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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
by and among
FLORAFAX INTERNATIONAL, INC.,
RED XXXXXX ACQUISITION CORP.,
and
XXXXXX XXXXXXX, INC.
December 9, 1998
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER........................................................................................................2
SECTION 1.1. THE MERGER.............................................................................2
SECTION 1.2. CLOSING................................................................................2
SECTION 1.3. EFFECTIVE TIME.........................................................................2
SECTION 1.4. EFFECT OF THE MERGER...................................................................2
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE
SURVIVING CORPORATION..................................................................2
SECTION 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION....................................3
SECTION 1.7. CERTIFICATE OF INCORPORATION OF RED XXXXXX.............................................3
SECTION 1.8. BY-LAWS OF RED XXXXXX..................................................................3
SECTION 1.9. DIRECTORS AND OFFICERS OF .............................................................3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES................................................................4
SECTION 2.1. CONVERSION OF SECURITIES...............................................................4
SECTION 2.2. EXCHANGE OF CERTIFICATES...............................................................5
SECTION 2.3. STOCK TRANSFER BOOKS...................................................................7
SECTION 2.4. STOCK OPTIONS..........................................................................8
SECTION 2.5. DISSENTERS' RIGHTS.....................................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................................................9
SECTION 3.1. ORGANIZATION AND GOOD STANDING.........................................................9
SECTION 3.2. SUBSIDIARIES...........................................................................9
SECTION 3.3. CAPITAL STRUCTURE......................................................................9
SECTION 3.4. AUTHORITY; NONCONTRAVENTION...........................................................10
SECTION 3.5. INFORMATION SUPPLIED; FINANCIAL STATEMENTS............................................11
SECTION 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS..................................................12
SECTION 3.7. LITIGATION............................................................................13
SECTION 3.8. COMPLIANCE WITH LAWS; PERMITS.........................................................13
SECTION 3.9. ENVIRONMENTAL MATTERS.................................................................13
SECTION 3.10. BENEFIT PLAN COMPLIANCE...............................................................14
SECTION 3.11. TAXES.................................................................................16
SECTION 3.12. NO EXCESS PARACHUTE PAYMENTS..........................................................16
SECTION 3.13. CONTRACTS.............................................................................17
SECTION 3.14. VOTING REQUIREMENTS...................................................................18
SECTION 3.15. REAL ESTATE...........................................................................18
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SECTION 3.16. GOOD TITLE TO, CONDITION AND ADEQUACY OF ASSETS.......................................19
SECTION 3.17. LABOR AND EMPLOYMENT MATTERS..........................................................19
SECTION 3.18. INSURANCE.............................................................................20
SECTION 3.19. RELATED PARTY TRANSACTIONS............................................................20
SECTION 3.20. NAMES; PRIOR ACQUISITIONS.............................................................20
SECTION 3.21. STATE TAKEOVER STATUTES...............................................................20
SECTION 3.22. BROKERS...............................................................................20
SECTION 3.23. ACCOUNTING MATTERS....................................................................21
SECTION 3.24. TAX MATTERS...........................................................................21
SECTION 3.25. OWNERSHIP OF COMPANY COMMON STOCK. ...................................................21
SECTION 3.26. YEAR 2000 COMPLIANCE..................................................................21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RED XXXXXX.....................................................................21
SECTION 4.1. ORGANIZATION AND GOOD STANDING........................................................21
SECTION 4.2. CAPITAL STRUCTURE.....................................................................22
SECTION 4.3. AUTHORITY; NONCONTRAVENTION...........................................................22
SECTION 4.4. SEC DOCUMENTS AND FINANCIAL STATEMENTS................................................23
SECTION 4.5. INFORMATION SUPPLIED..................................................................24
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS..................................................24
SECTION 4.7. LITIGATION............................................................................25
SECTION 4.8. COMPLIANCE WITH LAWS..................................................................25
SECTION 4.9. ENVIRONMENTAL MATTERS.................................................................26
SECTION 4.10. BENEFIT PLAN COMPLIANCE...............................................................27
SECTION 4.11. TAXES.................................................................................28
SECTION 4.12. NO EXCESS PARACHUTE PAYMENTS..........................................................29
SECTION 4.13. CONTRACTS.............................................................................29
SECTION 4.14. VOTING REQUIREMENTS...................................................................30
SECTION 4.15. REAL ESTATE...........................................................................30
SECTION 4.16. GOOD TITLE TO, CONDITION AND ADEQUACY OF ASSETS.......................................31
SECTION 4.17. LABOR AND EMPLOYMENT MATTERS..........................................................31
SECTION 4.18. INSURANCE.............................................................................31
SECTION 4.19. RELATED PARTY TRANSACTIONS............................................................31
SECTION 4.20. NAMES; PRIOR ACQUISITIONS.............................................................32
SECTION 4.21. STATE TAKEOVER STATUTES...............................................................32
SECTION 4.22. BROKERS...............................................................................32
SECTION 4.23. ACCOUNTING MATTERS....................................................................32
SECTION 4.24. TAX MATTERS...........................................................................32
SECTION 4.25. OWNERSHIP OF RED XXXXXX COMMON STOCK..................................................32
SECTION 4.26. INTERIM OPERATIONS OF MERGERSUB.......................................................33
SECTION 4.27. YEAR 2000 COMPLIANCE..................................................................33
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ARTICLE V
COVENANTS OF THE COMPANY.........................................................................................33
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY....................................................33
SECTION 5.2. APPROVAL BY THE COMPANY'S STOCKHOLDERS................................................35
SECTION 5.3. ACCESS TO INFORMATION.................................................................36
SECTION 5.4. AFFILIATE LETTERS.....................................................................36
SECTION 5.5. LETTER OF COMPANY'S ACCOUNTANTS.......................................................37
SECTION 5.6. COMPANY VOTING AGREEMENT..............................................................37
ARTICLE VI
COVENANTS OF RED XXXXXX AND MERGERSUB............................................................................37
SECTION 6.1. CONDUCT OF BUSINESS OF RED XXXXXX.....................................................38
SECTION 6.2. COMPLIANCE WITH NASDAQ AND
SEC REQUIREMENTS......................................................................40
SECTION 6.3. APPROVAL BY RED XXXXXX'X STOCKHOLDERS.................................................40
SECTION 6.4. ACCESS TO INFORMATION.................................................................40
SECTION 6.5. AFFILIATE LETTERS.....................................................................40
SECTION 6.6. EMPLOYMENT AGREEMENTS; COVENANT NOT TO COMPETE........................................41
SECTION 6.7. RED XXXXXX VOTING AGREEMENT...........................................................42
SECTION 6.8. LETTER OF RED XXXXXX'X ACCOUNTANTS....................................................42
ARTICLE VII
COVENANTS OF THE COMPANY, RED XXXXXX AND MERGERSUB...............................................................42
SECTION 7.1. LEGAL CONDITIONS TO MERGER............................................................42
SECTION 7.2. PREPARATION OF PROXY STATEMENT AND REGISTRATION
STATEMENT.............................................................................43
SECTION 7.3. BEST EFFORTS..........................................................................44
SECTION 7.4. NOTIFICATION OF CERTAIN MATTERS.......................................................44
SECTION 7.5. BROKERS...............................................................................44
SECTION 7.6. PUBLIC ANNOUNCEMENTS..................................................................44
SECTION 7.7. TAX AND ACCOUNTING TREATMENT..........................................................45
SECTION 7.8. INDEMNIFICATION OF OFFICERS AND DIRECTORS.............................................45
SECTION 7.9. FURTHER ASSURANCES....................................................................46
SECTION 7.10. NO SOLICITATIONS......................................................................46
ARTICLE VIII
CONDITIONS TO CLOSING............................................................................................47
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF THE COMPANY, RED
XXXXXX AND MERGERSUB..................................................................47
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SECTION 8.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY..............................................48
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF RED XXXXXX AND
MERGERSUB.............................................................................49
ARTICLE IX
TERMINATION......................................................................................................50
SECTION 9.1. TERMINATION...........................................................................50
SECTION 9.2. EFFECT OF TERMINATION.................................................................51
ARTICLE X
MISCELLANEOUS PROVISIONS.........................................................................................51
SECTION 10.1. AMENDMENT AND MODIFICATION............................................................51
SECTION 10.2. WAIVER OF COMPLIANCE; CONSENTS........................................................52
SECTION 10.3. FEES AND EXPENSES.....................................................................52
SECTION 10.4. NO THIRD-PARTY BENEFICIARIES..........................................................52
SECTION 10.5. RELIANCE ON AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES............................................................................52
SECTION 10.6. NOTICES...............................................................................52
SECTION 10.7. ASSIGNMENT............................................................................53
SECTION 10.8. GOVERNING LAW.........................................................................53
SECTION 10.9. HEADINGS..............................................................................54
SECTION 10.10. ENTIRE AGREEMENT......................................................................54
SECTION 10.11. SEVERABILITY..........................................................................54
SECTION 10.12. COUNTERPARTS..........................................................................54
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 8, 1998 (this
"Agreement"), by and among FLORAFAX INTERNATIONAL, INC., a Delaware corporation
("Red Xxxxxx"), RED XXXXXX ACQUISITION CORP., a Delaware corporation and
wholly-owned subsidiary of Red Xxxxxx ("Mergersub"), and XXXXXX XXXXXXX, INC., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("Delaware Law"), the parties desire to enter into a business combination
transaction pursuant to which Mergersub will be merged with and into the Company
(the "Merger');
WHEREAS, the Board of Directors of the Company has determined that the
Merger is fair to, and in the best interests of, the Company and its
stockholders, has unanimously adopted resolutions approving the Merger, this
Agreement and the transactions contemplated by this Agreement, and has
unanimously determined to recommend approval and adoption of this Agreement and
the Merger by the stockholders of the Company;
WHEREAS, the Board of Directors of Red Xxxxxx has determined that the
Merger is fair to, and in the best interests of, Red Xxxxxx and its
stockholders, and has unanimously adopted resolutions approving the Merger, this
Agreement and the transactions contemplated by this Agreement, and has
unanimously determined to recommend approval of the issuance of shares of common
stock, par value $0.01 per share, of Red Xxxxxx ("Red Xxxxxx Common Stock")
pursuant to the Merger by the stockholders of Red Xxxxxx;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling-of-interests business combination.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law, at the
Effective Time (as defined in Section 1.3), Mergersub shall be merged with and
into the Company, with the Company being the surviving corporation in the Merger
(the "Surviving Corporation") and thereby becoming a wholly-owned subsidiary of
Red Xxxxxx, and the separate corporate existence of Mergersub shall cease.
SECTION 1.2. CLOSING. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 9.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the closing of the Merger (the "Closing") will take place
at a date and time determined by the parties as promptly as practicable (and in
any event within two (2) business days) after satisfaction or waiver of the
conditions precedent set forth in Article VIII at the offices of Akerman,
Senterfitt & Xxxxxx, P.A., 000 X. Xxx Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx,
unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.3. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VIII, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in such form as required by, and executed in accordance
with the relevant provisions of, Delaware Law (the date and time of such filing,
or such later date or time as set forth therein, being the "Effective Time").
SECTION 1.4. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in Section 259 of the Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all property, rights, privileges,
powers and franchises of the Company and Mergersub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Mergersub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5. CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. At the Effective Time, the Certificate of Incorporation and the
ByLaws of the Company, as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation and the By-Laws of the Surviving
Corporation thereafter, unless and until amended in accordance with their terms
and as provided by law, provided, however, that the name of the Surviving
Corporation shall be changed to "GSI, Inc."
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SECTION 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At
the Effective Time, the directors of the Surviving Corporation shall be Xxxxxx
X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxxx, and the
officers of the Surviving Corporation shall be the persons who are the officers
of the Company immediately prior to the Effective Time, each to hold a
directorship or office in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation, until their respective successors have
been duly elected and qualified.
SECTION 1.7. CERTIFICATE OF INCORPORATION OF RED XXXXXX. At the
Effective Time, subject to the approval of Red Xxxxxx stockholders, the
Certificate of Incorporation of Red Xxxxxx shall be amended to change the name
of Red Xxxxxx to "Xxxxxx Xxxxxxx, Inc." and to increase the amount of authorized
shares of Red Xxxxxx Common Stock to 250,000,000 shares. Red Xxxxxx shall file a
Certificate of Amendment with the Secretary of State of the State of Delaware in
such form as required by, and executed in accordance with the relevant
provisions of, Delaware Law.
SECTION 1.8. BY-LAWS OF RED XXXXXX. At the Effective Time, the By-Laws
of Red Xxxxxx in effect as of the date hereof shall remain as the By-Laws of Red
Xxxxxx, except for such amendments as the Company may approve of.
SECTION 1.9. DIRECTORS AND OFFICERS OF RED XXXXXX. At the Effective
Time, the directors and officers of Red Xxxxxx, other than Xxxxxx X. Xxxxxxxx in
his capacity as a director, shall be removed without cause and Xxxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx and Xxxxxxx Xxxxx shall be appointed
to the Board of Directors of Red Xxxxxx. Should the Board of Directors of Red
Xxxxxx be expanded to seven or more members within one year following the
Effective Time, Xxxxxx X. Xxxxxxxx shall have the right to nominate one of such
additional directors, who shall be reasonably acceptable to the other directors.
Subject to the Company's approval, prior to the Effective Time, one or more
additional directors may be nominated for election or appointment to the Board
of Directors of Red Xxxxxx, as necessary, to comply with applicable law or
regulations of The Nasdaq Small Cap Market ("Nasdaq"). The officers of the
Company immediately prior to the Effective Time shall become the officers of Red
Xxxxxx at the Effective Time, and Xxxxx X. Xxxx shall become the President of
the Red Xxxxxx Division of Red Xxxxxx. Each shall hold a directorship and/or
office in accordance with the Certificate of Incorporation and By-Laws of Red
Xxxxxx, as amended, until their respective successors have been duly elected and
qualified.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Mergersub or
the stockholders of the Company or Mergersub:
(a) Each share of common stock, par value $0.01 per share, of
the Company ("Company Common Stock") issued and outstanding immediately prior to
the Effective Time (other than (i) any shares of Company Common Stock to be
canceled pursuant to Section 2.1(b) and (ii) shares of Company Common Stock for
which dissenter's rights of appraisal are duly asserted and perfected in
accordance with Delaware Law) shall be converted, subject to Section 2.2(d),
into the right to receive a number of shares of common stock, par value $0.01
per share, of Red Xxxxxx ("Red Xxxxxx Common Stock") equal to the Exchange Ratio
(as defined below); PROVIDED, HOWEVER, that if between the date of this
Agreement and the Effective Time the outstanding shares of Company Common Stock
or Red Xxxxxx Common Stock shall have been changed or reclassified into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares. Nothing stated in the immediately
preceding sentence shall be construed as providing the holders of Company Common
Stock or the holders of Red Xxxxxx Common Stock any preemptive or antidilutive
rights other than in the case of a stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares
occurring between the date of this Agreement and the Effective Time. At the
Effective Time, all shares of Company Common Stock issued and outstanding
immediately prior thereto shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each certificate
previously evidencing any such shares shall thereafter represent the right to
receive, upon the surrender of such certificate in accordance with the
provisions of Section 2.2, certificates evidencing such number of whole shares
of Red Xxxxxx Common Stock into which such Company Common Stock was converted in
accordance with the Exchange Ratio and any cash in lieu of fractional shares of
Red Xxxxxx Common Stock paid in consideration therefor pursuant to Section
2.2(d). The holders of such certificates previously evidencing such shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common Stock
except as otherwise provided herein or by law.
(b) Each share of Company Common Stock (if any) held in the
treasury of the Company, owned by Red Xxxxxx, or owned by any direct or indirect
wholly-owned subsidiary of Red Xxxxxx or of the Company, immediately prior to
the Effective Time shall automatically be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(c) Each share of common stock of Mergersub issued and
outstanding at the Effective Time shall be converted into one share of the
common stock, $0.01 par value per share, of the Surviving Corporation.
For purposes of this Section 2.1, the following terms shall have the
meanings set forth below:
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"Average Trading Price" means the average daily closing sales price of a
share of Red Xxxxxx Common Stock as quoted on Nasdaq, for the 45 consecutive
trading days immediately preceding the third trading day (including such third
trading day) prior to the Red Xxxxxx Meeting (as defined in Section 6.3). For
purposes of this Agreement, reference shall be made to THE WALL STREET JOURNAL
to determine such quotations, or such other authoritative source as mutually
agreed by Red Xxxxxx and the Company.
"Exchange Ratio" means (A) 1.25 if the Average Trading Price is less than
$5.00, (B) 1.30 if the Average Trading Price is greater than or equal to $5.00
but less than $6.50, and (C) 1.35 if the Average Trading Price is greater than
or equal to $6.50.
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At the Effective Time, Red Xxxxxx shall
deposit, or shall cause to be deposited, with a transfer agent or other bank or
trust company as may be designated by Red Xxxxxx, subject to the reasonable
approval of the Company (the "Exchange Agent"), for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, (i) certificates evidencing the shares of Red
Xxxxxx Common Stock issuable pursuant to Section 2.1 in exchange for outstanding
shares of Company Common Stock and (ii) upon the request of the Exchange Agent,
cash in an amount sufficient to make any cash payment in lieu of fractional
shares of Red Xxxxxx Common Stock pursuant to Section 2.2(d) (such certificates
for shares of Red Xxxxxx Common Stock, together with any dividends or
distributions to which such holders may be entitled with respect thereto
pursuant to Section 2.2(c), and cash in lieu of fractional shares of Red Xxxxxx
Common Stock being hereafter collectively referred to as the "Exchange Fund").
The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Red
Xxxxxx Common Stock contemplated to be issued pursuant to Section 2.1 out of the
Exchange Fund to holders of shares of Company Common Stock. Except as
contemplated by Section 2.2(e) hereof, the Exchange Fund shall not be used for
any other purpose. Any interest, dividends or other income earned on the
investment of cash or other property held in the Exchange Fund shall be for the
account of Red Xxxxxx. Red Xxxxxx shall pay all expenses and fees of the
Exchange Agent.
(b) EXCHANGE PROCEDURES. Red Xxxxxx shall instruct the
Exchange Agent to mail, within five (5) business days after the Effective Time,
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time evidenced outstanding shares of Company Common Stock
(the "Certificates") (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Red Xxxxxx may
reasonably specify) and (ii) instructions to effect the surrender of the
Certificates in exchange for the certificates evidencing shares of Red Xxxxxx
Common Stock and cash (if any). Upon surrender of a Certificate for cancellation
to the Exchange Agent together with such letter of transmittal, duly executed,
and such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor (A) certificates evidencing that number of whole shares of Red
Xxxxxx Common Stock that such holder
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has the right to receive in accordance with the Exchange Ratio in respect of the
shares of Company Common Stock formerly evidenced by such Certificate, (B) any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(c), and (C) cash in lieu of fractional shares of Red Xxxxxx Common
Stock to which such holder is entitled pursuant to Section 2.2(d) (the shares of
Red Xxxxxx Common Stock, and the dividends, distributions and cash described in
clauses (A), (B) and (C) being, collectively, the "Merger Consideration"), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Company Common Stock that is not registered
in the transfer records of the Company, the Merger Consideration with respect
thereto may be issued and paid in accordance with this Article II to a
transferee if the Certificate evidencing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid or by the transferee requesting such payment
paying to the Exchange Agent any such transfer tax. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration with respect thereto.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF RED
XXXXXX COMMON STOCK. No dividends or other distributions declared or made after
the Effective Time with respect to Red Xxxxxx Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Red Xxxxxx Common Stock represented
thereby and no cash payment in lieu of fractional shares of Red Xxxxxx Common
Stock shall be paid to any such holder pursuant to Section 2.2(d), until the
holder of such Certificate shall surrender such Certificate. Upon such
surrender, there shall be paid to the person or entity (hereinafter, any person
or entity being referred to as a "Person") in whose name the certificates
representing the shares of Red Xxxxxx Common Stock into which such Certificates
were converted and registered, all dividends and other distributions payable in
respect of such Red Xxxxxx Common Stock on a date after, and in respect of a
record date after, the Effective Time.
(d) FRACTIONAL SHARES. No fraction of a share of Red Xxxxxx
Common Stock shall be issued in the Merger and any such fractional share
interest shall not entitle the owner thereof to vote or to any other rights of a
stockholder of Red Xxxxxx. In lieu of any such fractional shares, each holder of
Company Common Stock upon surrender of a Certificate for exchange pursuant to
this Section 2.2 shall be paid an amount in cash (without interest), rounded to
the nearest cent, determined by multiplying (i) the per share closing sales
price of Red Xxxxxx Common Stock as quoted on Nasdaq on the date of the
Effective Time (or, if shares of Red Xxxxxx Common Stock are not quoted on
Nasdaq on the Effective Time, the first date of trading of such Red Xxxxxx
Common Stock on Nasdaq after the Effective Time) by (ii) the fractional interest
to which such holder would otherwise be entitled based on the applicable
Exchange Ratio (after taking into account all shares of Company Common Stock
then held of record by such holder).
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock for six
(6) months after the Effective Time shall be delivered to Red Xxxxxx, upon
demand, and any holders of Company
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Common Stock who have not theretofore complied with this Article II shall
thereafter look only to Red Xxxxxx for the Merger Consideration to which they
are entitled pursuant to this Article II.
(f) NO LIABILITY. None of Red Xxxxxx, the Company or the
Surviving Corporation shall be liable to any holder of shares of Company Common
Stock for any such shares of Red Xxxxxx Common Stock (or dividends or
distributions with respect thereto) from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(g) WITHHOLDING RIGHTS. Red Xxxxxx or the Exchange Agent shall
be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Red Xxxxxx or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Red Xxxxxx or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by Red Xxxxxx or the Exchange Agent.
(h) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
holder of record thereof claiming such Certificate to be lost, stolen or
destroyed and, if required by Red Xxxxxx the posting by such Person of a bond in
such reasonable amount as Red Xxxxxx may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Red Xxxxxx Common Stock, any cash in lieu of fractional shares and any unpaid
dividends and distributions on shares of Red Xxxxxx Common Stock deliverable in
respect thereof, pursuant to this Agreement.
SECTION 2.3. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
recordation of transfers of shares of the Company Common Stock thereafter on the
stock transfer books of the Company. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Red Xxxxxx in accordance with
Section 2.2(b) shall be converted into the Merger Consideration.
SECTION 2.4. STOCK OPTIONS. At the Effective Time, the Company's
obligations with respect to each outstanding Company Stock Option (as defined in
Section 3.3) to purchase shares of Company Common Stock, as amended in the
manner described in the following sentence, shall be assumed by Red Xxxxxx. The
Company Stock Options so assumed by Red Xxxxxx shall continue to have, and be
subject to, the same terms and conditions as set forth in the stock option plans
and agreements pursuant to which such Company Stock Options were issued and any
other agreements evidencing such options, as in effect immediately prior to the
Effective Time, except that from and after the Effective Time each such Company
Stock Option shall be exercisable for that number of whole shares of Red Xxxxxx
Common Stock equal to the product of the number of shares of Company Common
Stock covered by such option immediately prior to the Effective Time
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multiplied by the Exchange Ratio and rounded up to the nearest whole number of
shares of Red Xxxxxx Common Stock, with an exercise price per share equal to the
exercise price per share of such option immediately prior to the Effective Time
divided by the Exchange Ratio; PROVIDED, HOWEVER, that in the case of any option
to which Section 421 of the Code applies by reason of its qualification under
any of the requirements of Section 421 of the Code, the option price, the number
of shares purchasable pursuant thereto and the terms and conditions of exercise
thereof shall be determined in order to comply with Section 424(a) of the Code.
Red Xxxxxx shall (i) reserve for issuance the number of shares of Red Xxxxxx
Common Stock that will become issuable upon the exercise of such Company Stock
Options pursuant to this Section 2.4, (ii) promptly after the Effective Time
issue to each holder of an outstanding Company Stock Option a document
evidencing the assumption by Red Xxxxxx of the Company's obligations with
respect thereto under this Section 2.4, and (iii) promptly after the Effective
Time, prepare and file a registration statement on Form S-8 (or any successor or
other appropriate forms) with respect to the shares of Red Xxxxxx Common Stock
subject to such Company Stock Options and maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus
contained therein) for so long as such options remain outstanding and cause such
shares to be approved for quotation on Nasdaq. Nothing in this Agreement shall
accelerate the exercisability or affect the schedule of vesting with respect to
the Company Stock Options or, except as set forth on SCHEDULE 4.2, the Red
Xxxxxx Stock Options (as defined in Section 4.2).
SECTION 2.5. DISSENTERS' RIGHTS. Notwithstanding any provisions of this
Agreement to the contrary, shares of Company Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by a
Company stockholder who has not approved of the Merger by written consent or by
vote at the Company Special Meeting (as defined in Section 5.2) and, with
respect to which, appraisal rights shall have been duly demanded and perfected
in accordance with Section 262 of Delaware Law ("Dissenting Shares") shall not
be converted into a right to receive Red Xxxxxx Common Stock in accordance with
Section 2.1 hereof. The holders of Dissenting Shares shall be entitled only to
such rights as are granted by Section 262 of Delaware Law. Each holder of
Dissenting Shares who becomes entitled to payment for such Dissenting Shares
pursuant to Section 262 of Delaware Law shall receive payment therefor from the
Surviving Corporation in accordance with Delaware Law; provided, however, that
(i) if any such holder of Dissenting Shares shall have failed to establish its
entitlement to appraisal rights as provided in Section 262 of Delaware Law, (ii)
if any such holder of Dissenting Shares shall have effectively withdrawn its
demand for appraisal of such Dissenting Shares or lost its right to appraisal
and payment for its Dissenting Shares under Section 262 of Delaware Law, or
(iii) if neither any holder of Dissenting Shares nor the Surviving Corporation
shall have filed a petition demanding a determination of the value of all
Dissenting Shares within the time provided in Section 262 of Delaware Law, such
holder shall forfeit the right to appraisal of such Dissenting Shares and each
such Dissenting Share shall be treated as if such Share had been converted, as
of the Effective Time, into a right to receive, subject to the provisions of
Section 2.1 and 2.2 hereof, the Merger Consideration with respect thereto,
without interest thereon.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Red Xxxxxx that:
SECTION 3.1. ORGANIZATION AND GOOD STANDING. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed or to be in
good standing (individually or in the aggregate) would not have a Company
Material Adverse Effect (as defined in Section 8.3(b)). The Company has
delivered to Red Xxxxxx complete and correct copies of its Certificate of
Incorporation and By-Laws and the certificates of incorporation and by-laws (or
similar organizational documents) of its subsidiaries, in each case as amended
to the date hereof.
SECTION 3.2. SUBSIDIARIES. SCHEDULE 3.2 lists each subsidiary of the
Company, together with its jurisdiction of incorporation or organization. Except
as set forth on SCHEDULE 3.2, all the outstanding shares of capital stock of
each such subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company or by another subsidiary of the
Company, free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
Except for the capital stock of its subsidiaries set forth on SCHEDULE 3.2, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
SECTION 3.3. CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of forty million (40,000,000) shares of Company Common Stock.
At the close of business on December 7, 1998, (i) 18,536,038 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Common Stock
were held by the Company in its treasury, (iii) 514,500 shares of Company Common
Stock were reserved for issuance upon the exercise of outstanding stock options
("Company Stock Options") granted pursuant to the Company Stock Option Plan and
(iv) approximately 3,500,000 shares of Company Common Stock were reserved for
issuance upon the closing of certain acquisitions of floral and gift businesses
in accordance with SCHEDULE 5.1. Except as set forth above, as of the date of
this Agreement, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. A list of the
stockholders of the Company as of the date of this Agreement is set forth on
SCHEDULE 3.3(a). A list of the names of the holders of all outstanding Company
Stock Options, with the respective amounts of shares, exercise prices, vesting
dates and expiration dates thereof, as of the date of this Agreement is set
forth on SCHEDULE 3.3(b), and a copy of the Company Stock Option Plan is
attached thereto. All outstanding shares of capital stock of the Company are,
and all shares which may be
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issued pursuant to the Company Stock Options will be, when issued against
payment therefor in accordance with the terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into securities having the right to vote) on any
matters on which stockholders of the Company may vote. Except as set forth
above, as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party or by
which any of them is bound, obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any of
its subsidiaries, or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date hereof, there
are no outstanding contractual obligations which require or will require or
obligate the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries.
SECTION 3.4. AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the holders of a majority of the outstanding
shares of the Company Common Stock, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action, subject
to approval of this Agreement by the holders of a majority of the outstanding
shares of the Company Common Stock. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' generally and general equitable principles.
Except as set forth on SCHEDULE 3.4, the execution and delivery of this
Agreement by the Company does not, and performance of the Company's obligations
hereunder will not, conflict with, or result in any violation of, or constitute
a default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of the Company or any of its subsidiaries under, any
provision of (a) the Certificate of Incorporation or By-laws of the Company or
any provision of the comparable charter or organizational documents of any of
its subsidiaries, (b) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise,
or license to which the Company or any of its subsidiaries is a party or by
which their respective properties or assets are bound, or (c) subject to the
governmental filings and other matters referred to in the following sentence,
any (A) statute, law, ordinance, rule or regulation or (B) judgment, order or
decree applicable to the Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clause (b) and clause (c), any
such conflicts, violations, defaults, rights, losses or Liens that individually
or in the aggregate would not (x) have a Company Material Adverse Effect, (y)
impair in any material respect the ability of the Company to perform its
obligations under this Agreement, or (z) prevent or
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materially delay the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local government
or any court, tribunal, administrative agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Authority"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution, delivery and performance of this
Agreement by the Company, except for: (i) the filing of a premerger notification
and report form by the Company under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement; (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business;
(iii) the consents set forth on SCHEDULE 3.4; and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Company Material Adverse Effect or prevent or materially delay
the consummation of any of the transactions contemplated by this Agreement.
SECTION 3.5. INFORMATION SUPPLIED; FINANCIAL STATEMENTS. None of the
information supplied or to be supplied by the Company specifically for inclusion
in (i) the registration statement on Form S-4 to be filed with the Securities
and Exchange Commission (the "SEC") by Red Xxxxxx in connection with the
issuance of Red Xxxxxx Common Stock in the Merger (as amended or supplemented
from time to time, the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented and at the time it becomes effective under the Securities Act of
1933, as amended (the "Securities Act"), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary or make the statements therein, in light of the circumstances under
which they are made, not misleading, and (ii) the joint proxy statement to be
filed with the SEC (as amended or supplemented from time to time, the "Proxy
Statement") relating to (a) the approval by the stockholders of Red Xxxxxx at
the Red Xxxxxx Meeting (as defined in Section 6.3) of (1) the issuance of Red
Xxxxxx Common Stock pursuant to the Merger and the other transactions
contemplated by this Agreement, (2) the amendment to the Certificate of
Incorporation of Red Xxxxxx as contemplated by Section 1.7 of this Agreement,
(3) the election of new directors to the Board of Directors of Red Xxxxxx as
contemplated by Section 1.9 of this Agreement, and (4) the ratification of the
appointment of Xxxxxx Xxxxxxxx, LLP as independent auditors for Red Xxxxxx, and
(b) the approval by the stockholders of the Company at the Company Special
Meeting (as defined in Section 5.2) of the Merger and the other transactions
contemplated by this Agreement, will, at the date such Proxy Statement is first
mailed to the stockholders of Red Xxxxxx and the Company, and at the time of the
Red Xxxxxx Meeting and the Company Special Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. No representation is
made by the Company in this Section 3.5 with respect to statements made or
incorporated by reference in the Registration Statement or in the Proxy
Statement based on information supplied by Red Xxxxxx or Mergersub specifically
for inclusion or incorporation by reference in the Registration Statement or the
Proxy Statement. The financial
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statements of each of the businesses acquired by the Company underlying the pro
forma financial statements set forth on SCHEDULE 3.5, and included therein, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the period involved (except as may be
indicated therein) and fairly present, in all material respects taken as a whole
for all of the acquired businesses, the results of operations of each of such
acquired businesses for the indicated periods then ended (subject, in the case
of unaudited statements, to normal audit adjustments).
SECTION 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
on SCHEDULE 3.6, since September 30, 1998, the Company has conducted its
business only in the ordinary course, and there has not been: (i) any material
adverse change in the business, assets, results of operations, customer and
employee relations, or business prospects of the Company and its subsidiaries,
taken as a whole; (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of the Company's capital stock; (iii) any split, combination or reclassification
of any of its capital 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 its capital stock; (iv) any granting by the Company or any of its
subsidiaries to any officer of the Company or any of its subsidiaries of any
increase in compensation, except in the ordinary course of business consistent
with prior practice or as required under existing employment agreements; (v) any
granting by the Company or any of its subsidiaries to any officer of any
increase in severance or termination pay; (vi) an entry by the Company or any of
its subsidiaries into any employment, severance or termination agreement with
any officer; (vii) any damage, destruction or loss, whether or not covered by
insurance, that has had or is likely to have a Company Material Adverse Effect;
(viii) any change in accounting methods, principles or practices by the Company
materially affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting principles; or
(ix) any adoption or amendment in any material respect by the Company or any of
its subsidiaries of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or understanding in each
case maintained or contributed to, or required to be maintained or contributed
to, by the Company or its subsidiaries for the benefit of any current or former
employee, officer or director of the Company or any of its subsidiaries (each, a
"Company Benefit Plan" and, collectively, "Company Benefit Plans").
SECTION 3.7. LITIGATION. There is no suit, action or proceeding pending
or, to the Company's knowledge, threatened against the Company or any of its
subsidiaries challenging the acquisition by Red Xxxxxx or Mergersub of any
shares of the Company Common Stock or any provision of this Agreement or seeking
to restrain or prohibit the consummation of the Merger, or that, individually or
in the aggregate, could reasonably be expected to have a Company Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Authority or arbitrator outstanding against the Company or any
of its subsidiaries having, or which could reasonably be expected to have, any
such Company Material Adverse Effect.
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SECTION 3.8. COMPLIANCE WITH LAWS; PERMITS. The Company and its
subsidiaries are in compliance with all applicable statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any Governmental Authority
applicable to its business or operations, except for instances of possible
noncompliance that, individually or in the aggregate, would not have a Company
Material Adverse Effect. Each of the Company and its subsidiaries has in effect
all federal, state, local and foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights
("Permits"), necessary for it to own, lease or operate its properties and assets
and to carry on its business as now conducted, and there has occurred no default
under any such Permit, except for the absence of Permits and for defaults under
Permits which, individually or in the aggregate, would not have a Company
Material Adverse Effect. None of such Permits is or will be impaired or in any
way affected by the execution and delivery of this Agreement, or consummation of
the transactions contemplated hereby, provided that the consents or filings
referred to in Section 3.4 are obtained or made prior to the Closing.
SECTION 3.9. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.9
or as would not have a Company Material Adverse Effect:
(a) The Company and its subsidiaries is, and at all times has
been, in full compliance with, and has not been and is not in violation of or
liable under, any environmental law.
(b) Neither the Company nor its subsidiaries has any basis to
expect any actual or threatened order, notice, or other communication from (i)
any governmental body or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any facilities from which the Company
or its subsidiaries conducts its businesses, of any actual or potential
violation or failure to comply with any environmental law, or of any actual or
threatened obligation to undertake or bear the cost of any environmental,
health, and safety liabilities with respect to any of such facilities or any
other properties or assets (whether real, personal, or mixed) in which the
Company or its subsidiaries has had an interest, or with respect to any property
or facility at or to which hazardous materials were generated, manufactured,
refined, transferred, imported, used, or processed by the Company or its
subsidiaries, or from which hazardous materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(c) There are no pending or, to the knowledge of the Company,
threatened claims, encumbrances, or other restrictions of any nature, resulting
from any environmental, health, and safety liabilities or arising under or
pursuant to any environmental law, with respect to or affecting any of the
facilities of the Company or its subsidiaries or any other properties and assets
(whether real, personal, or mixed) in which the Company or its subsidiaries has
or had an interest.
(d) The Company or its subsidiaries has no basis to expect,
nor has the Company or its subsidiaries received, any citation, directive,
inquiry, notice, order, summons, warning, or other communication that relates to
hazardous activity, hazardous materials, or any alleged, actual, or potential
violation or failure to comply with any environmental law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
environmental, health, and safety liabilities
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with respect to any of the facilities of the Company or its subsidiaries or any
other properties or assets (whether real, personal, or mixed) in which the
Company or its subsidiaries had an interest, or with respect to any property or
facility to which hazardous materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company or its subsidiaries,
have been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(e) To the knowledge of the Company, there are no hazardous
materials present on or in the environment at any of the facilities of the
Company or its subsidiaries or at any geologically or hydrologically adjoining
property, including any hazardous materials contained in barrels, aboveground or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other part of such facilities
or such adjoining property, or incorporated into any structure therein or
thereon.
(f) Neither the Company nor its subsidiaries has permitted or
conducted, or is aware of, any hazardous activity conducted at facilities of the
Company or its subsidiaries or any other properties or assets (whether real,
personal, or mixed) in which the Company or its subsidiaries has or had an
interest except in full compliance with all applicable environmental laws.
SECTION 3.10. BENEFIT PLAN COMPLIANCE.
(a) SCHEDULE 3.10 contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Company Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA) and all other Benefit Plans maintained, or
contributed to, or required to be contributed to, by, or with respect to which
there is any accrued, contingent, secondary or other liability of, the Company
or any of its subsidiaries or any other Person that, together with the Company,
is treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (the Company and each such other Person, a "Company Commonly Controlled
Entity") for the benefit of any current or former employees, officers or
directors of any Company Commonly Controlled Entity. The Company will make
available to Red Xxxxxx true, complete and correct copies of (i) each Company
Benefit Plan (or, in the case of any unwritten Company Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Company Benefit Plan (if
any such report was required), (iii) the most recent summary plan description
for each Company Benefit Plan for which such summary plan description is
required, and (iv) where applicable, each trust agreement and group annuity
contract relating to any Company Benefit Plan. To the Company's knowledge, each
Company Benefit Plan has been administered in all material respects in
accordance with its terms and is in compliance with the applicable provisions of
ERISA, the Code, all other applicable laws and all applicable collective
bargaining agreements except where the failure to comply would not be reasonably
expected to result in a Company Material Adverse Effect.
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(b) All Company Pension Plans have been the subject of
determination letters from the Internal Revenue Service, or have filed a timely
application therefor, to the effect that such Company Pension Plans are
qualified and exempt from federal income taxes under Section 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked nor
has any such Company Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would adversely
affect its qualification or materially increase its costs, except where there
would not reasonably be a Company Material Adverse Effect.
(c) Except as set forth on SCHEDULE 3.10, no Company Pension
Plan is subject to Title IV of ERISA or Section 412 of the Code.
(d) No Company Benefit Plan is a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
(e) With respect to any Company Benefit Plan that is an
employee welfare benefit plan, (i) no such Company Benefit Plan is funded
through a "welfare benefits fund," as such term is defined in Section 419(e) of
the Code, (ii) each such Company Benefit Plan that is a "group health plan," as
such term is defined in Section 5000(b)(1) of the Code, complies substantially
with the applicable requirements of Section 4980B(f) of the Code, and (iii) no
such Company Benefit Plan provides post-termination employment benefits, except
as otherwise required by Section 4980B of the Code.
(f) No employee, director or independent contractor of the
Company or any of its subsidiaries will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or vesting
of any compensation or benefits under any Company Benefit Plan, including,
without limitation, the Company Stock Option Plan, as a result of the
transactions contemplated by this Agreement.
(g) Except as set forth on SCHEDULE 3.10, neither the Company
or any of its subsidiaries nor any Person acting on behalf of the Company or any
of its subsidiaries has, in contemplation of any corporate transaction involving
Red Xxxxxx, issued any written communication to, or otherwise made or entered
into any legally binding commitment with, any employees of the Company or of any
of its subsidiaries to the effect that, following the date hereof, (i) any
benefits or compensation provided to such employees under existing Company
Benefit Plans or under any other plan or arrangement will be enhanced, (ii) any
new plans or arrangements providing benefits or compensation will be adopted,
(iii) any Company Benefit Plans will be continued for any period of time, or
(iv) any plans or arrangements provided by Red Xxxxxx or Mergersub will be made
available to such employees.
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SECTION 3.11. TAXES. As used in this Section 3.11, "Taxes" shall
include all federal, state, local and foreign income, property, sales, payroll,
employee withholding, excise and other taxes, tariffs or governmental charges of
any nature whatsoever, including any interest, penalties or additions with
respect thereto. The Company and each of its subsidiaries, and each affiliated,
consolidated, combined or unitary group of which the Company or any of its
subsidiaries is or has been a member (an "Affiliated Company Group"), has filed
timely all material tax returns and reports required to be filed by the Company,
its subsidiaries or any Affiliated Company Group (or requests for extensions
have been filed timely), each such tax return is true and correct in all
material respects and has been prepared in material compliance with all
applicable laws and regulations, and the Company and each of its subsidiaries
has paid (or the Company or any Affiliated Company Group has paid on their
behalf) all Taxes required to be paid by it and them in accordance with such tax
returns. The financial statements to be supplied by the Company to be contained
in the Registration Statement will reflect an adequate reserve for all material
Taxes payable by the Company and its subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. Except as set
forth on SCHEDULE 3.11, as of the date hereof, no material deficiency or
proposed adjustment which has not been settled or otherwise resolved for any
Taxes has been asserted or assessed by any taxing authority against the Company
or any of its subsidiaries or any Affiliated Company Group. Except as set forth
on SCHEDULE 3.11, the Company and each of its subsidiaries has not consented to
extend the time in which any Taxes may be assessed or collected by any taxing
authority. None of the assets or properties of the Company or any of its
subsidiaries is subject to any material tax lien except for Taxes not yet due
and payable. Except as set forth on SCHEDULE 3.11, neither the Company nor any
of its subsidiaries is a party to or bound by any material tax allocation or tax
sharing agreement and has no current or potential material obligation to
indemnify any other Person with respect to Taxes, and is not otherwise obligated
to make payments of Taxes with respect to the activities of any other Person.
Since January 1, 1994, no material claim has been made by a taxing authority in
a jurisdiction where the Company or any of its subsidiaries do not file tax
returns that the Company or any such subsidiary is or may be subject to Taxes
assessed by such jurisdiction. As of the date hereof, the federal income tax
returns of the Company and each of its subsidiaries consolidated in such returns
have been examined or audited by the Internal Revenue Service for all years
through December 31, 1994, and the Company has not received notice of any
proposed tax audit. True, correct and complete copies of all federal and state
income tax returns filed by or with respect to the Company and each of its
subsidiaries for the past three years have been made available to Red Xxxxxx.
SECTION 3.12. NO EXCESS PARACHUTE PAYMENTS. Neither the Company nor any
of its affiliates has made any payments, is obligated to make any payments, or
is a party to any agreement that could obligate it to make any payments that
will not be deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign law).
SECTION 3.13. CONTRACTS.
(a) SCHEDULE 3.13 sets forth as of the date hereof (x) a list
of all material written and oral contracts, agreements or arrangements to which
the Company or any of its subsidiaries is a party or by which the Company or
such subsidiary or any of their respective assets is bound and (y)
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the following types of written and oral arrangements (all such written or oral
agreements, arrangements or commitments as are required to be set forth on
SCHEDULE 3.13, collectively the "Designated Contracts"), which schedule further
identifies each of the Designated Contracts which contain change of control
provisions:
(i) each partnership, joint venture or similar agreement of
the Company or any of its subsidiaries with another Person;
(ii) each contract or agreement under which the Company or any
of its subsidiaries have created, incurred, assumed or guaranteed (or
may create, incur, assume or guarantee) indebtedness of more than two
hundred fifty thousand dollars ($250,000) in principal amount or under
which the Company or any of its subsidiaries have imposed (or may
impose) a security interest or lien on any of their respective assets,
whether tangible or intangible securing indebtedness in excess of two
hundred fifty thousand dollars ($250,000);
(iii) each contract or agreement to which the Company or any
of its subsidiaries is a party which involves an obligation or
commitment to pay or be paid an amount in excess of one million dollars
($1,000,000) per year;
(iv) each contract or agreement which involves or contributes
to the Company or any of its subsidiaries aggregate annual remuneration
which is expected to exceed 5% of the Company's and its subsidiaries'
pro forma projected consolidated annual revenue for the twelve months
ending December 31, 1998;
(v) each contract or agreement relating to employment or
consulting which provides for annual compensation in excess of one
hundred thousand dollars ($100,000) and each severance, termination,
confidentiality, non-competition or indemnification agreement or
arrangement with any of the directors, officers, consultants or
employees of the Company or any of its subsidiaries;
(vi) each contract or agreement to which the Company or any of
its subsidiaries or affiliates is a party limiting, in any material
respect, the right of the Company or any of its subsidiaries prior to
the Effective Time, or the Surviving Corporation or any of its
subsidiaries or affiliates at or after the Effective Time (a) to engage
in, or to compete with any Person in, any business, including each
contract or agreement containing exclusivity provisions restricting the
geographical area in which, or the method by which, any business may be
conducted by the Company or any of its subsidiaries or affiliates prior
to the Effective Time, or the Surviving Corporation or any of its
subsidiaries or affiliates after the Effective Time or (b) to solicit
any customer or client;
(vii) all contracts or agreements between the Company or any
of its subsidiaries, and any Person controlling, controlled by or under
common control with the Company;
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(viii) all other contracts or agreements which are material to
the Company and its subsidiaries taken as a whole, or the conduct of
their respective business, other than those made in the ordinary course
of business or those which are terminable by the Company or any of its
subsidiaries upon no greater than sixty (60) days prior notice and
without penalty or other adverse consequence.
(b) All the Designated Contracts are valid, subsisting, in
full force and effect, binding upon the Company or one of its subsidiaries in
accordance with their terms, and to the knowledge of the Company binding upon
the other parties thereto in accordance with their terms. The Company and its
subsidiaries have paid in full or accrued all amounts now due from them under
the Designated Contracts and have satisfied in full or provided for all of their
liabilities and obligations under the Designated Contracts which are presently
required to be satisfied or provided for, and are not (with or without notice or
lapse of time or both) in default in any material respect under any of the
Designated Contracts nor to the knowledge of the Company is any other party to
any such Designated Contract (with or without notice or lapse of time or both)
in default in any material respect thereunder, except for any defaults that
could not be reasonably expected to have a Company Material Adverse Effect.
SECTION 3.14. VOTING REQUIREMENTS. The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock approving the
Merger and other transactions contemplated by this Agreement is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger and other transactions contemplated by this Agreement.
SECTION 3.15. REAL ESTATE.
(a) The Company and each of its subsidiaries does not own any
real property or any interest therein except as set forth on SCHEDULE 3.15(A)
(the "Owned Properties"), which Schedule sets forth the location of the Owned
Properties. With respect to each such parcel of Owned Property, except as set
forth on SCHEDULE 3.15(A): (i) the Company has good and marketable title to the
parcel of Owned Property, free and clear of any Lien other than (y) Liens for
real estate taxes not yet due and payable, or (z) recorded easements, covenants,
encumbrances and other restrictions which do not materially impair the current
use or occupancy of the property subject thereto, and any matters that would be
disclosed by an accurate and current survey of each of the other parcels of the
Owned Properties which would not materially impair the current use or occupancy
of the property so surveyed; (ii) there are no pending or threatened
condemnation proceedings, suits or administrative actions relating to the Owned
Properties materially affecting adversely the current use, occupancy or value
thereof; (iii) the legal descriptions for the parcels of Owned Property
contained in the deeds thereof describe such parcels fully and adequately, and
the Owned Properties are not located within any flood plain (such that a
mortgagee would require a mortgagor to obtain flood insurance) for which any
permits or licenses necessary to the use thereof have not been obtained; (iv)
there are no outstanding options or rights of first refusal to purchase the
parcels of Owned Property, or any portion thereof or interest therein; and (v)
there are no parties (other than the Company and its
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subsidiaries) in possession of the parcels of Owned Property except pursuant to
written leases entered into by the Company or a subsidiary thereof with respect
thereto in the capacity as landlord.
(b) SCHEDULE 3.15(B) sets forth a list of all material leases,
licenses or similar agreements to which the Company or its subsidiaries is a
party, which are for the use or occupancy of real estate owned by a third party
and which are material to the operations or the business of the Company and its
subsidiaries taken as a whole ("Leases")(copies of which have previously been
furnished to Red Xxxxxx), in each case, setting forth (A) the lessor and lessee
thereof, and (B) the street address of each property covered thereby (the
"Leased Premises"). The Leases are in full force and effect and have not been
amended, and neither the Company or its subsidiaries nor, to the knowledge of
the Company, any other party thereto is in material default or material breach
under any such Lease. No event has occurred which, with the passage of time or
the giving of notice or both, would cause a breach of or default under any of
such Leases, except for breaches or defaults which in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.16. GOOD TITLE TO, CONDITION AND ADEQUACY OF ASSETS. Except
as set forth on SCHEDULE 3.16, the Company and its subsidiaries have good title
to all of their respective Assets (as hereinafter defined), free and clear of
any Liens or restrictions on use. The Assets constitute, in the aggregate, all
of the assets and properties necessary for the conduct of the business of the
Company and its subsidiaries in the manner in which and to the extent to which
such business is currently being conducted. All vehicles, machinery, equipment,
tools, supplies, leasehold improvements, furniture and fixtures constituting
part of the Assets and which are used by or located on the premises of the
Company or its subsidiaries, and which are currently in use or necessary for the
business and operations of the Company or its subsidiaries, are in operating
condition, normal wear and tear excepted. For purposes of this Agreement, the
term "Assets" means all of the properties and assets owned by the Company and
its subsidiaries as of the date hereof, whether personal or mixed, tangible or
intangible, wherever located.
SECTION 3.17. LABOR AND EMPLOYMENT MATTERS. SCHEDULE 3.17 sets forth
the name, address, and social security number of each of the executive officers
of the Company and its subsidiaries. The current rate of compensation of each of
the executive officers of the Company and its subsidiaries has been previously
provided to Red Xxxxxx. Neither the Company nor any of its subsidiaries is a
party to or bound by any collective bargaining agreement or any other agreement
with a labor union. There is no pending or threatened labor dispute, strike or
work stoppage which affects or which may affect the business of the Company or
any of its subsidiaries. As of the date hereof, the Company is not aware that
any officer, key employee or group of employees has any plans to terminate his
or their employment with the Company or any of its subsidiaries as a result of
the Merger or otherwise.
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SECTION 3.18. INSURANCE. SCHEDULE 3.18 sets forth a list of all
insurance policies maintained as of the date hereof by the Company and its
subsidiaries. There are valid and enforceable policies of insurance covering the
respective properties, assets and businesses of the Company and its subsidiaries
against risks of the nature normally insured against by entities in the same or
similar lines of business and in coverage amounts typically and reasonably
carried by such entities. Such policies are in full force and effect, and all
premiums due thereon have been paid. None of such policies will lapse or
terminate as a result of the transactions contemplated by this Agreement. The
Company has not failed to give, in a timely manner, any notice required under
any of such policies to preserve its material rights thereunder.
SECTION 3.19. RELATED PARTY TRANSACTIONS. Except as set forth on
SCHEDULE 3.19, none of the officers or directors of the Company, and no Person
owning of record or beneficially more than 5% of the Company Common Stock, or
any members of their immediate families, has been a party to any transaction, or
series of similar transactions, with the Company or any of its subsidiaries, in
which the amount involved exceeds sixty thousand dollars ($60,000) per annum,
and in which any such Persons had or will have a direct or indirect material
interest.
SECTION 3.20. NAMES; PRIOR ACQUISITIONS. All names under which the
Company and its subsidiaries do business as of the date hereof are specified on
SCHEDULE 3.20. Except as set forth on SCHEDULE 3.20, neither the Company nor any
of its subsidiaries has changed its name or used any assumed or fictitious name,
or been the surviving entity in a merger, acquired any business or changed its
principal place of business or chief executive office, within the past year.
SECTION 3.21. STATE TAKEOVER STATUTES. The Board of Directors of the
Company has approved the Merger and this Agreement, and such approval is
sufficient to render inapplicable to this Agreement, the Merger and the other
transactions contemplated by this Agreement, the provisions of Section 203 of
the Delaware Law, to the extent, if any, such provisions of such Section 203
would otherwise be applicable to this Agreement, the Merger and the other
transactions contemplated by this Agreement. Less than 500 residents of the
State of Florida are employees of the Company and its subsidiaries, so as to
render inapplicable to this Agreement, the Merger and the other transactions
contemplated by this Agreement, the provisions of Section 607.0903 of the
Florida Business Corporation Act, to the extent, if any, such provisions of such
Section 607.0903 would otherwise be applicable to this Agreement, the Merger and
the other transactions contemplated by this Agreement.
SECTION 3.22. 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 the Company,
except that the Company has retained Xxxxx & Company as a financial advisor. A
true and correct copy of the Company's retainer agreement with Xxxxx & Company
has been delivered to Red Xxxxxx.
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SECTION 3.23. ACCOUNTING MATTERS. Neither the Company nor any of its
affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
Red Xxxxxx or any of its affiliates) would prevent Red Xxxxxx from accounting
for the business combination to be effected by the Merger as a pooling of
interests.
SECTION 3.24. TAX MATTERS. Neither the Company nor any of its
affiliates has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
Red Xxxxxx or any of its affiliates) would prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a)(2)(E) of the Code.
SECTION 3.25. OWNERSHIP OF COMPANY COMMON STOCK. As of the date hereof,
except for the voting proxies granted to Red Xxxxxx as described in Section 5.6
and the persons listed on SCHEDULE 3.25, no person nor any of the Company's
affiliates or associates (as such terms are defined under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (i) beneficially owns,
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding providing for the acquisition, holding, voting or disposition of,
in each case, shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for capital stock of the Company
which in the aggregate represent 10% or more of the outstanding shares of the
Company Common Stock after giving effect to the conversion, exercise or exchange
of all such securities beneficially owned by the Company and its affiliates and
associates which are convertible into or exercisable or exchangeable for capital
stock of the Company.
SECTION 3.26. YEAR 2000 COMPLIANCE. The software and hardware operated
by the Company and its subsidiaries (but not necessarily those operated or
provided by vendors) are capable of providing or are being tested, and, if
necessary, will be adapted or replaced to provide uninterrupted millennium
functionality to record, store, process and present calendar dates falling on or
after January 1, 2000 and date-dependent data in substantially the same manner
and with the same functionality as such software records, stores, processes and
presents such calendar dates and date- dependent data as of the date hereof,
except for the failure to have such capability which would not, individually or
in the aggregate, be reasonably likely to have a Company Material Adverse
Effect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RED XXXXXX
Red Xxxxxx hereby represents and warrants to the Company that:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. Each of Red Xxxxxx and its
subsidiaries, including Mergersub, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it was
incorporated or organized and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of Red Xxxxxx and its
subsidiaries, including Mergersub, is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed or to be in good standing (individually or in the
aggregate) would not have a Red Xxxxxx Material Adverse Effect (as defined in
Section 8.2(b)). Red Xxxxxx has delivered to the Company complete and correct
copies of the Certificate of Incorporation and ByLaws of Red Xxxxxx and its
subsidiaries, including Mergersub, in each case as amended to the date hereof.
Mergersub is controlled by Red Xxxxxx within the meaning of Section 368(a)(2)(E)
of the Code.
SECTION 4.2. CAPITAL STRUCTURE. The authorized capital stock of Red
Xxxxxx consists 70,000,000 shares of Red Xxxxxx Common Stock and 600,000 shares
of preferred stock, par value $10.00 per share ("Red Xxxxxx Preferred Stock").
At the close of business on December 7, 1998, (i) 8,003,602 shares of Red Xxxxxx
Common Stock were issued and outstanding, (ii) 519,975 shares of Red Xxxxxx
Common Stock were held by Red Xxxxxx in its treasury, (iii) 936,500 shares of
Red Xxxxxx Common Stock were reserved for issuance upon the exercise of
outstanding stock options ("Red Xxxxxx Stock Options") granted pursuant to Red
Xxxxxx'x various stock option plans and otherwise, (iv) 348,706 shares of Common
Stock were reserved for issuance upon the exercise of outstanding and vested
warrants, and (v) no shares of Red Xxxxxx Preferred Stock were issued or
outstanding. A list of the names of the holders of all outstanding Red Xxxxxx
Stock Options and of all outstanding warrants to purchase shares of Red Xxxxxx
Common Stock, with the respective amounts of shares, exercise prices, vesting
dates, acceleration provisions and expiration dates thereof, as of the date of
this Agreement is set forth on SCHEDULE 4.2, and copies of all of Red Xxxxxx'x
Stock Option Plans are attached thereto. All outstanding shares of capital stock
of Red Xxxxxx are, and all shares which may be issued pursuant to outstanding
options and warrants will be, when issued in accordance with the terms thereof,
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of Red Xxxxxx having the right to vote (or convertible into securities having
the right to vote) on any matters on which stockholders of Red Xxxxxx may vote.
Except as set forth above, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Red Xxxxxx or any of its
subsidiaries is a party or by which any of them is bound, obligating Red Xxxxxx
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Red Xxxxxx or of any of its subsidiaries, or obligating Red Xxxxxx or any of
its subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, there are not any outstanding contractual
obligations which require or will require or obligate Red Xxxxxx or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of Red Xxxxxx or any of its subsidiaries.
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SECTION 4.3. AUTHORITY; NONCONTRAVENTION. Red Xxxxxx and Mergersub have
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Red Xxxxxx and Mergersub have been
duly authorized by all necessary corporate action on the part of Red Xxxxxx and
Mergersub, respectively. This Agreement has been duly executed and delivered by
Red Xxxxxx and Mergersub and constitutes a valid and binding obligation of Red
Xxxxxx and Mergersub, enforceable against Red Xxxxxx and Mergersub in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights generally
and general equitable principles. Except as set forth on SCHEDULE 4.3, the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Red Xxxxxx or any of its
subsidiaries under, any provision of (a) the Certificate of Incorporation or
By-laws of Red Xxxxxx or any provision of the comparable charter or
organizational documents of any of its subsidiaries, (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, or license applicable to Red Xxxxxx
or any of its subsidiaries or their respective properties or assets, or (c)
subject to the governmental filings and other matters referred to in the
following sentence, any (A) statute, law, ordinance, rule or regulation or (B)
judgment, order or decree to which Red Xxxxxx or any of its subsidiaries is a
party or by which their respective properties or assets are bound, other than,
in the case of clause (b) and clause (c), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate would
not (x) have a Red Xxxxxx Material Adverse Effect, (y) impair in any material
respect the ability of Red Xxxxxx or Mergersub to perform its obligations under
this Agreement, or (z) prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority, is required by or with respect to Red Xxxxxx or any of its
subsidiaries in connection with the execution, delivery and performance of this
Agreement by Red Xxxxxx or Mergersub, except for: (i) the filing of a premerger
notification and report form by Red Xxxxxx under the HSR Act; (ii) the filing
with the SEC of the Registration Statement, the Proxy Statement and such reports
under the Exchange Act as may be required in connection with this Agreement and
the transactions contemplated by this Agreement; (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware; (iv)
the filing of the Certificate of Amendment with the Secretary of State of the
State of Delaware; and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Red
Xxxxxx Material Adverse Effect or prevent or materially delay the consummation
of any of the transactions contemplated by this Agreement.
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SECTION 4.4. SEC DOCUMENTS AND FINANCIAL STATEMENTS. Red Xxxxxx has
filed all required reports, schedules, forms, statements and other documents
with the SEC on a timely basis since September 1, 1996 (the "Red Xxxxxx SEC
Documents"). As of their respective dates, the Red Xxxxxx SEC Documents complied
as to form in all material respects with the requirements of Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Red Xxxxxx SEC Documents, and none of
the Red Xxxxxx SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Except to the extent that information
contained in any Red Xxxxxx SEC Document has been revised or superseded by a
later- filed Red Xxxxxx SEC Document, filed and publicly available prior to the
date of this Agreement, as of the date of this Agreement, none of the Red Xxxxxx
SEC Documents contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Red Xxxxxx included in the Red
Xxxxxx SEC Documents complied as of their respective dates of filing with the
SEC as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q or 8-K)
applied on a consistent basis during the period involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position, results of operations and cash flows as at the dates and for the
periods then ended (subject, in the case of unaudited statements, to normal
audit adjustments). Except as set forth in the financial statements of Red
Xxxxxx included in the Red Xxxxxx SEC Documents and except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice, since August 31, 1998, neither Red Xxxxxx nor any of its subsidiaries
has incurred any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance sheet of Red
Xxxxxx and its consolidated subsidiaries or in the notes thereto or that has had
or is reasonably likely to have a Red Xxxxxx Material Adverse Effect.
SECTION 4.5. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Red Xxxxxx specifically for inclusion or incorporation by
reference in (i) the Registration Statement will, at the time the Registration
Statement is filed with the SEC, at any time it is amended or supplemented and
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the Proxy
Statement will, at the date such Proxy Statement is first mailed to the
stockholders of the Company and Red Xxxxxx, and at the time of the Red Xxxxxx
Meeting (as defined in Section 6.3) and the Company Special Meeting (as defined
in Section 5.2), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. No representation is made by Red Xxxxxx in this Section
4.5 with respect to statements made or incorporated by reference in the
Registration Statement or the Proxy Statement
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based on information supplied by the Company specifically for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement.
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Red Xxxxxx SEC Documents filed and publicly available prior to the date
of this Agreement, and except as expressly contemplated by this Agreement, since
the date of the most recent audited financial statements included in such Red
Xxxxxx SEC Documents, Red Xxxxxx has conducted its business only in the ordinary
course, and there has not been: (i) any material adverse change in the business,
results of operations, or business prospects of Red Xxxxxx and its subsidiaries
taken as a whole; (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of Red Xxxxxx'x capital stock; (iii) any split, combination or reclassification
of any of its capital stock or any issuance or the authorization of any
insurance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; (iv) any granting by Red Xxxxxx or any of its
subsidiaries to any officer of Red Xxxxxx or any of its subsidiaries of any
increase in compensation, except in the ordinary course of business consistent
with prior practice or as required under existing employment agreements; (v) any
granting by Red Xxxxxx or any of its subsidiaries to any officer of any increase
in severance or termination pay; (vi) an entry by Red Xxxxxx or any of its
subsidiaries into any employment, severance or termination agreement with any
officer; (vii) any damage, destruction or loss, whether or not covered by
insurance, that has had or is likely to have a Red Xxxxxx Material Adverse
Effect; (viii) any change in accounting methods, principles or practices by Red
Xxxxxx materially affecting its assets, liabilities or business, except insofar
as may have been required by a change in generally accepted accounting
principles; or (ix) except as set forth on SCHEDULE 4.6, any adoption or
amendment in any material respect by Red Xxxxxx or any of its subsidiaries of
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding in each case maintained or
contributed to, or required to be maintained or contributed to, by Red Xxxxxx or
its subsidiaries for the benefit of any current or former employee, officer or
director of Red Xxxxxx or any of its subsidiaries (each, a "Red Xxxxxx Benefit
Plan" and, collectively, "Red Xxxxxx Benefit Plans").
SECTION 4.7. LITIGATION. Except as disclosed in the Red Xxxxxx SEC
Documents filed and publicly available prior to the date of this Agreement,
there is no suit, action or proceeding pending or, to Red Xxxxxx'x knowledge,
threatened against Red Xxxxxx or any of its subsidiaries challenging the
acquisition by Red Xxxxxx or Mergersub of any shares of Company Common Stock or
any provision of this Agreement or seeking to restrain or prohibit the
consummation of the Merger, or that, individually or in the aggregate, could
reasonably be expected to have a Red Xxxxxx Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Authority or arbitrator outstanding against Red Xxxxxx or any of its
subsidiaries having, or which could reasonably by expected to have, a Red Xxxxxx
Material Adverse Effect.
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SECTION 4.8. COMPLIANCE WITH LAWS. Except as disclosed in the Red
Xxxxxx SEC Documents filed and publicly available prior to the date of this
Agreement, Red Xxxxxx and its subsidiaries are in compliance with all applicable
statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of
any Governmental Authority applicable to its business or operations, except for
instances of possible noncompliance that, individually or in the aggregate,
would not have a Red Xxxxxx Material Adverse Effect. Each of Red Xxxxxx and its
subsidiaries has in effect all Permits, necessary for it to own, lease or
operate its properties and assets and to carry on its business as now conducted,
and there has occurred no default under any such Permit, except for the lack of
Permits and for defaults under Permits which, individually or in the aggregate,
would not have a Red Xxxxxx Material Adverse Effect. None of such Permits is or
will be impaired or in any way affected by the execution and delivery of this
Agreement, or the consummation of the transactions contemplated hereby.
SECTION 4.9. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 4.9
or as would not have a Red Xxxxxx Material Adverse Effect:
(a) Red Xxxxxx and its subsidiaries is, and at all times has
been, in full compliance with, and has not been and is not in violation of or
liable under, any environmental law.
(b) Neither Red Xxxxxx nor its subsidiaries has any basis to
expect any actual or threatened order, notice, or other communication from (i)
any governmental body or private citizen acting in the public interest, or (ii)
the current or prior owner or operator of any facilities from which Red Xxxxxx
or its subsidiaries conducts its businesses, of any actual or potential
violation or failure to comply with any environmental law, or of any actual or
threatened obligation to undertake or bear the cost of any environmental,
health, and safety liabilities with respect to any of such facilities or any
other properties or assets (whether real, personal, or mixed) in which Red
Xxxxxx or its subsidiaries has had an interest, or with respect to any property
or facility at or to which hazardous materials were generated, manufactured,
refined, transferred, imported, used, or processed by Red Xxxxxx or its
subsidiaries, or from which hazardous materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(c) There are no pending or, to the knowledge of Red Xxxxxx,
threatened claims, encumbrances, or other restrictions of any nature, resulting
from any environmental, health, and safety liabilities or arising under or
pursuant to any environmental law, with respect to or affecting any of the
facilities of Red Xxxxxx or its subsidiaries or any other properties and assets
(whether real, personal, or mixed) in which Red Xxxxxx or its subsidiaries has
or had an interest.
(d) Red Xxxxxx or its subsidiaries has no basis to expect, nor
has Red Xxxxxx or its subsidiaries received, any citation, directive, inquiry,
notice, order, summons, warning, or other communication that relates to
hazardous activity, hazardous materials, or any alleged, actual, or potential
violation or failure to comply with any environmental law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
environmental, health, and safety liabilities with respect to any of the
facilities of Red Xxxxxx or its subsidiaries or any other properties or assets
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(whether real, personal, or mixed) in which Red Xxxxxx or its subsidiaries had
an interest, or with respect to any property or facility to which hazardous
materials generated, manufactured, refined, transferred, imported, used, or
processed by Red Xxxxxx or its subsidiaries, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(e) To the knowledge of Red Xxxxxx, there are no hazardous
materials present on or in the environment at any of the facilities of Red
Xxxxxx or its subsidiaries or at any geologically or hydrologically adjoining
property, including any hazardous materials contained in barrels, aboveground or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, sumps, or any other part of such facilities
or such adjoining property, or incorporated into any structure therein or
thereon.
(f) Neither Red Xxxxxx or its subsidiaries has permitted or
conducted, or is aware of, any hazardous activity conducted at facilities of Red
Xxxxxx or its subsidiaries or any other properties or assets (whether real,
personal, or mixed) in which Red Xxxxxx or its subsidiaries has or had an
interest except in full compliance with all applicable environmental laws.
SECTION 4.10. BENEFIT PLAN COMPLIANCE.
(a) SCHEDULE 4.10 contains a list and brief description of all
"employee pension benefit plans" as defined in Section 3(2) of ERISA (sometimes
referred to herein as "Red Xxxxxx Pension Plans"), "employee welfare benefit
plans" as defined in Section 3(1) of ERISA and all other Red Xxxxxx Benefit
Plans maintained, or contributed to, or required to be contributed to, by, or
with respect to which there is any accrued, contingent, secondary or other
liability of, Red Xxxxxx or any of its subsidiaries or any other Person that,
together with Red Xxxxxx, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (Red Xxxxxx and each such other Person, a "Red
Xxxxxx Commonly Controlled Entity") for the benefit of any current or former
employees, officers or directors of any Red Xxxxxx Commonly Controlled Entity.
Red Xxxxxx has delivered or made available to the Company true, complete and
correct copies of (i) each Red Xxxxxx Benefit Plan (or, in the case of any
unwritten Red Xxxxxx Benefit Plans, descriptions thereof), (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Red Xxxxxx Benefit Plan (if any such report was required), (iii) the
most recent summary plan description for each Red Xxxxxx Benefit Plan for which
such summary plan description is required, and (iv) where applicable, each trust
agreement and group annuity contract relating to any Red Xxxxxx Benefit Plan. To
the knowledge of Red Xxxxxx, each Red Xxxxxx Benefit Plan has been administered
in all material respects in accordance with its terms and is in compliance with
the applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements except where the failure to comply
would not be reasonably expected to result in a Red Xxxxxx Material Adverse
Effect.
(b) All Red Xxxxxx Pension Plans have been the subject of
determination letters from the Internal Revenue Service, or have filed a timely
application therefor, to the effect that such
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Red Xxxxxx Pension Plans are qualified and exempt from federal income taxes
under Section 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor has any such Red Xxxxxx Pension Plan
been amended since the date of its most recent determination letter or
application therefor in any respect that would adversely affect its
qualification or materially increase its costs, except where there would not
reasonably be a Red Xxxxxx Material Adverse Effect.
(c) Except as set forth on SCHEDULE 4.10, no Red Xxxxxx
Pension Plan is subject to Title IV of ERISA or Section 412 of the Code.
(d) No Red Xxxxxx Benefit Plan is a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
(e) With respect to any Red Xxxxxx Benefit Plan that is an
employee welfare benefit plan, (i) no such Red Xxxxxx Benefit Plan is funded
through a "welfare benefits fund," as such term is defined in Section 419(e) of
the Code, (ii) each such Red Xxxxxx Benefit Plan that is a "group health plan,"
as such term is defined in Section 5000(b)(1) of the Code, complies
substantially with the applicable requirements of Section 4980B(f) of the Code,
and (iii) no such Red Xxxxxx Benefit Plan provides post-termination employment
benefits, except as otherwise required by Section 4980B of the Code.
(f) Except with respect to the certain of Red Xxxxxx Stock
Options as indicated on SCHEDULE 4.2 and severance benefits as indicated on
SCHEDULE 4.10, no employee, director or independent contractor of Red Xxxxxx or
any of its subsidiaries will be entitled to any additional compensation or
benefits or any acceleration of the time of payment or vesting of any
compensation or benefits under any Red Xxxxxx Benefit Plan as a result of the
transactions contemplated by this Agreement.
(g) Except as set forth on SCHEDULE 4.10, neither Red Xxxxxx
or any of its subsidiaries nor any Person acting on behalf of Red Xxxxxx or any
of its subsidiaries has, in contemplation of any corporate transaction involving
Red Xxxxxx, issued any written communication to, or otherwise made or entered
into any legally binding commitment with, any employees of Red Xxxxxx or of any
of its subsidiaries to the effect that, following the date hereof, (i) any
benefits or compensation provided to such employees under existing Red Xxxxxx
Benefit Plans or under any other plan or arrangement will be enhanced, (ii) any
new plans or arrangements providing benefits or compensation will be adopted,
(iii) any Red Xxxxxx Benefit Plans will be continued for any period of time, or
(iv) any plans or arrangements provided by Red Xxxxxx or Mergersub will be made
available to such employees.
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SECTION 4.11. TAXES. As used in this Section 4.11, "Taxes" shall
include all federal, state, local and foreign income, property, sales, payroll,
employee withholding, excise and other taxes, tariffs or governmental charges of
any nature whatsoever, including any interest, penalties or additions with
respect thereto. Red Xxxxxx and each of its subsidiaries, and each affiliated,
consolidated, combined or unitary group of which Red Xxxxxx or any of its
subsidiaries is or has been a member (an "Affiliated Red Xxxxxx Group"), has
filed timely all material tax returns and reports required to be filed by Red
Xxxxxx, its subsidiaries or any Affiliated Red Xxxxxx Group (or requests for
extensions have been filed timely), each such tax return is true and correct in
all material respects and has been prepared in material compliance with all
applicable laws and regulations, and Red Xxxxxx and each of its subsidiaries has
paid (or Red Xxxxxx or an Affiliated Red Xxxxxx Group has paid on their behalf)
all Taxes required to be paid by it and them in accordance with such tax
returns. The most recent financial statements supplied by Red Xxxxxx to be
contained in the Registration Statement reflect an adequate reserve for all
material Taxes payable by Red Xxxxxx and its subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
Except as set forth on SCHEDULE 4.11, as of the date hereof, no material
deficiency or proposed adjustment which has not been settled or otherwise
resolved for any Taxes has been asserted or assessed by any taxing authority
against Red Xxxxxx or any of its subsidiaries or any Affiliated Red Xxxxxx
Group. Except as set forth on SCHEDULE 4.11, Red Xxxxxx and each of its
subsidiaries has not consented to extend the time in which any Taxes may be
assessed or collected by any taxing authority. None of the assets or properties
of Red Xxxxxx or any of its subsidiaries is subject to any material tax lien
except for Taxes not yet due and payable. Except as set forth on SCHEDULE 4.11,
neither Red Xxxxxx nor any of its subsidiaries is a party to or bound by any
material tax allocation or tax sharing agreement and has no current or potential
material obligation to indemnify any other Person with respect to Taxes, and is
not otherwise obligated to make payments of Taxes with respect to the activities
of any other Person. Since January 1, 1998, no material claim has been made by a
taxing authority in a jurisdiction where Red Xxxxxx or any of its subsidiaries
do not file tax returns that Red Xxxxxx or any such subsidiary is or may be
subject to Taxes assessed by such jurisdiction. As of the date hereof, the
federal income tax returns of Red Xxxxxx and each of its subsidiaries
consolidated in such returns have been examined or audited by the Internal
Revenue Service for all years through August 31, 1995, and Red Xxxxxx has not
received notice of any proposed tax audit. True, correct and complete copies of
all federal and state income tax returns filed by or with respect to Red Xxxxxx
and each of its subsidiaries for the past three years have been made available
to Red Xxxxxx.
SECTION 4.12. NO EXCESS PARACHUTE PAYMENTS. Neither Red Xxxxxx nor any
of its affiliates has made any payments, is obligated to make any payments, or
is a party to any agreement that could obligate it to make any payments that
will not be deductible under Section 280G of the Code (or any corresponding
provision of state, local or foreign law).
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SECTION 4.13. CONTRACTS. Neither Red Xxxxxx nor any of its subsidiaries
is a party to or bound by, and neither they nor their properties are subject to,
any contracts, agreements or arrangements required to be disclosed in its most
recently filed Form 10-K, 10-Q or 8-K under the Exchange Act which has not been
filed as an exhibit to one or more of the Red Xxxxxx SEC Documents filed and
publicly available prior to the date of this Agreement ("Red Xxxxxx Designated
Contracts"). Red Xxxxxx and its subsidiaries have satisfied in full or provided
for all of their liabilities and obligations under the Red Xxxxxx Designated
Contracts which are presently required to be satisfied or provided for, and are
not (with or without notice or lapse of time or both) in default in any material
respect under any of the Red Xxxxxx Designated Contracts nor to the knowledge of
Red Xxxxxx is any other party to any such Red Xxxxxx Designated Contract (with
or without notice or lapse of time or both) in default in any material respect
thereunder, except for any defaults that could not reasonably be expected to
have a Red Xxxxxx Material Adverse Effect.
SECTION 4.14. VOTING REQUIREMENTS. The affirmative vote of the holders
of a majority of the total shares of Red Xxxxxx Common Stock represented in
person or by proxy and entitled to vote at the Red Xxxxxx Meeting is required
for approval of each of (i) the issuance of Red Xxxxxx Common Stock pursuant to
this Agreement, (ii) the election of new directors to the Board of Directors of
Red Xxxxxx as contemplated by Section 1.9 of this Agreement, and (iii) the
ratification of the appointment of new independent auditors for Red Xxxxxx as
contemplated by Section 6.3 of this Agreement. The affirmative vote of the
holders of a majority of the shares of Red Xxxxxx Common Stock outstanding and
entitled to vote at the Red Xxxxxx Meeting is required to approve the amendment
to the Certificate of Incorporation of Red Xxxxxx as contemplated by Section 1.7
of this Agreement. Except as set forth in this Section 4.14, there are no other
votes of the holders of any class or series of Red Xxxxxx'x capital stock
necessary to approve the transactions contemplated by this Agreement under
Delaware Law and the rules of Nasdaq.
SECTION 4.15. REAL ESTATE.
(a) The Company and each of its subsidiaries does not own any
real property or any interest therein except as set forth on SCHEDULE 4.15(a)
(the "Owned Properties"), which Schedule sets forth the location of the Owned
Properties. With respect to each such parcel of Owned Property, except as set
forth on SCHEDULE 4.15(a): (i) Red Xxxxxx has good and marketable title to the
parcel of Owned Property, free and clear of any Lien other than (y) Liens for
real estate taxes not yet due and payable, or (z) recorded easements, covenants,
encumbrances and other restrictions which do not materially impair the current
use or occupancy of the property subject thereto, and any matters that would be
disclosed by an accurate and current survey of each of the other parcels of the
Owned Properties which would not materially impair the current use or occupancy
of the property so surveyed; (ii) there are no pending or threatened
condemnation proceedings, suits or administrative actions relating to the Owned
Properties materially affecting adversely the current use, occupancy or value
thereof; (iii) the legal descriptions for the parcels of Owned Property
contained in the deeds thereof describe such parcels fully and adequately, and
the Owned Properties are not located within any flood plain (such that a
mortgagee would require a mortgagor to obtain flood insurance) for which any
permits or licenses necessary to the use thereof have not been obtained; (iv)
there are no
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outstanding options or rights of first refusal to purchase the parcels of Owned
Property, or any portion thereof or interest therein; and (v) there are no
parties (other than Red Xxxxxx and its subsidiaries) in possession of the
parcels of Owned Property except pursuant to written leases entered into by Red
Xxxxxx or a subsidiary thereof with respect thereto in the capacity as landlord.
(b) SCHEDULE 4.15(b) sets forth a list of all material leases,
licenses or similar agreements to which Red Xxxxxx or its subsidiaries is a
party, which are for the use or occupancy of real estate owned by a third party
and which are material to the operations or the business of Red Xxxxxx and its
subsidiaries taken as a whole ("Leases")(copies of which have previously been
furnished to Red Xxxxxx), in each case, setting forth (A) the lessor and lessee
thereof, and (B) the street address of each property covered thereby (the
"Leased Premises"). The Leases are in full force and effect and have not been
amended, and neither Red Xxxxxx or its subsidiaries nor, to the knowledge of Red
Xxxxxx, any other party thereto is in material default or material breach under
any such Lease. No event has occurred which, with the passage of time or the
giving of notice or both, would cause a breach of or default under any of such
Leases, except for breaches or defaults which in the aggregate could not
reasonably be expected to have a Red Xxxxxx Material Adverse Effect.
SECTION 4.16. GOOD TITLE TO, CONDITION AND ADEQUACY OF ASSETS.
Except as set forth on SCHEDULE 4.16, Red Xxxxxx and its subsidiaries have good
title to all of their respective Assets (as hereinafter defined), free and clear
of any Liens or restrictions on use. The Assets constitute, in the aggregate,
all of the assets and properties necessary for the conduct of the business of
Red Xxxxxx and its subsidiaries in the manner in which and to the extent to
which such business is currently being conducted. All vehicles, machinery,
equipment, tools, supplies, leasehold improvements, furniture and fixtures
constituting part of the Assets and which are used by or located on the premises
of Red Xxxxxx or its subsidiaries, and which are currently in use or necessary
for the business and operations of Red Xxxxxx or its subsidiaries, are in
operating condition, normal wear and tear excepted. For purposes of this
Agreement, the term "Assets" means all of the properties and assets owned by Red
Xxxxxx and its subsidiaries as of the date hereof, whether personal or mixed,
tangible or intangible, wherever located.
SECTION 4.17. LABOR AND EMPLOYMENT MATTERS. SCHEDULE 4.17 sets forth
the name, address, and social security number of each of the officers and key
employees of Red Xxxxxx and its subsidiaries. The current rate of compensation
of each of the officers and key employees of Red Xxxxxx and its subsidiaries has
been previously provided to the Company. Neither Red Xxxxxx nor any of its
subsidiaries is a party to or bound by any collective bargaining agreement or
any other agreement with a labor union. There is no pending or threatened labor
dispute, strike or work stoppage which affects or which may affect the business
of Red Xxxxxx or any of its subsidiaries. As of the date hereof, except in
accordance with Section 1.9 hereof, Red Xxxxxx is not aware that any officer,
key employee or group of employees has any plans to terminate his or their
employment with Red Xxxxxx or any of its subsidiaries as a result of the Merger
or otherwise.
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SECTION 4.18. INSURANCE. SCHEDULE 4.18 sets forth a list of all
insurance policies maintained as of the date hereof by Red Xxxxxx and its
subsidiaries. There are valid and enforceable policies of insurance covering the
respective properties, assets and businesses of Red Xxxxxx and its subsidiaries
against risks of the nature normally insured against by entities in the same or
similar lines of business and in coverage amounts typically and reasonably
carried by such entities. Such policies are in full force and effect, and all
premiums due thereon have been paid. None of such policies will lapse or
terminate as a result of the transactions contemplated by this Agreement. Red
Xxxxxx has not failed to give, in a timely manner, any notice required under any
of such policies to preserve its material rights thereunder.
SECTION 4.19. RELATED PARTY TRANSACTIONS. Except as set forth on
SCHEDULE 4.19, none of the officers or directors of Red Xxxxxx or any of its
subsidiaries, and no Person owning of record or beneficially more than 5% of Red
Xxxxxx Common Stock, or any members of their immediate families, has been a
party to any transaction, or series of similar transactions, with Red Xxxxxx or
any of its subsidiaries, in which the amount involved exceeds sixty thousand
dollars ($60,000) per annum, and in which any such Persons had or will have a
direct or indirect material interest.
SECTION 4.20. NAMES; PRIOR ACQUISITIONS. All names under which Red
Xxxxxx and its subsidiaries do business as of the date hereof are specified on
SCHEDULE 4.20. Except as set forth on SCHEDULE 4.20, neither Red Xxxxxx nor any
of its subsidiaries has changed its name or used any assumed or fictitious name,
or been the surviving entity in a merger, acquired any business or changed its
principal place of business or chief executive office, within the past year.
SECTION 4.21. STATE TAKEOVER STATUTES. The Board of Directors of Red
Xxxxxx has approved stock issuance pursuant to this Agreement and the Red Xxxxxx
Voting Agreement (as defined in Section 6.7), and such approval is sufficient to
render inapplicable to this Agreement, the Merger and the other transactions
contemplated by this Agreement, the provisions of Section 203 of the Delaware
Law, to the extent, if any, such provisions of Section 203 would otherwise be
applicable to this Agreement, the Merger and the other transactions contemplated
by this Agreement. Less than 500 residents of the State of Florida are employees
of Red Xxxxxx and its subsidiaries, so as to render inapplicable to this
Agreement, the Merger and the other transactions contemplated by this Agreement,
the provisions of Section 607.0903 of the Florida Business Corporation Act, to
the extent, if any, such provisions of such Section 607.0903 would otherwise be
applicable to this Agreement, the Merger and the other transactions contemplated
by this Agreement.
SECTION 4.22. BROKERS. No broker, investment banker, financial advisory
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 Red Xxxxxx,
except that Red Xxxxxx has retained ABN AMRO as a financial advisor. A true and
correct copy of Red Xxxxxx'x retainer agreement with ABN AMRO has been delivered
to the Company.
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SECTION 4.23. ACCOUNTING MATTERS. Neither Red Xxxxxx nor any of its
affiliates has taken or agreed to take any action that (without regard to any
action taken or agreed to be taken by the Company or any of its affiliates)
would prevent Red Xxxxxx from accounting for the business combination to be
effected by the Merger as a pooling of interests.
SECTION 4.24. TAX MATTERS. Neither Red Xxxxxx nor any of its affiliates
has taken or agreed to take any action, or knows of any circumstances, that
(without regard to any action taken or agreed to be taken by the Company or any
of its affiliates) would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a)(2)(E) of the Code.
SECTION 4.25. OWNERSHIP OF RED XXXXXX COMMON STOCK. As of the date
hereof, except for the voting proxies granted to the Company as described in
Section 6.7 and the persons listed on SCHEDULE 4.25, no person nor any of Red
Xxxxxx'x affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially owns, directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding providing for the acquisition, holding,
voting or disposition of, in each case, shares of capital stock of Red Xxxxxx or
any securities convertible into or exercisable or exchangeable for capital stock
of Red Xxxxxx, which in the aggregate represent 10% or more of the outstanding
shares of Red Xxxxxx Common Stock after giving effect to the conversion,
exercise or exchange of all such securities beneficially owned by Red Xxxxxx and
its affiliates and associates which are convertible into or exercisable or
exchangeable for capital stock of Red Xxxxxx.
SECTION 4.26. INTERIM OPERATIONS OF MERGERSUB. Mergersub was formed
solely for the purpose of engaging in a business combination transaction with
the Company and has engaged in no other business activities and has conducted
its operations only as contemplated hereby.
SECTION 4.27. YEAR 2000 COMPLIANCE. The software and hardware operated
by Red Xxxxxx and its subsidiaries (but not necessarily that operated or
provided by vendors) are capable of providing or are being tested, and, if
necessary, will be adapted or replaced to provide uninterrupted millennium
functionality to record, store, process and present calendar dates falling on or
after January 1, 2000 and date-dependent data in substantially the same manner
and with the same functionality as such software records, stores, processes and
presents such calendar dates and date- dependent data as of the date hereof,
except for the failure to have such capability which would not, individually or
in the aggregate, be reasonably likely to have a Red Xxxxxx Material Adverse
Effect.
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ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as may be
agreed to in writing by Red Xxxxxx, from the date hereof to the Effective Time,
the Company shall, and shall cause its subsidiaries to, (i) use its and their
best efforts to conduct its and their operations according to its and their
ordinary and usual course of business, consistent with past practice, it being
understood that the Company is evaluating all aspects of the operations of the
businesses of the Company and its subsidiaries and it is agreed that the Company
shall have the right, in its sole discretion, to make changes to such
operations, (ii) use its and their best efforts to preserve intact its and their
business organization, (iii) keep or cause to be kept in full force and effect
all of its and their material rights, contracts and agreements, (iv) maintain
all of its and their property in good operating condition and repair, (v) use
its and their best efforts to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relationships with any of them, consistent with the Company's
past practices, and (vi) maintain continuously insurance coverage substantially
equivalent to the insurance coverage in existence on the date of this Agreement.
Subject to the exercise of the applicable fiduciary duties of the Board of
Directors of the Company as set forth in Section 5.2, the Company and its
subsidiaries shall not take any action that would, or that could reasonably be
expected to, result in any of the conditions to the obligations of the Company
or Red Xxxxxx to consummate the Merger set forth in Article VIII not being
satisfied. Without limiting the generality of the foregoing and except as
provided above, the Company shall not, and shall not permit any of its
subsidiaries to:
(a) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
additional employee or other options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any options or rights
to purchase, or any securities convertible into, shares of stock of any class;
PROVIDED that the Company shall be entitled to (i) grant options to purchase
Company Common Stock to new employees, and make annual grants of options to
purchase Company Common Stock under the Company Stock Option Plan to its
directors, officers, and employees, for an aggregate of no more than 700,000
shares of Company Common Stock, and (ii) issue up to 5,000,000 shares of Company
Common Stock in the aggregate for the acquisition of businesses in the floral
and gift industry in accordance with SCHEDULE 5.1;
(b) split, combine or reclassify any shares of its or any of
its subsidiaries' capital stock; declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) to
its stockholders whether or not in respect of its capital stock; or redeem,
purchase or otherwise acquire any shares of, or rights to acquire shares of, its
or any of its subsidiaries' capital stock;
(c) amend its charter or by-laws;
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(d) voluntarily sell, transfer, surrender, abandon or dispose
of any of its material assets or property rights (tangible or intangible), other
than in the ordinary course of business consistent with past practices;
(e) acquire (including, without limitation, for cash or shares
of stock, by merger, consolidation, or acquisitions of stock or assets) any
interest in any corporation, partnership or other business organization, or make
any investment in any such entity either by purchase of securities,
contributions of capital or transfer of property, except that the Company may
pursue and complete acquisitions as set forth on SCHEDULE 5.1;
(f) grant or make any mortgage or pledge or subject itself or
any of its material properties or assets to any lien, charge or encumbrance of
any kind, except (i) pursuant to the Company's credit facilities with
NationsBank (or its successors), and (ii) liens for taxes not currently due;
(g) create, incur or assume any indebtedness for borrowed
money (contingent or otherwise), in an amount exceeding two hundred fifty
thousand dollars ($250,000), except borrowings under the Company's credit
facilities with NationsBank (or its successors), as may be amended to increase
such facilities from $20 million to $40 million, to the extent such borrowings,
not to exceed $40 million in the aggregate including existing borrowings, are
for general working capital purposes in the ordinary course of business or for
the acquisition of businesses in the floral and gift industry in accordance with
SCHEDULE 5.1;
(h) grant any increase in the compensation payable or to
become payable to directors, officers or employees (including, without
limitation, any such increase pursuant to any Company Benefit Plan or
otherwise), other than merit increases to employees of the Company or its
subsidiaries who are not directors or officers of the Company, in the ordinary
course of business and consistent with past practices;
(i) alter the manner of keeping the Company's books, accounts
or records, or change in any manner the accounting practices therein reflected,
except that books, accounts, records and accounting practices of subsidiaries
and acquired businesses may be changed to conform to the Company's standards and
practices;
(j) except as otherwise provided herein (including as set
forth on SCHEDULE 5.1), enter into any material commitment, transaction or
agreement, other than in the ordinary course of business consistent with past
practices and other than commitments, transactions or agreements that are
terminable by the Company without cost or penalty on no more than 60 days prior
notice;
(k) apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate of the Company or any
affiliate of its subsidiaries;
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(l) modify any provision of any Company Benefit Plan (except
that new Company Benefit Plans are being adopted as set forth on SCHEDULE 3.10),
any stock option plans of the Company or the terms of any stock options granted
thereunder;
(m) modify any of the Designated Contracts of the Company;
(n) enter into any agreement or transaction with any Person
controlling, controlled by or under common control with the Company; or
(o) agree, whether in writing or otherwise, to do any of the
foregoing.
SECTION 5.2. APPROVAL BY THE COMPANY'S STOCKHOLDERS. The Company
shall, as soon as practicable following the date hereof, establish a record date
for, duly call, give notice of, convene and hold a meeting of its stockholders,
to be held as promptly as practicable after the date of this Agreement, for the
purpose of voting upon the Merger and this Agreement (the "Company Special
Meeting"). Subject to the exercise of its applicable fiduciary duties under
Delaware Law to the stockholders of the Company, the Board of Directors of the
Company (i) shall recommend that the Company's stockholders approve and adopt
this Agreement and the Merger, and include such recommendation in the Proxy
Statement, provided that the Board of Directors shall not be obligated to make
such recommendation if the Company shall have received an offer for a Competing
Transaction that the Board of Directors determines in good faith is more
favorable to the stockholders of the Company from a financial point of view than
the transactions contemplated by this Agreement, and (ii) shall use its
reasonable best efforts to solicit from stockholders of the Company votes in
favor of such proposal. Nothing in this Agreement or otherwise shall relieve the
Company of its obligation to hold a meeting and submit approval of this
Agreement and the Merger to its stockholders at such meeting in accordance with
Section 251 of Delaware Law.
SECTION 5.3. ACCESS TO INFORMATION. From the date of this Agreement to
the Effective Time, the Company shall, and shall cause its subsidiaries and its
and their representatives, officers, directors, employees, auditors and agents
to, afford the representatives, officers, employees and agents of Red Xxxxxx
reasonable access at all reasonable times to its representatives, officers,
employees, agents, properties, offices, and other facilities and to all books
and records, and shall furnish Red Xxxxxx with all financial, operating and
other data and information Red Xxxxxx, through its representatives, officers,
employees or agents, may reasonably request. Red Xxxxxx shall hold, and will
cause its directors, officers, employees, agents, advisors (including attorneys,
auditors, and representatives) to hold in confidence, all documents and
information concerning the Company and its subsidiaries furnished to Red Xxxxxx
in connection with the transactions contemplated in this Agreement, to the
extent required by, and in accordance with, the provisions of that certain
confidentiality letter agreement previously entered into by and between Red
Xxxxxx and the Company (the "Confidentiality Agreement").
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SECTION 5.4. AFFILIATE LETTERS.
(a) SCHEDULE 5.4 sets forth a list of names and addresses of
those Persons who may be deemed "affiliates" of the Company within the meaning
of Rule 145 under the Securities Act ("Rule 145"), including all officers and
directors of the Company (each an "Affiliate"). The Company shall provide Red
Xxxxxx such information and documents as Red Xxxxxx shall reasonably request for
purposes of reviewing the accuracy and completeness of such list. There shall be
added to such list the names and addresses of any other Person who becomes an
Affiliate of the Company at any time after the date hereof up to and including
the time of the Company Special Meeting or who Red Xxxxxx reasonably identifies
(by written notice to the Company) as being a Person who may be deemed to be an
Affiliate of the Company. The Company shall deliver or cause to be delivered to
Red Xxxxxx, concurrent herewith, from each of the Affiliates identified on
SCHEDULE 5.4 (as the same may be supplemented as aforesaid), a letter in the
form of EXHIBIT A hereto which shall contain (i) a representation that on the
date hereof, such Affiliate has no plan or intention to sell, exchange or
otherwise dispose of the Red Xxxxxx Common Stock received by it pursuant to the
Merger, (ii) a covenant that such Affiliate shall not sell or otherwise dispose
of any shares of Red Xxxxxx Common Stock issued to it in the Merger until such
time as final results of operations of Red Xxxxxx covering at least thirty (30)
days of combined operations of Red Xxxxxx and the Company have been published
and (iii) a covenant that such Affiliate will not sell or otherwise dispose of
any shares of Red Xxxxxx Common Stock issued to it in the Merger, except
pursuant to an effective registration statement under the Securities Act or in
accordance with the provisions of paragraph (d) of Rule 145 or another exemption
from registration under the Securities Act.
(b) Red Xxxxxx shall be entitled to place appropriate legends
on the certificates evidencing the Red Xxxxxx Common Stock to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stock transfer instructions to the transfer agent for the Red Xxxxxx
Common Stock, to the effect that the shares of the Red Xxxxxx Common Stock
received or to be received by such Affiliates pursuant to the terms of this
Agreement may only be sold, transferred or otherwise conveyed, and the holder
thereof may only reduce his interest in or risks relating to such shares of Red
Xxxxxx Common Stock, pursuant to an effective registration statement under the
Securities Act or in accordance with the provisions of paragraph (d) of Rule 145
or another exemption from registration under the Securities Act and, in any
event, only after financial results covering at least 30 days of combined
operations of Red Xxxxxx and the Company after the Effective Time shall have
been published. The foregoing restrictions on the transferability of the Red
Xxxxxx Common Stock shall apply to all purported sales, transfers and other
conveyances of the shares of Red Xxxxxx Common Stock received or to be received
by such Affiliates pursuant to this Agreement and to all purported reductions in
the interest in or risks relating to such shares of the Red Xxxxxx Common Stock
whether or not such Affiliate has exchanged the certificates previously
evidencing such Affiliate's shares of the Company Common Stock for certificates
evidencing the shares of Red Xxxxxx Common Stock into which such shares of the
Company Common Stock were converted. The Proxy Statement and the Registration
Statement shall disclose the foregoing in a reasonably prominent manner.
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SECTION 5.5. LETTER OF COMPANY'S ACCOUNTANTS. The Company shall cause
to be delivered to Red Xxxxxx a letter of Xxxxxx Xxxxxxxx LLP, the Company's
independent public accountants, dated a date within two business days before (a)
the date on which the Proxy Statement is filed with the SEC, (b) the date on
which the Proxy Statement is mailed to the stockholders of Red Xxxxxx, (c) the
date of the Red Xxxxxx Meeting (as defined in Section 6.3), and (d) the
Effective Time, and addressed to Red Xxxxxx in form and substance reasonably
satisfactory to Red Xxxxxx and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement. In connection with Red
Xxxxxx'x efforts to obtain such letter, if requested by Xxxxxx Xxxxxxxx LLP, Red
Xxxxxx shall provide a representation letter to Xxxxxx Xxxxxxxx LLP complying
with SAS 72 (as amended), if then required.
SECTION 5.6. COMPANY VOTING AGREEMENT. On the date hereof, the Persons
listed on Appendix A to EXHIBIT B attached hereto (collectively, the "Company
Principal Stockholders") shall execute and deliver to Red Xxxxxx a voting
agreement and proxy in the form of Exhibit B hereto (the "Company Voting
Agreement"). To the extent that the Company issues any additional shares of
Company Common Stock, the Company agrees to obtain a voting agreement and proxy
in the form of Exhibit B hereto from additional holders of Company Common Stock
so that Red Xxxxxx holds voting proxies with respect to at least 50% of the
issued and outstanding shares of Company Common Stock at all times until the
Effective Time or the termination of this Agreement, if earlier.
ARTICLE VI
COVENANTS OF RED XXXXXX AND MERGERSUB
SECTION 6.1. CONDUCT OF BUSINESS OF RED XXXXXX. Except as may be agreed
to in writing by the Company, from the date hereof to the Effective Time, Red
Xxxxxx shall, and shall cause its subsidiaries to, (i) use its and their best
efforts to conduct its and their operations according to its and their ordinary
and usual course of business, consistent with past practice, (ii) use its and
their best efforts to preserve intact its and their business organization, (iii)
keep or cause to be kept in full force and effect all of its and their material
rights, contracts and agreements, (iv) maintain all of its and their property in
good operating condition and repair, (v) use its and their best efforts to
maintain satisfactory relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having business relationships
with any of them, consistent with Red Xxxxxx'x past practices, and (vi) maintain
continuously insurance coverage substantially equivalent to the insurance
coverage in existence on the date of this Agreement. Subject to the exercise of
the applicable fiduciary duties of the Board of Directors of Red Xxxxxx as set
forth in Section 6.2, Red Xxxxxx and its subsidiaries shall not take any action
that would, or that could reasonably be expected to, result in any of the
conditions to the obligations of the Company or Red Xxxxxx to consummate the
Merger set forth in Article VIII not being satisfied. Without limiting the
generality of the foregoing and except as provided above, Red Xxxxxx shall not,
and shall not permit any of its subsidiaries to:
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(a) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
additional employee or other options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any options or rights
to acquire, or any securities convertible into, shares of stock of any class;
PROVIDED that Red Xxxxxx shall be entitled to issue shares of Red Xxxxxx Common
Stock upon exercise of Red Xxxxxx Stock Options or warrants against payment
therefor in accordance with their terms;
(b) split, combine or reclassify any shares of its or any of
its subsidiaries' capital stock; declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) to
its stockholders whether or not in respect of its capital stock; or redeem,
purchase or otherwise acquire any shares of, or rights to acquire shares of, its
or any of its subsidiaries' capital stock;
(c) amend its charter or by-laws;
(d) voluntarily sell, transfer, surrender, abandon or dispose
of any of its material assets or property rights (tangible or intangible), other
than in the ordinary course of business consistent with past practices;
(e) acquire (including, without limitation, for cash or shares
of stock, by merger, consolidation, or acquisitions of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof, or make any investment in any entity either by purchase of
securities, contributions of capital or transfer of property, or make any loans
or advances to any Person;
(f) grant or make any mortgage or pledge or subject itself or
any of its material properties or assets to any lien, charge or encumbrance of
any kind, except liens for taxes not currently due;
(g) create, incur or assume any indebtedness for borrowed
money (contingent or otherwise), in an amount exceeding one hundred thousand
dollars ($100,000) individually or two hundred fifty thousand dollars ($250,000)
in the aggregate;
(h) make or commit to make any capital expenditures in excess
of $100,000 individually or $250,000 in the aggregate, other than as set forth
on the capital expenditure budget provided by Red Xxxxxx to the Company, a copy
of which is attached as SCHEDULE 6.1;
(i) grant any increase in the compensation payable or to
become payable to directors, officers or employees (including, without
limitation, any such increase pursuant to any Benefit Plan or otherwise), other
than merit increases to employees of Red Xxxxxx or its subsidiaries who are not
directors or officers of the Red Xxxxxx, in the ordinary course of business and
consistent with past practices;
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(j) alter the manner of keeping its books, accounts or
records, or change in any manner the accounting practices therein reflected;
(k) enter into any material commitment, transaction or
agreement, other than in the ordinary course of business consistent with past
practices and other than commitments, transactions or agreements that are
terminable by Red Xxxxxx without cost or penalty on no more than 60 days prior
notice;
(l) apply any of its assets to the direct or indirect payment,
discharge, satisfaction or reduction of any amount payable directly or
indirectly to or for the benefit of any affiliate of Red Xxxxxx or any affiliate
of its subsidiaries;
(m) modify any provision of any Red Xxxxxx Benefit Plan, any
stock option plans of Red Xxxxxx or the terms of any stock options granted
thereunder, including taking any action with respect to stock options otherwise
permitted under Section 9 of the Management Incentive Stock Plan or Section 6 of
the 1996 Nonemployee Directors' Stock Option Plan;
(n) modify any of the Designated Contracts of Red Xxxxxx;
(o) enter into any agreement or transaction with any Person
controlling, controlled by or under common control with Red Xxxxxx; or
(p) agree, whether in writing or otherwise, to do any of the
foregoing.
SECTION 6.2. COMPLIANCE WITH NASDAQ AND SEC REQUIREMENTS. From the date
hereof to the Effective Time, Red Xxxxxx shall comply in all material respects
with all applicable requirements of Nasdaq and the SEC with respect to the
filing of information and reports.
SECTION 6.3. APPROVAL BY RED XXXXXX'X STOCKHOLDERS. Red Xxxxxx shall,
as soon as practicable following the date hereof, establish a record date for,
duly call, give notice of, convene and hold a meeting of its stockholders, to be
held as promptly as practicable after the date of this Agreement, for the
purpose of voting upon (1) the stock issuance pursuant to the Merger and the
other transactions contemplated by this Agreement, (2) the Certificate of
Amendment to Red Xxxxxx'x Certificate of Incorporation contemplated by this
Agreement, (3) the election of new directors to the Board of Directors of Red
Xxxxxx pursuant to this Agreement, and (4) the ratification of the appointment
of Xxxxxx Xxxxxxxx LLP as independent auditors for Red Xxxxxx (the "Red Xxxxxx
Meeting"). Subject to the exercise of its applicable fiduciary duties under
Delaware Law to the stockholders of Red Xxxxxx, the Board of Directors of Red
Xxxxxx (i) shall recommend that Red Xxxxxx'x stockholders approve each of such
proposals, and include such recommendations in the Proxy Statement, provided
that the Board of Directors shall not be obligated to make such recommendations
if Red Xxxxxx shall have received an offer for a Competing Transaction that the
Board of Directors determines in good faith is more favorable to the
stockholders of Red Xxxxxx from a financial point of view than the transactions
contemplated by this Agreement, and (ii) shall use
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its reasonable best efforts to solicit from stockholders of Red Xxxxxx votes in
favor of approving such proposals. Nothing in this Agreement or otherwise shall
relieve Red Xxxxxx of its obligation to hold a meeting and submit approval of
the stock issuance pursuant to the Merger and the other transactions
contemplated by this Agreement to its stockholders at such meeting in accordance
with Section 251 of Delaware Law.
SECTION 6.4. ACCESS TO INFORMATION. From the date of this Agreement to
the Effective Time, Red Xxxxxx shall, and shall cause its subsidiaries and its
and their representatives, officers, directors, employees, auditors and agents
to, afford the representatives, officers, employees and agents of the Company
reasonable access at all reasonable times to its representatives, officers,
employees, agents, properties, offices, and other facilities and to all books
and records, and shall furnish the Company with all financial, operating and
other data and information the Company, through its representatives, officers,
employees or agents, may reasonably request. The Company shall hold, and will
cause its directors, officers, employees, agents, advisors (including attorneys,
auditors, and representatives) to hold in confidence, all documents and
information concerning Red Xxxxxx and its subsidiaries furnished to the Company
in connection with the transactions contemplated in this Agreement, to the
extent required by, and in accordance with, the provisions of the
Confidentiality Agreement.
SECTION 6.5. AFFILIATE LETTERS.
(a) SCHEDULE 6.5 sets forth a list of names and addresses of
those Persons who may be deemed "affiliates" of Red Xxxxxx within the meaning of
Rule 145 under the Securities Act ("Rule 145"), including the Red Xxxxxx
Principal Stockholders (as defined in Section 6.7) and all officers and
directors of Red Xxxxxx (each an "Affiliate"). Red Xxxxxx shall provide the
Company such information and documents as the Company shall reasonably request
for purposes of reviewing the accuracy and completeness of such list. There
shall be added to such list the names and addresses of any other Person who
becomes an Affiliate of Red Xxxxxx at any time after the date hereof up to and
including the time of Red Xxxxxx Meeting or who the Company reasonably
identifies (by written notice to Red Xxxxxx) as being a Person who may be deemed
to be an Affiliate of Red Xxxxxx. Red Xxxxxx shall deliver or cause to be
delivered to the Company, concurrent herewith, from each of the Affiliates
identified on SCHEDULE 6.5 (as the same may be supplemented as aforesaid), a
letter in the form of EXHIBIT C hereto, which shall contain (i) a representation
that on the date hereof, such Affiliate had no plan or intention to sell,
exchange or otherwise dispose of any Red Xxxxxx Common Stock owned by it as of
the date hereof, (ii) a covenant that such Affiliate shall not sell or otherwise
dispose of any shares of Red Xxxxxx Common Stock until such time as final
results of operations of Red Xxxxxx covering at least thirty (30) days of
combined operations of Red Xxxxxx and the Company have been published and (iii)
a covenant that such Affiliate will not sell or otherwise dispose of any shares
of Red Xxxxxx Common Stock issued to it in the Merger, except pursuant to an
effective registration statement under the Securities Act or an applicable
exemption from registration under the Securities Act.
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(b) Red Xxxxxx shall be entitled to place appropriate legends
on the certificates evidencing the Red Xxxxxx Common Stock owned by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stock transfer instructions to the transfer agent for the Red Xxxxxx Common
Stock, to the effect that the shares of the Red Xxxxxx Common Stock owned by
such Affiliates may only be sold, transferred or otherwise conveyed, and the
holder thereof may only reduce his interest in or risks relating to such shares
of Red Xxxxxx Common Stock, pursuant to an effective registration statement
under the Securities Act or in accordance with an exemption from registration
under the Securities Act and, in any event, only after financial results
covering at least 30 days of combined operations of Red Xxxxxx and the Company
after the Effective Time shall have been published. The foregoing restrictions
on the transferability of the Red Xxxxxx Common Stock shall apply to all
purported sales, transfers and other conveyances of the shares of Red Xxxxxx
Common Stock owned by such Affiliates and to all purported reductions in the
interest in or risks relating to such shares of the Red Xxxxxx Common Stock. The
Proxy Statement and the Registration Statement shall disclose the foregoing in a
reasonably prominent manner.
SECTION 6.6. EMPLOYMENT AGREEMENTS; COVENANT NOT TO COMPETE. On the
date hereof, Xxxxxx X. Xxxxxxxx shall execute and deliver to the Company a
covenant not to compete and non-disclosure agreement in the form of EXHIBIT C
hereto (the "Covenant Letter"). Each of the Company, on the one hand, and Xxxxx
X. Xxxx, Xxxxx Xxxxxx, Xxxxx XxXxxxx, Xxxxx X'Xxxx, Xxxxx Xxxxxx and Xxxxxxx
Xxxxxx, separately on the other hand, shall have executed and delivered to each
other an employment agreement substantially in the form of EXHIBIT D hereto (the
"Employment Agreements").
SECTION 6.7. RED XXXXXX VOTING AGREEMENT. On the date hereof, the
Persons listed on Appendix A to EXHIBIT E hereto (collectively, the "Red Xxxxxx
Principal Stockholders") shall execute and deliver to the Company a voting
agreement and voting proxy in the form of EXHIBIT E hereto (the "Red Xxxxxx
Voting Agreement," and together with the Company Voting Agreement, the "Voting
Agreements"). The Persons executing the Red Xxxxxx Voting Agreement beneficially
own, in the aggregate, over 50% of the issued and outstanding shares of Red
Xxxxxx Common Stock.
SECTION 6.8. LETTER OF RED XXXXXX'X ACCOUNTANTS. Red Xxxxxx shall cause
to be delivered to the Company a letter of Ernst & Young LLP, Red Xxxxxx'x
independent public accountants, dated a date within two business days before (a)
the date on which the Proxy Statement is filed with the SEC, (b) the date on
which the Proxy Statement is mailed to the stockholders of Red Xxxxxx and the
Company, (c) the date of the Red Xxxxxx Meeting, and (d) the Effective Time, and
addressed to the Company in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement. In connection with the Company's efforts
to obtain such letter, if requested by Ernst & Young LLP, Red Xxxxxx shall
provide a representation letter to Ernst & Young LLP complying with SAS 72 (as
amended), if then required.
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ARTICLE VII
COVENANTS OF THE COMPANY, RED XXXXXX AND MERGERSUB
SECTION 7.1. LEGAL CONDITIONS TO MERGER. Each of the Company, Red
Xxxxxx and Mergersub, shall use its best efforts to comply promptly with all
legal requirements which may be imposed on it with respect to the Merger, this
Agreement and the transactions contemplated hereby. Such actions shall include,
without limitation, filing or causing to be filed under the HSR Act a premerger
notification and report form, with respect to the transactions contemplated
hereby, furnishing all additional information required under the HSR Act and in
connection with approvals of or filings with any Governmental Authority. Each of
the Company, Red Xxxxxx and Mergersub promptly shall cooperate with and furnish
information to each other in connection with any such requirements imposed upon
any of them or any of their subsidiaries in connection with such transactions.
Each of the Company, Red Xxxxxx and Mergersub shall, and shall cause each of its
subsidiaries to, use its best efforts to obtain (and shall cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Authority or other public or private third party,
required to be obtained or made by the Company, Red Xxxxxx or any of their
subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement. In connection with the filings under the HSR
Act, each party shall request early termination of the HSR waiting period.
SECTION 7.2. PREPARATION OF PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) Red Xxxxxx and the Company promptly shall prepare and file
with the SEC the Proxy Statement, and Red Xxxxxx promptly shall prepare and file
with the SEC the Registration Statement. Each party shall provide the other
party and such other party's counsel and auditors with reasonable opportunity to
review and comment upon the Registration Statement, including all amendments
thereto and all supplements to the Proxy Statement contained therein and
constituting a part thereof, prior to the filing thereof with the SEC and/or the
distribution thereof to the stockholders of either party, and shall make all
reasonable changes thereto requested by such other party, counsel or auditors.
The parties agree that the Registration Statement shall comply as to form in all
material respects with the requirements of the Securities Act and the rules and
regulations thereunder, and the Proxy Statement shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder. Each of Red Xxxxxx and the Company shall use its best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing consistent with a
desired Effective Time of on or prior to February 28, 1999; provided, that the
failure of the Effective Time to have occurred on or prior to February 28, 1999
shall not be considered a breach of this Agreement or grounds for termination of
this Agreement. Red Xxxxxx shall advise the Company (promptly after it receives
notice thereof) of the time when the Registration Statement has become
effective, of any supplement or amendment that has been filed, of the issuance
of any stop order, of the suspension of the qualification of the shares of Red
Xxxxxx Common Stock for offering or sale in any jurisdiction, or
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of any request by the SEC for amendment of the Registration Statement or for
additional information. Promptly after the Registration Statement has been
declared effective, Red Xxxxxx and the Company shall use all reasonable efforts
to mail the Proxy Statement to their respective stockholders.
(b) Red Xxxxxx shall use its reasonable best efforts to
obtain, prior to the effective date of the Registration Statement, all necessary
state securities law or "Blue Sky" permits or approvals in connection with the
issuance of Red Xxxxxx Common Stock in the Merger, except that Red Xxxxxx shall
not be required to execute or file any general consent to service of process in
any jurisdiction in which it is not qualified to transact business or to
register as a dealer in any jurisdiction in which it is not qualified to
transact business or to register as a dealer in any jurisdiction.
(c) If at any time prior to the Effective Time any event
relating to Red Xxxxxx or any of its subsidiaries should be discovered which
should be set forth in an amendment of, or a supplement to, the Registration
Statement, Red Xxxxxx promptly shall so inform the Company and shall furnish all
necessary information to the Company relating to such event. If at any time
prior to the Effective Time any event relating to the Company or any of its
subsidiaries should be discovered which should be set forth in an amendment of,
or a supplement to, the Proxy Statement, the Company promptly shall so inform
Red Xxxxxx and shall furnish all necessary information to Red Xxxxxx relating to
such event.
SECTION 7.3. BEST EFFORTS. Upon the terms and subject to the conditions
of this Agreement (including, without limitation, the provisions of Sections
5.2, 6.3 and 7.10 relating to the exercise of the applicable fiduciary duties of
the Board of Directors of the Company or Red Xxxxxx, as applicable), each of the
parties to this Agreement shall use its best efforts to take or cause to be
taken all actions and to do or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement, and shall use its best efforts to obtain all
necessary waivers, consents and approvals, including the actions described in
Sections 7.1 and 7.2 above.
SECTION 7.4. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Red Xxxxxx and Red Xxxxxx shall give prompt notice to the
Company, of (a) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would, in the reasonable judgment of their
respective management, be likely to cause either (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to the Effective Time or
(ii) any condition set forth herein to be unsatisfied in any material respect at
any time from the date of this Agreement to the Effective Time, and (b) any
material failure of the Company, Red Xxxxxx or Mergersub, as the case may be, or
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, provided that the delivery of any notice pursuant to this Section 7.4
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
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SECTION 7.5. BROKERS. Each of the Company and Red Xxxxxx represents
that no agent, broker, investment banker, financial advisor or other firm or
Person is or shall be entitled to any brokers' or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement (except as set forth in Sections 3.22 and 4.22),
and each of the Company and Red Xxxxxx shall indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any Person on the
basis of any act or statement alleged to have been made by such party.
SECTION 7.6. PUBLIC ANNOUNCEMENTS. Neither the Company nor Red Xxxxxx
shall issue any press release or public announcement, including announcements by
any party for general reception by or dissemination to employees, agents or
customers, with respect to this Agreement, the Merger and the other transactions
contemplated by this Agreement without the prior written consent of the other
party (which consent shall not be withheld unreasonably), provided that the
Company or Red Xxxxxx may make any disclosure or announcement which, in the
opinion of its counsel, it is obligated to make pursuant to applicable law or
regulations of Nasdaq, in which case the party desiring to make the disclosure
shall reasonably consult with the other party prior to making such disclosure or
announcement.
SECTION 7.7. TAX AND ACCOUNTING TREATMENT. Until the Effective Time,
the Company and Red Xxxxxx each shall, and from and after the Effective Time Red
Xxxxxx shall, use its best efforts to qualify the Merger, and shall use best
efforts not to take any action to cause the Merger not to qualify, as a
reorganization within the meaning of Section 368(a) of the Code. From and after
the Effective Time, (a) Red Xxxxxx shall cause the Surviving Corporation to
continue the Company's historic business or use a significant portion of the
Company's historic business assets in a business within the meaning of the
Treasury regulation Section 1.368-1(d), and (b) Red Xxxxxx and Mergersub shall,
and Red Xxxxxx shall cause the Surviving Corporation to, treat the Merger as a
"reorganization" within the meaning of Section 368(a) of the Code and shall file
such information with their income tax returns as may be required by Treasury
regulation Section 1.368-3 or other applicable law. Until the Effective Time,
each of the Company and Red Xxxxxx, and from and after the Effective Time Red
Xxxxxx and their respective subsidiaries and other Affiliates over which they
exercise control, shall not knowingly take any action, or knowingly fail to take
any action, that is reasonably likely to jeopardize the treatment of the Merger
as a pooling of interests for accounting purposes.
SECTION 7.8. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) Red Xxxxxx shall indemnify, defend and hold harmless each
Person who is now, or who becomes prior to the Effective Time, an officer or
director of Red Xxxxxx or the Company (the "Indemnified Parties") against (i)
all losses, claims, damages, costs, expenses, liabilities or judgments or
amounts that are paid in settlement with the approval of the indemnifying party
(which approval shall not be withheld unreasonably) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such Person is or was a
director or officer of Red Xxxxxx or the Company, whether pertaining
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to any matter existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in whole
or in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated by this Agreement, in each case to
the full extent provided under the Certificate of Incorporation and By-laws of
the Company as in effect as of the date hereof or permitted under Delaware Law,
as applicable, to indemnify directors and officers. As of the date hereof,
neither Red Xxxxxx nor the Company has knowledge, after due inquiry of its
respective directors and executive officers, of any pending or threatened
claims, actions or other matters which reasonably could give rise to Indemnified
Liabilities.
(b) The Certificate of Incorporation and the By-laws of Red
Xxxxxx and the Surviving Corporation shall contain the provisions with respect
to indemnification substantially the same as set forth in the Company's
Certificate of Incorporation and By-laws on the date of this Agreement, and such
provisions shall not be amended, repealed or otherwise modified for a period of
six (6) years from the Effective Time in any manner that would adversely affect
the rights thereunder of individuals who on or prior to the Effective Time were
directors or officers of Red Xxxxxx or the Company, unless such modification is
required by law.
(c) The provisions of this Section 7.8 are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and executors after the Effective Time.
SECTION 7.9. FURTHER ASSURANCES. In the event that at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and/or directors of the Company,
Red Xxxxxx, Mergersub and the Surviving Corporation shall take such necessary
action.
SECTION 7.10. NO SOLICITATIONS. From the date hereof until the earlier
of (a) the Effective Time, or (b) the date that this Agreement shall terminate
in accordance with its terms (the "Non-Solicitation Period"), neither of the
Company nor Red Xxxxxx shall, and each such party shall cause its subsidiaries
not to, permit any of its representatives to, and shall use its best efforts to
cause such persons not to, directly or indirectly, initiate, solicit or
encourage, or take any action to facilitate the making of any offer or proposal
that constitutes or is reasonably likely to lead to any Competing Transaction.
Any violation of the restrictions set forth in the preceding sentence by an
officer or director of either the Company or Red Xxxxxx or any investment
banker, attorney or other representative of such party, whether such person is
purporting to act on behalf of such party or otherwise, shall be deemed to be a
breach of this Section 7.10. Each party hereto shall immediately cease and cause
to be terminated all existing discussions and negotiations, if any, with any
other persons conducted heretofore with respect to any Competing Transaction.
During the Non- Solicitation Period, Red Xxxxxx shall notify the Company, and
the Company shall notify Red Xxxxxx, orally and confirmed in writing, of any
inquiries, offers or proposals relating to a Competing Transaction (including,
without limitation, the terms and conditions of any such proposal and the
identity of the person making it) within 24 hours of the receipt thereof and
shall give the other five days' advance notice of any agreement to be entered
into with or any information to be supplied to
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any person making such inquiry, offer or proposal. Notwithstanding anything in
this Section 7.10 to the contrary, in the event of an unsolicited Competing
Transaction, unless the respective approvals of Red Xxxxxx'x Stockholders and
the Company's Stockholders have both been obtained, Red Xxxxxx or the Company,
as the case may be, may participate in discussions or negotiations with, furnish
information to, and afford access to its properties, books and records and that
of its subsidiaries, to any person in connection with a possible Competing
Transaction by such person (provided such person is BONA FIDE and financially
capable) with respect to either the Company or Red Xxxxxx if the Board of
Directors of the Company or Red Xxxxxx, as the case may be, after weighing the
advice of its counsel and financial advisor, determines in good faith that
taking such action is reasonably likely to lead to a definitive written offer or
proposal with respect to a Competing Transaction by or with such other person
that would be more favorable than the Merger to such party's stockholders from a
financial point of view. As used in this Section 7.10, "Competing Transaction"
shall mean any tender or exchange offer, proposal for a merger, consolidation or
other business combination involving any party or any of its material
subsidiaries, or any proposal or offer to acquire in any manner controlling
equity interest in, or substantially all of the assets of, any party or any of
its material subsidiaries, other than (i) pursuant to transactions contemplated
by this Agreement, (ii) any transaction by or involving the Company which is
permitted pursuant to Section 5.1 (and Schedule 5.1).
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF THE COMPANY, RED XXXXXX AND
MERGERSUB. The obligations of the Company, Red Xxxxxx and Mergersub to
consummate the Merger and the other transactions contemplated by this Agreement
are subject to the fulfillment, on or before the Effective Time, of each of the
following conditions:
(a) STOCKHOLDER APPROVALS. The Merger and the other
transactions contemplated by this Agreement shall have been approved and adopted
by the affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock entitled to vote at the Company Special Meeting. The
stock issuance pursuant to the Merger, the Certificate of Amendment, the
election of directors and the other transactions contemplated by this Agreement
shall have been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Red Xxxxxx Common Stock entitled to vote
at the Red Xxxxxx Meeting.
(b) APPROVALS OF GOVERNMENTAL AUTHORITIES AND OTHER PERSONS.
All authorizations, consents, orders or approvals of, or declarations or filings
with, or expiration or termination of any notice and waiting period imposed by,
any Governmental Authority or any other Person upon the consummation of the
transactions contemplated by this Agreement, the failure of which to obtain
could reasonably be expected to have a Company Material Adverse Effect or a Red
Xxxxxx Material Adverse Effect, shall have been filed or obtained or shall have
occurred. All of such authorizations,
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consents, orders or approvals shall have been obtained without the imposition of
any conditions which would require the divestiture of any of the Company's or
Red Xxxxxx'x assets or would otherwise materially adversely affect Red Xxxxxx'x
ability to operate the businesses of the Company and its subsidiaries following
the Effective Time.
(c) REGISTRATION STATEMENT. The Registration Statement shall
have been declared effective, and no stop order terminating the effectiveness of
the Registration Statement shall have been issued or threatened.
(d) NO ORDER OR INJUNCTION. The consummation of the Merger
shall not be precluded, enjoined, prohibited or materially restricted by any
order or injunction of a court of competent jurisdiction (each party agreeing to
use its best efforts to have any such order reversed or injunction lifted), and
no litigation, arbitration, or other proceeding initiated by any Governmental
Authority shall be pending which seeks to enjoin prohibit or materially restrict
the consummation of the Merger.
(e) POOLING LETTERS. The Company shall have received a letter
from its auditors, addressed to the Company, dated the date the Proxy Statement
is first mailed to the stockholders of the Company and confirmed in writing as
of the Effective Time, and Red Xxxxxx shall have received a letter from its
auditors, addressed to Red Xxxxxx, dated the date the Proxy Statement is first
mailed to the stockholders of Red Xxxxxx and confirmed in writing as of the
Effective Time, stating that the Merger shall qualify as a pooling of interests
business combination under applicable accounting and SEC rules, and the SEC
shall not have objected to such treatment.
(f) ACCOUNTANTS LETTERS. The Company and Red Xxxxxx shall have
received the letters described in Sections 5.5 and 6.8 above.
(g) NASDAQ. The shares of Red Xxxxxx Common Stock included in
the Merger Consideration shall have been duly approved for quotation on Nasdaq,
subject to official notice of issuance.
(h) AVERAGE TRADING PRICE OF RED XXXXXX COMMON STOCK. The
average daily closing sales price of a share of Red Xxxxxx Common Stock as
quoted on Nasdaq for the 20 consecutive trading days immediately preceding the
third trading day (including such third trading day) prior to the Effective
Time, shall be greater than or equal to $4.00.
(i) DISSENTING SHARES. Less than 10% of the issued and
outstanding shares of Company Common Stock shall have duly demanded and
perfected dissenters' rights of appraisal in accordance with Section 2.5 of this
Agreement and Section 262 of Delaware Law.
(j) BLUE SKY LAWS. Red Xxxxxx shall have received all state
securities or "Blue Sky" permits and other authorizations, if any, necessary to
issue the shares of Red Xxxxxx Common Stock pursuant to the Merger.
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SECTION 8.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. Except as
otherwise provided below, the obligations of the Company to consummate the
Merger and the other transactions contemplated by this Agreement shall be
subject to the fulfillment on or prior to the Effective Time of the following
additional conditions, any one or more of which may be waived by the Company:
(a) PERFORMANCE OF OBLIGATIONS OF RED XXXXXX AND MERGERSUB.
Red Xxxxxx and Mergersub shall have performed and complied in all material
respects with all agreements required by this Agreement to be performed or
complied with by them on or prior to the Effective Time, and the Company shall
have received a certificate signed on behalf of each of Red Xxxxxx and Mergersub
by an executive officer of each such company to such effect.
(b) REPRESENTATIONS AND WARRANTIES; CHANGE IN CONDITION. The
representations and warranties of Red Xxxxxx and Mergersub set forth in this
Agreement shall be true and correct in all material respects on and as of the
date hereof and on and as of the Effective Time, with the same force and effect
as through such representations and warranties had been made on and as of the
Effective Time, and the Company shall have received a certificate signed on
behalf of each of Red Xxxxxx and Mergersub by an executive officer of each such
company to such effect. Since the date hereof, no event or condition shall have
occurred (or shall be discovered) that could reasonably be expected to have a
material adverse effect on the business, assets, results of operations or
financial condition of Red Xxxxxx and its subsidiaries, taken as a whole (a "Red
Xxxxxx Material Adverse Effect").
(c) CORPORATE ACTION. The Company shall have received from Red
Xxxxxx (i) copies of the certificates of incorporation and by-laws of Red Xxxxxx
and Mergersub, (ii) copies of resolutions of Red Xxxxxx'x and Mergersub's Boards
of Directors approving and adopting this Agreement and the transactions
contemplated hereby, certified on behalf of each of Red Xxxxxx and Mergersub by
the corporate secretary of each such company, and (iii) a certificate of good
standing from the Secretary of State of the State of Delaware for each of Red
Xxxxxx and Mergersub (dated as of a date not more than 10 days prior to the
Closing).
(d) OPINION OF COUNSEL. The Company shall have received an
opinion of counsel to Red Xxxxxx and Mergersub, dated the Effective Time,
substantially in the form of EXHIBIT G.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF RED XXXXXX AND MERGERSUB. The
obligations of Red Xxxxxx and Mergersub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the fulfillment
on or prior to the Effective Time of the following additional conditions, any
one or more of which may be waived by Red Xxxxxx and Mergersub:
(a) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company
shall have performed and complied in all material respects with all agreements
required by this Agreement to be performed or complied with by the Company at or
prior to the Effective Time, and Red Xxxxxx
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and Mergersub shall have received a certificate of the Company, signed by the
chief executive officer and the chief financial officer of the Company, to such
effect.
(b) REPRESENTATIONS AND WARRANTIES; CHANGE IN CONDITION. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects on and as of the date hereof and at
and as of the Effective Time, with the same force and effect as though such
representations and warranties had been made on and as of the Effective Time,
and Red Xxxxxx and Mergersub shall have received a certificate of the Company,
signed by the chief executive officer and the chief financial officer of the
Company, to such effect. Since the date hereof, no event or condition shall have
occurred (or shall be discovered) that could reasonably be expected to have a
material adverse effect on the business, assets, results of operations, or
financial condition of the Company and its subsidiaries, taken as a whole (a
"Company Material Adverse Effect").
(c) CORPORATE ACTION. Red Xxxxxx and Mergersub shall have
received from the Company (i) copies of the certificates of incorporation and
bylaws of the Company and each of its subsidiaries, (ii) copies of resolutions
of the Company's Board of Directors approving and adopting this Agreement and
the transactions contemplated hereby, certified on behalf of the Company by its
corporate secretary, and (iii) a certificate of good standing from the Secretary
of State of the State of Delaware for the Company (dated as of a date not more
than 10 days prior to the Closing).
(d) BUSINESSES ACQUIRED BY THE COMPANY. As of the Effective
Time, the Company shall have Annualized Adjusted EBITDA of at least $11 million
(it being acknowledged and agreed by Red Xxxxxx that the Company had at least
$8.3 million of Annualized Adjusted EBITDA as of December 8, 1998). For purposes
of this Agreement, the following terms shall have the meanings set forth below:
"Addbacks" shall mean, with respect to each floral business
acquired by the Company, all expenses incurred by such floral business
during the applicable accounting period(s) preceding such acquisition,
which expenses would not have been incurred by the Company if the
Company owned such business during such period, including, without
limitation, dividends, distributions, excess owner's compensation,
extraordinary fringe benefits and perquisites provided to owners and
other employees, and other non-recurring revenue and expenses, in all
cases as evidenced by the Company's records.
"Annualized Adjusted EBITDA" shall mean, as of any date, the
Company's consolidated net income for the 12-month period immediately
preceding such date before (x) interest, taxes, depreciation and
amortization expenses paid or accrued during such period, and (y) plus
(or minus) all Addbacks related to such period; provided that (I) all
businesses acquired by the Company during such 12-month period shall be
treated as having been acquired by the Company as of the first day of
such 12-month period, and (II) other pro forma adjustments shall be
made to such net
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income consistent with the pro forma adjustments described in the
Company's Private Placement Memorandum dated September 1998.
(e) OPINION OF COUNSEL. Red Xxxxxx and Mergersub shall have
received an opinion of counsel to the Company, dated the Effective Time,
substantially in the form of EXHIBIT H.
ARTICLE IX
TERMINATION
SECTION 9.1. TERMINATION. This Agreement may be terminated and the
Merger contemplated by this Agreement may be abandoned at any time after the
occurrence of any of the following events, but prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company);
(a) by mutual written consent of Red Xxxxxx and the Company;
(b) by either Red Xxxxxx or the Company, if any Governmental
Authority shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become final and nonappealing;
(c) by either Red Xxxxxx or the Company, if the Merger has not
been consummated by March 31, 1999 (such date, or such later date mutually
agreed to in writing by the parties, hereto referred to as the "End Date")
(other than due to the failure of the party seeking to terminate this Agreement
to perform its obligations under this Agreement required to be performed at or
prior to the Effective Time); PROVIDED, HOWEVER, that if the reason the Merger
has not been consummated by March 31, 1999 is due to any of the conditions in
Sections 8.1(a), 8.1(b), 8.1(c), or 8.1(d) not having been satisfied as of March
31, 1999, then the End Date shall be automatically extended, without further
action of the parties, to May 31, 1999; FURTHER PROVIDED, that if the reason the
Merger has not been consummated by March 31, 1999 is due to the condition in
Section 8.1(e) not having been satisfied as of March 31, 1999, then the parties
agree to negotiate in good faith to agree on such terms and conditions as may
permit the Merger and the other transactions contemplated by this Agreement to
be closed and treated for accounting purposes as a purchase transaction as
opposed to a pooling of interests, and the End Date shall be automatically
extended, without further action of the parties, to May 31, 1999;
(d) by Red Xxxxxx, if any of the representations and
warranties of the Company in this Agreement are not true and correct in all
material respects and could not reasonably be expected to become true and
correct prior to the End Date, or if the Company breaches in any material
respects any covenant of the Company contained in this Agreement and such breach
could not reasonably be expected to be cured prior to the End Date; or
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(e) by the Company, if any of the representations and
warranties of Red Xxxxxx in this Agreement are not true and correct in all
material respects and could not reasonably be expected to become true and
correct prior to the End Date, or if Red Xxxxxx breaches in any material respect
any covenant of Red Xxxxxx contained in this Agreement and such breach could not
reasonably be expected to be cured prior to the End Date.
SECTION 9.2. EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Section 9.1, this Agreement shall terminate and become
void and of no force and effect, the Merger shall be abandoned without further
action by any of the parties to this Agreement, and no party to this Agreement
shall have any liability or further obligation under this Agreement, except for
the agreements contained in Sections 3.22 and 4.22 (Brokers), 7.10 (No
Solicitation), 10.3 (Fees and Expenses) and 10.8 (Governing Law); PROVIDED that
any termination of this Agreement pursuant to Sections 9.1(d) or 9.1(e) of this
Agreement shall not relieve any party from any liability for the breach of any
material representation, warranty or covenant contained in this Agreement or be
deemed to constitute a waiver of any remedy available for such breach, and
FURTHER PROVIDED, that if Red Xxxxxx terminates this Agreement pursuant to
Section 9.1(d), then Red Xxxxxx shall be entitled to recover its reasonable
attorney's fees and costs incurred in any action brought by Red Xxxxxx against
the Company to recover its damages caused by such breach, or if the Company
terminates this Agreement pursuant to Section 9.1(e), then the Company shall be
entitled to recover its reasonable attorney's fees and costs incurred in any
action brought by the Company against Red Xxxxxx to recover its damages caused
by such breach. Upon termination of this Agreement, each party shall return all
documents and other materials of any other party which constitute confidential
or proprietary information or trade secrets, whether so obtained before or after
the execution of this Agreement, to the party furnishing the same, and will
otherwise continue to abide by the terms of the Confidentiality Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. AMENDMENT AND MODIFICATION. Subject to applicable law,
this Agreement may be amended, modified and supplemented only by written
agreement of the Company, on the one hand, and Red Xxxxxx and Mergersub, on the
other hand, at any time prior to the Effective Time with respect to any of the
terms contained herein; PROVIDED, HOWEVER, that, after the adoption of this
Agreement by the Company's stockholders, no such amendment or modification shall
reduce the amount or change the form the consideration to be delivered to the
stockholders of the Company as contemplated by Article II of this Agreement.
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SECTION 10.2. WAIVER OF COMPLIANCE; CONSENTS. Any failure of the
Company, or of Red Xxxxxx or Mergersub, to comply with any obligation, covenant,
agreement or condition herein may be waived in writing by Red Xxxxxx or
Mergersub, or by the Company, respectively, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 10.2.
SECTION 10.3. FEES AND EXPENSES. Except as otherwise provided in this
Agreement or by law, all fees and expenses incurred in connection with the
Merger, this Agreement and the transactions contemplated by this Agreement shall
be paid by the party incurring such fees or expenses, except that Red Xxxxxx and
the Company shall share equally (i) the expenses payable in connection with
printing and mailing the Registration Statement and the Proxy Statement and all
SEC filing fees relating to the transactions contemplated herein, and (ii) all
HSR Act filing fees payable with respect to the Merger and other transactions
contemplated by this Agreement.
SECTION 10.4. NO THIRD-PARTY BENEFICIARIES. Except as provided in
Section 7.8, this Agreement is for the sole benefit of the parties hereto and
nothing herein expressed or implied shall give or be construed or is intended to
give to any Person, other than the parties hereto, any legal or equitable rights
hereunder.
SECTION 10.5. RELIANCE ON AND SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. Notwithstanding any knowledge of facts determined or determinable by
any party by investigation, each party shall have the right to fully rely on the
representations and warranties of the other parties contained in this Agreement
or in any other documents or certificates delivered in connection herewith. Each
representation and warranty contained in this Agreement is independent of each
other representation and warranty. None of the representation, warranties, or
covenants in this Agreement or in any Schedule, certificate, or other document
delivered pursuant to this Agreement shall survive beyond the Effective Time,
except for the agreements in Article I (The Merger), Article II (Conversion of
Securities; Exchange of Certificates), Section 7.7 (Tax Treatment), Section 7.8
(Indemnification of Officers and Directors), Section 7.9 (Further Assurances),
and Section 10.8 (Governing Law), and for those set forth in the Affiliate
letters required under Sections 5.4 and 6.5, the Covenant Letter, the Employment
Agreements and the Voting Agreements.
SECTION 10.6. NOTICES. All notice and other communications required or
permitted hereunder shall be in writing and shall be deemed duly given if
delivered by hand, faxed (provided a confirmation is sent by guaranteed
overnight delivery), guaranteed overnight delivery or mailed, first class
certified mail with postage prepaid, to the parties at the following addresses,
or such other addresses as such party shall furnish to the other in writing:
(a) If to Red Xxxxxx or Mergersub to:
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Florafax International, Inc.
0000 00xx Xxxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxx L.L.P.
0000 Xxxxxxxxxxxx Xxx. X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxxx III, Esq.
Fax: (000) 000-0000
(b) If to the Company to:
XXXXXX XXXXXXX, INC.
One Financial Plaza, Suite 1100
000 Xxxx Xxxxxxx Xxxx.
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Fax: (000) 000-0000
with a copy to:
Akerman, Senterfitt & Xxxxxx, P.A.
One Xxxxxxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
SECTION 10.7. ASSIGNMENT. This Agreement and all of its provisions
shall be binding upon and inure to the benefit of the parties to this Agreement,
but neither this Agreement nor any of the rights, interests or obligations
hereunder may be assigned by operation of law or otherwise.
SECTION 10.8. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
applicable to contracts executed and to be wholly performed within such State.
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SECTION 10.9. HEADINGS. The table of contents and the article and
section headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
When reference is made in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated.
SECTION 10.10. ENTIRE AGREEMENT. This Agreement (which term as used
throughout includes the Exhibits and Schedules hereto) and the other documents
and certificates contemplated herein embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein, and supersedes all prior agreements and understandings (oral or written)
between or among the parties with respect to such subject matter, except for the
Confidentiality Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein.
SECTION 10.11. SEVERABILITY. Wherever possible, each provision or
portion of any provisions of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
herein.
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[signatures on next page]
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement on the date set forth above.
FLORAFAX INTERNATIONAL, INC., a
Delaware corporation
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------------
Name: XXXXXX X. XXXXXXXX
Title: CHIEF EXECUTIVE OFFICER
RED XXXXXX ACQUISITION CORP., a
Delaware corporation
By: /s/ XXXXXX X. XXXXXXXX
-------------------------------------
Name: XXXXXX X. XXXXXXXX
Title: CHIEF EXECUTIVE OFFICER
XXXXXX XXXXXXX, INC., a Delaware
corporation
By: /s/ XXXXXX X. XXXXXX
-------------------------------------
Name: XXXXXX X. XXXXXX
Title: CHIEF EXECUTIVE OFFICER
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