EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
AMONG
U.S. INDUSTRIES, INC.,
USI, INC.
BLUE MERGER CORP.,
ZORO MERGER CORP.
AND
XXXX INDUSTRIES, INC.
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TABLE OF CONTENTS
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ARTICLE 1
THE MERGERS............................... 2
SECTION 1.1 - The Mergers............................................................... 2
SECTION 1.2 - Effective Time............................................................ 2
SECTION 1.3 - Effect of the Mergers..................................................... 2
SECTION 1.4 - Subsequent Actions........................................................ 3
SECTION 1.5 - Certificate or Articles of Incorporation, Bylaws and Directors and
Officers of Surviving Corporations........................................ 3
SECTION 1.6 - Certificate of Incorporation and Bylaws of Superholdco.................... 4
SECTION 1.7 - Corporate Identity........................................................ 4
SECTION 1.8 - Dividends................................................................. 4
SECTION 1.9 - Closing of the Mergers.................................................... 4
ARTICLE 2
EFFECT ON STOCK OF SUPERHOLDCO, THE SURVIVING
CORPORATIONS AND THE MERGED CORPORATIONS...................................................... 5
SECTION 2.1 - Conversion of Shares...................................................... 5
SECTION 2.2 - Conversion of USI and Xxxx Stock into Merger Consideration................ 5
SECTION 2.3 - Cancellation of Treasury Shares and of Outstanding Superholdco
Common Stock.............................................................. 6
SECTION 2.4 - Conversion of Common Stock of the Merger Subsidiaries into
Common Stock of the Surviving Corporations................................ 6
SECTION 2.5 - Exchange of Shares Other Than Treasury Shares............................. 7
SECTION 2.6 - Transfer Books............................................................ 8
SECTION 2.7 - No Fractional Share Certificates.......................................... 8
SECTION 2.8 - Stock Options............................................................. 10
SECTION 2.9 - Restricted Stock.......................................................... 11
SECTION 2.10 - Certain Adjustments...................................................... 11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF XXXX............................. 12
SECTION 3.1 - Organization and Qualification............................................ 12
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SECTION 3.2 - Capitalization of Xxxx and its Subsidiaries............................... 13
SECTION 3.3 - Authority Relative to this Agreement...................................... 14
SECTION 3.4 - SEC Reports; Financial Statements......................................... 15
SECTION 3.5 - Information Supplied...................................................... 16
SECTION 3.6 - Consents and Approvals; No Violations..................................... 17
SECTION 3.7 - No Default................................................................ 17
SECTION 3.8 - No Undisclosed Liabilities; Absence of Changes............................ 18
SECTION 3.9 - Litigation................................................................ 18
SECTION 3.10 - Compliance with Applicable Law........................................... 18
SECTION 3.11 - Employee Plans........................................................... 19
SECTION 3.12 - Environmental Matters.................................................... 21
SECTION 3.13 - Tax Matters.............................................................. 24
SECTION 3.14 - Intangible Property...................................................... 27
SECTION 3.15 - Opinion of Financial Advisor............................................. 27
SECTION 3.16 - Brokers.................................................................. 27
SECTION 3.17 - Accounting Matters....................................................... 28
SECTION 3.18 - Material Contracts....................................................... 28
SECTION 3.19 - Labor Matters............................................................ 29
SECTION 3.20 - Insurance................................................................ 29
SECTION 3.21 - Products................................................................. 29
SECTION 3.22 - Amendment to Rights Agreement............................................ 29
SECTION 3.23 - U.S. Brass Bankruptcy Proceeding......................................... 30
SECTION 3.24 - Full Disclosure.......................................................... 30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF USI, SUPERHOLDCO AND THE MERGER SUBSIDIARIES........................... 31
SECTION 4.1 - Organization and Qualification............................................ 31
SECTION 4.2 - Capitalization of USI and its Subsidiaries................................ 31
SECTION 4.3 - Authority Relative to this Agreement...................................... 33
SECTION 4.4 - SEC Reports; Financial Statements......................................... 33
SECTION 4.5 - Information Supplied...................................................... 34
SECTION 4.6 - Consents and Approvals; No Violations..................................... 35
SECTION 4.7 - No Default................................................................ 36
SECTION 4.8 - No Undisclosed Liabilities; Absence of Changes............................ 36
SECTION 4.9 - Litigation................................................................ 36
SECTION 4.10 - Compliance with Applicable Law........................................... 36
SECTION 4.11 - Employee Plans........................................................... 37
SECTION 4.12 - Environmental Matters.................................................... 38
SECTION 4.13 - Tax Matters.............................................................. 40
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SECTION 4.14 - No Prior Activities...................................................... 42
SECTION 4.15 - Brokers.................................................................. 42
SECTION 4.16 - Accounting Matters....................................................... 42
SECTION 4.17 - Absence of Certain Status................................................ 43
SECTION 4.18 - Full Disclosure.......................................................... 43
ARTICLE 5
COVENANTS.............................................. 43
SECTION 5.1 - Conduct of Business of Xxxx and USI....................................... 43
SECTION 5.2 - Preparation of S-4 and the Joint Proxy Statement.......................... 47
SECTION 5.3 - No Solicitation........................................................... 47
SECTION 5.4 - Letters of Accountants.................................................... 49
SECTION 5.5 - Meetings.................................................................. 49
SECTION 5.6 - Access to Information..................................................... 50
SECTION 5.7 - Additional Agreements; Reasonable Best Efforts............................ 50
SECTION 5.8 - Antitrust Reviews......................................................... 51
SECTION 5.9 - Public Announcements...................................................... 51
SECTION 5.10 - Indemnification; Directors' and Officers' Insurance...................... 52
SECTION 5.11 - Notification of Certain Matters.......................................... 53
SECTION 5.12 - Pooling.................................................................. 54
SECTION 5.13 - Tax-Free Reorganization Treatment........................................ 54
SECTION 5.14 - Company Affiliates....................................................... 55
SECTION 5.15 - SEC Filings.............................................................. 55
SECTION 5.16 - Employment and Employee Benefit Matters.................................. 55
SECTION 5.17 - Location of Xxxx Headquarters............................................ 58
SECTION 5.18 - Redemption of Xxxx Preferred Stock....................................... 58
SECTION 5.19 - Refinancing.............................................................. 58
SECTION 5.20 - Guarantee of Performance................................................. 59
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGERS.......................... 59
SECTION 6.1 - Conditions to Each Party's Obligations to Effect the Mergers.............. 59
SECTION 6.2 - Additional Conditions to the Obligation of Xxxx........................... 60
SECTION 6.3 - Additional Conditions to the Obligations of USI and the Merger
Subsidiaries....................................................... 60
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER..................................... 61
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SECTION 7.1 - Termination............................................................... 61
SECTION 7.2 - Effect of Termination..................................................... 63
SECTION 7.3 - Fees and Expenses......................................................... 63
SECTION 7.4 - Amendment................................................................. 65
SECTION 7.5 - Extension; Waiver......................................................... 65
ARTICLE 8
MISCELLANEOUS.............................. 65
SECTION 8.1 - Nonsurvival of Representations and Warranties............................. 65
SECTION 8.2 - Entire Agreement; Assignment.............................................. 65
SECTION 8.3 - Notices................................................................... 66
SECTION 8.4 - Governing Law............................................................. 67
SECTION 8.5 - Descriptive Headings...................................................... 67
SECTION 8.6 - Parties in Interest....................................................... 67
SECTION 8.7 - Severability.............................................................. 67
SECTION 8.8 - Specific Performance...................................................... 67
SECTION 8.9 - Certain Definitions....................................................... 67
SECTION 8.10 - Brokers.................................................................. 68
SECTION 8.11 - Counterparts............................................................. 68
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of February 16,
1998 (the "Agreement"), is among U.S. INDUSTRIES, INC., a Delaware corporation
("USI"), USI, INC., a Delaware corporation and a wholly-owned subsidiary of USI
("Superholdco"), BLUE MERGER CORP., a Delaware corporation and a wholly-owned
subsidiary of Superholdco ("B-Sub"), ZORO MERGER CORP., a Pennsylvania
corporation and a wholly-owned subsidiary of Superholdco ("Z-Sub"), and XXXX
INDUSTRIES, INC., a Pennsylvania corporation ("Xxxx").
WHEREAS, the Board of Directors of Xxxx has determined that
(i) it is in the best interests of Xxxx that Xxxx become a subsidiary of
Superholdco pursuant to the Xxxx Merger (as defined in Section 1.1 hereof) upon
the terms and conditions set forth herein and (ii) the Xxxx Merger and the other
transactions contemplated hereby are consistent with, and in furtherance of, its
business strategies and goals;
WHEREAS, the Board of Directors of USI has determined that (i)
it is fair to and in the best interests of its stockholders that USI become a
subsidiary of Superholdco pursuant to the USI Merger (as defined in Section 1.1
hereof) upon the terms and conditions set forth herein and (ii) the USI Merger
and the other transactions contemplated hereby are consistent with, and in
furtherance of, its business strategies and goals;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to USI's willingness to enter into this Agreement,
Xxxx and USI have entered into a Stock Option Agreement (the "Stock Option
Agreement") attached as Annex A hereto;
WHEREAS, for United States federal income tax purposes, it is
intended that the formation of Superholdco and the Mergers (as defined in
Section 1.1 hereof) shall constitute one or more tax-free transactions under the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the
Mergers shall be accounted for in accordance with the Pooling of Interests
Method of Accounting (as defined in Section 3.17 hereof);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGERS
SECTION 1.1 - The Mergers. Subject to and upon the terms and
conditions of this Agreement, at the Effective Time (as defined in Section 1.2
hereof) (a) B-Sub shall be merged with and into USI in accordance with the
Delaware General Corporation Law ("Delaware Law"), the separate corporate
existence of B-Sub shall cease, and USI shall continue as the surviving
corporation (the "USI Merger") and (b) Z-Sub shall be merged with and into Xxxx
in accordance with the Pennsylvania Business Corporation Law ("Pennsylvania
Law"), the separate corporate existence of Z-Sub shall cease, and Xxxx shall
continue as the surviving corporation (the "Xxxx Merger"). The USI Merger and
the Xxxx Merger are herein collectively referred to as the "Mergers" and each
individually as a "Merger". USI and Xxxx, as the surviving corporations after
the Mergers, are herein sometimes collectively referred to as the "Surviving
Corporations" and each individually as a "Surviving Corporation". B-Sub and
Z-Sub are herein sometimes collectively referred to as the "Merger Subsidiaries"
and each individually as a "Merger Subsidiary". Superholdco, USI, Zurn, B-Sub
and Z-Sub are herein referred to collectively as the "Parties" and each
individually as a "Party."
SECTION 1.2 - Effective Time. As promptly as practicable after
the satisfaction or waiver of the conditions set forth in Article 6 hereof and
the consummation of the Closing referred to in Section 1.9 hereof, the Parties
shall cause the Mergers to be consummated concurrently by (a) filing a
Certificate of Merger with the Secretary of State of the State of Delaware with
respect to the USI Merger, in such form as required by, and executed in
accordance with, the relevant provisions of Delaware Law and (b) filing Articles
of Merger with the Department of State of the Commonwealth of Pennsylvania with
respect to the Xxxx Merger, in such form as required by, and executed in
accordance with, the relevant provisions of Pennsylvania Law (the time of the
later of such filings to occur being the "Effective Time").
SECTION 1.3 - Effect of the Mergers. At the Effective Time,
the effect of the USI Merger shall be as provided in the applicable provisions
of Delaware Law and the effect of the Xxxx Merger shall be as provided in the
applicable provisions of Pennsylvania
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Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time (a) all the property, rights, privileges, powers and
franchises of USI and B-Sub shall continue with, or vest in, as the case may be,
USI as the Surviving Corporation of the USI Merger, and all debts, liabilities
and duties of USI and B-Sub shall continue to be, or become, as the case may be,
the debts, liabilities and duties of USI as the Surviving Corporation of the USI
Merger and (b) all the property, rights, privileges, powers and franchises of
Xxxx and Z-Sub shall continue with, or vest in, as the case may be, Xxxx as the
Surviving Corporation of the Xxxx Merger, and all debts, liabilities and duties
of Xxxx and Z-Sub shall continue to be, or become, as the case may be, the
debts, liabilities and duties of Xxxx as the Surviving Corporation of the Xxxx
Merger. At the Effective Time, each of the Surviving Corporations shall become a
direct wholly-owned subsidiary of Superholdco.
SECTION 1.4 - Subsequent Actions. If, at any time after the
Effective Time, either of the Surviving Corporations shall consider or be
advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to continue in, vest, perfect or
confirm of record or otherwise in such Surviving Corporation its right, title or
interest in, to or under any of the rights, properties, privileges, franchises
or assets of either of its constituent corporations or otherwise to carry out
this Agreement, the officers and directors of such Surviving Corporation shall
be directed and authorized to execute and deliver, in the name and on behalf of
either of such constituent corporations, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties, privileges, franchises or
assets in such Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.5 - Certificate or Articles of Incorporation, Bylaws
and Directors and Officers of Surviving Corporations. Unless otherwise agreed by
USI and Xxxx before the Effective Time, at the Effective Time:
(a) the Certificate of Incorporation of USI shall be the
Certificate of Incorporation of USI as a Surviving Corporation (except that the
corporate name of USI shall be changed), and the Articles of Incorporation of
Xxxx shall be the Articles of Incorporation of Xxxx as a Surviving Corporation,
in each case as in effect immediately prior to the Effective Time and until
thereafter amended as provided by law and such Certificate of Incorporation or
Articles of Incorporation.
(b) the respective Bylaws of each of USI and Xxxx shall be the
Bylaws of USI and Xxxx, respectively, as a Surviving Corporation in each case as
in effect immediately
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prior to the Effective Time, in each case until thereafter amended as provided
by law and the Certificate or Articles of Incorporation and such Bylaws; and
(c) the directors and officers of each of USI and Z-Sub
immediately prior to the Effective Time shall continue to serve in their
respective offices of their respective Surviving Corporation from and after the
Effective Time, in each case until their successors are elected or appointed and
qualified or until their resignation or removal. If, at the Effective Time, a
vacancy shall exist on the Board of Directors or in any office of either of the
Surviving Corporations, such vacancy may thereafter be filled in the manner
provided by law and the Bylaws of such Surviving Corporation.
SECTION 1.6 - Certificate of Incorporation and Bylaws of
Superholdco. Immediately prior to the Effective Time, USI shall cause the
Certificate of Incorporation and Bylaws of Superholdco to be amended and
restated to read as set forth in Annexes B and C hereto, respectively.
SECTION 1.7 - Corporate Identity. USI and Xxxx agree that
immediately after the Effective Time, the corporate name of Superholdco shall be
changed to "U.S. INDUSTRIES, INC.".
SECTION 1.8 - Dividends. Each of USI and Xxxx shall coordinate
with the other the declaration of, and the setting of record dates and payment
dates for, dividends on shares of its common stock so that holders thereof (i)
do not receive dividends on both such shares and shares of Superholdco common
stock received in connection with the applicable Merger in respect of any
particular calendar quarter or (ii) fail to receive a dividend on either shares
of common stock or Superholdco common stock received in connection with the
applicable Merger in respect of any particular calendar quarter. Each Party
hereby acknowledges that on January 19, 1998, Xxxx declared a quarterly dividend
of $0.10 per share of Xxxx Common Stock payable to holders of record on March
20, 1998.
SECTION 1.9 - Closing of the Mergers. The closing of the
Mergers (the "Closing") shall take place at a time and on a date to be specified
by the Parties, which shall be the first business day on which all of the
conditions set forth in Article 6 shall have been satisfied and waived (the
"Closing Date"), at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, unless another time, date or place is agreed to in
writing by the Parties.
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ARTICLE 2
EFFECT ON STOCK OF SUPERHOLDCO, THE SURVIVING
CORPORATIONS AND THE MERGED CORPORATIONS
SECTION 2.1 - Conversion of Shares. The manner and basis of
converting the shares of common stock of the Surviving Corporations and of the
Merger Subsidiaries at the Effective Time shall be as hereinafter set forth in
this Article 2.
SECTION 2.2 - Conversion of USI and Xxxx Stock into Merger
Consideration. (a) Each share of common stock, par value $0.01 per share, of USI
("USI Common Stock") issued and outstanding immediately before the Effective
Time (excluding those held in the treasury of USI) and all rights in respect
thereof, shall at the Effective Time, by virtue of the USI Merger and without
any action on the part of any holder thereof, forthwith cease to exist and be
converted into the right to receive one share of common stock, par value $0.01
per share ("Superholdco Common Stock"), of Superholdco (the "USI Merger
Consideration") upon surrender of the certificate theretofore representing such
share in accordance with this Agreement. The quotient obtained by dividing the
number of shares of Superholdco Common Stock referred to in the preceding
sentence by one is herein referred to as the "USI Exchange Ratio".
(b) Each share of common stock, par value $.50 per share, of
Xxxx ("Xxxx Common Stock") issued and outstanding immediately before the
Effective Time (excluding those held in the treasury of Xxxx) and all rights in
respect thereof, shall at the Effective Time, by virtue of the Xxxx Merger and
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into the right to receive 1.6 shares of Superholdco Common
Stock (the "Xxxx Merger Consideration") upon surrender of the certificate
theretofore representing such share in accordance with this Agreement. The
quotient obtained by dividing the number of shares of Superholdco Common Stock
referred to in the preceding sentence by one is herein referred to as the "Xxxx
Exchange Ratio". The USI Exchange Ratio and the Xxxx Exchange Ratio are herein
referred to collectively as the "Exchange Ratios".
(c) Commencing immediately after the Effective Time, each
certificate which, immediately prior to the Effective Time, represented issued
and outstanding shares of USI Common Stock ("USI Shares") or Xxxx Common Stock
(the "Xxxx Shares" and, together with the USI Shares, the "Shares"), shall
evidence the right to receive the USI Merger Consideration or the Xxxx Merger
Consideration, as the case may be, on the basis
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hereinbefore set forth, but subject to the limitations set forth in Sections
2.3, 2.5 and 2.7 hereof.
SECTION 2.3 - Cancellation of Treasury Shares and of
Outstanding Superholdco Common Stock. (a) At the Effective Time, each share of
USI Common Stock held in the treasury of USI immediately prior to the Effective
Time, and each share of Xxxx Common Stock held in the treasury of Xxxx
immediately prior to the Effective Time, shall be canceled and retired and no
shares of stock or other securities of Superholdco or either of the Surviving
Corporations shall be issuable, and no payment or other consideration shall be
made, with respect thereto.
(b) At the Effective Time, the shares of Superholdco Common
Stock held by USI shall be canceled and retired and all consideration paid by
USI in respect thereof shall be returned. No shares of stock or other securities
of Superholdco or any other corporation shall be issuable, and no other payment
or consideration shall be made, with respect to such shares of Superholdco
Common Stock.
SECTION 2.4 - Conversion of Common Stock of the Merger
Subsidiaries into Common Stock of the Surviving Corporations. (a) Each share of
common stock, par value $0.01 per share, of B-Sub issued and outstanding
immediately prior to the Effective Time, and all rights in respect thereof,
shall at the Effective Time, by virtue of the USI Merger and without any action
on the part of Superholdco, forthwith cease to exist and be converted into and
become 1,000 validly issued, fully paid and nonassessable shares of common stock
of USI, par value $0.01 per share (the "New USI Common Stock"). At any time
after the Effective Time, upon surrender by Superholdco of the certificate
formerly representing the shares of the common stock of B-Sub, USI, as a
Surviving Corporation, shall deliver to Superholdco an appropriate certificate
or certificates representing the shares of New USI Common Stock into which the
shares of common stock of B-Sub owned by Superholdco were converted at the
Effective Time.
(b) Each share of common stock, par value $0.01 per share, of
Z-Sub issued and outstanding immediately prior to the Effective Time, and all
rights in respect thereof, shall at the Effective Time, without any action on
the part of Superholdco, forthwith cease to exist and be converted into and
become 1,000 validly issued, fully paid and nonassessable shares of common stock
of Xxxx, par value $0.50 per share (the "New Xxxx Common Stock"). At any time
after the Effective Time and upon surrender by Superholdco of the certificate
formerly representing the shares of the common stock of Z-Sub, Xxxx as a
Surviving Corporation, shall deliver to Superholdco an appropriate certificate
or certificates
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representing the shares of New Xxxx Common Stock into which the shares of common
stock of Z-Sub owned by Superholdco were converted at the Effective Time.
SECTION 2.5 - Exchange of Shares Other Than Treasury Shares.
Subject to the terms and conditions hereof, at or prior to the Effective Time,
Superholdco shall appoint an exchange agent to effect the exchange of Shares for
Superholdco Common Stock in accordance with the provisions of this Article 2
(the "Exchange Agent"). As promptly as practicable after the Effective Time,
Superholdco shall deposit, or cause to be deposited, certificates representing
the shares of Superholdco Common Stock to be issued upon the surrender for
exchange of certificates theretofore representing Shares in accordance with the
provisions of Section 2.2 hereof (such certificates, together with any dividends
or distributions with respect thereto, being herein referred to collectively as
the "Exchange Fund") and the Excess Shares (as defined in Section 2.7(b)
hereof). Commencing immediately after the Effective Time and until the
appointment of the Exchange Agent shall be terminated, each holder of a
certificate or certificates theretofore representing Shares may surrender the
same to the Exchange Agent, and, after the appointment of the Exchange Agent
shall be terminated, any such holder may surrender any such certificate to
Superholdco. Such holder shall be entitled upon such surrender to receive in
exchange therefor a certificate or certificates representing the number of full
shares of Superholdco Common Stock into which the Shares theretofore represented
by the certificate or certificates so surrendered shall have been converted in
accordance with the provisions of Section 2.2 hereof, together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.7
hereof, and all such shares of Superholdco Common Stock shall be deemed to have
been issued at the Effective Time. From and after the Effective Time, until so
surrendered and exchanged each outstanding certificate which theretofore
represented issued and outstanding Shares (other than Shares to be canceled in
accordance with Section 2.3) shall be deemed for all corporate purposes of
Superholdco, other than the payment of dividends and other distributions, if
any, to represent the right to receive the USI Merger Consideration or the Xxxx
Merger Consideration, as the case may be. Unless and until any such certificate
theretofore representing Shares is so surrendered, no dividend or other
distribution, if any, payable to the holders of record of Superholdco Common
Stock as of any date subsequent to the Effective Time shall be paid to the
holder of such certificate in respect thereof. Upon the surrender of any such
certificate theretofore representing Shares, however, the record holder of the
certificate or certificates representing shares of Superholdco Common Stock
issued in exchange therefor shall receive from the Exchange Agent or from
Superholdco, as the case may be, payment of the amount of dividends and other
distributions, if any, which as of any date subsequent to the Effective Time and
until such issuance shall have become payable with respect to such number of
shares of Superholdco Common Stock ("Pre-Issuance Dividends"). No interest shall
be payable with respect to the payment of Pre-Issuance Dividends upon the
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surrender of certificates theretofore representing Shares. After the appointment
of the Exchange Agent shall have been terminated, such holders of Superholdco
Common Stock which have not received payment of Pre-Issuance Dividends shall
look only to Superholdco for payment thereof. Notwithstanding the foregoing
provisions of this Section 2.5, neither the Exchange Agent nor any Party shall
be liable to a holder of Shares for any Superholdco Common Stock or dividends or
distributions thereon delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law or to a transferee pursuant to
Section 2.6 hereof.
SECTION 2.6 - Transfer Books. The stock transfer books of USI
with respect to the USI Shares and the stock transfer books of Xxxx with respect
to the Xxxx Shares shall each be closed at the Effective Time and no transfer of
any Shares will thereafter be recorded on any of such stock transfer books. In
the event of a transfer of ownership of Shares that is not registered in the
stock transfer records of USI or Xxxx, as the case may be, at the Effective
Time, a certificate or certificates representing the number of full shares of
Superholdco Common Stock that a holder of such number of Shares would be
entitled to receive in accordance with this Article 2 shall be issued to the
transferee together with a cash payment in lieu of fractional shares, if any, in
accordance with Section 2.7 hereof, and a cash payment in the amount of
Pre-Surrender Dividends, if any, in accordance with Section 2.5 hereof, if the
certificate or certificates representing such Shares is or are surrendered as
provided in Section 2.5 hereof, accompanied by all documents required to
evidence and effect such transfer and by evidence of payment of any applicable
stock transfer tax.
SECTION 2.7 - No Fractional Share Certificates. (a) No scrip
or fractional share certificate for Superholdco Common Stock will be issued upon
the surrender for exchange of certificates evidencing Shares, and an outstanding
fractional share interest will not entitle the owner thereof to vote, to receive
dividends or to any rights of a stockholder of Superholdco or of either of the
Surviving Corporations with respect to such fractional share interest. The
Parties acknowledge that payment of the cash consideration described below in
lieu of the issuance of fractional shares was not separately bargained for
consideration but merely represents a mechanical rounding off for purposes of
simplifying the corporate and accounting problems which would otherwise be
caused by the issuance of fractional shares.
(b) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (i) the number of full shares
of Superholdco Common Stock that would be issued and delivered to the Exchange
Agent pursuant to Section 2.5 hereof but for the operation of Section 2.7(a)
over (ii) the aggregate number of full shares of Superholdco Common Stock to be
distributed to holders of Shares pursuant to Section 2.5 hereof giving effect to
the operation of Section 2.7(a) (such excess being herein called the
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"Excess Shares"). Following the Effective Time, the Exchange Agent, as agent for
the holders of Shares, shall sell the Excess Shares at then prevailing prices on
the NYSE, all in the manner provided in subsection (c) of this Section 2.7.
(c) The sale of the Excess Shares by the Exchange Agent shall
be executed on the NYSE through one or more member firms of the NYSE and shall
be executed in round lots to the extent practicable. The Exchange Agent shall
use all reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the holders of Shares, the Exchange Agent will hold
such proceeds in trust for such holders (the "Common Shares Trust"). Superholdco
shall pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent, incurred
in connection with such sale of the Excess Shares. The Exchange Agent shall
determine the portion of the Common Shares Trust to which each holder of shares
shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds comprising the Common Shares Trust by a fraction, the numerator of
which is the amount of fractional share interests to which such holder is
entitled (after taking into account all Shares held at the Effective Time by
such holder) and the denominator of which is the aggregate amount of fractional
share interests to which all holders of Shares are entitled.
(d) Notwithstanding the provisions of subsections (b) and (c)
of this Section 2.7, USI and Xxxx may agree at their option, exercised prior to
the Effective Time, in lieu of the issuance and sale of Excess Shares and the
making of the payments contemplated in such subsections, to cause Superholdco to
pay to the Exchange Agent an amount sufficient for the Exchange Agent to pay
each holder of Shares an amount in cash equal to the product obtained by
multiplying (i) the fractional share interest to which such holder would
otherwise be entitled (after taking into account all Shares held at the
Effective Time by such holder) by (ii) the closing price for a share of
Superholdco Common Stock on the NYSE Composite Transaction Tape on the first
business day immediately following the Effective Time, and, in such case, all
reference herein to the cash proceeds of the sale of the Excess Shares and
similar references shall be deemed to mean and refer to the payments calculated
as set forth in this subsection (d). In such event, Excess Shares shall not be
issued or otherwise transferred to the Exchange Agent pursuant to Section 2.5
hereof.
(e) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Shares with respect to any
fractional share interests, the
9
Exchange Agent shall make available such amounts, net of any required
withholding, to such holders, subject to and in accordance with the terms of
Section 2.5 hereof.
(f) Any portion of the Exchange Fund and the Common Shares
Trust which remains undistributed for six months after the Effective Time shall
be delivered to Superholdco, upon demand, and any holders of Shares who have not
theretofore complied with the provisions of this Article 2 shall thereafter look
only to Superholdco for satisfaction of their claims for Superholdco Common
Stock or any cash in lieu of fractional shares of Superholdco Common Stock and
any Pre-Surrender Dividends.
SECTION 2.8 - Stock Options. (a) At the Effective Time, each
option granted by USI to purchase shares of USI Common Stock, or by Xxxx to
purchase shares of Xxxx Common Stock, which is outstanding and unexercised
immediately prior to the Effective Time (collectively, "Options"), shall be
assumed by Superholdco and converted into an option (a "Superholdco Option") to
purchase shares of Superholdco Common Stock in such amount and at such exercise
price as provided below and otherwise having the same terms and conditions as
nearly as practicable as are in effect immediately prior to the Effective Time:
(i) the number of shares of Superholdco Common Stock to be
subject to the Superholdco Option shall be equal to the product of (x) the
number of shares of USI Common Stock or Xxxx Common Stock subject to the
original Option and (y) the USI Exchange Ratio (if the original Option related
to USI Common Stock) or the Xxxx Exchange Ratio (if the original Option related
to Xxxx Common Stock);
(ii) the exercise price per share of Superholdco Common Stock
under the Superholdco Option shall be equal to (x) the exercise price per share
of the USI Common Stock or Xxxx Common Stock under the original Option divided
by (y) the USI Exchange Ratio (if the original Option related to USI Common
Stock) or the Xxxx Exchange Ratio (if the original Option related to Xxxx Common
Stock); and
(iii) upon each exercise of Superholdco Options by a holder
thereof, the aggregate number of shares of Superholdco Common Stock deliverable
upon such exercise shall be rounded down, if necessary, to the nearest whole
share and the aggregate exercise price shall be rounded up, if necessary, to the
nearest cent.
The adjustments provided herein with respect to any Options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
10
(b) Superholdco shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Superholdco Common Stock
for delivery upon exercise of Superholdco Options in accordance with this
Section 2.8. At or prior to the Effective Time, Superholdco shall file a
registration statement on Form S-8 (or any successor or other appropriate forms)
with respect to the shares of Superholdco Common Stock subject to the
Superholdco Options and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as the Superholdco Options remain outstanding.
SECTION 2.9 - Restricted Stock. At the Effective Time, any
shares of USI Common Stock awarded pursuant to any plan, arrangement or
transaction, including, without limitation, the USI 1997 Restricted Stock Plan
and the Amended USI Stock Option Plan, and outstanding immediately prior to the
Effective Time shall be converted into the right to receive shares of
Superholdco Common Stock in accordance with Section 2.2 hereof, and such shares
of Superholdco Common Stock will be subject to the same terms, conditions and
restrictions as were in effect with respect to such shares of USI Common Stock
immediately prior to the Effective Time, except to the extent that such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the transactions contemplated hereby.
SECTION 2.10 - Certain Adjustments. If between the date of
this Agreement and the Effective Time, the outstanding shares of USI Common
Stock or Xxxx Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities shall
be declared thereon with a record date within such period, the applicable
Exchange Ratio established pursuant to the provisions of Section 2.2 hereof
shall be adjusted accordingly to provide to the holders of USI Common Stock and
Xxxx Common Stock the same economic effect as contemplated by this Agreement
prior to such reclassification, recapitalization, split-up, combination,
exchange or dividend.
11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF XXXX
Xxxx hereby represents and warrants to USI and each Merger
Subsidiary as follows:
SECTION 3.1 - Organization and Qualification.
(a) Xxxx and each of its subsidiaries (as defined in Section
8.9) is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power and authority would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below) on Xxxx. When used in connection with any
Party to this Agreement, the term "Material Adverse Effect" means a material
adverse effect on (i) the business, financial condition or results of operations
of such Party and its subsidiaries, taken as whole, except effects that are
generally applicable in the United States economy and/or the economy in any
other region of the world which do not have a disproportionate effect on USI and
its subsidiaries or Xxxx and its subsidiaries (as the case may be) or (ii) the
ability of such Party to consummate the transactions contemplated hereby without
unreasonable delay.
(b) Except as set forth in Section 3.1(b) of the Disclosure
Schedule previously delivered by Xxxx to USI (the "Xxxx Disclosure Schedule"),
Xxxx has no subsidiaries and does not own, directly or indirectly, beneficially
or of record, any shares of capital stock or other security of any other entity
or any other investment in any other entity.
(c) Xxxx has heretofore made available to USI accurate and
complete copies of the articles of incorporation and bylaws (or similar
governing documents), as currently in effect, of Xxxx and each of its
subsidiaries. Each of Xxxx and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing has
not had and would not have a Material Adverse Effect on Xxxx.
12
SECTION 3.2 - Capitalization of Xxxx and its Subsidiaries.
(a) The authorized capital stock of Xxxx consists of:
100,000,000 shares of Xxxx Common Stock, of which, as of February 11, 1998,
12,787,707 shares were issued and outstanding, and 5,000,000 shares of preferred
stock, par value $1.00 per share, of which, as of February 11, 1998, 1,956
shares of $1.00 Cumulative Convertible Preferred Stock, par value $1.00 per
share ("Xxxx Preferred Stock"), were issued and outstanding. Of the 5,000,000
shares of preferred stock authorized, 150,000 shares have been designated as
Xxxx Preferred Stock and 3,000,000 shares have been designated as Second Series
Junior Participating Preferred Stock. All of the issued and outstanding shares
of Xxxx Common Stock and Xxxx Preferred Stock have been validly issued, and are
fully paid, nonassessable and free of preemptive rights. As of February 11,
1998, 1,464,625 shares of Xxxx Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options granted by Xxxx to purchase shares of Xxxx Common Stock
issued pursuant to the Xxxx stock incentive plans listed on Section 3.2(a) of
the Xxxx Disclosure Schedule (the "Xxxx Stock Incentive Plans") and 3,912 shares
of Xxxx Common Stock were reserved for issuance and issuable upon conversion of
the Xxxx Preferred Stock in accordance with its terms. Since February 11, 1998,
except as set forth on Section 3.2(a) of the Xxxx Disclosure Schedule, no shares
of Xxxx'x capital stock have been issued otherwise than pursuant to the exercise
of options granted by Xxxx to purchase shares of Xxxx Common Stock already in
existence on such date, upon the conversion of Xxxx Preferred Stock or as
expressly permitted by this Agreement and, since February 11, 1998, no options
to purchase shares of Xxxx Common Stock have been granted. Except as set forth
above in this Section 3.2(a), Xxxx Securities (as defined below) issued after
the date hereof as expressly permitted by this Agreement, the rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of May 28, 1996,
between Xxxx and Society National Bank, as Rights Agent (the "Rights Agreement")
and obligations with respect to employer matching contributions under 401(k)
plans listed in Section 3.11(a) of the Xxxx Disclosure Schedule, there are
outstanding (i) no shares of capital stock or other voting securities of Xxxx,
(ii) no securities of Xxxx or its subsidiaries convertible into or exchangeable
for shares of capital stock or voting securities of Xxxx, (iii) no options or
other rights to acquire from Xxxx or its subsidiaries, and no other contract,
understanding, arrangement or obligation (whether or not contingent) of Xxxx or
its subsidiaries to issue or sell, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Xxxx and (iv) no equity equivalents, or interests in the ownership
or earnings, of Xxxx or its subsidiaries (including stock appreciation rights)
(collectively, "Xxxx Securities"). There are no contracts, understandings,
arrangements or obligations (whether or not contingent) of Xxxx or its
subsidiaries to repurchase, redeem or otherwise acquire any Xxxx Securities.
Except as set forth in Section 3.2(a) of the Xxxx Disclosure Schedule, there are
no
13
stockholder agreements, voting trusts or other agreements or understandings to
which Xxxx is a party or to which it is bound relating to the voting of any
shares of capital stock of Xxxx.
(b) Except as set forth in Section 3.2(b) of the Xxxx
Disclosure Schedule, (i) all of the outstanding capital stock of Xxxx'x
subsidiaries is owned beneficially and of record by Xxxx, directly or
indirectly, free and clear of any Lien (as defined below) and (ii) there are no
securities of Xxxx or its subsidiaries convertible into or exchangeable for, no
options or other rights to acquire from Xxxx or its subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
of Xxxx or its subsidiaries to issue or sell any capital stock or other
ownership interests in, or any other securities of, any subsidiary of Xxxx.
There are no contracts, understandings, arrangements or obligations (whether or
not contingent) of Xxxx or its subsidiaries to repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other ownership interests in
any subsidiary of Xxxx. Except as set forth in Section 3.2(b) of the Xxxx
Disclosure Schedule, there are no stockholder agreements, voting trusts or other
agreements or understandings to which Xxxx or its subsidiaries is a party or to
which it is bound relating to the voting of any shares of capital stock of any
subsidiary of Xxxx. For purposes of this Agreement, "Lien" means, with respect
to any asset (including, without limitation, any security) any mortgage, lien,
pledge, charge, security interest, or other encumbrance of any kind in respect
of such asset.
SECTION 3.3 - Authority Relative to this Agreement
(a) Xxxx has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Xxxx (the "Xxxx Board") and, assuming
the accuracy of the representation and warranty set forth in Section 4.17, no
other corporate proceedings on the part of Xxxx are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to Xxxx Merger, the approval and adoption of this Agreement by the
affirmative vote of the holders of a majority of the votes cast by the then
outstanding shares of Xxxx Common Stock and Xxxx Preferred Stock, voting
together as one class, at the meeting of Xxxx stockholders referred to in
Section 5.5 hereof). This Agreement has been duly and validly executed and
delivered by Xxxx and constitutes a valid, legal and binding agreement of Xxxx,
enforceable against Xxxx in accordance with its terms.
(b) The Xxxx Board has, by unanimous vote of those present,
duly and validly approved, and taken all corporate actions required to be taken
by the Xxxx Board for
14
the consummation of the transactions contemplated hereby (including, without
limitation, the Xxxx Merger and the execution and delivery of the Stock Option
Agreement) and resolved to recommend that the stockholders of Xxxx approve and
adopt this Agreement. Assuming the accuracy of the representation and warranty
set forth in Section 4.17, none of the provisions of Section 2538 and
Subchapters F (Business Combinations), G (Control - Share Acquisitions), I and J
of Chapter 25 (including, without limitation, Sections 2555, 2564, 2582 and 2587
thereof) of the Pennsylvania Law and Article Seventh of the Xxxx Articles of
Incorporation, and to the knowledge of Xxxx, no provision of any other
Pennsylvania or other state takeover statute or similar statute or regulation,
applies to the Xxxx Merger, this Agreement, the Stock Option Agreement or any of
the transactions contemplated hereby or thereby.
(c) The Xxxx Common Stock is listed on the NYSE.
SECTION 3.4 - SEC Reports; Financial Statements.
(a) Xxxx has filed all required forms, reports and documents
with the Securities and Exchange Commission (the "SEC") since April 1, 1994,
each of which has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), each
as in effect on the dates such forms, reports and documents were filed. Xxxx has
heretofore delivered to USI, in the form filed with the SEC (including any
amendments thereto), (i) its Annual Reports on Form 10-K for each of the fiscal
years ended March 31, 1995, 1996 and 1997, (ii) all definitive proxy statements
relating to Xxxx'x meetings of stockholders (whether annual or special) held
since April 1, 1994 and (iii) all other reports or registration statements filed
by Xxxx with the SEC since April 1, 1994 (the "Xxxx SEC Reports"). None of such
forms, reports or documents, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of Xxxx included in the Xxxx SEC Reports complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in conformity with GAAP (except, in the case of unaudited consolidated
quarterly statements, which have been prepared in accordance with the
instructions to Form 10-Q of the SEC and Article 10 of Regulation S-X) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto), and fairly present the consolidated financial position of
Xxxx and its consolidated subsidiaries as of the dates
15
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject, in the case of the unaudited interim financial
statements, to normal, recurring year-end adjustments). Since March 31, 1997,
except as set forth in the Xxxx SEC Reports, there has not been any change, or
any application or request for any change, by Xxxx or any of its subsidiaries in
accounting principles, methods or policies for financial accounting or tax
purposes.
(b) Xxxx has heretofore made available to USI a complete and
correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by Xxxx with the SEC pursuant to the Exchange Act.
SECTION 3.5 - Information Supplied. None of the information
supplied or to be supplied by Xxxx for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by
Superholdco in connection with the issuance of shares of Superholdco Common
Stock in the Mergers (the "S-4") will, at the time the S-4 is filed with the SEC
and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (ii) the joint proxy statement/prospectus relating to the meetings of Xxxx'x
stockholders and the USI's stockholders to be held in connection with the
Mergers and the offer by Superholdco of the shares of Superholdco Common Stock
issuable upon conversion of the Shares and the other transactions contemplated
hereby (the "Joint Proxy Statement") will, at the date mailed to stockholders of
Xxxx and USI and at the times of the meetings of stockholders of Xxxx and USI to
be held in connection with the Mergers, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time, any event with respect to Xxxx, its officers and directors
or any of its subsidiaries should occur which is required to be described in an
amendment of, or a supplement to, the S-4 or the Joint Proxy Statement, Xxxx
shall promptly so advise USI and such event shall be so described, and such
amendment or supplement (which USI shall have a reasonable opportunity to
review) shall be promptly filed with the SEC and, as and to the extent required
by law, disseminated to the stockholders of Xxxx. The Joint Proxy Statement,
insofar as it relates to the meeting of Xxxx'x stockholders to vote on Xxxx
Merger, will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made with respect to statements made or
incorporated by reference therein based on information supplied by USI
specifically for inclusion or incorporation by reference in such document.
16
SECTION 3.6 - Consents and Approvals; No Violations. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the filing and recordation
of the Articles of Merger as required by the Pennsylvania Law and as otherwise
set forth in Section 3.6 to the Xxxx Disclosure Schedule, no filing with or
notice to, and no permit, authorization, consent or approval of, any court or
tribunal or administrative, governmental or regulatory body, agency or authority
(a "Governmental Entity") is necessary for the execution and delivery by Xxxx of
this Agreement or the consummation by Xxxx of the transactions contemplated
hereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not,
individually or in the aggregate, have a Material Adverse Effect on Xxxx. Except
as set forth in Section 3.6 to the Xxxx Disclosure Schedule, and assuming all
filings, notifications, permits, authorizations, consents and approvals referred
to in the immediately preceding sentence are duly and timely obtained or made,
neither the execution, delivery and performance of this Agreement by Xxxx nor
the consummation by Xxxx of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
certificate or articles of incorporation or bylaws (or similar governing
documents) of Xxxx or any of its subsidiaries, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of indemnification, termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Xxxx or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound, or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Xxxx or any of its
subsidiaries or any of their respective properties or assets, except in the case
of (ii) and (iii) for violations, breaches or defaults which would not,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect on Xxxx.
SECTION 3.7 - No Default. None of Xxxx or its subsidiaries is
in default or violation (and no event has occurred which with or without due
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) its articles of incorporation or bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Xxxx or any of its subsidiaries is now a party or by which any of them or any of
their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Xxxx, its
subsidiaries or any of their respective properties or assets, except in the case
of (ii) and (iii) for violations, breaches or defaults
17
which, individually or in the aggregate, have not had and would not have a
Material Adverse Effect on Xxxx.
SECTION 3.8 - No Undisclosed Liabilities; Absence of Changes.
Except as and to the extent publicly disclosed by Xxxx in the Xxxx SEC Reports
filed and publicly available prior to the date of this Agreement (the "Filed
Xxxx SEC Reports") and for any liabilities or obligations arising out of matters
disclosed in Section 3.9 or 3.14 of the Xxxx Disclosure Schedule, as of March
31, 1997, none of Xxxx or its subsidiaries had any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and whether due or
to become due or asserted or unasserted, which would be required by GAAP to be
reflected in, reserved against or otherwise described in the consolidated
financial statements of Xxxx (including the notes thereto) as of such date or
which, individually or in the aggregate, has had or would have a Material
Adverse Effect on Xxxx. Except as publicly disclosed by Xxxx in the Filed Xxxx
SEC Reports, since March 31, 1997, (i) the business of Xxxx and its subsidiaries
has been carried on in the ordinary course and (ii) there has not been any
condition, event or occurrence (except for conditions, events or occurrences
arising out of (A) matters disclosed in Section 3.9 or 3.14 of the Xxxx
Disclosure Schedule or (B) any actual or potential claim, proceeding or
investigation, or any facts or circumstances underlying any such claim,
proceeding or investigation, which have been disclosed in the Filed Xxxx SEC
Reports) which, individually or in the aggregate, has had or would have a
Material Adverse Effect on Xxxx.
SECTION 3.9 - Litigation. Except as publicly disclosed by Xxxx
in the Filed Xxxx SEC Reports, publicly disclosed by Eljer Industries, Inc.
("Eljer") in any report, proxy statement, information statement or registration
statement filed by Eljer with the SEC since April 1, 1994 (the "Eljer SEC
Reports"), or disclosed in Section 3.9 of the Xxxx Disclosure Schedule, there is
no suit, claim, action, proceeding or investigation pending or, to the knowledge
of Xxxx, threatened against Xxxx or any of its subsidiaries or any of their
respective properties or assets which (a) individually or in the aggregate, has
had or would have a Material Adverse Effect on Xxxx or (b) questions the
validity of this Agreement or any action to be taken by Xxxx in connection with
the consummation of the transactions contemplated hereby. Except as publicly
disclosed by Xxxx in the Filed Xxxx SEC Reports or by Eljer in the Eljer SEC
Reports, none of Xxxx or its subsidiaries is subject to any outstanding order,
writ, injunction or decree which, individually or in the aggregate, has had or
would have a Material Adverse Effect on Xxxx.
SECTION 3.10 - Compliance with Applicable Law. Except as
publicly disclosed by Xxxx in the Filed Xxxx SEC Reports or by Eljer in the
Eljer SEC Reports, Xxxx and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of
18
all Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Xxxx Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which, individually or in
the aggregate, have not had and would not have a Material Adverse Effect on
Xxxx. Except as publicly disclosed by Xxxx in the Filed Xxxx SEC Reports or by
Eljer in the Eljer SEC Reports, Xxxx and its subsidiaries are in compliance with
the terms of Xxxx Permits, except where the failure so to comply, individually
or in the aggregate, has not had and would not have a Material Adverse Effect on
Xxxx. Except as publicly disclosed by Xxxx in the Filed Xxxx SEC Reports or by
Eljer in the Eljer SEC Reports, the businesses of Xxxx and its subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except that no representation or warranty is made in this
Section 3.10 with respect to Environmental Laws (as defined and addressed in
Section 3.12(a)) and except for violations or possible violations which,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect on Xxxx. Except as publicly disclosed by Xxxx in the Filed Xxxx
SEC Reports, or publicly disclosed by Eljer in the Eljer SEC Reports, no
investigation or review by any Governmental Entity with respect to Xxxx or its
subsidiaries is pending or, to the knowledge of Xxxx, threatened, nor, to the
knowledge of Xxxx, has any Governmental Entity indicated an intention to conduct
the same, other than, in each case, those the outcome of which, individually or
in the aggregate, have not had and would not have a Material Adverse Effect on
Xxxx.
SECTION 3.11 - Employee Plans.
(a) Section 3.11(a) of the Xxxx Disclosure Schedule lists all
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other employee
benefit plans or other benefit arrangements, including executive compensation,
directors' benefit, bonus or other incentive compensation, severance and
deferred compensation plans and practices which Xxxx or any of its subsidiaries
maintains, is a party to, contributes to or has any obligation to or liability
for (each an "Employee Benefit Plan" and collectively, the "Employee Benefit
Plans"), except Employee Benefit Plans mandated by law ("Statutory Plans").
(b) True, correct and complete copies or descriptions of each
Employee Benefit Plan that is a salaried plan, except Statutory Plans, have been
delivered to USI for review prior to the date hereof.
(c) As of the date hereof, except for exceptions which,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect on Xxxx, (i) all payments required to be made by or under any
Employee Benefit Plan, any related trusts, or
19
any collective bargaining agreement have been made; (ii) Xxxx and its
subsidiaries have performed all obligations required to be performed by them
under any Employee Benefit Plan; (iii) the Employee Benefit Plans have been
administered in compliance with their terms and, if applicable, the requirements
of ERISA, the Code and other applicable laws; (iv) there are no actions, suits,
arbitrations or claims (other than routine claims for benefit) pending or, to
the knowledge of Xxxx, threatened with respect to any Employee Benefit Plan; and
(v) Xxxx and its subsidiaries have no liability as a result of any "prohibited
transaction" (as defined in Section 406 of ERISA and Section 4975 of the Code)
for any excise tax or civil penalty.
(d) Except as disclosed on Section 3.11(d) of the Xxxx
Disclosure Schedule, none of the Employee Benefit Plans is subject to Title IV
of ERISA.
(e) Except for exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx,
Xxxx and its subsidiaries have not incurred any unsatisfied withdrawal liability
with respect to any Multiemployer Plan.
(f) Except for exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx,
each of the Pension Plans which is intended to be "qualified" within the meaning
of Section 401(a) and 401(k), if applicable, and 501(a) of the Code has been
determined by the Internal Revenue Service to be so "qualified" and Xxxx knows
of no fact which would adversely affect the qualified status of any such Pension
Plan.
(g) Except as set forth on Section 3.11(g) of the Xxxx
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment becoming due, or increase the amount of compensation due, to any current
or former employee of Xxxx or any of its subsidiaries; (ii) increase any
benefits otherwise payable under any Employee Benefit Plan; or (iii) result in
the acceleration of the time of payment or vesting of any such benefits.
(h) If and to the extent applicable, no Employee Benefit Plan
has or has incurred an accumulated funding deficiency within the meaning of
Section 302 of ERISA or Section 412 of the Code, nor has any waiver of the
minimum funding standards of Section 302 of ERISA and Section 412 of the Code
been requested of or granted by the IRS with respect to any Employee Benefit
Plan, nor has any lien in favor of any such plan arisen under Section 412(n) of
the Code or Section 302(f) of ERISA. Except as indicated on Schedule 3.11(h) of
the Xxxx Disclosure Schedule, no Plan that is a welfare benefit plan is self
funded by Xxxx. Except as disclosed on Schedule 3.11(h) of the Xxxx Disclosure
20
Schedule and for exceptions which, individually or in the aggregate, have not
had and would not have a Material Adverse Effect on Xxxx, with respect to any
insurance policy providing funding for benefits under any Employee Benefit Plan,
there is no liability of Xxxx in the nature of a retroactive rate adjustment,
loss sharing arrangement, or other actual or contingent liability, there will be
no such liability arising wholly or partially out of events occurring prior to
the execution of this Agreement, nor would there be any such liability if Xxxx
cancelled such policy as of the date hereof.
SECTION 3.12 - Environmental Matters. (a) As used in this
Agreement:
(1) "Environmental Law" means any applicable federal, state or
local law, statute, code, ordinance, rule, regulation or other governmental
requirement from any U.S. or foreign jurisdiction concerning the Release (as
defined herein), handling, storage, processing, transportation or other use of
any solid waste, industrial waste or Hazardous Substance (as defined herein), as
of the date hereof, including, by way of example but not limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss.
1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et
seq.), the Clean Water Act (42 U.S.C. ss. 7401 et seq.), the Clean Air Act (33
U.S.C. ss. 2601 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601
et seq.), and the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
ss. 136 et seq.) and the Occupational Safety and Health Act (29 U.S.C. ss. 651
et seq.), and the regulations promulgated pursuant thereto.
(2) "Environmental Claim" means any written notice of
violation, action, claim, lien, demand, order, injunction, judgment, decree,
ruling, assessment or arbitration award or directive (conditional or otherwise)
by any Governmental Entity or any person for personal injury (including
sickness, disease or death), tangible or intangible property damage, diminution
in value, damage to the environment or natural resources, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions resulting from or based upon (a) the existence, or the
continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden accidental or non-accidental Release) of, or exposure to,
any Hazardous Substance, odor, audible noise, or any solid or industrial waste;
(b) the transportation, storage, treatment or disposal of solid waste,
industrial waste or Hazardous Substances, in connection with the past or present
operations of Xxxx, any of its subsidiaries or, to the knowledge of Xxxx, any of
their respective predecessors or assigns; or (c) the violation, or alleged
violation, of any Environmental Laws, orders, injunctions, judgments, decrees,
rulings, assessments, arbitration awards, Environmental Permits or ruling, order
or decision of any court arbitrator or Government Entity relating to Xxxx and
its environmental matters.
21
(3) "Environmental Permit" means any permit, approval,
authorization, license, variance, registration, permit application,
notification, program development and implementation, or permission required
under any applicable Environmental Law.
(4) "Hazardous Substance" means any substance, material or
waste which is regulated under any Environmental Law or by any applicable
Governmental Entity in the jurisdictions in which Xxxx or any subsidiary or any
of their respective predecessors or assigns conducts or has conducted business,
or the United States, including, without limitation, any material or substance
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste,"
"subject waste," "contaminant," "toxic waste," "toxic substance" or "residual
waste" under any Environmental Law, including, but not limited to, radioactive
materials, petroleum products, asbestos and polychlorinated biphenyls.
(5) "Property" means, with respect to any person or entity,
any land, facility or operations currently or previously owned or otherwise used
by such person or entity, any of its subsidiaries or any of their respective
predecessors.
(6) "Release" means, with respect to any person or entity, any
intentional or unintentional, continuous or intermittent release, spill,
emission, seepage, leaking, pumping, uncontrolled loss, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the environment, or
any building surface, or onto or from any Property of such person or entity of
any Hazardous Substance, including the movement of any Hazardous Substance
through or in the air, soil, surface water, ground water or otherwise.
(7) "Remedial Action" means, with respect to any person or
entity, all actions, including, without limitation, any capital expenditures,
required or voluntarily undertaken by such person or entity to (i) clean up,
remove, treat, or in any other way address any Hazardous Substance or any other
material required pursuant to applicable Environmental Law; (ii) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substance or any other material required pursuant to applicable Environmental
Law; (iii) perform pre-remedial studies and investigations or post-remedial
monitoring and care including the conduct of risk assessments and negotiation
with applicable governmental entities regarding Hazardous Substance or any other
material required pursuant to applicable Environmental Law; or (iv) bring the
Properties of such person or entity into compliance with all applicable
Environmental Laws and Environmental Permits.
22
(b) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, Xxxx and each of its subsidiaries and its use of and
operations at each Property is in compliance with all applicable Environmental
Laws, except where the failure to so be in compliance, individually or in the
aggregate, has not had and would not have a Material Adverse Effect on Xxxx.
(c) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, neither Xxxx nor any of its subsidiaries or, to the knowledge
of Xxxx, any of their respective predecessors, has received any written
communication from a court, Governmental Entity or any other person or entity
that alleges that Xxxx or any such subsidiary or predecessor is not in
compliance, in all respects, with any Environmental Law or has liability
thereunder, except with respect to failures to so be in compliance which,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect on Xxxx.
(d) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, (i) none of the Properties or operations of Xxxx or any of its
subsidiaries or, to the knowledge of Xxxx, any of their respective predecessors,
is the subject of any investigation by any Governmental Entity, whether federal,
state, local or foreign, with respect to (A) any Environmental Law, (B) any
Remedial Action or (C) any Environmental Claim, which in each case, individually
or in the aggregate, has had or would have a Material Adverse Effect on Xxxx and
(ii) Xxxx and each of its subsidiaries has filed all notices, obtained all
Environmental Permits and conducted all Remedial Actions required under all
Environmental Laws, except where the failure to file such notices, obtain such
Environmental Permits or take such Remedial Actions, individually or in the
aggregate, has not had and would not have a Material Adverse Effect on Xxxx.
(e) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, Xxxx and each of its subsidiaries and, to the knowledge of
Xxxx, each of their respective predecessors, have filed all notices required to
be filed by them under all Environmental Laws reporting any Release, except
where failure to file such notices, individually or in the aggregate, has not
had and would not have a Material Adverse Effect on Xxxx.
(f) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, neither Xxxx nor any of its subsidiaries has any contingent
liabilities with respect to its business or, to the knowledge of Xxxx, that of
its predecessors, in connection with any Hazardous Substance or Environmental
Law which, individually or in the aggregate, have had or would have a Material
Adverse Effect on Xxxx.
23
(g) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, underground storage tanks are not located on or under any
Property for which Xxxx or any of its subsidiaries would be responsible or
potentially responsible under any Environmental Law and there have been no
Releases of Hazardous Substances on, in or under any Property for which Xxxx or
any of its subsidiaries would be responsible or potentially responsible under
any Environmental Law that in either case, individually or in the aggregate,
have had or would have a Material Adverse Effect on Xxxx.
(h) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, none of Xxxx, any of its subsidiaries or, to the knowledge of
Xxxx, any of their respective predecessors, is subject to any judicial,
administrative or arbitral actions, suits, proceedings (public or private),
written claims or governmental proceedings alleging the violation of any
Environmental Law or Environmental Permit that, individually or in the
aggregate, have had or would have a Material Adverse Effect on Xxxx.
(i) Except as disclosed in any Filed Xxxx SEC Report or any
Eljer SEC Report, none of Xxxx, any of its subsidiaries or, to the knowledge of
Xxxx, any of their respective predecessors, as a result of their respective past
and current operations, has caused or permitted any Hazardous Substances to
remain or be disposed of, either on or under any Property of Xxxx or on any real
property, otherwise than in compliance with all applicable Environmental Laws,
in a manner that, individually or in the aggregate, has had or would have a
Material Adverse Effect on Xxxx.
SECTION 3.13 - Tax Matters. Except as disclosed in Section
3.13 of the Xxxx Disclosure Schedule or as disclosed in any Filed Xxxx SEC
Document or any Eljer SEC Report:
(a) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx,
(i) Xxxx and each of its subsidiaries, and each affiliated group (within the
meaning of Section 1504 of the Code) of which Xxxx or any of its subsidiaries is
or has been a member, has timely filed all federal income tax returns and all
other Tax (as defined below) returns and reports required to be filed by it,
(ii) all such Tax returns are complete and correct in all respects and (iii)
Xxxx and each of its subsidiaries has paid (or Xxxx has paid on its
subsidiaries' behalf) all Taxes due in respect of the taxable periods covered by
such Tax returns. Xxxx has previously delivered to USI copies of all U.S.
federal income Tax returns filed by Xxxx and each of its subsidiaries for their
taxable years ended in 1996 and 1997. For purposes of this Agreement, (i) "Tax"
or "Taxes" shall mean all taxes, charges, fees, imposts, levies, gaming or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem,
24
value added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, together with any interest
and any penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any transferee
liability in respect of taxes, any liability in respect of taxes imposed by
contract, tax sharing agreement, tax indemnity agreement or any similar
agreement and (ii) "Tax returns" shall mean any report, return, document,
declaration or any other information or filing required to be supplied to any
taxing authority or jurisdiction (foreign or domestic) with respect to Taxes,
including without limitation, information returns, any document with respect to
or accompanying payments or estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return
document, declaration or other information.
(b) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx, no
deficiencies for any Taxes have been proposed, asserted or assessed against Xxxx
or any of its subsidiaries that have not been fully paid or adequately provided
for in the appropriate financial statements of Xxxx and its subsidiaries.
(c) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx,
(i) no requests for waivers of the time to assess any Taxes are pending, and no
power of attorney with respect to any Taxes has been executed or filed with any
taxing authority and (ii) no issues relating to Taxes have been raised in
writing by the relevant taxing authority during any pending audit or
examination. The federal income Tax returns of Xxxx and each of its subsidiaries
consolidated in such Tax returns have been reviewed by the Internal Revenue
Service for all years through its fiscal year ended March 31, 1994.
(d) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx, no
Liens for Taxes exist with respect to any assets or properties of Xxxx or any of
its subsidiaries, except for statutory liens for Taxes not yet due.
(e) None of Xxxx or any of its subsidiaries is a party to or
is bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority).
25
(f) None of Xxxx or any of its subsidiaries has taken or
agreed to take any action that would prevent the Xxxx Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
(g) There is no employment, severance or termination
agreement, other compensation arrangement or Employee Benefit Plan currently in
effect which provide for the payment of any amount (whether in cash or property
or the vesting of property) solely as a result of the consummation of the
transactions contemplated by this Agreement to occur prior to or concurrently
with the Effective Time that would not be deductible by reason of Sections 280G
or 162(m) of the Code.
(h) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx,
Xxxx and its subsidiaries have complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes.
(i) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx, no
federal, state, local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any federal income or
material state, local or foreign Taxes or Tax returns of Xxxx or its
subsidiaries and neither Xxxx nor any of its subsidiaries has received a written
notice of any pending audit or proceeding.
(j) Neither Xxxx nor any of its subsidiaries has agreed to or
is required to make any adjustment under Section 481(a) of the Code.
(k) Neither Xxxx nor any of its subsidiaries has (i) with
regard to any assets or property held or acquired by any of them, filed a
consent to the application of Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by Xxxx or any
of its subsidiaries, (ii) executed or entered into a closing agreement pursuant
to Section 7121 of the Code or any similar provision of state, local or foreign
law or (iii) received or filed any requests for rulings or determinations in
respect of any Taxes within the last five years.
(l) No property owned by Xxxx or any of its subsidiaries (i)
is property required to be treated as being owned by another Person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of the Tax Reform Act
of 1986; (ii) constitutes "tax exempt use property"
26
within the meaning of Section 168(h)(1) of the Code; or (iii) is "tax exempt
bond financed property" within the meaning of Section 168(g) of the Code.
(m) Xxxx and each of its subsidiaries are not currently, have
not been within the last five years, and do not anticipate becoming a "United
States real property holding company" within the meaning of Section 897(c) of
the Code.
(n) No subsidiary of Xxxx owns any Shares.
SECTION 3.14 - Intangible Property. Subject to such exceptions
which, individually or in the aggregate, have not had and would not have a
Material Adverse Effect on Xxxx, Xxxx and its subsidiaries own or possess
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of Xxxx and its subsidiaries as currently conducted
or as contemplated to be conducted, and, except as set forth in the Filed Xxxx
SEC Reports, the Eljer SEC Reports or Section 3.14 of the Xxxx Disclosure
Schedule, Xxxx is unaware of any assertion or claim challenging the validity or
enforceability of any of the foregoing which, individually or in the aggregate,
has had or would have a Material Adverse Effect on Xxxx. Except as disclosed in
Section 3.14 of the Xxxx Disclosure Schedule or in any Filed Xxxx SEC Report or
Eljer SEC Report and subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on Xxxx,
there have been no claims made or notices that the manufacture and sale of any
of Xxxx'x products infringes the patents of any third party.
SECTION 3.15 - Opinion of Financial Advisor. XX Xxxxxxxxxx
(the "Xxxx Financial Advisor") has delivered to the Xxxx Board its opinion,
dated the date of this Agreement, to the effect that, as of such date, the Xxxx
Merger Consideration is fair to the holders of Xxxx Common Shares from a
financial point of view, and such opinion has not been withdrawn or adversely
modified.
SECTION 3.16 - Brokers. No broker, finder or investment banker
(other than the Xxxx Financial Advisor, a true and correct copy of whose
engagement agreement has been provided to USI) is entitled to any brokerage,
finder's or other fee or commission or expense reimbursement in connection with
the transactions contemplated by this Agreement based upon arrangements made by
and on behalf of Xxxx or any of its affiliates.
27
SECTION 3.17 - Accounting Matters. Neither Xxxx nor, to its
knowledge, any of its affiliates or stockholders, has taken or agreed to take
any action that would prevent Superholdco from accounting for the transactions
to be effected pursuant to Article 1 of this Agreement in accordance with the
pooling of interests method of accounting under the requirements of the
Accounting Principles Board Opinion No. 16 "Business Combinations", as amended
by applicable pronouncements by the Financial Accounting Standards Board, the
Emerging Issues Taskforce and the SEC (the "Pooling of Interests Method of
Accounting"). Xxxx has not failed to bring to the attention of USI any actions,
or agreements or understandings, whether written or oral, that would be
reasonably likely to prevent Superholdco from accounting for the transactions to
be effected pursuant to Article 1 of this Agreement in accordance with the
Pooling of Interests Method of Accounting.
SECTION 3.18 - Material Contracts.
(a) Xxxx has delivered or otherwise made available to USI
true, correct and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side letters to which
Xxxx is a party affecting the obligations of any party thereunder) to which Xxxx
or any of its subsidiaries is a party or by which any of its properties or
assets are bound that are material to the business, properties or assets of Xxxx
and its subsidiaries taken as a whole, including, without limitation, to the
extent any of the following is material to the business, properties or assets of
Xxxx and its subsidiaries taken as a whole: (i) any employment, product design
or development, personal services, consulting, non-competition, severance or
indemnification contracts (including, without limitation, any contract to which
Xxxx or any of its subsidiaries is a party involving employees of Xxxx or any of
its subsidiaries); (ii) any licensing, merchandising or distribution agreements;
(iii) any contract granting a right of first refusal or first negotiation; (iv)
any partnership or joint venture agreements; (v) any agreement for the
acquisition, sale, lease or other disposition of material properties or assets
of Xxxx or its subsidiaries or predecessors (by merger, purchase or sale of
assets or stock or otherwise) entered into since January 1, 1992; (vi) any
contract or agreement with any Governmental Entity; and (vii) any commitment or
agreement to enter into any of the foregoing (collectively, the "Contracts").
(b) Each of the Contracts is valid and enforceable in
accordance with its terms, and there is no default under any Contract either by
Xxxx or, to the knowledge of Xxxx, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by Xxxx or, to the knowledge of Xxxx, any other
party, in any such case in which such default or event, individually or in the
aggregate, has had or would have a Material Adverse Effect on Xxxx.
28
(c) No party to any such Contract has given notice to Xxxx of
or made a claim against Xxxx with respect to any breach or default thereunder,
in any such case in which such breach or default, individually or in the
aggregate, has had or would have a Material Adverse Effect on Xxxx.
SECTION 3.19 - Labor Matters. As of the date of this
Agreement, except as set forth in Section 3.19 of the Xxxx Disclosure Schedule,
neither Xxxx nor any of its subsidiaries is a party to any employment, severance
compensation, labor or collective bargaining agreement and there are no
employment, severance compensation, labor or collective bargaining agreements
which pertain to employees of Xxxx or any of its subsidiaries. As of the date of
this Agreement, no labor organization or group of employees of Xxxx or any of
its subsidiaries has made a pending written demand for recognition or
certification.
SECTION 3.20 - Insurance. As of the date of this Agreement,
each of Xxxx and its subsidiaries is, and has been continuously since January 1,
1994, insured with financially responsible insurers in such amounts and against
such risks and losses as are customary for companies conducting the business as
conducted by Xxxx and its subsidiaries during such time period. Except as set
forth in the Filed Xxxx SEC Reports or the Eljer SEC Reports and subject to such
exceptions which, individually or in the aggregate, have not had and would not
have a Material Adverse Effect on Xxxx, (i) since January 1, 1994, neither Xxxx
nor any of its subsidiaries has received notice of cancellation or termination
(or a denial of coverage) with respect to any material insurance policy of Xxxx
or its subsidiaries and (ii) the insurance policies of Xxxx and its subsidiaries
are valid and enforceable policies.
SECTION 3.21 - Products. Except as otherwise disclosed in the
Filed Xxxx SEC Reports or the Eljer SEC Reports and subject to such exceptions
which, individually or in the aggregate, have not had and would not have a
Material Adverse Effect on Xxxx, (i) each of the products currently or formerly
produced or sold by Xxxx or its subsidiaries (A) complies or complied, as the
case maybe, with all applicable federal, state, local and foreign laws and
regulations and (B) conforms or conformed, as the case may be, to any promises
or affirmations of fact made on the container or label for such product or in
connection with its sale and (ii) there are no defects in any such product that
would adversely affect the functioning thereof in accordance with any published
specifications therefor.
SECTION 3.22 - Amendment to Rights Agreement. Concurrently
with the execution and delivery of this Agreement, the Xxxx Board has taken all
necessary action to approve, and Xxxx has duly executed, an amendment to the
Rights Agreement which provides that (a) notwithstanding anything in the Rights
Agreement to the contrary, (i) no
29
Distribution Date (as defined in the Rights Agreement) will occur, (ii) neither
USI nor Superholdco will be an Acquiring Person (as defined in the Rights
Agreement), and (iii) no Stock Acquisition Date (as defined in the Rights
Agreement) will occur, solely as a result of the approval, execution or delivery
of this Agreement or the consummation of the transactions contemplated hereby
and (b) the Expiration Date (as defined in the Rights Agreement) of the Rights
shall occur immediately prior to the Effective Time, and Xxxx will cause such
amendment to be delivered to the Rights Agent (as defined in the Rights
Agreement) in accordance with Section 26 of the Rights Agreement as promptly as
practicable. Except as set forth in the preceding sentence in connection with
the transactions contemplated by this Agreement, the Rights Agreement may not be
amended by Xxxx without the prior written consent of USI in its sole discretion.
SECTION 3.23 - U.S. Brass Bankruptcy Proceeding. As of the
date of this Agreement, a case pursuant to Chapter 11 of Xxxxx 00, Xxxxxx Xxxxxx
Code, is pending for United States Brass Corporation ("U.S. Brass"), Case No.
94-40823-S, in the United States Bankruptcy Court for the Eastern District of
Texas. The case has not been converted to a Chapter 7 proceeding and no trustee
or examiner has been appointed. U.S. Brass, together with Eljer Industries, Inc.
and Eljer Manufacturing, Inc., have proposed a Fourth Amended Plan of
Reorganization (the "Plan"), all amendments or modifications of which have been
furnished to USI. After a confirmation hearing which concluded on January 29,
1998, the Bankruptcy Court indicated that it would confirm the Plan in its
entirety. No order of confirmation has been entered as of the date of this
Agreement.
SECTION 3.24 - Full Disclosure. None of the representations or
warranties of Xxxx contained in this Article 3 nor any of the disclosures
contained in the Xxxx Disclosure Schedule 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 contained herein or therein, in
light of the circumstances under which they are to be made, not misleading,
subject to such exceptions which, individually or in the aggregate, have not had
and would not have a Material Adverse Effect on Xxxx.
30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF USI, SUPERHOLDCO AND THE MERGER SUBSIDIARIES
USI, Superholdco and each Merger Subsidiary hereby represents
and warrants to Xxxx as follows:
SECTION 4.1 - Organization and Qualification.
(a) Each of USI, Superholdco, the Merger Subsidiaries and
USI's other subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority, individually or in the aggregate,
has not had and would not have a Material Adverse Effect on USI.
(b) USI has heretofore delivered to Xxxx accurate and complete
copies of the articles of incorporation and bylaws, as currently in effect, of
USI, Superholdco and each of the Merger Subsidiaries. Each of USI, Superholdco,
the Merger Subsidiaries and USI's other subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing, individually or in the aggregate, has not had and would not have a
Material Adverse Effect on USI.
SECTION 4.2 - Capitalization of USI and its Subsidiaries.
(a) The authorized capital stock of USI consists of
200,000,000 shares of USI Common Stock, of which, as of February 11, 1998,
77,013,920 shares were issued and outstanding, and 50,000,000 shares of
preferred stock, $.01 par value per share, no shares of which were issued and
outstanding as of such date. All of the issued and outstanding shares of USI
Common Stock have been validly issued, and are fully paid, nonassessable and
free of preemptive rights. As of February 11, 1998, 3,803,750 shares of USI
Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding options granted by
USI to purchase shares of USI Common Stock issued pursuant to the USI stock
incentive plans listed on Section 4.2(a) of the Disclosure
31
Schedule previously delivered by USI to Xxxx (the "USI Disclosure Schedule").
Since February 11, 1998, no shares of USI's capital stock have been issued
otherwise than pursuant to the exercise of options granted by USI to purchase
shares of USI Common Stock already in existence on such date or as expressly
permitted by this Agreement and, since February 11, 1998, no options to purchase
shares of USI Common Stock have been granted. Except as set forth above in this
Section 4.2(a), as of the date hereof there are outstanding (i) no shares of
capital stock or voting securities of USI (ii) no securities of USI or its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of USI, (iii) no options or other rights to acquire from USI
or its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) of USI or its subsidiaries to issue or
sell, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of USI and (iv) no equity
equivalents, or interests in the ownership or earnings of USI, including stock
appreciation rights (collectively, "USI Securities"). There are no contracts,
understandings, arrangements or obligations (whether or not contingent) of USI
or any of its subsidiaries to repurchase, redeem or otherwise acquire any USI
Securities. There are no stockholder agreements, voting trusts or other
agreements or understandings to which USI is a party or to which it is bound
relating to the voting of any shares of capital stock of USI.
(b) Except for minority equity interests in indirect foreign
subsidiaries of USI which, individually or in the aggregate, are not material to
USI and its subsidiaries taken as a whole, all of the outstanding capital stock
of USI's subsidiaries (including Superholdco and the Merger Subsidiaries) is
owned by USI, directly or indirectly, free and clear of any Lien. There are no
securities of USI or its subsidiaries convertible into or exchangeable for, no
options or other rights to acquire from USI or its subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
of USI or its subsidiaries to issue or sell any capital stock or other ownership
interests in, or any other securities of, any subsidiary of USI. There are no
contracts, understandings, arrangements or obligations (whether or not
contingent) of USI or its subsidiaries to repurchase, redeem or otherwise
acquire any outstanding shares of capital stock or other ownership interests in
any subsidiary of USI.
(c) All of the issued and outstanding capital stock of
Superholdco is duly authorized, validly issued, fully paid and nonassessable,
and is owned by USI free and clear of any Lien. All of the issued and
outstanding capital stock of each of B-Sub and Z-Sub is duly authorized, validly
issued, fully paid and nonassessable, and is owned by Superholdco free and clear
of any Lien.
32
SECTION 4.3 - Authority Relative to this Agreement. (a) Each
of USI, Superholdco and each Merger Subsidiary has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Boards of Directors of USI, Superholdco and each
Merger Subsidiary, by USI as the sole stockholder of Superholdco and by
Superholdco as the sole stockholder of each of B-Sub and Z-Sub and no other
corporate proceedings on the part of USI, Superholdco or either of the Merger
Subsidiaries is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the affirmative vote of the holders
of a majority of the then outstanding shares of USI Common Stock entitled to
vote thereon which are present in person or represented by proxy at the meeting
of USI stockholders referred to in Section 5.5 hereof). This Agreement has been
duly and validly executed and delivered by each of USI, Superholdco and each
Merger Subsidiary and constitutes a valid, legal and binding agreement of each
of USI, Superholdco and each Merger Subsidiary, enforceable against each of USI,
Superholdco and each Merger Subsidiary in accordance with its terms.
(b) The Board of Directors of USI (the "USI Board") has, by
unanimous vote of those present, duly and validly approved, and taken all
corporate actions required to be taken by the USI Board for the consummation of
the transactions contemplated hereby (including, without limitation, the USI
Merger) and resolved to recommend that the stockholders of USI approve and adopt
this Agreement.
(c) The USI Common Stock is listed on the NYSE.
SECTION 4.4 - SEC Reports; Financial Statements.
(a) USI has filed all required forms, reports and documents
with the SEC since May 31, 1995, each of which has complied in all material
respects with all applicable requirements of the Securities Act and the Exchange
Act, each as in effect on the dates such forms, reports and documents were
filed. USI has heretofore made available to Xxxx, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Reports on Form 10-K for each
of the fiscal years ended on the Saturday closest to September 30, 1995, 1996
and 1997, (ii) all definitive proxy statements relating to USI's meetings of
stockholders (whether annual or special) held since May 31, 1995 and (iii) all
other reports or registration statements filed by USI with the SEC since May 31,
1995 (the "USI SEC Reports"). None of such forms, reports or documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
33
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of USI included in the USI SEC
Reports complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto have been prepared, in conformity with GAAP (except, in the case of
unaudited consolidated quarterly statements, which have been prepared in
accordance with the instructions to Form 10-Q of the SEC and Article 10 of
Regulation S- X) applied on a consistent basis during the periods presented
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of USI and its consolidated subsidiaries as of
the dates thereof and their consolidated results of operations and cash flows
for the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments). Since September 28, 1997,
except as set forth in the USI SEC Reports, there has not been any change, or
any application or request for any change, by USI or any of its subsidiaries in
accounting principles, methods or policies for financial accounting or tax
purposes.
(b) USI has heretofore made available to Xxxx a complete and
correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by USI with the SEC pursuant to the Exchange Act.
SECTION 4.5 - Information Supplied. None of the information
supplied or to be supplied by USI or any of the Merger Subsidiaries for
inclusion or incorporation by reference in (i) the S-4 will, at the time the S-4
is filed with the SEC and at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading and (ii) the Joint Proxy Statement will, at the date
mailed to stockholders of Xxxx and USI and at the times of the meetings of
stockholders of Xxxx and USI to be held in connection with the Mergers, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time, any event with respect
to USI, its officers and directors or any of its subsidiaries should occur which
is required to be described in an amendment of, or a supplement to, the S-4 or
the Joint Proxy Statement, USI shall promptly so advise Xxxx and such event
shall be so described, and such amendment or supplement (which Xxxx shall have a
reasonable opportunity to review) shall be promptly filed with the SEC and, as
and to the extent required by law, disseminated to the stockholders of USI. The
S-4 will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder and the Joint Proxy
34
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made with respect to statements made or
incorporated by reference therein based on information supplied by Xxxx
specifically for inclusion or incorporation by reference in such document.
SECTION 4.6 - Consents and Approvals; No Violations. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the HSR Act, the filing and recordation
of the Certificate of Merger as required by Delaware Law and the Articles of
Merger as required by Pennsylvania Law and as otherwise set forth in Section 4.6
to the USI Disclosure Schedule, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by USI, Superholdco or either of the Merger
Subsidiaries of this Agreement or the consummation by USI, Superholdco or either
of the Merger Subsidiaries of the transactions contemplated hereby, except where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not, individually or in the
aggregate, have a Material Adverse Effect on USI. Except as set forth in Section
4.6 of the USI Disclosure Schedule, and assuming all filings, notifications,
permits, authorizations, consents and approvals referred to in the immediately
preceding sentence are duly and timely obtained or made, neither the execution,
delivery and performance of this Agreement by USI, Superholdco or any of the
Merger Subsidiaries nor the consummation by USI, Superholdco or any of the
Merger Subsidiaries of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the respective certificate of
incorporation or bylaws (or similar governing documents) of USI, Superholdco or
either of the Merger Subsidiaries or any of USI's other subsidiaries, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of indemnification,
termination, amendment, cancellation or acceleration or Lien) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which USI,
Superholdco or either of the Merger Subsidiaries or any of USI's other
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to USI, Superholdco or
either of the Merger Subsidiaries or any of USI's other subsidiaries or any of
their respective properties or assets, except in the case of (ii) and (iii) for
violations, breaches or defaults which, individually or in the aggregate, have
not had and would not have a Material Adverse Effect on USI.
35
SECTION 4.7 - No Default. None of USI or its subsidiaries is
in default or violation (and no event has occurred which with or without due
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) its certificate or articles of
incorporation or bylaws (or similar governing documents), (ii) any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which USI or any of its subsidiaries is now a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to USI, its subsidiaries or any of their respective properties or
assets, except in the case of (ii) and (iii) for violations, breaches or
defaults which, individually or in the aggregate, have not had and would not
have a Material Adverse Effect on USI.
SECTION 4.8 - No Undisclosed Liabilities; Absence of Changes.
Except as and to the extent publicly disclosed by USI in the USI SEC Reports
filed and publicly available prior to the date of this Agreement (the "Filed USI
SEC Reports"), as of September 28, 1997, none of USI or its subsidiaries had any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and whether due or to become due or asserted or unasserted, which
would be required by GAAP to be reflected in, reserved against or otherwise
described in the consolidated balance sheet of USI (including the notes thereto)
as of such date or which, individually or in the aggregate, have had or would
have a Material Adverse Effect on USI. Except as publicly disclosed by USI in
the Filed USI SEC Reports, since September 28, 1997, the business of USI and its
subsidiaries has been carried on in the ordinary course and there has not been
any condition, event or occurrence which, individually or in the aggregate, has
had or would have a Material Adverse Effect on USI.
SECTION 4.9 - Litigation. Except as publicly disclosed by USI
in the Filed USI SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of USI, threatened against USI or any
of its subsidiaries or any of their respective properties or assets which (a)
individually or in the aggregate, would have a Material Adverse Effect on USI or
(b) questions the validity of this Agreement or any action to be taken by USI in
connection with the consummation of the transactions contemplated hereby. Except
as publicly disclosed by USI in the Filed USI SEC Reports, none of USI or its
subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, has had or would have a Material
Adverse Effect on USI.
SECTION 4.10 - Compliance with Applicable Law. Except as
publicly disclosed by USI in the Filed USI SEC Reports, USI and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "USI Permits"), except for failures
36
to hold such permits, licenses, variances, exemptions, orders and approvals
which, individually or in the aggregate, have not had and would not have a
Material Adverse Effect on USI. Except as publicly disclosed by USI in the Filed
USI SEC Reports, USI and its subsidiaries are in compliance with the terms of
the USI Permits, except where the failure so to comply, individually or in the
aggregate, has not had and would not have a Material Adverse Effect on USI.
Except as publicly disclosed by USI in the Filed USI SEC Reports, the businesses
of USI and its subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity except for violations or
possible violations which, individually or in the aggregate, have not had and
would not have a Material Adverse Effect on USI. Except as publicly disclosed by
USI in the Filed USI SEC Reports, no investigation or review by any Governmental
Entity with respect to USI or its subsidiaries is pending or, to the knowledge
of USI, threatened, nor to the knowledge of USI, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those the
outcome of which, individually or in the aggregate, has not had and would not
have a Material Adverse Effect on USI.
SECTION 4.11 - Employee Plans.
(a) For the purposes of this Agreement, all "employee benefit
plans," as defined in Section 3(3) of ERISA, and all other employee benefit
plans or other benefit arrangements, including executive compensation,
directors' benefit, bonus or other incentive compensation, severance and
deferred compensation plans and practices which USI or any of its subsidiaries
maintains, is a party to, contributes to or has any obligation to or liability
shall be defined as individually a "USI Employee Benefit Plan" and collectively,
the "USI Employee Benefit Plans".
(b) As of the date hereof, except for exceptions which,
individually or in the aggregate, have not had and would not have a Material
Adverse Effect on USI, (i) all payments required to be made by or under any USI
Employee Benefit Plan, any related trusts, or any collective bargaining
agreement have been made; (ii) USI and its subsidiaries have performed all
obligations required to be performed by them under any USI Employee Benefit
Plan; (iii) the USI Employee Benefit Plans have been administered in compliance
with their terms and, if applicable, the requirements of ERISA, the Code and
other applicable laws; (iv) there are no actions, suits, arbitrations or claims
(other than routine claims for benefits) pending or, to the knowledge of USI,
threatened, with respect to any USI Employee Benefit Plan; and (v) USI and its
subsidiaries have no liability as a result of any "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975 of the Code) for any excise tax
or civil penalty.
37
(c) Except for exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, USI
and its subsidiaries have not incurred any unsatisfied withdrawal liability with
respect to any Multiemployer Plan.
(d) Except for exceptions which, individually or in the
aggregate, have not and would not have a Material Adverse Effect on USI, each of
the USI Employee Benefit Plans which is intended to be "qualified" within the
meaning of Section 401(a) and 401(k), if applicable, and 501(a) of the Code has
been determined by the IRS to be so "qualified" or USI intends to seek such a
determination, and USI knows of no fact which would adversely affect the
qualified status of any such USI Employee Benefit Plan or which is reasonably
likely to preclude the issuance of such IRS determination retroactive to the
original date of such plan.
(e) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment becoming due, or increase the amount of compensation due, to any current
or former employee of USI or any of its subsidiaries; (ii) increase any benefits
otherwise payable under any USI Employee Benefit Plan; or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(f) If and to the extent applicable, no USI Employee Benefit
Plan has or has incurred an accumulated funding deficiency within the meaning of
Section 302 of ERISA or Section 412 of the Code, nor has any waiver of the
minimum funding standards of Section 302 of ERISA and Section 412 of the Code
been requested of or granted by the IRS with respect to any USI Employee Benefit
Plan, nor has any lien in favor of any such plan arisen under Section 412(n) of
the Code or Section 302(f) of ERISA. Except for exceptions which, individually
or in the aggregate, have not had and would not have a Material Adverse Effect
on USI, with respect to any insurance policy providing funding for benefits
under any USI Employee Benefit Plan, there is no liability of USI in the nature
of a retroactive rate adjustment, loss sharing arrangement, or other actual or
contingent liability, there will be no such liability arising wholly or
partially out of events occurring prior to the execution of this Agreement, nor
would there be any such liability if USI cancelled such policy as of the date
hereof.
SECTION 4.12 - Environmental Matters. (a) Except as disclosed
in any Filed USI SEC Document, USI and each of its subsidiaries and its use of
and operations at each Property is in compliance with all applicable
Environmental Laws, except where the failure to so be in compliance,
individually or in the aggregate, has not had and would not have a Material
Adverse Effect on USI.
38
(b) Except as disclosed in any Filed USI SEC Document, neither
USI nor any of its subsidiaries or, to the knowledge of USI, any of their
respective predecessors, has received any written communication from a court,
Governmental Entity or any other person or entity that alleges that USI or any
such subsidiary or predecessor is not in compliance, in all respects, with any
Environmental Law or has liability thereunder, except with respect to failures
to so be in compliance which, individually or in the aggregate, have not had and
would not have a Material Adverse Effect on USI.
(c) Except as disclosed in any Filed USI SEC Document, (i)
none of the Properties or operations of USI or any of its subsidiaries or, to
the knowledge of USI, any of their respective predecessors, is the subject of
any investigation by any Governmental Entity, whether federal, state, local or
foreign, with respect to (A) any Environmental Law, (B) any Remedial Action or
(C) any Environmental Claim, which in each case, individually or in the
aggregate, has had or would have a Material Adverse Effect on USI and (ii) USI
and each of its subsidiaries has filed all notices, obtained all Environmental
Permits and conducted all Remedial Actions required under all Environmental
Laws, except where the failure to file such notices, obtain such Environmental
Permits or take such Remedial Actions, individually or in the aggregate, has not
had and would not have a Material Adverse Effect on USI.
(d) Except as disclosed in any Filed USI SEC Document, USI and
each of its subsidiaries and, to the knowledge of USI, each of their respective
predecessors, have filed all notices required to be filed by them under all
Environmental Laws reporting any Release, except where failure to file such
notices, individually or in the aggregate, has not had and would not have a
Material Adverse Effect on USI.
(e) Except as disclosed in any Filed USI SEC Document, neither
USI nor any of its subsidiaries has any contingent liabilities with respect to
its business or, to the knowledge of USI, that of its predecessors in connection
with any Hazardous Substance or Environmental Law that, individually or in the
aggregate, have had or would have a Material Adverse Effect on USI.
(f) Except as disclosed in any Filed USI SEC Document,
underground storage tanks are not located on or under any Property for which USI
or any of its subsidiaries would be responsible or potentially responsible under
Environmental Law and there have been no Releases of Hazardous Substances on, in
or under any Property for which USI or any of its subsidiaries would be
responsible or potentially responsible under Environmental Law that in either
case, individually or in the aggregate, have had or would have a Material
Adverse Effect on USI.
39
(g) Except as disclosed in any Filed USI SEC Document, neither
USI nor any of its subsidiaries or, to the knowledge of USI, any of their
respective predecessors, is subject to any judicial, administrative or arbitral
actions, suits, proceedings (public or private), written claims or governmental
proceedings alleging the violation of any Environmental Law or Environmental
Permit that, individually or in the aggregate, have had or would have a Material
Adverse Effect on USI.
(h) Except as disclosed in any Filed USI SEC Document, neither
USI nor any of its subsidiaries or, to the knowledge of USI, any of their
respective predecessors, as a result of their respective past and current
operations, has caused or permitted any Hazardous Substances to remain or be
disposed of, either on or under any Property of USI or on any real property,
otherwise than in substantial compliance with all applicable Environmental Laws,
in a manner that, individually or in the aggregate, has had or would have a
Material Adverse Effect on USI.
SECTION 4.13 - Tax Matters. Except as disclosed in Section
4.13 of the USI Disclosure Schedule or as disclosed in any Filed USI SEC
Document:
(a) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, (i)
USI and each of its subsidiaries, and each affiliated group (within the meaning
of Section 1504 of the Code) of which USI or any of its subsidiaries is or has
been a member, has timely filed all federal income tax returns and all other Tax
(as defined below) returns and reports required to be filed by it, (ii) all such
Tax returns are complete and correct in all respects and (iii) USI and each of
its subsidiaries has paid (or USI has paid on its subsidiaries' behalf) all
Taxes due in respect of the taxable periods covered by such Tax returns.
(b) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, no
deficiencies for any Taxes have been proposed, asserted or assessed against USI
or any of its subsidiaries that have not been fully paid or adequately provided
for in the appropriate financial statements of USI and its subsidiaries.
(c) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, (i)
no requests for waivers of the time to assess any Taxes are pending, and no
power of attorney with respect to any Taxes has been executed or filed with any
taxing authority and (ii) no issues relating to Taxes have been raised in
writing by the relevant taxing authority during any pending audit or
examination. The federal income Tax returns of USI and each of its subsidiaries
40
consolidated in such Tax returns have been reviewed with the Internal Revenue
Service for all years through September 28, 1985.
(d) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, no
Liens for Taxes exist with respect to any assets or properties of USI or any of
its subsidiaries, except for statutory liens for Taxes not yet due.
(e) None of USI or any of its subsidiaries is a party to or is
bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority).
(f) None of USI or any of its subsidiaries has taken or agreed
to take any action that would prevent the USI Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
(g) There are no employment, severance or termination
agreement, other compensation arrangement or Employee Benefit Plan currently in
effect which provide for the payment of any amount (whether in cash or property
or the vesting of property) that would not be deductible by reason of Section
162(m) of the Code.
(h) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, USI
and its subsidiaries have complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes.
(i) Subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI, no
federal, state, local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any federal income or
material state, local or foreign Taxes or Tax returns of USI or its subsidiaries
and neither USI nor any of its subsidiaries has received a written notice of any
pending audit or proceeding.
(j) Neither USI nor any of its subsidiaries has agreed to or
is required to make any adjustment under Section 481(a) of the Code.
(k) Neither USI nor any of its subsidiaries has (i) with
regard to any assets or property held or acquired by any of them, filed a
consent to the application of Section
41
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by USI or any of its subsidiaries, (ii) executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
similar provision of state, local or foreign law or (iii) received or filed any
requests for rulings or determinations in respect of any Taxes within the last
five years.
(l) No property owned by USI or any of its subsidiaries (i) is
property required to be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986;
(ii) constitutes "tax exempt use property" within the meaning of Section
168(h)(1) of the Code; or (iii) is "tax exempt bond financed property" within
the meaning of Section 168(g) of the Code.
(m) USI and each of its subsidiaries are not currently, have
not been within the last five years, and do not anticipate becoming a "United
States real property holding company" within the meaning of Section 897(c) of
the Code.
(n) No subsidiary of USI owns any Shares.
SECTION 4.14 - No Prior Activities. Except for obligations
incurred in connection with its incorporation or organization, or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby, none of Superholdco or the Merger Subsidiaries has incurred any
obligation or liability, or engaged in any business or activity of any type or
kind whatsoever, or entered into any agreement or arrangement with any person or
entity.
SECTION 4.15 - Brokers. No broker, finder or investment banker
(other than Credit Suisse First Boston Corporation) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of USI, Superholdco or any of the Merger Subsidiaries or any of their
affiliates.
SECTION 4.16 - Accounting Matters. Neither USI nor, to its
knowledge, any of its affiliates, has taken or agreed to take any action that
would prevent Superholdco from accounting for the transactions to be effected
pursuant to Article 1 of this Agreement in accordance with the Pooling of
Interests Method of Accounting. USI has not failed to bring to the attention of
Xxxx any actions, or agreements or understandings, whether written or oral, to
act that would be reasonably likely to prevent Superholdco from accounting for
the
42
transactions to be effected pursuant to Article 1 of this Agreement in
accordance with the Pooling of Interests Method of Accounting.
SECTION 4.17 - Absence of Certain Status. Neither USI nor any
of its affiliates is an "interested stockholder" of Xxxx within the meaning of
Section 2553 of Pennsylvania Law or an "Interested Person" within the meaning of
Article Seventh of Xxxx'x Articles of Incorporation.
SECTION 4.18 - Full Disclosure. None of the representations or
warranties of USI and the Merger Subsidiaries contained in this Article 4 nor
any of the disclosures contained in the USI Disclosure Schedule 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 contained
herein or therein, in light of the circumstances under which they are to be
made, not misleading, subject to such exceptions which, individually or in the
aggregate, have not had and would not have a Material Adverse Effect on USI.
ARTICLE 5
COVENANTS
SECTION 5.1 - Conduct of Business of Xxxx and USI. Except as
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, Xxxx and USI will, and will cause their respective subsidiaries
to, conduct their respective operations in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, seek to
keep available the service of its current officers and employees and seek to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Effective Time, Xxxx and USI shall not, and shall not permit their
respective subsidiaries to, without the prior written consent of the other which
consent shall not be unreasonably withheld:
(a) amend its certificate or articles of incorporation
or bylaws (or other similar governing instrument);
43
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities or equity equivalents (including,
without limitation, any stock options or stock appreciation rights), except for
(i) the issuance, sale or delivery of shares of Xxxx Common Stock upon the
exercise of outstanding options granted prior to the date hereof under the Xxxx
Stock Incentive Plans, upon the exercise of Rights, upon the conversion of
outstanding shares of Xxxx Preferred Stock, or pursuant to any obligation with
respect to employer matching contributions under any 401(k) plan listed in
Section 3.11 of the Xxxx Disclosure Schedule, (ii) the issuance, sale or
delivery of shares of stock or other securities or equity equivalents pursuant
to any compensation or benefit plan or arrangement or agreement maintained by
USI or any of its subsidiaries or to which USI or any of its subsidiaries is a
party, and (iii) any issuance, sale or delivery of shares of stock or other
securities or equity equivalents in respect of which USI or any subsidiary of
USI receives consideration having a value substantially equivalent to or greater
than the value of the stock or other securities or equity equivalents so issued,
sold or delivered, as determined in good faith by the USI Board;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend (other than quarterly dividends of
no more than $0.25 per share of Xxxx Preferred Stock, $0.10 per share of Xxxx
Common Stock and $0.05 per share of USI Common Stock) or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any of
its securities or any securities of any of its subsidiaries (other than any
redemption of the Rights and any such distributions, payments, redemptions or
acquisitions made or effected by any wholly owned subsidiary of Xxxx or USI to
and from the corporate parent of such subsidiary);
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of Xxxx, USI or any of their respective subsidiaries (except that
USI and/or any subsidiary of USI may adopt a plan of merger in connection with
an acquisition or disposition of a business or assets, except for any such plan
of merger which would have a Material Adverse Effect on USI);
(e) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any subsidiary except (i) with respect to any subsidiary of USI, any such
alteration which would not have a Material Adverse Effect on USI and (ii) with
respect to any subsidiary of Xxxx, any such alteration described in Section
3.1(b) of the Xxxx Disclosure Schedule;
44
(f) in the case of Xxxx and its subsidiaries only, (i) incur
or assume any indebtedness for money borrowed or issue any debt securities,
except for borrowings (A) under lines of credit existing on the date hereof and
(B) in the ordinary course of business not in excess of $20 million in the
aggregate; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except for obligations incurred in the ordinary course of
business consistent with past practice not in excess of $20 million in the
aggregate, and except for obligations of wholly owned subsidiaries of Xxxx;
(iii) make any loans, advances or capital contributions to, or investments in,
any other person (other than to wholly owned subsidiaries of Xxxx or customary
loans or advances to employees in the ordinary course of business consistent
with past practice and in amounts not material to the maker of such loan or
advance); (iv) pledge or otherwise encumber shares of capital stock of Xxxx or
its subsidiaries, otherwise than pursuant to the terms of existing credit
facilities; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon, except
pursuant to the terms of credit facilities existing on the date hereof;
(g) in the case of Xxxx and its subsidiaries only, except as
may be required by law or as contemplated by this Agreement, enter into, adopt
or amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund, award or other arrangement for the benefit
or welfare of any director, officer or employee in any manner, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to Xxxx, and as required under existing
agreements or in the ordinary course of business generally consistent with past
practice) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units);
(h) in the case of Xxxx and its subsidiaries only, acquire,
sell, lease or dispose of any assets except (i) acquisitions of raw materials in
the ordinary course of business, (ii) acquisitions of assets with a fair market
value of less than $25 million in the aggregate, (iii) sales of inventory in the
ordinary course of business, and (iv) sales, leases or dispositions of assets
with a fair market value of less than $25 million in the aggregate; or enter
into any commitment or transaction outside the ordinary course of business or
grant any exclusive distribution rights;
45
(i) in the case of Xxxx and its subsidiaries only, except as
may be required as a result of a change in law or in generally accepted
accounting principles, change any of the accounting principles or practices used
by it;
(j) in the case of Xxxx and its subsidiaries only, revalue in
any material respect any of its assets, including, without limitation, writing
down the value of inventory or writing-off notes or accounts receivable, other
than in the ordinary course of business;
(k) in the case of Xxxx and its subsidiaries only, (i) acquire
(by merger, consolidation, or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or any equity
interest therein, except for such acquisitions with a fair market value of less
than $25 million in the aggregate; (ii) enter into or amend any contract or
agreement, other than in the ordinary course of business; or (iii) authorize any
new capital expenditure or expenditures which, individually, is in excess of $3
million or, in the aggregate, are in excess of $10 million; provided, that none
of the foregoing shall limit any capital expenditure already approved by the
Xxxx Board prior to the date hereof and disclosed to USI;
(l) in the case of Xxxx and its subsidiaries only, make or
revoke any tax election or settle or compromise any tax liability material to
Xxxx and its subsidiaries taken as a whole or change (or make a request to any
taxing authority to change) any material aspect of its method of accounting for
tax purposes;
(m) in the case of Xxxx and its subsidiaries only, pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of Xxxx and its
subsidiaries or incurred in the ordinary course of business consistent with past
practice and the payment, discharge and satisfaction of all obligations under
Xxxx'x existing bank credit facility prior to or concurrently with the Effective
Time.
(n) in the case of Xxxx and its subsidiaries only, settle or
compromise any pending or threatened suit, action or claim relating to the
transactions contemplated hereby;
(o) in the case of Xxxx and its subsidiaries only, take any
material action in connection with the Chapter 11 case of U.S. Brass, pending in
the United States Bankruptcy Court, Eastern District of Texas (case no
94-408233) that is not contemplated by the Plan or an order of such Bankruptcy
Court confirming the Plan or propose or agree to any material
46
amendment to or modification of the Plan or such order (it being understood that
nothing contained in this Section 5.1(o) is intended in any way to affect the
duties, obligations or responsibilities of U.S. Brass as a debtor under Chapter
11 of the Bankruptcy Code); or
(p) take or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through 5.1(o) or any action which would
make any of the representations or warranties of Xxxx contained in this
Agreement untrue or incorrect in any material respect.
SECTION 5.2 - Preparation of S-4 and the Joint Proxy
Statement. USI and Xxxx will, as promptly as practicable, jointly prepare the
Joint Proxy Statement. Superholdco will, as promptly as practicable, file with
the SEC the S-4, which shall contain the Joint Proxy Statement and forms of
proxy, in connection with the registration under the Securities Act of the
shares of Superholdco Common Stock issuable upon conversion of the Shares and
the other transactions contemplated hereby. USI and Xxxx will, and will cause
their accountants and lawyers to, use all reasonable best efforts to cause the
S-4 to be declared effective as promptly as practicable, including, without
limitation, causing their accountants to deliver necessary or required
instruments such as opinions, consents and certificates, and will take any other
action required or necessary to be taken under federal or state securities laws
or otherwise in connection with the registration process; provided, that the
Parties will have no obligation to cause the S-4 to be declared effective if the
SEC does not allow the Mergers to be accounted for under GAAP as a
"pooling-of-interests". Each of USI and Xxxx will use its reasonable best
efforts to cause the Joint Proxy Statement to be mailed to its stockholders at
the earliest practicable date after the effectiveness of the S-4.
SECTION 5.3 - No Solicitation.
(a) Until the valid termination of this Agreement, Xxxx shall
not, and shall not authorize or permit any of its subsidiaries, or any of its or
its subsidiaries' officers, directors, employees, representatives, agents or
affiliates (including, without limitation, any investment banker, financial
advisor, attorney, accountant or other representative of Xxxx or any of its
subsidiaries), to, directly or indirectly, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal (as defined below); provided, however, that if, at any time
prior to the date on which the stockholders of Xxxx vote to approve the Xxxx
Merger, the Xxxx Board determines in good faith and based upon the advice of
outside legal counsel that such action is necessary for the Xxxx Board to comply
with its fiduciary duties under applicable law, Xxxx may, in response to a bona
fide, written
47
Acquisition Proposal made subsequent to the date hereof, (x) after providing
reasonable prior notice to USI to the effect that it is taking such action,
which notice shall include the identity of the person or entity requesting such
information, furnish information with respect to Xxxx to any person pursuant to
a confidentiality agreement on terms no less favorable to Xxxx than the
Confidentiality Agreement dated as of October 13, 1997, as amended on January 1,
1998, between Xxxx and USI (the "Confidentiality Agreement") and (y) participate
in discussions, investigations and/or negotiations regarding such Acquisition
Proposal. Xxxx will promptly (and in no event later than 24 hours after receipt
of any Acquisition Proposal) notify USI after any receipt of any Acquisition
Proposal, which notice shall be provided orally and in writing and shall
identify the person making such Acquisition Proposal and set forth the material
terms thereof. For purposes of this Agreement, "Acquisition Proposal" means any
inquiry, proposal or offer relating to any of the following (other than the
transactions contemplated by this Agreement) involving Xxxx or any of its
subsidiaries: (w) any merger, consolidation, share exchange, recapitalization,
business combination or other similar transaction; (x) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 20 percent or more
of the assets of Xxxx and its subsidiaries, taken as a whole, in a single
transaction or series of related transactions; (y) any tender offer or exchange
offer that, if consummated, would result in any person beneficially owning more
than 20 percent of the outstanding shares of Xxxx Common Stock or the filing of
a registration statement under the Securities Act in connection therewith; or
(z) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(b) Except as set forth in this Section 5.3(b), the Xxxx Board
shall not (i) withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to USI, the approval or recommendation of the Xxxx Merger and
this Agreement by the Xxxx Board, (ii) approve or recommend, or propose publicly
to approve or recommend, any Acquisition Proposal, or (iii) cause Xxxx to enter
into any agreement (including, without limitation, any letter of intent but
excluding any confidentiality agreement) with respect to any Acquisition
Proposal. Notwithstanding the foregoing, if the Xxxx Board, after consultation
with and based upon the advice of outside legal counsel, determines in good
faith that it is necessary to do so in order to comply with its fiduciary duties
under applicable law, the Xxxx Board may withdraw or modify, or propose publicly
to withdraw or modify, in a manner adverse to USI, the approval and
recommendation of the Xxxx Merger and this Agreement by the Xxxx Board, approve
or recommend, or propose publicly to approve or recommend, a Superior Proposal
(as defined below) or cause Xxxx to enter into an agreement with respect to a
Superior Proposal, but in each case only after the expiration of five business
days after the date on which Xxxx provides written notice to USI (a "Notice of
Superior Proposal") advising USI that the Xxxx Board has received a Superior
Proposal,
48
specifying the terms and conditions of such Superior Proposal and identifying
the person making such Superior Proposal; provided, that prior to or
concurrently with entering into an agreement (including a letter of intent) with
respect to a Superior Proposal, Xxxx shall terminate this Agreement pursuant to
Section 7.1(d)(iii). For purposes of this Agreement, a "Superior Proposal" means
any Acquisition Proposal that the Xxxx Board determines (x) in its good faith
judgment (based on the advice of a financial advisor of nationally recognized
reputation) to be more favorable from a financial point of view to Xxxx'x
stockholders than the Xxxx Merger, including as part of the Xxxx Board's
determination, that, as to any cash consideration to be paid pursuant to the
Superior Proposal, the person making the Superior Proposal has all requisite
funds on hand or is reasonably capable of obtaining any requisite funds and (y)
in the manner contemplated by Subchapter B of Chapter 17 of Pennsylvania Law, to
be otherwise in the best interests of Xxxx.
(c) Nothing contained in this Section 5.3 shall prohibit the
Xxxx Board from taking and disclosing to Xxxx'x stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to Xxxx'x stockholders that the Xxxx Board, after consultation
with and based on the advice of independent legal counsel, determines in good
faith is required under applicable law.
SECTION 5.4 - Letters of Accountants. (a) Xxxx shall use its
reasonable best efforts to cause to be delivered to USI a letter of Ernst &
Young LLP ("E&Y"), Xxxx'x independent auditors, dated a date within two business
days before the date on which the S-4 shall become effective and addressed to
USI, in form and substance reasonably satisfactory to USI and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.
(b) USI shall use its reasonable best efforts to cause to be
delivered to Xxxx a letter of E&Y, USI's independent auditors, dated a date
within two business days before the date on which the S-4 shall become effective
and addressed to Xxxx, in form and substance reasonably satisfactory to Xxxx and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4.
SECTION 5.5 - Meetings. Xxxx and USI each shall call a meeting
of its stockholders to be held as promptly as practicable for the purpose of
voting upon this Agreement and the Xxxx Merger (with respect to Xxxx) and this
Agreement and the USI Merger (with respect to USI). Subject to Section 5.3(b),
Xxxx agrees that its obligations pursuant to the first sentence of this Section
5.5 shall not be affected by the commencement, public proposal, public
disclosure or communication to Xxxx of any Acquisition Proposal.
49
USI and Xxxx will, through their respective Boards of Directors, recommend to
their respective stockholders approval of this Agreement and the Xxxx Merger
(with respect to Xxxx) and this Agreement and the USI Merger (with respect to
USI), subject to the right of the Xxxx Board to modify or withdraw its
recommendation pursuant to Section 5.3(b). Xxxx and USI shall coordinate and
cooperate with respect to the timing of such meetings and each of Xxxx and USI
shall use its best efforts to hold such meetings as soon as practicable after
the date hereof; provided, that in the event that all of the conditions to
closing set forth in Article 6 of this Agreement (except the condition set forth
in Section 6.1(a)) have not been satisfied or waived prior to such meetings,
such meetings shall be adjourned until a date as soon as practicable following
the satisfaction or waiver of such conditions.
SECTION 5.6 - Access to Information.
(a) Between the date hereof and the Effective Time, each of
Xxxx and USI will give the other and its authorized representatives reasonable
access to all employees, plants, offices, warehouses and other facilities and to
all books and records of itself and its subsidiaries, will permit the other to
make such inspections as the other may reasonably require and will cause its'
officers and those of its subsidiaries to furnish the other with such financial
and operating data and other information with respect to the business,
properties and personnel of itself and its subsidiaries as the other may from
time to time reasonably request, provided that no investigation pursuant to this
Section 5.6(a) shall affect or be deemed to modify any of the representations or
warranties made by Xxxx or USI.
(b) Between the date hereof and the Effective Time, each of
Xxxx and USI shall furnish to the other (i) within five business days after the
delivery thereof to management, such monthly financial statements and data as
are regularly prepared for distribution to its management and (ii) at the
earliest time they are available, such quarterly and annual financial statements
as are prepared for its' SEC filings, which (in the case of this clause (ii)),
shall be in accordance with its books and records.
(c) Each of Xxxx and USI will hold and will cause its
consultants and advisors to hold in confidence all documents and information
concerning the other and the other's subsidiaries furnished to it in connection
with the transactions contemplated by this Agreement to the extent required by
the Confidentiality Agreement.
SECTION 5.7 - Additional Agreements; Reasonable Best Efforts.
Subject to the terms and conditions herein provided, each of the Parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable laws and
50
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) cooperation in the
preparation and filing of the Joint Proxy Statement and the S-4, any filings
that may be required under the HSR Act, and any amendments to any thereof; (ii)
cooperation in obtaining, prior to the Effective Time, the approval for listing
on the NYSE, effective upon the official notice of issuance, of the shares of
Superholdco Common Stock into which the Shares will be converted pursuant to
Article I hereof; (iii) the taking of all action reasonably necessary, proper or
advisable to secure any necessary consents of all third parties and Governmental
Entities, including those relating to existing debt obligations of Xxxx and its
subsidiaries; (iv) contesting any legal proceeding relating to the Mergers; and
(v) the execution of any additional instruments, including the Certificate of
Merger and Articles of Merger, as the case may be, necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Zurn, USI, Superholdco and the Merger Subsidiaries agree to use their
best efforts to cause the Effective Time to occur on the date of the stockholder
votes with respect to the Mergers. The provisions of this Section 5.7 will not
limit or otherwise affect the right or ability of any Party to take or omit to
take any action that it is permitted to take or omit to take, as the case may
be, pursuant to any other provisions of this Agreement, including, without
limitation, the provisions of Section 5.3 and Articles 6 and 7.
SECTION 5.8 - Antitrust Reviews. Each party hereto will use
its reasonable best efforts (a) to file with the US Department of Justice and US
Federal Trade Commission, as soon as practicable after the date hereof, the
Notification and Report Form under the HSR Act and any supplemental information
or material requested pursuant to the HSR Act, and (b) to comply as soon as
practicable after the date hereof with any other laws of any country and the
European Union under which any consent, authorization, registration, declaration
or other action with respect to the transactions contemplated herein may be
required. Each party hereto shall furnish to the other such information and
assistance as the other may reasonably request in connection with any filing or
other act undertaken in compliance with the HSR Act or other such laws, and
shall keep each other timely apprised of the status of any communications with,
and any inquiries or requests for additional information from, any Governmental
Entity under the HSR Act or other such laws. Each party hereto shall take any
and all action reasonably necessary to prevent the entry of any order,
preliminary or permanent injunction, or other legal restraint or prohibition
preventing consummation of the Xxxx Merger or any related transactions
contemplated by this Agreement, and to lift, mitigate or rescind the effect of
any litigation or administrative proceeding adversely affecting this Agreement
or any transactions contemplated herein.
SECTION 5.9 - Public Announcements. Each of USI, Superholdco,
the Merger Subsidiaries and Xxxx will consult with one another before issuing
any press release
51
or otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Mergers, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the NYSE, as determined by
USI, the Merger Subsidiaries or Xxxx, as the case may be.
SECTION 5.10 - Indemnification; Directors' and Officers'
Insurance.
(a) Indemnification. From and after the Effective Time,
Superholdco shall, to the fullest extent permitted by applicable law, indemnify,
defend and hold harmless each person who is now, or has been at any time prior
to the date hereof, or who becomes prior to the Effective Time, a director,
officer or employee of any party hereto or any subsidiary thereof (each an
"Indemnified Party" and, collectively, the "Indemnified Parties") against all
losses, expenses (including reasonable attorneys' fees and expenses), claims,
damages, liabilities and, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of any threatened or actual
claim, action, suit, proceeding or investigation (whether threatened or
commenced prior to, at or after the Effective Time) that, in whole or in part,
is (i) based on or arises out of the fact that such person is or was a director,
officer or employee of such party or a subsidiary of such party or (ii) based
on, arises out of or pertains to the transactions contemplated by this
Agreement. Without limiting the generality or effect of the immediately
preceding sentence, in the event of any such threatened or actual claim, action,
suit, proceeding or investigation, (i) Superholdco shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel shall
be reasonably satisfactory to Superholdco, promptly after statements therefor
are received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, in either case to the
extent not prohibited by applicable law and upon receipt of any affirmation and
undertaking required by applicable law, (ii) Superholdco will cooperate in the
defense of any such matter and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under applicable law shall be made by independent counsel mutually
acceptable to Superholdco and the Indemnified Party; provided, however, that
Superholdco shall not be liable for any settlement effected without its written
consent (which consent shall not be reasonably withheld). The Indemnified
Parties as a group may retain only one law firm with respect to each related
matter except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of any two or more
Indemnified Parties.
52
(b) Insurance. For a period of 6 years after the Effective
Time, Superholdco shall cause to be maintained in effect the policies of
directors' and officers' liability insurance maintained by Xxxx for the benefit
of those persons who are covered by such policies at the Effective Time (or
Superholdco may substitute therefor policies of at least the same coverage with
respect to matters occurring prior to the Effective Time), to the extent that
such liability insurance can be maintained annually at a cost to Superholdco not
greater than 200 percent of the premium for the current Company directors' and
officers' liability insurance; provided that if such insurance cannot be so
maintained or obtained at such costs, Superholdco shall maintain or obtain as
much of such insurance as can be so maintained or obtained at a cost equal to
200 percent of the current annual premiums of Xxxx for such insurance.
(c) Survival of Indemnification. To the fullest extent
permitted by law, from and after the Effective Time, all rights to
indemnification now existing in favor of the employees, agents, directors or
officers of USI and its subsidiaries, on the one hand, and Xxxx and its
subsidiaries, on the other hand, with respect to their capacities or activities
as such prior to the Effective Time, as provided in USI's certificate of
incorporation or bylaws or Xxxx'x articles of incorporation or bylaws, in effect
on the date thereof or otherwise in effect on the date hereof, shall survive the
USI Merger or Xxxx Merger, as the case may be, and shall continue in full force
and effect for a period of the lesser of six years from the Effective Time and
the expiration of the applicable statute of limitations.
(d) Successors. In the event Superholdco or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of Superholdco assume
the obligations set for in this Section 5.10.
(e) Benefit. The provisions of this Section 5.10 are intended
to be for the benefit of, and shall be enforceable by, each Indemnified Party,
his or her heirs and his or her representatives.
SECTION 5.11 - Notification of Certain Matters. Xxxx shall
give prompt notice to USI and USI shall give prompt notice to Xxxx of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time, (ii) any material failure of Zurn, USI, Superholdco or the
Merger Subsidiaries, as the case may be, to comply with or satisfy
53
any covenant, condition or agreement to be complied with or satisfied by it
hereunder, (iii) any notice of, or other communication relating to, a default or
event which, with notice or lapse of time or both, would become a default,
received by it or any of its subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any contract or agreement
material to the business, financial condition results of operations of it and
its subsidiaries taken as a whole to which it or any of its subsidiaries is a
party or is subject, (iv) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, or (v) any
material adverse change in business, financial condition or results of
operations of it and its subsidiaries taken as a whole, other than changes
resulting from general economic conditions; provided, however, that the delivery
of any notice pursuant to this Section 5.11 shall not cure such breach or
non-compliance or limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
SECTION 5.12 - Pooling. Each of the Parties agrees that it
will not take any action which could prevent Superholdco from accounting for the
transactions to be effected pursuant to Article 1 of this Agreement in
accordance with the Pooling of Interests Method of Accounting and Xxxx will
bring to the attention of USI, and USI will bring to the attention of Xxxx, any
actions, or agreements or understandings, whether written or oral, that could be
reasonably likely to prevent Superholdco from accounting for the transactions to
be effected pursuant to Article 1 of this Agreement in accordance with the
Pooling of Interests Method of Accounting. Xxxx and USI shall use their
reasonable best efforts to cause E&Y, the independent auditors for both Xxxx and
USI, to deliver to USI and Xxxx a letter dated as of the Closing Date, addressed
to Superholdco, Xxxx and USI, stating that after appropriate review of this
Agreement and based upon its familiarity with Superholdco, Xxxx and USI,
Superholdco, Xxxx and USI are entities that would qualify as parties to a
pooling of interests transaction under XXX Xx. 00 and applicable SEC rules and
regulations.
SECTION 5.13 - Tax-Free Reorganization Treatment. Zurn, USI,
Superholdco and the Merger Subsidiaries shall execute and deliver to Xxxxx, Day,
Xxxxxx & Xxxxx, counsel to Xxxx, and Weil, Gotshal & Xxxxxx LLP, counsel to USI,
Superholdco and the Merger Subsidiaries, certificates relating to the tax-free
reorganization treatment substantially in the forms to be agreed to by the
parties as promptly as practicable following the date hereof, at such time or
times as may be reasonably requested by such law firms in connection with their
respective deliveries of opinions with respect to the transactions contemplated
hereby. Prior to the Effective Time, none of Zurn, USI, Superholdco or the
Merger Subsidiaries shall take or cause to be taken any action which would cause
to be untrue (or fail to take or cause not to be taken any action which would
cause to be untrue) any of the representations in such certificates.
54
SECTION 5.14 - Company Affiliates. Each of Xxxx and USI has
identified to the other each of its affiliates (as such term is defined in Rule
12b-2 under the Exchange Act) and each such affiliate has delivered to USI on or
prior to the date hereof, a written agreement in the form of Annex D-1 or D-2
hereto, as appropriate, that (i) such affiliate will not sell, pledge, transfer
or otherwise dispose of any shares of Superholdco Common Stock issued to such
affiliate pursuant to the Mergers, except in compliance with Rule 145
promulgated under the Securities Act or an exemption from the registration
requirements of the Securities Act and (ii) from and after the earlier of (x)
the mailing of the Joint Proxy Statement and (y) the thirtieth day prior to the
Effective Time, such affiliate will not sell or in any other way reduce such
affiliate's risk relative to any shares of Superholdco Common Stock received or
to be received in the Mergers (within the meaning of the SEC's Financial
Reporting Release No. 1, "Codification of Financing Reporting Policies," ss.
201.01 47 F.R. 21028 (April 15, 1982)), until such time as financial results
(including combined sales and net income) covering at least 30 days of
post-merger operations have been published, except as permitted by Staff
Accounting Bulletin No. 76 issued by the SEC.
SECTION 5.15 - SEC Filings. Each of USI and Xxxx shall
promptly provide the other party (or its counsel) with copies of all filings
made by the other party or any of its subsidiaries with the SEC or any other
state or federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 5.16 - Employment and Employee Benefit Matters.
(a) Subject to the provisions of any agreement that may be
entered into between Superholdco or any of its subsidiaries and any Covered
Employee (as defined below) in connection with the execution and delivery of
this Agreement, Superholdco shall, and shall cause its subsidiaries following
the Effective Time (including Xxxx as a Surviving Corporation) to:
(i) honor and provide for payment of all
obligations and benefits under all Employee Benefit Plans in accordance with
their terms on the date hereof and as amended in accordance with the provisions
of this Agreement;
(ii) honor and provide for the payment of
all obligations and benefits under all employment or severance agreements
between Xxxx and any employee or former employee who is or had been an employee
of Xxxx or any of its subsidiaries on or before the Closing Date (each, a
"Covered Employee") in accordance with their terms on the date hereof and as
amended in accordance with the provisions of this Agreement and, except
55
as provided in Section 5.16(a)(ii) of the Xxxx Disclosure Schedule, Xxxx as a
Surviving Corporation shall be deemed to have assumed, as of the Effective Time,
all of Xxxx'x obligations under such agreements;
(iii) provide from and after the Effective
Time until (i) the end of the transition period described in Section
410(b)(6)(C) of the Code with respect to any Employee Benefit Plan which is
intended to be "qualified" within the meaning of Section 401(a) and 401(k), if
applicable, and Section 501(a) of the Code and (ii) the second anniversary of
the Closing Date with respect to all other Employee Benefit Plans (collectively,
the "Benefits Maintenance Period"), employee benefits which are at least
substantially comparable (as determined in good faith by the management of
Superholdco) in the aggregate to the level of employee benefits provided by Xxxx
and its subsidiaries under the Employee Benefit Plans in effect as of the
Closing Date for the benefit of Covered Employees provided that there shall be
no obligation pursuant to this clause (iii) to provide any stock option plan or
long-term incentive plan; and
(iv) provide until the first anniversary
of the Closing Date for the benefit of Covered Employees who remain in the
employ of Xxxx as a Surviving Corporation or Superholdco or any of its
affiliates employee compensation plans that are in the aggregate at a level at
least substantially comparable (as determined in good faith by the management of
Superholdco) to the employee compensation plans (including base pay and
incentive-type compensation plans, subject, in the case of incentive-type
compensation plans, to satisfaction of incentive criteria established by
Superholdco under such plans) provided by Xxxx and its subsidiaries under the
compensation arrangements in effect as of the Closing Date (it being understood
that the general structure of Xxxx'x existing compensation plans, including the
award opportunities to be made available under incentive-type compensation
plans, will be maintained).
(b) If Covered Employees are included in any benefit plan
(including, without limitation, provision for vacation) of Superholdco or its
subsidiaries, Superholdco agrees that the Covered Employees shall receive credit
as employees of Superholdco and its subsidiaries for service prior to the
Closing Date with Xxxx and its subsidiaries to the same extent such service was
counted under similar Employee Benefit plans for purposes of eligibility,
vesting and eligibility for retirement. In addition, with respect to vacation,
disability and severance, such service will also be counted for benefit accrual.
If Covered Employees are included in any medical, dental or health plan other
than the plan or plans they participated in on the Closing Date, Superholdco
agrees that any such plans shall not include pre-existing condition exclusions,
except to the extent such exclusions were applicable under the similar Employee
Benefit Plan on the Closing Date, and shall provide
56
credit for any deductibles and co-payments applied or made with respect to each
Covered Employee in the calendar year of the change.
(c) Prior to the Effective Time, the Xxxx Board will take or
cause to be taken (i) such actions in respect of the Xxxx Executive Incentive
Plan and the Xxxx Long- Term Incentive Plan as may be necessary to provide that
for the purposes of determining all awards thereunder that are to be determined
with reference to Xxxx'x performance for its fiscal year ending March 31, 1998,
the effects of all transaction costs and non-recurring charges associated with
or taken in contemplation of the Xxxx Merger shall be disregarded and (ii) such
actions in respect of the 401(k) plans listed in Section 3.11(a) of the Xxxx
Disclosure Schedule as may be necessary to provide that employee matching
contributions under such plans made after the Effective Time will be made in
Superholdco Common Stock, rather than in shares of Xxxx Common Stock and for
purposes of calculating the amount of the employer matching contributions under
such plans, the effects of all transaction costs and nonrecurring charges
associated with or taken in contemplation of the Xxxx Merger shall be
disregarded.
(d) Prior to the Effective Time, the Xxxx Board shall have
adopted and approved amendments, in form and substance reasonably satisfactory
to USI, to the 1986 Retirement Plan for Outside Directors of Xxxx Industries,
Inc., the Long Term Incentive Plan and the Xxxx Industries, Inc. Deferred
Compensation Plan for Non-Employee Directors, providing that, at the Effective
Time, payment of all obligations and benefits under such plans shall be made in
accordance with their terms and such plans shall terminate, and further provided
that the Long Term Incentive Plan shall not be extended for any period beyond
March 31, 1998 without the express written consent of USI.
(e) At the Effective Time, Superholdco shall assume
sponsorship of all stock option and/or restricted stock plans sponsored by each
of Xxxx and USI, and Xxxx and USI shall consent to such assumptions by
Superholdco.
(f) In the case of Employee Benefit Plans and USI Employee
Benefit Plans under which the employees' interests are based upon Xxxx Common
Stock and USI Common Stock respectively, or the respective market prices thereof
(but which interests do not constitute stock options), USI and Xxxx agree that
such interests shall, from and after the Effective Time, be based on Superholdco
Common Stock in accordance with the applicable Exchange Ratio.
(g) With respect to all Employee Benefit Plans and USI
Employee Benefit Plans which have entitlement or vesting terms that are based
upon the market price or value
57
per share of Xxxx Common Stock and USI Common Stock respectively, Xxxx and USI
agree that from and after the Effective Time, such market price or value per
share shall be adjusted by multiplying it by the inverse of the applicable
Exchange Ratio.
(h) Without limiting the applicability of Sections 2.8 and 2.9
hereof, each of the Parties shall take all actions as are necessary to ensure
that Xxxx and USI will not at the Effective Time be bound by any options, SARs,
warrants or other rights or agreements which would entitle any person, other
than Superholdco, to own any capital stock of Xxxx and USI or to receive any
payment in respect thereof.
(i) Prior to the Effective Time, Xxxx will use its reasonable
best efforts to contact any individual holding outstanding Options and to obtain
from such individual a written agreement that such individual will not require
Xxxx to purchase for cash any of such individual's Options under any stock
option plan of Xxxx.
(j) The parties acknowledge that nothing in this Section 5.16
shall be deemed to be a commitment on the part of Superholdco or Xxxx as a
Surviving Corporation to provide employment to any person for any period of time
and, except as otherwise provided in this Section 5.16, nothing herein shall be
deemed to prevent Superholdco or Xxxx as a Surviving Corporation from amending
or terminating any Employee Benefit Plan in accordance with its terms.
SECTION 5.17 - Location of Xxxx Headquarters. Superholdco has
no intention of changing the location of Xxxx'x executive headquarters and
agrees, for a period of at least three years after the Effective Time, that
Xxxx'x executive headquarters will remain at its present location in Addison,
Texas.
SECTION 5.18 - Redemption of Xxxx Preferred Stock. As soon as
practicable following the date hereof, Xxxx shall mail a notice of redemption to
all holders of record of Xxxx Preferred Stock which fixes a date not later than
45 days from the date of such mailing on which Xxxx will redeem all outstanding
shares of Xxxx Preferred Stock for $40.00 per share, plus accrued and unpaid
dividends up to and including the date fixed for redemption (the "Redemption
Date"). On the Redemption Date, Xxxx shall redeem all outstanding shares of Xxxx
Preferred Stock in accordance with the terms thereof.
SECTION 5.19 - Refinancing. On or prior to the Closing Date,
USI will obtain financing sufficient to pay all of the outstanding principal of
and accrued interest on Xxxx'x existing bank credit facility, which principal
amount shall not exceed $154,771,393, plus amounts borrowed after the date
hereof in accordance with this Agreement, plus accrued
58
and unpaid interest and any related costs and expenses incurred by the lenders
thereunder in connection with the transactions contemplated by this Agreement.
Superholdco agrees that it will pay, or cause to be paid, all of the amounts
described in the preceding sentence prior to or concurrently with the Effective
Time.
SECTION 5.20 - Guarantee of Performance. USI hereby guarantees
the performance by each of Superholdco and the Merger Subsidiaries of its
obligations under this Agreement.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGERS
SECTION 6.1 - Conditions to Each Party's Obligations to Effect
the Mergers. The respective obligations of each party hereto to effect the
Mergers are subject to the satisfaction or written waiver on or prior to the
Closing Date of the following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of Xxxx and of USI;
(b) no statute, rule, regulation, executive order, decree,
ruling or injunction which has the continuing effect of prohibiting the
consummation of the Mergers shall have been enacted, entered, promulgated or
enforced against any Party by any United States court or United States
governmental authority;
(c) any waiting period applicable to the Mergers under the HSR
Act shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received, subject to such exceptions as
would not, individually or in the aggregate, have a Material Adverse Effect on
Superholdco;
(d) the S-4 shall have become effective under the Securities
Act and shall not be the subject of any stop order or proceedings seeking a stop
order;
(e) each of Superholdco and Xxxx shall have received a letter
from E&Y dated as of the Closing Date and addressed to Superholdco and Xxxx, as
applicable, stating in substance that each of the Mergers will qualify as a
pooling of interests transaction under XXX Xx. 00 and applicable SEC rules and
regulations; and
59
(f) the Superholdco Common Stock issuable in the Mergers shall
have been authorized for listing on the NYSE, upon official notice of issuance.
SECTION 6.2 - Additional Conditions to the Obligation of Xxxx.
The obligation of Xxxx to effect the Xxxx Merger is also subject to the
satisfaction or written waiver on or prior to the Closing Date of the following
conditions:
(a) the representations and warranties of USI, Superholdco and
the Merger Subsidiaries contained in this Agreement or in any other document
delivered pursuant hereto shall be true and correct in all material respects on
and as of the Closing Date with the same effect as if made on and as of the
Closing Date, and at the Closing USI, Superholdco and the Merger Subsidiaries
shall have delivered to Xxxx a certificate to that effect signed by an executive
officer of USI, Superholdco, and each Merger Subsidiary;
(b) each of the obligations of USI, Superholdco and the Merger
Subsidiaries to be performed on or before the Closing Date pursuant to the terms
of this Agreement shall have been duly performed in all material respects on or
before the Closing Date and at the Closing USI and the Merger Subsidiaries shall
have delivered to Xxxx a certificate to that effect signed by an executive
officer of USI, Superholdco and each Merger Subsidiary;
(c) Xxxxx, Day, Xxxxxx & Xxxxx, counsel to Xxxx, shall have
delivered to Xxxx an opinion, dated the Closing Date and addressed to Xxxx,
substantially to the effect that (on the basis of the representations and
assumptions set forth in such opinion) (i) no gain or loss will be recognized
for federal income tax purposes by Superholdco, Xxxx or Z-Sub as a result of the
Xxxx Merger; and (ii) no gain or loss will be recognized for federal income tax
purposes by a stockholder of Xxxx upon the exchange of Xxxx Common Shares for
Xxxx Common Merger Consideration pursuant to the Xxxx Merger (other than with
respect to cash received in lieu of fractional shares of Superholdco Common
Stock);
(d) USI shall have received the opinion described in Section
6.3(c) in form and substance satisfactory to Xxxx; and
(e) the Board of Directors of Superholdco shall consist of the
Board of Directors of USI immediately prior to the Effective Time, together with
Xxxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx, if they are willing to serve as
directors of Superholdco.
SECTION 6.3 - Additional Conditions to the Obligations of USI
and the Merger Subsidiaries. The respective obligations of USI and the Merger
Subsidiaries to effect
60
the USI Merger are also subject to the satisfaction or written waiver on or
prior to the Closing Date of the following conditions:
(a) the representations and warranties of Xxxx contained in
this Agreement or in any other document delivered pursuant hereto shall be true
and correct in all material respects on and as of the Closing Date with the same
effect as if made on and as of the Closing Date, and at the Closing Xxxx shall
have delivered to USI a certificate to that effect signed by an executive
officer of Xxxx;
(b) each of the obligations of Xxxx to be performed on or
before the Closing Date pursuant to the terms of this Agreement shall have been
duly performed in all material respects on or before the Closing Date and at the
Closing Xxxx shall have delivered to USI a certificate to that effect signed by
an executive officer of Xxxx;
(c) Weil, Gotshal & Xxxxxx LLP, counsel to USI, shall have
delivered to USI an opinion, dated the Closing Date and addressed to USI,
substantially to the effect that (on the basis of the representations and
assumptions set forth in such opinion) (i) no gain or loss will be recognized
for federal income tax purposes by Superholdco, USI or B-Sub as a result of the
formation of Superholdco, B-Sub and Z-Sub and the USI Merger; and (ii) no gain
or loss will be recognized for federal income tax purposes by a stockholder of
USI upon the exchange of USI Common Stock for USI Merger Consideration pursuant
to the USI Merger;
(d) Xxxx shall have received the opinion described in Section
6.2(c) in form and substance satisfactory to USI; and
(e) USI shall have received reasonably satisfactory evidence
that all outstanding shares of Xxxx Preferred Stock have been redeemed by Xxxx
in accordance with the terms thereof.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1 - Termination. This Agreement may be terminated at
any time, prior to the Effective Time:
(a) by mutual written consent of USI and Xxxx;
61
(b) by USI or Xxxx if the Closing shall not have occurred on
or before July 31, 1998, except that if the Joint Proxy Statement has not been
mailed to the stockholders of USI and Xxxx on or before July 1, 1998 because the
S-4 has not been declared effective by the SEC prior to such date, the earliest
date on which USI or Xxxx may terminate this Agreement because the Closing shall
not have occurred shall be August 31, 1998 (the applicable date being the
"Outside Date") provided that no Party may terminate this Agreement pursuant to
this Section 7.1(b) if such Party's failure or the failure of any affiliate of
such Party to fulfill any of its obligations under this Agreement shall have
been the reason that the Effective Time shall not have occurred on or before
said date;
(c) by USI or Xxxx if (i) Xxxx shall have convened a meeting
of its stockholders and failed to obtain the requisite vote to approve this
Agreement and the Xxxx Merger, (ii) USI shall have convened a meeting of its
stockholders and failed to obtain the requisite vote to approve this Agreement
and the USI Merger, or (iii) if any federal or state court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree or
ruling, or taken any other action, permanently enjoining or otherwise
prohibiting either of the Mergers, provided that neither party may terminate
this Agreement pursuant to this clause (iii) if it has not complied with its
obligations under Sections 5.7 and 5.8.
(d) by Xxxx, if (i) there shall have been a breach of any
representation or warranty on the part of USI, Superholdco or the Merger
Subsidiaries set forth in this Agreement, or if any representation or warranty
of USI, Superholdco or the Merger Subsidiaries shall have become untrue, in any
case such that the conditions set forth in Section 6.2(a) would be incapable of
being satisfied by the Outside Date, (ii) there shall have been a material
breach by USI, Superholdco or the Merger Subsidiaries of any of their respective
covenants or agreements hereunder and such breach shall not have been cured
within 15 days after notice by Xxxx thereof, or (iii) Xxxx concurrently with or
immediately following such termination enters into an agreement (including a
letter of intent) providing for the consummation of the transactions
contemplated by a Superior Proposal after complying with the terms of Section
5.3(b), including, without limitation, the expiration of the five-business day
period contemplated thereby (provided that such termination shall not be
effective until payment of the amount required under Section 7.3(a)).
(e) by USI if (i) there shall have been a breach of any
representation or warranty on the part of Xxxx set forth in this Agreement, or
if any representation or warranty of Xxxx shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) would be incapable of
being satisfied by the Outside Date, (ii) there shall have been a material
breach by Xxxx of its covenants or agreements hereunder and such breach shall
not have been cured within 15 days after notice by USI thereof, (iii) the Xxxx
Board
62
shall have withdrawn or modified, or shall have publicly proposed to withdraw or
modify, in a manner adverse to USI, the approval or recommendation of this
Agreement or the Xxxx Merger by the Xxxx Board or shall have recommended, or
shall have publicly proposed to recommend, to Xxxx'x stockholders any
Acquisition Proposal (other than the Xxxx Merger) or Xxxx shall have publicly
proposed to enter into an agreement (other than a confidentiality agreement)
providing for the consummation of the transactions contemplated by a Superior
Proposal, or (iv) the Xxxx Board shall, following the commencement, public
proposal, public disclosure or communication to Xxxx of any Acquisition
Proposal, have failed to call, give notice of, convene or hold a stockholders'
meeting to vote upon the Xxxx Merger in breach of its obligations under Section
5.5, or shall have adopted any resolution to effect any of the foregoing.
SECTION 7.2 - Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 7.1, this
Agreement (other than the provisions of this Section 7.2, and Sections 5.6(c),
5.9 and 7.3 and Article 8) shall forthwith become void and have no effect,
without any liability on the part of any party hereto or its affiliates,
directors, officers or shareholders, provided, however, that nothing contained
in this Section 7.2 shall relieve any party from liability for any willful or
intentional breach of this Agreement.
SECTION 7.3 - Fees and Expenses. (a) In the event that this
Agreement shall be terminated pursuant to:
(i) Section 7.1(c)(i) and, prior to or on the date of the
meeting of Xxxx'x stockholders there shall have been commenced, publicly
disclosed or publicly proposed any transaction (other than the Xxxx Merger)
that, if consummated, would constitute an Acquisition Proposal and, within
twelve months after the termination of this Agreement, Xxxx consummates the
transaction contemplated by (A) any Acquisition Proposal (other than the Xxxx
Merger) which shall have been commenced, publicly disclosed or publicly proposed
prior to or on the date of the meeting of Xxxx'x stockholders or (B) any
Acquisition Proposal (other than the Xxxx Merger) which contemplates the
acquisition of more than 50 percent of (x) the assets of Xxxx and its
subsidiaries, taken as a whole, or (y) the outstanding shares of Xxxx Common
Stock;
(ii) Section 7.1(e)(iv), and, within twelve months thereafter,
Xxxx consummates the transaction contemplated by (i) any Acquisition Proposal
(other than the Xxxx Merger) which shall have been commenced, publicly disclosed
or publicly proposed prior to or on the date on which the Xxxx Board shall have
failed to call, give notice of, convene or hold a stockholders' meeting to vote
upon the Xxxx Merger in breach of its
63
obligations under Section 5.5 or (ii) any Acquisition Proposal (other than the
Xxxx Merger) which contemplates the acquisition of more than 50 percent of (x)
the assets of Xxxx and its subsidiaries, taken as a whole, or (y) the
outstanding shares of Xxxx Common Stock; or
(iii) Sections 7.1(d)(iii) or 7.1(e)(iii),
then Xxxx shall pay to USI as a fee the amount of $10 million plus all actual
documented out-of-pocket fees and expenses, not to exceed $2 million, incurred
by USI, the Merger Subsidiaries and their affiliates or on their behalf in
connection with the Mergers and the consummation of all transactions
contemplated by this Agreement (including, without limitation, fees payable to
investment bankers, counsel to any of the foregoing, and accountants), in the
manner provided by Section 7.3(b).
(b) Xxxx shall pay the amounts referred to in Section 7.3(a)
as follows:
(i) in the case of a termination under Section 7.1(c)(i) in
respect of which the conditions specified in Section 7.3(a)(i) are satisfied,
such amounts shall be paid concurrently with the consummation of the transaction
referred to in Section 7.3(a)(i);
(ii) in the case of a termination under Section 7.1(e)(iv) in
respect of which the conditions specified in Section 7.3(a)(ii) are satisfied,
such amounts shall be paid concurrently with the consummation of the transaction
referred to in Section 7.3(a)(ii);
(iii) in the case of a termination under Section 7.1(d)(iii),
such amounts shall be paid prior to or concurrently with Xxxx entering into the
agreement referred to in such Section 7.1(d)(iii); and
(iv) in the case of a termination under Section 7.1(e)(iii),
such amount shall be paid within two business days after the date of such
termination.
USI or the Merger Subsidiaries will provide Xxxx in due course with invoices or
other reasonable evidence of their out-of-pocket fees and expenses upon request.
Xxxx shall in any event pay the amount of out-of-pocket fees and expenses
referred to in Section 7.3(a) within two business days of a request by USI,
subject to Xxxx'x right to demand a return of any portion as to which invoices
are not received in due course. Upon payment of the amounts provided by this
Section 7.3, Xxxx shall be fully released and discharged from any liability or
obligation under or resulting from this Agreement.
64
(c) Except as specifically provided in this Section 7.3, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby. The cost of printing the S-4 and the Joint
Proxy Statement and the cost of filing any required notification under the HSR
Act shall be borne equally by Xxxx and USI.
SECTION 7.4 - Amendment. This Agreement may be amended by
action taken by Xxxx or USI at any time before or after approval of the Mergers
by the stockholders of Xxxx and stockholders of USI but, after any such
approval, no amendment shall be made which requires the approval of such
stockholders under applicable law without such approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties
hereto.
SECTION 7.5 - Extension; Waiver. At any time prior to the
Effective Time, each Party hereto (for purposes of this Section 7.5, USI,
Superholdco and the Merger Subsidiaries shall together be deemed one party and
Xxxx shall be deemed the other party) may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance by the other party with any of the agreements
or conditions contained herein. Any agreement on the part of either party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of either
party hereto to assert any of its rights hereunder shall not constitute a waiver
of such rights.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 - Nonsurvival of Representations and Warranties.
The representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
SECTION 8.2 - Entire Agreement; Assignment. This Agreement:
(a) constitutes the entire agreement between the Parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, between the Parties with
respect to the subject matter hereof; and
65
(b) shall not be assigned by operation of law or otherwise.
SECTION 8.3 - Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to USI or
to any of the Merger
Subsidiaries to: U.S. Industries, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. XxxXxxx, Esq.
Facsimile: (000) 000-0000
with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
if to Xxxx to: Xxxx Industries, Inc.
00000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to: Xxxxx, Day, Xxxxxx & Xxxxx
2300 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
66
SECTION 8.4 - Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof, except to the extent that matters
relating to the Xxxx Merger and other matters relating to the internal corporate
affairs of Xxxx or Z-Sub are necessarily governed by Pennsylvania Law.
SECTION 8.5 - Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 8.6 - Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors,
and except as provided in Sections 5.10 and 5.16, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 8.7 - Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
SECTION 8.8 - Specific Performance. The Parties hereto acknowledge
that irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and, shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
SECTION 8.9 - Certain Definitions. For purposes of this Agreement (a)
the term "subsidiary" shall mean, when used with reference to any entity, any
entity more than fifty percent (50%) of the outstanding voting securities or
interests (including membership interests) of which are owned directly or
indirectly by such first entity, (b) the term "affiliate" shall mean, when used
with reference to any person or entity, any other person or entity that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person or entity, and (c) the term
"knowledge" shall mean the actual knowledge of any executive officer of Xxxx or
USI, as the case may be.
67
SECTION 8.10 - Brokers. Except as otherwise provided in Section 7.3,
Xxxx agrees to indemnify and hold harmless USI, Superholdco and the Merger
Subsidiaries, and USI and the Merger Subsidiaries agree to indemnify and hold
harmless Xxxx, from and against any and all liability to which USI, Superholdco
and the Merger Subsidiaries, on the one hand, or Xxxx, on the other hand, may be
subjected by reason of any brokers, finder's or similar fees or expenses with
respect to the transactions contemplated by this Agreement to the extent such
similar fees and expenses are attributable to any action undertaken by or on
behalf of Xxxx, or USI, Superholdco or the Merger Subsidiaries, as the case may
be.
SECTION 8.11 - Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be duly executed on its behalf as of the day and year first above written.
U.S. INDUSTRIES, INC.
By: /s/Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
USI, INC.
By: /s/Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
BLUE MERGER CORP.
By: /s/Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
[SIGNATURES CONTINUE ON NEXT PAGE]
ZORO MERGER CORP.
By: /s/Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
XXXX INDUSTRIES, INC.
By: /s/Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
ANNEX A
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STOCK OPTION AGREEMENT
----------------------
STOCK OPTION AGREEMENT (this "Agreement"), dated as of February 16,
1998, by and between XXXX INDUSTRIES, INC., a Pennsylvania corporation ("Xxxx"),
and U.S. INDUSTRIES, INC., a Delaware corporation ("USI").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Zurn, USI, USI, Inc., a Delaware corporation and a wholly owned
subsidiary of USI, Blue Merger Corp., a Delaware corporation and a wholly owned
subsidiary of Superholdco ("B-Sub"), and Zoro Merger Corp., a Delaware
corporation and a wholly owned subsidiary of Superholdco ("Z-Sub"), are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides that, among other things, upon the terms and subject
to the conditions thereof, Z-Sub will be merged with Xxxx (the "Xxxx Merger")
and B-Sub will be merged with USI (the USI Merger"); and
WHEREAS, as a condition to USI's willingness to enter into the Merger
Agreement, USI has requested that Xxxx agree, and in order to induce USI to
enter into the Merger Agreement, Xxxx has so agreed, to grant to USI an option
with respect to certain shares of common stock, par value $.50 per share, of
Xxxx (the "Xxxx Common Stock") on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. Xxxx hereby grants to USI an irrevocable option
(the "Stock Option") to purchase up to 1,291,559 shares of Xxxx Common Stock, or
such other number of shares of Xxxx Common Stock as equals 10.1% of the issued
and outstanding shares of Xxxx Common Stock at the time of exercise of the Stock
Option, in the manner set forth below, at a price of $44.30 per share (the
"Exercise Price"), payable in cash in accordance with Section 5 hereof.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth in the Merger Agreement.
2. EXERCISE OF OPTION. The Stock Option may be exercised by USI, in
whole or in part, at any time or from time to time prior to its termination
pursuant to Section 3 hereof and (a) after the Merger Agreement is terminated
pursuant to Section 7.1(d)(iii) or 7.1(e)(iii) thereof or (b) after the date on
which Xxxx delivers to USI a Transaction Notice (as defined below), each of the
events described in clause (a) and (b) being a "Trigger Event". Xxxx shall not
consummate any transaction if the consummation thereof would result in a fee
being payable to USI pursuant to Section 7.3(a)(i) or 7.3(a)(ii) of the Merger
Agreement unless Xxxx shall have delivered to USI, at least 15 business days
prior to such consummation, a
written notice specifying the material terms of such transaction and stating
Xxxx'x intention to consummate such transaction (a "Transaction Notice").
In the event USI wishes to exercise the Stock Option, USI shall deliver
to Xxxx a written notice (an "Exercise Notice") specifying the total number of
shares of Xxxx Common Stock it wishes to purchase. Each closing of a purchase of
shares of Xxxx Common Stock (a "Closing") shall occur at a place, on a date and
at a time designated by USI in an Exercise Notice delivered at least two
business days prior to the date of the Closing.
Notwithstanding the foregoing, the Stock Option may not be exercised if
USI or, in the case of the Merger Agreement, USI, Superholdco or either of the
Merger Subsidiaries is (or, at the time of the termination of the Merger
Agreement, was) in material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement or in the Merger Agreement.
3. TERMINATION. The Stock Option shall terminate upon the earliest of:
(i) the Effective Time; (ii) the termination of the Merger Agreement (otherwise
than pursuant to Section 7.1(c)(i), 7.1(d)(iii), 7.1(e)(iii) or 7.1(e)(iv)
thereof); (iii) 120 days following any Trigger Event described in clause (a) of
Section 2 hereof (or if, at the expiration of such 120 day period the Stock
Option cannot be exercised by reason of any applicable judgment, decree, order,
law or regulation, or because the applicable waiting period under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act") has
not expired or been terminated, 10 business days after such impediment to
exercise shall have been removed or shall have become final and not subject to
appeal, but in no event under this clause (iii) later than 210 days after the
date of the Trigger Event); (iv) the fifteenth business day following the
delivery to USI of a Transaction Notice pursuant to the second sentence of
Section 2 hereof; and (v) 365 days following the termination of the Merger
Agreement.
4. CONDITIONS TO CLOSING. The obligation of Xxxx to issue shares of
Xxxx Common Stock to USI hereunder is subject to the conditions that (i) all
waiting periods, if any, under the HSR Act applicable to the issuance of shares
of Xxxx Common Stock hereunder shall have expired or have been terminated, and
all consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal administrative agency or commission or
other federal governmental authority or instrumentality, if any, required in
connection with the issuance of shares of Xxxx Common Stock hereunder shall have
been obtained or made, as the case may be; (ii) no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such issuance shall be in effect; and (iii) except as may
be waived in writing by Xxxx, such shares shall have been approved for listing
on the NYSE upon official notice of issuance.
5. CLOSING. At any Closing, (a) Xxxx will deliver to USI a single
certificate in definitive form representing the number of shares of Xxxx Common
Stock designated by USI
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in its Exercise Notice, such certificate to be registered in the name of USI, or
such affiliate of USI as USI shall designate in the Exercise Notice, and shall
bear the legend set forth in Section 11, and (b) USI will deliver to Xxxx the
aggregate Exercise Price for the shares of Xxxx Common Stock so designated and
being purchased at such Closing by wire transfer of immediately available funds.
6. REPRESENTATIONS AND WARRANTIES OF XXXX. Xxxx represents and warrants
to USI that (a) Xxxx is a corporation duly organized, validly existing and in
good standing under the laws of the State of Pennsylvania and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) assuming the accuracy of the representation and
warranty set forth in Section 4.14 of the Merger Agreement, the execution and
delivery of this Agreement by Xxxx and the consummation by Xxxx of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Xxxx and no other corporate proceedings on the
part of Xxxx are necessary to authorize this Agreement or any of the
transactions contemplated hereby, (c) this Agreement has been duly executed and
delivered by Xxxx and constitutes a valid and binding obligation of Xxxx, and,
assuming this Agreement constitutes a valid and binding obligation of USI, is
enforceable against Xxxx in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles, (d) Xxxx has taken all necessary corporate action to
authorize and reserve for issuance and to permit it to issue, upon exercise of
the Stock Option, and at all times from the date hereof through the expiration
of the Stock Option will have so reserved, 1,291,559 unissued shares of Xxxx
Common Stock (or such other number of shares of Xxxx Common Stock as may be
required to permit the issuance of 10.1% of the issued and outstanding shares of
Xxxx Common Stock at the time of exercise of the Stock Option), all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, (e) upon delivery of such
shares of Xxxx Common Stock to USI upon exercise of the Stock Option, USI will
acquire valid title to all of such shares, free and clear of any and all Liens,
(f) the execution and delivery of this Agreement by Xxxx does not, and the
performance of this Agreement by Xxxx will not, (1) violate the certificate of
incorporation or by-laws of Xxxx, (2) conflict with or violate any statute,
rule, regulation, order, judgment or decree applicable to Xxxx or by which it or
any of its assets or properties is bound or affected, or (3) result in any
breach or violation of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give rise to any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien on any of the property or assets of Xxxx pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, or other
instrument or obligation to which Xxxx or any of its subsidiaries is a party or
by which Xxxx or any of its assets or properties is bound or affected (except,
in the case of clauses (2) or (3) above, for violations, breaches or defaults
which would not, individually or in the aggregate, have a Material Adverse
Effect on Xxxx), and (g) the execution and delivery of this Agreement by Xxxx
does not, and the performance of this Agreement by Xxxx will not, require any
consent, approval,
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authorization or permit of, or filing with or notification to, any governmental
or regulatory authority except for pre-merger notification requirements of the
HSR Act. As soon as practicable following the date hereof, Xxxx will file a
supplemental listing application with the NYSE relating to the shares of Xxxx
Common Stock issuable upon exercise of the Option and will use its reasonable
best efforts to have such shares authorized for listing on the NYSE, subject to
official notice of issuance.
7. REPRESENTATIONS AND WARRANTIES OF USI. USI represents and warrants
to Xxxx that (a) USI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by USI
and the consummation by USI of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of USI and no
other corporate proceedings on the part of USI are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) this Agreement has
been duly executed and delivered by USI and constitutes a valid and binding
obligation of USI, and, assuming this Agreement constitutes a valid and binding
obligation of Xxxx, is enforceable against USI in accordance with its terms
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, (d) the execution and
delivery of this Agreement by USI does not, and the performance of this
Agreement by USI will not (1) violate the certificate of incorporation or
by-laws of USI, (2) conflict with or violate any statute, rule, regulation,
order, judgment or decree applicable to USI or by which it or any of its
properties or assets is bound or affected or (3) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any of the property or assets of USI pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, or other instrument or
obligation to which USI is a party or by which USI or any of its properties or
assets is bound or affected (except, in the case of clauses (2) and (3) above,
for violations, breaches, or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on USI), (e) the execution and
delivery of this Agreement by USI does not, and the performance of this
Agreement by USI will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except for pre-merger notification requirements of the HSR Act and
(f) any shares of Xxxx Common Stock acquired upon exercise of the Stock Option
will be, and the Stock Option is being, acquired by USI for its own account and
not with a view to the public distribution or resale thereof in any manner which
would be in violation of applicable United States securities laws.
8. CERTAIN REPURCHASES. (a) USI Put. At the request of USI at any time
during which the Stock Option is exercisable pursuant to Section 2 (the
"Repurchase Period"), Xxxx (or any successor entity thereof) shall repurchase
from USI the Stock Option, or any portion
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thereof, for a price equal to the amount by which the "Market/Tender Offer
Price" for shares of Xxxx Common Stock as of the date USI gives notice of its
intent to exercise its rights under this Section 8 (defined as the higher of (A)
the highest price per share of Xxxx Common Stock paid as of such date pursuant
to any tender or exchange offer or other Acquisition Proposal or (B) the average
of the closing sale prices of shares of Xxxx Common Stock on the NYSE for the
ten trading days immediately preceding such date) exceeds the Exercise Price,
multiplied by the number of shares of Xxxx Common Stock purchasable pursuant to
the Stock Option (or portion thereof with respect to which USI is exercising its
rights under this Section 8)).
(b) Payment and Redelivery of Stock Option or Shares. In the
event USI exercises its rights under this Section 8, Xxxx shall, within 10
business days thereafter, pay the required amount to USI in immediately
available funds and USI shall surrender to Xxxx the Stock Option, and USI shall
warrant that it owns the Stock Option free and clear of all Liens.
9. REGISTRATION RIGHTS. In the event that USI shall desire to sell any
of the shares of Xxxx Common Stock purchased pursuant to the Stock Option
("Restricted Shares") within 3 years after a Trigger Event and such sale
requires, in the opinion of counsel to USI (which opinion shall be reasonably
satisfactory to Xxxx and its counsel), registration of such shares under the
Securities Act, USI may, by written notice (the "Registration Notice") to Xxxx
(the "Registrant"), request the Registrant to register under the Securities Act
all or any part of the Restricted Shares beneficially owned by USI (the
"Registrable Securities") pursuant to a bona fide firm commitment underwritten
public offering in which USI and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any person (including any group) and its
affiliates from purchasing through such offering Restricted Shares representing
more than 2% of the outstanding shares of common stock of the Registrant on a
fully diluted basis (a "Permitted Offering"). The Registration Notice shall
include a certificate executed by USI and its proposed managing underwriter,
which underwriter shall be an investment banking firm of nationally recognized
standing reasonably acceptable to Xxxx (the "Manager"), stating that (i) they
have a good faith intention to commence promptly a Permitted Offering and (ii)
the Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price to be specified in such Registration Notice (the "Fair Market Value"). The
Registrant (and/or any person designated by the Registrant) shall thereupon have
the option exercisable by written notice delivered to USI within 10 business
days after the receipt of the Registration Notice, irrevocably to agree to
purchase all or any part of the Registrable Securities for cash at a price (the
"Option Price") equal to the product of (i) the number of Registrable Securities
and (ii) the Fair Market Value of such Registrable Securities. Any such purchase
of Registrable Securities by the Registrant hereunder shall take place at a
closing to be held at the principal executive offices of the Registrant or its
counsel at any reasonable date and time designated by the Registrant and its
designee in such notice within 20 business days after delivery of such
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notice. Any payment for the shares to be purchased shall be made by delivery at
the time of such closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option
pursuant to this Section 9 with respect to all Registrable Securities designated
in the Registration Notice, it shall use its best efforts to effect, as promptly
as practicable, the registration under the Securities Act of the unpurchased
Registrable Securities; provided, however, that (i) USI shall not be entitled to
more than an aggregate of two effective registration statements hereunder and
(ii) the Registrant will not be required to file any such registration statement
during any period of time (not to exceed 90 days after such request in the case
of clause (B) below or 120 days in the case of clauses (A) and (C) below) when
(A) the Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the judgment of the Board of Directors of the Registrant, such information would
have to be disclosed if a registration statement were filed at that time; (B)
the Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) the Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant or any of its affiliates. If consummation
of the sale of any Registrable Securities pursuant to a registration hereunder
does not occur within 120 days after the filing with the SEC of the initial
registration statement with respect thereto, the provisions of this Section 9
shall again be applicable to any proposed registration; provided, however, that
USI shall not be entitled to request more than two registrations pursuant to
this Section 9 in any 12 month period. The Registrant shall use its best efforts
to cause all Registrable Securities registered pursuant to this Section 9 to be
qualified for sale under the securities or blue-sky laws of such jurisdictions
as USI may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 9 are
subject to the condition that USI shall provide the Registrant with such
information with respect to USI's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to USI as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in such registration statement all material facts required
to be disclosed with respect to a registration thereunder.
A registration effected under this Section 9 shall be effected
at the Registrant's expense, except for underwriting discounts and commissions
and the fees and the expenses of counsel to USI, and the Registrant shall
provide to the underwriters such documentation (including certificates, opinions
of counsel and "comfort" letters from auditors) as are customary in connection
with underwritten public offerings as such underwriters may
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reasonably require. In connection with any such registration, the parties agree
(i) to indemnify each other and the underwriters in the customary manner and
(ii) to enter into an underwriting agreement in form and substance customary to
transactions of this type with the Manager and the other underwriters
participating in such offering.
10. PROFIT LIMITATION. (a) Notwithstanding any other provision of this
Agreement, in no event shall USI's Total Profit (as hereinafter defined) exceed
$5 million and, if it otherwise would exceed such amount USI, at its sole
election, shall either (i) deliver to Xxxx for cancellation Restricted Shares
previously purchased by USI, (ii) pay cash or other consideration to Xxxx or
(iii) undertake any combination thereof, so that USI's Total Profit shall not
exceed $5 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Stock Option may not be exercised for a number of Restricted Shares as
would, as of the date of the Exercise Notice, result in a Notional Total Profit
(as defined below) of more than $5 million, and, if exercise of the Stock Option
otherwise would exceed such amount, USI, at its discretion, may increase the
Exercise Price for that number of Restricted Shares set forth in the Exercise
Notice so that the Notional Total Profit shall not exceed $5 million; provided,
that nothing in this sentence shall restrict any exercise of the Stock Option
permitted hereby on any subsequent date at the Exercise Price set forth in
Section 1 hereof.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by USI
pursuant to Xxxx'x repurchase of the Stock Option pursuant to Section 8 hereof,
and (ii) (x) the net cash amounts received by USI pursuant to the sale of
Restricted Shares (or any other securities into which such shares are converted
or exchanged) to any unaffiliated party, less (y) USI's purchase price for such
Restricted Shares.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of Restricted Shares as to which USI may propose to
exercise this Stock Option shall be the Total Profit determined as of the date
of the Exercise Notice assuming that this Stock Option were exercised on such
date for such number of Restricted Shares and assuming that such Restricted
Shares, together with all other Restricted Shares held by USI and its affiliates
as of such date, were sold for cash at the closing market price for Xxxx Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any
change in Xxxx Common Stock by reason of stock dividends, stock splits, mergers
(other than the Merger), recapitalizations, combinations, exchange of shares or
the like, the type and number of shares or securities subject to the Stock
Option, and the Exercise Price per share, shall be adjusted appropriately.
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12. RESTRICTIVE LEGENDS. Each certificate representing shares of Xxxx
Common Stock issued to USI hereunder shall initially be endorsed with a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS
SET FORTH IN THE STOCK OPTION AGREEMENT, DATED FEBRUARY 16, 1998, A
COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER HEREOF.
13. BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
and permitted assigns. Except as expressly provided in this Agreement, neither
this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 9 shall, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Agreement. In no event
will any transferee of any Restricted Shares be entitled to the rights of USI
hereunder. Certificates representing shares sold in a registered public offering
pursuant to Section 9 shall not be required to bear the legend set forth in
Section 12.
14. SPECIFIC PERFORMANCE. The parties recognize and agree that if for
any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
the Agreement, neither party will allege, and each party hereby waives the
defense, that there is an adequate remedy at law.
15. ENTIRE AGREEMENT. This Agreement and the Merger Agreement (together
with the other documents and instruments referred to in the Merger Agreement,
and the exhibits and disclosure schedules thereto) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof.
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16. FURTHER ASSURANCES. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
17. NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way be
affected or impaired thereby, unless the foregoing inconsistent action or the
failure to take an action constitutes a material breach of this Agreement or
makes the Agreement impossible to perform in which case this Agreement shall
terminate. Except as otherwise contemplated by this Agreement, to the extent
that a party hereto took an action inconsistent herewith or failed to take
action consistent herewith or required hereby pursuant to an order or judgment
of a court or other competent authority, such party shall incur no liability or
obligation unless such party did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.
18. NOTICES. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied (answerback received) or, if mailed, five business
days after the date of mailing, to the following address or telecopy number, or
to such other address or addresses as such person may subsequently designate by
notice given hereunder:
(a) if to USI, to:
U.S. Industries, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. XxxXxxx, Esq.
Facsimile: (000) 000-0000
with a copy (which shall
not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
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(b) if to Xxxx, to:
Xxxx Industries, Inc.
00000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy (which shall
not constitute notice) to:
Xxxxx, Day Xxxxxx & Xxxxx
2300 Xxxxxxxx Xxxx Center
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof.
20. DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
22. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
23. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
XXXX INDUSTRIES, INC.
By: /s/Xxxxxx X. Xxxxxx
--------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
U.S. INDUSTRIES, INC.
By: /s/Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
NYFS11...:\95\78595\0019\1323\AGR1158L.04C
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ANNEX B
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
U.S. INDUSTRIES, INC.
This document constitutes an amendment and restatement of the original
Certificate of Incorporation of USI, Inc. (the "Corporation") which was filed
with the Secretary of State of Delaware on February 4, 1998. This Amended and
Restated Certificate of Incorporation was duly adopted in accordance with the
provisions of Sections 245(c) and 242 of the Delaware General Corporation Law
ARTICLE I.
NAME
The name of the Corporation is U.S. Industries, Inc.
ARTICLE II.
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, xx xxx Xxxx xx
Xxxxxxxxxx, Xxxxxx of New Castle, 19801. The name of its registered agent at
that address in the State of Delaware is The Corporation Trust Company.
ARTICLE III.
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law ("Delaware Law"). It shall have all powers that
may now or hereafter be lawful for a corporation to exercise under the Delaware
Law.
ARTICLE IV.
CAPITAL STOCK
SECTION 4.1 Total Number of Shares of Stock. The total number of shares
of capital stock of all classes that the Corporation shall have authority to
issue is ___________________ shares. The authorized capital stock is divided
into _____________ shares of preferred stock, of the par value of $.01 each (the
"Preferred Stock"), and ____________________ shares of common stock, of the par
value of $.01 each (the "Common Stock").
SECTION 4.2 Preferred Stock. (a) The shares of Preferred Stock of the
Corporation may be issued from time to time in one or more classes or series
thereof, the shares of each class or series thereof to have such voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as are stated and expressed herein or in
the resolution or resolutions providing for the issue of such class or series,
adopted by the board of directors of the Corporation (the "Board of Directors")
as hereinafter provided.
(b) Authority is hereby expressly granted to the Board of
Directors, subject to the provisions of this Article IV and to the limitations
prescribed by the Delaware Law, to authorize the issue of one or more classes,
or series thereof, of Preferred Stock and with respect to each such class or
series to fix by resolution or resolutions providing for the issue of such class
or series the voting powers, full or limited, if any, of the shares of such
class or series and the designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof. The authority of the Board of Directors with respect to
each class or series thereof shall include, but not be limited to, the
determination or fixing of the following:
(i) the maximum number of shares to constitute such
class or series, which may subsequently be increased or decreased by
resolutions of the Board of Directors unless otherwise provided in the
resolution providing for the issue of such class or series, the
distinctive designation thereof and the stated value thereof if
different than the par value thereof;
(ii) the dividend rate of such class or series, the
conditions and dates upon which such dividends shall be payable, the
relation which such dividends shall bear to the dividends payable on
any other class or classes of stock or any other series of any
2
class of stock of the Corporation, and whether such dividends shall be
cumulative or noncumulative;
(iii) whether the shares of such class or series shall be
subject to redemption, in whole or in part, and if made subject to such
redemption the times, prices and other terms and conditions of such
redemption, including whether or not such redemption may occur at the
option of the Corporation or at the option of the holder or holders
thereof or upon the happening of a specified event;
(iv) the terms and amount of any sinking fund
established for the purchase or redemption of the shares of such class
or series;
(v) whether or not the shares of such class or series
shall be convertible into or exchangeable for shares of any other class
or classes of any stock or any other series of any class of stock of
the Corporation, and, if provision is made for conversion or exchange,
the times, prices, rates, adjustments, and other terms and conditions
of such conversion or exchange;
(vi) the extent, if any, to which the holders of shares
of such class or series shall be entitled to vote with respect to the
election of directors or otherwise;
(vii) the restrictions, if any, on the issue or reissue
of any additional Preferred Stock;
(viii) the rights of the holders of the shares of such
class or series upon the dissolution of, or upon the subsequent
distribution of assets of, the Corporation; and
(ix) the manner in which any facts ascertainable outside
the resolution or resolutions providing for the issue of such class or
series shall operate upon the voting powers, designations, preferences,
rights and qualifications, limitations or restrictions of such class or
series.
Section 4.3 Common Stock. The shares of Common Stock of the Corporation
shall be of one and the same class. The holders of Common Stock shall have one
vote per share of Common Stock on all matters on which holders of Common Stock
are entitled to vote.
3
ARTICLE V.
BOARD OF DIRECTORS
Section 5.1 Powers of Board of Directors. The business and affairs of
the Corporation shall be managed by or under the direction of its Board of
Directors which shall consist of not less than three members. In furtherance,
and not in limitation, of the powers conferred by the laws of the State of
Delaware, the Board of Directors is expressly authorized to:
(a) adopt, amend, alter, change or repeal the By-Laws of the
Corporation; provided, however, that no By-Laws hereafter adopted shall
invalidate any prior act of the directors that would have been valid if
such new By-Laws had not been adopted;
(b) determine the rights, powers, duties, rules and procedures
that affect the power of the Board of Directors to manage and direct
the business and affairs of the Corporation, including the power to
designate and empower committees of the Board of Directors, to elect,
appoint and empower the officers and other agents of the Corporation,
and to determine the time and place of, the notice requirements for,
Board meetings, as well as quorum and voting requirements for, and the
manner of taking, Board action; and
(c) exercise all such powers and do all such acts as may be
exercised or done by the Corporation, subject to the provisions of the
Delaware Law, this Certificate of Incorporation, and the By-Laws of the
Corporation.
Section 5.2 Number of Directors. The number of directors constituting
the Board of Directors shall be determined from time to time exclusively by a
vote of a majority of the Board of Directors in office at the time of such vote.
Section 5.3 Classified Board of Directors. The directors shall be
divided into three classes, which each class to be as nearly equal in number as
reasonably possible, and with the initial term of office of the first class of
directors to expire at the 1999 annual meeting of stockholders, the initial term
of office of the second class of directors to expire at the 2000 annual meeting
of stockholders and the initial term of office of the third class of directors
to expire at the 2001 annual meeting of stockholders, in each case upon the
election and qualification of their successors. Commencing with the 1999 annual
meeting of stockholders, directors elected to succeed those directors whose
terms have thereupon expired shall be
4
elected to a term of office to expire at the third succeeding annual meeting of
stockholders after their election, and upon the election and qualification of
their successors. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain or attain the
number of directors in each class as nearly equal as reasonably possible, but in
no case will a decrease in the number of directors shorten the term of any
incumbent director.
Section 5.4 Vacancies. Any vacancies in the Board of Directors for any
reason and any newly created directorship resulting by reason of any increase in
the number of directors may be filled only by the Board of Directors, acting by
a majority of the remaining directors then in office, although less than a
quorum, or by a sole remaining director, and any directors so appointed shall
hold office until the next election of the class of which such directors have
been chosen and until their successors are elected and qualified.
Section 5.5 Removal of Directors. Except as may be provided in a
resolution or resolutions providing for any class or series of Preferred Stock
pursuant to Article IV hereof with respect to any directors elected by the
holders of such class or series, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause, and only by the
affirmative vote of the holders of at least 662/3% of the voting power of all of
the shares of capital stock of the Corporation then entitled to vote generally
in the election of directors, voting together as a single class.
ARTICLE VI.
STOCKHOLDER ACTIONS AND MEETINGS OF STOCKHOLDERS
Except as may be provided in a resolution or resolutions providing for
any class or series of Preferred Stock pursuant to Article IV hereof, any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any written consent in lieu of a meeting by such holders. Special
meetings of stockholders of the Corporation may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the members of the
Board of Directors then in office. Elections of directors need not be by written
ballot, unless otherwise provided in the By-Laws. For purposes of all meetings
of stockholders, a quorum shall consist of a majority of the shares entitled to
vote at such meeting of stockholders, unless otherwise required by law.
5
ARTICLE VII.
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
including without limitation directors serving on committees of the Board of
Directors; provided, however, that the foregoing shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware Law, or (iv) for any transaction from
which the director derived an improper personal benefit. If the Delaware Law is
amended hereafter to authorize corporate action further eliminating or limited
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware Law, as so amended. Any amendment, repeal or modification of this
Article VII shall not adversely affect any right or protection of a director of
the Corporation existing hereunder with respect to any act or omission occurring
prior to such amendment, repeal or modification.
ARTICLE VIII.
AMENDMENT OF BY-LAWS
The Board of Directors shall have the power to adopt, amend, alter,
change or repeal any By-Laws of the Corporation. In addition, the stockholders
of the Corporation may adopt, amend, alter, change or repeal any By-Laws of the
Corporation by the affirmative vote of the holders of at least 662/3% of the
voting power of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors, voting together as a
single class (notwithstanding the fact that a lesser percentage may be specified
by Delaware Law).
ARTICLE IX.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation hereby reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in any
manner permitted by Delaware Law and all rights and powers conferred upon
stockholders, directors, and officers herein are granted subject to this
reservation. Except as may be provided in a resolution or resolutions
6
providing for any class or series of Preferred Stock pursuant to Article IV
hereof and which relate to such class or series of Preferred Stock, any such
amendment, alteration, change or repeal shall require the affirmative vote of
both (a) a majority of the members of the Board of Directors then in office and
(b) a majority of the voting power of all of the shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class; except that any proposal to amend, alter, change or
repeal the provisions of Articles 5.3, Article 5.5, Article VI, Article VIII and
this Article IX shall require the affirmative vote of 662/3% of the voting power
of all of the shares of capital stock entitled to vote generally in the election
of directors,voting together as a single class.
ARTICLE X
SEVERABILITY
In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single Section, paragraph or
sentence) are held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
* * * *
7
DAFS03...:\95\78595\0019\1323\CRT1308W.48A
ANNEX C
-------
AMENDED AND RESTATED
BY-LAWS
OF
U.S. INDUSTRIES, INC.
(a Delaware corporation)
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. (a) All annual meetings of the
Stockholders for the election of directors shall be held at such place as shall
be designated from time to time by the Board of Directors and stated in the
notice of the meeting. Special meetings of Stockholders for any other purpose
may be held at such time and place as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
(b) Annual meetings of Stockholders shall be held on such date
and at such time as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote a Board of Directors or, during such time as the certificate of
incorporation of the Corporation (the "Certificate of Incorporation") provides
for a classified Board of Directors, that class of directors the term of which
shall expire at the meeting, and transact such other business as may properly be
brought before the meeting.
(c) Written notice of the annual meeting stating the place,
date, and hour of the meeting shall be given to each Stockholder entitled to
vote at such meeting not less than ten days nor more than sixty days prior to
the date of the meeting. A written waiver of any such notice signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.
(d) The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any Stockholder who is
present. The stock ledger shall be the only evidence as to the Stockholders
entitled to examine the stock ledger, the list required by this section or the
books of the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.
SECTION 2. Special Meetings. (a) Special meetings of the
Stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation of the Corporation, shall be
called by the Chairman, President or Secretary only at the request in writing of
a majority of the Board of Directors then in office. Such request shall state
the purpose or purposes of the proposed meeting.
(b) Written notice of a special meeting stating the place,
date, and hour of the meeting and, in general terms, the purpose or purposes for
which the meeting is called, shall be given not less than ten days nor more than
sixty days prior to the date of the meeting, to each Stockholder entitled to
vote at such meeting. Special meetings may be held at such place as shall be
designated by the Board of Directors. Whenever the directors shall fail to fix
such place, the meeting shall be held at the principal executive offices of the
Corporation.
(c) Business transacted at any special meeting of
Stockholders, other than procedural matters and matters relating to the conduct
of the meeting, shall be limited to the purpose or purposes stated in the
notice.
SECTION 3. Quorums. (a) The holders of a majority of the
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
Stockholders for the transaction of business except as otherwise provided by the
Delaware General
2
Corporation Law ("Delaware Law") or by the Certificate of Incorporation. Unless
these By-Laws otherwise require, when a meeting is adjourned to another time or
place, whether or not a quorum is present, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder of record entitled to vote at the
meeting. When a quorum is once present it is not broken by the subsequent
withdrawal of any Stockholder.
(b) When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one on which, by express provision of Delaware Law or of
the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
SECTION 4. Organization. Meetings of Stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's absence,
the President, if any, or if none or in the President's absence, by a Chairman
to be chosen by the Stockholders entitled to vote who are present in person or
by proxy at the meeting. The Secretary of the Corporation, or in the Secretary's
absence an Assistant Secretary, shall act as Secretary of every meeting and keep
the minutes thereof, but if neither the Secretary nor an Assistant Secretary is
present, the presiding officer of the meeting shall appoint any person present
to act as secretary of the meeting. The order of business at all meetings of
stockholders shall be as determined by the Chairman of the meeting.
SECTION 5. Voting; Proxies; Required Vote. (a) At each
meeting of Stockholders, every Stockholder shall be entitled to vote in person
or by proxy appointed by an instrument in writing, subscribed by such
Stockholder or by such Stockholder's duly authorized attorney-in-fact (but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period) and, unless Delaware Law or the
Certificate of Incorporation (including resolutions designating any class or
series of preferred stock pursuant to Article IV of the Certificate of
Incorporation) provides otherwise, shall have one vote for each share of stock
entitled to vote registered in the name of such Stockholder on the books of the
Corporation on the applicable record date fixed pursuant to these By-Laws. At
3
all elections of directors the voting may but need not be by ballot and a
plurality of the votes cast there shall elect directors. Except as otherwise
required by law or the Certificate of Incorporation, any other action shall be
authorized by a majority of the votes cast.
(b) Where a separate vote by a class or classes, a majority of
the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to vote on that matter,
the affirmative vote of the majority of shares of such class or classes present
in person or represented by proxy at the meeting shall be the act of such class,
unless otherwise provided in the Certificate of Incorporation.
SECTION 6. Inspector of Election. The Board of Directors, in
advance of any meeting, may, but need not, appoint one or more inspectors of
election to act at the meeting or any adjournment thereof. If an inspector or
inspectors are not so appointed, the person presiding at the meeting may, but
need not, appoint one or more inspectors. In case any person who may be
appointed as an inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, if any, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum, and the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all Stockholders. On request of the person presiding at the meeting,
the inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by such inspector or inspectors and
execute a certificate of any fact found by such inspector or inspectors.
SECTION 7. Stockholder Proposals and Nominations. (a) No
proposal for a stockholder vote shall be submitted by a stockholder (a
"Stockholder Proposal") to the Corporation's stockholders unless the stockholder
submitting such proposal (the "Proponent") shall have filed a written notice
setting forth with particularity (i) the names and business addresses of the
Proponent and all persons or entities (collectively, the "Persons") acting in
concert with the Proponent; (ii) the
4
name and address of the Proponent and the Persons identified in clause (i), as
they appear on the Corporation's books (if they so appear); (iii) the class and
number of shares of the Corporation beneficially owned by the Proponent and the
Persons identified in clause (i); (iv) a description of the Stockholder Proposal
containing all material information relating thereto; and (v) such other
information as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and stockholders of the Corporation
to consider the Stockholder Proposal. The presiding officer at any stockholders'
meeting may determine that any Stockholder Proposal was not made in accordance
with the procedures prescribed in these By-Laws or is otherwise not in
accordance with law, and if it is so determined, such officer shall so declare
at the meeting and the Stockholder Proposal shall be disregarded.
(b) Only persons who are selected and recommended by the Board
of Directors or the committee of the Board of Directors designated to make
nominations (if any), or who are nominated by stockholders in accordance with
the procedures set forth in this Section 7, shall be eligible for election, or
qualified to serve, as directors. Nominations of individuals for election to the
Board of Directors of the Corporation at any annual meeting or any special
meeting of stockholders at which directors are to be elected may be made by any
stockholder of the Corporation entitled to vote for the election of directors at
that meeting by compliance with the procedures set forth in this Section 7.
Nominations by stockholders shall be made by written notice (a "Nomination
Notice"), which shall set forth (i) as to each individual nominated, (A) the
name, date of birth, business address and residence address of such individual;
(B) the business experience during the past five years of such nominee,
including his or her principal occupations and employment during such period,
the name and principal business of any corporation or other organization in
which such occupations and employment were carried on, and such other
information as to the nature of his or her responsibilities and level of
professional competence as may be sufficient to permit assessment of his or her
prior business experience; (C) whether the nominee is or has ever been at any
time a director, officer or owner of 5% or more of any class of capital stock,
partnership interests or other equity interest of any corporation, partnership
or other entity; (D) any directorships held by such nominee in any company with
a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended; and (E) whether, in the last five
years, such nominee has been convicted in a criminal proceeding or has been
subject to a judgment, order, finding or decree of any federal, state or other
governmental
5
entity, concerning any violation of federal, state or other law, or any
proceeding in bankruptcy, which conviction, order, finding, decree or proceeding
may be material to an evaluation of the ability or integrity of the nominee; and
(ii) as to the Person submitting the Nomination Notice and any Person acting in
concert with such Person, (x) the name and business address of such Person, (y)
the name and address of such Person as they appear on the Corporation's books
(if they so appear), and (z) the class and number of shares of the Corporation
that are beneficially owned by such Person. A written consent to being named in
a proxy statement as a nominee, and to serve as a director if elected, signed by
the nominee, shall be filed with any Nomination Notice. If the presiding officer
at any stockholders' meeting determines that a nomination was not made in
accordance with the procedures prescribed by these By-Laws, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(c) Stockholder Proposals and Nomination Notices shall be
delivered to the Secretary at the principal executive office of the Corporation
60 days or more before the date of the stockholders' meeting if such Stockholder
Proposal or Nomination Notice is to be submitted at an annual stockholders'
meeting. Stockholder Proposals and Nomination Notices shall be delivered to the
Secretary at the principal executive office of the Corporation no later than the
close of business on the 15th day following the day on which notice of the date
of a special meeting of stockholders was given if the Stockholder Proposal or
Nomination Notice is to be submitted at a special stockholders' meeting.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs
of the Corporation shall be managed by, or under the direction of, the Board of
Directors. The Board of Directors shall exercise exclusive strategic control of
the Corporation and shall not delegate its policy-making powers.
SECTION 2. Qualification; Number; Term; Remuneration. (a)
Each director shall be at least 18 years of age. A director need not be a
Stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the entire Board shall be such
number as may be fixed from time to time by the Board of Directors, but shall be
not less than three. One of the
6
directors may be selected by the Board of Directors to be its Chairman, who
shall preside at meetings of the Stockholders and the Board of Directors and
shall have such other duties, if any, as may from time to time be assigned by
the Board of Directors. In the absence of formal selection, the President of the
Corporation shall serve as Chairman. The use of the phrase "entire Board" herein
refers to the total number of directors which the Corporation would have if
there were no vacancies.
(b) Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing Committees may be allowed like compensation for attending
Committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise
provided by law, a majority of the entire Board of Directors shall constitute a
quorum. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting from time to time to another time and place without
notice. The vote of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors. When a meeting
is adjourned to another time or place, whether or not a quorum is present,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Board of Directors may transact any business which might have been
transacted at the original meeting. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting, from time to time, without notice other than announcement at the
meeting, until a quorum is present.
SECTION 4. Annual Meeting. At the next regular meeting
following the annual meeting of Stockholders, the newly elected Board of
Directors shall meet for the purpose of the election of officers and the
transaction of such other business as may properly come before the meeting.
SECTION 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times as the Board of Directors shall from time
to time by resolution determine. After the place and time of regular meetings of
the Board of Directors shall have been determined and notice thereof shall have
been once given to each member of the Board of Directors, regular meetings may
be held without further notice being given.
7
SECTION 6. Special Meetings. Notice of the date, time and
place of each special meeting shall be mailed by regular mail to each director
at his designated address at least six days before the meeting; or sent by
overnight courier to each director at his designated address at least two days
before the meeting (with delivery scheduled to occur no later than the day
before the meeting); or given orally by telephone or other means, or by
telegraph or telecopy, or by any other means comparable to any of the foregoing,
to each director at his designated address at least 24 hours before the meeting;
provided, however, that if less than five days' notice is provided and one third
of the members of the Board of Directors then in office object in writing prior
to or at the commencement of the meeting, such meeting shall be postponed until
five days after such notice was given pursuant to this sentence (or such short
period to which a majority of those who objected in writing agree), provided
that notice of such postponed meeting shall be given in accordance with this
Section 7. The notice of the special meeting shall state the general purpose of
the meeting, but other routine business may be conducted at the special meeting
without such matter being stated in the notice.
SECTION 7. Organization. At all meetings of the Board of
Directors, the Chairman or in the Chairman's absence or inability to act, the
President, or in the President's absence, a Chairman chosen by the directors,
shall preside. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as Secretary.
SECTION 8. Resignation. Any director may resign at any time
upon written notice to the Corporation and such resignation shall take effect
upon receipt thereof by the Chairman or Secretary, unless otherwise specified in
the resignation. Directors may be removed only in the manner provided in the
Certificate of Incorporation.
SECTION 9. Vacancies. Unless otherwise provided in these
ByLaws, vacancies on the Board of Directors, whether caused by resignation,
death, disqualification, removal, an increase in the authorized number of
directors or otherwise, may be filled by the affirmative vote of a majority of
the remaining directors, although less than a quorum, or by a sole remaining
director.
SECTION 10. Preferred Directors. Notwithstanding anything
else contained herein, whenever the holders of one or more classes or series of
Preferred Stock shall have the right, voting separately as a class or series, to
elect directors, the
8
election, term of office, filling of vacancies, removal and other features of
such directorships shall be governed by the terms of the resolutions applicable
thereto adopted by the Board of Directors pursuant to the Certificate of
Incorporation, and such directors so elected shall not be subject to the
provisions of this Article II unless otherwise provided herein.
ARTICLE III
Committees
SECTION 1. Appointment; Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
Committees, each Committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any Committee, who may replace any absent or disqualified
member at any meeting of the Committee. In the absence or disqualification of a
member of a Committee, the member or members present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Any such
Committee, to the extent provided in the resolution, shall, subject to the
provisions of Article II, Section 1 of these By-Laws, have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such Committee shall have the power
or authority to: (i) approve or adopt, or recommend to the stockholders, any
action or matter required to be submitted to the stockholders for approval or
(ii) adopt, amend or repeal any By-Law. Such Committee or Committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.
SECTION 2. Procedures, Quorum and Manner of Acting. Each
Committee shall fix its own rules of procedure, and shall meet where and as
provided by such rules or by resolution of the Board of Directors, subject to
the provisions of Sections 3 and 4 of Article II. Except as otherwise provided
by law, the presence of a majority of the then appointed members of a Committee
shall constitute a quorum for the transaction of business by that Committee, and
in every case where a quorum is present the affirmative vote of a majority of
the members of the Committee present shall be the act of the Committee. Each
Committee shall keep minutes of its
9
proceedings, and actions taken by a Committee shall be reported to the Board of
Directors.
SECTION 3. Termination. In the event any person shall cease
to be a director of the Corporation, such person shall simultaneously therewith
cease to be a member of any Committee appointed by the Board of Directors.
ARTICLE IV
Officers
SECTION 1. Election and Qualifications. The Board of Directors
at its first meeting held after each annual meeting of Stockholders shall elect
the officers of the Corporation, which shall include a President and a
Secretary, and may include, by election or appointment, a Chairman of the Board,
one or more Vice-Presidents (any one or more of whom may be given an additional
designation of rank or function), a Treasurer and such Assistant Secretaries,
such Assistant Treasurers and such other officers as the Board of Directors may
from time to time deem proper. Each officer shall have such powers and duties as
may be prescribed by these ByLaws and as may be assigned by the Board of
Directors or the President. Any two or more offices may be held by the same
person.
SECTION 2. Term of Office and Remuneration. The term of office
of all officers shall be until their respective successors have been elected and
qualified or their earlier death, resignation or removal. The remuneration of
all officers of the Corporation may be fixed by the Board of Directors or in
such manner as the Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any
time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation. Any officer shall be subject to removal, with or
without cause, at any time by the Board of Directors. Any vacancy in any office
shall be filled in such manner as the Board of Directors shall determine.
10
SECTION 4. Powers and Duties of Officers.
(a) The Chairman of the Board of Directors, if there be one,
shall preside at all meetings of the Board of Directors and shall have such
other powers and duties as may from time to time be assigned by the Board of
Directors. The Chairman of the Board of Directors, if there be one, shall be the
chief executive officer of the Corporation and shall preside at all meetings of
the Stockholders and the Board of Directors and shall have general management of
and supervisory authority over the property, business and affairs of the
Corporation and its other officers. The Chairman of the Board may execute and
deliver in the name of the Corporation powers of attorney, contracts, bonds and
other obligations and instruments, and shall have such other authority and
perform such other duties as from time to time may be assigned by the Board of
Directors. The Chairman of the Board shall see that all orders and resolutions
of the Board of Directors are carried into effect and shall perform such
additional duties that usually pertain to the office of chief executive officer.
(b) If there be no Chairman of the Board, the President shall
be the chief executive officer and shall exercise the powers listed in (a)
above. Otherwise, the President may execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations and
instruments, and shall have such other authority and perform such other duties
as from time to time may be assigned by the Board of Directors or the Chairman
of the Board.
(c) A Vice President may execute and deliver in the name of
the Corporation powers of attorney, contracts, bonds and other obligations and
instruments, and shall have such other authority and perform such other duties
as from time to time may be assigned by the Board of Directors, the Chairman of
the Board or the President.
(d) The Treasurer shall in general have all duties and
authority incident to the position of Treasurer and such other duties and
authority as may be assigned by the Board of Directors, the Chairman of the
Board or the President. The Treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by or at the direction
of the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board of Directors,
11
the Chairman of the Board or the President, and shall render, upon request, an
account of all such transactions.
(e) The Secretary shall in general have all the duties and
authority incident to the position of Secretary and such other duties and
authority as may be assigned by the Board of Directors, the Chairman of the
Board or the President. The Secretary shall attend all meetings of the Board of
Directors and all meetings of Stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose. The Secretary shall
give, or cause to be given, notice of all meetings of the Stockholders and
special meetings of the Board of Directors. The Secretary shall have custody of
the seal of the Corporation and any officer of the Corporation shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by the signature of the Secretary or any other officer.
(f) Any assistant officer shall have such duties and authority
as the officer such assistant officer assists and, in addition, such other
duties and authority as the Board of Directors, the Chairman of the Board or
President shall from time to time assign.
ARTICLE V
Contracts, Etc.
SECTION 1. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Corporation, to enter into
or execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 2. Proxies; Powers of Attorney; Other Instruments. (a)
The Chairman, the President, any Vice President, the Treasurer or any other
person designated by any of them shall have the power and authority to execute
and deliver proxies, powers of attorney and other instruments on behalf of the
Corporation in connection with the execution of contracts, the purchase of real
or personal property, the rights and powers incident to the ownership of stock
by the Corporation and such other situations as the Chairman, the President,
such Vice President or the Treasurer shall approve, such approval to be
conclusively evidenced by the execution of such proxy, power of attorney or
other instrument on behalf of the Corporation.
12
(b) The Chairman, the President, any Vice President, the
Treasurer or any other person authorized by proxy or power of attorney executed
and delivered by any of them on behalf of the Corporation may attend and vote at
any meeting of stockholders of any company in which the Corporation may hold
stock, and may exercise on behalf of the Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, or
otherwise as specified in the proxy or power of attorney so authorizing any such
person. The Board of Directors, from time to time, may confer like powers upon
any other person.
ARTICLE VI
Books and Records
SECTION 1. Location. The books and records of the Corporation
may be kept at such place or places as the Board of Directors or the respective
officers in charge thereof may from time to time determine. The record books
containing the names and addresses of all Stockholders, the number and class of
shares of stock held by each and the dates when they respectively became the
owners of record thereof shall be kept by the Secretary as prescribed in the
By-Laws or by such officer or agent as shall be designated by the Board of
Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and
all other corporate notices may be delivered personally or mailed to each
Stockholder at the Stockholder's address as it appears on the records of the
Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of
Record. (a) In order that the Corporation may determine the Stockholders
entitled to notice of or to vote at any meeting of Stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors and which record date shall not be more
than 60 days nor less than 10 days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
Stockholders entitled to notice of or to vote at a meeting of Stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of Stockholders
of record entitled to notice of or to vote at a meeting of Stockholders
13
shall apply to any adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the Stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action not contemplated by paragraph (a) of this Section 3, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted and which
record date shall be not more than 60 days prior to such action. If no record
date is fixed, the record date for determining Stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
ARTICLE VII
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate, signed by or
in the name of the Corporation by the Chairman or Vice-Chairman of the Board of
Directors, or the President or any Vice-President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, representing the number of shares registered in certificate form.
Any or all of the signatures on any such certificate may be a facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue.
SECTION 2. Record Ownership. The name of the holder of
record of the shares represented thereby, with the number of such shares and the
date of issue
14
thereof, shall be entered on the books of the Corporation. The Corporation shall
be entitled to treat the holder of record of any share of stock as the holder in
fact thereof, and accordingly shall not be bound to recognize any equitable or
other claim to or interest in any share on the part of any other person, whether
or not it shall have express or other notice thereof, except as required by
Delaware Law. The Board of Directors shall have power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
SECTION 3. Transfer of Record Ownership. Transfer of stock
shall be made on the books of the Corporation only by direction of the person
named in the certificate or such person's attorney, lawfully constituted in
writing, and only upon the surrender of the certificate therefor and a written
assignment of the shares evidenced thereby, which certificate shall be canceled
before the new certificate is issued.
SECTION 4. Fractional Shares. The Corporation may, but shall
not be required to, issue certificates for fractions of a share where necessary
to effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a Stockholder except as therein
provided.
SECTION 5. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate in place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Board of
Directors may require the owner of any lost, stolen or destroyed certificate, or
his legal representative, to give the Corporation a bond sufficient to indemnify
the Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
SECTION 6. Transfer Agents; Registrants; Rules Respecting
Certificates. The Board of Directors may appoint, or authorize any officer or
officers to appoint, one or more transfer agents and one or more registrars. The
Board of Directors may make such further rules and regulations as it may deem
expedient concerning the issue, transfer and registration of stock certificates
of the Corporation.
15
ARTICLE VIII
Dividends
Subject to the provisions of Delaware Law and the Certificate
of Incorporation, the Board of Directors shall have full power to declare and
pay dividends on the capital stock of the Corporation. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, may determine for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
ARTICLE IX
Ratification
Any transaction, questioned in any lawsuit on the ground of
lack of authority, defective or irregular execution, adverse interest of
director, officer or Stockholder, non-disclosure, miscomputation, or the
application of improper principles or practices of accounting, may be ratified
before or after judgment, by the Board of Directors or by the Stockholders, and
if so ratified shall have the same force and effect as if the questioned
transaction had been originally duly authorized. Such ratification shall be
binding upon the Corporation and its Stockholders and shall constitute a bar to
any claim or execution of any judgment in respect of such questioned
transaction.
ARTICLE X
Corporate Seal
The corporate seal shall be in form of a circular inscription
which contains the words "Corporate Seal" and such additional information as the
officer inscribing such seal shall determine in such officer's sole discretion.
The corporate seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise displayed or it may be manually
inscribed.
16
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall
be subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Corporation shall end on the Saturday
closest to March 31.
ARTICLE XII
Waiver of Notice
Whenever notice is required to be given by these By-Laws or by
the Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XIII
Amendments
By-Laws may be adopted, amended or repealed by either the
Board of Directors or the affirmative vote of the holders of at least 66 2/3% of
the voting power of all shares of the Corporation's capital stock then entitled
to vote generally in the election of directors.
ARTICLE XIV
Indemnification
SECTION 1. Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact (a) that he or she is or was a director or officer of the Corporation, or
(b) that he or she, being at the time a director or officer of the Corporation,
is or was serving at the request of
17
the Corporation as a director, officer, member, employee, fiduciary or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(collectively, "another enterprise" or "other enterprise"), shall be indemnified
and held harmless by the Corporation to the fullest extent permitted by Delaware
Law as the same exists or may hereafter be amended (but, in the case of any such
amendment, with respect to alleged action or inaction occurring prior to such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including, without limitation, attorneys' and
other professionals' fees and expenses, claims, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith ("Losses"). Without
diminishing the scope of indemnification provided by this Section 1, such
persons shall also be entitled to the further rights set forth below.
SECTION 2. Actions, Suits Or Proceedings Other Than Those By
Or In The Right Of The Corporation. Subject to the terms and conditions of this
Article, the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any Proceeding (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was a
director, officer or employee of the Corporation, or, being at the time a
director, officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, member, employee, fiduciary
or agent of another enterprise, against all Losses, actually and reasonably
incurred or suffered by such person in connection with such Proceeding if such
person acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. The termination of any Proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that the conduct was unlawful.
SECTION 3. Actions, Suits Or Proceedings By Or In The Right Of
The Corporation. Subject to the terms and conditions of this Article, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any Proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director, officer or employee
18
of the Corporation, or being at the time a director, officer or employee of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, member, employee, fiduciary or agent of another enterprise against all
Losses actually and reasonably incurred or suffered by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Corporation except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
SECTION 4. Authorization of Indemnification. Any
indemnification under this Article (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of a person is proper in the circumstances because such
person has met the applicable standard of conduct required by Section 1 or set
forth in Section 2 or 3 of this Article, as the case may be. Such determination
shall be made, with respect to a person who is a director or officer at the time
of such determination, in a reasonably prompt manner (i) by the Board of
Directors by a majority vote of directors who were not parties to such action,
suit or proceeding, whether or not they constitute a quorum of the Board of
Directors, (ii) by a committee of such directors designated by majority vote of
such directors, even though less than a quorum, (iii) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion, (iv) by the stockholders or (v) as Delaware Law may otherwise
permit. To the extent, however, that a present or former director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' and other professionals' fees) actually
and reasonably incurred by such person in connection therewith, without the
necessity of authorization in the specific case.
SECTION 5. Good Faith Defined. For purposes of any
determination under Section 4 of this Article, a person shall be deemed to have
acted in good faith if the action is based on (a) the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties or on (b) the advice of
19
legal counsel for the Corporation or another enterprise, or on information or
records given or reports made to the Corporation or another enterprise by an
independent certified public accountant, independent financial adviser,
appraiser or other expert selected with reasonable care by the Corporation or
the other enterprise. The provisions of this Section 5 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct.
SECTION 6. Proceedings Initiated by Indemnified Persons.
Notwithstanding any provisions of this Article to the contrary, the Corporation
shall not indemnify any person or make advance payments in respect of Losses to
any person pursuant to this Article in connection with any Proceeding (or
portion thereof) initiated against the Corporation by such person unless such
Proceeding (or portion thereof) is authorized by the Board of Directors or its
designee; provided, however, that this prohibition shall not apply to a
counterclaim, cross-claim or third-party claim brought in any Proceeding or to
any claims provided for in Section 7 of this Article.
SECTION 7. Indemnification By A Court. Notwithstanding any
contrary determination in the specific case under Section 4 of this Article, and
notwithstanding the absence of any determination thereunder, any director,
officer or employee may apply to any court of competent jurisdiction for
indemnification to the extent otherwise permissible under Section 1, 2 or 3 of
this Article. Notice of any application for indemnification pursuant to this
Section 7 shall be given to the Corporation promptly upon the filing of such
application.
SECTION 8. Losses Payable In Advance. Losses reasonably
incurred by an officer or director in defending any threatened or pending
Proceeding shall be paid by the Corporation in advance of the final disposition
of such Proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the Corporation as
authorized in this Article. Losses shall be reasonably documented by the officer
or director and required payments shall be made promptly by the Corporation.
Losses incurred by former directors and officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the Corporation deems
appropriate.
SECTION 9. Non-exclusivity and Survival of Indemnification.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article shall not be deemed exclusive of any other rights to which those
seeking
20
indemnification or advancement of expenses may be entitled under the Certificate
of Incorporation, any By-Law, agreement, contract, vote of Stockholders or of
disinterested directors, or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise. The provisions of this Article
shall not be deemed to preclude the indemnification of any person who is not
specified in Section 1, 2 or 3 of this Article but whom the Corporation has the
power or obligation to indemnify under the provisions of Delaware Law, or
otherwise. The rights conferred by this Article shall continue as to a person
who has ceased to be a director, officer or employee and shall inure to the
benefit of such person and the heirs, executors, administrators and other
comparable legal representatives of such person. The rights conferred in this
Article shall be enforceable as contract rights, and shall continue to exist
after any rescission or restrictive modification hereof with respect to events
occurring prior thereto. No rights are conferred in this Article for the benefit
of any person (including, without limitation, officers, directors and employees
of subsidiaries of the Corporation) in any capacity other than as explicitly set
forth herein.
SECTION 10. Meaning of certain terms in connection with
Employee Benefit Plans, etc. For purposes of this Article, references to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; references to "serving at the request of the Corporation" shall
include any service as a director, officer or employee of the Corporation which
imposes duties on, or involves services by, such director, officer or employee,
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who has acted in good faith and in a manner reasonably believed to be
in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article.
SECTION 11. Insurance. The Corporation may, but shall not be
required to, purchase and maintain insurance on behalf of any person who is or
was a director, officer or employee of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, member, employee,
fiduciary or agent of another against any liability asserted against such person
and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power or
the obligation to indemnify such person against such liability under the
provisions of this Article.
Dated: _______ ____, 1998.
21
DAFS03...:\95\78595\0019\1323\BYL1308X.47A
ANNEX D-1
---------
FORM OF XXXX AFFILIATE LETTER
February ____, 1998
U.S. Industries, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
Reference is made to the provisions of the Agreement and Plan
of Merger, dated as of the date hereof (together with any amendments thereto,
the "Merger Agreement"), by and among U.S. INDUSTRIES, INC., a Delaware
corporation ("USI"), USI, INC., a Delaware corporation and a wholly-owned
subsidiary of USI ("Superholdco"), BLUE MERGER CORP., a Delaware corporation and
a wholly-owned subsidiary of Superholdco (B-Sub"), XXXX MERGER CORP., a
Pennsylvania corporation and a wholly-owned subsidiary of Superholdco ("Z-Sub"),
and XXXX INDUSTRIES, INC., a Pennsylvania corporation ("Xxxx"), pursuant to
which Z-Sub will be merged with and into Xxxx, with Xxxx continuing as the
surviving corporation (the "Xxxx Merger"). This letter is being delivered as
contemplated by Section 5.14 of the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of Xxxx
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), and may be deemed to be an
"affiliate" of Xxxx for purposes of qualifying the Xxxx Merger for pooling of
interest accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"). Notwithstanding the foregoing, nothing herein shall be
construed as an admission that I am an affiliate of Xxxx for any purpose.
I understand that the transferability of the shares of common
stock, par value $.01 per share, of Superholdco (the "Superholdco Shares") which
I will receive upon the consummation of the Xxxx Merger in exchange for any
shares of Common Stock, par value $.50 per share, of Xxxx ("Xxxx Shares") held
by me, or upon exercise of any options to purchase Superholdco Shares which I
receive upon the consummation of the Xxxx Merger in exchange for any options
held by me to purchase Xxxx Shares, may be restricted. Accordingly, I hereby
represent, warrant and covenant to Superholdco and USI that I will
U.S. Industries, Inc.
February ___, 1998
Page 2
not sell, transfer, or otherwise dispose of any of the Superholdco Shares except
(i) pursuant to an effective registration statement under the Securities Act; or
(ii) as permitted by, and in accordance with Rule 145 or any other applicable
exemption from registration under the Securities Act. I hereby acknowledge that
Superholdco and USI are under no obligation to register the sale, transfer, or
other disposition of the Superholdco Shares under the Securities Act or to take
any other action necessary for the purpose of making an exemption from
registration thereunder available.
I hereby further covenant to Superholdco and USI that I will
not, within the 30 days preceding the effective time of the Xxxx Merger, sell,
transfer or otherwise dispose of any Xxxx Shares held by me and that I will not
sell, transfer or otherwise dispose of any Superholdco Shares received by me in
connection with the Xxxx Merger until after such time as financial results
covering at least 30 days of combined operations of Xxxx and USI have been
published by Superholdco, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on Form
10-K, 10-Q or 8-K, or any other public filing or announcement which includes
such combined financial results.
I understand that Superholdco will issue stop transfer
instructions to its transfer agent with respect to the Superholdco Shares and
that a restrictive legend will be placed on certificates delivered to me
evidencing the Superholdco Shares in substantially the following form:
"The shares represented by this certificate were issued in
connection with a merger which is being accounted for as a
pooling of interests and to which Rule 145 promulgated under
the Securities Act of 1933 (the "Securities Act") applies. The
shares may not be sold, transferred or otherwise disposed of
(i) until such time as Superholdco shall have published
financial results covering at least 30 days of combined
operations after the effective time of such merger and (ii)
except pursuant to an effective registration statement under
the Securities Act or in accordance with an exemption from the
registration requirements of the Securities Act. Reference is
made to that certain letter agreement between the registered
holder hereof and the issuer, a copy of which is on file in
the principal office of the issuer, which contains further
restrictions on the transferability of this certificate and
the shares represented hereby."
U.S. Industries, Inc.
February ___, 1998
Page 3
It is understood and agreed that the restrictive legend set
forth above will be removed by delivery of substitute certificates without such
legend if such legend is no longer required for purposes of the Securities Act
or qualification of the Xxxx Merger for pooling of interest accounting
treatment. In such event, Superholdco will also rescind the stock transfer
instructions referred to above.
I hereby acknowledge that the receipt of this letter by
Superholdco and USI is an inducement to the obligations of Superholdco and USI
to cause Z-Sub to consummate the Xxxx Merger and that I understand the
requirements of this letter and the limitations imposed upon the sale, transfer,
or other disposition of the Superholdco Shares.
Very truly yours,
Agreed and Accepted:
U.S. INDUSTRIES, INC.
By: ________________________________
Name:
Title:
USI, INC.
By: ________________________________
Name:
Title:
DAFS03...:\95\78595\0019\1323\CRT1308R.00A
ANNEX D-2
---------
FORM OF USI AFFILIATE LETTER
February ____, 1998
USI, Inc.
c/o U.S. Industries, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Xxxx Industries, Inc.
00000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
Reference is made to the provisions of the Agreement and Plan
of Merger, dated as of the date hereof (together with any amendments thereto,
the "Merger Agreement"), by and among U.S. INDUSTRIES, INC., a Delaware
corporation ("USI"), USI, INC., a Delaware corporation and a wholly-owned
subsidiary of USI ("Superholdco"), BLUE MERGER CORP., a Delaware corporation and
a wholly-owned subsidiary of Superholdco (B-Sub"), ZORO MERGER CORP., a
Pennsylvania corporation and a wholly-owned subsidiary of Superholdco ("Z-Sub"),
and XXXX INDUSTRIES, INC., a Pennsylvania corporation ("Xxxx"), pursuant to
which Z-Sub will be merged with and into Xxxx, with Xxxx continuing as the
surviving corporation (the "Xxxx Merger") and B-Sub will be merged with and into
USI, with USI continuing as the surviving corporation (the "USI Merger" and
together with the Xxxx Merger, the "Mergers"). This letter is being delivered as
contemplated by Section 5.14 of the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of USI
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities Act
of 1933, as amended (the "Securities Act"), and may be deemed to be an
"affiliate" of USI for purposes of qualifying the Mergers for pooling of
interest accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable rules and regulations of the Securities and Exchange
Commission (the "SEC"). Notwithstanding the foregoing, nothing herein shall be
construed as an admission that I am an affiliate of USI for any purpose.
USI, Inc.
Xxxx Industries, Inc.
February ___, 1998
Page 2
I understand that the transferability of the shares of common
stock, par value $.01 per share, of Superholdco (the "Superholdco Shares") which
I will receive upon the consummation of the USI Merger in exchange for any
shares of Common Stock, par value $.01 per share, of USI ("USI Common Shares"),
held by me, or upon exercise of any options to purchase Superholdco Shares which
I receive upon the consummation of the USI Merger in exchange for any options
held by me to purchase USI Common Shares, may be restricted. Accordingly, I
hereby represent, warrant and covenant to Superholdco and Xxxx that I will not
sell, transfer, or otherwise dispose of any of the Superholdco Shares except (i)
pursuant to an effective registration statement under the Securities Act; or
(ii) as permitted by, and in accordance with Rule 145 or any other applicable
exemption from registration under the Securities Act. I hereby acknowledge that
neither Superholdco nor USI is under any obligation to register the sale,
transfer, or other disposition of the Superholdco Shares under the Securities
Act or to take any other action necessary for the purpose of making an exemption
from registration thereunder available.
I hereby further covenant to Superholdco and Xxxx that I will
not, within the 30 days preceding the effective time of the USI Merger, sell,
transfer or otherwise dispose of any USI Common Shares held by me and that I
will not sell, transfer or otherwise dispose of any Superholdco Shares received
by me in connection with the USI Merger until after such time as financial
results covering at least 30 days of combined operations of Xxxx and USI have
been published by Superholdco, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on Form
10-K, 10-Q or 8-K, or any other public filing or announcement which includes
such combined financial results.
I understand that Superholdco will issue stop transfer
instructions to its transfer agent with respect to the Superholdco Shares and
that a restrictive legend will be placed on certificates delivered to me
evidencing the Superholdco Shares in substantially the following form:
"The shares represented by this certificate were issued in
connection with a merger which is being accounted for as a
pooling of interests and to which Rule 145 promulgated under
the Securities Act of 1933 (the "Securities Act") applies. The
shares may not be sold, transferred or otherwise disposed of
(i) until such time as Superholdco shall have published
financial results covering at least 30 days of combined
operations after the effective time of such merger and (ii)
except pursuant to an
USI, Inc.
Xxxx Industries, Inc.
February ___, 1998
Page 3
effective registration statement under the Securities Act or
in accordance with an exemption from the registration
requirements of the Securities Act. Reference is made to that
certain letter agreement between the registered holder hereof
and the issuer, a copy of which is on file in the principal
office of the issuer, which contains further restrictions on
the transferability of this certificate and the shares
represented hereby."
It is understood and agreed that the restrictive legend set
forth above will be removed by delivery of substitute certificates without such
legend if such legend is no longer required for purposes of the Securities Act
or qualification of the Mergers for pooling of interest accounting treatment. In
such event, Superholdco will also rescind the stock transfer instructions
referred to above.
I hereby acknowledge that the receipt of this letter is an
inducement to the obligations of Superholdco, USI and Xxxx to cause the Mergers
to be consummated and that I understand the requirements of this letter and the
limitations imposed upon the sale, transfer, or other disposition of the
Superholdco Shares.
Very truly yours,
Agreed and Accepted:
USI, INC.
By: ______________________________
Name:
Title:
XXXX INDUSTRIES, INC.
By: ______________________________
Name:
Title:
NYFS11...:\95\78595\0019\1323\CRT2048V.55A
