AGREEMENT AND PLAN OF MERGER
Among
REPUBLIC AUTOMOTIVE PARTS, INC.
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
and
KAI MERGER, INC.
Dated as of February 17, 1998
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this
"Agreement"), dated as of February 17, 1998, among Republic
Automotive Parts, Inc., a Delaware corporation (the "Company"),
Keystone Automotive Industries, Inc, a California corporation
("Keystone"), and KAI Merger, Inc., a Delaware corporation and a
wholly-owned subsidiary of Keystone ("Merger Sub").
RECITALS
WHEREAS, the respective boards of directors of each of
Keystone, Merger Sub and the Company have approved the merger of
Merger Sub with and into the Company (the "Merger") and adopted
this Agreement;
WHEREAS, it is intended that, for federal income tax
purposes, the Merger shall qualify as a "tax-free" reorganization
under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
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WHEREAS, as an inducement to the willingness of
Keystone to enter into this Agreement, the board of directors of
the Company has approved the grant to Keystone of an option to
purchase shares of common stock of the Company pursuant to a
stock option agreement, substantially in the form of Exhibit A
(the "Stock Option Agreement"), and each of the Company and
Keystone have duly authorized, executed and delivered the Stock
Option Agreement; and
WHEREAS, the Company, Keystone and Merger Sub desire to
make certain representations, warranties, covenants and
agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and
of the representations, warranties, covenants and agreements
contained herein, the parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as
defined in Section 1.3) Merger Sub shall be merged with and into
the Company and the separate corporate existence of Merger Sub
shall thereupon cease.
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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 Merger shall have the
effects provided in the Delaware General Corporation Law ( the
"DGCL").
1.2 Closing. The closing of the Merger (the
"Closing") shall take place (i) at the offices of Manatt, Xxxxxx
& Xxxxxxxx, LLP, 00000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 000000-0000 at 9:00 a.m. local time on the second
business day after the date on which the last to be fulfilled or
waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied 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 Keystone may agree in writing (the
"Closing Date").
1.3 Effective Time. As soon as practicable following
the Closing, the Company and Keystone will cause a certificate of
merger (the "Certificate of Merger") to be signed, acknowledged
and delivered for filing with the Secretary of State of the State
of Delaware as provided in Sections 251(c) and 103 of the DGCL.
The Merger shall become effective at the time when the
Certificate of Merger shall have become effective in accordance
with the DGCL (the "Effective Time").
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ARTICLE II
Certificate of Incorporation and By-Laws of the Surviving
Corporation
2.1 The Certificate of Incorporation. The certificate
of incorporation of the Company as in effect immediately prior to
the Effective Time shall be the certificate of incorporation of
the Surviving Corporation (the "Charter"), until duly amended as
provided therein or by applicable law, except that Article Fourth
of the Charter shall be amended to read in its entirety as
follows: "The authorized capital stock of the Corporation shall
consist of one thousand shares of common stock having a par value
of one dollar per share."
2.2 The By-Laws. The by-laws of the Company in effect
at the Effective Time shall be the by-laws of the Surviving
Corporation (the "By-Laws"), until duly amended as provided
therein or by applicable law.
ARTICLE III
Officers, Directors and Management
3.1 Directors of Surviving Corporation. The directors
of Merger Sub at the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation
until their successors shall have been duly elected or appointed
and shall have
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qualified or until their earlier death,
resignation or removal in accordance with the Charter and the By-
Laws.
3.2 Officers of Surviving Corporation. The officers
of the Company at the Effective Time (other than the Chairman of
the Board of the Company) shall, from and after the Effective
Time, be the officers of the Surviving Corporation until their
successors shall have been duly elected or appointed and shall
have qualified or until their earlier death, resignation or
removal in accordance with the Charter and the By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1 Effect on Capital Stock. At the Effective Time,
as a result of the Merger and without any action on the part of
the holder of any capital stock of the Company:
(a) Merger Consideration. Each share of the
common stock, having a par value of $0.50 per share (each a
"Company Share" and together the "Company Shares"), of the
Company issued ;and outstanding immediately prior to the
Effective Time (other than (i) Company Shares that are owned by
Keystone or Merger Sub; or (ii) Company Shares that are held in
the treasury of the Company (collectively, "Excluded Company
Shares")) shall be
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converted into 0.80 of a share (the "Exchange
Ratio") of common stock, no par value, of Keystone ("Keystone
Common Stock"), subject to adjustment as provided in Section 4.4
(the "Merger Consideration"). At the Effective Time, all Company
Shares shall no longer be outstanding, shall be canceled and
retired and shall cease to exist, and each certificate (a
"Certificate") formerly representing any Company Shares (other
than Excluded Company Shares) shall thereafter represent only the
right to the Merger Consideration and the right, if any, to
receive, pursuant to Section 4.2(d), cash in lieu of fractional
shares into which such Company Shares have been converted
pursuant to this Section 4.1(a).
(b) Cancellation of Shares. Each Company Share
issued and outstanding immediately prior to the Effective Time
and owned directly by Keystone, Merger Sub or the Company shall,
by virtue of the Merger and without any action on the part of the
holder thereof, no longer be outstanding, shall be canceled and
retired without payment of any consideration therefor and shall
cease to exist.
(c) Merger Sub. At the Effective Time, each
share of common stock, par value $0.10 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the
Surviving Corporation, and the Surviving Corporation shall be a
wholly-owned subsidiary of Keystone.
4.2 Exchange of Certificates for Shares.
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(a) Exchange Procedures. As soon as practicable
after the Effective Time, the Surviving Corporation shall cause
an exchange agent (the "Exchange Agent"), selected by Keystone
with the Company's prior approval, which shall not be
unreasonably withheld, to mail to each holder of record of
Company Shares (other than holders of record of Excluded Company
Shares) (i) a letter of transmittal specifying that delivery
shall be effected, and that risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates
(or affidavits of loss in lieu thereof) to the Exchange Agent,
such letter of transmittal to be in such form and have such other
provisions as Keystone and the Company may reasonably agree, and
(ii) instructions for surrendering the Certificates in exchange
for (A) uncertificated shares of Keystone Common Stock registered
on the stock transfer books of Keystone in the name of such
holder ("Registered Keystone Shares") or, at the election of such
holder, certificates representing shares of Keystone Common Stock
and (B) cash in lieu of fractional shares. Subject to
Section 4.2(g), upon surrender of a Certificate for cancellation
to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor (x) Registered Keystone Shares
or, at the election of such holder, a certificate, representing
that number of whole shares of Keystone Common Stock that such
holder is entitled to receive pursuant to this Article IV, (y) a
check in the amount (after giving effect to any required tax
withholdings) of any cash in lieu of fractional shares, and the
Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on any amount payable upon due
surrender of the Certificates. In the event of a transfer of
ownership of Company Shares that is not registered in the
transfer records of the Company, the Registered Keystone Shares
or certificate, as the case may be, representing the proper
number of shares of
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Keystone Common Stock, together with a check
for any cash to be paid upon due surrender of the Certificate,
may be issued and/or paid to such a transferee if the Certificate
formerly representing such Company Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence
and effect such transfer and to evidence that any applicable
stock transfer taxes have been paid. If any Registered Keystone
Shares or certificate for shares of Keystone Common Stock is to
be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Person (as defined below)
requesting such exchange shall pay any transfer or other taxes
required by reason of the issuance of Registered Keystone Shares
or certificates for shares of Keystone Common Stock in a name
other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of Keystone
or the Exchange Agent that such tax has been paid or is not
applicable.
For the purposes of this Agreement, the term "Person"
shall mean any individual, corporation (including not-for-
profit), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
Governmental Entity (as defined in Section 5.1(b)) or other
entity of any kind or nature.
(b) Voting. Holders of unsurrendered
Certificates shall not be entitled to vote after the Effective
Time at any meeting of Keystone stockholders with a record date
at or after the Effective Time.
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(c) Transfers. After the Effective Time, there
shall be no transfers on the stock transfer books of the Company
of the Company Shares that were outstanding immediately prior to
the Effective Time.
(d) Fractional Shares. Notwithstanding any other
provision of this Agreement, no fractional shares of Keystone
Common Stock will be issued and any holder of record of Company
Shares entitled to receive a fractional share of Keystone Common
Stock, but for this Section 4.2(d), shall be entitled to receive
an amount in cash (without interest) determined by multiplying
such fraction (rounded to the nearest one-hundredth of a share)
by the closing price of a share of Keystone Common Stock, on the
NASDAQ National Market, as reported in The Wall Street Journal,
West Coast edition, for the last trading day prior to the
Effective Time. Keystone shall make available to the Exchange
Agent cash in an amount sufficient to make the payments in lieu
of fractional shares of Keystone Common Stock.
(e) Termination of Exchange Period; Unclaimed
Stock. Any shares of Keystone Common Stock and any portion of
the cash payable with respect to the Keystone Common Stock
pursuant to Section 4.1 and Section 4.2(d) (including the
proceeds of any investments thereof) that remains unclaimed by
the former shareholders of the Company 180 days after the
Effective Time shall be paid to Keystone. Any former
shareholders of the Company who have not theretofore complied
with this Article IV shall look only to Keystone for payment of
their shares of Keystone Common Stock and any cash issuable
and/or payable pursuant to Section 4.1 and Section 4.2(d) upon
due surrender of their Certificates (or affidavits
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of loss in
lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, none of Keystone, the Surviving
Corporation, the Exchange Agent or any other Person shall be
liable to any former holder of Company Shares for any amount
properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) Lost, Stolen or Destroyed Certificates. In
the event any Certificate 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
and the posting by such Person of a bond in the form customarily
required by Keystone as indemnity against any claim that may be
made against it with respect to such Certificate, Keystone will
issue the shares of Keystone Common Stock, and the Exchange Agent
will issue any cash payment in lieu of a fractional share in
respect thereof, issuable and/or payable in exchange for such
lost, stolen or destroyed Certificate pursuant to this Article IV
upon due surrender of and deliverable in respect of the Company
Shares represented by such Certificate pursuant to this
Agreement, in each case, without interest.
(g) Affiliates. Notwithstanding anything herein
to the contrary, Certificates surrendered for exchange by any
Affiliate (as defined in Section 6.7(a)) of the Company shall not
be exchanged until Keystone has received a written agreement from
such Person as provided in Section 6.7 hereof.
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4.3 Adjustments to Prevent Dilution. In the event
that prior to the Effective Time there is a change in the number
of Company Shares or shares of Keystone Common Stock or
securities convertible or exchangeable into or exercisable for
Company Shares or shares of Keystone Common Stock issued and
outstanding as a result of a distribution, reclassification,
stock split (including a reverse split), stock dividend or
distribution, merger (except as contemplated by this Agreement)
or other similar transaction, the Exchange Ratio shall be
equitably adjusted to eliminate the effects of such event.
ARTICLE V
Representations and Warranties
5.1 Representations and Warranties of the Company,
Keystone and Merger Sub. Except as set forth in the disclosure
letter, dated the date hereof, delivered by the Company to
Keystone or by Keystone to the Company (each a "Disclosure
Letter", and the "Company Disclosure Letter" and the "Keystone
Disclosure Letter", respectively), as the case may be, the
Company (except for references in subparagraphs (a), (b)(ii) and
(c) below to documents made available or disclosed by Keystone to
the Company) hereby represents and warrants to Keystone and
Merger Sub, and Keystone (except for references in subparagraphs
(a), (b)(ii) and (c) below to documents made available or
disclosed by the Company to Keystone), on behalf of itself and
Merger Sub, hereby represents and warrants to the Company, that:
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(a) Organization, Good Standing and
Qualification. Each of it and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization and has all
requisite corporate or similar power and authority to own and
operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where
the ownership or operation of its properties or conduct of its
business requires such qualification, except where the failure to
be so qualified or in good standing is not, when taken together
with all other such failures, reasonably likely to have a
Material Adverse Effect (as defined below) on it. It has made
available to Keystone, in the case of the Company, and to the
Company, in the case of Keystone, a complete and correct copy of
its certificate of incorporation and by-laws, each as amended to
date. Such certificates of incorporation and by-laws as so made
available are in full force and effect.
As used in this Agreement, (i) the term "Subsidiary"
means, with respect to the Company, Keystone, or Merger Sub, as
the case may be, any entity, whether incorporated or
unincorporated, of which at least fifty percent of the securities
or ownership interests having by their terms ordinary voting
power to elect at least fifty percent of the board of directors
or other Persons performing similar functions is directly or
indirectly owned by such party or by one or more of its
respective Subsidiaries or by such party and any one or more of
its respective Subsidiaries, (ii) the term "Material Adverse
Effect" means, with respect to any Person, a material adverse
effect on the total enterprise value of such Person and its
Subsidiaries, taken as a whole, other than effects or changes
resulting from the execution of this Agreement or the
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announcement thereof, and (iii) reference to "the other party"
means, with respect to the Company, Keystone and means, with
respect to Keystone, the Company.
(b) Governmental Filings; No Violations. (i)
Other than (A) the filings pursuant to Section 1.3 and
Section 6.8, (B) the notification under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Securities Act of 1933, as amended (the "Securities
Act"), (C) the filings and/or notice to comply with state
securities or "blue-sky" laws (such filings and/or notices of the
Company being the "Company Required Consents" and of Keystone
being the "Keystone Required Consents"), no notices, reports or
other filings are required to be made by it to or with, nor are
any consents, registrations, approvals, permits or authorizations
required to be obtained by it from, any governmental or
regulatory authority, court, agency, commission, body or other
governmental entity ("Governmental Entity"), in connection with
the execution and delivery of this Agreement and the Stock Option
Agreement by it and the consummation by it of the Merger and the
other transactions contemplated hereby and thereby, except those
that the failure to make or obtain are not, individually or in
the aggregate, reasonably likely to have a Material Adverse
Effect on it or to prevent, or materially impair its ability to
effect, the consummation by it of the transactions contemplated
by this Agreement or the Stock Option Agreement.
(ii) The execution, delivery and performance
of this Agreement and the Stock Option Agreement by it do not,
and the consummation by it of the Merger and the other
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transactions contemplated hereby and thereby will not, constitute
or result in (A) a breach or violation of, or a default under,
its certificate of incorporation or by-laws or the comparable
governing instruments of any of its "Significant Subsidiaries",
as such term is defined in Rule 1.02(w) of Regulation S-X
promulgated under the Exchange Act, (B) a material breach or
material violation of, a material default under, the acceleration
of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on its assets or the assets of any
of its Subsidiaries (with or without notice, lapse of time or
both) pursuant to, any agreement, lease, contract, note,
mortgage, indenture, arrangement or other obligation
("Contracts") binding upon it or any of its Subsidiaries or any
Law (as defined in Section 5.1(h)) or (C) any change in the
rights or obligations of any party under any of its Contracts,
except for any breach, violation, default, acceleration, creation
or change that, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on it or to
prevent, or materially impair its ability to effect, the
consummation by it of the transactions contemplated by this
Agreement or the Stock Option Agreement. The Company Disclosure
Letter, with respect to the Company, and the Keystone Disclosure
Letter, with respect to Keystone, sets forth a correct and
complete list of all Contracts of it and its Subsidiaries
required to be filed as material contract exhibits under the
Exchange Act and pursuant to which consents or waivers are or may
be required prior to consummation of the transactions
contemplated by this Agreement or the Stock Option Agreement.
(c) Reports; Financial Statements. It has made
available to the other party each registration statement, report,
proxy statement or information statement prepared by it since
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December 31, 1996 as to the Company and since March 28, 1997 as
to Keystone (the "Audit Date"), including its Annual Report on
Form 10-K for the year ended December 31, 1996 for the Company
and for the year ended March 28, 1997 for Keystone in the form
(including exhibits, annexes and any amendments thereto) filed
with the Securities and Exchange Commission (the "SEC")
(collectively, including any such reports filed subsequent to the
date hereof, its "Reports"). As of their respective dates, its
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 the light of
the circumstances in which they were made, not misleading. Each
of the consolidated balance sheets included in or incorporated by
reference into its Reports (including the related notes and
schedules) fairly presents the consolidated financial position of
it and its Subsidiaries as of its date and each of the
consolidated statements of income and of cash flows included in
or incorporated by reference into its Reports (including any
related notes and schedules) fairly presents the consolidated
results of operations and cash flows of it and its Subsidiaries
for the periods set forth therein (subject, in the case of
unaudited statements, to notes and year-end audit adjustments
that will not be material in amount or effect), in each case in
accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may
be noted therein.
(d) Absence of Certain Changes. Except as
disclosed in its Reports filed prior to the date hereof, as set
forth in the Disclosure Letters or as expressly contemplated by
this Agreement, since the Audit Date it and its Subsidiaries have
conducted their respective
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businesses only in the ordinary and
usual course of such businesses, and there has not been (i) any
change in the financial condition, business or results of
operations of it and its Subsidiaries, except those changes that
are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it; (ii) any damage,
destruction or other casualty loss with respect to any asset or
property owned, leased or otherwise used by it or any of its
Subsidiaries, whether or not covered by insurance, which damage,
destruction or loss is reasonably likely, individually or in the
aggregate, after taking into account any insurance coverage, to
have a Material Adverse Effect on it; (iii) any declaration,
setting aside or payment of any dividend or other distribution in
respect of its capital stock; or (iv) any change by it in
accounting principles, practices or methods except as required by
GAAP.
(e) Litigation and Liabilities. Except as
disclosed in its Reports filed prior to the date hereof and in
the Disclosure Letters, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations
or proceedings ("Litigation") pending or, to the actual knowledge
of its named executive officers as set forth in the Proxy
Statement for its last Annual Meeting of Stockholders (the "Named
Executive Officers"), threatened against it or any of its
affiliates (as defined in Rule 12b-2 under the Exchange Act) or
(ii) obligations or liabilities, whether or not accrued,
contingent or otherwise, including those relating to matters
involving any Environmental Law (as defined in Section 5.2(e)),
pending or, to the actual knowledge of its named executive
officers, threatened against it or any of its Affiliates that in
either case are reasonably likely to result in any claims against
or obligations or liabilities of it or any of its Affiliates,
except for those that are not, individually or in the aggregate,
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reasonably likely to have a Material Adverse Effect on it or to
prevent, or materially impair its ability to effect, the
consummation by it of the transactions contemplated by this
Agreement or the Stock Option Agreement; provided, that for
purposes of this paragraph (e) no Litigation arising after the
date hereof shall be deemed to have a Material Adverse Effect if
and to the extent such Litigation (or any relevant part thereof)
is based on this Agreement or the transactions contemplated
hereby.
(f) Accounting and Tax Matters. As of the date
hereof, neither it nor any of its Affiliates has taken or agreed
to take any action, nor do its Named Executive Officers have any
actual knowledge of any fact or circumstance, that would prevent
Keystone from accounting for the business combination to be
effected by the Merger as a "pooling-of-interests" or prevent the
Merger from qualifying as a "reorganization" within the meaning
of Section 368(a) of the Code.
(g) Taxes. It and each of its Subsidiaries have
prepared in good faith and duly and timely filed (taking into
account any extension of time within which to file) all material
Tax Returns (as defined below) required to be filed by any of
them and all such filed Tax Returns are complete and accurate in
all material respects and: (i) it and each of its Subsidiaries
have paid all Taxes (as defined below) that are shown as due on
such filed Tax Returns or that it or any of its Subsidiaries is
obligated to withhold from amounts owing to any employee,
creditor or third party, except with respect to matters contested
in good faith or for such amounts that, alone or in the
aggregate, are not reasonably likely to have a Material Adverse
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Effect on it; (ii) as of the date hereof, there are not pending
against it or its Subsidiaries or, to the actual knowledge of its
Named Executive Officers, threatened against it or its
Subsidiaries, in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax
matters, except with respect to matters contested in good faith
or for such amounts that, alone or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it; and
(iii) there are not, to the actual knowledge of its Named
Executive Officers, any unresolved questions or claims concerning
its or any of its Subsidiaries' Tax liability that are reasonably
likely to have a Material Adverse Effect on it. Neither it nor
any of its Subsidiaries has any liability with respect to income,
franchise or similar Taxes in excess of the amounts accrued in
respect thereof that are reflected in the financial statements
included in its Reports, except such excess liabilities as have
been incurred in the ordinary course of business since the date
of such Reports and such excess liabilities as are not,
individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it.
As used in this Agreement, (x) the term "Tax"
(including, with correlative meaning, the terms "Taxes", and
"Taxable") includes all federal, state, local and foreign income,
profits, franchise, gross receipts, environmental, customs duty,
capital stock, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise,
production, value added, transfer, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such
amounts and any interest in respect of such penalties and
additions, and (y) the term "Tax Return" includes all returns,
amended returns and reports (including elections, declarations,
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disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.
(h) Compliance with Laws. Except as set forth in
its Reports filed prior to the date hereof and in the Disclosure
Letters, the businesses of each of it and its Subsidiaries have
not been, and are not being, conducted in violation of any law,
statute, ordinance, regulation, judgment, order, decree,
injunction, arbitration award, license, authorization, opinion,
agency requirement or permit of any Governmental Entity or common
law (collectively, "Laws"), except for violations that are not,
individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or to prevent, or materially impair
its ability to effect, the consummation by it of the transactions
contemplated by this Agreement or the Stock Option Agreement.
Except as set forth in its Reports filed prior to the date hereof
and in the Disclosure Letters, as of the date hereof no
investigation or review by any Governmental Entity with respect
to it or any of its Subsidiaries is, to the actual knowledge of
its Named Executive Officers, pending or threatened, nor has any
Governmental Entity indicated to it or any of its Subsidiaries an
intention to conduct the same, except for those the outcome of
which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or to prevent, or
materially impair its ability to effect, the consummation by it
of the transactions contemplated by this Agreement or the Stock
Option Agreement. To the actual knowledge of its Named Executive
Officers, as of the date hereof no material change is required in
its or any of its Subsidiaries' processes, properties or
procedures in connection with any such Laws, and it has not
received any notice or communication of any material
noncompliance with any such Laws that has not been cured as of
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the date hereof, except for such changes and noncompliance that
are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it or to prevent, or materially
impair its ability to effect, the consummation by it of the
transactions contemplated by this Agreement or the Stock Option
Agreement. Each of it and its Subsidiaries has all permits,
licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals
(collectively, "Permits") necessary to conduct their business as
presently conducted, except for those the absence of which are
not, individually or in the aggregate, reasonably likely to have
a Material Adverse Effect on it.
5.2 Representations and Warranties of the Company.
Except as set forth in the Company Disclosure Letter, the Company
hereby represents and warrants to Keystone and Merger Sub that:
(a) Capital Structure. The authorized capital
stock of the Company consists of (i) 5,000,000 Company Shares, of
which 3,401,818 Company Shares were issued and outstanding and
73,165 Company Shares were held in treasury, (ii) 150,000 shares
of Preferred Stock, $1.00 par value, of which no shares were
issued and outstanding and (iii) 50,000 shares of Junior
Participating Cumulative Preferred Stock, $1.00 par value, of
which no shares were issued and outstanding, as of the close of
business on January 31, 1998. All of the outstanding Company
Shares have been duly authorized and are validly issued, fully
paid and nonassessable. Other than Company Shares reserved for
issuance pursuant to the Stock Option Agreement and Company
Shares reserved for issuance as set forth below or which may be
issued in accordance with Section 6.1(a), the Company has no
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Company Shares reserved for issuance. As of January 31, 1998,
there were not more than (i) 750,000 Company Shares reserved for
issuance pursuant to the Company's Stock Compensation Plan and
(ii) 60,000 Company Shares reserved for issuance under the 1997
Stock Option Plan for Non-Employee Directors (collectively, the
"Stock Plans"). Each of the outstanding shares of capital stock
or other securities of each of the Company's Significant
Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or a direct or indirect
wholly-owned Subsidiary of the Company, free and clear of any
lien, pledge, security interest, claim or other encumbrance.
Except as set forth above and except for Company Shares and
options to purchase Company Shares which may be issued in
accordance with Section 6.1(a), neither the Company nor any of
its Subsidiaries has any obligation with respect to any
preemptive or other outstanding rights, options, warrants,
conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to
issue or sell any shares of capital stock or other securities of
the Company or any of its Significant Subsidiaries or any
securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of the Company or any of its Significant
Subsidiaries, and no securities or obligations evidencing such
rights are authorized, issued or outstanding. The Company Shares
issuable pursuant to the Stock Option Agreement have been duly
reserved for issuance by the Company, and upon any issuance of
such Company Shares in accordance with the terms of the Stock
Option Agreement, such Company Shares will be duly and validly
issued and fully paid and nonassessable. The Company does not
have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or
21
convertible into or exercisable for securities having the right
to vote) with the shareholders of the Company on any matter.
(b) Corporate Authority; Approval and Fairness.
The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement and the
Stock Option Agreement and to consummate, subject only to
approval of this Agreement by the holders of a majority of the
outstanding Company Shares (the "Company Requisite Vote") and the
Company Required Consents, the Merger. Each of this Agreement
and the Stock Option Agreement has been duly executed and
delivered by the Company and, assuming the due authorization,
execution and delivery of this Agreement by Keystone and Merger
Sub and the due authorization, execution and delivery of the
Stock Option Agreement by Keystone, is a valid and binding
agreement of the Company enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and
Equity Exception"). The board of directors of the Company
(A) has adopted this Agreement and approved the Merger and the
other transactions contemplated hereby, (B) has approved the
execution and delivery of the Stock Option Agreement and (C) has
received the opinion of its financial advisors in a customary
form and to the effect that, as of the date of this Agreement,
the Exchange Ratio is fair, from a financial point of view, to
the holders of the Company Shares (other than Keystone or any of
its affiliates) and said opinion has not been withdrawn. The 80%
vote requirement set forth in Article Fifteenth of the Company's
22
Certificate of Incorporation, as amended, is not applicable to
the Merger approval, the conditions of Article Fifteenth, Section
3(a) having been duly met.
(c) Employee Benefits.
(i) A copy of each executive bonus, deferred
compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other material plan,
agreement, policy or arrangement that covers employees,
directors, former employees or former directors of it and its
Subsidiaries (its "Compensation and Benefit Plans") and any trust
agreements or insurance contracts forming a part of such
Compensation and Benefit Plans has been made available by the
Company to Keystone prior to the date hereof and each such
Compensation and Benefit Plan is listed in Section 5.2(c) of the
Company Disclosure Letter.
(ii) All of its Compensation and Benefit
Plans are in substantial compliance with all applicable law,
including the Code and the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") with the exception of any
instances of non-compliance that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on
the Company. Each of its Compensation and Benefit Plans that is
an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan") and that is intended to
be qualified under Section 401(a) of the Code has received a
23
favorable determination letter from the Internal Revenue Service
(the "IRS"), and it is not aware of any circumstances likely to
result in revocation of any such favorable determination letter.
As of the date hereof, there is no pending or, to the knowledge
of its Named Executive Officers, threatened in writing material
litigation relating to its Compensation and Benefit Plans which
is reasonably likely to have a Material Adverse Effect on it.
Neither it nor any Subsidiary has engaged in a transaction with
respect to any of its Compensation and Benefit Plans that,
assuming the taxable period of such transaction expired as of the
date hereof, would subject it or any of its Subsidiaries to a
material tax or penalty imposed by either Section 4975 of the
Code or Section 502 of ERISA and that is reasonably likely to
have a Material Adverse Effect on the Company.
(iii) As of the date hereof, no liability
under Subtitle C or D of Title IV of ERISA (other than the
payment of prospective premium amounts to the Pension Benefit
Guaranty Corporation in the normal course) has been or is
expected to be incurred by it or any Subsidiary with respect to
any ongoing, frozen or terminated "single-employer plan", within
the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan
of any entity which is considered one employer with it under
Section 4001 of ERISA or Section 414 of the Code (its "ERISA
Affiliate") (each such single-employer plan, its "ERISA Affiliate
Plan"). No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any of its
Pension Plans or any of its ERISA Affiliate Plans within the 12-
24
month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this
Agreement.
(iv) Neither any of its Pension Plans nor any
of its ERISA Affiliate Plans has an "accumulated funding
deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither it nor
its Subsidiaries has provided, or is required to provide,
security to any of its Pension Plans or to any of its ERISA
Affiliate Plans pursuant to Section 401(a)(29) of the Code.
(v) The consummation of the Merger (or its
approval by its shareholders) and the other transactions
contemplated by this Agreement and the Stock Option Agreement
will not (x) entitle any of its employees or directors or any
employees of its Subsidiaries to severance pay, directly or
indirectly, upon termination of employment, (y) accelerate the
time of payment or vesting or trigger any payment of compensation
or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of its Compensation
and Benefit Plans or (z) result in any breach or violation of, or
a default under, any of its Compensation and Benefit Plans.
(vi) Since the Audit Date, except as provided
for herein, in the Company Disclosure Letter or as disclosed in
the Company's Reports filed prior to the date hereof, there has
not been any increase in the compensation payable or that could
25
become payable by it or any of its Subsidiaries to officers or
key employees or any amendment of any of its Compensation and
Benefit Plans other than increases or amendments in the ordinary
course.
(d) Takeover Statutes. The Board of Directors of
the Company, including a majority of the non-employee directors
of the Company, has duly adopted resolutions approving the
Merger, the Stock Option Agreement and the transactions
contemplated hereby and thereby and specifically naming Keystone
and its existing and future affiliates or associates. Such
resolutions satisfy the requirements of Section 203 of the DGCL,
are by their terms irrevocable, and have not been amended or
modified in any manner. The provisions of Section 203 of the DGCL
do not and will not apply to the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreement. No
other "fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation (each a
"Takeover Statute") as in effect on the date hereof or any anti-
takeover provision in the Company's certificate of incorporation
and by-laws is applicable to the Company, the Company Shares, the
Merger or the other transactions contemplated by this Agreement
or the Stock Option Agreement.
(e) Environmental Matters. Except as disclosed
in its Reports filed prior to the date hereof and except for such
matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it:
(i) each of it and its Subsidiaries has complied in all material
respects with all applicable Environmental Laws (as defined
below); (ii) the properties currently owned or operated by it or
any of its Subsidiaries (including soils, any groundwater
26
underlying such properties, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances
(as defined below) at levels that require investigation or
cleanup under applicable Environmental Laws; (iii) the properties
formerly owned or operated by it or any of its Subsidiaries were
not contaminated with Hazardous Substances during the period of
ownership or operation by it or any of its Subsidiaries;
(iv) neither it nor any of its Subsidiaries has received written
notice that it is subject to liability for any Hazardous
Substance disposal or contamination on any third party property;
(v) neither it nor any Subsidiary has been responsible for any
release or threat of release of any Hazardous Substance; (vi) as
of the date hereof neither it nor any Subsidiary has received any
written notice, demand, letter, claim or request for information
alleging that it or any of its Subsidiaries may be in violation
of or liable under any Environmental Law; and (vii) neither it
nor any of its Subsidiaries is subject to any binding orders,
decrees, injunctions or other arrangements with any Governmental
Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or
relating to Hazardous Substances.
As used herein, the term "Environmental Law" means any
Law relating to: (A) the protection, investigation or
restoration of the environment, health, safety, or natural
resources, (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, pollution, contamination or any injury or threat of
injury to persons or property in connection with any Hazardous
Substance.
27
As used herein, the term "Hazardous Substance" means
any substance that is: listed, classified or regulated pursuant
to any Environmental Law, including any petroleum product or by-
product, friable asbestos-containing material, lead-containing
paint, polychlorinated biphenyls, radioactive materials or radon.
(f) Labor Matters. As of the date hereof,
neither it nor any of its Subsidiaries is the subject of any
material proceeding asserting that it or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it
to bargain with any labor union or labor organization nor is
there pending or, to the actual knowledge of its Named Executive
Officers, threatened, nor has there been for the past five years,
any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving it or any of its Subsidiaries, except in each
case as is not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it.
(g) Brokers and Finders. Neither it nor any of
its 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 Merger or the
other transactions contemplated in this Agreement and the Stock
Option Agreement.
(h) Intellectual Property. (i) The Company
and/or each of its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use, all material
patents, trademarks, trade names, service marks, copyrights, and
28
any applications therefor, technology, know-how, computer
software programs or applications, and tangible or intangible
proprietary information or materials that are used in its or any
of its Subsidiaries' businesses as currently conducted, and to
the actual knowledge of its Named Executive Officers all patents,
trademarks, trade names, service marks and copyrights held by it
and/or its Subsidiaries are valid and subsisting, except for any
failures to so own, be licensed or possess or to be valid and
subsisting, as the case may be, that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse
Effect on it.
(i) Rights Agreement. The Company has amended
the Rights Agreement relating to its Junior Participating
Cumulative Preferred Stock Purchase Rights, issued to
stockholders in June 1992, to provide that neither Keystone nor
Merger Sub shall be deemed to be an Acquiring Person (as defined
in the Rights Agreement) and the Distribution Date (as defined
therein) shall not be deemed to occur and that the Rights will
not become separable, distributable, unredeemable or exercisable
as a result of entering into this Agreement, the Stock Option
Agreement, the Affiliate Agreement or consummating the Merger
and/or the other transactions contemplated hereby and thereby.
5.3 Representations and Warranties of Keystone and
Merger Sub. Except as set forth in the Keystone Disclosure
Letter, Keystone, on behalf of itself and Merger Sub, hereby
represents and warrants to the Company that:
29
(a) Capital Structure. (i) The authorized
capital stock of Keystone consists of 50,000,00 shares of
Keystone Common Stock, of which 14,642,000 shares were issued and
outstanding as of the close of business on January 31, 1998; and
3,000,000 shares of Preferred Stock, no par value (the "Keystone
Preferred Shares"), of which no shares were outstanding as of the
close of business on January 31, 1998. All of the outstanding
shares of Keystone Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. Keystone has no
shares of Keystone Common Stock or Keystone Preferred Shares
reserved for issuance except as described below. Each of the
outstanding shares of capital stock of each of Keystone's
Significant Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and owned by Keystone or a direct or
indirect wholly-owned Subsidiary of Keystone, free and clear of
any lien, pledge, security interest, claim or other encumbrance.
Except pursuant to Keystone's 1996 Employee Stock Incentive Plan,
neither Keystone nor any of its Subsidiaries has any obligation
with respect to any preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or to sell any shares of capital stock or
other securities of Keystone or any of its Significant
Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any securities of the Company
or any of its Significant Subsidiaries, and no securities or
obligation evidencing such rights are authorized, issued or
outstanding. Keystone does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have
the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of
Keystone on any matter.
30
(ii) The authorized capital stock of Merger
Sub consists of 1,000 shares of common stock, par value $0.10 per
share, all of which are validly issued and outstanding. All of
the issued and outstanding capital stock of Merger Sub is, and at
the Effective Time will be, owned by Keystone, and there are
(i) no other shares of capital stock or other voting securities
of Merger Sub, (ii) no securities of Merger Sub convertible into
or exchangeable for shares of capital stock or other voting
securities of Merger Sub and (iii) no options or other rights to
acquire from Merger Sub, and no obligations of Merger Sub to
issue, any capital stock, other voting securities or securities
convertible into or exchangeable for capital stock or other
voting securities of Merger Sub. Merger Sub has not conducted
any business prior to the date hereof and has no, and prior to
the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its
formation and pursuant to this Agreement and the Merger and the
other transactions contemplated by this Agreement.
(b) Corporate Authority; Approval and Fairness.
Keystone and Merger Sub each has all requisite corporate power
and authority and each has taken all corporate action necessary
in order to execute, deliver and perform its obligations under
this Agreement and the Stock Option Agreement and to consummate,
subject only to approval of this Agreement by the holders of a
majority of the outstanding Keystone Shares (the "Keystone
Requisite Vote") and the Keystone Required Consents, the Merger.
Each of this Agreement and the Stock Option Agreement has been
duly executed and delivered by Keystone and Merger Sub and,
assuming the due authorization, execution and delivery of this
Agreement and the Stock Option Agreement by the Company, is a
valid and binding agreement of Keystone and Merger Sub,
31
enforceable against each of Keystone and Merger Sub in accordance
with its terms, subject to the Bankruptcy and Equity Exception.
Keystone has received the opinion of its financial advisors, X.X.
Xxxxxxx & Sons, Inc., in a customary form and to the effect that
the Merger Consideration to be paid by Keystone in the Merger is
fair to Keystone from a financial point of view and said opinion
has not been withdrawn. The shares of Keystone Common Stock,
when issued pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable, and no stockholder
of Keystone will have any preemptive right of subscription or
purchase in respect thereof.
(c) Employee Benefits.
(i) A complete list of each bonus, deferred
compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other material plan,
agreement, policy or arrangement that covers employees,
directors, former employees or former directors of Keystone or
any of its Subsidiaries ("Keystone Compensation and Benefit
Plans") is set forth in the Keystone Disclosure Letter.
(ii) All of the Keystone Compensation and
Benefit Plans are in substantial compliance with all applicable
law, including the Code and ERISA, with the exception of any
instances of non-compliance that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on
Keystone or any Subsidiary. Each of the Keystone Compensation
and Benefit Plans that is a Pension Plan and that is intended to
32
be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS, and neither Keystone
nor any Subsidiary is aware of any circumstances likely to result
in revocation of any such favorable determination letter. As of
the date hereof, there is no pending or, to the knowledge of the
Named Executive Officers of Keystone, threatened in writing
material litigation relating to Keystone Compensation and Benefit
Plans which is reasonably likely to have a Material Adverse
Effect on it. Neither Keystone nor any Subsidiary has engaged in
a transaction with respect to any of the Keystone Compensation
and Benefit Plans that, assuming the taxable period of such
transaction expired as of the date hereof, would subject it to a
material tax or penalty imposed by either Section 4975 of the
Code or Section 502 of ERISA and that is reasonably likely to
have a Material Adverse Effect on Keystone or any Subsidiary.
(iii) As of the date hereof, no material
liability under Subtitle C or D of Title IV of ERISA (other than
the payment of prospective premium amounts to the Pension Benefit
Guaranty Corporation in the normal course) has been or is
expected to be incurred by Keystone or any Subsidiary with
respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any ERISA
Affiliate Plan. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed
for any of its Pension Plans or any of its ERISA Affiliate Plans
within the 12-month period ending on the date hereof or will be
required to be filed in connection with the transactions
contemplated by this Agreement.
33
(iv) Neither any of its Pension Plans nor any
of its ERISA Affiliate Plans have a material "accumulated funding
deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither
Keystone nor its Subsidiaries have provided, or are required to
provide, security to any of its Pension Plans or to any of its
ERISA Affiliate Plans pursuant to Section 401(a)(29) of the Code.
(v) The consummation of the Merger (or its
approval by its shareholders) and the other transactions
contemplated by this Agreement, the Stock Option Agreement and
the Affiliate Agreement will not (x) entitle any of Keystone's or
its Subsidiaries' employees or directors to severance pay,
directly or indirectly, upon termination of employment,
(y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any
of the Keystone Compensation and Benefit Plans or (z) result in
any breach or violation of, or a default under, any of the
Keystone Compensation and Benefit Plans.
(d) Environmental Matters. Except as disclosed
in its Reports filed prior to the date hereof and except for such
matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it:
(i) each Keystone and its Subsidiaries have complied in all
material respects with all applicable Environmental Laws;
(ii) the properties currently owned or operated by Keystone or
any of its Subsidiaries (including soils, any groundwater
underlying such properties, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances at
levels that require investigation or cleanup under applicable
34
Environmental Laws; (iii) the properties formerly owned or
operated by Keystone or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of
ownership or operation by Keystone or any of its Subsidiaries;
(iv) neither it nor any of its Subsidiaries has received written
notice that it is subject to liability for any Hazardous
Substance disposal or contamination on any third party property;
(v) neither it nor any Subsidiary has been responsible for any
release or threat of release of any Hazardous Substance; (vi) as
of the date hereof neither Keystone nor any Subsidiary has
received any written notice, demand, letter, claim or request for
information alleging that it or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; and
(vii) neither Keystone nor any Subsidiary is subject to any
binding orders, decrees, injunctions or other arrangements with
any Governmental Entity or is subject to any indemnity or other
agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances.
(e) Labor Matters. As of the date hereof,
neither Keystone nor any Subsidiary is the subject of any
material proceeding asserting that it or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it
to bargain with any labor union or labor organization affecting a
substantial number of its employees nor is there pending or, to
the actual knowledge of its Named Executive Officers, threatened,
nor has there been for the past five years, any labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving
it or any of its Subsidiaries, except in each case as is not,
individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or any of its Subsidiaries.
35
(f) Intellectual Property. Keystone and/or each
Subsidiary owns, or is licensed or otherwise possesses legally
enforceable rights to use, all material patents, trademarks,
trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information
or materials that are used in its or any of its Subsidiaries'
businesses as currently conducted, and to the actual knowledge of
Keystone's Named Executive Officers all patents, trademarks,
trade names, service marks and copyrights held by it and/or its
Subsidiaries are valid and subsisting, except for any failures to
so own, be licensed or possess or to be valid and subsisting, as
the case may be, that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it.
(g) Brokers and Finders. Neither it nor any of
its 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 Merger or the
other transactions contemplated in this Agreement and the Stock
Option Agreement.
ARTICLE VI
Covenants
6.1 Interim Operations. (a) The Company covenants and
agrees as to itself and its Subsidiaries that, after the date
hereof and prior to the Effective Time (unless Keystone shall
36
otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, and except as otherwise
expressly contemplated by this Agreement, the Stock Option
Agreement, the Company Disclosure Letter or as required by
applicable Law):
(i) the business of it and its Subsidiaries
shall be conducted in the ordinary and usual course and, to the
extent consistent therewith, it and its Subsidiaries shall use
all reasonable efforts to preserve its business organization
intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees
and business associates;
(ii) it shall not (A) amend its certificate
of incorporation or by-laws; (B) split, combine, subdivide or
reclassify its outstanding shares of capital stock; (C) declare,
set aside or pay any dividend payable in cash, stock or property
in respect of any capital stock; or (D) repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries to purchase
or otherwise acquire, any shares of its capital stock or any
securities convertible into or exchangeable or exercisable for
any shares of its capital stock;
(iii) neither it nor any of its
Subsidiaries shall knowingly take any action that would prevent
the merger from qualifying as a tax-free "reorganization" within
the meaning of Section 368(a) of the Code or that would cause any
of its representations and warranties herein to become untrue in
any material respect;
37
(iv) neither it nor any of its Subsidiaries
shall terminate, establish, adopt, enter into, make any new
grants or awards under, amend or otherwise modify, any
Compensation and Benefit Plans or Stock Plans or increase the
salary, wage, bonus or other compensation of any directors,
officers or employees or take any action which would result in an
acceleration of benefits or vesting under the Stock Plans as a
result of the consummation of the Merger which would not
otherwise occur pursuant to the terms and conditions of such
benefits or Stock Plan grants, awards or options as in effect on
the date hereof;
(v) neither it nor any of its Subsidiaries
shall issue any preferred stock or incur any indebtedness for
borrowed money (other than indebtedness in the ordinary course of
business consistent with past practice, indebtedness incurred
solely for the purpose of funding the Escrow Account or the
replacement or refinancing of existing short-term indebtedness);
or guarantee any such indebtedness;
(vi) neither it nor any of its Subsidiaries
shall make any capital expenditures in an aggregate amount in
excess of the aggregate amount reflected in the Company's capital
expenditure budget heretofore delivered to Keystone;
(vii) except as contemplated by
Section 6.1(a)(iv), neither the Company nor any of its
Subsidiaries shall issue, deliver, sell, or encumber shares of
any class of its common stock or any securities convertible into,
or any rights, warrants or options to acquire, any such shares
except the option granted under the Stock Option Agreement,
38
options and performance share programs outstanding on the date
hereof under the Stock Plans, and shares issuable pursuant to
such options and performance share programs;
(viii) neither it nor any of its
Subsidiaries shall acquire any business, whether by merger,
consolidation, purchase of property or assets or otherwise;
(ix) neither it nor any of its Subsidiaries
shall agree prior to the Effective Time to do any of the
foregoing after the Effective Time.
(b) Keystone covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless the Company shall otherwise approve in
writing, which approval shall not be unreasonably withheld or
delayed, and except as otherwise expressly contemplated by this
Agreement or in the Keystone Disclosure Letter or as required by
applicable Law):
(i) the business of it and its Subsidiaries
shall be conducted in the ordinary and usual course and, to the
extent consistent therewith, it and its Subsidiaries shall use
all reasonable efforts to preserve its business organization
intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees
and business associates;
39
(ii) it shall not (A) amend its certificate
of incorporation or by-laws in any manner that would prohibit or
hinder, impede or delay in any material respect the Merger or the
consummation of the transactions contemplated hereby;
(B) declare, set aside or pay any dividend or other distribution
payable in cash or property in respect of any capital stock; or
(C) repurchase, redeem or otherwise acquire, or permit any of its
Subsidiaries to purchase or otherwise acquire, except in open
market transactions or in connection with the Keystone Stock
Plans, any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital
stock;
(iii) neither it nor any of its
Subsidiaries shall knowingly take any action that would prevent
the Merger from qualifying as a tax-free "reorganization" within
the meaning of Section 368(a) of the Code or that would cause any
of its representations and warranties herein to become untrue in
any material respect, provided, however, that nothing contained
herein shall limit the ability of Keystone to exercise its rights
under the Stock Option Agreement; and
(iv) neither it nor any of its Subsidiaries
will authorize or enter into an agreement to do any of the
foregoing.
(c) Keystone and the Company agree that any
written approval obtained under this Section 6.1 may be relied
upon by the other party if signed by the Chief Executive Officer
or the Chief Financial Officer of the other party.
40
6.2. Acquisition Proposals. (a) The Company agrees
that neither it nor any of its Subsidiaries nor any of the
officers and directors of it or its Subsidiaries shall and that
it shall direct and use its best efforts to cause its and its
Subsidiaries' Representatives (as defined below) not to, directly
or indirectly, initiate, solicit, encourage or otherwise
facilitate any inquiries or the making of any proposal or offer
with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving it, or any
purchase of, or tender offer for, 15% or more of the equity
securities of it or any of its Subsidiaries or 15% or more of its
and its Subsidiaries' assets (based on the fair market value
thereof) taken as a whole (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). The
Company further agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and use its best
efforts to cause its Representatives not to, directly or
indirectly, have any discussions with or provide any confidential
information or data to any Person relating to an Acquisition
Proposal or engage in any negotiations concerning an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Company or
its board of directors from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition
Proposal; (B) making any disclosure to the Company's shareholders
if, in the good faith judgment of the board of directors of the
Company, failure so to disclose would be inconsistent with its
obligations under applicable law; (C) engaging in any discussions
or negotiations with or providing any information to, any Person
in response to a bona fide written Acquisition Proposal by any
such Person received after the date hereof that was not solicited
by the Company after the date hereof; or (D) recommending such an
41
Acquisition Proposal to the shareholders of the Company if and
only to the extent that, in such case referred to in clause (C)
or (D), the board of directors of the Company concludes in good
faith (after consultation with its financial advisor) that such
Acquisition Proposal is reasonably capable of being completed,
taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal, and
would, if consummated, result in a transaction more favorable to
the Company's shareholders from a financial point of view than
the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this
Agreement as a "Superior Proposal"). The Company agrees that it
will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal.
The Company also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in
connection with its consideration of any Acquisition Proposal to
return all confidential information heretofore furnished to such
Person by or on behalf of it or any of its Subsidiaries.
(b) The Company agrees that it will take the
necessary steps to promptly inform the individuals or entities
referred to in the first sentence hereof of the obligations
undertaken in this Section 6.2. The Company agrees that it will
notify Keystone promptly if any such inquiries, proposals or
offers are received by, any such information is requested from,
or any such discussions or negotiations are sought to be
initiated or continued with, any of the Company's Representatives
indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or
42
offers and thereafter shall keep Keystone informed, on a current
basis, of the status and material terms of any such proposals or
offers and the status of any such discussions or negotiations.
6.3 Information Supplied. The Company and Keystone
each agrees, as to itself and its Subsidiaries, that none of the
information supplied or to be supplied by it or its Subsidiaries
for inclusion or incorporation by reference in (i) the
Registration Statement on Form S-4 to be filed with the SEC by
Keystone in connection with the issuance of shares of Keystone
Common Stock in the Merger (including the proxy statement and
prospectus (the "Prospectus/Proxy Statement") constituting a part
thereof) (the "S-4 Registration Statement") will, at the time the
S-4 Registration Statement becomes effective under the Securities
Act, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders
and at the time of the Shareholders Meeting, in any such case,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at
any time prior to the Effective Time any information relating to
Keystone or the Company, or any of their respective affiliates,
officers or directors, should be discovered by Keystone or the
Company which should be set forth in an amendment or supplement
to any of the S-4 Registration Statement or the Prospectus/Proxy
Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, the
party which discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or supplement
43
describing such information shall be promptly filed with the SEC
and, to the extent required by law, disseminated to the
shareholders of the Company and Keystone.
6.4 Shareholders Meeting. The Company and Keystone
will take, in accordance with applicable law and each of their
certificates of incorporation and by-laws, all action necessary
to convene meetings of their respective holders of Company Shares
stockholders (the "Shareholders Meetings") as promptly as
practicable after the S-4 Registration Statement is declared
effective to consider and vote upon the approval of this
Agreement and the Merger. Unless the board of directors of the
Company determines in good faith after consultation with outside
legal counsel that to do so would result in a failure to comply
with its fiduciary duties under applicable law, the Company's
board of directors shall recommend approval of this Agreement and
the Merger and shall take all lawful action to solicit such
approval.
6.5 Filings; Other Actions; Notification. (a)
Keystone and the Company shall promptly prepare and file with the
SEC the Prospectus/Proxy Statement, and Keystone shall prepare
and file with the SEC the S-4 Registration Statement as promptly
as practicable. Keystone and the Company each shall use all
reasonable efforts to have the S-4 Registration Statement
declared effective under the Securities Act as promptly as
practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the shareholders of Keystone and
the Company. Keystone shall also use all reasonable efforts to
obtain prior to the effective date of the S-4 Registration
Statement all necessary state securities law or "blue sky"
44
permits and approvals required in connection with the Merger and
to consummate the other transactions contemplated by this
Agreement.
(b) The Company and Keystone each shall use all
reasonable efforts to cause to be delivered to the other party
and its directors (i) letters of its independent auditors, dated
(A) the date on which the S-4 Registration Statement shall become
effective and (B) the Closing Date, and addressed to the other
party and its directors, in form and substance customary for
"comfort" letters delivered by independent public accountants in
connection with registration statements similar to the S-4
Registration Statement, and (ii) if elected by Keystone, a letter
from its independent auditors addressed to Keystone and the
Company, dated as of the Closing Date, stating their opinion that
the Merger will qualify for pooling-of-interests accounting
treatment.
(c) The Company and Keystone shall cooperate with
the other and use (and shall cause their respective Subsidiaries
to use) their respective best efforts to take or cause to be
taken all actions, and do or cause to be done all things,
necessary, proper or advisable to be done on its part under this
Agreement and the Stock Option Agreement and applicable Laws to
consummate and make effective the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement as soon as practicable, including preparing and filing
as promptly as practicable all documentation required to be filed
by it to effect all necessary applications, notices, petitions,
filings and other documents applicable to it and to obtain as
promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained
from any third party and/or any Governmental Entity in order for
45
it to consummate the Merger or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement,
including, but not limited to, the HSR Act.
(d) Subject to applicable laws relating to the
exchange of information, the Company and Keystone each shall,
upon request by the other, furnish the other with all information
concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy
Statement, the S-4 Registration Statement or any other statement,
filing, notice or application made by or on behalf of Keystone,
the Company or any of their respective Subsidiaries to any third
party and/or any Governmental Entity in connection with the
Merger and the transactions contemplated by this Agreement or the
Stock Option Agreement.
(e) The Company and Keystone each shall keep the
other apprised of the status of matters relating to completion of
the transactions contemplated hereby, including promptly
furnishing the other with copies of notices or other
communications received by Keystone or the Company, as the case
may be, or any of its Subsidiaries, from any third party and/or
the SEC with respect to the Merger and the other transactions
contemplated by this Agreement or the Stock Option Agreement.
Each of the Company and Keystone shall give prompt notice to the
other of any change that is reasonably likely to result in a
material Adverse Effect on it or of any failure of any of the
conditions to the other party's obligations to effect the Merger
set forth in Article VII.
46
6.6 Access; Consultation. (a) Upon reasonable notice,
and except as may otherwise be required by applicable law, the
Company and Keystone each shall (and shall cause its Subsidiaries
to) afford the other's and the other's Subsidiaries, employees,
agents and representatives (including any investment banker,
attorney or accountant retained by the other or any of the
other's Subsidiaries) (such officers, directors, employees,
agents and representatives being referred to in this Agreement,
with respect to the Company or Keystone, as the context requires,
as such party's "Representatives") reasonable access, during
normal business hours throughout the period prior to the
Effective Time, to its properties, books, contracts and records
and, during such period, each shall (and shall cause its
Subsidiaries to) furnish promptly to the other all information
concerning its business, properties and personnel as may
reasonably be requested, provided that no investigation pursuant
to this Section shall affect or be deemed to modify any
representation or warranty made by the Company, Keystone or
Merger Sub hereunder, and provided, further, that the foregoing
shall not require the Company or Keystone to permit any
inspection, or to disclose any information, that in the
reasonable judgment of the Company or Keystone, as the case may
be, would violate applicable law or any of its obligations with
respect to confidentiality or would result in the disclosure of
any trade secrets of third parties if the Company or Keystone, as
the case may be, shall have used all reasonable efforts to obtain
the consent of such third party to such inspection or disclosure.
All requests for information made pursuant to this Section shall
be directed to an executive officer of the Company or Keystone,
as the case may be, or such Person as may be designated by any
such executive officer, as the case may be. All information
provided pursuant to this Section 6.6 shall be governed by the
47
terms of the Confidentiality Agreement between the Company and
Keystone dated January 22, 1998 (the "Confidentiality
Agreement").
(b) Subject to the Confidentiality Agreement,
from the date hereof to the Effective Time, Keystone and the
Company agree to consult with each other on a regular basis on a
schedule to be agreed with regard to their respective operations.
6.7 Affiliates. (a) Each of the Company and Keystone
shall deliver to the other a letter identifying all Persons whom
such party believes to be, at the date of the Shareholders
Meeting, "affiliates" of such party for purposes of applicable
interpretations regarding use of the pooling-of-interests
accounting method and, in the case of "affiliates" of the
Company, for purposes of Rule 145 under the 1933 Act. Each of
the Company and Keystone shall use all reasonable efforts to
cause each Person who is identified as an "affiliate" in the
letter from such party referred to above to deliver to Keystone
prior to the date of the Shareholders Meeting a written
agreement, in the form attached hereto as Exhibit B, in the case
of affiliates of the Company (the "Company Affiliate's Letter"),
and Exhibit C, in the case of affiliates of Keystone (the
"Keystone Affiliate's Letter"). Prior to the Effective Time,
each of the Company and Keystone shall use all reasonable efforts
to cause each additional Person who is identified by such party
as an "affiliate" to execute the applicable written agreement as
set forth in this Section 6.7 (each Person identified by a party
pursuant to the provisions of this Section 6.7(a), an
"Affiliate").
48
(b) If the Merger would otherwise qualify for
pooling-of-interests accounting treatment, shares of Keystone
Common Stock issued to such Affiliates of the Company in exchange
for Company Shares shall not be transferable until such time as
financial results covering at least 30 days of combined
operations of Keystone and the Company shall have been published
within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, regardless of whether each such
Affiliate has provided the written agreement referred to in this
Section, except to the extent permitted by, and in accordance
with, SEC Accounting Series Release 135 and SEC Staff Accounting
Bulletins 65 and 76. Keystone agrees to use its best efforts to
publish said financial results on Form 8-K within 60 days after
the Effective Time. If the Merger would otherwise qualify for
pooling-of-interests accounting treatment, any Company Shares
held by any such Affiliate shall not be transferable, regardless
of whether such Affiliate has provided the applicable written
agreement referred to in this Section, if such transfer, either
alone or in the aggregate with other transfers by Affiliates,
would preclude Keystone's ability to account for the business
combination to be effected by the Merger as a pooling of
interests. The Company shall not register the transfer of any
Certificate, unless such transfer is made in compliance with the
foregoing. The provisions of this Section 6.7(b) regarding the
filing of a Form 8-K are intended to be for the benefit of and
shall be enforceable by, each of the Affiliates of the Company,
their heirs and representatives.
6.8 National Market Listing and De-listing. Keystone
shall use its best efforts to cause the shares of Keystone Common
Stock to be issued in the Merger to be approved for listing on
the NASDAQ National Market, prior to the Closing Date. The
49
Surviving Corporation shall use its best efforts to cause the
Company Shares to be de-listed from the NASDAQ National Market
and de-registered under the Exchange Act as soon as practicable
following the Effective Time.
6.9 Publicity. The initial press release with respect
to the Merger shall be a joint press release, and thereafter the
Company and Keystone each shall consult with each other prior to
issuing any press releases or otherwise making public
announcements with respect to the Merger and the other
transactions contemplated by this Agreement and the Stock Option
Agreement and prior to making any filings with any third party
and/or any Governmental Entity (including NASDAQ) with respect
thereto, except as may be required by law or by obligations
pursuant to any listing agreement with or rules of NASDAQ.
6.10 Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding
option to purchase Company Shares (a "Company Option") under the
Stock Plans, whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and conditions
as were applicable under such Company Option, the same number of
shares of Keystone Common Stock as the holder of such Company
Option would have been entitled to receive pursuant to the Merger
had such holder exercised such Company Option in full immediately
50
prior to the Effective Time (rounded down to the nearest whole
number) (a "Substitute Option"), at an exercise price per share
(rounded up to, the nearest whole cent) equal to (y) the
aggregate exercise price for the Company Shares otherwise
purchasable pursuant to such Company Option divided by (z) the
number of full shares of Keystone Common Stock deemed purchasable
pursuant to such Company Option in accordance with the foregoing.
At or prior to the Effective Time, the Company shall make all
necessary arrangements with respect to the Stock Plans, including
any necessary amendments thereto, to permit the assumption of the
unexercised Company Options by Keystone pursuant to this Section
and no later than the Effective Time Keystone shall register
under the Securities Act of 1933 on Form S-8 or other appropriate
form (and use its best efforts to maintain the effectiveness
thereof) shares of Keystone Common Stock issuable pursuant to all
Substitute Options. As promptly as practicable after the
Effective Time, the Company shall deliver to the participants in
the Stock Plans appropriate notices setting forth such
participants' rights pursuant to such assumed Company Options.
(ii) Effective at the Effective Time,
Keystone shall assume each Company Option in accordance with the
terms of the Stock Plan under which it was issued and the stock
option agreement by which it is evidenced.
(b) Employee Benefits. Keystone shall, and shall
cause the Surviving Corporation to, honor, pursuant to their
terms, all employee benefit obligations to current and former
employees under the Compensation and Benefit Plans.
51
6.11 Expenses. Except as otherwise provided in
Section 8.5, whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement
shall be paid by the party incurring such cost or expense, except
that expenses incurred in connection with the filing fee for the
S-4 Registration Statement and printing and mailing the
Prospectus/Proxy Statement and the S-4 Registration Statement and
the filing fee under the HSR Act shall be shared equally by
Keystone and the Company.
6.12 Indemnification; Directors, and Officers,
Insurance. (a) From and after the Effective Time, Keystone
agrees that it will indemnify and hold harmless each present and
former director and officer of the Company (when acting in such
capacity) determined immediately prior to the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including
reasonable attorneys, fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing
or occurring at or prior to the Effective Time, whether asserted
or claimed prior to, at or after the Effective Time, to the
fullest extent that the Company would have been permitted under
Delaware law and its certificate of incorporation or by-laws in
effect on the date hereof to indemnify such Person (and Keystone
shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Person to whom
expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not
entitled to indemnification).
52
(b) Any Indemnified Party wishing to claim
indemnification under paragraph (a) of this Section 6.12, upon
learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Keystone thereof, but the
failure to so notify shall not relieve Keystone of any liability
it may have to such Indemnified Party if such failure does not
materially prejudice Keystone. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before
or after the Effective Time), (i) Keystone or the Surviving
Corporation shall have the right to assume the defense thereof
and Keystone 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 the defense thereof, except that if Keystone or the
Surviving Corporation elects not to assume such defense or
counsel for the Indemnified Parties advises that there are issues
which raise conflicts of interest between Keystone or the
Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and
Keystone or the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however,
that Keystone shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction, (ii) the Indemnified
Parties will cooperate in the defense of any such matter, and
(iii) Keystone shall not be liable for any settlement effected
without its prior written consent.
(c) Keystone or the Surviving Corporation shall
maintain a policy of officers, and directors, liability insurance
for acts and omissions occurring prior to the Effective Time
("D&O Insurance") with coverage in amount and scope at least as
53
favorable as the Company's existing directors' and officers'
liability insurance coverage for a period of six years after the
Effective Time; provided, however, if the existing D&O Insurance
expires, is terminated or canceled, or if the annual premium
therefor is increased to an amount in excess of $60,000 (the
"Current Premium"), in each case during such six year period,
Keystone or the Surviving Corporation will use its best efforts
to obtain D&O Insurance in an amount and scope as great as can be
obtained for the remainder of such period for a premium not in
excess (on an annualized basis) of the Current Premium.
(d) If Keystone or the Surviving Corporation or
any of its successors or assigns (i) shall consolidate with or
merge into any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual,
corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of
Keystone or the Surviving Corporation, as the case may be, shall
assume all of the obligations set forth in this Section.
(e) The provisions of this Section are intended
to be for the benefit of, and shall be enforceable by, each of
the Indemnified Parties, their heirs and their representatives.
6.13 Takeover Statute. If any Takeover Statute is or
may become applicable to the Merger or the other transactions
contemplated by this Agreement or the Stock Option Agreement,
each party hereto and its board of directors shall grant such
54
approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement or the Stock Option
Agreement or by the Merger and otherwise act to eliminate or
minimize the effects of such statute or regulation on such
transactions.
6.14 Confidentiality. The Company and Keystone each
acknowledges and confirms that it has entered into the
Confidentiality Agreement and that the Confidentiality Agreement
shall remain in full force and effect in accordance with its
terms, whether or not the Merger is consummated.
6.15 Transfer Taxes. All state, local, foreign use,
real property transfer, stock transfer or similar Taxes
(including any interest or penalties with respect thereto)
attributable to the Merger (collectively, the "Transfer Taxes")
shall be timely paid by the Company.
6.16 Tax Status. From and after the Effective Time and
for a period of twenty- four months thereafter Keystone agrees
that it shall not, and it shall not permit any of its
Subsidiaries to, take any action (other than lifting any transfer
restrictions on the Keystone Shares issued in the Merger pursuant
to the provisions of the Company Affiliate Agreement) that would
prevent the Merger from qualifying as a tax-free reorganization
within the meaning of Section 368(a) of the Code and the Treasury
regulations. In the event of a breach of the provisions of this
Section 6.16, Keystone shall indemnify and hold harmless the
Persons who were stockholders of the Company immediately prior to
the Effective Time in respect of any and all damages (including,
55
but not limited to, reasonable attorneys' fees and costs) which
arise from or are related to any breach by Keystone of this
Section 6.16. The provisions of this Section 6.16 are intended
for the benefit of, and shall be enforceable by, each Person who
was a stockholder of the Company immediately prior to the
Effective Time.
ARTICLE VII
Conditions
7.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect
the Merger is subject to the satisfaction or waiver at or prior
to the Effective Time of each of the following conditions:
(a) Shareholder Approval. This Agreement shall
have been duly approved by holders of Company Shares and Keystone
Shares constituting the Company Requisite Vote and the Keystone
Requisite Vote;
(b) National Market Listing. The shares of
Keystone Common Stock issuable to the Company shareholders
pursuant to this Agreement shall have been approved for listing
on the NASDAQ National Market, upon official notice of issuance.
56
(c) Governmental Consents. The waiting period
applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated.
(d) Laws and orders. No Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or
permanent) that is in effect and restrains, enjoins or otherwise
prohibits consummation of the Merger or the other transactions
contemplated by this Agreement or that is, individually or in the
aggregate with all other such Laws, reasonably likely to have a
Material Adverse Effect on Keystone or the Company (collectively,
an "Order"), and none of the Department of Justice or the Federal
Trade Commission shall have instituted any proceeding or
threatened in writing or publicly announced its intention to
institute any proceeding seeking any such Order.
(e) S-4. The S-4 Registration Statement shall
have become effective under the Securities Act. No stop order
suspending the effectiveness of the S-4 Registration Statement
shall have been issued, and no proceedings for that purpose shall
have been initiated or be threatened by the SEC.
7.2 Conditions to Obligations of Keystone and Merger
Sub. The obligations of Keystone and Merger Sub to effect the
Merger are also subject to the satisfaction or waiver by Keystone
at or prior to the Effective Time of the following conditions:
57
(a) Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement (i) to the extent qualified by Material Adverse Effect
shall be true and correct and (ii) to the extent not qualified by
Material Adverse Effect shall be true and correct, except that
this clause (ii) shall be deemed satisfied so long as any
failures of such representations and warranties to be true and
correct, taken together, do not have a Material Adverse Effect on
the Company, in each case (i) and (ii), as of the date of this
Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as
though made on and as of the Closing Date, and Keystone shall
have received a certificate signed on behalf of the Company by
the Chief Executive Officer of the Company to such effect.
(b) Performance of Obligations Company. The
Company shall have performed all material obligations required to
be performed by it under this Agreement at or prior to the
Closing Date, and Keystone shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer of
the Company to such effect.
(c) Dissenting Keystone Shares. Holders of less
than 5% of the issued and outstanding Keystone Shares shall have
dissented from the Merger under California law.
(d) Consent of Lender. Either (i) Keystone shall
have received the consent of Mellon Bank, N.A. under its Credit
Agreement with Mellon Bank, N.A., dated March 25, 1997, to the
consummation of the transactions contemplated hereby or (ii) the
58
Company shall have received the consent of Comerica Bank under
its Revolving Credit Agreement with Comerica Bank, dated March
31, 1997, not to accelerate the outstanding indebtedness
thereunder as a result of the consummation of the transactions
contemplated hereby.
(e) Fairness Opinion. The fairness opinion
referenced in Section 5.3(b) of this Agreement shall remain in
full force and effect and shall not have been withdrawn or
modified (in any way which is materially adverse to Keystone) by
X.X. Xxxxxxx & Sons, Inc.
(f) Legal Opinion. The Company shall have
received the legal opinion from its counsel referred to in
Section 7.3(e).
7.3 Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to
the satisfaction or waiver by the Company at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The
representations and warranties of Keystone and Merger Sub set
forth in this Agreement (i) to the extent qualified by Material
Adverse Effect shall be true and correct, and (ii) to the extent
not qualified by material Adverse Effect shall be true and
correct, except that this clause (ii) shall be deemed satisfied
so long as any failures of such representations and warranties to
be true and correct, taken together, do not have a Material
Adverse Effect on Keystone, in each case (i) and (ii), as of the
59
date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date,
and the Company shall have received a certificate signed on
behalf of Keystone by the Chief Executive Officer of Keystone to
such effect.
(b) Performance of Obligations of Keystone and
Merger Sub. Each of Keystone and Merger Sub shall have performed
all material obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of Keystone
and Merger Sub by the Chief Executive Officer of Keystone to such
effect.
(c) Dissenting Keystone Shares. Holders of less
than 5% of the issued and outstanding Keystone Shares shall have
dissented from the Merger under California law.
(d) Fairness Opinion. The fairness opinion
referred to in Section 5.2(b) of this Agreement shall remain in
full force and effect and shall not have been withdrawn or
modified (in any way which is materially adverse to the Company)
by the Company's financial advisor.
(e) Legal Opinion. The Company shall have
received a legal opinion from its counsel, in form and substance
reasonably satisfactory to the Company, to the effect that the
60
Merger qualifies as a tax-free reorganization within the meaning
of Section 368(a) of the Code.
61
ARTICLE VIII
Termination
8.1 Termination by Mutual Consent. This Agreement may
be terminated and the Merger may be abandoned at any time prior
to the Effective Time, whether before or after the approval by
shareholders of the Company or Keystone, by mutual written
consent of the Company and Keystone, by action of their
respective boards of directors.
8.2 Termination by Either Keystone or the Company.
This Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time by action of the board of
directors of either Keystone or the Company if (i) the Merger
shall not have been consummated by August 31, 1998, whether such
date is before or after the date of approval by the shareholders
of the Company or Keystone, (the "Termination Date"); (ii) the
approval of the Company's or Keystone's shareholders required
hereunder shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof or
(iii) any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger shall become final and
non-appealable (whether before or after the approval by the
shareholders of Keystone or the Company); provided that the right
to terminate this Agreement pursuant to clause (i) above shall
not be available to any party that has breached in any material
62
respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure of the Merger
to be consummated.
8.3 Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, whether before or after the approval by
shareholders of the Company referred to herein, by action of the
board of directors of the Company:
(a) If (i) the Company shall not have willfully
breached any of the terms of this Agreement in a manner resulting
in failure of a condition set forth in Section 7.2(a) or 7.2(b),
(ii) the board of directors of the Company approves entering into
a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Keystone
in writing that the Company wishes to enter into such agreement,
(iii) Keystone does not make, within five business days of
receipt of the Company's written notification of its desire to
enter into a binding agreement for a Superior Proposal, an offer
that the board of directors of the Company believes, in good
faith after consultation with its financial advisors, is at least
as favorable, from a financial point of view, to the shareholders
of the Company as the Superior Proposal, and that contains terms
and conditions (other than with respect to type or amount of
consideration) that do not differ materially from the terms and
conditions of the proposed agreement for such Superior Proposal
and (iv) the Company prior to such termination pays to Keystone
in immediately available funds any fees required to be paid
pursuant to Section 8.5. The Company agrees to notify Keystone
63
promptly if its desire to enter into a written agreement referred
to in its notification shall change at any time after giving such
notification.
(b) If there has been a breach by Keystone or
Merger Sub of any representation, warranty, covenant or agreement
contained in this Agreement which (i) would result in a failure
of a condition set forth in Section 7.3(a) or 7.3(b) and (ii) it
cannot be cured prior to the Termination Date.
8.4 Termination by Keystone. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time by action of the board of directors of
Keystone if (i) the board of directors of the Company shall have
withdrawn or adversely modified its approval or recommendation of
this Agreement or failed to reconfirm its recommendation of this
Agreement within ten business days after a written request by
Keystone to do so, provided that such a request is made after the
board of directors of the Company has taken any of the actions
specified in clause (C) or (D) of the proviso of Section 6.2 with
respect to an Acquisition Proposal and such Acquisition Proposal
has not been rejected by such board of directors or withdrawn,
(ii) there has been a breach by the Company of any
representation, warranty, covenant or agreement contained in this
Agreement which (A) would result in a failure of a condition set
forth in Section 7.2(a) or 7.2(b) and (B) cannot be cured prior
to the Termination Date or (iii) if the Company or any of its
Representatives shall take any of the actions that would be
proscribed by Section 6.2 but for the exception therein allowing
certain actions to be taken pursuant to clause (C) or (D) of the
64
proviso thereof (other than any such actions taken pursuant to
such clause (C) with respect to any bona fide written Acquisition
Proposal (received after the date hereof that was not solicited
by the Company after the date hereof) taken during the ten
calendar day period following receipt of such Acquisition
Proposal by the Company if, and only if, the Company receives
such Acquisition Proposal during the Initial 15 Day Period). For
purposes of this Agreement, the "Initial 15 Day Period" shall
mean the 15 calendar day period commencing with the first
calendar day after which this Agreement shall have been filed by
Keystone or the Company with the SEC as an exhibit to a Current
Report on Form 8-K under the Exchange Act.
8.5 Effect of Termination and Abandonment. (a) In
the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, this Agreement (other
than as set forth in Section 9.1) shall become void and of no
effect with no liability on the part of any party hereto (or of
any of its directors, officers, employees, agents, legal or
financial advisors or other representatives); provided, however,
that except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages
resulting from any intentional breach of any covenant of such
party set forth in this Agreement (in any such case in which
Keystone is not the breaching party, to the extent any such
liability or damages exceed any Termination Fee which may have
been paid to Keystone pursuant to Section 8.5(b)); and, provided,
further, that if such termination arises pursuant to Section
8.3(b) or clause (ii) of Section 8.4 as a result of a breach of a
representation and warranty made by the other party (other than a
breach caused solely as a result of an event or circumstance
occurring or arising subsequent to the date of the execution and
delivery of this Agreement), such other party shall pay to the
65
non-breaching party promptly, but in no event later than two days
after the date of such termination, a fee equal to two hundred
fifty thousand dollars ($250,000).
(b) In the event that (i) after the date hereof a
bona fide Acquisition Proposal with respect to the Company or any
Subsidiary of the Company that was not solicited by the Company
after the date hereof shall have been made to the Company or any
of its Subsidiaries by any Person and made known to shareholders
generally or has been made directly to shareholders generally or
any Person shall have publicly announced an intention (whether or
not conditional) to make a bona fide Acquisition Proposal with
respect to the Company or any Subsidiary of the Company and such
Acquisition Proposal or announced intention shall not have been
withdrawn prior to the Shareholders Meeting and thereafter this
Agreement is terminated by either Keystone or the Company
pursuant to Section 8.2(ii) as a result of the failure of the
Company's shareholders to approve the Merger at the meeting
referred to herein and within nine months after such termination
the Company shall have entered into an agreement to consummate a
transaction with such Person that would constitute an Acquisition
Proposal if it were the subject of a proposal, or (ii) this
Agreement is terminated (x) by the Company pursuant to
Section 8.3(a) or (y) by Keystone pursuant to Section 8.4(i),
(ii) (solely with respect to a willful and intentional breach of
Section 6.2) or (iii), then the Company shall promptly, but in no
event later than two days after the date of such termination
(except as otherwise provided in Section 8.3(a)) or, in the case
of a termination pursuant to Section 8.2(ii), two days after the
relevant agreement is entered into, pay Keystone a fee equal to
$1.9 million (the "Termination Fee"), payable by wire transfer of
same day funds. The Company acknowledges that the agreements
66
contained in this Section 8.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, Keystone and Merger Sub would not enter into
this Agreement; accordingly, if the Company fails to promptly pay
the amount due pursuant to this Section 8.5(b), and, in order to
obtain such payment, Keystone or Merger Sub commences a suit
which results in a judgment against the Company for the fee set
forth in this paragraph (b), the Company shall pay to Keystone or
Merger Sub its costs and expenses (including attorneys, fees) in
connection with such suit, together with interest on the amount
of the fee at the prime rate of Mellon Bank, N.A. in effect on
the date such payment was required to be made. Solely for
purposes of Section 8.5(b)(i), the term "Acquisition Proposal"
shall have the meaning assigned to such term in Section 6.2(a)
except that references to "15%" in the definition of "Acquisition
Proposal" in Section 6.2(a) shall be deemed to be references to
35%.
ARTICLE IX
Miscellaneous and General
9.1 Survival. This Article IX (other than Sections
9.2 and 9.4) and the agreements of the Company, Keystone and
Merger Sub contained in Sections 6.7(b) (Affiliates), 6.10
(Benefits), 6.11 (Expenses), 6.12 (Indemnification; Directors'
and Officers' Insurance) and 6.16 (Tax Status) shall survive the
consummation of the Merger. This Article IX (other than
Section 9.2, Section 9.3, and Section 9.14) and the agreements of
the Company, Keystone and Merger Sub contained in Section 6.11
67
(Expenses), Section 6.15 (Confidentiality) and Section 8.5
(Effect of Termination and Abandonment) shall survive the
termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not
survive the consummation of the Merger or the termination of this
Agreement.
9.2 Modification or Amendment. Subject to the
provisions of applicable law, at any time prior to the Effective
Time, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized
officers of the respective parties.
9.3 Waiver of Conditions. (a) Any provision of this
Agreement may be waived prior to the Effective Time if, and only
if, such waiver is in writing and signed by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. Except as
otherwise herein provided, the rights and remedies herein
provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
9.4 Counterparts. This Agreement may be executed in
any number of counterparts, each such counterpart being deemed to
be an original instrument, and all such counterparts shall
together constitute the same agreement.
68
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF, AND THE MERGER SHALL
BE GOVERNED BY AND IN ACCORDANCE WITH THE DGCL, TO THE EXTENT
APPLICABLE. The parties hereby irrevocably submit to the
jurisdiction of the Federal courts of the United States of
America or the Court of Chancery located in the State of Delaware
solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in
this Agreement, and in respect of the transactions contemplated
hereby and thereby, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said
courts or that the venue thereof may not be appropriate or that
this Agreement or any such document may not be enforced in or by
such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard
and determined in such a court. The parties hereby
consent to and grant any such court jurisdiction over the Person
of such parties and over the subject matter of such dispute and
agree that mailing of process or other papers in connection with
any such action or proceeding in the manner provided in
Section 9.6 or in such other manner as may be permitted by law,
shall be valid and sufficient service thereof.
69
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6 Notices. Notices, requests, instructions or other
documents to be given under this Agreement shall be in writing
and shall be deemed given, (i) three business days following
sending by registered or certified mail, postage prepaid,
(ii) when sent if sent by facsimile, provided that the fax is
promptly confirmed by telephone confirmation thereof, (iii) when
delivered, if delivered personally to the intended recipient, and
70
(iv) one business day later, if sent by overnight delivery via a
national courier service, and in each case, addressed to a party
at the following address for such party:
If to Keystone or Merger Sub:
Keystone Automotive Industries, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
with copies to:
Manatt, Xxxxxx & Xxxxxxxx, LLP
00000 X. Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxx, Esq.
Fax: (000) 000-0000
If to the Company:
71
Republic Automotive Parts, Inc.
000 Xxxxxx Xxxx Xxxxxx
Xxxxx 000
P.O. Box 2088
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx
Fax: (000) 000-0000
with copies to:
00
Xxxxxxxxx, Xxxxxxx, Xxxx & Xxxxx, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. XxXxxxx, Esq.
Fax: (000) 000-0000
and
Xxxxxx & Xxxxxx, P.C.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
or to such other Persons or addresses as may be designated in
writing by the party to receive such notice as provided above.
9.7 Entire Agreement. This Agreement (including any
exhibits hereto), the Stock Option Agreement, the Confidentiality
Agreement, the Company Disclosure Letter and the Keystone
Disclosure Letter constitute the entire agreement, and supersede
all other prior agreements, understandings, representations and
warranties both written and oral, among the parties with respect
73
to the subject matter hereof. EACH PARTY HERETO AGREES THAT,
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
AGREEMENT AND THE STOCK OPTION AGREEMENT, NEITHER KEYSTONE AND
MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR
WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS
OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE
OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION
WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8 No Third Party Beneficiaries. Except as provided
in Sections 6.7(b) (Affiliates), 6.12 (Indemnification;
Directors, and Officers, Insurance) and 6.16 (Tax Status), this
Agreement is not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
9.9 Obligations of Keystone and of the Company.
Whenever this Agreement requires a Subsidiary of Keystone to take
any action, such requirement shall be deemed to include an
undertaking on the part of Keystone to cause such Subsidiary to
take such action. whenever this Agreement requires a Subsidiary
of the Company to take any action, such requirement shall be
74
deemed to include an undertaking on the part of the Company to
cause such Subsidiary to take such action and, after the
Effective Time, on the part of the Surviving Corporation to cause
such Subsidiary to take such action.
9.10 Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability
of any provision shall not affect the validity or enforceability
or the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to
carry out, so far as may be valid and enforceable, the intent and
purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision
to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
9.11 Interpretation. The table of contents and
headings herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to
limit or otherwise affect any of the provisions hereof. Where a
reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement
unless otherwise indicated. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation."
75
9.12 Assignment. This Agreement shall not be
assignable by operation of law or otherwise.
76
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officers of the
parties hereto as of the date first written above.
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
By:/s/Xxxxxxx X. Xxxxxxx
____________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
KAI MERGER, INC.
By:/s/Xxxxxxx X. Xxxxxxx
____________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
REPUBLIC AUTOMOTIVE PARTS, INC.
By:/s/Xxxxxx X. Xxxx
____________________________________
Name: Xxxxxx X. Xxxx
Title: Executive Vice President
and Chief Financial Officer
77
TABLE OF CONTENTS
Page
RECITALS 1
ARTICLE I The Merger; Closing; Effective Time 2
1.1 The Merger. 2
1.2 Closing. 3
1.3 Effective Time. 3
ARTICLE II Certificate of Incorporation and By-Laws of the
Surviving Corporation 4
2.1 The Certificate of Incorporation. 4
2.2 The By-Laws 4
ARTICLE III Officers, Directors and Management 4
3.1 Directors of Surviving Corporation. 4
3.2 Officers of Surviving Corporation. 5
ARTICLE IV Effect of the Merger on Capital Stock;
Exchange of Certificates 5
4.1 Effect on Capital Stock. 5
(a) Merger Consideration 5
(b) Cancellation of Shares 6
(c) Merger Sub 6
4.2 Exchange of Certificates for Shares. 6
(a) Exchange Procedures 7
(b) Voting 8
(c) Transfers 9
(d) Fractional Shares 9
(e) Termination of Exchange Period; Unclaimed Stock 9
(f) Lost, Stolen or Destroyed Certificates 10
(g) Affiliates 10
4.3 Adjustments to Prevent Dilution. 10
i
ARTICLE V Representations and Warranties 11
5.1 Representations and Warranties of the Company,
Keystone and Merger Sub 11
(a) Organization, Good Standing and Qualification 12
(b) Governmental Filings; No Violations 13
(c) Reports; Financial Statements 14
(d) Absence of Certain Changes 15
(e) Litigation and Liabilities 16
(f) Accounting and Tax Matters 17
(g) Taxes 17
(h) Compliance with Laws 19
5.2 Representations and Warranties of the Company 20
(a) Capital Structure 20
(b) Corporate Authority; Approval and Fairness 22
(c) Employee Benefits 23
(d) Takeover Statutes 25
(e) Environmental Matters 26
(f) Labor Matters 27
(g) Brokers and Finders 28
(h) Intellectual Property 28
(i) Rights Agreement 29
5.3 Representations and Warranties of Keystone
and Merger Sub 29
(a) Capital Structure 29
(b) Corporate Authority; Approval and Fairness 31
(c) Employee Benefits 32
(d) Environmental Matters 34
(e) Labor Matters 35
(f) Intellectual Property 35
(g) Brokers and Finders 36
ARTICLE VI Covenants 36
6.1 Interim Operations 36
6.2. Acquisition Proposals. 40
6.3 Information Supplied. 42
6.4 Shareholders Meeting. 43
6.5 Filings; Other Actions; Notification 44
6.6 Access; Consultation. 46
6.7 Affiliates. 47
ii
6.8 National Market Listing and De-listing. 49
6.9 Publicity 49
6.10 Benefits. 50
(a) Stock Options 50
(b) Employee Benefits 51
6.11 Expenses 51
6.12 Indemnification; Directors, and Officers, Insurance 51
6.13 Takeover Statute 54
6.14 Confidentiality 54
6.15 Transfer Taxes 55
6.16 Tax Status 55
ARTICLE VII Conditions 55
7.1 Conditions to Each Party's Obligation to
Effect the Merger 56
(a) Shareholder Approval 56
(b) National Market Listing 56
(c) Governmental Consents 56
(d) Laws and orders 56
(e) S-4 57
7.2 Conditions to Obligations of Keystone
and Merger Sub 57
(a) Representations and Warranties 57
(b) Performance of Obligations Company 58
(c) Dissenting Keystone Shares 58
(d) Consent of Lender 58
(e) Fairness Opinion 58
(f) Legal Opinion 58
7.3 Conditions to Obligation of the Company 59
(a) Representations and Warranties 59
(b) Performance of Obligations of Keystone
and Merger Sub 59
(c) Dissenting Keystone Shares 60
(d) Fairness Opinion 60
(e) Legal Opinion 60
ARTICLE VIII Termination 61
8.1 Termination by Mutual Consent 61
8.2 Termination by Either Keystone or the Company 61
8.3 Termination by the Company 62
iii
8.4 Termination by Keystone 63
8.5 Effect of Termination and Abandonment 64
ARTICLE IX Miscellaneous and General 66
9.1 Survival 66
9.2 Modification or Amendment 67
9.3 Waiver of Conditions 67
9.4 Counterparts 67
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL 68
9.6 Notices 69
9.7 Entire Agreement 72
9.8 No Third Party Beneficiaries 73
9.9 Obligations of Keystone and of the Company 73
9.10 Severability 74
9.11 Interpretation 74
9.12 Assignment 75
EXHIBITS
A Stock Option Agreement A-1
B Form of Company Affiliate's Letter B-1
C Form of Keystone Affiliate's Letter C-1
iv
INDEX OF DEFINED TERMS
Term Section
Acquisition Proposal.................................6.2(a),8.5(b)(i)
Affiliate............................................ 6.7
Agreement............................................preamble
Audit Date........................................... 5.1(c)
Bankruptcy and Equity Exception...................... 5.2(b)
By-Laws.............................................. 2.2
Certificate.......................................... 4.1(a)
Certificate of Merger................................ 1.3
Charter.............................................. 2.1
Closing.............................................. 1.2
Closing Date......................................... 1.2
Code.................................................recitals
Company..............................................preamble
Company Affiliate's Letter........................... 6.7(a)
Company Disclosure Letter............................ 5.1
Company Option.......................................6.10(a)(i)
Company Required Consents............................5.1(b)(i)
Company Requisite Vote............................... 5.2(b)
Company Share........................................ 4.1(a)
Company Shares....................................... 4.1(a)
Compensation and Benefit Plans.......................5.2(c)(i)
Confidentiality Agreement............................ 6.6(a)
Contracts............................................5.1(b)(ii)(B)
Costs................................................ 6.12(a)
Current Premium...................................... 6.12(c)
D&O Insurance........................................ 6.12(c)
DGCL................................................. 1.1
Disclosure Letter.................................... 5.1
Effective Time....................................... 1.3
Environmental Law.................................... 5.2(e)
ERISA................................................5.2(c)(ii)
ERISA Affiliate......................................5.2(c)(iii)
ERISA Affiliate Plan.................................5.2(c)(iii)
Escrow Account....................................... 4.4
Escrow Agent......................................... 4.4
Escrow Agreement..................................... 4.4
Exchange Act.........................................5.1(b)(i)(B)
Exchange Agent....................................... 4.2(a)
Exchange Ratio....................................... 4.1(a)
v
Excluded Company Shares.............................. 4.1(a)
GAAP................................................. 5.1(c)
Governmental Entity..................................5.1(b)(i)(C)
Hazardous Substance.................................. 5.2(e)
HSR Act..............................................5.1(b)(i)(B)
Indemnified Parties.................................. 6.12(a)
Initial 15 Day Period................................ 8.4
IRS..................................................5.2(c)(ii)
Keystone.............................................preamble
Keystone Affiliate's Letter.......................... 6.7(a)
Keystone Common Stock................................ 4.1(a)
Keystone Disclosure Letter........................... 5.1
Keystone Preferred Shares............................5.3(a)(i)
Keystone Required Consents...........................5.1(b)(i)
Keystone Requisite Vote.............................. 5.3(b)
Laws................................................. 5.1(h)
Litigation...........................................5.1(e)(i)
Material Adverse Effect..............................5.1(a)(ii)
Merger...............................................recitals
Merger Consideration................................. 4.1(a)
Merger Sub...........................................preamble
Named Executive Officers............................. 5.1(e)
Order................................................ 7.1(d)
Pension Plan.........................................5.2(c)(ii)
Person............................................... 4.2(a)
Permits.............................................. 5.1(h)
Prospectus/Proxy Statement........................... 6.3(i)
Registered Keystone Shares...........................4.2(a)(ii)(A)
Reports.............................................. 5.1(c)
Representatives...................................... 6.6(a)
S-4 Registration Statement........................... 6.3(i)
SEC.................................................. 5.1(c)
Securities Act.......................................5.1(b)(i)(B)
Shareholders Meetings................................ 6.4
Significant Subsidiaries.............................5.1(b)(ii)(A)
Stock Option Agreement...............................recitals
Stock Plans..........................................5.2(a)(ii)
Subsidiary...........................................5.1(a)(i)
Substitute Option....................................6.10(a)(i)
Superior Proposal.................................... 6.2(a)
Surviving Corporation................................ 1.1
Takeover Statute..................................... 5.2(d)
Tax..................................................5.1(g)(x)
vi
Taxes................................................5.1(g)(x)
Taxable..............................................5.1(g)(x)
Tax Return...........................................5.1(g)(y)
Termination Date..................................... 8.2(i)
Termination Fee...................................... 8.5(b)
The Other Party......................................5.1(a)(iii)
Transfer Taxes....................................... 6.15
vii
