AGREEMENT AND PLAN OF
MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement") is
made as of the 16th day of June, 1998, among and between DHI HOLDINGS, INC., an
Ohio corporation ("DHI"), DHI SUB CORP, an Indiana corporation that is a
wholly-owned subsidiary of DHI ("DHI Sub Corp"), and PERSONNEL MANAGEMENT, INC.,
an Indiana corporation ("PMI") (as such defined terms are used in this
Agreement, each of DHI, DHI Sub Corp and PMI is a "Party" and together they are
the "Parties").
RECITALS
WHEREAS, DHI and PMI have determined that it is in their mutual best
interest, and PMI has determined that it is in the best interest of PMI's
shareholders, to effect an acquisition transaction whereby DHI acquires 100% of
the outstanding capital stock of PMI in exchange for cash paid to the PMI
shareholders; and
WHEREAS, DHI and PMI have mutually agreed to effect such acquisition
transaction upon and subject to the terms and conditions of this Agreement; and
WHEREAS, DHI Sub Corp has been organized by DHI as its wholly-owned
subsidiary corporation to facilitate such acquisition transaction by merging
with and into PMI as provided in this Agreement; and
WHEREAS, simultaneously with the execution hereof, certain shareholders of
PMI have executed and delivered to DHI a Voting Agreement of even date herewith
pursuant to which such shareholders agree to vote for the Merger described
herein, which Voting Agreement has been relied upon by DHI in its decision to
execute this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
made herein, DHI, DHI Sub Corp and PMI agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES TO TERMS
Section 1.1. Definitions. For purposes of this Agreement, and in addition
to terms that are defined elsewhere herein, the following terms (and the plural
or singular forms thereof when applicable) have the meanings specified or
referred to in this Section:
"Acquisition Proposal" is defined in Section 7.3(d).
"Xxxx" is defined in Section 7.1(g).
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"Closing" means the consummation by the parties of the transactions
contemplated by this Agreement as more particularly described in
Section 2.10.
"Closing Date" means the date and time as of which the Closing
actually takes place.
"Code" means the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue
Code or any successor law, all as amended from time to time.
"Commitments" is defined in Section 4.8.
"Confidential Information" is defined in Sections 5.11(a) and (b).
"Current PMI Filings" is defined in Section 3.8.
"Disclosing Party" is defined in Section 5.13.
"Effective Time" is defined in Section 2.5.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations and rules issued pursuant thereto, all as amended from
time to time.
"Exchange Act" means the Securities Exchange Act of 1934 or any
successor law, and regulations and rules issued pursuant to that Act
or any successor law, all as amended from time to time.
"Favorable Preliminary Finding" is defined in Section 5.10(d).
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the financial
statements referred to in Section 3.8 or Section 4.10, as applicable,
were prepared.
"Governmental Authorization" means any approval, consent, license,
permit, waiver or other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental Body" means any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department,
official or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, and regulations and rules issued pursuant to that Act, all as
amended from time to time.
"IBCL" means the Indiana Business Corporation Law.
"Interested Person" is defined in Section 3.21.
"Knowledge" is defined in Section 1.2.
"Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty.
"LP I" is defined in Section 3.2.
"XX XX" is defined in Section 3.2.
"Material adverse change" and "material adverse effect" are defined in
Section 1.4.
"Merger Consideration" is defined in Section 2.6.
"Nondisclosing Party" is defined in Section 5.13.
"Nullifying Event" is defined in Section 7.3(e).
"OGCL" is defined in Section 4.1.
"Option Consideration" is defined in Section 2.7. "Ordinary Course of
Business" is defined in Section 1.3.
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of a corporation, (b) the partnership
agreement and any statement of partnership of a general partnership,
(c) the limited partnership agreement and the certificate of limited
partnership of a limited partnership, (d) the articles of organization
and the operating agreement of a limited liability company, (e) any
charter or similar document adopted or filed in connection with the
creation, formation, or organization of a Person, and (f) any
amendment to any of the foregoing.
"Outstanding Obligations" is defined in Section 5.1(c).
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization,
labor union or other entity or Governmental Body.
"Plan" is defined in Section 5.15(b).
"Plan of Merger" means the Plan of Merger in the form attached hereto
as Exhibit A.
"PMI Administration" is defined in Section 3.2.
"PMI Benefit Plans" is defined in Section 3.13(a).
"PMI Common Shares" is defined in Section 2.6.
"PMI Corporate Subsidiaries" is defined in Section 3.2.
"PMI Disclosure Schedule" means the confidential writing by that name
provided by PMI to DHI concurrently with the execution of this
Agreement.
"PMI Holdings" is defined in Section 3.2.
"PMI Partnership Subsidiaries" is defined in Section 3.2.
"PMI Proxy Materials" is defined in Section 3.23.
"PMI Reports" is defined in Section 3.7.
"PMI Special Meeting" is defined in Section 5.5.
"PMI Stock Plans" is defined in Section 3.4.
"PMI Subsidiaries" is defined in Section 3.2.
"PMI's Current Premium" is defined in Section 5.10(a).
"Quest" is defined in Section 3.2.
"Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor or other
representative of such Person, including legal counsel, accountants
and financial advisors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any
successor law, all as amended from time to time.
"SIT" is defined in Section 3.2.
"Subsidiaries" means, with respect to a Person, all corporations,
partnerships, limited liability companies or other entities as to
which such Person (or one or more Subsidiaries of such Person)
directly or indirectly owns or has the power to vote a majority of the
common stock or other voting securities or interests (including,
without limitation, partnership or limited liability company
interests).
"Supplemental Disclosure" is defined in Section 5.13.
"Surviving Corporation" is defined in Section 2.1.
"Taxes" is defined in Section 3.12.
"Termination Fee" is defined in Section 7.3(a).
"Warrants" is defined in Section 3.4.
Section 1.2. Knowledge. An individual will be deemed to have "Knowledge" of
a particular fact or other matter if (a) such individual is actually aware of
such fact or other matter, or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or existence of such fact or
other matter. A Person other than an individual will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is a
director, officer or general partner of such Person (or any individual in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter.
Section 1.3. Ordinary Course of Business. An action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices
(including with respect to quantity and frequency) of such Person and
is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
Section 1.4. Material Adverse Effect. When used in this Agreement, the
terms "material adverse change", "material adverse effect" or similar terms
shall mean a material adverse change in, or a material adverse effect upon, the
business, properties, operations, prospects or assets or in the condition,
financial or otherwise, of PMI and the PMI Subsidiaries taken as a whole.
Section 1.5. Section References. All references to numbered sections refer
to sections of this Agreement unless otherwise provided. All references to
"this" article, section or subsection refer to the particular article, section
or subsection in which such reference occurs unless otherwise provided.
ARTICLE II
TERMS AND CONDITIONS OF THE MERGER:
STATUS AND CONVERSION OF SHARES
Section 2.1. The Merger. At the Effective Time, in accordance with this
Agreement, the Plan of Merger and the IBCL, DHI Sub Corp shall be merged with
and into PMI, the separate corporate existence of DHI Sub Corp shall cease and
PMI shall be the surviving corporation (the "Surviving Corporation") in the
Merger.
Section 2.2. Surviving Corporation. The name of the Surviving Corporation
after the Effective Time shall be "Personnel Management, Inc." The Surviving
Corporation shall continue to exist as a corporation under the IBCL and shall
succeed to, possess and enjoy all the property, rights, privileges, immunities,
powers, purposes and franchises, both of a public and a private nature, and be
subject to all the restrictions, disabilities and duties, of DHI Sub Corp and
PMI, all in accordance with the IBCL. At any time, or from time to time, after
the Effective Time, the officers of the Surviving Corporation may, in the name
of PMI and/or DHI Sub Corp, and the officers of PMI and DHI Sub Corp shall,
execute and deliver all such proper deeds, assignments and other instruments and
take or cause to be taken all such further or other action as the Surviving
Corporation may deem necessary or desirable in order to vest, perfect or confirm
in the Surviving Corporation title to and possession of all PMI's and/or DHI Sub
Corp's property, rights, privileges, immunities, powers, purposes and
franchises, and otherwise to carry out the purposes of this
Agreement.
Section 2.3. Articles of Incorporation. Subject to the provisions of
Section 5.10 hereof, the Restated Articles of Incorporation of PMI, dated
December 2, 1993, a copy of which is attached hereto as Exhibit B, shall from
and after the Effective Time be and continue to be the Articles of Incorporation
of the Surviving Corporation until amended as provided therein or by law.
Section 2.4. Bylaws. Subject to the provisions of Section 5.10 hereof, the
Restated Bylaws of PMI, adopted December 2, 1993, a copy of which is attached
hereto as Exhibit C, shall from and after the Effective Time be and continue to
be the Bylaws of the Surviving Corporation until amended or repealed as provided
therein or as provided by the Articles of Incorporation of the Surviving
Corporation or by law.
Section 2.5. Effective Time. The Merger (unless this Agreement is earlier
terminated) shall become effective on the date and time when Articles of Merger
in the prescribed form have been duly filed with the Secretary of State of the
State of Indiana. The date and time of such effectiveness is referred to herein
as the Effective Time. Each of the Parties hereto agrees to use its reasonable
efforts to cause the Merger to become effective as soon as practicable.
Section 2.6. PMI Common Shares. Each share of the common stock, no par
value, of PMI (the "PMI Common Shares") issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be canceled and retired and DHI shall, in
accordance with the procedures specified in Section 2.9 hereof, pay or cause to
be paid to each record holder of PMI Common Shares as of the Effective Time
$16.00 net cash per share (the "Merger Consideration"), and pay to each holder
of unexercised Warrants or options under the PMI Stock Plans the Option
Consideration. Each PMI Common Share held in treasury, if any, shall be
canceled, and no consideration shall be paid therefor.
Section 2.7. Treatment of Warrants and Stock Options. All rights to receive
PMI Common Shares pursuant to the Warrants and all options granted under the PMI
Stock Plans, which rights or options have not been exercised as of the Effective
Time , shall be canceled and converted, without the necessity of any further
action by the holders thereof, into the right to receive, in cash, an amount
equal to the positive difference, if any, between $16.00 per share and the
exercise price per share of each such option or Warrant (the "Option
Consideration").
Section 2.8. DHI Sub Shares. The single share of capital stock of DHI Sub
Corp issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and become a number of validly issued, fully paid and
nonassessable common shares, without par value, of the Surviving Corporation,
which is equal to the number of PMI Common Shares issued and outstanding as of
the Effective Time.
Section 2.9. Procedures.
(a) Exchange Agent. PMI shall authorize one or more banks or
trust companies reasonably acceptable to DHI to act as exchange agent
(the "Exchange Agent") hereunder pursuant to an agreement or agreements
satisfactory to PMI.
(b) Additional agreements. DHI and PMI shall have the right to
make additional agreements consistent with the terms of this Agreement,
governing the payment for PMI Common Shares being canceled in
connection with the Merger. All such additional agreements shall be
final and binding on all holders of PMI Common Shares.
(c) Surrender of shares. DHI shall make appropriate
arrangements with the Exchange Agent to wire transfer the aggregate
Merger Consideration and aggregate Option Consideration to the Exchange
Agent on or prior to the Closing Date. Commencing as soon as
practicable after the Effective Time , each holder of record as of the
Effective Time of one or more PMI Common Shares (other than treasury
shares) shall be paid the Merger Consideration per each share
surrendered, upon delivery to the Exchange Agent of one or more
certificates for such PMI Common Shares (the "Certificates") for
cancellation, together with a duly executed transmittal letter and such
other documents, information or assurances as may be required in
accordance with Section 2.9(e) hereof. Each holder of Warrants or
options under the PMI Stock Plans shall receive payment of the Option
Consideration from the Exchange Agent promptly following the Effective
Time. No interest shall be paid or accrued on the Merger Consideration
or Option Consideration payable hereunder. If so requested by the
Surviving Corporation, any funds remaining with the Exchange Agent nine
(9) months after the Effective Time shall be released and repaid by the
Exchange Agent to the Surviving Corporation, after which time persons
entitled thereto may look, subject to applicable escheat and other
similar laws, only to the Surviving Corporation for payment thereof.
(d) Cancellation of shares. All holders of Certificates shall
cease at the Effective Time to have any rights as shareholders of PMI,
or any interest in PMI, DHI, DHI Sub Corp or any subsidiary or
affiliate of any of the foregoing, by reason of the Merger, and, in
full satisfaction of all rights pertaining to their PMI Common Shares,
their exclusive right shall be to receive cash in accordance with this
Article II, without regard to any delay in surrender of any Certificate
or appropriate accompanying documentation hereunder.
(e) Transmittal letter. As soon as practicable after the
Effective Time , but in any event not later than 14 days thereafter,
the Exchange Agent shall mail to each holder of record of a Certificate
or Certificates: (1) a form letter of transmittal which, without
limitation, shall include a representation to be signed by such holder
to the effect that the PMI Common Shares represented by such
Certificate(s) are owned by such holder free and clear from any liens,
claims or other encumbrances and shall specify that delivery shall be
effected, and risk of loss and title to the Certificate(s) shall pass,
only upon delivery of the Certificate(s) to the Exchange Agent; and (2)
instructions for use in effecting the surrender of the Certificate(s),
which shall specify what, if any, other documents, information or
assurances may be reasonably required by the Surviving Corporation to
effect a surrender of any Certificate or to be presented in the absence
of a Certificate.
(f) Lost certificates. The holders of Certificates
representing PMI Common Shares shall not be entitled to receive the
amount of cash payable pursuant to Section 2.9(c) until such holders
have surrendered such Certificates. If such Certificates are lost,
stolen or destroyed, the Surviving Corporation shall determine the
amount of the bond, if any, and the type of additional documents,
information or assurances as shall be reasonably required to protect
the Surviving Corporation from other claimants with respect to the PMI
Common Shares represented thereby in conformity with applicable law.
The Surviving Corporation shall have no obligation to pay or to
recognize the claim of any holder of PMI Common Shares who was not the
holder of record thereof as of the Effective Time.
Section 2.10. Closing. Subject to the provisions of Article VI, the
consummation of the Merger and other transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of PMI's counsel in
Indianapolis, Indiana, as soon as practicable after satisfaction of all of the
conditions precedent to Closing provided in Article VI. In the absence of a
mutual agreement by DHI and PMI as to the date and time of the Closing, the
Closing shall be held on the last business day of the calendar month during
which the satisfaction of the last to be satisfied of the conditions to Closing
occurs, commencing on such date at 10:00 a.m., Indianapolis time. The date on
which the Closing actually occurs is the "Closing Date" as such term is used
herein. In the event the Closing occurs, the following actions will be taken at
the Closing:
(a) the Parties will execute (unless same has been previously
executed) the Plan of Merger;
(b) PMI shall deliver to DHI a certificate dated the Closing
Date of the secretary (or other appropriate officer) of PMI certifying
as to appropriate resolutions of the Board of Directors and the
shareholders of PMI authorizing and approving this Agreement, the Plan
of Merger and the Merger;
(c) DHI and DHI Sub Corp shall provide to PMI a certificate of
the secretary of each of said corporations certifying, respectively,
appropriate resolutions of the Board of Directors of DHI and the Board
of Directors and shareholders of DHI Sub Corp authorizing and approving
this Agreement, the Plan of Merger and the Merger; and
(d) each of the Parties shall take such further actions as may
be reasonably required to consummate the Merger and the other
transactions contemplated hereby to be consummated on or before the
Closing Date in accordance with the provisions of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PMI
PMI represents and warrants to DHI and DHI Sub Corp as follows:
Section 3.1. PMI Organization. PMI is a corporation that is duly organized
and validly existing, and is current in its corporate reporting obligations,
under the IBCL.
Section 3.2. Subsidiaries. PMI owns all of the issued and outstanding
capital stock of PMI Administration, Inc., a corporation that is duly organized
and validly existing, and is current in its corporate reporting obligations,
under the IBCL ("PMI Administration"). PMI also owns all of the issued and
outstanding capital stock of PMI Holdings, Inc., a corporation that is duly
organized, validly existing and in good standing under the laws of the State of
Delaware ("PMI Holdings"). PMI also owns all of the issued and outstanding
capital stock of two additional corporations, Southern Indiana Temporaries,
Inc., a corporation that is duly organized and validly existing, and is current
in its corporate reporting obligations, under the IBCL ("SIT"), and Quest
Personnel Search, Inc., a corporation that is duly organized and validly
existing, and is current in its corporate reporting obligations, under the IBCL
("Quest"). (PMI Administration, PMI Holdings, SIT and Quest are collectively
referred to herein as the "PMI Corporate Subsidiaries".) Neither SIT nor Quest
conducts any active business operations. Two limited partnerships in which PMI
holds an interest as a limited partner conduct active business operations
through the temporary staffing offices maintained by those limited partnerships
under the name of PMI. PMI LP I is a limited partnership that is duly organized
and validly existing, and is current in its corporate reporting obligations,
under the laws of the State of Indiana ("LP I"). PMI Administration is the
general partner of LP I and owns a 78.1% partnership interest therein, and PMI
and SIT are the limited partners of LP I, owning 0.8% and 20.1% limited partner
interests therein. LP I conducts its business operations through offices located
in Indiana and Kentucky. PMI XX XX is a limited partnership that is duly
organized, validly existing, and is current in its corporate reporting
obligations, under the laws of the State of Indiana ("XX XX"). PMI
Administration is the 1% general partner, and PMI is the 99% limited partner, of
XX XX. XX XX conducts business operations from offices located in the states of
Georgia and Florida. (LP I and XX XX are collectively referred to herein as the
"PMI Partnership Subsidiaries", and the PMI Corporate Subsidiaries and the PMI
Partnership Subsidiaries are collectively referred to herein as the "PMI
Subsidiaries".) Except as set forth in this Section and in the PMI Disclosure
Schedule, there are no Persons (other than the PMI Subsidiaries) in which PMI or
any of the PMI Subsidiaries has any voting rights or equity interests. True and
correct copies of the Organizational Documents of PMI are attached hereto as
Exhibits B and C, and true and correct copies of the Organizational Documents
pertaining to the PMI Subsidiaries are included in the PMI Disclosure Schedule.
Section 3.3. Qualification and Corporate Power. PMI Administration is
qualified as a foreign corporation and in good standing as such in the State of
Florida. LP I is qualified as a foreign limited partnership and in good standing
as such in the State of Kentucky. XX XX is qualified as a foreign limited
partnership and in good standing as such in the States of Georgia and Florida.
Each of PMI and the PMI Subsidiaries is duly authorized to conduct business
under the laws of each jurisdiction where such qualification is required except
where the lack of such qualification would not have a material adverse effect on
the financial condition of PMI and the PMI Subsidiaries taken as a whole or on
the ability of PMI to consummate the transactions contemplated by this
Agreement. Each of PMI and the PMI Subsidiaries has full corporate or
partnership (as the case may be) power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it.
Section 3.4. Capitalization. The entire authorized capital stock of PMI
consists of Four Million (4,000,000) authorized shares of preferred stock, no
shares of which are issued and outstanding, and Twenty Million (20,000,000)
shares of PMI Common Shares, of which 2,048,771 are issued and outstanding as of
March 13, 1998. All of the issued and outstanding PMI Common Shares have been
duly authorized and are validly issued, fully paid and nonassessable. As of June
1, 1998, 225,549 PMI Common Shares were issuable upon the exercise of options,
at exercise prices ranging from $5.90 to $16.73 per PMI Common Share, pursuant
to PMI's 1993 Stock Option Plan, 1994 Stock Option Plan, 1994 Director Stock
Option Plan and 1998 Stock Option Plan, all as amended (collectively, the "PMI
Stock Plans"). As of June 1, 1998, 52,416 PMI Common Shares were issuable upon
the exercise of warrants, at an exercise price of $9.2727 per PMI Common Share,
pursuant to warrants originally granted in connection with PMI's initial public
offering (the "Warrants"). Section 3.4 of the PMI Disclosure Schedule contains a
chart reflecting the exercise prices, vesting status, date of grant and other
information concerning the options exercisable under the PMI Stock Plans and the
Warrants as of June 1, 1998. Except for the Warrants and options that are
outstanding under the PMI Stock Plans and except as disclosed in the PMI
Disclosure Schedule, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights or
other contracts or commitments that could require PMI or any of the PMI
Subsidiaries to issue or sell, or that could otherwise cause to become
outstanding, any PMI Common Shares or other securities of PMI or any securities
of or partnership interests in any of the PMI Subsidiaries in addition to those
currently issued and outstanding. Except as disclosed in the PMI Disclosure
Schedule, there are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to PMI or any of the
PMI Subsidiaries. Upon the consummation of the transactions contemplated hereby,
the Warrants and the options that are outstanding under the PMI Stock Plans will
be cancelable in exchange for payment by DHI to the warrantholders and
optionholders of an amount equal to the difference between the price per share
to be paid by DHI hereunder and the exercise price per share applicable to such
Warrant or option.
Section 3.5. Authorization. PMI has full power and authority (including
full corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder, except that PMI cannot consummate the Merger
unless and until it receives the affirmative vote of the holders of a majority
of the PMI Common Shares approving this Agreement, the Plan of Merger and the
Merger. This Agreement constitutes the valid and legally binding obligation of
PMI, enforceable against PMI in accordance with its terms and conditions.
Section 3.6. Noncontravention. Except as disclosed in the PMI Disclosure
Schedule, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation or rule, or any injunction, judgment, order,
decree, ruling, charge or other restriction of any Governmental Body or court to
which any of PMI or the PMI Subsidiaries is subject, or any provision of the
Organizational Documents of any of PMI or the PMI Subsidiaries, or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, or create in any party the right to accelerate, terminate,
modify, cancel or require any notice under, any agreement, contract, lease,
license, instrument or other arrangement to which any of PMI or the PMI
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject, or result in the imposition of any lien or security interest on any of
its assets, except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice or imposition of
a lien or security interest would not have a material adverse effect on the
financial condition of PMI and the PMI Subsidiaries taken as a whole or on the
ability of PMI to consummate the transactions contemplated by this Agreement.
Other than filings to be made under the IBCL in connection with the Merger and
matters in connection with the provisions of the Exchange Act, the Securities
Act and applicable state securities laws, none of PMI and the PMI Subsidiaries
needs to give any notice to, make any filing with or obtain any authorization,
consent or approval of, any Governmental Body in order for PMI to consummate the
transactions contemplated by this Agreement.
Section 3.7. PMI SEC Reports. PMI has made all filings with the SEC that it
has been required to make within the past two years under the Securities Act and
the Exchange Act (which filings, collectively, are the "PMI Reports"). Each of
the PMI Reports has complied with the Securities Act and the Exchange Act in all
material respects. Except as disclosed in the PMI Disclosure Schedule, none of
the PMI Reports, as of their respective dates, contained any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. The PMI Reports are each identified by specific
description in the PMI Disclosure Schedule. PMI has delivered to DHI a correct
and complete copy of the PMI Reports (together with all exhibits and schedules
thereto and as amended to date).
Section 3.8. PMI Financial Statements. PMI has filed, as part of the PMI
Reports, its Quarterly Report on Form 10-Q for its fiscal quarter ended April
30, 1998, and its Annual Report on Form 10-K for its fiscal year ended October
31, 1997 (collectively, the "Current PMI Filings"). The financial statements
included in or incorporated by reference into the Current PMI Filings (including
the related notes and schedules thereto) have been prepared in accordance with
GAAP and present fairly the consolidated financial condition of PMI and the PMI
Subsidiaries as of the indicated dates and the consolidated results of
operations of PMI and the PMI Subsidiaries for the indicated periods, subject,
however, in the case of the interim financial statements included therein to
normal year-end adjustments.
Section 3.9. Events Subsequent to January 31, 1998. Since January 31, 1998,
excluding changes generally affecting the industries in which PMI and the PMI
Subsidiaries operate and the change in control of PMI contemplated hereby, there
has not been any material adverse change in the business, financial condition,
operations, results of operations or future prospects of PMI and the PMI
Subsidiaries taken as a whole. Without limiting the generality of the foregoing,
except as disclosed in the PMI Disclosure Schedule (and, with respect to all
periods of time and dates after the date of this Agreement, except as
contemplated by Section 5.15 or approved in writing by DHI), since January 31,
1998:
(a) none of PMI or the PMI Subsidiaries has sold, leased,
transferred or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
(b) none of PMI or the PMI Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related
agreements, contract, leases and licenses) either involving more than
$50,000 or outside the Ordinary Course of Business;
(c) no party (including any of PMI or the PMI Subsidiaries)
has accelerated, terminated, modified or canceled any agreement,
contract, lease or license (or series of related agreements, contracts,
leases and licenses) involving more than $50,000 to which any of PMI or
the PMI Subsidiaries is a party or by which any of them is bound;
(d) none of PMI or the PMI Subsidiaries has imposed any
security interest upon any of its assets, tangible or intangible;
(e) none of PMI or the PMI Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either
involving more than $50,000 or outside the Ordinary Course of Business;
(f) none of PMI or the PMI Subsidiaries has made any capital
investment in, any loan to or any acquisition of the securities or
assets of, any other Person (or series of related capital investments,
loans and acquisitions) either involving more than $50,000 or outside
the Ordinary Course of Business;
(g) none of PMI or the PMI Subsidiaries has issued any note,
bond or other debt security or created, incurred, assumed or guaranteed
any indebtedness for borrowed money or capitalized lease obligation
either involving more than $10,000 singly or $50,000 in the aggregate;
(h) none of PMI or the PMI Subsidiaries had delayed or
postponed the payment of accounts payable and other liabilities or
accelerated the collection of accounts receivable outside the Ordinary
Course of Business;
(i) none of PMI or the PMI Subsidiaries has canceled,
compromised, waived or released any right or claim (or series of
related rights and claims) either involving more than $50,000 or
outside the Ordinary Course of Business;
(j) none of PMI or the PMI Subsidiaries has granted any
license or sublicense of any rights under or with respect to any
intellectual property;
(k) there has been no change made or authorized in the
Organizational Documents of any of PMI or the PMI Subsidiaries;
(l) none of PMI or the PMI Subsidiaries has issued, sold or
otherwise disposed of any of its capital stock, or granted any options,
warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;
(m) none of PMI or the PMI Subsidiaries has declared, set
aside or paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed, purchased or
otherwise acquired any of its capital stock;
(n) none of PMI or the PMI Subsidiaries has experienced any
material damage, destruction or loss to its property that was not fully
covered (except for applicable deductibles) by casualty or other
applicable insurance;
(o) none of PMI or the PMI Subsidiaries has made any loan to,
or entered into any other transaction with, any of its directors,
officers and employees outside the Ordinary Course of Business;
(p) none of PMI or the PMI Subsidiaries has entered into any
employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(q) none of PMI or the PMI Subsidiaries has granted any
increase in the base compensation of any of its directors or officers;
(r) none of PMI or the PMI Subsidiaries has granted any
increase in the base compensation of any of its employees outside the
Ordinary Course of Business;
(s) none of PMI or the PMI Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance
or other plan, contract or commitment for the benefit of any of its
directors, officers and employees (or taken any such action with
respect to any other employee benefit plan) except, in any such case,
as required by ERISA or other applicable Legal Requirement;
(t) none of PMI or the PMI Subsidiaries has made any material
change in the employment terms of any of its directors or officers;
(u) none of PMI or the PMI Subsidiaries has made or pledged to
make any charitable or other capital contribution outside the Ordinary
Course of Business;
(v) there has not been any material transaction outside the
Ordinary Course of Business involving any of PMI or the PMI
Subsidiaries; and
(w) none of PMI or the PMI Subsidiaries has committed to do
any of the foregoing.
Section 3.10. Undisclosed Liabilities. Except as disclosed in the PMI
Disclosure Schedule, none of PMI and the PMI Subsidiaries has any liability
(whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued and liquidated or unliquidated, and whether due or to
become due), including any liability for taxes, except for (i) liabilities set
forth on the face of the balance sheet of PMI dated as of January 31, 1998
(rather than in any notes thereto) and (ii) liabilities which have arisen after
January 31, 1998 in the Ordinary Course of Business (none of which results from,
arises out of, relates to, is in the nature of or was caused by any breach of
contract, breach of warranty, tort, infringement of intellectual property rights
or violation of law).
Section 3.11. Litigation. Except as disclosed in the PMI Reports or in the
PMI Disclosure Schedule, there are no actions, suits, proceedings, reviews or
investigations pending, or to the Knowledge of PMI or any of its Subsidiaries
threatened, involving PMI or any of its Subsidiaries, at law or in equity, or
before any Governmental Body. PMI is not subject to any order, judgment or
decree that can reasonably be expected to result in any material adverse change.
Section 3.12. Taxes. PMI and each of its Subsidiaries has duly filed all
material federal, state, local and foreign tax returns required to be filed by
it, and PMI except as disclosed in the PMI Disclosure Schedule has duly paid,
caused to be paid or properly accrued an adequate reserve for the payment of all
taxes and penalties and interest relating thereto (collectively, all such taxes,
penalties and interest are "Taxes") required to be paid in respect of the
periods covered by such returns and has properly accrued an adequate reserves
for payment of all Taxes anticipated to be payable in respect of all calendar
periods since the periods covered by such returns. The federal income tax
returns required to be filed by PMI have been examined by the IRS for all
taxable years through October 31, 1996. All deficiencies and assessments
asserted as a result of such examinations or other audits by federal, state,
local or foreign taxing authorities have been paid, fully settled or adequately
provided for in the financial statements contained in the PMI Reports, and no
issue or claim has been asserted for Taxes by any taxing authority for any prior
period the adverse determination of which would result in a deficiency which
would have a material adverse effect on the business, financial condition or
results of operations of PMI and its Subsidiaries taken as a whole other than
those heretofore paid or provided for. Except as set forth in the PMI Disclosure
Schedule, there are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal, state, local or foreign income
tax return of PMI or its Subsidiaries.
Section 3.13. ERISA.
(a) The PMI Disclosure Schedule describes each "employee
benefit plan" (as such term is defined in Section 3(3) of ERISA) and
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, dental or other benefit plan, arrangement or
understanding (collectively, all such plans, arrangements and
understandings are the "PMI Benefit Plans"), maintained or contributed
to by PMI or any of its Subsidiaries for the benefit of the employees
of PMI or any of its Subsidiaries. With respect to the PMI Benefit
Plans, PMI has included in the PMI Disclosure Schedule a list of the
documents creating or evidencing the PMI Benefit Plans and true and
correct copies of (i) the most recent annual reports (Form 5500) filed
with the IRS, (ii) the most current determination letter received from
the IRS with respect to each PMI Benefit Plan as to which a
determination letter has been issued, and (iii) each group insurance or
annuity contract, if any, relating thereto. Neither PMI nor any of its
Subsidiaries has ever maintained or contributed to an "employee benefit
plan" subject to Title IV of ERISA.
(b) With respect to the PMI Benefit Plans, neither PMI nor any
of its Subsidiaries has any liabilities, other than liabilities for
benefit claims and funding obligations payable in the normal course of
the operations of the PMI Benefit Plans, under ERISA, the Code or any
other applicable law that in the aggregate would have a material
adverse effect on PMI and its Subsidiaries taken as a whole.
(c) With respect to the PMI Benefit Plans, there are no funded
benefit obligations for which contributions have not been made or
properly accrued, and there are no unfunded benefit obligations which
have not been accounted for by reserves or otherwise properly footnoted
in accordance with GAAP on the financial statements of PMI and its
Subsidiaries.
(d) All of the PMI Benefit Plans have been operated in all
material respects in compliance with their respective terms and all
Legal Requirements, and all contributions required (by Legal
Requirements or contract) to any such PMI Benefit Plan have been made.
All reports required to be filed with any Governmental Body have been
filed with such Governmental Body on a timely basis. None of the PMI
Benefit Plans provide benefits to Persons who are not employees of PMI
or the PMI Subsidiaries. Neither PMI nor any of the PMI Subsidiaries
has any liability of any nature to plan participants, whether known or
unknown, and whether absolute, accrued, contingent or otherwise), with
respect to any PMI Benefit Plan (including, without limitation, any
prior plans and any plans maintained by any predecessor, affiliated or
related entities), other than for payments of benefits due in the
ordinary course under the PMI Benefit Plans, none of which are overdue.
Section 3.14. Legal Compliance. PMI and its Subsidiaries hold all
Governmental Authorizations necessary for the lawful conduct of their respective
businesses except for failures to hold such Governmental Authorizations the
absence of which would not, in the aggregate, have a material adverse effect on
the business, operations or financial condition of PMI and its Subsidiaries
taken as a whole. PMI and its Subsidiaries are in compliance with the terms of
all Governmental Authorizations held by them except where the failure so to
comply would not have a material adverse effect on the business, operations or
financial condition of PMI and its Subsidiaries taken as a whole. The businesses
of PMI and its Subsidiaries are not being conducted in violation of any
applicable law, ordinance, rule, regulation, decree or order of any Governmental
Body (including but not limited to any Legal Requirement relating or pertaining
to employment matters) except for violations which in the aggregate do not and
would not have a material adverse effect on the business, operations or
financial condition of PMI and its Subsidiaries taken as a whole.
Section 3.15. No Defaults. Except as set forth in the PMI Disclosure
Schedule, neither PMI nor any of its Subsidiaries is in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its Organizational Documents, (ii) any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which PMI or any of its
Subsidiaries is a party or by which they or any of their properties or assets
may be bound, or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to PMI or any of its Subsidiaries, which defaults or
violations would, in the aggregate, have a material adverse effect on the
business, operations or financial condition of PMI and its Subsidiaries taken as
a whole or which would prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.16. Broker's Fees. Except as otherwise disclosed in the PMI
Disclosure Schedule, none of PMI and the PMI Subsidiaries has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
Section 3.17. Certain Documents. The PMI Disclosure Schedule includes a
list setting forth for PMI and the PMI Subsidiaries:
(a) all PMI Benefit Plans and all contracts with any labor
union;
(b) contracts for the employment or engagement as an
independent contractor of any person on a full-time, part-time,
consulting or other basis, excluding contracts wherein the aggregate
annual payment contemplated does not exceed Fifty Thousand Dollars
($50,000);
(c) contracts pursuant to which PMI or any PMI Subsidiary has
advanced or loaned funds, or agreed to advance or loan funds, to any
other person other than minimal advances to employees in the Ordinary
Course of Business;
(d) contracts or indentures relating to any indebtedness or
the mortgaging, pledging or otherwise placing a lien on any asset of
PMI or any of the PMI Subsidiaries;
(e) contracts pursuant to which PMI or any of the PMI
Subsidiaries is the lessee of, or holds or operates, any leasehold
estate or any leased operating asset, other than leases of office
equipment such as computers, copiers, facsimile machines and the like;
(f) contracts pursuant to which PMI or any PMI Subsidiary is
the lessor of, or permits any party to hold or operate, any real or
personal property owned by PMI or any such PMI Subsidiary;
(g) contracts or agreements with customers of PMI or any of
the PMI Subsidiaries, or contracts for purchase of goods or services
(other than leases) involving annual payments in excess of $50,000,
excluding in all such cases contracts that may be terminated without
penalty (or other termination charge) on not more than 30 days' notice;
and
(h) any other contract which is material to the business of
PMI or any such PMI Subsidiary and involves an aggregate consideration
in excess of $100,000 annually.
Section 3.18. No Material Defaults. PMI has made available to DHI and DHI
Sub Corp for their examination copies of all material contracts, agreements,
leases, licenses and understandings of a kind that would be required to be filed
(or incorporated by reference) by PMI as exhibits to a Registration Statement on
Form S-1 under the Securities Act, as well as any other agreements and other
instruments referred to in Section 3.17 above to which it or any PMI Subsidiary
is a party or by which any of them or their properties might be affected. Except
as disclosed in the PMI Disclosure Schedule, neither PMI nor any such PMI
Subsidiary is in default in any manner which could lead to a material adverse
change under the terms of any such contract, agreement, leases, license or
understanding. Neither PMI nor any PMI Subsidiary has breached, nor is there
pending or to the Knowledge of PMI threatened any claim, nor to the Knowledge of
PMI any legal basis for a claim, that PMI or any PMI Subsidiary has breached any
of the terms or conditions of any agreement, contract, commitment, plan,
instrument or other arrangement set forth in any of the schedules or exhibits
delivered in connection herewith or of any agreement, contract or commitment,
which breach or breaches singularly or in the aggregate could result in a
material adverse change.
Section 3.19. Notes and Accounts Receivable. All notes and accounts
receivable of PMI and the PMI Subsidiaries are reflected properly on their books
and records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and will be collected in accordance with their terms at
their recorded amounts, without resort to collection proceedings or other
extraordinary action, subject only to the reserve for bad debts set forth on the
face of the April 30, 1998 unaudited balance sheet of PMI (rather than in any
notes thereto) as adjusted for the passage of time in accordance with the past
custom and practice of PMI and the PMI Subsidiaries.
Section 3.20. Authorized Signatories; Officers and Banks. The PMI
Disclosure Schedule contains a list of all of the names and locations of each
bank at which PMI or any PMI Subsidiary has an account, safe deposit box or any
other banking relationship and the names of all persons authorized to draw
therefrom or have access thereto.
Section 3.21. Insider Interests. Except as set forth in the PMI Disclosure
Schedule, to PMI's Knowledge none of the leases, contracts, documents and
instruments required to be set forth in the PMI Reports or the PMI Disclosure
Schedule delivered pursuant to this Agreement involves any "Interested Person"
(hereinafter defined) as a party thereto or as a party beneficially interested
therein. Since November 1, 1996, neither PMI nor any PMI Subsidiary has directly
or indirectly purchased, leased from or otherwise acquired any property or
obtained any services from or sold, leased to or otherwise disposed of any
material amount of property or furnished any services to or otherwise dealt with
(except in respect of remuneration for services rendered (including stock
options and other fringe benefits) as a Director, officer or employee of PMI or
any PMI Subsidiary), in the Ordinary Course of Business or otherwise, any
Interested Person. As used in this Section, "Interested Person" means any
executive officer or Director of PMI or any PMI Subsidiaries or any Person with
whom such Person has any direct or indirect relation by blood or marriage or
adoption, or entity in which any such Person has any material direct or indirect
interest.
Section 3.22. Customers, Distributors and Suppliers. The PMI Disclosure
Schedule contains a true, correct and complete list for PMI and each PMI
Subsidiary of all of its and their customers who or which individually accounted
for 5% or more of the total sales of PMI or such PMI Subsidiary in the fiscal
year ended October 31, 1997.
Section 3.23. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of PMI with respect to the transactions contemplated
hereby for inclusion in (i) the letter to shareholders, notice of meeting and
proxy statement or form of proxy to be used by PMI in connection with the
special meeting of the shareholders of PMI to be held to vote on the Merger (the
"PMI Proxy Materials"), including any amendments thereof or supplements thereto,
or (ii) any other document to be filed with the SEC in connection with the
transactions contemplated hereby, will at the time the PMI Proxy Materials are
mailed to the shareholders of PMI, at the respective times such documents are
filed with the SEC and at the time of the PMI shareholders' meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, or
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy or approval for the PMI shareholders' meeting. The
PMI Proxy Materials will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated
thereunder.
Section 3.24. Environmental Compliance. None of the real property owned by
PMI or any of the PMI Subsidiaries (and to the Knowledge of PMI, none of the
real property leased by PMI or any PMI Subsidiary) is in violation in any
material respect of any federal, state or local statues, regulations, ordinances
or other provisions having the force or effect of law, in each case concerning
pollution or protection of the environment (including, without limitation. all
those relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, testing, processing,
discharge, release, control or cleanup of any hazardous materials, substances or
wastes, toxic chemicals, petroleum products or by-products, asbestos,
polychlorinated biphenyls (or PCBs), or radiation). Except as set forth in the
PMI Reports or the PMI Disclosure Schedule, (i) neither PMI nor any of the PMI
Subsidiaries is the subject of any federal, state, local, foreign or provincial
investigation, and neither PMI nor any of the PMI Subsidiaries has received any
notice or claim (or is aware of any facts that would form a reasonable basis for
any claim), or entered into any negotiations or agreements with any other
person, relating to any liability or obligation or remedial action or potential
liability or obligation or remedial action under any environmental law which
could have a material adverse effect and (ii) there are no pending, reasonably
anticipated or to the Knowledge of PMI threatened actions, suits or proceedings
(or facts that would form a reasonable basis for any such action, suit or
proceeding) against PMI, any of the PMI Subsidiaries or any of their respective
properties, assets or operations asserting any liability or obligation or
seeking any remedial action in connection with any environmental law which could
have a material adverse effect.
Section 3.25. HSR Act. PMI is its own "ultimate parent entity" under the
HSR Act and has not at any time had total assets or annual net sales of
$100,000,000 or more.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF DHI AND DHI SUB CORP
DHI and DHI Sub Corp, jointly and severally, represent and warrant to PMI
as follows:
Section 4.1. Due Incorporation and Good Standing. DHI is a corporation duly
organized, validly existing and in good standing under the Ohio General
Corporation Law (the "OGCL"). DHI Sub Corp is a corporation duly organized and
validly existing, and is current in its corporate reporting obligations, under
the IBCL. DHI wholly owns Diversco, Inc., a Delaware corporation.
Section 4.2. Qualification and Corporate Power. Each of DHI and DHI Sub
Corp is duly authorized to conduct business under the laws of each jurisdiction
where such qualification is required except where the lack of such qualification
would not have a material adverse effect on the financial condition of DHI and
DHI Sub Corp taken as a whole or on the ability of DHI or DHI Sub Corp to
consummate the transactions contemplated by this Agreement. Each of DHI and DHI
Sub Corp has full corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it.
Section 4.3. Authorization. Each of DHI and DHI Sub Corp has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder . This Agreement
constitutes the valid and legally binding obligation of DHI and DHI Sub Corp
enforceable against them in accordance with its terms and conditions.
Section 4.4. Noncontravention. Except as set forth on Schedule 4.4 attached
hereto, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation or rule, or any injunction, judgment, order,
decree, ruling, charge or other restriction of any Governmental Body or court to
which DHI or DHI Sub Corp is subject, or any provision of the Organizational
Documents of DHI or DHI Sub Corp, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, or create in any
party the right to accelerate, terminate, modify, cancel or require any notice
under, any agreement, contract, lease, license, instrument or other arrangement
to which DHI or DHI Sub Corp is a party or by which it is bound or to which any
of its assets is subject, or result in the imposition of any lien or security
interest on any of its assets, except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice or imposition of a lien or security interest would not have a material
adverse effect on the financial condition of DHI and DHI Sub Corp taken as a
whole or on the ability of DHI and DHI Sub Corp to consummate the transactions
contemplated by this Agreement. Other than filings to be made under the IBCL in
connection with the Merger and matters in connection with the provisions of the
Exchange Act, the Securities Act and applicable state securities laws, neither
DHI nor DHI Sub Corp needs to give any notice to, make any filing with or obtain
any authorization, consent or approval of, any Governmental Body in order for it
to consummate the transactions contemplated by this Agreement.
Section 4.5. Litigation. There are no actions, suits, proceedings, reviews
or investigations pending, or to the Knowledge of DHI or DHI Sub Corp
threatened, involving DHI or DHI Sub Corp, at law or in equity, or before any
Governmental Body, which individually or in the aggregate are likely to have a
material adverse effect on the financial condition of DHI and DHI Sub Corp taken
as a whole or on the ability of DHI or DHI Sub Corp to consummate the
transactions contemplated by this Agreement. Neither DHI nor DHI Sub Corp is
subject to any order, judgment or decree that can reasonably be expected to
result in any material adverse change.
Section 4.6. No Prior Activities. DHI Sub Corp has not engaged in any
material business activities and has not incurred, nor prior to the Closing Date
will it incur, directly or indirectly, any liabilities or obligations, except
those incurred in connection with its organization, the Merger and the
consummation of the transactions contemplated hereby.
Section 4.7. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of DHI or DHI Sub Corp for inclusion in (i) the PMI
Proxy Materials, or (ii) any other document to be filed with the SEC or any
regulatory agency in connection with the transactions contemplated hereby will,
at the time of the PMI Proxy Materials are mailed to shareholders of PMI, at the
respective times such documents are filed and at the time of the PMI Special
Meeting, be false or misleading with respect to any material fact included in
such information, or omit to state any material fact required to be stated in
such information or necessary in order to make the statements included in such
information in the context of such information not misleading or necessary to
correct any statement in any such information previously supplied by DHI or DHI
Sub Corp.
Section 4.8. Financing. DHI has received three binding commitments (subject
to the satisfaction of stated conditions) to provide such financing to it as,
when combined with immediately available cash from DHI, will enable it to pay,
at the Closing Date, the entire Merger Consideration payable hereunder in cash.
DHI has provided PMI with true and accurate copies of each such commitment
(collectively, the "Commitments"), which have not been amended or modified since
the respective dates thereof except as approved in writing by PMI. There are no
conditions, restrictions or limitations on the availability of the financing
provided for in such Commitments other than as set forth therein.
Section 4.9. HSR Act. DHI will be its own "ultimate parent entity" under
the HSR Act as of the Closing Date and has not at any time had total assets or
annual net sales of $100,000,000 or more.
Section 4.10. DHI Financial Statements. The consolidated balance sheets of
DHI and its Subsidiaries as of March 31, 1998, March 31, 1997 and October 24,
1996, and the related consolidated statements of income and retained earnings
and of cash flows for the periods ending March 31, 1998 and March 31, 1997,
together with the notes thereto, have been prepared in accordance with GAAP and
fairly present the consolidated financial condition of DHI and its subsidiaries
at the dates thereof and their consolidated results of operations and cash flows
for the periods stated therein.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business. Except as otherwise expressly
contemplated or permitted by the terms of this Agreement or the written consent
of DHI during the period from the date of this Agreement until the Closing Date
PMI will comply with, and will cause each of its Subsidiaries to comply with,
the following covenants:
(a) Each of PMI and its Subsidiaries will carry on its
respective businesses only in the Ordinary Course of Business and will
use its Best Efforts to (i) preserve intact its business organization,
(ii) keep available the services of its present officers and employees,
(iii) preserve its relationships with its customers, suppliers and
others with whom it has business dealings, and (iv) satisfy its
obligations under each material agreement or commitment to which it is
a party.
(b) Neither PMI nor any of its Subsidiaries (other than
Subsidiaries that are directly or indirectly wholly owned by such
Party) will declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock or other ownership
interests, (ii) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital
stock, or (iii) repurchase, redeem or otherwise acquire any of its
securities or any securities.
(c) Neither PMI nor any of its Subsidiaries will 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 (including indebtedness having the
right to vote or equity equivalents including, without limitation,
stock appreciation rights), except as required pursuant to agreements
and instruments outstanding as of the date of this Agreement and
disclosed in the PMI Disclosure Schedule ("Outstanding Obligations") or
amend in any respect any of the terms of any such Outstanding
Obligations except as necessary to comply with this Agreement.
(d) Neither PMI nor any of its Subsidiaries will amend its
Organizational Documents.
(e) Neither PMI nor any of its Subsidiaries will sell, lease,
encumber, transfer or dispose of any assets outside the Ordinary Course
of Business or any assets which are material to PMI and its
Subsidiaries taken as a whole (whether or not such transaction was
outside the Ordinary Course of Business) except, in any such case,
pursuant to Outstanding Obligations, nor shall either Party nor any of
its Subsidiaries enter into any commitment or transaction outside the
Ordinary Course of Business except pursuant to Outstanding Obligations.
(f) Other than in the Ordinary Course of Business or pursuant
to Outstanding Obligations, neither PMI nor any of its Subsidiaries
will (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness, (ii) issue or sell any debt securities or warrants
or rights to acquire any debt securities, (iii) guarantee or otherwise
become liable for any indebtedness of others or make any loans,
advances or capital contributions to others, (iv) mortgage, pledge or
otherwise encumber any material assets or create or suffer any material
lien upon any material assets, or (v) make any payment or transfer
anything of value to any officer, director or stockholder of PMI or any
of its Subsidiaries.
(g) Neither PMI nor any of its Subsidiaries will pay,
discharge or satisfy any claims, liabilities or obligations, whether
absolute, accrued, asserted or unasserted, contingent or otherwise,
other than the payment, discharge or satisfaction of any such claims,
liabilities or obligations (i) in the Ordinary Course of Business, or
(ii) in accordance with the terms of liabilities (A) reflected or
reserved against in or contemplated by the consolidated financial
statements (or the notes thereto) of PMI and its Subsidiaries, or (B)
incurred in the Ordinary Course of Business.
(h) Neither PMI nor any of its Subsidiaries will change any of
its accounting principles or practices except as required by GAAP.
(i) Neither PMI nor any of its Subsidiaries will make any
change in employment terms (including employee benefit plans) with
respect to any of its directors, officers or employees outside the
Ordinary Course of Business.
(j) Neither PMI nor any of its Subsidiaries will (i) agree to
take any of the actions prohibited in the foregoing clauses of this
Section, or (ii) take or agree to take any action that would or is
reasonably likely to result in any of its representations and
warranties set forth in this Agreement being untrue, or (iii) take or
agree to take any action that would or is reasonably likely to result
in any of the conditions to the Merger set forth in Article VI not
being satisfied.
(k) PMI will maintain, and will cause each PMI Subsidiary to
maintain, all of its and their properties in customary repair, order
and condition, reasonable wear and tear and obsolescence excepted, and
will use commercially reasonable efforts to maintain, and to cause each
PMI Subsidiary to maintain, insurance upon all of its and their
properties reasonably required in the conduct of its and their business
and with respect to the conduct of its and their businesses, in such
amounts and of such kinds as are comparable to that in effect on the
date of this Agreement.
(l) No change shall be made in the banking and safe deposit
arrangements existing on the date hereof of PMI and its Subsidiaries.
(m) If any action, suit, proceeding or (to the Knowledge of
PMI) investigation is commenced against PMI or any of its Subsidiaries
after the date of this Agreement, PMI agrees promptly to advise DHI of
the same in writing and to consult with DHI on the nature and effect of
and its response to such action, suit, proceeding or investigation.
Section 5.2. DHI Sub Corp. DHI will cause DHI Sub Corp to take all such
actions as shall be reasonably required under this Agreement, the Plan of Merger
or applicable law in order to consummate the Merger at the appropriate time, all
in accordance with applicable law.
Section 5.3. Best Efforts. Subject to the terms and conditions herein
provided, each of the Parties hereto agrees to use its Best Efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its Best Efforts to obtain all necessary waivers, consents and
approvals, and effecting all necessary registrations and filings with any and
all relevant Governmental Authorities (including its Best Efforts to cause the
satisfaction, but without any obligation to waive any, of the closing conditions
set forth in Article VI). In case at any time after the Closing Date any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of DHI, DHI Sub Corp or PMI, as the case
may be, shall take all such necessary action.
Section 5.4. Certification of Shareholder Votes. On or prior to the Closing
Date, PMI shall deliver to DHI and DHI Sub Corp a certificate of its Secretary
setting forth the number of PMI Common Shares outstanding and entitled to vote
on the adoption of this Agreement and the Plan of Merger and approval of the
Merger and the number of PMI Common Shares voted in favor of adoption of this
Agreement and the Plan of Merger and approval of the Merger.
Section 5.5. PMI Shareholder Meeting. PMI will, as promptly as is
reasonably practicable, duly call, give notice of, convene and hold a special
meeting of its shareholders for the purpose of voting on and approving this
Agreement, the Plan of Merger and the Merger (the "PMI Special Meeting"). PMI
will, through its Board of Directors, recommend to the PMI shareholders that
they approve this Agreement, the Plan of Merger and the Merger, and will use its
Best Efforts to secure the approval of its shareholders thereof, except that the
Board of Directors of PMI shall not be required to recommend approval thereof to
the PMI shareholders if the Board of Directors has determined, after
consultation with its counsel and financial advisors, that the making of a
favorable recommendation with respect thereto would violate the fiduciary duties
of the Board of Directors. In connection with the PMI Special Meeting, PMI will
prepare and file a preliminary proxy statement with the SEC and responses to the
comments of the SEC relating thereto (including, without limitation, the
preparation and filing of amendments, supplements or other filings), and PMI
will cause the definitive proxy statement and related documents with respect to
the PMI Special Meeting (as previously defined, the "PMI Proxy Materials") to be
mailed to the PMI shareholders, all at the earliest practicable time and all in
accordance with applicable provisions of the Exchange Act, PMI's Organizational
Documents and the IBCL. DHI will timely furnish to PMI all information
concerning DHI and , DHI Sub Corp, and any other related entity of either of
them, reasonably required to be included in the PMI Proxy Materials or in any
other information to be furnished to the shareholders of PMI in connection with
their approval of this Agreement, the Plan of Merger and the Merger. PMI shall
notify DHI of the receipt of the comments of the SEC and of any request by the
SEC for amendments or supplements to the PMI Proxy Materials, or for additional
information, and shall supply DHI with copies of all correspondence between
itself (or its representatives) and the SEC (or its staff) with respect thereto.
If any event should occur relating to PMI or its Subsidiaries, or their
respective officers and directors, which should be described in an amendment or
supplement to the PMI Proxy Materials, PMI shall promptly inform DHI and shall
promptly prepare, file and clear with the SEC and mail to PMI's shareholders
such amendment or supplement.
Section 5.6. DHI Negative Covenants. Neither DHI nor DHI Sub Corp will (i)
take or agree to take any action that would or is reasonably likely to result in
any of its representations and warranties set forth in this Agreement being
untrue, or (ii) take or agree to take any action that would or is reasonably
likely to result in any of the conditions to the Merger set forth in Article VI
not being satisfied.
Section 5.7. Notice of Developments. Each Party will give prompt notice to
the other Parties of (i) any notice, or other communication received by it or
any of its Subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time of or relating to a default or event which, with notice or
the lapse of time or both would become a default, under any agreement, indenture
or instrument material to the financial condition, properties, businesses or
results of operations of such Party and its Subsidiaries, taken as a whole, and
by which such Party or any of its Subsidiaries is bound or to which such Party
or any of its Subsidiaries is subject, (ii) 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,
which allegation, if true, would mean that there has been a breach of a
representation or warranty of a Party under this Agreement, and (iii) any
material adverse change in the financial condition, properties, businesses,
results of operations or prospects of such Party and its Subsidiaries taken as
whole.
Section 5.8. Announcements and Filings. The Parties shall consult with each
other before issuing any press releases or otherwise making public statements
with respect to the transactions contemplated by this Agreement and in making
any filings with any Governmental Body (including any national securities
exchange) with respect thereto.
Section 5.9. Governmental Authorizations. Each of the Parties will (and, as
applicable, will cause each of its Subsidiaries to) give any notices to, make
any filings with, and use its Best Efforts to obtain any Governmental
Authorizations as required in connection with the matters referred to in Section
3.6 and Section 4.4. Each of the Parties shall promptly and timely consult with
one another with respect to, and shall provide to one another (or to a Party's
counsel) copies of, all filings made by such Party with any Governmental Body in
connection with this Agreement and the transactions contemplated hereunder.
Section 5.10. Indemnification of PMI Officers and Directors. With respect
to each individual who served as a director of officer of PMI or any of its
Subsidiaries at any time prior to the Effective Time, DHI will provide, or will
cause the Surviving Corporation to provide (in which case DHI does hereby
guarantee the payment and performance by the Surviving Corporation of its
obligations in that regard), each of the following insurance or indemnification
benefits or rights:
(a) liability insurance for a period of 48 months after the
Effective Time with respect to acts or omissions occurring prior to the
Effective Time which were committed (or allegedly committed) by such
officers or directors in their capacities as such no less favorable in
coverage and amount than any applicable liability insurance in effect
and provided by PMI or any of its Subsidiaries for the benefit of any
such individual as of March 5, 1998; provided, however, that neither
DHI nor the Surviving Corporation shall be obligated to make annual
premium payments for such insurance to the extent such premiums exceed
the premiums paid as of the date hereof by PMI for such insurance
("PMI's Current Premium"), and if such premiums for such insurance
would at any time exceed PMI's Current Premium, then DHI shall cause to
be maintained policies of insurance which, in DHI's good faith
determination, provide the maximum coverage available at an annual
premium equal to PMI's Current Premium;
(b) indemnification rights and the benefits thereof identical
in all respects to the provisions of the Organizational Documents
currently in effect of PMI or any of its Subsidiaries relating to the
indemnification of officers and directors;
(c) indemnification from and against any and all actions,
suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses and fees,
including all court costs and reasonable attorneys' fees, resulting
from, arising out of, relating to or caused by this Agreement or the
Merger or any of the other transactions contemplated herein; and
(d) with respect to any pending matters as to which the Board
of Directors of PMI has determined on or prior to Xxxxx 0, 0000 (xxx as
to which such Board has subsequently made such a determination as
disclosed in the "Special Disclosure Under Section 5.10(d)" in the PMI
Disclosure Schedule) that one or more officers or Directors (including
former officers or Directors) of PMI (i) are not precluded from
obtaining indemnification with respect to such matter from PMI based on
information then known, and/or (ii) are entitled to receive
advancements of reasonable expenses from PMI during the pendency of
such matter (in either case, a "Favorable Preliminary Finding"), then
DHI shall not (and shall cause the Surviving Corporation not to) deny
either the right to indemnification or the advancement of reasonable
expenses with respect to such matter to an officer or Director as to
whom the Board of Directors of PMI has made a Favorable Preliminary
Finding unless the Board of Directors of DHI or the Surviving
Corporation affirmatively determines, in good faith, that such officer
or Director has failed to meet in some material respect the standard of
conduct required for indemnification under PMI's Organizational
Documents as in effect at the Effective Time.
Section 5.11. Full Access.
(a) PMI will (and will cause each of its Subsidiaries to)
permit Representatives of DHI to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of PMI and its Subsidiaries, to all premises, properties,
personnel, books, records (including tax records), contracts and
documents of or pertaining to each of PMI and its Subsidiaries. DHI and
DHI Sub Corp will treat (and will instruct their Representatives to
treat) as confidential and respect the confidentiality of any
Confidential Information (hereinafter defined) received from PMI or its
Subsidiaries in the course of the reviews by DHI or their
Representatives contemplated by this Section, and DHI and DHI Sub Corp
will not use any of such Confidential Information except in connection
with this Agreement and, if this Agreement is terminated for any reason
whatsoever without the consummation of the Merger, DHI and DHI Sub Corp
shall (and shall cause their Representatives to) return to PMI and its
Subsidiaries all instruments, documents or other tangible things (and
all copies of any of them) relating to or containing any of the
Confidential Information which are in the possession or under the
control of DHI or DHI Sub Corp or their Representatives. For purposes
of this Section, the term "Confidential Information" means any
information concerning the businesses and affairs of PMI and its
Subsidiaries that is not already generally available to the public and
does not become available on a nonconfidential basis from a source
other than PMI or the PMI Subsidiaries.
(b) DHI will (and will cause each of its Subsidiaries to)
permit Representatives of PMI to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of DHI and its Subsidiaries, to all premises, properties,
personnel, books, records (including tax records), contracts and
documents of or pertaining to each of DHI and its Subsidiaries. PMI
will treat (and will instruct its Representatives to treat) as
confidential and respect the confidentiality of any Confidential
Information (hereinafter defined) received from DHI or its Subsidiaries
in the course of the reviews by PMI or its Representatives contemplated
by this Section, and PMI will not use any of such Confidential
Information except in connection with this Agreement and, if this
Agreement is terminated for any reason whatsoever without the
consummation of the Merger, PMI shall (and shall cause its
Representatives to) return to DHI and its Subsidiaries all instruments,
documents or other tangible things (and all copies of any of them)
relating to or containing any of the Confidential Information which are
in the possession or under the control of PMI or its Representatives.
For purposes of this Section, the term "Confidential Information" means
any information concerning the businesses and affairs of DHI and its
Subsidiaries that is not already generally available to the public and
does not become available on a nonconfidential basis from a source
other than DHI, DHI Sub Corp or any of their related entities.
Section 5.12. Exclusivity. PMI will not, directly or indirectly, whether
through any subsidiary, officer, director or employee of, or any investment
banker, attorney, accountant or other representative retained by, PMI or any PMI
Subsidiary, solicit or encourage (including by way of furnishing information)
any inquiries or the making of any proposal by any Person that could reasonably
be expected to lead to any Acquisition Proposal unless, after receipt of an
unsolicited inquiry or proposal from a third party, PMI's Board of Directors
believes after consultation with counsel that the Board's fiduciary
responsibilities obligate it to make such information available to and/or engage
in such negotiations with such third party. PMI will promptly (and in any event
not later than the time of its first furnishing information to or engaging in
such negotiations) advise DHI orally and in writing of inquiries or proposals.
Section 5.13. Supplemental Disclosures. If an event occurs subsequent to
the date of this Agreement and prior to the Effective Time which renders any
representation or warranty of a Party made as of the date of this Agreement
incorrect or incomplete, such Party (the "Disclosing Party") shall promptly, and
in any event not later than three business days prior to the Closing Date,
deliver to each other unaffiliated Party (the "Nondisclosing Party") a
supplement to the Disclosure Schedule previously provided by the Disclosing
Party pursuant to Article III or Article IV, as applicable (a "Supplemental
Disclosure"), which Supplemental Disclosure shall contain a detailed description
of the event that has occurred and the manner in which such event has resulted
in one or more representations or warranties of the Disclosing Party becoming
incorrect or incomplete. The furnishing of a Supplemental Disclosure, and the
occurrence of the events and matters disclosed therein, shall not constitute a
default or breach by the Disclosing Party of any of its representations and
warranties under this Agreement (no implication shall be drawn from the
foregoing as to whether the events or matters described therein, or the actions
or failure to act of the Disclosing Party with respect thereto, shall or shall
not constitute a default or breach of any covenant of the Disclosing Party under
this Agreement). With respect to any Supplemental Disclosure made by a
Disclosing Party, for purposes of determining compliance with or satisfaction of
the condition precedent to the obligation of the Nondisclosing Party to
consummate the Merger as set forth in clause (a) of either Sections 6.1 or 6.2,
as applicable, such Supplemental Disclosure (a) shall not be given any effect
(shall not "cure" any inaccuracy) for purposes of testing the accuracy of the
Disclosing Party's representations and warranties made as of the date of this
Agreement, (b) shall be given effect (shall be deemed to have modified the
representations and warranties of the Disclosing Party) for purposes of testing
the accuracy of all representations and warranties of the Disclosing Party as of
the Closing Date other than those in Sections 3.9 or 4.8, whichever is
applicable, and (c) may be taken into account (the events described shall be
considered and need not be disregarded merely because of the disclosure thereof)
in determining the accuracy as of the Closing Date of the representation and
warranty of the Disclosing Party in Sections 3.9 or 4.8, whichever is
applicable, and whether there has or has not been any material adverse change in
the business, financial condition, operations, results of operation or future
prospects of the Disclosing Party and its Subsidiaries taken as a whole.
Section 5.14. Availability of Funds. DHI shall obtain the financing to be
provided and made pursuant to the Commitments on or before the Closing Date, and
shall have available to it on the Closing Date all funds necessary for the
payment of the Merger Consideration.
Section 5.15. PMI Permitted Actions. PMI shall be permitted to take any or
all of the following actions at or prior to the Closing Date:
(a) PMI may grant options to acquire PMI Common Shares under
the PMI Stock Plans (i) to PMI employees in accordance with PMI's
existing employee bonus program (as described in the PMI Disclosure
Schedule) for all periods of time through July 31, 1998, and (ii) to
PMI's Directors in accordance with PMI's 1994 Director Stock Option
Plan, as amended (the estimated numbers of options to be granted to
Employees and Directors is shown on the chart of options included in
Section 3.4 of the PMI Disclosure Schedule); and
(b) PMI may accelerate the vesting of all options outstanding
under PMI's 1994 Director Stock Option Plan, as amended (the "Plan"),
and may amend the Plan accordingly, to provide that all options
outstanding under the Plan shall be fully exercisable on the Closing
Date if the transaction contemplated by this Agreement is consummated
and to provide that in such event all such options shall be canceled in
exchange for payment by DHI of the difference between the exercise
price thereof and the price paid by DHI for PMI Common Shares pursuant
to this Agreement.
ARTICLE VI
CONDITIONS
Section 6.1. DHI's Conditions. The obligation of DHI and DHI Sub Corp to
consummate the Merger is subject to the satisfaction (or the waiver by DHI in
writing at or prior to the Closing) of each of the following conditions:
(a) the representations and warranties of PMI set forth in
this Agreement shall be true and correct as of the date of this
Agreement (without regard to any knowledge qualifiers contained therein
or any Supplemental Disclosures made) and shall be true and correct in
all material respects on and as of the Closing Date (after giving
effect to any Supplemental Disclosures made) with the same force and
effect as though made on and as of the Closing Date, except if and to
the extent any failures to be true and correct would not, in the
aggregate, have a material adverse effect on PMI and its Subsidiaries
taken as a whole (for purposes hereof, the representations and
warranties of PMI shall be deemed to be made without the phrase "to the
knowledge of PMI" or any similar phrase, it being the intent of the
parties that DHI and DHI Sub Corp will not be obligated to consummate
the Merger if the representations and warranties of PMI contained
herein (i) are not true and correct as of the Closing Date without
regard to the knowledge of PMI or any of its officers, and (ii) the
failure of such representations and warranties to be true and correct
causes a material adverse change);
(b) PMI shall have performed and complied in all material
respects with all of its obligations and covenants under this Agreement
required to be performed by it at or prior to the Closing and PMI shall
have delivered to DHI a certificate of a duly authorized officer of PMI
attesting thereto;
(c) PMI and its Subsidiaries shall have procured all of the
third party consents specified in Section 3.6;
(d) PMI shall have delivered all documents to be delivered by
it, and shall have complied in all material respects with its
obligations to be performed, at or in connection with the Closing as
specified in Section 2.10:
(e) DHI shall have received from counsel to PMI an opinion in
form and substance as set forth in Exhibit D attached hereto, addressed
to DHI and dated as of the Closing Date;
(f) PMI shall have taken all steps necessary to cause all
outstanding warrants and stock options granted pursuant to the PMI
Stock Plans or otherwise to be exercised or terminated on or prior to
the Date, including, without limitation, the giving of timely written
notice to each holder of a stock option in accordance with the PMI
Stock Plans;
(g) on or prior to the Closing Date PMI shall deliver to DHI
evidence satisfactory to DHI of the resignation of each director of PMI
and any PMI Subsidiary, effective as of the Effective Time;
(h) there shall have been no material adverse change (whether
or not disclosed in a Supplemental Disclosure) since the date hereof;
(i) Xxx X. Xxxxxx shall not have breached the Noncompetition
Agreement entered into with DHI in the form of Exhibit E attached
hereto;
(j) neither JBD Real Estate, Inc. nor Xxx X. Xxxxxx shall have
breached the Termination Agreement entered into with DHI in the form of
Exhibit F attached hereto;
(k) Xxxxxx X. Xxxxxxx shall not have breached the Employment
Agreement entered into with DHI in the form of Exhibit G attached
hereto;
(l) Xxxx X. Xxxxxxxxx shall not have breached the Employment
Agreement entered into with DHI in the form of Exhibit H attached
hereto;
(m) no act or event which gives rise to the right of Xxx X.
Xxxxxx, Xxxxxx X. Xxxxxxx or Xxxx X. Xxxxxxxxx to receive severance
benefits under or pursuant to their respective Change of Control
Severance Benefits Agreement, as amended, shall have occurred prior to
the Closing or by reason of the consummation of the Merger;
(n) all employee loans or notes receivable from employees of
PMI or the PMI Subsidiaries, other than loans or notes which,
individually or in the aggregate (with respect to any one person), are
of a principal amount of $10,000 or less, shall have been paid;
(o) PMI shall have delivered to DHI a certificate of a duly
authorized officer of PMI certifying as to the accuracy of PMI's
representations and warranties as of the date of this Agreement and as
of the Closing Date (which may be to the best of such officer's
knowledge); and
(p) the Warrants and the options outstanding under the PMI
Stock Plans shall be cancelable as of the Effective Time upon payment
of the Option Consideration to the holders thereof.
Section 6.2. PMI's Conditions. The obligation of PMI to consummate the
Merger is subject to the satisfaction (or the waiver by PMI in writing at or
prior to the Closing) of each of the following conditions:
(a) the representations and warranties of DHI and DHI Sub Corp
as set forth in this Agreement shall be true and correct as of the date
of this Agreement (without regard to any Supplemental Disclosures made)
and shall be true and correct in all material respects on and as of the
Closing Date (after giving effect to any Supplemental Disclosures made)
with the same force and effect as though made on and as of the Closing
Date, except if and to the extent any failures to be true and correct
would not, in the aggregate, have a material adverse effect on DHI and
its Subsidiaries taken as a whole (for purposes hereof, the
representations and warranties of DHI and DHI Sub Corp shall be deemed
to be made without the phrase "to the knowledge of DHI" or any similar
phrase, it being the intent of the parties that PMI will not be
obligated to consummate the Merger if the representations and
warranties of DHI and DHI Sub Corp contained herein (i) are not true
and correct as of the Closing Date without regard to the knowledge of
DHI and DHI Sub Corp or any of their officers, and (ii) the failure of
such representations and warranties to be true and correct causes a
material adverse change);
(b) DHI and DHI Sub Corp shall have performed and complied in
all material respects with all of their obligations and covenants under
this Agreement required to be performed by them at or prior to the
Closing and DHI shall have delivered to PMI a certificate of a duly
authorized officer of DHI attesting thereto;
(c) DHI and DHI Sub Corp shall have procured all of the third
party consents specified in Section 4.4;
(d) DHI and DHI Sub Corp shall have delivered all documents to
be delivered by them, and shall have complied in all material respects
with their obligations to be performed, at or in connection with the
Closing as specified in Section 2.10;
(e) PMI shall have received from counsel to DHI and DHI Sub
Corp an opinion in form and substance as set forth in Exhibit I
attached hereto, addressed to PMI and dated as of the Closing Date; and
(f) DHI shall have delivered to PMI a certificate of an
authorized officer of DHI certifying as to the accuracy of DHI's and
DHI Sub Corp's representations and warranties as of the date of this
Agreement and as of the Closing Date (which may be to the best of such
officer's knowledge).
Section 6.3. Common Conditions. The obligation of each of DHI, DHI Sub Corp
and PMI to consummate the Merger shall be subject to the satisfaction (or to the
mutual waiver in writing by each of PMI and DHI) of each of the following
conditions:
(a) other than the filings contemplated under Article II in
connection with the Merger, (i) all Governmental Authorizations and all
filings with any Governmental Body contemplated by this Agreement or
otherwise required by any Legal Requirement to be made prior to the
consummation of the Merger and the other transactions contemplated by
this Agreement shall have been obtained or filed, (ii) all waiting
periods imposed by any Governmental Body or Legal Requirement shall
have expired or otherwise terminated, and (iii) all required third
party consents contemplated by this Agreement shall have been obtained
except third party consents, in the aggregate, the failure of which to
obtain would not have a material adverse effect on either of PMI and
its Subsidiaries taken as a whole or DHI and its Subsidiaries taken as
a whole;
(b) this Agreement, the Plan of Merger and the Merger shall
have been approved by the shareholders of PMI in accordance with
applicable provisions of the PMI Organizational Documents and the IBCL;
and
(c) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated, made or
enforced by any court or Governmental Body (i) which is in effect, and
(ii) which prohibits the consummation of the Merger.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time (whether before or after approval of the Merger by
the PMI shareholders):
(a) by the mutual written consent or agreement of DHI and PMI;
(b) by either DHI or PMI if the Merger shall not have been
consummated on or before (i) 120 days after the date of this Agreement
or (ii) such later date, if any, as DHI and PMI shall mutually agree to
in writing (unless, in any such case, the failure to consummate the
Merger by such date shall be due to the action or failure to act of the
Party seeking to terminate this Agreement);
(c) by either DHI or PMI in the event the other Party has
breached any material representation, warranty or covenant made by such
other Party in this Agreement in any material respect and such breach
has continued uncured for a period of thirty (30) days (or more) after
written notice of such breach has been given by the terminating Party
to the breaching Party;
(d) by either DHI or PMI if (i) any of the conditions to such
Party's obligations shall have become impossible to satisfy unless
such impossibility results primarily from a breach by such terminating
Party of any of its representations, warranties or covenants under
this Agreement, or (ii) any permanent injunction or other order of a
court or other Governmental Body preventing the consummation of the
Merger shall have become final and non-applicable;
(e) by PMI if it shall have received an Acquisition Proposal
(as defined in Section 7.3 below) which in the opinion of the Board of
Directors of PMI is more favorable to the shareholders of PMI than the
transactions contemplated hereby, and which offer the Board has
determined, by vote of a majority of the members thereof, to accept and
has accepted;
(f) by either DHI or PMI if the required approval of the PMI
shareholders of this Agreement, the Plan of Merger and the Merger shall
not have been obtained upon a vote of such shareholders taken at the
PMI Special Meeting or at any adjournment thereof for the purpose of
obtaining such approval;
(g) by PMI if the fairness opinion provided to the PMI Board
of Directors by Xxxxxx X. Xxxx & Company ("Xxxx") prior to the
execution of this Agreement shall be withdrawn after and as a result of
an Acquisition Proposal that, in Xxxx'x reasonable opinion, requires
Xxxx to withdraw such fairness opinion;
(h) by the Board of Directors of DHI if PMI, through its
Board, has (i) failed to recommend that its shareholders approve the
Merger, (ii) withdrawn, modified (in a manner adverse to DHI) or
qualified such recommendation once given, or (iii) taken any position
or action that is inconsistent with such recommendation (including,
without limitation, recommending or not opposing any Acquisition
Proposal); provided, that DHI must exercise such termination rights
hereunder prior to any final vote by the PMI shareholders at which the
Merger is approved;
(i) by the Board of Directors of DHI if, after the date
hereof, a single purchaser or a group (as defined in Section 13(d) of
the Exchange Act) of purchasers acquires a number of PMI Common Shares
which results in such purchaser(s) owning more than 50% of the issued
and outstanding PMI Common Shares; or
(j) by the Board of Directors of DHI if, following the
occurrence of an Acquisition Proposal, PMI shall have breached any
covenant or agreement contained in this Agreement (including, without
limitation, PMI's covenant in Section 5.5 with respect to calling and
holding the PMI Special Meeting) and shall have failed, within ten days
after written notice of such breach has been given by DHI or PMI, to
cure such breach if such breach is curable within such ten day period,
or if such breach is curable but is not curable within a ten day period
shall have failed, within thirty days after written notice of such
breach has been given by DHI to PMI, to cure such breach.
Section 7.2. Notice of Termination. In the event of termination of this
Agreement by any Party, as provided in Section 7.1 above, written notice thereof
(accompanied, in the case of a termination by PMI, by the Termination Fee, if
applicable) shall promptly be given by the terminating Party to the other Party
hereto.
Section 7.3. Termination Fee.
(a) Unless a Nullifying Event shall have occurred and be
continuing at the time this Agreement is terminated, in the event that
this Agreement is terminated by PMI: (i) pursuant to Section 7.1(e) or
Section 7.1(g); or (ii) pursuant to Section 7.1(f) after the existence
of an Acquisition Proposal; or (iii) pursuant to Section 7.1(b) after
the PMI shareholders have approved the Merger; or (iv) pursuant to
Section 7.1(b) after the existence of an Acquisition Proposal and prior
to a vote of PMI's shareholders on the question of whether to approve
the Merger; then PMI shall pay to DHI a cash fee of $1,250,000 (the
"Termination Fee"). Such fee shall be payable in immediately available
funds simultaneously with delivery of notice of termination of this
Agreement.
(b) PMI shall also pay to DHI the Termination Fee in the event
this Agreement is terminated by DHI (i) pursuant to Section 7.1(i) or
(j); or (ii) pursuant to Section 7.1(f) or 7.1(h) after the existence
of an Acquisition Proposal. Such fee shall be payable in immediately
available funds within two business days after delivery of notice of
termination of this Agreement.
(c) PMI shall also pay to DHI the Termination Fee if DHI or
PMI terminates this Agreement pursuant to Section 7.1(f) following the
making of a proposal that would have been an Acquisition Proposal had
it not been withdrawn after being made and if, within twelve months
after the effective date of such termination, PMI either enters into a
definitive and binding agreement to effect, or consummates, any of the
following transactions (a "Transaction") with a counterparty other than
DHI (or its affiliates): (i) a merger or consolidation, or any similar
transaction, involving PMI (other than mergers, consolidations or any
similar transactions involving solely PMI and/or one or more
wholly-owned Subsidiaries of PMI); or (ii) a purchase, lease or other
acquisition of all or substantially all of the assets or stock of PMI
or any of the PMI Subsidiaries. Such fee shall be payable in
immediately available funds concurrently with the earlier of PMI's
execution of a definitive agreement to effect, or PMI's consummation
of, a Transaction.
(d) As used herein, "Acquisition Proposal" shall mean any:
(i) publicly-announced proposal;
(ii) regulatory application or notice (whether in
draft or final form);
(iii) agreement or understanding;
(iv) disclosure of an intention to make a proposal;
or
(v) amendment to any of the foregoing;
which is made or filed on or after the date hereof and which is not
withdrawn and is communicated to the PMI shareholders (either directly
or through a public announcement) prior to their vote on the approval
of the Merger, in each case with respect to any of the following
transactions with a counterparty other than DHI (or its affiliates):
(A) a merger or consolidation, or any similar transaction, involving
PMI (other than mergers, consolidations or any similar transactions
involving solely PMI and/or one or more wholly-owned Subsidiaries of
PMI); (B) a purchase, lease or other acquisition of all or
substantially all of the assets of PMI or any of the PMI Subsidiaries;
or (C) a purchase or other acquisition after the date hereof by a
single purchaser or a group (as defined in Section 13(d) of the
Exchange Act) of purchasers (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 40% of the
voting power of PMI.
(e) As used herein, "Nullifying Event" shall mean an event
causing DHI to be in breach of any of its covenants or agreements
contained in this Agreement such that PMI shall be entitled to
terminate this Agreement pursuant to Section 7.1(c) hereof, unless such
event shall have resulted from or been caused by any act or failure to
act of PMI.
(f) Subject to the provisions of Section 8.8, in the event the
Termination Fee is paid by PMI to DHI hereunder, DHI shall not have any
right to seek or recover its expenses in connection with this Agreement
and the proposed transactions contemplated hereby on account of the
breach of this Agreement by PMI or otherwise in connection with the
termination hereof or the failure of PMI to consummate the Merger.
Section 7.4. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any Party or its
affiliates, directors, officers or stockholders to perform hereunder or on
account of such termination, except that (a) the provisions of Section 5.11
(relating to Confidential Information), Section 8.8 and Section 7.3 (if
applicable), and the obligations of the Parties thereunder, shall remain in
effect, and (b) nothing contained in this Section shall relieve any Party from
liability for any breach of this Agreement.
Section 7.5. Amendment. This Agreement may be amended by the Parties, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the Merger by the PMI shareholders, but after any
such approval no amendment shall be made which by law requires further approval
by such shareholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
Parties.
Section 7.6. Extension; Waiver. At any time prior to the Effective Time a
Party may, to the extent legally allowed, (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 delivered pursuant hereto, and (iii) waive
compliance or satisfaction by the other Party with any of the agreements or
conditions contained herein. Any agreement on the part of a Party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such Party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 8.2. Survival of Certain Covenants. All covenants in this Agreement
that are to be performed after the Effective Time shall continue in effect after
and shall survive the Effective Time.
Section 8.3. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed), delivered by a nationally recognized express
courier service, or mailed by registered or certified U.S. mail (return receipt
requested), to the Parties at the following addresses and numbers (or at such
other address for a Party as shall be specified by like notice to the other
Party):
If to DHI or DHI Sub Corp,
addressed to: Xxxxxxxxx Capital Partners Fund III, L.P.
c/o X. Xxxxx Xxxxxxxx
Landerbrook Corporate Xxxxxx Xxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxx 00000
Telecopier: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxxxxxx, Esq.
Xxxxxx, Halter & Xxxxxxxx LLP
1400 XxXxxxxx Investment Center
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Telecopier: (000) 000-0000
If to PMI, addressed to: Xxx X. Xxxxxx, Chief Executive Officer
Personnel Management, Inc.
0000 Xxxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
With a copy to: Xxxxx X. Xxxxxxx, Esq.
Leagre Xxxxxxxx & Xxxxxxx
0000 Xxxxx Xxxxxxx Xxxxx
000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Section 8.4. Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
Section 8.5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have been signed by each
Party and delivered to the other Party, it being understood that all Parties
need not sign the same counterpart.
Section 8.6. Entire Agreement; Assignment. This Agreement and all of the
documents, exhibits, schedules or agreements delivered or executed in connection
herewith (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the Parties with
respect to the subject matter hereof (other than any confidentiality agreements
between the parties, any provisions of which that are inconsistent with the
transactions contemplated by this Agreement being waived hereby) and (b) shall
not be assigned by either Party without the written consent thereto of the other
Party.
Section 8.7. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Indiana without regard to any
applicable principles of conflicts of law.
Section 8.8. Expenses and Fees.
(a) Each party shall pay all of the expenses incurred by it in
connection with this Agreement and the investigation, negotiation,
consummation or termination of the same, including all out-of-pocket
expenses for attorneys, accountants, investment bankers, financial
advisers, fundraisers and consultants, travel expenses, and all
deposits, commitments and other fees paid to potential lenders, except
that, in the event of a termination for breach of this Agreement under
Section 7.1(c), and except as otherwise provided in Section 7.3(f ),
the terminating Party shall pay all such expenses of the other Party in
addition to any other damages which may be owed to the terminating
Party in respect thereof.
(b) In the event either Party shall assert a claim to recover
damages from the other Party on account of a breach of this Agreement
(including, without limitation, a claim by DHI against PMI for recovery
of the Termination Fee), the prevailing Party shall be entitled to
recover its expenses reasonably incurred in connection with such claim
(including reasonable attorneys' fees) from the non-prevailing Party.
Section 8.9. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each Party hereto and Acquisition Subsidiary, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person or Persons any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement, except the PMI shareholders and
except pursuant to Section 5.10 hereof. DHI shall cause DHI Sub Corp to perform
its obligations hereunder.
IN WITNESS WHEREOF, DHI, DHI Sub Corp and PMI have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
DHI HOLDINGS, INC.
By /s/ X. Xxxxx Xxxxxxxx
X. Xxxxx Xxxxxxxx, Chairman
DHI SUB CORP
By /s/ X. Xxxxx Xxxxxxxx
X. Xxxxx Xxxxxxxx, President
PERSONNEL MANAGEMENT, INC.
By /s/ Xxx X. Xxxxxx
Xxx X. Xxxxxx, Chief Executive Officer
EXHIBIT LIST
Exhibit A -- Plan of Merger
Exhibit B -- Restated Articles of Incorporation of Personnel Management,
Inc.
Exhibit C -- Restated Bylaws of Personnel Management, Inc.
Exhibit D -- Form of Opinion of Leagre Xxxxxxxx & Xxxxxxx
Exhibit E -- Noncompetition Agreement between Xxx X. Xxxxxx and DHI
Exhibit F -- Termination Agreement between Xxx X. Xxxxxx, JBD Real
Estate, Inc., DHI and PMI
Exhibit G -- Employment Agreement between Xxxxxx X. Xxxxxxx and DHI
Exhibit H -- Employment Agreement between Xxxx X. Xxxxxxxxx and DHI
Exhibit I -- Forms of Opinion of Xxxxxx Halter & Xxxxxxxx and Xxxxx &
Xxxxxxx
