ANNEX I
AGREEMENT OF MERGER
BY AND AMONG
XXXXXXXX WINDOWS, INC.
ANDERSEN DISTRIBUTION, INC.
AND
XXXXXX PRODUCTS LTD.
MARCH 10, 1999
TABLE OF CONTENTS
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ARTICLE 1 THE MERGER; CONVERSION OF SHARES................................................................... 1
1.1 THE MERGER. 1
1.2 EFFECTIVE TIME. 1
1.3 EFFECT OF THE MERGER. 1
1.4 CANCELLATION AND CONVERSION OF SECURITIES. 2
1.5 DISSENTING SHARES. 2
1.6 CERTAIN EQUITY-BASED PLANS. 3
1.7 SURRENDER OF SECURITIES; FUNDING OF PAYMENTS; STOCK TRANSFER BOOKS. 3
1.8 EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK. 5
1.9 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. 5
1.10 ADJUSTMENT TO UNADJUSTED CONSIDERATION. 5
ARTICLE 2 CLOSING............................................................................................ 5
2.1 TIME AND PLACE. 5
2.2 FILINGS AT THE CLOSING. 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 6
3.1 DISCLOSURE SCHEDULE; DISCLAIMER OF ADDITIONAL REPRESENTATIONS AND WARRANTIES. 6
3.2 ORGANIZATION. 7
3.3 AUTHORIZATION AND ENFORCEABILITY. 7
3.4 CAPITALIZATION. 8
3.5 REPORTS AND FINANCIAL STATEMENTS. 9
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. 9
3.7 CONSENTS AND APPROVALS. 9
3.8 COMPLIANCE WITH LAWS. 10
3.9 LITIGATION. 10
3.10 ABSENCE OF MATERIAL ADVERSE CHANGES. 11
3.11 ENVIRONMENTAL AND SAFETY MATTERS. 11
3.12 OFFICERS, DIRECTORS AND EMPLOYEES. 12
3.13 TAXES. 13
3.14 CONTRACTS. 14
3.15 TITLE TO PROPERTIES; LIENS. 15
3.16 PERMITS, LICENSES, ETC. 15
3.17 INTELLECTUAL PROPERTY RIGHTS. 16
3.18 BENEFIT PLANS. 16
3.19 INSURANCE POLICIES. 18
3.20 WARRANTIES. 18
3.21 RELATIONS WITH SUPPLIERS AND CUSTOMERS. 18
3.22 NO FINDERS. 19
3.23 PROXY STATEMENT. 19
3.24 MERGER FILINGS. 19
3.25 FAIRNESS OPINION. 19
3.26 TERMINATION OF RIGHTS AGREEMENT. 19
3.27 NEGOTIATIONS. 20
3.28 DISCLOSURE. 20
3.29 YEAR 2000 ISSUE. 20
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY.....................................
20
4.1 ORGANIZATION. 20
4.2 AUTHORIZATION AND ENFORCEABILITY. 21
4.3 PROXY STATEMENT. 21
4.4 CONSENTS AND APPROVALS. 21
4.5 MERGER FILINGS. 22
4.6 NO FINDERS. 22
4.7 FINANCIAL ABILITY TO PERFORM. 22
ARTICLE 5 COVENANTS.......................................................................................... 22
5.1 CONDUCT OF BUSINESS OF THE COMPANY. 22
5.2 NO SOLICITATION. 24
5.3 ACCESS AND INFORMATION. 25
5.4 COMPANY STOCKHOLDERS MEETING; PROXY STATEMENT. 25
5.5 CONSENTS. 26
5.6 EXPENSES. 26
5.7 FURTHER ACTIONS. 26
5.8 REGULATORY APPROVALS. 26
5.9 CERTAIN NOTIFICATIONS. 27
5.10 VOTING OF SHARES. 27
5.11 [INTENTIONALLY OMITTED] 27
5.12 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. 27
5.13 SECTION 203. 27
5.14 TAX MATTERS. 28
5.15 PURCHASE PLAN. 28
ARTICLE 6 CLOSING CONDITIONS................................................................................. 28
6.1 CONDITIONS TO OBLIGATIONS OF PARENT, MERGER SUBSIDIARY AND THE COMPANY. 28
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY. 29
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. 29
ARTICLE 7 TERMINATION AND ABANDONMENT........................................................................ 30
7.1 TERMINATION. 30
7.2 EFFECT OF TERMINATION. 31
ARTICLE 8 MISCELLANEOUS...................................................................................... 33
8.1 AMENDMENT AND MODIFICATION. 33
8.2 WAIVER OF COMPLIANCE; CONSENTS. 33
8.3 INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES. 33
8.4 NOTICES. 33
8.5 ASSIGNMENT. 34
8.6 GOVERNING LAW; SUBMISSION TO JURISDICTION. 34
8.7 COUNTERPARTS. 34
8.8 KNOWLEDGE. 34
8.9 INTERPRETATION. 35
8.10 PUBLICITY. 35
8.11 ENTIRE AGREEMENT. 35
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EXHIBITS:
Exhibit A--Certificate of Merger
Exhibit B--Disclosure Schedule
Exhibit C--Agreement to Facilitate Merger
Exhibit D--Form of Opinion of Company's Counsel
Exhibit E--Form of Opinion of Parent's Counsel
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AGREEMENT OF MERGER
THIS AGREEMENT is dated as of March 10, 1999, by and among Xxxxxxxx Windows,
Inc., a Minnesota corporation ("Parent"), Andersen Distribution, Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Subsidiary"), and Xxxxxx Products Ltd., a Delaware corporation (the "Company").
WHEREAS, Merger Subsidiary, Parent and the Company desire to effect a
business combination by means of a merger of Merger Subsidiary with and into the
Company; and
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary, and the
Company have approved the merger of Merger Subsidiary with and into the Company
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the officers and directors of the Company have executed and
delivered to Parent the Agreements to Facilitate Merger described in Section
5.10, in which they have agreed, among other things, to vote all of their shares
of Company stock in favor of the merger; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants, and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 THE MERGER.
Subject to the terms and conditions of this Agreement, at the Effective Time
(as defined in Section 1.2, below), Merger Subsidiary will merge with and into
the Company (the "Merger") in accordance with the provisions of the Delaware
General Corporation Law ("DGCL").
1.2 EFFECTIVE TIME.
Pursuant to Section 2.2, the Company and Merger Subsidiary will file, or
cause to be filed, with the Secretary of State of the State of Delaware a
Certificate of Merger for the Merger, which Certificate will be in the form
required by, and executed in accordance with, the applicable provisions of the
DGCL (the "Certificate of Merger"), and will be substantially in the form
attached hereto as Exhibit A. The Merger will become effective at the date and
time that the Certificate of Merger is filed or, if agreed to by Parent and the
Company, such later date or time set forth in the Certificate of Merger (the
"Effective Time" or the "Effective Date").
1.3 EFFECT OF THE MERGER.
At the Effective Time, the separate corporate existence of Merger Subsidiary
will cease, and the Company will continue as the surviving corporation (the
"Surviving Corporation"). From and after the Effective Time, the Surviving
Corporation will possess all the rights, privileges, powers, and franchises, and
will be subject to all the restrictions, disabilities, and duties, of the
Company and Merger Subsidiary, all as more fully described in Section 259 of the
DGCL.
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1.4 CANCELLATION AND CONVERSION OF SECURITIES.
At the Effective Time, automatically by virtue of the Merger and without any
further action on the part of Merger Subsidiary, the Company, the Surviving
Corporation or the holders of any of the following securities:
(a) Each share of the Company's common stock, par value $.10 per share
("Company Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than shares canceled pursuant to Section 1.4(b) and
Dissenting Shares (as defined in Section 1.5) ("Converted Shares"), shall be
canceled, extinguished and converted into and become a right to receive $4.00 in
net cash per share without any interest thereon (the "Unadjusted Consideration")
subject to adjustment as set forth in Section 1.10 (such Unadjusted
Consideration after giving effect to the adjustment, if any, described in
Section 1.10 is referred to herein as the "Merger Consideration"), subject to
appropriate further adjustment for any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange with respect
to the Company Common Stock occurring before the Effective Time.
(b) Each share of Company Common Stock that is issued and outstanding
immediately prior to the Effective Time that is held in treasury of the Company
or is then owned by Parent, Merger Subsidiary or any direct or indirect wholly
owned subsidiary of Parent or the Company shall be canceled, extinguished and
retired without payment of any consideration therefor and without any conversion
thereof.
(c) Each share of any class of capital stock of the Company other than
Company Common Stock will be canceled without payment of any consideration
therefor and without any conversion thereof.
(d) Each share of Merger Subsidiary's common stock, par value $.01 per share
("Merger Subsidiary Common Stock") issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(e) Each certificate previously evidencing Converted Shares (a
"Certificate") shall thereafter solely represent the right to receive the Merger
Consideration pursuant to Section 1.4(a) and the holders of Certificates shall
cease to have any rights with respect to the Converted Shares represented by
such Certificates except as otherwise provided herein or by law.
1.5 DISSENTING SHARES.
Notwithstanding any provision of this Agreement to the contrary, any shares
of Company Common Stock issued and outstanding immediately prior to the
Effective Time that are held by any holder of Company Common Stock who has not
voted in favor of the Merger and has properly exercised and perfected such
holder's demand for appraisal rights in accordance with Section 262 of the DGCL
(the "Dissenting Shares") and as of the Effective Time has neither effectively
withdrawn nor lost his, her or its right to such appraisal will not be converted
into the right to receive the Merger Consideration, but will become entitled to
the right to receive such consideration as may be determined to be due to the
holder of such Dissenting Shares pursuant to the DGCL; provided, however, that
any holder of Dissenting Shares who will have failed to perfect or who
effectively will have withdrawn or lost such rights of appraisal under the DGCL
will forfeit the right to appraisal of such shares, and such shares of Company
Common Stock will no longer be Dissenting Shares and will be deemed to have been
converted into the right to receive, at the Effective Time, the Merger
Consideration set forth in Section 1.4(a). The Company will give Parent and
Merger Subsidiary prompt notice of any written demands for appraisal,
withdrawals of demands for appraisal and any other related instruments received
by the Company and, prior to the Effective Time, Parent will have the right to
participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company will not, except with the prior written
consent of Parent, make any payment with respect to,
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or settle or offer to settle, any such demands. Notwithstanding anything to the
contrary in this Section 1.5, if (i) the Merger is rescinded or abandoned or
(ii) if the stockholders of the Company revoke the authority to effect the
Merger, then the right of any stockholder to be paid the fair value of such
stockholder's Company Common Stock will cease. The Surviving Corporation will
comply with all obligations of the DGCL with respect to dissenting stockholders.
1.6 CERTAIN EQUITY-BASED PLANS.
At the Effective Time each option to acquire shares of Company Common Stock
outstanding immediately prior to the Effective Time including, without
limitation, those issued under the Company's 1985 Incentive Stock Option Plan,
as amended (the "ISO Plan"), the Company's Incentive Compensation Plan, the
Company's 1992 Non-Employee Directors' Stock Option Plan (the "Directors Plan"),
and all out of plan option arrangements, whether vested or unvested (each, an
"Option," collectively, the "Options"), shall automatically become immediately
vested and exercisable and each holder of an Option shall have the right to
receive from the Surviving Corporation a cash payment (less applicable
withholding taxes) in an aggregate amount equal to the excess, if any, of the
Merger Consideration over the exercise price per share applicable to such Option
for all shares of Company Common Stock subject to the Option as expressly stated
in the applicable stock option agreement or other agreement, without any
interest thereon (the "Option Consideration"). At least thirty (30) days prior
to the Effective Date, the Company shall take such other actions (including,
without limitation, giving requisite notices to holders of Options advising them
of such accelerated vesting and rights pursuant to this Section 1.6 and
obtaining any requisite consents from holders of Options) as are necessary to
fully advise holders of Options of their rights under this Agreement and the
Options, to facilitate their timely exercise of such rights and to effectuate
the provisions of this Section 1.6. From and after the Effective Time, other
than as expressly set forth in this Section 1.6, no holder of an Option shall
have any other rights in respect thereof other than to receive payment for his
or her Options equal to the Option Consideration, and the Company shall take all
necessary actions to terminate effective as of the Effective Time the Company's
stock option plans, agreements and similar arrangements.
1.7 SURRENDER OF SECURITIES; FUNDING OF PAYMENTS; STOCK TRANSFER BOOKS.
(a) Prior to the Effective Time, Merger Subsidiary shall designate a bank or
trust company reasonably acceptable to the Company to act as agent for the
holders of the Converted Shares and Options (the "Exchange Agent") for the
purpose of exchanging Certificates for the Merger Consideration and documents
representing Options (the "Option Agreements") for the Option Consideration
pursuant to an agreement between Merger Subsidiary and the Exchange Agent
reasonably satisfactory to Company. The fees and expenses of the Exchange Agent
shall be paid by Merger Subsidiary and Merger Subsidiary shall indemnify the
Exchange Agent and the Company against actions taken by the Exchange Agent
pursuant hereto other than for acts or omissions which constitute willful
misconduct or gross negligence, pursuant to the agreement with the Exchange
Agent.
(b) At the Effective Time, Merger Subsidiary shall remit to the Exchange
Agent an amount equal to the aggregate Merger Consideration and Option
Consideration necessary to pay the holders of the Converted Shares and Options
(collectively, the "Payment Fund"). If, for any reason (including losses) during
the six-month period immediately following the Effective Date the Payment Fund
is inadequate to pay the amounts to the holders of Company Common Stock that are
entitled thereto under this Section 1.7, Parent shall during such six-month
period deposit additional cash with the Exchange Agent sufficient to make all
payments required under this Agreement that have not at such time been paid, and
Parent shall in any event be liable for the payment thereof. The Payment Fund
shall not be used for any purpose except as expressly set forth in this
Agreement.
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(c) As soon as practicable after the Effective Time and in no event later
than five business days thereafter, the Surviving Corporation shall cause the
distribution to holders of record of the Certificates and Option Agreements (as
of the Effective Time) of a form of letter of transmittal and other appropriate
materials and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor and in effecting
the surrender of the Option Agreements for payment of the Option Consideration
therefor. In the event any Certificate or Option Agreement shall have been lost
or destroyed, the Exchange Agent, subject to such other conditions as the
Surviving Corporation may reasonably impose (including the posting of an
indemnity bond or other surety in favor of the Surviving Corporation with
respect to the Certificate alleged to be lost or destroyed), shall be authorized
to accept an affidavit from the record holder of such Certificate or Option
Agreement in a form reasonably satisfactory to the Surviving Corporation. Upon
the surrender of each Certificate representing Converted Shares, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the Exchange Agent shall pay to holders of such
Certificates out of the Payment Fund the Merger Consideration multiplied by the
number of Converted Shares represented by such Certificates, less any amounts
required to be withheld pursuant to applicable tax laws. Upon the surrender of
each such Option Agreement formerly representing Options, together with a letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the Exchange Agent shall pay to holders of such Options
the Option Consideration (less applicable withholding).
(d) If any portion of the Merger Consideration or Option Consideration is to
be paid to a person other than the person in whose name a Certificate or Option
Agreement is registered, it shall be a condition to such payment that such
Certificate or Option Agreement shall be surrendered and shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment or shall have established to the satisfaction of the
Surviving Corporation and the Exchange Agent that such tax either has been paid
or is not payable.
(e) At the Effective Time, the stock transfer books of the Company shall be
closed and there shall not be any further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company.
(f) To the extent not immediately required for payment on surrendered
Converted Shares and Options, proceeds in the Payment Fund shall be invested by
the Exchange Agent, as directed by the Surviving Corporation (as long as such
directions do not impair the rights of holders of Converted Shares or Options),
in direct obligations of the United States of America, obligations for which the
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, commercial paper rated of the highest
investment quality by Xxxxx'x Investors Service, Inc. or Standard & Poor's
Ratings Group, or certificates of deposit issued by a commercial bank having at
least $5 billion in assets, and any net earnings with respect thereto shall be
paid to the Surviving Corporation as and when requested by the Surviving
Corporation.
(g) After the Effective Time, no dividends, interest or other distributions
shall be paid to the holder of any unsurrendered Certificates.
(h) Promptly following the six-month anniversary date of the Effective Date,
the Exchange Agent shall return to the Surviving Corporation all of the
remaining Payment Fund, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate or an Option Agreement may surrender
the same to the Surviving Corporation and upon such surrender (subject to
applicable abandoned property, escheat or similar laws) shall receive the
applicable aggregate Merger Consideration and/or Option Consideration, as
applicable (less applicable withholding). Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto shall be liable to any former holder of
Converted
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Shares or Options for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar law.
1.8 EXCHANGE OF MERGER SUBSIDIARY COMMON STOCK.
From and after the Effective Time, each outstanding certificate previously
representing shares of Merger Subsidiary Common Stock will be deemed for all
purposes to evidence ownership of and to represent the number of shares of
Surviving Corporation Common Stock into which such shares of Merger Subsidiary
Common Stock will have been converted. Promptly after the Effective Time, the
Surviving Corporation will issue to Parent a stock certificate or certificates
representing such shares of Surviving Corporation Common Stock in exchange for
the certificate or certificates that formerly represented shares of Merger
Subsidiary Common Stock, which will be canceled.
1.9 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
(a) At the Effective Time, the Certificate of Incorporation of Merger
Subsidiary as in effect immediately before the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by the DGCL and the provisions of such Certificate of
Incorporation.
(b) The Bylaws of Merger Subsidiary as in effect immediately before the
Effective Time shall become the Bylaws of the Surviving Corporation until
thereafter amended as provided by the DGCL, the provisions of the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
(c) The directors and officers of Merger Subsidiary immediately before the
Effective Time shall be the initial directors and officers of the Surviving
Corporation in each case until their successors are elected or appointed and
qualified.
1.10 ADJUSTMENT TO UNADJUSTED CONSIDERATION.
In the event Tennessee Stadium Group ("TSG") and/or Metropolitan Government
of Nashville and Davidson County ("MGNDC") makes any bona fide claim on or
before the Closing Date in connection with a subcontract agreement between the
Company (acting under the name Tennessee Glass Company) and TSG, the Performance
Bond dated June 11, 1998 with Tennessee Glass Company as principal, Travelers
Casualty & Surety Company of America as surety and TSG and MGNDC as dual
obligees in the sum of $3,407,934, as affected by the Addendum (the "Performance
Bond") or the Payment Bond dated June 11, 1998 with Tennessee Glass Company as
principal, Travelers Casualty & Surety Company of America as surety and TSG and
MGNDC as dual obligees, in the sum of $3,407,934, as affected by the Addendum
(the "Payment Bond"), then the Unadjusted Consideration shall be reduced by an
amount equal to the quotient of the amount of such claim or claims divided by
10,358,154, with the result being rounded to the nearest cent.
ARTICLE 2
CLOSING
2.1 TIME AND PLACE.
Subject to the satisfaction or waiver of the provisions of Article 6 hereof,
the closing of the Merger (the "Closing") will take place at 10:00 a.m., local
time, on the day the Merger is approved by the stockholders of the Company at
the Company Stockholders Meeting (as defined in Section 5.4 hereof), or as soon
thereafter as all conditions to Closing have been satisfied or waived, or on
such other date and/or at such other time as Parent and the Company may mutually
agree. The date on which the Closing actually occurs is herein referred to as
the "Closing Date." The Closing will take place at the corporate headquarters
offices of Parent, or at such other place or in such other manner (e.g., by
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telecopy exchange of signature pages with originals to follow by overnight
delivery) as the parties hereto may agree.
2.2 FILINGS AT THE CLOSING.
At the Closing, the Company and Merger Subsidiary will file or cause the
Certificate of Merger to be filed with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 103 of the DGCL, and
Parent, Merger Subsidiary and the Company will take any and all other lawful
actions and do any and all other lawful things necessary to cause the Merger to
become effective.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary as of
the date hereof as follows:
3.1 DISCLOSURE SCHEDULE; DISCLAIMER OF ADDITIONAL REPRESENTATIONS AND
WARRANTIES.
(a) The Company does not make, and has not made, any representations or
warranties relating to the Company or the business of the Company or otherwise
in connection with the transactions contemplated hereby other than those
expressly set forth in this Agreement which are made by the Company. Without
limiting the generality of the foregoing, the Company has not made, and shall
not be deemed to have made, any representations or warranties in any
presentation of the businesses of the Company in connection with the
transactions contemplated hereby, and accordingly, no statement made in any such
presentation shall be deemed a representation or warranty hereunder or
otherwise. It is understood that any cost estimates, projections or other
predictions, any data, any financial information or any memoranda or offering
materials or presentations are not and shall not be deemed to be or to include
representations or warranties of the Company. No Person has been authorized by
the Company to make any representation or warranty relating to the Company, the
business of the Company or otherwise in connection with the transactions
contemplated hereby and, if made, such representation or warranty must not be
relied upon as having been authorized by the Company.
(b) The disclosure schedule dated the date hereof and delivered by the
Company to Parent prior to execution of this Agreement, as attached hereto as
Exhibit B (the "Disclosure Schedule"), is divided into sections which correspond
to the sections of this Article 3. The Disclosure Schedule is true, accurate and
complete in all material respects. Any item, information or facts set forth in
the Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation and warranty unless a reasonable person would not understand the
exception taken from the item, information or facts provided; provided, however,
the mere listing (or inclusion of a copy) of a document or other item will not
be deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). In addition, any item, information or facts
disclosed in one subsection of the Disclosure Schedule shall be deemed to be
disclosed in all other applicable subsections of the Disclosure Schedule;
provided, that such item, information or fact has been initially disclosed in
such a manner that a reasonable person could infer that the inclusion of such
information in such additional subsection would be warranted. Certain
information set forth in the Disclosure Schedule is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information shall not be deemed to constitute
an acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by the Company in this
Agreement or that it is material. The Company acknowledges that Parent and
Merger Subsidiary are relying on each and every representation and warranty
contained in this Article 3 and that any representation and warranty as to a
specific matter shall not be interpreted to limit the scope of any other
representation and warranty.
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3.2 ORGANIZATION.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company has no
subsidiaries. The Company is duly qualified and in good standing to do business
in each jurisdiction in which the property owned, leased, or operated by it or
the nature of the business conducted by it makes such qualification necessary
and where the failure to qualify would have a Company Material Adverse Effect.
"Company Material Adverse Effect" means any condition, effect, change or event
that, individually or in the aggregate with all similar conditions, effects,
changes or events, and when aggregated with all similar positive conditions,
effects, changes and events of a substantial like nature, is or would reasonably
be expected to be material and adverse: (i) either before or immediately after
the Effective Time, to the business, assets, properties, liabilities, results of
operation, cash flows or financial condition of the Company; (ii) to the ability
of Parent or the Surviving Corporation to conduct such businesses, as presently
conducted, immediately following the Effective Time; or (iii) to the Company's
ability to perform any of its material obligations under this Agreement or which
threatens materially or is or would reasonably be expected to impede the
Company's ability to consummate the Merger and the other transactions
contemplated by this Agreement. Notwithstanding the foregoing: (i) in no event
shall any condition, effect, change or event that is caused by Parent or Merger
Subsidiary be deemed to have a Company Material Adverse Effect; (ii), nor shall
retaliatory, industry or competitive reactions by any Person (including, without
limitation, any of the Company's suppliers and customers and other distributors)
to the public announcement of the Merger be deemed to have a Company Material
Adverse Effect; nor (iii) shall any such condition effect, change or event
described in the immediately preceding clauses (i) and (ii) be aggregated with
any other conditions effects, changes or events in determining whether a Company
Material Adverse Effect has occurred. The jurisdictions in which the Company is
qualified are listed on Schedule 3.2 to the Disclosure Schedule. The Company has
previously delivered to Parent complete and accurate copies of its Restated
Certificate of Incorporation, as amended (the "Company Certificate of
Incorporation"), and its Bylaws as currently in effect (the "Company Bylaws").
Except to the extent disclosed on Schedule 3.2 to the Disclosure Schedule, the
Company does not directly or indirectly, own or control or have any capital,
equity, partnership, limited liability company, participation, or other
ownership interest in any corporation, partnership, joint venture, trust, or
other business association or entity.
3.3 AUTHORIZATION AND ENFORCEABILITY.
The Company has the requisite corporate power and authority to execute and
deliver this Agreement and, subject to obtaining the necessary approval of its
stockholders, the requisite corporate power and authority to consummate the
transactions contemplated hereby, and to file and distribute the Proxy Statement
(as defined in Section 5.4 hereof). The execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by the Company's Board of
Directors, no other corporate proceedings on the part of the Company (other than
stockholder approval) are necessary to authorize this Agreement, and, subject to
obtaining the approval of the Company's stockholders, no other corporate
proceedings on the part of the Company is necessary to consummate the
transactions contemplated hereby. The stockholder vote or consent required for
approval of this Agreement and the Merger will be no greater than the
affirmative vote of the holders of record of a majority of the outstanding
shares of Company Common Stock. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and rules of law governing specific performance,
injunctive relief or other equitable remedies. Each Agreement to Facilitate
Merger (as described in Section 5.10) has been duly and validly executed and
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delivered by the person who is a party thereto and, to the Company's knowledge,
constitutes the valid and binding obligation of such person, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.4 CAPITALIZATION.
The authorized capital stock of the Company consists of (i) 20,000,000
shares of Company Common Stock, of which 10,358,154 shares are issued and
outstanding as of the day immediately preceding the date of this Agreement, and
(ii) 5,000,000 shares of preferred stock, par value $.10 per share, none of
which is issued or outstanding. All issued and outstanding shares of Company
Common Stock have been validly issued, are fully paid and nonassessable, and
have not been issued in violation of and are not currently subject to any
preemptive rights. Except as set forth on Schedule 3.4 to the Disclosure
Schedule and except for options to purchase an aggregate of 698,000 shares of
Company Common Stock at an aggregate exercise price of $2,209,249.25 granted
pursuant to the Director Plan, the ISO Plan, the Incentive Compensation Plan and
non-plan options (collectively, the "Company Options") listed, together with
their respective exercise prices, on Schedule 3.4 to the Disclosure Schedule,
and except for the rights to purchase shares of Company Common Stock under the
Purchase Plan (estimated to be approximately 500 shares, based on an assumed
purchase price of $3.25 per share and assuming that the current contribution
rates of the participants, as listed on Schedule 3.4 to the Disclosure Schedule
continue, and assuming the Purchase Plan is terminated as of the date hereof for
this purpose), there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, convertible securities, commitments,
restrictions, arrangements, or any other agreements of any character to which
the Company is a party that, directly or indirectly, (i) obligate the Company to
issue any shares of capital stock or any securities convertible into, or
exercisable or exchangeable for, or evidencing the right to subscribe for, any
shares of capital stock, (ii) call for or relate to the sale, pledge, transfer,
or other disposition or encumbrance by the Company of any shares of its capital
stock, or (iii) to the knowledge of the Company, relate to the voting or control
of such capital stock. The Disclosure Schedule sets forth a complete and
accurate list of all stock options, warrants and other rights to acquire shares
of Company Common Stock or any other shares of capital stock of the Company,
including the name of the holder, the date of grant, acquisition price,
expiration date, number of shares, exercisability schedule, and, in the case of
options, the type of option under the Internal Revenue Code of 1986, as amended
and any corresponding provisions of foreign, state and local laws (the "Code").
The Disclosure Schedule also sets forth the contractual restrictions to which
any shares of Company Common Stock issued pursuant to the Company Option Plans
or other option arrangements are currently subject and also sets forth the
restrictions to which such shares will be subject immediately after the
Effective Time, other than as set forth in the Company Option Plans or stock
option agreements thereunder and except for any restrictions under federal or
state securities laws. No consent of holders or participants under the Company
Option Plans or the Purchase Plan is required to carry out the provisions of
Section 1.6 hereof. All actions, if any, required on the part of the Company
under the Company Option Plans or the Purchase Plan to allow for the treatment
of Options and the Purchase Plan as provided in Section 1.6 hereof have been, or
prior to the Closing will be, validly taken by the Company, and the Company will
not from and after the date hereof allow any increase in the rate of a
participant's contributions to the Purchase Plan, any new enrollments or
re-enrollments in the current offering period in process as of the date of this
Agreement under the Purchase Plan or the commencement of any offering periods
under the Purchase Plan subsequent to the offering period in process as of the
date of this Agreement.
8
3.5 REPORTS AND FINANCIAL STATEMENTS.
The Company has filed all forms, reports, registration statements and
documents required to be filed by it with the Securities and Exchange Commission
("SEC") since January 1, 1996 (such forms, reports, registration statements, and
documents, together with any amendments thereto, are referred to as the "Company
SEC Filings"). As of their respective dates, the Company SEC Filings (i)
complied as to form in all material respects with the applicable requirements of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "1933 Act") and the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "1934 Act"), as the case may be, and (ii)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim financial
statements included or incorporated by reference in the Company SEC Filings, and
the Company's audited financial statements at and for the year ended December
31, 1998 (the "Company 1998 Financials"), (i) were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto), (ii) complied as of their respective dates in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, and (iii) fairly presented the financial
position of the Company as of the dates thereof and the income, cash flows and
changes in stockholders' equity for the periods involved. The statements of
earnings included in the audited or unaudited interim financial statements in
the Company SEC Filings do not contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of business, except
as expressly specified in the applicable statement of operations or notes
thereto. Prior to the date hereof, the Company has delivered to Parent complete
and accurate copies of all Company SEC Filings. The Company has also previously
delivered to Parent complete and accurate copies of all statements on Schedule
13D and Schedule 13G known to the Company to have been filed with the SEC since
January 1, 1996, with respect to capital stock of the Company. Except as set
forth on Schedule 3.5 to the Disclosure Schedule, since January 1, 1996, the
Company has filed in a timely manner all reports required to be filed by it
pursuant to Sections 13, 14, or 15(d) of the 0000 Xxx.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES.
Except to the extent specifically disclosed on Schedule 3.6 to the
Disclosure Schedule, the Company has no liabilities or obligations of any nature
(whether absolute, accrued, contingent, or otherwise) which would have a Company
Material Adverse Effect except (a) liabilities or obligations that are accrued
or reserved against in the audited consolidated balance sheet as of December 31,
1998 contained in the Company 1998 Financials (the "Company Audited Balance
Sheet") and (b) liabilities or obligations arising since December 31, 1998 in
the ordinary course of business and consistent with past practice that would not
have a Company Material Adverse Effect.
3.7 CONSENTS AND APPROVALS.
Except for (i) any applicable requirements of the 1933 Act, the 1934 Act,
and state securities laws and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the regulations thereunder (the "HSR Act"), (ii)
approval by the Company's stockholders, (iii) the filing and recordation of
appropriate merger documents as required by the DGCL, (iv) compliance with
Section 262 of the DGCL regarding appraisal rights, and (v) any items disclosed
on Schedule 3.8 to the Disclosure Schedule, the execution and delivery of this
Agreement by the Company, and, to the Company's knowledge, the execution and
delivery of the Agreements to Facilitate Merger by the parties thereto, and the
consummation of the transactions contemplated hereby and thereby will not: (a)
violate any provision of the Company Certificate of Incorporation or Company
Bylaws; (b) violate any statute, rule, regulation, order or decree of any
federal, state, local or foreign body or authority
9
(including, but not limited to, any non-governmental self-regulatory agency) by
which the Company or any Subsidiary or any of its properties or assets may be
bound; (c) require any filing with or permit, consent, or approval of any
federal, state, local, or foreign public body or authority (including, but not
limited to, any non-governmental self-regulatory agency); or (d) result in any
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, result in the loss of any material benefit under,
or give rise to any right of termination, cancellation, increased payments, or
acceleration under, or result in the creation of any Lien (as defined in Section
3.15 hereof) on any of the properties or assets of the Company under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, authorization, agreement or other instrument or obligation to
which the Company is a party, or by which it or any of its properties or assets
may be bound, except, (x) in the cases of clauses (b) or (c), where such
violation, failure to make any such filing or failure to obtain such permit,
consent or approval, would not prevent or delay (for a period of more than seven
days) consummation of the Merger or otherwise prevent the Company from
performing its obligations under this Agreement and would not have a Company
Material Adverse Effect, and (y) in the case of clause (d), for any such
violations, breaches, defaults or other occurrences that would not prevent or
delay consummation of any of the transactions contemplated hereby in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and would not have a
Company Material Adverse Effect.
3.8 COMPLIANCE WITH LAWS.
Except to the extent disclosed on Schedule 3.8 to the Disclosure Schedule,
all activities of the Company have been, and are currently being, conducted in
compliance with all applicable federal, state, local and foreign laws,
ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, orders and other
similar items of any court or other governmental entity (including, but not
limited to, those of any non-governmental self-regulatory agency), the failure
to comply with which would have a Company Material Adverse Effect.
3.9 LITIGATION.
(a) Except to the extent disclosed on Schedule 3.9 to the Disclosure
Schedule, to the Company's knowledge, as of the date hereof there is no
investigation or review by any federal, state, local or foreign body or
authority (including, but not limited to, any non-governmental self-regulatory
agency) with respect to the Company is pending or threatened, nor has any such
body or authority (including, but not limited to, any non-governmental
self-regulatory agency) indicated in writing to the Company an intention to
conduct the same. Except to the extent disclosed on Schedule 3.9 to the
Disclosure Schedule, as of the date hereof there are no claims, actions, suits
or proceedings (i) by any private party that could reasonably be expected to
involve individually an amount in excess of $5,000 or collectively an aggregate
amount in excess of $10,000, or (ii) by any governmental body or authority
(including, but not limited to, any non-governmental self-regulatory agency),
against the Company, pending or, to the knowledge of the Company, threatened at
law or in equity, or before any federal, state, local, foreign, or other
governmental department, commission, board, bureau, agency, or instrumentality
(including, but not limited to, any non-governmental self-regulatory agency),
and, to the knowledge of the Company as of the date hereof, there is no basis
for any such investigation, review, claim, action, suit or proceedings.
(b) Except to the extent disclosed on Schedule 3.9 to the Disclosure
Schedule, to the Company's knowledge, as of the Effective Time there is no
investigation or review by any federal, state, local or foreign body or
authority (including, but not limited to, any non-governmental self-regulatory
agency) with respect to the Company pending or threatened, nor as of the
Effective Time has any such body or authority (including, but not limited to,
any non-governmental self-regulatory agency) indicated in writing to the Company
an intention to conduct the same. Except to the extent disclosed on Schedule 3.9
to the Disclosure Schedule, as of the Effective Time, there are no claims,
actions, suits or
10
proceedings by any private party that would have a Company Material Adverse
Effect or by any governmental body or authority (including, but not limited to,
any non-governmental self-regulatory agency), against the Company pending or, to
the knowledge of the Company, threatened at law or in equity, or before any
federal, state, local, foreign, or other governmental department, commission,
board, bureau, agency, or instrumentality (including, but not limited to, any
non-governmental self-regulatory agency), that would have a Company Material
Adverse Effect.
3.10 ABSENCE OF MATERIAL ADVERSE CHANGES.
Except to the extent disclosed on Schedule 3.10 to the Disclosure Schedule,
since December 31, 1998 there has not been any (a) change or circumstance that
would have a Company Material Adverse Effect; (b) action by the Company that, if
taken on or after the date of this Agreement, would require the consent or
approval of Parent pursuant to Sections 5.1(a)-(o) and (q) and (r) hereof,
except for actions as to which consent or approval has been given as provided
therein; (c) damage, destruction, or loss, whether or not covered by insurance,
that would have a Company Material Adverse Effect; (d) change by the Company in
accounting methods or principles used for financial reporting purposes, except
as required by a change in GAAP and concurred with by the Company's independent
public accountants; or (e) agreement, whether in writing or otherwise, to take
any action described or referenced in this Section 3.10.
3.11 ENVIRONMENTAL AND SAFETY MATTERS.
Except as set forth in the Disclosure Schedule:
(a) Neither the Company, any subsidiary or former subsidiaries of the
Company engaged in or permitted operations or activities upon, or any use or
occupancy of any property owned or leased by or to the Company or by or to any
subsidiary or former subsidiary of the Company (the "Properties"), or any
portion thereof, for the handling, manufacture, treatment, storage, use,
generation, emission, release, discharge, refining, dumping or disposal of any
Environmentally Regulated Materials (as hereinafter defined) (whether legal or
illegal, accidental or intentional, direct or indirect) on, under, in or about
the Properties except in material compliance with applicable law, or transported
any Environmentally Regulated Materials to, from or across the Properties except
in material compliance with applicable law, nor are any Environmentally
Regulated Materials presently deposited, stored, placed or otherwise located on,
under, in or about the Properties except in compliance with applicable law, nor
have any Environmentally Regulated Materials migrated from the Properties upon
or beneath other properties, nor have any Environmentally Regulated Materials
migrated or threatened to migrate from other properties upon, about or beneath
the Properties. The Properties do not contain any: (i) underground or
aboveground storage tanks; (ii) asbestos; (iii) equipment using PCBs; (iv)
underground injection xxxxx; or (v) septic tanks in which process waste water or
any Environmentally Regulated Materials have been disposed.
(i) no violation or noncompliance with Environmental and Occupational Safety
and Health Laws has occurred with respect to the Properties or operations
conducted thereon; the Company and its Subsidiaries have obtained all
permits, licenses and authorizations required by, and the Company, its
Subsidiaries and the Properties are in compliance with, all Environmental
and Occupational Safety and Health Laws including, without limitation,
all applicable restrictions, conditions, standards, limitations,
prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental and Occupational Safety and Health Laws or
contained in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder;
(ii) no enforcement, investigation, cleanup, removal, remediation or
response or other governmental or regulatory actions have been asserted
or threatened with respect to operations conducted on the Properties or
the Properties themselves or against the Company
11
or any subsidiary, or former subsidiary of the Company with respect to or
in any way regarding the Properties pursuant to any Environmental and
Occupational Safety and Health Laws; and
(iii) no claims or settlements with respect to the Properties or the
operations thereon, or against the Company or any subsidiary or former
subsidiary of the Company with respect to the Properties or operations
conducted thereon, relating to or arising out of Environmental and
Occupational Safety and Health Laws or Environmentally Regulated
Materials have been made or been threatened by any third party, including
any governmental entity, agency or representative, nor does there exist
any basis for any such claim (any such enforcement, investigation,
cleanup, removal, remediation or response, or other governmental or
regulatory action, claim or settlement is herein referred to as an
"ENVIRONMENTAL CLAIM").
(b) The term "ENVIRONMENTAL AND OCCUPATIONAL SAFETY AND HEALTH LAW" as used
in this Agreement means any common law or duty, caselaw or ruling, statue, rule,
regulation, law, ordinance or code, whether local, state, federal, international
or otherwise in effect, that (i) regulates, creates standards for or imposes
liability or standards or conduct concerning any element, compound, pollutant,
contaminant, or toxic or hazardous substance, material or waste, or any mixture
thereof, or relates in any way to emissions or releases into the environment or
ambient environmental conditions, or conduct affecting such matters or (ii) is
designed to provide safe and healthful working conditions or reduce occupational
safety and health hazards. Such laws include, but are not limited to, the
National Environmental Policy Act, 42 U.S.C. SectionSection 4321 ET SEQ., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
SectionSection 9601 ET SEQ., the Resource Conservation and Recovery Act, 42
U.S.C. SectionSection 6901 ET SEQ., the Federal Water Pollution Control Act, 33
U.S.C. SectionSection 1251 ET SEQ., the Federal Clean Air Act, 42 U.S.C.
SectionSection 7401 ET SEQ., the Toxic Substances Control Act), 15 U.S.C.
SectionSection 2601 ET SEQ., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. PARA 11001, the Hazard Communication Act, 29 U.S.C.
SectionSection 651 ET SEQ., the Occupational Safety and Health Act, 29 U.S.C.
SectionSection 651 ET SEQ., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Section 136, and any caselaw interpretations, amendments or
restatements thereof or similar enactment thereof, as is now in effect, as well
as their international, state and local counterparts.
(c) The term "ENVIRONMENTALLY REGULATED MATERIALS" as used in this Agreement
means any element, compound, pollutant, contaminant, substance, material or
waste, or any mixture thereof, designated, listed, referenced, regulated or
identified pursuant to any Environmental and Occupational Safety and Health Law.
(d) Notwithstanding anything in this Section 3.11 to the contrary, (i) the
Company shall not be deemed to have breached the representations and warranties
contained in this Section 3.11 unless the effect of such breach would have a
Company Material Adverse Effect and (ii) the representations and warranties
contained in this Section 3.11 shall be deemed to apply only for the periods
during which the Company (or its Subsidiaries) owned, operated or leased the
Properties.
3.12 OFFICERS, DIRECTORS AND EMPLOYEES.
Prior to the date hereof, the Company has provided to Parent a list that
completely and accurately sets forth the name and current annual salary rate of
each officer or exempt employee of the Company or any Subsidiary whose total
remuneration for the last fiscal year was, or for the current fiscal year has
been set at, in excess of $75,000, together with a summary of the bonuses,
commissions, additional compensation, and other like benefits, if any, paid or
payable to such persons for the last fiscal year and proposed for the current
fiscal year other than as set forth in Schedule 3.14 or Schedule 3.18(e).
Schedule 3.12 to the Disclosure Schedule completely and accurately sets forth
(i) the names and positions of all former officers whose employment with the
Company has terminated either voluntarily or involuntarily during the preceding
24-month period; and (ii) the names of the officers (with all positions and
titles indicated) and directors of the Company. No unfair labor practice
complaint against
12
the Company is pending before the National Labor Relations Board, and there is
no labor strike, slowdown or stoppage pending or, to the knowledge of the
Company, threatened against or involving the Company, except for any unfair
labor practice, labor strike, slowdown or stoppage which would not have a
Company Material Adverse Effect. Except as set forth on Schedule 3.12 to the
Disclosure Schedule, no unionizing efforts have, to the knowledge of the
Company, been made by employees of the Company, the Company is not a party to or
subject to any collective bargaining agreement, and no collective bargaining
agreement is currently being negotiated by the Company. The Company has
performed all obligations required to be performed by it under any collective
bargaining agreement to which it is a party (except for any failure to perform
obligations which would not have a Company Material Adverse Effect); there has
not been any event of default (or any event or condition which, with notice or
the lapse of time, both or otherwise, would constitute an event of default)
thereunder on the part of Company (except for any defaults which would not have
a Company Material Adverse Effect), or, to the Company's knowledge, any other
party thereto; and the same are in full force and effect and valid and
enforceable by the Company in accordance with their respective terms subject to
laws of general application relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and rules
of law governing specific performance, injunctive relief or other equitable
remedies. There is no labor dispute pending or, to the knowledge of the Company,
threatened between the Company and its employees (except for any labor disputes
which would not have a Company Material Adverse Effect). During the 24-month
period preceding the date of this Agreement, there has not been any material
increase of the rate of turnover of employees of the Company over historical
rates.
3.13 TAXES.
The Company has previously made available to Parent complete and accurate
copies of all tax or assessment reports and tax returns (including any
applicable information returns) required by any law or regulation (whether
United States, foreign, state, local or other jurisdiction) (sometimes,
collectively, "Returns") and filed by the Company for each of the three fiscal
years ended December 31, 1995, 1996 and 1997. The Company, each Subsidiary and
all members of any consolidated, affiliated, combined or unitary group of which
the Company or any Subsidiary is or has been a member, has filed, or has
obtained extensions to file (which extensions have not expired without filing),
all Returns required to be filed by any of them. The Company and each Subsidiary
has duly paid, or accrued on its books of account, in a manner consistent with
GAAP and past practices all taxes (including estimated taxes) shown as due on
such Returns (or such extension requests), or assessed against it, or that it is
obligated to withhold from amounts owed by it to any person. The liabilities and
reserves for taxes reflected in the Company Audited Balance Sheet are adequate
to cover all taxes payable by the Company and its Subsidiaries for all taxable
periods and portions thereof ending on or before the dates thereof. There are no
Liens (as defined in Section 3.15 hereof) for taxes upon any property or asset
of the Company or any Subsidiary, other than Liens for taxes not yet due or
being diligently contested in good faith and by appropriate proceedings. Neither
the Company nor any Subsidiary is delinquent in the payment of any tax
(including, but not limited to, any applicable withholding taxes and estimated
taxes). None of the Returns or reports for the tax periods ending on or before
December 31, 1998 have been audited by the Internal Revenue Service (the "IRS")
or by any other taxing authority. Except to the extent disclosed on Schedule
3.13 to the Disclosure Schedule, neither the Company nor any Subsidiary has (i)
received notification of any pending or proposed examination by either the IRS
or any state, local, foreign or other taxing authority, (ii) received
notification of any pending or proposed deficiency by either the IRS or any
state, local, foreign or other taxing authority, (iii) granted any extension or
waiver of the limitations period applicable to any claim for taxes, or (iv)
received any claim or demand by taxing authorities or other persons arising out
of membership or participation in any consolidated, affiliated, combined or
unitary group. Except as set forth in Schedule 3.13 to the Disclosure Schedule,
neither the Company nor any Subsidiary is or has been a party to any tax
allocation, tax sharing, tax indemnity or similar agreement.
13
For the purposes of this Section 3.13, "tax" will mean and include taxes,
additions to tax, penalties, interest, fines, duties, withholdings, assessments
and charges assessed or imposed by any governmental authority, including, but
not limited to, all federal, state, county, local and foreign income, profits,
gross receipts, import, ad valorem, real and personal property, premium
franchise, transfer, windfall profits, environmental, minimum or alternative,
accumulated profits, license, occupation, sales, use, value added, stamp,
capital stock, net worth, transfer, withholding, payroll, employment, excise,
custom, duty and any other taxes, obligations and assessments of any kind
whatsoever; "tax" will also include any liability arising as a result of being
(or ceasing to be) a member of any affiliated, consolidated, combined or unitary
group as well as any liability under any tax allocation, tax sharing, tax
indemnity or similar agreement. Neither the Company nor any Subsidiary: (i) is a
party to any safe harbor lease within the meaning of former section 168(f)(8) of
the Code; (ii) is or has been a United States real property holding corporation
within the meaning of section 897(c)(2) of the Code during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code, and Parent is not required to
withhold tax on the purchase of the stock of Company by reason of section 1445
of the Code; (iii) is a "consenting corporation" under section 341(f) of the
Code; (iv) has entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a nondeductible
expense pursuant to section 162(m) of the Code; (v) has made or will make a
deemed dividend election under Treasury Regulations section 1.1502-32(f)(2) or a
consent dividend under section 565 of the Code; (vi) has participated in an
international boycott as defined in Code section 999; (vii) has agreed, or is
required to make, any adjustment under Code section 481(a) by reason of a change
in accounting method or otherwise; (viii) has or had a permanent establishment
in any foreign country, as defined in any applicable tax treaty or convention
between the United States of America and such foreign country; (ix) has any
assets directly or indirectly securing any debt the interest on which is tax
exempt under section 103(a) of the Code; or (x) has any assets that are
"tax-exempt use property" within the meaning of section 168(h) of the Code.
Section 3.13 of the Disclosure Schedule sets forth the amounts and
expiration dates of any carryforwards of the Company's and each Subsidiary's net
operating losses, net capital losses, foreign tax credits, and business credits
and, except as set forth in Section 3.13 of the Disclosure Schedule, none of
such tax attributes is as of the date hereof subject to limitation under Code
sections 382, 383, or 384, or the federal consolidated return regulations
(except as a result of the transactions contemplated by this Agreement).
3.14 CONTRACTS.
Except as set forth on Schedule 3.14 to the Disclosure Schedule, the Company
(i) is not a party to any written or oral contract for the employment of any
officer, individual employee or other person on a full-time or consulting basis,
or relating to severance pay for any such person, (ii) is not a party to any (A)
written or oral agreement or understanding to repurchase assets previously sold
(or to expressly indemnify or otherwise compensate the purchaser in respect of
such assets) or (B) agreement for the sale of any capital asset with a fair
market value in excess of $50,000, (iii) is not a party to any contract,
arrangement, commitment or understanding (whether written or oral) which
provides for future payments by the Company in excess of $100,000 and is not
terminable by the Company nor any Subsidiary within 60 days without payment of a
penalty or premium, other than purchase orders given in the ordinary course of
business, employment contracts, benefit plans and leases otherwise disclosed in
the Disclosure Schedule or listed as an exhibit in the Company SEC Filings, (iv)
is not a party to any independent sales representative, OEM, supply,
distribution, manufacturers' representative, dealer, licensing (except for
immaterial licenses, which include without limitation, licenses for
off-the-shelf software) joint development, joint venture, research and
development, or similar contract, (v) is not a party to any contract,
arrangement, commitment or understanding which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement that has not been filed or incorporated by reference
in the Company SEC Filings, (vi) is not a party to any confidentiality agreement
or any agreement which prohibits the Company from
14
freely engaging in any business anywhere in the world, (vii) is not a party to
any agreement or indenture relating to the borrowing of money of more than
$100,000, (viii) has not guaranteed any obligation for borrowed money of more
than $100,000, or (ix) is not a party to any agreement or contract that
expressly obligates the Company to pay consequential or punitive damages.
The Company has performed all obligations required to be performed by it
under any contract, plan, agreement, understanding or arrangement made or
obligation owed by or to the Company listed on the Disclosure Schedule, except
where the failure would not have a Company Material Adverse Effect; there has
not been any event of default (or any event or condition which with notice or
the lapse of time, both or otherwise, would constitute an event of default)
thereunder on the part of the Company, any Subsidiary or, to the Company's
knowledge, any other party thereto that would have a Company Material Adverse
Effect; the same are in full force and effect and valid and enforceable by the
Company or its Subsidiaries in accordance with their respective terms subject to
laws of general application relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and rules
of law governing specific performance, injunctive relief or other equitable
remedies; and the performance of any such contracts, plans, agreements,
understandings, arrangements, or obligations would not have a Company Material
Adverse Effect. As of the date hereof, the Company has no knowledge of any basis
for a claim by the Company for indemnification from Xxxx (as hereinafter
defined) (without regard to any baskets) pursuant to the Asset Purchase
Agreement dated as of December 22, 1998, as amended, by and among the Company,
Xxxx Wholesalers, Inc. ("Xxxx") and certain subsidiaries of Xxxx (the "Xxxx
Purchase Agreement"). The Company has not waived any of its rights under the
Xxxx Purchase Agreement or further amended the Xxxx Purchase Agreement in any
respect. As of the date hereof, there are no claims against the Company, and the
Company has no knowledge of any basis for a claim against the Company, pursuant
to or in connection with the asset purchase agreement between the Company and
JELD-WEN, Inc. or any agreement executed in connection therewith, except for any
claim, the effect of which would not have a Company Material Adverse Effect.
3.15 TITLE TO PROPERTIES; LIENS.
The Company has good and marketable title to all of its material properties
and assets reflected on the Company Audited Balance Sheet or acquired after the
date thereof (except for properties and assets sold or otherwise disposed of in
the ordinary course of business since the dates thereof) subject only to (a)
statutory Liens arising or incurred in the ordinary course of business with
respect to which the underlying obligations are not delinquent, (b) with respect
to personal property, the rights of customers of the Company with respect to
inventory or work in progress under orders or contracts entered into by the
Company in the ordinary course of business, (c) Liens reflected on the Company
Audited Balance Sheet, (d) Liens for taxes not yet due or being diligently
contested in good faith and by appropriate proceedings, and (e) any defects in
title that would not have a Company Material Adverse Effect. The term "Lien" as
used in this Agreement means any mortgage, pledge, security interest,
encumbrance, lien, claim, or charge of any kind. All properties and assets
purported to be leased by the Company are subject to valid and effective leases
that are in full force and effect, and there does not exist, and the Merger will
not result in, any default or event that with notice or lapse of time, or both
or otherwise, would constitute a default under any such leases which would have
a Company Material Adverse Effect. The properties and assets of the Company are
in good condition and repair (taking into account the age of the assets) in the
ordinary course of business, except for the effect of any properties and assets
which are not in good condition and repair that would not have a Company
Material Adverse Effect.
3.16 PERMITS, LICENSES, ETC.
Except as disclosed on Schedule 3.16 to the Disclosure Schedule, the Company
has all rights, permits, certificates, licenses, consents, franchises,
approvals, registrations, and other authorizations (collectively, "Permits")
necessary to sell its products and services and otherwise carry on and conduct
15
its business and to own, lease, use, and operate its properties and assets at
the places and in the manner now conducted and operated, except those the
absence of which would not have a Company Material Adverse Effect. The Company
has not received any written notice or claim from any federal, state, local or
foreign body or authority (including, but not limited to, any non-governmental
self-regulatory agency) pertaining to the failure to obtain any such Permits.
3.17 INTELLECTUAL PROPERTY RIGHTS.
Schedule 3.17 to the Disclosure Schedule contains a complete and accurate
list of all material patents, trademarks, trade names, service marks copyrights,
and all applications for or registrations of any of the foregoing that the
Company uses in any material respect in its businesses, or as to which the
Company is the owner or a licensee (indicating whether such license is exclusive
or nonexclusive) that are not listed or described to such extent in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997. The Company exclusively owns, free and clear of any Lien, or is
exclusively (unless otherwise indicated in Schedule 3.17 to the Disclosure
Schedule) licensed to use, all patents, trademarks, trade names, service marks,
copyrights, applications for or registrations of any of the foregoing,
processes, inventions, designs, technology, formulas, computer software
programs, know-how and trade secrets used in or necessary for the conduct of its
business as currently conducted or proposed to be conducted (the "Company
Intellectual Property"), except where the failure of which to exclusively own or
exclusively license such Company Intellectual Property would not have a Company
Material Adverse Effect. Except to the extent disclosed on Schedule 3.17 to the
Disclosure Schedule, and except for claims which would not have a Company
Material Adverse Effect, no claim has been asserted or, to the knowledge of the
Company, threatened by any person, and, to the Company's knowledge, its patent
counsel has not concluded that any claim exists, with respect to the use of the
Company Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement to which the Company is a party with
respect thereto. To the knowledge of the Company, neither the use of the Company
Intellectual Property by the Company in the present or planned conduct of its
business nor any product or service of the Company infringes on the intellectual
property rights of any person. No current or former stockholder, employee or
consultant of the Company has any material rights in or to any of the Company
Intellectual Property. All Company Intellectual Property listed on Schedule 3.17
to the Disclosure Schedule has the status indicated therein and all applications
are still pending in good standing and have not been abandoned. Except to the
extent disclosed on Schedule 3.17 to the Disclosure Schedule: (i) to the
Company's knowledge, the Company Intellectual Property is valid and has not been
challenged in any judicial or administrative proceeding; (ii) the Company has
made all statutorily required filings, if any, to record their interests, and
taken reasonable actions to protect their rights, in the Company Intellectual
Property, where the failure to make any such filing, record such interest or
take such other actions would have a Company Material Adverse Effect; (iii) to
the knowledge of the Company, no person or entity nor such person's or entity's
business or products has infringed or misappropriated any Company Intellectual
Property or currently is infringing or misappropriating any Company Intellectual
Property; and (iv) no other person or entity has any right to receive or any
obligation to pay a royalty with respect to any Company Intellectual Property or
any product or service of the Company.
3.18 BENEFIT PLANS.
(a) Except to the extent disclosed on Schedule 3.18(a) to the Disclosure
Schedule, neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or, at any time during the three-year period preceding the date
of this Agreement, has sponsored, maintained, or contributed to or been required
to contribute to, any "employee pension benefit plan" ("Pension Plan"), as such
term is defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), including, solely for the purpose of this
subsection, a plan excluded from coverage by Section 4(b)(5) of ERISA. Each such
Pension Plan presently maintained by the Company or any Subsidiary is, in all
material respects, in compliance with applicable provisions of ERISA the Code,
and other applicable laws.
16
(b) Except to the extent disclosed on Schedule 3.18(b) to the Disclosure
Schedule, neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or, at any time during the three-year period preceding the date
of this Agreement, has sponsored, maintained, or contributed to or been required
to contribute to, any Pension Plan that is a "Multiemployer Plan" within the
meaning of Section 4001(a)(3) of ERISA.
(c) Except to the extent disclosed on Schedule 3.18(c) to the Disclosure
Schedule, neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or, at any time during the three-year period preceding the date
of this Agreement, has sponsored, maintained, contributed to or been required to
contribute to, any "employee welfare benefit plan" ("Welfare Plan"), as such
term is defined in Section 3(1) of ERISA, whether insured or otherwise and any
such Welfare Plan presently maintained by the Company or any Subsidiary is, in
all material respects, in compliance with the provisions of ERISA, the Code and
all other applicable laws, including, but not limited to, Section 4980B of the
Code and the regulations thereunder, and Part 6 of Title I of ERISA. Neither the
Company nor any Subsidiary has established or contributed to any "voluntary
employees' beneficiary association" within the meaning of Section 501(c)(9) of
the Code.
(d) Except to the extent disclosed on Schedule 3.18(d) to the Disclosure
Schedule, neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or, at any time during the three-year period preceding the date
of this Agreement, has sponsored, maintained or contributed to, a "self-insured
medical reimbursement plan" within the meaning of Section 105(h) of the Code and
the regulations thereunder.
(e) Except to the extent disclosed on Schedule 3.18(e) to the Disclosure
Schedule, neither the Company nor any Subsidiary currently maintains or
contributes to any oral or written bonus, profit-sharing, compensation
(incentive or otherwise), commission, stock option or other stock-based
compensation, retirement, severance, change of control, vacation, sick or
parental leave, dependent care, deferred compensation, cafeteria, disability,
hospitalization, medical, death, retiree, insurance or other benefit or welfare
or other similar plan, policy, agreement, trust, fund or arrangement providing
for the remuneration or benefit of all or any employees or stockholders or any
other person, that is neither a Pension Plan nor a Welfare Plan (collectively,
the "Compensation Plans"). Schedule 3.18(e) also contains a list of all deferred
compensation account balances.
(f) To the knowledge of the Company, neither any Pension Plans or Welfare
Plans nor any trust created or insurance contract issued thereunder nor any
trustee, fiduciary or administrator thereto, nor any officer, director, or
employee of the Company or any Subsidiary, custodian, or any other "disqualified
person" within the meaning of Section 4975(e)(2) of the Code or "party in
interest" within the meaning of Section 3(14) of ERISA with respect to any such
plan, has engaged in any act or omission that could reasonably be expected to
subject the Company or any Subsidiary either directly or indirectly to a
liability for breach of fiduciary duties under ERISA or a material tax or
penalty imposed by Section 502 of ERISA.
(g) Full and timely payment has been made of all amounts that the Company or
any Subsidiary is required, under applicable law, with respect to any Pension
Plan, Welfare Plan, or Compensation Plan, or any agreement relating to any
Pension Plan, Welfare Plan, or Compensation Plan, to have paid as a contribution
to each Pension Plan, Welfare Plan, or Compensation Plan. To the extent required
by GAAP, the Company has made adequate provisions for reserves to meet
contributions that have not been made because they are not yet due under the
terms of any Pension Plan, Welfare Plan, Compensation Plan or related
agreements. Except as set forth on the Disclosure Schedule, there will be no
change on or before the Effective Time in the operation of any Pension Plan,
Welfare Plan, Compensation Plan or documents under which any such plan is
maintained that will result in an increase in the benefit liabilities under such
plan, except as may be required by law or as provided by the terms of the
Pension Plan, Welfare Plan, Compensation Plan or document in effect on the date
of this Agreement. The IRS has issued favorable determination letters with
respect to all the Company and Subsidiary Pension Plans that are intended to be
qualified under Section 401(a) of the Code. The
17
Company has provided to Parent complete and accurate copies of all Pension
Plans, Welfare Plans, Compensation Plans, and related agreements, the most
recent three years' annual reports (Form 5500), favorable determination letters
and current summary plan descriptions, and all current employee handbooks or
manuals.
(h) Except to the extent disclosed on Schedule 3.18(h) to the Disclosure
Schedule, the execution of, and performance of the transactions contemplated in,
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Pension Plan, Welfare Plan,
Compensation Plan or other arrangement that will or may result in any new,
increased or accelerated payment (whether of severance pay or otherwise),
forgiveness of indebtedness, vesting, increase in benefits, or any new,
increased or accelerated obligation to fund benefits. Schedule 3.18(h) of the
Disclosure Schedule lists each Pension Plan, Welfare Plan and Compensation Plan
currently in effect under which there could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement separately or in conjunction with the occurrence
of any other event(s) (including, without limitation, a person's termination of
employment) by any employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) an amount under any Pension Plan,
Welfare Plan or Compensation Plan currently in effect that would be or could
reasonably be expected to be a "parachute payment" (as such term is defined in
Section 280G(b)(2) of the Code).
(i) Except to the extent disclosed on Schedule 3.18(i) to the Disclosure
Schedule, no Pension Plan that is a defined benefit pension plan or subject to
the funding standards of Section 302 of ERISA maintained, sponsored or
contributed to by the Company nor any subsidiary has been amended since December
31, 1988, to reduce the rate of accrual for any participant. Each amendment
effecting a reduction in the benefit accrual rate for any participant has been
adopted in compliance with Section 204(h) of ERISA.
(j) Except to the extent disclosed on Schedule 3.18(j) to the Disclosure
Schedule, the Company and each subsidiary has fully complied in all material
respects with the notice and continuation coverage requirements of Code section
4980B and sections 601 et seq. of ERISA. Except to the extent disclosed on
Schedule 3.18(j) to the Disclosure Schedule, the Company is not aware of any
circumstance that may reasonably give rise to any material liability for tax
under Code section 4980B or to any material civil penalty under section 502(c)
of ERISA.
3.19 INSURANCE POLICIES.
Schedule 3.19 to the Disclosure Schedule sets forth a complete and accurate
list of all insurance policies and programs (other than welfare benefit
insurance policies and programs disclosed in Schedule 3.19), including
self-insurance programs, maintained by the Company. All such policies of
insurance are in full force and effect and have been issued for the benefit of
the Company, and/or their respective directors, officers and employees. Schedule
3.19 also lists all pending insurance claims involving amounts in excess of
$50,000.
3.20 WARRANTIES.
The Company does not provide any warranties (express or implied) other than
pass-through warranties of the manufacturers.
3.21 RELATIONS WITH SUPPLIERS AND CUSTOMERS.
No "material current supplier" of the Company has canceled any contract or
order for provision of, and, to the knowledge of the Company, there has been no
threat by or basis for any such supplier not to provide, raw materials,
products, supplies or services to the business of the Company either prior to or
following the Merger. For purposes of the preceding sentence, a "material
current supplier" shall mean a supplier (other than the Parent) whom the Company
paid $10,000,000 or more in the 12-month period immediately preceding the date
of this Agreement. Except as specifically set forth on
18
Schedule 3.21 to the Disclosure Schedule, the Company has not, to the knowledge
of the Company, received any information from any customer that accounted for
more than 5% of the revenues of the Company during the last full fiscal year to
the effect that such customer intends to materially decrease the amount of
business it does with the business of the Company either prior to or following
the Merger. Schedule 3.21 to the Disclosure Schedule lists each supplier to the
Company that is the sole source of a particular raw material, product, supply or
service.
3.22 NO FINDERS.
No act of the Company has given or will give rise to any claim against any
of the parties hereto for a brokerage commission, finder's fee or other like
payment in connection with the transactions contemplated herein, except payments
in the amounts specified on Schedule 3.22 to the Disclosure Schedule to those
parties identified thereon who have acted as a finder for the Company or have
been retained by the Company as financial advisors pursuant to the agreements or
other documents described in Schedule 3.22 to the Disclosure Schedule, copies of
which have been provided to Parent prior to the date of this Agreement.
3.23 PROXY STATEMENT.
The Proxy Statement (as defined in Section 5.4 hereof) and any amendments or
supplements thereto will comply in all material respects with all applicable
laws, regulations and requirements, including the requirements of the 1934 Act
and the rules and regulations thereunder and none of the information relating to
the Company or its affiliates included or incorporated therein or in any
amendments or supplements thereto, or any schedules required to be filed with
the SEC in connection therewith, will, at the time the Proxy Statement is mailed
or at the time of the vote taken at the Company Stockholders Meeting (as defined
in Section 5.4 hereof), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation or warranty
is made by the Company with respect to information relating to Parent or any
affiliate of Parent supplied by Parent in writing specifically for inclusion in
the Proxy Statement.
3.24 MERGER FILINGS.
The information as to the Company or any of their affiliates or shareholders
included in the Company's filing, or submitted to Parent for inclusion in its
filing, if any, required to be submitted under the HSR Act shall be true,
correct and complete in all material respects, and shall comply in all material
respects with the applicable requirements of the HSR Act and the rules and
regulations of the Federal Trade Commission thereunder.
3.25 FAIRNESS OPINION.
The Company has received a written opinion from Xxxxxx, Xxxxxxxxx Xxxxxx to
the effect that, as of the date hereof, the consideration to be received by the
holders of Company Common Stock in the Merger is fair to such holders from a
financial point of view, and the Company has delivered a true and correct copy
of such opinion to Parent concurrent with the execution of this Agreement.
3.26 TERMINATION OF RIGHTS AGREEMENT.
The Company has taken all action necessary and appropriate to terminate the
Rights Agreement, dated as of March 15, 1989, between the Company and
Manufacturers Hanover Trust Company, as Rights Agent and no rights to acquire
any shares of capital stock or assets of the Company thereunder remain
outstanding or exercisable. The Company has not adopted or taken any other
action to implement any other so called "poison pill" or rights plan.
19
3.27 NEGOTIATIONS.
Except for the discussions contemplated by this Agreement, no discussions or
negotiations are pending with any person or entity concerning a merger,
consolidation, sale of all or substantially all of the assets, liquidation,
dissolution or similar transactions involving the Company.
3.28 DISCLOSURE.
The representations and warranties of the Company contained in this
Agreement are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
3.29 YEAR 2000 ISSUE.
(a) The system of internal accounting controls used by the Company is
sufficient to provide reasonable assurances that: (i) financial statements are
prepared in accordance with the books and records of the Company and generally
accepted accounting principles and to maintain accountability for assets; and
(ii) the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences.
(b) Except as provided on Schedule 3.29, the software and systems used by
the Company are in all material respects Year 2000 Compliant. Year 2000
Compliant means that the software and systems used by the Company are able to
provide the following functions without any additional processing:
(i) effectively process date information before, during and after January
1, 2000;
(ii) function accurately and without interruption before, during and after
January 1, 2000, without any change in operation associated with the
advent of the year 2000, the new century or the leap year in the year
2000;
(iii) respond to two-digit year input in a way that resolves the ambiguity
as to the century in a disclosed, defined and predetermined manner;
(iv) process two-digit year information in ways that are similarly
unambiguous as to century; and
(v) store and provide output of date information that is similarly
unambiguous as to century.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUBSIDIARY
Each of Parent and Merger Subsidiary represent and warrant to the Company as
of the date hereof as follows:
4.1 ORGANIZATION.
Each of Parent and Merger Subsidiary is a corporation duly organized,
validly existing, and in good standing under the laws of the States of Minnesota
and Delaware, respectively, and has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted. Each of Parent and Merger Subsidiary is duly qualified and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary and where the failure to qualify would have a
Parent Material Adverse Effect. "Parent Material Adverse Effect" means any
conditions, effect, change or event that, individually or in the aggregate with
all similar conditions, effects, changes or events, when aggregated with all
similar positive conditions, effects, changes and events of a substantial like
nature, is or would reasonably be expected to be material and adverse: (i) to
the business, properties, liabilities, results of operation, cash flows or
financial condition of Parent and its subsidiaries, considered as a whole, or
(ii) to Parent's ability to perform any of its material obligations under this
Agreement or to consummate the Merger. Notwithstanding the foregoing: (i) in no
event shall any condition, effect, change or event that is caused by the Company
be deemed a Parent Material Adverse Effect; (ii) nor shall retaliatory, industry
or competitive reactions by any Person (including, without limitation, any of
the Parent's suppliers and customers and other distributors) to the public
announcement of the Merger be deemed to have a Parent Material Adverse Effect;
and (iii) nor shall any such condition effect, change or event described in the
immediately preceding clauses (i) and (ii) be aggregated with any other
conditions effects, changes or events in determining whether a Parent Material
Adverse Effect has occurred.
20
4.2 AUTHORIZATION AND ENFORCEABILITY.
Each of Parent and Merger Subsidiary has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Subsidiary and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Boards of Directors of Parent and Merger Subsidiary and by Parent as the sole
stockholder of Merger Subsidiary, and no other corporate proceedings on the part
of Parent and Merger Subsidiary are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Subsidiary and
constitutes the valid and binding obligation of Parent and Merger Subsidiary,
enforceable against each of them in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and rules
of law governing specific performance, injunctive relief or other equitable
remedies.
4.3 PROXY STATEMENT.
None of the information supplied or to be supplied by Parent, Merger
Subsidiary or their respective affiliates in writing specifically for inclusion
in the Proxy Statement (as defined in Section 5.4 hereof) or in any amendments
or supplements thereto, or any schedules required to be filed with the SEC in
connection therewith, will, at the time the Proxy Statement is mailed or at the
time of the vote taken at the Company Stockholders Meeting (as defined in
Section 5.4 hereof), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
4.4 CONSENTS AND APPROVALS.
Except for (i) any applicable requirements of the HSR Act, (ii) the filing
and recordation of appropriate merger documents as required by the DGCL, and
(iii) compliance with Section 262 of the DGCL regarding appraisal rights of the
Company's stockholders, the execution and delivery of this Agreement by Parent
and Merger Subsidiary and the consummation of the transactions contemplated
hereby will not: (a) violate any provision of the Articles of Incorporation, as
amended, or Bylaws, as amended, of Parent or the Certificate of Incorporation or
Bylaws of Merger Subsidiary; (b) violate any statute, rule, regulation, order or
decree of any public body or authority (including, but not limited to, any
non-governmental self-regulatory agency) by which Parent or any of its
subsidiaries or any of their respective properties or assets may be bound; (c)
require any filing with or permit, consent or approval of any public body or
authority (including, but not limited to, any non-governmental self-regulatory
agency); or (d) result in any violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, result in the loss
of any material benefit under, or give rise to any right of termination,
cancellation, increased payments or acceleration under, or result in the
creation of any Lien on any of the properties or assets of Parent or its
subsidiaries under, any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license, franchise, permit, agreement or other
instrument or obligation to which Parent or any of its subsidiaries is a party,
or by which any of them or any of their respective properties or assets may be
bound, except (x) in the cases of clauses (b) or (c), where such violation,
failure to make any such filing or failure to obtain such permit, consent or
approval, would not prevent or delay consummation of this Merger or otherwise
prevent Parent from performing its obligations under the Agreement and would not
have a Parent Material Adverse Effect, and (y) in the case of clause (d), for
any such violations, breaches, defaults or other occurrences that would not
prevent or delay consummation of any of the transactions contemplated hereby in
any material respect, or otherwise prevent Parent from performing its
obligations under this Agreement in any material respect, and would not have a
Parent Material Adverse Effect.
21
4.5 MERGER FILINGS.
The information as to Parent and Merger Subsidiary or any of their
affiliates or shareholders included in Parent's filing, or submitted to the
Company for inclusion in its filing, if any, required to be submitted under the
HSR Act shall be true, correct, and complete in all material respects and shall
comply in all material respects with the applicable requirements of the HSR Act
and the rules and regulations issued by the Federal Trade Commission thereunder.
4.6 NO FINDERS.
Except for Xxxxx Xxxxxxx Inc., no act of Parent or Merger Subsidiary has
given or will give rise to any claim against any of the parties hereto for a
brokerage commission, finder's fee or other like payment in connection with the
transactions contemplated herein.
4.7 FINANCIAL ABILITY TO PERFORM.
Parent has or has access to sufficient funds to pay the Merger Consideration
and the Option Consideration on the terms and conditions contemplated by this
Agreement. Parent acknowledges and agrees that Parent's performance of its
obligations under this Agreement is not in any way contingent upon the
availability of financing to Parent.
ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY.
Except as contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, the Company will conduct its respective
operations according to its ordinary and usual course of business and consistent
with past practice, and the Company will, in all material respects, use its
reasonable best efforts to preserve intact its respective business
organizations, to maintain its present and planned business, to keep available
the services of its respective officers and employees and to maintain
satisfactory relationships with licensors, licensees, suppliers, contractors,
distributors, consultants, customers and others having business relationships
with it. The Company will promptly advise Parent in writing of any material
change in the management, present or planned business, properties, liabilities,
results of operations or condition (financial or otherwise) of the Company.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in or contemplated by this Agreement or the Disclosure
Schedule, prior to the Effective Time, the Company will not, without the prior
written consent of Parent:
(a) amend its Certificate of Incorporation (or other charter documents), or
Bylaws;
(b) authorize for issuance, issue, sell, pledge or deliver (whether through
the issuance or granting of additional options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
securities convertible into shares of stock of any class (other than the
issuance of the number of shares of Company Common Stock upon the exercise of
Options outstanding listed in Schedule 3.1 of the Disclosure Schedule and the
actual number of shares issuable for the current offering period under the
Purchase Plan in accordance with Section 1.8 hereof);
(c) split, combine or reclassify any shares of its capital stock; declare,
set aside or pay any dividend or other distribution (whether in cash, stock,
property or any combination thereof) in respect of its capital stock; redeem or
otherwise acquire any shares of its capital stock or other securities; or amend
or alter any material term of any of its outstanding securities;
(d) create, incur or assume any indebtedness for borrowed money (other than
defined draws under any existing lines); assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person; make any loans, advances (other than
advances of business expenses to employees in the ordinary course) or capital
contributions
22
to, or investments in, any other person; or create, incur or assume any Lien
(other than those excepted under (a) through (e) of Section 3.16 hereof) on any
material asset;
(e) (i) increase in any manner the compensation of any of its directors,
officers, employees, stockholders or consultants, unless such increase is in the
ordinary course of business and consistent with past practice (provided,
however, any general "across the board" increase in compensation for employees
shall not be deemed in the ordinary course of business) or consistent with
existing contractual commitments or accelerate the payment of any such
compensation (whether or not any such acceleration is consistent with past
practice), other than as required by existing contractual commitments to the
extent disclosed in the Disclosure Schedule; (ii) pay or accelerate or otherwise
modify the payment, vesting, exercisability, the Company's matching amount or
other feature or requirement of any pension, retirement allowance, severance,
change of control, stock option or other employee benefit not required by any
existing plan, agreement or arrangement to any such director, officer, employee,
stockholder or consultant, whether past or present; or (iii) except for normal
increases in the ordinary course of business in accordance with its customary
past practices or consistent with existing contractual commitments, in each case
to the extent disclosed in writing to Parent prior to the date hereof, commit
itself to any additional or increased benefits or obligations under any pension,
profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance, change of control,
retirement or other benefit, plan, agreement or arrangement, or to any
employment or consulting agreement, with or for the benefit of any person, or
amend any of such plans or any of such agreements in existence on the date
hereof;
(f) except in the ordinary course of business and consistent with past
practice or pursuant to contractual obligations existing on the date hereof, (i)
sell, transfer or otherwise dispose of any real or personal property, (ii) pay,
discharge or satisfy claims, liabilities or obligations (absolute, accrued,
contingent or otherwise), or (iii) cancel any debts or waive any claims or
rights;
(g) except with respect to the Xxxx Purchase Agreement, acquire or agree to
acquire (i) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any portion of the assets of,
or by any other manner, any business of any corporation, partnership, joint
venture, association or other business organization or division thereof or (ii)
any assets that are material, individually or in the aggregate, to the Company,
except as provided in subsection (h) below and except purchases of inventory in
the ordinary course of business consistent with past practice;
(h) make or agree to make any new capital expenditure or expenditures that,
individually, is in excess of $50,000 or, in the aggregate, are in excess of
$100,000;
(i) enter into, amend or terminate any joint ventures or any other
agreements, commitments or contracts that, individually or in the aggregate, are
material to the Company (except agreements, commitments or contracts expressly
provided for or contemplated by this Agreement or for the purchase, sale or
lease of goods, services or properties in the ordinary course of business and
consistent with past practice or agreements, commitments or contracts that
terminate in accordance with their terms due to the lapse of time), or otherwise
make any material change in the conduct of the business or operations of the
Company;
(j) enter into or terminate, or amend, extend, renew or otherwise modify
(including, but not limited to, by default or by failure to act) any
distribution, OEM, independent sales representative, noncompetition, licensing,
franchise, research and development, supply or similar contract, agreement or
understanding (except agreements, commitments or contracts expressly provided
for or contemplated by this Agreement or for the purchase, sale, lease or
license of goods, services or properties in the ordinary course of business and
consistent with past practice);
(k) change its credit policy as to sales of inventories or collection of
receivables or its inventory consignment practices;
23
(l) remove or knowingly permit to be removed from any building, facility or
real property any machinery, equipment, fixture, vehicle or other personal
property or parts thereof, except in the ordinary course of business;
(m) alter or revise its accounting principles, procedures, methods or
practices, except as required by a change in GAAP and concurred with by the
Company's independent public accountants;
(n) institute, settle or compromise any claim, action, suit, or proceeding
pending or threatened by or against it involving amounts in excess of $10,000,
at law or in equity or before any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality
(including, but not limited to, any non-governmental self-regulatory agency);
(o) subject to the provisions of Section 8.10, distribute or otherwise
circulate any notices, directives or other communications directed to all or
groups of customers, vendors, employees, distributors or others associated with
its business relating to the transactions contemplated hereby or to the
operation of business after completion of the Merger;
(p) knowingly take any action that would knowingly render any
representation, warranty, covenant or agreement of the Company in this Agreement
inaccurate or breached as of the Closing Date;
(q) close the operations of any distribution facilities, effect any general
layoffs, or hire any employees at the branch manager level or above; or
(r) agree, whether in writing or otherwise, to do any of the foregoing;
provided, however, that in the event that the Company would be prohibited from
taking any action by reason of this Section 5.1 without the prior written
consent of Parent, such action may nevertheless be taken if the Company is
expressly required to do so by law (or by the rules of the New York Stock
Exchange, if applicable) and the Company prior to taking such action informs
Parent in writing of such requirement.
5.2 NO SOLICITATION.
Neither the Company, its Subsidiaries, nor any of their respective officers,
directors, employees, financial advisors, counsel, representatives, agents or
affiliates will, directly or indirectly, encourage, solicit, initiate or, except
to the extent provided below, participate in any way in discussions or
negotiations with, or provide any confidential information regarding Company or
any Subsidiary to, any Third Party (as defined below) concerning or in
connection with any tender offer (including a self-tender offer), exchange
offer, merger, sale of substantial assets outside the ordinary course of
business, sale of securities or similar transactions involving the Company or
any Subsidiary or division of the Company (each, an "Acquisition Proposal");
except that nothing contained in this Section 5.2 or in any other provision of
this Agreement will prohibit the Company or its Board of Directors from: (i)
taking and disclosing to the Company's stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the 1934 Act; or (ii) making such
disclosure to the Company's stockholders as, in the judgment of its Board of
Directors with the advice of outside counsel, is required under applicable law.
For purposes of this Agreement, "Third Party" will mean any corporation,
partnership, person or other entity or "group" (as defined in Section 13(d)(3)
of the 0000 Xxx) other than Parent or any affiliate of Parent or Merger
Subsidiary and their respective directors, officers, employees, representatives
and agents. Notwithstanding the foregoing, the Company may furnish confidential
information regarding the Company to and enter into discussions or negotiations
with any Third Party if and only if: (x) such Third Party, has on an unsolicited
basis, submitted a bona fide written Acquisition Proposal; (y) the Company's
Board of Directors determines in good faith, based upon the legal advice of the
Company's outside counsel (with a copy provided to Parent), that its fiduciary
duties require the Board of Directors to take such action; and (z) the Company
and such Third Party enter into a confidentiality agreement with standard terms
and provisions. Subject to the provisions of Section 7.1 hereof, the Company may
approve, accept and recommend an Acquisition Proposal if and
24
only if: (1) the Board of Directors determines in good faith, based on, among
other things, advice of its legal counsel that its fiduciary duties require the
Board of Directors to take such action; (2) the Board of Directors determines,
after consultation with its financial advisors, that the Acquisition Proposal
would result in a transaction more favorable to the Company's stockholders from
a financial point of view than the transaction contemplated by this Agreement
(such Acquisition Proposal satisfying the immediately preceding clauses (1) and
(2)) is referred to hereinafter as an "Approved Offer"); (3) the Company
promptly notifies Parent of the Board's determination that an Acquisition
Proposal constitutes an Approved Offer; and (4) Parent does not make, within
three (3) business days of Parent's receiving such notice, an offer which the
Board of Directors, after consultation with its financial advisors, determines
is superior to such Approved Offer. The Company will promptly notify Parent of
the receipt and the terms of any Acquisition Proposal which it may receive,
including the identity of the offeror, and will keep Parent reasonably informed
of the status of any such Acquisition Proposal. The Board of Directors of the
Company acknowledges that the agreements contained in this Section 5.2 are
derived from and based upon its opinion that the Merger is fair and in the best
interests of the Company and its stockholders. Nothing contained in this Section
5.2 shall relieve any party from fulfilling its obligations under Article 7.
5.3 ACCESS AND INFORMATION.
The Company will afford to Parent, and to Parent's accountants, officers,
directors, employees, counsel and other representatives, full access, from the
date hereof through the Effective Time, to all of its and its Subsidiaries'
properties, books, contracts, commitments and records, and, during such period,
the Company will furnish promptly to Parent all information concerning the
Company's and its Subsidiaries' businesses, prospects, properties, products,
services, processes, liabilities, results of operations, financial condition,
officers, employees, investigators, distributors, customers, suppliers and
others having dealings with the Company as Parent may reasonably request and
reasonable opportunity to contact and obtain information from such officers,
employees, investigators, distributors, customers, suppliers, and others having
dealings with the Company as Parent may reasonably request. During the period
from the date hereof to the Effective Time, the parties will in good faith meet
and correspond on a regular basis for mutual consultation concerning the conduct
of the Company's and the Subsidiaries' businesses and, in connection therewith,
Parent will be entitled to have employees or other representatives present at
the offices of the Company and its Subsidiaries to observe, and be kept informed
concerning, the Company's and the Subsidiaries' operations and business
planning.
5.4 COMPANY STOCKHOLDERS MEETING; PROXY STATEMENT.
(a) The Company will take all action necessary in accordance with Delaware
law and the Company Certificate of Incorporation and Bylaws to cause a special
meeting of the Company's stockholders (the "Company Stockholders Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of voting
upon this Agreement and the Merger. The Company will, through its Board of
Directors, recommend that its stockholders approve this Agreement and the Merger
at the Company Stockholders Meeting.
(b) As soon as practicable after the date hereof, the Company shall use its
best efforts to prepare and file with the SEC a proxy statement and a form of
proxy in connection with the Company Stockholders Meeting (such proxy statement,
together with any amendments thereof or supplements thereto, in each case in the
form or forms mailed to the Company's stockholders, being the "Proxy
Statement"), respond promptly to any comments of the SEC or its staff regarding
the Proxy Statement and cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff of the SEC. Parent and Merger Subsidiary shall
furnish such information concerning Parent and Merger Subsidiary as is necessary
to cause the Proxy Statement, insofar as it relates to Parent and Merger
Subsidiary, to be prepared in accordance with the rules and regulations of the
SEC. The Company shall notify Parent promptly of
25
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. Prior to filing the Proxy Statement with the SEC, the Company shall
provide reasonable opportunity for Parent to review and comment upon the
contents of the Proxy Statement and shall not include therein or omit therefrom
any information to which counsel to Parent shall reasonably object. The Proxy
Statement shall include the recommendation of the Company's Board of Directors
in favor of approval of this Agreement and the Merger.
(c) If at any time prior to the Company Stockholders Meeting any event
should occur relating to the Company or the Company's officers or directors that
is required to be described in an amendment or supplement to the Proxy Statement
the Company will promptly inform Parent, and the Company shall promptly prepare,
file with the SEC and mail such amendment or supplement to the Company's
stockholders as soon as practicable after it is cleared by the SEC in accordance
with the procedures (including review and comment by Parent set forth in
subsection (b), above.
5.5 CONSENTS.
The Company will, at its cost and expense, use its reasonable best efforts
to obtain all approvals and consents of all third parties necessary on the part
of the Company to consummate the transactions contemplated hereby. Parent agrees
to cooperate with the Company in connection with obtaining such approvals and
consents. Parent will, at its cost and expense, use its reasonable best efforts
to obtain all approvals and consents of all third parties necessary on the part
of Parent to consummate the transactions contemplated hereby. The Company agrees
to cooperate with Parent in connection with obtaining such approvals and
consents.
5.6 EXPENSES.
Subject to Section 7.2 hereof, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement will be paid by the party
incurring such expenses. The Company and its Subsidiaries will not incur costs
and expenses (including, without limitation, fees and expenses of attorneys,
accountants and investment bankers) in connection with the negotiation,
execution and delivery of this Agreement or in connection with the transactions
contemplated hereby in excess of $925,000.
5.7 FURTHER ACTIONS.
Subject to the terms and conditions herein provided and without being
required to waive any conditions herein (whether absolute, discretionary or
otherwise), each of the parties hereto agrees to use all commercially reasonable
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 to consummate and make
effective the transactions contemplated by this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement will take all such necessary action as is commercially
reasonable.
5.8 REGULATORY APPROVALS.
The Company and Parent will take all reasonable action as may be necessary
under federal or state securities laws or the HSR Act applicable to or necessary
for, and will file as soon as reasonably practicable and, if appropriate, use
all reasonable efforts to have declared effective or approved all documents and
notifications with the SEC and other governmental or regulatory bodies
(including, without limitation, any foreign labor councils or bodies as may be
required) that they deem necessary or appropriate for, the consummation of the
Merger and the transactions contemplated hereby, and
26
each party will give the other information reasonably requested by such other
party pertaining to it and its subsidiaries and affiliates to enable such other
party to take such actions. Notwithstanding the foregoing or anything herein to
the contrary, neither Parent nor Merger Subsidiary will be required to make
arrangements for or to effect the cessation, sale or other disposition of
particular assets or categories of assets or businesses of Parent, Merger
Subsidiary, the Company or any of their affiliates.
5.9 CERTAIN NOTIFICATIONS.
From time to time prior to the Effective Time within (5) days of the end of
each calendar month, the Company will provide written notice to the Parent of
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in the Disclosure Schedule
or which is necessary to correct any information in the Disclosure Schedule
which has been rendered inaccurate thereby, or (b) would constitute a breach of
any covenant contained in this Agreement. For purposes of determining the
accuracy of the representations and warranties of the Company contained in
Article 3 of this Agreement in order to determine the fulfillment of the
conditions set forth in Section 6.2(a) and to determine whether a breach has
occurred for purposes of Section 6.2(b) or pursuant to Section 7.1(g) hereof,
the Disclosure Schedule delivered by Company in accordance with Section 3.1
shall be deemed to include only the information contained therein when delivered
in accordance with Section 3.1 and shall be deemed to exclude any information
contained in any subsequent notifications hereunder.
5.10 VOTING OF SHARES.
To induce Parent to execute this Agreement, all of the officers and
directors of the Company who are stockholders of the Company have executed and
delivered as of the date hereof Agreements to Facilitate Merger in the form
attached hereto as Exhibit C, pursuant to which each such person has agreed to
vote his or her shares of Company Common Stock in favor of the Merger at the
Company Stockholders Meeting.
5.11 [INTENTIONALLY OMITTED.]
5.12 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
The Surviving Corporation agrees that it will provide to the directors and
officers of the Company indemnification to the fullest extent provided by its
Certificate of Incorporation and Bylaws with respect to matters occurring prior
to the Effective Time, including, without limitation, the authorization of this
Agreement and the transactions contemplated hereby until the six (6) year
anniversary date of the Effective Time (or, in case of matters occurring prior
to the Effective Time giving rise to claims that are made prior to but which
have not been resolved by the sixth (6th) anniversary of the Effective Time,
until such matters are finally resolved). Surviving Corporation shall obtain and
maintain in effect for not less than two (2) years after the Effective Date, the
current directors' and officers' liability insurance policies maintained by the
Company (provided that the Surviving Corporation may substitute therefore a
policy or policies of at least the same coverage containing similar terms and
conditions so long as no lapse in coverage occurs as a result of such
substitution); provided that in no event shall Surviving Company be required to
expend more than 110% of the current annual premiums paid by the Company for
such coverage (the "Maximum Premium"); and provided further that if the
Surviving Corporation is unable to obtain the amount of insurance required by
this Section 5.12 for such aggregate premium, the Surviving Corporation shall
obtain as much insurance as can be obtained for an annual premium not in excess
of the Maximum Premium.
5.13 SECTION 203.
From and after the date hereof, the Company will not, except as otherwise
provided for in this Agreement, approve any acquisition of shares of Company
Common Stock by any person which would
27
result in such person becoming an interested stockholder (as such term is
defined in Section 203 of the DGCL) or otherwise take any action rendering it
subject to Section 203 of the DGCL.
5.14 TAX MATTERS.
The Company shall file (or cause to be filed) at its own expense, on or
prior to the due date, all Returns, including all Plan returns and reports, for
all tax periods ending on or before the Effective Time where the due date for
such Returns (taking into account valid extensions of the respective due dates)
falls on or before the Effective Time; provided, however, that the Company shall
not consent to any material adjustment or otherwise compromise or settle any
material matters with respect to taxes, without prior consultation with Parent;
provided, further, that the Company shall not make any material election or take
any other material discretionary position with respect to taxes, in a manner
inconsistent with past practices, without the prior written approval of Parent,
which approval shall not be unreasonably withheld. In the event the granting or
withholding of such approval by Parent results in additional taxes owing for any
tax period ending on or before the Effective Time, liability for such additional
taxes shall not cause any representation of Company relating to taxes to be
untrue.
5.15 PURCHASE PLAN.
The Company will terminate the 1988 Stock Purchase Plan, as amended (the
"Purchase Plan"), effective as of the date of this Agreement. The Company will
at least thirty (30) days prior to Closing cause the custodian to promptly
distribute any cash account balances to participants as provided under, and
subject to, the terms and conditions of the Purchase Plan. The Company will at
least ten (10) days prior to record date for the Company Stockholders Meeting
take such actions as are necessary (including, without limitation, amendment of
the Purchase Plan) to require the custodian to hold (rather than distribute)
shares for the benefit of participants, except for any participants who
specifically request a distribution of shares.
ARTICLE 6
CLOSING CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF PARENT, MERGER SUBSIDIARY AND THE COMPANY.
The respective obligations of each party to consummate the Merger will be
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) NO INJUNCTION. None of Parent, Merger Subsidiary, or the Company will be
subject to any final order, decree, or injunction of a court of competent
jurisdiction within the United States that (i) prevents or materially delays the
consummation of the Merger, or (ii) would impose any material limitation on the
ability of Parent effectively to exercise full rights of ownership of the
Company or the assets or business of the Company.
(b) STOCKHOLDER APPROVAL. The approval of the stockholders of the Company
referred to in Section 5.4 hereof will have been obtained, in accordance with
the DGCL and the Company Certificate of Incorporation and Company Bylaws.
(c) WAITING PERIODS. The waiting periods applicable to the consummation of
the Merger under the HSR Act shall have expired or terminated.
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6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.
The respective obligations of Parent and Merger Subsidiary to consummate the
Merger will be subject to the fulfillment at or prior to the Closing of the
following additional conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. Each representation and warranty
of the Company contained in this Agreement will be true and correct on the date
hereof and on the Closing Date as though such representations and warranties
were made on such date (except those representations and warranties that address
matters only as of a particular date will remain true and correct as of such
date), except for any inaccuracies that have not had, and would not have, a
Company Material Adverse Effect. For purposes of this Section 6.2(a), all
representations and warranties contained in Article 3 qualified by Company
Material Adverse Effect shall not be deemed so qualified.
(B) PERFORMANCE. The Company will have performed and complied in all
material respects with all agreements, obligations, and conditions required by
this Agreement to be performed or complied with by it on or prior to the
Closing.
(C) CONSENTS. The Company will have obtained all permits, authorizations,
consents, and approvals required on its part to perform its obligations under,
and consummate the transactions contemplated by, this Agreement, in form and
substance reasonably satisfactory to Parent, and Parent and Merger Subsidiary
will have received evidence reasonably satisfactory to them of the receipt of
such permits, authorizations, consents and approvals.
(D) OPINION OF COUNSEL FOR THE COMPANY. Parent and Merger Subsidiary will
have received an opinion of Winthrop, Stimson, Xxxxxx & Xxxxxxx counsel to the
Company, dated the Closing Date, in form and substance reasonably satisfactory
to Parent, to the effect set forth in Exhibit E hereto.
(E) RESIGNATIONS. Such officers and directors of the Company as will have
been specified by Parent will have tendered their respective resignations
effective as of the Closing; provided, that, no such resignation by any such
officer shall be deemed in and of itself to have been a voluntary resignation or
termination of employment by any such officer for purposes of any right of or
benefit due to such officer under any employment agreement, stock option plan or
arrangement, severance plan or any other employee benefit arrangement or plan in
effect with respect to such officer.
(F) CERTIFICATES. The Company will have furnished certificates of its
officers to evidence compliance with its respective conditions set forth in
Sections 6.1 and 6.2 hereof as may reasonably be requested by Parent.
(G) XXXX TRANSACTION. The Company shall not have: (i) amended the Xxxx
Purchase Agreement; or (ii) waived any of its rights under the Xxxx Purchase
Agreement. In addition, the Company shall have consummated the transactions
contemplated by the Xxxx Purchase Agreement.
(H) CERTAIN EMPLOYMENT ARRANGEMENTS. The Employment Agreements executed and
delivered as of the date hereof between the Company and Xxxxx X. Xxxxxxxxx,
Xxxxx X. Xxxxx and Xxxxxxx X. Xxxxx have not been rescinded, revoked or
otherwise terminated by any of the individuals subject to such employment
agreements as of the Effective Time.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate the Merger will be subject to
the fulfillment at or prior to the Closing of the following additional
conditions:
(A) REPRESENTATIONS AND WARRANTIES TRUE. Each representation and warranty
of Parent and Merger Subsidiary contained in this Agreement will be true and
correct on the date of this Agreement and on the Closing Date as though such
representations and warranties were made on such date (except those
29
representations and warranties that address matters only as of a particular date
will remain true and correct as of such date), except for any inaccuracies that
have not had, and would not have, a Parent Material Adverse Effect. For purposes
of this Section 6.3(a), all representations and warranties contained in Article
4 qualified by Parent Material Adverse Effect shall not be deemed so qualified.
(B) PERFORMANCE. Parent and Merger Subsidiary will have performed and
complied in all material respects with all agreements, obligations, and
conditions required by this Agreement to be performed or complied with by them
on or prior to the Closing.
(C) CONSENTS. Parent and Merger Subsidiary will have obtained all permits,
authorizations, consents, and approvals required on their part to perform their
obligations under, and consummate the transactions contemplated by, this
Agreement, in form and substance satisfactory to the Company, and the Company
will have received evidence satisfactory to it of the receipt of such permits,
authorizations, consents and approvals.
(D) OPINION OF COUNSEL FOR PARENT. The Company will have received an
opinion of Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP, counsel to Parent, dated the
Closing Date, in form and substance reasonably satisfactory to the Company, to
the effect set forth in Exhibit F hereto.
(E) CERTIFICATES. Parent and Merger Subsidiary will have furnished such
certificates of their respective officers to evidence compliance with the
conditions set forth in Sections 6.1 and 6.3 hereof as may reasonably be
requested by the Company.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 TERMINATION.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval by the stockholders of the Company, only:
(a) by mutual written consent duly authorized by the Board of Directors of
Parent and the respective Boards of Directors of the Company and Merger
Subsidiary;
(b) by either Parent or the Company if the Merger will not have been
consummated on or before the date that is six months after the date hereof;
provided, however, that the terminating party will not have breached in any
material respect its obligations under this Agreement in any manner that will
have been the proximate cause of, or resulted in, the failure to consummate the
Merger by such date and provided further, however, that, if a request for
additional information is received from the U.S. Federal Trade Commission (the
"FTC") or Department of Justice ("DOJ") pursuant to the HSR Act, such date shall
be extended to the 90th day following acknowledgment by the FTC, or DOJ, as
applicable, that Parent and the Company have complied with such request, but in
any event not later than nine months from the date hereof;
(c) by either Parent or the Company if a court of competent jurisdiction or
an administrative, governmental, or regulatory body has issued a final
nonappealable order, decree or ruling, or taken any other action, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by either Parent or the Company if, at the Company Stockholders Meeting,
the requisite vote of the stockholders of the Company is not obtained, except
that the right to terminate this Agreement under this Section 7.1(d) will not be
available to any party whose failure to perform any material obligation under
this Agreement has been the proximate cause of, or resulted in, the failure to
obtain the requisite vote of the stockholders of the Company;
30
(e) by Parent if Parent has not willfully and intentionally materially
breached any of its material obligations under this Agreement in any material
respect and either (i) the Company has breached its obligations under Section
5.2 hereof in any material respect, (ii) the Board of Directors of the Company
has recommended, approved, accepted or entered into an agreement (other than a
confidentiality agreement) regarding an Acquisition Proposal or an Approved
Offer, (iii) the Board of Directors of the Company has withdrawn or modified in
a manner adverse to Parent its recommendation of the Merger, or (iv) a tender
offer or exchange offer for 15% or more of the outstanding shares of Company
Common Stock is commenced, and the Board of Directors of the Company, within 10
business days after such tender offer or exchange offer is so commenced, either
fails to recommend against acceptance of such tender offer or exchange offer by
its stockholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders;
(f) by the Company if (i) it is not in material breach of its obligations
under this Agreement, (ii) the Board of Directors of the Company has approved,
accepted or recommended an Approved Offer in accordance with Section 5.2 hereof
and (iii) the Company has paid to Parent the fee required by Section 7.2 hereof
to be paid to Parent in the manner provided therein;
(g) by Parent if (i) Parent is not in material breach of its obligations
under this Agreement and (ii) there has been a material breach by the Company of
any of its representations, warranties or obligations under this Agreement or by
an affiliate of the Company under such person's Agreement to Facilitate Merger
described in Section 5.10 hereof such that the conditions in Article 6 hereof
will not be satisfied, and the breach is not curable or, if curable, is not
cured by the Company within 10 calendar days after receipt by the Company of
written notice from Parent of such breach; provided, however, that the Company
will only be allowed to cure any such breaches of this Agreement twice, and
thereafter, Parent or Merger Subsidiary will be allowed to terminate this
Agreement; or
(h) by the Company if (i) the Company is not in material breach of its
obligations under this Agreement and (ii) there has been a material breach by
Parent or Merger Subsidiary of any of their respective representations,
warranties or obligations under this Agreement such that the conditions in
Article 6 hereof will not be satisfied, and the breach is not curable or, if
curable, is not cured by Parent within 10 calendar days after receipt by Parent
of written notice from the Company of such breach; provided, however, that the
Parent will only be allowed to cure any such breaches of this Agreement twice
and, thereafter, the Company will be allowed to terminate this Agreement.
7.2 EFFECT OF TERMINATION.
(a) In recognition of the time, efforts and expenses expended and incurred
by Parent with respect to the Company and the opportunity that the acquisition
of the Company presents to Parent, if:
(i) this Agreement is terminated pursuant to Sections 7.1(e)(i), (ii) or
(iii) above, then the Company shall pay to Parent a fee in the amount of Two
Million Seven Hundred Fifty Thousand Dollars ($2,750,000) (the "Fee"),
payable upon such date of termination;
(ii) this Agreement is terminated pursuant to Section 7.1(e)(iv) above,
then the Company shall pay to Parent the Fee upon, and only upon: (A) the
entering into of an agreement (except for a confidentiality agreement)
providing for an Acquisition Proposal or an Approved Offer, or (B) the date
a Third Party acquires 50% or more of the Company's outstanding shares of
Company Common Stock in a tender or exchange offer, if such agreement is
entered into or if such acquisition occurs within 12 months of the
termination of this Agreement;
(iii) this Agreement is terminated pursuant to Section 7.1(f) above,
then the Company shall pay to Parent the Fee, payable upon such date of
termination;
31
(iv) (A) this Agreement is terminated pursuant to Section 7.1(d) above
or if the requisite vote of the stockholders of the Company to approve the
Merger is not obtained; and (B) any Third Party makes an Acquisition
Proposal to which the Company has made a response or such Third Party
acquires more than 15% of the outstanding Company Common Stock prior to the
Company Stockholders Meeting, then the Company shall pay to Parent the Fee
upon, and only upon: (x) the entering into of an agreement (except for a
confidentiality agreement) providing for an Acquisition Proposal or an
Approved Offer, or (y) the date a Third Party acquires 50% or more of the
Company's outstanding shares of Company Common Stock in a tender or exchange
offer, if such agreement is entered into or if such acquisition occurs
within 12 months of the termination of this Agreement or within 12 months of
the date that the Company shall have failed to obtain the requisite vote of
the stockholders to approve the Merger; or
(v) (A) this Agreement is terminated pursuant to Section 7.1(g) above
where the Company's breach is willful and intentional; and (B) any Third
Party makes an Acquisition Proposal to which the Company has made a response
or such Third Party acquires more than 15% of the outstanding Company Common
Stock prior to the Company Stockholders Meeting, then the Company shall pay
to Parent the Fee upon, and only upon: (x) the entering into of an agreement
(except for a confidentiality agreement) providing for an Acquisition
Proposal or an Approved Offer, or (y) the date a Third Party acquires 50% or
more of the Company's outstanding shares of Company Common Stock in a tender
or exchange offer, if such agreement is entered into or if such acquisition
occurs within 12 months of the termination of this Agreement.
The Fee, if payable pursuant to subsections (i), (ii), (iii), (iv) or (v)
above, shall be paid by wire transfer of immediately available funds to an
account designated by Parent for such purpose. The Company acknowledges that the
agreements contained in this Section 7.2 are an integral part of the
transactions contemplated by this Agreement and are not a penalty, and that,
without these agreements, Parent would not enter into this Agreement. If the
Company fails to pay promptly, the Fee due pursuant to this Section 7.2, the
Company will also pay to Parent Parent's costs and expenses (including legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of the unpaid Fee under this section, accruing from its due date,
at an interest rate per annum equal to five percentage points in excess of the
prime commercial lending rate quoted by Norwest Bank Minnesota, N.A. Any change
in the interest rate hereunder resulting from a change in such prime rate will
be effective at the beginning of the day of such change in such prime rate.
(b) Except as provided in the next sentence of this paragraph, in the event
of the termination of this Agreement pursuant to any paragraph of Section
7.1 hereof, the obligations of the parties to consummate the Merger will
expire, and none of the parties will have any further obligations under
this Agreement except pursuant to Sections 5.3, 5.6, and 7.2(a) hereof,
which sections will survive termination of this Agreement. In the event
of the termination of this Agreement pursuant to any paragraph of Section
7.1 hereof that is caused by a breach of a party, the party whose breach
was the basis for the termination will not be relieved from any liability
for its breach or its obligations pursuant to this Section 7.2, and the
other party will have no further obligations under this Agreement except
as provided in Sections 5.3 and 5.6 and Article 8 hereof.
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ARTICLE 8
MISCELLANEOUS
8.1 AMENDMENT AND MODIFICATION.
Subject to applicable law, this Agreement may be amended, modified or
supplemented only by written agreement of Parent, Merger Subsidiary and the
Company at any time prior to the Effective Time with respect to any of the terms
contained herein. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.2 WAIVER OF COMPLIANCE; CONSENTS.
Any failure of Parent or Merger Subsidiary on the one hand, or the Company
on the other hand, to comply with any obligation, covenant, agreement or
condition herein may be waived by the Company or Parent, respectively, only by a
written instrument signed by an officer of the party granting such waiver, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
will be given in writing. Any consent or waiver of compliance given by Parent
hereunder will be conclusively binding upon Merger Subsidiary, whether or not
given expressly on its behalf.
8.3 INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The respective representations and warranties of Parent and Merger
Subsidiary on the one hand and the Company on the other hand contained herein or
in any certificates or other documents delivered prior to or at the Closing will
not be deemed waived or otherwise affected by any investigation made by any
party hereto. The representations and warranties contained herein will be deemed
to be conditions to the Merger and will not survive the Merger. This Section 8.3
will have no effect upon any other obligation of the parties hereto, whether to
be performed before or after the Closing.
8.4 NOTICES.
All notices and other communications hereunder will be in writing and will
be deemed given when delivered personally by commercial courier service or
otherwise, or by telecopier, or three days after such notice is mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as will be specified
by like notice):
(a) if to Parent or Merger Subsidiary, to it at:
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx
with a copy to:
Xxxxxxxxxxx Xxxxx & Xxxxxxxx LLP
First National Bank Building
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxx, XX 00000-0000
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Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
(b) If to the Company, to it at:
000 XxXxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx
with a copy to:
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Financial Centre
000 Xxxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
Fax: 000-000-0000
Attention: Xxxxx Xxxxxx
8.5 ASSIGNMENT.
This Agreement and all of the provisions hereof will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder will be assigned by any of the parties hereto without
the prior written consent of the other parties, nor is this Agreement intended
to confer upon any other person except the parties hereto any rights or remedies
hereunder, except that Section 5.12 hereof will inure to the benefit of the
persons identified therein.
8.6 GOVERNING LAW; SUBMISSION TO JURISDICTION.
This Agreement will be governed by, and construed and enforced in accordance
with the laws of the State of Delaware (regardless of the laws that might
otherwise govern under applicable principles of conflicts of law). The parties
to this Agreement, acting for themselves and for their respective successors and
assigns, hereby irrevocably and unconditionally consent to submit to the
jurisdiction of the federal courts located in the State of New York for any
actions, suits or proceedings arising out of or relating to this Agreement (and
none of such persons shall commence any action, suit or proceeding relating
thereto except in such courts). Each such person hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement in the federal courts located in the
State of New York.
8.7 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
will be deemed an original, and all of which together will constitute one and
the same instrument.
8.8 KNOWLEDGE.
As used in this Agreement or the instruments, certificates or other
documents required hereunder, the term "knowledge" will mean actual knowledge of
a fact or the knowledge that such person or, if such person is a corporation,
its directors or officers could reasonably be expected to have based on such
person's director's or officer's position and duties. The knowledge of an entity
will be deemed to include the knowledge of its subsidiaries.
34
8.9 INTERPRETATION.
The Table of Contents, article and section headings contained in this
Agreement are inserted for reference purposes only and will not affect the
meaning or interpretation of this Agreement. This Agreement will be construed
without regard to any presumption or other rule requiring the resolution of any
ambiguity regarding the interpretation or construction hereof against the party
causing this Agreement to be drafted.
8.10 PUBLICITY.
Neither party will, without the prior consent of the other, issue any
statement or communication to the public or the press regarding this Agreement,
or any of the terms, conditions or other matters with respect to this Agreement,
except as required by law or the rules of the New York Stock Exchange (the
"NYSE") and then only (a) upon the advice of such party's legal counsel; (b) to
the extent required by law or the rules of the NYSE; and (c) following prior
notice to, and consultation with, the other party (which notice will include a
copy of the proposed statement or communication to be issued to the press or
public). The foregoing will not, however, restrict Parent's communications with
distributors, retailers, suppliers, dealers, employees or customers concerning
this Agreement or any of the terms, conditions or other matters with respect to
this Agreement, provided Parent, to the extent practicable, provides prior
notice to and consults with, the Company (which notice will include a copy of
any proposed written statement). In addition, the first sentence of this Section
8.10 will not restrict the Company's communications with its employees in the
ordinary course of business, provided the Company, to the extent practicable,
provides prior notice to and consults with Parent (which notice will include a
copy of any proposed written statement).
8.11 ENTIRE AGREEMENT.
This Agreement, including the exhibits and schedules hereto, and that
certain letter agreement dated as of the date hereof between Parent and Company
embodies the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter. No discussions regarding or exchange of drafts or comments in connection
with the transactions contemplated herein will constitute an agreement among the
parties hereto. Any agreement among the parties will exist only when the parties
have fully executed and delivered this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
XXXXXXXX WINDOWS, INC.
By: /s/_DONALD L. GAROFALO____________
Its: PRESIDENT AND CEO
By: /s/_CHARLES W. SCHMID_____________
Its: EXECUTIVE VICE PRESIDENT
ANDERSEN DISTRIBUTION, INC.
By: /s/_DONALD L. GAROFALO____________
Its:
XXXXXX PRODUCTS LTD.
By: /s/_LARRY ROBINETTE_______________
Its: PRESIDENT AND CEO
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