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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAVALIER HOMES, INC.,
CRIMSON ACQUISITION CORP.
AND
BELMONT HOMES, INC.
AUGUST 14, 1997
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger................................................................2
1.2 Effective Time............................................................2
1.3 Effects of the Merger.....................................................2
1.4 Articles of Incorporation and By-laws.....................................2
1.5 Directors and Officers....................................................2
1.6 Parent Board Seats........................................................3
1.7 Additional Actions........................................................3
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock...............................................3
2.2 Exchange Ratio; Fractional Shares.........................................4
2.3 Exchange of Certificates..................................................5
(a) Exchange Agent..........................................................5
(b) Exchange Procedures.....................................................5
(c).........................................................................6
(d) No Further Ownership Rights in Company Common Stock.....................6
(e) Termination of Exchange Fund............................................6
(f) No Liability............................................................6
(g) Investment of Exchange Fund.............................................7
2.4 Treatment of Stock Options and Warrants...................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
3.1 Organization and Standing.................................................9
3.2 Subsidiaries..............................................................9
3.3 Corporate Power and Authority............................................10
3.4 Capitalization of Parent.................................................10
3.5 Conflicts, Consents and Approvals........................................11
3.6 Absence of Certain Changes...............................................12
3.7 Parent SEC Documents.....................................................12
3.8 Taxes....................................................................12
3.9 Compliance with Law......................................................13
3.10 Registration Statement..................................................13
3.11 Litigation..............................................................14
3.12 Brokerage and Finder's Fees.............................................14
3.13 Opinion of Financial Advisor............................................14
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3.14 Accounting Matters......................................................14
3.15 Tax-Free Reorganization.................................................14
3.16 Employee Benefit Plans..................................................14
3.17 Contracts...............................................................17
3.18 Labor Relations.........................................................17
3.19 Permits.................................................................18
3.20 Environmental Matters...................................................18
3.21 No Undisclosed Liabilities..............................................19
3.22 Restrictions on Business Activities.....................................19
3.23 Title to Property.......................................................19
3.24 Condition of Property...................................................20
3.25 Intellectual Property...................................................20
3.26 Interested Party Transactions...........................................21
3.27 Insurance...............................................................21
3.28 Full Disclosure.........................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Standing..............................................22
4.2 Subsidiaries...........................................................22
4.3 Corporate Power and Authority..........................................23
4.4 Capitalization of the Company..........................................23
4.5 Conflicts; Consents and Approvals......................................23
4.6 Absence of Certain Changes.............................................24
4.7 Company SEC Documents..................................................24
4.8 Taxes..................................................................25
4.9 Compliance with Law....................................................26
4.10 Registration Statement.................................................26
4.11 Litigation.............................................................26
4.12 Brokerage and Finder's Fees............................................26
4.13 Opinion of Financial Advisor...........................................26
4.14 Accounting Matters.....................................................27
4.15 Tax-Free Reorganization................................................27
4.16 Employee Benefit Plans.................................................27
4.17 Contracts..............................................................29
4.18 Labor Relations........................................................29
4.19 Permits................................................................29
4.20 Environmental Matters..................................................30
4.21 Parent Stock Ownership.................................................30
4.22 State Takeover Laws....................................................30
4.23 No Undisclosed Liabilities.............................................31
4.24 Restrictions on Business Activities....................................31
4.25 Title to Property......................................................31
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4.26 Condition of Property...................................................32
4.27 Intellectual Property...................................................32
4.28 Interested Party Transactions...........................................33
4.29 Insurance...............................................................33
4.30 Full Disclosure.........................................................33
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Mutual Covenants..........................................................34
(a) General.................................................................34
(b) HSR Act.................................................................34
(c) Other Governmental Matters and Consents.................................34
(d) Pooling-of-Interests....................................................34
(e) Tax-Free Treatment......................................................34
(f) Public Announcements....................................................34
(g) Access..................................................................35
(h) Stockholders and Shareholders Meetings..................................35
(i) Preparation of Proxy Statement and Registration Statement...............35
(j) Notification of Certain Matters.........................................36
(k) Affiliates..............................................................36
(l) Injunctions.............................................................36
(m) Tax Representation Letters.............................................36
(n) Additional Reports.....................................................36
5.2 Covenants of Parent.......................................................37
(a) Conduct of Parent's Operations..........................................37
(b) Indemnification.........................................................37
(c).........................................................................38
(d).........................................................................38
(e).........................................................................38
5.3 Covenants of the Company..................................................38
(a) Conduct of the Company's Operations.....................................38
(b) No Solicitation.........................................................41
ARTICLE VI
CONDITIONS
6.1 Mutual Conditions.........................................................42
6.2 Conditions to Obligations of the Company..................................43
6.3 Conditions to Obligations of Parent and Sub...............................43
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination...............................................................46
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7.2 Effect of Termination..................................................49
7.3 Amendment..............................................................51
7.4 Extension; Waiver......................................................51
ARTICLE VIII
MISCELLANEOUS
8.1 Survival of Representations and Warranties.............................51
8.2 Notices................................................................52
8.3 Interpretation.........................................................53
8.4 Counterparts...........................................................53
8.5 Entire Agreement.......................................................53
8.6 Third Party Beneficiaries..............................................53
8.7 Governing Law..........................................................53
8.8 Exclusive Remedies.....................................................53
8.9 Assignment.............................................................54
8.10 Expenses..............................................................54
8.11 Incorporation of Disclosure Schedules.................................54
8.12 Severability..........................................................54
8.13 Subsidiaries..........................................................54
8.14 Waiver Of Jury Trial..................................................54
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made
and entered into as of the 14th day of August, 1997, by and among Cavalier
Homes, Inc., a Delaware corporation ("Parent"), Crimson Acquisition Corp., a
Mississippi corporation and a wholly owned subsidiary of Parent ("Sub"), and
Belmont Homes, Inc., a Mississippi corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Parent desires to combine with the business and
operations of the Company through the merger (the "Merger") of Sub with and into
the Company, with the Company as the surviving corporation, pursuant to which
each share of Company Common Stock (as defined in Section 4.4) outstanding at
the Effective Time (as defined in Section 1.2) will be converted into the right
to receive shares of Parent Common Stock (as defined in Section 3.4) as more
fully provided herein; and
WHEREAS, the Company desires to combine its business and
operations with the businesses of Parent and to become a wholly owned subsidiary
of Parent and for the holders of shares of Company Common Stock ("Company
Shareholders") to have a continuing equity interest in the combined businesses
of Parent and the Company; and
WHEREAS, the parties intend that the Merger constitute a
tax-free "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties intend that the Merger be accounted for
as a pooling-of-interests for financial reporting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share of the
Company's Common Stock, $0.10 par value per share (the "Company Common Stock"),
except shares of Company Common Stock held by persons who object to the Merger
and comply with all provisions of Mississippi law concerning the right of
holders of Company Common Stock to dissent from the Merger and obtain payment of
the fair value of their shares of Company Common Stock ("Dissenting
Shareholders"), shall be converted into the right to receive Parent Common Stock
and be exchanged for Parent Common Stock pursuant to the Exchange Ratio (as
defined in Section 2.1(b)), upon the terms and subject to the conditions set
forth herein; and
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have unanimously determined that the Merger in the manner
contemplated herein is fair to and in the best interests of their respective
stockholders and shareholders and, by duly adopted resolutions, have unanimously
approved and adopted this Agreement;
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
mutual and dependent covenants and agreements hereinafter set forth, Parent, Sub
and the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of Section 79-4-11.01 et seq. of
the Mississippi Business Corporation Act (the "AMBCA"), Sub shall be merged with
and into the Company as soon as practicable following the satisfaction or waiver
of the conditions set forth in Article VI, but in no event later than two
business days thereafter (the date of such merger being referred to herein as
the "Closing Date"), unless otherwise mutually agreed to by the parties hereto.
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue its existence under the laws of the State of
Mississippi. The Company, in its capacity as the corporation surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. The Merger shall be consummated by filing
with the Secretary of State of the State of Mississippi (the "Mississippi
Secretary of State") articles of merger (the "Articles of Merger") in such form
as is required by and executed in accordance with the MBCA. The Merger shall
become effective (the "Effective Time") when the Articles of Merger have been
filed with the Mississippi Secretary of State or at such later time as may be
agreed by Parent and the Company and specified in the Articles of Merger.
Immediately prior to the filing referred to in this Section 1.2, a closing (the
"Closing") shall be held at the offices of Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC
at 000 Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx, or such other place as the parties
may agree.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the MBCA.
1.4 ARTICLES OF INCORPORATION AND BY-LAWS. The Restated
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall remain the Articles of Incorporation of the Surviving
Corporation. The By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation.
1.5 DIRECTORS AND OFFICERS. From and after the Effective Time,
the officers of the Company shall be the officers of the Surviving Corporation,
and the directors of Sub shall be the directors of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified.
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1.6 PARENT BOARD SEATS. Parent shall cause its Board of
Directors to be expanded by two seats as of the Effective Time, and such
directorships shall, as of such time, be filled by A. Xxxxxxx Xxxxxx, Xx. and
Xxxx Xxxxxxx for a term expiring at Parent's next annual meeting of stockholders
following the Effective Time, subject to being renominated as a director at the
discretion of Parent's Board of Directors.
1.7 ADDITIONAL ACTIONS. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
deeds, assignments or assurances in law or any other acts are necessary or
desirable to carry out the provisions of this Agreement, the proper officers and
directors of Parent and the Company shall take all such necessary action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Sub or the
Company:
(a) Each share of common stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted
into one share of common stock of the Surviving Corporation. Such
shares shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Each share of Company Common Stock (other than
shares to be canceled in accordance with Section 2.1(c) and shares
subject to Section 2.1(d)) issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive 0.80
shares of Parent Common Stock (the "Exchange Ratio"), together with the
associated Parent Rights (as defined in Section 3.4; unless the context
otherwise requires, all references herein to Parent Common Stock
include the associated Parent Rights).
(c) Each share of capital stock of the Company held
in the treasury of the Company or held by Parent or any of its
subsidiaries shall be canceled and retired and no payment shall be made
in respect thereof.
(d) Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding Company Common Stock held by a
Dissenting Shareholder shall not be converted as described in Section
2.1(b) but shall become solely the right to receive payment of the fair
value of his shares in such amount as may be determined to be due to
such Dissenting Shareholder pursuant to the dissent provisions of the
MBCA; provided, however, that the Company Common Stock outstanding
immediately prior to the Effective Time of the Merger and held by a
Dissenting Shareholder who shall, after the Effective Time of the
Merger, withdraw his demand for appraisal or lose his, her or its right
of appraisal, in either case pursuant to the MBCA, shall be deemed to
be converted as of the Effective Time of the Merger into the right to
receive the Parent Common Stock at the Exchange Ratio. The Company
shall give Parent (i) prompt notice of any written
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notices of any intent to demand payment and any written demands for
payment of Company Common Stock received by the Company and (ii) the
opportunity to direct all offers of payment, negotiations and
proceedings with respect to any such demands, provided that in such
event Parent agrees to assume the settlement or payment obligations of
the Company. The Company shall not, without the prior written consent
of Parent, voluntarily make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
(e) As of the Effective Time, all shares of Company
Common Stock not canceled pursuant to Section 2.1(c) shall no longer be
outstanding and shall cease to exist, and each holder of a certificate
or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive (i)
in the case of Shares subject to Section 2.1(b), (A) certificates
representing the number of whole shares of Parent Common Stock into
which such shares have been converted pursuant to Section 2.1(b), (B)
cash in lieu of fractional shares of Parent Common Stock in accordance
with Section 2.2, without interest, and (C) certain dividends and other
distributions in accordance with Section 2.3(c), without interest; and
(ii) in the case of shares subject to Section 2.1(d), payment of the
fair value of their shares in such amount as may be determined to be
due a Dissenting Shareholder pursuant to the dissent provisions of the
MBCA.
2.2 EXCHANGE RATIO; FRACTIONAL SHARES. No certificates for
fractional shares of Parent Common Stock shall be issued as a result of the
conversion provided for in Section 2.1(b). To the extent that an outstanding
share of Company Common Stock would otherwise have become a fractional share of
Parent Common Stock, the holder thereof, upon presentation of such fractional
interest represented by an appropriate certificate for Company Common Stock to
the Exchange Agent pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the closing price of Parent Common Stock on the New York Stock Exchange
Composite Tape ("NYSE") on the last full trading day immediately prior to the
Effective Time) of such fractional interest. Such payment with respect to
fractional shares is merely intended to provide a mechanical rounding off of,
and is not a separately bargained for, consideration. If more than one
certificate representing shares of Company Common Stock shall be surrendered for
the account of the same holder, the number of shares of Parent Common Stock for
which certificates have been surrendered shall be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered. In
the event that prior to the Effective Time Parent or the Company shall declare a
stock dividend or other distribution payable in shares of its common stock or
securities convertible into shares of its common stock, or effect a stock split,
reclassification, combination or other change with respect to its common stock,
the Exchange Ratio shall be adjusted to reflect such dividend, distribution,
stock split, reclassification, combination or other change.
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2.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent
shall make available to an exchange agent designated by Parent and
reasonably acceptable to the Company (the "Exchange Agent"), for the
benefit of Company Stockholders, for exchange in accordance with this
Section 2.3, certificates representing shares of Parent Common Stock
issuable pursuant to Section 2.1 in exchange for outstanding shares of
Company Common Stock and shall from time-to-time deposit cash in an
amount reasonably expected to be paid pursuant to Section 2.2 (such
shares of Parent Common Stock and cash, together with any dividends or
distributions with respect thereto, being hereinafter referred to as
the "Exchange Fund").
(b) EXCHANGE PROCEDURES. Promptly after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares
of Company Common Stock whose shares were converted into the right to
receive shares of Parent Common Stock pursuant to Section 2.1(b) hereof
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Parent and Company
agree are reasonably necessary, and (ii) instructions for effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed
letter of transmittal, the holder of such Certificate shall be entitled
to receive in exchange therefor (x) a certificate representing that
number of shares of Parent Common Stock which such holder has the right
to receive pursuant to Section 2.1 and (y) a check representing the
amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, which such holder has the right to
receive pursuant to the provisions of this Article II, after giving
effect to any required withholding tax, and the shares represented by
the Certificate so surrendered shall forthwith be canceled. No interest
will be paid or accrued on the cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, payable to holders
of shares of Company Common Stock. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered on
the transfer records of the Company, a certificate representing the
proper number of shares of Parent Common Stock, together with a check
for the cash to be paid in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, may be issued to such
transferee if the Certificate representing such shares of Company
Common Stock held by such transferee is presented to the Exchange
Agent, properly endorsed or otherwise in proper form for the transfer,
accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer or other
nonincome taxes required by reason of the issuance of shares of Parent
Common Stock to a person other than the registered holder of such
Certificate have been paid. Until surrendered as contemplated by this
Section 2.3, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon surrender a
certificate representing shares of Parent Common Stock and
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cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, or the right to receive payment of the fair
value of his, her or its shares in such amount as may be determined to
be due to a Dissenting Shareholder pursuant to the dissent provisions
of the MBCA, in each case as provided in this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared or made after the Effective Time with
respect to shares of Parent Common Stock having a record date after the
Effective Time shall be paid to the holder of any unsurrendered
Certificate, and no cash payment in lieu of fractional shares shall be
paid to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Subject to the effect of
Applicable Law (as defined in Section 3.9), following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of
Parent Common Stock and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate
payment date subsequent to surrender, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock, less the amount of
any withholding taxes which may be required thereon.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON
STOCK. All shares of Parent Common Stock issued upon surrender of
Certificates in accordance with the terms hereof (including any cash
paid pursuant to this Article II) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company
Common Stock represented thereby, and from and after the Effective Time
there shall be no further registration of transfers on the stock
transfer books of the Company of shares of Company Common Stock. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 2.3.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to Company Shareholders for
six months after the Effective Time shall be delivered to Parent or the
Surviving Corporation, upon demand thereby, and holders of shares of
Company Common Stock who have not theretofore complied with this
Section 2.3 shall thereafter look only to Parent for payment of any
claim to shares of Parent Common Stock, cash in lieu of fractional
shares thereof, or dividends or distributions, if any, in respect
thereof.
(f) NO LIABILITY. None of Parent, the Surviving
Corporation or the Exchange Agent shall be liable to any person in
respect of any shares of Company Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange Fund
required to be delivered to a public official pursuant to any
applicable
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abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered immediately prior to such date on which any
cash, any cash in lieu of fractional shares or any dividends or
distributions with respect to whole shares of Company Common Stock in
respect of such Certificate would otherwise escheat to or become the
property of any Governmental Authority (as defined in Section 3.5),
any such cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by Applicable Law and
without any further action on the part of any party, become the
property of Parent, free and clear of all claims or interest of any
person previously entitled thereto.
(g) INVESTMENT OF EXCHANGE FUND. The Exchange Agent
shall invest any cash included in the Exchange Fund, as directed by
Parent in a manner consistent with Parent's investment of its own
funds, on a daily basis. Any interest and other income resulting from
such investments shall be paid to Parent. In the event the Exchange
Fund shall realize a loss on any such investment, Parent shall promptly
thereafter deposit, or cause to be deposited, in such Exchange Fund on
behalf of the Surviving Corporation cash in an amount equal to such
loss.
2.4 TREATMENT OF STOCK OPTIONS AND WARRANTS.
(a) At the Effective Time, each unexpired and
unexercised option or right to purchase shares of Company Common Stock
granted (or subject to being granted on a contingent basis) under the
Company's various stock option plans in effect on the date hereof to
current or former directors, officers, employees, consultants or
independent contractors of the Company or its subsidiaries (each, a
"Company Option" and collectively, "Company Options") shall be assumed
by Parent and converted, without further action, into an option (an
"Adjusted Option") to acquire, on the same terms and conditions as were
applicable under the Company Options and the plans under which they
were issued, prior to the Effective Time (including without limitation
any provisions for acceleration), that number of shares of Parent
Common Stock equal to the number of shares of Company Common Stock
issuable immediately prior to the Effective Time upon exercise of the
Company Options (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exercise
price equal to the exercise price which existed under the corresponding
Company Options divided by the Exchange Ratio. In addition,
notwithstanding the foregoing, each Company Option which is an
"incentive stock option" shall be adjusted as required by Section 424
of the Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within
the meaning of Section 424(h) of the Code. As of the Effective Time,
all references to the Company in each Company Option shall be deemed to
be references to Parent, where appropriate, and Parent shall assume the
obligations of the Company under the Company's 1994 Incentive Stock
Plan, as amended, but not under the 1994 Non-qualified Stock Option
Plan for Non-Employee Directors, which plan will be terminated as of
the Effective Time (but without adversely affecting the holders of
outstanding options under such plan). On the Closing Date, Parent will
deliver to the holders of Company Options appropriate notices setting
forth
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such holders' rights pursuant thereto together with written evidence
of Parent's acceptance and assumption of all Company Options.
(b) At the Effective Time, that certain warrant to
purchase 75,000 shares of Company Common Stock at $14.67 per share
issued to The Xxxxxxx Companies, a Florida corporation, on October 25,
1996 (the "Xxxxxxx Warrant"), shall be assumed by Parent and shall
become a warrant (the "Adjusted Warrant") to acquire, on the same terms
and conditions as were applicable to the Xxxxxxx Warrant prior to the
Effective Time, that number of shares of Parent Common Stock equal to
the number of shares of Company Common Stock issuable immediately prior
to the Effective Time upon exercise of the Xxxxxxx Warrant (without
regard to actual restrictions on exercisability) multiplied by the
Exchange Ratio, with an exercise price per share equal to $14.67
divided by the Exchange Ratio. As of the Effective Time, all references
to the Company in the Xxxxxxx Warrant shall be deemed to be references
to Parent, where appropriate.
(c) In connection with the issuance of Adjusted
Options and the Adjusted Warrant, Parent shall (i) reserve for issuance
the number of shares of Parent Common Stock that will become subject to
Adjusted Options and the Adjusted Warrant pursuant to this Section 2.4
and (ii) from and after the Effective Time, upon exercise of Adjusted
Options and the Adjusted Warrant, make available for issuance all
shares of Parent Common Stock covered thereby, subject to the terms and
conditions applicable thereto. Parent agrees to file with the
Securities and Exchange Commission (the "Commission") as soon as
reasonably practicable after the Closing Date, an amendment to a
registration statement on Form S-8, or a new registration statement on
Form S-8, or other appropriate form under the Securities Act of 1933
(together with the rules and regulations thereunder, the "Securities
Act") to register the issuance of the shares of Parent Common Stock
issuable upon exercise of the Adjusted Options and use its reasonable
efforts to cause such registration statement to remain effective until
the exercise or expiration of such options. In addition, Parent will
cause that certain Registration Rights Agreement between the Company
and The Xxxxxxx Companies, dated October 25, 1996, to be complied with
respecting shares of Parent Company Stock issuable pursuant to the
Adjusted Warrant, and will, on or prior to or immediately after the
Effective Time, file a resale registration statement with the
Commission concerning shares of Parent Common Stock issuable upon
exercise of the Xxxxxxx Warrant.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
In order to induce the Company to enter into this Agreement,
Parent and Sub hereby represent and warrant to the Company that the statements
contained in this Article III are true, correct and complete.
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3.1 ORGANIZATION AND STANDING. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation with full power and
authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
Parent and its subsidiaries is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on Parent. The copies
of the Amended and Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and the Amended and Restated By-laws (the
"By-laws") (or similar organizational documents) of Parent and each of its
subsidiaries, which have previously been made available to the Company, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
3.2 SUBSIDIARIES.
(a) As of the date hereof, other than immaterial interests,
Parent does not own, directly or indirectly, any equity or other ownership
interest in any corporation, partnership, joint venture or other entity or
enterprise, except as set forth in Section 3.2 to the disclosure schedule (the
"Parent Disclosure Schedule") delivered by Parent to the Company and dated the
date hereof. Section 3.2 to the Parent Disclosure Schedule sets forth as to each
subsidiary of Parent: (i) its name and jurisdiction of incorporation or
organization, (ii) its authorized capital stock or share capital, and (iii) the
number of issued and outstanding shares of its capital stock or share capital.
Except as set forth in Section 3.2 to the Parent Disclosure Schedule, each of
the outstanding shares of capital stock of each of Parent's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and is owned, directly
or indirectly, by Parent free and clear of all liens, pledges, security
interests, claims or other encumbrances, other than liens imposed by law which
could not reasonably be expected to have, in the aggregate, a material adverse
effect on Parent. All of the outstanding shares of the capital stock of Sub are
directly owned by Parent. Other than as set forth in Section 3.2 to the Parent
Disclosure Schedule, there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer of any securities of any subsidiary of Parent, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of any subsidiary of Parent; and no subsidiary of Parent
has any obligation of any kind to issue any additional securities or to pay for
securities of any subsidiary of Parent or any predecessor thereof. As used in
this Section 3.2, "capital stock" shall include capital stock or other ownership
interests having by their terms ordinary voting power to elect directors or
others performing similar functions with respect to such entity.
(b) Neither Parent nor any Affiliate (as defined in Section
79-25-3(a) of the Mississippi Shareholder Protection Act) of Parent is an
Interested Shareholder (as defined in Section 79-25-3(l) of the Mississippi
Shareholder Protection Act) with respect to the Company.
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3.3 CORPORATE POWER AND AUTHORITY.
(a) Parent has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of the Share Issuance (as
defined below) by the requisite votes of the stockholders of Parent
(the "Parent Stockholders") in accordance with the rules of the NYSE
and this Agreement. The execution and delivery of this Agreement by
Parent and the consummation by Parent of the transactions contemplated
hereby have been duly and validly approved by the Board of Directors of
Parent. The Board of Directors of Parent has directed that the issuance
of Parent Common Stock pursuant hereto (the "Share Issuance") be
submitted to the Parent Stockholders for approval at a stockholders
meeting and, except for the approval of the Share Issuance by the
Parent Stockholders in accordance with the rules of the NYSE, no other
corporate approvals on the part of Parent are necessary to approve this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Parent
and constitutes a valid and binding obligation of Parent, enforceable
against Parent in accordance with its terms.
(b) Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
Sub and the consummation by Sub of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of Sub
and by Parent as the sole stockholder of Sub, and no other corporate
proceedings on the part of Sub are necessary to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Sub and constitutes a valid and
binding obligation of Sub, enforceable against Sub in accordance with
its terms.
3.4 CAPITALIZATION OF PARENT. Parent's authorized capital
stock consists solely of (a) 50,000,000 shares of common stock, $0.10 par value
per share ("Parent Common Stock"), and (b) 500,000 shares of preferred stock,
$0.01 par value per share ("Parent Preferred Stock"), of which 200,000 shares
have been designated as Series A Junior Participating Preferred Stock (the
"Parent Series A Preferred Stock"). As of August 11, 1997, (i) 12,283,127 shares
of Parent Common Stock were issued and outstanding, (ii) 1,457,985 shares of
Parent Common Stock were issuable upon the exercise or conversion of options,
warrants or convertible securities granted or issuable by Parent, and (iii) no
shares of Parent Preferred Stock were issued and outstanding. Since August 11,
1997, Parent has not issued any shares of its capital stock except upon the
exercise of such options, warrants or convertible securities. Each outstanding
share of Parent capital stock is, and all shares of Parent Common Stock to be
issued in connection with the Merger will be at the time of issuance, duly
authorized and validly issued, fully paid and nonassessable and free of any
preemptive rights. As of the date hereof, other than the rights ("Parent
Rights") issued under the rights agreement, dated as of October 23, 1996,
between Parent and ChaseMellon Shareholder Services, L.L.C. (the "Parent Rights
Agreement"), and other than as set forth above, in the Parent SEC Documents (as
defined in Section 3.7) or in Section 3.4 to the Parent Disclosure Schedule,
there are no outstanding shares of capital stock or subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other
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commitments or rights of any type relating to the issuance, sale or transfer by
Parent of any securities of Parent, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
Parent; and Parent has no obligation of any kind to issue any additional
securities or to pay for securities of Parent or any predecessor. Parent has no
outstanding bonds, debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of Parent Common Stock.
3.5 CONFLICTS, CONSENTS AND APPROVALS. Neither the execution
and delivery of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will:
(a) conflict with or violate any provision of the
Certificate of Incorporation or By-laws (or any similar organizational
document) of Parent or any subsidiary of Parent;
(b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any party (with the giving of
notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the termination,
acceleration or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which Parent or any of its subsidiaries is
a party or by which any of their respective properties or assets may be
bound;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its
subsidiaries or their respective properties or assets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by Parent or any of its affiliates
with, any third party or any court, arbitral tribunal, administrative
agency or commission or other governmental or regulatory body, agency,
instrumentality or authority (a "Governmental Authority"), other than
(i) approval of the Share Issuance by Parent Stockholders, (ii)
approval of the listing of the shares of Parent Common Stock to be
issued in the Merger on the NYSE, subject to official notice of
issuance, (iii) actions required by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and (iv) registrations or other
actions required under federal and state securities laws as are
contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 3.5 to the Parent Disclosure Schedule and, in the case of (b),
(c) and (d), for any of the foregoing that
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would not, in the aggregate, have a material adverse effect on Parent or that
would not prevent or delay the consummation of the transactions contemplated
hereby.
3.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in the
Parent SEC Documents filed with the Commission as of the date hereof, since
December 31, 1996, (i) each of Parent and its subsidiaries has conducted its
business in the ordinary course, consistent with past practice, (ii) no event
has occurred which has or which would reasonably be expected to have, in the
aggregate, a material adverse effect on Parent (but, excluding for such
purposes, events that are generally applicable in Parent's and the Company's
industry or industries and the United States economy), and (iii) neither Parent
nor any of its subsidiaries has taken any action which would be prohibited by
Section 5.2(a).
3.7 PARENT SEC DOCUMENTS. Each of Parent and its
subsidiaries has timely filed with the Commission all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since
December 31, 1994 under the Securities Exchange Act of 1934 (together with the
rules and regulations thereunder, the "Exchange Act") or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Parent SEC Documents"). The Parent SEC Documents, including,
without limitation, any financial statements or schedules included therein, at
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit 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, and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements (including the related notes) of Parent
included in the Parent SEC Documents were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), and fairly present
(subject in the case of unaudited statements to the absence of footnotes and to
normal, recurring and year-end audit adjustments) in all material respects the
consolidated financial position of Parent as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended.
3.8 TAXES. Except as set forth in the Parent SEC Documents,
and except with respect to any such matters that would not, in the aggregate,
have a material adverse effect on Parent, (i) each of Parent and its
subsidiaries has duly filed all federal and state income tax returns and all
other material tax returns (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been filed by Parent
or any of its subsidiaries prior to the date hereof and will file, on or before
the Effective Time, all such returns which are required to be filed after the
date hereof and on or before the Effective Time, (ii) all of the foregoing
returns and reports are true and correct in all material respects, and each of
Parent and its subsidiaries has paid or, prior to the Effective Time, will pay
all taxes required to be paid in respect of the periods covered by such returns
or reports to any federal, state, foreign, local or other taxing authority,
(iii) each of Parent and its subsidiaries has paid or made adequate provision
(in accordance with generally accepted accounting principles) in the financial
statements of Parent included in the Parent SEC Documents for all taxes payable
in respect of all
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periods ending on or prior to June 30, 1997, (iv) neither Parent nor any of its
subsidiaries will have any material liability for any taxes in excess of the
amounts so paid or reserves so established and neither Parent nor any of its
subsidiaries is delinquent in the payment of any material tax, assessment or
governmental charge and none of them has requested any extension of time within
which to file any returns in respect of any fiscal year which have not since
been filed, (v) no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed in writing (tentatively or definitely),
in each case, by any taxing authority, against Parent or any of its subsidiaries
for which there are not adequate reserves in its financial statements (in
accordance with generally accepted accounting principles), (vi) as of the date
of this Agreement, there are no extensions or waivers or pending requests for
extensions or waivers of the time to assess or collect any such tax, (vii) the
federal income tax returns of Parent have not been audited, and the federal
income tax returns of its subsidiaries have not been audited, since fiscal year
ended December 31, 1991, (viii) neither Parent nor any of its subsidiaries is or
has been a party to any tax sharing agreement with any corporation which is not
currently a member of the affiliated group of which Parent is currently a
member, (ix) there are no liens for taxes on any assets of Parent or any of its
subsidiaries (other than statutory liens for taxes not yet due or liens for
which adequate reserves have been established in its financial statements in
accordance with generally accepted accounting principles), (x) Parent and its
subsidiaries have withheld and paid (and until the Effective Time will withhold
and pay) all income, social security, unemployment, and all other material
payroll taxes required to be withheld (including, without limitation, pursuant
to Sections 1441 and 1442 of the Code or similar provisions under foreign law)
and paid in connection with amounts paid to any employee, independent
contractor, stockholder, creditor or other third party, and (xi) Parent has not
filed an election under Section 341(f) of the Code to be treated as a consenting
corporation. For purposes of this Agreement, the term "tax" shall include all
federal, state, local and foreign taxes including interest and penalties thereon
and additions to tax. In addition, the term "tax return" shall mean any return,
declaration, statement, report, schedule, certificate, form information return,
or any other document (including any related or supporting information) required
to be supplied to, or filed with, a taxing authority (foreign or domestic) in
connection with taxes.
3.9 COMPLIANCE WITH LAW. Each of Parent and its subsidiaries
is in compliance with, and at all times since December 31, 1993 has been in
compliance with, all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any Governmental Authority (collectively, "Applicable Law") relating to it or
its business or properties, except for any such failures to be in compliance
therewith which, in the aggregate, would not have a material adverse effect on
Parent.
3.10 REGISTRATION STATEMENT. None of the information
provided by Parent or any of its subsidiaries for inclusion in the registration
statement on Form S-4 to be filed with the Commission by Parent under the
Securities Act, including the prospectus (as amended, supplemented or modified,
the "Prospectus") relating to shares of Parent Common Stock to be issued in the
Merger and the joint proxy statement and form of proxies relating to the vote of
Company Shareholders with respect to the Merger and the Parent Stockholders with
respect to the Share Issuance (collectively and as amended, supplemented or
modified, the "Proxy Statement") contained therein (such registration statement
as amended, supplemented or
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modified, the "Registration Statement"), at the time the Registration Statement
becomes effective or, in the case of the Proxy Statement, at the date of
mailing, will 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. Each of the Registration Statement and Proxy Statement (except
for such portions thereof that relate only to or were supplied by the Company
and its subsidiaries as to which no representation is made hereby), will comply
in all material respects with the provisions of the Securities Act and the
Exchange Act.
3.11 LITIGATION. Except as set forth in the Parent SEC
Documents or Section 3.11 of the Parent Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation (an "Action") pending or, to the
knowledge of Parent, threatened against Parent or any of its subsidiaries which
could reasonably be expected to have a material adverse effect on Parent.
Neither Parent nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree which could reasonably be expected to have a material
adverse effect on Parent.
3.12 BROKERAGE AND FINDER'S FEES. Except for Parent's
obligation to Equitable Securities Corporation ("Parent Broker") (a copy of the
agreement relating to such obligation having previously been provided to the
Company), Parent has not incurred and will not incur, directly or indirectly,
any brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement. Other than the foregoing obligation to Parent
Broker and the obligation of the Company to the Company Broker (as hereinafter
defined), Parent is not aware of any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiation of this Agreement or in connection with the transactions
contemplated hereby.
3.13 OPINION OF FINANCIAL ADVISOR. Parent has received the
opinion of Parent Broker to the effect that, as of the date hereof, the Exchange
Ratio is fair to Parent from a financial point of view.
3.14 ACCOUNTING MATTERS. To the best knowledge of Parent,
neither Parent nor any of its affiliates has taken or agreed to take any action
that (without giving effect to any actions taken or agreed to be taken by the
Company or any of its affiliates) would prevent Parent from accounting for the
business combination to be effected by the Merger as a pooling-of-interests for
financial reporting purposes in accordance with Accounting Principles Board
Opinion No. 16, the interpretative releases issued pursuant thereto, and the
pronouncements of the Commission thereon.
3.15 TAX-FREE REORGANIZATION. To the best knowledge of
Parent, neither Parent nor any of its subsidiaries has taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
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3.16 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, the following
terms have the definitions given below: "Controlled Group Liability"
means any and all liabilities under (i) Title IV of ERISA, (ii) section
302 of ERISA, (iii) sections 412 and 4971 of the Code, (iv) the
continuation coverage requirements of section 601 et seq. of ERISA and
section 4980B of the Code, and (v) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the
Parent Plans with respect to Parent, or Company Plans (as defined
below) with respect to the Company.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity,
trade or business, any other entity, trade or business that is a member
of a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
"Parent Plans" means all employee benefit plans,
programs, policies, practices, and other arrangements providing
benefits to any employee or former employee or beneficiary or dependent
thereof, whether or not written, and whether covering one person or
more than one person, sponsored or maintained by Parent or any of its
subsidiaries or to which Parent or any of its subsidiaries contributes
or is obligated to contribute. Without limiting the generality of the
foregoing, the term. "Parent Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of ERISA and all
employee pension benefit plans within the meaning of Section 3(2) of
ERISA.
(b) Section 3.16 to the Parent Disclosure Schedule
lists all Parent Plans. With respect to each Parent Plan, Parent has
made available to the Company a true, correct and complete copy of: (i)
each writing constituting a part of such Parent Plan, including without
limitation all plan documents, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (ii) the most recent
Annual Report (Form 5500 Series) and accompanying schedule, if any;
(iii) the current summary plan description, if any; (iv) the most
recent annual financial report, if any; and (v) the most recent
determination letter from the IRS, if any.
(c) Except as set forth in Section 3.16(c) to the
Parent Disclosure Schedule, the Internal Revenue Service has issued a
favorable determination letter or opinion letter with respect to each
Parent Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code (a "Qualified Parent Plan") and
there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Qualified
Parent Plan or the related trust.
(d) All contributions required to be made to any
Parent Plan by Applicable Law or by any plan document or other
contractual undertaking, and all premiums due or payable with respect
to insurance policies funding any Parent Plan, for
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any period through the date hereof have been timely made or paid in
full and through the Closing Date will be timely made or paid in full
or, to the extent not required to be made or paid on or before the
date hereof or the Closing Date, as applicable, have been or will be
fully reflected in Parent's financial statements contained in the
Parent SEC Documents.
(e) Except as set forth in Section 3.16(e) to the
Parent Disclosure Schedule, Parent and its subsidiaries have complied,
and are now in compliance, in all material respects, with all
provisions of ERISA, the Code and all laws and regulations applicable
to the Parent Plans. There is not now, and there are no existing,
circumstances that standing alone could give rise to any requirement
for the posting of security with respect to a Parent Plan or the
imposition of any lien on the assets of Parent or any of its
subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 3.16(f) to the
Parent Disclosure Schedule, no Parent Plan is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code. Except as set
forth in Section 3.16(f) to the Parent Disclosure Schedule, no Parent
Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple
Employer Plan"), nor has Parent or any of its subsidiaries or any of
their respective ERISA Affiliates, at any time within five years before
the date hereof, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no
existing, circumstances that could result in, any Controlled Group
Liability that would be a liability of Parent or any of its
subsidiaries following the Closing, other than normal funding
responsibilities. Without limiting the generality of the foregoing,
neither Parent nor any of its subsidiaries nor any of their respective
ERISA affiliates has engaged in any transaction described in Section
4069 or Section 4204 of ERISA.
(h) Except as set forth in Section 3.16(h) to the
Parent Disclosure Schedule and except for health continuation coverage
as required by Section 4980B of the Code or Part 6 of Title I of ERISA,
neither Parent nor any of its subsidiaries has any liability for life,
health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
(i) Except as set forth in Section 3.16(i) to the
Parent Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any employee
or director or former employee or former director of Parent or any of
its subsidiaries, pursuant to a "change in control" or "change of
control" or otherwise. Without limiting the generality of the foregoing
and except as set forth in Section 3.16(i) to the Parent Disclosure
Schedule, no amount paid or payable by Parent or any of its
subsidiaries in
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connection with the transactions contemplated hereby either solely as
a result thereof or as a result of such transactions in conjunction
with any other events will be an "excess parachute payment" within the
meaning of Section 280G of the Code.
(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Parent
Plans, any fiduciaries thereof with respect to their duties to the
Parent Plans or the assets of any of the trusts under any of the Parent
Plans which could reasonably be expected to result in any material
liability of Parent or any of its subsidiaries to the Pension Benefit
Guaranty Corporation, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
3.17 CONTRACTS. Section 3.17 of the Parent Disclosure
Schedule lists all agreements, arrangements, guaranties, leases, contracts and
understandings, whether written or oral, to which Parent or its subsidiaries, or
any of their respective assets, business, or operations, is a party, or is bound
or affected by, or receives benefits under, but not including the following: (i)
those cancelable without penalty on notice of ninety (90) days or less and
pursuant to which aggregate annual payments do not exceed $50,000; (ii) those
with a remaining term of less than one year and pursuant to which aggregate
annual payments do not exceed $50,000; (iii) those for the purchase and sale of
raw materials and supplies and finished goods and repurchase agreements with
dealers' floor plan lenders (forms of which have been provided to the Company)
in the ordinary course of business on terms customary in the industry and
consistent with past practices; (iv) those that do not require the Company to
make aggregate annual payments of more than $25,000; and (v) as otherwise
reflected in Parent SEC Documents (the "Parent Contracts"). With respect to each
Parent Contract and each such agreement, arrangement, guaranty, lease, contract
or understanding excluded from the definition of Parent Contract, and except as
set forth in Section 3.17 of the Parent Disclosure Schedule, none of the Parent,
any of its subsidiaries, or, to the knowledge of the Parent, any other party
thereto is in violation of or in default in respect of, nor has there occurred
an event or condition which with the passage of time or giving of notice (or
both) would constitute a default by the Parent under, any Parent Contract to
which it is a party, except such violations or defaults under such Parent
Contracts which, in the aggregate, would not have a material adverse effect on
the Parent.
3.18 LABOR RELATIONS. There is no unfair labor practice
complaint against Parent or any of its subsidiaries pending before the NLRB and
there is no labor strike, dispute, slowdown or stoppage, or any union organizing
campaign, actually pending or, to the knowledge of Parent, threatened against or
involving Parent or any of its subsidiaries, except for any such proceedings
which would not have a material adverse effect on Parent. Except as disclosed in
the Parent SEC Documents or Section 3.18 to the Parent Disclosure Schedule,
neither Parent nor any of its subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. To the knowledge of Parent, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of Parent
or any of its subsidiaries.
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3.19 PERMITS. Each of Parent and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
(collectively, "Permits") necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted, except for any such
Permits the failure of which to possess, in the aggregate, would not reasonably
be expected to have a material adverse effect on Parent.
3.20 ENVIRONMENTAL MATTERS.
(a) As used herein, the term "Environmental Laws"
means all applicable federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances
or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all applicable authorizations, codes, decrees,
injunctions, judgments, licenses, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder to the extent
applicable to the specific operations of Parent or the Company, as
applicable.
(b) Except as set forth in the Parent SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys conducted with respect to the facilities
operated by Parent and its subsidiaries, copies of which have been made
available to the Company, there are, with respect to Parent, its
subsidiaries or any predecessor of the foregoing, no past or present
violations of Environmental Laws, nor any releases of any materials
into the environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state or local laws, other than those which,
in the aggregate, would not reasonably be expected to have a material
adverse effect on Parent, and none of Parent and its subsidiaries has
received any notice with respect to any of the foregoing, nor is any
action pending or threatened in connection with any of the foregoing
that, if adversely determined, could reasonably be expected to have a
material adverse effect on Parent.
(c) Except as set forth in the Parent SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys conducted with respect to the facilities
operated by Parent and its subsidiaries, copies of which have been made
available to the Company, no Hazardous Materials are contained on or
about any real property currently owned, leased or used by Parent or
any of its subsidiaries and no Hazardous Materials were released on or
about any real property previously owned, leased or used by Parent or
any of its subsidiaries during the period the
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property was so owned, leased or used, except in the normal course of
Parent's business, other than those which, in the aggregate, would not
reasonably be expected to have a material adverse effect on Parent.
3.21 NO UNDISCLOSED LIABILITIES. Except as set forth in
Section 3.21 of the Parent Disclosure Schedule or the Parent SEC Documents,
neither Parent nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in Parent's audited balance sheet (including any related
notes thereto) for the fiscal year ended December 31, 1996, included in Parent's
1996 Annual Report to Stockholders (the "1996 Balance Sheet"), (b) incurred in
the ordinary course of business and not required under generally accepted
accounting principles to be reflected on the 1996 Balance Sheet, (c) in the
aggregate adequately provided for in Parent's unaudited balance sheet (including
any notes thereto) for the period ended June 27, 1997, included in Parent's
Quarterly Report on Form 10-Q for such period or incurred since December 31,
1996 in the ordinary course of business and consistent with past practice, (d)
incurred in connection with this Agreement, or (e) which would not reasonably be
expected to have a material adverse effect on Parent.
3.22 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, or as set forth in Section 3.22 of the Parent Disclosure Schedule or
the Parent SEC Documents, to the best of Parent's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon Parent or any of
its subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing any business practice of Parent or any of its
subsidiaries, acquisition of property by Parent or any of its subsidiaries or
the conduct of business by Parent or any of its subsidiaries as currently
conducted or as proposed to be conducted by Parent, except for any prohibition
or impairment as would not reasonably be expected to have a material adverse
effect on Parent.
3.23 TITLE TO PROPERTY. Except as set forth in Section 3.23
of the Parent Disclosure Schedule, Parent and each of its subsidiaries have good
and marketable title to all of their properties and assets, real and personal,
tangible and intangible, free and clear of all liens, charges and encumbrances,
except liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which
would not reasonably be expected to have a material adverse effect on Parent;
and, to the knowledge of Parent, all leases pursuant to which Parent or any of
its subsidiaries lease from others material amounts of real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, to the knowledge of Parent, under any of such leases,
any existing material default or event of default (or event which with notice or
lapse of time, or both, would constitute a material default), except where the
lack of such good standing, validity and effectiveness or the existence of such
default or event of default would not reasonably be expected to have a material
adverse effect on Parent.
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3.24 CONDITION OF PROPERTY.
(a) Except as set forth in Section 3.24 of the Parent
Disclosure Schedule, each of the buildings, improvements and structures
located upon any real property and land owned by Parent or any of its
subsidiaries ( collectively, the "Owned Property"), and each of the
buildings, structures and premises leased by the Parent or any of its
subsidiaries (the "Leased Premises"), is in reasonably good repair and
operating condition, and Parent has not received any notice of or
writing referring to any requirements by any insurance company that has
issued a policy covering any part or any Owned Property or Lease
Premises or by any board of fire underwriters or any other body
exercising similar functions, requiring any repairs or work to be done
on any part of any Owned Property or Leased Premises, except as would
not reasonably be expected to have a material adverse effect on Parent.
(b) Except as set forth in Section 3.24(b) of the
Parent Disclosure Schedule, all structural or material mechanical
systems in the buildings upon the Owned Property and Leased Properties
are in good working order and working condition, and adequate for the
operation of the business of Parent and its subsidiaries as heretofore
conducted, except as would not reasonably be expected to have a
material adverse effect on Parent.
3.25 INTELLECTUAL PROPERTY.
(a) Parent and/or each of its subsidiaries owns, or
is licensed or otherwise possesses legally enforceable rights to use,
all patents, trade secrets, trademarks, trade names, service marks,
copyrights, and any applications therefor, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are used in the business of
Parent and its subsidiaries as currently conducted, except as would not
reasonably be expected to have material adverse effect on Parent.
(b) Except as disclosed in Section 3.25(b) of the
Parent Disclosure Schedule or the Parent SEC Documents or as would not
reasonably be expected to have a material adverse effect on Parent (i)
Parent is not, nor will it be as a result of the execution and delivery
of this Agreement or the performance of its obligations hereunder, in
violation of any licenses, sublicenses and other agreements as to which
Parent is a party and pursuant to which Parent is authorized to use any
third-party patents, trademarks, service marks and copyrights
("Third-Party Intellectual Property Rights"); (ii) no claims with
respect to the patents, registered and material unregistered trademarks
and service marks, registered copyrights, trade names and any
applications therefor owned by Parent or any of its subsidiaries (the
"Parent Intellectual Property Rights"), any trade secret material to
Parent, or Third Party Intellectual Property Rights to the extent
arising out of any use, reproduction or distribution of such Third
Party Intellectual Property Rights by or through Parent or any of its
subsidiaries, are currently pending or, to the knowledge of Parent, are
overtly threatened by any person; and (iii) Parent does not know
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of any valid ground for any bona fide claims (A) to the effect that
the manufacture, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by Parent or any
of its subsidiaries, infringes on any copyright, patent, trademark,
service xxxx or trade secret; (B) against the use by Parent or any of
its subsidiaries, of any programs and applications used in the
business of Parent or any of its subsidiaries, of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how
or computer software programs and applications used in the business of
Parent or any of its subsidiaries as currently conducted or as
proposed to be conducted; (C) challenging the ownership, validity or
effectiveness of any of the Parent Intellectual Property Rights or
other trade secret material to Parent; or (D) challenging the license
or legally enforceable right to use of the Third Party Intellectual
Rights by Parent or any of its subsidiaries.
(c) To Parent's knowledge, all material patents,
registered trademarks, service marks and copyrights held by Parent are
valid and subsisting. Except as set forth in Section 3.25(c) of the
Parent Disclosure Schedule or the Parent SEC Documents, to Parent's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Parent Intellectual Property by any
third party, including any employee or former employee of Parent or any
of its subsidiaries.
3.26 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 3.26 of the Parent Disclosure Schedule or the Parent SEC Documents or
for events as to which the amounts involved do not, in the aggregate, exceed
$100,000, since the date of Parent's proxy statement dated March 31, 1997 (the
"1997 Parent Proxy Statement"), no event has occurred that would be required to
be reported as a Certain Relationship or Related Transaction, pursuant to Item
404 of Regulation S-K promulgated by the Commission.
3.27 INSURANCE. Except as set forth in Section 3.27 of the
Parent Disclosure Schedule, all material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by Parent or any of its subsidiaries are with
reputable insurance carriers, and provide adequate coverage for all normal risks
incident to the business of Parent and its subsidiaries and their respective
properties and assets, except as would not reasonably be expected to have a
material adverse effect on Parent.
3.28 FULL DISCLOSURE. No statement contained in this
Agreement or any certificate or schedule furnished or to be furnished by Parent
or Sub or its subsidiaries to the Company in, or pursuant to the provisions of,
this Agreement when considered with all other statements made in or in
connection with this Agreement, contains or shall contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary,
in the light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading, except where the material fact so
misstated or omitted to be stated would not reasonably be expected to have a
material adverse effect on Parent.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Sub to enter into this
Agreement, the Company hereby represents and warrants to Parent and Sub that the
statements contained in this Article IV are true, correct and complete.
4.1 ORGANIZATION AND STANDING. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation with full power and
authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. Each of
the Company and its subsidiaries is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates makes such qualification
necessary, except where the failure to be so qualified or in good standing in
such jurisdiction would not have a material adverse effect on the Company. The
copies of the Restated Articles of Incorporation and Bylaws (or similar
organizational documents) of the Company and each of its subsidiaries, which
have previously been made available to Parent, are true, complete and correct
copies of such documents as in effect as of the date of this Agreement.
4.2 SUBSIDIARIES. As of the date hereof, other than
immaterial interests, the Company does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except as set forth in Section 4.2 to the
disclosure schedule (the "Company Disclosure Schedule") delivered by the Company
to Parent and dated the date hereof. Section 4.2 to the Company Disclosure
Schedule sets forth as to each subsidiary of the Company: (i) its name and
jurisdiction of incorporation or organization, (ii) its authorized capital stock
or share capital and (iii) the number of issued and outstanding shares of its
capital stock or share capital. Except as set forth in Section 4.2 of the
Company Disclosure Schedule, each of the outstanding shares of capital stock of
each of the Company's subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned, directly or indirectly, by the Company
free and clear of all liens, pledges, security interests, claims or other
encumbrances, other than liens imposed by law which could not reasonably be
expected to have, in the aggregate, a material adverse effect on the Company.
Other than as set forth in Section 4.2 to the Company Disclosure Schedule, there
are no outstanding shares of capital stock or subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale or transfer of any securities of any
subsidiary of the Company, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of any
subsidiary of the Company; and no subsidiary of the Company has any obligation
of any kind to issue any additional securities or to pay for securities of any
subsidiary of the Company or any predecessor thereof. As used in this Section
4.2, "capital stock" shall include capital stock or other ownership interests
having by their terms ordinary voting power to elect directors or others
performing similar functions with respect to such entity.
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4.3 CORPORATE POWER AND AUTHORITY. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, subject to the approval of the
Merger and the adoption and authorization of this Agreement by the Company
Shareholders in accordance with the MBCA and this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company. The Board of Directors of the Company has
directed that this Agreement and the transactions contemplated hereby be
submitted to the Company Shareholders for adoption at a shareholders meeting
and, except for the adoption of this Agreement by the affirmative vote of the
holders of a majority of shares of Company Common Stock in accordance with the
Applicable Law, no other corporate approvals on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4.4 CAPITALIZATION OF THE COMPANY. The Company's authorized
capital stock consists solely of (a) 20,000,000 shares of common stock, $0.10
par value per share ("Company Common Stock") and (b) 5,000,000 shares of
preferred stock, no par value per share ("Company Preferred Stock"). As of June
30, 1997, (i) 9,466,486 shares of Company Common Stock were issued and
outstanding, (ii) 450,000 shares of Company Common Stock were issuable upon the
exercise or conversion of outstanding options, warrants or convertible
securities granted or issuable (on a contingent basis or otherwise) by the
Company, and (iii) no shares of Company Preferred Stock were issued and
outstanding. Since June 30, 1997, the Company has not issued any shares of its
capital stock except upon the exercise of such options, warrants or convertible
securities. Each outstanding share of Company capital stock is duly authorized
and validly issued, fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, other than as set forth above, in the Company SEC
Documents (as defined in Section 4.7) or in Section 4.4 to the Company
Disclosure Schedule, there are no outstanding shares of capital stock or
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance, sale
or transfer by the Company of any securities of the Company, nor are there
outstanding any securities which are convertible into or exchangeable for any
shares of capital stock of the Company; and the Company has no obligation of any
kind to issue any additional securities or to pay for securities of the Company
or any predecessor. The Company has no outstanding bonds, debentures, notes or
other similar obligations the holders of which have the right to vote generally
with holders of Company Common Stock.
4.5 CONFLICTS; CONSENTS AND APPROVALS. Neither the execution
and delivery of this Agreement by the Company, nor the consummation of the
transactions contemplated hereby will:
(a) conflict with or violate any provision of the
Restated Articles of Incorporation or Bylaws (or any similar organizational
document) of the Company or any subsidiary of the Company;
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(b) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with
the giving of notice, the passage of time or otherwise, would
constitute a default) under, or entitle any party (with the giving of
notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the termination,
acceleration or cancellation of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease or
other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of their respective properties
or assets may be bound;
(c) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets; or
(d) require any action or consent or approval of, or
review by, or registration or filing by the Company or any of its
affiliates with any third party or any Governmental Authority, other
than (i) authorization of the Merger and the transactions contemplated
hereby by Company Shareholders, (ii) actions required by the HSR Act
and (iii) registrations or other actions required under federal and
state securities laws as are contemplated by this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Section 4.5 of the Company Disclosure Schedule and, in the case of (b),
(c) and (d), for any of the foregoing that would not, in the aggregate, have a
material adverse effect on the Company or that would not prevent or delay the
consummation of the transactions contemplated hereby.
4.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in the
Company SEC Documents filed with the Commission as of the date hereof, since
December 31, 1996, (i) each of the Company and its subsidiaries has conducted
its business in the ordinary course, consistent with past practice, (ii) no
event has occurred which has or which would reasonably be expected to have, in
the aggregate, a material adverse effect on the Company (but, excluding for such
purposes, events that are generally applicable in Parent's and the Company's
industry or industries and the United States economy), and (iii) except as
listed on Section 4.6 of the Company Disclosure Schedule neither the Company nor
any of its subsidiaries has taken any action which would be prohibited by
Section 5.3(a).
4.7 COMPANY SEC DOCUMENTS. Each of the Company and its
subsidiaries has timely filed with the Commission all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since
December 21, 1994 under the Exchange Act or the Securities Act (such documents,
as supplemented and amended since the time of filing, collectively, the "Company
SEC Documents"). The Company SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and,
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in the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively) (a) did not contain any
untrue statement of a material fact or omit 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, and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be. The financial
statements (including the related notes) of the Company included in the Company
SEC Documents were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto), and fairly present (subject in the case
of unaudited statements to the absence of footnotes and to normal, recurring and
year-end audit adjustments) in all material respects the consolidated financial
position of the Company as of the dates thereof and the consolidated results of
its operations and cash flows for the periods then ended.
4.8 TAXES. Except as set forth in the Company SEC Documents
and except with respect to any such matters that would not, in the aggregate,
have a material adverse effect on the Company or as listed in Section 4.8 to the
Company Disclosure Schedule, (i) each of the Company and its subsidiaries has
duly filed all federal and state income tax returns and all other material tax
returns (including, but not limited to, those filed on a consolidated, combined
or unitary basis) required to have been filed by the Company or any of its
subsidiaries prior to the date hereof and will file, on or before the Effective
Time, all such returns which are required to be filed after the date hereof and
on or before the Effective Time, (ii) all of the foregoing returns and reports
are true and correct in all material respects, and each of the Company and its
subsidiaries has paid or, prior to the Effective Time, will pay all taxes
required to be paid in respect of the periods covered by such returns or reports
to any federal, state, foreign, local or other taxing authority, (iii) each of
the Company and its subsidiaries has paid or made adequate provision (in
accordance with generally accepted accounting principles) in the financial
statements of the Company included in the Company SEC Documents for all taxes
payable in respect of all periods ending on or prior to June 30, 1997, (iv)
neither the Company nor any of its subsidiaries will have any material liability
for any taxes in excess of the amounts so paid or reserves so established and
neither the Company nor any of its subsidiaries is delinquent in the payment of
any material tax, assessment or governmental charge and none of them has
requested any extension of time within which to file any returns in respect of
any fiscal year which have not since been filed, (v) no deficiencies for any
tax, assessment or governmental charge have been proposed, asserted or assessed
in writing (tentatively or definitely), in each case, by any taxing authority,
against the Company or any of its subsidiaries for which there are not adequate
reserves in its financial statements (in accordance with generally accepted
accounting principles), (vi) as of the date of this Agreement, there are no
extensions or waivers or pending requests for extensions or waivers of the time
to assess or collect any such tax, (vii) the federal income tax returns of the
Company have not been audited and the federal income tax returns of its
subsidiaries have not been audited, since December 31, 1994, (viii) neither the
Company nor any of its subsidiaries is or has been a party to any tax sharing
agreement with any corporation which is not currently a member of the affiliated
group of which the Company is currently a member, (ix) there are no liens for
taxes on any assets of the Company or any of its subsidiaries (other than
statutory liens for taxes not yet due or liens for which adequate reserves have
been established in its financial statements in accordance with generally
accepted accounting
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principles), (x) the Company and its subsidiaries have withheld and paid (and
until the Effective Time will withhold and pay) all income, social security,
unemployment, and all other material payroll taxes required to be withheld
(including, without limitation, pursuant to Sections 1441 and 1442 of the Code
or similar provisions under foreign law) and paid in connection with amounts
paid to any employee, independent contractor, stockholder, creditor or other
third party, and (xi) the Company has not filed an election under Section 341(f)
of the Code to be treated as a consenting corporation.
4.9 COMPLIANCE WITH LAW. Each of the Company and its
subsidiaries is in compliance with, and at all times since December 31, 1993 has
been in compliance with, all Applicable Laws relating to it or its business or
properties, except for any such failures to be in compliance therewith which, in
the aggregate, would not have a material adverse effect on the Company.
4.10 REGISTRATION STATEMENT. None of the information provided
by the Company or any of its subsidiaries for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Proxy
Statement, at the date of mailing, will 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. Each of the
Registration Statement and Proxy Statement (except for such portions thereof
that relate only to or were supplied by Parent and its subsidiaries as to which
no representation is made hereby), will comply in all material respects with the
provisions of the Securities Act and the Exchange Act.
4.11 LITIGATION. Except as set forth in the Company SEC
Documents or Section 4.11 of the Company Disclosure Schedule, there is no action
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which could reasonably be expected to have a material
adverse effect on the Company. Neither the Company nor any of its subsidiaries
is subject to any outstanding order, writ, injunction or decree which could
reasonably be expected to have a material adverse effect on the Company.
4.12 BROKERAGE AND FINDER'S FEES. Except for the Company's
obligation to Xxxxxxxx Xxxxxx Refsnes, Inc. ("Company Broker") (a copy of the
written agreement relating to such obligation having previously been provided to
Parent), the Company has not incurred and will not incur, directly or
indirectly, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Other than the foregoing obligation
to Company Broker and the obligation of Parent to the Parent Broker, the Company
is not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiation of this
Agreement or in connection with the transactions contemplated hereby.
4.13 OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of Company Broker to the effect that, as of the date hereof, the
Exchange Ratio is fair to the Company Shareholders from a financial point of
view.
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4.14 ACCOUNTING MATTERS. To the best knowledge of the
Company, neither the Company nor any of its affiliates has taken or agreed to
take any action that (without giving effect to any actions taken or agreed to be
taken by Parent or any of its affiliates) would prevent Parent from accounting
for the business combination to be effected by the Merger as a
pooling-of-interests for financial reporting purposes in accordance with
Accounting Principles Board Opinion No. 16, the interpretative releases issued
pursuant thereto, and the pronouncements of the Commission thereon.
4.15 TAX-FREE REORGANIZATION. To the best knowledge of the
Company, neither the Company nor any of its subsidiaries has taken any action or
failed to take any action which action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
4.16 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Agreement, "Company Plans"
means all employee benefit plans, programs, policies, practices, and
other arrangements providing benefits to any employee or former
employee or beneficiary or dependent thereof, whether or not written,
and whether covering one person or more than one person, sponsored or
maintained by the Company or any of its subsidiaries or to which the
Company or any of its subsidiaries contributes or is obligated to
contribute. Without limiting the generality of the foregoing, the term
"Company Plans" includes all employee welfare benefit plans within the
meaning of Section 3(1) of ERISA and all employee pension benefit plans
within the meaning of Section 3(2) of ERISA.
(b) Section 4.16 to the Company Disclosure Schedule
lists all Company Plans. With respect to each Company Plan, the Company
has made available to Parent a true, correct and complete copy of: (i)
each writing constituting a part of such Company Plan, including
without limitation all plan documents, benefit schedules, trust
agreements, and insurance contracts and other funding vehicles; (ii)
the most recent Annual Report (Form 5500 Series) and accompanying
schedule, if any; (iii) the current summary plan description, if any;
(iv) the most recent annual financial report, if any; and (v) the most
recent determination letter from the IRS, if any.
(c) Except as set forth in Section 4.16(c) to the
Company Disclosure Schedule, the Internal Revenue Service has issued a
favorable determination letter or opinion letter with respect to each
Company Plan that is intended to be a "qualified plan" within the
meaning of Section 401(a) of the Code (a "Qualified Company Plan") and
there are no existing circumstances nor any events that have occurred
that could adversely affect the qualified status of any Qualified
Company Plan or the related trust.
(d) All contributions required to be made to any
Company Plan by Applicable Law or by any plan document or other
contractual undertaking, and all premiums due or payable with respect
to insurance policies funding any Company Plan, for any period through
the date hereof have been timely made or paid in full and through
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the Closing Date will be timely made or paid in full or, to the extent
not required to be made or paid on or before the date hereof or the
Closing Date, as applicable, have been or will be fully reflected in
the Company's financial statements contained in the Company SEC
Documents.
(e) Except as set forth in Section 4.16(e) to the
Company Disclosure Schedule, the Company and its subsidiaries have
complied, and are now in compliance, in all material respects, with all
provisions of ERISA, the Code and all laws and regulations applicable
to the Company Plans. There is not now, and there are no existing,
circumstances that standing alone could give rise to, any requirement
for the posting of security with respect to a Company Plan or the
imposition of any lien on the assets of the Company or any of its
subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 4.16(f) to the
Company Disclosure Schedule, no Company Plan is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code. No Company
Plan is a Multiemployer Plan (as defined in Section 3.16) or a Multiple
Employer Plan (as defined in Section 3.16), nor has the Company or any
of its subsidiaries or any of their respective ERISA Affiliates, at any
time within five years before the date hereof, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan.
(g) There does not now exist, and there are no
existing, circumstances that could result in, any Controlled Group
Liability that would be a liability of the Company or any of its
subsidiaries following the Closing, other than normal funding
responsibilities. Without limiting the generality of the foregoing,
neither the Company nor any of its subsidiaries nor any of their
respective ERISA Affiliates has engaged in any transaction described in
Section 4069 or Section 4204 of ERISA.
(h) Except as set forth in Section 4.16(h) to the
Company Disclosure Schedule and except for health continuation coverage
as required by Section 4980B of the Code or Part 6 of Title I of ERISA,
neither the Company nor any of its subsidiaries has any liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
(i) Except as set forth in Section 4.16(i) to the
Company Disclosure Schedule, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any employee
or director or former employee or former director of the Company or any
of its subsidiaries, pursuant to a "change in control" or "change of
control" or otherwise. Without limiting the generality of the foregoing
and except as set forth in Section 4.16(i) to the Company Disclosure
Schedule, no amount paid or payable by the Company or any of its
subsidiaries in connection with the transactions contemplated hereby
either solely as a result thereof or as a result of such transactions
in conjunction with any other events will be an "excess parachute
payment" within the meaning of Section 280G of the Code.
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(j) There are no pending or threatened claims (other
than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Company
Plans, any fiduciaries thereof with respect to their duties to the
Company Plans or the assets of any of the trusts under any of the
Company Plans which could reasonably be expected to result in any
material liability of the Company or any of its subsidiaries to the
Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan.
4.17 CONTRACTS. Section 4.17 of the Company Disclosure
Schedule lists all agreements, arrangements, guaranties, leases, contracts and
understandings, whether written or oral, to which the Company or its
subsidiaries, or any of their respective assets, business, or operations, is a
party, or is bound or affected by, or receives benefits under, but not including
the following: (i) those cancelable without penalty on notice of ninety days or
less and pursuant to which aggregate annual payments do not exceed $50,000; (ii)
those with a remaining term of less than one year and pursuant to which
aggregate annual payments do not exceed $50,000; (iii) those for the purchase
and sale of raw materials and supplies and finished goods and repurchase
agreements with dealers' floor plan lenders (forms of which have been provided
to Parent) in the ordinary course of business on terms customary in the industry
and consistent with past practices; (iv) those that do not require the Company
to make aggregate annual payments of more than $25,000; and (v) except as
otherwise reflected in the Company SEC Documents (the "Company Contracts"). With
respect to each Company Contract and each such agreement, arrangement, guaranty,
lease, contract or understanding excluded from the definition of Company
Contract, and except as set forth in Section 4.17 of the Company Disclosure
Schedule, none of the Company, any of its subsidiaries, or, to the knowledge of
the Company, any other party thereto is in violation of or in default in respect
of, nor has there occurred an event or condition which with the passage of time
or giving of notice (or both) would constitute a default by the Company under,
any Company Contract to which it is a party, except such violations or defaults
under such Company Contracts which, in the aggregate, would not have a material
adverse effect on the Company.
4.18 LABOR RELATIONS. There is no unfair labor practice
complaint against the Company or any of its subsidiaries pending before the NLRB
and there is no labor strike, dispute, slowdown or stoppage, or any union
organizing campaign, actually pending or, to the knowledge of the Company,
threatened against or involving the Company or any of its subsidiaries, except
for any such proceedings which would not have a material adverse effect on the
Company. Except as disclosed in the Company SEC Documents or Section 4.18 to the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. To the
knowledge of the Company, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or threatened
involving employees of the Company or any of its subsidiaries.
4.19 PERMITS. Each of the Company and its subsidiaries is in
possession of all Permits necessary to own, lease and operate its properties and
to carry on its business as it is now
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being conducted, except for any such Permits the failure of which to possess, in
the aggregate, would not reasonably be expected to have a material adverse
effect on the Company.
4.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Company SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys with respect to the facilities operated
by the Company and its subsidiaries, copies of which have been provided
to Parent, there are, with respect to the Company, its subsidiaries or
any predecessor of the foregoing, no past or present violations of
Environmental Laws, nor any releases of any materials into the
environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws, other than those which,
in the aggregate, would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole,
and none of the Company and its subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or
threatened in connection with any of the foregoing that, if adversely
determined, could reasonably be expected to have a material adverse
effect on the Company.
(b) Except as set forth in Section 4.20 to the
Company Disclosure Schedule or set forth in the Company SEC Documents
filed with the Commission as of the date hereof or as disclosed in the
Phase I environmental surveys conducted in connection with the
transactions contemplated by this Agreement with respect to the
facilities operated by the Company and its subsidiaries, copies of
which have been provided to Parent, no Hazardous Materials are
contained on or about any real property currently owned, leased or used
by the Company or any of its subsidiaries and no Hazardous Materials
were released on or about any real property previously owned, leased or
used by the Company or any of its subsidiaries during the period the
property was so owned, leased or used, except in the normal course of
the Company's business, other than those which, in the aggregate, would
not reasonably be expected to have a material adverse effect on the
Company.
4.21 PARENT STOCK OWNERSHIP. Except as set forth in Section
4.21 to the Company Disclosure Schedule, neither the Company nor any of its
"affiliates" or "associates" "owns" (as each of such terms is defined in Section
203 of the Delaware General Corporation Law) any shares of Parent Common Stock
or other securities convertible into Parent Common Stock.
4.22 STATE TAKEOVER LAWS. Prior to the date hereof, the Board
of Directors of the Company has taken all action necessary to exempt under or
make not subject to any applicable takeover laws: (i) the execution of this
Agreement, (ii) the Merger and (iii) the transactions contemplated hereby. As
used herein, "takeover laws" means any "moratorium," "control share," "fair
price," "business combination" or similar anti-takeover statutes or
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regulations of the State of Mississippi or any other law, or any provision of
the Company's Restated Articles of Incorporation or Bylaws, that purports to
limit or restrict business combinations or the ability to acquire or vote shares
that would otherwise be applicable to this Agreement and the transactions
contemplated hereby.
4.23 NO UNDISCLOSED LIABILITIES. Except as is disclosed in
Section 4.23 of the Company Disclosure Schedule and the Company SEC Documents,
neither the Company nor any of its subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise), except liabilities (a) in the aggregate
adequately provided for in the Company's balance sheet (including any related
notes thereto) as of December 31, 1996 included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996 (the "1996 Balance
Sheet"), (b) incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected on the 1996 Balance
Sheet, (c) in the aggregate adequately provided for in the Company's unaudited
balance sheet (including any notes thereto) for the period ended June 30, 1997,
included in the Company's Quarterly Report on Form 10-Q for such period or
incurred since December 31, 1996 in the ordinary course of business and
consistent with past practice, (d) incurred in connection with this Agreement,
or (e) which would not reasonably be expected to have a material adverse effect
on the Company.
4.24 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement, or as set forth in Section 4.24 of the Company Disclosure Schedule or
the Company SEC Documents, to the best of the Company's knowledge, there is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of the Company or
any of its subsidiaries, any acquisition of property by the Company or any of
its subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted or as proposed to be conducted by the
Company, except for any prohibition or impairment as would not reasonably be
expected to have a material adverse effect on the Company.
4.25 TITLE TO PROPERTY. Except as set forth in Section 4.25
of the Company Disclosure Schedule, the Company and each of its subsidiaries
have good and marketable title to all of their owned properties and assets, real
and personal, tangible and intangible, free and clear of all liens, charges and
encumbrances, except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which would not reasonably be expected to have a material adverse effect on the
Company; and, to the Company's knowledge, all leases pursuant to which the
Company or any of its subsidiaries lease from other material amounts of real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of the Company, under
any of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would not
reasonably be expected to have a material adverse effect on the Company.
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4.26 CONDITION OF PROPERTY.
(a) Except as set forth in Section 4.26(a) of the
Company Disclosure Schedule, each of the buildings, improvements and
structures located upon any real property and land owned by Company or
any of its subsidiaries (collectively, the "Owned Property"), and each
of the buildings, structures and premises leased by the Company or any
of its subsidiaries (the "Leased Premises"), is in reasonably good
repair and operating condition, and the Company has not received any
notice of or writing referring to any requirements by any insurance
company that has issued a policy covering any part of any Owned
Property or Leased Premises or by any board of fire underwriters or
other body exercising similar functions, requiring any repairs or work
to be done on any part of any Owned Property or Leased Premises, except
as would not reasonably be expected to have a material adverse effect
on the Company.
(b) Except as set forth in Section 4.26(b) of the
Company Disclosure Schedule, all structural or material mechanical
systems in the buildings upon the Owned Property and Leased Properties
are in good working order and working condition, and are adequate for
the operation of the business of the Company and its subsidiaries as
heretofore conducted, except as would not reasonably be expected to
have a material adverse effect on the Company.
4.27 INTELLECTUAL PROPERTY.
(a) The Company and/or each of its subsidiaries owns,
or is licensed or otherwise possesses legally enforceable rights to
use, all patents, trade secrets, trademarks, trade names, service
marks, copyrights, and any applications therefor, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are used in the business of
the Company and its subsidiaries as currently conducted, except as
would not reasonably be expected to have a material adverse effect on
the Company.
(b) Except as disclosed in Section 4.27(b) of the
Company Disclosure Schedule or the Company SEC Documents or as would
not reasonably be expected to have a material adverse effect on the
Company: (i) the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any licenses, sublicenses and
other agreements as to which the Company is a party and pursuant to
which the Company is authorized to use any third-party patents,
trademarks, service marks and copyrights ("Third-Party Intellectual
Property Rights"); (ii) no claims with respect to the patents,
registered and material unregistered trademarks and service marks,
registered copyrights, trade names and any applications therefor owned
by the Company or any of its subsidiaries (the "Company Intellectual
Property Rights"), any trade secret material to the Company, or Third
Party Intellectual Property Rights to the extent arising out of any
use, reproduction or distribution of such Third Party Intellectual
Property Rights by or through the Company or any of its subsidiaries,
are currently pending or, to the knowledge of the
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Company, are overtly threatened by any person; and (iii) the Company
does not know of any valid grounds for any bona fide claims (A) to the
effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the
Company or any of its subsidiaries infringes on any copyright, patent,
trademark, service marks or trade secret; (B) against the use by the
Company or any of its subsidiaries of any trademarks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of the Company
or any of its subsidiaries as currently conducted or as proposed to be
conducted; (C) challenging the ownership, validity or effectiveness of
any part of the Company Intellectual Property Rights or other trade
secret material to the Company; or (D) challenging the license or
legally enforceable right to use of the Third Party Intellectual
Rights by the Company or any of its subsidiaries.
(c) To the Company's knowledge, all material patents,
registered trademarks and copyrights held by the Company are valid and
subsisting. Except as set forth in Section 4.27(c) of the Company
Disclosure Schedule or the Company SEC Documents, to the Company's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any
third party, including any employee or former employee of the Company
or any of its subsidiaries.
4.28 INTERESTED PARTY TRANSACTIONS. Except as set forth in
Section 4.28 of the Company Disclosure Schedule or the Company SEC Documents or
for events as to which the amounts involved do not, in the aggregate, exceed
$100,000, since the date of the Company's proxy statement dated May 6, 1997, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the Commission.
4.29 INSURANCE. Except as disclosed in Section 4.29 of the
Company Disclosure Schedule, all material fire and casualty, general liability,
business interruption, product liability and sprinkler and water damage
insurance policies maintained by the Company or any of its subsidiaries are with
reputable insurance carriers, and provide adequate coverage for all normal risks
incident to the business of the Company and its subsidiaries and their
respective properties and assets, except as would not reasonably be expected to
have a material adverse effect on the Company.
4.30 FULL DISCLOSURE. No statement contained in this
Agreement or in any certificate or schedule furnished or to be furnished by the
Company to Parent in, or pursuant to the provisions of, this Agreement, when
considered with all other statements made in or in connection with this
Agreement, contains or will contain any untrue statement of a material fact or
omits or shall omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading, except where the material fact so misstated or omitted
to be stated would not reasonably be expected to have a material adverse effect
on the Company.
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ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period
from and after the execution of this Agreement.
5.1 MUTUAL COVENANTS.
(a) GENERAL. Each of the parties shall use its
reasonable efforts to take all action and to do all things necessary,
proper or advisable to consummate the Merger and the transactions
contemplated by this Agreement as promptly as possible (including,
without limitation, using its reasonable efforts to cause the
conditions set forth in Article VI for which they are responsible to be
satisfied as soon as reasonably practicable and to prepare, execute and
deliver such further instruments and take or cause to be taken such
other and further action as any other party hereto shall reasonably
request).
(b) HSR ACT. As soon as practicable, and in any event
no later than ten business days after the date hereof, each of the
parties hereto will file any Notification and Report Forms and related
material required to be filed by it with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice
under the HSR Act with respect to the Merger, will use its reasonable
efforts to obtain an early termination of the applicable waiting
period, and shall promptly make any further filings pursuant thereto
that may be necessary, proper or advisable.
(c) OTHER GOVERNMENTAL MATTERS AND CONSENTS. Each of
the parties shall use its reasonable efforts to take any additional
action that may be necessary, proper or advisable in connection with
any other notices to, filings with, and authorizations, consents and
approvals of any Governmental Authority or other person or entity that
it may be required to give, make or obtain.
(d) POOLING-OF-INTERESTS. Each of the parties shall
use its reasonable efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment for financial reporting
purposes.
(e) TAX-FREE TREATMENT. Each of the parties shall use
its reasonable efforts to cause the Merger to constitute a tax-free
"reorganization" under Section 368(a) of the Code and to permit Xxxxxxx
Xxxxx Xxxx & White LLP to issue its opinion provided for in Section
6.2(d).
(f) PUBLIC ANNOUNCEMENTS. Unless otherwise required
by Applicable Law or requirements of the NYSE or The Nasdaq Stock
Market, at all times prior to the earlier of the Effective Time or
termination of this Agreement pursuant to Section 7.1, Parent and the
Company shall consult with each other before issuing any press release
with respect to the Merger and shall not issue any such press release
prior to such
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consultation except as may be required by law or by obligations
pursuant to any listing agreement with any national securities
exchange or the National Association of Securities Dealers, Inc.
(g) ACCESS. Subject to Applicable Law, from and after
the date of this Agreement until the Effective Time (or the termination
of this Agreement), Parent and the Company shall permit representatives
of the other to have reasonable access to the other's officers,
employees, premises, properties, books, records, contracts, tax records
and documents. Information obtained by Parent and the Company pursuant
to this Section 5.1(g) shall be subject to the provisions of the
confidentiality agreement between them dated July 11, 1997 (the
"Confidentiality Agreement"), which agreement remains in full force and
effect.
(h) STOCKHOLDERS AND SHAREHOLDERS MEETINGS. Each of
Parent and the Company shall duly call, give notice of, convene and
hold a meeting of its respective stockholders and shareholders, to be
held as promptly as practicable following the date hereof for the
purpose of obtaining the requisite stockholder and shareholder
approvals and adoptions in connection with this Agreement, the Share
Issuance and the Merger, and each shall use reasonable efforts to cause
such meetings to occur on the same date. Subject to compliance with
their respective fiduciary duties to their shareholders and
stockholders under Mississippi and Delaware law, respectively, the
Board of Directors of each of Parent and the Company will (i) recommend
that its respective stockholders and shareholders approve such matters
and (ii) use reasonable efforts to obtain any necessary approvals by
its respective stockholders and shareholders.
(i) PREPARATION OF PROXY STATEMENT AND REGISTRATION
STATEMENT. Each of Parent and the Company shall cooperate to, and
shall, as soon as is reasonably practicable, prepare and file the Proxy
Statement with the Commission on a confidential basis. Each of Parent
and the Company shall cooperate to prepare and file, and Parent shall
prepare and file, the Registration Statement with the Commission as
soon as is reasonably practicable following clearance of the Proxy
Statement by the Commission and each of Parent and the Company shall
cooperate to, and shall, use all reasonable efforts to have the
Registration Statement declared effective by the Commission as promptly
as practicable and to maintain the effectiveness of the Registration
Statement through the Effective Time. Parent shall advise the Company
promptly after it receives notice of (i) the Registration Statement
being declared effective or any supplement or amendment thereto being
filed with the Commission, (ii) the issuance of any stop order in
respect of the Registration Statement, and (iii) the receipt of any
correspondence, comments or requests from the Commission in respect of
the Registration Statement. If at any time prior to the Effective Time,
any information pertaining to the Company contained in or omitted from
the Registration Statement makes statements contained in the
Registration Statement false or misleading, the Company shall promptly
so inform Parent and provide Parent with the information necessary to
make such statements contained therein not false and misleading. Each
of Parent and Company shall also cooperate to, and shall, take such
other reasonable actions (other than qualifying to do
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business in any jurisdiction in which it is not so qualified) required
to be taken under any applicable state securities laws in connection
with the Share Issuance.
(j) NOTIFICATION OF CERTAIN MATTERS. Each of Parent
and the Company shall give prompt notice to the other party of (i) the
occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty
contained in this Agreement made by such party to be untrue or
inaccurate at or prior to the Effective Time and (ii) any material
failure of such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this
Section 5.1(j) shall not limit or otherwise affect the remedies
available hereunder to any party, nor will it override the provisions
of Sections 6.2 and 6.3, as applicable.
(k) AFFILIATES. Each of Parent and the Company shall
use its reasonable efforts to cause each such person who may be at the
Effective Time or was on the date hereof an "affiliate" of such party
within the meaning of Rule 145 under the Securities Act, to execute and
deliver to Parent no less than 35 days prior to the date of the meeting
of such party's respective stockholders and shareholders written
undertakings in the form attached hereto as Exhibit 5.1(k).
(l) INJUNCTIONS. Each of Parent and the Company
shall cooperate with one another in order to lift any injunctions or remove
any other impediment to the consummation of the transactions contemplated by
this Agreement.
(m) TAX REPRESENTATION LETTERS. Each of Parent and
the Company shall cooperate with one another in obtaining the opinion of Xxxxxxx
Xxxxx Rose & White LLP, counsel to Parent, dated as of the Closing Date, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code and no gain or loss will be recognized by Company
Shareholders with respect to shares of Parent Company Stock received in the
Merger in exchange for shares of Company Common Stock, except with respect to
cash received in lieu of fractional shares of Parent Common Stock. In connection
therewith, each of Parent and the Company shall deliver to Xxxxxxx Xxxxx Xxxx &
White LLP representation letters substantially in the form attached hereto as
Exhibit 5.1(m).
(n) ADDITIONAL REPORTS. Parent and the Company shall
each furnish to the other copies of any reports of the type referred to in
Sections 3.7 and 4.7 which it files with the SEC on or after the date hereof,
and Parent and the Company, as the case may be, represents and warrants that, as
of the respective dates thereof, such reports will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any unaudited
consolidated interim financial statements included in such reports (including
any related notes and schedules) will fairly present in all material respects
the financial position of Parent and its consolidated subsidiaries or the
Company and its consolidated subsidiaries, as the case may be, as of the dates
thereof and the results of operations and changes in financial position or other
information included therein for the periods or as of the dates then
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ended (subject, where appropriate, to normal year-end adjustments), in each case
in accordance with past practice and generally accepted accounting principles
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto).
5.2 COVENANTS OF PARENT.
(a) CONDUCT OF PARENT'S OPERATIONS. From the date of
this Agreement until the earlier of the Effective Time or the
termination of this Agreement, Parent covenants and agrees that it
shall (x) continue to conduct its business and the business of its
subsidiaries in a manner designed in its reasonable judgment to enhance
the long-term value of the Parent Common Stock and the business
prospects of the Parent and its subsidiaries and (y) take no action
which would (i) materially adversely affect the ability to obtain any
consents required for the transactions contemplated hereby, or (ii)
materially adversely affect the ability of any party hereto to perform
its covenants and agreements under this Agreement; provided, that the
foregoing shall not prevent the Parent or any of its subsidiaries from
discontinuing or disposing of any of their respective properties or
business if such action is, in the judgment of Parent, desirable in the
conduct of the business of Parent and its subsidiaries.
(b) INDEMNIFICATION. Parent and Sub agree that all
rights to exculpation and indemnification for acts or omissions
occurring prior to the Effective Time now existing in favor of the
current or former directors or officers (the "Indemnified Parties") of
the Company as provided by law or in its Restated Articles of
Incorporation, Bylaws or in any agreement shall survive the Merger and
shall continue in full force and effect in accordance with their terms.
For six years from the Effective Time, Parent shall not amend, repeal,
or otherwise modify the Restated Articles of Incorporation, Bylaws or
any such agreement as any of them relate to indemnification in any
manner that would adversely affect the rights thereunder of the
Indemnified Parties, unless such modification is required by law, and
Parent further shall indemnify the Indemnified Parties to the same
extent as such Indemnified Parties are entitled to indemnification
pursuant to the preceding sentence. In addition, from and after the
Effective Time, Parent and the Surviving Corporation shall indemnify
and hold harmless each officer and director of the Company to the
extent such person would be entitled to indemnification pursuant to the
first sentence of this Section 5.2(b) against any costs or expenses
(including attorneys' fees), losses, damages or amounts paid in
settlement in connection with any claim, action, suit or proceeding
arising out of or pertaining to the transactions contemplated by this
Agreement, provided that the Indemnified Party agrees that, in the
event that it is ultimately determined that such Indemnified Party is
not entitled to the payment of such expenses, for any reason, such
Indemnified Party shall reimburse Parent or the Surviving Corporation
for such expenses paid in advance. The Surviving Corporation or Parent,
as the case may be, shall only be required to pay for one law firm for
all Indemnified Parties (unless the use of one law firm for all
Indemnified Parties would present such law firm with a conflict of
interest). Neither the Surviving Corporation nor Parent shall be liable
for any settlement effected without its prior written consent (which
consent shall not be
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unreasonably withheld or delayed). Parent will maintain in effect the
Company's directors' and officers' liability policy for the current
term of such policy.
(c) LISTING APPLICATION. Parent shall, as soon as
practicable following the date hereof, prepare and submit to the NYSE
a subsequent listing application covering the shares of Parent Common
Stock issuable in the Merger, and shall use its reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such
shares of Parent Common Stock, subject to official notice of issuance.
(d) EMPLOYEE BENEFITS. Following the Effective Time,
except as otherwise provided in this Section 5.2, Parent shall provide
generally to officers and employees of the Company and its subsidiaries
employee benefits under employee benefit plans (other than stock option
or other plans involving the potential issuance of Parent Common
Stock), on terms and conditions which are not materially less favorable
than those currently provided by the Company and its subsidiaries to
their similarly situated officers and employees. Company officers and
employees shall be entitled to receive credit for time of service to
the Company or any of its subsidiaries for such purposes. Parent and
Company further agree that the Belmont Homes, Inc. 401(k) Profit
Sharing Plan (the "BH 401(k)") will either be (i) merged into the
Cavalier Homes, Inc. Employees 401(k) Retirement Plan (the "CH
401(k)"), (ii) terminated as of such date prior to, on or after the
Effective Time or (iii) continued (with such changes as Parent from
time to time shall determine), all as Parent shall determine and
specify consistent with the requirements of the Code and ERISA. In the
event of the merger or termination of the BH 401(k) as contemplated by
clauses (i) and (ii) above, then from and after (i) January 1 following
the termination of the BH 401(k) or (ii) the merger of the BH 401(k)
into the CH 401(k), for purposes of determining eligibility to
participate in, and vesting in accrued benefits under the CH 401(k),
employment by the Company or its subsidiaries shall be credited as if
it were employment by Parent, except to the extent otherwise required
by applicable law, but such service shall not be credited for purposes
of determining benefit accrual under the CH 401(k).
(e) ACCOUNTANT'S "COMFORT" LETTER. Parent shall use
its reasonable efforts to cause to be delivered to the Company
"comfort" letters of Deloitte & Touche LLP, its independent public
accountants, dated the date on which the Registration Statement shall
become effective and as of the Effective Time, respectively, and
addressed to the Company, in form and substance reasonably satisfactory
to the Company and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement and
transactions such as those contemplated by this Agreement.
5.3 COVENANTS OF THE COMPANY.
(a) CONDUCT OF THE COMPANY'S OPERATIONS. During the
period from the date of this Agreement to the Effective Time, the
Company shall, and shall cause its subsidiaries to, conduct its
operations in the ordinary course except as expressly
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contemplated by this Agreement and the transactions contemplated
hereby and shall use its reasonable efforts to maintain and preserve
its business organization and its material rights and franchises and
to retain the services of its officers and key employees and maintain
relationships with customers, suppliers and other third parties to the
end that their goodwill and ongoing business shall not be impaired in
any material respect. The Company shall confer at such times as Parent
may reasonably request with one or more representatives of Parent to
report material operational matters and the general status of on-going
operations (to the extent Parent reasonably requires such
information). Furthermore, the Company shall notify Parent of any
emergency or other change in the normal course of its or its
subsidiaries respective businesses or in the operation of its or its
subsidiaries respective properties and of any complaints,
investigations or hearings (or communications that threaten the same)
of any governmental body or authority if such emergency, charge,
complaint, investigation or hearing would have a material adverse
effect on the Company. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the
Effective Time or the earlier termination of this Agreement pursuant
to Section 7.1, the Company shall not, and shall cause its
subsidiaries to not, except as otherwise expressly contemplated by
this Agreement and the transactions contemplated hereby, without the
prior written consent of Parent:
(i) do or effect any of the following
actions with respect to its securities or the securities of
any of its subsidiaries: (A) adjust, split, combine or
reclassify its capital stock, (B) make, declare or pay any
dividend or distribution on, or directly or indirectly redeem,
purchase or otherwise acquire any of its securities, (C) grant
any person any right or option to acquire any of its
securities, (D) issue, deliver or sell or agree to issue,
deliver or sell any additional securities (except pursuant to
the exercise of outstanding options to purchase Company Common
Stock or the Xxxxxxx Warrant) or amend the terms of any of its
securities, or (E) enter into any agreement, understanding or
arrangement with respect to the sale or voting of its capital
stock;
(ii) sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property
or assets which are material, in the aggregate, other than in
the ordinary course of business consistent with past practice;
(iii) make or propose any changes in its
Restated Articles of Incorporation, as amended, or Bylaws, or
other organizational documents;
(iv) merge or consolidate with any other
person or acquire a material amount of assets or capital stock
of any other person or enter into any confidentiality
agreement with any person except in the circumstances
permitted in Section 5.3(b) below, other than in connection
with this Agreement and the transactions contemplated hereby;
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(v) incur, create, assume or otherwise
become liable for indebtedness for borrowed money, other than
in the ordinary course of business consistent with past
practice, or assume, guarantee, endorse or otherwise as an
accommodation become responsible or liable for obligations of
any other individual, corporation or other entity, other than
in the ordinary course of business consistent with past
practice;
(vi) enter into or modify any employment,
severance, termination or similar agreements or arrangements
with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or
employee other than salary increases and bonuses granted to
employees who are not officers or directors in the ordinary
course of business consistent with past practice, or otherwise
increase the compensation or benefits provided to any officer,
director, consultant or employee except as may be required by
Applicable Law, this Agreement, any applicable collective
bargaining agreement or a binding written contract in effect
on the date of this Agreement, or adopt any new employee
benefit plan (or grant any options or awards thereunder);
(vii) change its method of doing business or
change any method or principle of accounting in a manner that
is inconsistent with past practice;
(viii) settle any actions or claims, whether
now pending or hereafter made or brought, involving an amount
in excess of $25,000;
(ix) modify, amend or terminate, or waive,
release or assign any material rights or claims with respect
to, any Company Contract to which the Company is a party or
any confidentiality agreement to which the Company is a party
(except in the case of a confidentiality agreement to the
extent permitted by Section 5.3(b) below), or enter into any
new Company Contract;
(x) incur or commit to any capital
expenditures, obligations or liabilities in respect thereof or
any acquisitions of any other business or any material portion
thereof, other than in the ordinary course of business
consistent with past practice;
(xi) subject to the terms of Section 5.3(b)
of this Agreement, conduct its business in a manner or take,
or cause to be taken, any other action that could reasonably
be expected to prevent or materially delay the Company from
consummating the transactions contemplated by this Agreement
(regardless of whether such action would otherwise be
permitted or not prohibited hereunder), including without
limitation, any action that may materially limit or delay the
ability of the Company to consummate the transactions
contemplated by this Agreement as a result of antitrust or
securities laws or other regulatory concerns;
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(xii) make any material tax election or
settle or compromise any material tax liability, other than in
connection with currently pending proceedings or other than in
the ordinary course of business;
(xiii) pay, discharge or satisfy any
material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice
of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports filed prior to
the date of this Agreement or incurred in the ordinary course
of business and consistent with past practice; or
(xiv) agree to take any action prohibited by
the foregoing.
(b) NO SOLICITATION. The Company agrees that, during
the term of this Agreement, it shall not, and shall not authorize or
permit any of its subsidiaries or any of its or its subsidiaries'
directors, officers, employees, agents, financial advisors, investment
bankers, attorneys, accountants or other representatives, directly or
indirectly, to (i) solicit, initiate or encourage (including by way of
furnishing non-public information) any inquiries or the making of any
proposal with respect to any recapitalization, merger, tender offer or
exchange offer, consolidation or other business combination involving
the Company, or acquisition or disposition of any capital stock
(whether or not then outstanding except in connection with the exercise
of options or warrants, as permitted in Section 5.3(a)) or any material
portion of the assets of the Company (except for acquisitions or
dispositions of assets in the ordinary course of business consistent
with past practice), or any combination of the foregoing or other
similar transaction (a "Company Competing Transaction"), (ii) negotiate
or otherwise engage in discussions with any person (other than Parent,
Sub or their respective directors, officers, employees, agents,
financial advisors, investment bankers, attorneys, accountants and
other representatives) with respect to any Company Competing
Transaction or (iii) enter into any agreement, arrangement or
understanding with respect to a Company Competing Transaction, or that
requires it to abandon, terminate or fail to consummate the Merger, or
that directly results in impeding, interfering with or frustrating the
Merger. Notwithstanding anything in this Agreement to the contrary, the
Company may (x) furnish non-public or other information to (subject to
a confidentiality agreement in reasonably customary form, but in no
event on terms materially less favorable to the Company than the
Confidentiality Agreement), and negotiate or otherwise engage in
discussions with, any party who delivers an unsolicited bona fide
proposal for a Company Competing Transaction (as further defined in the
last sentence of Section 7.1 below) if and so long as the Board of
Directors of the Company determines in good faith, after consultation
with its outside legal counsel, that not taking such action would
reasonably be expected to result in the violation by the Board of
Directors of the Company of its fiduciary duties to its shareholders
under Mississippi law, and (y) take a position with respect to a
Company Competing Transaction, or amend or withdraw such position, in
compliance with Rule 14e-2 promulgated under the Exchange Act with
regard to a
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Company Competing Transaction; provided, however, that the Company
shall take a position recommending against such Company Competing
Transaction unless it determines in good faith, after consultation
with its outside legal counsel, that to take such a position would
reasonably be expected to constitute a violation of the fiduciary
duties of the Board of Directors of the Company to its shareholders
under Mississippi law. The Company will immediately cease all existing
activities, discussions and negotiations with any parties conducted
heretofore with respect to any Company Competing Transaction. From and
after the execution of this Agreement, the Company shall immediately
advise Parent orally, to be followed by a confirmation in writing, of
the receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Company Competing Transaction
(including, unless prohibited by law from doing so, the status of the
negotiations and the transaction and reasonable details with respect
thereto), and shall, unless prohibited by law from doing so keep
Parent advised on a current basis of the status and the reasonable
details with respect to any such proposals or inquiries and any
discussions or negotiations. Unless prohibited by law the Company
shall also promptly furnish to Parent a copy of any such proposal or
inquiry in addition to any information provided to or by any third
party relating thereto.
(c) ACCOUNTANT'S "COMFORT" LETTERS. The Company shall
use its reasonable efforts to cause to be delivered to Parent "comfort"
letters of KPMG Peat Marwick LLP, its independent public accountants,
dated the date on which the Registration Statement shall become
effective and as of the Effective Time, respectively, and addressed to
Parent, in form and substance reasonably satisfactory to Parent and
reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with registration
statements similar to the Registration Statement and transactions such
as those contemplated by this Agreement.
ARTICLE VI
CONDITIONS
6.1 MUTUAL CONDITIONS. The obligations of the parties hereto
to consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) No temporary restraining order, preliminary or
permanent injunction or other order or decree which prevents the
consummation of the Merger shall have been issued and remain in effect,
and no statute, rule, regulation or executive order shall have been
enacted, entered or promulgated by any Governmental Authority which
prohibits the consummation of the Merger substantially on the terms
contemplated hereby.
(b) All waiting periods applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all other material consents, approvals, permits or
authorizations required to be obtained prior to the Effective Time from
any Governmental Authority in connection with the execution and
delivery of this
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Agreement and the consummation of the transactions contemplated hereby
shall have been obtained.
(c) This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the affirmative vote of
a majority of the outstanding shares of Company Common Stock entitled
to vote thereon, in accordance with Applicable Law, at the Company's
shareholder meeting, and the Share Issuance shall have been approved by
the Parent Stockholders in accordance with the rules of NYSE.
(d) The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been initiated or, to the
knowledge of Parent or the Company, threatened by the SEC or any other
Governmental Entity.
(e) No action shall be instituted by any Governmental
Authority which seeks to prevent consummation of the Merger or which
seeks material damages in connection with the transactions contemplated
hereby which continues to be outstanding.
(f) The shares of Parent Common Stock to be issued in
the Merger shall have been authorized for listing on the NYSE, subject
to official notice of issuance.
(g) All consents, waivers and approvals of third
parties required in connection with the transactions contemplated
hereby shall have been obtained, except where the failure to obtain
such consents, waivers or approvals, in the aggregate, would not
reasonably be expected to result in a material adverse effect on Parent
or the Company, as the case may be, provided that a party which has not
used all reasonable efforts to obtain a consent, approval or waiver may
not assert this condition with respect to such consent, approval or
waiver.
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger and the transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
the Company:
(a) The representations and warranties of each of
Parent and Sub shall be true and correct on the date hereof and on and
as of the Closing Date as though made on and as of the Closing Date
(except for representations and warranties made as of a specified date,
which need be true and correct only as of the specified date), other
than such breaches of representations and warranties which would not
have or which would not be reasonably expected to have, in the
aggregate, a material adverse effect on Parent.
(b) Each of Parent and Sub shall have performed in
all material respects each obligation and agreement and shall have
complied in all material respects with each covenant to be performed
and complied with by it hereunder at or prior to the Effective Time.
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(c) Parent and Sub shall have delivered to the
Company a certificate, dated as of the Closing Date and signed by its
Chairman, Chief Executive Officer and President or a Senior Vice
President, certifying as to the satisfaction of the matters described
in (a) and (b) above.
(d) The Company shall have received an opinion dated
as of the date of the mailing of the Proxy Statement of Xxxxxxx Xxxxx
Rose & White LLP, which opinion has not been withdrawn or modified in
any material way, substantially in the form of Exhibit 6.2(d), to the
effect that (1) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and (2) no gain or loss will be
recognized by Company Shareholders with respect to shares of Parent
Common Stock received in the Merger in exchange for shares of Company
Common Stock, except with respect to cash received in lieu of
fractional shares of Parent Common Stock; and the Company shall further
have received an opinion of Xxxxxxx Xxxxx Xxxx & White LLP dated as of
the Closing Date, in form reasonably satisfactory to the Company, to
the effect that, (A) each of Parent and Sub are corporations duly
organized, existing and in good standing under the laws of their
respective states of incorporation, (B) this Agreement was duly
authorized by Parent and Sub and constitutes a valid and binding
agreement enforceable against each of Parent and Sub in accordance with
its terms, and (C) the shares of Parent Common Stock to be issued in
the Merger have been duly authorized and are validly issued, fully paid
and nonassessable, have been registered under the Securities Act
pursuant to a registration statement that has been declared effective
and as to which, to the best of its knowledge, no stop order has been
issued or is threatened. In rendering the tax opinions referenced in
(1) and (2) above, Xxxxxxx Xxxxx Rose & White LLP, may require and rely
on representations contained in certificates of Parent, the Company,
Sub and others and in the tax representation letters provided for in
Section 5.1(m) above, as they deem reasonably appropriate. In the
corporate opinions referred to in (A), (B) and (C) above, Xxxxxxx Xxxxx
Rose & White LLP may rely on representations contained in certificates
of Parent, the Company, Sub and others, on certificates of public
officials, and on opinions of local legal counsel, as it deems
appropriate, and shall be entitled to render the opinion in such form
and with such qualifications as is customary for such firm in rendering
similar opinions in transactions of this nature.
(e) The Company shall have received a letter, in form
and substance reasonably satisfactory to the Company, from KPMG Peat
Marwick LLP, dated the date of the Proxy Statement and confirmed in
writing at the Effective Time, stating that the Merger will qualify as
a pooling of interests transaction under Opinion 16 of the Accounting
Principles Board.
(f) The Company shall have received from Parent the
"comfort" letters of Deloitte & Touche LLP described in Section 5.2(e).
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(g) The Company shall have received an opinion from
the Company Broker dated as of the date of mailing of the Proxy
Statement to the effect that, as of the date thereof, the Exchange
Ratio is fair to the Company Shareholders from a financial point of
view.
6.3 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
obligations of Parent and Sub to consummate the Merger and the other
transactions contemplated hereby shall be subject to the fulfillment of the
following conditions unless waived by each of Parent and Sub:
(a) The representations and warranties of the Company
shall be true and correct on the date hereof and on and as of the
Closing Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need
be true and correct only as of the specified date), other than such
breaches of representations and warranties which would not have or
which would not be reasonably expect to have, in the aggregate, a
material adverse effect on the Company.
(b) The Company shall have performed in all material
respects each obligation and agreement and shall have complied in all
material respects with each covenant to be performed and complied with
by it hereunder at or prior to the Effective Time.
(c) The Company shall have delivered to Parent a
certificate, dated as of the Closing Date and signed by its Chairman,
Chief Executive Officer and President or a Senior Vice President
certifying as to the satisfaction of the matters described in (a) and
(b) above.
(d) Each person who may be at the Effective Time or
was on the date of this Agreement an "affiliate" of the Company within
the meaning of Rule 145 under the Securities Act, shall have executed
and delivered to Parent a written undertaking in the form attached
hereto as Exhibit 5.1(k).
(e) Parent shall have received a letter, in form and
substance reasonably satisfactory to Parent, from Deloitte & Touche
LLP, dated the date of the Proxy Statement and confirmed in writing at
the Effective Time, stating that the Merger will qualify as a pooling
of interests transaction under Opinion 16 of the Accounting Principles
Board.
(f) Parent shall have received from the Company the
"comfort" letters of KPMG Peat Marwick LLP described in Section 5.3(c).
(g) Each of Xxxxx X. Xxxxx, Xxxx X. Xxxxxxx and Xxxxx
Xxxxxxx who, contemporaneously with the execution of this Agreement,
entered into Non-Competition and Non-Solicitation Agreements by and
between Parent, Company and certain subsidiaries of the Company (the
"Non-Compete Agreements") shall have remained employees of the Company
and/or its subsidiaries, as the case may be, and there shall
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have been no breach or repudiation of the Non-Compete Agreements by
the Company or the employees and the Non-Compete Agreements shall be
in full force and effect.
(h) The tax opinion of Xxxxxxx Xxxxx Rose & White LLP
referenced in 6.2(d)(1) and (2) shall have been delivered to the
Company and shall not have been withdrawn by such firm.
(i) Parent shall have received an opinion of Xxxxxx
Xxxxxxx Xxxxxx & Xxxxx, a Professional Limited Liability Company, dated
as of the Closing Date, in form reasonably satisfactory to Parent, to
the effect that (1) the Company and its subsidiaries are corporations
existing and in good standing under the laws of their respective states
of incorporation, and (2) this Agreement was duly authorized by the
Company and constitutes a valid and binding agreement enforceable
against the Company in accordance with its terms, and an opinion of
Xxxxxx & Tutor, P.A. dated as of the Closing Date, in form reasonably
satisfactory to Parent, to the effect that the Company is a corporation
duly organized under the laws of the State of Mississippi. In rendering
these opinions, Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, a Professional Limited
Liability Company, and Xxxxxx & Tutor, P.A., may rely on
representations contained in certificates of Parent, the Company, Sub
and others, on certificates of public officials, and on opinions of
local legal counsel, as it deems appropriate, and shall be entitled to
render the opinion in such form and with such qualifications as is
customary for such firm in rendering similar opinions in transactions
of this nature.
(j) The holders of not more than 7% of the
outstanding Company Common Stock shall have elected to exercise their
right to dissent from the Merger in accordance with the MBCA.
(k) Parent shall have received the opinion of Parent
Broker to the effect that, as of the date of mailing of the Proxy
Statement, the Exchange Ratio is fair to Parent from a financial point
of view.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the Merger
by the shareholders of the Company or the Share Issuance by the stockholders of
Parent:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company;
(b) by either Parent or the Company if (i) a statute,
rule, regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Merger substantially on
the terms contemplated hereby, or (ii) any
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permanent injunction or other ruling, order or decree of a court or
other competent Governmental Authority preventing the consummation of
the Merger shall have become final and nonappealable; provided, that
the party seeking to terminate this Agreement pursuant to this clause
7.1(b)(ii) shall have used all reasonable efforts to resist and to
remove such injunction, ruling, order or decree;
(c) by either Parent or the Company if the Merger
shall not have been consummated before December 31, 1997, unless
extended by mutual written consent duly authorized by the Boards of
Directors of both Parent and the Company (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to perform any material covenant
or obligation or whose breach of a representation or warranty under
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(d) by Parent or the Company if at the meeting of
Company Shareholders held for such purpose (including any adjournment
or postponement thereof) the requisite vote of the Company Shareholders
to approve the Merger and the transactions contemplated hereby shall
not have been obtained;
(e) by Parent or the Company if at the meeting of
Parent Stockholders held for such purpose (including any adjournment or
postponement thereof) the requisite vote of the Parent Stockholders to
approve the Share Issuance shall not have been obtained;
(f) by Parent or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall
have been a material breach of any of the covenants or agreements or
any of the representations or warranties set forth in this Agreement on
the part of the other party, which breach is not cured within 30 days
following written notice given by the terminating party to the party
committing such breach, or which breach, by its nature, cannot be cured
prior to the Closing, but only if such breach would constitute a
failure of a condition contained in Section 6.2 or Section 6.3, as
applicable; provided, however, that any right of termination under this
Section 7.1(f) with respect to any breach of a representation or
warranty occurring as a result of a notification delivered pursuant to
Section 5.1(j), excluding any such breach related to pending or
threatened litigation or governmental investigations or proceedings
involving the Company or one or more of its subsidiaries, shall be
waived unless the terminating party gives written notice of termination
to the breaching party within 10 days (subject to extension by mutual
written agreement of Parent, Sub and the Company) after each of the
following has occurred: (i) the breaching party has given written
notice of such breach to the terminating party, (ii) the cure period
with respect to such breach has expired, and (iii) the terminating
party has had a reasonable opportunity and amount of time to
investigate the facts and circumstances surrounding, and the effect on
the Company and (following the Merger) Parent as a result of, such
breach;
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(g) by Parent or the Company if the Board of
Directors of the Company shall determine that the failure to engage in
a Company Competing Transaction would result in a breach of the
fiduciary duties of the Board of Directors of the Company and shall
further determine to engage in a Company Competing Transaction;
provided, however, that the Company may not terminate this Agreement
pursuant to this clause (g) unless (i) the Company shall have delivered
to Parent a written notice of the determination by the Company Board of
Directors to terminate this Agreement pursuant to this Section 7.1(g),
setting forth (unless the Company is prohibited by law from doing so)
the status of and the reasonable details related to the Company
Competing Transaction and the identity of the other parties involved
therein, (ii) five business days shall have elapsed after delivery to
Parent of the notice referred to above, during which time the Company
cooperates with Parent in good faith with the intent of enabling Parent
to agree to a modification of the terms and conditions of this
Agreement, (iii) at the end of such five business-day period the
Company Board of Directors shall continue to believe that the failure
to engage in such Company Competing Transaction would result in a
breach of the fiduciary duties of the Board of Directors of the Company
(after giving effect to any adjustment to the terms and conditions of
the transactions contemplated by this Agreement proposed by Parent in
response to such Company Competing Transaction), and (iv) as soon as
reasonably practical thereafter the Company shall enter into a
definitive acquisition, merger or similar agreement to effect, or shall
effect, such Company Competing Transaction;
(h) by Parent if the Board of Directors of the
Company shall not have recommended the Merger to the Company
Stockholders, or shall have resolved not to make such recommendation,
or shall have materially modified or rescinded its recommendation of
the Merger to the Company Stockholders, or shall have modified or
rescinded its approval of this Agreement, or shall have resolved to do
any of the foregoing;
(i) by Parent if a tender offer or exchange offer for
25% or more of the outstanding shares of capital stock of the Company
is commenced by any person (including the Company or any of its
subsidiaries or affiliates), and the Board of Directors of the Company
fails to recommend against acceptance of such tender offer or exchange
offer by its shareholders (including by taking no position with respect
to the acceptance of such tender offer or exchange offer by its
stockholders) within the time period presented by Rule 14e-2 under the
Exchange Act, or if the Board of Directors of the Company shall have
recommended to the shareholders of the Company any Company Competing
Transaction or shall have resolved to do so; or
(j) by the Company if the Average Closing Price (as
hereinafter defined) on the seventh business day before the date of the
Company Shareholders meeting held to approve the Merger, and on the
last trading day before such meeting, shall be less than 75% of the
Average Closing Price of Parent Common Stock on the date of this
Agreement (the "Floor Value"), subject, however, to the following:
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1) If the Company elects to terminate this
Agreement pursuant to this Section 7.1(j), it shall give prompt (but
in no event longer than the close of business on the sixth business
day before the date of such meeting) written notice thereof to Parent.
2) During the five business day period
commencing with its receipt of such notice, the Company and Parent
shall cooperate with each other to enable Parent to propose a
modification to the terms of this Agreement that are acceptable to the
Company.
3) If the Company and Parent agree to a
modification to the terms of this Agreement, no termination shall have
occurred pursuant to this Section 7.1(j), and this Agreement shall
remain in effect in accordance with its terms (except as the Exchange
Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to
the Exchange Ratio as adjusted pursuant to this Section 7.1(j).
4) In the event the Average Closing Price
is not less than the Floor Value on the last trading day before the
Company's Shareholders meeting, no termination of this Agreement shall
have occurred pursuant to this Section 7.1(j), and this Agreement
shall remain in effect in accordance with its original terms,
including the original Exchange Ratio.
For purposes of this Section 7.1(j), "Average Closing Price" shall mean the
average per share closing price of the Parent Common Stock as reported by the
NYSE for the ten consecutive trading days ending at the close of trading on the
applicable date. For purposes of this calculation, all share prices shall be
rounded to three decimals.
For purposes of this Section 7.1 and Section 7.2 below, the
terms "Company Competing Transaction" and "Parent Competing Transaction" shall
mean any such transaction or series of related transactions involving, or
constituting any purchase of, more than 50% of the assets, voting power or then
outstanding Common Stock of the Company or Parent, as the case may be.
7.2 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement
pursuant to Section 7.1, this Agreement, except for the provisions of
the last sentence of Section 5.1(g) and the provisions of Sections 7.2,
8.8, and 8.10, shall become void and have no effect, without any
liability on the part of any party or its directors, officers,
employees, shareholders or stockholders.
(b) If this Agreement is terminated
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(i) (A) by Parent or the Company pursuant to
Section 7.1(d) or 7.1(g), (B) by Parent pursuant to Section
7.1(f), 7.1(h) or 7.1(i), (C) by Parent pursuant to Section
7.1(c), or otherwise, as a result of the, failure of the
conditions set forth in Section 6.3(j) in a circumstance where
a termination fee would otherwise be payable under Section
7.2(c) below, or (D) by Parent or the Company pursuant to
Section 7.2(c), or otherwise, as a result of a failure of the
conditions set forth in Section 6.2(g) in a circumstance where
the conditions set forth in Section 6.3(k) would be met and a
termination fee would otherwise be payable under Section
7.2(c) below, then the Company will pay to Parent in cash by
wire transfer in immediately available funds to an account
designated by Parent the reasonable documented out-of-pocket
expenses, up to $600,000, incurred by Parent in connection
with the transactions contemplated hereby, including the
negotiation and execution of this Agreement; provided,
however, that if such termination is by Parent pursuant to
Section 7.1(f) as a result of a breach of the representation
and warranty of the Company set forth in Section 4.25, then
the maximum amount of such reimburseable out-of-pocket
expenses of Parent shall be $300,000 rather than $600,000; or
(ii) by Parent or the Company pursuant to
Section 7.1(e), or by the Company pursuant to Section 7.1(f),
then Parent will pay to the Company in cash by wire transfer
in immediately available funds to an account designated by the
Company the reasonable documented out-of-pocket expenses, up
to $600,000, incurred by the Company in connection with the
transactions contemplated hereby, including the negotiation
and execution of this Agreement.
(c) If this Agreement is terminated by Parent
pursuant to Section 7.1(f), 7.1(h) or 7.1(i), or by Parent or the
Company pursuant to Section 7.1(d) or 7.1(g), or pursuant to the
circumstances described in Section 7.2(b)(i)(C) or (D) above, and if in
each case either (A) the Company shall enter into a definitive
agreement with respect to a Company Competing Transaction prior to
termination or within twelve months following such termination and such
Company Competing Transaction is thereafter consummated, or (B) a
Company Competing Transaction is consummated prior to termination or
within twelve months following such termination, then, in any such
case, the Company will pay to Parent in cash by wire transfer in
immediately available funds to an account designated by Parent a
termination fee in an amount equal to two million dollars ($2,000,000),
less any amounts paid or payable pursuant to Section 7.2(b) hereof (the
"Termination Fee"). Such payment shall be made within one business day
following the consummation of such Company Competing Transaction.
(d) If this Agreement is terminated by (i) the
Company pursuant to Section 7.1(f), or (ii) by Parent or the Company
pursuant to Section 7.1(e), and if in each case either (A) Parent shall
enter into a definitive agreement with respect to a Parent Competing
Transaction (as defined below) prior to termination or within twelve
months following such termination and such Parent Competing Transaction
(as it may be amended) is thereafter consummated, or (B) a Parent
Competing Transaction is
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consummated prior to termination or within twelve months following
such termination, then, in any such case, Parent will pay to the
Company in cash by wire transfer in immediately available funds to an
account designated by the Company a Termination Fee in an amount equal
to two million dollars ($2,000,000), less any amounts paid or payable
pursuant to Section 7.2(b) of this Agreement. Such payment shall be
made within one business day following the consummation of the Parent
Competing Transaction.
(e) As used herein, the term "Parent Competing
Transaction" shall have the same meaning with respect to Parent as the
term "Company Competing Transaction" has with respect to the Company,
with such changes in the definition thereof as are appropriate to
contemplate Parent in lieu of the Company.
(f) As used herein, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(g) The Company and Parent agree that the Termination
Fee and expenses provided in Section 7.2(b), (c) and (d) are fair and
reasonable in the circumstances. If a court of competent jurisdiction
shall nonetheless, by a final, nonappealable judgment, determine that
the amount of any such Termination Fee and expenses exceeds the maximum
amount permitted by law, then the amount of such Termination Fee and
expenses shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by such court of competent jurisdiction.
7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, at any time before or after adoption of this Agreement by Company
Stockholders or authorization of the Share Issuance by Parent Stockholders, but
after such approval or authorization, no amendment shall be made which by law or
its terms requires further approval or authorization by the Company Shareholders
or Parent Stockholders, as the case may be, without such further approval or
authorization. Notwithstanding the foregoing, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective
Time, Parent (with respect to the Company) and the Company (with respect to
Parent and Sub) may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of such party, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations, warranties, covenants or agreements made or incorporated herein
(or in any
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instrument or documents delivered pursuant to this Agreement) by the parties
hereto shall survive the Effective Time, except for those covenants and
agreements contained herein or therein which by their terms contemplate
performance after the Effective Time, and provided that the parties acknowledge
and agree that any rights or remedies otherwise available to a party hereunder
shall not be affected by any investigation conducted with respect to or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Effective Time, with
respect to the accuracy or inaccuracy of or compliance with any such
representation, warranty, covenant or agreement. Notwithstanding the foregoing,
it is understood that factual matters set forth in a party's disclosure schedule
to this Agreement shall be exceptions to such party's representations and
warranties under this Agreement.
8.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given upon receipt if delivered
personally, telecopied (which is confirmed) or dispatched by a nationally
recognized overnight courier service to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub:
Cavalier Homes, Inc.
Highway 00 Xxxxx xxx Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx Rose & White LLP
0000 Xxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company:
Belmont Homes, Inc.
Highway 00 Xxxxx
Xxxxxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC
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Nashville City Center
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: X. Xxxxx Xxxx, Esq.
Facsimile No.: (000) 000-0000
8.3 INTERPRETATION. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or
Section of this Agreement unless otherwise indicated. The headings and the table
of contents contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. For
the purposes of this Agreement, a "material adverse effect" shall mean, as to
any party, any change, effect or circumstance that, individually or when taken
together with all other such changes, effects or circumstances that have
occurred prior to the date of determination of the occurrence of the material
adverse effect, is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), liabilities, results of
operations, or financial condition of such party and its subsidiaries, taken as
a whole, or on such party's ability to consummate the transactions contemplated
hereby.
8.4 COUNTERPARTS. This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement. The
parties may execute more than one copy of the Agreement, each of which shall
constitute an original.
8.5 ENTIRE AGREEMENT. This Agreement (including the
documents, agreements and the instruments referred to herein) and the
Confidentiality Agreement constitute the entire agreement among the parties and
supersede all prior agreements and understandings, agreements or representations
by or among the parties, written and oral, with respect to the subject matter
hereof and thereof.
8.6 THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries, except for the provisions of Sections 1.6, 2.1, 2.3, 2.4, 5.2(b),
and 5.2(d), which may be enforced by the beneficiaries thereof.
8.7 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, except that
Mississippi law shall govern the Merger, without regard to principles of
conflicts of law.
8.8 EXCLUSIVE REMEDIES. PARENT, SUB AND THE COMPANY HEREBY
EXPRESSLY AGREE THAT, AS BETWEEN SUCH PARTIES TO THIS AGREEMENT (BUT NOT AS TO
THE THIRD PARTY BENEFICIARIES OF THIS AGREEMENT), THE REMEDIES PROVIDED IN
SECTION 7.2 OF THIS AGREEMENT CONSTITUTE LIQUIDATED DAMAGES AND DO NOT
CONSTITUTE A PENALTY. PARENT, SUB AND THE COMPANY HEREBY EXPRESSLY AGREE THAT
SUCH LIQUIDATED DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY FOR ANY CLAIM
ARISING OUT OF OR RELATING TO THIS NEGOTIATION, EXECUTION,
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DELIVERY OR PERFORMANCE OF THIS AGREEMENT OR THE MERGER. NOTWITHSTANDING THE
FOREGOING, NOTHING IN THIS SECTION 8.8 SHALL RELIEVE ANY PARTY TO THIS AGREEMENT
OF LIABILITY FOR A WILLFUL AND INTENTIONAL BREACH OF ANY PROVISION OF THIS
AGREEMENT.
8.9 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.10 EXPENSES. Subject to the provisions of Section 7.2,
Parent and the Company shall pay their own costs and expenses associated with
the transactions contemplated by this Agreement; provided, that the costs of
environmental audits (whether Phase I or Phase II environmental audits)
conducted by Parent of the facilities, operations, business or properties of the
Company or its subsidiaries shall be borne by the Company, if, in the case of
Phase II environmental audits, such audits were approved in advance by the
Company in writing.
8.11 INCORPORATION OF DISCLOSURE SCHEDULES. The Company
Disclosure Schedule and the Parent Disclosure Schedule are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
8.12 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
8.13 SUBSIDIARIES. As used in this Agreement, the word
"subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such party
is a general partner.
8.14 WAIVER OF JURY TRIAL. EACH OF PARENT, SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, Parent, Sub and the Company have executed
and delivered this Agreement on the date first written above.
CAVALIER HOMES, INC.
By /s/ Xxxxx Xxxxxxxx
-----------------------------------
Its President
-------------------------------
CRIMSON ACQUISITION CORP.
By /s/ Xxxx Xxxxxx
-----------------------------------
Its Vice President
-------------------------------
BELMONT HOMES, INC.
By /s/ Xxxx X. Xxxxxxx
-----------------------------------
Its President
-------------------------------
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