined in Section 7.1) is attached as
Attachment 3.22-1 to the Company Disclosure Letter. The Settlement Agreement
constitutes the entire agreement between Company and the other defendants and
the plaintiffs in the Derivative Suit relating to the settlement of such
lawsuit, has been executed and delivered by all the parties thereto and has
not been amended, modified or rescinded. Company is not (and to the knowledge
of Company no other party is) in breach of, or default under the Settlement
Agreement and, to the knowledge of Company, no event has occurred that, with
or without notice or lapse of time or both, would result in a breach or a
default thereunder. Other than the Derivative Suit, there is no suit, action
or proceeding pending or, to the knowledge of Company, threatened against or
affecting Company or the Subsidiary that arises out of or is related to, the
settlement contemplated by the Settlement Agreement or any matters,
transactions, circumstances or occurrences referred to in the complaint of
the plaintiffs in the Derivative Suit.
Section 3.23 Industrial Revenue Bonds.
(a) The County of Saratoga Industrial Development
Revenue Bonds (Xxxxxxxx Adhesives Inc. Project), Series 1997-A (the
"Industrial Revenue Bonds") (i) have an Interest Rate Mode (as defined in the
Trust Indenture, dated October 1, 1997, between the County of Saratoga
Industrial Development Agency and Star Bank, N.A. (the "Trust Indenture"))
equal to the Weekly Rate (as defined in the Trust Indenture) and (ii) are
40
redeemable either prior to or following the Closing Date, at the option of
Company, in whole at a redemption price that is not more than 100% of the
principal amount thereof upon 30 days notice and upon compliance by Company
with the requirements for such redemption set forth in the Trust Indenture
and Section 5.5 of the Installment Sale Agreement relating to such bonds; and
(b) That certain Master Agreement, dated as of September
19, 1997, between Keybank National Association and the Subsidiary can be
terminated by the Subsidiary on or prior to the Closing Date in exchange for
a payment by the Subsidiary of an amount not to exceed $285,000.
Section 3.24 Waiver and Agreement; Mutual Release. True and
complete copies of the Waiver and Agreement and the Mutual Release are
attached as Attachments 3.24-1 and 3.24-2, respectively, to the Company
Disclosure Letter. The Waiver and Agreement and the Mutual Release constitute
the entire agreement between Company and the Subsidiary, on the one hand, and
the other parties to such agreements, on the other hand, relating to the
settlement of all claims or causes of action, past and present, whether known
or unknown, in any way arising out of, related to or in any way connected
with, alleged agreements to grant options to purchase shares of the common
stock of either Company or the Subsidiary or any other compensation for
services of Xxxxxxx X. Xxxxxxxxx, Xxxx Xxxxxx or Corporate Strategies, Inc.,
including but not limited to that set forth in a letter from Xxxxxxx X.
Xxxxxxxxx to Xxxxxx X. Xxxxxxxx, Xx. dated February 7, 1994, signed by Xxxxxx
X. Xxxxxxxx, Xx. on February 18, 1994 and a letter from Xxxxxx X. Xxxxxxxx,
Xx. to Xxxx Xxxxxx dated on or about March 12, 1994, and all other
controversies which might arise out of or be related to the aforesaid letter
41
or any agreement in any way related thereto. Each of the Waiver and Agreement
and the Mutual Release has been executed and delivered by all parties
thereto, is in full force and effect and has not been amended, modified or
rescinded. Company is not (and, to the knowledge of Company, no other party
is) in breach of, or default under either the Waiver and Agreement or the
Mutual Release and, to the knowledge of Company, no event has occurred that,
with or without lapse of time or both, would result in a breach or default
thereunder. There is no suit, action or proceeding pending or, to the
knowledge of Company, threatened against or affecting Company or the
Subsidiary (and Company does not have knowledge of any basis for any such
suit, action or proceeding) that arises out of or is related to, the
settlement contemplated by the Waiver and Agreement or the Mutual Release or
any matters, transactions, circumstances or occurrences referred to therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Organization, Standing and Corporate Power. Each of
Parent and Acquisition is a corporation, duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized
and has the requisite power and authority to own, lease and operate its
property and carry on its business as now being conducted. Each of Parent and
Acquisition is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
42
licensed (individually or in the aggregate) would not have a material adverse
effect on the ability of Parent and Acquisition to perform their respective
obligations hereunder or to consummate the transactions contemplated hereby,
including the Merger (a "Parent Material Adverse Effect"). Neither Parent nor
Acquisition is in violation of any provision of its certificate of
incorporation, bylaws or comparable organizational documents, except to the
extent that such violations would not, individually or in the aggregate, have
a Parent Material Adverse Effect.
Section 4.2 Authority: Noncontravention. Parent and Acquisition
have all requisite corporate power and authority to enter into this
Agreement, to perform their respective obligations under this Agreement and
to consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by Parent and Acquisition, and the
consummation by Parent and Acquisition of the transactions contemplated by
this Agreement, have been duly authorized by all necessary corporate action
on the part of Parent and Acquisition. This Agreement has been duly executed
and delivered by Parent and Acquisition and constitutes a valid and binding
obligation of each such party, enforceable against each such party in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law). The
execution, delivery and performance of this Agreement by Parent and
Acquisition do not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
43
conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Acquisition under (i) their respective
certificates of incorporation or bylaws or comparable organizational
documents, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or Acquisition or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Acquisition
or their respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate could not be reasonably expected to (x) have
a Parent Material Adverse Effect, (y) prevent Parent and Acquisition from
performing their respective obligations under this Agreement in any material
respect or (z) prevent or delay in any material respect the consummation of
any of the transactions contemplated by this Agreement. No consent, approval,
order, action or authorization of, or registration, declaration or filing
with, any Governmental Authority is required by or with respect to Parent or
Acquisition in connection with the execution, delivery and performance of
this Agreement by Parent and Acquisition or the consummation by Parent or
Acquisition, as the case may be, of any of the transactions contemplated by
this Agreement, except for (i) the filing of a premerger notification and
44
report form by Parent under the HSR Act, (ii) applicable requirements, if
any, of the Exchange Act and the rules and regulations promulgated
thereunder, (iii) the filing of articles of merger, a plan of merger and
other appropriate documents, if any, with the Virginia State Corporation
Commission and appropriate documents with the relevant authorities of other
states in which Company or Acquisition is qualified or may be required to be
qualified to do business, and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings which, if not
obtained or made, could not be reasonably expected to prevent or delay in any
material respect the consummation of any of the transactions contemplated by
this Agreement or otherwise prevent Parent or Acquisition from performing
their respective obligations under this Agreement in any material respect or
have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.3 Information Supplied. None of the information
supplied or to be supplied in writing by Parent or Acquisition for inclusion
or incorporation by reference in the Proxy Statement will, at the date the
Proxy Statement is first mailed to Company's shareholders or at the time of
the Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. Neither Parent nor Acquisition makes any
representation or warranty with respect to any information supplied by
Company or the Subsidiary or any of their respective representatives which is
contained in or incorporated by reference in the Proxy Statement.
45
Section 4.4 Litigation. There is no suit, action or proceeding
pending or, to the knowledge of Parent, threatened against or affecting
Parent or Acquisition (and Parent does not have any knowledge of any basis
for any such suit, action or proceeding) that, individually or in the
aggregate, could reasonably be expected to (a) have a Parent Material Adverse
Effect or (b) delay or prevent Parent or Acquisition from performing their
respective obligations under this Agreement in any material respect, and
there is not any judgment, decree, injunction, rule or order of any
Governmental Authority or arbitrator outstanding against Parent or
Acquisition having, or which, insofar as reasonably can be foreseen, in the
future could reasonably be expected to have, any Parent Material Adverse
Effect or could prevent or delay in any material respect the consummation of
the transactions contemplated by this Agreement.
Section 4.5 Financial Ability to Pay Merger Consideration.
Parent has or has available to it pursuant to available credit lines in
effect on the date hereof, access to which credit lines is subject to no
material conditions other than the satisfaction or waiver of the conditions
set forth in Sections 7.1 and 7.2 hereof, and through the Closing Date will
continue to have available to it through such sources, and shall cause
Acquisition to have, the ability to pay the Merger Consideration and to
otherwise perform the respective obligations of Parent and Acquisition as
provided for in this Agreement.
Section 4.6 No Ownership of Company Common Stock. As of the
date hereof, neither Parent, Xxxxxx, Inc., a New Jersey corporation, nor any
direct or indirect subsidiary of either such corporation (and, to the
46
knowledge of Parent, no officer or director of Parent), owns, beneficially or
of record, any shares of Common Stock of Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business by Company. During the period
from the date of this Agreement to the Effective Time (unless this Agreement
is terminated prior thereto pursuant to Section 8.1 hereof), Company shall,
and shall cause the Subsidiary to, carry on their respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable laws and regulations and, to the extent consistent therewith, use
commercially reasonable best efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensers, licensees, distributors and others having business dealings with
them. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, except for Approved
Matters (as defined below) Company shall not, and shall not permit the
Subsidiary to:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions - in respect of, any of its capital stock, other
than dividends and distributions by the Subsidiary to Company, (ii) split,
combine, reclassify or take similar action with respect to any of its capital
stock or issue or authorize the issuance of any other securities in respect
47
of, in lieu of or in substitution for shares of its capital stock, or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of Company
or the Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(b) authorize for issuance, issue, deliver, sell, pledge
or otherwise encumber, or agree or commit to issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalents (including, without limitation, stock
appreciation rights) or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities, equity
equivalents or convertible securities (whether through the granting or
issuance of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) (other than (i) the issuance of shares of Common Stock upon the
exercise of Company Stock Options outstanding on the date of this Agreement,
and in accordance with their then terms, and (ii) up to 50,000 shares of
Common Stock to be issued by Company pursuant to the Settlement Agreement);
(c) amend its articles of incorporation, Bylaws or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership, limited
liability company, joint venture, association or other business organization
or division thereof or (ii) any assets that are material, individually or in
the aggregate, to Company and the Subsidiary taken as a whole;
48
(e) sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets, other than sales of inventory, sales or other dispositions of other
assets which do not exceed $100,000 in the aggregate, and mortgages or other
encumbrances or Liens that, in each instance, are transacted or incurred in
the ordinary course of business;
(f) (i) except for the indebtedness described in Section
5. l(f)(i) of the Company Disclosure Letter, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of Company or the Subsidiary, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-term
borrowings under existing lines of credit or replacements thereof incurred in
the ordinary course of business consistent with past practice, or (ii) make
any loans, advances (other than advances to employees not to exceed $50,000
in the aggregate) or capital contributions to, or investments in, any other
person, either by purchase of stock or securities, property transfer or
purchase of any material amount of property or assets, other than to Company
or the Subsidiary;
(g) make or agree to make any new capital expenditure or
expenditures which are not set forth in Section 5.1 of the Company Disclosure
Letter, except for expenditures reasonably necessary to effect any
replacement or repair of a capital asset required as a result of any
49
obsolescence, breakdown, casualty or loss occurring after the date of this
Agreement (to the extent necessary to continue or restore the conduct of
business by Company or the Subsidiary in the ordinary course);
(h) make or change any Tax election, adopt or change any
method of accounting with respect to any Taxes, unless required to do so by
law, or settle or compromise any Tax liability or refund in excess of
$10,000;
(i) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization of
Company or the Subsidiary other than in connection with the consummation of
the Merger pursuant to this Agreement;
(j) change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve, or change any other
material accounting principles or practices used by it (except changes that
may be necessary or appropriate in order to comply with a change in generally
accepted accounting principles that takes effect after the date of this
Agreement);
(k) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise) other
than the payment, discharge or satisfaction of (A) liabilities in the
ordinary course consistent with past practices (including current payments
due under long term debt outstanding on the date of this Agreement or
otherwise set forth in Section 5.1(f)(i) of the Company Disclosure Letter),
(B) costs relating to this Agreement and the transactions contemplated
50
hereby, (C) accrued and current legal, accounting and other professional fees
and expenses incurred by Company or the Subsidiary and (D) claims or
liabilities paid, discharged or satisfied in accordance with the Settlement
Agreement, the Mutual Release, the Waiver and Agreement or as otherwise
expressly contemplated or permitted under the terms and provisions of this
Agreement;
(l) except as set forth in Section 5.1(1) of the Company
Disclosure Letter or as required by employment agreements or Company Plans
existing on the date of this Agreement, or as required by applicable law, (i)
increase the compensation payable or to become payable to its executive
officers or employees, (ii) grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director,
executive officer or employee of Company or the Subsidiary or (iii)
establish, adopt, enter into or amend in any material respect or take action
to accelerate any rights or benefits under any collective bargaining
agreement, stock option plan, Company Plan, or other employee benefit plan,
agreement or policy except as contemplated by this Agreement; provided,
however, that this clause (1) shall not prohibit Company or the Subsidiary
from entering into any employment agreement with any employee (other than any
executive officer of Company) (A) whose current employment agreement is
expiring, (B) contemporaneously with the hiring of such employee or (C)
contemporaneously with the promotion of such employee, if, in each case, such
employment agreement does not provide for salary in excess of $50,000 per
year, does not have a term in excess of one year and is entered into in the
ordinary course of business consistent with prior practice, and, in the case
51
of clause (A) above, such new employment agreement is substantially similar
to the expiring agreement and, in the case of clause (B) or (C) above, such
employment agreement is substantially similar to current employment
agreements for employees of Company and the Subsidiary at the applicable
level;
(m) waive, release, grant or transfer any rights of
material value or terminate, modify or change in any material respect any
existing license, lease, contract or other agreement which is material to the
business of Company and the Subsidiary, taken as a whole; or
(n) authorize any of, or commit, agree, arrange or
contract to take any of, the foregoing actions.
For purposes of this Agreement, "Approved Matters" means matters that
are either (i) expressly contemplated or provided for in this Agreement or
(ii) approved in writing by Parent (such approval not to be unreasonably
withheld).
Section 5.2 Other Actions. Company and Parent shall not, and
shall not permit any of their respective affiliates to, take any action that
would, or that could reasonably be expected to, result in (a) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (b) any of such
representations and warranties that are not so qualified becoming untrue in
any material respect or (c) any of the conditions to the Merger set forth in
Article VII not being satisfied.
Section 5.3 Advice of Changes. Company and Parent shall
promptly advise the other orally and in writing of any change or event
52
having, or which, insofar as can reasonably be foreseen, would have, a
Company Material Adverse Effect or a Parent Material Adverse Effect, as
applicable; provided, however, that the delivery of any notice pursuant to
this Section 5.3 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 5.4 No Solicitation.
(a) Company shall not, nor shall it permit the
Subsidiary to, nor shall it authorize or permit any officer, director or
employee of or any investment banker, attorney or other advisor or
representative of, Company or the Subsidiary to, directly or indirectly (i)
solicit, initiate or encourage the submission of any takeover proposal (as
defined below), (ii) enter into any agreement with respect to, or endorse,
any takeover proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any takeover
proposal, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to do
or seek any of the foregoing; provided, however, that nothing contained in
this Agreement shall prevent Company or its Board of Directors from (A)
furnishing nonpublic innovation to, or entering into discussions or
negotiations with, any person who has made an unsolicited bona fide written
takeover proposal to Company or its shareholders or (B) complying with Rule
14e-2 promulgated under the Exchange Act with regard to a takeover proposal,
but only to the extent that (1) in each case referred to in clauses (A) and
53
(B) the Board of Directors of Company determines in good faith based on
written advice of its outside legal counsel, that such action is necessary
for the Board of Directors of Company to comply with its fiduciary duties to
shareholders under applicable law or to comply with the Exchange Act, and the
rules and regulations thereunder, and (2) prior to furnishing such nonpublic
information to, or entering into discussions or negotiations with, such
person, the Board of Directors of Company receives from such person or entity
an executed confidentiality agreement with terms no less favorable to Company
than those contained in the Confidentiality Agreement (the "Confidentiality
Agreement") dated August 4, 1998 executed by Parent and Company; and
provided, further that, except as necessary to comply with any time periods
prescribed by applicable law, the Board of Directors of Company shall not
take any of the foregoing actions referred to in clauses (A) and (B) until a
reasonable period of time has elapsed after it has delivered the Notice of
Takeover Proposal with respect thereto in accordance with Section 5.4(c).
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in this Section 5.4(a) by any director, executive
officer or authorized employee of Company or Subsidiary or any investment
banker, attorney or other advisor or representative of Company or the
Subsidiary, whether or not such person is purporting to act on behalf of
Company or the Subsidiary or otherwise, shall be deemed to be a breach of
this Section 5.4 by Company. For purposes of this Agreement, "takeover
proposal" means any proposal for a merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving Company or the Subsidiary or any proposal or offer to
54
acquire in any manner, directly or indirectly, more than 15% of any class of
voting securities of Company or the Subsidiary, or assets representing a
substantial portion of the assets of Company and the Subsidiary, taken as a
whole, or any tender offer (including a self tender offer that if consummated
would result in any person beneficially owning more than 15% of any class of
voting securities of Company or the Subsidiary) other than the transactions
contemplated by this Agreement. Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations by Company or
any of its officers, investment bankers, attorneys or other advisors or
representatives with any parties conducted heretofore with respect to any of
the foregoing.
(b) Prior to a termination of this Agreement pursuant to
any of the applicable provisions of Section 8.1 (which termination may be
simultaneous with such action), neither the Board of Directors of Company nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent, the adoption, approval or
recommendation by such Board of Directors or any such committee of this
Agreement or the Merger or (ii) approve or recommend, or propose to approve
or recommend, any takeover proposal.
(c) Company promptly shall advise Parent orally and in
writing of any takeover proposal or any inquiry with respect to, or which
could reasonably be expected to lead to, any takeover proposal, the material
terms and conditions thereof and the identity of the person making any such
takeover proposal or inquiry (the "Notice of Takeover Proposal"). Company
shall keep Parent promptly and fully informed in all material respects of the
status and details of any such takeover proposal or inquiry.
55
(d) Company agrees not to release any third party from,
or waive any provisions of, any confidentiality or standstill agreement to
which Company is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of the Proxy Statement; Shareholders
Meeting.
(a) As soon as practicable following the date of this
Agreement, Company shall prepare and file with the SEC the Proxy Statement
(subject to receipt of any necessary information from Parent pursuant to
Section 6. l(b) hereof). Company shall use its commercially reasonable best
efforts to have the Proxy Statement approved by the SEC as promptly as
practicable and to cause the Proxy Statement to be mailed to Company's
shareholders as promptly as practicable after it is approved by the SEC.
Company will cause the Proxy Statement to comply as to form in all material
respects with the applicable provisions of the Exchange Act. Company will
notify Parent of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the
Proxy Statement or for additional information and will supply Parent with
copies of all correspondence between Company or any of its representatives,
on the one hand, and the SEC or its staff, on the other hand, with respect to
the Proxy Statement prior to its being filed with the SEC and shall give
Parent and its counsel the reasonable opportunity to review the Proxy
Statement and all amendments and supplements thereto and all responses to
56
requests for additional information and replies to comments prior to their
being filed with or sent to the SEC. Company agrees to use its commercially
reasonable best efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and requests by the SEC. If at any
time prior to the approval of this Agreement by Company's shareholders there
shall occur any event that should be set forth in an amendment or supplement
to the Proxy Statement, Company will prepare and mail to its shareholders
such an amendment or supplement.
(b) Parent shall promptly upon request from Company use
commercially reasonable best efforts to provide all information concerning
Parent or its affiliates required to be disclosed in the Proxy Statement and
such information shall not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make such information
not misleading in light of the circumstances under which it is provided.
(c) Company shall, as soon as practicable following the
approval of the Proxy Statement by the SEC and subject to the requirements of
applicable law, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Shareholders Meeting") for the purpose of obtaining the
Shareholder Approval. Subject to the provisions of Section 8.1(d), Company
shall, through its Board of Directors, recommend to its shareholders approval
of this Agreement and the transactions contemplated by this Agreement. In the
event that (i) the affirmative votes of the shares of Common Stock subject to
the Voting Agreement are insufficient, standing alone, to obtain the
Shareholder Approval or (ii) any of the shares of Common Stock subject to the
Voting Agreement are not voted in accordance with the terms thereof, Company
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shall, subject to the provisions of Section 8.1(d), use its commercially
reasonable best efforts in soliciting votes to obtain the necessary approval
by its shareholders of this Agreement and the transactions contemplated
hereby.
Section 6.2 Access to Information; Confidentiality. Subject to
limitations imposed by applicable law, Company shall, and shall cause the
Subsidiary to, (i) afford to Parent and its officers, employees, accountants,
counsel, financial advisors and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time to
all its properties, books, contracts, commitments, personnel, audits, files,
correspondence, contracts and records and (ii) furnish promptly to the Parent
(a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
Federal or state securities laws and (b) all financial and operating data and
other information concerning its business, properties and personnel as Parent
may reasonably request. Company shall, and shall cause the Subsidiary to, (i)
instruct its employees, counsel and financial advisors to reasonably
cooperate with Parent in Parent's investigation of the business of Company
and (ii) make its personnel reasonably available for discussions with
representatives of Parent. Parent and Acquisition shall hold, and shall cause
its respective officers, employees, accountants, counsel, financial advisors
and other representatives and affiliates to hold, any nonpublic information
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in confidence to the extent required by, and in accordance with, the
Confidentiality Agreement.
Section 6.3 Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties agrees to use its best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger, including (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary registrations and
filings (including filings with Governmental Authorities, if any) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental
Authorities, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated by this
Agreement, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Authority vacated or reversed, and
(iv) the execution and delivery of any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement; provided, however, that (x) a party
shall not be obligated to take any action pursuant to the foregoing clauses
(i) through (iv) if the taking of such action or the obtaining of any waiver,
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consent, approval or exemption is reasonably likely to be materially
burdensome to such party and its subsidiaries taken as a whole or to impact
in a materially adverse manner the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger and (y) Parent or Acquisition shall not be
obligated to take any action pursuant to the foregoing clauses (i) through (iv)
if the taking of such action or the obtaining of any waiver, consent, approval
or exemption is reasonably likely to result in the imposition of a condition or
restriction of the type referred to in clause (ii), (iii) or (iv) of
Section 7.2(c). Notwithstanding the foregoing, Company agrees to use it
commercially reasonable best efforts to (i) take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper and advisable to satisfy
the conditions set forth in Section 7.1(a) and Sections 7.2(d) and (h), and
(ii) not enter into (and to prevent the Subsidiary from entering into) any
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger. Further, Company shall
(a) comply with all of its obligations under the Settlement Agreement, the
Waiver and Agreement and the Mutual Release, (b) not amend or modify the
Settlement Agreement (unless required to do so by court order), the Waiver and
Agreement or the Mutual Release, (c) not waive compliance by any other party to
the Settlement Agreement, the Waiver and Agreement or the Mutual Release, and
(d) obtain the written consent of Parent (not to be unreasonably withheld)
prior to any withdrawal by Company from the settlements contemplated by the
Settlement Agreement, the Waiver and Agreement and the Mutual Release or any
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termination of the Settlement Agreement, the Waiver and Agreement or the Mutual
Release or such settlements, except, in the case of the Settlement Agreement,
to the extent necessitated by court order.
(b) Company shall give prompt notice to Parent, and
Parent shall give prompt notice to Company, of (i) any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate
in any respect or (ii) the failure by it to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that the delivery of any notice pursuant
to this Section 6.3(b) shall not limit or otherwise affect the remedies
available hereunder to the parties receiving such notice.
Section 6.4 Public Announcements. Parent and Acquisition, on
the one hand, and Company and the Subsidiary, on the other hand, shall
consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other 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 as may be required by applicable law,
court process or by obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that a press release mutually
agreed upon by Company and Parent regarding the execution of this Agreement
and the transactions contemplated hereunder will be issued promptly following
the execution of this Agreement by all parties hereto.
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Section 6.5 Benefit Plans.
(a) Provision of Benefits. At Parent's option, Parent
shall provide or cause the Surviving Corporation (or in the case of a
transfer of all or substantially all of the assets and business of the
Surviving Corporation, its successors and assigns) to provide benefits to
employees of Company and the Subsidiary that either (i) are not materially
less favorable, in the aggregate, than those provided to employees of Parent
holding similar positions or (ii) are not materially less favorable, in the
aggregate, than those provided by Company on the date of this Agreement.
(b) Service. With respect to any "employee benefit
plan", as defined in Section 3(3) of ERISA, maintained by Parent or the
Surviving Corporation (or its successors and assigns) (including any
severance plan), for purposes of determining eligibility to participate and
vesting, service with Company or the Subsidiary prior to the Effective Date
shall be treated as service with Parent or the Surviving Corporation (or its
successors and assigns); provided, however, that such service need not be
recognized to the extent that such recognition would result in any
duplication of benefits.
Section 6.6 Indemnification.
(a) Parent agrees that it will not, and that it will
cause the Surviving Corporation not to, voluntarily take any action to reduce
any rights to indemnification or exculpation existing at the date hereof in
favor of the directors or officers of Company or Subsidiary (the "Indemnified
Parties") as provided in the respective Articles of Incorporation or Bylaws
or Virginia law, as the case may be, with respect to actions by them
occurring at or prior to the Effective Time.
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(b) Parent shall use its best efforts to cause the
persons serving as officers and directors of Company or the Subsidiary
immediately prior to the Effective Time to be covered for a period of six
years from the Effective Time by the directors' and officers' liability
insurance policy maintained by Company and the Subsidiary (provided that
Parent or the Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not less advantageous than such policy) with respect to acts or omissions
occurring prior to the Effective Time which were committed by such officers
and directors in their capacity as such. Prior to the Effective Time, Company
shall endeavor to, and shall be permitted to, satisfy the obligations under
the preceding sentence by extending or arranging for the extension of
coverage under such insurance policies pursuant to (i) a six-year "tail"
policy with respect to acts or omissions occurring prior to the Effective
Time other than claims, suits or damages relating to the matters,
transactions or occurrences referred to in the complaint of plaintiffs in the
Derivative Suit (provided that without Parent's consent the lump sum payment
to purchase such coverage shall not exceed $132,300) and (ii) a one-year
"tail" policy with respect to the policy of insurance under which Company has
filed claims relating to the matters, transactions or occurrences referred to
in the complaint of plaintiffs in the Derivative Suit (provided that without
Parent's consent the lump sum payment to purchase such coverage shall not
exceed $12,000), in which case Parent shall cause such premium, to the extent
not previously paid by Company, to be paid at the Closing. If such a "tail"
policy cannot be purchased on such terms prior to the Effective Time, then
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Parent and the Surviving Corporation shall endeavor to obtain coverage
contemplated by the first sentence of this Section 6.6(b); provided, however,
that in no event shall Parent or the Surviving Corporation be required to
expend more than the amount (the "Insurance Amount") equal to 150% of the
current annual premium expended by Company and the Subsidiary to maintain
such insurance coverage as of the Effective Time; and provided, further, that
if Parent or the Surviving Corporation is unable to maintain or obtain the
insurance called for by this Section 6.6, Parent shall use its best efforts
to obtain as much comparable insurance as available for the Insurance Amount
and; provided, further, that during such six-year period the Surviving
Corporation shall review, not less than annually, the feasibility of
purchasing tail coverage for the balance of such six-year period and shall
endeavor to purchase such coverage if it is available at a cost not exceeding
the maximum amount that the Surviving Corporation would otherwise be
obligated to pay under the first proviso to this sentence. Company represents
and warrants that the current annual premium for such insurance coverage is
$44,100.
(c) In the event Parent or the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (ii) transfers or conveys all or
substantially all of its properties and assets to any person, then, and in
each such case, to the extent necessary, proper provision shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as
the case may be, assume the obligations set forth in this Section 6.6.
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Section 6.7 Payment of Fees and Expenses. Except as provided in
Sections 8.2(a) and 8.2(b), in the event the Merger is not consummated, all
fees and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated by this Agreement (including any fees set forth
in Attachment 3.12 to the Company Disclosure Letter which are due and
payable) shall be paid by the party incurring such fees or expenses. In the
event the Merger is consummated, Parent shall cause the following payments to
be made by the Surviving Corporation at the Effective Time:
(a) To Xxxxxxxxx & Company, LLC, the sums payable to it
by Company under the agreement dated June 24, 1998, to the extent not
previously paid by Company.
(b) To Williams, Mullen, Christian & Xxxxxxx, all unpaid
reasonable legal fees and expenses owing to it by Company or the Subsidiary
for services rendered through the Effective Time.
(c) To Cherry, Bekaert & Holland, all unpaid reasonable
accounting fees and expenses owing to it by Company or the Subsidiary for
services rendered through the Effective Time.
(d) To such other persons as may be applicable, any
unpaid reasonable printing costs, solicitation fees or SEC filing fees
relating to the filing and printing of the Proxy Statement and the
solicitation of proxies thereunder.
To the extent that the portion of the aggregate sum of the amounts
payable pursuant to clauses (a), (b) and (c) above of this Section 6.7 which
is directly related to the negotiation of this Agreement and the consummation
of the Merger, together with the amount payable pursuant to clause (d) above,
65
exceeds the sum of $600,000, then the aggregate Merger Consideration payable
pursuant to Section 2.7 hereof shall be reduced on a dollar for dollar basis
by the amount of such excess, and such reduction shall be applied pro rata to
reduce the per share amounts of the Merger Consideration payable to the
holders of shares of Common Stock or Company Stock Options pursuant to
Sections 2.7 and 2.8 hereof. For the purposes of the foregoing, the parties
agree that all legal and accounting fees and expenses accrued and unpaid by
the Company through the date of this Agreement, which are set forth in
Section 6.7 of the Company Disclosure Letter, or thereafter accrued and not
paid prior to the Effective Time in connection with (i) the settlement and
defense of the Derivative Suit (including negotiation and preparation of the
Settlement Agreement), (ii) the normal year-end financial audit and
preparation of related audited financial statements for Company and
Subsidiary on a consolidated basis, (iii) any SEC Documents, other than the
Proxy Statement and any Current Reports on Form 8-K related to the Merger,
required to be filed by Company after the date of this Agreement or (iv) any
other legal or accounting matters of Company or the Subsidiary which are
unrelated to the Merger, shall not be included within the fees and expenses
subject to the above-described $600,000 ceiling.
Section 6.8 Promissory Note from the Xxxxxxxx Family Limited
Partnership. During the period from the date hereof until the earlier of the
Effective Time or the Expiration Date under the Voting Agreement (as defined
in Section 2 of the Voting Agreement), Company shall not, and Company shall
cause the Subsidiary not to, (i) enforce any rights it may have under (A)
that certain $375,000 promissory note, dated April 8, 1998 (the "Subsidiary
66
Note"), payable to the Subsidiary by the Xxxxxxxx Family Limited Partnership
(the "Partnership") or (B) the Pledge and Security Agreement, dated April 8,
1998 (the "Pledge Agreement"), between the Partnership and the Subsidiary,
which, in either case, would in any way affect the rights of the Partnership
to vote the 2,325,000 shares of Common Stock pledged to the Subsidiary to
secure payment of the Subsidiary Note and (ii) assign or otherwise transfer
the Subsidiary Note or the Pledge Agreement or any rights arising thereunder
to any other person.
Section 6.9 Stop Transfer Order. Company shall notify Company's
transfer agent that there is a stop order with respect to all of the Shares
(as defined in the Voting Agreement) and that the Voting Agreement places
limits on the voting of the Shares.
Section 6.10 No Acquisition of Common Stock Prior to Effective
Time. Prior to the earlier of (a) the Effective Time or (b) the termination
of this Agreement in accordance with the - terms hereof, without consent of
the Company, neither Parent nor any of its affiliates shall acquire by
purchase or otherwise any shares of the Common Stock of Company.
Section 6.11 Buy-Out of Plant A Lease. At Closing, the
Subsidiary shall exercise its right under that certain lease, dated September
30, 1997, between D. B. Western, Inc. ("D. B. Western") and the Subsidiary
(the "Plant A Lease") to purchase the Equipment and D.B. Western's
"proprietary information" relating thereto (all as defined in the Plant A
Lease) for a purchase price not to exceed $3,603,660. Parent shall cause the
Subsidiary to be provided with all funds necessary to consummate such
purchase. In the event that the purchase price exceeds the sum of $3,603,660,
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the aggregate Merger Consideration payable pursuant to Section 2.7 hereof
shall be reduced on a dollar for dollar basis by the amount of such excess,
and such reduction shall be applied pro rata to reduce the per share amount
of the Merger Consideration payable to the holders of shares of Common Stock
or Company Stock Options pursuant to Sections 2.7 and 2.8 hereof.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. Company shall have obtained
the Shareholder Approval.
(b) Antitrust. The waiting period (and any extensions
thereof) applicable to the transactions contemplated by this Agreement under
the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger, shall be in effect;
provided, however, that, subject to the proviso in Section 6.3, each of the
parties shall have used its best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
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Section 7.2 Conditions to Obligations of Parent and Acquisition.
The obligations of Parent and Acquisition to effect the Merger are further
subject to the satisfaction or waiver by Parent on or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties. The representations
and warranties of Company set forth in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and
warranties of Company set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the
date of this Agreement, and as of the Closing Date as though made on and as
of the Closing Date, except to the extent any such representation or warranty
expressly relates to an earlier date (in which case as of such date), and
Parent shall have received a certificate signed on behalf of Company by the
Chief Executive Officer of Company to such effect.
(b) Performance of Obligations of Company. Company shall
have performed and complied with in all material respects all obligations and
covenants required to be performed or complied with by it under this
Agreement at or prior to the Closing Date, and Parent shall have received a
certificate signed on behalf of Company by the Chief Executive Officer of
Company to such effect.
(c) No Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Authority (or by any other person,
if such suit, action or proceeding has a reasonable likelihood, in the
opinion of outside counsel to Parent, of success) (i) challenging the
acquisition by Parent or Acquisition of any shares of capital stock of
69
Company, seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement or the Voting
Agreement or seeking to obtain from Company, Parent, Acquisition or any of
their respective subsidiaries any damages that are material to either Parent
or Company and the Subsidiary taken as a whole, (ii) seeking to prohibit or
limit the ownership or operation by Parent or the Surviving Corporation of
any material portion of the business or assets of Company or the Subsidiary
or to compel Parent or the Surviving Corporation, or any of their respective
subsidiaries to dispose of or hold separate any material portion of the
business or assets of Company or the Subsidiary as a result of the Merger,
(iii) seeking to impose limitations on the ability of Parent or Acquisition
to acquire or hold, or exercise full rights of ownership of, any shares of
capital stock of the Surviving Corporation, including, without limitation,
the right to vote such capital stock on all matters properly presented to the
shareholders of the Surviving Corporation, (iv) seeking to prohibit Parent
from effectively controlling in any material respect the business or
operations of the Surviving Corporation or the Subsidiary or (v) which
otherwise could be reasonably expected to have a Company Material Adverse
Effect or a Parent Material Adverse Effect.
(d) Settlement of Derivative Suit. Either (i) that
certain Stipulation and Settlement Agreement (the "Settlement Agreement")
between the respective plaintiffs and defendants in the Derivative Suit (as
hereinafter defined) (which Settlement Agreement has previously been provided
to Parent), shall have been executed and delivered by the parties thereto and
filed in the Federal District Court having jurisdiction over such lawsuit,
70
and the Settlement Agreement shall have become effective following approval
thereof by the court pursuant to its issuance of a Final Order, the running
of all appeals periods and the payment by Company of all consideration
required under the Settlement Agreement or (ii) the Derivative Suit shall
have otherwise been dismissed (and all applicable appeal periods shall have
terminated) or finally adjudicated (and all applicable appeal periods shall
have terminated) on terms not materially less favorable to Company than those
provided for in the Settlement Agreement; provided, that under any
circumstance the aggregate consideration to be paid by Company to the
plaintiffs in the Derivative Suit shall not exceed $267,500 (with the value
of any consideration payable in shares of Common Stock being valued for the
purposes of this Section only by multiplying the number of such shares by
$3.40). Prior to the Closing Date, Parent shall have received documentary
evidence, in form and substance reasonably satisfactory to it, with respect
to (a) the payment of (i) all consideration required under the Settlement
Agreement (including the 50,000 shares of Common Stock to be issued by
Company pursuant thereto), in the event that the Settlement Agreement shall
have become effective as described above, or (ii) any consideration paid by
Company to the plaintiffs in respect of the Derivative Suit, in the event
that the Derivative Suit shall have been otherwise adjudicated on terms not
materially less favorable to Company than those provided for in the
Settlement Agreement, or (b) the dismissal of the Derivative Suit with
prejudice and the expiration of all applicable appeal periods. For the purposes
of this Agreement, the "Derivative Suit" shall mean that certain lawsuit filed
in the United States District Court for the District of Colorado, Civil Action
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No. 97-D-2214, styled Xxx Xxxxxxxxx, minority shareholder of record;
Xxxx Xxxxxxxx; Xxxx X. Xxxxxx; Xxxxxx Xxxxxx; Xxxxxx Xxxxxxxxx;
Xxxxxx Xxxxxxxxx; Xxxxxxx Xxxxxxxxx; Xxxxxxx Xxxxx, minority shareholders in
street name; Plaintiffs, x. Xxxxxxxx Industries, Inc., a Virginia corporation;
Xxxxxx X. Xxxxxxxx; Irvine X. Xxxxxxxx; H. Xxxxxx Xxxxxxxx, Xx.;
Xxxxxxx X. Xxxxxxx; Xxxxxx X. Xxxx, Xx.; Xxxxx Xxxxxx, as individuals;
Defendants.
(e) Consents. etc. Parent shall have received evidence,
in form and substance reasonably satisfactory to it, that the licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities and other third parties which are required in
connection with the performance by Company or the Subsidiary of the
transactions contemplated in this Agreement have been obtained, except where
the failure to obtain such licenses, permits, consents, approvals,
authorizations, qualifications and orders could not, individually or in the
aggregate with all other failures, be reasonably expected to have a Company
Material Adverse Effect.
(f) Repayment of Notes by the Partnership. Parent shall
have received evidence, in form and substance reasonably satisfactory to it,
that the Partnership has repaid, caused to be repaid, or has made
arrangements reasonably satisfactory to Parent to repay out of its share of
the Merger Consideration through direct offsets pursuant to which the
Surviving Corporation shall withhold the amounts referred to below in
satisfaction of such obligations, in full, (i) the remaining principal amount
(and all accrued but unpaid interest thereon) and all other amounts due in
respect of the Subsidiary Note and that certain Collateral Promissory Note,
72
dated November 15, 1995, payable by Irvine X. Xxxxxxxx and H. Xxxxxx
Xxxxxxxx, Xx. to Xxxxx X. Xxxxxx in the original principal amount of
$210,176.72 and (ii) all other unpaid amounts in respect of any loans or
advances made by Company or the Subsidiary to Irvine X. Xxxxxxxx or his wife
prior to the Closing Date.
(g) Repayment of Notes by Xxxxxx X. Xxxxxxxx. Parent
shall have received evidence, in form and substance reasonably satisfactory
to it, that Xxxxxx X. Xxxxxxxx has repaid, caused to be repaid, or has made
arrangements reasonably satisfactory to Parent to repay out of his share or
the Partnership's share of the Merger Consideration through direct offsets
pursuant to which the Surviving Corporation shall withhold the amounts
referred to below in satisfaction of such obligations, in full, (i) the
remaining principal amount (and all accrued but unpaid interest thereon) and
all other amounts due in respect of that certain Collateral Promissory Note,
dated as of June 30, 1995, payable to the Subsidiary in the original
principal amount of $112,500 and (ii) all other unpaid amounts in respect of
any loans or advances made by Company or the Subsidiary to Xxxxxx X.
Xxxxxxxx, Xx., H. Xxxxxx Xxxxxxxx, Xx. or Xxxxxx Xxxxxxxx prior to the
Closing Date.
(h) Evidence of Certain Amounts to be Paid and of Plant
A Lease Purchase Agreement. Not less than two (2) business days prior to the
Closing Date, Parent shall have received from Company evidence, in form and
substance reasonably satisfactory to it, of (i) the aggregate sum of the
amounts payable pursuant to clauses (a), (b), (c) and (d) of Section 6.7 and
(ii) the agreement between the Subsidiary and D. B. Western with respect to
73
the exercise by the Subsidiary of its purchase right under the Plant A Lease,
as described in Section 6.11, and the purchase price to be paid in connection
therewith.
(i) Matters Relating to the Contract With Nepera. Inc.
There shall not have occurred (i) any termination of that certain supply
contract dated as of July 1, 1998 (the "Nepera Contract") between the
Subsidiary and Nepera, Inc. ("Nepera"), (ii) any modification of the terms
or conditions of the Nepera Contract which could reasonably be expected to be
materially adverse to Company and the Subsidiary, taken as a whole, (iii) any
determination by a court of competent jurisdiction in that certain lawsuit
filed in the Ontario Court (General Division), Court File No. 98-CV-149846,
styled Neste Canada Inc., Plaintiff v. Nepera, Inc., Defendant (the "Neste-
Nepera Proceeding") that the supply contract dated January 1997 between
Nepera and Neste Canada Inc. must be honored by Nepera or (iv) any
settlement, final adjudication or resolution of, or other development
with respect to, the Neste-Nepera Proceeding which could reasonably be
expected to result in the occurrence of any of the events described in clauses
(i), (ii) or (iii) above.
Section 7.3 Conditions to Obligation of Company. The obligation
of Company to effect the Merger is further subject to the satisfaction or
waiver by Company on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of Parent set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties
74
of Parent set forth in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except to the extent any such representation or warranty expressly
relates to another date (in which case as of such date), and Company shall
have received a certificate signed on behalf of Parent by the Chief Executive
Officer of Parent to such effect.
(b) Performance of Obligations. Parent and Acquisition
shall have performed and complied with in all material respects all
obligations and covenants required to be performed or complied with by them
under this Agreement at or prior to the Closing Date, and Company shall have
received a certificate signed on behalf of Parent by the Chief Executive
Officer of Parent to such effect.
(c) No Litigation. There shall not be pending any suit,
action or proceeding by any Governmental Authority (or by any other person,
if such suit, action or proceeding has a reasonable likelihood, in the
opinion of outside counsel to Company, of success) challenging the
acquisition by Parent or Acquisition of any shares of capital stock of
Company or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement if, as a result
of such acquisition or consummation, any of the persons who are shareholders
of Company immediately prior to giving effect to the Merger could reasonably
be expected to be subject in such suit, action or proceeding to a valid claim
being asserted against them (i) to recover any of the Merger Consideration
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received by them or (ii) which would impose any penalties, fines, costs or
damages on them.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after the Shareholder
Approval:
(a) by mutual written consent of Parent and Company;
(b) by either Parent or Company:
(i) if, at a duly held shareholders meeting of
Company or any adjournment thereof at which the Shareholder Approval
is voted upon, the Shareholder Approval shall not have been obtained;
(ii) if the Merger shall not have been
consummated on or before June 1, 1999, unless the failure to
consummate the Merger is the result of a willful and material breach
of this Agreement by the party seeking to terminate this Agreement;
(iii) if any court of competent jurisdiction or
other Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; or
(iv) in the event of a breach by the other party
of any representation, warranty, covenant or other agreement
contained in this Agreement which (A) would give rise to the failure
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of a condition set forth in Section 7.2(a) or 7.2(b) or Section
7.3(a) or 7.3(b), as applicable, and (B) cannot be or has not been
cured within thirty (30) days after the giving of written notice to
the breaching party of such breach (a "Material Breach") (provided
that the terminating party is not then in breach of any
representation, warranty, covenant or other agreement that would give
rise to a failure of a condition as described in clause (A) above);
(c) by either Parent or Company (as applicable) in the
event that (i) all the conditions to the obligation of such party to effect
the Merger set forth in Section 7.1 shall have been satisfied and (ii) any
condition to the obligation of such party to effect the Merger set forth in
Section 7.2 (in the case of Parent) or Section 7.3 (in the case of Company)
which has not been waived by such party is not capable of being satisfied
prior to the end of the period referred to in Section 8.1(b)(ii);
(d) by Company, subject to Section 8.5(b), if the Board
of Directors of Company shall concurrently approve, and Company shall
concurrently enter into, a definitive agreement providing for the
implementation of the transactions contemplated by a takeover proposal;
provided, however, that (i) Company is not then in breach of Section 5.4 or
in breach of any other representation, warranty, covenant or agreement that
would give rise to a failure of a condition set forth in Section 7.2(a) or
7.2(b), and (ii) the Board of Directors of Company shall have complied with
Section 8.5(b) in connection with such takeover proposal; and
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(e) by Parent:
(i) if, without the prior written consent of
Parent, the Board of Directors of Company shall have withdrawn or
modified, in any manner adverse to Parent or Acquisition, the
approval or recommendation by the Board of this Agreement or the
Merger or approved or recommended any takeover proposal or shall have
resolved to do any of the foregoing;
(ii) if Company shall have failed, as soon as
reasonably practicable after no further approval by the SEC is
required, to mail the Proxy Statement to its shareholders or shall
have failed to include in the Proxy Statement the recommendation of
the Board of Directors of this Agreement and the Merger;
(iii) if Company shall have exercised a right
specified in the first proviso to Section 5.4(a) with respect to any
takeover proposal and shall, directly or through authorized agents or
representatives, continue discussions or negotiations with the maker
of such takeover proposal for more than ten (10) business days after
the receipt of such takeover proposal;
(iv) (A) if a takeover proposal that is publicly
disclosed shall have been commenced, publicly proposed or
communicated to Company which contains a proposal as to price
(without regard to the specificity of such price proposal) and (B)
Company shall not have rejected such takeover proposal within ten
(10) business days after the earlier of the receipt thereof by
Company or the date its existence first becomes publicly disclosed;
and
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(v) if Company shall have breached Section
5.4(a) hereof.
Section 8.2 Effect of the Termination.
(a) (i) If this Agreement is terminated (A) by Company
pursuant to Section 8.l(d) or (B) by Parent pursuant to Section 8. l(e); or
(ii) If (A) this Agreement is terminated
pursuant to Section 8.1 (other than by Company pursuant to Section 8.1(b)(iv)
or Section 8.1(d), by Parent pursuant to Section 8.1(e) or by Parent and
Company pursuant to Section 8.1(a)) and (B) within twelve months thereafter,
either (1) Company enters into an agreement with respect to any Third Party
Acquisition or (2) any Third Party Acquisition occurs, and (C) after the
execution and delivery of this Agreement but prior to such termination, (1)
Company (or its agents) had any discussions with any Third Party (as defined
below) with respect to any Third Party Acquisition, (2) Company (or its
agents) furnished information to any Third Party with respect to or with a
view to any Third Party Acquisition or (3) such Third Party made a proposal
or expressed any interest publicly or to Company with respect to any Third
Party Acquisition; then Company shall pay to Parent, (x) in the case of any
event described in clause (ii) above, within three (3) business days
following the execution and delivery of such Third Party Acquisition
agreement or the occurrence of such Third Party Acquisition, as the case may
be, or (y) in the case of any event described in clause (i) above, no later
than concurrently with any termination contemplated by Section 8.1(d) or
8.1(e) above, a fee, in cash and in immediately available funds, of $600,000
(the "Fee"); provided, however, that Company in no event shall be obligated
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to pay more than one Fee with respect to all such agreements and occurrences
and such termination; and provided, further, that the Company shall not be
obligated to pay the Fee or any Expenses (as defined below) pursuant to this
Section 8.2 if Parent or Acquisition shall be in material breach of any of
its representations, warranties, covenants or agreements in this Agreement.
In addition, Company shall, from time to time after any termination in which
a Fee shall be or become payable, pay to Parent, within three (3) b therefor
(accompanied by appropriate supporting documentation), an amount equal to the
Expenses set forth in such statement, not to exceed the aggregate amount of
$200,000, plus the actual reasonable fees and expenses incurred by Parent in
connection with any litigation or other proceeding to collect the Fee or such
Expenses.
"Expenses" means all reasonable out-of-pocket fees and expenses
actually incurred by Parent or Acquisition or on their behalf, whether before
or after the execution and delivery of this Agreement, in connection with the
transactions contemplated by this Agreement, including the Merger and Voting
Agreement, including without limitation fees and expenses payable to all
banks, investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees and expenses of counsel,
accountants, experts and consultants to Parent or Acquisition, to the extent
directly related to services rendered to Parent or Acquisition in connection
with this Agreement or the transactions contemplated hereunder and, further,
including without limitation fees and expenses of, or incurred in connection
with, any litigation or other proceedings to collect the Fee and/or any
Expenses.
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"Third Party" means any person other than Parent, Acquisition or any
affiliate thereof.
"Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of Company by a Third Party through a
merger, consolidation, business combination, recapitalization or other
similar transaction; (ii) the acquisition by a Third Party of 15% or more of
the operating assets of Company and the Subsidiary, taken as a whole; or
(iii) the acquisition, directly or indirectly, by a Third Party of more than
15% of any class of securities of Company or the Subsidiary entitled to
voting rights through a tender offer (including a self tender offer),
exchange offer or otherwise, unless the Company has issued a public statement
rejecting or recommending against acceptance of such offer.
(b) If this Agreement is terminated by Parent pursuant
to Section 8.1 (b)(iii) solely due to the failure of the condition set forth
in Section 7.2(d) to be satisfied prior to such termination, then Company
shall pay to Parent, within three (3) business days after its receipt of
written statements therefor (accompanied by appropriate supporting
documentation), an amount equal to the sum of (i) $50,000 plus (ii) any
Expenses set forth in such statement which were incurred by Parent after the
date of this Agreement, such sum not to exceed the aggregate amount of
$200,000, plus the actual reasonable fees and expenses incurred by Parent in
connection with any litigation or other proceeding to collect such Expenses.
(c) If this Agreement is terminated by either Company or
Parent pursuant to Section 8.1(b)(iv), the party committing the Material
Breach which gave rise to such termination shall, from time to time, pay the
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other party, within three (3) business days after its receipt of written
statements therefor (accompanied by appropriate supporting documentation), an
amount equal to the Expenses set forth in such statement, not to exceed the
aggregate amount of $200,000, plus the actual reasonable fees and expenses
incurred by such party in connection with any litigation or other proceeding
to collect such Expenses. Amounts payable pursuant to this Section 8.2(c)
shall be in addition to any Fee (but not Expenses) which Company may be
obligated to pay pursuant to Section 8.2(a) above. For the purposes of this
paragraph (c), Expenses shall have the same meaning as set forth in Section
8.2(a) above, except that, in the case of a Material Breach by Parent or
Acquisition, Company and the Subsidiary shall be inserted in such definition
in place of any references to Parent and Acquisition. Except as provided in
Section 8.2(d) with respect to a willful and material breach by a party of
its representations, warranties, covenants or other agreements set forth in
this Agreement, in the event that a party is required to pay any Expenses
pursuant to this Section 8.2(c) as a result of a Material Breach by it, such
party shall not be liable for the payment of any other damages, costs or
expenses (including reasonable attorneys' fees) suffered by the other party
as a result of such Material Breach.
(d) In the event of termination of this Agreement by
either Company or Parent as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, without any further liability or
obligation on the part of Parent, Acquisition or Company, except that (i) the
obligations provided for pursuant to the provisions of Sections 3.6, 3.12 and
4.3, the last sentence of Section 6.2, Section 6.7, this Section 8.02 and
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Article IX shall survive any such termination and (ii) nothing herein shall
relieve any party from any liability for damages, costs or expenses
(including reasonable attorneys' fees) suffered or incurred by the other
parties hereto to the extent that such termination results from the willful
and material breach by such party prior to termination of any of its
representations, warranties, covenants or other agreements set forth in this
Agreement. The Confidentiality Agreement shall survive any termination of
this Agreement in accordance with its terms.
Section 8.3 Amendment. This Agreement may be amended by the
parties at any time before or after the Shareholder Approval, provided,
however, that after the Shareholder Approval, there shall be made no
amendment that pursuant to the VSCA requires further approval by the
shareholders of Company without the further approval of such shareholders.
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties.
Section 8.4 Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to the proviso of Section 8.3, waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure
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of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
Section 8.5 Procedure for Termination, Amendment, Extension or
Waiver.
(a) A termination of this Agreement pursuant to Section
8.1, an amendment of this Agreement pursuant to Section 8.3 or an extension
or waiver pursuant to Section 8.4 shall, in order to be effective, require,
in the case of Parent or Company, action by its Board of Directors or, in the
case of an extension or waiver pursuant to Section 8.4, the duly authorized
designee of its Board of Directors.
(b) Company shall provide to Parent prior to any
termination of this Agreement pursuant to Section 8.1(d) the Notice of
Takeover Proposal in accordance with Section 5.4(c) and written notice
advising Parent that the Board of Directors of Company in the exercise of its
good faith judgment as to its fiduciary duties to the shareholders of Company
under applicable law, after receipt of written advice of outside legal
counsel and Company's financial advisors, has determined (on the basis of
such takeover proposal and the terms of this Agreement, as then in effect)
that such termination is required in connection with a takeover proposal that
is more favorable to the shareholders of Company than the transactions
contemplated by this Agreement (taking into account all terms of such
takeover proposal and this Agreement, including all conditions). At any time
after two (2) business days following receipt of such notice, Company may
terminate this Agreement as provided in Section 8.1(d) only if the Board of
Directors of Company, in the exercise of its good faith judgment as to its
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fiduciary duties to the shareholders of Company under applicable law, after
receipt of written advice of outside legal counsel, re-determines that such
proposal is more favorable to the shareholders of Company than the
transactions contemplated by this Agreement (taking into account all terms of
such takeover proposal and this Agreement, including all conditions, and
which determination shall be made in light of any revised proposal made by
Parent prior to the expiration of such two (2) business day period) and
concurrently enters into a definitive agreement providing for the
implementation of the transactions contemplated by such takeover proposal.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.1 shall not limit any covenant or agreement of the parties which,
by its terms, contemplates performance after the Effective Time.
Section 9.2 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
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(a) if to Parent or Acquisition, to:
Xxxxxx Chemical Holdings, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Vice President, General Counsel and Secretary
Facsimile: 000-000-0000
with a copy to:
Xxxxxx, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Xx., Esq., Senior
Vice President and General Counsel
Facsimile: 000-000-0000
and with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
(b) if to Company, to:
Xxxxxxxx Industries, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx,
Chairman of the Board and CEO
Facsimile: 000-000-0000
with a copy to:
Williams, Mullen, Christian & Xxxxxxx
X.X. Xxx 0000
Two Xxxxx Center
0000 Xxxx Xxxx Xxxxxx, 00xx Xxxxx (23219)
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esquire
Facsimile: 804-783-6507
and with a copy to:
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Xxxxxxxxx & Company, LLC
000 Xxxx Xxxx Xxxxxx
11th Floor (23219)
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx, III, Vice President
Facsimile: 000-000-0000
Section 9.3 Interpretation. When a reference is made in this
Agreement to a Section or Exhibit such reference shall be to a Section of, or
an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
Section 9.4 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents referred to herein) (a) constitutes
the entire agreement, and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
of this Agreement, except for the Confidentiality Agreement, which expressly
survives the execution and delivery of this Agreement, and (b) except for the
provisions of (i) Article II relating to the payment of an applicable portion
of the Merger Consideration to nondissenting shareholders of Company and
holders of Company Stock Options in accordance with this Agreement and in
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compliance with Virginia law and (ii) Section 6.6, is not intended to confer
upon any person other than the parties any rights or remedies.
Section 9.6 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Virginia,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
Section 9.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, except that Parent or
Acquisition may assign, in its sole discretion, any of or all its rights,
interests and obligations under this Agreement to any direct wholly owned
subsidiary of Parent or Xxxxxx, Inc., but no such assignment shall relieve
Parent or Acquisition, as the case may be, of any of its obligations under
this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
Section 9.8 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to seek
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement, this being
in addition to any other remedy to which they are entitled at law or in
equity. In addition, the parties hereto agree (a) that any claim, suit,
88
action or proceeding initiated by Parent, Acquisition or the Surviving
Corporation against Company or the Subsidiary (or their respective
shareholders, directors, officers, successors or assigns) relating to or
arising out of this Agreement, the Voting Agreement or the transactions
contemplated hereby or thereby shall be filed and prosecuted only in the
United States District Court for the Eastern District of Virginia (Richmond
Division) and in the court hearing appeals therefrom, unless no federal
diversity or subject matter jurisdiction exists, in which event, and only in
which event, such claim, suit, action or proceeding shall be filed and
prosecuted in the Circuit Court of the County of Sussex, Virginia and in the
courts hearing appeals therefrom, (b) that any claim, suit, action or
proceeding initiated by Company or the Subsidiary against Parent, Acquisition
or the Surviving Corporation (or their respective shareholders, directors,
officers, successors or assigns) relating to or arising out of this
Agreement, the Voting Agreement or the transactions contemplated hereby or
thereby shall be filed and prosecuted only in the United States District
Court for the Central District of Ohio and in the court hearing appeals
therefrom, unless no federal diversity or subject matter jurisdiction exists,
in which event, and only in which event, such claim, suit, action or
proceeding shall be filed and prosecuted in the District Court of the County
of Franklin, Ohio and in the courts hearing appeals therefrom, (c) that each of
the parties hereto consents to submit itself to the personal jurisdiction to
such courts for the purposes stated in clause (b) above and that no party
hereto will attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court and (d) that no party will initiate
89
any action relating to or arising out of this Agreement, the Voting Agreement
or any of the transactions contemplated hereby or thereby in any court other
than as set forth above.
Section 9.9 Waivers. Except as provided in this Agreement or
any waiver pursuant to Section 8.4, no action taken pursuant to this
Agreement, including any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained in
this Agreement. The waiver by any party hereto of a breach of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
Section 9.10 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and
this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
Section 9.11 Definitions of Certain General Terms. For the
purposes of this Agreement:
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(a) an ''affiliate'' of any person means another person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "knowledge" means:
(i) with respect to Company, the actual
knowledge of the following officers and employees (as well as any of
their successors) of Company and the Subsidiary: Xxxxxxx X. Xxxxxxx,
Irvine X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, Xx., Xxxx Xxxxxxxxx, Xxxxx
Xxxxxxxx and Xxxx Xxxxxxxxxx, Xx., or any of the foregoing, in each
case after reasonable inquiry or investigation (including, without
limitation, inquiries of the plant managers and controllers of each
of the Subsidiary's facilities in Malvern, Arkansas, Xxxxxx, New
York, and Waverly, Virginia); and
(ii) with respect to the Parent, the actual
knowledge of the following officers and employees (as well as any of
their successors) of Parent: Xxxxxxx Xxxxx, Xxxxx Xxxxxxxx, and
Xxxxxxxx Xxxxxx, or any of the foregoing, in each case after
reasonable inquiry or investigation;
(c) "person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(d) "subsidiary" of any person means another person, an
amount of the voting securities or other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of
its Board of Directors or other governing body (or if there are no such
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voting interests, more than 50% of the equity interests of which) is owned
directly or indirectly by such first person.
(SIGNATURES ON NEXT PAGE)
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IN WITNESS WHEREOF, Parent, Acquisition and Company have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first within above.
XXXXXX CHEMICAL, INC.
By:_____________________________________
Title:____________________________________
SII ACQUISITION COMPANY
By:_____________________________________
Title:____________________________________
XXXXXXXX INDUSTRIES, INC.
By:_____________________________________
Title:____________________________________
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