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Exhibit 1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 25,
1995, is by and among ADVANTAGE COMPANIES, INC., a Delaware corporation (the
"Company"), THORN AMERICAS, INC., a Delaware corporation ("Parent"), and THORN
ACQUISITION CORP., a Delaware corporation ("Acquisition).
WHEREAS, the Boards of Directors of Parent, Acquisition and
the Company each have approved the acquisition of the Company by Parent upon
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, upon the terms and subject to
the conditions of this Agreement, (i) Acquisition would be merged (the
"Merger") with and into the Company in accordance with the General Corporation
Law of the State of Delaware ("Delaware Law") and (ii) each share of common
stock, par value $0.01 per share (the "Common Stock"), of the Company (the
"Shares"), issued and outstanding immediately prior to the Effective Time (as
defined in Section 1.2 hereof) would, except as otherwise expressly provided
herein, be converted into the right to receive the Merger Consideration (as
defined in Section 1.7(a) hereof); and
WHEREAS, on July 9, 1995, Parent and certain stockholders of
the Company entered into an option agreement entitled the Advantage Agreement,
as amended on September 25, 1995 (the "Option Agreement"), pursuant to which
such stockholders agreed, among other things, to grant Parent an irrevocable
option to purchase from them all of (i) the Common Stock owned by such
stockholders in exchange for $17.50 per Share (without interest) in cash, and
(ii) the Company's Class A Cumulative Convertible Preferred Stock, par value
$100 per share (the "Preferred Stock"), owned by such stockholders in exchange
for $17.50 multiplied by fifty (50), or $875, for each share of Preferred Stock
(without interest) in cash.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the Company, Parent and Acquisition hereby agree as follows:
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ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time and upon the
terms and subject to the conditions of this Agreement and Delaware Law,
Acquisition shall be merged with and into the Company, whereupon the separate
corporate existence of Acquisition shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation").
Section 1.2 Effective Time; Closing. As soon as practicable
after the later of (a) January 2, 1996 and (b) the satisfaction or waiver of
the conditions set forth in Article VI, the parties hereto will file a
certificate of merger with the Secretary of State of the State of Delaware and
make all other filings or recordings required by Delaware Law in connection
with the Merger. The Merger shall become effective at such time as the
certificate of merger is duly filed with the Secretary of State of the State of
Delaware (the "Effective Time"). Prior to such filing, a closing (the
"Closing") shall be held at the offices of Parent, 0000 Xxxx Xxxx-X-Xxxxxx
Xxxxx, Xxxxxxx, Xxxxxx 00000, or such other place as the parties shall agree,
for the purpose of confirming the satisfaction or waiver of the conditions set
forth in Article VI. The date on which the Closing occurs is referred to
herein as the "Closing Date."
Section 1.3 Effects of the Merger; Subsequent Actions.
(a) The Merger shall have the effects set forth in
Delaware Law. Without limiting the generality of the foregoing, and subject
thereto and any other applicable laws, at the Effective Time all of the
properties, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities, restrictions, disabilities and duties of the Company and
Acquisition shall become the debts, liabilities, restrictions, disabilities and
duties of the Surviving Corporation.
(b) 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
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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 the
Company or Acquisition 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 the Company or
Acquisition, all such deeds, bills of sale, assignments, assumption agreements
and assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm of record or otherwise any
and all right, title and interest in, to and under such rights, properties or
assets of the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.4 Certificate of Incorporation and By-Laws.
(a) The certificate of incorporation of Acquisition
in effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
(b) The by-laws of Acquisition in effect at the
Effective Time shall be the by-laws of the Surviving Corporation until amended
in accordance with applicable law.
Section 1.5 Directors. The directors of Acquisition at the
Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation and until his or her successor is duly
elected and qualified.
Section 1.6 Officers. The officers of Acquisition at the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the certificate of incorporation and by-laws
of the Surviving Corporation and until his or her successor is duly appointed
and qualified.
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Section 1.7 Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Acquisition,
the Company or the holder of any of the following securities:
(a) Each Share issued and outstanding immediately
prior to the Effective Time (other than Shares to be cancelled pursuant to
Section 1.7(b) hereof and Dissenting Shares (as defined in Section 2.1
hereof)), shall by virtue of the Merger and without any action on the part of
the holder thereof be converted into the right to receive the Merger
Consideration. As used herein, "Merger Consideration" means (i) for
stockholders other than those party to the Option Agreement, $18.50 per Share
(without interest) in cash and (ii) for stockholders party to the Option
Agreement, $17.50 per Share (without interest) in cash.
(b) Each Share which is issued and outstanding
immediately prior to the Effective Time and owned by Parent or Acquisition or
any direct or indirect subsidiary of Parent or Acquisition, or which is held in
the treasury of the Company or any of its subsidiaries, shall be cancelled and
retired and no payment of any consideration shall be made with respect thereto.
(c) Each share of common stock, par value $0.01 per
share, of Acquisition issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
Section 1.8 Stock Options. Prior to the Effective Time, each
outstanding option ("Employee Option") issued, awarded or granted pursuant to
the Company's Restated 1988 Incentive Stock Option Plan, the Company's Restated
1993 Non-Qualified Stock Option Plan, the Restated and Extended Stock Option
Agreement with Xxxxxxx X. Xxxxx or the Company's 1995 Incentive Stock Option
Plan (the "Company Plans") to purchase Shares shall be cancelled by the
Company, and each holder of a cancelled Employee Option who is not a party to
the Option Agreement shall be entitled to receive from the Company in
consideration for the cancellation of such Employee Option an amount in cash
(less applicable withholding Taxes (as defined in Section 3.10 hereof)) equal
to the product of (i) the number of Shares previously subject to such Employee
Option
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and (ii) the excess, if any, of $18.50 over the exercise price per Share
previously subject to such Employee Option. The parties agree that the
aggregate cash consideration for cancellation of all outstanding options shall
not exceed the sum of $2,839,625, and that any such amounts paid in
cancellation of Employee Options may be subtracted, if necessary, from the
Total Equity Requirement set forth in Section 6.3(d) hereof. Holders of
Employee Options electing to receive the cash payment referred to in this
Section 1.8 shall not be entitled to receive Common Stock upon the exercise of
any Employee Option.
Section 1.9 Stockholders' Meeting. The Company, acting
through its Board of Directors (the "Board"), shall in accordance with
applicable law as soon as practicable following the date hereof:
(i) duly call, give notice of, convene and
hold an annual or special meeting of its stockholders (the
"Stockholders' Meeting") for the purpose of considering and taking
action upon this Agreement;
(ii) include in the Proxy Statement (as
defined in Section 3.7 hereof), subject to the Board's fiduciary
duties, the recommendation of the Board that stockholders of the
Company vote in favor of the approval and adoption of this Agreement
and the transactions contemplated hereby; and
(iii) use its reasonable best efforts (A) to
obtain and furnish the information required to be included by it in
the Proxy Statement and, after consultation with Parent and
Acquisition, respond promptly to any comments made by the Securities
and Exchange Commission (the "SEC") with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy
Statement to be mailed to its stockholders at the earliest practicable
time and (B) subject to the Board's fiduciary duties under applicable
law, to obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby.
At such meeting, each of Parent and Acquisition will vote (and will cause each
of its affiliates to vote) any Shares owned by it (or its affiliates) in favor
of adoption of this Agreement and the transactions contemplated hereby.
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ARTICLE II
DISSENTING SHARES; EXCHANGE OF SHARES
Section 2.1 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with Section 262 of Delaware Law ("Dissenting Shares") shall not be
converted into a right to receive the Merger Consideration unless such holder
fails to perfect or withdraws or otherwise loses his right to appraisal. If,
after the Effective Time, such holder fails to perfect or withdraws or loses
his right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into the right to receive the Merger
Consideration without interest thereon. The Company shall give Acquisition or
Parent prompt notice of any demands received by the Company for appraisal of
Shares, and, prior to the Effective Time, Acquisition shall have the right to
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company shall not, except with the prior
written consent of Acquisition, make any payment with respect to, or settle or
offer to settle, any such demands.
Section 2.2 Exchange of Certificates.
(a) From and after the Effective Time, a bank or
trust company to be designated by Parent (the "Paying Agent") shall act as
exchange agent in effecting the exchange for the Merger Consideration of
certificates (the "Certificates") that, prior to the Effective Time,
represented Shares. Upon the surrender of each such Certificate formerly
representing Shares, together with a properly completed letter of transmittal,
the Paying Agent promptly shall pay the holder of such Certificate the Merger
Consideration multiplied by the number of Shares formerly represented by such
Certificate, in exchange therefor, and such Certificate shall forthwith be
cancelled. Until so surrendered and exchanged, each such Certificate (other
than Certificates representing Dissenting Shares or Shares held by Parent,
Acquisition or the Company, or any direct or indirect subsidiary thereof) shall
represent solely the right to receive the Merger Consideration. No interest
shall be paid or accrue on the Merger Consideration.
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If the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the Certificate formerly
representing Shares surrendered in exchange therefor is registered, it shall be
a condition to such exchange that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such exchange shall pay to the Paying Agent any transfer or
other Taxes required by reason of the payment of the Merger Consideration to a
person other than the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Paying Agent that such Tax has been
paid or is not applicable.
(b) At Closing, Parent or Acquisition shall have
deposited, or caused to be deposited, in trust with the Paying Agent the Merger
Consideration to which holders of Shares shall be entitled at the Effective
Time pursuant to Section 1.7(a) hereof.
(c) The Merger Consideration shall be invested by
the Paying Agent, as directed by Parent, provided such investments shall be
limited to direct obligations of the United States of America, obligations for
which the full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest, commercial paper rated of
the highest quality by Xxxxx'x Investors Services, Inc. or Standard & Poor's
Corporation or certificates of deposit issued as to all principal and interest
by federal deposit insurance issued by a commercial bank having at least
$100,000,000 in assets.
(d) Promptly following the date which is six months
after the Effective Time, the Paying Agent shall deliver to Parent all cash and
documents in its possession relating to the transactions described in this
Agreement, and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate formerly representing a Share may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar laws) receive in exchange therefor the Merger
Consideration, without any interest thereon.
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(e) Promptly after the Effective Time, the Paying
Agent shall mail to each record holder of Certificates that immediately prior
to the Effective Time represented Shares a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Consideration in exchange therefor.
(f) After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any
Shares. If, after the Effective Time, Certificates formerly representing
Shares are presented to the Surviving Corporation or the Paying Agent, they
shall be cancelled and exchanged for the Merger Consideration, as provided in
this Article II, subject to applicable law in the case of Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Parent and Acquisition
as follows:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) Each of the Company and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted and as proposed to be conducted.
(b) Each of the Company and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
(including any foreign country) in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification or
licensing necessary.
(c) The Company has heretofore furnished to Parent
true, complete and correct copies of its certificate of incorporation (the
"Certificate of Incorporation") and its by-laws (the "By-Laws") and the
equivalent organizational documents of each of its subsidiaries, each as
amended to the
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date hereof. The Certificate of Incorporation, By-Laws and such equivalent
organizational documents are in full force and effect. The Company is not in
violation of any of the provisions of the Certificate of Incorporation or
By-Laws and no subsidiary of the Company is in violation of any of the
provisions of such subsidiary's equivalent organizational documents. All
minutes of the Company and each of its subsidiaries are contained in the minute
books of the Company and each of its subsidiaries, which have been made
available to Parent, and such minute books contain a complete and accurate
record of the substance of all actions taken at all meetings of the Board, the
board of directors of each of the Company's subsidiaries and of all committees
thereof.
(d) Schedule 3.1(d) sets forth a complete and
correct list of all subsidiaries of the Company, which list sets forth the
amount of capital stock of or other equity interests in such subsidiaries owned
by the Company, directly or indirectly. There are no irrevocable proxies with
respect to the shares of capital stock of such subsidiaries, and no equity
securities of any of the subsidiaries are or may become required to be issued
by reason of any options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of any capital stock of any
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any subsidiary is bound to issue additional shares of its
capital stock or securities convertible into or exchangeable for such shares.
All of the shares of capital stock of such subsidiaries so owned by the Company
are owned by it free and clear of any claim, lien, encumbrance or agreement
with respect thereto. No entity in which the Company owns, directly or
indirectly, less than a 50% equity interest is, individually or when taken
together with all other such entities, material to the business of the Company
and its subsidiaries, taken as a whole.
Section 3.2 Capitalization of the Company and its
Subsidiaries. The authorized capital stock of the Company consists of (i)
10,000,000 Shares of which, as of the date of this Agreement, 4,242,938 Shares
were issued and outstanding and 131,062 Shares were held as treasury shares of
the Company, (ii) 15,000 shares of Preferred Stock, of which, as of the date of
this Agreement, 14,000 shares were issued and outstanding, and (iii) 50,000
shares of Class B Preferred
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Stock, par value $100 per share, of which, as of the date of this Agreement, no
shares were issued and outstanding. All outstanding shares of capital stock of
the Company have been validly issued, duly authorized, fully paid,
nonassessable and free of preemptive rights. As of the date of this Agreement,
Employee Options to purchase an aggregate of 381,500 Shares were outstanding
and the weighted average exercise price of such Employee Options was $11.27 per
Share. The only Employee Options (or any other option or related stock
appreciation right) in existence are set forth above and no additional Employee
Options (or any other option or related stock appreciation right) have been
granted since June 1, 1995 (other than extensions of preexisting Employee
Options set forth on Schedule 3.2). As of the date of this Agreement, 700,000
Shares were issuable upon conversion of the Preferred Stock. Each share of
Preferred Stock is convertible into fifty (50) Shares. Except as set forth
above, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into
or exchangeable for shares of capital stock or voting securities of the
Company, (iii) no options, subscriptions, warrants, convertible securities,
calls or other rights to acquire from the Company, and no obligation of the
Company to issue, deliver or sell any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company and (iv) no equity equivalents, performance shares,
interests in the ownership or earnings of the Company or other similar rights
issued by the Company (collectively, "Company Securities"). Except as
contemplated by this Agreement, there are no outstanding obligations of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Company Securities, other than the Company's obligations hereunder to
redeem (subject to conversion by the holder thereof) the Preferred Stock. Each
of the outstanding shares of capital stock of each of the Company's
subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and is directly or indirectly owned by the Company, free and clear of all
security interests, liens, claims, pledges, charges, voting agreements or other
encumbrances of any nature whatsoever (collectively, "Liens"). There are no
existing options, calls or commitments of any character relating to the issued
or unissued capital stock or other equity securities of any subsidiary of the
Company.
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Section 3.3 Authority Relative to this Agreement; Fairness
Opinion. The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The Board, at a meeting duly
called and held prior to the date of this Agreement, (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
in the best interests of the stockholders of the Company (other than
stockholders who are party to the Option Agreement, Parent, Acquisition or
their affiliates), (ii) approved this Agreement and the transactions
contemplated hereby, including the Merger, (iii) subject to its fiduciary
duties, resolved to recommend that the stockholders of the Company approve and
adopt this Agreement and the Merger and (iv) resolved to redeem (subject to
conversion by the holder thereof), effective immediately prior to the Merger,
all of the outstanding Preferred Stock. Xxxxxx X. Xxxx & Company, the Company's
financial advisor, has delivered to the Board its written opinion to the effect
that, as of the date of such opinion, the consideration to be received by the
holders of Shares (other than stockholders who are party to the Option
Agreement, Parent, Acquisition or their affiliates, and other officers and
employees specifically excluded from the opinion) pursuant to the Merger is
fair to such holders from a financial point of view. As of the date hereof,
the Company has been authorized by Xxxxxx X. Xxxx & Company to permit the
inclusion of such fairness opinion in the Proxy Statement referred to in
Section 3.7 hereof. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board and no other corporate proceedings or action on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a
majority of the outstanding Shares and the filing of the appropriate merger
documents as required by Delaware Law). The Company elected not to be governed
by Section 203 of the Delaware Law pursuant to Article XI of the Certificate of
Incorporation, so as to render inapplicable to such transactions, including,
without limitation, the Merger and the purchase of Shares, if any, pursuant to
the Option Agreement, the restrictions on business combinations contained in
Section 203 of the Delaware Law. This Agreement has been duly and validly
executed and delivered by the Company and,
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assuming it constitutes a valid and binding agreement of the other parties
hereto, constitutes a legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms.
Section 3.4 Non-Contravention; Required Filings and Consents.
Except as set forth on Schedule 3.4:
(a) The execution, delivery and performance by the
Company of this Agreement and the consummation of the transactions contemplated
hereby (including the Merger) do not and will not (i) violate, breach,
contravene, terminate or conflict with the Certificate of Incorporation or
By-Laws or the equivalent organizational documents of any of the Company's
subsidiaries; (ii) assuming that all consents, authorizations and approvals
contemplated by subsection (b) below have been obtained and all filings
described therein have been made, contravene, violate or conflict with or
constitute a violation of any provision of any law, rule, regulation, judgment,
injunction, order, writ, award or decree binding upon or applicable to the
Company, any of its subsidiaries or any of their respective properties; (iii)
conflict with, or result in the breach or termination of any provision of or
constitute a default (with or without the giving of notice or the lapse of time
or both) under, or give rise to any right of termination, cancellation, or loss
of any benefit to which the Company or any of its subsidiaries is entitled
under any provision of any agreement, commitment, arrangement, trust, lease,
contract, license or other instrument binding upon the Company, any of its
subsidiaries or any of their respective properties, or allow the acceleration
of the performance of, any debt, liability or obligation of the Company or any
of its subsidiaries under any indenture, mortgage, deed of trust, license,
lease, contract, instrument or other agreement to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective assets or properties is subject or bound; or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any of its subsidiaries.
(b) The execution, delivery and performance by the
Company of this Agreement and the consummation of the transactions contemplated
hereby (including the Merger) by the Company require no action by or in respect
of, or filing with, any governmental body, agency, official or authority
(either
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domestic or foreign) other than (i) the filing of a certificate of merger in
accordance with Delaware Law; (ii) compliance with any applicable requirements
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (iii) compliance with any applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and state securities,
takeover and Blue Sky laws; and (iv) such actions or filings which, if not
taken or made, would not prevent the consummation by the Company of the
transactions contemplated by this Agreement.
Section 3.5 SEC Reports.
(a) The Company has filed all required forms,
reports and documents with the SEC since January 1, 1990. The Company has
provided to Parent, in the form filed with the SEC, the Company's (i) Annual
Reports on Form 10-K for each of the last five fiscal years, (ii) Quarterly
Reports on Form 10-Q for the quarters ended since January 1, 1990, (iii) all
proxy statements or information statements relating to meetings or actions by
consent of the Company's stockholders since January 1, 1990 and (iv) all other
reports or registration statements filed by the Company with the SEC since
January 1, 1990 (collectively, the "SEC Reports"). The SEC Reports, as amended
through the date of this Agreement, were prepared in accordance with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act. As of their respective dates, none of
the SEC Reports, including, without limitation, any financial statements or
schedules included therein (the "Financial Statements"), contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Except as set
forth on Schedule 3.5(a), the audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company included in
the SEC Reports fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis, the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended. The Company has heretofore provided complete and correct
copies of each of the SEC Reports to Parent.
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(b) Except as disclosed in the Financial Statements
or as set forth on Schedule 3.5(b), the Company and its subsidiaries have no
debts, financial obligations or liabilities of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities incurred in the
ordinary course of business since January 23, 1995.
Section 3.6 Absence of Certain Changes. Since January 23,
1995, except as set forth in Schedule 3.6, neither the Company nor any of its
subsidiaries has (i) declared, set aside or paid any dividend or other
distribution (whether in cash, stock, or property or any combination thereof)
in respect of its capital stock, (ii) entered into, adopted, terminated,
amended or increased the benefits paid or payable under any severance,
termination, deferred or other compensation agreement or arrangement with any
director, officer or employee, other than extensions of preexisting Employee
Options as set forth on Schedule 3.2, (iii) changed any of the accounting
principles, or methods of application of said principles, or practices used by
the Company, (iv) settled any litigation for amounts in excess of $5,000, (v)
granted any Employee Options (or other options or similar stock appreciation
rights), other than extensions of preexisting Employee Options as set forth on
Schedule 3.2, (vi) granted any bonuses other than as specifically permitted by
this Agreement, (vii) delayed or deferred payment of accounts payable or other
obligations of the Company or any of its subsidiaries or accelerated the
collection of receivables or other obligations due the Company or any of its
subsidiaries or (viii) entered into any transaction, or conducted its business
or operations, outside of the ordinary course of business. Since January 23,
1995, no event, fact, condition, change or effect has occurred that will or
could, individually or in the aggregate, have an adverse effect on the business
of the Company.
Section 3.7 Proxy Statement. The proxy or information
statement or similar materials distributed to the Company's stockholders in
connection with the Merger, including any amendments or supplements thereto
(the "Proxy Statement"), shall not, at the time filed with the SEC, at the time
mailed to the Company's stockholders, at the time of the Stockholders' Meeting
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
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circumstances under which they are made, not misleading. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information provided by Parent or Acquisition specifically for use in the Proxy
Statement. The Proxy Statement will comply with the requirements of Section
1.9 hereof and will comply as to form with the provisions of the Exchange Act
and the rules and regulations thereunder.
Section 3.8 Finder's Fee. No broker, finder, investment
banker or other intermediary is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of the Company.
Section 3.9 Absence of Litigation. Except as disclosed in
Schedule 3.9, as of the date hereof, there is no action, suit, claim,
investigation or proceeding pending or threatened, nor is there any valid basis
for any claim, against the Company or any of its subsidiaries or any of their
respective properties before any court or arbitrator or any administrative,
regulatory or governmental body, or any agency or official. Except as
disclosed on Schedule 3.9, as of the date hereof, there is no action, suit,
claim, investigation or proceeding pending or threatened, nor is there any
valid basis for any claim, against the Company or any of its subsidiaries or
any of their respective properties before any court or arbitrator or any
administrative, regulatory or governmental body, or any agency or official
which (i) challenges or seeks to prevent, enjoin, alter or delay the Merger or
any of the other transactions contemplated hereby or (ii) alleges criminal
action or inaction. Except as disclosed on Schedule 3.9, as of the date
hereof, neither the Company nor any of its subsidiaries nor any of their
respective properties is subject to any order, writ, judgment, injunction,
decree, determination or award which would prevent or delay the consummation of
the transactions contemplated hereby.
Section 3.10 Taxes. Except as set forth in Schedule 3.10,
(a) the Company and its subsidiaries have filed, been included in or sent, all
returns, declarations and reports and information returns and statements
required to be filed or sent by or relating to any of them relating to any
Taxes (as defined below) with respect to any income, properties or
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16
operations of the Company or any of its subsidiaries (collectively, "Returns");
(b) as of the time of filing, the Returns correctly reflected in all respects
the facts regarding the income, business, assets, operations, activities and
status of the Company and its subsidiaries and any other information required
to be shown therein; (c) the Company and its subsidiaries have timely paid all
Taxes that are due and payable, whether or not such Taxes were shown on any
Return; (d) the Company and its subsidiaries have made or will make provision
for all Taxes payable for any periods that end before the Effective Time for
which no Returns have yet been filed and for any periods that begin before the
Effective Time and end after the Effective Time to the extent such Taxes are
attributable to the portion of any such period ending at the Effective Time;
(e) the charges, accruals and reserves for taxes reflected on the books of the
Company and its subsidiaries are adequate to cover the Tax liabilities accruing
or payable by the Company and its subsidiaries in respect of periods prior to
the date hereof; (f) neither the Company nor any of its subsidiaries is
delinquent in the payment of any Taxes or has requested any extension of time
within which to file or send any Return, which Return has not since been filed
or sent; (g) no deficiency for any Taxes has been proposed, asserted or
assessed against the Company or any of its subsidiaries (or any member of any
affiliated or combined group of which the Company or any of its subsidiaries is
or has been a member for which either the Company or any of its subsidiaries
could be liable); (h) neither the Company nor any of its subsidiaries has
granted any extension of the limitation period applicable to any Tax claims;
(i) neither the Company nor any of its subsidiaries is subject to liability for
Taxes of any person (other than the Company or its subsidiaries), including,
without limitation, liability arising from the application of U.S. Treasury
Regulation Section 1.1502-6 or any analogous provision of state, local or
foreign law; (j) neither the Company nor any of its subsidiaries is or has been
a party to any tax sharing agreement with any corporation which is not
currently a member of the affiliated group of which the Company is currently a
member; (k) no claim has ever been made by an authority in a jurisdiction where
any of the Company and its subsidiaries does not file Returns that it is or may
be subject to taxation by that jurisdiction; (l) each of the Company and its
subsidiaries has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor,
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17
stockholder, or other third party; (m) none of the Company and its subsidiaries
has made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Sec. 162 (as unreasonable
compensation), Code Sec. 162(m) or Code Sec. 280G; and (n) Schedule 3.10 lists
all Returns that currently are the subject of audit.
"Taxes" means with respect to any person (i) any net income,
gross income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, value-added, windfall profits, custom duty or
other tax, governmental fee, capital stock, social security (or similar),
unemployment, disability, transfer, registration, alternative or add-on
minimum, estimated or other like assessment or charge of any kind whatsoever,
together with any interest and any penalty, addition to tax or additional
amount imposed by any taxing authority (domestic or foreign) on such person and
(ii) any liability of the Company or any subsidiary for the payment of any
amount of the type described in clause (i) as a result of being a member of an
affiliated or combined group.
Section 3.11 Employee Benefits.
(a) Schedule 3.11(a) contains a true and complete
list of each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitalization or other
medical, dental, life, disability or other insurance, supplemental unemployment
benefits, profit-sharing, pension, savings or retirement plan, program,
agreement or arrangement, plans within the meaning of section 125 of the Code,
retiree medical plans and any trust fund, plan, program or arrangement funding
any plan (including any voluntary employee beneficiary association within the
meaning of section 501(c)(9) of the Code), and each other employee benefit
plan, program, agreement or arrangement, sponsored, maintained or contributed
to or required to be contributed to by the Company, any of its subsidiaries or
by any trade or business, whether or not incorporated (an "ERISA Affiliate"),
that together with the Company or any of its subsidiaries would be deemed a
"single employer" within the meaning of section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), for the benefit of any
employee or terminated employee of the Company, any of its
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18
subsidiaries or any ERISA Affiliate (the "Plans"). Schedule 3.11(a) identifies
each of the Plans that is an "employee benefit plan," as that term is defined
in section 3(3) of ERISA (the "ERISA Plans").
(b) With respect to each Plan, the Company has
heretofore delivered to Parent true and complete copies of each of the
following documents (to the extent applicable):
(i) a copy thereof;
(ii) a copy of the three most recent annual
reports and actuarial reports, if required under ERISA, and the most
recent report prepared with respect thereto in accordance with
Statement of Financial Accounting Standards No. 87, Employer's
Accounting for Pensions;
(iii) a copy of the most recent actuarial
report prepared with respect thereto in accordance with Statement of
Financial Accounting Standards No. 106, Employer's Accounting for
Non-Pension Postretirement Benefits;
(iv) a copy of the most recent Summary Plan
Description, summaries of all modifications, administrative forms and
other documents that constitute a part of or are incident to the
administration of the Plans;
(v) copies of any insurance contracts and
administrative service contracts;
(vi) if the Plan is funded through a trust
or any third party funding vehicle, a copy of the trust or other
funding agreement and the latest financial statements thereof;
(vii) the most recent determination letter
received from the Internal Revenue Service with respect to each Plan
intended to qualify under section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and any pending determination letter
request; and
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(viii) Schedule 3.11(a) also shall contain a
written description of all communications regarding any Plan to
employees or former employees who may be affected by this transaction.
(c) Neither the Company, nor any subsidiary, nor any
ERISA Affiliate or predecessor maintains or has ever maintained a plan which is
or was subject to (i) the minimum funding requirements of ERISA or the Code or
(ii) Title IV of ERISA.
(d) Neither the Company, nor any of its
subsidiaries, nor any ERISA Affiliate, nor any ERISA Plan, nor any trust
created thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which the Company, any of its subsidiaries or
any ERISA Affiliate, any ERISA Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any ERISA Plan or any such
trust could be in violation of sections 404, 405, or 406 of ERISA or could be
subject to either a civil penalty assessed pursuant to section 409, 502(i) or
502(l) of ERISA or a Tax imposed pursuant to section 4975 or 4976 of the Code.
(e) No ERISA Plan is a "multiemployer pension plan,"
as defined in section 3(37) of ERISA, nor is any ERISA Plan a plan described in
section 4063(a) of ERISA. Neither the Company, nor any subsidiary, nor any
ERISA Affiliate or predecessor has ever maintained, contributed to or been
required to contribute to a "multiemployer pension plan" as defined in section
3(37) of ERISA.
(f) Each Plan has been operated and administered in
accordance with its terms and applicable law, including but not limited to
ERISA and the Code.
(g) Each ERISA Plan intended to be qualified within
the meaning of section 401(a) of the Code and each related trust intended to be
qualified within the meaning of section 501(a) of the Code has been established
and operated so as to be qualified and tax exempt under such sections. Nothing
has occurred or, in connection with the transactions contemplated by this
Agreement, will occur, which would adversely affect the qualified status of
such plans and trusts. In the event the Company (or any affiliated entity)
sponsors or maintains a voluntary employee beneficiary
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20
association with the meaning of section 501(c)(9) of the Code, all necessary
governmental approvals for obtaining tax exempt status have been obtained, and
such determination letter is dated on or after January 1, 1985.
(h) No amounts payable under the Plans as a result
of or in connection with the consummation of the transactions contemplated by
this Agreement will fail to be deductible for federal income tax purposes by
application of section 162(m), section 280G or section 404 of the Code.
(i) Except as set forth on Schedule 3.11(i), no Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any ERISA Affiliate beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law or (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in section 3(2) of ERISA).
(j) Except as provided in Schedule 3.11(j), the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee or officer.
(k) There are no pending or threatened claims by or
on behalf of any Plan, by any employee or beneficiary covered under any such
Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
(l) The Company has reserved the right to amend or
terminate any Plan.
(m) Neither the Company nor any ERISA Affiliate has
any announced plan or legally binding commitment to create any additional Plans
which are intended to cover employees or former employees of the Company or any
ERISA Affiliate or to amend or modify any existing Plan which covers or has
covered employees or former employees of the Company or any ERISA Affiliate.
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21
(n) No event has occurred in connection with which
the Company or any ERISA Affiliate or any Plan, directly or indirectly, could
be subject to any liability (i) under any statute, regulation or governmental
order relating to any Plans or (ii) pursuant to any obligation of the Company
or any ERISA Affiliate to indemnify any person against liability incurred under
any such statute, regulation or order as they relate to the Plans.
Section 3.12 Compliance. Except as set forth on Schedule
3.12, neither the Company nor any of its subsidiaries is in violation of, or
has violated, or has received any notification of any asserted present or past
failure to comply with, any applicable provisions of (i) any laws, rules,
statutes, orders, ordinances or regulations or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, or other
instrument or obligations to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties are bound or affected.
Section 3.13 Environmental Matters.
(a) Except as set forth on Schedule 3.13, the
Company and its subsidiaries are in compliance with all applicable
Environmental Laws (which compliance includes, but is not limited to, the
possession by the Company and its subsidiaries of all permits and other
governmental authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof).
Except as set forth on Schedule 3.13, neither the
Company nor any of its subsidiaries has received any communication (written or
oral), whether from a governmental authority, private party, citizens group,
employee or otherwise, that alleges that the Company is not in such compliance,
and there are no past or present actions, activities, circumstances,
conditions, events or incidents that would prevent or interfere with such
compliance in the future.
(b) Except as set forth on Schedule 3.13, there is
no Environmental Claim pending or threatened against the Company or any of its
subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company
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22
or any of its subsidiaries has retained or assumed either contractually or by
operation of law.
(c) Except as set forth on Schedule 3.13, there are
no past or present actions, activities, circumstances, conditions, events or
incidents (including, without limitation, the release, emission, discharge,
presence or disposal of any Hazardous Material) which could form the basis of
any Environmental Claim against the Company or any of its subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any of its subsidiaries has or may have retained or assumed either
contractually or by operation of law.
(d) Except as set forth on Schedule 3.13, neither
the Company nor any of its subsidiaries has, and no other person has, Released,
placed, stored, buried or dumped Hazardous Materials on, beneath or adjacent to
any property owned, operated or leased or formerly owned, operated or leased by
the Company or any of its subsidiaries, and neither the Company nor any of its
subsidiaries has received notice that it is a potentially responsible party for
the Cleanup of any property, whether or not owned or operated by the Company or
any of its subsidiaries.
(e) The Company and its subsidiaries have delivered
to Parent true, complete and correct copies and results of any reports,
studies, analyses, tests or monitoring possessed or initiated by the Company or
any of its subsidiaries pertaining to Hazardous Materials in, on, beneath or
adjacent to the property owned or leased by the Company or any of its
subsidiaries or regarding the Company's and its subsidiaries' compliance with
applicable Environmental Laws.
(f) Except as set forth on Schedule 3.13, no
transfers of permits or other governmental authorizations under Environmental
Laws, and no additional permits or other governmental authorizations under
Environmental Laws, will be required to permit the Company and its subsidiaries
or the Surviving Corporation and its subsidiaries, as the case may be, to be in
full compliance with all applicable Environmental Laws for the period
immediately following the transactions contemplated hereby, as conducted by the
Company and its subsidiaries immediately prior to the date hereof. To the
extent that such transfers or additional permits and other governmental
authorizations are required, the Company and its
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23
subsidiaries agree to use reasonable best efforts to effect such transfers and
obtain such permits and other governmental authorizations at the time such
transfers, permits and other governmental authorizations are required by law.
(g) The following terms as used in this Section
shall have the following meanings:
"Cleanup" means all actions required by governmental
entities or Environmental Laws to: (1) cleanup, remove, treat or remediate
Hazardous Materials in the indoor or outdoor environment; (2) prevent the
Release of Hazardous Materials so that they do not migrate, endanger or
threaten to endanger public health or welfare of the indoor or outdoor
environment; (3) perform preremedial studies and investigations and
postremedial monitoring and care; or (4) respond to any government requests for
information or documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of
Hazardous Materials in the indoor or outdoor environment.
"Environmental Claim" means any claim, action, cause
of action, investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation, potential
liability for investigatory costs, Cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or Release into
the indoor or outdoor environment, of any Hazardous Materials at any location,
whether or not owned or operated by the Company or any of its subsidiaries or
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" means all federal, state, local
and foreign laws, regulations and ordinances relating to pollution or
protection of human health or the environment, including without limitation,
laws relating to Releases or threatened Releases of Hazardous Materials into
the indoor or outdoor environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
Release, disposal, transport or handling of Hazardous Materials and all laws,
regulations and ordinances with regard to recordkeeping,
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24
notification, disclosure and reporting requirements respecting Hazardous
Materials.
"Hazardous Materials" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
"Release" means any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment
(including, without limitation, ambient air, surface water, groundwater and
surface or subsurface strata) or into or out of any property, including the
movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
Section 3.14 Intellectual Property.
(a) Schedule 3.14 contains an accurate and complete
description of all domestic and foreign patents, patent applications, patent
licenses, shop rights, trademarks, trademark registrations and applications
therefore, service marks, service xxxx registrations and applications therefor,
logos, trade names, assumed names, copyright registrations and applications
therefor, which are used by the Company, any of its subsidiaries or which are
presently owned or held by the Company or any of its subsidiaries or under
which the Company or any of its subsidiaries owns or holds any license, or in
which the Company or any of its subsidiaries owns or holds any direct or
indirect interest, other than those rights granted or licensed by Parent
(collectively, the "Intellectual Property Rights"). Schedule 3.14 further sets
forth: (i) the nature of such Intellectual Property Rights; (ii) the owner of
such Intellectual Property Right; (iii) the jurisdiction by or in which such
Intellectual Property Right has been issued or registered or in which an
application for such issuance or registration has been filed, including the
respective registration or application numbers; and (iv) licenses, sublicenses
and other agreements as to which the Company or any of its subsidiaries is a
party and pursuant to which the Company, any of its subsidiaries or any other
person or entity is authorized to use such Intellectual Property Right,
process, design, invention, know-how, trade secret or other
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25
proprietary information (collectively, the "Company Intellectual Property").
(b) Except as set forth on Schedule 3.14, the
Company or any of its subsidiaries does not infringe or unlawfully or wrongly
use any patent, trademark, tradename, service xxxx, copyright, trade secret,
confidential or proprietary right or any similar rights owned or claimed by
another.
(c) Except as set forth in Schedule 3.14, the
Company or any of its subsidiaries does not know of any use that has been or is
now being made by another of the Company Intellectual Property or that would
infringe such rights.
(d) Except as set forth on Schedule 3.14, the
Company or any of its subsidiaries is the sole and exclusive owner of or
possesses valid licenses and rights to use all Company Intellectual Property
necessary to conduct the businesses of the Company and any of its subsidiaries
as they are currently being conducted.
(e) Except as set forth on Schedule 3.14, neither
the Company nor any of its subsidiaries has sold, licensed or otherwise
disposed of or transferred or granted any interest in the Company Intellectual
Property. The Company and each of its subsidiaries have taken all reasonable
measures, which may or may not have included the institution of litigation, to
maintain and protect the Company Intellectual Property and all such rights
remain valid and enforceable.
(f) Except as set forth on Schedule 3.14, no claims
have been asserted by any person to the use or validity of any of the Company
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto, and there is no
valid basis for any such claim. None of the Company Intellectual Property is
subject to any outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by the Company or any of its subsidiaries or
restricting the licensing thereof by the Company or any of its subsidiaries to
any other person or entity. Except as set forth on Schedule 3.14, the Company
and any of its subsidiaries have not entered into any agreement to indemnify
any other person or entity
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26
against any charge of infringement of any Company Intellectual Property.
Section 3.15 Insurance.
(a) Schedule 3.15(a) sets forth a complete and
correct list of all insurance policies (including a brief summary of the nature
and terms thereof and any amounts paid or payable to the Company or any of its
subsidiaries thereunder, their respective expiration dates, deductibles and
stop-loss thresholds) providing coverage in favor of the Company or any of its
subsidiaries or any of their respective properties. Each such policy is valid,
in full force and effect and will remain in full force at least through the
respective dates set forth in Schedule 3.15(a) and effect without the payment
of additional premiums other than additional premiums in the ordinary course
prior to the Effective Time, no notice of termination, cancellation or
reservation of rights has been received with respect to any such policy, there
is no default with respect to any provision contained in any such policy, and
there has not been any failure to give any notice or present any claim under
any such policy in a timely fashion or in the manner or detail required by any
such policy.
(b) The Company and its subsidiaries have insurance
in an amount and of a type normal in the ordinary course for businesses similar
to the Company and its subsidiaries. Other than as set forth on Schedule
3.15(b), neither the Company nor any of its subsidiaries has received notice of
any proposed increase in premiums or deductible amounts, decrease in coverage
or termination of any policy.
Section 3.16 Labor Matters. Except as set forth in Schedule
3.16, neither the Company nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract or labor union agreement
applicable to persons employed by the Company or any of its subsidiaries, no
collective bargaining agreement is being negotiated by the Company or any of
its subsidiaries and no activities or proceedings of any labor union are being
held to organize any of their respective employees. There is no labor dispute,
strike or work stoppage against the Company or any of its subsidiaries pending
or threatened which may interfere with the respective business activities of
the Company or any of its subsidiaries. The Company and its subsidiaries are
in
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27
compliance with all federal, state and local laws, including without limitation
the rules and regulations of the Department of Labor and the Office of Federal
Contract Compliance Programs, respecting employment and employment practices,
terms and conditions of employment and wages and hours and not engaged in any
unfair labor practice. There is no unfair labor practice complaint against
either the Company or any of its subsidiaries pending or threatened before the
National Labor Relations Board. Except as set forth on Schedule 3.16, no
charges with respect to or relating to the Company or any of its subsidiaries
are threatened or pending before the Equal Employment Opportunity Commission or
any state, local or foreign agency responsible for the enforcement of labor or
employment laws or for the conduct of an investigation of or relating to the
Company or any of its subsidiaries and no such investigation is in process.
Section 3.17 Real Property. Except for the Company's Wichita
office, which will be sold prior to Closing, the Company and its subsidiaries
do not own any real property in fee simple. Schedule 3.17(a) sets forth a list
of all real property leased by the Company or its subsidiaries (collectively,
the "Properties"). The Company and its subsidiaries hold good and valid
leasehold title and estate in the Properties, in each case free and clear of
all mortgages, deeds of trust, pledges, liens, security interests, claims,
mechanic's or materialmen's liens, charges, easements, restrictive covenants,
rights-of-way and other encumbrances. There are no eminent domain proceedings
pending or threatened against any of the Properties.
The Company hereby represents that:
(a) All buildings, structures and equipment located
on the Properties are structurally sound and are in good operating condition
and repair (ordinary wear and tear excepted), and are usable in the ordinary
course of business;
(b) Except as set forth in existing title insurance
policies and reports delivered to Parent pursuant to Section 3.15 hereto, the
Company and its subsidiaries have not received written notice (i) of any
dispute from any contiguous boundary owners concerning contiguous boundary
lines, (ii) that any of the Properties (or the buildings, structures or
improvements thereon), or the Company's or any of its subsidiaries' operations,
violate the zoning or planning laws,
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28
ordinances, rules or regulations of the city, county or state in which they are
located, or any building regulations or codes of such city, county or state, or
land use laws or regulations applicable to the Properties, and that no such
violations exist or (iii) of any claims of others to rights over, under, across
or through any of the Properties by virtue of use or prescription;
(c) All permits, approvals, authorizations or
licenses required or necessary for the use of any of the Properties have been
obtained and are in full force and effect;
(d) Neither the Company nor any of its subsidiaries
has sublet, and is not subletting, all or any part of any of the Properties,
and has not assigned all or any part of its interest in any of the leases;
(e) Schedule 3.17(e) sets forth a list of all
service and maintenance contracts affecting the Properties and all utility and
management contracts affecting the Properties to which the Company or any of
its subsidiaries is a party or to which said properties are subject and which,
in any individual contract, obligate the Company to pay more than $12,000 in
any year. All such contracts are currently in full force and effect, and there
is no default, or action or omission which with the giving of notice or passage
of time or both would constitute a default, thereunder. Copies of all such
contracts have been delivered to Parent. In addition, the Company has
previously delivered to Parent copies of the most recently issued bills for
real estate tax assessments against any or all of the Properties;
(f) All the Properties are free and clear of any
agreements to sublease (or to grant an assignment of lease), options to
sublease (or to grant an assignment of lease) or rights of first refusal
relating thereto. All real property with respect to which the Company or any
of its subsidiaries has an agreement to purchase, lease or sublease, option to
purchase, lease, or sublease or right of first refusal relating thereto is set
forth on Schedule 3.17(f);
(g) All the Properties are currently zoned in the
zoning category which permits operation of said properties as now used,
operated and maintained. Neither the Company nor any of its subsidiaries has
requested, applied for, or given
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29
consent to, and there are no pending, zoning variances or changes with respect
to any of the Properties. The consummation of the transactions contemplated
herein will not result in a violation of any applicable zoning ordinance or the
termination of any applicable zoning variance now existing, and if the
improvements on the Properties are damaged or destroyed subsequent to the
Effective Time, the repair or replacement of the same by Parent to the
condition existing immediately prior to the Effective Time will not violate
applicable zoning ordinances (assuming there has been no change in such zoning
ordinances);
(h) All buildings, structures or improvements owned
and/or leased by the Company or any of its subsidiaries on any of the
Properties are located entirely within the property boundary lines of such
properties and do not encroach onto adjoining lands, and there are no
encroachments of buildings, structures or improvements from adjoining lands
onto such properties;
(i) The Properties (i) currently have access to, at
or within their property boundary lines to all gas, water, electricity, storm
sewer, sanitary sewer, telephone and all other utilities necessary or
beneficial to the current operation of the Properties, and all of such
utilities are adequate and sufficient for the current operation of such
properties and (ii) are contiguous to and have vehicular and pedestrian access
to and from physically open and publicly dedicated public streets;
(j) Except as set forth on Schedule 3.17(j), and
except for repair and maintenance in the ordinary course of business, no
construction, improvements, or expansion is currently on-going at any of the
Properties;
(k) The Company or its subsidiaries hold valid
leasehold estate pursuant to each lease by which real properties are leased, as
shown on Schedule 3.17(a), and enjoys peaceful and undisturbed possession
thereunder. The Company has previously delivered to Parent complete and
accurate copies of all such scheduled leases. All such leases shall continue
in full force and effect (without default) after the Effective Time and the
consummation of the transactions contemplated by this Agreement without the
consent, approval or act of any other party;
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30
(l) Neither the Company nor any of its subsidiaries
has received written notice of any pending, proposed or threatened proceedings
or governmental or quasi-governmental actions to condemn or take by the power
of eminent domain (or to purchase in lieu thereof), or otherwise to take or
restrict the right to use or occupy, any of the Properties; and
(m) Neither the Company nor any of its subsidiaries
has received notification that it is in violation of any applicable
antipollution, health or other law, ordinance or regulation in respect of its
structures or their operation, which violation remains uncured, and no such
violation exists.
Section 3.18 Contracts and Commitments. Schedule 3.18
contains a true and complete list of (i) all agreements and other commitments
for the purchase of any materials or supplies; (ii) all employment and
consulting agreements; (iii) all license agreements with third parties; (iv)
other than rental agreements with customers, all leases, whether for real
property or personal property; (v) all loan agreements, mortgages or
indentures; (vi) all agreements, arrangements or commitments with any director,
officer, employee, stockholder or beneficial owner of any of the outstanding
Common Stock or Preferred Stock of the Company or any of their affiliates; and
(vii) all other arrangements, commitments and understandings (written or oral)
to which the Company or any of its subsidiaries is a party or by which it or
its properties are bound that require (or that the Company has reason to
believe it will require) payment by any party to the agreement, commitment or
understanding of, or the performance by any party to the agreement, commitment
or understanding of services having a value of, more than $25,000 in the
aggregate. True and complete copies of the Company's and all of its
subsidiaries' agreements, commitments and understandings, or in the case of
unwritten agreements, commitments and understandings, summaries thereof,
referred to in Schedule 3.18 (collectively, the "Commitments") have been
delivered to Parent or Acquisition.
Except as set forth in Schedule 3.18, (i) all of the
Commitments are valid, binding and enforceable and in full force and effect in
accordance with their respective terms and there is no existing default that
would permit the other party to a Commitment to terminate the Commitment, not
to perform
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its obligations under the Commitment or accelerate the payment of money, and no
condition exists that, with notice or lapse of time or both, would constitute a
default on any Commitment, by the Company or any of its subsidiaries or any
other party under any Commitment; (ii) all of the respective parties' covenants
and obligations under all Commitments accrued to date have been performed;
(iii) no party has made or asserted or has any defense, setoff or counterclaim
under any Commitment; (iv) neither the Company nor any of its subsidiaries has
notice that any party under any Commitment has exercised any option granted to
it to cancel or terminate its Commitment, to shorten the term of its Commitment
or to renew or extend the term (other than automatic renewals) of the
Commitment and the Company has not received any notice of termination of any
Commitment; (v) neither the Company nor any of its subsidiaries has received
any notice (written or otherwise) of cancellation or termination of, or any
expression or indication of an intention or desire to cancel or terminate, any
of the Commitments; and (vi) no Commitment is the subject of, or has been
threatened to be made the subject of, any arbitration, suit or other legal
proceeding. Except as noted on Schedule 3.18, every contract listed on such
schedule may be assigned or otherwise transferred pursuant to this Agreement or
the transactions contemplated hereby without the consent of any third party.
Section 3.19 Employees. Except as set forth on Schedule
3.19, the Company (i) has not been informed of any current plans of any home
office or multi-unit management personnel of the Company to terminate their
employment with the Company; (ii) agrees that employees of the Company have no
greater rights upon termination as a result of this Agreement and the
transactions contemplated herein and (iii) agrees to use its reasonable best
efforts to ensure that this Agreement and the transactions contemplated herein
will not cause the termination of any employees of the Company.
Section 3.20 Licenses and Permits. The Company and its
subsidiaries have obtained all licenses, product and establishment
registrations, franchises, permits, easements, certificates, consents, rights
and privileges necessary or appropriate to the conduct of the Company's and its
subsidiaries' businesses (collectively, the "Licenses," all of which are set
forth on Schedule 3.20, which shall be delivered by the Company as a
supplemental Schedule at least two (2) business days prior to Closing). The
Licenses are valid and
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in full force at the Effective Time and will remain valid and in full force
from and after the Effective Time.
Section 3.21 Products Liability. Except as set forth on the
Company's form customer agreements listed on Schedule 3.21, neither the Company
nor any of its subsidiaries has given or made any warranties to third parties
with respect to any products rented or sold by it except for the warranties
imposed by the provisions of the applicable commercial codes. No state of
facts or the occurrence of any event exists to form the basis of any present
claim against the Company or any of its subsidiaries for product liability on
account of any express or implied warranty which is not fully covered by
insurance.
Section 3.22 Inventory; Motor Vehicles; Accounts Receivable;
Assets Necessary to Business.
(a) Inventory. Each of the Company and its
subsidiaries has inventory of a quantity and quality sufficient to conduct, and
reasonably related to the needs of, its business. Except for inventory in
repair which shall not exceed 1,700 units of inventory, all inventory of the
Company and each of its subsidiaries is in good working order and rentable
condition.
(b) Motor Vehicles. All motor vehicles of the
Company and each of its subsidiaries are listed on Schedule 3.22(b). The
Company expressly warrants (i) that such vehicles, subject to ordinary wear and
tear, are mechanically sound and are in good working order and condition to
perform in the manner needed for the operation of the Company's business; (ii)
are in good cosmetic condition, so as to convey the high quality image of the
Company's business; (iii) are in compliance with all applicable statutes,
ordinances and regulations, including, without limitation, those related to
safety; and (iv) are owned by the Company or its subsidiaries free and clear of
all liens, security interests, encumbrances or other restrictions on title.
(c) Accounts Receivable. All accounts and notes
receivable of the Company or any of its subsidiaries, whether reflected in the
balance sheet(s) or otherwise, represent sales actually made in the ordinary
course of business, are assets of the Company or any of its subsidiaries and
are current and fully collectible net of any reserves shown on the
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balance sheet(s) which reserves are adequate and were calculated consistent
with past practice and experience). Except as set forth on Schedule 3.22(c),
each of the accounts and notes receivable either has been collected in full or
will be collected in full, without any setoff, within 30 days after the day on
which it became due and payable.
(d) Assets Necessary to Business. The Company or
its subsidiaries have good, valid, indefeasible and marketable title to all
properties and assets, real, personal and mixed, tangible and intangible, and
are parties to all leases, licenses and other agreements, currently being used
or that are reasonably necessary to permit it to carry on their businesses and
operations as presently conducted, except for the Company's Wichita office and
the furniture and equipment therein, which may be sold prior to Closing.
Section 3.23 Bank Accounts. Schedule 3.23 sets forth the
names and locations of all banks in which the Company or its subsidiaries have
an account or safe deposit box, the amounts therein or the contents thereof,
and the names of all persons authorized to draw thereon or have access thereto.
Section 3.24 Seller's Documentation. All documents supplied
by the Company and its subsidiaries to Parent or Acquisition for the Company's
and its subsidiaries' businesses including customer agreements, payment cards,
ledgers and similar records, and other information related to the Company's and
its subsidiaries' businesses are true, accurate and complete.
Section 3.25 Disclosure. Schedule 3.25 lists any
information, of which management of the Company is aware, that is (a) material
to the business of the Company or to the transactions contemplated by this
Agreement, and (b) not already disclosed in the Schedules hereto or in any
representation or warranty to Parent or Acquisition contained in this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Each of Parent and Acquisition represents and warrants to the
Company as follows:
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Section 4.1 Organization. Each of Parent and Acquisition is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
Section 4.2 Authority Relative to this Agreement. Each of
Parent and Acquisition has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the board of
directors of Acquisition and Parent, and no other corporate proceedings on the
part of Parent or Acquisition are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of Parent and Acquisition and, assuming
it constitutes a valid and binding agreement of the other parties hereto,
constitutes a legal, valid and binding agreement of each of Parent and
Acquisition, enforceable against each of Parent and Acquisition in accordance
with its terms.
Section 4.3 Non-Contravention; Required Filings and Consents.
(a) The execution, delivery and performance by
Parent and Acquisition of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger) do not and will not (i)
contravene or conflict with the Certificate of Incorporation or By-Laws of
Parent or Acquisition; (ii) assuming that all consents, authorizations and
approvals contemplated by subsection (b) below have been obtained and all
filings described therein have been made, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Parent or Acquisition
or any of their respective properties; (iii) conflict with, or result in the
breach or termination of any provision of or constitute a default (with or
without the giving of notice or the lapse of time or both) under, or give rise
to any right of termination, cancellation, or loss of any benefit to which
Parent or Acquisition is entitled under any provision of any agreement,
contract, license or other instrument binding upon
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Parent, Acquisition or any of their respective properties, or allow the
acceleration of the performance of, any obligation of Parent or Acquisition
under any indenture, mortgage, deed of trust, lease, license, contract,
instrument or other agreement to which Parent or Acquisition is a party or by
which Parent or Acquisition or any of their respective assets or properties is
subject or bound; or (iv) result in the creation or imposition of any Lien on
any asset of Parent or Acquisition.
(b) The execution, delivery and performance by
Parent and Acquisition of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger) by Parent and
Acquisition require no action by or in respect of, or filing with, any
governmental body, agency, official or authority (either domestic or foreign)
other than (i) the filing of a certificate of merger in accordance with
Delaware Law; (ii) compliance with any applicable requirements of the HSR Act;
(iii) compliance with any applicable requirements of the Exchange Act and state
securities, takeover and Blue Sky laws; and (iv) such actions or filings which,
if not taken or made, would not, individually or in the aggregate, prevent the
consummation of the Merger.
Section 4.4 Proxy Statement. None of the information
provided by Parent or Acquisition specifically for use in the Proxy Statement
shall, at the time filed with the SEC, at the time mailed to the Company's
stockholders, at the time of the Stockholders' Meeting or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
Section 4.5 Availability of Funds. Parent and Acquisition
will have available at the Closing sufficient funds to enable them to
consummate the transactions contemplated by this Agreement and the Option
Agreement.
Section 4.6 Absence of Litigation. As of the date hereof,
there is no action, suit, claim, investigation or proceeding pending or
threatened against, Parent or Acquisition or any of their respective properties
before any court or arbitrator or any administrative, regulatory or
governmental body, or any agency or official which challenges or seeks to
prevent, enjoin, alter or delay the Merger or any
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36
of the date hereof, neither Parent nor Acquisition nor any of their respective
properties is subject to any order, writ, judgment, injunction, decree,
determination or award which would prevent or delay the consummation of the
transactions contemplated hereby.
ARTICLE V
COVENANTS
Section 5.1 Conduct of Business of the Company. Except as
otherwise expressly provided in this Agreement, during the period from the date
hereof to the Effective Time, the Company and its subsidiaries will each
conduct its operations according to its ordinary course of business consistent
with past practice, and the Company and its subsidiaries will each use its
reasonable best efforts to preserve intact its business organization, to
maintain the quantity and quality of its customer rental agreements, to keep
available the services of its officers and employees and to maintain existing
relationships with licensors, licensees, suppliers, contractors, distributors,
customers and others having business relationships with it. Without limiting
the generality of the foregoing, and except as otherwise expressly provided in
this Agreement, as required by law or as set forth in Schedule 5.1, prior to
the Effective Time, neither the Company nor any of its subsidiaries will,
without the prior written consent of Parent:
(a) amend the Certificate of Incorporation or
By-Laws or equivalent organizational documents;
(b) authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, stock appreciation rights), except
for Employee Option payments contemplated by Section 1.8 hereof with respect to
Company Plans as in effect as of June 1, 1995, or upon any redemption and
conversion of Preferred Stock in accordance with the terms of this Agreement,
or amend any of the terms of any such securities or agreements outstanding as
of the date hereof, other than the extension and acceleration of vesting of the
Employee Options;
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(c) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
its capital stock (provided, that the Company may pay its previously declared
regular quarterly Preferred Stock dividend on July 31, 1995, in an aggregate
amount not to exceed $42,000, subject to the provisions of Section 6.3(d)), or,
except for the redemption of the Preferred Stock pursuant hereto, redeem,
repurchase or otherwise acquire any of its securities or any securities of its
subsidiaries, except for cash settlement of the Employee Options in accordance
with the terms of Section 1.8 hereof;
(d) (i) incur any indebtedness for borrowed money or
issue any debt securities or assume, guarantee or endorse the obligations of
any other person; (ii) make any loans, advances or capital contributions to, or
investments in, any other person; (iii) pledge or otherwise encumber shares of
capital stock of the Company or any of its subsidiaries; or (iv) mortgage or
pledge any of its assets, tangible or intangible, or create or suffer to exist
any Lien thereupon;
(e) enter into, adopt, amend or terminate (other
than extensions and acceleration of vesting of existing Employee Options in
accordance with Section 1.8 hereof) any bonus, profit sharing, 401(k) plan,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee, or increase in any
manner the compensation or benefits of any director, officer or employee (other
than normal salary increases in the ordinary course of business for
non-executive employees) or pay any benefit not required by any plan or
arrangement as in effect as of the date hereof or accelerate the terms for
payment of any benefit if such acceleration is not required by any plan or
arrangement as in effect as of the date hereof; provided, however, that the
Company may pay discretionary bonus amounts to its employees prior to the
Effective Time in an aggregate amount not exceeding $1,400,000 subject to the
provisions of Section 6.3(d) hereof; provided, in addition, that the Company
may pay accrued bonus amounts as such accrued bonuses become due and payable in
accordance with
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the terms of any plan or arrangement as in effect as of the date hereof;
provided, that such bonus amounts may be paid only when due and may not be
accelerated;
(f) acquire, sell, lease or dispose of any assets
outside the ordinary course of business or enter into any contract, agreement,
commitment or transaction outside the ordinary course of business consistent
with past practice; provided, however, that the Company will sell the land,
building and equipment used by the Company as its home office in exchange for
consideration equal to an appraisal amount of not less than $500,000, subject
to the provisions of Section 6.3(d);
(g) change any of the accounting principles, or
methods of application of said principles, or practices used by it;
(h) except as set forth on Schedule 5.1, (i) acquire
(by merger, consolidation, or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof; (ii) authorize
any new capital expenditure or expenditures which, individually, is in excess
of $25,000; (iii) settle any litigations for amounts in excess of $5,000; or
(iv) enter into or amend any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(i) make any Tax election or settle or compromise
any Tax liability, other than in the ordinary course of business;
(j) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
liabilities in the ordinary course of business consistent with past practice
and in accordance with the terms of such liabilities or obligations;
(k) delay or defer payment of accounts payable or
other obligations of the Company or any of its subsidiaries or accelerate
collection of receivables or other obligations due the Company or any of its
subsidiaries;
(l) take any action outside of the ordinary course
of business (except in accordance with the provisions
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of Sections 5.1(c), (e) and (f) hereof), including but not limited to making
any unauthorized distributions; or
(m) take, or agree in writing or otherwise to take,
any of the actions described above in Section 5.1.
Section 5.2 Boards of Directors and Committees; Section 14(f).
(a) Promptly following the purchase by Acquisition,
Parent or their affiliates of Shares pursuant to the Option Agreement,
Acquisition shall be entitled to designate a majority of the Company's Board,
and the Company shall, upon request by Acquisition, promptly either increase
the size of the Board or use its reasonable best efforts to secure the
resignation of such number of directors as is necessary to enable Acquisition's
designees to be elected to the Board and shall cause Acquisition's designees to
be so elected. Promptly upon request by Acquisition, the Company will use its
reasonable best efforts to cause persons designated by Acquisition to
constitute the same percentage as is on the Board of (i) each committee of the
Board, (ii) each board of directors of each subsidiary of the Company
designated by Acquisition and (iii) each committee of each such board.
(b) The Company's obligations to appoint designees
to the Board shall be subject to Section 14(f) of the Exchange Act, and Rule
14f-1 promulgated thereunder. As promptly as practicable following the date of
this Agreement, the Company shall take all actions required pursuant to Section
14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 5.2
and shall file with the SEC and distribute to its stockholders such information
as is required under Section 14(f) and Rule 14f-1. Parent or Acquisition will
supply to the Company in writing and be solely responsible for any information
with respect to either of them and their nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of
Acquisition's designees pursuant to this Section 5.2 and prior to the Effective
Time, any amendment of this Agreement or the Certificate of Incorporation or
By-Laws, any termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or
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other acts of Parent or Acquisition or any waiver of any of the Company's
rights hereunder, will require the concurrence of a majority of the directors
of the Company then in office who are not designees of Acquisition.
Section 5.3 Proxy Statement.
(a) The Company shall, as promptly as practicable
following the date hereof, prepare and file the Proxy Statement with the SEC
under the Exchange Act. As soon as practicable following completion of review
of the Proxy Statement by the SEC, the Company shall mail the Proxy Statement
to its stockholders who are entitled to vote at the Stockholders' Meeting.
Subject to the Board's fiduciary duties, the Proxy Statement shall contain the
recommendation of the Board that the stockholders of the Company approve and
adopt this Agreement and the Merger.
(b) The Company, Parent and Acquisition shall
cooperate with one another in the preparation and filing of the Proxy Statement
and shall use their reasonable best efforts to promptly obtain and furnish the
information required to be included in the Proxy Statement and to respond
promptly to any comments or requests made by the SEC with respect to the Proxy
Statement. Each party hereto shall promptly notify the other parties of the
receipt of comments of, or any requests by, the SEC with respect to the Proxy
Statement, and shall promptly supply the other parties with copies of all
correspondence between such party (or its representatives) and the SEC (or its
staff) relating thereto. The Company, Parent and Acquisition each agrees to
correct any information provided by it for use in the Proxy Statement which
shall have become, or is, false or misleading.
Section 5.4 Access to Information. (a) Subject to applicable
law and the agreements set forth in Section 5.4(b), between the date hereof and
the Effective Time, the Company will give each of Parent and Acquisition and
their counsel, financial advisors, auditors, and other authorized
representatives reasonable access to all employees, landlords, suppliers,
customers, vendors, plants, offices, warehouses and other facilities and to all
books and records of the Company and its subsidiaries, will permit each of
Parent and Acquisition and their respective counsel, financial advisors,
auditors and other authorized representatives to make such inspections as
Parent or Acquisition may reasonably require
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and will cause the Company's officers and those of its subsidiaries to furnish
Parent or Acquisition or their representatives with such financial and
operating data and other information with respect to the business and
properties of the Company and any of its subsidiaries as Parent or Acquisition
may from time to time reasonably request. No investigation pursuant to this
Section 5.4(a) shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereunder.
(b) Parent and Acquisition will keep confidential
and not divulge (except to its employees, counsel, accountants and other
advisors who need to know such information in connection with the Merger) any
confidential information obtained by them regarding the business and finances
of the Company; provided, however, that this prohibition will not include any
information (i) known generally to the public, (ii) accessible to third parties
on an unrestricted basis or (iii) of a type generally considered
nonconfidential by persons engaged in the same or similar business.
Section 5.5 Reasonable Best Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, Parent, Acquisition and the Company shall cooperate with one
another: (i) in the preparation and filing of any required filings under the
HSR Act and the other laws referred to herein; (ii) in determining whether
action by or in respect of, or filing with, any governmental body, agency,
official or authority (either domestic or foreign) is required, proper or
advisable or any actions, consents, waivers or approvals are required to be
obtained from parties to any contracts, in connection with the transactions
contemplated by this Agreement; and (iii) in seeking timely to obtain any such
actions, consents and waivers and to make any such filings. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party hereto shall take all such necessary action.
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Section 5.6 Public Announcements. Parent and Acquisition, on
the one hand, and the Company, on the other hand, will consult with each other
before issuing any press release with respect to the transactions contemplated
by this Agreement, and shall not issue any such press release prior to such
consultation, except as may be required by applicable law or by applicable
rules of any securities exchange.
Section 5.7 Notification of Certain Matters. The Company
shall give prompt notice to Parent or Acquisition, and Parent or Acquisition
shall give prompt notice to the Company, upon becoming aware of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence
of which would cause any representation or warranty contained in this Agreement
to be untrue or inaccurate, (ii) any fact which was in existence on the date of
this Agreement and, if known on such date, would have been required to be set
forth or described in the Schedules hereto, and (iii) any failure of the
Company, Parent or Acquisition, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, that the delivery of any notice pursuant to this Section
5.7 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.8 Treatment of Preferred Stock; Termination of
Stock Plans. (a) The Company will use its reasonable best efforts to cause the
holders of the Preferred Stock to convert their Preferred Stock to Common Stock
prior to the Effective Time; provided that the Company will take all necessary
actions to cause any Preferred Stock not so converted to be redeemed for $100
per share, together with the amount of accrued dividends as may have
accumulated thereon through the date of redemption, in accordance with the
terms of the Certificate of Incorporation prior to the Effective Time.
(b) The Company shall terminate all of the Company
Plans as of the Effective Time.
Section 5.9 No Solicitation.
(a) The Company and its subsidiaries are not engaged
in and will not engage in any discussions or negotiations with any third
parties with respect to any Acquisition Proposal (as defined below). The
Company and its subsidiaries shall not, directly or indirectly, through any
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officer, director, employee, representative or agent or any of its
subsidiaries, (i) solicit, initiate, or encourage any inquiries or proposals
that constitute, or would lead to, a proposal or offer for a sale of the Common
Stock or the Preferred Stock, a merger, consolidation, business combination,
sale of substantial assets, sale of a substantial percentage of shares of
capital stock (including, without limitation, by way of a tender offer) or
similar transactions involving the Company or any of its subsidiaries, other
than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) subject to the fiduciary duties of the Board under applicable
law, engage in negotiations or discussions concerning, or provide any
non-public information to any person or entity relating to, any Acquisition
Proposal or (iii) subject to the fiduciary duties of the Board under applicable
law, agree to, approve or recommend any Acquisition Proposal.
(b) The Company shall notify Parent immediately (in
no case later than 12 hours) after receipt by the Company or any of its
subsidiaries of any Acquisition Proposal or any request for non-public
information in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any of its subsidiaries by any
person or entity that informs the Company or any of its subsidiaries that it is
considering making, or has made, an Acquisition Proposal. Such notice shall
indicate the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact.
(c) Subject to the fiduciary duties of the Board
under applicable law, the Board will not withdraw or modify its recommendation
made pursuant to Section 1.9 hereof.
Section 5.10 Employee Matters. At or prior to the Effective
Time, Parent will offer to enter into two-year employment agreements with Xxxxx
X. Xxxxxxxx and A. Xxxxx Xxxxxx. In addition, at or prior to the Effective
Time, Parent will offer to enter into one-year employment agreements with
Messrs. Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxx.
Section 5.11 Office Lease. At Parent's option at Closing,
the Surviving Corporation and the owner of the Company's Wichita office will
execute a lease allowing
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Acquisition to use the Company's current office space at no cost for thirty
(30) days from the Closing Date; provided, however, that Parent shall pay
utility and telephone expenses for such office space during the 30-day period.
Section 5.12 Insurance. The Company and its subsidiaries
shall maintain the insurance coverage specified in Section 3.15 hereto in full
force and effect through the Closing.
Section 5.13 Consents of Third Parties. The Company and its
subsidiaries shall obtain, prior to Closing, consents of all third parties to
change in control of the Company with respect to all leases, licenses, product
and establishment registrations, contracts and commitments that require such
consents.
Section 5.14 Taxes. The Company and its subsidiaries shall
be responsible for payment of taxes, including any and all income taxes, sales
taxes, use taxes and personal property taxes related to periods through the
Closing Date including taxes arising out of this transaction, such payments to
be made in whole or in part, but no later than such time as such taxes become
due and payable.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to the Company's, Parent's and
Acquisition's Obligation to Effect the Merger. The respective obligations of
the Company, Parent and Acquisition to effect the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have
been adopted by the affirmative vote of the stockholders of the Company by the
requisite vote in accordance with Delaware Law;
(b) HSR Act. Any waiting period applicable to the
Merger under the HSR Act shall have terminated or expired; and
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling, injunction or
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other order shall have been enacted, entered, promulgated or enforced by any
court or governmental authority of competent jurisdiction which prohibits the
Merger or makes the Merger illegal.
Section 6.2 Conditions to Company's Obligation to Effect the
Merger. The obligations of the Company to effect the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. All
representations and warranties of Parent and Acquisition shall be true and
correct when made and continuously shall remain true and be reaffirmed and
remade at and as of the Effective Time, as if made at and as of such time;
(b) Covenants. Each of Parent and Acquisition shall
have performed all of its covenants and obligations under this Agreement
required to be performed by it prior to or at Closing; and
(c) Dismissal of Lawsuit. The lawsuit captioned as
Xxxx Xx. 00 X 0000, XXXXX Americas, Inc. v. COMCOA, Inc.; Tidewater Rental
Corp.; AdvantEdge Rental Purchase Inc.; Advantage Companies, Inc.; and certain
other parties, pending in the 18th Judicial District Court of Sedgwick County,
Kansas, shall have been dismissed with prejudice and the parties to such action
shall have entered into a mutual release from liability with respect to the
subject matter of such action.
Section 6.3 Conditions to Parent's and Acquisition's
Obligations to Effect the Merger. The obligations of Parent and Acquisition to
effect the Merger are subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. All
representations and warranties of the Company (as supplemented pursuant to
Section 5.7 of this Agreement) shall be true and correct as of the date of this
Agreement and at and as of the Effective Time, as if made at and as of such
time, and Parent and Acquisition shall have received a certification of the
Company signed by the president and chief executive officer and the chief
financial officer of the Company to that effect dated the Closing Date;
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(b) Covenants. The Company shall have performed all
of its covenants and obligations under this Agreement required to be performed
by it prior to or at Closing;
(c) Consents. The Company shall have obtained,
prior to the consummation of the Merger, all required governmental and
third-party consents required for consummation of the transactions contemplated
by this Agreement;
(d) Total Equity. The Total Equity of the Company
and its subsidiaries, as of November 26, 1995, was at least $30,600,000. As
used herein, "Total Equity" means the Company's stockholders' equity,
calculated in a manner consistent with the audited annual financial statements
of the Company; provided, that the Total Equity calculation shall not include
(i) any amounts attributable to the exercise of, Employee Options pursuant to
Section 1.8 hereof, (ii) any adjustment for any redemption of Preferred Stock
pursuant to Section 5.8(a) hereof or (iii) any adjustment related to amounts
recorded on the Financial Statements for the 1993 compensatory non-qualified
stock option grants. The Company, however, may subtract from the Total Equity
requirement of $30,600,000 amounts paid for early cancellation of Employee
Options pursuant to Section 1.8 hereof. Prior to the Closing Date, Parent
shall have verified that the Total Equity amount as of November 26, 1995 was as
required above. The accrual of bonus amounts as set forth in Section 5.1(e)
hereof must be reflected in the calculation of the November 26 Total Equity.
All earnings for the period on and after November 27, 1995, through the Closing
Date shall accrue on a dollar for dollar basis and be added to the November 26
Total Equity, and the entire amount of such accrued Total Equity will be
delivered to Parent and Acquisition at Closing;
(e) Lease. The owner of the Company's Wichita
office shall have executed a lease allowing Acquisition to use the Company's
current office space at no cost for thirty (30) days in accordance with Section
5.11;
(f) Reasonable Expenses. The Company's paid and
payable transaction expenses, including but not limited to, attorneys' fees,
accounting fees, financial advisor fees of Xxxxxx X. Xxxx & Company, Proxy
Statement printing and mailing costs (collectively, "Reasonable Expenses"),
shall not exceed $250,000;
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(g) Preferred Stock. The Company's Preferred Stock
shall have been converted or redeemed prior to the Effective Time;
(h) Lawsuit Dismissal. All counterclaims relating
to the lawsuit captioned as Xxxx Xx. 00 X 0000, XXXXX Americas, Inc. v. COMCOA,
Inc.; Tidewater Rental Corp.; AdvantEdge Rental Purchase Inc.; Advantage
Companies, Inc.; and certain other parties, pending in the 18th Judicial
District Court of Sedgwick County, Kansas, shall have been dismissed with
prejudice and the parties to such action shall have entered into a mutual
release from liability with respect to the subject matter of such action;
(i) Officer's Certificate. Evidence satisfactory to
Parent and Acquisition, in the form of an officers' certificate of the Company,
signed by the president and chief executive officer and the chief financial
officer of the Company, certifying compliance by the Company with the terms and
conditions of Article V and Section 6.3 hereof;
(j) Resignations. The directors and officers of the
Company and its subsidiaries immediately prior to the Closing shall have
resigned effective as of the Closing;
(k) Opinion of Counsel. Parent shall have received
an opinion of counsel to the Company, dated as of the Closing Date, in the form
of Exhibit A, hereto and satisfactory to Parent and its counsel;
(l) Condition of Company. The Parent shall have
determined, in its sole discretion, that as of the Closing Date, the business,
operations, results of operations, condition, assets, prospects and liabilities
of the Company and each of its subsidiaries are such that the acquisition of
the Company pursuant to and in accordance with the terms of this Agreement is
in the best interest of the Parent; provided that in making such determination
the Parent shall not be subject to any requirement of reasonableness;
(m) Amendments to Indemnity Agreements. All parties
to indemnification agreements with the Company shall have executed an amendment
thereto in the form of Exhibit B attached hereto;
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(n) Litigation Settlement. The litigation matters
set forth on Schedule 6.3(n) hereto shall have been settled by the Company or
reserves shall have been set forth in the Financial Statements for such matters
if such reserves are required by GAAP; and
(o) Computer Software Confidentiality. Parent shall
have received affidavits or confidentiality agreements, in a form satisfactory
to Parent, stating that Parent's proprietary computer software system is not
being used by unauthorized third parties who obtained such computer information
from the Company.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent, Acquisition
and the Company;
(b) by Parent or the Company if any court or
governmental authority of competent jurisdiction shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable;
(c) by Parent or the Company, at any time after
January 31, 1996 if the Merger shall not have occurred by such date; provided,
that the right to terminate this Agreement under this subparagraph (c) shall
not be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause or resulted in the failure of the Merger to
have occurred by such date; and provided, further, that this date shall be
extended no more than ninety (90) days if the Merger has not been consummated
because of delays in the regulatory approval process;
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(d) by Parent, if (i) in Parent's sole discretion it
determines that any fact revealed pursuant to a supplemental representation and
warranty as required by Section 5.7 of this Agreement makes it not in Parent's
best interest to consummate the Merger, (ii) there shall have been a breach of
any representation or warranty of the Company contained herein, (iii) there
shall have been a breach of any covenant or agreement of the Company contained
herein which shall not have been cured prior to ten (10) business days
following notice of such breach, or (iv) the Amendment to the Advantage
Agreement extending the termination date and noncompete agreements shall not
have been executed by each party thereto prior to October 31, 1995; or
(e) by Company if there shall have been a breach of
any representation, warranty, covenant or agreement of Parent or Acquisition
contained herein which would prevent the consummation of the Merger which shall
not have been cured prior to ten (10) business days following the notice of
such breach.
Section 7.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto, other than the provisions of Sections 5.4 and
7.3. The termination of this Agreement shall not relieve any party from
liability for any breach of this Agreement.
Section 7.3 Fees and Expenses. Each party shall bear its own
expenses and costs in connection with this Agreement and the transactions
contemplated hereby.
Section 7.4 Amendment. Subject to Section 5.2(c), this
Agreement may be amended by action taken by the Company, Parent and Acquisition
at any time before or after adoption of the Merger by the stockholders of the
Company but, after any such approval, no amendment shall be made which
decreases the Merger Consideration to the stockholders who are not parties to
the Option Agreement or changes the form thereof or which adversely affects the
rights of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
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Section 7.5 Extension; Waiver. Subject to Section 5.2(c), at
any time prior to the Effective Time, the Company, on the one hand, and Parent
and Acquisition, on the other hand, may (i) extend the time for the performance
of any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document, certificate or writing delivered pursuant hereto, or
(iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival. The representations, warranties,
covenants and agreements made herein shall not survive beyond the Effective
Time.
Section 8.2 Entire Agreement; Assignment. This Agreement
(including the Schedules hereto) (i) constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all
other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and (ii) shall not be
assigned by operation of law or otherwise; provided that Acquisition may assign
its rights and obligations in whole or in part to any subsidiary or affiliate
of Parent (provided that such transferee agrees in writing to be bound by this
Agreement), but no such assignment shall relieve Acquisition of its obligations
hereunder if such assignee does not perform such obligations.
Section 8.3 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested), to the other party as follows:
if to Parent or Acquisition:
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THORN Americas, Inc.
0000 Xxxx Xxxx-X-Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000-0000
Fax: 000-000-0000
Attention: P. Xxxxx Xxxx, Senior
Vice President and General Counsel
with copies to:
Shook, Hardy & Bacon P.C.
One Kansas City Place
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
Fax: 000-000-0000
Attention: Xxxxxxxx X. Xxxxxx
if to the Company:
Advantage Companies, Inc.
0000 Xxxx 00xx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000-0000
Fax: 000-000-0000
Attention: Law Department
with copies to:
Xxxxxxxx, Thomson & Xxxxxx, P.C.
0000 Xxxxxx Xxxxxxxxx Xxxxx
000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Fax: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxx
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Section 8.4 Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of Delaware, without
regard to the principles of conflicts of law thereof.
Section 8.5 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and its
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to
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or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
Section 8.6 Remedies. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 8.7 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
Section 8.8 Consent to Jurisdiction. Each of the parties
hereto hereby irrevocably and unconditionally consents to submit to
jurisdiction of the courts of the State of Kansas for any litigation arising
out of or relating to this Agreement and the transactions contemplated hereby,
waives any objection to laying of venue of any such litigation in the courts
located in the State of Kansas and agrees not to plead or claim in any court in
the State of Kansas that such litigation brought therein has been brought in an
inconvenient forum.
Section 8.9 Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a person means a person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by"
and "under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(c) "generally accepted accounting principles" shall
mean the generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public
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Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession in the United
States, in each case applied on a basis consistent with the manner in which the
audited financial statements for the fiscal year of the Company ended January
22, 1995 were prepared;
(d) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act); and
(e) "subsidiary" or "subsidiaries" of any person
means any corporation, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other
subsidiary), owns, directly or indirectly, any stock or other equity interests
the holder of which is generally entitled to vote for the election of the board
of directors or other governing body of such corporation, partnership, joint
venture or other legal entity.
Section 8.10 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its representatives thereunto duly
authorized, all as of the day and year first above written.
THORN AMERICAS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------
Name: Xxxx X. Xxxxxxxxx
Title: Executive Vice President
THORN ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxxx
----------------
Name: Xxxx X. Xxxxxxxxx
Title: President
ADVANTAGE COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
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