1
EXHIBIT 2.4
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BROMAR, INC.,
AS THE SURVIVING CORPORATION,
MSSC CALIFORNIA, INC.,
AS THE NON-SURVIVING CORPORATION,
AND
MARKETING SPECIALISTS SALES COMPANY
FOR THE LIMITED PURPOSES SET FORTH HEREIN
DATED AS OF OCTOBER 18, 1996
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TABLE OF CONTENTS
Page
ARTICLE I - THE MERGER............................................................................................1
SECTION 1.01. The Merger.............................................................................1
SECTION 1.02. Effective Time.........................................................................1
SECTION 1.03. Effect of the Merger...................................................................2
SECTION 1.04. Certificate of Incorporation...........................................................2
SECTION 1.05. Bylaws.................................................................................2
SECTION 1.06. Additional Actions.....................................................................2
SECTION 1.07. Conversion of Securities...............................................................2
SECTION 1.08. Dissenting Shares......................................................................3
SECTION 1.09. Surrender of Shares, Stock Transfer Books..............................................3
SECTION 1.10. Deposit................................................................................5
ARTICLE II - CLOSING..............................................................................................6
SECTION 2.01. Closing................................................................................6
SECTION 2.02. Deliveries by Bromar...................................................................6
SECTION 2.03. Deliveries by MSSC California and Marketing Specialists................................7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BROMAR............................................................7
SECTION 3.01. Organization and Qualification of Bromar...............................................7
SECTION 3.02. Power and Capacity; Charter Documents of Bromar........................................7
SECTION 3.03. Subsidiaries...........................................................................8
SECTION 3.04. Capitalization and Ownership of Bromar.................................................9
SECTION 3.05. No Conflicts...........................................................................9
SECTION 3.06. Consents and Approvals................................................................10
SECTION 3.07. Financial and Operating Statements....................................................10
SECTION 3.08. No Undisclosed or Contingent Liabilities..............................................11
SECTION 3.09. Assets of the Company.................................................................11
SECTION 3.10. Absence of Certain Changes............................................................12
SECTION 3.11. Real Property.........................................................................14
SECTION 3.12. Company Equipment.....................................................................15
SECTION 3.13. Contracts and Commitments.............................................................16
SECTION 3.14. Intellectual Property.................................................................17
SECTION 3.15. Inventory.............................................................................18
SECTION 3.16. Commitments and Returns...............................................................18
SECTION 3.17. Accounts Receivable...................................................................18
SECTION 3.18. Pension and Other Employee Plans and Agreements.......................................19
SECTION 3.19. Litigation............................................................................20
SECTION 3.20. Insurance.............................................................................21
SECTION 3.21. Collective Bargaining Agreements; Compensation;
Employee Agreements...............................................................21
SECTION 3.22. Labor Matters.........................................................................21
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SECTION 3.23. Compliance with Law...................................................................22
SECTION 3.24. Permits...............................................................................22
SECTION 3.25. Environmental Matters.................................................................23
SECTION 3.26. Tax Matters...........................................................................24
SECTION 3.27. Product Liability.....................................................................26
SECTION 3.28. Title to Assets.......................................................................26
SECTION 3.29. Accuracy of Disclosure................................................................26
SECTION 3.30. Redemptions of Capital Stock by Bromar................................................26
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF
MSSC CALIFORNIA AND MARKETING SPECIALISTS....................................................26
SECTION 4.01. Organization and Qualification - MSSC California......................................26
SECTION 4.02. Organization and Qualification - Marketing Specialists................................27
SECTION 4.03. Power and Capacity; Charter Documents of MSSC California..............................27
SECTION 4.04. Power and Capacity; Charter Documents of Marketing Specialists........................27
SECTION 4.05. No Conflicts..........................................................................28
SECTION 4.06. Consents and Approvals................................................................28
SECTION 4.07. Accredited Investor...................................................................28
SECTION 4.08. Absence of Market.....................................................................29
SECTION 4.09. Investment Purposes...................................................................29
ARTICLE V - OTHER OBLIGATIONS OF THE PARTIES.....................................................................29
SECTION 5.01. Conduct of Company Business...........................................................29
SECTION 5.02. Access to Books and Records...........................................................32
SECTION 5.03. Consents..............................................................................32
SECTION 5.04. Other Transactions....................................................................32
SECTION 5.05. Supplemental Disclosure...............................................................32
SECTION 5.06. Governmental Filings..................................................................33
SECTION 5.07. Covenant to Satisfy Conditions........................................................33
SECTION 5.08. Confidentiality.......................................................................33
SECTION 5.09. Employees.............................................................................33
SECTION 5.10. Damage or Destruction.................................................................33
SECTION 5.11. Employment Agreements.................................................................34
SECTION 5.12. Management Support....................................................................34
SECTION 5.13. Shareholder Meeting of Bromar.........................................................34
SECTION 5.14. Information Delivered to Shareholders.................................................34
SECTION 5.15. Resignation of Officers and Directors.................................................34
SECTION 5.16. Use of Name...........................................................................34
SECTION 5.17. Payment of Certain Transactional Fees by Marketing Specialists........................34
SECTION 5.18. Provision of Monthly Financial Statements; Accounts Receivable........................35
SECTION 5.19. Funding...............................................................................35
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ARTICLE VI - CONDITIONS PRECEDENT................................................................................35
SECTION 6.01. Conditions Precedent to Obligations of MSSC
California and Marketing Specialists..............................................35
SECTION 6.02. Conditions Precedent to Obligations of Bromar.........................................38
ARTICLE VII - TERMINATION OF AGREEMENT...........................................................................39
SECTION 7.01. Termination of Agreement..............................................................39
SECTION 7.02. Procedure Upon Termination............................................................39
SECTION 7.03. Effect of Termination of Agreement in Certain Instances...............................40
SECTION 7.04. Limitation on Damages.................................................................40
ARTICLE VIII - MISCELLANEOUS.....................................................................................40
SECTION 8.01. Survival of Representations...........................................................40
SECTION 8.02. Limitation of Liability...............................................................41
SECTION 8.03. Commissions...........................................................................41
SECTION 8.04. Definition of Knowledge...............................................................41
SECTION 8.05. Definition of Material Adverse Effect and Material
Adverse Change....................................................................41
SECTION 8.06. Glossary..............................................................................41
SECTION 8.07. Expenses, Taxes, Etc..................................................................41
SECTION 8.08. Successors and Assigns................................................................41
SECTION 8.09. No Third-Party Benefit................................................................42
SECTION 8.10. Entire Agreement; Amendment...........................................................42
SECTION 8.11. Reformation and Severability..........................................................42
SECTION 8.12. Notices...............................................................................42
SECTION 8.13. GOVERNING LAW.........................................................................43
SECTION 8.14. Counterparts..........................................................................43
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Exhibit "A" - Articles of Incorporation of Bromar
Exhibit "B" - Form of Release Regarding Bromar
Exhibit "C" - Form of Release Regarding Subsidiaries
Exhibit "D" - Management Support Agreement
Exhibit "E" - Opinion of Bromar's Counsel
Exhibit "F" - Opinion of MSSC California's and Marketing Specialists' Counsel
Appendix I - Year End Audited Financial Statements
Appendix II - 1996 Financial Statements
Appendix III - Glossary
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
October 18, 1996, is by and among Bromar, Inc., a California corporation
("BROMAR" or, in certain cases, following the merger referenced herein, the
"SURVIVING CORPORATION"), Marketing Specialists Sales Company, a Texas
corporation ("MARKETING SPECIALISTS"), and MSSC California, Inc., a Delaware
corporation and a wholly owned subsidiary of Marketing Specialists ("MSSC
CALIFORNIA").
INTRODUCTORY STATEMENTS
Bromar, MSSC California and Marketing Specialists desire to effect the
merger of MSSC California with and into Bromar, with Bromar as the surviving
corporation, pursuant to the terms hereof (the "MERGER").
Accordingly, for and in consideration of the foregoing and the mutual
agreements, representations, warranties, covenants and conditions herein set
forth, and other good, valid and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
hereof, the Merger shall be consummated in accordance with the General
Corporation Law of the State of California (the "CALIFORNIA LAW") and the
General Corporation Law of the State of Delaware (the "DELAWARE LAW") as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Article VI hereof. At the Effective Time (as hereinafter defined) and subject to
and upon the terms and conditions of this Agreement, the Delaware Law and the
California Law, MSSC California shall be merged with and into Bromar, the
separate corporate existence of MSSC California shall cease, and Bromar shall
continue as the Surviving Corporation.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI hereof, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger with the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with, the relevant provisions of the
Delaware Law, and by filing an agreement of merger, with officers' certificates
of both Bromar and MSSC California attached thereto, with the Secretary of State
of the State of California in such form as is mutually acceptable to the parties
and as required by, and executed in accordance with, the relevant provisions of
the California Law. The Merger shall become effective upon the filing of such
agreement of merger with the Secretary of State of the State of California (the
"EFFECTIVE TIME").
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SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger in California shall be as provided in Section 1107 of the
California Law and the effect of the Merger in Delaware shall be as provided in
Section 252 of the Delaware Law.
SECTION 1.04. Certificate of Incorporation. At the Effective Time, the
Articles of Incorporation of Bromar shall be amended and restated to be in the
form of Exhibit "A" hereto and shall become the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by Law (as defined
herein).
SECTION 1.05. Bylaws. The Bylaws of Bromar, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by Law.
SECTION 1.06. Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances, or any other actions or things are
necessary or desirable to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of Bromar or MSSC California acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of Bromar and MSSC California, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Bromar and MSSC California or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.07. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Bromar, MSSC
California or the holder of any of the following securities:
(a) Each share (individually, a "COMMON SHARE" and, collectively, the
"COMMON SHARES") of common stock of Bromar (the "COMMON STOCK") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Common Stock to be canceled pursuant to Section 1.07(b) and any Dissenting
Shares (as defined herein), shall be converted into the right to receive the
amount (the "PER COMMON SHARE AMOUNT") obtained by dividing (x) the aggregate
amount of $26,005,000 (such aggregate amount being termed the "AGGREGATE
EXCHANGE AMOUNT") by (y) the total number of Common Shares issued and
outstanding at the Effective Time; provided, that such conversion shall be
effected in accordance with the provisions of this Article I upon surrender of
the certificate representing such Common Share. Based upon 529,879 Common Shares
issued and outstanding at the Effective Time, the Per Common Share Amount would
be approximately $49.08.
(b) Each share of Common Stock, if any, held in the treasury of Bromar
shall be canceled and extinguished and no payment or other consideration shall
be made with respect thereto.
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(c) Each share of Common Stock, par value $.01 per share, of MSSC
California issued and outstanding immediately prior to the Effective Time shall
be converted into and thereafter represent one share, validly issued, fully paid
and nonassessable, of Common Stock of the Surviving Corporation. Immediately
following the Effective Time, the Common Stock of the Surviving Corporation held
by Marketing Specialists shall represent all of the issued and outstanding
capital stock of the Surviving Corporation.
(d) From and after the Effective Time, holders of certificates
evidencing Common Shares that were issued prior to the Merger shall cease to
have any rights as shareholders of Bromar or the Surviving Corporation, except
as provided otherwise by Law.
SECTION 1.08. Dissenting Shares.
(a) Any Common Shares held by a holder who has not voted such shares in
favor of the approval and adoption of this Agreement and who has properly
demanded and perfected such demand for appraisal of such shares in accordance
with Chapter 13 of the California Law and as of the Effective Time has neither
effectively withdrawn nor lost such right to such appraisal ("DISSENTING
SHARES"), shall not be converted into or represent a right to receive the Per
Common Share Amount, pursuant to Section 1.07 hereof, but the holder thereof
shall only be entitled to such rights as are granted by Chapter 13 of the
California Law.
(b) Notwithstanding the provisions of subsection (a) of this Section,
if any holder of Common Shares who demands appraisal of such shares under the
California Law shall effectively withdraw or lose (through failure to perfect or
otherwise) such right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such holder's shares shall
automatically be converted into and represent only the right to receive the
consideration as provided in Section 1.07 without interest thereon, upon
surrender of the certificate or certificates representing such shares and such
shares shall no longer be Dissenting Shares. Furthermore, upon surrender of
Dissenting Shares in accordance with the provisions of Section 1.09 hereof, the
holder thereof shall be deemed to have waived his appraisal rights under the
California Law with respect to such Common Shares.
(c) Bromar shall give MSSC California and, after the Merger, the
Surviving Corporation shall give Marketing Specialists (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Common Shares,
withdrawals of such demands, and any other instruments served pursuant to the
California Law received by Bromar or the Surviving Corporation and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the California Law. Prior to the Merger, Bromar shall not
voluntarily make any payment with respect to any demands for appraisal or,
except with the prior written consent of MSSC California, settle or offer to
settle any such demands.
SECTION 1.09. Surrender of Shares, Stock Transfer Books.
(a) Prior to the Effective Time, Marketing Specialists shall designate
a bank or trust company to act as agent for the holders of Common Shares (the
"EXCHANGE AGENT") to receive the
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funds necessary to make the payments of the Per Common Share Amount contemplated
by Section 1.07 and this Section 1.09.
(b) At the Effective Time, MSSC California shall make available or
cause to be made available to the Exchange Agent for disbursement in accordance
with this Agreement an amount of cash (the "EXCHANGE FUND") equal to the amount
obtained by subtracting (x) the Shareholders' Note Amount (as defined herein)
from (y) the Aggregate Exchange Amount. The Exchange Agent shall, pursuant to
irrevocable instructions, make the payments provided for in Section 1.07 out of
the Exchange Fund. The Exchange Agent may invest all or portions of the Exchange
Fund, as the Surviving Corporation shall direct, in United States Treasury
Bills, each having a maturity of not more than 30 days. Any net profit resulting
from, or interest or income produced by, the investment of the Exchange Fund
shall be paid to the Surviving Corporation.
(c) Each holder of a certificate or certificates representing any
Common Shares canceled upon the Merger pursuant to Section 1.07 may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending nine months after the Effective Time.
Marketing Specialists agrees that promptly after the Effective Time it shall
distribute or shall cause the Exchange Agent to distribute to each holder of
record of Common Shares as of the Effective Time a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to such certificates shall pass, only upon proper delivery thereof to the
Exchange Agent) and instructions for use in effecting the surrender of such
certificates for payment therefor. (Any holders of Common Shares who have lost
or destroyed the certificates representing their Common Shares shall be required
to execute an affidavit regarding such matters in a form to be distributed by
the Exchange Agent and to indemnify the Surviving Corporation and Marketing
Specialists against any other claimants of such Common Shares, but no bond or
other security shall be required for such indemnity.) Upon surrender by such
holder to the Exchange Agent of a certificate (or such executed affidavit and
indemnity), together with such letter of transmittal duly executed, the holder
of such certificate shall be entitled to receive in exchange therefor cash in an
amount equal to the product of the number of shares represented by such
certificate and the Per Common Share Amount less the outstanding amount, if any,
outstanding at the Effective Time under any note or other financing obligation
entered into by such holder and Bromar in connection with the acquisition of the
Common Shares represented by such certificate, whether or not such note or
financing obligation is due pursuant to its terms (which outstanding amount is
to be set off against the aggregate Per Common Share Amount otherwise due such
holder); provided that, notwithstanding anything in this Agreement to the
contrary, no amount of the Exchange Fund shall be released or distributed to any
holder of Common Shares until Marketing Specialists has received written
confirmation of the effectiveness of the Merger under the California Law from
the Secretary of State of the State of California; provided, further, that
Marketing Specialists shall provide the Exchange Agent with prompt written
notice of its receipt of such written confirmation. The aggregate amount of all
amounts outstanding at the Effective Time under any such notes or other
financing obligations shall be termed the "SHAREHOLDERS' NOTE AMOUNT". Each
certificate surrendered hereunder shall forthwith be canceled. Any amounts paid,
released or distributed to any holder of Common Shares under this Agreement
shall have deducted therefrom the amount of any withholding taxes due thereon
regarding such holder.
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(d) If payment in respect of Common Shares is to be made to a Person
(as defined herein) other than the Person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such payment
that the certificate or instrument so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person requesting
such payment shall have paid any transfer and other taxes required by reason of
such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of Marketing Specialists or the Exchange Agent that such tax either
has been paid or is not payable. The registered holder of each certificate
surrendered in accordance with the preceding sentence shall indemnify and hold
the Exchange Agent and the parties hereto harmless from any claims by third
parties (and any direct or indirect damages relating thereto) as to the title of
such certificate or the Common Shares evidenced thereby. Until surrendered in
accordance with the provisions of this Section 1.09, each certificate (other
than certificates representing Dissenting Shares, which shall be treated in
accordance with applicable provisions of the California Law) shall represent for
all purposes whatsoever only the right to receive the Per Common Share Amount
multiplied by the number of shares evidenced by such certificate, except as
otherwise provided in subsection (c), above, without any interest thereon.
(e) At the Effective Time, the stock transfer books of Bromar shall be
closed and there shall be no further registration of transfers of shares of
Common Stock issued prior to the Merger on the records of Bromar or the
Surviving Corporation. If, after the Effective Time, such certificates for
Common Stock are presented to the Surviving Corporation, they shall be entitled
only to be canceled and exchanged for the Per Common Share Amount, as provided
in Sections 1.07 and this Section 1.09. No interest shall accrue or be paid on
any amount payable upon the surrender of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Common Shares.
(f) Any portion of the Exchange Fund which remains unclaimed by the
shareholders of Bromar for nine months after the Effective Time shall be repaid
to the Surviving Corporation, and any shareholders of Bromar who have not
theretofore complied with the provisions of Section 1.09(c) shall thereafter
look only to the Surviving Corporation for payment of their claim for the Per
Common Share Amount for each Common Share, as provided in Section 1.07 and this
Section 1.09, without any interest thereon.
SECTION 1.10. Deposit. On the date hereof, MSSC California is
depositing into escrow, pursuant to the terms of the Escrow Agreement dated as
of August 29, 1996 among First Trust of California, National Association (the
"ESCROW AGENT"), Bromar and Marketing Specialists (the "ESCROW AGREEMENT"), the
amount of $1,000,000 to add to the amount already held in escrow under the
Escrow Agreement (such aggregate amount being termed the "DEPOSIT"). Subject to
Section 7.03, in the event that this Agreement shall not be consummated because
any of the conditions contained in Sections 6.02(a), (b), (e), (f), (g), (h) or
(j) hereof has not been satisfied on or prior to the Closing Date (as defined
herein), the Deposit (together with all interest earned thereon) shall be
delivered to Bromar. In the event that this Agreement shall not be consummated
for any other reason, then the Deposit (with all interest earned thereon) shall
be returned to MSSC California, subject to the provisions of Section 7.03. In
the event that the Closing occurs, the Deposit (together with all interest
earned thereon) shall be delivered to the Exchange Agent as part of the Exchange
Fund. The parties agree to execute an instruction letter giving effect to the
provisions of this
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Section 1.10 and deliver such letter to the Escrow Agent promptly after
occurrence of the appropriate event. If the Deposit is delivered to Bromar
pursuant to this Section 1.10 and if on or prior to August 16, 1997 Bromar
and/or its shareholders consummate a transaction (the "SECOND TRANSACTION") that
results in the transfer of ownership of all or substantially all of Bromar's
capital stock (or transaction of similar effect) at a price that is at least
$26,505,000, then Marketing Specialists shall be entitled to receive back the
lesser of (A) the amount of the Deposit and (B) the excess, if any, of (i) the
aggregate price received by Bromar and Bromar's shareholders in the Second
Transaction over (ii) the sum of (x) $26,505,000 and (y) the lesser of $500,000
and all of Bromar's direct out-of-pocket legal, accounting and financial advisor
costs reasonably incurred and documented relating to the transactions
contemplated hereby.
ARTICLE II
CLOSING
SECTION 2.01. Closing. The consummation of the transactions
contemplated hereby (the "CLOSING") shall, subject to the provisions of Article
VI hereof, take place on November 6, 1996 at the offices of Xxxxxxx & Xxxxx
L.L.P., 000 Xxxxx Xxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx or at such other
date, time and place as Bromar and MSSC California mutually agree. The date on
which the Closing actually occurs is referred to herein as the "CLOSING DATE".
SECTION 2.02. Deliveries by Bromar. At the Closing, Bromar shall
deliver, or cause to be delivered, to MSSC California and Marketing Specialists
(unless delivered previously) the following:
(a) the Officers' Certificate referred to in Section 6.01(g) hereof;
(b) the Certificate of the Secretary of Bromar referred to in Section
6.01(h) hereof;
(c) a release by each director and executive officer of Bromar in the
form of the release attached hereto as Exhibit "B", a release by each director
of any subsidiary of Bromar in the form of the release attached hereto as
Exhibit "C" (collectively, the "O&D RELEASES") and the resignations required by
Section 5.15 hereof;
(d) the opinion of counsel referred to in Section 6.01(i) hereof;
(e) executed counterparts of any consents required to be obtained by
Bromar pursuant to Section 5.03 hereof;
(f) the certificate regarding non-foreign status referred to in Section
6.01(n) hereof; and
(g) all other previously undelivered documents, instruments and
writings required to be delivered by Bromar to MSSC California or Marketing
Specialists at or prior to the Closing pursuant to this Agreement or otherwise
required in connection herewith.
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SECTION 2.03. Deliveries by MSSC California and Marketing Specialists.
At the Closing, MSSC California and Marketing Specialists shall deliver, or
cause to be delivered, to Bromar (unless delivered previously) the following:
(a) the Officers' Certificates referred to in Section 6.02(e)
hereof;
(b) the Secretary's Certificates referred to in Section
6.02(f) hereof,
(c) the opinion of counsel referred to in Section 6.02(g)
hereof;
(d) the O&D Releases; and
(e) all other previously undelivered documents, instruments
and writings required to be delivered by MSSC California or Marketing
Specialists to Bromar at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
Furthermore, MSSC California shall deliver, or cause to be delivered, the
Exchange Fund to the Exchange Agent by wire transfer in immediately available
funds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BROMAR
Bromar hereby represents and warrants to MSSC California and Marketing
Specialists as follows, except as otherwise set forth in the relevant section of
the Disclosure Schedule:
SECTION 3.01. Organization and Qualification of Bromar. Bromar is (a) a
corporation duly organized, validly existing and in good standing under the laws
of the State of California and (b) duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which the character of
the properties and assets now owned or leased by it or the nature of the
business transacted by it requires it to be so qualified, except where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect (as defined herein) upon the Company (as defined herein)
or the consummation of the transactions contemplated hereby. Each jurisdiction
in which Bromar is qualified to do business is listed on Section 3.01 of the
Disclosure Schedule. No jurisdiction in which Bromar is not qualified or
licensed has claimed, in writing or otherwise, that Bromar is required to
qualify or be licensed therein.
SECTION 3.02. Power and Capacity; Charter Documents of Bromar.
(a) Subject to the approval of the shareholders of Bromar in accordance
with the terms of the California Law and this Agreement, Bromar has all
requisite power and authority (corporate and otherwise) to enter into, execute
and deliver this Agreement and perform its obligations hereunder. Bromar has the
corporate power and authority to carry on its business as now being conducted
and to own and lease its properties. This Agreement has been duly executed and
delivered by Bromar and is a valid and binding obligation of Bromar, enforceable
in accordance with its terms.
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(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Bromar will not result
in a violation or breach of or constitute a default under any term or provision
of the Articles of Incorporation or Bylaws of Bromar. Bromar has delivered to
MSSC California true and complete copies of the Articles of Incorporation and
the Bylaws of Bromar, as in effect on the date hereof, and any existing minute
books and stock transfer books of Bromar and the Subsidiaries (as defined
herein) for the last three years. Such minute books and stock transfer books are
accurate and complete and contain the minutes of all meetings (and written
consents in lieu thereof) of the shareholders and the board of directors of
Bromar and the Subsidiaries held during the three years immediately preceding
the date of this Agreement and record all issuances and transfers of record of
the capital stock of Bromar and the Subsidiaries during such three years. All
actions taken at such meetings were duly passed or ratified, and any actions
taken by any committee of the board of directors of Bromar or the Subsidiaries
were duly ratified by the appropriate board of directors.
SECTION 3.03. Subsidiaries.
(a) Section 3.03(a) of the Disclosure Schedule sets forth for each
subsidiary, direct or indirect, of Bromar (each a "SUBSIDIARY"), its capital
structure, its place of organization and the other jurisdictions in which it is
qualified to do business. Each of the Subsidiaries has been duly organized and
is validly existing and in good standing under the laws of its respective state
of incorporation, has all requisite corporate power and authority to own or
lease and operate its properties and conduct its business as now conducted and
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties owned or leased by it makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
Material Adverse Effect on the Company or the consummation of the transactions
contemplated hereby. No jurisdiction in which any Subsidiary is not qualified or
licensed has claimed, in writing or otherwise, that such Subsidiary is required
to qualify or be licensed therein.
(b) Bromar owns, free and clear of all liens, claims and encumbrances
of any type ]whatsoever, and has the unrestricted power to dispose of and vote,
all of the outstanding capital stock of each of the Subsidiaries. There are no
outstanding or authorized options, warrants, subscriptions, calls, conversions
or other rights, contracts, agreements, commitments or understandings of any
kind obligating any Subsidiary to issue, sell, purchase, return or redeem any
shares of its capital stock or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of capital
stock of, or other ownership interest in, any Subsidiary. All of the outstanding
shares of the capital stock of each class of each Subsidiary have been duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive rights or any applicable Law.
(c) Except for its interest in any Subsidiary, Bromar does not (i) own,
beneficially or of record, any shares of any other corporation or entity or any
interests in any partnerships or limited liability companies or (ii) participate
in any manner in any joint ventures, corporate alliance agreements or corporate
partnering agreements. Except for Bromar's interest in any Subsidiary, neither
Bromar nor any Subsidiary has an interest in, or is subject to, any agreement,
obligation or
14
commitment to make any equity investment in or loan or advance to, any other
Person (as defined herein).
(d) For purposes of this Agreement, Bromar and the Subsidiaries shall
collectively be termed the "COMPANY"; when such collective term is used in
connection with financial issues, it shall refer to Bromar and the Subsidiaries
as a consolidated whole. For example, when references are made to officers,
directors and employees of the Company, it shall mean all officers, directors
and shareholders of Bromar and the Subsidiaries.
SECTION 3.04. Capitalization and Ownership of Bromar. Section 3.04 of
the Disclosure Schedule lists, for Bromar, its authorized capitalization, the
number of shares of its capital stock (or other equity interests) issued and
outstanding, and the number of shares of its capital stock (or other equity
interests) owned of record by each shareholder. All of the outstanding shares of
the capital stock of Bromar are validly issued, fully paid and non-assessable.
All such shares are owned free and clear of any lien, claim or encumbrance of
any type whatsoever imposed by Bromar. There are no outstanding options,
warrants or other rights to acquire any share of capital stock of Bromar, there
are no outstanding securities authorized, granted or issued by Bromar that are
convertible into or exchangeable for shares of its capital stock and there are
no phantom stock rights, stock appreciation rights or similar rights regarding
Bromar or any Subsidiary.
SECTION 3.05. No Conflicts. The execution, delivery and performance of
this Agreement by Bromar and the consummation of the transactions contemplated
hereby will not:
(a) result in the creation or imposition of any security interest,
lien, charge or other encumbrance against the Company Assets (as defined
herein), with or without the giving of notice and/or the passage of time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which the Company is a party or
by which the Company or its assets is bound or (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Company is a party or by which the Company may be bound or affected, or to which
any of the Company Assets may be subject, or
(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on the Company or the
transactions contemplated by this Agreement.
SECTION 3.06. Consents and Approvals. The Company is not required to
obtain, transfer or cause to be transferred any consent, approval, license,
permit or authorization of, or make any declaration, filing or registration
with, any third party or any public body or authority in connection with (a) the
execution and delivery by Bromar of this Agreement, or (b) the consummation of
the Merger and the other transactions contemplated hereby or (c) the future
conduct by the Surviving
15
Corporation of the business of the Company (the "COMPANY BUSINESS") including,
without limitation, the Company's Parowax operations (the "PAROWAX BUSINESS")
other than those that may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), or that may be required
solely by reason of MSSC California's or Marketing Specialists' participation in
the transactions contemplated hereby.
SECTION 3.07. Financial and Operating Statements.
(a) Year End Audited Financial Statements. Attached hereto as Appendix
I is a true and complete copy of the audited consolidated financial statements
of the Company for the fiscal years ended December 31, 1994 and December 31,
1995, accompanied by an unqualified audit opinion of Ernst & Young LLP prepared
in accordance with applicable Statement of Auditing Standards requirements (the
"YEAR END AUDITED FINANCIAL STATEMENTS"). The Year End Audited Financial
Statements include audited balance sheets of the Company as of December 31, 1994
and December 31, 1995 (such balance sheet being termed the "1995 AUDITED BALANCE
SHEET"), together with related statements of operations, equity and cash flow of
the Company (and notes thereto) for each of such periods. The Year End Audited
Financial Statements are accurate and correct in all material respects and
fairly present the combined financial position and the results of operations of
the Company for the periods therein identified in conformity with generally
accepted accounting principles ("GAAP") GAAP consistently applied.
(b) Year End Adjusted Financial Statements. Attached hereto as Appendix
II is a true and complete copy of unaudited consolidated financial statements of
the Company for the eight months ended August 31, 1996, which have been prepared
by the Chief Financial Officer of Bromar (the "1996 FINANCIAL STATEMENTS"). The
1996 Financial Statements include an unaudited balance sheet of the Company as
of August 31, 1996 (such balance sheet being termed herein the "1996 BALANCE
SHEET"). The 1996 Financial Statements are accurate and correct in all material
respects and fairly present the financial position and results of operations of
the Company for the period therein identified in conformity with GAAP
consistently applied (except that the 1996 Financial Statements do not include
notes or normal year end adjustments).
(c) Accounting Records. The Company (i) keeps books, records and
accounts that, in reasonable detail, accurately and fairly reflect the
transactions, dispositions and assets of the Company and (ii) maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(A) transactions are executed in accordance with the management's general or
specific authorization, and (B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets and (C) access to such books, records and accounts is
permitted only in accordance with management's general or specific
authorizations.
SECTION 3.08. No Undisclosed or Contingent Liabilities. Except for (a)
liabilities or obligations incurred by the Company in the ordinary course of
business and not required by GAAP applied on a consistent basis to be set forth
on the 1996 Balance Sheet (all of which such items are described in Section 3.08
of the Disclosure Schedule), and (b) liabilities and obligations incurred by the
Company in the ordinary course of business since the date of the 1996 Balance
Sheet (none of which could reasonably be expected to cause a Material Adverse
Effect on the Company), there is
16
no basis for the assertion against the Company of any liability or obligation of
any nature whatsoever (whether absolute, accrued, contingent or otherwise) that
may encumber or affect the Company or the transactions contemplated hereby which
is not fully reflected or reserved against on the 1996 Balance Sheet.
SECTION 3.09. Assets of the Company. The assets of the Company
(collectively, the "COMPANY ASSETS") include the assets referenced below:
(a) Intellectual Property. All patents, trade or service names and
marks, assumed names and copyrights and all applications therefor relating in
which the Company has an interest (collectively, "INTELLECTUAL PROPERTY"),
including without limitation those listed on Section 3.09(a) of the Disclosure
Schedule;
(b) Receivables. All accounts receivable, bills and notes receivable,
commercial paper and acceptances or any other evidences of indebtedness to the
Company, including without limitation those listed on Section 3.09(b) of the
Disclosure Schedule;
(c) Company Equipment. All furniture, fixtures, machinery, molds,
tools, dies and equipment of the Company (the "COMPANY EQUIPMENT"), including
without limitation those listed on Section 3.09(c) of the Disclosure Schedule,
whether or not such items are in any way attached or affixed to real property;
(d) Vehicles. All automobiles, trucks, trailers and other vehicles
owned or leased by the Company, including without limitation those listed on
Section 3.09(d) of the Disclosure Schedule;
(e) Inventory. All inventory of the Company (the "INVENTORY"),
including, without limitation, all raw materials, work-in-process, finished
products, goods in transit, office, manufacturing, lab and advertising supplies,
containers and packaging and shipping materials and all inventory in the hands
of suppliers for which the Company is committed as of the date hereof or the
Closing Date, including without limitation those listed on Section 3.09(e) of
the Disclosure Schedule;
(f) Contracts. All leases, contracts, agreements, arrangements,
commitments and understandings (whether written or oral), including without
limitation all deferred compensation agreements, agreements with principals,
leases, security deposits and options under leases, acquisition agreements and
confidentiality agreements, to which the Company is a party, including without
limitation all such contracts listed or referred to on Section 3.09(f) of the
Disclosure Schedule;
(g) Insurance. All insurance policies covering the Company and its
directors, officers, employees and agents (and all rights and claims thereunder
for damage to, or otherwise relating to, the Company Assets), including without
limitation those listed on Section 3.09(g) of the Disclosure Schedule; and
(h) Permits. All licenses, permits and authorizations issued by any
federal, state, local or foreign governmental authority (the "PERMITS") relating
to the Company, the Company Assets or the conduct of the Company Business,
including without limitation those listed on Section 3.09(h) of the Disclosure
Schedule.
17
SECTION 3.10. Absence of Certain Changes. Since December 31, 1995, the
Company has not:
(a) suffered any Material Adverse Effect and there has not been any
event (whether occurring before or after December 31, 1995) that could
reasonably be expected to have a Material Adverse Effect on the Company; or
(b) experienced any material decrease in the book value of the Company
Assets from the amounts reflected on the 1995 Audited Balance Sheet, other than
decreases resulting from depreciation in accordance with accounting practices in
effect at all times since January 1, 1995; or
(c) incurred any liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or to become due),
except (i) liabilities or obligations for raw materials purchased for use in the
ordinary course of business for the Parowax Business in accordance with
historical levels, taking into account such factors as the time of year and
projected sales for the following period, (ii) liabilities or obligations for
rent under the Leases (as defined herein) and (iii) liabilities or obligations
for other items incurred in the ordinary course of business of the Company and
consistent with past practice, none of which other items exceeds $40,000
(considering liabilities or obligations arising from one transaction or a series
of similar transactions, and all periodic installments or payments under any
lease (other than the Leases) or other agreement providing for periodic
installments or payments, as a single obligation or liability); or
(d) increased (other than increases resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice), or experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves; or
(e) paid, discharged or satisfied any claims, encumbrances, liabilities
or obligations (whether absolute, accrued, contingent or otherwise and whether
due or to become due) other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the 1995 Audited Balance Sheet or
incurred in the ordinary course of business and consistent with past practice
since the date thereof; or
(f) permitted, allowed or suffered any of the Company Assets,
including, without limitation, real property, personal property or any leasehold
interest, to be subjected to any mortgage, pledge, lien, encumbrance,
restriction or charge of any kind (except for liens for Taxes (as defined
herein) not yet owing); or
(g) written down or written up the value of any Inventory (including
write-downs by reason of shrinkage or xxxx-xxxxx), determined as collectible any
notes or accounts receivable or any portion thereof which were previously
considered uncollectible, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs in the ordinary course
of business, consistent with past practice, in accordance with GAAP consistently
applied; or
18
(h) canceled any material amount of indebtedness or waived any material
claims or rights; or
(i) sold, transferred or otherwise disposed of any Company Assets
except in the ordinary course of business and consistent with past practice; or
(j) disposed of or permitted to lapse any right to the use of any
patent, trademark, assumed name, service xxxx, trade name, copyright, license or
application therefor or disposed of or disclosed to any corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or government agency (collectively, a "PERSON")
other than representatives of MSSC California and Marketing Specialists any
trade secret, formula, process or know-how not theretofore a matter of public
knowledge; or
(k) granted any increase in the salary, compensation, rate of
compensation, commissions or bonuses payable to or to become payable by the
Company to any officer or director of the Company (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment); or
(l) granted any increase in the salary, compensation, rate of
compensation, commissions of bonuses payable to or to become payable by the
Company to any employee of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit-sharing, retirement or
other plan or commitment), except in the ordinary course of business and
consistent with past practice; or
(m) paid, loaned or advanced any amount to any officer, director,
employee or shareholder of the Company except for amounts advanced to employees
of the Company in the ordinary course of business consistent with past practice
(none of which advances were loans for personal purposes), or sold, transferred
or leased any Company Assets to, or entered into any agreement (other than this
Agreement) or arrangement with, any officer, director, employee or shareholder
of the Company (except for agreements or arrangements made in the ordinary
course of business and consistent with past practice); or
(n) entered into any new collective bargaining or labor agreement, or
experienced any labor dispute or difficulty; or
(o) made any single capital expenditure or commitment in excess of
$45,000 for additions to property, plant, equipment or for any other purpose or
made aggregate capital expenditures or commitments in excess of $80,000 for
additions to property, plant, equipment or for any other purpose; or
(p) made any change in any method of accounting or accounting practice
or policy; or
(q) suffered any casualty loss in excess of $30,000 (whether or not
insured against) or suffered aggregate casualty losses in excess of $60,000
(whether or not insured against); or
19
(r) issued any additional shares of capital stock of Bromar or the
Subsidiaries or any option, warrant, right or other security exercisable for,
convertible into or exchangeable for shares of capital stock of Bromar or the
Subsidiaries; or
(s) paid dividends on or made other distributions or payments in
respect of the capital stock of Bromar or the Subsidiaries; or
(t) paid its suppliers in connection with the Parowax Business and
other vendors other than in a manner and time consistent with past practice; or
(u) taken any other action not either in the ordinary course of
business and consistent with past practice or provided for in this Agreement for
which the aggregate monetary effect of all such items is in excess of $45,000;
or
(v) entered into or agreed to any transaction not in the ordinary
course of business, for which the aggregate monetary effect of all such items is
in excess of $45,000; or
(w) agreed, whether in writing or otherwise, to take any of the actions
set forth in this Section 3.10.
SECTION 3.11. Real Property.
(a) Set forth in Section 3.11 of the Disclosure Schedule is a complete
list of all real property that the Company currently owns or has owned in the
past ten years. The Company has good and marketable title in fee simple to such
currently owned real property and to all plants, buildings and improvements
thereon, free and clear of any mortgages, liens, claims, charges, pledges,
security interests or other encumbrances of any nature whatsoever.
(b) With respect to any deeds, title insurance policies, surveys,
mortgages, agreements and other documents granting to the Company title to or an
interest in or otherwise affecting any such real property, (i) no breach or
event of default on the part of the Company, (ii) no material breach or event of
default, to the best knowledge of the Company, on the part of any other party
thereto, and (iii) no event that, with the giving of notice or lapse of time or
both, would constitute such breach or event of default on the part of the
Company or, to the best knowledge of the Company, on the part of any other party
thereto, has occurred and is continuing.
(c) Section 3.11 of the Disclosure Schedule contains a complete and
accurate list of all real property leases to which the Company is a party in any
capacity (including all amendments thereof and modifications thereto) (the
"LEASES"), including the address of each property, a summary description of the
property leased and its uses, the name and address of each landlord or tenant,
if applicable, the expiration date of each Lease, whether an option to renew or
an option to purchase has been exercised, and whether the obligations of the
Company thereunder have been guaranteed by any Person. The Company's interests
in and to all Leases listed on Section 3.11 of the Disclosure Schedule are free
and clear of all mortgages, liens, claims, charges, pledges, security interests
or other encumbrances of any nature whatsoever including without limitation
subleases, chattel mortgages, mechanics' and materialmen's liens, conditional
sales contracts, collateral security arrangements and
20
other interest retention arrangements. The Company has not received notice of
any default by the Company under any of the Leases, and there are no facts or
conditions that would, with notice or lapse of time or both, constitute a
default by the Company under any of the Leases. None of the landlords under any
of the Leases is in default.
(d) The buildings and improvements owned or leased by the Company on
any real property owned by the Company and on any Lease, and the operation and
maintenance thereof as operated and maintained, do not (i) contravene any zoning
or building Law or ordinance or other administrative regulation or (ii) violate
any restrictive covenant or any applicable Law. All of the plants, buildings and
structures located on any real property owned by the Company or on any Lease are
in a state of good maintenance and repair (normal wear and tear excepted)
suitable in all respects for the operation of the Company Business.
(e) There is no pending or threatened condemnation, eminent domain or
similar proceeding with respect to, or that could affect, any real property
owned by the Company or any Lease.
SECTION 3.12. Company Equipment. The Company has good and marketable
title to each piece of the Company Equipment except for such pieces which, in
the aggregate, are not material. Each piece of the Company Equipment is in good
and normal operating condition and repair and adequate for the uses to which it
is being put by the Company, except for pieces which, in the aggregate, are not
material. No piece of the Company Equipment being used in the Parowax Business
is in need of maintenance or repairs except for ordinary routine maintenance.
The Company has not received any notification from any governmental or
regulatory authority within the last five years that the Company is in violation
of any health, sanitation, fire, safety, zoning, building or other Law (other
than Environmental Laws, which are addressed in Section 3.25), ordinance or
regulation in respect of the Company Equipment or operations, which violation
has not been appropriately and completely resolved. The Company has provided
MSSC California and Marketing Specialists with access to, or copies of, all
guarantees, service contracts, maintenance agreements, management agreements,
instruction manuals, and any and all other documents and papers that in any
manner pertain to each material piece of the Company Equipment.
SECTION 3.13. Contracts and Commitments.
(a) The Company is not a party to or bound by any agreements, contracts
or commitments which individually or when aggregated with all related
agreements, contracts or commitments, are material to the business, operations,
condition (financial or otherwise), liabilities, assets, earnings or working
capital of the Company or that provide for the grant of any preferential rights
to purchase or lease any of the Company Assets;
(b) The enforceability of the agreements, contracts and commitments
referred to in subsections (a-h) of this Section 3.13 will not be affected in
any respect by the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby;
(c) No purchase contracts or commitments of the Company regarding the
Parowax Business or otherwise are in excess of the normal, ordinary and usual
requirements of the Company,
21
or to the best knowledge of the Company, were entered into at prices materially
in excess of those available in the industry in arm's length transactions on the
respective dates thereof;
(d) The Company is not a party to or bound by any outstanding
agreements, arrangements or contracts with any of its officers, employees,
agents, consultants, advisors, salesmen or sales representatives that (A) are
not cancelable by it on notice of not longer than 30 days and without the
imposition of any liability, penalty or premium, (B) require non-cancelable
payment by the Company of over $20,000, or (C) provide for any bonus or other
payment based on the sale of the Company or any portion thereof;
(e) The Company is not a party to or bound by any employment agreement,
consulting agreement or any other agreements that contains any provision for
severance or termination pay liabilities or obligations;
(f) The Company is not a party to or bound by:
(i) any mortgage, indenture, note, installment
obligation or other instrument, agreement or arrangement for or
relating to any borrowing of money by the Company;
(ii) any guaranty, direct or indirect, by the Company
of any obligation for borrowings or otherwise, excluding
endorsements made for collection in the ordinary course of
business;
(iii) any obligation to make payments, contingent or
otherwise, of over $20,000 arising out of any prior acquisition
of the business, assets or stock of other persons;
(iv) any collective bargaining agreement with any
labor union;
(v) any lease or similar arrangement for the use by
the Company of personal property requiring payments by the
Company, on an annual basis, of over $20,000;
(vi) any agreement containing noncompetition or other
limitations restricting the conduct of the business of the
Company; and
(vii) any partnership, joint venture or similar
agreement.
(g) Neither the Company nor any of its officers, directors,
shareholders or affiliates is a party to or bound by any agreement (other than
this Agreement) or arrangement for the sale of any of the assets (other than in
the ordinary course of business and consistent with past practice) or capital
stock of Bromar or the Subsidiaries or for the grant of any preferential rights
to purchase any of the assets or capital stock of Bromar or the Subsidiaries;
and
22
(h) The Company is not bound by any agreement to redeem the Common
Shares held by any shareholder, which agreement will not be effectively and
properly terminated by the consummation of the Merger.
(i) With respect to each contract and agreement listed in Section 3.13
of the Disclosure Schedule, except as set forth therein, (i) each of such
contracts and agreements is valid, binding and in full force and effect and is
enforceable by the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other Laws and judicial decisions of general
applicability relating to or affecting creditors' rights and to general
principles of equity; (ii) there have been no cancellations or threatened
cancellations thereof nor are there any outstanding material disputes
thereunder; (iii) neither the Company, nor any other party is in breach of any
material provision thereof; and (iv) there does not exist any default under, or
any event or condition which with the giving of notice or passage of time or
both would become a breach or default under, the terms of any such contract or
agreement on the part of the Company or on the part of any other party thereto.
(j) The Company has delivered or made available to MSSC California or
Marketing Specialists true and complete copies of each written contract or
agreement listed in Section 3.13 of the Disclosure Schedule and true and
accurate summaries of any oral agreement listed thereon.
SECTION 3.14. Intellectual Property. Section 3.14 of the Disclosure
Schedule contains an accurate and complete list of (a) all patents, trademarks
(registered or unregistered), trade names, assumed names, copyrights, and all
applications therefor, owned or filed by the Company and used in or necessary
for the conduct of the Company Business and, with respect to registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered and all registration numbers; (b) all licenses, permits and other
agreements relating thereto; and (c) all agreements relating to technology,
know-how or processes used in or necessary for the conduct of the business of
the Company Business which the Company is licensed or authorized to use by
others. Such patents, trademarks (registered or unregistered) and copyrights
(and applications therefor, where appropriate) are (i) valid, subsisting and
enforceable, and (ii) duly recorded in the names of the Persons set forth in
Section 3.14 of the Disclosure Schedule. The Persons set forth in Section 3.14
of the Disclosure Schedule have the sole and exclusive right, free from any
liens, mortgages, security interests, charges or encumbrances, to use the
patents, trademarks (registered or unregistered), copyrights and applications
therefor set forth beside their names, and the Company has the full right to use
the trade names, assumed names, technology, know-how, inventions, works and
processes referred to in such lists and all trade secrets required for or
incident to the conduct of the Company Business in the jurisdictions in which
the Company Business is conducted or where the products of the Parowax Business
are distributed, and the consummation. of the transactions contemplated hereby
will not alter or impair any such rights. No claims have been asserted by any
Person against the Company with respect to the ownership, validity,
enforceability, misappropriation or use of any product or service of the Company
Business or such patents, trademarks (registered or unregistered, or of any
confusingly similar or dilative trademarks), trade names, assumed names,
copyrights, applications therefor, technology, know-how, processes or trade
secrets or challenging or questioning the validity or effectiveness of any such
license, permits or agreement and there is no valid basis for any such claim,
and the use or other exploitation of any such product or service of the Company
Business or patents, trademarks (registered or unregistered), trade names,
assumed names, copyrights, applications therefor, technology, know-how,
processes and trade secrets by the Company does not
23
infringe on or dilute the rights of any Person; and, to the best knowledge of
the Company, no other Person is infringing the rights of the Company with
respect to such patents, trademarks (registered or unregistered), trade names,
assumed names, copyrights, and applications therefor, technology, know-how,
inventions, works, processes or trade secrets.
SECTION 3.15. Inventory. All Inventory, whether reflected in the 1996
Balance Sheet or subsequently acquired, consists of a quality and quantity
reasonably expected to be usable and salable in the ordinary course of the
Parowax Business. The values at which all Inventory are carried on the 1996
Balance Sheet are the lower of cost or market, calculated in accordance with
GAAP. The quantities of all Inventory of the Company are reasonable and
warranted in the present and anticipated circumstances of the Parowax Business.
The Company has no Inventory (other than customary office supplies) that is not
related to the Parowax Business.
SECTION 3.16. Commitments and Returns. As of the date hereof, the
aggregate unfulfilled portion of all contracts or commitments by the Company for
the purchase of supplies does not exceed normal and customary levels and all of
such contracts and commitments were made in the ordinary course of business.
There are no current claims to return in excess of an aggregate of $20,000 of
products to the Company by reason of (i) alleged overshipments, defective or
otherwise, or any alleged defects in products (i.e., Parowax) produced by the
Company or (ii) products in the hands of customers under an understanding that
such product is or will be returnable.
SECTION 3.17. Accounts Receivable. The Company has delivered to
Marketing Specialists and MSSC California a true and complete listing of the
aging status of each of the accounts receivable of the Company dated September
30, 1996. All accounts receivable of the Company, whether reflected in the 1996
Balance Sheet or accrued since the date thereof, represent revenue generated in
the ordinary course of business and are collectible net of any reserves shown on
the 1996 Balance Sheet or reserves for accounts receivable accrued since the
date thereof (which reserves are adequate and were calculated in accordance with
GAAP). Subject to the reserves established on the 1996 Balance Sheet or accrued
since the date thereof, each of the accounts receivable either has been
collected in full or will be collected in full, without any set-off, in a period
of time consistent with the historical collection results of the Company during
1993 through 1996, but in no event in excess of 120 days after the day on which
each such account receivable became due and payable. A list of any promissory
note held by the Company that has been accepted by the Company as payment of
accounts receivable of the Company is set forth in Section 3.17 of the
Disclosure Schedule.
SECTION 3.18. Pension and Other Employee Plans and Agreements.
(a) Section 3.18(a) of the Disclosure Schedule sets forth, as of the
date of this Agreement, all of the pension, profit sharing, stock option, stock
purchase, stock bonus, incentive, bonus, life, health, disability or accident
plans, deferred compensation plans, and other employee compensation or benefit
plans, agreements, practices, policies, customs, contracts, arrangements or
commitments, including, without limitation, changes in control or severance
agreements, holiday, vacation or other similar plans, programs or arrangements,
employee benefit plans (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and labor union
agreements under or with respect to which the Company or any person ("ERISA
AFFILIATE") who would be treated as being a "single employer" with the Company
under section 414 of the Internal
24
Revenue Code of 1986, as amended (the "CODE"), has any liability or obligation,
whether current, contingent, secondary or otherwise (collectively, the "PLANS"
and individually, a "PLAN"), and the Company has furnished to MSSC California or
Marketing Specialists complete copies of all of the foregoing as amended and in
effect on the date hereof, including, where applicable, any trust agreements,
insurance contracts or other funding mediums related to any Plan and summaries
of plan descriptions. The Company has heretofore delivered to MSSC California or
Marketing Specialists the most recent liability valuation report with respect to
each Plan for which a report or estimate has been prepared, the most recent
assets valuation report provided to the Company with respect to each Plan that
has assets, the two most recent annual reports (form 5500) filed with respect to
each Plan for which such report must be filed, and the most recent favorable
Internal Revenue Service ("IRS") determination letter received with respect to
each Plan that is intended to be qualified under section 401(a) of the Code or
trust intended to be exempt under section 501(a) or section 501(c)(9) of the
Code.
(b) With respect to each Plan, the Company and its ERISA Affiliates
have complied in all material respects with, and each Plan conforms in all
material respects to and has from its inception been operated in all material
respects with, all applicable Laws and regulations, including but not limited to
ERISA and the Code, and each Plan has been administered in all material respects
in accordance with its terms. Each Plan intended to be qualified under section
401(a) of the Code or trust intended to be exempt under section 501(a) or
section 501(c)(9) of the Code is, and for each prior year for which any
applicable statute of limitations has not expired, was, qualified or exempt, as
the case may be, and each such Plan is a single Plan, as defined in section
414(1) of the Code and the regulations thereunder, in which the Company is the
sole employer. Neither the Company nor any ERISA Affiliate has ever had an
obligation or liability, to or with respect to, a multiemployer plan, as defined
in section 4001(a)(3) of ERISA. Neither the Company nor any ERISA Affiliate has
any commitment and has not taken any action to adopt or establish any additional
Plans or to materially increase the benefits under any Plan; no event or
condition has occurred or exists with respect to any Plan or Plans, whether or
not terminated prior to the date of this Agreement and whether or not maintained
or contributed to by the Company or any ERISA Affiliate, which individually or
collectively could result in a material liability to the Company or any ERISA
Affiliate; all contributions required to any Plan and all premiums for insurance
coverage for each fiscal year of each Plan ended before the date of this
Agreement and for any portion of a fiscal year ending on the Closing Date have
been timely paid and payments to be made but not yet due properly accrued and
recorded in the Year End Audited Financial Statements and 1996 Financial
Statements through their relevant dates; no Plan has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and section 412 of the
Code), whether or not waived; there is no material pending or, to the best
knowledge of the Company, threatened or anticipated litigation, arbitration,
proceeding, claim (other than an undisputed claim for payment of benefits in
accordance with the terms thereof or a pending or final qualified domestic
relations order), demand, grievance, or allegation of unfair labor practice (or
any basis therefor) involving any of the Plans or any investigation, proceeding,
administrative review or other administrative agency process which could result
in imposition on the Company or any ERISA Affiliate of any penalty, assessment
or liability in connection with any of the Plans, individually or collectively;
no Plan has engaged or is about to engage in a prohibited transaction as defined
in section 406 of ERISA or section 4975 of the Code; and no "reportable
event,"as defined in section 4043 of ERISA, has occurred or, to the best
knowledge of the Company, is about to incur that could result in a liability to
the Company or any ERISA Affiliate.
25
(c) No Plan provides (or has any commitment to provide) health benefits
with respect to any current or former employees or independent contractors (or
beneficiary thereof) of the Company or any ERISA Affiliate beyond their
retirement or other termination of service (other than coverage mandated by
COBRA). Each Plan can be unilaterally terminated at any time by the Company
without material liability.
SECTION 3.19. Litigation. There are no open and unresolved claims,
actions, suits, proceedings, investigations or inquiries that have been made or
served against the Company or, to the best knowledge of the Company, that are
pending against (without having been so served), threatened by or against, or
otherwise affecting or that would adversely affect, the transactions
contemplated hereby at law or in equity or before or by any federal, state,
local, foreign or other governmental department, commission, board, agency, or
authority; and no other such claim, action, suit, proceeding, inquiry or
investigation could be brought against the Company for which valid defenses are
not available. No claim, action, suit, proceeding, inquiry or investigation set
forth in Section 3.19 of the Disclosure Schedule would, if adversely decided,
have a Material Adverse Effect on the Company or the transactions contemplated
hereby. The Company is not a party to or a recipient of service of process
regarding (and has not otherwise been named and noticed in) any judgment, order
or decree entered in any lawsuit or proceeding which has had or may have a
Material Adverse Effect on the Company or on its ability to acquire any property
or conduct its business in any way.
SECTION 3.20. Insurance. (a) All policies of fire, liability, product
liability, workmen's compensation, health and other forms of insurance relating
to the Company Business are in full force and effect, (b) all billed premiums
with respect thereto covering all periods up to and including the Closing Date
have been paid or will be paid prior to the Closing Date, and (c) no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of Law and of
all agreements with respect to the operation of the Company Business, are valid,
outstanding and enforceable policies (subject to bankruptcy, insolvency,
reorganization and other Laws and judicial decisions of general applicability
relating to or affecting creditors' rights and to general principles of equity),
and, to the best knowledge of the Company, provide insurance coverage customary
in the industry regarding the Company Assets and the operations of the Company
Business. The coverage provided by such policies, with respect to any insured
act or event occurring on or prior to the Closing Date, will not in any way be
affected by or terminate or lapse by reason of the transactions contemplated
hereby.
SECTION 3.21. Collective Bargaining Agreements; Compensation; Employee
Agreements. The Company does not have in effect any collective bargaining
agreement. Section 3.21 of the Disclosure Schedule sets forth a complete and
accurate list showing the names, the rate of compensation (and the portions
thereof attributable to salary and bonuses, respectively) and location of all
officers of the Company and of all employees of or consultants (except for
non-individual providers of professional services such as accounting and legal
services) to the Company that received annual base salary and cash bonus
totaling in excess of $100,000 for the fiscal year ended December 31, 1995 (such
officers, employees and consultants being, collectively termed, the "SENIOR
EMPLOYEES"). There are no covenants, agreements or restrictions to which the
Company is a party, including but not limited to employee noncompete agreements,
prohibiting, limiting or in any way
26
restricting any employee listed on Section 3.21 of the Disclosure Schedule from
engaging in any type of business activity in any location. The Company is not
currently engaged in any bargaining with any labor union. To the best knowledge
of the Company, no petition is on file with the National Labor Relations Board
submitted by a labor union seeking to represent any of the employees of the
Company and the Company is not aware of any attempts to organize the employees
of the Company by any labor union.
SECTION 3.22. Labor Matters. (a) The Company has complied and is
presently complying with all applicable Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice or unlawful employment practice
which has had, or could reasonably be expected to produce, a Material Adverse
Effect on the Company; (b) (i) there is no open and unresolved unfair labor
practice charge or complaint against the Company for which the Company has
received service of process or other appropriate notice or, to the best
knowledge of the Company, pending (without having been so served or noticed)
being considered or threatened before the National Labor Relations Board, (ii)
there is no open and unresolved grievance or any open and unresolved arbitration
proceeding arising out of or under collective bargaining agreements for which
the Company has received service of process or other appropriate notice and, to
the best knowledge of the Company, no such grievance or arbitration proceeding
is pending (without having been so served or noticed) or is being considered or
threatened, and (iii) there is no basis for any such charge, complaint or
grievance; (c) there is no labor strike, slowdown or work stoppage for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, pending (without having been so served or
noticed) or threatened against the Company; (d) the Company has not experienced
any significant work stoppages or been a party within the past two years to any
proceedings before the National Labor Relations Board, and is not a party to any
arbitration proceeding arising out of or under collective bargaining agreements;
and (e) there is no open and unresolved charge or complaint for which the
Company has received service of process or other appropriate notice or, to the
best knowledge of the Company, which is being considered or threatened against
the Company before the Equal Employment Opportunity Commission or any state,
local, federal or foreign agency responsible for the prevention of unlawful
employment practices. The Company has not received notice of the intent of any
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws to conduct an investigation of or relating to the Company,
and, to the best knowledge of the Company, no such investigation is in progress.
The employees of the Company are not represented by any labor union and there
are no any collective bargaining agreements otherwise in effect with respect to
such employees. There are no citations against the Company from the Occupational
Safety and Health Administration for which the Company has been provided service
of process or other appropriate notice, and, to the best knowledge of the
Company, no such citations are pending. There are no current Affirmative Action
Plans to which the Company is a party affecting the Company Business and, to the
best knowledge of the Company, there are no current or pending audits
contemplated against the Company by the Office of Federal Compliance Programs
pursuant to Executive Order 11246.
SECTION 3.23. Compliance with Law. The Company is in substantial
compliance with all federal, state, foreign and local laws (whether statutory or
otherwise), ordinances, rules, regulations, orders, judgments, decrees, writs
and injunctions of any governmental authority (collectively, "LAWS") applicable
to the Company Business (except Environmental Laws which are addressed in
27
Section 3.25) for which the failure to be in compliance (individually or in the
aggregate) would result in a Material Adverse Effect on the Company. The Company
has not received written notification from any governmental or regulatory
authority within the past five years of any asserted present or past failure to
so comply, which failure has not been appropriately and completely resolved. The
Company has not been notified by any governmental or regulatory authority that
the Company is in violation or alleged violation of any Law applicable to the
Company Business which violation has not been appropriately and completely
resolved, or that any governmental or regulatory authority contemplates any
investigation or proceeding with respect to any such violation or alleged
violation which has not been appropriately and completely resolved which, in
either case, has resulted in or could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.24. Permits. The Company has all Permits (other than those
required by Environmental Laws, which are addressed in Section 3.25) necessary
for the ownership or leasing of its properties and the conduct of the Company
Business as now being conducted other than those the absence of which has not,
and is not reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or the transactions contemplated hereby.
All such Permits are in full force and effect. No violations exist or, to the
best knowledge of the Company, have been reported in respect of such Permits. No
notice of any proceeding has been served or otherwise given to the Company or,
to the best knowledge of the Company, is pending (without service or other
notice) or threatened seeking the revocation or limitation of any of such
Permits.
SECTION 3.25. Environmental Matters.
(a) All Permits that are required for the current operation of the
Company Business under all Environmental Laws have been obtained. No notice to,
approval of, authorization or consent from any Person is necessary for the
transfer of any such Permit, and the consummation of the transactions
contemplated by this Agreement will not violate, alter, impair or invalidate, in
any respect, such Permits.
(b) The Company has neither disposed, nor caused the disposal of, any
waste or other items, except waste and other items which are customarily and
properly disposed of in normal municipal garbage sites and which have been
disposed of through normal municipal garbage collection.
(c) The Company is in substantial compliance with all terms and
conditions of the required Permits, and is also in substantial compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all applicable
Environmental Laws. Further, the Company is in substantial compliance with all
applicable covenants running with any current leases that relate to the
protection of health or the environment. The Company has not received any
communication (written or oral) from any Person that alleges that the Company is
not in compliance with the current required Permits or with any applicable
Environmental Law, which allegation has not been appropriately and completely
resolved.
(d) There is no Environmental Claim (as defined herein) pending,
threatened or likely to be threatened (i) against the Company; (ii) against any
Person whose liability for any Environmental Claim the Company may have retained
or assumed either contractually or by operation of Law; or
28
(iii) against any real or personal property or operations that are or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company, which, either individually or in the aggregate, has had or could have a
Material Adverse Effect on the Company.
(e) There are no events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance with Environmental Laws with respect to the
operation of the Company or that may otherwise form the basis of an
Environmental Claim against the Company, which, either individually or in the
aggregate, has had or could have a Material Adverse Effect on the Company.
(f) The Company has not prepared or caused the preparation of any
environmental reports, audits, investigations or assessments of the Company or
any real or personal property or operations which are now, or have been
previously owned, leased, operated or managed, in whole or in part, by the
Company (collectively, "ENVIRONMENTAL REPORTS"). No Environmental Reports exist.
(g) The Company has disclosed to MSSC California and Marketing
Specialists all relevant facts with respect to potential or actual environmental
liabilities of the Company which have had or could have a Material Adverse
Effect.
(h) For purposes of this Agreement, the following terms shall be given
the following meanings:
(i) "ENVIRONMENTAL CLAIM" shall mean any judicial,
administrative or regulatory action, civil or criminal suit, demand,
demand letter, directive, claim, lien, superlien, investigation,
proceeding or notice of violation (written or oral) by any Person
alleging potential liability (including, without limitation, potential
liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, removal costs, remedial costs, natural
resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (a) the presence or Release
or threatened Release into the environment, of any Hazardous Materials
at any location, whether owned, operated, leased or managed by the
Company; or (b) circumstances forming the basis of any violation or
alleged violation, of any Environmental Law; or (c) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence
or Release of any Hazardous Materials.
(ii) "ENVIRONMENTAL LAWS" shall mean any Law relating to or
applicable to the regulation or protection of human health, safety or
the environment (including, without limitation, ambient air, soil,
surface water, groundwater, wetlands, land or subsurface), including
without limitation, Laws and regulations relating to the Release or
threatened Release of Hazardous Material, or manufacture, processing,
distribution, use, treatment, storage, disposal, transport, recycling
or handling of Hazardous Material.
(iii) "HAZARDOUS MATERIAL" shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is
or could become friable, and compressors or other equipment that
contain polychlorinated biphenyls; and (b) any chemicals, materials or
substances which are now defined as or included in the definition of
"HAZARDOUS
29
SUBSTANCES," "HAZARDOUS WASTES," "HAZARDOUS MATERIALS," "EXTREMELY
HAZARDOUS WASTES," "RESTRICTED HAZARDOUS WASTES," "TOXIC SUBSTANCES,"
"TOXIC POLLUTANTS," "POLLUTANTS," "CONTAMINANTS" or words of similar
import, under any Environmental Law; and (c) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law.
(iv) "RELEASE" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or
property.
SECTION 3.26. Tax Matters.
(a) All Tax Returns required to be filed on or before the Closing Date
by the Company have been or will be filed within the time prescribed by Law
(including extensions of time approved by the appropriate taxing authority).
"TAX RETURN" means any report, statement, form, return or other document or
information required to be supplied to a taxing authority in connection with
Taxes. "TAX" or "TAXES" means any United States or foreign federal, state, or
local tax, including without limitation income tax, ad valorem tax, excise tax,
sales tax, use tax, franchise tax, gross receipts tax, withholding tax, social
security tax, occupation tax, service tax, license tax, payroll tax, transfer
and recording tax, severance tax, customs tax, import tax, export tax,
employment tax, or any similar or other tax, assessment, duty, fee, levy or
other governmental charge, together with and including, without limitation, any
and all interest, fines, penalties, assessments and additions to tax resulting
from, relating to, or incurred in connection with any such tax or any contest or
dispute thereof.
(b) The Tax Returns so filed are complete, correct and accurate
representations of the Tax liabilities of the Company and such Tax Returns
accurately set forth or will accurately set forth all items to the extent
required to be reflected or included in such returns.
(c) The Company has timely paid or has made adequate provision in the
1996 Balance Sheet for the payment of all Taxes due on such Tax Returns that
have been filed or will be filed for periods ending on or before the date of the
1996 Balance Sheet.
(d) There is no action, suit, investigation, proceeding, audit or claim
that has been served against or otherwise properly noticed to the Company, or,
to the best knowledge of the Company, pending or proposed against or with
respect to the Company in respect of any Tax. There are no material liens for
Taxes upon any of the Company Assets.
(e) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other Person.
(f) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(g) The Company does not have in effect a consent under Section 341(f)
of the Code concerning collapsible corporations.
30
(h) The Company has not made any payment, and is not obligated to make
any payment, and is not a party to any agreement that could obligate it to make
any payment that will not be deductible under section 280G of the Code or will
be subject to Tax under section 4999 of the Code.
(i) There has never been a Tax sharing or allocation agreement in place
between the Company and any other Person other than those, if any, regarding the
payment of Taxes for which the applicable statute of limitations has run.
(j) The Company is not liable for a Tax incurred by any other
corporation that was a member of a consolidated group of corporations (within
the meaning of Treasury regulation section 1.1502) that included the Company.
(k) The Company has delivered or made available to MSSC California and
Marketing Specialists correct and complete copies of all Tax Returns filed by
the Company for 1993, 1994 and 1995, all examination reports, and any statements
of deficiencies assessed against or agreed to by the Company.
SECTION 3.27. Product Liability. There is no state of facts or the
occurrence of any event forming the basis of any present claim against the
Company for personal injury or property damage alleged to be caused by products
shipped or services rendered by the Company in connection with the Company
Business, which is not fully covered by insurance, except for deductibles (the
amount of which deductibles is set forth on Section 3.27 of the Disclosure
Schedule), and except for claims that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or the consummation of
the transactions contemplated hereby.
SECTION 3.28. Title to Assets. The Company has good and valid title to
the Company Assets, including without limitation those assets set forth on the
1996 Balance Sheet. At the Closing the Company Assets will be free and clear of
all mortgages, liens, claims, charges, pledges, security interests or
encumbrances of any nature whatsoever.
SECTION 3.29. Accuracy of Disclosure. There is no information contained
in this Agreement (whether in this Article III, any other portion of this
Agreement pertaining to the Company, the Disclosure Schedule, the Appendices,
the Exhibits or any other documents or certificates delivered pursuant to this
Agreement) that contains an untrue statement of material fact or omits to state
any material fact required to be stated in order to make the statements made
herein and therein not misleading.
SECTION 3.30. Redemptions of Capital Stock by Bromar. All redemptions
of its capital stock by Bromar in the past ten years have been effected in
accordance with all applicable federal and state securities (and other) Laws and
agreements between the Company and its shareholders. There exists no continuing
claim by any former or current shareholder, for money or otherwise, against the
Company regarding any such redemptions, and no basis for any such claim exists.
31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
MSSC CALIFORNIA AND MARKETING SPECIALISTS
MSSC California and Marketing Specialists hereby jointly represent and
warrant to Bromar as follows, except as otherwise set forth in the relevant
section of the Disclosure Schedule:
SECTION 4.01. Organization and Qualification - MSSC California. MSSC
California is (a) a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and (b) duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction in
which the character of the properties and assets now owned or leased by it or
the nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect on MSSC California or the consummation
of the transactions contemplated hereby. Each jurisdiction in which MSSC
California is qualified to do business is listed on Section 4.01 of the
Disclosure Schedule.
SECTION 4.02. Organization and Qualification - Marketing Specialists.
Marketing Specialists is (a) a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and (b) duly qualified to
do business as a foreign corporation and in good standing in each jurisdiction
in which the character of the properties and assets now owned or leased by it or
the nature of the business transacted by it requires it to be so qualified,
except where the failure to be so qualified, individually or in the aggregate,
would not have a Material Adverse Effect on Marketing Specialists or the
consummation of the transactions contemplated hereby. Each jurisdiction in which
Marketing Specialists is qualified to do business is listed on Section 4.02 of
the Disclosure Schedule.
SECTION 4.03. Power and Capacity; Charter Documents of MSSC California.
(a) MSSC California has all requisite power and authority (corporate
and otherwise) to enter into, execute and deliver this Agreement and perform its
obligations hereunder. MSSC California has the corporate power and authority to
carry on its business as now being conducted and to own and lease its
properties. This Agreement has been duly executed and delivered by MSSC
California and is a valid and binding obligation of MSSC California, enforceable
in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by MSSC California will not
result in a violation or breach of or constitute a default under any term or
provision of the Certificate of Incorporation or Bylaws of MSSC California. MSSC
California has delivered to Bromar true and complete copies of the Certificate
of Incorporation and the Bylaws of MSSC California, as in effect on the date
hereof.
SECTION 4.04. Power and Capacity; Charter Documents of Marketing
Specialists.
(a) Marketing Specialists has all requisite power and authority
(corporate and otherwise) to enter into, execute and deliver this Agreement and
perform its obligations hereunder. Marketing
32
Specialists has the corporate power and authority to carry on its business as
now being conducted and to own and lease its properties. This Agreement has been
duly executed and delivered by Marketing Specialists and is a valid and binding
obligation of Marketing Specialists, enforceable in accordance with its terms.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Marketing Specialists
will not result in a violation or breach of or constitute a default under any
term or provision of the Articles of Incorporation or Bylaws of Marketing
Specialists. Marketing Specialists has delivered to Bromar true and complete
copies of the Articles of Incorporation and the Bylaws of Marketing Specialists,
as in effect on the date hereof.
SECTION 4.05. No Conflicts. The execution, delivery and performance of
this Agreement by MSSC California and Marketing Specialists and the consummation
of the transactions contemplated hereby will not:
(a) result in the creation or imposition of any security interest,
lien, charge or other encumbrance against MSSC California's assets or Marketing
Specialists' assets, with or without the giving of notice and/or the passage of
time, or
(b) violate, conflict with, affect acceleration of, or result in
termination, cancellation or modification of, or constitute a default under (i)
any contract, agreement or other instrument to which MSSC California or
Marketing Specialists is a party or by which MSSC California or Marketing
Specialists or their respective assets is bound or (ii) any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which MSSC California or Marketing Specialists is a party or by which MSSC
California or Marketing Specialists may be bound or affected or to which any of
their respective assets may be subject, or
(c) violate any statute or Law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or any local, state or federal
governmental or regulatory authority, which violation, conflict, acceleration,
requirement, termination, modification or default described in (a), (b), or (c)
above could result in a Material Adverse Effect on MSSC California or Marketing
Specialists or the transactions contemplated by this Agreement.
SECTION 4.06. Consents and Approvals. Neither MSSC California nor
Marketing Specialists is required to obtain, transfer or cause to be transferred
any consent, approval, license, permit or authorization of, or make any
declaration, filing or registration with, any third party or any public body or
authority in connection with (a) the execution and delivery by MSSC California
and Marketing Specialists of this Agreement, (b) the consummation of the Merger
and the other transactions contemplated hereby or (c) the future conduct by the
Surviving Corporation of the Company Business, other than those that may be
required under the HSR Act or that may be required solely by reason of Bromar's
(as opposed to any other third party's) participation in the transactions
contemplated hereby.
33
SECTION 4.07. Accredited Investor. Marketing Specialists is an
"ACCREDITED INVESTOR" as such term is defined in Rule 501(a) promulgated under
the Securities Act of 1933 as amended (the "SECURITIES ACT"). Marketing
Specialists represents and warrants that it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Common Stock. Marketing Specialists has had the
opportunity, through representatives, to obtain from Bromar all information, to
the extent possessed by Bromar or obtainable by Bromar, necessary to evaluate
the merits and risks of an investment in the Common Stock and has concluded,
based on such information and other information previously known to it, to
invest in the Common Stock pursuant to the terms of this Agreement.
SECTION 4.08. Absence of Market. Marketing Specialists acknowledges
that the Common Stock lacks liquidity as compared with other securities
investments since there is not, and there is not expected to be, any market for
the Common Stock, and that the sale or transfer of the Common Stock must comply
with the provisions of applicable federal and state securities Laws. Marketing
Specialists acknowledges that it must bear the economic risk of its investment
in the Common Stock for an indefinite period of time since the Common Stock has
not been registered under the Securities Act and therefore cannot be sold unless
the Common Stock is subsequently registered or an exemption from registration is
available.
SECTION 4.09. Investment Purposes. Marketing Specialists hereby
represents and warrants that it is acquiring the Common Stock for investment
purposes only, for its own account, and not as nominee or agent for any other
Person, and not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act. Marketing
Specialists has no agreement or other arrangement with any Person to sell,
transfer or pledge any part of the Common Stock and has no plans to enter into
any such agreement or arrangement.
ARTICLE V
OTHER OBLIGATIONS OF THE PARTIES
SECTION 5.01. Conduct of Company Business. From the date hereof to the
Closing, except as otherwise expressly set forth in this Agreement or in Section
5.01 of the Disclosure Schedule, the Company shall conduct the business,
operations, activities and practices of the Company only in the ordinary course,
in accordance with prudent practice and consistent with past practice. Without
limiting the generality of the foregoing, from the date hereof to the Closing,
without the prior written consent of MSSC California or Marketing Specialists,
Bromar shall not (and shall cause the Subsidiaries to not):
(a) incur any liabilities or obligations of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), except for liabilities or obligations for (i) purchases of raw material
for use in the ordinary course of the Parowax Business, (ii) rent under the
Leases, (iii) periodic drawdowns under the $3.5 million revolving credit line of
the Company with Xxxxx Fargo (as in place on the date hereof), (iv) periodic
drawdowns under the $5.0 million revolving line of credit with Xxxxx Fargo (as
in place on the date hereof) if, prior to each such drawdown, the Company
provides written notice to Marketing Specialists and MSSC California
34
identifying the date such drawdown is to be made, the amount thereof and the
specific purpose or purposes therefor and (v) other items incurred in the
ordinary course of business and consistent with past practice, none of which
other items shall exceed $25,000 (considering liabilities or obligations arising
from one transaction or a series of similar transactions, and all periodic
installments or payments under any lease (other than the Leases) or other
agreement providing for periodic installments or payments, as a single
obligation or liability);
(b) increase (other than an increase resulting from the calculation of
reserves in the ordinary course of business and in a manner consistent with past
practice) or change any assumptions underlying, or methods of calculating, any
bad debt, contingency or other reserves;
(c) pay, discharge or satisfy any claim, encumbrance, liability or
obligation (whether absolute, accrued, contingent or otherwise and whether due
or to become due), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities and
obligations which are reflected or reserved against in the 1996 Balance Sheet or
which have been incurred since the date thereof in the ordinary course of
business and consistent with past practice, or prepay any liability or
obligation having a fixed maturity of more than 90 days from the date such
liability or obligation was issued or incurred;
(d) permit, allow or suffer any of the Company Assets to be subjected
to any new or additional mortgage, pledge, lien, encumbrance, restriction or
charge of any kind (except for liens arising as a result of Taxes not yet owing)
except for items subject to capital equipment leases not exceeding $10,000 in
the aggregate;
(e) write down or write up the value of any Inventory (including
write-downs by reason of shrinkage or xxxx-xxxxx), determine as collectible any
notes or accounts receivable or any portion thereof which was previously
considered uncollectible or write off as uncollectible (except for the automatic
creation of a bad debt reserve for amounts due for more than 120 days) any notes
or accounts receivable or any portion thereof other than in the ordinary course
of business, but in no event to exceed $5,000 in the aggregate,
(f) cancel any amount of indebtedness in excess of $10,000 or waive any
claims or rights of value in excess of $10,000;
(g) sell, transfer or otherwise dispose of any of the Company Assets
with an aggregate value of more than $40,000, other than Inventory sold in the
ordinary course of business;
(h) dispose of or permit to lapse any right to use any patent,
trademark, assumed name, service xxxx, trade name, copyright, license or
application therefor or dispose of or disclose to any Person other than
representatives of MSSC California or Marketing Specialists any trade secret,
formula, process or know-how not theretofore a matter of public knowledge (other
than disclosures in the ordinary course of business and consistent with past
practice that would not materially diminish the value of such trade secrets,
formulae, processes or know-how to the Company);
(i) grant any increase in the compensation (including, without
limitation, any increase or change pursuant to any bonus, pension,
profit-sharing, retirement or other plan or commitment)
35
payable to or to become payable to the Senior Employees, grant any general
increase in the compensation payable to or to become payable to employees of the
Company or, except in the ordinary course of business and consistent with past
practice, grant any increase in the compensation payable or to become payable to
individual employees;
(j) loan or advance any amount (except for advances in the ordinary
course of business and consistent with past practice that do not in the
aggregate exceed $20,000 and are not made as advances for personal loans) to, or
sell, transfer or lease any of the Company Assets to, or enter into any
agreement or arrangements with, any of the officers, directors, shareholders or
employees of any Company or any of their respective affiliates (which
affiliation is known to the Company);
(k) enter into any collective bargaining or labor agreement;
(l) make any single capital expenditure or commitment in excess of
$20,000 for additions to property, plant, equipment or intangible capital assets
or for any other purpose or make aggregate capital expenditures or commitments
in excess of $40,000 for additions to property, plant, equipment or for any
other purpose;
(m) make any change in any method of accounting or accounting practice
or policy;
(n) enter into any agreement or contract or commitment of the type
required to be disclosed pursuant to Section 3.10 hereof or outside the ordinary
course of business except as provided in Section 5.01(n) of the Disclosure
Schedule;
(o) terminate or amend in any material respect any material contract,
lease, license, or other agreement to which the Company is a party;
(p) permit any option to renew any Lease or any option to purchase any
property to expire or exercise any such option;
(q) issue any additional shares of capital stock of the Company or
options, warrants, rights (including, without limitation, stock appreciation
rights and phantom stock rights) or other securities exercisable for,
convertible into or exchangeable for shares of capital stock of the Company;
(r) omit to do any act, or permit any act or omission to act, which may
cause a breach of any contract, commitment or obligation of the Company, or any
breach of any representation, warranty, covenant or agreement made by the
Company herein;
(s) pay its suppliers and other vendors in a manner and time not
consistent with past practice;
(t) take any other action not in the ordinary course of business and
consistent with past practice and prudent business practice or provided for in
this Agreement; or
(u) agree, whether in writing or otherwise, to do any of the foregoing.
36
SECTION 5.02. Access to Books and Records. In order that MSSC
California and Marketing Specialists may have full opportunity to make
investigations of the Company in connection with the actions contemplated by
this Agreement, Bromar shall permit MSSC California and Marketing Specialists
and their counsel, accountants, auditors, lenders, environmental consultants and
other representatives reasonable access, upon reasonable notice during normal
business hours, to all of the plants, offices, properties, contracts and
commitments of the Company from the date hereof through the Closing Date, and
all books and records (including all computerized records and other computerized
storage media and the software used in connection therewith) of Bromar and any
subsidiary thereof, including without limitation the corporate minute books,
capital stock books and tax returns of Bromar and any subsidiary thereof, all
books and records relating to employees of Bromar and any subsidiary thereof,
all books and records relating to the purchase of materials, supplies and
services for the Parowax Business and the dealings with distributors of the
Parowax Business and all post office lock box numbers.
SECTION 5.03. Consents. Bromar agrees to use its reasonable efforts to
obtain prior to the Closing all consents necessary, in the reasonable
determination of MSSC California and Marketing Specialists, to consummate the
transactions contemplated hereby, including without limitation each of the
consents, approvals, licenses, permits and authorizations (and the declarations,
filings and registrations) listed or referred to in Section 3.06 of the
Disclosure Schedule. All such consents shall be in writing and in form and
substance reasonably satisfactory to MSSC California and Marketing Specialists,
and executed counterparts thereof shall be delivered to MSSC California and
Marketing Specialists promptly after receipt thereof by Bromar but in no event
later than the Closing.
SECTION 5.04. Other Transactions. Prior to the Closing, Bromar shall
not, and shall not permit any of its (and the Subsidiaries') officers,
directors, employees or other representatives to, directly or indirectly,
encourage, solicit, initiate or participate in negotiations with, or provide any
information or assistance to, any Person (other than MSSC California and
Marketing Specialists and their representatives) concerning any merger, sale of
securities, sale of the Company Assets or similar transaction involving the
Company or any of the Company Assets (other than between the parties hereto
regarding the transactions contemplated herein).
SECTION 5.05. Supplemental Disclosure. Article III of the Disclosure
Schedule shall be considered to be part of the representations and warranties of
Bromar. Until the Closing, Bromar shall have the continuing obligation to
promptly supplement or amend the Disclosure Schedule with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule ("SUPPLEMENTAL DISCLOSURES"); provided, however, that MSSC
California and Marketing Specialists shall be entitled to treat any such
supplementation or amendment as a breach of the appropriate representation or
warranty, whether or not the event or condition giving rise to such
supplementation or amendment occurred on or prior to the date hereof except to
the extent that such supplementation or amendment is a result of any of the
activities permitted by Section 5.01 (whether by the language thereof or as a
result of the consent of Marketing Specialists or MSSC California), which
supplementation or amendment shall not be deemed a breach by Bromar of any
obligation hereunder or be deemed the non-fulfillment of a condition hereunder.
Bromar acknowledges that the Disclosure Schedule is an important and integral
part of this Agreement and that MSSC California and Marketing
37
Specialists have relied upon the information contained therein in entering into
this Agreement and in establishing the Exchange Fund.
SECTION 5.06. Governmental Filings. As soon as practicable, the
Company, MSSC California and Marketing Specialists shall make any and all
filings and submissions to any governmental agency that are required to be made
in connection with the transactions contemplated hereby (including, without
limitation, filings under the HSR Act). The Company shall furnish to MSSC
California and Marketing Specialists, and MSSC California and Marketing
Specialists shall furnish to the Company, such information and assistance as the
other party or parties may reasonably request in connection with the preparation
of any such filings or submissions.
SECTION 5.07. Covenant to Satisfy Conditions. The Company, MSSC
California and Marketing Specialists shall each use their reasonable efforts to
insure that the conditions set forth in Article VI hereof are satisfied, insofar
as such matters are within their respective control.
SECTION 5.08. Confidentiality. Each party hereto shall hold, and cause
its respective officers, directors, employees, consultants and advisors
(collectively, "PARTY REPRESENTATIVES") to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of Law, all documents and information concerning the other parties
furnished to it by any other party or its party representatives in connection
with the transactions contemplated by this Agreement (except to the extent that
such information can be shown to have been (i) previously known by the party to
which it was furnished, (ii) in the public domain through no fault of such party
or (iii) later lawfully acquired from other sources by the party to which it was
furnished), and neither party shall release or disclose to any other Person (or
otherwise use) such information except in connection with the transactions
contemplated hereby. No party shall release any information regarding this
Agreement or the transactions contemplated hereby without the prior written
consent of each other party hereto.
SECTION 5.09. Employees. From the date hereof Bromar shall use its
reasonable efforts to retain as employees of the Company through the Closing
Date the active employment of the Company's current employees. Bromar agrees in
this regard to cooperate with MSSC California and Marketing Specialists by
permitting MSSC California and Marketing Specialists throughout the period prior
to the Closing Date to meet with the employees of the Company at such times as
shall be approved by a representative of Bromar (which approval shall not be
unreasonably withheld).
SECTION 5.10. Damage or Destruction. If an amount in excess of $45,000
of the Company Assets shall be damaged or destroyed prior to the Closing, or if
any of the offices of the Company shall be damaged so as to be unusable for more
than one week or destroyed prior to Closing, then in either case Bromar shall
immediately notify MSSC California and Marketing Specialists and furnish to MSSC
California and Marketing Specialists a written statement of the amount of
insurance, if any, payable on account thereof. In the event of such damage or
destruction, MSSC California or Marketing Specialists may elect to require that
Bromar restore or replace the Company Assets or the affected offices of the
Company to their condition on the date of this Agreement. In the event that such
damage to any Company Asset or office of the Company (taking into account the
insurance amounts due to the Company as a result of such damage) would
reasonably be determined to result in a Material Adverse Effect to the Company
(for which the
38
threshold is $250,000 rather than the $20,000 threshold provided elsewhere in
this Agreement), then MSSC California or Marketing Specialists may terminate,
without liability to Bromar, MSSC California or Marketing Specialists, the
transactions contemplated hereby.
SECTION 5.11. Employment Agreements. On the date hereof, Bromar has
entered into Employment Agreements with each of Xxxxxxx X. Xxxx and Xxxxxxx
Xxxxxxxx (jointly, the "MANAGEMENT EMPLOYMENT AGREEMENTS").
SECTION 5.12. Management Support. On the date hereof, members of the
management of Bromar have agreed (subject to certain conditions) to support the
Merger and the other transactions contemplated hereby, pursuant to the terms of
a letter agreement attached hereto as Exhibit "D".
SECTION 5.13. Shareholder Meeting of Bromar. Bromar shall, at a meeting
of its shareholders duly called by its Board of Directors to be held as soon as
practicable following execution of this Agreement, submit this Agreement and the
consummation of the Merger to a vote of its shareholders in accordance with the
California Law.
SECTION 5.14. Information Delivered to Shareholders. Bromar shall
submit all shareholder notices, proxy solicitation material, written consents
and other information to MSSC California and Marketing Specialists for its
written approval (which approval shall not be unreasonably withheld) at least
four days prior to delivering such materials to Bromar's shareholders. All such
materials shall comply with the California Law and all applicable state and
federal securities Laws. MSSC California and Marketing Specialists shall be
provided with the opportunity to have one or more representatives attend
shareholder meetings, if any, of Bromar.
SECTION 5.15. Resignation of Officers and Directors. On or prior to the
Closing, Bromar shall deliver, or cause to be delivered, to MSSC California and
Marketing Specialists the resignation of each officer and director of Bromar and
the Subsidiaries, effective at the Effective Time.
SECTION 5.16. Use of Name. Marketing Specialists shall continue to use
the name "Bromar" as part of the corporate name of the Surviving Corporation in
connection with the operation of the Company Business for at least two years
following the Effective Time.
SECTION 5.17. Payment of Certain Transactional Fees by Marketing
Specialists. Bromar acknowledges receipt of the amount of $100,000 from
Marketing Specialists pursuant to the terms of the letter from Bromar to
Marketing Specialists dated August 27, 1996. Bromar and Marketing Specialists
agree that such amount shall be treated as a loan from Marketing Specialists to
the Surviving Corporation in the event that the Merger is consummated. In the
event that the Merger is not consummated, the terms of such letter shall control
the disposition of such amount.
SECTION 5.18. Provision of Monthly Financial Statements; Accounts
Receivable. Until the Closing, within ten business days of the end of each
calendar month, Bromar shall deliver to MSSC California and Marketing
Specialists a true and complete copy of unaudited consolidated financial
statements of the Company for the period beginning January 1, 1996 and ending on
the last day of such calendar month, which have been prepared by the Chief
Financial Officer of Bromar (the
39
"UPDATED 1996 FINANCIAL STATEMENTS"). Each of the Updated 1996 Financial
Statements shall include an unaudited balance sheet of the Company as of the end
of such calendar month and shall be accompanied by a certificate of the Chief
Financial Officer that states that: "The Updated 1996 Financial Statements are
accurate and correct in all material respects and fairly present the financial
position and results of operations of the Company for the period therein
identified in conformity with GAAP consistently applied (except that the 1996
Financial Statements do not include notes or normal year end adjustments)."
Bromar shall deliver to MSSC California and Marketing Specialists a true and
complete listing of the aging status of each of the accounts receivable of the
Company as of October 31, 1996, within one day of the completion of such listing
in accordance with the normal procedures of Bromar (in the event such listing is
completed at least one day prior to the Closing).
SECTION 5.19. Funding. On or prior to the Closing Date, Marketing
Specialists shall provide (or cause other Persons to provide) MSSC California
with all amounts necessary to fund the Exchange Fund. Marketing Specialists has
informed Bromar of the identity of the Person from whom Marketing Specialists is
obtaining funding for the Exchange Fund. Marketing Specialists shall inform
Bromar in a reasonably prompt manner if there is any change in the source of or
prospects for its funding for the Exchange Fund.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions Precedent to Obligations of MSSC California
and Marketing Specialists. The obligations of MSSC California and Marketing
Specialists under this Agreement are subject to the satisfaction or, unless
prohibited by Law, the waiver by MSSC California and Marketing Specialists, at
or before the Closing, of each of the following conditions:
(a) Representations and Warranties. Except with regard to breaches and
inaccuracies in the representations and warranties of Bromar contained herein
(collectively, "PRE-CLOSING BREACHES") for which the aggregate adverse effect
thereof on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the Company or the transactions contemplated hereby has not been,
is not and/or is not reasonably expected over time to be equal to or in excess
of $500,000, the representations and warranties of Bromar contained herein shall
be true, complete and accurate as of the date when made and at and as of the
Closing Date as though such representations, warranties and statements were made
at and as of such date. Pre-Closing Breaches shall be automatically waived at
the Closing.
(b) Performance. Bromar shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be so performed or complied with by it at or prior to the
Closing.
(c) No Transaction Litigation Injunction. On the Closing Date, there
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction restraining or
prohibiting the consummation of the transactions contemplated
40
hereby arising out of any litigation brought by a former or current shareholder,
director, officer or employee of the Company or by any trustee of the any of the
Plans (such litigation collectively, "TRANSACTION LITIGATION").
(d) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting the
consummation of the transactions contemplated hereby arising as a result of any
event or litigation other than Transaction Litigation.
(e) No Transaction Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that (i) restrains or prohibits the consummation of the
transactions contemplated hereby, (ii) would adversely effect Marketing
Specialists' ability to exercise control over the Surviving Corporation after
the Closing, or (iii) would have a Material Adverse Effect on the business,
operations, condition (financial or otherwise), liabilities, Company Assets or
earnings of the Surviving Corporation, which in the case of any of (i), (ii) or
(iii), arises out of or is related to Transaction Litigation.
(f) No Other Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that (i) restrains or prohibits the consummation of the
transactions contemplated hereby, (ii) would adversely effect Marketing
Specialists' ability to exercise control over the Surviving Corporation after
the Closing, or (iii) except as otherwise set forth in Section 3.19 of the
Disclosure Schedule, would have a Material Adverse Effect on the business,
operations, condition (financial or otherwise), liabilities, Company Assets or
earnings of the Surviving Corporation, which in the case of any of (i), (ii), or
(iii), arises out of or is related to any event or litigation other than
Transaction Litigation.
(g) Officers' Certificate. Bromar shall have delivered to MSSC
California and Marketing Specialists a certificate, dated the Closing Date,
executed by its Chief Executive Officer and Chief Financial Officer in their
corporate capacity certifying the fulfillment of the conditions specified in
Section 6.01(a) and (b) hereof.
(h) Secretary's Certificate. Bromar shall have delivered to MSSC
California and Marketing Specialists a certificate, dated the Closing Date,
executed by its Secretary or Assistant Secretary and certifying as to Bromar's
articles of incorporation, bylaws, enabling resolutions, incumbency of officers
and other reasonably related matters (including, without limitation, the
articles of incorporation and bylaws of any Subsidiary).
(i) Opinion of Bromar's Counsel. MSSC California and Marketing
Specialists shall have received an opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP,
counsel to the Company, in the form attached hereto as Exhibit "E".
41
(j) Documents. All documents to be delivered by the Company to MSSC
California and Marketing Specialists at the Closing shall be duly executed and
in form and substance reasonably satisfactory to MSSC California and Marketing
Specialists.
(k) Consents and Approvals. All material licenses, permits, consents,
approvals and authorizations of all third parties and governmental bodies and
agencies (other than approvals from Bromar's Board of Directors and
shareholders, which are provided for elsewhere in this Agreement) shall have
been obtained which are necessary, in the reasonable determination of counsel to
MSSC California and Marketing Specialists, in connection with (a) the execution
and delivery by each of the parties, as appropriate, of this Agreement, (b) the
consummation by each of the parties of the transactions contemplated hereby or
thereby or (c) the conduct by the Surviving Corporation of the Company Business
substantially as conducted on the date hereof.
(l) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
(m) No Material Adverse Change. Except as specifically disclosed herein
or in the Disclosure Schedule, the events occurring since December 31, 1995, and
the conditions arising since such date shall not, in the aggregate, have
resulted in, or with the passage of time or otherwise, reasonably be expected to
result in, an adverse change (direct or indirect) of $500,000 or more on the
business, operations, properties (including tangible and intangible properties),
condition (financial or otherwise), assets, prospects, obligations or
liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the Company.
(n) Non-Foreign Status. At or prior to Closing, the Company shall have
delivered to MSSC California and Marketing Specialists a statement certifying
that it is not a foreign person, which statement shall comply with the
requirements of Treasury regulation Section 1.1445-2(b).
(o) O&D Releases. MSSC California and Marketing Specialists shall have
received all of the O&D Releases, each duly executed by the appropriate officer
or director.
(p) Shareholder Approval. The shareholders of Bromar shall have duly
approved the Merger and the other transactions contemplated hereby.
(q) Other. MSSC California and Marketing Specialists shall have
received such other documents or certificates as MSSC California and Marketing
Specialists may reasonably have requested, including, without limitation,
certificates of good standing with respect to each of Bromar and the
Subsidiaries from the appropriate authority in its jurisdiction of incorporation
and certificates of good standing with respect to each of Bromar and the
Subsidiaries from the appropriate authority in each jurisdiction in which it is
qualified to do business.
SECTION 6.02. Conditions Precedent to Obligations of Bromar. The
obligations of the Company under this Agreement are subject to the satisfaction
or, unless prohibited by Law, the waiver by the Company at or before the
Closing, of each of the following conditions:
42
(a) Representations and Warranties. The representations and warranties
of MSSC California and Marketing Specialists contained herein shall be true,
complete and accurate as of the date when made and at and as of the Closing Date
as though such representations and warranties were made at and as of such date.
(b) Performance. MSSC California and Marketing Specialists shall have
performed and complied with all agreements, obligations and conditions required
by this Agreement to be so performed or complied with by them at or prior to the
Closing.
(c) No Injunction. On the Closing Date, there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated hereby.
(d) No Proceeding or Litigation. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree that restrains or prohibits the consummation of the
transactions contemplated hereby.
(e) Officers' Certificates. Each of MSSC California and Marketing
Specialists shall have delivered to Bromar a certificate, dated the Closing Date
and executed by its Chief Executive Officer and Chief Financial Officer
certifying the fulfillment of the conditions specified in Sections 6.02(a) and
(b) hereof.
(f) Secretary's Certificates. MSSC California and Marketing Specialists
shall have delivered to Bromar a certificate, dated the Closing Date, executed
by its Secretary or any Assistant Secretary and certifying as to its
organizational documents, enabling resolutions, incumbency of officers and other
related matters.
(g) Opinion of MSSC California's and Marketing Specialists' Counsel.
Bromar shall have received an opinion, dated the Closing Date, from Xxxxxxx &
Xxxxx L.L.P., counsel to MSSC California and Marketing Specialists, in the form
attached hereto as Exhibit "F".
(h) Releases. The directors and officers of Bromar and the Subsidiaries
shall have received all of the O&D Releases, each duly executed on behalf of the
Surviving Corporation.
(i) Shareholder Approval. The shareholders of Bromar shall have duly
approved the Merger and the other transactions contemplated hereby.
(j) Documents. All documents to be delivered by each of MSSC California
and Marketing Specialists to Bromar at the Closing shall be duly executed and in
form and substance reasonably satisfactory to Bromar.
(k) HSR Waiting Period. Any applicable waiting period under the HSR Act
shall have expired, or a notice of early termination shall have been granted,
regarding the transactions contemplated hereby.
43
ARTICLE VII
TERMINATION OF AGREEMENT
SECTION 7.01. Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual agreement of Bromar, MSSC California and Marketing
Specialists;
(b) by MSSC California or Marketing Specialists pursuant to Section
5.10 hereof;
(c) by MSSC California or Marketing Specialists, on or after December
4, 1996, if any of the conditions provided in Section 6.01 hereof of this
Agreement have not been met or, to the extent permitted by applicable Law, have
not been waived in writing by MSSC California or Marketing Specialists prior to
such date; or
(d) by Bromar, on or after December 4, 1996, if any of the conditions
provided in Section 6.02 hereof have not been met or, to the extent permitted by
applicable Law, have not been waived in writing by Bromar prior to such date.
SECTION 7.02. Procedure Upon Termination. In the event of termination
by Bromar, MSSC California or Marketing Specialists pursuant to Section 7.01
hereof, written notice thereof shall promptly be given to the other parties and
the transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this Agreement
are terminated as provided herein:
(a) each of Bromar, MSSC California and Marketing Specialists shall
return all documents, work papers and other material of any other party relating
to the transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and
(b) all confidential information received by Bromar, MSSC California or
Marketing Specialists with respect to the business of any other party or its
subsidiaries or affiliates shall be treated in accordance with Section 5.08
hereof, and Section 5.08 hereof shall remain in full force and effect
notwithstanding the termination of this Agreement.
SECTION 7.03. Effect of Termination of Agreement in Certain Instances.
In the event this Agreement is terminated by MSSC California or Marketing
Specialists in accordance with the provisions of Section 7.01(c), and such
termination occurs solely because of one of the conditions set forth in Sections
6.01(d), (f), (k) or (l) were not met as a result of conduct by Persons other
than the parties hereto, then the Deposit shall be returned to MSSC California
and MSSC California shall reimburse Bromar for all of its direct out-of-pocket
legal, accounting and financial advisor costs relating to this Agreement (as
reasonably incurred and documented) (such payable costs, collectively, the
"RECOVERABLE COSTS"); provided, however, that Bromar shall only be entitled to
payment by MSSC California or Marketing Specialists of the Recoverable Costs
following termination of this
44
Agreement due to failure of the condition set forth in Section 6.01(l) if Bromar
was unwilling on December 4, 1996 to extend the deadline for fulfillment of the
condition set forth in Section 6.02(k) until February 4, 1997.
SECTION 7.04. Limitation on Damages. The parties agree that the damages
that might be realized by Bromar or its shareholders in the event that the
Closing hereunder does not occur due to the breach of this Agreement by MSSC
California and/or Marketing Specialists would be difficult to determine in
advance. The parties, nonetheless, desire to make a reasonable estimate herein.
Accordingly, in the event of certain breaches, Bromar and its shareholders shall
be entitled to retain the Deposit pursuant to Section 1.10 hereof as liquidated
damages and not as a penalty; provided, that such retention of the Deposit by
Bromar shall be the sole and exclusive remedy of Bromar for any breach hereunder
by MSSC California or Marketing Specialists (except in the case of MSSC
California's or Marketing Specialists' bad faith or willful misconduct, for
which Bromar may seek other damages).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Survival of Representations. Solely for the purpose
referenced in Section 8.02 hereof, the representations, warranties and
agreements made by Bromar in Sections 3.04, 3.07, 3.08 (limited to known items
under this representation and warranty), 3.13, 3.18, 3.19, 3.22, 3.23, 3.25,
3.26, 5.01, and 5.14 (with respect to compliance with the California Law and
applicable state and federal securities laws, to the extent that such compliance
is dependent on information regarding the Company that is not disclosed in this
Agreement or the Disclosure Schedule) of this Agreement shall survive any
investigation made by or on behalf of MSSC California or Marketing Specialists
and shall survive the Closing hereunder. None of the other representations,
warranties or agreements of Bromar hereunder or any of the representations,
warranties or agreements of MSSC California or Marketing Specialists hereunder
shall survive the Closing.
SECTION 8.02. Limitation of Liability. No recourse shall be available
against Bromar, its officers, directors, shareholders, employees,
representatives and affiliates for any misrepresentations or breaches by Bromar
hereunder, except that recourse shall be available for claims regarding any
willful or bad faith misrepresentations or breaches of Bromar hereunder against
any Person who knowingly participated in such misrepresentation or breach.
SECTION 8.03. Commissions. No party hereto has employed any investment
banker, broker, finder or similar agent in connection with any transaction
contemplated by this Agreement.
SECTION 8.04. Definition of Knowledge. For the purpose of this
Agreement, the Exhibits and Appendices to this Agreement and the Disclosure
Schedule, the phrases "to the best knowledge" of any party and "known" and words
of like effect shall mean to the knowledge of such party and any officer,
director or manager of any such party, as such knowledge has been, or should
have been, obtained in the performance of their duties in the ordinary course of
business in a prudent and diligent manner, which knowledge shall also include
information existing in the records and files of such party.
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SECTION 8.05. Definition of Material Adverse Effect and Material
Adverse Change. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means,
with respect to any party, any change, occurrence or effect (direct or indirect)
on the business, operations, properties (including tangible and intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of such party and its subsidiaries taken as a whole that reasonably
could be expected to exceed $20,000. "Material" or "materially" or words of like
effect shall refer to items capable of producing a monetary effect of at least
$20,000 on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets, prospects, obligations
or liabilities (whether absolute, contingent or otherwise and whether due or to
become due) of the relevant party and its subsidiaries taken as a whole.
SECTION 8.06. Glossary. Set forth as Appendix III hereto is a glossary
of all defined terms used in this Agreement. The glossary is provided for the
convenience of the parties only. In the event any difference exists between any
definition set forth in the glossary and any definition set forth in this
Agreement, the definition set forth in this Agreement shall control.
SECTION 8.07. Expenses, Taxes, Etc. Except as otherwise provided
herein, in the event of the termination of this Agreement prior to Closing, each
of the parties hereto shall pay all fees and expenses incurred by it or any of
its affiliates in connection with the transactions contemplated by this
Agreement.
SECTION 8.08. Successors and Assigns. No party shall have the right to
assign all or any part of its interest in this Agreement without the prior
written consent of the other parties, and any attempted transfer without such
consent shall be null and void.
SECTION 8.09. No Third-Party Benefit. Nothing in this Agreement shall
be deemed to create any right or obligation in any Person not a party hereto and
this Agreement shall not be construed in any respect to be a contract or
agreement in whole or in part for the benefit of or binding upon any Person not
a party hereto.
SECTION 8.10. Entire Agreement; Amendment. This Agreement, the
Exhibits, the Appendices, the Escrow Agreement, the Disclosure Schedule, the
August 27, 1996 letter from Bromar to Marketing Specialists and the letter dated
the date hereof from Marketing Specialists and MSSC California to Bromar
constitute the entire agreement among the parties hereto with respect to the
transactions contemplated herein and supersede all prior oral and written
agreements, memoranda, understandings and undertakings between the parties
hereto relating to the subject matter hereof including, without limitation, the
letter of intent dated August 16, 1996 between Bromar and Marketing Specialists
and the term sheet attached thereto. This Agreement may not be modified,
amended, altered or supplemented except by a written instrument executed and
delivered by each of the parties hereto.
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SECTION 8.11. Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof and such illegality, invalidity or
unenforceability does not result in a material failure of consideration, then;
(a) in lieu of such illegal, invalid or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible
and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.
SECTION 8.12. Notices. All notices, claims, certificates, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed (registered or
certified mail, postage prepaid, return receipt requested) as follows:
If to MSSC California or Marketing Specialists:
Marketing Specialists Sales Company
0000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
4400 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: J. Xxxxxxx Xxxxxxxx, Esq.
If to Bromar:
Bromar, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
with a copy to:
Xxxxxxx Phleger & Xxxxxxxx L.L.P.
Xxxxx Xxxxxx Xxxxx
Xxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
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or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
SECTION 8.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 8.14. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
The remainder of this page is intentionally left blank.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto as of the date first above written.
BROMAR, INC.
By: /s/ XXXXXXX X. XXXX
-----------------------------------------
Name: Xxxxxxx X. Xxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
MARKETING SPECIALISTS SALES COMPANY
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
---------------------------------------
Title: Chairman & CEO
--------------------------------------
MSSC CALIFORNIA, INC.
By: /s/ XXXXXX X. XXXXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
---------------------------------------
Title: Chairman & CEO
--------------------------------------
SIGNATURE PAGE
