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AGREEMENT AND PLAN OF MERGER
AMONG
OWOSSO CORPORATION
XXXXXX COMPANY
AND
X. X. XXXXXX, INC.
DATED: April 3, 1998
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TABLE OF CONTENTS
Page
BACKGROUND.................................................................1
ARTICLE 1 - THE MERGER.....................................................1
1.1. The Merger..................................................1
1.2. Closing.....................................................1
1.3. Merger Filings..............................................2
1.4. Filing of Merger Documents; Effective Time..................2
1.5. The Articles of Incorporation...............................2
1.6. The Bylaws..................................................2
1.7. Resignations................................................2
ARTICLE 2 - CONVERSION OR CANCELLATION OF SHARES IN THE MERGER.............2
2.1. Conversion or Cancellation of Shares........................2
2.2. Payment for Shares..........................................3
2.3. Dissenters' Rights..........................................4
2.4. Transfer of Shares After the Effective Time.................4
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY...............................4
3.1. Organization, Power, Standing and Qualification.............4
3.2. Power and Authority.........................................5
3.3. Validity of Contemplated Transactions.......................5
3.4. Capitalization of Company...................................5
3.5. Governmental Filings; No Violations.........................6
3.6. Title to Properties.........................................6
3.7. Real Property...............................................6
3.8. Company Reports; Financial Statements.......................8
3.9. Absence of Undisclosed Liabilities..........................8
3.10. Certain Tax Matters.........................................9
3.11. Litigation; Compliance with Laws...........................10
3.12. Employee Benefits..........................................10
3.13. Insurance..................................................13
3.14. Proprietary Rights.........................................13
3.15. Labor Disputes.............................................13
3.16. Contracts..................................................13
3.17. Minute Books...............................................14
3.18. Product Liability Claims...................................15
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3.19. Fairness Opinion..........................................15
3.20. Bank Accounts.............................................15
3.21. No Changes................................................15
3.22. Compensation Arrangements.................................16
3.23. Copies of Articles and Bylaws.............................16
3.24. Condition of Tangible Assets..............................16
3.25. Accounts Receivable.......................................16
3.26. Hazardous Substances......................................17
3.27. Inventory.................................................17
3.28. Relationship With Customers and Suppliers.................17
3.29. Transactions with Affiliates..............................18
3.30. Capital Expenditures......................................18
3.31. Discontinued Operations...................................18
3.32. Veracity of Statements....................................18
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF BUYER AND XXXXXX............18
4.1. Power and Authority........................................18
4.2. Conflict With Authority, Bylaws, etc.......................19
4.3. Acquisition of Shares for Investment.......................19
4.4. Governmental Filings; No Violations........................19
4.5. Brokers and Finders........................................19
4.6. Proxy Statement............................................19
ARTICLE 5 - ACTIVITIES PRIOR TO CLOSING BY THE COMPANY....................19
5.1. Operation of Business....................................19
5.1.1. Organizational Documents........................20
5.1.2. Corporate Name..................................20
5.1.3. Compensation, Bonuses...........................20
5.1.4. Management......................................20
5.1.5. Mergers, Etc....................................20
5.1.6. Disposition of Assets...........................20
5.1.7. Indebtedness....................................20
5.1.8. Payables........................................20
5.1.9. Inventory.......................................20
5.1.10. Maintenance of Assets..........................20
5.1.11. Insurance......................................20
5.1.12. Contracts and Permits..........................21
5.1.13. Litigation, etc................................21
5.1.14. Dividends or Other Distributions...............21
5.1.15. Capital Stock..................................21
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Page
5.2. Acquisition Proposals....................................21
5.3. Meetings of the Company's Shareholders...................21
5.4. Filings; Other Action....................................22
5.5. Access to Information....................................22
5.6. Best Efforts.............................................23
5.7. Benefit Plans............................................23
5.7.1. Plan Changes....................................23
5.7.2. Contributions and Payments......................23
5.8. Notice of Change.........................................23
5.9. Publicity................................................23
5.10. Xxxxxx ESOP...............................................24
ARTICLE 6 - ACTIVITIES PRIOR TO CLOSING BY BUYER..........................24
6.1. Best Efforts...............................................24
6.2. Access to Information......................................24
6.3. Confidentiality............................................25
6.4. Purchase or Sale of Shares.................................25
ARTICLE 7 - CONDITIONS PRECEDENT TO CLOSING...............................25
7.1. Conditions to Obligation of Buyer to Close.................25
7.1.1. Representations and Warranties;
Compliance with Agreement...................25
7.1.2. Opinion of Counsel for the Company..............26
7.1.3. Litigation Affecting Closing....................26
7.1.4. Required Consents and Regulatory Approvals......26
7.1.5. No Material Damage to Business..................26
7.1.6. Approval of Buyer; Corporate Matters............26
7.1.7. Shareholder Approval............................26
7.1.8. Dissenter's Rights..............................26
7.1.9. Environmental Issues............................27
7.2. Conditions to Obligation of the Company to Close...........27
7.2.1. Representations and Warranties..................27
7.2.2. Opinion of Counsel of Buyer.....................27
7.2.3. Litigation Affecting Closing....................27
7.2.4. Approval of The Company; Corporate Matters......28
7.2.5. Shareholder Approval............................28
7.2.6. 401K Plan.......................................28
ARTICLE 8 - INDEMNIFICATION...............................................28
8.1. Officers and Directors Indemnification.....................28
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ARTICLE 9 - TERMINATION...................................................29
9.1. Termination................................................29
9.1.1. Termination by Mutual Consent...................29
9.1.2. Prior to Effective Time.........................29
9.1.3. By Buyer........................................30
9.1.4. By the Company..................................30
9.1.5. By Either Party.................................30
9.1.6. Withdrawal of Recommendation....................30
9.1.7. Higher Offer....................................30
9.2. Effect of Termination and Abandonment......................30
9.3. No Purchase of Company Stock...............................30
ARTICLE 10 - MISCELLANEOUS................................................31
10.1. Payment of Expenses......................................31
10.2. Entire Agreement; Amendments.............................31
10.3. Headings.................................................31
10.4. Gender; Number...........................................31
10.5. Exhibits and Schedules...................................31
10.6. Severability.............................................31
10.7. Notices..................................................32
10.8. Waiver...................................................33
10.9. Assignment...............................................33
10.10. Successors and Assigns...................................33
10.11. Governing Law............................................33
10.12. No Benefit to Others.....................................33
10.13. Counterparts.............................................33
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made
this 3rd day of April, 1998, by and among OWOSSO CORPORATION, a Pennsylvania
corporation ("Buyer"), XXXXXX COMPANY, a Delaware corporation and wholly-owned
subsidiary of Buyer, ("Xxxxxx") and X. X. XXXXXX, INC., a Delaware corporation
(the "Company") .
BACKGROUND
The Company is engaged in the business of manufacturing
mechanical timers, photo controls and parking meters (the "Business");
Each Board of Directors of Buyer, Xxxxxx and the Company has
approved the acquisition of the Company by Buyer through the merger of Xxxxxx
into the Company (the "Merger") pursuant to and subject to the terms and
conditions of this Agreement; and
The Board of Directors of the Company has determined that the
Merger is fair to and in the best interests of the holders of the Company's
common stock, par value $1.00 per share (the "Common Stock") and has resolved to
recommend the approval of the Merger by the shareholders of the Company.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises and covenants herein contained, and intending to be legally
bound, Buyer, Xxxxxx and the Company hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.4), Xxxxxx shall be merged with
and into the Company pursuant to the Merger and the separate corporate existence
of Xxxxxx shall thereupon cease. The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
except as set forth in Sections 1.5 and 1.6. The Merger shall have the effects
specified in the General Business Corporation Law of the State of Delaware (the
"DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of the Company at 10:00 A.M. on the later of (A) June
30, 1998 or (B) the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article 7 hereof shall be
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fulfilled or waived in accordance with this Agreement or (ii) at such other
place and time and/or on such other date as the Company and Buyer may agree.
1.3. Merger Filings. In connection with the Closing, the Company and
Xxxxxx will cause the Certificate of Merger to be filed with the Secretary of
State of Delaware (the "Certificate of Merger").
1.4. Filing of Merger Documents; Effective Time. The Merger shall
become effective on the date on which the Certificate of Merger has been duly
filed with the Secretary of State of Delaware. The "Effective Time" refers to
the time at which the Delaware Certificate of Merger has been duly filed with
the Secretary of State of Delaware.
1.5. The Articles of Incorporation. The Articles of Incorporation of
the Surviving Corporation shall, at the Effective Time, be and read as set forth
on Exhibit A hereto and incorporated herein by this reference, until further
amended in accordance with the terms thereof and the DGCL.
1.6. The Bylaws. The Bylaws of the Surviving Corporation shall, at the
Effective Time, be and read as set forth on Exhibit B hereto, until further
amended in accordance with the terms thereof and the DGCL.
1.7. Resignations. On the Closing Date, the Company will make available
to Buyer the written resignations of all the directors and officers of the
Company effective as of the Effective Time, except for such officers and
directors as Buyer shall designate in writing. The Company shall use its best
efforts at or before the Effective Time to cause the nominees of Buyer to be
elected (effective the Effective Time) by the resigning directors in accordance
with the Bylaws of the Company.
ARTICLE 2
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
2.1. Conversion or Cancellation of Shares. The manner of converting or
canceling shares of stock of the Company and Xxxxxx in the Merger shall be as
follows:
(a) At the Effective Time, each share of the Common
Stock issued and outstanding immediately prior to the Effective Time (a
"Share"), other than Common Stock held in the Company's treasury and Common
Stock which is held by shareholders perfecting dissenter's rights pursuant to
the DGCL ("Dissenting Shareholders"), by virtue of the Merger and without any
action on the part of the holder thereof, shall be converted into the right to
receive, without interest, an amount in cash equal to $14.51 (the "Merger
Consideration"). All such Shares, by virtue of the Merger and without any action
on the part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a
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certificate representing any such Shares shall thereafter cease to have any
rights with respect to such Shares, except the right to receive the Merger
Consideration for such Shares upon the surrender of such certificate in
accordance with Section 2.2.
(b) At the Effective Time, each Share issued and held
in the Company's treasury at the Effective Time, shall, by virtue of the Merger
and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(c) At the Effective Time, each share of common stock
and each share of preferred stock of Xxxxxx issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Xxxxxx or the holders of such shares, be converted into,
respectively, one share of common stock or one share of preferred stock as the
case may be, of the Surviving Corporation.
(d) Shares that are held by Dissenting Shareholders
shall be entitled to such amount as is provided in the DGCL and shall not be
converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost his dissenter's right to appraisal and
payment under the DGCL.
2.2. Payment for Shares. Prior to the Effective Time, Buyer or Xxxxxx
shall designate bank or trust company reasonably acceptable to the Company, to
act as Paying Agent in connection with the Merger (the "Paying Agent") and to
receive and disburse the Merger Consideration to which holders of Shares become
entitled pursuant to Section 2.1. At the Effective Time, Buyer or Xxxxxx will
provide the Paying Agent with sufficient cash to allow the Merger Consideration
to be paid by the Paying Agent for each Share then entitled to receive the
Merger Consideration. Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each person who was, at the Effective
Time, a holder of record (other than Dissenting Shareholders) of issued and
outstanding Shares a form (mutually agreed to by Buyer and the Company) of
letter of transmittal and instructions for use in effecting the surrender of the
certificates which, immediately prior to the Effective Time, represented any of
such Shares in exchange for payment therefor. Upon surrender to the Paying Agent
of such certificates, together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, the Surviving
Corporation shall promptly cause the Paying Agent to pay to the persons entitled
thereto a check in the amount to which such persons are entitled, after giving
effect to any required tax withholdings. No interest will be paid or will accrue
on the amount payable upon the surrender of any such certificate. If payment is
to be made to a person other than the registered holder of the certificate
surrendered, it shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the certificate surrendered or establish to the satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is not
applicable. The Surviving Corporation shall pay all charges and expenses,
including those of
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the Paying Agent, in connection with the exchange of the Merger Consideration
for Shares. In the event any certificate representing Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such certificate to be lost, stolen or destroyed, the Paying
Agent will issue in exchange for such lost, stolen or destroyed certificate the
Merger Consideration deliverable in respect thereof as determined in accordance
with this Article 2; provided, however, the person to whom the Merger
Consideration is paid shall, as a condition precedent to the payment thereof,
give the Surviving Corporation a bond in such sum as it may direct or otherwise
indemnify the Surviving Corporation in a manner satisfactory to it against any
claim that may be made against the Surviving Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed. Promptly following
the first anniversary of the Effective Time, the Paying Agent shall deliver to
the Surviving Corporation all cash held for payment as Merger Consideration and
all other documents in its possession relating to the transactions described in
this Agreement, and the Paying Agent's duties shall terminate. Thereafter each
holder of a certificate representing Shares may surrender such certificate to
the Surviving Corporation (subject to applicable abandoned property, escheat and
similar laws) and receive in exchange therefor the Merger Consideration in
respect thereof, without interest thereon.
2.3. Dissenters' Rights. If any Dissenting Shareholder shall be
entitled to be paid the "fair value" of his or her Shares, as provided in
Section 262 of the DGCL, the Company shall give Buyer notice thereof and Buyer
shall have the right to participate in all negotiations and proceedings with
respect to any such demands. Neither the Company nor the Surviving Corporation
shall, except with the prior written consent of Buyer, voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
payment. If any Dissenting Shareholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the Shares held by such
Dissenting Shareholder shall thereupon be treated as though such Shares had been
converted into the Merger Consideration pursuant to Section 2.1.
2.4. Transfer of Shares After the Effective Time. No transfers of
Shares shall be made on the stock transfer books of the Surviving Corporation at
or after the Effective Time.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY
The Company hereby represents and warrants to Buyer and Xxxxxx that,
except as set forth in the numbered paragraph of the disclosure letter of even
date delivered by the Company to the Buyer in conjunction with execution of this
Agreement (the "Disclosure Letter") which paragraph corresponds to the
applicable section of this Article 3:
3.1. Organization, Power, Standing and Qualification. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware,
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and has full corporate power and authority to carry on its business as it is now
being conducted and to own and operate the properties and assets now owned and
operated by it. The Company is duly qualified to do business and is in good
standing in all jurisdictions where the failure to qualify or to be in good
standing would have a material adverse effect upon its financial condition, the
conduct of its business or the ownership of its property and assets (a "Material
Adverse Effect"), such jurisdictions being listed in Paragraph 3.1 of the
Disclosure Letter. The Company does not have any "subsidiaries" (which, for
purposes of this Agreement, shall mean all corporations in which the Company
owns more than 50% of the issued and outstanding capital stock). The Company
does not own (i) any equity interest in any corporation or other entity or (ii)
marketable securities where the Company's equity interest in any such entity
exceeds 5% of the outstanding equity of such entity on the date hereof.
3.2. Power and Authority. The Company has the power and authority to
execute, deliver and perform this Agreement and the other documents, instruments
and agreements contemplated herein (the "Collateral Documents") to which the
Company is a party and, subject only to approval of this Agreement by the
holders of sixty percent (60%) of the Shares, to consummate the transactions
contemplated by this Agreement and the Collateral Documents. Each of this
Agreement and the Collateral Documents is a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally.
3.3. Validity of Contemplated Transactions. The execution, delivery and
performance of this Agreement and the Collateral Documents and the consummation
of the transactions contemplated hereby and thereby do not and will not
contravene any provision of the Certificate of Incorporation or Bylaws of the
Company; nor subject to receipt of the Consents (as defined below) violate, be
in conflict with, or constitute a default under, cause the acceleration of any
payments pursuant to, or otherwise impair the good standing, validity or
effectiveness of any agreement, contract, indenture, lease, or mortgage to which
the Company is a party or by which the Company or any of its assets is bound; or
violate any provision of law, rule, regulation, order, permit, or license to
which the Company is subject. Paragraph 3.3 of the Disclosure Letter attached
hereto sets forth an accurate and complete list of any consents required to be
obtained in connection with any items identified in the preceding sentence,
prior to consummation of the transactions contemplated by this Agreement (the
"Consents").
3.4. Capitalization of Company. The Company's total authorized capital
stock consists of 400,000 shares of common stock, $1.00 par value, of which
196,736 shares are currently outstanding, validly issued, fully paid and
non-assessable and have not been issued in violation of any preemptive or
similar right. Except as set forth above in this Section 3.4 and in Paragraph
3.4 of the Disclosure Letter, there are no shares of capital stock of the
Company authorized, issued or outstanding and, except for the rights of ESOP (as
defined in Section 5.10 hereof) participants to diversify under Section 401(a)28
of the Internal Revenue Code of 1986, as amended (the "Code") and to exercise
"put" options under Section 409(h) of the Code, there are no preemptive rights
or any outstanding subscriptions, options, warrants, rights, convertible or
exchangeable securities or
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other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company (all such outstanding
subscriptions, options, warrants, rights, securities, agreements and commitments
being collectively called, the "Stock Rights"), and no Stock Rights have been
issued since 1987, except in connection with the ESOP.
3.5. Governmental Filings; No Violations. Other than the filings
provided for in Section 1.4 hereof, the filing identified on Section 7.1.9(b)
and the filings as required under the Securities Exchange Act of 1934 (as
amended) (the "Exchange Act" and such filings being called, collectively, the
"Regulatory Filings"), and except as set forth in Paragraph 3.5 of the
Disclosure Letter, no notices, reports or other filings are required to be made
by the Company with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any governmental or
regulatory authorities of the United States or the several States in connection
with the execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby.
3.6. Title to Properties. Except as set forth in Paragraph 3.6 of the
Disclosure Letter, the Company has good, valid and marketable title to all of
its properties and assets, real, personal and mixed, including all of the
properties and assets reflected on the most recent balance sheet which is part
of the Financial Statements (as defined in Section 3.8 hereof) and those
acquired since the Financial Statement Date (as defined in Section 3.9 hereof),
except in each case for properties and assets sold or otherwise disposed of in
the ordinary course of business, free and clear of all mortgages, liens,
pledges, security interests and other encumbrances (collectively "Liens"),
except (a) liens for current taxes not delinquent or being contested in good
faith by appropriate proceedings (which, in the latter case, are disclosed in
Paragraph 3.6 of the Disclosure Letter), (b) mechanics', workmen's,
materialmen's or other like liens arising in the ordinary course of business
with respect to obligations which are not due, and (c) liens securing the
repurchase of securities from ESOP participants under Section 409(h)(5) of the
Code (collectively, "Permitted Liens").
3.7. Real Property.
(a) Paragraph 3.7 of the Disclosure Letter accurately
lists all real property owned by the Company beneficially, or of record and
contains a brief description of all plants and structures located thereon.
Except as set forth in Paragraph 3.7 of the Disclosure Letter, (i) the Company
is lawfully seized and possessed of the real property, (ii) the Company has good
and marketable fee simple title to the real property, free and clear of all
Liens other than Permitted Liens (which Permitted Liens are disclosed in
Paragraph 3.7 of the Disclosure Letter), (iii) the Company is in possession of
the real property, and (iv) there are no options, licenses, leases, rights of
first refusal, conditional sales agreements, or similar arrangements respecting
any such real property or improvements. The Company has appropriate rights of
ingress and egress with respect to the real property and any improvements
located thereon. None of the real property, the improvements or the use thereof
contravenes or violates any material building, zoning, land use, administrative,
occupational or safety and health law in any respect (except as
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permitted on the basis of prior nonconforming use, waiver or variance, all of
which permitted uses that are known to the Company are set forth in Paragraph
3.7 of the Disclosure Letter).
(b) The Company has delivered to Buyer prior to the
execution of this Agreement true and complete copies of all deeds, leases,
mortgages, deeds of trust, certificates of occupancy, title insurance policies,
title reports, surveys and similar documents, and all amendments thereof, in the
Company's possession, with respect to the real property.
(c) There are no condemnation or appropriation
proceedings pending or, to the best knowledge of the Company, threatened against
any of the real property or the improvements.
(d) Except as disclosed in Paragraph 3.7 of the
Disclosure Letter, the improvements on any such real property are in good
operating condition (ordinary wear and tear excepted).
(e) Except as disclosed in Paragraph 3.7 of the
Disclosure Letter, since the Financial Statement Date, there has been no damage,
destruction or loss (whether or not covered by insurance), or any condemnation,
with respect to the real property.
(f) Except as disclosed in Paragraph 3.7 of the
Disclosure Letter, the Company has access to all utilities, including water and
sewage, necessary to operate its business in the normal course and there are no
unpaid assessments for the installation thereof or charges for making connection
thereto that have not been fully paid; and with respect to the real property,
all public utilities, including connection and permanent right to discharge
sanitary waste into the collector system of the appropriate sewer authority, are
installed and operating, and all installation and connection charges have been
paid in full.
(g) All curb cut and street opening licenses, permits
or other approvals required for vehicular access to and from the real property
to any adjoining public street have been obtained and paid for and are in full
force and effect.
(h) There are no outstanding notices of uncorrected
violations of the building, safety, plumbing, electrical, health, zoning or fire
ordinances of the city, county, state or municipality in which the real property
is located. The zoning and building laws and ordinances of the city, county,
state or municipality in which the real property is located are not violated in
any material respect by the existing structures.
(i) Paragraph 3.7 of the Disclosure Letter contains a
true and correct list of any and all management, service, supply, security,
maintenance, or similar contracts with respect to or affecting the real
property.
(j) No portion of the real property or the
improvements are affected by any special assessments, whether or not a Lien
thereon, which has not been paid in full and there are no
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current installments of such assessments which remain unpaid and no such real
property will be assessed for any street paving or curbing heretofore laid or
any other public improvements heretofore made. There are no pending, or to the
Company's knowledge threatened, assessments or similar charges that affect the
real property; and there is no proceeding pending or to the Company's knowledge,
threatened for any increase of the assessed valuation of any portion of the real
property. No ordinance authorizing improvements, the cost of which might be
assessed against Buyer or any real property, is pending or contemplated.
(k) Except as disclosed in Paragraph 3.7 of the
Disclosure Letter, the real property is not located within a special flood
hazard area as documented in the "Department of Housing and Urban Development,
Federal Insurance Administration Special Flood Hazard Area Maps."
3.8. Company Reports; Financial Statements. The Company has filed all
required forms, reports and documents with the Securities and Exchange
Commission ( the "SEC") with respect to all periods commencing on or after
January 1, 1992 (collectively, the "Company Reports"), all of which, when filed,
complied in all material respects with all applicable requirements of the
Securities Act of 1933 and the Exchange Act and the rules and regulations
thereunder. Accurate and complete copies of the Company Reports heretofore have
been made available to Buyer. As of their respective dates, the Company Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances in which they were made, not
misleading. Each of the consolidated balance sheets included in or incorporated
by reference into the Company Reports (including any related notes and
schedules) fairly presents the consolidated financial position of the Company
and its subsidiaries as of its date, and each of the consolidated statements of
income, of changes in shareholder equity and of cash flows included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presents the results of operations, retained earnings and
cash flows, as the case may be, of the Company and its subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which will not, individually or in the
aggregate, have a Material Adverse Effect), in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein (such balance sheets, income statements
and statements of change in financial condition, being referred to herein
collectively as the "Financial Statements").
3.9. Absence of Undisclosed Liabilities. Except as set forth in
Paragraph 3.9 of the Disclosure Letter, the Company has no material liabilities
or obligations except for (i) those reflected or reserved against (which
reserves are adequate) in the Financial Statements, (ii) those incurred,
consistent with past business practices, reasonably and in the ordinary course
of its business, since the last audited date of the Financial Statements (the
"Financial Statement Date") and (iii) those which are specifically disclosed in
this Agreement or in the Disclosure Letter. There is no reasonable basis for the
assertion against the Company as of the Financial Statement Date of any material
liability not reflected or reserved against in the Company's balance sheet as of
such date or as disclosed by this Agreement or in the Disclosure Letter.
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3.10. Certain Tax Matters.
(a) For any period ending on the date of or before
the Effective Time, the Company has duly and timely filed or will file all
federal, state, and local tax returns, declarations, and reports, estimates,
information returns and statements (collectively, "Returns") required to be
filed or sent by it or on its behalf and all such Returns are or will be true,
correct and complete, true, correct and complete copies of which Returns have
been delivered to Buyer prior to the date hereof. The Company has paid in full
all Taxes (as hereinafter defined) and any penalties entered with respect
thereto, due and payable for any period ending on or before the Effective Time.
All Taxes have been paid, withheld, or reserved for or, to the extent that they
relate to periods on or prior to the Financial Statement Date, are reflected as
a liability on the Financial Statements. For these purposes, "Taxes" means all
federal, state, territorial, local, foreign and other net income, gross income,
gross receipts, sales, use, value added, ad valorem, transfer, franchise,
profits, license lease, service, use, withholding, payroll, employment,
unemployment insurance, workers compensation, social security, excise,
severance, stamp, business license, occupation, premium, property,
environmental, windfall profits, customs, duties, alternative minimum, estimated
or other taxes, fees, premiums, assessments or charges of any kind whatever
imposed or collected by any governmental entity or political subdivision
thereof.
(b) The Company's federal income tax liabilities, if
any, have never been audited by the Internal Revenue Service and have been
satisfied for all taxable years up to and including the taxable year ended
December 31, 1997.
(c) There are no Liens for Taxes upon any of the
Company's assets, except Permitted Liens (provided that adequate reserves have
been provided therefor and are reflected in the Financial Statements) and no
event has occurred which with the passage of time or the giving of notice, or
both, could result in a Lien (other than Permitted Liens) for Taxes on any of
the Company's assets.
(d) Except as set forth in Paragraph 3.10 of the
Disclosure Letter, no deficiency for any Taxes has been proposed, asserted or
assessed against the Company which has not been resolved and paid in full.
(e) No waiver or comparable consent given by the
Company regarding the application of the statute of limitations with respect to
any Taxes or Returns is outstanding, nor, is any request for any such waiver or
consent pending. Except as set forth in Paragraph 3.10 of the Disclosure Letter
hereof (which shall set forth the nature of the proceeding, the type of return,
the deficiencies proposed or assessed and the amount thereof, and the taxable
year in question), no federal, state, local or foreign audit or other
administrative proceeding, inquiry or investigation or court proceeding is
presently pending or, to the best of the Company's knowledge, contemplated with
regard to any Taxes or Returns.
(f) The Company has not requested any extension of
time within which to file any Return, which Return has not since been filed.
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(g) The Company is not a United States real property
holding corporation and has not been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during any period
specified in Section 897(c)(1)(A)(ii) of the Code.
(h) The Company is not a party to any agreement
providing for the allocation or sharing of Taxes.
(i) The Company has not agreed to make, nor is it
required to make, any adjustment under Section 481(a) of the Code for any period
ending after the Effective Time by reason of a change in its accounting method
or otherwise.
(j) None of the assets of the Company is required to
be treated as owned by any other person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code.
(k) The Company is not a party to any venture,
partnership, contract or arrangement under which it could be treated as a
partner, for federal income tax purposes.
(l) The Company has no permanent establishment
located in any tax jurisdiction other than the United States and is not liable
for the payment of taxes levied by any such jurisdiction located outside the
United States.
(m) The Company is not currently and has never been a
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code.
(n) The Company has not participated in (and shall
not participate in) an international boycott within the meaning of Section 999
of the Code.
3.11. Litigation; Compliance with Laws. Except as set forth in
Paragraph 3.11 of the Disclosure Letter, there is no suit, action, claim,
arbitration, administrative or legal or other proceeding, or governmental or
other investigation pending or, to the Company's knowledge, threatened, against
or affecting the Company, whether or not covered by insurance; nor does there
exist any failure to comply with, nor any default under, any law, ordinance,
requirement, regulation, or order applicable to the Company, nor any violation
of or default with respect to any order, writ, injunction, judgment, or decree
of any court or federal, state or local department, official, commission,
authority, board, bureau, agency, or other instrumentality issued or pending
against the Company which might have a Material Adverse Effect, or have a
material adverse effect on Buyer's purchase or ownership of the Shares. The
Company has obtained all permits, licenses, zoning variances, approvals, and
other authorization (collectively "Permits") necessary for the operation of its
business as presently operated. There have been no illegal kickbacks, bribes or
political contributions made by the Company.
3.12. Employee Benefits. Paragraph 3.12 of the Disclosure Letter lists
all deferred compensation, pension, profit sharing, stock option, stock
purchase, savings, group insurance and
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retirement plans, and all vacation pay, severance pay, incentive compensation,
consulting, bonus and other employee benefit or fringe benefit plans or
arrangement maintained by the Company (including health, life insurance and
other benefit plans maintained for retirees). Said plans, including but not
limited to all plans or programs that constitute "employee benefit plans" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), are sometimes collectively referred to in this section as
"Benefit Plans." Access to true and complete copies of all Benefit Plans,
including any insurance contracts under which benefits are provided, as
currently in effect has been provided to Buyer. Buyer has also been provided
with access to a true and complete copy of the summary plan description, if any
was required by ERISA to be prepared and distributed to participants, for each
Benefit Plan. Except as set forth in Paragraph 3.12 of the Disclosure Letter :
(a) Except as set forth in Paragraph 3.12 of the
Disclosure Letter, the Company has no affiliates and has not at any time been a
party to or had any obligation under any pension plan or welfare benefit plan
that is a "Multiemployer Plan" within the meaning of section 4001(a)(3) of
ERISA. With respect to each such Multiemployer Plan identified in said Paragraph
3.12: neither the Company nor any affiliate has incurred any withdrawal
liability, failed to make any required contributions when due, or given or
received any notice of withdrawal or alleged withdrawal, or of any intention to
assert any withdrawal liability; there has been no complete or partial
withdrawal; there has been no material change in contribution or contribution
base units; and, if there were any complete or partial withdrawal by the Company
or any affiliate, as of the date of the Effective Time, there would be no
liability or obligation imposed on or incurred by the Company or any affiliate.
Paragraph 3.12 of the Disclosure Letter sets forth, with respect to each
multi-employer plan, for the 1997 plan year, the amount of any payment made and
the amount of any payment to be made or which is due; the number of contribution
base units for which the Company has an obligation to contribute; and any
conditions to such contribution.
(b) Each Benefit Plan that provides medical benefits
has been operated in compliance with all requirements of sections 601 through
608 of ERISA and either (i) sections 162(i)(2) and (k) of the Internal Revenue
Code of 1986 as amended (the "Code") and regulations thereunder (prior to 1989)
or (ii) section 4980B of the Code and regulations thereunder (after 1988),
relating to the continuation of coverage under certain circumstances in which
coverage would otherwise cease.
(c) Paragraph 3.12 of the Disclosure Letter
discloses, and separately indicates, each plan, fund or program maintained by
the Company that provides post-retirement medical benefits, post-retirement
death benefits or other post-retirement welfare benefits. A copy of any written
description of post-retirement welfare benefits that has been provided to
employees has been furnished to Buyer. A copy of each plan document, insurance
contract or other written instrument providing for post-retirement welfare
benefits has been provided to Buyer, together with a description of any advance
funding arrangement that has been established to fund post-retirement welfare
benefits.
(d) All contributions to, and payment from the
Benefit Plan which may have been required to be made in accordance with the
Benefit Plans and, when applicable, section 302 of
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ERISA or section 412 of the Code, have been timely made. All such contributions
to the Benefit Plans, and all payments under the Benefit Plans, except those to
form a trust qualified under section 401(a) of the Code, for any period ending
before the Effective Time that are not yet, but will be, required to be made are
properly accrued and reflected on the Financial Statements or are disclosed on
Paragraph 3.12 of the Disclosure Letter. Except as disclosed on Paragraph 3.12
of the Disclosure Letter, the Company has funded or will fund each Benefit Plan
in accordance with its terms through the Effective Time, including the payment
of applicable premiums on any insurance contract funding a Benefit Plan for
coverage provided through the Effective Time. Neither Company nor any affiliate
has sponsored, maintained or contributed to any defined benefit pension plan.
(e) Except for amendments to the written documents
governing the ESOP to comply with the requirements of the Uniformed Services
Employment and Reemployment Rights Act ("USERRA") and Small Business Job
Protection Act ("SBJPA"), each Benefit Plan is in compliance in all material
respects with the presently applicable provisions of ERISA and the Code,
including but not limited to the satisfaction of all applicable reporting and
disclosure requirements under ERISA and the Code. The Company has filed or
caused to be filed with the Internal Revenue Service annual reports on Form 5500
or 5500C and 5500R, as applicable, for each Benefit Plan for all years and
periods for which such reports were required. Each of the Benefits Plans has
been administered at all times, and in all material respects, in accordance with
its terms except that in any case in which any Benefit Plan is currently
required to comply with a provision of ERISA or of the Code, but is not yet
required to be amended to reflect such provision, it has been administered in
accordance with such provision.
(f) No "prohibited transaction," as defined in
section 406 of ERISA and section 4975 of the Code, has occurred in respect of
any Benefit Plan which could give rise to any material liability or tax under
ERISA or the Code on the part of the Company, and no civil or criminal action
brought pursuant to part 5 of Title I of ERISA is pending or is threatened in
writing or orally against any fiduciary of any such plan.
(g) Except as disclosed in Paragraph 3.12 of the
Disclosure Letter, all of the Benefit Plans which are pension benefit plans have
received determination letters from the IRS to the effect that such plans are
qualified and exempt from federal income taxes under sections 401(a) and 501(a),
respectively, of the Code, as amended through December 31, 1984; and no
determination letter with respect to any Benefit Plan has been revoked nor, to
the knowledge of the Company, has revocation been threatened, nor to the
knowledge of the Company has any Benefit Plan been amended since the date of its
most recent determination letter or application therefor in any request which
would adversely affect its qualification or materially increase its cost and no
Benefit Plan has been amended in a manner that would require security to be
provided in accordance with section 401(a)(29) of the Code.
(h) There have been no statements or communications
made or materials provided to any employee or former employee of the Company by
any person (including any affiliate or any employee, officer or director of any
affiliate) which provide for or could be construed as a contract or promise by
the Company or any affiliate to provide for any pension, welfare, or other
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insurance-type benefits to any such employee or former employee, whether before
or after retirement, other than benefits under Benefit Plans set forth in
Paragraph 3.12 of the Disclosure Letter or otherwise disclosed in Paragraph 3.12
of the Disclosure Letter, nor under the form of employment contracts.
3.13. Insurance. All inventories, machinery, equipment, buildings,
improvements, and other tangible assets owned or leased by the Company are, and
between the date hereof and the Effective Time will be, insured against fire and
casualty under the policies and in the amounts and types of coverage set forth
in Paragraph 3.13 of the Disclosure Letter and such policies are, and between
the date hereof and the Effective Time will be, outstanding and duly in force
and the premiums thereon fully paid when and as the same are due and payable.
Paragraph 3.13 of the Disclosure Letter is a true and correct Schedule of all
policies of fire, liability, and other forms of insurance, excluding the Benefit
Plans listed in Paragraph 3.12 of the Disclosure Letter, pursuant to which the
Company or any of its assets are insured (whether or not held by the Company) or
with respect to which the Company directly or indirectly pays all or part of the
premium.
3.14. Proprietary Rights. The Company owns, possesses, or lawfully uses
all patents, patent applications, trademarks, trade applications, service marks,
trade names, franchises, permits, copyrights, and similar intangible rights used
in its business (collectively, the "Patents and Trademarks"), each of which is
listed in Paragraph 3.14 of the Disclosure Letter, and those Patents and
Trademarks designated on Paragraph 3.14 of the Disclosure Letter are owned
exclusively by the Company, are valid and enforceable, and none infringe (nor
has any claim been made that there is any such infringement) the patents,
trademarks, service marks, trade names, copyrights or similar intangible rights
of others. Such franchises, licenses, permits, easements, rights and other
authorizations will not be adversely affected by the transaction contemplated by
this Agreement. The Company does not know of any claim or reasonable basis for
any claim that the Company is or may be infringing on or otherwise acting
adversely to the rights of any person under or in respect, of any patent,
trademark, service xxxx, trade name, copyright, license, franchise, permit, or
other intangible right. Except as set forth in Paragraph 3.14 of the Disclosure
Letter, the Company is not obligated or under any liability whatever to make any
payments by way of royalties, fees, or otherwise to any owner or licensee of, or
other claimant to, any patent, trademark, trade name, copyright, or other
intangible asset with respect to the use thereof, in connection with the conduct
of its business, or otherwise.
3.15. Labor Disputes. Except as set forth in Paragraph 3.15 of the
Disclosure Letter, the Company is not a party to any contract or other agreement
with any labor union and the Company is not experiencing or the subject of or
threatened by, any union organization campaign or any strike, slowdown,
picketing, work stoppage, or other labor disturbance by any labor union or group
of employees.
3.16. Contracts. Listed in Paragraph 3.16 of the Disclosure Letter are
all contracts to which the Company is a party ("Contracts") and which fall into
the following categories:
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3.16.1. Contracts, separately or in aggregate, with any third
party, involving an amount in excess of $10,000;
3.16.2. Contracts for the purchase of goods from the Company;
3.16.3. Contracts for the purchase by the Company of materials
and supplies; or
3.16.4. Contracts with distributors, dealers, manufacturer's
representatives, sales agencies, other commissioned sales representatives of the
Company, or any advertising Contracts.
All such Contracts in the above categories have been made in the ordinary course
of business. Except for the Contracts listed in Paragraph 3.16 of the Disclosure
Letter, the Company is not party to (a) any Contract not made in the ordinary
course of business; (b) any Contract that cannot be terminated within 10 days
after giving notice of termination without resulting in any material cost or
penalty to the Company; or (c) any (i) Contract with any labor union, (ii)
Contract for the employment of any officer or individual employee, (iii) profit
sharing, bonus, commission, stock option, pension, vacation pay, employee's
insurance, retirement plan or agreement, or other welfare plans or agreements,
(iv) agreement or indenture relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing of a lien on its assets, (v) lease or
agreement under which it is lessee of or holds or operates any material
property, real or personal, owned by any other party, (vi) agreement containing
any provision or covenant prohibiting or limiting the ability of the Company or
Buyer to operate the Business in the manner currently operated by the Company
or, (vii) lease or agreement under which it is lessor of, or permits any third
party to hold or operate, any material property, real or personal, owned by it.
The Company has delivered to Buyer prior to the execution of this Agreement,
true and complete copies of such Contracts. The Company and each other party to
any of the aforesaid agreements has in all material respects performed all the
material obligations required to be performed by it to date and is not in
default under any such Contract. All Contracts are legal, valid and binding and
in full force and effect, and, to the best knowledge of the Company, no other
party thereto is in default thereunder. The Company is not a party to any
Contracts, including agreements not to compete, which could restrict or prohibit
Buyer's operations or Buyer's ability to expand its business in any manner. The
consummation of the transactions contemplated hereby will not affect the
validity or enforceability of any of the Contracts, will not constitute a
default under any of the Contracts and will not give rise to any right to
terminate such Contracts under any provisions thereof. The Company will take
such steps as may be necessary or proper to renew or revalidate any such
Contracts and Permits, which may become void, expired, terminated, canceled, or
withdrawn between the date hereof and the Effective Time.
3.17. Minute Books. The minute books of the Company, as previously made
available to Buyer and its representatives (and as updated to reflect all
matters and transactions involving the Company, other than this Agreement and
the transactions contemplated hereby), contain, in all material respects,
accurate and complete records of all meetings of and corporate actions or
written consents by the shareholders and Boards of Directors of the Company
through the date hereof. The Company has previously delivered to Buyer an
accurate and complete copy of resolutions of the Company's board of directors
approving this Agreement, the Merger and the transactions
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contemplated hereby, and submitting this Agreement, the Merger and the
transactions contemplated hereby to the shareholders of the Company, along with
their recommendation that the shareholders of the Company approve the Merger.
3.18. Product Liability Claims. The Company has delivered to Buyer a
narrative of unresolved incidents, events and claims under all policies of
product liability insurance relating to the Company. The Company is an insured
under all policies of insurance relating to product liability listed in
Paragraph 3.18 of the Disclosure Letter for and against covered claims for
product liability based on events occurring prior to the Effective Time, which
insurance coverage will continue in effect after the Effective Time. The
above-described coverage is adequate considering the Company's claims history
and the industry taken as a whole.
3.19. Fairness Opinion. Valuation & Financial Strategies LLC ("VFS")
has delivered to the Board of Directors of the Company, and not withdrawn or
modified in any material respect, its opinion that the Merger Consideration is
fair to the holders of Common Stock from a financial point of view, subject to
the qualifications and assumptions set forth in such opinion.
3.20. Bank Accounts. Paragraph 3.20 of the Disclosure Letter hereto
lists the names and addresses of every bank and other financial institution in
which the Company maintains an account (whether checking, savings or otherwise),
lock box or safe deposit box, and the account numbers and names of persons
having signing authority or other access thereto.
3.21. No Changes. Since the Financial Statement Date, and except as
disclosed in Paragraph 3.21 of the Disclosure Letter, there has not been:
3.21.1. Any materially adverse change in the financial or
other condition, assets, liabilities or business of the Company;
3.21.2. Any damage, destruction or loss (whether or not
covered by insurance) or any condemnation by governmental authorities which has
or may adversely affect the business, prospects or any property of the Company;
3.21.3. Any strike, lockout, labor trouble or any event or
condition of similar character adversely affecting the business or prospects of
the Company;
3.21.4. Any declaration, setting aside or payment of any
dividend or other distribution in respect of any of the Company's shares of
stock, or any direct or indirect redemption, purchase or other acquisition of
any such shares (except as may be required under the terms of the ESOP); or
3.21.5. Any increase in the compensation payable or to become
payable by the Company to any of its officers, employees or agents, or any known
payment or arrangement made to or with any thereof, other than salary reviews
and increases taking effect between January 1, 1998 and April 30, 1998, all of
which were consistent with the Company's past practices.
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3.21.6. Any change by the Company in accounting principles,
practices or methods;
3.21.7. Any split, combination, reclassification, redemption,
purchase or other acquisition of any capital stock or other securities of the
Company; or any grant, or modification of any provision of any outstanding Stock
Right.
3.22. Compensation Arrangements. The Company has delivered to Buyer a
correct list showing the names (except for persons specifically excluded from
such list as stated thereon) and the employment commencement date of all
officers, employees and independent contractors performing services for the
Company in connection with its business and the rate of hourly, monthly or
annual compensation (as the case may be). Buyer has been provided access to
records reflecting amounts paid or to be paid to each such person in 1995, 1996
and 1997, any accrued sick leave or vacation and any bonus or similar
arrangement with any of them. Except as set forth in Paragraph 3.22 of the
Disclosure Letter, with respect to each employment, consulting, or independent
contractor agreement or arrangement between the Company and any other person;
(i) the Company is not obligated to pay any severance pay; (ii) no payments
under such agreement would be "parachute payments", within the meaning of
section 280G of the Code; (iii) no person is entitled to retiree health benefits
that have not been reflected on the Company's financial statements; (iv) no
person is entitled to any deferred compensation except for any benefit under a
tax-qualified retirement plan under Section 401(a) of the Code; and (v) there is
no other liability for any post-employment compensation or benefits. There are
no unresolved claims or disputes with respect to any person's compensation or
benefits, whether or not already paid.
3.23. Copies of Articles and Bylaws. The Company's Certificate of
Incorporation (certified by the Secretary of State of the jurisdiction of
incorporation) and Bylaws (certified by the Secretary of the Company) to which
Buyer has been provided copies, are correct and remain in effect on the date of
this Agreement. There are no other material books and records of Company to
which Buyer has not been provided access.
3.24. Condition of Tangible Assets. Except as set forth in Paragraph
3.24 of the Disclosure Letter, all of the assets of the Company, including the
real property, are in good operating condition as necessary for the operation of
the business of the Company, and the operation and use of such property in the
Company's business conform in all material respects to all applicable laws,
ordinances, regulations, permits, licenses and certificates.
3.25. Accounts Receivable. Except to the extent of the reserve for bad
debts shown on the consolidated balance sheet of the Company as of the Financial
Statement Date, all of the accounts receivable of the Company constitute valid
receivables, have been incurred in the ordinary course of business, are fully
collectible in the stated amount, subject to the term of payment as shall have
been agreed upon between Company and each customer and as have been disclosed by
the Company to Buyer (which terms are in no case greater than 30 days), and are
not subject to any set-off or counterclaim. No part of such accounts receivable
is contingent upon performance by the Company of any obligation and no
agreements for deductions or discounts have been made with respect to any part
of such receivables.
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3.26. Hazardous Substances. Except as listed in Paragraph 3.26 of the
Disclosure Letter: (i) none of the assets of the Company has been used for the
manufacture, storage, transportation, deposit, disposal, treatment, handling,
production, processing or recycling of toxic, dangerous or hazardous substances
nor is there any tank or facility for the storage of hazardous substances
located on or in the assets of the Company; (ii) there are no asbestos materials
on or in the assets of the Company creating, or likely to create, a hazardous
condition; (iii) there is not now nor has there been any activity on or in the
assets of the Company which would subject the Company or the Surviving
Corporation to liens, damages, penalties, injunctive relief or cleanup costs
under any federal, state or local law, or under any civil action respecting
hazardous substances; (iv) the Company has complied with each, and is not in
violation of any, federal, state or local law, statute, regulation, permit,
provision or ordinance, relating to the generation, handling, storage,
transportation, treatment or disposal of hazardous substances (the
"Environmental Laws"); and (v) the Company has obtained and complied with all
necessary permits and other approvals, including interim status under the
Reserve Conservation and Recovery Act, as amended ("RCRA"), necessary to store,
treat, dispose of and otherwise handle hazardous wastes and hazardous
substances. No portion of the assets of the Company constitutes any of the
following "environmentally sensitive areas": (1) a wetland or other "water of
the United States" for purposes of Section 404 of the Federal Clean Water Act,
33 U.S.C. ss.1344, or any similar area regulated under any state law; (2) a
100-year floodplain; or (3) a portion of the coastal zone for purposes of the
federal Coastal Zone Management Act, 16 U.S.C. ss.ss.1451-1464. The assets of
the Company are free from the presence of unacceptable levels of radon gas or
the presence of the radioactive decay products of radon. A "hazardous substance"
shall mean that term as defined in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601, et seq., as amended, and
dangerous, regulated toxic or hazardous substances, including without
limitation, petroleum products, or similar terms under any other applicable
state, federal or local law and any regulations thereunder.
3.27. Inventory. Except as set forth in Paragraph 3.27 of the
Disclosure Letter, all items of inventory are of a quality usable or salable in
the ordinary course of business within one (1) year from the date hereof. The
value at which the inventory is carried on the books and records of the Company
reflects the normal inventory valuation policy utilized by Company and is in
accordance with generally accepted accounting principles, consistently applied,
and is stated at the lower of cost or market. The Company does not hold any
items of inventory on consignment or have title to any items of inventory in the
possession of others.
3.28. Relationship With Customers and Suppliers. Paragraph 3.28 of the
Disclosure Letter contains an accurate list of the Company's ten (10) largest
customers by dollar volume. None of such customers has given the Company notice
terminating, canceling or threatening to terminate or cancel any contract or
relationship with the Company and The Company is not aware of any material
deterioration of any such relationship. None of the Company's suppliers for the
past two fiscal years has given the Company notice terminating, canceling or
threatening to terminate or cancel any contract or relationship with the Company
and The Company is not aware of any material deterioration of any such
relationship.
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3.29. Transactions with Affiliates. No employee or affiliate of the
Company, nor any officer or director of the Company or any affiliate thereof,
(i) owns or has a material interest in any asset used by the Company in the
operation of the business of the Company, (ii) has any direct or indirect
interest of any nature whatsoever in any person which markets or provides the
same type of services as those which Buyer will provide by purchasing the
business of the Company, (iii) provides or causes to be provided any assets,
services or facilities used or held for use in connection with the business of
the Company.
3.30. Capital Expenditures. Except as set forth in Paragraph 3.30 of
the Disclosure Letter, no capital expenditures are required in connection with
the business of the Company or the assets owned by the Company in order for the
Company to operate the business of the Company in the manner in which it is
currently being operated.
3.31. Discontinued Operations. Except as set forth in Paragraph 3.31 of
the Disclosure Letter, the Company has terminated and disposed of all facilities
and/or operations formerly owned and/or conducted in any foreign country,
including without limitation Mexico and Canada (the "Former Foreign Operations")
and currently conducts its operations solely at and from its facilities in Avon,
Connecticut. The Company terminated the Former Foreign Operations in compliance
with all applicable foreign laws, statutes, rules and regulations, obtained in
connection therewith all required approvals, permits and authorities, and does
not have any unsatisfied liability or obligation of any nature in connection
with any such Former Foreign Operations.
3.32. Veracity of Statements. No representation or warranty by the
Company contained in this Agreement and no statement contained in any
certificate, Schedule or other instrument furnished to Buyer pursuant hereto or
in connection with the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material fact.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND XXXXXX
Buyer and Xxxxxx, jointly and severally, hereby represent and
warrant to the Company as follows:
4.1. Power and Authority. Each of Buyer and Xxxxxx has full power and
authority to enter into this Agreement and the Collateral Documents to which
each is a party and to perform all of each's covenants and undertakings herein
and therein set forth; the execution and delivery of this Agreement and the
Collateral Documents to which Buyer and/or Xxxxxx is a party, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of Buyer and Xxxxxx; and each of
this Agreement and the Collateral Documents to which Buyer and/or Xxxxxx is a
party is a valid and binding obligation of Buyer and/or Xxxxxx, enforceable in
accordance with their terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors generally.
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4.2. Conflict With Authority, Bylaws, etc. Neither the execution and
delivery of this Agreement and the Collateral Documents to which Buyer and/or
Xxxxxx is a party, nor the consummation of the transactions contemplated hereby
and thereby in the manner herein provided will violate, be in conflict with,
constitute a default under, cause the acceleration of any payments pursuant to,
or otherwise impair the good standing, validity, and effectiveness of the
Articles or Certificate of Incorporation or Bylaws of Buyer or Xxxxxx, any
lease, license, permit, authorization, or approval applicable to Buyer or
Xxxxxx; or violate any provision of law, rule, regulation, order, or permit to
which Buyer or Xxxxxx is subject.
4.3. Acquisition of Shares for Investment. Buyer will be acquiring
ownership of the Company for investment for its own account and not with a view
to the resale or distribution of any Company securities in violation of any
federal or state securities laws.
4.4. Governmental Filings; No Violations. Other than Regulatory
Filings, no notices, reports or other filings are required to be made by Buyer
or Xxxxxx with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Buyer or Xxxxxx from, any governmental
and regulatory authorities of the United States or the several States in
connection with the execution and delivery of this Agreement and Collateral
Documents by Buyer and Xxxxxx and the consummation of the transactions
contemplated hereby by Buyer and Xxxxxx.
4.5. Brokers and Finders. Neither Buyer nor Xxxxxx, nor any of their
respective officers, directors or employees, has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated herein.
4.6. Proxy Statement. None of the information supplied in writing by
Buyer or any subsidiary of Buyer specifically for inclusion in the Proxy
Statement (as defined in Section 5.3), including all amendments and supplements
thereto, shall, in the case of the Proxy Statement, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
shareholders and at the time of the meeting of shareholders to vote on the
matters covered thereby, contain any untrue statement of a material fact, or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not misleading.
ARTICLE 5
ACTIVITIES PRIOR TO CLOSING BY THE COMPANY
5.1. Operation of Business. Prior to the Effective Time, the Company
shall conduct its business only in the ordinary course and in connection
therewith and, to the extent consistent therewith, the Company shall use its
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, employees and business associates.
Except as set forth in Paragraph 5.1 of the Disclosure Letter, the Company
shall:
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5.1.1. Organizational Documents. Not amend its
Certificate of Incorporation or Bylaws, except as may be necessary to carry out
this Agreement or as required by law;
5.1.2. Corporate Name. Not change its corporate name
or permit the use thereof by any other person or entity;
5.1.3. Compensation, Bonuses. Not pay or agree to pay
to any employee, officer, or director of the Company, without the consent of
Buyer, compensation that is in excess of the current compensation level of such
employee, officer, or director;
5.1.4. Management. Not make any changes in the
Company's management without the consent of Buyer;
5.1.5. Mergers, Etc. Not merge or consolidate the
Company with any other corporation or allow it to acquire or agree to acquire or
be acquired by any corporation, association, partnership, joint venture, or
other entity except pursuant to Section 5.2;
5.1.6. Disposition of Assets. Not sell, transfer, or
otherwise dispose of any assets of the Company without the prior written consent
of Buyer, except in the ordinary course of business or pursuant to Sections 5.2
and 5.10;
5.1.7. Indebtedness. Not create, incur, assume, or
guarantee any indebtedness for money borrowed arising out of or in connection
with the Company's business except in the ordinary course of business; create or
suffer to exist any Lien on any of the Company's assets, except those in
existence on the date hereof; or increase the amount of any indebtedness
outstanding under any loan agreement, mortgage, or other borrowing arrangement
in existence on the date hereof arising out of or in connection with the
Company's business;
5.1.8. Payables. Pay when due, in accordance with
past practices, all of its accounts payable and trade obligations;
5.1.9. Inventory. Maintain reasonable levels of
inventory in accordance with past practice;
5.1.10. Maintenance of Assets. Maintain its
facilities, assets, and properties in good operating repair, order, and
condition, reasonable wear and tear excepted, and notify Buyer immediately upon
any loss of, damage to, or destruction of any of the Company's assets;
5.1.11. Insurance. Maintain in full force and effect
insurance coverage of the types and in the amounts set forth in Paragraphs 3.13
and 3.18 of the Disclosure Letter and apply the proceeds received under any
insurance policy or as a result of any loss or destruction of or damage to any
of the Company's assets to the repair or replacement of such assets;
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5.1.12. Contracts and Permits. Maintain in full force
and effect all Contracts and Permits necessary for or related to the operation
of the Company's business in all material respects and in all places as such
business is now conducted and renew or revalidate any Permits which may become
void, expired, terminated, canceled or withdrawn between the date hereof and the
Effective Time;
5.1.13. Litigation, etc. Promptly advise Buyer in
writing of the commencement of, and of any known threat to commence any, suit,
claim, action, arbitration, legal or administrative proceeding, governmental
investigation, or tax audit against it; and
5.1.14. Dividends or Other Distributions. Not
declare, set aside or pay any dividend or other distribution in respect of its
shares of capital stock, or redeem, purchase or otherwise acquire any such
shares of capital stock, except for repurchases of securities from former
participants of the ESOP and to comply with the diversification exclusions under
the applicable provisions of the ESOP and the Code; and
5.1.15. Capital Stock. Not issue sell, pledge,
dispose of or encumber any additional shares of, or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of its capital stock or split, combine or reclassify the
outstanding Share.
5.2. Acquisition Proposals. Neither the Company nor any of its officers
and directors shall, and the Company will cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by the Company) not to, directly or indirectly,
encourage, initiate or solicit any inquiries or the making of any proposal with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets of, or any equity
interest in, the Company (an "Acquisition Proposal") or, except to the extent
required for the discharge by the Board of Directors of its fiduciary duties as
advised by counsel in writing, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise assist or facilitate
any effort or attempt by any person or entity (other than Buyer, or their
officers, directors, representatives, agents, affiliates or associates) to make
or implement an Acquisition Proposal. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing. The
Company will notify Buyer promptly if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be instituted or continued with, the Company, such
notice to include the material terms communicated to the Company.
5.3. Meetings of the Company's Shareholders. If required to consummate
the Merger, the Company will take all action necessary in accordance with
applicable law and its Certificate of Incorporation and Bylaws to convene a
meeting of holders of Shares as promptly as practicable to consider and vote
upon the approval of this Agreement and the Merger. Subject to fiduciary
requirements of applicable law as advised by counsel in writing, the Board of
Directors of the
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Company shall recommend such approval and the Company shall take all lawful
action to solicit such approval. The Company hereby represents, warrants and
covenants that the proxy or information statement with respect to such meeting
of shareholders (the "Proxy Statement"), at the date thereof and at the date of
such meeting, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information concerning Buyer and Xxxxxx furnished to the Company by
Buyer specifically for use in the Proxy Statement. The Proxy Statement shall not
be filed, and no amendment or supplement to the Proxy Statement will be made by
the Company, without consultation with Buyer and its counsel.
5.4. Filings; Other Action.
(a) Subject to the terms and conditions herein
provided, the Company and Buyer shall: (a) promptly make their respective
filings and thereafter make any other required submissions under any Regulatory
Filings with respect to the Merger; and (b) use their best efforts to promptly
take, or cause to be taken, all other action and do, or cause to be done, all
other things necessary, proper or appropriate under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement as soon as practicable.
(b) Unless an exemption shall be expressly applicable
to the Company, or unless Buyer agree otherwise in writing, the Company will
file with the SEC all reports required to be filed by it pursuant to the rules
and regulations of the SEC. Such reports and other information shall comply in
all material respects with all of the requirements of the SEC rules and
regulations and, when filed, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Buyer and its counsel, shall be given an opportunity
to review such filings prior to their being filed with the SEC.
(c) Prior to Closing, the Company agrees to deliver
to Buyer the financial statements of the Company which are required to be filed
by Buyer pursuant to Item 3-05 of Regulation S-X promulgated under the Exchange
Act. Such financial statements shall be accompanied by an unqualified opinion of
the Company's auditors, together with a consent of such auditors complying in
with Rule 436 under the Securities Act of 1933 permitting Buyer to file such
opinion with Buyer's Form 8-K under the Exchange Act.
5.5. Access to Information. As promptly as practical after the end of
each calendar month, the Company will deliver to Buyer a copy of The Company's
balance sheet and income and loss statements for each calendar month (the
"Monthly Statements"). Prior to the Effective Time, The Company will cooperate
fully with Buyer and shall provide Buyer and its accountants, counsel, and other
representatives, during normal business hours, full access to the books,
records, equipment, real estate, contracts, and other assets of the Company, and
full opportunity to discuss the Company's business, affairs, and assets with its
officers, employees, customers, suppliers and independent accountants, and
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furnish to Buyer and its representatives copies of such documents, records, and
information with respect to the affairs of the Company as Buyer or its
representatives may reasonably request. In addition to the foregoing right of
access and information, Buyer may designate on-site observers of the business
and operations of the Company, which observers shall be permitted such access to
the Company's business and operations as Buyer may reasonably request and shall
be fully informed by it concerning all of its assets, operation, and business
affairs at such observer's reasonable request for due diligence purposes.
5.6. Best Efforts. Subject to the other provisions of this Agreement,
The Company will use its best efforts to cause the conditions listed in Section
7.1 hereof to be satisfied on the Effective Time.
5.7. Benefit Plans. Between the date hereof and the Effective Time, the
Company shall maintain in full force and effect the Benefit Plans as they
pertain to the Company's employees or former employees and, in connection
therewith, except as set forth in Paragraph 5.7 of the Disclosure Letter:
5.7.1. Plan Changes. Except as may be required by law
or as may be necessary to continue the qualified status under Section 401 of the
Code or as required by Section 5.10 hereof, the Company shall not adopt,
terminate, amend, extend, or otherwise change any Benefit Plan without the prior
written consent of Buyer, and the Company shall give Buyer prior written notice
of the Company's intention to take any such action required by law or necessary
to continue the qualified status of any Benefit Plans as they pertain to the
Company's employees or its former employees; and
5.7.2. Contributions and Payments. The Company shall
not make, cause to be made, or agree to make any contribution, award, or payment
under any Benefit Plans as they pertain to the Company's employees or former
employees, except at the time and to the extent required by the written terms
thereof, or as required under Section 5.10 hereof, without the prior written
consent of Buyer.
5.8. Notice of Change. The Company will promptly notify Buyer of the
existence or happening of any fact, event or occurrence prior to the Effective
Time and of which the Company or any of the Company's employees, officers,
directors, stockholders, or other representatives has knowledge which may alter
the accuracy of completeness of any representation or warranty contained in
Article 3 of this Agreement.
5.9. Publicity. The initial press release relating to the transactions
contemplated hereby shall be a joint press release and thereafter the Company
and Buyer shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby and in making any filings with any federal or state governmental or
regulatory agency. The parties hereto shall not issue any such press release or
make any such public statement or filing prior to such consultation, except as
may be required by law.
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5.10. Xxxxxx ESOP.
(a) The Company maintains the X.X. Xxxxxx Company, Inc.
Employee Stock Ownership Plan ("the ESOP"). The ESOP owns 93,155 Shares (the
"ESOP Shares"). As of December 31, 1997, 83,916.53 of the ESOP Shares have been
allocated to ESOP participants' accounts. The balance of the ESOP Shares are
unallocated and held in the Unallocated Stock Account (as defined in the ESOP).
At the Effective Time, the ESOP Shares shall be converted into the right to
receive cash, as further set forth in Section 2.1(a).
(b) Prior to the Effective Time, the Company and the Trustee
of the Trust (the "ESOT") established under the ESOP will execute an Amended and
Restated Replacement Promissory Note dated as of January 1, 1998 (the
"Replacement ESOT Note") reducing the principal balance of the Promissory Note
dated December 19, 1985 (the "1985 ESOT Note") from the ESOT to the Company to
$188,000 and changing the maturity date of the 1985 ESOT Note to December 31,
1998. Prior to the Effective Time, the Company shall continue to pay (or accrue)
contributions to the ESOT to enable the ESOT to make the required monthly
payments under the Replacement Promissory Note. If not sooner paid, immediately
preceding the Effective Time, the Company shall contribute to the ESOP for the
1997 and/or 1998 plan years an amount sufficient to enable the ESOT to pay the
outstanding balance on the Replacement ESOT Note in full if, but only if, Buyer
and the Company conclude that such contribution (the "Tentative Contribution")
will be fully tax deductible under Section 404 of the Code for the year or years
with respect to which such contribution is made, and that the allocation of such
contribution to ESOP participants' accounts will not violate the limitations of
Section 415 of the Code for such year or years. If the Tentative Contribution
can be and is made without violating such limitations, the Company will
terminate the ESOP as of the Effective Time. If the Tentative Contribution can
not be made without violating one or both of such limitations, the ESOP shall
not be terminated and shall remain in effect after the Effective Time. In that
event, Buyer shall thereafter make such contributions to the ESOT in the maximum
amount permitted by law as shall allow Buyer to cause the ESOP to be terminated
as soon following the Effective Time as is permissible under the terms of the
ESOP Loan and practicable without violating the limits of Sections 404 and 415.
ARTICLE 6
ACTIVITIES PRIOR TO CLOSING BY BUYER
6.1. Best Efforts. Subject to the other conditions of this Agreement,
Buyer will use its best efforts to cause the conditions listed in Section 7.2
hereof to be satisfied on the Effective Time.
6.2. Access to Information. Buyer shall provide The Company with
information concerning Buyer's financing arrangements as well as other
information reasonably requested by The Company regarding Buyer's ability to
consummate the transactions contemplated herein, as may be. The Company shall
not disclose any such information to any other person or entity without the
prior written consent of Buyer.
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6.3. Confidentiality. Except as otherwise required by law, or as may be
necessary or appropriate to enforce Buyer's rights hereunder, Buyer shall retain
in confidence, and shall cause its advisors to retain in confidence, all
information obtained by it pursuant to investigations made by Buyer or its
advisors pursuant to Section 5.5 hereof (the "Confidential Information"). The
parties agree that the Confidential Information shall not include information
which (i) was or becomes generally available to the public other than as a
result of a disclosure by Buyer or its advisors, (ii) was or becomes available
to Buyer or its advisors on a non-confidential basis from a source other than
the Company or the Company's representatives, provided that such source is not
bound by a confidentiality agreement or (iii) was, or in the future is,
developed independently by Buyer or its advisors without reference to the
information furnished by the Company or the Company's representatives. The
parties understand and agree that all of the Confidential Information supplied
to Buyer or its advisors is provided on the understanding that such Confidential
Information remains the property of the Company and that all copies and
originals will be returned to the Company promptly upon its request after
termination of this Agreement pursuant to Article 14 hereof. This Section 6.3
shall terminate upon consummation of the transaction contemplated hereby.
6.4. Purchase or Sale of Shares. Neither Buyer nor Xxxxxx or any
affiliate of either thereof shall make any open market purchase or sale of
Shares or privately negotiate a purchase or sale of Shares, or, except as
contemplated by this Agreement, otherwise in any manner agree or make any
proposal to acquire or dispose of, directly or indirectly, any Shares.
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
7.1. Conditions to Obligation of Buyer to Close. The obligation of
Buyer to consummate the transaction contemplated under this Agreement on the
Effective Time shall be subject to the satisfaction or the waiver by Buyer of
the following conditions on or prior to the Effective Time:
7.1.1. Representations and Warranties; Compliance with
Agreement. The representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time as though made on and as of the
Effective Time, the Company shall have performed all covenants and agreements to
be performed by them under this Agreement on or prior to the Effective Time and
the Company shall have delivered to the Buyer a certificate to such effect,
dated the Effective Time, which certificate shall be in form and substance
satisfactory to Buyer and its counsel, it being agreed that inaccuracies in or
omissions from any representation or warranty of the Company (including any such
inaccuracies or omissions resulting from matters occurring or discovered between
the execution of this Agreement and the Effective Time), excluding the
representations and warranties contained in Section 3.26 hereof, shall be deemed
to be material only if such inaccuracies and omissions, in aggregate, have
resulted in or are reasonably likely to result in loss, damage, liability and
related expense of defense and remedy to the Company of more than $50,000;
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7.1.2. Opinion of Counsel for the Company. Messrs. Pepe &
Hazard LLP, counsel for the Company, shall have delivered to Buyer their
favorable opinion, dated as of the Effective Time and in the form set forth in
Exhibit C;
7.1.3. Litigation Affecting Closing. At the Effective Time, no
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or threatened;
7.1.4. Required Consents and Regulatory Approvals. The parties
(other than the Company) to any other contract, commitment or agreement to which
the Company is a party, any governmental agency or body or any other person,
firm or corporation which owns or has authority to grant any franchise, license,
permit, easement, right or other authorization necessary for the business or
operations of the Company, and any governmental body or regulatory agency having
jurisdiction over Buyer or the Company, to the extent that their consent or
approval is required under the pertinent debt, lease, contract, commitment or
agreement or other document or instrument or under applicable laws, rules or
regulations for the consummation of the transaction contemplated hereby in the
manner herein provided, shall have granted such consent or approval, which shall
include all Consents.
7.1.5. No Material Damage to Business. The assets, properties
and business of the Company shall not have been and shall not be threatened to
be materially adversely affected in any way as a result of fire, explosion,
earthquake, disaster, accident, labor dispute, any action by any governmental
authority, flood, drought, embargo, riot, civil disturbance, uprising, activity
of armed forces or act of God; and
7.1.6. Approval of Buyer; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved by Buyer, in the exercise of its reasonable judgment, and Buyer or
its counsel shall have been furnished with certified copies, satisfactory in
form and substance to Buyer in the exercise of its reasonable judgment, of all
such corporate records of the Company, and of the proceedings of such persons
authorizing the execution, delivery and performance of this Agreement as Buyer
shall reasonably require.
7.1.7. Shareholder Approval. This Agreement shall have been
duly approved by the holders of 60% of the outstanding Shares in accordance with
applicable law and the Certificate of Incorporation and Bylaws of the Company.
7.1.8. Dissenter's Rights. Dissenting Shareholders shall hold
not more than seven and one-half percent (7.5%) of the Shares.
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7.1.9. Environmental Issues.
(a) The expenses reasonably anticipated to remediate
the environmental matters identified on Schedule 3.26 and any other matters
relating to Environmental Laws or Hazardous Substances, including any required
filings with federal or state agencies (including the Connecticut Transfer Act,
CHWETA Form III Filing and any investigation measures required in support
thereof) in respect of which the Company and/or the Surviving Corporation may be
liable shall not exceed $325,000.
(b) The parties agree and acknowledge that under the
Connecticut Hazardous Waste Establishment Transfer Act, Conn. Gen. Stat.
ss.ss.22a-134 et seq. ("CHWETA") the CHWETA Form III filing must be signed by a
"certifying party" prior to closing, and filed with the Connecticut Department
of Environmental Protection within ten days of the closing and that the
Surviving Corporation shall be the CHWETA "certifying party."
7.1.10. Employment Agreement.
The Company's existing employment agreement with Xxxxxx X.
Xxxxxxx ("Xxxxxxx") shall have been terminated without for the liability to the
Company and the Surviving Corporation shall have entered into a new employment
agreement with Xxxxxxx in the form hereto attached as Exhibit D.
7.2. Conditions to Obligation of the Company to Close. The obligation
of the Company to consummate the Merger at the Effective Time shall be subject
to the satisfaction of the following conditions on or prior to the Effective
Time:
7.2.1. Representations and Warranties. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time, Buyer and Xxxxxx shall have performed all covenants and
agreements to be performed by each of them under this Agreement on or prior to
the Effective Time, and Buyer shall have delivered to the Company a certificate
to such effect, dated the Effective Time, which certificate shall be in form and
substance satisfactory to the Company and its counsel;
7.2.2. Opinion of Counsel of Buyer. Messrs. Xxxxxx Xxxxxxxx
LLP, counsel for Buyer, shall have delivered to the Company their opinion, dated
as of the Effective Time and in the form set forth in Exhibit E;
7.2.3. Litigation Affecting Closing. On the Effective Time, no
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transaction contemplated hereby, and no investigation that might eventuate in
any such suit, action or proceeding shall be pending or threatened; and
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7.2.4. Approval of the Company; Corporate Matters. All
actions, proceedings, resolutions, instruments and documents required to carry
out this Agreement or incidental hereto and all other related legal matters
shall have been approved on the Effective Time by the Company, in the exercise
of its reasonable judgment, and the Company shall have been furnished with
certified copies, satisfactory in form and substance to the Company in the
exercise of its reasonable judgment, of all such records of Buyer and Xxxxxx and
of the proceedings of Buyer and Xxxxxx authorizing the execution, delivery and
performance of this Agreement as the Company shall reasonably require.
7.2.5. Shareholder Approval. This Agreement shall have been
duly approved by the holders of 60% of the outstanding Shares, in accordance
with applicable law and the Certificate of Incorporation and Bylaws of the
Company.
7.2.6. 401K Plan. Buyer shall have caused a 401K Plan to be
established for or to be extended to the Surviving Corporation employees to be
effective as of the Closing.
ARTICLE 8
INDEMNIFICATION
8.1. Officers and Directors Indemnification.
8.1.1. The Company and Xxxxxx agree, and Buyer shall cause the
Surviving Corporation to agree that all rights to indemnification and
advancement of expenses by the Company now existing in favor of each present and
former director and officer of the Company and each fiduciary under the
Company's ESOP and other Benefit Plans (acting in their capacities as directors
and/or officers of the Company, and/or as such fiduciaries, the "Indemnified
Parties") as provided in the Company's Certificate of Incorporation or Bylaws,
the ESOP and other Benefit Plans as in effect on the date hereof with respect to
matters occurring at or prior to the Effective Time, shall, upon consummation of
the Merger, continue in full force and effect at all times prior to the
Effective Time and shall survive the Merger and shall continue in full force and
effect until the earlier of (A) their current expiration date and (B) the date
which is six (6) years from the Effective Time; provided, however, in the event
any claim or claims are asserted or threatened within such period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims.
8.1.2. Any Indemnified Party wishing to claim indemnification
under this Section 8.1, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Surviving Corporation
thereof, but the failure to so notify shall not relieve the Surviving
Corporation of any liability it may have to such Indemnified Party if such
failure does not materially prejudice the indemnifying party. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) the Surviving Corporation shall have
the right to assume the defense thereof and shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
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the defense thereof, except that if the Surviving Corporation fails to assume
such defense or counsel for the Surviving Corporation advises that there are
issues which raise conflicts of interest between the Surviving Corporation, on
the one hand, and the Indemnified Parties, on the other hand, the Indemnified
Parties may retain counsel satisfactory to them, and the Surviving Corporation
and shall pay all reasonable fees and expenses of one such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Surviving Corporation shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, in which case Purchaser
need only pay for separate counsel to the extent necessary to resolve such
conflict, (ii) the Indemnified Parties will cooperate in the defense of any such
matter and (iii) the Surviving Corporation shall not be liable for any
settlement effectuated without its prior written consent.
8.1.3. Notwithstanding anything contained in paragraph (b) of
this Section 8.1, the Surviving Corporation shall not have any obligation
hereunder to any Indemnified Party (w) if the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law (provided, however, that if such indemnification is limited by any law, such
indemnification obligation shall continue to the maximum extent permitted under
such laws, or (x) the conduct of the Indemnified Party relating to the matter
for which indemnification is sought involved bad faith or willful misconduct, or
(y) with respect to actions taken by any such Indemnified Party in its
individual capacity rather than in his capacity as an officer, director or
fiduciary including, without limitations, with respect to any matters relating,
directly or indirectly to the purchase, sale or trading of securities issued by
the Company, or (z) if such Indemnified Party shall have breached its obligation
to cooperate with the Surviving Corporation in the defense of any claim in
respect of which indemnification is sought. Each Indemnified Party's entitlement
to the indemnification provisions contained in this Section 8.1 shall be
contingent on such Indemnified Party acknowledging and agreeing in writing to
cooperate in the defense of any such claims in respect of which indemnification
is sought from the Surviving Corporation.
ARTICLE 9
TERMINATION
9.1. Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, before or after the
approval by holders of Shares:
9.1.1. Termination by Mutual Consent. By the mutual consent of
Buyer and the Company by action of their respective Boards of Directors.
9.1.2. Prior to Effective Time. By the Company or Buyer if the
other shall have (a) materially misstated any representation or been in material
breach of any warranty contained herein or (b) been in material breach of any
covenant, undertaking or restriction contained herein and such misstatement or
breach has not been cured by the earlier of (i) thirty (30) days after the
giving of
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notice to such party of such misstatement or breach or (ii) the Effective Time,
and in any event such other party shall not be in breach of such other party's
obligations hereunder;
9.1.3. By Buyer. Provided that the Buyer is not in material
default hereunder, by Buyer if all of the conditions precedent set forth in
Section 7.1 hereof have not been met prior to July 31, 1998;
9.1.4. By the Company. Provided that the Company is not in
material default hereunder, by the Company if all of the conditions precedent
set forth in Section 7.2 hereof have not been met prior to July 31, 1998; or
9.1.5. By Either Party. Provided that such party is not in
material default hereunder, by either party if the Closing does not occur on or
before July 31, 1998.
9.1.6. Withdrawal of Recommendation. By Buyer, if the Board of
Directors of the Company shall have withdrawn or modified in a manner adverse to
Buyer or Xxxxxx its approval or recommendation of this Agreement or the Merger,
or the Board of Directors of the Company, upon request by Buyer, shall fail to
reaffirm such approval or recommendation, or shall have resolved to do any of
the foregoing.
9.1.7. Higher Offer. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by holders of Shares, by action of the Board of Directors of the
Company, if the Board of Directors of the Company receives an unsolicited
written offer at a higher dollar value per Share with respect to a merger,
consolidation or sale of all or substantially all of the Company's assets, or if
an unsolicited tender or exchange offer for the Shares at a higher dollar value
per Share is commenced, and the Board of Directors of the Company determines to
accept such merger, consolidation or sale of all or substantially all of the
Company's assets or recommend that its stockholders accept such tender or
exchange offer, but only after receipt by the Board of Directors of (x) a
written opinion to such effect from VFS that such transaction is more favorable
to the shareholders from a financial point of view than the Merger and the
transactions contemplated hereby and (y) a written opinion of counsel that
approval, acceptance or recommendation of such transaction is required by
fiduciary obligations under applicable law.
9.2. Effect of Termination and Abandonment In the event of termination
of this Agreement and abandonment of the Merger pursuant to this Article 10, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation to any other party to this Agreement, except as provided in
Sections 6.3 and 10.1 and except that nothing will relieve any party from
liability for any breach of this Agreement.
9.3. No Purchase of Company Stock Buyer agrees that of this Agreement
terminates for any reason other than pursuant to Section 9.1.6 or 9.1.7 hereof,
neither Buyer nor any affiliate of Buyer shall acquire any capital stock of the
Company or any interest therein for a period of twelve (12) months following the
date of such termination.
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ARTICLE 10
MISCELLANEOUS
10.1. Payment of Expenses.
(a) Except as set forth in subsection (b) below,
whether or not the Merger shall be consummated, each party hereto shall pay its
own expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the Merger.
(b) If (A) (x) any person, entity or group not
currently shareholders of the Company (other than Buyer or any subsidiary or
affiliate of Buyer or any group including Buyer or any subsidiary or affiliate
of Buyer) (i) shall have become the beneficial owner of 35% or more of the
outstanding Shares or (ii) shall have publicly proposed (1) any merger or
consolidation with or acquisition of all or substantially all of the assets of
the Company or other similar business combination involving the Company, (2)
that any change be made in the composition of the Board of Directors of the
Company and such person, entity or group shall file proxy materials with the SEC
in respect of such proposal or (3) the purchase of 50% or more of the total
voting power of the Company, including by tender or exchange offer, and (y) this
Agreement is terminated in accordance with its terms or (B) this Agreement is
terminated pursuant to Section 9.1.6 or 9.1.7, then the Company shall pay
Purchaser the sum of three hundred thousand dollars ($300,000) in immediately
available funds (the "Fee").
10.2. Entire Agreement; Amendments. This Agreement constitutes the
entire understanding among the parties hereto with respect to the subject matter
contained herein and supersedes any prior understandings and agreements among
them respecting such subject matter. This Agreement may be amended,
supplemented, and terminated only by a written instrument duly executed by the
Company, Buyer and Xxxxxx.
10.3. Headings. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation.
10.4. Gender; Number. Words of gender may be read as masculine,
feminine, or neuter, as required by context. Words of number may be read as
singular or plural, as required by context.
10.5. Exhibits and Schedules. Each Exhibit and Schedule referred to
herein is incorporated into this Agreement by such reference.
10.6. Severability. If any provision of this Agreement is held illegal,
invalid, or unenforceable, such illegality, invalidity, or unenforceability will
not affect any other provision hereof. This Agreement shall, in such
circumstances, be deemed modified to the extent necessary to render enforceable
the provisions hereof.
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10.7. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given to the person if delivered personally or
upon sending a copy thereof by first class or express mail, postage prepaid, or
by telegram (with messenger service specified), or reputable courier services,
charges prepaid, or by telecopier, to such party's address (or to such party's
telecopier or telephone number).
If to Buyer or Xxxxxx, to:
Owosso Corporation
The Triad Building
0000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Xx., President
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx, III, Esquire
Telecopy No.: (000) 000-0000
If to the Company to:
X. X. Xxxxxx, Inc.
00 Xxxxxxxx Xxxx
Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
With a copy to:
Pepe & Hazard LLP
Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party hereto entitled to receive such notice.
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10.8. Waiver. The failure of any party hereto to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
10.9. Assignment. This Agreement is not assignable.
10.10. Successors and Assigns. This Agreement binds, inures to the
benefit of, and is enforceable by the successors and assigns of the parties
hereto, and does not confer any rights on any other persons or entities.
10.11. Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Delaware.
10.12. No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their successors and assigns, and they shall not be construed
as conferring and are not intended to confer any rights on any other persons.
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10.13. Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
OWOSSO CORPORATION
By: /s/ Xxxx X. Xxxx, Xx.
------------------------------
Title: Sr. Vice-President Finance
XXXXXX COMPANY
By: /s/ Xxxx X. Xxxx, Xx.
------------------------------
Title: Secretary/Treasurer
X. X. XXXXXX, INC.
By: /s/ Xxxxxx Xxxxxxx
------------------------------
Title: President
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