Exhibit No. 2.1
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CONDITIONAL
AGREEMENT AND PLAN OF MERGER
dated as of July 31, 1998,
among
ROOM PLUS, INC.,
ROOM PLUS SUB, INC.,
and
NATIONWIDE WAREHOUSE & STORAGE, INC.
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CONDITIONAL AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 31, 1998 (the "Agreement"),
by and among ROOM PLUS, INC., a New York corporation ("Parent"), ROOM PLUS SUB,
INC., an Ohio corporation ("Acquisition Sub") and wholly-owned subsidiary of
Parent, and NATIONWIDE WAREHOUSE & STORAGE, INC., an Ohio corporation (the
"Company").
W I T N E S S E T H:
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WHEREAS, the Boards of Directors of Parent and Acquisition Sub have
approved the merger of the Company with and into Acquisition Sub (the "Merger")
pursuant to the terms and conditions set forth in this Agreement and the sole
stockholder of Acquisition Sub has approved the Merger;
WHEREAS, the Board of Directors and stockholders of the Company have not
approved the Merger and if they fail to do so within five business days after
receipt by the Company of the audited financial statements of the Parent for the
year ending December 31, 1998, this Agreement may be terminated;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, Parent, Acquisition Sub
and the Company, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
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Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the Ohio General Corporation Law (the "GCL"), the Company shall be merged
with and into Acquisition Sub in accordance with this Agreement and with an
appropriate certificate of merger (the "Certificate of Merger") and the separate
existence of the Company shall thereupon cease (the "Forward Merger"). The
Acquisition Sub shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "Surviving Corporation"). Notwithstanding the
foregoing, after consultation with its advisors and counsel, if Parent and the
Company determine that the Forward Merger is not practicable, could be
detrimental to Parent or the Company, or would not qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended, Parent
may cause Acquisition Sub to merge with and into the Company, with the Company
to be the Surviving Corporation or to cause the Company to be merged directly
with the Parent (the "Reverse Merger").
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Section 1.2 Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") after the Closing as a copy of the
duly completed Certificate of Merger (the "Merger Filing") is delivered to the
Secretary of State of the State of Ohio for filing and is filed by the Secretary
of State of the State of Ohio or at such later time as the parties may agree to
specify in the Certificate of Merger.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 1701.82 of the GCL.
Section 1.4 Closing. The closing (the "Closing ") of the transactions
contemplated by this Agreement shall take place at the offices of Stroock &
Stroock & Xxxxx LLP, 000 Xxxxxx Xxxx, Xxx Xxxx, Xxx Xxxx at 10:00 A.M. New York
time on the second business day immediately following the date on which the last
of the conditions set forth in Article VIII hereof is fulfilled or waived, or at
such other time and place as Parent and the Company shall agree (the "Closing
Date").
Section 1.5 Shareholders' Agreements. Concurrently herewith, each of
Messrs. Xxxxxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxx and Xxxx Xxxxxx are entering
into agreements with the Company providing for, among other matters, their
agreement to vote in favor of the Merger.
ARTICLE II
THE SURVIVING CORPORATION
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Section 2.1 Certificate of Incorporation; By-laws.
(a) At the Effective Time of the Forward Merger, the Certificate
of Incorporation and the By-Laws of Acquisition Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and the
By-Laws of the Surviving Corporation.
(b) Alternatively, at the Effective Time of the Reverse Merger,
the Certificate of Incorporation and By-Laws, respectively, of the Surviving
Corporation shall be amended and restated in their entirety to read as the
Certificate of Incorporation and By-Laws of Acquisition Sub.
Section 2.2 Directors and Officers.
(a) The directors of Acquisition Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly elected or appointed in
accordance with applicable law.
(b) The officers of Acquisition Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly elected or appointed in
accordance with applicable law.
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ARTICLE III
CONVERSION OF SHARES
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Section 3.1 Conversion of Company Shares in the Merger.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any capital stock of the Company except as
set forth in this Section 3.1, subject to the other provisions of this Section
3.1, the shares of common stock, without par value, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective Time
(excluding any treasury shares) owned by the stockholders of the Company shall
be converted in the aggregate into the right to receive an aggregate of
84,915,000 validly issued, fully paid and nonassessable shares of common stock,
par value $0.00133 per share (the "Merger Consideration"), of Parent ("Parent
Common Stock"), subject to adjustment. Each holder of Company Common Stock shall
receive its pro rata share of the Merger Consideration.
At the Effective Time, all shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration. The holders
of certificates previously evidencing shares of Company Common Stock outstanding
immediately prior to the Effective Time (the "Certificates") shall cease to have
any rights with respect to shares of Company Common Stock except as otherwise
provided herein or by law. The Certificates shall be exchanged for certificates
evidencing whole shares of Parent Common Stock issued in consideration therefor
in accordance with the allocation procedures of this Section 3.1 and upon the
surrender of such Certificates in accordance with the provisions of Section 3.2.
No fractional shares of Parent Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 3.2(c).
(b) Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common Stock
shall have been changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Merger
Consideration shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
(c) The Merger Consideration to be received by the stockholders of
the Company assumes that prior to the Merger the Company shall have acquired, in
exchange for equity securities, Nationwide Warehouse & Storage, Inc. of Georgia
and affiliated entities ("Nationwide South"). If Nationwide South shall not have
been acquired, then the Merger Consideration shall be reduced to an aggregate of
61,965,000 shares of Parent Common Stock.
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct or
indirect wholly owned subsidiary of Parent or of Company immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
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(e) In the Reverse Merger, each share of common stock of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
3.2 Exchange of Certificates.
(a) At or prior to the Effective Time, each holder of Company
Common Stock shall surrender the certificates representing such stock to the
Parent and the Parent shall issue or cause to be issued to such holder at the
Closing the certificates representing the Parent Common Stock to which the
holder is entitled.
(b) All shares of Parent Common Stock issued and cash paid upon
conversion of the shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been issued or paid in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(c) No certificates or scrip evidencing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. In lieu of any such
fractional shares, each holder of Company Common Stock upon surrender of a
Certificate for exchange pursuant to this Section 3.2 shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the Average Stock Price by (b) the fractional interest to which such holder
would otherwise be entitled (after taking into account all shares of Company
Common Stock then held of record by such holder). The "Average Stock Price"
shall mean the average of the per share closing prices of Parent Common Stock on
the Nasdaq SmallCap Market during the 10 consecutive trading days ending the
tenth trading day prior to the Parent Stockholders' Meeting (as defined in
Section 7.3).
At the Closing, concurrently with the issuance of the certificates representing
the Parent Common Stock as set forth in Section 3.1(a), Parent shall pay the
amount of cash, if any, to be paid to holders of Company Common Stock with
respect to any fractional share interests, to such holders of Company Common
Stock subject to and in accordance with this Agreement.
Section 3.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to Parent and Acquisition Sub as
follows:
Section 4.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and
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has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
The Company is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a Company Material Adverse
Effect. For purposes of this Agreement, a Company Material Adverse Effect shall
be a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries taken as a whole. True and complete copies of the Company's
Certificate of Incorporation and By-Laws, as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Parent.
Section 4.2 Company Common Stock. The authorized capital stock of the
Company consists of 1,000 shares of Company Common Stock, of which 350 shares
are outstanding as of the date hereof, all of which are or shall be validly
issued and are fully paid, nonassessable and free of preemptive rights. Except
as set forth in Section 4.2 of the separate disclosure schedule delivered by the
Company simultaneous with the execution and delivery of this Agreement (the
"Company's Disclosure Schedule"), as of the date hereof, there are no
outstanding subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions, or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company or any
subsidiary of the Company to grant, extend or enter into any such agreement or
commitment except pursuant to this Agreement.
Section 4.3 Subsidiaries. Each direct and indirect subsidiary of the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Each of such subsidiaries is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a Company Material Adverse Effect. All of the outstanding
shares of capital stock of each subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned directly or
indirectly by the Company or another subsidiary free and clear of any liens,
claims, encumbrances, security interests, equities, charges and options of any
nature whatsoever. There are no outstanding subscriptions, options, warrants,
rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights affecting any shares of capital
stock of any subsidiary of the Company, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
Section 4.4 Authority; Non-Contravention; Approvals. (a) Subject to
approval by its board of directors and stockholders, the Company has full
corporate power and authority to enter
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into this Agreement and, subject to the Company Required Approvals (as defined
in Section 4.4(c)), to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation by
the Company of the transactions contemplated hereby have not been authorized by
the Company's Board of Directors, and this Agreement and the transactions
contemplated hereby have not been approved by the stockholders of the Company,
and approval by the board of directors and stockholders on the part of the
Company are necessary to authorize the execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby.
Subject to board of directors and stockholders approval, this Agreement will
have been duly and validly executed and delivered by the Company and will
constitute a valid and legally binding agreement of the Company enforceable
against it in accordance with its terms.
(b) Except as set forth in Section 4.4(a), the execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated hereby will not, violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries under any of the
terms, conditions or provisions of (i) the respective charters or by-laws of the
Company or any of its subsidiaries, (ii) subject to obtaining the Company
Required Approvals, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its subsidiaries is now a party or by which the Company or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected, excluding from the foregoing clauses (ii) and (iii) such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a Company Material Adverse Effect.
(c) Except for (i) the filings, if any, by the Company required by
Title II of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) approval by the board of directors and stockholders of the
Company and (iii) the making of the Merger Filing with the Secretary of State of
the State of Ohio in connection with the Merger (the filings and approvals
referred to in clauses (i), (ii) and (iii) are collectively referred to as the
"Company Required Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, other than such filings, registrations, authorizations,
consents or approvals, the failure of which to make or obtain, as the case may
be, will not have a Company Adverse Effect.
Section 4.5 Financial Statements. The Company has previously delivered
to Parent true and complete copies of its audited consolidated financial
statements as at and for the two
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years ended December 31, 1996, its unaudited consolidated financial statements
as at and for the year ended December 31, 1997 and its unaudited consolidated
financial statements for the six months ended June 30, 1998 (collectively the
"Company Financial Statements"). The Company Financial Statements fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis, the consolidated financial position of the Company and its
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (except as otherwise
indicated therein or in the notes thereto, or, in the case of audited financial
statements, the related report of the Company's independent accountants, as the
case may be). subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any other adjustments
described therein. The Company has also previously delivered to Parent true and
complete copies of certain unaudited consolidated financial information of
Nationwide South for the two years ended December 31, 1997 (collectively the
"South Financial Statements"). To the best knowledge of the Company, the South
Financial Statements fairly present the consolidated results of operations of
Nationwide South for the periods then ended, subject to normal year end and
audit adjustments.
Section 4.6 Absence of Undisclosed Liabilities. Neither the Company nor
any of its subsidiaries had at December 31, 1997, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except liabilities, obligations or contingencies (a)
which are accrued or reserved against in the Company Financial Statements or
reflected in the notes thereto or (b) which were incurred after December 31,
1997, and were incurred in the ordinary course of business and consistent with
past practices and, in either case, except for any such liabilities, obligations
or contingencies which (i) would not, in the aggregate, have a Company Material
Adverse Effect or (ii) have been discharged or paid in full prior to the date
hereof.
Section 4.7 Absence of Certain Changes or Events. Since June 30, 1998
there has not been any material adverse change in the business (including,
without limitation, any actual or threatened loss of significant customers or
suppliers), operations, properties, assets, liabilities, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as a
whole, or, to the knowledge of the Company, in Nationwide South and the Company
and its subsidiaries and, to the knowledge of the Company, Nationwide South have
in all material respects conducted their respective businesses in the ordinary
course consistent with past practice.
Section 4.8 Litigation. (a) There are no claims, suits, actions or
proceedings pending or, to the knowledge of the Company, threatened, nor to the
knowledge of the Company are there any investigations or reviews pending or
threatened, against, relating to or affecting the Company or any of its
subsidiaries, which, if adversely determined, could have a Company Material
Adverse Effect; (b) there have not been any developments since June 30, 1998
with respect to such claims, suits, actions, proceedings, investigations or
reviews which, individually or in the aggregate, may have a Company Material
Adverse Effect; and (c) except as contemplated by the Company Required
Approvals, neither the Company nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission,
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agency, instrumentality, authority or arbitrator which prohibits or restricts
the consummation of the transactions contemplated hereby or may have a Company
Material Adverse Effect.
Section 4.9 No Violation of Law. Neither the Company nor any of its
subsidiaries is in violation of, or, to the knowledge of the Company, is under
investigation with respect to, or has been given notice of or been charged with,
any violation of any law, statute, order, rule, regulation, ordinance, or
judgment of any governmental or regulatory body or authority, except for
violations which in the aggregate do not have a Company Material Adverse Effect.
The Company and its subsidiaries have all material permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
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Parent and Acquisition Sub jointly and severally represent and warrant to
the Company as follows:
Section 5.1 Organization and Qualification. Parent and Acquisition Sub
are each corporations duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and have the
requisite corporate power and authority to own, lease and operate their
respective assets and properties and to carry on their respective businesses as
they are now being conducted. Each of Parent and Acquisition Sub is qualified to
do business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a Parent Material Adverse Effect. For purposes of this Agreement, a Parent
Material Adverse Effect shall be a material adverse effect on the business,
operations, properties, assets, condition (financial or otherwise) or results of
operations of the Parent and its subsidiaries taken as a whole. True and
complete copies of Parent's and Acquisition Sub's Certificates of Incorporation
and By-Laws, as in effect on the date hereof, including all amendments thereto,
have heretofore been delivered to the Company.
Section 5.2 Parent Common Stock. The authorized capital stock of Parent
consists of 10,000,000 shares of Parent Common Stock, of which 4,385,000 shares
are outstanding as of the date hereon, all of which are validly issued and are
fully paid, nonassessable and free of preemptive rights. Except for 2,530,000
redeemable common stock purchase warrants and except as set forth in Section 5.2
of the separate disclosure schedule delivered by Parent and Acquisition Sub
simultaneous with the execution and delivery of this Agreement ("Parent's
Disclosure Schedule"), as of the date hereof, there are no other outstanding
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions, or arrangements,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Parent to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
Parent or
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obligating Parent or any subsidiary of Parent to grant, extend or enter into any
such agreement or commitment except pursuant to this Agreement.
Section 5.3 Subsidiaries. Each subsidiary of Parent is listed in Section
5.3 of Parent's Disclosure Schedule. Each direct and indirect subsidiary of
Parent is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Each such subsidiary is qualified
to do business, and is in good standing, in each jurisdiction in which the
properties owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a Parent Material Adverse Effect. The authorized capital
stock of Acquisition Sub consists of 100 shares of common stock, of which 100
shares are issued and outstanding, all of which are beneficially owned by
Parent. All of the outstanding shares of capital stock of each subsidiary are
validly issued, fully paid, nonassessable and free of preemptive rights, and are
owned directly or indirectly by Parent free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever. There are no outstanding subscriptions, options, warrants, rights,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights affecting any shares of capital stock of any
subsidiary of Parent, including any right of conversion or exchange under any
outstanding security, instrument or agreement. Section 5.3 of Parent's
Disclosure Schedule sets forth a list of all material corporations,
partnerships, joint ventures and other business entities in which Parent or any
of its subsidiaries directly or indirectly owns an interest and Parent's or such
subsidiary's direct and indirect share, partnership or other ownership interest
of each such entity.
Section 5.4 Authority; Non-Contravention; Approvals. (a) Each of Parent
and Acquisition Sub has full corporate power and authority to enter into this
Agreement and, subject to the Parent Stockholders' Approval (as defined in
Section 7.3) and the Parent Required Approvals (as defined in Section 5.4(c)),
to consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Parent and Acquisition Sub
of the transactions contemplated hereby have been duly authorized by Parent's
and Acquisition Sub's Boards of Directors, and no other corporate proceedings on
the part of Parent or Acquisition Sub are necessary to authorize the execution
and delivery of this Agreement and the consummation by Parent and Acquisition
Sub of the transactions contemplated hereby, except for the Parent Stockholders'
Approval and the obtaining of the Parent Required Approvals. This Agreement has
been duly and validly executed and delivered by Parent and Acquisition Sub and
constitutes a valid and legally binding agreement of each of Parent and
Acquisition Sub, enforceable against it in accordance with its terms.
(b) Except as set forth in Section 5.4(b) of Parent's Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Acquisition
Sub do not, and the consummation by Parent and Acquisition Sub of the
transactions contemplated hereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event
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which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
respective properties or assets of Parent or any of its subsidiaries under any
of the terms, conditions or provisions of (i) the respective charters or by-laws
of Parent or any of its subsidiaries, (ii) subject to obtaining the Parent
Required Approvals and the receipt of the Parent Stockholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which Parent or any of its subsidiaries is now a
party or by which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, excluding from the foregoing
clauses (ii) and (iii) such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests, charges
or encumbrances that would not, in the aggregate, have a Parent Material Adverse
Effect.
(c) Except for (i) the filings, if any, by Parent required by
Title II of the HSR Act, (ii) the filing of the Proxy Statement (as defined in
Section 5.9) with the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act of 1933, as amended (the "Securities Act"), and the declaration
of the effectiveness thereof by the SEC and filings with various blue sky
authorities, (iii) the filing of the Registration Statement (as defined in
Section 5.9) with the SEC pursuant to the Securities Act, and the declaration of
the effectiveness thereof by the SEC and filings with various blue sky
authorities, (iv) the making of the Merger Filing with the Secretary of State of
the State of Ohio in connection with the Merger and (v) the listing with the
Nasdaq SmallCap Market of the additional shares of Parent Common Stock to be
issued in the Merger (the filings and approvals referred to in clauses (i)
through (v) are collectively referred to as the "Parent Required Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Parent and
Acquisition Sub or the consummation by Parent and Acquisition Sub of the
transactions contemplated hereby, other than such filings, registrations,
authorizations, consents or approvals, the failure of which to make or obtain,
as the case may be, will not, in the aggregate, have a Parent Material Adverse
Effect.
Section 5.5 Reports and Financial Statements. Since December 31, 1995,
Parent and each of its subsidiaries required to make filings under the
Securities Act, the Exchange Act and applicable state laws and regulations, as
the case may be, have filed all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by them under the Securities Act, the Exchange Act and applicable laws and
regulations of Parent's and its subsidiaries' jurisdictions of incorporation and
the respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate acts, laws
and regulations and the rules and regulations thereunder. Parent has previously
delivered to the Company true and complete copies of its (a) Annual Reports on
Form 10-KSB, Quarterly Reports on Form 10-QSB, and Current Reports on Form 8-K
filed by Parent or any of its subsidiaries with the SEC under the Exchange Act
since December 31, 1995, (b) proxy and information statements relating to all
meetings of its
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stockholders (whether annual or special) and actions by written consent in lieu
of a stockholders' meeting held or taken since December 31, 1995 and (c) all
other reports or registration statements filed by Parent or any of its
subsidiaries with the SEC under the Exchange Act or the Securities Act since
December 31, 1995 (collectively, the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Parent included in the
Parent SEC Reports fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis, the consolidated financial
position of Parent and its subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(except as otherwise indicated therein or in the notes thereto or, in the case
of audited financial statements, the related report of Parent's independent
accountants, as the case may be), subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
Section 5.6 Absence of Undisclosed Liabilities. Except as set forth in
Section 5.6 of Parent's Disclosure Schedule or in the Parent SEC Reports,
neither Parent nor any of its subsidiaries had at December 31, 1997, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except liabilities, obligations
or contingencies (a) which are accrued or reserved against in the financial
statements of Parent included in Parent's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997 or (b) which were incurred after December
31, 1997, and were incurred in the ordinary course of business and consistent
with past practices and, in either case, except for any such liabilities,
obligations or contingencies which (i) would not, in the aggregate, have a
Parent Material Adverse Effect or (ii) have been discharged or paid in full
prior to the date hereof.
Section 5.7 Absence of Certain Changes or Events. Except as set forth in
Section 5.7 of Parent's Disclosure Schedule, since March 31, 1998 there has not
been any material adverse change in the business (including, without limitation,
any actual or threatened loss of significant customers or suppliers),
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole, and
Parent and its subsidiaries have in all material respects conducted their
respective businesses in the ordinary course consistent with past practice.
Section 5.8 Litigation. Except as disclosed in Section 5.8 of Parent's
Disclosure Schedule or in the Parent SEC Reports, (a) there are no claims,
suits, actions or proceedings pending or, to the knowledge of Parent,
threatened, nor to the knowledge of Parent are there any investigations or
reviews pending or threatened, against, relating to or affecting Parent or any
of its subsidiaries, which, if adversely determined, could have a Parent
Material Adverse Effect; (b) there have not been any developments since March
31, 1998 with respect to such claims, suits, actions, proceedings,
investigations or reviews which, individually or in the aggregate, may have a
Parent Material Adverse Effect; and (c) except as contemplated by the Parent
Required Approvals, neither Parent nor any of its subsidiaries is subject to any
judgment, decree,
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injunction, rule or order of any court, governmental department, commission,
agency, instrumentality, authority or arbitrator which prohibits or restricts
the consummation of the transactions contemplated hereby or may have a Parent
Material Adverse Effect.
Section 5.9 Proxy Statement. The proxy statement to be distributed in
connection with the Parent Stockholders' Meeting (the "Proxy Statement") and
which shall be included in the Registration Statement on Form S-4 to be filed by
Parent with the SEC in connection with the issuance of Parent Common Stock in
the Merger (the "Registration Statement") will not at the time of the mailing of
the Proxy Statement and any amendment or supplement thereto, and at the time of
the Parent Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading or necessary to correct any statement
in any earlier filing with the SEC of such Proxy Statement or any amendment or
supplement thereto or any earlier communication to stockholders of Parent with
respect to the transactions contemplated by this Agreement. The Proxy Statement
will comply as to form in all material respects with all applicable laws,
including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. Notwithstanding the foregoing, no representation is made
by Parent with respect to information supplied by the Company or its
representatives specifically for inclusion in the Proxy Statement.
Section 5.10 No Violation of Law. Except as set forth in Section 5.10 of
Parent's Disclosure Schedule, neither Parent nor any of its subsidiaries is in
violation of, or, to the knowledge of Parent, is under investigation with
respect to, or has been given notice of or been charged with, any violation of
any law, statute, order, rule, regulation, ordinance, or judgment of any
governmental or regulatory body or authority, except for violations which in the
aggregate do not have a Parent Material Adverse Effect. Parent and its
subsidiaries have all material permits, licenses, franchises and other
governmental authorizations, consents and approvals (the "Parent Government
Approvals") necessary to conduct their businesses as presently conducted and all
such Parent Government Approvals shall continue in full force and effect after
the Merger.
Section 5.11 Compliance with Agreements. Except as already set forth in
the Parent SEC Documents, Section 5.11 of Parent's Disclosure Schedule sets
forth as of the date hereof a list of all leases for real property, all material
leases for personal property and all material contracts to which Parent or any
of its subsidiaries is a party or by which Parent or any of its subsidiaries or
any of its assets is bound or subject. Except as set forth in Section 5.11 of
Parent's Disclosure Schedule, Parent and each of its subsidiaries are not in
breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (i) the respective
charters or by-laws of Parent or any of its subsidiaries or (ii) any contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which Parent or any of its subsidiaries
is a party or by which any of them is bound or to which any of their property is
subject, which breaches, violations and defaults, in the case of this clause
(ii) would have, in the aggregate, a Parent Material Adverse Effect.
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Section 5.12 Taxes. Parent and its subsidiaries have duly filed with
the appropriate federal, state, local, and foreign taxing authorities all tax
returns required to be filed by them on or prior to the Effective Time and such
tax returns are true and complete in all material respects. Parent and its
subsidiaries have duly paid in full or made adequate provision for the payment
of all taxes for all periods ending at or prior to the Effective Time. The
liabilities and reserves for taxes reflected in Parent's consolidated financial
statements described in Section 5.5 are adequate to cover all taxes which are or
may become payable with respect to all periods covered by such financial
statements. Except as set forth in Section 5.12 of Parent's Disclosure Schedule,
(i) there are no material liens for taxes upon any property or asset of Parent
or any subsidiary thereof, except for (x) liens for taxes not yet due and (y)
any such liens for taxes shown on such Section 5.12 of Parent's Disclosure
Schedule, which are being contested in good faith through appropriate
proceedings; (ii) Parent has not made any change in accounting method, received
a ruling from any taxing authority or signed an agreement with any taxing
authority which will materially and adversely affect Parent in future periods;
(iii) during the past three years neither Parent nor any of its subsidiaries has
received any notice of deficiency, proposed deficiency or assessment from any
governmental taxing authority with respect to taxes of Parent or any of its
subsidiaries, except any such notice of deficiency, proposed deficiency or
assessment which will not in the aggregate cause a Parent Material Adverse
Effect, and, any such deficiency or assessment shown on such Section 5.12 of
Parent's Disclosure Schedule has been paid or is being contested in good faith
through appropriate proceedings; (iv) the income tax returns for Parent and its
subsidiaries are not currently the subject of any audit by the IRS or any other
national taxing authority, and such federal income tax returns have been
examined by the IRS (or the applicable statutes of limitation for the assessment
of federal taxes for such periods have expired) for all periods through and
including December 31, 1993 and no material deficiencies were asserted as a
result of such examinations which have not been resolved and fully paid; (v)
there are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any taxes or
deficiencies against Parent or any of its subsidiaries, and no power of attorney
granted by either Parent or any of its subsidiaries with respect to any taxes is
currently in force; and (vi) neither Parent nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing of taxes. Neither
Parent nor any of its subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code").
Section 5.13 Employee Benefit Plans; ERISA. (a) Section 5.13 of Parent's
Disclosure Schedule lists all material employee benefit plans, employment
contracts or other arrangements for the provision of benefits for employees or
former employees of Parent and its subsidiaries and neither Parent nor its
subsidiaries have any commitment to create any additional plan, contract or
arrangement or to amend any such plan, contract or arrangement so as to increase
benefits thereunder, except as required under existing collective bargaining
agreements. Section 5.13(a) of Parent's Disclosure Schedule identifies all
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), other than
"multiemployer plans" within the meaning of Section 3(37) of ERISA, covering
current or former employees of Parent and its subsidiaries (the "Parent Plans"),
other than the Parent Plans which are described in the Parent SEC Reports. A
true and correct copy of
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each of the employee benefit plans, employment contracts and other arrangements
for the provision of benefits for employees and former employees of Parent and
its subsidiaries described in the Parent Plans listed on Section 5.13(a) of
Parent's Disclosure Schedule, except for any multiemployer plans, and all
contracts relating thereto, or to the funding thereof (including, without
limitation, all trust agreements, insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements), each as will be in effect at the Effective Time, has been provided
to the Company. A true and correct copy of the most recent annual report,
actuarial report, summary plan description, and IRS determination letter with
respect to each such Parent Plan, to the extent applicable, and a current
schedule of assets (and the fair market value thereof assuming liquidation of
any asset which is not readily tradeable) held with respect to any funded plan,
Parent Plan, or benefit arrangement has been provided to the Company by Parent,
and there have been no material changes in the financial condition in the
respective plans, Parent Plans or benefit arrangements from that stated in such
annual report and actuarial reports.
(b) Except as set forth in Section 5.13(b) of Parent's Disclosure
Schedule, (i) there have been no prohibited transactions within the meaning of
Section 406 of ERISA or Section 4975 of the Code with respect to any of the
Parent Plans which, assuming that the taxable period of such transaction expired
as of the date hereof, could subject Parent or its subsidiaries to a material
tax or penalty under Section 502(i) of ERISA or Section 4975 of the Code; (ii)
no liability (except for premiums due) has been or is expected to be incurred by
Parent or any of its subsidiaries under Title IV of ERISA with respect to any of
the Parent Plans or with respect to any ongoing, frozen or terminated "single
employer plan" within the meaning of Section 4001(a)(15) of ERISA currently or
formerly maintained by any of them, or by any entity which is considered a
single employer with Parent under Section 4001 of ERISA or Section 414 of the
Code (a "Parent ERISA Affiliate"); (iii) all amounts which Parent or its
subsidiaries are required to pay as contributions to the Parent Plans have been
timely made or have been reflected in the financial statements described in
Section 5.5; (iv) none of the Parent Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived; (v) the current value of all "benefit liabilities" within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions used in the Plan's most recent actuarial valuation) under
each of the Parent Plans which is subject to Title IV of ERISA did not exceed
the then current value of the assets of such plan allocable to such benefit
liabilities by more than the amount disclosed in Section 5.13(b) of Parent's
Disclosure Schedule; (vi) each of the Parent Plans has been operated and
administered in all material respects in accordance with applicable laws,
including, but not limited to, the reporting and disclosure requirements of Part
1 of Subtitle I of ERISA and the group health plan continuation requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA; (vii)
each of the Parent Plans which is intended to be "qualified" within the meaning
of Section 401(a) of the Code has been determined by the IRS to be so qualified
and Parent is not aware of any circumstances likely to result in revocation of
any such determination; (viii) there are no material pending, threatened or
anticipated claims involving any of the Parent Plans other than claims for
benefits in the ordinary course; (ix) no notice of a "reportable event" within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived has been required to be filed for any of the Parent Plans;
(x) neither Parent nor any of its
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subsidiaries is a party to, nor participates in or has any liability or
contingent liability with respect to, any multiemployer plan (regardless of
whether based on contributions of a Parent ERISA affiliate); and (xi) neither
Parent nor its subsidiaries has any liability or contingent liability for
retiree life and health benefits under any of the Parent Plans other than
statutory liability for providing group health plan continuation coverage under
Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code, except
as set forth in Section 5.13(b) of Parent's Disclosure Schedule.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will accelerate benefits or
any payments under any Parent employee agreement, plan or arrangement.
Section 5.14 Material Defaults. Except as set forth in Section 5.14 of
Parent's Disclosure Schedule, neither Parent nor any of its subsidiaries is, or
has received any notice or has any knowledge that Parent or any subsidiary is,
in default in any respect under any contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which Parent or any
of its subsidiaries is a party or by which Parent or any of its subsidiaries or
their respective assets, business, or operations receives benefits, except for
those defaults which would not have, individually or in the aggregate, a Parent
Material Adverse Effect; and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
Section 5.15 Labor Matters. Except as set forth in Section 5.15 of
Parent's Disclosure Schedule, there are no material controversies pending or, to
the knowledge of Parent, threatened between Parent or any of its subsidiaries
and any representatives of its employees, and, to the knowledge of Parent, there
are no material organizational efforts presently being made involving any of the
presently unorganized employees of Parent or its subsidiaries. Parent and its
subsidiaries have complied in all material respects with all laws relating to
the employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and no person has, to the knowledge of Parent,
asserted that Parent or any of its subsidiaries is liable in any material amount
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing.
Section 5.16 Environmental Matters.
(a) Except as set forth in the Section 5.16(a) of Parent's
Disclosure Schedule, Parent and its subsidiaries have complied in all respects
with all Environmental Laws (as defined in Section 5.16(g)). Parent and its
subsidiaries have obtained and will maintain through the Closing Date all
permits, licenses, certificates and other authorizations which are required with
respect to its operation under any Environmental Laws and all such permits,
licenses, certificates and other authorizations are listed on Section 5.16(a) of
Parent's Disclosure Schedule.
(b) Except as set forth in Section 5.16(b) of Parent's Disclosure
Schedule, Parent and its subsidiaries are in compliance in all respects with all
permits, licenses and authorizations required by any Environmental Laws, and are
also in full compliance with all
-16-
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Laws or contained in any regulation or code promulgated or
approved under the Environmental Laws, or any plan, order, decree, judgment,
injunction, notice or demand letter issued to or entered against Parent
thereunder. All products sold and services provided by Parent and its
subsidiaries prior to the date hereof are in compliance with all Environmental
Laws applicable thereto and all such products and services so sold or provided
prior to the Closing Date will as of such date be in compliance with all
Environmental Laws applicable thereto. Parent has hereto delivered to the
Company true and complete copies of all environmental studies made in the last
ten years relating to the business or assets of Parent and its subsidiaries.
(c) Except as set forth in Section 5.16(c) of Parent's Disclosure
Schedule, there is no pending or, to Parent's knowledge, threatened, civil,
criminal or administrative action, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter that affects or applies to
Parent or its subsidiaries, their respective businesses or assets, the products
they have sold or the services they have provided relating in any way to any
Environmental Laws or any regulation or code promulgated or approved under the
Environmental Laws, or any plan, order, decree, judgment, injunction, notice or
demand letter issued to or entered against Parent or its subsidiaries
thereunder.
(d) Except as set forth in Section 5.16(d) of Parent's Disclosure
Schedule, there are no past or present (or, to the knowledge of Parent,
anticipated) events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent compliance or
continued compliance by Parent or its subsidiaries with any Environmental Laws
or with any regulation or code promulgated or approved under the Environmental
Laws, or any plan, order, decree, judgment, injunction, notice or demand letter
issued to or entered against Parent or its subsidiaries thereunder, or which may
give rise to any common law or legal liability, or otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, notice of violation, study
or investigation, based on or related to the sale, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, by Parent or its
subsidiaries of any pollutant, contaminant, chemical, or industrial, toxic or
hazardous substance or waste.
(e) Except as set forth in Section 5.16(e) of Parent's Disclosure
Schedule and except in accordance with a valid governmental permit, license,
certificate or approval listed in Section 5.16(e) of Parent's Disclosure
Schedule there has not been by Parent or its subsidiaries, from any of their
assets, from any site at which any of such assets were or are located, any
emission, spill, release or discharge into or upon (i) the air, (ii) soils or
improvements, (iii) surface or ground water, or (iv) the sewer, septic system or
waste treatment, storage or disposal system servicing such asset of any toxic or
hazardous substances or wastes used, stored, generated, treated or disposed at
or from any of such assets (any of which events in hereinafter referred to as
"Hazardous Discharge").
(f) Prior to the Closing Date, there shall not occur, by Parent or
its subsidiaries, any Hazardous Discharge (except in accordance with a valid
governmental permit, license, certificate or approval listed in Section 5.16(f)
of Parent's Disclosure Schedule).
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(g) As used in this Agreement, the term "Environmental Laws" means
all federal, state, local and foreign environmental, health and safety laws,
codes and ordinances and all rules and regulations promulgated under the
Environmental Laws, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, air, surface water, ground water,
land surface or subsurface strata) or otherwise relating to the sale,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes. As used in this Agreement, the
term "hazardous substances or wastes" includes, without limitation, (i) all
substances which are designated pursuant to Section 311(b)(2)(A) of the Federal
Water Pollution Control Act ("FWPCA"), 33 U.S.C ss. 1251 et seq.; (ii) any
element, compound, mixture, solution, or substance which is designated pursuant
to Section 102 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.; (iii) any hazardous waste
having the characteristics which are identified under or listed pursuant to
Section 3001 of the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq.; (iv) any toxic pollutant listed under Section 307(a) of the
FWPCA; (v) any hazardous air pollutant which is listed under Section 112 of the
Clean Air Act, 42 U.S.C. ss. 7401 et seq.; (vi) any imminently hazardous
chemical substance or mixture with respect to which action has been taken
pursuant to Section 7 of the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq.; and (vii) waste oil.
Section 5.17 Certain Business Practices. As of the date of this
Agreement, except for such action which would not have a Parent Material Adverse
Effect, neither Parent nor any of its subsidiaries nor any directors, officers,
agents, or employees of Parent or any of its subsidiaries has (i) used any funds
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
Section 5.18 No Excess Parachute Payments. Sections 5.13(a), 5.13(b), and
5.13(c) of Parent's Disclosure Schedule set forth all written contracts,
arrangements, or undertakings pursuant to which any person may receive any
amount or entitlement from Parent or the Surviving Corporation or any of their
respective subsidiaries (including cash or property or the vesting of property)
that may be characterized as an "excess parachute payment" as such term is
defined in Section 280G(B)(1) of the Code as a result of any of the transactions
being contemplated by this Agreement. No person is entitled to receive any
additional payment from Parent, any of its subsidiaries, or any other person (a
"Parachute Gross-Up Payment") in the event that the 20 percent parachute excise
tax of Section 4999(a) of the Code is imposed on such person. Parent's Board of
Directors has not, during the six months prior to the date of this Agreement,
granted to any officer, director, or employee of Parent any right to receive any
Parachute Gross-Up Payment.
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Section 5.19 Trademarks, etc. Section 5.19 of Parent's Disclosure
Schedule sets forth a true and complete list of all patents, trademarks
(registered or unregistered), trade names, service marks, and registered
copyrights and applications therefor ("Intellectual Property Rights") owned,
used or filed by or licensed to Parent and its subsidiaries and, with respect to
registered trademarks, contains a list of all jurisdictions in which such
trademarks are registered or applied for and all registration and application
numbers. Except as disclosed in Section 5.19 of Parent's Disclosure Schedule,
the Intellectual Property Rights which are trademark or copyright registrations
and issued patents are valid and in good standing, and are owned by Parent or
its subsidiaries, free and clear of all liens, encumbrances, equities, or claims
and, along with applications therefor, are not involved in any interferences,
litigations, oppositions, or cancellation proceedings. Parent or its
subsidiaries owns or has the right to use, without payment to any other party,
the patents, trademarks, trade names, service marks, copyrights, and
applications therefor referred to in Parent's Disclosure Schedule or otherwise
used by Parent or its subsidiaries, and the consummation of the transactions
contemplated hereby will not alter or impair such rights in any material
respect. Except as set forth in Section 5.19 of Parent's Disclosure Schedule,
neither Parent nor any of its subsidiaries is a licensor or licensee in respect
of any Intellectual Property Rights, nor has it granted any rights thereto or
interest therein to any person or entity. Except as set forth in Section 5.19 of
Parent's Disclosure Schedule, no claims are pending or threatened by any person
with respect to the ownership, validity, enforceability, or use of any such
Intellectual Property Rights challenging or questioning the validity or
effectiveness of any of the foregoing, which claims reasonably could be expected
to have a Parent Material Adverse Effect. Parent and its subsidiaries shall make
all required filings to ensure the continued validity and enforceability of its
Intellectual Property Rights up to the Effective Time.
Section 5.20 State Takeover Statutes. Parent's Board of Directors has
approved the Merger and the Merger is exempt from the provisions of Section 912
of the New York Business Corporation Law and Chapter 1704 of the GCL.
Section 5.21 Vote Required. The affirmative vote of the holders of at
least two-thirds of the outstanding Parent Common Stock is the only vote of the
holders of any class or series of Parent capital stock necessary to approve the
Merger.
Section 5.22 Registration Statement. The prospectus forming part of the
Registration Statement will not, at the time it becomes effective and at the
Effective Time, 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. If at any time prior to the Effective Time, any event with
respect to Parent or any of its subsidiaries or their respective officers and
directors should occur which is required to be described in an amendment or
supplement to such prospectus, such event shall be so described and such
description in such amendment or supplement of such information will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or in the prospectus or necessary in order to make
the statements therein or in the prospectus, in light of the circumstances under
which they are made, not misleading. Notwithstanding the foregoing, no
representation is made by Parent with respect to information
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other than information supplied by Parent or Acquisition Sub or their
representatives specifically for inclusion therein.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
Section 6.1 Conduct of Business by Parent Pending the Merger. Except as
set forth in Section 6.1 of Parent's Disclosure Schedule or as otherwise
contemplated by this Agreement, after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless otherwise agreed in
writing by the Company, Parent shall and shall cause each of its subsidiaries
to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
by-laws; (ii) split, combine or reclassify their outstanding capital stock or
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise; or (iii) knowingly take any action which would result in
a failure to maintain the trading of Parent Common Stock on the Nasdaq SmallCap
Market;
(c) not (i) except for the issuance of shares of common stock upon
the exercise of currently outstanding stock options or warrants, authorize the
issuance of, issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any additional shares of, or any options, warrants or rights of
any kind to acquire any shares of, their capital stock of any class or any debt
or equity securities convertible into or exchangeable for such capital stock,
(ii) sell (including, without limitation, by sale/leaseback), pledge, dispose
of, license or encumber any material assets (including, without limitation,
intellectual property), or any interests therein, other than in the ordinary
course of business and consistent with past practice; (iii) redeem, purchase,
acquire or offer to purchase or acquire any (x) shares of their capital stock,
other than in accordance with the governing terms of such securities or (y)
long-term debt, other than as required by the governing instruments relating
thereto; or (iv) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(d) use their best efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers, and others
having business relationships with them;
(e) confer on a regular and frequent basis with one or more
representatives of the Company to discuss operational matters of materiality and
the general status of ongoing operations;
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(f) promptly notify the Company of any significant changes in the
business, properties, assets, financial condition, or results of operations of
Parent and its subsidiaries taken as a whole;
(g) not acquire, or publicly propose to acquire, all or any
substantial part of the business and properties or capital stock of any person
not a party to this Agreement, whether by merger, purchase of assets, tender
offer or otherwise;
(h) not, directly or indirectly, through any officer, director,
employee, representative, agent, or otherwise, solicit, initiate or encourage,
including by way of furnishing information, or take any other action to
facilitate, the submission of any proposal or offer from any person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act) or entity relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any portion of the assets of, or any equity
interest in, or any merger or other business combination with, Parent or any of
its subsidiaries (collectively, an "Acquisition Transaction") or participate in
any discussion or negotiations regarding any Acquisition Transaction; provided,
however, that if Parent's Board of Directors determines in good faith, after
consultation with and based on the written advice of outside counsel that it is
required to do so in order to comply with its fiduciary obligations to its
stockholders under New York law, (a) following receipt of a bona fide
unsolicited written offer to consummate an Acquisition Transaction, Parent may
take and disclose to its stockholders the position of Parent's Board of
Directors contemplated by Rule 14e-2 under the Exchange Act or otherwise make
appropriate disclosures to its stockholders, (b) Parent may furnish or cause to
be furnished information concerning its business, properties or assets to a bona
fide third party on terms substantially similar to those set forth in the letter
agreement entered into in July 1998 between Parent and the Company (the
"Confidentiality Agreement"), and (c) Parent may engage in discussions or
negotiations with a third party concerning an Acquisition Transaction with
respect to Parent, provided that Parent shall notify the Company promptly
(orally and in writing) of any such offer, the material terms of such offer and
the identity of the person making the offer, and shall keep the Company informed
as to the status and details of the offer;
(i) not enter into or amend any employment, severance, or special
pay arrangement with respect to termination of employment, or other similar
arrangement or agreement with any directors, officers or key employees;
(j) not adopt, enter into or amend any bonus, profit sharing,
compensation (except ordinary course salary adjustments consistent with historic
practice), stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law occurring after the date
hereof;
(k) maintain with financially responsible insurance companies,
insurance on Parent's and its subsidiaries' tangible assets and businesses in
such amounts and against such risks and losses as are consistent with past
practice and customary for companies engaged in the businesses engaged in by
Parent and its subsidiaries;
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(l) not introduce any new product or plan which would
substantially increase the risk exposure of Parent and its subsidiaries taken as
a whole;
(m) not enter into any material arrangement, agreement, or
contract with any third party (other than customers in the ordinary course of
business) which provides for an exclusive arrangement with that third party or
is substantially more restrictive on Parent or substantially less advantageous
to Parent than arrangements, agreements, or contracts existing on the date
hereof;
(n) not establish any new lines of credit or other credit
facilities or incur any indebtedness other than pursuant to existing credit
facilities, except for trade liabilities incurred in the ordinary course of
business;
(o) not make or agree to make any new capital expenditure or
expenditures that, individually, exceeds $5,000 or, in the aggregate, exceed
$10,000;
(p) not pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereof) of Parent, or incurred
since the date of such financial statements in the ordinary course of business
consistent with past practice;
(q) not adopt any material change in Parent's accounting policies,
practices or procedures, other than in the ordinary course of business
consistent with past practice or as required by the SEC or by law; and
(r) not agree in writing, or otherwise, to take any of the
foregoing actions or any other action which would make any representation or
warranty contained in Article V untrue or incorrect in any material respect as
of the time of the Closing.
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
Section 7.1 Access to Information. (a) The Company and its subsidiaries
shall afford to Parent and Acquisition Sub and their accountants, counsel, and
other representatives full access during normal business hours throughout the
period prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax returns)
and during such period, shall furnish promptly to Parent and Acquisition Sub (i)
a copy of each report, schedule and other document filed or received by any of
them pursuant to the requirements of federal or state securities laws or the HSR
Act or filed or received by any of them with or from the SEC, Federal Trade
Commission ("FTC") or Department of Justice ("DOJ") and (ii) all other
information concerning their respective businesses, properties and personnel as
Parent and Acquisition Sub may reasonably request; provided, however, that no
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investigation pursuant to this Section 7.1(a) shall affect any representations
or warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. The Company and its subsidiaries shall
promptly advise Parent in writing of any change or occurrence of any event after
the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a Company Material Adverse Effect.
(b) Parent and its subsidiaries shall afford to the Company and
its accountants, counsel and other representatives full access during normal
business hours throughout the period prior to the Effective Time to all of their
respective properties, books, contracts, commitments and records (including, but
not limited to, tax returns) and, during such period, shall furnish promptly to
the Company (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of federal or state
securities laws or the HSR Act or filed or received by any of them with or from
the SEC, FTC or DOJ and (ii) all other information concerning their respective
businesses, properties and personnel as the Company may reasonably request;
provided, however, that no investigation pursuant to this Section 7.1(b) shall
affect any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Merger. Parent and its
subsidiaries shall promptly advise the Company in writing of any change or
occurrence of any event after the date of this Agreement having, or which,
insofar as can reasonably be foreseen, in the future may have, a Parent Material
Adverse Effect. Parent shall furnish to the Company promptly after available the
audited financial statements of the Parent for the year ending December 31,
1998.
(c) Any information received pursuant to Sections 7.1(a) and
7.1(b) above shall be considered Evaluation Material (as defined in the
Confidentiality Agreement), and such information shall be held in confidence by
Parent, Acquisition Sub and the Company in accordance with the terms of the
Confidentiality Agreement.
Section 7.2 Registration Statement and Proxy Statement. Parent shall
prepare and file with the SEC as soon as reasonably practicable after this
Agreement has been approved by the board of directors and stockholders of the
Company, the Proxy Statement and the Registration Statement (in which the Proxy
Statement shall be included) and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable
thereafter. Parent shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with the issuance of
Parent Common Stock in the Merger; provided, however, that with respect to such
blue sky qualifications neither Parent nor the Company shall be required to
register or qualify as a foreign corporation or to take any action which would
subject it to service of process in any jurisdiction where any such entity is
not now so subject, except as to matters and transactions relating to or arising
solely from the offer and sale of Parent Common Stock. Parent and the Company
shall promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any action by any of
them in connection with the preceding sentence. The information provided and to
be provided by each of the Company and Parent (and by their auditors, attorneys,
financial advisors or other consultants or advisors) to the other for use in the
Registration Statement and Proxy Statement shall be true and complete in all
material respects without omission of any material fact which is required to
make such information not false or misleading as of the date
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the Registration Statement becomes effective, the date of the Proxy Statement
and the Effective Time. The Proxy Statement shall include the recommendation of
Parent's Board of Directors in favor of the Merger, unless otherwise necessary
due to the applicable fiduciary duties of the directors of Parent, as determined
pursuant to Section 6.1(h).
Section 7.3 Stockholders' Approval. After approval of this Agreement by
the board of directors and stockholders of the Company, Parent shall promptly
submit this Agreement and the transactions contemplated hereby for the approval
of its stockholders at a special meeting of its stockholders (the "Parent
Stockholders' Meeting") to be held as soon as practicable after the Registration
Statement is declared effective by the SEC and, subject to the fiduciary duties
of Parent's Board of Directors pursuant to Section 6.1(h), shall use its best
efforts to obtain stockholder approval (the "Parent Stockholders' Approval") of
this Agreement and the transactions contemplated hereby in accordance with
Section 5.21. Parent shall, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the transactions contemplated by
this Agreement. The transactions contemplated hereby shall include (a) the
amendment to the Certificate of Incorporation of the Parent to increase its
authorized shares of Common Stock to a number sufficient to issue the Merger
Consideration and (b) approval of the issuance of warrants by the Parent to
Xxxxx X. Xxxxxxx.
Section 7.4 Compliance with the Securities Act. The Company shall use
its best efforts to cause each principal executive officer, each director and
each other person who is an "affiliate," as that term is used in paragraphs (c)
and (d) of Rule 145 under the Securities Act (an "Affiliate"), of the Company to
deliver to Parent and the Company on or prior to the Effective Time a written
agreement (an "Affiliate Agreement") to the effect that such person will not
offer to sell, sell or otherwise dispose of any shares of Parent Common Stock
issued in the Merger, except, in each case, pursuant to an effective
registration statement or in compliance with Rule 145, as amended from time to
time, or in a transaction which, in the opinion of legal counsel reasonably
satisfactory to Parent, is exempt from the registration requirements of the
Securities Act and, in any case, until after the results covering 30 days of
post-merger combined operations of Parent and the Company have been filed with
the SEC, sent to shareholders of Parent or otherwise publicly issued.
Section 7.5 Nasdaq SmallCap Market. Parent shall use its best efforts to
obtain the listing on Nasdaq SmallCap Market, at or before the Effective Time,
of the additional shares of Parent Common Stock to be issued pursuant to the
Merger.
Section 7.6 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses; provided, however that all costs and expenses
relating to the HSR Act and to printing, filing and mailing the Registration
Statement, the Proxy Statement and any other filings with the SEC and all SEC
and other regulatory filing fees incurred in connection with such filings shall
be borne 50% by Parent and 50% by the Company.
Section 7.7 Agreement to Cooperate. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use all reasonable
efforts to take, or cause to be
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taken, all action to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using its reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals
and SEC "no-action" letters (including, but not limited to, required approvals
under applicable New York and Ohio state laws and regulations), to effect all
necessary registrations and filings (including, but not limited to, filings
under the HSR Act) and to lift any injunction or other legal bar to the Merger
(and, in such case, to proceed with the Merger as expeditiously as possible).
Each party hereto agrees to allow the other to review each regulatory filing
made by such party prior to the filing thereof during the term of this
Agreement.
Section 7.8 Public Statements. The parties shall release a mutually
agreed upon press release immediately upon the signing of this Agreement. None
of the parties hereto shall issue any press release or make any other public
statements, in each case relating to or connected with or arising out of this
Agreement or the matters contained therein, without obtaining the prior written
approval of the other parties to the contents and the manner of presentation and
publication thereof, provided, however, that nothing herein shall prevent any
party from making any disclosures required by applicable law or regulation
(including regulation of the SEC and the Nasdaq SmallCap Market).
Section 7.9 Accountants' Letters. Each of Parent and the Company shall
use its best efforts to cause to be delivered to the other letters of Xxxxxx
Xxxxxxxx LLP and Ehrenkrantz Sterling & Co., LLC, independent auditors for the
Company and the Parent, respectively, dated the date of the Proxy Statement, the
effective date of the Registration Statement and the Effective Time (or such
other dates reasonably acceptable to the parties) with respect to certain
financial statements and other financial information included in the
Registration Statement, which letters shall be in customary form and substance
reasonably satisfactory to the addressee.
Section 7.10 Indemnification of Certain Officers and Directors. To the
extent permitted by applicable law, Parent and Acquisition Sub agree that all
rights to indemnification from the Company or any subsidiary of the Company now
existing in favor of the directors, officers, employees or agents of the Company
and any subsidiary of the Company as provided in their respective charters or
by-laws, as in effect on the date of this Agreement, shall survive the Merger
and shall continue in full force and effect and be honored by Parent,
Acquisition Sub and the Surviving Corporation for a period of not less than six
years from the Effective Time; provided, however, that in the event any claim or
claims are asserted or made within such six-year period, all such rights shall
continue until final disposition of any such claim or claims.
Section 7.11 Tax Treatment. Each of Parent, Acquisition Sub and the
Company will use its reasonable best efforts to cause the Forward Merger to
qualify as a reorganization under the provisions of Section 368(a) of the Code.
Section 7.12 Reverse Merger. In the event a decision is made to structure
the Merger as a Reverse Merger pursuant to Section 1.1, Parent agrees to cause a
merger agreement conforming to Section 1701.78 of the GCL and effecting the
terms hereof to be adopted by Acquisition Sub. The Company agrees in such case
to enter into such merger agreement.
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Section 7.13 Indemnification. (a) The Certificate of Incorporation and
By-Laws of the Parent and Surviving Corporation shall contain the provisions
with respect to indemnification set forth in their respective Certificates of
Incorporation and By-Laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years after
the Effective Time in any manner that would adversely affect the rights
thereunder of persons who at any time prior to the Effective Time were
identified as prospective indemnitees under such Certificates of Incorporation
or By-Laws in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), unless such modification is required by law.
(b) From and after the Effective Time, the Parent and the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former officers, directors, agents and employees of the Parent, the Surviving
Corporation and the Company and their subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of
Parent and the Surviving Corporation (which approval shall not be unreasonably
withheld), or otherwise in connection with, any claim, action, suit, proceeding
or investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer, agent or employee of the Parent, the
Surviving Corporation, the Company or any subsidiary and arising out of actions
or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), in each case to the fullest extent
permitted under law (and, from and after the Effective Time, shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under law, upon receipt from
the Indemnified Party to whom expenses are advanced of the undertaking to repay
such advances contemplated by law).
(c) Without limiting the foregoing, in the event any Claim is
brought against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Surviving Corporation shall pay
all reasonable fees and expenses of counsel for the Indemnified Parties relating
to such claim (which counsel shall be reasonably acceptable to Parent) and (ii)
the Surviving Corporation shall not be liable for any settlement of any Claim
effected without its written consent, which consent shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 7.13, upon learning of any such Claim, shall promptly notify the
Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability which
the Surviving Corporation may have under this Section 7.13, except to the extent
such failure prejudices the Surviving Corporation), and shall deliver to the
Surviving Corporation the undertaking contemplated by law. Notwithstanding
anything contained herein to the contrary, the Surviving Corporation shall not
be obligated pursuant to this Section 7.13 to pay the fees and expenses of more
than one law firm (in addition to any appropriate local counsel) for all
Indemnified Parties as a group with respect to each such matter unless there is,
under applicable standards of professional conduct (as reasonably determined by
counsel to such Indemnified Parties), a conflict on any significant issue
between the positions of any two or more of such
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Indemnified Parties, in which event, any additional counsel as may be reasonably
required and shall be reasonably satisfactory to Parent may be retained by such
Indemnified Parties.
(d) For a period of three years after the Effective Time, the
Parent shall cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by Parent (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 7.13(d)
more than an amount equal to 150% of current annual premiums paid by Parent for
such insurance.
(e) This Section 7.13 shall survive the consummation of the Merger
and is intended for the benefit of, and shall be enforceable by, the Indemnified
Parties referred to herein, their heirs and personal representatives and shall
be binding on Parent and Acquisition Sub and the Surviving Corporation and their
respective successors and assigns.
ARTICLE VIII
CONDITIONS
----------
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the stockholders of
Parent pursuant to Section 5.21;
(b) The additional shares of Parent Common Stock issuable in the
Merger shall have been authorized for listing on the Nasdaq SmallCap Market;
(c) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and no additional
requirements relating thereto shall be applicable;
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect;
(e) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each party agreeing to use
all reasonable efforts to have any such injunction, order or decree lifted);
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(f) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state, federal or foreign government
or governmental agency which would prevent the consummation of the Merger or
that would have a material adverse effect on the prospects of the Surviving
Corporation; and
(g) All governmental consents and approvals legally required for
the consummation of the Merger and the transactions contemplated hereby,
including, without limitation, approval (if required) by the DOJ, FTC and the
SEC, shall have been obtained and be in effect at the Effective Time on terms
and conditions that would not have a material adverse effect on the prospects of
the Surviving Corporation.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Parent and Acquisition Sub shall have performed in all
material respects their agreements contained in this Agreement required to be
performed on or prior to the Effective Time and the representations and
warranties made by Parent and Acquisition Sub herein that are qualified as to
materiality shall be true and correct in all respects in accordance with their
terms, and the representations and warranties made by such parties herein that
are not so qualified shall be true and correct in all material respects, in each
case on and as of the date of this Agreement and on and as of the Effective Time
as if made on and as of such date, except as contemplated or permitted by this
Agreement, and except to the extent such representations and warranties relate
solely to an earlier date, in which case such representations and warranties
were true and correct on and as of such earlier date, and the Company shall have
received a certificate of the President or the Chief Financial Officer of each
of Parent and Acquisition Sub to that effect;
(b) The Company shall have received an opinion addressed to the
Company from existing counsel to Parent and Acquisition Sub, or other counsel
reasonably acceptable to the Company, dated the Closing Date;
(c) The Company shall have received the letter of Ehrenkrantz
Sterling & Co., LLC contemplated by Section 7.9;
(d) The Affiliate Agreements required to be delivered to the
Company pursuant to Section 7.4 shall have been furnished as required by Section
7.4;
(e) Parent shall have delivered to the Company at or prior to the
Effective Time such other documents (including certificates of officers of
Parent) as the Company may reasonably request in order to enable the Company to
determine whether the conditions to its obligations under this Agreement have
been met and otherwise to carry out the provisions of this Agreement;
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(f) Between the date of this Agreement and the Closing Date, there
shall have been no event with respect to Parent or any subsidiary of Parent
having or reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect;
(g) The employment agreement of Xxxxxxxx Xxxxxxx shall have been
terminated, Xx. Xxxxxxx shall be entitled to receive an aggregate of $186,000
payable in equal monthly installments commencing January 1, 1999, the Parent
shall continue to pay for his health insurance benefits until January 31, 2000
and the Parent shall continue to pay $500 per month for an automobile allowance
until March 1, 2001; and
(h) The Board of Directors and stockholders of the Company shall
have approved this Agreement within five business days after the Company's
receipt of the audited financial statements of the Parent for the year ending
December 31, 1998.
Section 8.3 Conditions to Obligation of Parent and Acquisition Sub to
Effect the Merger. The obligation of Parent and Acquisition Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the additional following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties made by the Company
herein that are qualified as to materiality shall be true and correct in all
respects in accordance with their terms, and the representations and warranties
made by such parties herein that are not so qualified shall be true and correct
in all material respects, in each case on and as of the date of this Agreement
and on and as of the Effective Time as if made on and as of such date, except as
contemplated or permitted by this Agreement, and except to the extent such
representations and warranties relate solely to an earlier date, in which case
such representations and warranties were true and correct on and as of such
earlier date, and Parent and Acquisition Sub shall have received a Certificate
of the President of the Company to that effect;
(b) Parent and Acquisition Sub shall have received an opinion from
Stroock & Stroock & Xxxxx LLP, counsel to the Company, or other counsel
reasonably acceptable to Parent and Acquisition Sub, dated the Closing Date;
(c) Parent and Acquisition Sub shall have received the letters of
Xxxxxx Xxxxxxxx LLP contemplated by Section 7.9;
(d) The employment agreement of Xxxxxxxx Xxxxxxx shall have been
terminated as set forth in Section 8.2(g);
(e) The Affiliate Agreements required to be delivered to Parent
pursuant to Section 7.4 shall have been furnished as required by Section 7.4.
(f) The Company shall have delivered to Parent at or prior to the
Effective Time such other documents (including certificates of officers of the
Company) as Parent may reasonably request in order to enable Parent to determine
whether the conditions to its
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obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement; and
(g) Between the date of this Agreement and the Closing Date, there
shall have been no event with respect to the Company or any subsidiary of the
Company having or reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders or Parent:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if (i) the Merger shall not
have been consummated on or before June 30, 1999 (the "Termination Date"), (ii)
the requisite vote of the stockholders of Parent to approve this Agreement
pursuant to Section 8.1(a) and the transactions contemplated hereby shall not be
obtained at the Parent Stockholders' Meeting, or any adjournments thereof, (iii)
any governmental or regulatory body, the consent of which is a condition to the
obligations of Parent, Acquisition Sub and the Company to consummate the
transactions contemplated hereby, shall have determined not to grant its consent
and any appeals of such determination shall have been taken and have been
unsuccessful or such body shall have imposed conditions or limitations on its
consent that would have a material adverse effect on the prospects of the
Surviving Corporation and any appeals from such imposition shall have been taken
and have been unsuccessful, or (iv) any court of competent jurisdiction in the
United States, or any state or any country in which there is a subsidiary of
Parent or the Company, shall have issued an order, judgment or decree (other
than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall have become
final and nonappealable; or
(c) by the Company (i) if Parent's Board of Directors shall have
withdrawn or modified in a manner adverse to the Company its approval or
recommendation of the Merger, this Agreement or the transactions contemplated
hereby or shall have failed to reaffirm such approval or recommendation upon the
Company's request, or shall have resolved to do any of the foregoing, (ii) if
Parent or any of the other persons or entities described in Section 6.1(c) or
6.1(h) shall take any of the actions that would be proscribed by Section 6.1(c)
or 6.1(h) but for the proviso in Section 6.1(h) allowing certain actions to be
taken if required by fiduciary duty upon advice of counsel, (iii) if there has
been (x) a material breach of any covenant or agreement herein on the part of
Parent or Acquisition Sub which has not been cured or adequate assurance of cure
given, in either case within 15 business days following receipt of notice of
such breach, or (y) a representation or warranty of Parent or Acquisition Sub
herein is or becomes untrue or incorrect in a material respect which
representation or warranty by its nature cannot be made true and correct in all
material respects prior to the Termination Date or is not made true and correct
prior to the Termination Date, (iv) if (x) Parent enters into an agreement with
any corporation,
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partnership, person, other entity or group (as defined in Section 13(d)(3) of
the Exchange Act) other than the Company whereby such entity or group would
directly or indirectly acquire all or any substantial part of the assets or
capital stock of Parent, whether by merger, share exchange, purchase of assets,
consolidation, tender offer or otherwise or (y) any third party commences a
tender or exchange offer for 20% or more of the Parent Common Stock and Parent's
Board of Directors does not recommend, or ceases to recommend, to the
stockholders of Parent that they reject such offer; or (v) the Board of
Directors and stockholders of the Company shall not have approved this Agreement
within five business days after the receipt by the Company of the audited
financial statements of the Parent for the year ending December 31, 1998 or
shall have voted against approval of this Agreement prior thereto.
(d) by Parent if there has been (x) a material breach of any
covenant or agreement herein on the part of the Company which has not been cured
or adequate assurance of cure given, in either case within 15 business days
following receipt of notice of such breach or (y) a representation or warranty
of the Company herein is or becomes untrue or incorrect in a material respect
which representation or warranty by its nature cannot be made true and correct
in all material respects prior to the Termination Date or is not made true and
correct prior to the Termination Date.
Notwithstanding the foregoing, if prior to the Closing Date, (i) any preliminary
or permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the Merger shall have been issued, and
remains in effect (each party agreeing to use all reasonable efforts to have any
such injunction, order or decree lifted); (ii) any action shall have been taken,
or any statute, rule or regulation shall have been enacted, by any state,
federal or foreign government or governmental agency which would prevent the
consummation of the Merger or that would have a material adverse effect on the
prospects of the Surviving Corporation; or (iii) any governmental consents and
approvals legally required for the consummation of the Merger and the
transactions contemplated hereby, including, without limitation, approval (if
required) by the DOJ, FTC and the SEC, shall not have been obtained or not be in
effect at the Effective Time on terms and conditions that would not have a
material adverse effect on the prospects of the Surviving Corporation, the
Termination Date shall be extended at the option of any party hereto for a
period of up to 120 days. If, at the end of such 120-day period, the matters
referred to in (i), (ii) or (iii) shall not have been satisfied to each party's
reasonable satisfaction, either party may terminate this Agreement pursuant to
the applicable provisions of this Section 9.1.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
Parent, Acquisition Sub or the Company as provided in Section 9.1 or any breach
of any party or any failure of condition giving rise to a right to terminate
this Agreement, there shall be no liability on the part of either the Company,
Parent or Acquisition Sub or their respective officers or directors except as
set forth in this Section 9.2.
(b) If this Agreement is terminated pursuant to or as the result
of the provisions of Sections 6.1(h) or 9.1(c)(i), (ii) or (iv), then
concurrently with such termination
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Parent shall pay to the Company in cash a fee (the "Termination Fee") equal to
the greater of (i) $1,000,000 or (ii) 25% of the consideration in such
Acquisition Transaction over $10 million. In addition, Parent shall pay to the
Company in cash all reasonable out-of-pocket expenses incurred by it or on its
behalf in connection with the transactions contemplated by this Agreement (the
"Expense Reimbursement"), including but not limited to, reasonable attorneys',
accountants' and advisors' fees and expenses and financing commitment fees. In
addition, if the Agreement is terminated for any reason other than pursuant to
Section 9.1(d) hereof, then Parent shall pay to the Company (x) concurrently
with such termination the Expense Reimbursement and (y) if an Acquisition
Transaction is consummated within twelve months after such termination,
concurrently with such consummation the Termination Fee.
(c) The agreements contained in this Section 9.2 are an integral
part of the transactions contemplated by this Agreement and constitute
liquidated damages or other appropriate payments and not a penalty. If a party
fails promptly pay to perform in accordance with Article IX, such party shall
pay the costs and expenses (including legal fees and expenses) of the other
party in connection with any action, including the filing of any lawsuit or
other legal action, taken to enforce the terms of this Agreement. Payments under
this Section shall be made within five business days after termination of this
Agreement.
Section 9.3 Amendment. This Agreement may be amended by the parties
hereto, at any time before or after approval hereof by the stockholders of
Parent, but, after any such approval, no amendment shall be made which (a)
changes the Merger Consideration or (b) changes any of the other principal terms
of this Agreement, in each case, without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (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; provided, however, that waiver of compliance with
any agreements or conditions herein shall not limit the parties' obligations to
comply with all other agreements or conditions herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of each of the parties.
ARTICLE X
GENERAL PROVISIONS
------------------
Section 10.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement shall
survive the Merger, except for the agreements contained in this Section 10.1,
Article III, and in Sections 2.2, 7.1(c), 7.6, 7.8, 7.10, 7.13 and Article IX.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
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Section 10.2 Brokers. The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Parent and Acquisition Sub represent and warrant that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or
Acquisition Sub.
Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) 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 the Company, to:
Nationwide Warehouse & Storage, Inc.
0000 Xxxxx Xxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxx, Xxxx 00000
Attn.: Xxxxx X. Xxxxxxx
with a copy to:
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxx X. Xxxxxxx
(b) If to Acquisition Sub or the Parent, to:
Room Plus, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn.: Xxxx Xxxxxx
Section 10.4 General Terms. The following definitions shall apply to the
extent not otherwise defined, or used in capitalized form, in this Agreement:
(a) The terms "agreements" and "contracts" shall include any
contract, purchase or sales order, franchise, insurance policy, license,
undertaking, arrangement, understanding, commitment, document, lease, sublease,
deed, mortgage, plan, indenture, xxxx of sale, assignment, proxy, voting trust
or other agreement or instrument.
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(b) The term "approval" shall include any consent, waiver,
license, permit, certificate or authorization.
(c) The term "breach" shall include any default, event of default
or event, occurrence, condition or act which, with notice or lapse of time or
both, would constitute a breach, default, or event of default or give the other
party or parties a right to accelerate any obligation under the applicable
agreement.
(d) The term "governmental authority" means any agency,
instrumentality, department, commission, court, tribunal or board of any
government, whether foreign or domestic and whether national, federal, state,
provincial or local.
(e) The term "law" shall mean, unless specifically stated
otherwise herein, laws, rules, regulations, codes, orders, ordinances,
judgments, injunctions, decrees and government policies.
(f) The terms "liability" and "liabilities" shall include any
direct or indirect indebtedness, claim, loss, damage, penalty, deficiency
(including deferred income tax and other net tax deficiencies), cost, expense,
obligation, duties or guarantee, whether accrued, absolute, or contingent, known
or unknown, fixed or unfixed, liquidated or unliquidated, matured or unmatured
or secured or unsecured.
(g) The term "person" shall include an individual, a partnership,
a joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or other legal body thereof.
(h) The term "subsidiary" shall include each entity controlled by
the Company or Parent, as the case may be.
(i) The term "transfer" shall include any sale, pledge, gift,
assignment, conveyance, lease or disposition and the term "transferred" shall
include sold, pledged, gave, assigned, conveyed, leased or disposed of.
Section 10.5 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.6 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) together with the Confidentiality Agreement,
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder; (c) shall not be assigned by
operation of law or otherwise; and (d) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of New
York (without giving effect to the provisions thereof relating to conflicts of
law) and service of process may be made upon any
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party by using the notification procedure set forth in Section 10.3. References
to Exhibits and Schedules shall be references to the exhibits of, and schedules,
to this Agreement. Such Exhibits and Schedules form an integral part of this
Agreement and are hereby incorporated in this Agreement. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
Section 10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.8 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under this Agreement.
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IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ROOM PLUS, INC.
By: /s/ Xxxx Xxxxxx
---------------
ROOM PLUS SUB, INC.
By: /s/ Xxxx Xxxxxx
---------------
NATIONWIDE WAREHOUSE & STORAGE, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------
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