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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
THE TIMES MIRROR COMPANY,
CHANDIS ACQUISITION CORPORATION,
CHANDIS SECURITIES COMPANY
AND
THE SHAREHOLDERS OF CHANDIS SECURITIES COMPANY
AUGUST 8, 1997
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TABLE OF CONTENTS
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RECITALS ................................................................................1
ARTICLE 1. PLAN OF MERGER........................................................................1
1.1. BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL................................1
1.2. THE MERGER....................................................................1
1.3. THE CLOSING...................................................................2
1.4. EFFECTIVE TIME................................................................3
1.5. EXEMPTION FROM REGISTRATION...................................................3
1.6. RESTRICTED SECURITIES.........................................................3
1.7. SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES; STATUS OF OUTSTANDING
CERTIFICATES..................................................................3
1.8. DISSENTERS' RIGHTS............................................................3
1.9. TAX-FREE REORGANIZATION.......................................................4
1.10. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION.........................................................4
ARTICLE 2. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY..................................4
2.1. ORGANIZATION AND STANDING.....................................................4
2.2. CAPITALIZATION................................................................5
2.3. SUBSIDIARIES..................................................................5
2.4. AUTHORITY, APPROVAL AND ENFORCEABILITY........................................6
2.5. LICENSES AND PERMITS..........................................................7
2.6. FINANCIAL STATEMENTS..........................................................7
2.7. MATERIAL ADVERSE CHANGES......................................................7
2.8. ASSETS; REAL PROPERTY.........................................................8
2.9. MATERIAL AGREEMENTS AND RELATIONSHIPS........................................11
2.10. EMPLOYEE BENEFITS............................................................12
2.11. COMPLIANCE WITH LAWS.........................................................12
2.12. ABSENCE OF LITIGATION........................................................13
2.13. NO BROKERS...................................................................13
2.14. TAXES........................................................................13
2.15. COMPLIANCE WITH INSTRUMENTS..................................................15
2.16. NO POWERS OF ATTORNEY OR SURETYSHIPS.........................................15
2.17. TAX-FREE REORGANIZATION......................................................16
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ARTICLE 3. REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS............................16
3.1. ORGANIZATION.................................................................16
3.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.......................................16
3.3. OWNERSHIP OF COMPANY CAPITAL STOCK...........................................17
3.4. NO REGISTRATION; INVESTMENT INTENT...........................................17
3.5. NO BROKER....................................................................18
3.6. TAX-FREE REORGANIZATION......................................................18
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF TMC AND ACQUISITION SUB...........................19
4.1. ORGANIZATION AND STANDING....................................................19
4.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.......................................19
4.3. FINANCIAL STATEMENTS AND SEC REPORTS.........................................20
4.4. TMC CAPITAL STOCK............................................................21
4.5. NO BROKERS...................................................................21
4.6. TAX-FREE REORGANIZATION......................................................21
4.7. CAPITAL STOCK................................................................21
ARTICLE 5. COVENANTS............................................................................22
5.1. CONDUCT OF BUSINESS..........................................................22
5.2. ACTIONS CONTRARY TO TAX FREE TREATMENT.......................................23
5.3. CONTINUITY OF INTEREST AND RESTRICTIONS ON RESALE............................24
5.4. NO TRANSFER OF COMPANY CAPITAL STOCK.........................................25
5.5. BEST EFFORTS.................................................................25
5.6. REGISTRATION RIGHTS; NYSE LISTING............................................25
5.7. TERMINATION OF CERTAIN AGREEMENTS............................................25
ARTICLE 6. CONDITIONS TO MERGER.................................................................25
6.1. CONDITIONS TO OBLIGATIONS OF TMC, ACQUISITION SUB, THE SHAREHOLDERS, AND
THE COMPANY..................................................................25
6.2. CONDITIONS TO OBLIGATIONS OF TMC AND ACQUISITION SUB.........................26
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS................27
ARTICLE 7. INDEMNITY............................................................................27
7.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; NO
SUBROGATION..................................................................27
7.2. INDEMNIFICATION OF TMC AND THE SURVIVING CORPORATION.........................28
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7.3. INDEMNIFICATION OF THE SHAREHOLDERS..........................................30
7.4. PROCEDURE FOR INDEMNIFICATION OF TMC WITH RESPECT TO THIRD-PARTY CLAIMS......30
7.5. PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS WITH RESPECT TO
THIRD-PARTY CLAIMS...........................................................31
ARTICLE 8. TERMINATION..........................................................................32
8.1. TERMINATION BY MUTUAL CONSENT................................................32
8.2. TERMINATION BY TMC OR ACQUISITION SUB OR THE COMPANY.........................32
8.3. EFFECT OF TERMINATION........................................................32
ARTICLE 9. MISCELLANEOUS........................................................................33
9.1. NOTICES......................................................................33
9.2. ENTIRE AGREEMENT; MODIFICATIONS; WAIVER......................................34
9.3. COUNTERPARTS.................................................................35
9.4. PUBLICITY....................................................................35
9.5. SUCCESSORS AND ASSIGNS.......................................................35
9.6. GOVERNING LAW................................................................35
9.7. EXPENSES.....................................................................35
9.8. GENDER AND NUMBER............................................................35
9.9. CONSTRUCTION OF AGREEMENT....................................................35
9.10. CONSENT TO JURISDICTION AND FORUM SELECTION..................................35
9.11. ATTORNEYS' FEES..............................................................36
9.12. CONSENT TO ISSUANCE OF SERIES C-1 AND C-2 PREFERRED STOCK....................36
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EXHIBITS
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Exhibit A Certificate of Merger
Exhibit B-1 Certificate of Designation of Series C-1 Preferred Stock
Exhibit B-2 Certificate of Designation of Series C-2 Preferred Stock
Exhibit C Stock Ownership of the Company; TMC Merger Shares to be received by
the Shareholders in the Merger
Exhibit D Opinion of Counsel to the Company and Xxxxxxxx Trust No. 2 and
Opinion of Counsel to the Other Shareholders
Exhibit E Opinion of Counsel to TMC and Acquisition Sub
SCHEDULES
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Schedule 2.1 Office & Personnel Locations; Business Undertaken
Schedule 2.2 Capitalization
Schedule 2.3 Subsidiaries; Other Investments
Schedule 2.4 Consents
Schedule 2.6 Financial Statements Exceptions
Schedule 2.7 Material Changes
Schedule 2.8(a) Assets
Schedule 2.8(b) Real Property Descriptions
Schedule 2.9 Material Agreements
Schedule 2.13 Litigation
Schedule 2.14 Brokers
Schedule 2.15 Taxes
Schedule 2.16 Compliance with Instruments
Schedule 2.17 Powers of Attorney
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as
of August 8, 1997 by and among (i) The Times Mirror Company, a Delaware
corporation ("TMC"); (ii) Chandis Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of TMC ("Acquisition Sub" or the
"surviving corporation"); (iii) Chandis Securities Company, a California
corporation (the "Company"); and (iv) all of the shareholders of the Company
(the "Shareholders"), the names of which are set forth on the signature pages
hereto.
RECITALS
The parties hereto intend that, subject to the terms and conditions
hereinafter set forth, the Company will be merged with and into Acquisition Sub
(the "Merger") in accordance with the terms of this Agreement, a Certificate of
Merger substantially in the form attached hereto as Exhibit A (the "Certificate
of Merger"), and the applicable provisions of the Delaware General Corporation
Law (the "Delaware Law") and the California Corporations Code (the "California
Law"), in connection with which all of the outstanding shares of capital stock
of the Company (the "Company Capital Stock") will be exchanged for and converted
into the right to receive shares of capital stock of TMC ("TMC Capital Stock").
The Company Capital Stock shall be automatically converted into TMC Capital
Stock, and certificates representing Company Capital Stock will be exchanged for
certificates representing TMC Capital Stock, as provided in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
do hereby agree as follows:
ARTICLE 1.
PLAN OF MERGER
1.1. BOARD OF DIRECTORS' AND SHAREHOLDERS' APPROVAL. The respective
boards of directors of Acquisition Sub and the Company have duly adopted and
approved this Agreement and the transactions contemplated hereby (the
"Transactions"), and this Agreement and the Transactions have been unanimously
approved by the Shareholders, as all of the shareholders of the Company. The
Agreement and the Transactions shall be promptly submitted for consideration to
the Board of Directors of TMC and, subject to adoption and approval by such
Board, shall be approved by TMC, as the sole stockholder of Acquisition Sub.
1.2. THE MERGER. Subject to the terms and conditions of this Agreement,
the Company shall be merged with and into Acquisition Sub pursuant to the
Certificate of Merger, with Acquisition Sub as the surviving corporation, and
the separate existence of the Company shall thereupon cease. At the Effective
Time (as hereinafter defined), the Acquisition Sub, as the surviving corporation
in the Merger, shall continue its corporate existence under the laws of the
State of Delaware. As a result of the Merger, all of the issued and outstanding
shares of
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Company Capital Stock shall be converted into TMC Capital Stock in the manner
described below.
(a) At the Effective Time, all of the issued and outstanding
shares of Company Capital Stock shall, by virtue of the Merger and without any
action on the part of TMC, Acquisition Sub or the Company be converted
automatically into the right to receive shares of TMC Capital Stock (the "TMC
Merger Shares"), in such number, and of such classes, as are set forth
immediately below. The TMC Merger Shares shall consist of (a) 6,581,432 shares
of "Series A Common Stock"; (b) 9,656,432 shares of "Series C Common Stock"; (c)
380,972 shares of "Series C-1 Preferred Stock"; and (d) 245,100 shares of
"Series C-2 Preferred Stock" (as such terms are defined in Section 4.7 hereof).
The terms of the Series C-1 and C-2 Preferred Stock shall be as set forth in the
Certificates of Designation attached hereto as Exhibit B-1 and Exhibit B-2,
respectively (collectively, the "Certificates of Designation"). The TMC Merger
Shares shall be allocated among the Shareholders in accordance with Exhibit C.
In the Merger, any shares of Company Capital Stock that are owned by the Company
shall be canceled, and no securities of TMC or other consideration shall be
delivered in exchange therefor. No shares of capital stock of the Company shall
be issued in, or outstanding immediately after, the Merger. Neither the
authorized nor the outstanding capital stock of Acquisition Sub shall be
affected by, and no shares of capital stock of Acquisition Sub shall be issued
in, the Merger.
(b) If, between the date of this Agreement and the Effective Time,
any of the Series A Common Stock or the Series C Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split, reverse split, stock dividend or
combination, the consideration to be issued to the holders of Company Capital
Stock in the Merger shall be correspondingly adjusted.
(c) No certificates or scrip representing fractional shares of TMC
Capital Stock shall be issued in connection with the Merger, and any fractional
interests shall not entitle the holder thereof to any rights as a securityholder
of TMC. Each holder who would have otherwise been entitled to receive a fraction
of a share of Series A Common Stock or Series C Common Stock shall be entitled
to receive, in lieu thereof, an amount in cash (without interest), to be
determined by multiplying (a) $50.75, by (b) the fractional interest to which
such holder would have otherwise been entitled. Each holder who would have
otherwise been entitled to receive a fraction of a share of Series C-1 Preferred
Stock or Series C-2 Preferred Stock shall be entitled to receive, in lieu
thereof, an amount in cash (without interest), to be determined by multiplying
(a) $500 by (b) the fractional interest to which such holder would have
otherwise been entitled.
1.3.THE CLOSING. Upon the satisfaction or waiver of all conditions set
forth in Article 6 of this Agreement, the closing (the "Closing") of the Merger
shall take place at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 X. Xxxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at 5:00 p.m. on August 8, 1997, or such
other place, time and date as TMC and the Company may mutually select (with the
date of the Closing being referred to herein as the "Closing Date").
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1.4. EFFECTIVE TIME. Pursuant to Delaware Law and California Law, the
Certificate of Merger shall be filed, simultaneously with the Closing, in the
offices of the Secretary of State of the State of Delaware and the Secretary of
State of the State of California. The Merger shall become effective immediately
upon the filing of the Certificate of Merger with the office of the Secretary of
State of the State of Delaware (the "Effective Time").
1.5. EXEMPTION FROM REGISTRATION. The TMC Merger Shares will be issued
in a transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"), and exempt from registration or qualification
under the California Corporate Securities Law (the "California Securities Act")
and any other applicable state securities laws.
1.6. RESTRICTED SECURITIES. The TMC Merger Shares will be subject to
the restrictions and obligations imposed pursuant to Article 5 hereof, as well
as restrictions under applicable securities laws (as referenced in Section 3.4
hereof).
1.7. SURRENDER AND EXCHANGE OF OUTSTANDING CERTIFICATES; STATUS OF
OUTSTANDING Certificates. The conversion of shares of Company Capital Stock into
the TMC Merger Shares as provided for by this Agreement shall occur
automatically at the Effective Time without further action by the holders
thereof. Until surrendered, all of the certificates held by each Shareholder
that prior to the Effective Time represented shares of Company Capital Stock
shall, in the aggregate, be deemed to evidence that number and class of TMC
Merger Shares to which such Shareholder is entitled pursuant to Section 1.2 of
this Agreement, as set forth on Exhibit C. At the Closing and at any time
thereafter, each Shareholder upon presentation to TMC of all of the certificates
theretofore representing all of the shares of Company Capital Stock held by such
Shareholder (as set forth on Exhibit C) shall be entitled to receive from TMC,
in exchange for and upon the surrender of all of such Shareholder's Company
Capital Stock certificates, certificates representing the number and class(es)
of TMC Merger Shares to which the holder of such certificates is entitled
pursuant to Section 1.2 of this Agreement (as set forth on Exhibit C), and TMC
shall cause such certificates with respect to such TMC Merger Shares to be
issued to such Shareholder promptly after such presentation. In the case of lost
or destroyed certificates representing shares of Company Capital Stock, the
Shareholder shall submit proof of loss or destruction and such indemnity as
shall be required by TMC.
1.8. DISSENTERS' RIGHTS. The Shareholders, as all of the holders of
Company Capital Stock, have and, prior to the Effective Time, TMC, as the sole
stockholder of Acquisition Sub, will have approved this Agreement and the
Transactions, and, therefore, no person shall be entitled to exercise the
dissenters' rights as set forth in Chapter 13 of the California Law or Section
262 of the Delaware Law.
1.9. TAX-FREE REORGANIZATION. The parties intend to adopt the Agreement
as a plan of reorganization within the meaning of Section 354 of the Code, and
to consummate the Merger in accordance with Section 368(a)(1)(A) of the Code.
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1.10. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION.
(a) The Certificate of Incorporation and Bylaws of Acquisition
Sub, as in effect at the Effective Time, shall be (until amended or repealed as
provided by law) the Certificate of Incorporation and Bylaws, respectively, of
the surviving corporation.
(b) The directors and officers of the surviving corporation
immediately following the Effective Time shall be the directors and officers of
Acquisition Sub immediately prior to the Effective Time (until their successors
are elected or appointed and qualified).
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Shareholders, jointly and severally, represent and warrant to TMC
and Acquisition Sub as follows:
2.1. ORGANIZATION AND STANDING.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted, and is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
the failure to so qualify would, individually or in the aggregate, have a
Material Adverse Effect. Whenever used in this Article 2, "Material Adverse
Effect" shall mean a material adverse effect on the business, assets, prospects,
condition (financial or otherwise) or results of operations of the Company or
the ability of the Company to consummate the Transactions.
(b) Schedule 2.1(b) sets forth a complete and accurate list of (i)
each location where the Company maintains an office or personnel or owns or
leases real property, and (ii) each state or other jurisdiction in which the
Company is legally qualified to transact business.
(c) The Company is a holding company. Except as set forth on
Schedule 2.1(c), the Company does not undertake, and has not undertaken, any
business other than the holding of the assets referenced in Sections 2.8(b) and
(c).
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(d) The Company has made available to TMC complete and accurate
copies of its Articles of Incorporation and Bylaws, its minute books, containing
minutes of all of its directors', board committees' and shareholders' meetings
(as well as any actions taken by written consent) and stock books. Each set of
minutes (or action taken by written consent) contained in the minute books
accurately reflect the actions that were taken by the indicated body. The
meetings of directors, board committees or shareholders referred to in the
minutes were duly called and held, and the signatures contained on all documents
in the minute books and stock books are the true signatures of the persons
purporting to have signed the same.
2.2. CAPITALIZATION.
(a) The authorized capital of the Company consists of (i) 50,000
shares of Common Stock, without par value (the "Common Stock"), of which 30,933
shares are issued and outstanding; (ii) 61,866 shares of Class A Stock, without
par value, non-voting (the "Class A Stock"), of which 24,150 shares are issued
and outstanding; (iii) 30,933 shares of Class B Stock, without par value (the
"Class B Stock"), of which 1,412 shares are issued and outstanding; and (iv)
30,933 shares of Class C Stock, without par value (the "Class C Stock"), of
which 24,108 shares are issued and outstanding. Except as set forth in the
preceding sentence there are no outstanding shares of capital stock of the
Company and there exist no (i) outstanding options, warrants or other rights to
purchase or subscribe for any equity securities or other ownership interests of
the Company, (ii) indebtedness or securities directly or indirectly convertible
into or exchangeable for any equity securities of the Company, or (iii) any
other obligations, rights, agreements or arrangements, whether absolute or
contingent, with respect to the issuance of any equity securities of the
Company. Exhibit C accurately sets forth the record ownership of all issued and
outstanding shares of Company Capital Stock.
(b) All of the issued and outstanding shares of Company Capital
Stock have been duly authorized and validly issued, are fully paid and
non-assessable, and were issued in full compliance with all applicable federal
and state laws, rules and regulations and were not issued in violation of any
preemptive rights. The Company has no obligation, whether absolute or
contingent, to repurchase any of the issued and outstanding shares of Company
Capital Stock.
(c) Except as set forth on Schedule 2.2 and except for any
restrictions imposed by applicable state and federal securities laws, there is
no right of first refusal, co-sale right, right of participation, right of first
offer, option or other restriction on transfer applicable to any shares of
Company Capital Stock. Except as set forth on Schedule 2.2, the Company is not a
party to, or subject to, any agreement that affects or relates to the voting or
giving of written consent with respect to any shares of Company Capital Stock,
and there is no agreement between or among any Shareholders to such effect.
2.3. SUBSIDIARIES. Except as set forth on Schedule 2.3, the Company
does not own or hold, directly or indirectly, an interest or investment in any
corporation, partnership, business, trust or other entity, except for shares of
TMC Capital Stock. The Company has no obligations, whether absolute or
contingent, to purchase or acquire any equity security or other ownership
interest in any other business entity.
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2.4. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the Transactions, and all corporate action on its part necessary for
such execution, delivery, performance and consummation has been duly taken. The
Agreement and the Transactions have been unanimously approved by all of the
holders of all classes of the Company Capital Stock.
(b) The execution and delivery by the Company of this Agreement do
not, and the performance and consummation of the Transactions will not, result
in or give rise to (with or without the giving of notice or the lapse of time,
or both) any conflict with, breach or violation of, or default, termination,
forfeiture or acceleration of obligations under, or result in any lien by virtue
of, any terms or provisions of (i) its Articles of Incorporation or Bylaws, (ii)
any statute, rule or regulation, or any judicial, governmental, regulatory or
administrative decree, order, writ or judgment, directive, interpretation or
other requirement applicable to the Company or its assets, or (iii) except as
set forth on Schedule 2.4, any material agreement, lease or other instrument to
which it is a party or by which it or any of its assets may be bound.
(c) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of the Company
for the consummation by it of the Transactions, except the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
the Secretary of State of the State of California.
(d) This Agreement has been duly and validly executed and
delivered by the Company and is the legal, valid and binding obligation of the
Company, enforceable against it in accordance with the terms hereof, except as
such enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) subject to general equitable principles.
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2.5. LICENSES AND PERMITS. The Company has, and at all times has held,
all permits, licenses, orders, authorizations, registrations, qualifications,
approvals and other analogous instruments (collectively, "Permits") (and each is
in full force and effect) as required by applicable law for the purpose of
conducting its business or owning its properties or both, in each jurisdiction
in which it does business or owns property or in which such Permits are
otherwise required and where the failure to have such Permits would have a
Material Adverse Effect. The Company is in compliance with all such Permits,
except where non-compliance would not have a Material Adverse Effect. There are
no proceedings pending or, to the knowledge of the Shareholders, threatened to
revoke or terminate any such presently existing Permits and the Shareholders
know of no reason why any such Permit would not be renewed in the ordinary
course. The Company has made all filings and registrations and the like
necessary or required by law to conduct its business, except where the failure
to make such filings and registrations would not have a Material Adverse Effect.
2.6. FINANCIAL STATEMENTS.
(a) The Company has delivered to TMC complete copies of (y) its
audited balance sheets as of October 31, 1996, 1995, and 1994 and the related
audited statements of income and retained earnings and cash flows for the years
then ended and (z) its unaudited balance sheet as of July 31, 1997 and the
related unaudited statement of income and retained earnings for the period from
October 31, 1996, through July 31, 1997 (collectively, the "Company
Financials"). Except as set forth on Schedule 2.6, the Company Financials (i)
have been prepared from the books and records of the Company, in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
with prior periods and (ii) present fairly the financial position of the Company
as of the respective dates and the results of its operations and cash flows for
the periods then ended.
(b) Except as set forth on Schedule 2.6, there is no outstanding
claim, liability or obligation of any nature, whether absolute, accrued,
contingent or otherwise, other than the liabilities and obligations reflected on
the latest balance sheet included in the Company Financials, except for (i)
liabilities and obligations for the fees and expenses charged by Xxxxxxx Xxxxx &
Co. and Irell & Xxxxxxx LLP in connection with the Transactions; (ii)
liabilities and obligations (not exceeding $100,000, in the aggregate) incurred
in the ordinary course of business consistent with past practice since the date
of the most recent balance sheet included in the Company Financials; and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected as liabilities in the
Company Financials.
2.7. MATERIAL ADVERSE CHANGES. Since October 31, 1996, except as is set
forth on Schedule 2.7, there has not occurred:
(a) Any events, circumstances or developments of any character
that have caused, or are reasonably likely to cause, a Material Adverse Effect;
(b) Any increase in the indebtedness or liabilities of the Company
over the level thereof as reflected on the most recent balance sheet included in
the Company
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Financials (except as contemplated by this Agreement), or any
mortgage, pledge or encumbrance on any of the assets of the Company;
(c) Any amendment or modification of, or waiver with respect to,
any Material Agreement (as defined below), or any termination of any agreement
that would have been a Material Agreement were such agreement in existence on
the date hereof;
(d) Any creation of any written or oral agreement, contract,
commitment or transaction involving the Company that extends beyond the first
anniversary of the date hereof or that involves obligations or payments
thereunder in excess of $50,000;
(e) Any transaction by the Company, whether or not covered by the
foregoing, not in the ordinary course of business and consistent with past
practice, including, without limitation, any purchase or sale of any asset
having a cost or value in excess of $50,000;
(f) Any material alteration in the manner of keeping the books,
accounts or records of the Company, or in the accounting practices therein
reflected;
(g) Any declaration or payment of any dividends or distributions
by the Company (other than as reflected in the Company Financials), any
acquisition or redemption by the Company of any of its equity securities or
(except for this Agreement) any transaction between the Company and one or more
of its officers, directors, any of the Shareholders (including for this purpose
any trustees or beneficiaries of any Shareholder that is a trust) or any
affiliates thereof; or
(h) Any agreement, commitment or understanding to do any of the
things described in subsections (a) through (g) of this Section 2.7.
2.8. ASSETS; REAL PROPERTY.
(a) Except as set forth in Schedules 2.8(a) or (b) the Company has
good and marketable (and, in the case of Real Property, as defined below, fee
simple absolute) title to all of the assets reflected on the Company Financials
(except for assets sold in the ordinary course of business, consistent with past
practice, since the date of the latest balance sheet included in the Company
Financials), free and clear of all liens, mortgages, pledges, charges, security
interests, encumbrances, title defects, leases, options to purchase, material
restrictions or adverse claims of any nature whatsoever which, individually or
in the aggregate, would have a Material Adverse Effect on the Company or on the
value or the current or intended use of such asset.
(b) Set forth on Schedule 2.8(b) is a complete and correct list of
all assets owned by the Company having a value in excess of $50,000.
(c) Schedule 2.8(c) sets forth a complete and correct description
of each parcel of real property (collectively, the "Real Property") owned or
used by the Company (including properties co-owned with others).
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(i) No portion of the Real Property contains, or is being or
has been used in any manner at any previous time for the storage, disposal,
treatment, processing, production, refinement, generation or other handling of,
waste contamination, oils or petroleum products, PCBs, asbestos, or other waste,
compound, substance or material the use, release, disposal, presence or storage
of which is restricted, or regulated, or required to be reported, or could give
rise to liability or an obligation to xxxxx or remediate, under any
"Environmental Protection Law," as such term is defined below (hereinafter
"Hazardous Substances").
(ii) There is not present at, under, in or emanating from, any
of the Real Property, any Hazardous Substances in soil, ground water,
improvements or otherwise.
(iii) No condition exists on or with respect to any of the
Real Property that violates any federal, state, local, or other law (including
the common law), regulation, code, order, or rule (an "Environmental Protection
Law"), or requires reporting to any governmental authority or that may give rise
to any liability under any Environmental Protection Law.
(iv) No portion of the Real Property contains underground
tanks of any type, or any materials containing PCBs or any asbestos or contains
any above-ground, surface or sub-surface conditions that constitute, or that
through the passage of time may constitute if not abated, a public or private
nuisance or a trespass.
(v) No portion of the Real Property has been designated,
listed, or identified in any manner by the United States Environmental
Protection Agency (the "EPA") or any other federal, state or local agency or
governmental entity under or pursuant to any Environmental Protection Law as a
site which has been reported to have had or which has had a release of Hazardous
Substances or as a hazardous waste or hazardous substance disposal or removal
site, Superfund or clean-up site or candidate for investigation or remediation
or removal or closure pursuant to any Environmental Protection Law.
(vi) Neither the Company nor any of its affiliates has
received at any time a summons, citation, notice, directive, letter or other
communication, written or oral (an "Environmental Notice"), from the EPA or any
other federal, state, local or other governmental agency or instrumentality,
related to any portion of the Real Property, including, without limitation,
actual or possible releasing, spilling, leaking, pumping, pouring, emitting,
emptying, dumping or disposing of Hazardous Substances, and there exist no facts
that would be the basis for the Company or any of its affiliates receiving any
such Environmental Notice.
(vii) The Real Property complies with, and is currently
operated in accordance with, all applicable ordinances, laws, rules,
regulations, statutes, codes and orders affecting such Real Property or the
possession, use, occupancy or operation thereof promulgated by any federal,
state, local or other governmental agency or instrumentality (including, without
limiting the generality of the foregoing, the Americans With Disabilities Act,
health and safety codes, and all applicable zoning ordinances) and any and all
liens, encumbrances, agreements, covenants, conditions and restrictions
affecting the Real Property or the owner or occupant thereof. Neither the
Company nor any affiliate has received any notice from any governmental
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agency or instrumentality requiring any repairs or changes to any portion of the
Real Property, except for notices which have been fully complied with.
(viii) All improvements on the Real Property are in good
condition, reasonable wear and tear excepted, and there are no material defects
in any such improvements which would be likely to preclude the use of the
improvements for the uses for which they are now being put. There are no defects
in any such improvements which would pose an unreasonable risk to the life or
health of any person.
(ix) The Company has been advised that TMC has obtained an
appraisal of the Real Property prepared for TMC by Xxxx-Shelger Associates (the
"Appraisal"). To the best knowledge of the Shareholders, the facts upon which
the Appraisal was based are accurate in all material respects.
(x) The Company has no notice of any pending or threatened
proceeding in eminent domain or otherwise which would affect the Real Property,
or any portion thereof, nor does the Company know of any facts which might give
rise to such action or proceeding.
(xi) The Company has no knowledge of any plan, study or effort
of any governmental authority or agency or of any nongovernmental person or
entity which in any way would materially affect the use of the Real Property, or
any portion thereof.
(xii) To the Company's best knowledge, there are no intended
public improvements which will result in any charge being levied or assessed
against, or in the creation of any lien upon the Real Property or any portion
thereof.
(xiii) The Real Property has not generated revenues in excess
of $5,000,000 since 1993.
(xiv) All taxes, assessments, charges and impositions
(collectively, "Real Property Impositions") which now constitute or may
constitute a lien on any of the Real Property have been paid before delinquency,
except those Real Estate impositions which are not yet payable.
(xv) The exercise of the right to use or maintain any easement
on or against any of the Real Property in accordance with the terms of such
easement will not damage any of the improvements on or of any of the Real
Property, and shall not interfere with the use or occupancy of any of the Real
Property.
(d) The representations and warranties contained in Section 2.8(c)
shall survive and continue to be enforceable notwithstanding any investigation,
and any knowledge of inaccuracy, by TMC or Acquisition Sub, it being agreed that
TMC and Acquisition Sub are entitled to be indemnified pursuant to Section
7.2(a) hereof against any Losses resulting from an inaccuracy in the
representations and warranties contained in Section 2.8(c) regardless of whether
any or all of them had knowledge that such representations and warranties are
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inaccurate. The parties hereto acknowledge that they are both aware that certain
of the representations and warranties made by the Shareholders in Section 2.8(c)
may be inaccurate and that such representations and warranties are not intended
to attempt to represent that certain statements are in fact true, but rather are
intended to clarify that TMC and Acquisition Sub are entitled to be indemnified
against any Losses resulting from any inaccuracies in such representations and
warranties.
2.9. MATERIAL AGREEMENTS AND RELATIONSHIPS.
(a) Except as set forth on Schedule 2.9, the Company is not a
party to or subject to any oral or written:
(i) joint venture, partnership or other contract or
arrangement presently in effect involving the sharing of profits or losses;
(ii) agreement presently in effect relating to the purchase or
acquisition, by merger or otherwise, of a significant portion of its business,
assets or securities by any other person, or of any other person by it, other
than as contemplated herein;
(iii) agreement presently in effect containing a covenant or
covenants which purport to limit its ability or right to engage in any lawful
business activity material to it or to compete with any person or entity in a
business material to it;
(iv) agreement presently in effect involving payments to or
obligations of it in excess of $50,000, not otherwise described in this Section
2.9;
(v) agreement that relates to the borrowing or lending by the
Company of any money or the guaranty by the Company of any obligation of another
in excess of $50,000;
(vi) agreement not terminable on 60 days notice or less or
with a performance obligation on the part of the Company due more than 6 months
from today's date;
(vii) agreement that creates or continues or, upon the
occurrence of some future event, would create any material claim, lien, charge
or encumbrance against, or right of any third party with respect to, any
material asset of the Company;
(viii) agreement that affects the ownership, use, development,
operation, or management of the Real Property; or
(ix) agreement with any of its directors or officers, any
Shareholder, or any trustee or beneficiary of any of the Shareholders.
The term "Material Agreements" means the agreements of the Company required to
be disclosed on Schedule 2.9.
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(b) The Company has performed all material obligations required to
be performed by it on or prior to the date hereof under each Material Agreement
to which it is a party, except for such failures to perform, defaults, breaches,
or violations under such instruments or obligations that would not have a
Material Adverse Effect.
2.10. EMPLOYEE BENEFITS.
(a) The Company has only one employee, Xx. Xxxxxx X. Xxxxxxxxxx.
The Company has not had any other employees during the last three years (and
shall have no employees by the Effective Time).
(b) Neither the Company nor any of its "ERISA Affiliates" sponsors
or has ever sponsored, maintained, contributed to, or incurred an obligation to
contribute to, or in respect of, any "Employee Pension Benefit Plan" or "Benefit
Arrangement" (as such terms are defined below).
(c) For purposes of this Section 2.10, the following definitions
shall apply:
(i) "Benefit Arrangement" means any benefit arrangement that
is not an Employee Benefit Plan, including without limitation (A) any employment
or consulting agreement, (B) any arrangement providing for insurance coverage or
workers' compensation benefits, (C) any incentive bonus or deferred bonus
arrangement, (D) any arrangement providing termination allowance, severance or
similar benefits, (E) any equity compensation plan, (F) any deferred
compensation plan, and (G) any compensation policy and practice maintained by
the Company covering any employees, former employees, directors and former
directors of the Company or the beneficiaries of any of them.
(ii) "Employee Benefit Plan" means any employee benefit plan,
as defined in Section 3(3) of ERISA.
(iii) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(iv) "ERISA Affiliate" of any person means any other person
that, together with such person as of the relevant measuring date under ERISA,
was or is required to be treated as a single employer under Section 414 of the
Internal Revenue Code of 1986.
2.11. COMPLIANCE WITH LAWS. The Company has complied in all material
respects with all foreign, federal, state, local and county laws, ordinances,
regulations, judgments, orders, decrees or rules of any court, arbitrator or
governmental, regulatory or administrative agency or entity applicable to the
Company, its assets or its business, except in such cases where non-compliance
would not have a Material Adverse Effect. The Company has not received any
governmental notice of any violation or alleged violation by the Company of any
such laws, rules, regulation or orders.
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2.12. ABSENCE OF LITIGATION. Except as set forth on Schedule 2.12, the
Company is not a party to any litigation, claim, arbitration, investigation or
other proceeding, nor, to the best knowledge of the Shareholders, is there any
such litigation, claim, arbitration, investigation or other proceeding
threatened against the Company. Neither the Company, the Shareholders, nor any
of their respective officers or directors is bound by any judgment, decree,
injunction, ruling or order of any court, governmental, regulatory or
administrative department, commission, agency or instrumentality, arbitrator or
any other person that relates to the Company.
2.13. NO BROKERS. Except as set forth in Schedule 2.13, the Company is
not obligated for the payment of fees or expenses of any broker or finder in
connection with the origin, negotiation or execution of this Agreement or in
connection with the Transactions.
2.14. TAXES.
(a) Definitions. For purposes of this Agreement:
(i) the term "Taxes" means (A) all federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, (B) any liability
for payment of amounts described in clause (A) whether as a result of transferee
liability, of being a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law and (C) liability
for the payment of amounts described in clauses (A) or (B) as a result of any
tax sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and the term "Tax" means any
one of the foregoing Taxes; and
(ii) the term "Returns" means all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and the term "Return" means any one of the foregoing Returns.
(b) The Company has accurately prepared and timely filed all
Returns required to have been filed. The Company will accurately prepare and
timely file all Returns required to be filed after the date of this Agreement
and on or prior to the Closing, and will provide TMC the reasonable opportunity
to review and comment on any such Return prior to its filing.
(c) The Company has timely paid all Taxes required to have been
paid by it. The Company will timely pay all Taxes that are required to be paid
after the date of this Agreement and on or prior to the Closing.
(d) Except as set forth on Schedule 2.14: (i) none of the Returns
of the Company have been audited or are under audit by any tax authority, and
the Company has not
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received notice of a forthcoming audit of its Returns; (ii) no claim has been
made by a Tax authority in a jurisdiction where the Company does not file
Returns that such entity is or may be subject to Tax by that jurisdiction; (iii)
no extensions or waivers of statutes of limitations with respect to the Returns
have been given by or requested from the Company; and (iv) no power of attorney
granted by the Company with respect to Taxes is in force.
(e) There are no liens for any material amount of Taxes (other
than for current Taxes not yet due and payable) upon the assets of the Company.
(f) The Company is not a party to or bound by any tax indemnity,
tax sharing or tax allocation agreement.
(g) The Company has not ever been a member of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, or a member of
combined, consolidated or unitary group for state, local or foreign Tax
purposes. The Company has not made an election under Section 1361 of the Code or
any predecessor provision or any similar provision for state, local or other Tax
purposes. The Company has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state, local or foreign income Tax law) or agreed to have Section
341(f)(2) of the Code (or any corresponding provision of state, local or foreign
income Tax law) apply to any disposition of any asset owned by it. The Company
has not made a consent dividend election under Section 565 of the Code.
(h) The Company has not agreed to make, nor is it required to
make, any adjustment under Sections 481(a) or 263A of the Code or any comparable
provision of state or foreign tax laws by reason of a change in accounting
method or otherwise. The Company has always used and continues to use the
accrual method of accounting for federal and state income and franchise Tax
purposes. The Company is not a party to or bound by any closing agreement, offer
in compromise or similar agreement with any Taxing authority.
(i) The Company is not, and has not been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(j) Except as set forth in Schedule 2.14, to the knowledge of the
Shareholders, as of the date hereof, no Shareholder is other than a United
States person within the meaning of the Code.
(k) Except as set forth in Schedule 2.14, the Company does not
have a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country, and the Company has not engaged in a trade or business within any
foreign country. The Company has not made a "waters-edge election" pursuant to
California Revenue and Tax Code Section 25110.
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(l) Except as set forth on Schedule 2.14, the Company is not party
to any joint venture, partnership, or other arrangement or contract which could
reasonably be expected to be treated as a partnership for federal income tax
purposes.
(m) Except as set forth on Schedule 2.14, the unpaid Taxes of the
Company as of the date hereof are not materially in excess of the unpaid
liability for Taxes reflected on the Company Financials.
(n) All material elections with respect to Taxes affecting the
Company as of the date of this Agreement that are not readily identifiable on
the Returns heretofore provided to or made available to TMC and any attachments
thereto are set forth in Schedule 2.14. No material election with respect to
Taxes will be made after the date of this Agreement without the prior written
consent of TMC.
(p) Schedule 2.14 sets forth all state, local or foreign
jurisdictions in which the Company is or at any time during the past five years
has been subject to Tax. Other than in the State of California, at no time
during the five-year period ending on the date hereof did the Company engage in
the following activities in any state, local or foreign jurisdiction: (i)
perform more than an insignificant amount of services or solicit business using
its own employees, or (ii) engage in or do business, or (iii) own property.
(q) Schedule 2.14 sets forth all Returns the due dates for which
(including any valid extensions of time currently in effect) are sixty (60) or
fewer days following the Closing, and the Taxes for which estimated or final
payments may, based on current operations of the Company, become due sixty (60)
or fewer days following the Closing.
2.15. COMPLIANCE WITH INSTRUMENTS. Except as set forth in Schedule
2.15, the Company is not (and would not be with the giving of notice or the
passage of time or both) in violation of, conflict with, breach of or default
under any term or provision of its Articles of Incorporation or Bylaws, or any
agreement, arrangement, contract, lease or other instrument to which it is bound
or its properties are subject, except where such violation, conflict, breach or
default would not have a Material Adverse Effect.
2.16. NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 2.16, (a) the Company has not granted any general or special powers of
attorney and (b) the Company has no obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, consignor, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
2.17. TAX-FREE REORGANIZATION. The Company has not engaged in any
transaction which it believes would preclude the Transactions from constituting
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS
Each of the Shareholders severally and not jointly represents and
warrants to TMC and Acquisition Sub as follows:
3.1. ORGANIZATION. Such Shareholder is duly organized and validly
existing and (if a corporation) in good standing under the laws of the state of
its organization or incorporation.
3.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Such Shareholder has full power and authority to execute,
deliver and perform its obligations under this Agreement and the Registration
Rights Agreement (as defined herein) and to consummate the Transactions, and all
necessary action required to have been taken by or on behalf of such Shareholder
(including any actions required pursuant to its trust instrument or charter
documents, as applicable) for such execution, delivery, performance and
consummation has been duly taken.
(b) The execution and delivery by such Shareholder of this
Agreement and the Registration Rights Agreement do not, and the performance and
consummation of the Transactions by such Shareholder will not, result in or give
rise to (with or without the giving of notice or the lapse of time, or both) any
conflict with, breach or violation of, or default, termination, forfeiture or
acceleration of obligations under, or result in any lien by virtue of, any terms
or provisions of (i) its Declaration (as defined below), other trust instruments
or charter documents (as applicable); (ii) any statute, rule or regulation, or
any judicial, governmental, regulatory or administrative decree, order, writ,
judgment, directive, interpretation or other requirement applicable to such
Shareholder, its assets, or, in the case of a Trust, its Trustees (as such terms
are defined below) or their assets; or (iii) any material agreement or other
instrument to which it is a party or to which any of its assets is subject, or
in the case of a Trust, to which any of its Trustees is a party or to which any
of such Trustees' assets are subject.
(c) With respect to any Shareholder which is a trust (a "Trust"):
(i) such Trust has not been revoked, modified, or amended in any manner which
would cause the representations and warranties made by such Trust herein to be
untrue or incorrect or cause this Agreement to be unenforceable against such
Trust; (ii) each trustee (a "Trustee") of such Trust has accepted appointment as
a trustee of such Trust under the declaration of trust relating to such Trust
(the "Declaration"), and, by the terms of such Trust, is qualified and possesses
the necessary trust powers to act, and does act as a Trustee pursuant to such
Declaration; (iii) the Trustees who have executed and delivered this Agreement
and the Registration Rights Agreement on behalf of such Trust possess the full
power and authority to execute and deliver the Agreement and the Registration
Rights Agreement and to consummate the Transactions, and, in so doing, are
properly acting and exercising their powers under such Declaration; (iv) the
Trustees of who have executed and delivered this Agreement and the Registration
Rights
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Agreement on behalf of such Trust constitute all of the currently acting
Trustees of such Trust, and the signature of such Trustees is all that is
required for the execution and delivery of this Agreement and the Registration
Rights Agreement and to authorize the consummation of the Transactions; and (v)
no other signature or other proceedings on the part of such Trust or any of its
Trustees or beneficiaries is necessary to approve this Agreement and the
Registration Rights Agreement or to authorize the execution and delivery, and
the performance of the terms, hereof and thereof.
(d) No consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of such
Shareholder for the consummation by it of the Transactions, except the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
and the Secretary of State of the State of California.
(e) This Agreement and the Registration Rights Agreement have been
duly and validly authorized, executed and delivered by such Shareholder, and are
such Shareholder's legal, valid and binding obligations, enforceable against it
in accordance with the respective terms hereof and thereof, except as such
enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) subject to general equitable principles.
3.3. OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date hereof, such
Shareholder is the sole record and beneficial owner of the number of shares of
Company Capital Stock set forth opposite its name in Exhibit C hereto, free and
clear of all liens, encumbrances, mortgages, pledges, security interests,
restrictions, prior assignments and claims of any kind or nature whatsoever
(except for those created by this Agreement).
3.4. NO REGISTRATION; INVESTMENT INTENT.
(a) Such Shareholder understands that the TMC Merger Shares are
being offered and sold without registration under the Securities Act of 1933, as
amended (the "Act"), based upon an exemption provided under the Act and without
qualification or registration under the securities laws of California, in
reliance upon the representations and warranties made by the Shareholders
herein, and the TMC Merger Shares may not be re-sold, transferred, assigned or
otherwise disposed of other than pursuant to an effective registration statement
or pursuant to an exemption from such registration requirements.
(b) Such Shareholder agrees that it shall not sell, transfer,
assign, pledge or otherwise dispose of any TMC Merger Shares (or any interest
therein) unless (a) pursuant to an effective registration statement or (b) such
Shareholder delivers to TMC an opinion of counsel, reasonably acceptable to TMC,
that such sale, transfer, assignment, pledge or other disposition is exempt from
registration under the Act. The stock certificates representing the TMC Merger
Shares will have a legend to that effect, and TMC may give appropriate "stop
transfer" instructions to its transfer agent.
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(c) Such Shareholder understands that it may be deemed an
"affiliate" of TMC and/or the Company, as such term is used for purposes of
Rules 144 and 145 under the Act, in which case any disposition of TMC Merger
Shares by such Shareholder may be subject to the requirements of such rules
(although this shall not be deemed an admission that such Shareholder is such an
affiliate).
(d) Such Shareholder is acquiring the TMC Merger Shares to be
issued to it in the Merger for investment purposes for its own account and
without a view to distribution or resale thereof (except in compliance with
applicable law).
(e) Such Shareholder acknowledges that it has had the right to ask
questions of and receive answers from TMC and its officers and representatives
and from the Company and its officers and representatives to obtain such
information concerning TMC, the Company and the terms and conditions of the
Merger and the Transactions as such Shareholder deems necessary prior to making
an investment decision with respect to the Transactions, including with respect
to the TMC Merger Shares. Such Shareholder has such knowledge and experience in
financial and business matters so as to enable such Shareholder to evaluate the
merits and risks of an investment in the TMC Merger Shares. Such Shareholder is
able to bear the economic risk of the investment in the TMC Merger Shares.
(f) Such Shareholder is domiciled in the State of California, and
files income tax returns as a person or entity that is domiciled in that State.
3.5. NO BROKER. Such Shareholder is not obligated for the payment of
fees or expenses of any broker or finder in connection with the origin,
negotiation or execution of this Agreement or in connection with the
Transactions.
3.6. TAX-FREE REORGANIZATION. Such Shareholder has not engaged in any
transaction which it believes would preclude the Transactions from constituting
a "reorganization" within the meaning of Section 368(a)(1)(A) of the Code.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF
TMC AND ACQUISITION SUB
TMC and Acquisition Sub, jointly and severally, represent and warrant
to the Company and the Shareholders as follows:
4.1. ORGANIZATION AND STANDING.
Each of TMC and Acquisition Sub is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to so qualify would have a Material
Adverse
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Effect. Whenever used in this Article 4, "Material Adverse Effect" shall mean a
material adverse effect on the business, assets, prospects, condition (financial
or otherwise) or results of operations of TMC and its subsidiaries (on a
consolidated basis), or the ability of TMC to consummate the Transactions.
4.2. AUTHORITY, APPROVAL AND ENFORCEABILITY.
(a) Each of TMC and Acquisition Sub has all requisite corporate
power and authority (and no vote or approval of the stockholders of TMC is
required for it) to execute, deliver and perform its obligations under this
Agreement and the Registration Rights Agreement, as the case may be, and to
consummate the Transactions and subject to the approval by the Board of
Directors of TMC, all corporate action on their respective parts necessary for
such execution and delivery and, performance and consummation has been duly
taken. A special committee of the Board of Directors of TMC (the "Special
Committee") is considering this Agreement and the Transactions and will make a
recommendation with respect thereto to the Board of Directors of TMC.
(b) Subject to the approval by the Board of Directors of TMC, the
execution and delivery by each of TMC and Acquisition Sub, as the case may be,
of this Agreement, the Certificate of Merger and the Registration Rights
Agreement do not, and, the performance and consummation of the Transactions will
not, result in or give rise to (with or without the giving of notice or the
lapse of time, or both) any conflict with, breach or violation of, or default,
termination, forfeiture or acceleration of obligations under, any terms or
provisions of its (i) Certificate of Incorporation or Bylaws, (ii) any statute,
rule or regulation or any judicial, governmental, regulatory or administrative
decree, order, writ, judgment, directive, interpretation or other requirement
applicable to it or its assets, or (iii) any material agreement, lease or other
instrument to which it is a party or by which it or any of its assets may be
bound (other than, in the case of items (ii) and (iii) immediately above, such
breaches, violations, defaults, terminations, forfeitures or accelerations as
would not have a Material Adverse Affect).
(c) Assuming that the representations and warranties contained in
Section 3.4 are true, no consent, approval, authorization, order, registration,
qualification or filing of or with any court or any regulatory authority or any
other governmental or administrative body is required on the part of TMC or
Acquisition Sub for the consummation by each of TMC and Acquisition Sub, as the
case may be, of the Transactions, except any approvals or filings required under
state "blue sky" laws, the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of California, the filing of the Certificates of Designation with the
Secretary of State of the State of Delaware and, with respect to the
Registration Rights Agreement, the registration, filings and other requirements
contemplated thereby.
(d) This Agreement, the Certificate of Merger, the Certificates of
Designation and the Registration Rights Agreement have been duly and validly
executed and delivered by TMC and/or Acquisition Sub, as applicable, and are the
legal, valid and binding obligations of TMC and/or Acquisition Sub, as
applicable, enforceable against them in
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accordance with the respective terms hereof and thereof, except as such
enforcement may be (i) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) subject to general equitable principles.
4.3. FINANCIAL STATEMENTS AND SEC REPORTS.
(a) During the past twelve months, TMC has timely filed all
required forms, reports, statements and documents with the Securities and
Exchange Commission (the "Commission"), all of which have complied in all
material respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). TMC has
delivered or made available to the Company and the Shareholders true and
complete copies of (i) TMC's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, (ii) TMC's proxy statement relating to TMC's annual
stockholders meeting held May 8, 1997, and (iii) all other forms, reports,
statements and documents filed by TMC with the Commission pursuant to the
Exchange Act since March 31, 1997 (collectively, the "TMC Reports"). As of their
respective dates, the TMC Reports (including the financial statements contained
therein) 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 the light of the circumstances under which they were
made, not misleading.
(b) The audited consolidated financial statements contained in
TMC's Annual Report on Form 10-K for the year ended December 31, 1996 were
prepared in accordance with generally accepted accounting principles ("GAAP")
and present fairly TMC's consolidated financial position and the results of its
operations as of December 31, 1996 and for the year then ended. The unaudited
condensed consolidated financial statements contained in TMC's Quarterly Report
on Form 10-Q for the three months ended March 31, 1997 were prepared on a basis
consistent with the audited consolidated financial statements for the year ended
December 31, 1996 and, in the opinion of management, include all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation. The results of operations for interim periods are not necessarily
indicative of the results that may be expected for the fiscal year.
(c) Absence of Certain Changes. Except as otherwise disclosed in
the TMC Reports, since December 31, 1996 there has not been any events,
circumstances or developments of any character that have, or would reasonably be
expected to have, a Material Adverse Effect.
4.4. TMC CAPITAL STOCK. The shares of TMC Merger Shares to be issued to
the holders of Company Capital Stock as contemplated hereunder (i) are duly
authorized; (ii) when issued pursuant to the terms of this Agreement, will be
validly issued, fully paid, non-assessable and not subject to any preemptive
rights; and (iii) with respect to the shares of the Series A Common Stock to be
issued in the Merger, will be listed on the New York Stock Exchange (the
"NYSE"). The shares of Series A Common Stock issuable upon conversion of the
Series C-1 and C-2 Preferred Stock shall be listed on the NYSE on or before the
time that any shares of Series C-1 or C-2 Preferred Stock are converted.
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4.5. NO BROKERS. Neither TMC nor Acquisition Sub is obligated for the
payment of fees or expenses of any broker or finder in connection with the
origin, negotiation or execution of this Agreement in connection with the
Transactions, except for the fees and expenses of (a) Xxxxxxx, Xxxxx & Co. which
has been employed by TMC as its financial advisor; and (b) Xxxxxx Xxxxxxx & Co.
Incorporated, which has been employed by the Special Committee as its financial
advisor.
4.6. TAX-FREE REORGANIZATION. Neither TMC nor Acquisition Sub has
engaged in any transaction which it believes would preclude the Transactions
from constituting a "reorganization" within the meaning of Section 368(a)(1)(A)
of the Code.
4.7. CAPITAL STOCK.
(a) The authorized capital stock of TMC consists of
(i) 500,000,000 shares of Series A Common Stock, $1 par value
(the "Series A Common Stock"), of which 68,997,386 shares were issued and
outstanding as of May 8, 1997;
(ii) 100,000,000 shares of Series B Common Stock, $1 par value
(the "Series B Common Stock"), of which no shares were issued and outstanding as
of May 8, 1997;
(iii) 300,000,000 shares of Series C Common Stock, $1 par
value (the "Series C Common Stock"), of which 26,620,836 shares were issued and
outstanding as of May 8, 1997;
(iv) 900,000 shares of Series A Preferred Stock, $1 par value
(the "Series A Preferred Stock"), of which 823,568 shares were issued and
outstanding as of May 8, 1997;
(v) 8,438,822 shares of Series B Preferred Stock, $1 par value
(the "Series B Preferred Stock"), of which no shares were issued and outstanding
as of May 8, 1997; and
(vi) subject to the filing of the Certificate of Designation
attached as Exhibit B-1 hereto, 380,972 shares of Series C-1 Preferred Stock, $1
par value (the "Series C-1 Preferred"), of which (A) no shares are issued and
outstanding at the time that this Agreement is being executed and (B) 380,972
shares (being part of the TMC Merger Shares) shall be issued and outstanding
immediately after the Effective Time;
(vii) subject to the filing of the Certificate of Designation
attached as Exhibit B-2 hereto, 245,100 shares of Series C-2 Preferred Stock, $1
par value (the "Series C-2 Preferred"), of which (A) no shares are issued and
outstanding at the time that this Agreement is being executed and (B) 245,100
shares (being part of the TMC Merger Shares) shall be issued and outstanding
immediately after the Effective Time; and
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(viii) 23,661,178 (on the date of this Agreement, being
reduced upon the filing of the Certificates of Designation by the number of
shares set forth therein) shares of Preferred Stock without designation (the
"Undesignated Preferred Stock"), of which no shares were issued and outstanding
as of May 8, 1997.
(b) All of the issued and outstanding shares of TMC Capital Stock
are duly authorized, validly issued, fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities laws.
(c) The authorized capital stock of Acquisition Sub consists of
1,000 shares of common stock, par value $.01 per share, of which 100 shares are
issued and outstanding. All of such outstanding shares are owned by TMC and are
validly issued, fully paid and nonassessable.
ARTICLE 5.
COVENANTS
5.1. CONDUCT OF BUSINESS. The Shareholders shall not permit the Company
to, and the Company shall not, enter into any material agreements or take any
other significant actions without the prior written consent of TMC, which
consent shall not be unreasonably withheld. Without limiting the generality of
the foregoing, except as otherwise contemplated by this Agreement, the
Shareholders shall not permit the Company to, and the Company shall not:
(a) Other than in the ordinary course of business consistent with
past practice, set aside or pay any dividend or distribution of assets on its
capital stock to, repurchase any of its capital stock from, or enter into any
transaction with, any of the Shareholders (including any trustees or
beneficiaries thereof), or its directors, officers, employees, agents, or
consultants;
(b) Enter into any agreement or commitment that would be a
Material Agreement if in existence on the date hereof;
(c) Amend, modify or terminate any Material Agreement;
(d) Alter the manner of keeping its books, accounts or records or
the accounting practices therein reflected;
(e) Issue any capital stock or any security convertible into, or
options, warrants or rights to acquire, its capital stock;
(f) Create, incur or assume any indebtedness or guarantee or
otherwise become liable for any obligations of any other person;
(g) Make any loans, advances or new investments;
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(h) cancel any debts owed to it, or settle any claims held by it,
for less than the full amount due;
(i) amend its Articles of Incorporation or Bylaws;
(j) acquire, sell, lease, encumber, transfer or dispose of any of
its assets, other than in the ordinary course of business, consistent with past
practice;
(k) make any changes (including changes in compensation) in its
employment arrangements;
(l) take any action that would, or is reasonably likely to, result
in any of the representations and warranties set forth in Articles 2 and 3 being
untrue or incorrect as of the date made or at the Effective Time;
(m) take any action which would frustrate TMC's and Acquisition
Sub's ability to consummate the Transactions or materially diminish the value of
the Company or the benefits reasonably anticipated by TMC and Acquisition Sub as
a result of the Transactions; or
(n) Agree to do any of the foregoing.
5.2. ACTIONS CONTRARY TO TAX FREE TREATMENT. Each of TMC, the Company,
Acquisition Sub and the Shareholders will not, from the date hereof through and
after consummation of the Merger, knowingly take any action inconsistent with
(or fail to take any action necessary for) the treatment of the Merger as a
"reorganization" described in Section 368(a)(1)(A) of the Code. TMC has no plan
or intention to liquidate Acquisition Sub; to merge Acquisition Sub with or into
another corporation; to sell or otherwise dispose of the stock of Acquisition
Sub except for transfers of stock to corporations controlled by TMC; or to cause
Acquisition Sub to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business or transfers of assets (by
way of a merger or otherwise) to TMC or any corporation controlled by TMC.
5.3. CONTINUITY OF INTEREST AND RESTRICTIONS ON RESALE. Each of the
Shareholders represents, warrants and agrees as follows (except that Section
5.3(b) only applies to Xxxxxxxx Trust No. 2):
(a) Such Shareholder intends to treat the Merger as a
"reorganization" described in Section 368 of the Code, and understands that one
condition to qualification of the Merger as a reorganization is the retention of
a significant continuing equity interest in Acquisition Sub by the Shareholders,
through their ownership of the TMC Merger Shares.
(b) Such Shareholder has no plan or intention (a "Plan") to, and
agrees that, for a period of two (2) years after the Closing, it shall not,
engage, agree to engage, or enter into any plan, agreement or understanding to
engage, in any sale, exchange, transfer, distribution, pledge, disposition or
other transaction which results in a reduction of such Shareholder's interest
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or risk of ownership in, whether directly or indirectly (such actions being
collectively referred to as a "Sale"), the TMC Merger Shares received by such
Shareholder in the Merger such that the aggregate fair market value, as of the
Effective Time, of TMC Merger Shares subject to such Sales would exceed fifty
percent (50%) of the aggregate fair market value, determined at such time, of
the TMC Merger Shares. For purposes of this Section 5.3, shares of Company
Capital Stock (or the portion thereof) with respect to which a Sale occurs prior
to and in contemplation of the Merger, shall be considered shares of outstanding
Company Capital Stock exchanged for TMC Merger Shares in the Merger and then
disposed of following the Merger pursuant to a Plan.
(c) Such Shareholder has not engaged, agreed to engage, or entered
into any plan, agreement or understanding to engage, in a Sale of any Company
Capital Stock in contemplation of the Merger. Other than as required by the
Agreement, such Shareholder will not engage, agree to engage, or enter into any
plan, agreement or understanding to engage, in a Sale of any Company Capital
stock prior to the Merger.
(d) Such Shareholder does not intend to take a position on any
federal or state income tax return that is inconsistent with the treatment of
the Merger as a "reorganization" for federal and state income tax purposes.
(e) Such Shareholder has been informed of, and has discussed with
such Shareholder's legal and financial advisors, the requirements for treatment
of the Merger as a "reorganization" within the meaning of Section 368(a)(1)(A)
of the Code.
5.4. NO TRANSFER OF COMPANY CAPITAL STOCK. During the period from the
date of this Agreement until the Effective Time, the Shareholders shall not
sell, transfer or otherwise dispose of any of the shares of Company Capital
Stock.
5.5. BEST EFFORTS. Each party will use its reasonable best efforts to
cause all conditions to the Closing to be satisfied as soon as practicable. Each
party shall use its reasonable best efforts to obtain any consents necessary or
desirable in connection with the consummation of the Transactions.
5.6. REGISTRATION RIGHTS; NYSE LISTING. TMC shall provide to the
Shareholders certain registration rights pursuant to the terms of a registration
rights agreement (the "Registration Rights Agreement") substantially in the form
previously provided to the Shareholders, which shall be executed by TMC and the
Shareholders on or prior to the Effective Time, and TMC shall cause the shares
of Series A Common Stock to be issued in the Merger to be listed on the NYSE.
The shares of Series A Common Stock issuable upon conversion of the Series C-1
and C-2 Preferred Stock shall be listed on the NYSE on or before the time that
any shares of Series C-1 or C-2 Preferred Stock are converted.
5.7. TERMINATION OF CERTAIN AGREEMENTS. Prior to the Effective Time,
the Company shall terminate, on terms satisfactory to TMC, the Agreement with
Respect to the Class A Common Stock of the Company, dated March 4, 1966, the
Agreement with Respect to the Class B Shares of the Company, dated December 12,
1982, and any related agreements (collectively, the "Redemption Agreements") and
all other agreements (other than this
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Agreement) between or among the Company and any of the Shareholders, its
directors or officers, and/or any director, officer, trustee or beneficiary of
any of the Shareholders.
ARTICLE 6.
CONDITIONS TO MERGER
6.1. CONDITIONS TO OBLIGATIONS OF TMC, ACQUISITION SUB, THE
SHAREHOLDERS, AND THE COMPANY. The respective obligations of TMC, Acquisition
Sub, the Shareholders and the Company to consummate the Transactions are subject
to satisfaction (or waiver by each party whose obligation is subject to such
condition) of the following conditions:
(a) The parties hereto shall have obtained all consents and
approvals of, and given all required notices to, third parties (including
governmental authorities) required to consummate the Transactions.
(b) Consummation of the Transactions shall not violate any
statute, rule, regulation, order, decree, ruling, injunction or judgment of any
court or governmental body having jurisdiction over any of the parties hereto.
(c) Federal and state securities law exemptions shall be available
for the issuance of the TMC Merger Shares.
(d) TMC, certain of its subsidiaries, Xxxxxxxx Trust No. 1 and
Xxxxxxxx Trust No. 2 shall have executed a Limited Liability Company Agreement
with respect to, and formed, TMCT, LLC, a Delaware limited liability company,
and shall have contributed to TMCT, LLC the assets described in a Contribution
Agreement.
6.2. CONDITIONS TO OBLIGATIONS OF TMC AND ACQUISITION SUB. The
obligations of TMC and Acquisition Sub to consummate the Transactions are
subject to satisfaction (or waiver by them) of the following conditions:
(a) All representations and warranties of the Shareholders made
herein shall be true and correct in all material respects as of the date made,
and as of the Closing Date as if made on and as of the Closing Date. Each of the
Company and the Shareholders shall have performed in all material respects all
obligations and agreements undertaken to be performed by them at or prior to the
Closing.
(b) TMC and Acquisition Sub shall have received opinions of (i)
Irell & Xxxxxxx LLP, counsel to the Company and to Xxxxxxxx Trust No. 1 and
Xxxxxxxx Trust No. 2, and (ii) counsel to the other Shareholders, substantially
in the forms set forth in Exhibit D attached hereto.
(c) TMC and Acquisition Sub shall have received an opinion of
Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to TMC and Acquisition Sub, regarding
certain tax matters, satisfactory to TMC and Acquisition Sub in form and
substance.
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(d) TMC shall be satisfied that no holders of Company Capital
Stock shall be entitled to exercise dissenters' rights in connection with the
Merger.
(e) All agreements described in Section 5.7 shall have been
terminated to TMC's satisfaction.
(f) The Special Committee shall have recommended that the Board of
Directors of TMC approve this Agreement and the Transactions, and the Board of
Directors of TMC shall have approved this Agreement and the Transactions.
(g) TMC and its counsel shall have received such certificates and
other documents related to the Company, the Shareholders and the Transactions as
they shall reasonably request.
(h) TMC shall have received an opinion of Xxxxxxx, Sachs & Co. in
form and substance satisfactory to TMC.
6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS. The
obligations of the Company and the Shareholders to consummate the transactions
contemplated hereby are subject to satisfaction (or waiver by them) of the
following conditions:
(a) All representations and warranties of TMC and Acquisition Sub
made herein shall be true and correct in all material respects as of the date
made, and as of the Closing Date as if made on and as of the Closing Date. TMC
and Acquisition Sub shall have performed in all material respects all
obligations and agreements undertaken to be performed by them at or prior to the
Closing.
(b) The Company and the Shareholders shall have received an
opinion of Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to TMC and Acquisition Sub,
substantially in the form of Exhibit E attached hereto.
(c) TMC shall have executed and delivered the Registration Rights
Agreement.
(d) The Company, the Shareholders, and their counsel shall have
received such certificates and other documents related to TMC, Acquisition Sub
and the Transactions as they shall reasonably request.
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ARTICLE 7.
INDEMNITY
7.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
NO SUBROGATION.
(a) All representations, warranties, covenants and agreements of
TMC, Acquisition Sub, and the Shareholders in this Agreement shall survive the
execution, delivery and performance of this Agreement, and the consummation of
the Transactions, except as otherwise provided in this Article 7. All
representations and warranties of each party set forth in this Agreement shall
be deemed to have been made again by such party at and as of the Closing Date.
(b) The representations and warranties of TMC, Acquisition Sub and
the Shareholders set forth in this Agreement, and their indemnity obligations
under this Article 7, shall terminate on the second anniversary of the Closing
Date (except to the extent that a claim has been made or notice of a claim has
been provided prior thereto, in which case the relevant representations and
warranties, and the indemnity obligations, shall continue to survive until such
matter is finally resolved) (the "Indemnity Termination Date"); provided,
however, that any representation or warranty by the Shareholders relating to
Taxes, Environmental Protection Laws, Hazardous Substances, ownership of the
Company Capital Stock, or the investment intent of the Shareholders (including
the representations and warranties set forth in Sections 2.8, 2.14, 2.17, 3.3,
3.4 and 5.3) and the indemnity obligations of the Shareholders with respect
thereto shall not terminate until the end of the statute of limitations
applicable to the subject matter of such representation or warranty (and, to the
extent that a claim has been made or notice of a claim has been provided prior
thereto, such representations and warranties, and the indemnity obligations,
shall continue to survive until such matter is finally resolved).
(c) If the Shareholders, or any of them, are determined to be
liable, in respect of an alleged breach by the Company or any Shareholder of, or
default by the Company or any Shareholder under, this Agreement or any of the
agreements or transactions contemplated hereby, then (i) the Shareholders shall
not be subrogated, and hereby waive any right of subrogation, to the rights of
TMC and/or Acquisition Sub against the Company in respect thereof, and (ii) the
Shareholders hereby waive any right to indemnification or contribution from the
Company in respect thereof.
7.2. INDEMNIFICATION OF TMC AND THE SURVIVING CORPORATION.
(a) Joint and Several Indemnity. The Shareholders agree to
indemnify, defend and hold harmless, jointly and severally (with each
Shareholder agreeing with each other Shareholder to be responsible for its pro
rata share of any obligations hereunder) TMC, and Acquisition Sub, and each of
their respective affiliates, successors, assigns, agents and representatives
(collectively, the "Affiliated Parties") against and in respect of any and all
claims, demands, losses, costs, expenses, obligations, liabilities, damages,
remedies and penalties (including, without limitation, interest, penalties,
settlement costs and any legal, accounting or
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other fees and expenses for investigating or defending any claims or threatened
actions) (collectively, "Losses") that TMC, Acquisition Sub or their Affiliated
Parties may incur or suffer in connection with each and all of the following:
(i) Any misrepresentation or inaccuracy of any of the
representations or warranties of the Shareholders contained in Article 2 of this
Agreement;
(ii) Any misrepresentation or inaccuracy of, breach of or
default under any of the representations, warranties or agreements contained in
Section 5.3 of this Agreement;
(iii) Any breach of or default under any covenant, agreement
or obligation of the Company or the Shareholders contained in this Agreement or
any other agreement or instrument contemplated by this Agreement;
(iv) Any liabilities of the Company arising from or relating
to the operations of the Company, prior to the Effective Time (except as
contemplated by Sections 2.6(b) and 2.7 hereof);
(v) Any remediation, monitoring, removal or abatement of
Hazardous Substances on or with respect to any of the Real Property if such
remediation, monitoring, removal or abatement (a) is required by any
Environmental Protection Law or any order or decree of any court or governmental
body, or (b) is reasonably necessary to protect TMC or Acquisition Sub against
potential liability to third parties, or (c) is reasonably necessary to protect
the marketability or value of the Real Property;
(vi) The lease agreement, dated as of September 29, 1994, for
the office space previously leased by the Company and located at 000 Xxxx
Xxxxxxxx Xxxx., Xxxxxxxx, Xxxxxxxxxx;
(vii) Any agreement described in Section 5.7 hereof; and
(viii) Any Tax liabilities of the Company or Acquisition Sub
arising out of the Merger or the Transactions.
(b) Several Indemnity. Each of the Shareholders agrees to
indemnify, defend and hold harmless TMC, Acquisition Sub and their Affiliated
Parties against and in respect of any Losses that TMC, Acquisition Sub or their
Affiliated Parties may incur or suffer in connection with each and all of the
following:
(i) Any misrepresentation in or inaccuracy of any of such
Shareholder's representations or warranties contained in Article 3 of this
Agreement; or
(ii) Any breach of or default under any covenant, agreement or
obligation of such Shareholder contained in this Agreement or any other
agreement or instrument contemplated by this Agreement.
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(c) Limitations. No claim, demand, suit or cause of action shall
be brought against the Shareholders under this Section 7.2 unless and until the
aggregate amount of Losses under this Section 7.2 exceeds $250,000, in which
event TMC, Acquisition Sub and their Affiliated Parties shall be entitled to
indemnification from the Shareholders for all Losses under this Section 7.2 in
excess of $250,000. The aggregate liability of the Shareholders under this
Section 7.2 for all Losses shall not exceed the fair market value at the time of
Closing of the TMC Merger Shares (and, in the case of any Shareholder other than
Xxxxxxxx Trust No. 2, shall not exceed the fair market value at the time of the
Closing of the TMC Merger Shares received by such Shareholder). None of TMC,
Acquisition Sub, or their Affiliated Parties shall seek or be entitled to
punitive damages from the Shareholders or their Affiliated Parties as to any
matter arising out of or relating to this Agreement or the Transactions.
(d) Disclosure with Respect to Schedules. Any disclosure set forth
on any Schedule hereto shall be deemed to be disclosed on all other Schedules
hereto for the purpose of determining whether any of the representations and
warranties made by the Shareholders contained in this Agreement contain any
misrepresentations or inaccuracies.
7.3. INDEMNIFICATION OF THE SHAREHOLDERS.
(a) Indemnity. TMC agrees to indemnify, defend and hold harmless
the Shareholders and their Affiliated Parties against and in respect of any
Losses that the Shareholders or their Affiliated Parties may incur or suffer in
connection with each and all of the following:
(i) Any misrepresentation in or any inaccuracy of any of TMC's
or Acquisition Sub's representations or warranties contained in Article 4 of
this Agreement
(ii) Any breach of or default under any covenant, agreement or
obligation of TMC or Acquisition Sub contained in this Agreement or any other
agreement or instrument contemplated by this Agreement.
(b) Limitations. No claim, demand, suit or cause of action shall
be brought against TMC under this Section 7.3 unless and until the aggregate
amount of Losses under this Section 7.3 exceeds $250,000, in which event the
Shareholders and their Affiliated Parties shall be entitled to indemnification
from TMC for all Losses under this Section 7.3 in excess of $250,000. The
aggregate liability of TMC under this Section 7.3 shall not exceed the fair
market value of the TMC Merger Shares at the time of Closing. None of the
Shareholders or their Affiliated Parties shall seek or be entitled to punitive
damages from TMC, Acquisition Sub or their Affiliates as to any matter arising
out of or relating to this Agreement or the Transactions.
7.4. PROCEDURE FOR INDEMNIFICATION OF TMC WITH RESPECT TO THIRD-PARTY
CLAIMS.
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(a) If TMC or any other indemnified party under Section 7.2
determines to seek indemnification with respect to a claim resulting from the
assertion of liability by third parties, TMC shall promptly give written notice
thereof to the Shareholders, including in such notice a brief description of the
facts upon which such claim is based and the amount thereof. The rights of the
TMC or any other party to be indemnified hereunder in respect of claims
resulting from the assertion of liability by third parties shall not be
adversely affected by the failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, the Shareholders are materially
prejudiced thereby. TMC shall select and employ counsel in such case, which
counsel shall be subject to the reasonable approval of the "Shareholders'
Representative" (as defined below), and undertake the defense of such claim. TMC
shall not, without the written consent of the Shareholders' Representative
(which consent shall not be unreasonably withheld), settle or compromise any
such claim or consent to entry of any judgment in respect thereof. The
"Shareholders' Representative" is Xxxxxx X. Xxxxxxxxxx, or, if he is unable or
unwilling to act in such capacity, Xxxxxxx Xxxxxxxxx Xx., or, if he is unable or
unwilling to act in such capacity, such other person(s) as shall be designated
by Shareholders holding a majority of the voting interest represented by the TMC
Merger Shares (treating any outstanding Series C-1 Preferred or Series C-2
Preferred on an as-converted basis). With respect to any assertion of liability
by a third party that results in an indemnifiable claim, the parties hereto
shall make available to each other all relevant information in their possession
material to any such assertion.
(b) At TMC's option in its sole discretion, indemnification
payments by the Shareholders may be made in shares of TMC Capital Stock valued
at fair market value on the date of any such payment.
(c) Any indemnification payments under this Section 7.4 shall be
treated as an adjustment to the Merger consideration provided in Section 1.2.
7.5. PROCEDURE FOR INDEMNIFICATION OF THE SHAREHOLDERS WITH RESPECT TO
THIRD-PARTY CLAIMS.
(a) If the Shareholders or any other indemnified party under
Section 7.3 determine to seek indemnification under Section 7.3(a) with respect
to a claim resulting from the assertion of liability by third parties, the
Shareholders shall promptly give written notice thereof to TMC, including in
such notice a brief description of the facts upon which such claim is based and
the amount thereof. In case any such liability is asserted against the
Shareholders, and the Shareholders notify TMC thereof, TMC will be entitled, if
TMC so elects by written notice delivered to the Shareholders' Representative
within ten business days after receiving the Shareholders' notice, to assume the
defense thereof with counsel reasonably satisfactory to the Shareholders'
Representative. Notwithstanding the foregoing, (i) the Shareholders shall also
have the right to employ their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Shareholders unless the
Shareholders shall have been advised by counsel in writing that there is a
conflict of interest between the Shareholders, on the one hand, and TMC, on the
other, with respect to such claim, in which case the fees and expenses of one
law firm for the Shareholders (to be selected by the Shareholders'
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Representative and reasonably acceptable to TMC) will be borne by TMC and (ii)
the rights of the Shareholders to be indemnified hereunder in respect of claims
resulting from the assertion of liability by third parties shall not be
adversely affected by their failure to give notice pursuant to the foregoing
unless, and, if so, only to the extent that, TMC is materially prejudiced
thereby. With respect to any assertion of liability by a third party that
results in an indemnifiable claim, the parties hereto shall make available to
each other all relevant information in their possession material to any such
assertion.
(b) In the event that TMC, within ten business days after receipt
of the aforesaid notice of a claim, fails to assume the defense of the
Shareholders against such claim, the Shareholders shall have the right to select
and employ counsel in such case, which counsel shall be subject to the
reasonable approval of TMC, and to undertake the defense of such claim. The
Shareholders shall not, without the written consent of TMC (which consent shall
not be unreasonably withheld) settle or compromise any claim or consent to the
entry of any judgment in respect thereof.
(c) Notwithstanding anything in this Article 7 to the contrary, if
there is a reasonable probability that a claim may materially adversely affect
the Shareholders, the Shareholders shall have the right to participate (at the
Shareholders' expense) in such defense, compromise, or settlement and TMC shall
not, without the written consent of the Shareholders' Representative (which
consent shall not be unreasonably withheld), settle or compromise any such claim
or consent to entry of any judgment in respect thereof unless such settlement,
compromise, or consent includes as an unconditional term thereof the giving by
the claimant or the plaintiff to the Shareholders a release from all liability
in respect of such claim.
ARTICLE 8.
TERMINATION
8.1. TERMINATION BY MUTUAL CONSENT. At any time prior to the Closing,
this Agreement may be terminated by written consent of TMC, Acquisition Sub and
the Company, notwithstanding approval of the Merger by the shareholders of
Acquisition Sub or the Company.
8.2. TERMINATION BY TMC OR ACQUISITION SUB OR THE COMPANY.
(a) TMC or Acquisition Sub may terminate this Agreement at any
time prior to the Closing by delivery of written notice to the Company, if: (1)
any court having competent jurisdiction or other governmental body shall have
issued an order, decree or ruling or taken any other action which prevents,
restrains, or enjoins the Merger and such order, decree or ruling shall have
become non-appealable; (2) any of the Company or the Shareholders has breached
or violated this Agreement in any material respect and, if such breach or
violation is curable, has failed to cure such violations within twenty days of
receiving written notice thereof; or (3) the Closing has not occurred by 11:59
p.m. on August 10, 1997.
(b) The Company may terminate this Agreement at any time prior to
the Closing by delivery of written notice from the Company to TMC and
Acquisition Sub if:
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(1) any court having competent jurisdiction or other governmental body shall
have issued an order, decree or ruling or taken any other action which prevents,
restrains, or enjoins the Merger and such order, decree or ruling shall have
become non-appealable; (2) either TMC or Acquisition Sub has breached or
violated this Agreement in any material respect and, if such breach or violation
is curable, has failed to cure such violations within twenty days of receiving
written notice thereof; or (3) the Closing has not occurred by 11:59 p.m. on
August 10, 1997.
8.3. EFFECT OF TERMINATION. In the event that this Agreement is
terminated (a "Termination") as provided in this Article 8, all further
obligations of the parties under this Agreement shall terminate without further
liability of any party to any other party or to the stockholders, directors or
officers of any party
ARTICLE 9.
MISCELLANEOUS
9.1. NOTICES. Unless otherwise provided, all notices or other
communications required or permitted to be given to the parties hereto shall be
in writing and shall be deemed to have been given if personally delivered,
including personal delivery by facsimile, provided that the sender receives
telephonic or electronic confirmation that the facsimile was received by the
recipient and that such facsimile is followed the same day by mailing by
certified or registered mail, return receipt requested, first class postage
prepaid (a "Mailing"), upon receipt of courier delivery or the third day
following a Mailing, addressed as follows (or at such other address as the
addressed party may have substituted by notice pursuant to this Section 9.1):
(a) If to TMC or Acquisition Sub:
The Times Mirror Company
Times Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
With a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
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(b) If to the Company (until the Effective Time):
Chandis Securities Company
000 Xxxx Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
With a copy to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
And with a copy to:
Xxxxxx Xxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Xx., Esq.
(c) If to the Shareholders, to the addresses
set forth on the signature page:
With a copy to:
Irell & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
And with a copy to:
Xxxxxx Xxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Xx., Esq.
or to such other address as any party may have furnished in writing to the other
parties in the manner provided above.
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9.2. ENTIRE AGREEMENT; MODIFICATIONS; WAIVER. This Agreement and the
exhibits and schedules hereto and the documents referred to herein constitute
the final, exclusive and complete understanding of the parties with respect to
the subject matter hereof and supersede any and all prior agreements,
understandings and discussions with respect thereto. No variation or
modification of this Agreement and no waiver of any provision or condition
hereof, or granting of any consent contemplated hereby, shall be valid unless in
writing and signed by the party against whom enforcement of any such variation,
modification, waiver or consent is sought. Waivers or consents may be granted to
TMC or Acquisition Sub by the Shareholders' Representative on behalf of, and
shall be binding upon, all of the Shareholders.
9.3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
9.4. PUBLICITY. None of TMC, Acquisition Sub, the Company or the
Shareholders, shall issue any statement or communication to the general public
or the press regarding the Transactions without first providing a copy to, and
using reasonable efforts to consult with (a) the Shareholders' Representative,
with respect to a statement or communication by TMC or Acquisition Sub, or (b)
TMC, with respect to a statement or communication by the Company or any
Shareholder. The requirements of this Section 9.4 shall not apply to any
statements or communications by TMC in response to an inquiry from financial
analysts or press or in any periodic reports to the Commission or stockholders
(other than the first such periodic report filed after the Effective Time).
9.5. SUCCESSORS AND ASSIGNS. None of the Shareholders or the Company,
without the prior express written consent of TMC, may assign this Agreement in
whole or in part. TMC may assign this Agreement, in whole or in part to an
affiliate of TMC; provided, that TMC shall remain obligated hereunder. This
Agreement shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
9.6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware as applied to contracts
between Delaware residents made and to be performed entirely within the State of
Delaware (other than the mandatory provisions of the California Law that apply
to the Merger).
9.7. EXPENSES. Except as may otherwise be expressly provided in this
Agreement or any other agreement referenced herein, each party shall pay its own
expenses in connection with this Agreement and the Transactions.
9.8. GENDER AND NUMBER. In this Agreement, unless the context otherwise
requires, the masculine, feminine and neuter genders and the singular and the
plural include one another.
9.9. CONSTRUCTION OF AGREEMENT. No party hereto, nor its respective
counsel, shall be deemed the drafter of this Agreement for purposes of
construing the provisions of this
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Agreement, and all provisions of this Agreement shall be construed in accordance
with their fair meaning, and not strictly for or against any party hereto.
9.10. CONSENT TO JURISDICTION AND FORUM SELECTION. The parties hereto
agree that all actions or proceedings arising in connection with this Agreement
shall be tried and litigated exclusively in the State and Federal courts located
in the County of Los Angeles, State of California. The aforementioned choice of
venue is intended by the parties to be mandatory and not permissive in nature,
thereby precluding the possibility of litigation between the parties with
respect to or arising out of this Agreement in any jurisdiction other than that
specified in this paragraph. Each party hereby waives any right it may have to
assert the doctrine of forum non conveniens or similar doctrine or to object to
venue with respect to any proceeding brought in accordance with this paragraph,
and stipulates that the State and Federal courts located in the County of Los
Angeles, State of California shall have in personal jurisdiction and venue over
each of them for the purpose of litigating any dispute, controversy, or
proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this paragraph by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement.
9.11. ATTORNEYS' FEES. If either party to this Agreement shall bring
any action, suit, counterclaim, appeal or arbitration for any relief against the
other to enforce the terms hereof or to declare rights hereunder (collectively,
an "Action"), the losing party shall pay to the prevailing party a reasonable
sum for attorneys' fees and costs incurred in bringing and prosecuting such
Action and/or enforcing any judgment, order, ruling, or award. For the purposes
of this paragraph, attorneys' fees shall include, without limitation, fees
incurred in discovery, postjudgment motions and collection actions, and
bankruptcy litigation. "Prevailing party" within the meaning of this paragraph
includes, without limitation, a party who agrees to dismiss an Action on the
other party's payment of the sums allegedly due or performance of the covenants
allegedly breached, or who obtains substantially the relief sought by it.
9.12. CONSENT TO ISSUANCE OF SERIES C-1 AND C-2 PREFERRED STOCK. The
Company, in its capacity as a holder of Series A Preferred Stock, hereby
consents to the authorization and issuance of the Series C-1 and Series C-2
Preferred Stock, as described herein.
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41
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first above written.
THE TIMES MIRROR COMPANY
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------------------
Title: Senior Vice President and Chief Financial
Officer
CHANDIS ACQUISITION CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------------------
Title: President
CHANDIS SECURITIES COMPANY
By: /s/ Xxxxxxx Xxxxxxxxx, Xx.
------------------------------------------------
Title: Assistant Secretary
42
THE SHAREHOLDERS OF CHANDIS SECURITIES COMPANY:
Torrey Pacific Corporation, a California corporation
By: /s/ Xxx Xxxxxx
------------------------------------------------
Title: President
---------------------------------------------
Address:
c/o Xxx. Xxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxx Xxx, Xxxxxxxxxx 00000
Xxxxxxx Xxxxxxxxxxx Xxxxxx Trust U/T/A Dated 8/26/92
By: /s/ Xxxxxxx Xxxxxxxxxxx Xxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Nairn Xxxxxxxxxxx Xxxxx
------------------------------------------------
Nairn Xxxxxxxxxxx Xxxxx, Co-Trustee
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Chasuk
------------------------------------------------
Xxxxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Xxxxx Xxxxxxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxx Xxxxxxxxxxx Xxxxxxxx, Co-Trustee
Address:
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Nairn Xxxxxxxxxxx Trust U/T/A Dated 8/26/82
By: /s/ Xxxxxxx Xxxxxxxxxxx Xxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Nairn Xxxxxxxxxxx Xxxxx
------------------------------------------------
Nairn Xxxxxxxxxxx Xxxxx, Co-Trustee
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Chasuk
------------------------------------------------
Xxxxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Xxxxx Xxxxxxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxx Xxxxxxxxxxx Xxxxxxxx, Co-Trustee
43
Address:
0000 Xxxxxxxxxx Xxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Xxxxxxxxx Xxxxxxxxxxx Trust U/T/A Dated 8/26/82
By: /s/ Xxxxxxx Xxxxxxxxxxx Xxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Nairn Xxxxxxxxxxx Xxxxx
------------------------------------------------
Nairn Xxxxxxxxxxx Xxxxx, Co-Trustee
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Chasuk
------------------------------------------------
Xxxxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Xxxxx Xxxxxxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxx Xxxxxxxxxxx Xxxxxxxx, Co-Trustee
Address:
0000 0xx Xxxxxx
Xxxx, Xxxxxxxxxx 00000
Xxxxx Xxxxxxxxxxx Xxxxxxxx Trust U/T/A Dated 8/26/82
By: /s/ Xxxxxxx Xxxxxxxxxxx Xxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Nairn Xxxxxxxxxxx Xxxxx
------------------------------------------------
Nairn Xxxxxxxxxxx Xxxxx, Co-Trustee
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Chasuk
------------------------------------------------
Xxxxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Xxxxx Xxxxxxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxx Xxxxxxxxxxx Xxxxxxxx, Co-Trustee
Address:
0000 00xx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
44
Xxxxx X. Xxxxxxxxxxx Grandchildren's Irrevocable Trust U/T/A
Dated 2/24/95
By: /s/ Xxxxxxx Xxxxxxxxxxx Xxxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
By: /s/ Nairn Xxxxxxxxxxx Xxxxx
------------------------------------------------
Nairn Xxxxxxxxxxx Xxxxx, Co-Trustee
By: /s/ Xxxxx Xxxxxxxxxxx Xxxxxxxx
------------------------------------------------
Xxxxx Xxxxxxxxxxx Xxxxxxxx, Co-Trustee
By: /s/ Xxxxxxxxx Xxxxxxxxxxx Chasuk
------------------------------------------------
Xxxxxxxxx Xxxxxxxxxxx Xxxxxx, Co-Trustee
Address:
Bank of America, Attn: Xx. Xxxxxxxx
P. O. Xxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxxxxxxxxxx Community Property Trust
U/T/A Dated 9/11/96
By: /s/ Xxxxx X. Xxxxxxxxxxx
------------------------------------------------
Xxxxx X. Xxxxxxxxxxx, Co-Trustee
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
------------------------------------------------
Xxxxxxx X. Xxxxxxxxxxx, Co-Trustee
Address:
0000 Xxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
45
XXXXXXXX TRUST NO. 2
By: /s/ Xxxxxxxxx Xxxxxxx Xxxxxxx
------------------------------------------------
Xxxxxxxxx Xxxxxxx Xxxxxxx, as trustee of Xxxxxxxx
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Xxxxx Xxxxxxxx
------------------------------------------------
Xxxxx Xxxxxxxx, as trustee of Xxxxxxxx Trust
No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Xxxxxxx Xxxxxxxxx, Xx.
------------------------------------------------
Xxxxxxx Xxxxxxxxx, Xx., as trustee of Xxxxxxxx
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------------------
Xxxxxx X. Xxxxxxxxxx, as trustee of Xxxxxxxx Trust
No. 2 under Trust Agreement dated June 26, 1935
By: /s/ Xxxxxxx Xxxxxxxx Xxxxx
------------------------------------------------
Xxxxxxx Xxxxxxxx Frost, as trustee of Xxxxxxxx
Trust No. 2 under Trust Agreement dated June 26,
1935
By: /s/ Xxxxxxx Xxxxxx
------------------------------------------------
Xxxxxxx Xxxxxx, as trustee of Xxxxxxxx Trust No.
2 under Trust Agreement dated June 26, 1935
By: /s/ Xxxx X. Xxxx
------------------------------------------------
Xxxx X. Xxxx, as trustee of Xxxxxxxx Trust No. 2
under Trust Agreement dated June 26, 1935
Address:
Attention: Xxxxxx X. Xxxxxxxxxx
000 Xxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
