EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.,
INTEURO MERGER, INC.,
INTEURO PARTS DISTRIBUTORS, INC.
XXXX XXXXXXXX
and
XXXXXX XXXX
Dated: November 14, 1997
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS................................................... 1
ARTICLE II - THE MERGER................................................... 6
2.1 The Merger................................................. 6
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2.2 Articles of Merger; Effective Time......................... 6
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2.3 Effect of Merger........................................... 6
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2.4 Closing.................................................... 6
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2.5 Articles of Incorporation; By-laws......................... 6
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2.6 Directors and Officers..................................... 6
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2.7 Accounting Treatment....................................... 6
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ARTICLE III - CONVERSION OF SECURITIES;
EXCHANGE OF CERTIFICATES.............................. 7
3.1 Conversion of Securities................................... 7
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3.2 Rights of Holders of Inteuro Common Stock.................. 7
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3.3 Surrender, Exchange and Delivery........................... 7
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3.4 No Fractional Shares....................................... 7
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF INTEURO
AND INTEURO SHAREHOLDERS.............................. 8
4.1 Corporate Existence and Power.............................. 8
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4.2 Inteuro Subsidiaries....................................... 8
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4.3 Corporate Authorization.................................... 8
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4.4 Governmental Authorization................................. 8
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4.5 Non-Contravention.......................................... 8
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4.6 Capitalization............................................. 9
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4.7 Inteuro Financial Statements............................... 9
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4.8 Inteuro's Books and Records................................ 10
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4.9 Inteuro Contracts with Related Parties..................... 10
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4.10 Absence of Certain Changes or Events....................... 10
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4.11 Litigation................................................. 11
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4.12 Taxes...................................................... 11
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4.13 Title to Assets............................................ 12
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4.14 Labor Matters.............................................. 12
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4.15 Employee Benefit Plans..................................... 12
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4.16 Compliance with Laws....................................... 13
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4.17 Brokers.................................................... 14
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4.18 Vote Required.............................................. 14
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4.19 Environmental Matters...................................... 14
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4.20 Trademarks, Patents and Copyrights......................... 15
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4.21 Contracts and Other Agreements............................. 15
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4.22 Insurance.................................................. 16
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4.23 Accounts Receivable........................................ 17
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4.24 Inventory.................................................. 17
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4.25 Plant, Property and Equipment.............................. 17
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4.26 Conflicting Interest....................................... 17
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4.27 No Prohibited Payments..................................... 17
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4.28 Minute Books............................................... 17
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4.29 Disclosure................................................. 18
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ARTICLE V - REPRESENTATIONS AND WARRANTIES OF KEYSTONE.................... 18
5.1 Corporate Existence and Power.............................. 18
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5.2 Corporate Authorization.................................... 18
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5.3 Governmental Authorization................................. 18
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5.4 Non-Contravention.......................................... 19
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5.5 Capitalization............................................. 19
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5.6 SEC Documents.............................................. 20
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5.7 Absence of Certain Changes or Events....................... 20
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5.8 Litigation................................................. 21
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5.9 Compliance with Laws....................................... 21
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5.10 Brokers.................................................... 21
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5.11 Disclosure................................................. 21
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ARTICLE VI - COVENANTS RELATING TO CONDUCT OF BUSINESS.................... 22
6.1 Conduct of Business by Inteuro............................. 22
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6.2 Conduct of Business by Keystone............................ 24
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6.3 Other Action............................................... 24
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6.4 No Solicitation of Transactions............................ 24
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6.5 Interim Financial Information.............................. 24
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6.6 Aggregate Indebtedness..................................... 24
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ARTICLE VII - ADDITIONAL AGREEMENTS....................................... 24
7.1 Access to Information...................................... 24
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7.2 Confidentiality............................................ 25
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7.3 Public Announcements....................................... 25
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7.4 Appropriate Action; Consents; Filings...................... 26
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7.5 State Statutes............................................. 27
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7.6 Employment Contracts....................................... 27
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7.7 Indemnification............................................ 27
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7.8 Accounting Treatment....................................... 28
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7.9 Other Agreements........................................... 29
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7.10 Right to Update Schedules.................................. 29
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7.11 Board of Directors......................................... 29
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7.12 Leases..................................................... 29
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7.13 Release from Guarantees.................................... 29
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ARTICLE VIII - CONDITIONS TO THE MERGER................................... 29
8.1 Conditions of Each Party's Obligation to Effect the Merger. 29
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8.2 Conditions of Obligation of Keystone....................... 30
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8.3 Conditions of Obligation of Inteuro........................ 31
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ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER............................ 32
9.1 Termination................................................ 32
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9.2 Consequences of Termination................................ 33
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9.3 Amendment.................................................. 33
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9.4 Waiver..................................................... 34
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ARTICLE X - GENERAL PROVISIONS............................................ 34
10.1 Survival of Representations and Warranties................. 34
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10.2 Notices.................................................... 34
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10.3 Entire Agreement........................................... 34
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10.4 Severability............................................... 34
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10.5 Successors and Assigns..................................... 34
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10.6 Parties in Interest........................................ 35
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10.7 Enforcement................................................ 35
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10.8 Governing Law.............................................. 35
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10.9 Counterparts; Effectiveness................................ 35
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10.10 Further Assurances......................................... 35
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10.11 Attorney Fees.............................................. 36
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into
and effective as of November 14, 1997, by and among Keystone Automotive
Industries, Inc., a California corporation ("Keystone"), Inteuro Merger, Inc., a
Florida corporation (the "Subsidiary"), Inteuro Parts Distributors, Inc., a
Florida corporation ("Inteuro"), and Xxxx Xxxxxxxx and Xxxxxx Xxxx
(collectively, the "Inteuro Shareholders").
R E C I T A L S:
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A. Keystone has formed the Subsidiary as a wholly-owned subsidiary in
order to effect the merger of the Subsidiary with and into Inteuro, on the terms
and conditions set forth in this Agreement and in accordance with applicable law
(the "Merger"), such that upon the consummation of the Merger, Inteuro will be a
wholly-owned Subsidiary of Keystone and the Subsidiary will cease to exist.
B. The Boards of Directors of Keystone, the Subsidiary and Inteuro each
have determined that it is in the best interests of their respective companies
and shareholders that the Merger be consummated.
C. The Merger is intended to qualify as a tax-free reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I - DEFINITIONS
As used herein, the following words and terms shall have the meanings set forth
below:
1.1 "Affiliate" means as to any Person (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, (b) any Person who is a director, officer, partner or principal (i)
of such Person, (ii) of any subsidiary of such Person or (iii) of any Person
described in clause (a) above, or (c) any individual who is a member of the
immediate family of any Person described in clause (a) or clause (b) above. For
purposes of this definition, "control" of a Person shall mean the power, direct
or indirect, (i) to vote or direct the voting of 5% or more of the securities
having ordinary voting power for the election of directors of such Person, or
(ii) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
1.2 "Articles of Merger" shall refer to the document described in Section
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2.2, providing for the consummation of the Merger in accordance with the terms
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of this Agreement.
1.3 "CBC" shall mean Car Body Concepts, Inc., a Florida corporation.
1.4 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601 et seq., as amended.
1.5 "CERCLIS" shall mean the Comprehensive Environmental Response
Compensation Liability Information System List.
1.6 "Closing" shall mean the consummation of the Merger as described in
Section 2.4 hereof.
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1.7 "Closing Date" shall mean the date on which the Closing occurs.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.9 "Competing Transaction" shall mean any of the following (other than
the transactions contemplated hereby): (i) any merger, consolidation, share
exchange, business combination, or other similar transaction involving Inteuro,
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 50% or more of the assets of Inteuro or any subsidiary of Inteuro, taken as a
whole, in a single transaction or series of transactions, other than in the
ordinary course of business, (iii) any tender offer or exchange offer for any of
the Inteuro Shares or the filing of a registration statement under the
Securities Act in connection therewith, (iv) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 10% or
more of the Inteuro Shares or (v) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing other than any transaction contemplated herein.
1.10 "Effective Time" shall mean the time that the Merger becomes effective
pursuant to Section 2.2 below.
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1.11 "Environmental Laws" shall mean all federal, state and local statues,
laws, rules, regulations, ordinances, codes, guidelines and orders (including
consent decrees and administrative orders) that relate to public health and
safety or purport to regulate the release of hazardous substances or other
materials into the environment, or impose requirements relating to the
protection of human health or the environment, including, but not limited to,
CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., as
amended, the Clean Air Act, 42 U.S.C. 7401 et seq., as amended, the Clean Water
Act, 33 U.S.C. 1251 et seq., as amended, and the Occupational Safety and Health
Act, 29 U.S.C. 655 et seq.
1.12 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.13 "Evaluation Materials" shall mean any business and/or technical
information of the Other Party or any of its subsidiaries which is (X) of a type
typically regarded by both
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Keystone and Inteuro as confidential or proprietary or (Y) is either (a) is
disclosed in written form and designated as "Confidential" or "Proprietary" or
(ii) initially is disclosed verbally, is identified as "Confidential" or
"Proprietary" at the time of disclosure and, within five (5) days following
disclosure, is summarized in written form, designated as "Confidential" or
"Proprietary" and delivered to an executive officer of the party to which such
disclosure was made.
1.14 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.15 "Exchange Ratio" shall mean the ratio at which Inteuro Common Stock
is to be exchanged for Keystone Common Stock, which ratio is one share of
Inteuro Common Stock to 30,666.7 shares of Keystone Common Stock, which ratio is
based upon there being 60 shares of Inteuro Common Stock issued and outstanding
at the Effective Time and an aggregate of 1,840,000 shares of Keystone Common
Stock being issued to the Inteuro Shareholders. In the event that at the close
of business on the business day immediately preceding the Closing, the aggregate
indebtedness of Inteuro and CBC (excluding accounts payable and accrued
expenses) exceeds the aggregate indebtedness (excluding accounts payable and
accrued expenses) of Inteuro and CBC on September 30, 1997 plus $500,000 (the
"Excess Indebtedness"), the aggregate number of shares of Keystone Common Stock
to be issued to the Inteuro Shareholders will be reduced by one (1) share for
each $19.50 of Excess Indebtedness times 92.0%, rounded to the closest share,
limited in amount to 184,000 shares. In such an event, the Exchange Ratio shall
be calculated based upon the reduced number of aggregate Keystone shares of
Common Stock to be issued.
1.16 "FCA" shall mean the Florida Business Corporation Act.
1.17 "Governmental Entity" shall mean any federal, state, local or foreign
governmental body, agency, official or authority (including courts,
administrative agencies, commissions, self-regulatory agencies or authorities or
other governmental authority or instrumentality).
1.18 "Hazardous Materials" means (a) any "hazardous waste" as defined in
either the United States Resource Conservation and Recovery Act, as amended, or
regulations adopted pursuant to said act; (b) any "hazardous materials" or
"hazardous substance" as defined in CERCLA; (c) any petroleum product,
explosives, flammable material, radioactive material, friable asbestos-
containing materials and transformers and other electrical equipment that
contain dielectric fluid containing polychlorinated biphenyls (PCBs); or (d)
any pollutant or contaminant or hazardous, dangerous or toxic chemical, material
or substance which are now or hereafter become defined, listed or otherwise
classified as, or included in the definition of "hazardous substances"
"hazardous wastes", "hazardous materials", "contaminants", "pollutants", "solid
wastes", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants" or words of similar import within the meaning of
any Environmental Law, whether now existing or hereafter in effect and as
amended from time to time, and (e) to the extent not included in the foregoing,
any medical waste.
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1.19 "Inteuro" shall mean Inteuro Parts Distributors, Inc., a Florida
corporation.
1.20 "Inteuro Affiliated Group" shall mean Inteuro and each of its
subsidiaries and Affiliates.
1.21 "Inteuro Common Stock" shall mean the common stock of Inteuro, no par
value.
1.22 "Inteuro Financial Statements" shall mean the balance sheets,
statements of income and retained earnings, statements of cash flows, reports
thereon by Inteuro's independent auditors, if any, and any notes thereto which
are referred to in Section 4.7 below and Section 7.7 below.
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1.23 "Inteuro Plans" shall mean all employee benefit plans (as defined in
Section 3(3) of ERISA) which Inteuro or any of its subsidiaries maintains or to
which Inteuro or any of its subsidiaries contributes.
1.24 "Inteuro Shareholders" shall mean collectively Xxxx Xxxxxxxx and
Xxxxxx Xxxx.
1.25 "Inteuro Shares" shall mean all issued and outstanding shares of
Inteuro Common Stock, and "Inteuro Share" shall mean one outstanding share of
Inteuro Common Stock.
1.26 "Keystone" shall mean Keystone Automotive Industries, Inc., a
California corporation.
1.27 "Keystone Common Stock" shall mean the Common Stock of Keystone, no
par value.
1.28 "Keystone Plans" shall mean all employee benefit plans (as defined in
Section 3(3) of ERISA) which Keystone or any of its subsidiaries maintains or to
which Keystone or any of its subsidiaries contributes.
1.29 "Keystone SEC Documents" shall mean all required reports, schedules,
forms, statements and other documents filed or required to be filed by Keystone
with the SEC since June 20, 1996.
1.30 "Keystone Shares" shall mean all issued and outstanding shares of
Keystone Common Stock.
1.31 "Knowledge" means as to any Person's awareness of any fact as of the
time of determination either (i) such Person's then current actual conscious
awareness of such fact or (ii) constructive knowledge of such fact if a
reasonably prudent Person in a like position would then have known, or should
then have known, the fact in the reasonably diligent performance of such
Person's duties. In the case of a corporate party hereto, Knowledge shall be
limited to the aggregate Knowledge of all of the officers of such corporation.
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1.32 "Lien" shall mean any pledge, claim, lien, charge, encumbrance or
security interest of any nature whatsoever.
1.33 "Material Adverse Effect" when used with respect to any entity means
any change or changes, condition or conditions or effect or effects that
individually or in the aggregate are or are likely to be materially adverse to
(a) the business, assets (including intangible assets), liabilities, financial
condition, results of operations or prospects of such entity and its
subsidiaries, if any, or on the ability of such entity or any of its
subsidiaries following the consummation of the Merger to continue the business
of such entity and its subsidiaries, if any, substantially as currently
conducted (without the loss of any material rights), or (b) the ability of such
entity or any of its subsidiaries to perform any of their respective obligations
under this Agreement or to consummate the Merger.
1.34 "Merger" shall mean the merger of Inteuro and the Subsidiary more
fully described herein.
1.35 "Other Party" when used with reference to Keystone shall mean Inteuro
and when used with respect to Inteuro, shall mean Keystone.
1.36 "Person" shall mean an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, a foundation, an
unincorporated organization or a Governmental Body or any department or agency
thereof.
1.37 "SEC" shall mean the Securities and Exchange Commission.
1.38 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.39 "Shareholders' Meeting" shall mean the meeting of the shareholders of
Inteuro to be called to approve the Merger and this Agreement.
1.40 "State Takeover Laws" shall mean any state "control share
acquisition," "anti-takeover" or other similar statutes and regulations.
1.41 "Surviving Corporation" shall mean Inteuro, the surviving corporation
in the Merger.
1.42 "Survivor Common Stock" shall mean the common stock of Inteuro.
1.43 "Taxes" shall mean all federal, state, local and foreign income,
property, sales, excise and other taxes, tariffs or governmental charges of any
nature whatsoever, including any interest, penalties or additions with respect
thereto.
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ARTICLE II - THE MERGER
2.1 The Merger. At the Effective Time, the Subsidiary shall be merged
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with and into Inteuro and the separate corporate existence of the Subsidiary
shall cease and Inteuro shall continue as the surviving corporation.
2.2 Articles of Merger; Effective Time. As soon as practicable after
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satisfaction or, to the extent permitted hereunder, waiver of all conditions to
the Merger set forth in Article VIII below, the parties hereto shall cause the
Merger to be consummated by filing the Articles of Merger with the Department of
State of the State of Florida and make all other filings or recordings required
by the FCA in connection with the Merger and the transactions contemplated by
this Agreement. The Merger shall become effective (a) at such time as the
Articles of Merger are duly filed with the Department of State of the State of
Florida or (b) at such later time as may be agreed by the parties in writing and
specified in the Articles of Merger.
2.3 Effect of Merger. From and after the Effective Time, the Surviving
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Corporation shall possess all the rights, privileges, powers and franchises, and
be subject to all of the restrictions, disabilities and duties, of Inteuro and
the Subsidiary, all as provided under the FCA.
2.4 Closing. The Closing will take place at 10:00 a.m. on the later to
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occur of December 31, 1997 or the first business day after satisfaction or
waiver of the conditions set forth in Article VIII at the offices of Keystone in
Pomona, California, unless another date, time or place is agreed to in writing
by the parties hereto.
2.5 Articles of Incorporation; By-laws.
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(a) At the Effective Time, the Articles of Incorporation of Inteuro
shall be the Articles of Incorporation of the Surviving Corporation.
(b) At the Effective Time, the Bylaws of Inteuro shall be the Bylaws
of the Surviving Corporation.
2.6 Directors and Officers. The persons specified in Exhibit 2.6A
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attached hereto shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles of Incorporation and Bylaws
of the Surviving Corporation, and the persons specified in Exhibit 2.6B shall be
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the initial officers of the Surviving Corporation, holding the offices set forth
opposite their respective names thereon, in each case until their respective
successors are duly elected or appointed and qualified.
2.7 Accounting Treatment. The parties intend that the Merger will be
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treated as a pooling-of-interests for accounting purposes by Keystone.
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ARTICLE III - CONVERSION OF SECURITIES;
EXCHANGE OF CERTIFICATES
3.1 Conversion of Securities. As of the Effective Time, by virtue of the
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Merger and without any action on the part of the holder of any shares of Inteuro
Common Stock:
(a) subject to Section 3.4 below, each Inteuro Share issued and
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outstanding immediately prior to the Effective Time shall be converted into
the right to receive the number of shares of Keystone Common Stock
determined by multiplying such Inteuro Share by the Exchange Ratio,
provided that each Inteuro Share issued and outstanding immediately prior
to the Merger and held by Inteuro as treasury stock shall be canceled, and
no consideration shall be delivered in consideration therefor; and
(b) each share of the Subsidiary's common stock, no par value
(constituting all of the Subsidiary's capital stock), immediately prior to
the Effective Time, shall be converted into one share of Survivor Common
Stock.
3.2 Rights of Holders of Inteuro Common Stock. On and after the Effective
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Time and until surrendered for exchange, each outstanding stock certificate
which immediately prior to the Effective Time represented shares of Inteuro
Common Stock shall be deemed for all purposes to evidence ownership of and to
represent the number of whole shares of Keystone Common Stock into which such
shares of Inteuro Common Stock shall have been converted, and the record holder
of such outstanding certificate shall, after the Effective Time, be entitled to
vote the shares of Keystone Common Stock into which such shares of Inteuro
Common Stock shall have been converted on any matters on which the holders of
record of Keystone Common Stock, as of any date subsequent to the Effective
Time, shall be entitled to vote. In any matters relating to such certificates,
Keystone may rely conclusively upon the record of shareholders maintained by
Inteuro containing the names and addresses of the holders of record of Inteuro
Common Stock at the Effective Time.
3.3 Surrender, Exchange and Delivery. At the Effective Time, Keystone
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will issue shares of Keystone Common Stock to each of Xxxx Xxxxxxxx and Xxxxxx
Xxxx as calculated in accordance with Section 3.1(a) of this Agreement and Xxxx
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Schigiel and Xxxxxx Xxxx will deliver to Keystone the certificates representing
all of the issued and outstanding shares of Inteuro Common Stock.
3.4 No Fractional Shares. No fractional shares of Keystone Common Stock
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shall be issued in connection with the Merger and no certificate therefor shall
be issued. In lieu of such fractional shares, (a) any holder of Inteuro Common
Stock who would otherwise be entitled to a fractional share of Keystone Common
Stock equal to .50 or more of a share shall instead receive one full share of
Keystone Common Stock and (b) any holder of Inteuro Common Stock who would
otherwise be entitled to a fractional share of Keystone Common Stock equal to
less than .50 of a share shall instead receive no consideration in respect of
such fractional interest.
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF INTEURO
AND INTEURO SHAREHOLDERS
Except as set forth in and qualified by the schedules attached hereto,
Inteuro and each of the Inteuro Shareholders hereby jointly and severally make
the following representations and warranties to Keystone.
4.1 Corporate Existence and Power. Inteuro is a corporation duly
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incorporated, validly existing and in good standing under the laws of the State
of Florida, and has all corporate powers required to carry on its business as
now conducted. Inteuro is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not have a Material Adverse Effect on Inteuro. The copies of
the Articles of Incorporation and Bylaws of Inteuro which have been delivered to
Keystone by Inteuro are as of the date hereof and will be at the Effective Time,
true and complete copies of the Articles of Incorporation and Bylaws of Inteuro,
in each case as amended, restated and otherwise in effect at the Effective Time.
4.2 Inteuro Subsidiaries. Inteuro does not own, directly or indirectly,
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any capital stock or other ownership interest in any Person.
4.3 Corporate Authorization. The execution, delivery and performance by
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Inteuro of this Agreement and the consummation by Inteuro of the transactions
contemplated hereby to be consummated by it, including the Merger, are within
Inteuro's corporate powers and have been duly authorized by all necessary
corporate and shareholder action on the part of Inteuro, including without
limitation approval of the directors of Inteuro and the holders of Inteuro
Common Stock. This Agreement has been duly and validly executed and delivered
by Inteuro and the Inteuro Shareholders and constitutes a legal, valid and
binding agreement of Inteuro and the Inteuro Shareholders enforceable in
accordance with its terms.
4.4 Governmental Authorization. The execution, delivery and performance
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by Inteuro and the Inteuro Shareholders of this Agreement and the consummation
of the Merger by Inteuro require no action by or in respect of, or filing with,
any Governmental Entity other than (a) the filing of the Articles of Merger in
accordance with the FCA, (b) compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 and related regulations promulgated thereunder, and (c)
any action or filing which the failure to obtain or make would not, individually
or in the aggregate, have a Material Adverse Effect on Inteuro.
4.5 Non-Contravention. The execution, delivery and performance by Inteuro
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and the Inteuro Shareholders of this Agreement do not, and the consummation by
Inteuro and the Inteuro Shareholders of the transactions contemplated hereby
will not, (a) contravene or conflict with the Articles of Incorporation or
Bylaws of Inteuro, (b) assuming compliance with the matters referred to in
Section 4.4 above, contravene or conflict with or constitute a violation of any
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provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Inteuro or the Inteuro Shareholders (including, without
limitation, applicable federal
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and state securities laws), (c) assuming that the consents listed on Schedule
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4.5 hereto are obtained prior to the Effective Time, constitute a breach or
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violation of, or a default under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Inteuro or to a loss
of any benefit to which Inteuro is entitled under any provision of, any
agreement, contract or other instrument binding upon Inteuro or any license,
franchise, permit or other similar authorization held by Inteuro, other than
such breaches, violations, defaults, rights or losses which would not,
individually or in the aggregate, have a Material Adverse Effect on Inteuro, or
(d) result in the creation or imposition of any Lien on any asset of Inteuro,
other than any such creation or imposition which would not, individually or in
the aggregate, have a Material Adverse Effect on Inteuro. Schedule 4.5 hereto
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sets forth a true, complete and correct list of all consents, approvals and
authorizations required to be obtained by Inteuro from any third party (other
than as otherwise expressly contemplated by Section 4.4 of this Agreement) in
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connection with this Agreement, the Merger and the transactions contemplated
hereby.
4.6 Capitalization. The authorized capital stock of Inteuro consists of
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60 shares of Inteuro Common Stock. As of the date of this Agreement, there are
issued and outstanding 60 shares of Inteuro Common Stock. All outstanding
shares of Inteuro Common Stock are duly authorized and validly issued, fully
paid and nonassessable, and were issued in compliance with all applicable
federal and state securities laws. The outstanding shares of Inteuro Common
Stock at the time of this Agreement and immediately prior to the Effective Time
are owned in equal amounts by the Inteuro Shareholders. Except as set forth
above or in Schedule 4.6, there are outstanding (a) no shares of Inteuro Common
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Stock or other voting securities of Inteuro, (b) no securities of Inteuro
convertible into or exchangeable for shares of Inteuro Common Stock or voting
securities of Inteuro and (c) no options, warrants or other rights to acquire
from Inteuro, and no obligation of Inteuro to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Inteuro. There are no outstanding obligations of Inteuro
to repurchase, redeem or otherwise acquire any Inteuro Common Stock. As of the
date hereof all of the shares of Inteuro Common Stock owned by the Inteuro
Shareholders are owned, and as of the Effective Time all such shares will be
owned, free and clear from all Liens. All Inteuro shareholders are citizens of
the United States.
4.7 Inteuro Financial Statements. Schedule 4.7 contains the audited
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balance sheet of Inteuro at December 31, 1996, and the unaudited balance sheets
of Inteuro at December 31, 1995 and September 30, 1997, together with the
audited statement of income and retained earnings and cash flows of Inteuro for
the fiscal year ended December 31, 1996 and the unaudited statements of income
and retained earnings and cash flows of Inteuro for the fiscal year ended
December 31, 1995 and the nine month period ended September 30, 1997. All such
Inteuro Financial Statements have been, and any Inteuro Financial Statements
delivered to Keystone for subsequent periods will be, prepared in conformance
with generally accepted accounting principles applied on a basis consistent with
prior periods (except, in the case of any unaudited financial statements, for
the absence of footnotes), and fairly present and will fairly present the
financial condition of Inteuro as of the represented dates thereof and the
results of Inteuro's operations for the periods covered thereby. Inteuro does
not have any material
9
liabilities or obligations other than (i) those disclosed or reflected on its
balance sheet dated September 30, 1997, (ii) those which were incurred since
that date in the ordinary course of business, or (iii) those arising under
contracts disclosed on Schedule 4.21 hereto.
-------------
4.8 Inteuro's Books and Records. The books of account and records
---------------------------
(including customer order files, employment records, licensing records,
employment records and production and manufacturing records) of Inteuro and its
subsidiaries are complete, true and correct in all material respects.
4.9 Inteuro Contracts with Related Parties. Except as disclosed on
--------------------------------------
Schedule 4.9 hereto, there are no material agreements or contracts by, between
------------
or among Inteuro and any of Inteuro's officers, directors or shareholders or
Affiliates of said persons. Schedule 4.9 contains a complete and accurate
------------
description of all material transactions between Inteuro and any of Inteuro's
officers, directors or shareholders (excluding salaries and normal and customary
expense reimbursements) between January 1, 1996 and the date of this Agreement.
4.10 Absence of Certain Changes or Events. Except as expressly
------------------------------------
contemplated by this Agreement or as disclosed on Schedule 4.10, since September
-------------
30, 1997, Inteuro has conducted its business only in the ordinary course, and
there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which has had, or could reasonably be expected to have a Material
Adverse Effect on Inteuro;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of Inteuro Common Stock, or any
repurchase, redemption or other acquisition by Inteuro of any outstanding shares
of Inteuro Common Stock or other securities of, or other ownership interests in,
Inteuro; except for such dividends or other distributions between the date
hereof and the Closing reflecting the distribution of Inteuro earnings
consistent with past practices;
(c) any split, combination or reclassification of any of Inteuro
Common Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Inteuro
Common Stock;
(d) any incurrence, assumption or guarantee by Inteuro of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices (including any such
borrowings under its existing bank credit facility);
(e) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of Inteuro which,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on Inteuro;
10
(f) any change in any method of accounting or accounting practice by
Inteuro, except for any such change required by reason of a concurrent change in
generally accepted accounting principles;
(g) except for this Agreement, any contract or commitment other than
in the ordinary course of business;
(h) any sale, assignment, transfer or other disposition of material
properties or assets, other than inventory or supplies consumed or disposed of
in the ordinary course of business;
(i) any change or anticipated change in the relationship between
Inteuro and any of its major customers or suppliers which, taken in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Inteuro;
(j) any (i) grant, except pursuant to agreements in effect on the date
of this Agreement and disclosed in a Schedule hereto, of any material severance
or termination pay to any director, officer or employee of Inteuro, (ii)
entering into of any material employment, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of Inteuro, (iii) material increase in benefits payable
under any existing severance or termination pay policies or employment
agreements or (iv), material increase in compensation, bonus or other benefits
payable to directors, officers or employees of Inteuro, other than in the
ordinary course of business consistent with past practices; or
(k) any agreement or commitment obligating Inteuro to do any of the
things described in clauses (a) through (j).
4.11 Litigation. Except as disclosed in Schedule 4.11 hereto, there is no
---------- -------------
action, suit, investigation or proceeding pending or threatened against or
affecting Inteuro or any of its properties (other than any such suit, action or
proceeding challenging the transactions contemplated by this Agreement or any
provision of this Agreement or seeking to restrain or prohibit the consummation
of the Merger) that, if determined or resolved adversely to Inteuro(in
accordance with the plaintiff's demands, if applicable), individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Inteuro.
4.12 Taxes. Each of the Inteuro Affiliated Group has filed all material
-----
tax returns and reports required to be filed by it and has paid (or Inteuro has
paid on its behalf) all of the Taxes required to be paid by it (other than
Taxes, the failure to pay which would not, individually or in the aggregate,
have a Material Adverse Effect on Inteuro), and the most recent financial
statements contained in the Inteuro Financial Statements reflect an adequate
reserve for all Taxes payable by Inteuro for all taxable periods and portions
thereof through the date of such financial statements. No deficiencies for any
Taxes have been proposed, asserted or assessed against Inteuro or any member of
the Inteuro Affiliated Group (other than deficiencies, the liability for which
would not, individually or in the aggregate, have a Material Adverse Effect on
Inteuro),
11
and no requests for waivers of the time to assess any Taxes are pending. None
of the assets or properties of Inteuro is subject to any tax lien (other than
liens for Taxes that are not yet due or that are being contested in good faith
by appropriate proceedings) except for liens which would not, individually or in
the aggregate, have a Material Adverse Effect on Inteuro.
4.13 Title to Assets. Schedule 4.13A contains a complete and accurate
--------------- --------------
list of all machinery, tools, equipment, instruments, racks, trucks,
automobiles, furniture, computers, fixtures, leasehold improvements, documents,
records, books and all other tangible personal property and real property owned
or leased by, or in the possession of, or used by Inteuro and appearing on
Inteuro's tax depreciation schedule. As of the date hereof and as of the
Effective Time, Inteuro shall hold title to its assets and properties free and
clear of all Liens, except as disclosed in Schedule 4.13B hereto.
--------------
4.14 Labor Matters. Inteuro is not a party to any collective bargaining
-------------
agreement or other labor union contract applicable to persons employed by
Inteuro. Except as disclosed in Schedule 4.14 hereto, (i) Inteuro is in
-------------
substantial compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours and
Inteuro is not engaged in any unlawful labor or employment practice nor has
received any notice of a complaint, charge or allegation to the contrary; (ii)
there is no labor strike, dispute, slowdown or work stoppage pending or
threatened against or affecting Inteuro; (iii) no present or former employee of
Inteuro has any rightful claim for wrongful discharge against Inteuro, which
could reasonably be expected to have a Material Adverse Effect on Inteuro; (iv)
no present or former employee or independent contractor of Inteuro has any
pending or threatened claim against Inteuro, which could reasonably be expected
to have a Material Adverse Effect on Inteuro, for (A) overtime pay, other than
overtime pay for the current period; (B) wages, salaries or profit sharing
(excluding wages, salaries or profit sharing for the current payroll period);
(C) vacations, time off or pay in lieu of vacation or time off, other than
vacation or time off (or pay in lieu thereof) earned in respect of the
employer's current fiscal year; (D) any violation of any statute, ordinance,
contract or regulation relating to minimum wages or maximum hours of work; (E)
discrimination against employees on any basis; (F) unlawful or wrongful
employment or termination practices; (G) unlawful retirement, termination or
labor relations practices, breach of contract or other claim arising under a
collective bargaining agreement, individual, express or implied contract, or
policy, practice or procedure manual or statement; or (H) any violation of
occupational safety or health standards, or any violation of the Worker
Adjustment Retraining and Notification Act ("WARN").
4.15 Employee Benefit Plans.
----------------------
(a) Schedule 4.15 hereto sets forth a list of all Inteuro Plans.
-------------
Except for the Inteuro Plans, with respect to all employees and former employees
of Inteuro and all dependents and beneficiaries of such employees and former
employees, (i) Inteuro does not maintain or contribute to any nonqualified
deferred compensation or retirement plans, contracts or arrangements, (ii)
Inteuro does not maintain or contribute to any qualified defined contribution
plans (as defined in Section 3(34) of ERISA, or Section 414(i) of the Code),
(iii) Inteuro does
12
not maintain or contribute to any qualified defined benefit plans (as defined in
Section 3(35) of ERISA or Section 414(j) of the Code) and (iv) Inteuro does not
maintain or contribute to any employee welfare benefit plans (as defined in
Section 3(1) of ERISA).
(b) The Inteuro Plans comply in all material respects with the
applicable requirements of ERISA and the Code, except for such failures to
comply which individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect on Inteuro.
(c) Inteuro has delivered to Keystone true and complete copies of (i)
all Inteuro Plans, (ii) the most recent determination letter, if any, received
by Inteuro from the Internal Revenue Service regarding the Inteuro Plans, (iii)
the most recent financial statements and annual report or return for the Inteuro
Plans and (iv) the most recently prepared actuarial valuation reports for the
Inteuro Plans, if any.
(d) Inteuro does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. Inteuro has no
actual or potential liabilities under Section 4201 of ERISA for any complete or
partial withdrawal from a multi-employer plan. Inteuro has no actual or
potential liability for death or medical benefits after separation from
employment, other than (i) death benefits under the Inteuro Plans (whether or
not subject to ERISA) and (ii) health care continuation benefits described in
Section 4980B of the Code.
(e) Neither Inteuro nor any of its directors, officers, employees or
other "fiduciaries," as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Inteuro Plans which would subject Inteuro,
Keystone, the Surviving Corporation or any of their respective directors,
officers or employees to any liability under ERISA or any applicable law, which
liability would have a Material Adverse Effect on Inteuro.
(f) Inteuro has not incurred any liability for any tax or civil
penalty or any disqualification of any employee benefit plan (as defined in
Section 3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6
of Title I and Section 502(i) of ERISA, which liability would have a Material
Adverse Effect on Inteuro.
(g) 4.16 Compliance with Laws. Except as disclosed on Schedule 4.16
-------------------- -------------
hereto, Inteuro (a) is not in violation of, nor has it violated, any applicable
provisions of any laws, statutes, ordinances or regulations or (b) has not
received any notice from any Governmental Entity or any other Person that
Inteuro is in violation of, or has violated, any applicable provisions of any
laws, statutes, ordinances or regulations, except in the case of clauses (a) and
(b), for violations, individually or in the aggregate, which have not had and
could not reasonably be expected to have a Material Adverse Effect on Inteuro.
Inteuro has all permits, licenses and franchises from Governmental Entities
required to conduct its business as now being conducted, except for such
permits, licenses and franchises the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect on Inteuro.
13
4.17 Brokers. No broker, investment banker, financial advisor or other
-------
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Inteuro or the
Inteuro Shareholders and not entered into pursuant to the provisions of this
Agreement.
4.18 Vote Required. The affirmative vote of a majority of the votes that
-------------
holders of the outstanding Inteuro Shares are entitled to cast at a meeting
called for the purpose of approving the Merger and this Agreement is the only
vote of holders of any Inteuro capital stock required to approve this Agreement,
the Merger and the transactions contemplated hereby.
4.19 Environmental Matters. Except as set forth on Schedule 4.19,
--------------------- -------------
(a) all facilities and property (including underlying groundwater)
owned or leased by Inteuro, or owned by the Inteuro Shareholders and currently
leased to Inteuro, have been operated by Inteuro or other leasees of the
properties from the Inteuro Shareholders in material compliance with all
Environmental Laws;
(b) there have been no past, and there are no pending or threatened
(i) claims, complaints, notices or requests for information
received by Inteuro with respect to any alleged violation of any
Environmental Law, or
(ii) complaints, notices or inquiries to Inteuro regarding
potential liability under any Environmental Law;
(c) there have been no releases of Hazardous Materials by Inteuro at,
on or under any property now or previously owned or leased by Inteuro that,
singly or in the aggregate, have, or may reasonably be expected to have, a
Material Adverse Effect on Inteuro;
(d) Inteuro has been issued and is in material compliance with all
permits, certificates, approvals, licenses and other authorizations relating to
environmental matters and necessary or desirable for its business except where
such failure, singly or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Inteuro;
(e) to the Knowledge of Inteuro, no property now or previously owned
or leased by Inteuro is listed or proposed for listing (with respect to owned
property only) on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list of sites requiring investigation or clean-
up;
(f) to the Knowledge of Inteuro, there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, on or under any
property now or previously owned or leased by Inteuro that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material Adverse
Effect on Inteuro;
14
(g) to the Knowledge of Inteuro, there are no polychlorinated
biphenyls or friable asbestos present at any property now or previously owned or
leased by Inteuro that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect on Inteuro; and
(h) to the Knowledge of Inteuro, no conditions exist at, on or under
any property now or previously owned or leased by Inteuro which, with the
passage of time, or the giving of notice or both, would give rise to liability
under any Environmental Law that may reasonably be expected to have a Material
Adverse Effect on Inteuro.
4.20 Trademarks, Patents and Copyrights. Except as set forth on Schedule
---------------------------------- --------
4.20, Inteuro owns or possesses adequate licenses or other valid rights to use,
----
all patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, copyrights, service marks, service xxxx rights, trade secrets,
applications to register and registrations for, the foregoing patents,
trademarks, service marks, know-how and other proprietary rights and information
used in connection with the business of Inteuro as currently conducted, and no
assertion or claim has been made in writing challenging the validity of any of
such rights. Except as set forth on Schedule 4.20, the conduct of the business
-------------
of Inteuro as currently conducted does not conflict in any way with any patent,
patent rights, license, trademark, trademark right, trade name, trade name
right, service xxxx, copyright or other proprietary right of any other Person,
Inteuro has received no claim or threat that any such conflict exists, and no
litigation, claim, suit, action, proceeding, or complaint concerning the
foregoing has been filed or is ongoing. Except as set forth in Schedule 4.20
-------------
hereto, Inteuro has the unencumbered right to sell its products and services
(whether now offered for sale or under development) free from any royalty or
other obligations to any third parties.
4.21 Contracts and Other Agreements. All contracts and agreements listed
------------------------------
on Schedule 4.21 hereto are valid, existing, in full force and effect, binding
-------------
upon Inteuro and upon the other parties thereto in accordance with their terms,
and Inteuro has paid in full or accrued all amounts now due from it thereunder
and has satisfied in full or provided for all of its liabilities and obligations
thereunder which are presently required to be satisfied or provided for, and,
except as disclosed on Schedule 4.21 hereto, is not in default under any of
-------------
them, nor to the Knowledge of Inteuro is any other party to any such contract or
other agreement in default thereunder, nor does any condition exist that with
notice or lapse of time or both would constitute a default thereunder (except
for (x) such defaults other than defaults in payment that would not,
individually or in the aggregate, have a Material Adverse Effect on Inteuro and
(y) such defaults in payment as do not exceed, individually or in the aggregate,
$10,000). Schedule 4.21 hereto sets forth a list of all material contracts and
-------------
other agreements, excluding leases for vehicles or material handling equipment
used in the ordinary course of business, to which Inteuro is a party or by or to
which Inteuro or any of its assets or properties is bound or subject, including,
without limitation, the following:
15
(a) any agreement that individually requires aggregate expenditures by
Inteuro in any one year of more than $10,000 or any agreement which by its terms
requires performance over a period exceeding one year with aggregate
expenditures of over $10,000;
(b) any indenture, trust agreement, loan agreement or note that
involves or evidences outstanding indebtedness, obligations or liabilities for
borrowed money in excess of $10,000;
(c) any lease, sublease, installment purchase or similar arrangement
for the purchase, use or occupancy of real or personal property (i) that
individually requires aggregate expenditures by Inteuro in any one year of more
than $10,000, or (ii) pursuant to which Inteuro is the lessor of any real
property which has rentals over $10,000 per year, together with the date of
termination of such leases, the name of the other party and the annual rental
payments required to be made under such leases;
(d) any agreement of surety, guarantee or indemnification, other than
(i) an agreement in the ordinary course of business with respect to obligations
in an amount not in excess of $10,000, or (ii) indemnification provisions
contained in leases not otherwise required to be disclosed;
(e) except as disclosed on Schedule 4.15, any agreement, including
-------------
without limitation employment agreements and bonus plans, relating to the
compensation of, or obligating Inteuro to make payments (whether such payments
are fixed in amount or contingent) to, (i) officers, (ii) employees, (iii)
former employees, (iv) consultants, (v) advisors or (vi) any Person who was
promised such payments;
(f) any agreement containing covenants of Inteuro not to compete in
any line of business, in any geographic area or with any Person or covenants of
any other Person not to compete with Inteuro in any line of business of Inteuro;
(g) any agreement granting or restricting the right of Inteuro to use
a trade name, trade xxxx or logo;
(h) any agreement with any customer or supplier that cannot be
terminated without penalty in excess of $10,000 by Inteuro within ninety days;
and
(i) any franchise, licensing (other than computer software
agreements, except those providing for aggregate payments exceeding $10,000) or
development agreement.
True and complete copies of all of the contracts and other agreements set forth
in Schedule 4.21 hereto (or required to be set forth therein) have been
-------------
previously provided to Keystone.
4.22 Insurance. Schedule 4.22 attached hereto contains a true and
--------- -------------
complete listing of all policies of insurance maintained by Inteuro as of the
date hereof and at all times during the
16
twenty four month period ending on the date hereof. All such policies of
insurance are in full force and effect, and true and correct copies of all such
policies of insurance have been previously provided to Keystone. Inteuro
maintains insurance in such amounts, and with respect to such liabilities and
properties, as are customary for its industry for similarly situated entities
and comparable assets.
4.23 Accounts Receivable. The accounts receivable of Inteuro were
-------------------
acquired in the ordinary course of business and to the Knowledge of Inteuro are
subject to no defenses, set-offs or counterclaims, except to the extent of the
reserves reflected in the Inteuro Financial Statements.
4.24 Inventory. The inventories of Inteuro were acquired in the ordinary
---------
course of business and to the knowledge of Inteuro are saleable in due course
under normal circumstances.
4.25 Plant, Property and Equipment. The plant, property and equipment of
-----------------------------
Inteuro presently used in, or necessary for the operation of, Inteuro's business
is in satisfactory operating condition, in a state of reasonable maintenance and
repair and is suitable for the purpose intended.
4.26 Conflicting Interest. Other than as set forth on Schedule 4.26, no
-------------------- -------------
director, officer or principal shareholder, or any Affiliates of any of such
persons, of Inteuro (i) has any pecuniary interest in any supplier or customer
of Inteuro or in any other business with which Inteuro conducts business or with
which Inteuro is in competition or (ii) is indebted to Inteuro for borrowed
money.
4.27 No Prohibited Payments. Neither Inteuro nor, to Inteuro's or Inteuro
----------------------
Shareholders' Knowledge, any officers, directors, employees, independent
contractors or agents acting on behalf of Inteuro has at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any contributions to any candidate for political office
in accordance with any applicable statute, rule, regulation or ordinance
requiring such disclosure, (ii) made any payment to any local, state, federal or
foreign governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or allowed by
applicable law, (iii) made any payment outside the ordinary course of business
to any purchasing or selling agent or person charged with similar duties of any
entity to which Inteuro sells products or renders services or from which Inteuro
buys products or services for the purpose of influencing such agent or person to
buy products or services from or sell products or services to Inteuro, or (iv)
engaged in any transaction, maintained any bank account or used any corporate
funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of Inteuro.
4.28 Minute Books. The minute books of Inteuro accurately record all
------------
actions taken by its shareholders and directors.
17
4.29 Disclosure. No representations or warranties by Inteuro or the
----------
Inteuro Shareholders contained in this Agreement, and no document, statement,
certificate or schedule furnished to Keystone in connection with the
transactions contemplated by this Agreement, contains or will contain any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements and facts contained therein not misleading. Inteuro and the
Inteuro Shareholders have provided Keystone complete and accurate documentation
in response to Keystone's disclosure requests consistent with the provisions of
this Agreement. All material facts relating to the business, operations,
properties, assets, liabilities (contingent or otherwise), and financial
condition of Inteuro have been disclosed to Keystone in this Agreement or the
Schedules attached hereto. Notwithstanding any right of Keystone to fully
investigate the affairs of Inteuro and notwithstanding any Knowledge of facts
determined or determinable by Keystone pursuant to such investigation or right
of investigation (but subject to matters disclosed in the exhibits and schedules
annexed hereto, as supplemented pursuant to Section 7.10), Keystone has the
------------
right to rely fully upon the representations, warranties, covenants and
agreements contained in this Agreement or in any exhibits and schedules annexed
hereto.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF KEYSTONE
Except as set forth in and qualified by the schedules attached hereto,
Keystone hereby makes the following representations and warranties to Inteuro
and the Inteuro Shareholders.
5.1 Corporate Existence and Power. Keystone and the Subsidiary are
-----------------------------
corporations duly incorporated, validly existing and in good standing under the
laws of their respective states of incorporation, and each corporation has all
corporate powers required to carry on its business as now conducted. Keystone
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not
have a Material Adverse Effect on Keystone. The copies of the Articles of
Incorporation and Bylaws of Keystone and the Subsidiary which have been
delivered to Inteuro by Keystone are as of the date hereof and will be at the
Effective Time, true and complete copies of the Articles of Incorporation and
Bylaws of Keystone and the Subsidiary, in each case as amended, restated and
otherwise in effect at the Effective Time.
5.2 Corporate Authorization. The execution, delivery and performance by
-----------------------
Keystone and the Subsidiary of this Agreement and the consummation by Keystone
and the Subsidiary of the transactions contemplated hereby to be consummated by
them are within each of their corporate powers and have been duly authorized by
all necessary corporate action on the part of Keystone and the Subsidiary. This
Agreement has been duly and validly executed and delivered by Keystone and the
Subsidiary and constitute legal, valid and binding agreements of Keystone and
the Subsidiary enforceable in accordance with its terms.
5.3 Governmental Authorization. The execution, delivery and performance
--------------------------
by Keystone and the Subsidiary of this Agreement and the consummation by
Keystone and the Subsidiary of the transactions contemplated hereby to be
consummated by each of them requires no action by or in respect of, or filing
with, any Governmental Entity other than (a) the filing
18
of Articles of Merger in accordance with the FCA, (b) compliance with the rules
and regulations of NASDAQ, (c) compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 and related regulations promulgated thereunder and (d)
any action or filing which the failure to obtain or make would not, individually
or in the aggregate, have a Material Adverse Effect on Keystone.
5.4 Non-Contravention. The execution, delivery and performance by
-----------------
Keystone of this Agreement does not, and the consummation by Keystone of the
transactions contemplated hereby will not, (a) contravene or conflict with the
Articles of Incorporation or Bylaws of Keystone or the Subsidiary, (b) assuming
compliance with the matters referred to in Section 5.3 above, 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 Keystone
(including, without limitation, applicable federal and state securities laws)
other than such contraventions, conflicts or violations which would not,
individually or in the aggregate, have a Material Adverse Effect on any party
hereto, (c) assuming that the consents listed on Schedule 5.4 hereto are
------------
obtained prior to the Effective Time, constitute a breach or violation of, or a
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Keystone or to a loss of any benefit
to which Keystone is entitled under any provision of, any agreement, contract or
other instrument binding upon Keystone or any license, franchise, permit or
other similar authorization held by Keystone, other than such breaches,
violations, defaults, rights or losses which would not, individually or in the
aggregate, have a Material Adverse Effect on Keystone, or (d) result in the
creation or imposition of any Lien on any asset of Keystone, other than any such
creation or imposition which would not, individually or in the aggregate, have a
Material Adverse Effect on Keystone. Schedule 5.4 sets forth a true, complete
------------
and correct list of all consents, approvals and authorizations required to be
obtained by Keystone or the Subsidiary from any third party (other than as
otherwise expressly contemplated by Section 5.3 of this Agreement) in connection
-----------
with this Agreement, the Merger and the transactions contemplated hereby.
5.5 Capitalization. The authorized capital stock of Keystone consists of
--------------
50,000,000 shares of Common Stock and 3,000,000 shares of Preferred Stock. As
of the date of this Agreement, there are outstanding 12,642,000 shares of
Keystone Common Stock and no shares of Preferred Stock. As of the date of this
Agreement, Keystone has reserved 1,100,000 shares of Keystone Common Stock for
issuance upon exercise of stock options granted pursuant to the 1996 Employee
Stock Option Plan, as amended (the "Stock Option Plan"). All outstanding shares
of Keystone Common Stock are, and the shares of Keystone Common Stock to be
issued in connection with the Merger, when issued pursuant to the terms of this
Agreement, will be duly authorized, validly issued, fully paid and nonassessable
and have been or will be issued in compliance with all applicable federal and
state securities laws. The Keystone Common Stock is registered pursuant to
Section 12(g) of the Exchange Act. Except as set forth in this Section or on
Schedule 5.5 attached hereto and except for changes since the date hereof
------------
resulting from the exercise, cancellation or exchange of options granted
pursuant to the Stock Option Plan, there are outstanding (a) no shares of
Keystone Common Stock or other voting securities of Keystone, (b) no securities
of Keystone convertible into or exchangeable for shares of capital stock or
voting securities of Keystone and (c) no options or other rights to acquire from
19
Keystone, and no obligation of Keystone to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Keystone. There are no outstanding obligations of Keystone
to repurchase, redeem or otherwise acquire any Keystone Common Stock.
5.6 SEC Documents. Keystone has filed all Keystone SEC Documents required
-------------
to be filed by it prior to the date hereof. As of their respective dates, the
Keystone SEC Documents complied as to form in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Keystone SEC Documents.
5.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Keystone SEC Documents, and except as expressly contemplated by this Agreement,
since the date of the most recent unaudited financial statements included in the
Keystone SEC Documents, Keystone has conducted its business only in the ordinary
course, and there has not been:
(a) any event, occurrence or development of a state of circumstances
or facts which has had a Material Adverse Effect on Keystone;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of Keystone Common Stock, or any
repurchase, redemption or other acquisition by Keystone of any outstanding
shares of Keystone Common Stock or other securities of, or other ownership
interests in, Keystone;
(c) any split, combination or reclassification of any of Keystone
Common Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Keystone
Common Stock;
(d) any incurrence, assumption or guarantee by Keystone of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices (including any such
borrowings under its existing bank credit facility);
(e) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business assets of Keystone which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on Keystone;
(f) any change in any method of accounting or accounting practice by
Keystone, except for any such change required by reason of a concurrent change
in generally accepted accounting principles; or
(g) any (i) grant, except pursuant to agreements in effect on the date
of this Agreement and disclosed in a Schedule hereto, of any material severance
or termination pay to any director, officer or employee of Keystone, (ii)
entering into any material employment, deferred compensation or other similar
agreement (or any amendment to any such existing
20
agreement) with any director, officer or employee of Keystone, (iii) material
increase in benefits payable under any existing severance or termination pay
policies or employment agreements or (iv) other than in the ordinary course of
business consistent with past practices, material increase in compensation,
bonus or other benefits payable to directors, officers or employees of Keystone.
5.8 Litigation. Except as disclosed in the Keystone SEC Documents, there
----------
is no action, suit, investigation or proceeding pending or threatened against or
affecting Keystone or any of its properties (other than any such suit, action or
proceeding challenging the transactions contemplated by this Agreement or any
provision of this Agreement or seeking to restrain or prohibit the consummation
of the Merger) that, if determined or resolved adversely to Keystone (in
accordance with the plaintiff's demands, if applicable), individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Keystone.
5.9 Compliance with Laws. Except as disclosed in the Keystone SEC
--------------------
Documents, Keystone (a) is not in violation of, nor has it violated, any
applicable provisions of any laws, statutes, ordinances or regulations and (b)
has not received any notice from any Governmental Entity or any other Person
that Keystone is in violation of, or has violated, any applicable provisions of
any laws, statutes, ordinances or regulations, except in the case of clauses (a)
and (b), for violations, individually or in the aggregate, which have not had
and could not reasonably be expected to have a Material Adverse Effect on
Keystone. Keystone has all permits, licenses and franchises from Governmental
Entities required to conduct its business as now being conducted, except for
such permits, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect on Keystone.
5.10 Brokers. No broker, investment banker, financial advisor or other
-------
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Keystone.
5.11 Disclosure. No representations or warranties by Keystone contained in
----------
this Agreement, and no document, statement, certificate or schedule furnished to
Inteuro or the Inteuro Shareholders in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements and facts contained therein not misleading. Keystone has provided
Inteuro and the Inteuro Shareholders complete and accurate documentation in
response to such Persons' disclosure requests consistent with the provisions of
this Agreement. All material facts relating to the business, operations,
properties, assets, liabilities (contingent or otherwise), and financial
condition of Keystone have been disclosed to Inteuro and the Inteuro
Shareholders in this Agreement, the Schedules attached hereto or in the Keystone
SEC Documents. Notwithstanding any right of Inteuro and the Inteuro
Shareholders to fully investigate the affairs of Keystone and notwithstanding
any Knowledge of facts determined or determinable by Inteuro and the Inteuro
Shareholders pursuant to such investigation or right of investigation (but
subject to matters disclosed in the exhibits and schedules annexed hereto, as
21
supplemented pursuant to Section 7.10), Inteuro and the Inteuro Shareholders
------------
have the right to rely fully upon the representations, warranties, covenants and
agreements contained in this Agreement or in any exhibits and schedules annexed
hereto.
ARTICLE VI - COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Business by Inteuro. Except as contemplated by this
------------------------------
Agreement, from the date hereof until the Effective Time, Inteuro shall, and
each of the Inteuro Shareholders shall use their best efforts to cause Inteuro
to, conduct its business in the ordinary course consistent with past practice
and shall use its and their best efforts to preserve intact its business
organizations and relationships with third parties and to keep available the
services of its present officers and employees. Without limiting the generality
of the foregoing, except as provided in this Agreement, from the date hereof
until the Effective Time, Inteuro will not, and the Inteuro Shareholders will
not permit Inteuro to, without the prior written approval of Keystone in each
instance:
(a) amend its Articles of Incorporation, Bylaws or other comparable
charter or organizational documents;
(b) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any Inteuro
Common Stock; except for such dividends or other distributions reflecting the
distribution of Inteuro earnings consistent with past practices;
(c) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any portion of the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof except in the ordinary course of business
consistent with past practice or (ii) any assets that are material, individually
or in the aggregate, to Inteuro, except purchases of inventory in the ordinary
course of business consistent with past practice;
(d) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, except in
the ordinary course of business consistent with past practice;
(e) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Inteuro, guarantee
any debt securities of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another Person or
enter into any arrangement having the economic effect of any of the foregoing,
except for short-term borrowings incurred in the ordinary course of business
consistent with past practice, or (ii) make any loans, advances or capital
contributions to, or investments in, any other Person, other than (A) to Inteuro
or (B) advances to employees in accordance with past practice;
22
(f) make or agree to make any new capital expenditure or expenditures
which, individually, is in excess of $50,000 or, in the aggregate, are in excess
of $100,000;
(g) make any material tax election or settle or compromise any
material tax liability;
(h) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent Inteuro Financial Statements or incurred in the
ordinary course of business consistent with past practice, or waive any material
benefits of, or agree to modify in any material respect, any confidentiality,
standstill or similar agreements to which Inteuro is a party;
(i) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which Inteuro is a party or
waive, release or assign any material rights or claims;
(j) enter into any contracts, agreements, arrangements or
understandings relating to the distribution, sale or marketing by third parties
of Inteuro's products or products licensed by Inteuro except in the ordinary
course of business consistent with past practice;
(k) except as required to comply with applicable law, (i) adopt,
enter into, terminate or amend any bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation or
other plan, trust arrangement or fund for the benefit or welfare of any
director, officer or current or former employee, (ii) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or employee (except for normal increases or bonuses in the ordinary course of
business consistent with past practice), (iii) pay any benefit not provided for
under a Inteuro Plan, (iv) except as permitted in clause (ii), grant any awards
under any bonus, incentive, performance or other compensation plan or
arrangement or Inteuro Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Inteuro Plans
or agreement or awards made thereunder) or (v) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Inteuro Plan;
(l) make any change in any method of accounting or accounting
practice or policy other than those required by generally accepted accounting
principles;
(m) pay all trade and other payables other than on a basis consistent
with past practice; or
23
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 Conduct of Business by Keystone. Except as contemplated by this
-------------------------------
Agreement, from the date hereof until the Effective Time, Keystone shall conduct
its business in the ordinary course consistent with past practice and shall use
its best efforts to preserve intact its business organizations and relationships
with third parties and to keep available the services of its present officers
and employees.
6.3 Other Action. Inteuro and Keystone shall not take any action that
------------
would, or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of the representations
and warranties that are not so qualified becoming untrue in any material respect
or (iii) any of the conditions to the Merger and consummation of the
transactions contemplated by this Agreement set forth in Article VIII below not
being satisfied.
6.4 No Solicitation of Transactions. Inteuro and the Inteuro Shareholders
-------------------------------
shall, and shall direct and use its and their commercially reasonable efforts to
cause Inteuro's officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it) not to initiate, solicit or knowingly encourage, directly or
indirectly (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction, or enter into or continue discussions or
negotiations with any Person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize any of its officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative retained by it
to take any such action, and Inteuro shall notify Keystone of all inquiries or
proposals which Inteuro may receive relating to any of such matters and if such
inquiry or proposal is in writing, shall deliver to Keystone a copy of such
inquiry or proposal.
6.5 Interim Financial Information. Inteuro shall provide to Keystone, not
-----------------------------
later than December 29, 1997, copies of its internally prepared financial
statements for the two and eleven month periods ending November 30, 1997.
6.6 Aggregate Indebtedness. Immediately prior to the Closing, Inteuro
----------------------
shall furnish Keystone with a certificate representing the aggregate
indebtedness of Inteuro and CBC for purposes of calculating the Exchange Ratio
as defined in Section 1.15 above.
------------
ARTICLE VII - ADDITIONAL AGREEMENTS
7.1 Access to Information. Subject to Section 7.2 below, from the date
--------------------- -----------
hereof to the Effective Time, each of Keystone and Inteuro shall provide to the
other access to all information and documents which the other may reasonably
request regarding the business, assets, liabilities, employees and other aspects
of the Other Party and their respective subsidiaries, other than such
24
information and documents that in the opinion of such Other Party's legal
counsel may not be disclosed under applicable law.
7.2 Confidentiality. Neither Inteuro, on the one hand, nor Keystone, on
---------------
the other hand, shall release, publish, reveal or disclose, directly or
indirectly, any Evaluation Material of the Other Party, except (a) to such of
its directors, officers, employees, financial advisors, legal counsel,
accountants or other agents, advisors or representatives as shall require access
thereto on a need-to-know basis for the purpose of the transactions contemplated
by this Agreement, so long as such Persons are informed by the revealing party
of the confidential nature of such information and are directed by it to treat
such information confidentially, (b) to such third parties as are reasonably
necessary to obtain the consents and approvals from such parties to the
transactions contemplated by this Agreement so long as such third parties are
informed by the revealing party of the confidential nature of such information
and are directed by it to treat such information confidentially, or (c) with the
prior written consent of the Other Party and then only to the extent specified
in such consent. The parties agree to take all reasonable precautions to
safeguard the confidentiality of the Evaluation Material. Neither Inteuro nor
Keystone shall make, or permit to be made, except in furtherance of the
transactions contemplated by this Agreement, any copies, abstracts or summaries
of the Evaluation Material of the Other Party. In addition, all such Evaluation
Material shall be used solely for the purposes of the investigations
contemplated by Section 7.1 above, and shall not be otherwise used to the
-----------
detriment of the Other Party or in competition with the Other Party. The
restrictions on disclosure of information contained in this Section 7.2 do not
-----------
extend to any item of information that (i) is publicly known at the time of its
disclosure, (ii) is lawfully received from a third party not bound in a
confidential relationship to the Other Party, (iii) is published or otherwise
made known to the public by the Other Party, (iv) was generated independently
before its receipt from the Other Party or (v) is required to be disclosed
pursuant to a governmental order or decree or other legal requirement to produce
or disclose such item of information, provided that upon receiving notice that
any such order or decree is being sought or that any such legal requirement is
applicable, such party shall promptly give the Other Party notice thereof and
such party shall cooperate with the Other Party's efforts, if any, to contest
the issuance of such order or decree or the application of such legal
requirement. Upon written request, the parties shall return or destroy all
writings, documents and materials containing Evaluation Material. Each of
Inteuro, on the one hand, and Keystone, on the other hand, understands that the
Other Party will not have an adequate remedy at law for a breach or threatened
breach by the revealing party or any of its subsidiaries of the terms of this
Section 7.2, and each party therefore agrees that if there is any such breach or
-----------
threatened breach, the Other Party may, in addition to any other legal or
equitable remedies available to it, obtain an injunction or restraining order to
enjoin the Other Party or any of its subsidiaries from the breach or threatened
breach of this Section 7.2.
-----------
7.3 Public Announcements. Each of Inteuro and Keystone shall consult with
--------------------
the Other Party before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by
25
applicable law or Keystone's listing agreement with NASDAQ, will not issue any
such press release or make any such public statement prior to such consultation.
7.4 Appropriate Action; Consents; Filings.
-------------------------------------
(a) Inteuro, the Inteuro Shareholders and Keystone shall use their
respective best efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable law or required to be taken by any Governmental Entity or
otherwise to consummate the Merger and the transactions contemplated by this
Agreement as promptly as practicable, (ii) obtain from any Governmental Entities
any consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Inteuro or Keystone in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and (iii) as promptly as practicable, make
all necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under any applicable law;
provided that Keystone and Inteuro shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the Other Party and its advisors prior to filing and, if requested,
to accept all reasonable additions, deletions or changes suggested in connection
therewith. All fees and expenses relating to compliance with the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976 by Inteuro and the Inteuro
Shareholders shall be borne by Inteuro. All fees and expenses relating to
compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 by
Keystone shall be borne by Keystone. Inteuro and Keystone shall use reasonable
best efforts to furnish to the Other Party all information required for any
application or other filing to be made pursuant to the rules and regulations of
any applicable law in connection with the transactions contemplated by the
Merger and this Agreement.
(b) (i) Inteuro and Keystone shall give any notices to third
parties, and use their reasonable best efforts to obtain any third party
consents, (A) necessary to consummate the Merger and the transactions
contemplated by this Agreement, (B) disclosed or required to be disclosed in the
schedules to this Agreement or (C) required to prevent a Material Adverse Effect
on Inteuro or Keystone.
(ii) In the event that Inteuro or Keystone shall fail to obtain
any third party consent described in subsection (b)(i) above, Inteuro or
Keystone, as appropriate, shall use its reasonable best efforts, and shall
take any such actions reasonably requested by the Other Party, to minimize
any adverse effect on Inteuro, its subsidiaries and Keystone and their
respective businesses resulting, or which could reasonably be expected to
result after the Effective Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, each of
Inteuro and Keystone shall promptly notify the Other Party of any pending or, to
the Knowledge of such
26
party, threatened action, proceeding or investigation by any Governmental Entity
or any other Person (i) challenging or seeking material damages in connection
with the Merger or the transactions contemplated by this Agreement or (ii)
seeking to restrain or prohibit the consummation of the Merger or otherwise
limit the right of Keystone or, to the Knowledge of such first party, any
subsidiary of Keystone to own or operate all or any portion of the businesses or
assets of Inteuro, which in either case is reasonably likely to have a Material
Adverse Effect on Keystone.
(d) Each party shall execute and deliver on and after the execution
of this Agreement such further documents and instruments and take such other
actions as the Other Party may reasonably request to implement and effect the
purposes of and transactions contemplated by this Agreement.
7.5 State Statutes. If any State Takeover Laws shall become applicable to
--------------
the transactions contemplated by this Agreement, each of Inteuro and Keystone,
as the case may be, and their respective boards of directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effects of such State Takeover Law on
the transactions contemplated by this Agreement.
7.6 Employment Contracts. The parties shall use their respective
--------------------
reasonable best efforts to cause the Surviving Corporation to enter into
employment contracts to be effective as of the Effective Time with Xxxx Xxxxxxxx
and Xxxxxx Xxxx in substantially the form attached hereto as Exhibits 7.6-1 and
--------------
7.6-2, respectively.
-----
7.7 Indemnification.
---------------
(a) Indemnification by the Inteuro Shareholders. Subject to the
-------------------------------------------
limitations set forth in Section 7.7(d) below, the Inteuro Shareholders, jointly
--------------
and severally, shall indemnify and hold Keystone harmless at all times from and
after the date of this Agreement against and in respect of all payments,
damages, demands, claims, losses, obligations, liabilities, costs and expenses,
including but not limited to, reasonable attorneys' fees and costs ("Claims")
which Keystone may suffer or incur in connection with any breach by Inteuro or
the Inteuro Shareholders of any of their respective representations, warranties
or covenants in this Agreement.
(b) Indemnification by Keystone. Subject to the limitations set
---------------------------
forth in Section 7.7(d) below, Keystone shall indemnify and hold Inteuro and the
--------------
Inteuro Shareholders harmless at all times from and after the date of this
Agreement, against and in respect of all Claims which Inteuro or the Inteuro
Shareholders may suffer or incur in connection with any breach by Keystone of
any of its representations, warranties or covenants in this Agreement.
(c) Third Party Claims. If a claim by a third party is made against
------------------
any of the indemnified parties, and if any of the indemnified parties intends to
seek indemnity with respect
27
to such claim under this Section 7.7, such indemnified party shall promptly
-----------
notify the indemnifying party of such claim. The indemnifying party shall have
thirty (30) days after receipt of the above-mentioned notice to undertake,
conduct and control, through counsel of such party's own choosing (subject to
the consent of the indemnified party, such consent not to be unreasonably
withheld) and at such party's expense, the settlement or defense of it, and the
indemnified party shall cooperate with the indemnifying party in connection with
such efforts; provided that: (i) the indemnifying party shall not by this
Agreement permit to exist any lien, encumbrance or other adverse charge upon any
asset of any indemnified party, (ii) the indemnifying party shall permit the
indemnified party to participate in such settlement or defense through counsel
chosen by the indemnified party, provided that the fees and expenses of such
counsel shall be borne by the indemnified party, and (iii) the indemnifying
party shall agree promptly to reimburse the indemnified party for the full
amount of any loss resulting from such claim and all related expense incurred by
the indemnified party pursuant to this Section. So long as the indemnifying
party is reasonably contesting any such claim in good faith, the indemnified
party shall not pay or settle any such claim. If the indemnifying party does
not notify the indemnified party within thirty (30) days after receipt of the
indemnified party's notice of a claim of indemnity under this Section that such
party elects to undertake the defense of such claim, or does not actively
prosecute such defense thereafter, the indemnified party shall have the right to
contest, settle or compromise the claim in the exercise of the indemnified
party's exclusive discretion at the expense of the indemnifying party.
(d) Limitations. Notwithstanding anything to the contrary contained
-----------
in this Agreement, a party shall be liable for any Claim only to the extent that
(i) such Claim, together with all other Claims for which such party is liable
under this Agreement and under the Agreement and Plan of Merger among Keystone,
the Subsidiary, CBC and the CBC Shareholders (the "CBC Merger Agreement"),
exceeds $500,000, and (ii) written notice of such Claim, describing the subject
matter thereof in reasonable detail, shall have been delivered to such party
within the applicable period set forth below: (A) with respect to a Claim
arising from the breach of the representations and warranties contained in
Section 4.7, not later than thirty (30) days after the first issuance of audited
-----------
financial statements of Keystone following the Merger, (B) with respect to a
Claim arising from a breach of the representations and warranties contained in
the penultimate sentence of Section 4.6, the sixth anniversary of the Effective
-----------
Time, and (C) with respect to a Claim arising from a breach of any of the other
representations, warranties and covenants contained in this Agreement, the date
occurring 365 days after the Effective Time. The foregoing limitations shall
apply to each party regardless of any joint or joint and several liability borne
by such party together with any other party.
(e) Limits Applicable to General Liability. The indemnification
--------------------------------------
provided in this Section 7.7 is not the exclusive remedy of any party with
-----------
respect to the transactions contemplated hereby; provided, that the limitations
--------
provided under subsection (d) shall apply to any Claim, whether pursuant to this
Section 7.7, in an action at law or in equity, or otherwise.
-----------
7.8 Accounting Treatment. The Inteuro Shareholders covenant and agree
--------------------
that they shall take no action that could reasonably be deemed to impair the
accounting treatment of the Merger as a "pooling".
28
7.9 Other Agreements. Keystone and each of the Inteuro Shareholders shall
----------------
at the Effective Time have entered into a Registration Rights Agreement
substantially in the form of Exhibit 7.9-1 hereto; and Inteuro and the Inteuro
-------------
Shareholders shall have entered into an Affiliate Agreement substantially in the
form of Exhibit 7.9-2 hereto.
-------------
7.10 Right to Update Schedules. Notwithstanding anything herein to the
-------------------------
contrary, Inteuro and the Inteuro Shareholders (on the one hand) and Keystone
(on the other hand) may, after the date of this Agreement, amend or supplement
the Schedules relating to their respective representations and warranties
hereunder for the purpose of disclosing transactions or occurrences arising
after the date of this Agreement and prior to the Effective Time. No
transaction or occurrence duly disclosed pursuant to this Section 7.10 shall be
------------
deemed to constitute a breach of this Agreement; provided that if the
--------
transactions and occurrences so disclosed (a) are reasonably likely to
constitute, individually or in the aggregate, a Material Adverse Effect on
Inteuro (in the case of disclosures by Inteuro and the Inteuro Shareholders),
then Keystone may terminate this Agreement in accordance with Section 9.2(b) and
--------------
without liability to Keystone; and (b) are reasonably likely to constitute,
individually or in the aggregate, a Material Adverse Effect on Keystone (in the
case of disclosures by Keystone), then Inteuro may terminate this Agreement in
accordance with Section 9.2(a) and without liability to Inteuro or the Inteuro
--------------
Shareholders.
7.11 Board of Directors. Keystone shall use its best efforts to cause the
------------------
election of Xxxx Xxxxxxxx to its Board of Directors as soon as practicable
following the Closing.
7.12 Leases. Keystone and the Inteuro Shareholders shall at the Effective
------
Time have entered into Lease Agreements substantially in the forms of Exhibits
--------
7.12-1, 7.12-2, 7.12-3 and 7.12-4 hereto.
------ ------ ------ ------
7.13 Release from Guarantees. Not later than 60 days following the
-----------------------
Closing, Keystone shall cause the Inteuro Shareholders to be released from any
and all guarantees of any indebtedness set forth on Schedule 4.13 B or Schedule
4.21 that they personally guaranteed for the benefit of Inteuro, with all such
guarantees on indebtedness being assumed by Keystone; provided that in the
event the beneficiary of any such guarantee is unwilling to permit the
assumption by Keystone of the obligations under such guarantee, Keystone shall
repay the indebtedness to which such guarantee relates together with all
interest and prepayment penalties, if any, then due and owing.
ARTICLE VIII - CONDITIONS TO THE MERGER
8.1 Conditions of Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of Inteuro and Keystone to consummate the Merger are
subject to the satisfaction upon or prior to the Closing of the following
conditions:
(a) Governmental Entity Approvals. All authorizations, consents,
-----------------------------
orders or approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any
29
Governmental Entity necessary for the consummation of the transactions
contemplated by this Agreement (including, without limitation, the expiration of
any waiting period (and any extension thereof) required under the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976) shall have been filed, expired or
been obtained.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any Governmental
Entity of competent jurisdiction nor other legal restraint or prohibition
preventing the consummation of the Merger or any other transaction contemplated
by this Agreement shall be in effect.
(c) Statutes. No action shall have been taken, and no statute, rule,
--------
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would (i) make the
consummation of the Merger illegal or (ii) render Inteuro or Keystone unable to
consummate the Merger, except for any waiting period provisions.
(d) Material Adverse Effect. Since the date of this Agreement, there
-----------------------
shall have occurred no Material Adverse Effect with respect to Keystone or
Inteuro that is the result of (i) conditions or factors generally affecting the
economy or the industry in which Inteuro or Keystone operates, or (ii) the
announcement of the Merger or actions taken in contemplation thereof.
(e) Simultaneous Closings. The Merger contemplated by the CBC Merger
---------------------
Agreement shall close simultaneously with this Merger.
8.2 Conditions of Obligation of Keystone. The obligation of Keystone to
------------------------------------
consummate the Merger is subject to the satisfaction prior to or upon the
Closing of the following conditions, unless waived by Keystone.
(a) Representations and Warranties. The representations and
------------------------------
warranties of Inteuro and the Inteuro Shareholders set forth in this Agreement,
without regard to any qualification or reference to immateriality or "Material
Adverse Effect," shall be true and correct in all respects as of the Closing
Date (subject to Section 7.10), as though made on and as of such date (provided
------------
that those representations or warranties made as of a particular date need only
be true and correct as of such date), except for any inaccuracies which,
individually or in the aggregate, have not had, and would not have, a Material
Adverse Effect on Inteuro. Keystone shall have received a certificate signed on
behalf of Inteuro by the chief executive officer and the chief financial officer
of Inteuro, and by the Inteuro Shareholders, to such effect.
(b) Performance of Obligations of Inteuro and the Inteuro
-----------------------------------------------------
Shareholders. Inteuro and the Inteuro Shareholders shall have performed in all
material respects all obligations and covenants required to be performed by them
under this Agreement prior to or as of the Closing Date, unless waived in
writing by Keystone, and Keystone shall have received a certificate signed on
behalf of Inteuro by the chief executive officer and the chief financial officer
of Inteuro, certifying as to Inteuro's performance.
30
(c) Consents. The consents, approvals and authorizations described
--------
(or required to be described) on Schedules 4.5 and 5.4 hereto shall have been
------------- ---
obtained in form and in substance reasonably satisfactory to Keystone, except
for such consents, approvals and authorizations with respect to which the
failure to obtain would not have a Material Adverse Effect on either Keystone or
the Surviving Corporation.
(d) Accounting Treatment. Keystone shall have received from Ernst &
--------------------
Young LLP an opinion dated the Effective Time in form and substance reasonably
satisfactory to Keystone that the Merger will receive "pooling" treatment for
accounting purposes.
(e) Dissenting Shareholders. Keystone shall have received evidence
-----------------------
satisfactory to Keystone that no holders of Inteuro Common Stock are entitled
to, or have, dissented from the Merger.
(f) Legal Opinion. Keystone shall have received an opinion of Xxxxxx
-------------
Xxxxxxx Xxxxxx & Xxxxxxx, XX, counsel to Inteuro and the Inteuro Shareholders,
in substantially the form attached hereto as Exhibit 8.2(f).
--------------
(g) Results of Operations. The combined results of operations of
---------------------
Inteuro and CBC (with all intercompany transactions eliminated) prepared in
accordance with generally accepted accounting principles applied on a consistent
basis with prior periods, reflect pretax income (excluding transactional costs
with respect to this Agreement) for the eleven (11) months ended November 30,
1997 in excess of $4.6 million.
8.3 Conditions of Obligation of Inteuro. The obligation of Inteuro to
-----------------------------------
effect the Merger is subject to the satisfaction prior to or upon the Closing of
the following conditions, unless waived by Inteuro:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Keystone set forth in this Agreement, without regard to any
qualification or reference to immateriality or "Material Adverse Effect," shall
be true and correct in all respects as of the Closing Date (subject to Section
-------
7.10), as though made on and as of such date (provided that those
----
representations or warranties made as of a particular date need only be true and
correct as of such date), except for any inaccuracies which, individually or in
the aggregate, have not had, and would not have, a Material Adverse Effect on
Keystone. Inteuro shall have received a certificate signed on behalf of
Keystone by the chief executive officer and the chief financial officer of
Keystone to such effect.
(b) Performance of Obligations of Keystone. Keystone shall have
--------------------------------------
performed in all material respects all obligations and covenants required to be
performed by them under this Agreement prior to or as of the Closing Date,
unless waived in writing by Inteuro and/or the Inteuro Shareholders, and Inteuro
shall have received a certificate signed on behalf of Keystone by the chief
executive officer and the chief financial officer of Keystone, certifying as to
Keystone's performance.
31
(c) Consents. The consents, approvals and authorizations described
--------
(or required to be described) on Schedules 4.5 and 5.4 hereto shall have been
------------- ---
obtained in form and substance reasonably satisfactory to Inteuro, except for
such consents, approvals and authorizations with respect to which the failure to
obtain would not have a Material Adverse Effect on either Keystone or the
Surviving Corporation.
(d) Legal Opinion. The Inteuro Shareholders shall have received an
-------------
opinion of Manatt, Xxxxxx & Xxxxxxxx, LLP, counsel to Keystone, in substantially
the form attached hereto as Exhibit 8.3(d).
--------------
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Merger may be
-----------
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval of this Agreement and the Merger by the shareholders of Keystone and
Inteuro:
(a) by mutual written consent of Keystone and Inteuro; or
(b) by either Keystone or Inteuro if either (i) the Effective Time
shall not have occurred on or before January 31, 1998; provided, however, that
the right to terminate this Agreement under this Section 9.1(b) shall not be
--------------
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date, or (ii) there shall be any law that makes
consummation of the Merger illegal or otherwise prohibited or if any court of
competent jurisdiction or Governmental Entity shall have issued an order,
decree, 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 unappealable; provided that the party seeking to terminate this
Agreement pursuant to this subsection (b)(ii) shall have complied with its
obligations under Section 7.4 above; or
-----------
(c) by Inteuro, if the Board of Directors of Keystone withdraws,
modifies or changes its approval of the Merger and this Agreement in a manner
adverse to Inteuro or shall have resolved to do any of the foregoing; or
(d) by Keystone, if the Board of Directors of Keystone shall have
withdrawn, modified or changed its approval of the Merger and of this Agreement
as a result of a determination by a majority of such directors in good faith
that failure to so withdrawn, modify or change such approval would be a breach
of the fiduciary duty of such directors; or
(e) by Inteuro, in the event that any condition in Section 8.1 or
-----------
Section 8.3 is not satisfied or waived by January 31, 1998;
-----------
(f) by Keystone, in the event that any condition in Section 8.1 or
-----------
Section 8.2 is not satisfied or waived by January 31, 1998;
-----------
32
(g) by Keystone, pursuant to clause (a) of Section 7.10; or
------------
(h) by Keystone, if Excess Indebtedness as defined in Section 1.15
------------
exceeds $3.9 million;
(i) by Inteuro, pursuant to clause (b) of Section 7.10.
------------
(j) by Inteuro, if the average closing price of Keystone Common Stock
on the NASDAQ National Market for any seven consecutive trading days falls below
$18.00 per share between the date of this Agreement and the Effective Time.
9.2 Consequences of Termination.
---------------------------
(a) In the event Keystone terminates this Agreement other than in
compliance with Section 9.1 above, or in the event Inteuro terminates this
-----------
Agreement in compliance with the provisions of Section 9.1(b)(i) above because
-----------------
the Effective Time has not occurred on or before January 31, 1998 as a result of
a material breach of this Agreement by Keystone, or in compliance with the
provisions of clause (b) of Section 7.10 or in compliance with the provisions of
------------
Section 9.1(e) to the extent arising from the failure of any condition under
--------------
Section 8.3, Keystone shall reimburse Inteuro for its reasonable and documented
-----------
fees and expenses (including reasonable attorney's fees and costs) incurred in
connection with the transactions contemplated by this Agreement, in an aggregate
amount not to exceed $150,000.
(b) In the event Inteuro terminates this Agreement other than and in
compliance with Section 9.1 above, or in the event Keystone terminates this
-----------
Agreement in compliance with the provisions of Section 9.1(b)(i) above because
-----------------
the Effective Date has not occurred on or before January 31, 1998 as a result of
a material breach of this Agreement by Inteuro or the Inteuro Shareholders, or
in compliance with the provisions of clause (a) of Section 7.10 or pursuant to
------------
Section 9.1(f) to the extent arising from the failure of any condition under
--------------
Section 8.2, Inteuro shall reimburse Keystone for its reasonable and documented
-----------
fees and expenses (including reasonable attorney's fees and costs) incurred in
connection with the transactions contemplated by this Agreement, in an aggregate
amount not to exceed $150,000.
(c) Termination of this Agreement other than as provided for in
Section 9.2(a) or 9.2(b) above shall not result in any liability on the part of
-------------- ------
any party to this Agreement. The remedies set forth in this Section 9.2 are
-----------
intended to be the sole remedies of the parties in the event that either party
terminates this Agreement for any reason.
9.3 Amendment. This Agreement may be amended by the parties hereto by
---------
action taken by or on behalf of their respective boards of directors at any time
prior to the Effective Time. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
33
9.4 Waiver. At any time prior to the Effective Time, any party hereto may
------
(a) extend the time for the performance of any obligation or other act of any
other party hereto, (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid if set forth in any instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE X - GENERAL PROVISIONS
10.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties in this Agreement and in any instrument delivered pursuant to this
Agreement shall survive the Merger subject to the limitations set forth in
Section 7.7.
-----------
10.2 Notices. All notices, requests, claims, demands and other
-------
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be deemed given if delivered personally, by
facsimile, by certified mail (postage prepaid, return receipt requested) or sent
by overnight courier (in each case, providing proof of delivery) to the parties
at the following addresses and/or facsimile numbers set forth on the signature
pages of this Agreement (or such other address or facsimile number for a party
as shall be specified in like notice).
10.3 Entire Agreement. This Agreement (including the Exhibits and
----------------
Schedules hereto) and the other documents referenced herein contain the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior arrangements and understandings, both written and oral, with
respect thereto.
10.4 Severability. It is the desire and intent of the parties that the
------------
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.5 Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other parties hereto in each instance.
34
10.6 Parties in Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
10.7 Enforcement. The parties agree that irreparable damage would occur in
-----------
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of California or in a California state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of California or
any California state court in the event any dispute arises out of this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement or the
transactions contemplated by this Agreement in any court other than a federal
court sitting in the State of California or a California state court.
10.8 Governing Law. This Agreement shall be construed in accordance with
-------------
and governed by the law of the State of California, without giving effect to the
principles of conflict of laws thereof.
10.9 Counterparts; Effectiveness. This Agreement may be signed in any
---------------------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
10.10 Further Assurances. Each of the parties hereto covenants that it
------------------
shall promptly do, execute, acknowledge, deliver, record, re-record, file, re-
file, register and re-register, any and all such further acts, documents,
instruments and agreements as may reasonably be requested by any Other Party
from time to time in order to carry out more effectively the purposes of this
Agreement.
10.11 Attorney Fees. In the event of any dispute between the parties
-------------
hereto, the prevailing party shall be entitled to recover its reasonable
attorney fees and costs from the Other Party.
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
/s/ Xxxxxxx X. Xxxxxxx
By _____________________________________________
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopier No. (000) 000-0000
INTEURO MERGER, INC.
/s/ Xxxxxxx X. Xxxxxxx
By _____________________________________________
Xxxxxxx X. Xxxxxxx, Chief Executive Officer
INTEURO PARTS DISTRIBUTORS, INC.
/s/ Xxxx Xxxxxxxx
By _____________________________________________
Xxxx Xxxxxxxx, President
0000 X.X. 00xx Xxxxx
Xxxxxx, Xxxxxxx 00000
Telecopier No. (000) 000-0000
/s/ Xxxx Xxxxxxxx
__________________________________________
XXXX XXXXXXXX
0000 XX 000xx Xxxxxx
Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000
Telecopier No. (000) 000-0000
/s/ Xxxxxx Xxxx
__________________________________________
XXXXXX XXXX
0000 Xxxxxxxx Xxxxx Xxxx
Xxxxxx, Xxxxxxx 00000
36
