EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
Dated as of July 29, 1996
Among
HANGER ORTHOPEDIC GROUP, INC.
JEH ACQUISITION CORPORATION
and
X.X. XXXXXX, INC. OF GEORGIA
TABLE OF CONTENTS
PAGE
NO.
ARTICLE I CERTAIN DEFINITIONS
Section 1.1 Certain Definitions...................... 1
ARTICLE II THE MERGER
Section 2.1 The Merger............................... 6
Section 2.2 Effective Date of the Merger............. 7
ARTICLE III THE SURVIVING CORPORATION
Section 3.1 Articles of Incorporation................ 7
Section 3.2 By-Laws.................................. 7
Section 3.3 Officers and Board of Directors.......... 8
ARTICLE IV CONVERSION OF SHARES
Section 4.1 Exchange Ratio........................... 8
Section 4.2 Post-Closing Adjustments................. 9
Section 4.3 Dividends; Transfer Taxes................ 12
Section 4.4 No Fractional Securities................. 12
Section 4.5 Non-Transferability of Company Common
Stock Following Effective Date........... 12
Section 4.6 Closing.................................. 12
Section 4.7 Lost Certificates........................ 13
Section 4.8 Capitalization Changes................... 13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.1 Organization and Qualification........... 13
Section 5.2 Capitalization........................... 14
Section 5.3 Subsidiaries............................. 14
Section 5.4 Authority Relative to this Agreement..... 15
Section 5.5 Reports, Financial Statements
and Proxy Statement............... 16
Section 5.6 Information in the Private Offering
Memorandum/Proxy Statement............... 16
Section 5.7 Vote Required............................ 16
Section 5.8 Absence of Undisclosed Liabilities....... 17
Section 5.9 Absence of Certain Changes or Events..... 17
Section 5.10 No Default or Litigation; Permits........ 17
Section 5.11 Taxes.................................... 18
Section 5.12 Employee Benefit Plans; ERISA............ 18
Section 5.13 Patents and Trademarks................... 20
Section 5.14 Interests of Officers and Directors...... 20
(i)
TABLE OF CONTENTS (Cont.)
PAGE
NO.
Section 5.15 Certain Agreements....................... 20
Section 5.16 Investment Company....................... 21
Section 5.17 Ownership of Company Stock............... 21
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 6.1 Organization and Qualification........... 21
Section 6.2 Capitalization........................... 21
Section 6.3 Subsidiaries............................. 21
Section 6.4 Authority Relative to this Agreement..... 22
Section 6.5 Financial Statements and Proxy
Statements.............................. 22
Section 6.6 Absence of Undisclosed Liabilities....... 22
Section 6.7 Absence of Certain Changes or Events..... 23
Section 6.8 No Default or Litigation; Permits........ 23
Section 6.9 Taxes.................................... 24
Section 6.10 Employee Benefit Plans; ERISA............ 25
Section 6.11 Patents and Trademarks................... 26
Section 6.12 Information in the Private Offering
Memorandum/Proxy Statement............... 27
Section 6.13 Interests of Officers and Directors...... 27
Section 6.14 Certain Agreements ...................... 27
Section 6.15 Investment Company ...................... 27
Section 6.16 Vote Required ........................... 27
Section 6.17 Insurance ............................... 27
Section 6.18 Environmental Matters ................... 28
ARTICLE VII REPRESENTATIONS AND WARRANTIES REGARDING
ACQUISITION
Section 7.1 Organization............................. 29
Section 7.2 Capitalization........................... 29
Section 7.3 Authority Relative to this Agreement..... 29
Section 7.4 No Prior Activities...................... 29
ARTICLE VIII CONDUCT OF BUSINESS AFTER EXECUTION
OF THE AGREEMENT
Section 8.1 Conduct of Business by the Company
Prior to the Merger...................... 29
Section 8.2 Conduct of Business by Parent Prior
to the Merger............................ 31
Section 8.3 Conduct of Business of Acquisition....... 31
(ii)
TABLE OF CONTENTS (Cont.)
PAGE
NO.
ARTICLE IX ADDITIONAL AGREEMENTS
Section 9.1 Access to and Information Regarding
the Company...................... 32
Section 9.2 Private Offering Memorandum.............. 33
Section 9.3 Company Shareholders' Meeting............ 33
Section 9.4 Fees and Expenses........................ 33
Section 9.5 Additional Agreements.................... 35
Section 9.6 Publicity................................ 35
Section 9.7 Director and Officer Indemnification .... 35
Section 9.8 Fair Price Statute....................... 35
Section 9.9 Notification of Certain Matters.......... 36
Section 9.10 Employee Benefit Plans................... 37
Section 9.11 Company Employment Agreements............ 37
Section 9.12 Distribution or Transfer of Certain
Marketable Securities and
Real Property.......................... 37
Section 9.13 Grant of Parent Stock Options............ 37
Section 9.14 Appointment of Directors.................. 38
Section 9.15 Section 338(h)(10) Election............... 38
Section 9.16 Certain Conveyance Taxes ................. 39
Section 9.17 Other Tax Matters......................... 39
ARTICLE X CONDITIONS PRECEDENT
Section 10.1 Conditions to Each Party's Obligation
to Effect the Merger ............ 40
Section 10.2 Conditions to Obligation of the Company
to Effect the Merger ............ 41
Section 10.3 Conditions to Obligations of Parent and
Acquisition to Effect the Merger. 42
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER
Section 11.1 Termination............................... 45
Section 11.2 Effect of Termination..................... 47
Section 11.3 Amendment................................. 47
Section 11.4 Waiver.................................... 47
ARTICLE XII GENERAL PROVISIONS
Section 12.1 Non-Survival of Representations,
Warranties and Agreements................ 47
Section 12.2 Assumption of Responsibility for, and
Limitations on Damages for Breaches
of, Certain Representations and
Warranties............................... 48
(iii)
TABLE OF CONTENTS (Cont.)
PAGE
NO.
Section 12.3 Notices.................................. 48
Section 12.4 Interpretation........................... 49
Section 12.5 Disclosure Letters and Exhibits.......... 49
Section 12.6 Miscellaneous............................ 49
Exhibit A - Form of Amendment to Employment Agreement
Exhibit B - Form of Amendment to Employment Agreement
Exhibit C - Form of Indemnification Agreement
(iv)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 29, 1996, by and among
Hanger Orthopedic Group Inc., a Delaware corporation ("Parent"), JEH
Acquisition Corporation, a Georgia corporation and a wholly-owned subsidiary
of Parent ("Acquisition"), and X.X. Xxxxxx, Inc. of Georgia, a Georgia
corporation (the "Company") (Acquisition and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
WHEREAS, the respective Boards of Directors of Acquisition and the
Company have approved the merger of Acquisition with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below:
"Adjusted Stockholders Equity" shall have the meaning set forth in
Section 4.2(c).
"Accountant's Post-Closing Report" shall have the meaning set forth in
Section 4.2(c).
"Acquisition" shall mean JEH Acquisition Corporation, a Georgia
corporation and a wholly-owned subsidiary of Parent.
"Acquisition Transaction" shall have the meaning set forth in Section
8.1(v).
"Actions" shall have the meaning set forth in Section 6.8(c).
"Additional Section 338 Tax" shall have the meaning set forth in Section
4.2(d).
"AMEX" shall mean the American Stock Exchange.
"best knowledge of the Company" shall have the meaning set forth in
Section 6.8(b).
"best knowledge of Parent" shall have the meaning set forth in Section
5.10(b).
1
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act.
"Certificates" shall have the meaning set forth in Section 4.1(e).
"certificates" shall have the meaning set forth in Section 4.4(a).
"Closing" shall have the meaning set forth in Section 4.6.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean X.X. Xxxxxx, Inc. of Georgia, a Georgia corporation.
"Company Common Stock" shall mean the common stock, $1.00 par value per
share, of the Company.
"Company Letter" shall have the meaning set forth in the first sentence
of ARTICLE VI.
"Constituent Corporations" shall mean Acquisition and the Company.
"Effective Date" shall have the meaning set forth in Section 2.2.
"Employee Benefit Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, agreement, program or
arrangement (whether written or oral) involving direct and indirect
compensation, under which the Company or any ERISA Affiliate of the Company
has any present or future obligations or liability on behalf of its employees
or former employees, contractual employees or their dependents or
beneficiaries.
"Environmental and Safety Requirements" means all Laws, Orders,
contractual obligations and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including, without limitation, all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, including, but not limited to,
the Solid Waste Disposal Act, as amended, 42 U.S.C. Subsection 6901, et seq.,
the Clean Air Act, as amended, 42 U.S.C. Subsection 7401 et seq., the Federal
Water Pollution Control Act, as
2
amended, 33 U.S.C. Subsection 1251 et seq., the Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. Subsection 1101 et seq., the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, 42 U.S.C. Subsection 9601 et seq., the Hazardous Materials
Transportation Uniform Safety Act, as amended, 49 U.S.C. Section 1804 et seq.,
the Occupational Safety and Health Act of 1970, and the regulations
promulgated thereunder.
"ERISA Affiliate" means, with respect to any Person, any entity that is a
member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c) or 414(m) of the Code.
"Escrow" shall have the meaning set forth in Section 4.2(a).
"Escrow Agent" shall mean NationsBank, N.A.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Ratio" shall have the meaning set forth in Section 4.1(c).
"Excluded Persons" shall have the meaning set forth in Section 8.1(v).
"GAAP" shall mean United States generally accepted accounting principles
in effect.
"Georgia Code" shall mean the Georgia Business Corporation Code.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, Federal, state or local.
"Indebtedness" shall mean the indebtedness of the Company, including
capital leases, accrued interest and bank overdrafts, industrial revenue
bonds, mortgages and other promissory notes of the Company, determined in
accordance with GAAP and on a basis consistent with the preparation of the
Company's financial statements for the year ended December 31, 1995, and notes
9 and 10 thereto.
"Indemnified Parties" shall have the meaning set forth in Section 9.7.
3
"Law" means any law, statute, treaty, rule, directive or regulation or
Order of any Governmental Entity.
"Liability" means any liability or obligation, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of
when asserted.
"Material Adverse Effect" shall have the respective meanings set forth in
Sections 5.1.
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"Parent" shall mean Hanger Orthopedic Group, Inc., a Delaware
corporation.
"Parent Common Stock" shall mean Parent's common stock, par value $.01
per share.
"Parent Letter" shall have the meaning set forth in the first sentence of
ARTICLE V.
"Parent Preferred Stock" shall mean Parent's preferred stock, par value
$.01 per share.
"Parent 1991 Stock Option Plan" shall mean the Parent's 1991 Stock Option
Plan.
"Parent 1993 Stock Option Plan" shall mean the Parent's 1993 Non-Employee
Directors Stock Option Plan.
"Payment Subject to Adjustment" shall have the meaning set forth in
Section 4.2(a).
"Person" shall have the meaning set forth in Section 8.1(iii)(D).
"Post-Closing Cash Payment" shall have the meaning set forth in Section
4.1(d).
"Primary Cash Payment" shall have the meaning set forth in Section
4.1(d).
"Proceedings" means actions, suits, claims, investigations or legal or
administrative arbitration proceedings.
"Private Offering Memorandum" shall have the meaning set forth in Section
5.4.
"Merger" shall have the meaning set forth in Section 2.1.
4
"Restricted securities" shall have the meaning set forth in Section
4.1(e).
"SEC" shall mean the Securities and Exchange Commission.
"Section 338(h)(10) Election" shall have the meaning set forth in Section
9.15(a).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Selling Shareholders" shall have the meaning set forth in Section 12.2.
"Shareholders' Representatives" shall mean Xxxxxx X. Xxxxxxxxxx and
Xxxxxx X. XxXxxxxx.
"subsidiaries" shall have the meaning set forth in Section 5.3.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax" means any of the Taxes.
"Tax Gross-Up" shall have the meaning set forth in Section 4.2(d).
"Tax Liability Adjustment" shall have the meaning set forth in Section
4.2(d).
"Tax Returns" means Federal, state, local and foreign tax returns,
reports, statements, declaration of estimated tax and forms.
"Taxes" means, with respect to any entity, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, alternative or add-on
minimum taxes, customs duties and other taxes, fees, assessments or charges of
any kind whatsoever, together with all interest and penalties, additions to
tax and other additional amounts imposed by any taxing authority (domestic or
foreign) on such entity (if any) and (ii) any liability for the payment of any
amount of the type described in the immediately preceding clause (i) as a
result of being a "transferee" (within the meaning of Section 6901 of the Code
or any
5
other applicable law) of another entity or a member of an affiliated or
combined group.
"Third Party" shall have the meaning set forth in Section 9.4(a).
"Third Party Acquisition" shall have the meaning set forth in Section
9.4(a).
"Total Section 338 Tax" shall have the meaning set forth in Section
4.2(d).
"Working Capital" shall mean the current assets minus current liabilities
of the Company, determined in accordance with GAAP and on a basis consistent
with the preparation of the Company's financial statements for the year ended
December 31, 1995, and notes 2, 3, 6, 8, 9, 10 and 12 thereto.
ARTICLE II
THE MERGER
Section 2.1 THE MERGER. Upon the terms and subject to the conditions
hereof, on the Effective Date, Acquisition shall be merged with and into the
Company in accordance with the Georgia Code and the separate existence of
Acquisition shall thereupon cease (the "Merger"), and the name of the Company,
as the surviving corporation in the Merger (the "Surviving Corporation"),
shall by virtue of the Merger remain "X.X. Xxxxxx, Inc. of Georgia." Upon the
effectiveness of the Merger, the Company shall possess all of the estate,
property, rights, privileges, powers and franchises of the Constituent
Corporations and all of their property, real, personal and mixed, and all of
the debts due on whatever account to any of them, as well as all stock
subscriptions and other choses in action belonging to any of them; and all
claims, demands, property and other interest of either of the Constituent
Corporations shall be the property of the Surviving Corporation, and the title
to all real estate vested in either of the Constituent Corporations shall not
revert or be in any way impaired by reason of the Merger, but shall be vested
in the Surviving Corporation; provided, however, that the marketable
securities and real properties presently owned by the Company and referred to
in Section 9.12 hereof, shall not be retained by the Company and shall not be
the property of the Surviving Corporation as of the Effective Date. The rights
of creditors of either Constituent Corporation shall not in any manner be
impaired, nor shall any liability or obligation, including taxes due or to
become due, or any claim or demand in any cause existing against such
Constituent Corporation, or any stockholder, director or officer thereof, be
released or impaired by the Merger, but the Surviving Corporation shall be
deemed to have assumed, and shall be
6
liable for, all liabilities and obligations of each of the Constituent
Corporations in the same manner and to the same extent as if the Surviving
Corporation had itself incurred such liabilities or obligations. The
shareholders, directors, and officers of the Constituent Corporations shall
continue to be subject to all the liabilities, claims and demands existing
against them as such at or before the Merger, subject to Section 9.7. No
action or proceeding then pending before any court or tribunal in which either
Constituent Corporation is a party, or in which any such shareholder,
director, or officer is a party, shall xxxxx or be discontinued by reason of
the Merger, but any such action or proceeding may be prosecuted to final
judgment as though the Merger had not taken place, or the Surviving
Corporation may be substituted as a party in place of any Constituent
Corporation by the court in which such action or proceeding is pending.
Section 2.2 EFFECTIVE DATE OF THE MERGER. The Merger shall become
effective when properly executed Articles of Merger are duly filed by the
Surviving Corporation with the Secretary of State of the State of Georgia,
which filing shall be made as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 4.6
hereof; provided that, by mutual consent, such Articles of Merger may provide
for a later date of effectiveness of the Merger not more than 30 days after
the date of such filing. When used in this Agreement, the term "Effective
Date" shall mean the date and time at which such Articles of Merger are so
filed in accordance with Section 14-2-1105 of the Georgia Code (or the date
and time provided in such Articles of Merger).
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 ARTICLES OF INCORPORATION. At the Effective Date, Article Two
of the Articles of Incorporation of the Company shall be amended to change the
total number of shares of stock which the Company is authorized to issue to be
solely as follows: 1,000 shares of Common Stock, par value $1.00 per share. As
so amended, the Articles of Incorporation of the Company shall be the Articles
of Incorporation of the Surviving Corporation after the Effective Date unless
and until amended in accordance with their terms and as provided by law.
Section 3.2 BY-LAWS. The By-Laws of the Company as in effect on the
Effective Date shall be the By-Laws of the Surviving Corporation unless and
until amended in accordance with their terms or the Articles of Incorporation
of the Surviving Corporation and as provided by law.
7
Section 3.3 OFFICERS AND BOARD OF DIRECTORS. The Board of Directors of
the Surviving Corporation shall consist of two directors to be designated by
Parent, who shall serve until their respective successors are duly elected and
qualified. The officers of the Company immediately prior to the Effective Date
shall be the officers of the Surviving Corporation until their respective
successors are duly elected and qualified.
ARTICLE IV
CONVERSION OF SHARES
Section 4.1 EXCHANGE RATIO. As of the Effective Date, by virtue of the
Merger and without any action on the part of any holder of Company Common
Stock:
(a) Any shares of Company Common Stock which are held in the
treasury of the Company shall be cancelled.
(b) All issued and outstanding shares of capital stock of
Acquisition shall be converted into 1,000 issued and outstanding shares
of common stock of the Surviving Corporation.
(c) Subject to the provisions of paragraph (d) of this Section 4.1
and Sections 4.2, 4.5 and 4.6 hereof, each remaining outstanding share of
Company Common Stock shall be converted into the right to receive
$2,009.13 (subject to adjustment as set forth in Section 4.2 hereof) and
45.66 shares of Parent Common Stock (subject to adjustment as provided in
Section 4.8). The amount of cash and shares of Parent Common Stock
(subject to adjustment as provided in Section 4.8) to be exchanged for
each share of Company Common Stock is hereinafter referred to as the
"Exchange Ratio." The total amounts of such cash and shares of Parent
Common Stock (subject to adjustment as provided in Section 4.8) to be
paid or issued to the holders of Company Common Stock are $44,000,000
(subject to adjustment as set forth in Section 4.2 hereof) and 1,000,000
shares of Parent Common Stock.
(d) The $2,009.13 amount of the cash consideration to be paid by
Parent in exchange for each share of Company Common Stock pursuant to
paragraph (c) of this Section 4.1 shall consist of (i) $1,825.00 which
shall be paid at Closing by wire transfer to the bank account designated
by Shareholders' Representative and shall not be subject to adjustment
(the "Primary Cash Payment"); and (ii) $184.13 which shall be placed in
Escrow on the
8
Effective Date, be subject to adjustment after the Closing as provided in
Section 4.2 hereof and shall be paid as promptly as practicable after the
amount of such post-closing adjustment is determined pursuant to Section 4.2
hereof (the "Post-Closing Cash Payment"). The Shareholders' Representative
will obtain the consents of the Company shareholders to make the Primary Cash
Payment and any Post Closing Cash Payment by aggregate wire transfers.
(e) The shares of Parent Common Stock to be issued by Parent in
exchange for each share of Company Common Stock pursuant to paragraph (c)
of this Section 4.1 shall be delivered at the Closing to the
Shareholders' Representatives in the name of the Company shareholders
upon receipt of all shares of Company Stock ("Certificates") duly
endorsed for transfer. Such shares of Parent Common Stock shall not be
registered under the Securities Act or any state securities law and,
accordingly, shall constitute "restricted securities" within the meaning
of Rule 144(a)(3) under the Securities Act. Such shares of Parent Common
Stock will be approved for listing on the American Stock Exchange upon
official notice of issuance.
Section 4.2 POST-CLOSING ADJUSTMENTS.
(a) The $184.13 cash payment per share of Company Common Stock
provided for in Section 4.1(d) (the "Payment Subject to Adjustment")
shall be subject to adjustment following the Closing as provided in this
Section 4.2. Upon the Effective Date, Parent shall place in escrow (the
"Escrow") with the NationsBank, N.A. or such other party agreeable to
Parent and the Company (the "Escrow Agent") $4,032,447, representing the
aggregate amount of the Payments Subject to Adjustment for all
outstanding shares of Company Common Stock, to be held in Escrow pending
the determination of the amount of the Post-Closing Cash Payment to be
set forth in the Accountant's Post-Closing Report referred to below. The
amount placed in escrow shall bear interest at a Treasury xxxx rate until
paid.
(b) The Payment Subject to Adjustment shall be increased or
decreased, as the case may be, by the amount by which the total of
stockholders' equity at the Effective Date, determined in accordance with
GAAP on a basis consistent with the application of GAAP in the Company
financial statements for the year ended December 31, 1995, exceeds or is
less than the Adjusted Stockholders' Equity as determined in accordance
with Section 4.2(c). The Company may sell to CRP, Inc. the Company's
investment in CRP, Inc. for $175,000
9
and distribute the $175,000 to the Company shareholders in accordance
with Section 9.12 hereof. If CRP, Inc. declines to purchase such
investment, Parent shall have the option by written notice of the
Shareholders' Representative on or before September 30, 1996 to increase
the Payment Subject to Adjustment by $175,000 and have the investment in
CRP, Inc. not included in the marketable securities to be distributed to
shareholders of the Company in accordance with Section 9.12 hereof. If
such investment is not sold to CRP, Inc. and if Parent fails to exercise
its option, such investment shall be distributed to the shareholders of
the Company in accordance with Section 9.12. The Payment Subject to
Adjustment shall also be increased by the Total Section 338 Tax
attributable to the Section 338(h)(10) Election referred in Section 9.15
hereof as set forth in paragraph (d) of this Section 4.2 (the "Tax
Liability Adjustment").
(c) The Adjusted Stockholders' Equity shall be $22,926,999, the
stockholders' equity at December 31, 1995, less (i) the fair market value
of the marketable securities referred to in Section 9.12 at the date
distributed to the Company shareholders prior to the Effective Date, (ii)
the cash proceeds from the sale by the Company of any marketable
securities or non-operating real properties referred to in Section 9.12
distributed to the Company shareholders prior to the Effective Date, and
(iii) the net book value determined in accordance with GAAP of the
non-operating real properties referred to in Section 9.12 distributed to
the Company shareholders prior to the Effective Date.
(d) The Tax Liability Adjustment shall be equal to the "Total
Section 338 Tax" which is equal to (i) the "Additional Section 338 Tax"
associated with a Section 338(h)(10) Election and (ii) the "Tax Gross-Up"
of federal, and state tax on the increase in purchase price attributable
to the Additional Section 338(h)(10) Tax.
The "Additional Section 338 Tax" shall be computed on the following
assumptions:
(i) The Company has one shareholder ("Deemed Shareholder");
(ii) The Deemed Shareholder has an aggregate state and federal marginal
tax rate of 44.31% for ordinary income and 32.32% for long-term
capital gain income.
Using the foregoing assumptions, the "Additional Section 338 Tax" is the
excess of (i) aggregate of the Deemed
10
Shareholder's state and federal taxes attributable to the closing of the
Agreement and Plan of Merger assuming a Section 338(h)(10) Election is
made (exclusive of any Taxes arising out of any breach of a
representation or warranty contained in Section 6.9), over (ii) the
aggregate of the Deemed Shareholder's state and federal taxes
attributable to such closing had it been treated as a sale of Company
stock by such Deemed Shareholder. The Additional Section 338 Tax shall be
reduced by an built-in gains tax under Section 1374 the Code incurred by
the Company as a result of the transactions contemplated under this
Agreement. The "Tax Gross-Up" shall be the Additional Section 338 Tax,
unreduced by the foregoing Section 1374 adjustment, divided by 55.69% to
the extent the income subject to such Additional Section 338 Tax is taxed
as ordinary income and divided by 67.68% to the extent the income subject
to such Additional Section 338 Tax is taxed as long-term capital gain.
(e) Within 60 days following the preparation by the Company of audit
schedules in accordance with the terms of the Coopers & Xxxxxxx audit
assistance letter, which audit assistance letter be will be delivered to
the Company on or prior to the Effective Date, Parent shall cause Coopers
& Xxxxxxx to complete, at Parent's expense, a report (the "Accountant's
Post-Closing Report") (applying GAAP based upon the Company's accounting
policies so long as such policies are in accordance with GAAP) setting
forth the adjustment in the Payment Subject to Adjustment in Section
4.2(b) above. Parent shall promptly deliver the Accountant's Post-Closing
Report to the Shareholders' Representative and in the event the total
amount of the Post-Closing Cash Payments is greater than the amount of
the Payment Subject to Adjustment held in Escrow, Parent shall transfer
an amount equal to such excess to the Escrow Agent. In the event the
Payment Subject to Adjustment held in Escrow is greater than the total
amount of the Post-Closing Cash Payments, the Escrow Agent shall transfer
an amount equal to such excess to Parent. Parent shall promptly direct
the Escrow Agent to release the balance of the funds held in Escrow to
the bank account designated by the Shareholders' Representative as
payment of the Post-Closing Cash Payment calculated in accordance with
the above paragraphs of this Section 4.2. If the Shareholders'
Representative is in disagreement with the Accountant's Post Closing
Report, written notice to such effect shall be given to Parent within
five (5) business days of the receipt of the report. If the disagreement
cannot be resolved within ten (10) business days of such written notice,
the disagreement will be referred to a mutually agreed upon Big Six
accounting firm that has not
11
previously performed services for Parent or Company. All parties agree to
cooperate with such firm. The decision of such firm shall be binding upon
all parties.
Section 4.3 DIVIDENDS; TRANSFER TAXES. No dividends or other
distributions that are declared after the Effective Date on Parent Common
Stock or are payable to the holders of record thereof after the Effective Date
will be paid to persons entitled by reason of the Merger to receive
certificates representing Parent Common Stock until such persons surrender
their Certificates. Upon such surrender, there shall be paid to the person in
whose name the certificates representing such Parent Common Stock shall be
issued, any dividends or other distributions which shall have become payable
with respect to such Parent Common Stock between the Effective Date and the
time of such surrender. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. Notwithstanding the foregoing, no party
hereto shall be liable to a holder of shares of Company Common Stock for any
shares of Parent Common Stock or dividends or other distributions thereon, or,
in accordance with Section 4.5 hereof, proceeds of the sale of fractional
interests, delivered to a public official pursuant to applicable escheat laws.
Section 4.4 NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this ARTICLE IV and no
Parent dividend or other distribution, stock split or interest shall relate to
any fractional security, and such fractional interests shall not entitle the
owner thereof to vote or to any rights of a security holder of Parent. In lieu
of any such fractional securities, each holder of Company Common Stock who
would otherwise have been entitled to a fraction of a share of Parent Common
Stock upon surrender of Certificates for exchange pursuant to this ARTICLE IV
shall be paid an amount in cash (without interest) upon such surrender equal
to such holder's proportionate interest in the net proceeds from the sale or
sales in the open market, on behalf of all such holders, of the aggregate
fractional shares of Parent Common Stock. Such sale or sales shall be effected
promptly following the surrender of Certificates for Company Common Stock.
Section 4.5 NON-TRANSFERABILITY OF COMPANY COMMON STOCK FOLLOWING
EFFECTIVE DATE. Upon the Effective Date, no transfer of Company Common Stock
issued prior to the Effective Date shall be made. If, after the Effective
Date, Certificates representing such shares are presented to the Surviving
Corporation, they shall be cancelled and exchanged for cash and certificates
representing Parent Common Stock, as provided in this ARTICLE IV.
Section 4.6 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place (i)
12
at the offices of counsel to Parent, Freedman, Levy, Xxxxx & Xxxxxxx, in
Washington, D.C., as soon as practicable, after the fulfillment or waiver of
the last of the conditions set forth in Article X hereof, or (ii) at such
other time and place as Parent and the Company shall agree.
Section 4.7 LOST CERTIFICATES. In the event any Certificates for
Company Common Stock shall have been lost, stolen or destroyed, the Parent
shall issue in exchange for such lost, stolen or destroyed Certificate, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock and a check representing the cash payment provided in
Section 4.3(a) hereof plus the amount of cash in lieu of fractional shares, if
any, as may be required pursuant to this ARTICLE IV, provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate to
deliver a bond in such reasonable amount as it may direct as indemnity against
any claim that may be made against Parent or the Company with respect to the
Certificate alleged to have been lost, stolen or destroyed.
Section 4.8 CAPITALIZATION CHANGES. If, between the date of this
Agreement and the Effective Date, the outstanding shares of Parent Common
Stock shall have been changed into a different number of shares or a different
class by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares, or stock dividend, the Exchange Ratio set
forth in this Agreement shall be appropriately adjusted. If the number of
outstanding shares of Company Common Stock on the Effective Date is not 21,900
shares, the Exchange Ratio set forth in this Agreement shall be appropriately
adjusted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, except as set forth in the
letter of even date with this Agreement from the Parent to the Company (the
"Parent Letter"), as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has corporate power to carry on its business as it is
now being conducted or presently proposed to be conducted. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified will not, individually or in the
aggregate, have a material adverse
13
effect on the assets, liabilities, results of operations, financial condition
or business (a "Material Adverse Effect") of Parent and its subsidiaries,
taken as a whole.
Section 5.2 CAPITALIZATION. The authorized capital stock of Parent
consists of 25,000,000 shares of Parent Common Stock and 10,000,000 shares of
Parent Preferred Stock. As of the date hereof, (i) 8,303,269 shares of Parent
Common Stock were validly issued and outstanding, fully paid and
non-assessable; (ii) 153,945 shares of Parent Common Stock were reserved for
issuance upon the exercise of warrants exercisable through December 31, 2001
at a price of $4.16 per share; (iii) 322,699 shares of Parent Common Stock
were reserved for issuance upon the exercise of warrants exercisable through
December 31, 2001 at a price of $7.65 per share; (iv) 790,459 shares of Parent
Common Stock were reserved for issuance upon the exercise of options granted
under the Parent 1991 Stock Option Plan at prices ranging from $2.75 to $12.25
per share; (v) 120,000 shares of Parent Common Stock were reserved for
issuance upon the exercise of options granted under the Parent 1993 Stock
Option Plan at prices ranging from $3.00 to $6.00 per share; (vi) 70,000
shares of Parent Common Stock were reserved for issuance upon the exercise of
non-qualified options granted other than pursuant to the Parent 1991 Stock
Option Plan or Parent 1993 Stock Option Plan and exercisable at prices ranging
from $3.00 to $12.00 per share; (vii) 454,545 shares of Parent Common Stock
were reserved for issuance upon the conversion of a $4,000,000 Convertible
Junior Subordinated Note due in March 1999; (ix) 148,367 shares of Parent
Common Stock were reserved for issuance upon the conversion of a $1,000,000
Convertible Junior Subordinated Note due in March 1999; and (x) 300 shares of
Parent Preferred Stock were issued and outstanding. All of the shares of
Parent Common Stock issuable in exchange for Company Common Stock at the
Effective Date in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and non-assessable and free of
preemptive rights.
Section 5.3 SUBSIDIARIES. Parent has 18 subsidiaries, each of which is
wholly owned by Parent unless otherwise indicated: Albuquerque Prosthetics
Center, Inc., a New Mexico corporation; Apothecaries, Inc., a Delaware
corporation; Capital Orthopedics, Inc., a Colorado corporation; Columbia Brace
Acquisition Corp., a Delaware corporation (80%-owned); DOBI-Symplex, Inc., a
Delaware corporation; Xxxxxx Prosthetics & Orthotics, Inc., a New York
corporation; Xxxxxxx & Xxxx Orthopedics, Inc., a Colorado corporation; X.X.
Xxxxxx, Inc., a Delaware corporation; X.X. Xxxxxx of California, Inc., a
Delaware corporation; JEH Acquisition Corporation, a Delaware corporation;
Memphis Orthopedic, Inc., a Delaware corporation; Metzgers Orthopaedic
Services, Inc., a California corporation; Opnet Inc., a Nevada corporation;
Xxxxx Xxxxxx, Inc., a Delaware corporation; Xxxxx Orthopedics, Inc., a
Colorado corporation; Xxxxx Orthopedics of Northern Colorado, Inc., a Colorado
corporation; York Prosthetics, Inc., a Delaware corpora-
14
tion; and Xxxxxx Orthotics & Prosthetics, Inc., a Delaware corporation. (The
subsidiaries of Parent are collectively referred to hereinafter as the
"subsidiaries"). Each subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power to carry on its business as it is now
being conducted or proposed to be conducted. Each subsidiary is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease
or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified will not have a Material Adverse Effect
on Parent and its subsidiaries, taken as a whole. All the outstanding shares
of capital stock of each subsidiary owned by Parent are validly issued, fully
paid and non-assessable and Parent's shares in such subsidiaries are owned
free and clear of any liens, claims or encumbrances. There are no existing
options, calls or commitments of any character relating to the issued or
unissued capital stock or other securities of any subsidiary.
Section 5.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Parent has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by Parent's
Board of Directors; the issuance of up to 1,000,000 shares of Parent Common
Stock pursuant to this Agreement and the conduct of a private offering thereof
to the shareholders of the Company in accordance with Regulation D under the
Securities Act and the preparation of a Private Offering Memorandum (the
"Private Offering Memorandum") to be forwarded to such shareholders and the
filing with the SEC of a Form D in connection therewith, together with all
other filings required under all applicable state securities laws, have been
duly authorized by Parent's Board of Directors; no other corporate proceedings
on the part of Parent are necessary to authorize this Agreement and the
transactions contemplated hereby. Parent's Board of Directors has unanimously
determined that the Merger is in the best interests of Parent and has
unanimously approved all of the transactions contemplated by this Agreement,
including without limitation, the Merger. This Agreement has been executed and
delivered by each of Parent and Acquisition and (assuming the valid
authorization, execution and delivery of this Agreement by the Company) is a
valid and binding obligation of Parent and Acquisition. Parent and its
subsidiaries are not subject to or obligated under (i) any charter or bylaw,
(ii) any indenture or other loan document provision or (iii) any other
contract, license, franchise, permit, law, regulation, injunction, writ, order
or decree, which would be breached or violated or under which there would be a
default (with or without notice or passage of time) or a loss of benefits by
its executing and carrying out this Agreement other than, in the case of
clauses (ii) and (iii) only, any breaches, violations, or defaults which,
singly or in the aggregate, will not
15
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole
or which shall be cured, waived or terminated prior to the Effective Date.
Except as referred to herein or in connection or in compliance with any
applicable provisions of the Securities Act, the Exchange Act, the rules of
the AMEX and the corporation, securities or blue sky laws of the various
states of the United States, no filing or registration with, or authorization,
consent or approval of, any public body or authority is necessary for the
consummation by Parent of the Merger or the other transactions contemplated by
this Agreement, other than filings, registrations, authorizations, consents or
approvals which if not made or obtained would not, singly or in the aggregate,
have a Material Adverse Effect on Parent and its subsidiaries, taken as a
whole.
Section 5.5 REPORTS, FINANCIAL STATEMENTS AND PROXY STATEMENT. Parent
has previously furnished the Company with true and complete copies (without
exhibits) of its (i) Annual Reports on Form 10-K for the years ended December
31, 1993, 1994 and 1995, as filed with the SEC, (ii) Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, and (iii) proxy statement, dated
May 1, 1996, of the Company relating to the Annual Meeting of Stockholders of
the Company held on June 18, 1996. As of their respective dates, such reports
and statements did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and any
unaudited interim financial statements of Parent included in such reports have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be indicated therein or in the notes thereto) and fairly present the
financial position of Parent and its subsidiaries as at the dates thereof and
the results of their operations and changes in financial position for the
periods then ended. Parent is in compliance with the "current public
information" requirement of Rule 144 and will, at all times following the
Effective Date, remain in compliance with such requirement.
Section 5.6 INFORMATION IN THE PRIVATE OFFERING MEMORANDUM. None of
the information supplied by Parent or Acquisition for inclusion in the Private
Offering Memorandum will, in the case of the Private Offering Memorandum or
any supplement thereto, as of its date and at the Effective Date, and at the
time of the meeting referred to in Section 9.3 hereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
Section 5.7 VOTE REQUIRED. The vote of the holders of the outstanding
shares of Parent Common Stock is not necessary to approve this Agreement and
the transactions contemplated hereby.
16
Section 5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Parent's Annual Report on Form 10-K for the year ended December 31, 1995, or
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1996,
neither Parent nor any of its subsidiaries (i) had as of March 31, 1996, any
material Liability which is required to be accrued, reserved against or
otherwise disclosed in the consolidated financial statements of Parent under
GAAP or (ii) has incurred after March 31, 1996 any such material Liability
except in the ordinary course of business and consistent with past practices.
Section 5.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1996, there have not been (i) any adverse change or changes in the financial
condition, results of operations, businesses, properties, assets or
Liabilities of Parent or any of its subsidiaries that would, singly or in the
aggregate, have a Material Adverse Effect on Parent and its subsidiaries,
taken as a whole, or (ii) any direct or indirect redemption, purchase or other
acquisition by Parent of any shares of Parent Common Stock, or any
declaration, setting aside or payment of any dividend or other distribution by
the Parent in respect of Parent Common Stock.
Section 5.10 No Default or Litigation; Permits. Except as disclosed in
Parent's Annual Report on Form 10-K for the year ended December 31, 1995, and
the reports, statements and schedules (other than exhibits thereto) filed by
Parent with the SEC since December 31, 1995:
(a) neither Parent nor any of its subsidiaries is in default or
violation under any agreement relating to indebtedness for borrowed money
to which it is a party; and neither Parent nor any of its subsidiaries is
in default or violation under any lease or other instrument to which it
is a party, or under any law, rule, regulation, writ, injunction, order
or decree of any court or any foreign, federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, applicable laws, rules
and regulations relating to antitrust and civil rights) which default or
violation would have a Material Adverse Effect on Parent and its
subsidiaries taken as a whole;
(b) there are no actions at law, suits in equity or claims pending
or, to the best knowledge of the directors and executive officers of
Parent (such knowledge is hereinafter referred to as the "best knowledge
of Parent"), threatened against or affecting Parent or any of its
subsidiaries or their respective businesses or properties which in the
aggregate might result in a Material Adverse Effect on Parent and its
subsidiaries
17
taken as a whole; and
(c) Parent and its subsidiaries possess all franchises, permits,
licenses, certificates, approvals and other authorizations necessary to
own or lease and operate their properties and to conduct their businesses
as now conducted, except for incidental licenses, permits and
certificates which would be readily obtainable by any qualified applicant
without undue burden in the event of any lapse, termination, cancellation
or forfeiture.
The Parent Letter sets forth a list as of the date hereof of, and Parent has
delivered to the Company true, correct and complete copies of, all agreements
or other instruments, including all amendments thereto, under which Parent or
its subsidiaries have outstanding, or may incur, indebtedness for borrowed
money, together with the principal amount of indebtedness outstanding under
each such agreement or instrument as of March 31, 1996. There are no liens on
any property of Parent or its subsidiaries securing any such indebtedness
except as set forth in the Parent Letter.
Section 5.11 TAXES. All federal, state, county, municipal or foreign
income, franchise, sales and other Tax Returns required by Law to be filed
have been duly filed, and all Taxes, assessments, fees and other governmental
charges upon Parent or any of its subsidiaries or upon any of their respective
properties, assets, revenues, income or franchises which have become due and
payable as shown therein have been paid, and adequate provision has been made
for all such Taxes, assessments, fees and other charges which may become due
and payable with respect to such periods for which returns were required to be
filed. Neither the Internal Revenue Service nor any other taxing authority or
agency is now asserting, in writing, any deficiency or claim for material
additional Taxes or interest thereon or penalties in connection therewith
against Parent or any of its subsidiaries; nor, to the best knowledge of
Parent, is any such authority threatening, in writing, to initiate a
proceeding against Parent or any of its subsidiaries with respect to any such
deficiency or claim. Neither Parent nor any of its subsidiaries has granted
any waiver of any statute of limitations with respect to, or any extension of
a period for the assessment of, any federal, state or foreign income Tax or
material county or municipal income Tax. The accruals and reserves for Taxes
reflected in the balance sheet included in Parent's Annual Report on Form 10-K
for the year ended December 31, 1995 are adequate to cover all taxes accruable
through such date (including interest and penalties, if any, thereon) in
accordance with GAAP.
Section 5.12 EMPLOYEE BENEFIT PLANS; ERISA.
(a) The Parent Letter sets forth a list of each employee pension
benefit plan, as defined in Section 3(2)
18
of ERISA, to which Parent or any of its subsidiaries contributes on
behalf of its employees, and Parent has delivered to the Company true,
correct and complete copies of each of such plans and trusts, including
all amendments thereto, and, with respect to each of such plans, the most
recent report on Form 5500, actuarial valuation report and summary plan
description. None of such plans is (i) a multi-employer plan (as defined
in Section 414(f) of the Code or Section 4001(a) of ERISA), or (ii) a
plan with respect to which more than one employer makes contributions
within the meaning of Sections 4063 and 4064 of ERISA.
(b) With respect to each of such plans:
(i) as of the date of execution of this Agreement, all
contributions required for such plan for the plan year most recently
ended and for all prior plan years have been made or are reserved
for on the balance sheet included in Parent's Annual Report on Form
10-K for the year ended December 31, 1995;
(ii) no reportable event, as such term is defined in Section
4043(b) of ERISA, has occurred with respect to any of such plans
which are subject to Section 4043(b) of ERISA, other than those
which will not have a Material Adverse Effect on Parent and its
consolidated subsidiaries, taken as a whole, which might arise
solely as a result of the transactions contemplated by this
Agreement or which pursuant to applicable regulations are not
subject to the 30-day notice to the Pension Benefit Guaranty
Corporation;
(iii) the total assets of such plans are sufficient to
discharge all liabilities of the plans on a termination basis; and
(iv) as of the Effective Date, no event will have occurred
which will result in the imposition of a material liability on
Parent under Section 4063 or 4201 of ERISA.
(c) The Parent Letter sets forth a list and Parent has delivered to
the Company copies of all deferred compensation plans, all supplemental
death, disability, and retirement plans, all medical reimbursement plans,
all employee welfare benefit plans (within the meaning of Section 3(1) of
ERISA), all severance plans, all bonus plans and all other employee
benefit plans of any kind or
19
character, whether written or oral, maintained by Parent or any of
its subsidiaries. Except as set forth in said list, none of such
plans or arrangements provides benefits to employees or their
dependents after retirement, except as required by applicable law.
Section 5.13 PATENTS AND TRADEMARKS. Parent and each of its
subsidiaries own or have the right to use all patents, trademarks, service
marks, copyrights, trade names, inventions, improvements, processes, formulae,
trade secrets, mailing lists, know-how and proprietary or confidential
information used in conducting their businesses which are material to their
respective businesses. To the best knowledge of Parent, (i) the operations or
businesses of Parent or its subsidiaries do not infringe any patent, patent
right, trademark, service xxxx, trade name, or copyright or registration
thereof of any other party; (ii) no claim or threat of any such infringement
has been made, and no proceedings are pending or threatened against Parent or
any of its subsidiaries which challenge the validity or ownership of any
patent, trademark, trade name, service xxxx or copyright or the ownership of
any other right or property owned or used by Parent or any of its
subsidiaries; and (iii) there is no infringing use of any of the same by
others.
Section 5.14 INTERESTS OF OFFICERS AND DIRECTORS. Except as disclosed
in Parent's Annual Report on Form 10-K for the year ended December 31, 1995,
or any other reports or statements filed by Parent with the SEC since December
31, 1995, to the best knowledge of Parent, none of Parent's officers or
directors has, nor does any officer or director of any subsidiary of Parent
have, any interest in any material property, real or personal, tangible or
intangible, including inventions, trademarks, service marks, trade names and
copyrights, used in or pertaining to the business of Parent or any of its
subsidiaries, except for the normal rights of a stockholder and except for
rights under existing employee benefit plans.
Section 5.15 CERTAIN AGREEMENTS. Except as disclosed in Parent's Proxy
Statement, dated May 1, 1996, neither Parent nor any of its subsidiaries is a
party to any (i) agreements with any director, officer or employee of Parent
or any of its subsidiaries (A) the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving Parent or any of its subsidiaries of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (C) providing severance benefits or other benefits (which are
conditioned upon a change of control) after the termination of employment of
such employee regardless of the reason for such termination of employment,
(ii) agreement or plan, including, without limitation, any incentive or bonus
plan, stock option plan, stock appreciation right plan or stock purchase plan,
any of the benefits of which will be materially increased, or the vesting of
benefits of which will be materially accelerated, by the
20
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement or (iii) agreements
providing for any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement. Parent has
delivered to the Company copies of all such agreements and plans.
Section 5.16 INVESTMENT COMPANY. Neither Parent nor any of its
subsidiaries is an "investment company" or an "affiliated person" thereof or
an "affiliated person" of any such "affiliated person," as such terms are
defined in the Investment Company Act of 1940, as amended.
Section 5.17 OWNERSHIP OF COMPANY STOCK. Neither Parent nor Acquisition
nor any subsidiaries of Parent own beneficially or of record, or is party to
any agreement, arrangement or understanding for the purpose of acquiring,
holding or voting, shares of capital stock of the Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquisition, except as
set forth in the letter of even date with this Agreement from the Company to
the Parent (the "Company Letter"), as follows:
Section 6.1 ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Georgia and has corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified will not, individually or in the
aggregate, have a Material Adverse Effect on the Company and its subsidiaries,
taken as a whole.
Section 6.2 CAPITALIZATION. The authorized capital stock of the
Company consists of 250,000 shares of Company Common Stock. As of the date
hereof, (i) 21,900 shares of Company Common Stock were outstanding, all of
which were validly issued, fully paid and non-assessable; and (ii) no shares
of Company Common Stock were held in the treasury of the Company. There are no
options, warrants, rights, agreements or commitments presently outstanding
obligating the Company to issue shares of Company Common Stock.
Section 6.3 SUBSIDIARIES. The Company has no subsidiaries.
21
The Company does not directly or indirectly have any investment in any other
corporation, partnership, joint venture or other business association or
entity which investment is not owned free and clear of any liens, claims or
encumbrances.
Section 6.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by the
Company's Board of Directors; and, except for the approval of its shareholders
as set forth in Section 9.3 hereof, no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement and the transactions
contemplated hereby. The Company's Board of Directors has unanimously
determined that the Merger is in the best interests of its shareholders and
has unanimously approved all of the transactions contemplated by this
Agreement, including without limitation, the Merger. The Company is not
subject to or obligated under (i) any charter or bylaw, (ii) any indenture or
other loan document provision, or (iii) any other contract, license,
franchise, permit, law, regulation, injunction, writ, order or decree, which
would be breached or violated or under which there would be a default (with or
without notice or passage of time) or a loss of benefits by its executing and
carrying out this Agreement. Except as referred to herein, no filing or
registration with, or authorization, consent or approval of, any public body
or authority is necessary for the consummation by the Company of the Merger or
the other transactions contemplated by this Agreement.
Section 6.5 FINANCIAL STATEMENTS AND PROXY STATEMENTS. The Company has
previously furnished Parent with true and complete copies (without exhibits)
of its financial statements for the years ended December 31, 1993, 1994 and
1995 (of which the financial statements for the year ended December 31, 1993
and December 31, 1995 were audited). As of their respective dates, such annual
financial statements did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company have been
prepared in accordance with GAAP applied on a consistent basis (except as may
be indicated therein or in the notes thereto) and fairly present the financial
position of the Company as at the dates thereof and the results of their
operations and changes in financial position for the periods then ended.
Section 6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
the Company's audited financial statements for the year ended December 31,
1995, the Company (i) did not have as of December 31, 1995, any material
Liability or (ii) has not incurred after December 31, 1995 any such material
Liability except in the ordinary course of business and consistent with past
practices
22
(none of which relate to violation of Law, tort, breach of contract or a
Proceeding), which would have a Material Adverse Effect on the Company.
Section 6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
contemplated by this Agreement, since December 31, 1995, there have not been
(i) any adverse change or changes in the financial condition, results of
operations, businesses, properties, assets or Liabilities of the Company that
would, singly or in the aggregate, have a Material Adverse Effect on the
Company ; or (ii) any direct or indirect redemption, purchase or other
acquisition by the Company of any share of Company Common Stock; (iii) any
declaration, setting aside or payment of any dividend or other distribution
(except for any distribution contemplated by Section 9.12) by the Company in
respect of Company Common Stock; or (iv) any action by the Company which would
have been prohibited by Section 8.1 of this Agreement had such Section 8.1
been in effect at all times since December 31, 1995.
Section 6.8 NO DEFAULT OR LITIGATION; PERMITS.
(a) the Company is not in default or violation under any agreement
relating to indebtedness for borrowed money to which it is a party; and
the Company is not in default or violation under any lease or other
instrument to which it is a party, or under any law, rule, regulation,
writ, injunction, order or decree of any court or any foreign, federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation,
applicable laws, rules and regulations relating to anti-trust and civil
rights) which default or violation would have a Material Adverse Effect
on the Company;
(b) there are no actions at law, suits in equity or claims pending
or, to the best knowledge of the directors and executive officers of the
Company (such knowledge is hereinafter referred to as the "best knowledge
of the Company"), threatened against or affecting the Company or its
business or properties which in the aggregate might result in a Material
Adverse Effect on the Company;
(c) to the best knowledge of the Company, there are no pending or
threatened claims, actions, suits, proceedings or investigations relating
to the Company ("Actions") against any Indemnified Parties (as defined in
Section 9.7 hereof) or facts upon which any such Actions could be based;
and
(d) the Company possesses all franchises, permits, licenses,
certificates, approvals and other authorizations necessary to own or
lease and operate its properties and to conduct its businesses as now
conducted,
23
except for incidental licenses, permits and certificates which would be
readily obtainable by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or forfeiture.
The Company Letter sets forth the aggregate Indebtedness of the Company as of
December 31, 1995. There have been no changes to such Indebtedness since
December 31, 1995, other than repayments or as permitted under Section
8.1(iii). There are no liens on any property of the Company securing any such
indebtedness.
Section 6.9 TAXES. All federal, state, county, municipal or foreign,
income, franchise, sales and other Tax Returns required by law to be filed
have been duly filed, and all Taxes, assessments, fees and other governmental
charges upon the Company or upon any of its properties, assets, revenues,
income or franchises which have become due and payable have been paid, and
adequate provision has been made for all such Taxes, assessments, fees and
other charges which may become due and payable with respect to such periods
for which returns were required to be filed. Neither the Internal Revenue
Service nor any other taxing authority or agency is now asserting, in writing,
any deficiency or claim for material additional Taxes or interest thereon or
penalties in connection therewith against the Company; nor, to the best
knowledge of the Company, is any such authority threatening, in writing, to
initiate a proceeding against the Company with respect to any such deficiency
or claim. None of the Company's federal or state Tax Returns have been
audited. The Company has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any
federal, state or foreign income Tax or material county or municipal income
Tax. The accruals and reserves for Taxes reflected in the balance sheet
included in the Company's audited financial statements for the year ended
December 31, 1995 are adequate to cover all Taxes accruable through such date
(including interest and penalties, if any, thereon) in accordance with GAAP.
The Company has been a "small business corporation " (within the meaning of
Section 1361 of the Code) for all taxable years beginning on January 1, 1984
and ending on the date of the Closing, has duly elected under Section 1362(a)
of the Code to be taxed as an "S corporation" for federal income tax purposes
for each of such taxable years, and has made a corresponding election under
the tax laws of each state that permits an S election to be made of those
states in which the Company files tax returns for each of such taxable years
(or such shorter period for which tax returns have been filed). Payment to
shareholders of the Company in 1996 for their taxes attributable to prior year
Company net income is not reflected as a liability in the Company's fiscal
1995 financial statements because the Company had not then declared the
dividend. Deferred income taxes on the Company shareholders will be triggered
by the Closing. Accrual of such liability is not required by GAAP prior to
Closing.
24
Section 6.10 EMPLOYEE BENEFIT PLANS; ERISA.
(a) The Company Letter sets forth a list of each Employee Benefit
Plan to which the Company or any Subsidiary contributes on behalf of its
employees, and the Company has delivered to Parent true, correct and
complete copies of each of such plans and trusts, including all
amendments thereto, and, with respect to each of such plans, the most
recent annual report on Form 5500 and related financial statements,
actuarial valuation report summary plan description, all governmental
rulings, determinations and opinions (and pending requests therefor).
None of such plans is and neither the Company nor any of its ERISA
Affiliates has ever maintained or been obligated to contribute to (i) a
multi employer plan (as defined in Section 414(f) of the Code or Section
4001(a) of ERISA), or (ii) a plan with respect to which more than one
employer makes contributions within the meaning of Sections 4063 and 4064
of ERISA or (iii) a defined benefit pension plan (as defined in Section
3(35) of ERISA). All employee plans have been operated and administered
in compliance in all material respects with ERISA, the Code and other
applicable Laws.
(b) With respect to each of such plans:
(i) each Employee Benefit Plan, if intended to be "qualified"
within the meaning of Section 401(a) of the Code, has been
determined by the Internal Revenue Service to be so qualified and
the related trusts are exempt from tax under Section 501(a) of the
Code, and to the best knowledge of the Company, nothing has occurred
that has or could reasonably be expected to affect adversely such
qualification or exemption;
(ii) to the best knowledge of the Company, neither the Company,
its ERISA Affiliates, nor any other "disqualified person" or "party
in interest" (as such terms are defined in Section 4975 of the Code
and Section 3(14) of ERISA, respectively) with respect to an
Employee Plan has breached the fiduciary rules of ERISA or engaged
in a prohibited transaction that could subject the Company or any of
its ERISA Affiliates to any tax or penalty imposed under Section
4975 of the Code or Section 501(i), (j) or (l) of ERISA;
(iii) no Proceedings (other than routine claims for benefits)
are pending, or to the best knowledge of the Company, threatened,
25
with respect to or involving any Employee Benefit Plan;
(iv) except as may be required under Laws of general
application, none of the Employee Benefit Plans obligate the Company
to provide any employee or former employee, or their spouses, family
members or beneficiaries, any post-employment or post-retirement
health or life insurance or other benefits;
(v) each Employee Benefit Plan that is a "group health plan"
within the meaning of Section 5000 of the Code has been maintained
in compliance with Section 4980B of the Code and Title I, Subtitle
B, Part 6 of ERISA and no tax payable on account of Section 4980B of
the Code has been or is expected to be incurred;
(vi) as of the date of execution of this Agreement, all
contributions required for such plan for the plan year most recently
ended and for all prior plan years have been made or are reserved
for on the balance sheet included in the Company's audited financial
statements for the year ended December 31, 1995;
Section 6.11 PATENTS AND TRADEMARKS. The Company and each Subsidiary
own or have the right to use all patents, trademarks, service marks,
copyrights, trade names, inventions, improvements, processes, formulae, trade
secrets, mailing lists, know-how and proprietary or confidential information
used in conducting their businesses which are material to their respective
businesses. To the best knowledge of the Company, (i) the operations or
businesses of the Company or any Subsidiary do not infringe any patent, patent
right, trademark, service xxxx, trade name, or copyright or registration
thereof of any other party; (ii) no claim or threat of any such infringement
has been made, and no proceedings are pending or threatened against the
Company or any Subsidiary which challenge the validity or ownership of any
patent, trademark, trade name, service xxxx or copyright or the ownership of
any other right or property owned or used by the Company or any Subsidiary;
and (iii) there is no infringing use of any of the same by others.
Section 6.12 INFORMATION IN THE PRIVATE OFFERING MEMORANDUM. None of
the information supplied by the Company for inclusion in the Private Offering
Memorandum or any supplement thereto will, as of its date and at the Effective
Date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
26
Section 6.13 INTERESTS OF OFFICERS AND DIRECTORS. To the best knowledge
of the Company, none of the Company's officers or directors has, nor does any
officer or director of any Subsidiary have, any interest in any material
property, real or personal, tangible or intangible, including inventions,
trademarks, service marks, trade names and copyrights, used in or pertaining
to the business of the Company or any Subsidiary, except for the normal rights
of a stockholder and except for rights under existing employee benefit plans.
Section 6.14 CERTAIN AGREEMENTS. The Company is not a party to any (i)
agreements with any director, officer or employee of the Company (A) the
benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company of the
nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee extending for a
period longer than one year, or (C) providing severance benefits or other
benefits (which are conditioned upon a change of control) after the
termination of employment of such employee regardless of the reason for such
termination of employment; (ii) agreement or plan, including, without
limitation, any incentive or bonus plan, stock option plan, stock appreciation
right plan or stock purchase plan, any of the benefits of which will be
materially increased, or the vesting of benefits of which will be materially
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement; or (iii)
agreements providing for any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement.
The Company has delivered to Parent copies of all such agreements and plans.
Section 6.15 INVESTMENT COMPANY. The Company is not an "investment
company" or an "affiliated person" thereof or an "affiliated person" of any
such "affiliated person," as such terms are defined in the Investment Company
Act of 1940, as amended.
Section 6.16 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class of the Company's capital stock necessary to approve
this Agreement and the transactions contemplated hereby.
Section 6.17 INSURANCE. The Company Letter sets forth a list and brief
description of all policies of medical malpractice and other insurance and
surety bonds held by or on behalf of the Company (specifying the issuer and
the policy number or other identifying number with respect to binders), and
describes any pending claims thereunder. The insurer has accepted coverage
with respect to such pending claims. Such policies and bonds (and binders, if
any) are in full force and effect, and insure against risks and liabilities to
the extent and in the manner appropriate
27
and sufficient under industry practice.
Section 6.18 ENVIRONMENTAL MATTERS. To the best knowledge of the
Company,
(a) neither the Company nor any of its past owned or leased real
properties or operations, are subject to or the subject of, any Proceeding,
Order, settlement, or other contract or agreement arising under Environmental
and Safety Requirements, nor has any investigation been commenced or is any
Proceeding threatened against the Company under the Environmental and Safety
Requirements with regard to the Company's business activities.
(b) the Company has not received any written notice, report or other
written information regarding any actual or alleged violation of any
Environmental and Safety Requirement, or any Liabilities or potential
Liabilities, including any investigatory remedial or corrective obligations,
relating to the Company's business activities or the real properties owned or
operated by the Company and arising under any Environmental and Safety
Requirement.
(c) none of the following exists, nor has ever existed, at any real
property previously owned or operated by the Company: (1) underground storage
tanks, (2) asbestos-containing material in any form or condition, (3)
materials or equipment containing polychlorinated biphenyls or (4) landfills,
surface impoundments or disposal areas.
(d) the Company has not treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled or released any substance,
or owned or operated any real property (and no such real property is
contaminated by any such substance) in a manner that has given or could
reasonably be expected to give rise to onsite or offsite Liabilities pursuant
to CERCLA, SWDA or any other Environmental and Safety Requirement, including
any Liability for response costs, corrective action costs, personal injury,
property damage, natural resources damage or attorney fees, or any
investigative, corrective or remedial obligations.
(e) the Company has provided Parent with correct and complete copies
of all reports and studies within the possession or control of the Company
with respect to past or present environmental conditions or events at any of
real properties presently or previously owned or operated by the Company.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING ACQUISITION
Parent and Acquisition jointly and severally represent and warrant to the
Company as follows:
28
Section 7.1 ORGANIZATION. Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of Georgia.
Section 7.2 CAPITALIZATION. The authorized capital stock of
Acquisition consists of 1,000 shares of common stock, par value $.01 per
share, 1,000 shares of which are validly issued and outstanding, fully paid
and non-assessable and are owned by Parent free and clear of all liens, claims
and encumbrances.
Section 7.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Acquisition has the
corporate power to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by its Board
of Directors and sole stockholder, and no other corporate proceedings on the
part of Acquisition are necessary to authorize this Agreement and the
transactions contemplated hereby.
No filing or registration with, or authorization, consent or approval of,
any public body or authority is necessary for the consummation by Acquisition
of the Merger or the other transactions contemplated by this Agreement.
Section 7.4 NO PRIOR ACTIVITIES. Acquisition has not, except as
contemplated by this Agreement, (i) engaged, directly or through any
subsidiary, in any business or activities of any type or kind whatsoever, (ii)
entered into any agreements or arrangements with any person or entity, or
(iii) become subject to or bound by any obligation or undertaking.
ARTICLE VIII
CONDUCT OF BUSINESS AFTER EXECUTION OF THE AGREEMENT
Section 8.1 CONDUCT OF BUSINESS BY THE COMPANY PRIOR TO THE MERGER.
Prior to the Effective Date, unless Parent shall otherwise agree in writing or
as otherwise contemplated by this Agreement or as set forth in the Company
Letter:
(i) the business of the Company shall be conducted only in the
ordinary course, the Company shall not create any subsidiaries and there
shall be no material change in the conduct of the Company's operations;
(ii) the Company shall not (A) directly or indirectly redeem,
purchase or otherwise acquire any shares of Company Common Stock; (B)
amend its Articles of Incorporation or By-Laws; or (C) split, combine or
reclassify the outstanding Company Common Stock; or declare, set aside or
pay any dividend payable in cash, stock or
29
property otherwise than as contemplated by Section 9.12;
(iii) the Company shall not (A) issue or agree to issue any additional
shares of, or rights of any kind to acquire any shares of, Company Common
Stock; (B) acquire or dispose of any fixed assets (other than the real
properties and marketable securities referred to in Section 9.12 hereof) or
acquire or dispose of any other substantial assets other than in the ordinary
course of business otherwise than as contemplated by Section 9.12; (C) incur
any indebtedness for money borrowed or evidenced by notes, debentures or
similar instruments or any other material liabilities or enter into any other
material transaction, other than in the ordinary course of business; (D) enter
into any new lease contracts with any person, corporation, partnership or
other entity or group (such person, corporation, partnership or other entity
or group being referred to hereinafter, singularly or collectively, as a
"Person") except for renewals of leases in the ordinary course of business;
(E) make any capital expenditures, or enter into any contract or commitment
therefor, in excess of $200,000 in the aggregate; or (F) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(iv) the Company shall use all reasonable efforts to preserve intact the
business organization of the Company, to keep available the services of its
and their present officers and key employees, and to preserve the good will of
those having business relationships with it;
(v) the Company shall not, and shall not permit its officers, employees,
representatives or agents to, directly or indirectly, (A) encourage, solicit
or initiate or participate in discussions or negotiations with or provide any
non-public information to, any Person, other than Parent or its affiliates or
any group in which Parent or its affiliates participates (collectively being
referred to hereinafter as the "Excluded Persons") concerning any merger,
amalgamation, sale of substantial assets or equity interests or other business
combination involving the Company or any division of the Company or tender
offer (each of such transactions being referred to hereinafter as an
"Acquisition Transaction") or (B) otherwise solicit, initiate or encourage
inquiries or the submission of any proposal contemplating an Acquisition
Transaction. The Company, its officers and directors may, however, engage in
such discussions or negotiations to the extent their fiduciary duties require
it. The Company will promptly communicate to Parent the terms of any inquiry
or proposal which it may receive in respect of an Acquisition Transaction. The
Company will
30
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore in
respect of an Acquisition Transaction. The Company's notification under
this Section 8.1(v) shall include the identity of the Person making such
proposal or any other such information with respect thereto as Parent may
reasonably request;
(vi) except as set forth in the Company Letter or Section 9.11
hereof, the Company will not enter into any new employment agreements
with any of its officers or grant any increases in the compensation of
its officers and employees (except in accordance with current incentive
compensation plans) or amend any Employee Benefit Plan or arrangement;
and
(vii) prior to the Effective Date, unless Parent shall otherwise
consent in writing, which consent shall not be unreasonably withheld, the
Company shall not settle any actions at law, suits in equity or claims
pending to which the Company is a party.
Section 8.2 CONDUCT OF BUSINESS BY PARENT PRIOR TO THE MERGER. Prior
to the Effective Date, unless the Company shall otherwise agree in writing or
as otherwise contemplated by this Agreement or as set forth in the Parent
Letter:
(i) the respective businesses of Parent and its subsidiaries shall
be conducted only in ordinary course and there shall be no material
change in the conduct of Parent's operations;
(ii) neither Parent nor any of its subsidiaries shall (A) issue or
agree to issue any additional shares of, or rights of any kind to acquire
any shares of, Parent Common Stock other than in connection with the
Parent 1991 Stock Option Plan or Parent 1993 Stock Option Plan or upon
the exercise of any options or warrants or conversion of any convertible
securities outstanding as of the date of this Agreement; (B) incur a
material amount of indebtedness for money borrowed or evidenced by notes,
debentures or similar instruments or any other material liabilities,
other than in ordinary course of business, except as contemplated under
Section 10.3(c) hereof; or (C) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing; and
(iii) Parent shall not amend any Employee Benefit Plan or
arrangement, other than in the ordinary course of business and consistent
with past practices.
Section 8.3 CONDUCT OF BUSINESS OF ACQUISITION. During the
31
period from the date of this Agreement to the Effective Date, Acquisition
shall not engage in any activities of any nature except as provided in or
contemplated by this Agreement.
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.1 ACCESS TO AND INFORMATION REGARDING THE COMPANY AND THE
PARENT.
(a) The Company shall, and shall cause each of its officers,
directors, employees and agents, including accountants, counsel and other
representatives, to afford the officers, employees and agents of Parent
full access during normal business hours throughout the period prior to
the Effective Date to all of its respective officers, employees, agents,
properties, books, contracts, commitments and records and, during such
period, shall furnish promptly to Parent all information concerning its
business, properties and personnel as Parent, through its officers,
employees or agents, may reasonably request.
(b) In addition, the Company shall, and shall cause its officers,
directors, employees and agents, to, afford the officers, employees and
agents of Parent with access to such information concerning the Company
as may be necessary to ascertain the accuracy and completeness of the
information supplied by the Company for inclusion in the Private Offering
Memorandum and to verify the performance of and compliance with the
representations, warranties, covenants and conditions herein contained.
(c) Information obtained pursuant to this ARTICLE IX may be
disclosed to Parent's accountants, counsel and other representatives as
may be appropriate or required in connection with the transactions
contemplated hereby but only if such persons shall be specifically
informed by Parent of the confidential nature of such information and the
restrictions contained herein. If this Agreement is terminated, Parent
will, and will cause its officers, employees and agents to, destroy or
deliver to the Company all nonpublic documents, work papers and other
materials, and all copies thereof, obtained by Parent or on its behalf
from the Company as a result of this Agreement or in connection herewith,
whether so obtained before or after the execution hereof. Except as set
forth in this Section 9.1(c), Parent and its officers and employees will
not disclose any information so obtained, except as required by
applicable law or legal process, without the prior written consent of the
Company.
32
(d) The Company shall have the same rights and obligations regarding
the Parent as the Parent has regarding this Company as set forth in
paragraphs (a) - (c) above.
Section 9.2 PRIVATE OFFERING MEMORANDUM.
(a) Parent shall prepare the Private Offering Memorandum as soon as
is reasonably practicable. The Company shall furnish Parent all
information concerning the Company and the holders of Company Common
Stock required for use in the Private Offering Memorandum and shall take
such other action as Parent may reasonably request in connection with any
such actions.
(b) The Private Offering Memorandum shall be sent by the Company to
its shareholders and used in connection with the Company's approval of
the transaction in accordance with Section 9.3 hereof.
(c) The information provided and to be provided by Parent and the
Company for use in the Private Offering Memorandum, shall be true and
correct in all material respects without omission of any material fact
which would be required to make such information not false or misleading.
(d) The Company and Parent shall each advise the other promptly if
prior to the Effective Date it has or obtains knowledge of any facts that
would make it necessary to supplement the Private Offering Memorandum in
order to render the statements therein not misleading or to comply with
applicable law. In such case, the Company and Parent shall cooperate in
preparing and disseminating to Company shareholders any necessary
supplement to the Private Offering Memorandum.
Section 9.3 COMPANY SHAREHOLDERS' MEETING. The Company shall either
call a special meeting of its shareholders to be held as soon as practicable
after the distribution of the Private Offering Memorandum or solicit the
written consents to the transaction contemplated by this Agreement of its
shareholders as soon as practicable after the distribution of the Private
Offering Memorandum for the purpose of voting upon this Agreement in
accordance with Section 14-2-1104 of the Georgia Code.
Section 9.4 FEES AND EXPENSES.
(a) If (i) the Company engages in discussions prior to the Effective
Date with a Third Party (as defined below) relating to a Third Party
Acquisition (as defined below), (ii) this Agreement is terminated by
Parent pursuant to
33
Section 11.1(b) or the Company pursuant to Section 11.1(c)(iv), and (iii)
prior to or within eighteen (18) months after the termination of this
Agreement, the Company enters into any agreement or arrangement with
respect to a Third Party Acquisition (as defined below), then the Company
shall pay to Parent immediately upon the consummation of the Third Party
Acquisition, a fee of $5.0 million in cash. "Third Party Acquisition"
means any of the following events: (i) acquisition of the Company by
merger or otherwise by any Person other than Parent or any affiliate
thereof (a "Third Party"); (ii) acquisition by a Third Party of more than
50% of the total assets of the Company and its consolidated Subsidiaries,
taken as a whole; (iii) acquisition by a Third Party of more than 50% of
the outstanding shares of Company Common Stock; (iv) adoption and
implementation by the Company of a plan of liquidation or extraordinary
dividend relating to more than 50% of the outstanding shares of Company
Common Stock; or (v) the repurchase by the Company or any Subsidiary of
more than 50% of the outstanding shares of Company Common Stock.
(b) If this Agreement is terminated because either (i) Parent has
not received a commitment for financing as provided in Section 10.3(b)
hereof, or (ii) Parent does not consummate the transaction contemplated
by this Agreement for reasons other than as permitted pursuant to Section
11.1 hereof, Parent shall promptly pay to the Company the sum of $1
million in cash.
(c) In the event that this Agreement is terminated by Parent or the
Company as a result of, directly or indirectly, the material breach by
the other party of its obligations hereunder or the failure of any
representation or warranty of the other party to be true and correct in
any material respects, provided that the terminating party is not itself
in material breach, then such other party shall reimburse the party that
so terminated this Agreement (not later than two days after submission by
the non-breaching party to the breaching party of statements supporting
such expenses) for all out-of-pocket expenses and fees actually incurred
by such party in good faith or on their behalf in connection with the
Merger, the consummation of all transactions contemplated by this
Agreement and the negotiation, preparation, execution and performance of
this Agreement; provided, however, that nothing contained in this Section
9.4(c) shall be construed to be liquidated damages or preclude any party
not in breach of this Agreement from pursuing any remedy at law or in
equity.
(d) If the Merger is not consummated under circumstances where no
fees or expenses may be payable pursuant
34
to paragraph (c) of this Section 9.4, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses.
Section 9.5 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its best efforts to satisfy the conditions precedent to the
obligations of any of the parties hereto, to obtain all necessary waivers,
consents and approvals, to effect all necessary filings and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed
with the Merger as expeditiously as possible), subject, however, to the
appropriate vote of the shareholders of the Company. In case at any time after
the Effective Date any further action is necessary or desirable to carry out
the purposes of this Agreement, the proper officers and/or directors of
Parent, the Company and Acquisition shall take all such necessary action.
Section 9.6 PUBLICITY. The parties hereto agree that they will consult
with each other concerning any proposed press release or public announcement
pertaining to the Merger and shall use their best efforts to agree upon the
text of any such press release or public announcement prior to the publication
of such press release or the making of such public announcement; provided,
that nothing herein shall restrict any public announcement or other disclosure
which a party deems upon advice of counsel to be required to be made by law or
applicable AMEX rule.
Section 9.7 DIRECTOR AND OFFICER INDEMNIFICATION. Parent agrees that
all rights to indemnification, advancement of litigation expenses or
limitation of personal liability existing in favor of the directors and
officers of the Company (the "Indemnified Parties") under the provisions
existing on the date hereof of its Articles of Incorporation or By-laws shall
survive the Effective Date and that after the Effective Date Parent shall
assume all obligations of the Company in respect thereof as to any claim or
claims for which said officers and directors would have been indemnified under
said Articles of Incorporation or By-laws.
Section 9.8 FAIR PRICE STATUTE. If any "fair price," "control share
acquisition", or "business acquisition" statute or other similar statute or
regulation shall be or become applicable to the transactions contemplated
hereby, the Company and the members of the Board of Directors of the Company
shall use their best efforts to grant such approvals and take such actions as
are necessary so that the transactions contemplated hereby may be consummated
as promptly as practicable on the terms contemplated hereby and otherwise act
to minimize the effects of such statute or
35
regulation on the transactions contemplated hereby.
Section 9.9 NOTIFICATION OF CERTAIN MATTERS. Without limiting any of
their other obligations under this Agreement, the Company and Parent each
shall promptly notify the other of:
(a) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating
to or involving or otherwise affecting Parent or its subsidiaries or the
Company or its Subsidiaries, as the case may be, that, if adversely
decided, would either individually or in the aggregate have a Material
Adverse Effect on the Parent and its subsidiaries taken as a whole or on
the Company and its Subsidiaries taken as a whole, as the case may be, or
that relate to the consummation of the Merger;
(b) any notice, or other communication relating to, a default or an
event that, with notice or lapse of time or both, would become a default,
received by Parent or any of its subsidiaries or the Company or any of
its Subsidiaries, as the case may be, subsequent to the date of this
Agreement and prior to the Effective Date, under any agreement to which
it is a party or to which it or any of its properties or assets may be
subject or bound if the agreement, alone or together with other
agreements as to which there has been such a notice, communication, or
event, is material to the business of the Company and its Subsidiaries
taken as a whole or, as the case may be, to the Parent and its
subsidiaries taken as a whole;
(c) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection
with the transactions contemplated by this Agreement;
(d) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated hereby; and
(e) any adverse change or changes in the business of the Parent or
any of its subsidiaries or the Company or any of its Subsidiaries, as the
case may be, or the occurrence of one or more events or developments
that, so far as reasonably can be foreseen at the time of its occurrence,
is reasonably likely to result in any such change, if such change or
changes, individually or in the aggregate, would have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole, or as the
case may be, Parent and its subsidiaries, taken as a whole.
36
Section 9.10 EMPLOYEE BENEFITS PLANS. Parent shall, following the
Merger, either (i) continue the operation of the Employee Benefit Plans of the
Company that were in effect immediately prior to the Merger or (ii) permit
employees of the Company to participate in Employee Benefit Plans of the
Parent no less favorable to such employees than Employee Benefit Plans
currently made available by Parent or its subsidiaries to their employees.
Section 9.11 COMPANY EMPLOYMENT AGREEMENTS. Prior to the Effective
Date, Parent shall enter into new employment agreements in a mutually-agreed
form or amendments to current employment agreements with the following
persons, substantially in the form attached hereto as Exhibit A and B, as
indicated:
H.E. Thranhardt - new
Xxxx XxXxxxx - new
Xxxxx Xxxxxxx - new
Xxxx Xxxxxxxxxxx - new
Gene Hair - A
Xx Xxxxxxx - A
Xx Xxxxx - A
Xxx May - A
Xxxx Xxxxxxxx - B
Xxxxx Xxxxxx - B
Xxxxxx Xxxxxxx - B
Xxx Xxxxx - B
Xxxx Xxxxxxxxx - B
Xxxxx Xxxxxx - B
Xxxxx Xxxxxxx - B
Xxxxxx Xxxxxxx - B
Xxxx Xxxx - B
Xxxxxx Xxxxxxx - B
Section 9.12 DISTRIBUTION OR TRANSFER OF CERTAIN MARKETABLE SECURITIES
AND REAL PROPERTIES. Prior to the Effective Date, the Company shall either
distribute to its shareholders the marketable securities and non-operating
real properties listed in the Company Letter, or sell or otherwise dispose of
such marketable securities and real properties and distribute the proceeds
thereof to its shareholders. Such marketable securities and real properties
shall not be owned by the Company as of the Effective Date and Parent shall
not be entitled to any of the proceeds from any sale thereof by the Company
prior thereto.
Section 9.13 GRANT OF PARENT STOCK OPTIONS. As of the Effective Date,
Parent agrees to grant options pursuant to the Parent 1991 Stock Option Plan
for an aggregate of 480,000 shares of Parent Common Stock to the following
persons, such options to be for the amounts of shares set forth below and to
be on terms consistent with options previously granted by Parent under that
plan:
37
Number of Shares
Name of Parent Common Stock
H.E. Thranhardt 150,000
Xxxx XxXxxxx 100,000
Xxxxx Xxxxxxx 30,000
Xxxx Xxxxxxxxxxx 20,000
Gene Hair 20,000
Xx Xxxxxxx 20,000
Xx Xxxxx 20,000
Xxx May 20,000
Xxxx Xxxxxxxx 10,000
Xxxxx Xxxxxx 10,000
Xxxxxx Xxxxxxx 10,000
Xxx Xxxxx 10,000
Xxxx Xxxxxxxxx 10,000
Xxxxx Xxxxxx 10,000
Xxxxx Xxxxxxx 10,000
Xxxxxx Xxxxxxx 10,000
Xxxx Xxxx 10,000
Xxxxxx Xxxxxxx 10,000
Section 9.14 APPOINTMENT OF DIRECTORS. As soon as practicable after the
Effective Date, the Board of Directors of Parent shall amend Section 2 of
Article III of the By-Laws of Parent to increase the maximum size of the Board
to ten members and shall appoint Xxxxxx X. XxXxxxxx and H.E. Thranhardt to
serve as members of the Board of Directors of Parent.
Section 9.15 SECTION 338(h)(10) ELECTION.
(a) At Parent's option and to the extent deemed necessary by
Parent, the Company will join, and the Company will cause its
shareholders to join, with Parent in making an election under Section
338(h)(10) of the Code and any corresponding elections under state,
local, or foreign tax law (collectively a "Section 338(h)(10)
Election"), with respect to the exchange of the Company Common stock
hereunder. On the Effective Date, or as soon as practicable thereafter
and within 8 1/2 months after the Effective Date, Parent and the
Company shall exchange completed and executed copies of Internal
Revenue Service Form 8023 and required schedules thereto, and any
similar state, local and foreign forms. If any changes are required in
these forms as a result of information which is first available after
the Effective Date, the parties shall promptly agree on such changes.
The Company shall cause its shareholders to pay any federal, state,
local, or foreign Tax payable by the Company or Parent attributable to
the making of the Section 338(h)(10) Election. The Parent agrees to
compensate the Company's shareholders for the Total Section 338 Tax
attributable to the election in accor-
38
dance with the provisions of Section 4.2(d) of this agreement.
(b) The parties agree that the cash payments to be made by Parent
hereunder, the shares of Parent Common Stock to be issued hereunder, and
the Liabilities of the Company assumed will be allocated to the assets of
the Company for all purposes as shown on an allocation schedule set forth
in the Accountant's Post-Closing Report referred to in Section 4.2(e)
hereof. As among the Parent, the Company and the Company's shareholders,
the valuation of assets listed in the allocation schedule contained in
the Accountant's Post-Closing Report shall be conclusive and binding and
the parties will file all Tax Returns (including amended returns and
claims for refund) and information reports in a manner consistent with
such values.
Section 9.16 CERTAIN CONVEYANCE TAXES. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement (other than
any Taxes and fees attributable to the Section 338(h)(10) Election) shall be
paid by the Company Shareholders when due, and the Company Shareholders shall
file all necessary Tax Returns and other documentation in connection with all
such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and if required by applicable law, Parent, Company and the
Shareholders will join in the execution of any such Tax Returns or
documentation.
Section 9.17 OTHER TAX MATTERS.
(a) Tax Period Ending on Closing Date. The Company Shareholders
shall prepare or cause to be prepared and file or cause to be filed any
and all Tax Returns of Company for the period beginning January 1, 1996
and ending on the Closing Date which Tax Returns are filed after the
Closing Date. The Company Shareholders shall report their respective
shares of income, gain, loss and other tax items reported by the Company
on such Tax Returns and shall bear responsibility for any corporate level
income tax not reflected in the Tax Liability or any individual income
taxes incurred with respect to such Tax Returns. Parent shall have the
right to review such Tax Returns prior to their filing and the Company
Shareholders shall provide copies to Parent of such Tax Returns after
their filing with proof of such filing.
(b) Tax Returns Relating to Section 338(h)(10) Election. Parent
shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for the Tax period relating to the filing of
the Section 338(h)(10) election contemplated under Section
39
9.15(a) of this Agreement. The Company Shareholders shall report their
respective shares of income, gain, loss and other tax items reported on
such Tax Returns and shall bear responsibility for any individual income
taxes incurred with respect to such Tax Returns. The Company Shareholders
shall have the right to review such Tax Returns prior to their filing and
the Parent shall provide copies to the Company Shareholders of such Tax
Returns after their filing with proof of such filing.
(c) Cooperation on Tax Matters. Parent, Company and the Shareholders
shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to
this Section and any audit, litigation or other proceeding with respect
to such Taxes. Such cooperation shall include the retention and provision
of books and records and other information which are reasonably relevant
to such audit, litigation or other proceeding and making employees or
themselves available on a mutually convenient basis to provide additional
information and explanations of any material provided hereunder. Parent
shall retain all books and records of the Company with respect to taxable
periods ending on or before the Closing Date, and shall be responsible
for hiring tax counsel or other tax professionals to represent the
Company in connection with any audit, litigation or other proceeding with
respect to Tax Returns relating to such taxable periods. The parties
further agree to use their best efforts, if necessary, to obtain any
certificate or other document from any governmental authority or any
other person as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed, including, without limitation, with respect to the
transactions contemplated hereby. The parties further agree to provide
the other party with all information that either party may be required to
report pursuant to Section 6043 of the Code.
ARTICLE X
CONDITIONS PRECEDENT
Section 10.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the
40
requisite votes of the holders of the Company Common Stock.
(b) No preliminary or permanent injunction or other order by any
federal or state court or any administrative order by any governmental
authority which prevents the consummation of the Merger shall have been
issued and remain in effect (each party agreeing to use its reasonable
efforts to have any such injunction or order lifted).
Section 10.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Date of the following additional
conditions:
(a) Except as contemplated or permitted by this Agreement, (i)
Parent and Acquisition shall have performed in all material respects each
of their agreements contained in this Agreement required to be performed
on or prior to the Effective Date; and (ii) the representations and
warranties of Parent and Acquisition contained in this Agreement shall be
true and correct in all material respects on and as of the Effective Date
as if made on and as of such date, and the Company shall have received a
certificate of Parent, signed by the President and the Chief Financial
Officer of Parent, to that effect.
(b) The Company shall have received an opinion from Freedman, Levy,
Xxxxx & Xxxxxxx, counsel to Parent and Acquisition, dated the Effective
Date, to the effect that:
(i) Parent and Acquisition are each a corporation duly
organized and validly existing under the laws of the State of
Delaware.
(ii) Parent and Acquisition each has the corporate power to
enter into the Agreement and to consummate the transactions
contemplated hereby; and the execution and delivery of the Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by requisite corporate action taken on the part
of Parent and Acquisition, respectively.
(iii) The Agreement has been executed and delivered by each of
Parent and Acquisition and (assuming the valid authorization,
execution and delivery of the Agreement by the Company) is a valid
and binding obligation of
41
Parent and Acquisition enforceable in accordance with its terms,
except (A) as enforceability may be limited by any bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (B) as such
enforceability is subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iv) Neither the execution, delivery nor performance of the
Agreement by Parent and Acquisition, nor the consummation of the
transactions contemplated thereby, will violate the Certificate of
Incorporation or Bylaws of Parent or Acquisition and, to the actual
knowledge of such counsel, without having made any independent
investigation, will not constitute a violation of or a default under
(except for any such violation or default as to which requisite
waivers or consent either shall have been obtained by Parent and
Acquisition by the Effective Date or shall have been waived by the
Company in writing) any material contract, agreement or instrument
to which Parent or Acquisition is subject and which has been
specifically identified to such counsel by Parent or Acquisition in
connection with rendering such opinion.
(v) The shares of Parent Common Stock to be issued in
connection with the transactions contemplated by the Agreement, are
duly authorized and reserved for issuance and, when issued as
contemplated by the Agreement will be validly issued, fully paid and
non-assessable.
As to any matter in such opinion which involves matters of fact,
such counsel may rely upon the certificates of officers and directors of
Parent and Acquisition and of public officials.
(c) There shall not have arisen prior to the Effective Date any
event that causes a Material Adverse Effect upon Parent and its
subsidiaries, taken as a whole.
Section 10.3 CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION TO
EFFECT THE MERGER. The obligations of Parent and Acquisition to effect the
Merger shall be subject to the fulfillment at or
42
prior to the Effective Date of the additional following conditions:
(a) Except as contemplated or permitted by this Agreement, (i) the
Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or
prior to the Effective Date; and (ii) the representations and warranties
of the Company contained in this Agreement shall be true and correct in
all material respects on and as of the Effective Date as if made on and
as of such date, and Parent and Acquisition shall have received a
certificate of the Company, signed by the principal executive officer and
principal financial officer of the Company, to that effect.
(b) Parent shall have received, not later than September 30, 1996,
or such later date as mutually agreed upon by the parties, a standard
commitment letter from a financial institution or other person on terms
acceptable to Parent for not less than $44,000,000, which proceeds shall
be used by Parent to pay to the Company's shareholders the cash
consideration called for in Section 4.1(c) hereof.
(c) The total assets of the Company at August 31, 1996, determined
in accordance with GAAP on a basis consistent with the application of
GAAP in the Company financial statements as of December 31, 1995, shall
equal or exceed $32,037,934 (the total assets of the Company at December
31, 1995 of $38,901,004 less (i) the carrying values at December 31, 1995
of $4,196,946 for the marketable securities, (ii) $841,976 for the
non-operating real properties referred to in Section 9.12, (iii) $389,148
for deferred compensation to H.E. Thranhardt to be accrued through
September 30, 1996, and (iv) $1,435,000 for the amount by which
Indebtedness will be reduced during the period from December 31, 1995 to
September 30, 1996).
(d) The holders of no more than 10 percent of the outstanding shares
of Company Common Stock shall have (i) voted against approval of the
Agreement at the Company special meeting of shareholders referred to in
Section 9.3 hereof and (ii) elected to exercise the dissenters' rights of
appraisal under Section 14-2-1332 of the Georgia Code.
(e) Parent and Acquisition shall have received an opinion from
Xxxxxx & Bird, counsel to the Company, dated the Effective Date, to the
effect that:
(i) The Company is a corporation duly
43
organized and validly existing under the laws of Georgia.
(ii) The Company has the corporate power to enter into the
Agreement and to consummate the transactions contemplated hereby;
and the execution and delivery of the Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by
requisite corporate action taken on the part of the Company.
(iii) The Agreement has been executed and delivered by the
Company and (assuming the valid authorization, execution and
delivery of the Agreement by each of Parent and Acquisition) is a
valid and binding obligation of the Company enforceable in
accordance with its terms, except (A) as enforceability may be
limited by any bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights, and (B) as such enforceability is subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iv) The Company is not subject to or obligated under (A) any
Articles of Incorporation, charter or bylaw, (B) any indenture or
other loan document provision, other than as set forth in the
Company Letter, or (C) any other contract, license, franchise,
permit, law, regulation, injunction, writ, order or decree, which
would be breached or violated or under which there would be a
default (with or without notice or passage of time) or a loss of
benefits by its executing and carrying out the Agreement, except, in
the case of (B) or (C) only, for violations, breaches or defaults
which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole
or which shall be cured, waived or terminated prior to the Effective
Date.
(v) The Company is subject to no "fair price," "control share
acquisition," "business acquisition" or similar statute that
directly or indirectly limits or affects the terms of the Merger or
other transactions contemplated hereby, or that directly or
indirectly dilutes
44
the interest of, or limits the rights and privileges of, Parent,
Acquisition or Parent's stockholders to own Company Common Stock
upon consummation of the Merger.
As to any matter in such opinion which involves matters of fact,
such counsel may rely upon the certificates of officers and directors of the
Company and of public officials.
(f) The Indemnification Agreement referred to in Section 12.2 shall
have been executed and delivered to the Parent.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
Section 11.1 TERMINATION. This Agreement may be terminated by Parent on
or before September 30, 1996, or such later date as mutually agreed upon by
the parties, if the results of Parent's due diligence investigation pursuant
to Section 9.1 shall not be reasonably acceptable to Parent in all material
respects. Furthermore, this Agreement may be terminated at any time prior to
the Effective Date, whether before or after approval by the shareholders of
the Company:
(a) by mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company;
(b) by Parent if (i) the Company shall have failed to comply in any
material respect with any of the covenants or agreements contained in
ARTICLES VIII or IX of this Agreement required to be complied with by the
Company prior to the date of such termination; (ii) the shareholders of
the Company do not approve the Merger in accordance with Section 9.3
hereof; (iii) the Company withdraws, amends or modifies its favorable
recommendation to its shareholders of the Merger or promulgates any
recommendation with respect to any other Acquisition Transaction (other
than a recommendation to reject such Acquisition Transaction); or (iv)
if, despite the real property purchases permitted hereunder, at August
31, 1996 the Company's Working Capital is less than $12,578,427 (the
Working Capital at December 31, 1995 of $17,164,521 less the carrying
value at December 31, 1995 of $4,196,946 for the marketable securities
referred to in Section 9.12, and $389,148 for deferred compensation to
H.E. Thranhardt to be accrued through September 30, 1996)). If necessary
to meet this Working Capital test, the Company Shareholders, at the
option of Parent, will purchase from the Company certain operating real
properties to be mutually agreed to by representatives of the
45
Parent and the Company for cash at a price equivalent to the Company's
net book value in the properties. The maximum to be purchased shall be
approximately equal to the amount sufficient to increase the Company's
Working Capital to the amount stated in this paragraph above. The
properties eligible for purchase by the Company Shareholders shall be
limited to the assets purchased by the Company in 1996 in Greenville,
South Carolina, Charleston, South Carolina, and Birmingham, Alabama.
(Such properties purchased by the Company Shareholders will be leased
back to the Company under a 10 year triple net operating lease at rates
to yield an annual return to the Company Shareholders of 15%).
(c) by the Company if (i) Parent shall have failed to comply in any
material respect with any of the covenants or agreements contained in
ARTICLES VIII or IX of this Agreement required to be complied with by
Parent prior to the date of such termination; (ii) the shareholders of
the Company do not approve the Merger in accordance with Section 9.3
hereof, including any adjournments and postponements thereof; (iii) any
event has occurred that either individually or in the aggregate has a
material adverse effect on the assets, liabilities, results of
operations, financial condition or business of Parent and its
subsidiaries, taken as a whole; or (iv) the Board of Directors of the
Company, in the exercise of its fiduciary duties, elects to complete a
Third Party Transaction;
(d) by either Parent or the Company:
(i) if the Merger has not been effected on or prior to the
close of business on December 31, 1996; provided, however, that the
right to terminate this Agreement shall not be available to any
party whose failure to fulfill any obligation of this Agreement has
been the cause of, or resulted in, the failure of the Merger to have
occurred on the aforesaid date; or
(ii) if a federal or state court of competent jurisdiction or
federal or state governmental, regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate this
46
Agreement pursuant to this clause (ii) shall have used all
reasonable efforts to remove such injunction, order or decree.
Section 11.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided above (except in the
event of a breach of a representation, warranty or covenant contained in this
Agreement), this Agreement shall forthwith become void and there shall be no
liability on the part of either the Company or Parent or Acquisition or their
respective officers or directors (except as set forth in Section 9.1 and
Section 9.4 hereof which shall survive the termination).
Section 11.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors, at any time before or after approval hereof by the shareholders of
the Company, but, after any such approval, no amendment shall be made which
changes the Exchange Ratio or which in any way materially adversely affects
the rights of any such shareholders, without the further approval of the
shareholders so adversely affected. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
Section 11.4 WAIVER. At any time prior to the Effective Date, the
parties hereto, by action taken by their respective Boards of Directors, may
(i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties of the Parent under Sections 5.1, 5.2, 5.5, 5.6
and 5.8 through 5.13 and those of the Company under sections 6.6, 6.9, 6.10,
6.17 and 6.18 shall survive for a period of one year after the date of the
Closing. All other representations, warranties and agreements in this
Agreement shall not survive the Merger, except for the agreements contained in
Sections 4.1 through 4.9, 9.4, 9.7, 9.10 9.13, 9.14, 9.15, 9.16, 9.17 and
Article XII.
47
Section 12.2 ASSUMPTION OF RESPONSIBILITY FOR, AND LIMITATION ON
DAMAGES FOR BREACHES OF, CERTAIN REPRESENTATIONS AND WARRANTIES. The Company
shall cause H.E. Thranhardt and Xxxxxx X. XxXxxxxx (the "Selling
Shareholders") to enter into agreements with Parent pursuant to which such
Selling Shareholders shall assume responsibility for the representations and
warranties referred to in the first sentence of Section 12.1 hereof. Exhibit C
hereto sets forth the form of an Indemnification Agreement to be entered into
between Parent and the Selling Shareholders of the Company.
Section 12.3 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or
delivered by a national overnight delivery service (e.g., Federal Express) or
mailed by registered or certified mail (first class postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Parent or Acquisition, to:
Hanger Orthopedic Group, Inc.
0000 Xxx Xxxxxxxxxx Xxxx (0xx Xxxxx)
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxx
Chairman, President and
Chief Executive Officer
with a copy to:
Freedman, Levy, Xxxxx & Xxxxxxx
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
(b) If to the Company, to:
X.X. Xxxxxx, Inc. of Georgia
0000 XxXxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Mr. H.E. Thranhardt
President
with a copy to:
Xxxxxx Xxxxxxx, Xx., Esq.
J. Xxxxxxx Xxxxxx, Esq.
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
48
Section 12.4 INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 12.5 DISCLOSURE LETTERS AND EXHIBITS. The Company Letter and
the Parent Letter and any Exhibits thereto, or any documents expressly
incorporated into this Agreement, are hereby incorporated into this Agreement
and are hereby made a part hereof as if set out in full in this Agreement.
Section 12.6 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof; (b) shall not be assigned by operation of law or otherwise except that
the shareholders of the Company shall be, and be deemed to be, third party
beneficiaries of the representations, warranties and covenants of Parent that
survive in accordance with Section 12.1; and (c) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Maryland (without giving effect to the provisions thereof relating to
conflicts of law), except that the Merger shall be governed by the laws of
Georgia. This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
-----------------------
49
IN WITNESS WHEREOF, Parent, Acquisition and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
Attest: HANGER ORTHOPEDIC GROUP, INC.
/s/XXXXXXX X. XXXXX By /s/XXXX X. XXXXX
------------------------------ -----------------------------
Xxxxxxx X. Xxxxx Xxxx X. Xxxxx
Secretary Chairman, President and Chief
Executive Officer
Attest: JEH ACQUISITION CORPORATION
/s/XXXXXXX X. XXXXX By /s/XXXX X. XXXXX
------------------------------ -----------------------------
Xxxxxxx X. Xxxxx Xxxx X. Xxxxx
Secretary President
Attest: X.X. XXXXXX, INC. OF GEORGIA
/s/XXXXX X. XXXXXXX By /s/H.E. THRANHARDT
------------------------------ -----------------------------
Xxxxx X. Xxxxxxx H.E. Thranhardt
Secretary President
50
