EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
between
THE XXXXXXX CO.,
EASTCHESTER ENTERPRISES, INC.
and
GUNHILL ENTERPRISES, INC.
Dated as of April 30, 2003
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions..................................................................................1
Section 1.01 Certain Definitions..........................................................................1
ARTICLE II Merger.......................................................................................7
Section 2.01 The Merger...................................................................................7
Section 2.02 Closing......................................................................................7
Section 2.03 Consummation of the Merger; Effects of Merger................................................7
Section 2.04 Articles of Incorporation and By-laws........................................................7
Section 2.05 Directors and Officers.......................................................................7
Section 2.06 Taking of Necessary Action; Further Action...................................................8
ARTICLE III Effects of the Merger on the Capital Stock of the Company and Buyer;
Exchange of Certificates.....................................................................8
Section 3.01 Effects of the Merger on Capital Stock.......................................................8
Section 3.02 Exchange of Certificates.....................................................................9
ARTICLE IV Representations and Warranties of the Company...............................................11
Section 4.01 Organization................................................................................11
Section 4.02 Subsidiaries................................................................................11
Section 4.03 Capitalization..............................................................................11
Section 4.04 Authority...................................................................................11
Section 4.05 Consents and Approvals; No Violations.......................................................12
Section 4.06 SEC Documents; Financial Statements.........................................................12
Section 4.07 Information Supplied........................................................................13
Section 4.08 Absence of Certain Changes or Events........................................................13
Section 4.09 Litigation..................................................................................14
Section 4.10 Contracts...................................................................................14
Section 4.11 Compliance with Laws........................................................................15
Section 4.12 Environmental Matters.......................................................................15
Section 4.13 Absence of Changes in Benefit Plans; Labor Relations........................................15
Section 4.14 ERISA Compliance............................................................................16
Section 4.15 Taxes.......................................................................................17
Section 4.16 No Excess Parachute Payments................................................................18
Section 4.17 Title to Properties.........................................................................18
Section 4.18 Intellectual Property.......................................................................19
Section 4.19 Voting Requirements.........................................................................19
Section 4.20 State Statutes..............................................................................19
Section 4.21 Brokers.....................................................................................19
Section 4.22 Opinion of SRH..............................................................................19
ARTICLE V Representations and Warranties of Parent and Buyer..........................................19
Section 5.01 Organization................................................................................19
Section 5.02 Authority...................................................................................20
Section 5.03 Consents and Approvals; No Violations.......................................................20
Section 5.04 Information Supplied........................................................................20
Section 5.05 Interim Operations of Parent and Buyer......................................................21
Section 5.06 Brokers.....................................................................................21
Section 5.07 Financing...................................................................................21
Section 5.08 State Statutes..............................................................................22
Section 5.09 No Breaches.................................................................................22
Section 5.10 Ownership of Common Stock...................................................................22
ARTICLE VI Covenants...................................................................................22
Section 6.01 Conduct of Business.........................................................................22
Section 6.02 No Solicitation.............................................................................24
Section 6.03 Certain Tax Matters.........................................................................25
Section 6.04 Other Actions...............................................................................25
Section 6.05 Filings.....................................................................................25
Section 6.06 Financing of the Merger.....................................................................25
ARTICLE VII Additional Agreements.......................................................................26
Section 7.01 Preparation and Filing of the Joint Proxy/Registration Statement and the Schedule 13E-3.....26
Section 7.02 Company Shareholder Approval................................................................27
Section 7.03 Access to Information; Confidentiality......................................................27
Section 7.04 Reasonable Efforts; Notification............................................................27
Section 7.05 Stock Option Plans..........................................................................28
Section 7.06 Indemnification, Exculpation and Insurance..................................................29
Section 7.07 Fees and Expenses...........................................................................30
Section 7.08 Public Announcements........................................................................30
Section 7.09 Continuation of Benefits....................................................................31
Section 7.10 Labor and Employment........................................................................31
Section 7.11 Knowledge of Breach.........................................................................31
Section 7.12 Parent Vote of Common Stock.................................................................31
Section 7.13 Delisting of Common Stock...................................................................31
Section 7.14 Reporting Obligations.......................................................................31
Section 7.15 Payment Fund................................................................................31
ARTICLE VIII Conditions..................................................................................32
Section 8.01 Conditions to Each Party's Obligation To Effect the Merger..................................32
Section 8.02 Conditions to the Obligations of Parent and Buyer to Effect the Merger......................32
Section 8.03 Conditions to the Obligation of the Company to Effect the Merger............................33
ARTICLE IX Termination and Amendment...................................................................34
Section 9.01 Termination.................................................................................34
Section 9.02 Effect of Termination.......................................................................35
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Section 9.03 Amendment...................................................................................35
Section 9.04 Extension; Waiver...........................................................................36
Section 9.05 Procedures for Termination, Amendment, Extension or Waiver..................................36
ARTICLE X General Provisions..........................................................................36
Section 10.01 Non-survival of Representations, Warranties and Covenants...................................36
Section 10.02 Notices.....................................................................................36
Section 10.03 Interpretation..............................................................................37
Section 10.04 Counterparts................................................................................38
Section 10.05 Entire Agreement; Third-Party Beneficiaries.................................................38
Section 10.06 Governing Law...............................................................................38
Section 10.07 Publicity...................................................................................38
Section 10.08 Assignment..................................................................................38
Section 10.09 Enforcement.................................................................................38
Section 10.10 Severability................................................................................39
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DISCLOSURE SCHEDULES:
SCHEDULE DESCRIPTION SECTION
-------- ----------- -------
Schedule 4.02 Subsidiaries; Interest in Other Persons 4.02
Schedule 4.03 Capitalization 4.03
Schedule 4.05 Consents and Approvals; No Violations 4.05
Schedule 4.06 SEC Documents; Financial Statements 4.06
Schedule 4.08 Absence of Certain Changes or Events 4.08
Schedule 4.09 Litigation 4.09
Schedule 4.10 Contracts 4.10
Schedule 4.13 Absence of Changes in Benefit Plans; Labor Relations 4.13
Schedule 4.14(a) Benefit Plans 4.14(a)
Schedule 4.14(a)(i) Company Stock Options 4.14(f)
Schedule 4.14(a)(ii) Additional Material Compensation 4.14(g)
Schedule 4.15 Certain Tax Matters 4.15
Schedule 4.16 Parachute Payments 4.16
Schedule 4.17 Title to Properties 4.17
Schedule 4.18 Intellectual Property 4.18
Schedule 6.01 Absence of Changes 6.01
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April
30, 2003, between The Xxxxxxx Co., a Florida corporation (the "Company"),
Eastchester Enterprises, Inc., a Florida corporation ("Parent"), and Gunhill
Enterprises, Inc., a Florida corporation and wholly-owned subsidiary of Parent
("Buyer"). Each of the Company, Parent and Buyer is referred to herein
individually, as a "Party" and collectively as, the "Parties".
WITNESSETH:
WHEREAS, the Company, Parent and Buyer each desires to enter into a
transaction providing for the merger of Buyer with and into the Company on the
terms and subject to the conditions set forth in this Agreement (the "Merger");
WHEREAS, four members of the Company's Board of Directors have agreed to
contribute all shares of Common Stock (as defined below) owned by them to Parent
in exchange for shares of the common stock of Parent;
WHEREAS, the Independent Committee (as defined below), comprised solely
of two Company directors who are not shareholders of Parent, has recommended to
the Board of Directors of the Company to approve and adopt this Agreement and,
based on such recommendation and the opinion, dated as of April 30, 2003, of
SunTrust Xxxxxxxx Xxxxxxxx ("SRH"), a conformed copy of which is attached hereto
as Exhibit A, that, as of such date and based upon and subject to the matters
set forth therein, the Merger Consideration (as defined below) to be received by
the Company's shareholders pursuant to this Agreement and the Merger is fair,
from a financial point of view, to such shareholders (the "Fairness Opinion"),
the Board of Directors of the Company has unanimously approved and adopted this
Agreement, determining that the terms of the Merger are fair to, and in the best
interests of the Company's shareholders, and further has approved recommending
to the Company's shareholders that they approve this Agreement and the Merger;
WHEREAS, each of the respective Boards of Directors of Parent and Buyer
have unanimously approved and adopted this Agreement and the Merger and Parent,
as the sole shareholder of Buyer, has approved this Agreement and the Merger;
and
WHEREAS, the Company, Parent and Buyer have agreed to make certain
representations warranties, covenants and other agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and for other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties
mutually agree as follows:
ARTICLE I DEFINITIONS.
Section 1.01 Certain Definitions. The following terms shall have the
meanings set forth below:
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"Acquisition Agreement" means any letter of intent, agreement in
principle, acquisition or similar agreement with respect to any Takeover
Proposal.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" shall have the meaning set forth in the preamble hereof.
"AMEX" shall have the meaning set forth in Section 7.13 hereof.
"Applicable Law" shall have the meaning set forth in Section 4.05
hereof.
"Articles of Merger" shall have the meaning Set forth in Section 2.03
hereof.
"Associate" shall have the meaning set forth in Rule 405 promulgated
under the Securities Act.
"Benefit Plans" shall have the meaning set forth in Section 4.14 hereof
"Blue Sky Laws" shall have the meaning set forth in Section 4.05 hereof.
"Board of Directors" means, with respect to a particular corporation,
the duly elected board of directors of such corporation.
"Business Day" means any day, other than a Saturday, Sunday, Federal
holiday or day that banks in the State of Florida are required or permitted by
law to be closed.
"Buyer" shall have the meaning set forth in the preamble hereof.
"Buyer Organizational Documents" means (a) the Articles of Incorporation
of Buyer, as filed with the Secretary of State of the State of Florida on
December 27, 2002, and (b) the By-laws of Buyer.
"Cash Merger Consideration" shall have the meaning set forth in Section
3.01(c) hereof.
"Certificate" means a stock certificate that immediately prior to the
Effective Time represents one or more shares of Common Stock.
"Certificate Holder" means any Person that is the legal owner of record
(as reflected in the Company's stock transfer records) of a Certificate to be
converted into the right to receive the Merger Consideration pursuant to Section
3.01(c) hereof (collectively, the "Certificate Holders").
"Closing" shall have the meaning set forth in Section 2.02 hereof.
"Closing Quote" shall have the meaning set forth in Section 2.02 hereof.
2
"Code" means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.
"Common Stock" shall have the meaning set forth in Section 4.03 hereof.
"Company Shareholder Approval" shall have the meaning set forth in
Section 4.04 hereof.
"Company Stock Options" means any Option to purchase shares of Common
Stock granted to any Person pursuant to a stock option or similar plan approved
by the Board of Directors of the Company.
"Company Subsidiary" means a Subsidiary of the Company (collectively,
the "Company Subsidiaries").
"Effective Time" shall have the meaning set forth in Section 2.03
hereof.
"Employee Welfare Benefit Plans" shall have the meaning set forth in
Section 3(1) of ERISA.
"Environmental Laws" means all statutes (including, but not limited to,
the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act, the
Comprehensive Environmental Response, Compensation and Liability Act, and the
Resource Conservation and Recovery Act), common law, rules, regulations, orders
or directives, or other enforceable requirement, as and to the extent in effect
on the date of this Agreement, relating to the (a) protection of the environment
or the public health and welfare from any actual or threatened Release of any
Hazardous Materials or (b) manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous Materials.
"Equity Commitments" means all outstanding subscriptions, Options,
calls, contracts or other commitments, understandings, arrangements or
obligations, including any right of conversion or exchange (matured or
contingent) under any outstanding security, instrument or other agreement,
creating an obligation to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or creating an obligation
to grant, extend or enter into any such agreement or commitment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and rules promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" means all reasonable out-of-pocket expenses incurred by
Parent and Buyer in connection with this Agreement and the transactions
contemplated hereby.
"Fairness Opinion" shall have the meaning set forth in the recitals
hereof.
"FBCA" means the Florida Business Corporation Act, as in effect on the
date hereof.
3
"Filed SEC Documents" shall have the meaning set forth in Section 4.08
hereof.
"Form 15" means the certification to be filed with the SEC that the
number of record holders of Common Stock has been reduced to less than 300
Persons pursuant to Rule 12g-4(a) promulgated under the Exchange Act.
"GAAP" means generally accepted accounting principles in the United
States of America, as in effect from time to time
"Governmental Entity" shall have the meaning set forth in Section 4.05
hereof.
"Hazardous Materials" means any pollutant, contaminant, dangerous,
hazardous, radioactive or toxic substance, material, constituent or waste, or
any other waste, substance, chemical or material regulated under any
Environmental Law, including (a) petroleum, crude oil and any fractions thereof,
(b) natural gas, synthetic gas and any mixtures thereof, (c) asbestos and/or
asbestos-containing material and (d) polychlorinated biphenyls ("PCBs") or
materials or fluids containing PCBs.
"Independent Committee" means the special committee of the Company's
Board of Directors appointed by such Board of Directors on February 14, 2001,
comprised of the following directors: Messrs. Xxxxxx Xxxxxxx and Xxxxxxx
Xxxxxxxx.
"Intellectual Property Rights" shall have the meaning set forth in
Section 4.18 hereof.
"IRS" means the Internal Revenue Service.
"Joint Proxy/Registration Statement" means the joint Proxy Statement and
Registration Statement relating to the Shareholders Meeting and the issuance of
the Notes to be filed by the Parties with the SEC and delivered to the
shareholders of the Company.
"Knowledge of the Company" means (a) with respect to the Company, the
actual knowledge of any of the Company's executive officers or directors and (b)
with respect to a Company Subsidiary, the actual knowledge of any of such
Subsidiary's executive officers or directors.
"Lien" means any lien, pledge, mortgage, adverse claim, security
interest, lease, charge, option. right of first refusal or offer, other
encumbrance, restriction or limitation whatsoever.
"Material Adverse Effect" means any event that, either individually or
in the aggregate, together with all other such events, is materially adverse to
(a) the business, condition (financial or other) or results of operations of the
Company and the Company Subsidiaries, taken as a whole, or (b) the ability of
the Company to consummate the transactions described herein.
"Merger" shall have the meaning set forth in the recitals hereof.
"Merger Consideration" shall have the meaning set forth in Section
3.01(c) hereof.
"Net Amount" shall have the meaning set forth in Section 7.05(a) hereof.
"Note" shall have the meaning set forth in Section 3.01(c) hereof.
4
"Note Merger Consideration" shall have the meaning set forth in Section
3.01(c) hereof.
"Option" means any outstanding obligation, option, warrant, convertible
security, subscription or other commitment or right (matured or contingent) of
any nature to purchase, acquire or subscribe for any security or other equity
interest, including pursuant to any Stock Option Plan.
"Parachute Gross-Up Payment" shall have the meaning set forth in Section
4.16 hereof.
"Parent" shall have the meaning set forth in the preamble hereof.
"Party" or "Parties" shall have the meaning set forth in the preamble
hereof.
"Paying Agent" shall have the meaning set forth in Section 3.02(a)
hereof
"Pension Plans" shall have the meaning set forth in Section 3(2) of
ERISA.
"Permits" shall have the meaning set forth in Section 4.11 hereof.
"Permitted Liens" means (a) Liens for Taxes not yet due and payable or
being contested in good faith; (b) Liens of materialmen, mechanics, carriers,
landlords and like persons to the extent payment thereof is not in arrears or
otherwise due and that are not material in the aggregate; and (c) Liens that do
not materially interfere with the Company's or any Company Subsidiary's
respective business and that do not materially detract from the value of their
respective property and assets.
"Person" means an individual, partnership (general or limited),
corporation, joint venture, business trust, limited liability company,
cooperative, association or other form of business organization (whether or not
regarded as a business entity under applicable law), trust, estate or any other
entity, other than a Governmental Entity.
"Post-Signing Returns" means all Returns required to be filed by the
Company and/or any Company Subsidiary from the date of this Agreement until the
Effective Time.
"Proceeding" means any claim, action, suit, hearing, audit, arbitration,
proceeding or governmental investigation that has been brought by or against any
Governmental Authority or Person (collectively, "Proceedings").
"Proxy Statement" shall have the meaning set forth in Section 4.07
hereof.
"Registration Statement" shall have the meaning set forth in Section
4.07 hereof
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
Hazardous Materials into the environment in an amount greater than a reportable
quantity as defined under applicable Environmental Law, which otherwise requires
notification to a Governmental Entity or that is likely to result in the
imposition of liability for clean-up, personal injury, property damage or
natural resource damage.
"Retains" shall have the meaning set forth in Section 4.15(a) hereof
5
"Schedule 13E-3" shall have the meaning set forth in Section 4.07
hereof.
"SEC" means the U.S. Securities Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 4.06 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"SRH" shall have the meaning set forth in the recitals hereof.
"Shareholders Meeting" shall have the meaning set forth in Section 7.02
hereof.
"Stock Option Plan" means any stock option, stock appreciation right or
stock purchase plan, program or similar arrangement of the Company.
"Subsidiary" means, with respect to a particular Person, any
corporation, business trust, joint venture, association, company, limited
liability company, firm or partnership of which at least a majority of the
outstanding capital stock or other voting securities having voting power under
ordinary circumstances to elect directors or similar members of the governing
body of such entity shall at the time be held, directly or indirectly, by such
Person.
"Superior Proposal" means any bona fide proposal made by a third party
to acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than fifty (50%) percent of the outstanding shares of Common
Stock or all or substantially all the assets of the Company on terms that the
Board of Directors of the Company determines in good faith (after consultation
with SRH or another nationally recognized financial advisor) to be more
favorable to the Company's shareholders than the Merger Consideration and for
which financing, to the extent required, is then committed or that, in the good
faith judgment of the Board of Directors of the Company, is reasonably capable
of being obtained by such third party.
"Surviving Corporation" shall have the meaning set forth in Section 2.01
hereof.
"Surviving Corporation's Organizational Documents" shall have the
meaning set forth in Section 2.04 hereof
"Takeover Proposal" means any proposal or offer from any third party
relating to any direct or indirect acquisition or purchase of twenty (20%)
percent or more of the assets of the Company or twenty (20%) percent or more of
the outstanding shares of Common Stock, any tender or exchange offer that, if
consummated, would result in any Person beneficially owning twenty (20%) percent
or more of the outstanding shares of Common Stock or any merger, consolidation,
business combination, sale of all or substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company, other than the transactions contemplated by this Agreement.
"Taxes" shall have the meaning set forth in Section 4.15(a) hereof -----
"Termination Fee" means $400,000 payable in cash.
6
"Union Plan" shall have the meaning set forth in Section 4.14(d) hereof.
ARTICLE II MERGER.
Section 2.01 The Merger. Upon the terms and subject to the conditions
contained herein, at the Effective Time, in accordance with this Agreement and
pursuant to the provisions of the FBCA, (a) Buyer shall be merged with and into
the Company, (b) the separate existence of Buyer (except as such existence may
be continued by operation of law) shall cease and (c) the Company shall continue
as the surviving corporation in the Merger under the corporate name of "The
Xxxxxxx Co." After the Effective Time, the existence and corporate organization
of the Company shall continue in effect under the laws of the State of Florida
as the surviving corporation (the "Surviving Corporation").
Section 2.02 Closing. The closing of the Merger, and related financing
transactions (the "Closing"), shall take place at the offices of the Company at
0000 Xxxx XxXxx Xxxx, Xxxx Xxxxxxxxxx, XX 00000, at 10:00 a.m., local time, as
soon as is practicable after the satisfaction or due waiver of the conditions
set forth in Article VIII hereof and, in no event later than two Business Days
after such satisfaction or waiver, or at such other time, date and/or place as
the Parties shall mutually agree (the "Closing Date").
Section 2.03 Consummation of the Merger; Effects of Merger. As soon as
is practicable after the satisfaction or due waiver of the conditions set forth
in Article VIII hereof and, in no event later than two Business Days after such
satisfaction or waiver, except as the Parties may otherwise mutually agree, the
Parties will cause the articles of merger (the "Articles of Merger") relating to
the Merger (and executed in accordance with the FBCA), and such other documents
as are required by the FBCA, to be duly filed with the Secretary of State of the
State of Florida. The Merger shall become effective upon the filing of the
Articles of Merger with the Secretary of State of the State of Florida, or at
such other later date and time as the Parties shall mutually agree (the
"Effective Time"). The Merger shall have the effects set forth in the FBCA, and
the Surviving Corporation shall succeed to and, without limiting the generality
of the foregoing, shall possess all properties, rights, privileges, immunities,
powers, franchises and purposes, and be subject to all the duties, liabilities,
debts, obligations, restrictions and disabilities of the Company all without
further act or deed. Notwithstanding the foregoing, subject to Article IX
hereof, the Parties may, by mutual agreement, abandon the Merger in accordance
with the FBCA at any time prior to the Effective Time, whether before or after
obtaining the Company Shareholder Approval.
Section 2.04 Articles of Incorporation and By-laws. From and after the
Effective Time, the Buyer Organizational Documents in effect immediately prior
to the Effective Time shall become the Articles of Incorporation and By-laws of
the Surviving Corporation (the "Surviving Corporation's Organizational
Documents") unless and until thereafter amended in the manner prescribed by the
FBCA and/or the Surviving Corporation's Organizational Documents.
Section 2.05 Directors and Officers. From and after the Effective Time,
the persons who are directors and officers of Buyer immediately prior to the
Effective Time shall be the directors and officers (in the same respective
offices then held) of the Surviving Corporation, respectively, to serve until
their successors have been duly elected and qualified in accordance with the
Surviving
7
Corporation's Organizational Documents or their earlier death, resignation or
removal. The Company shall cause all directors of the Company who are not also
directors of Buyer to resign their positions as directors of the Company
effective as of the Effective Time.
Section 2.06 Taking of Necessary Action; Further Action. Each of the
Company, Parent and Buyer will take all such reasonable and lawful action, as
promptly as possible, as may be necessary or appropriate in order to effectuate
the Merger in accordance with this Agreement. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession of all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of the Company and
Buyer immediately prior to the Effective Time are hereby fully authorized in the
name of their respective corporations or otherwise to take, and are directed to
take, all such lawful and necessary action as promptly as possible. Without
limiting the generality of the foregoing, the Parties shall cooperate to
determine as soon as reasonably practicable after the date hereof whether an
indenture with respect to the Notes is required or appropriate under the
circumstances and, if so required or appropriate, shall use their respective
commercially reasonable efforts to negotiate the terms (including, without
limitation, the creation of the Payment Fund described in Section 7.15, below)
of and deliver such an indenture.
ARTICLE III EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF THE COMPANY
AND BUYER; EXCHANGE OF CERTIFICATES.
Section 3.01 Effects of the Merger on Capital Stock. As of the Effective
Time, automatically by virtue of the Merger, and without any action on the part
of the holders of shares of Common Stock or any shares of the capital stock of
Buyer or Parent:
(a) Capital Stock of Buyer. Each issued and outstanding
share of common stock of Buyer shall be converted into and become one fully paid
and non-assessable share of common stock, $0.0l par value per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent/Buyer Owned
Stock. Each share of Common Stock that is owned by the Company, any Company
Subsidiary, Parent or Buyer (other than Common Stock received pursuant to
Section 3.01(a), above) shall automatically be cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Common Stock. Each issued and outstanding
share of Common Stock (other than the Common Stock received pursuant to Section
3.01(a), above, and other than those to be cancelled and retired in accordance
with Section 3.01(b), above) shall be converted into the right to receive from
the Surviving Corporation, subject to Section 3.02 hereof, $3.25 in cash (the
"Cash Merger Consideration") and an unsecured, non-transferable promissory note,
dated as of the Effective Time (the "Note"), of Parent or Buyer in the principal
amount of $1.25, bearing interest at the rate of 4.5% per annum, with equal
payments of principal, together with accrued interest thereon, payable
semi-annually over a 42-month period (the "Note Merger Consideration" and,
together with the Cash Merger Consideration, the "Merger Consideration"). As of
the Effective Time, all issued and outstanding shares of Common Stock to be
converted pursuant to this Section 3.01(c) shall no longer be outstanding and
shall automatically be cancelled and retired
8
and shall cease to exist, and each Certificate Holder shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration.
SECTION 3.02 EXCHANGE OF CERTIFICATES.
(a) Paying Agent. Prior to the Effective Time, Parent shall
engage and designate a bank or trust company to act as paying agent in the
Merger (the "Paying Agent"). At or promptly after the Effective Time, Parent
shall deposit with the Paying Agent, in separate trust for Certificate Holders,
Notes representing the aggregate Note Merger Consideration for shares of Common
Stock converted pursuant to Section 3.01(c) hereof, and as soon as practicable
after the Effective Time, Parent or the Surviving Company shall deposit with the
Paying Agent in separate trust for Certificate Holders, immediately available
funds in an amount sufficient for the payment of the aggregate Cash Merger
Consideration. Any interest earned on funds deposited with the Paying Agent
pursuant to this Agreement shall be disbursed to the Surviving Corporation.
(b) Exchange Procedure.
(i) As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each Certificate Holder (A) a
letter of transmittal, which shall specify that delivery shall be effected, and
risk of loss and title to Certificates shall pass, only upon delivery of
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent or Buyer may reasonably specify and (B) instructions for
exchanging Certificates for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, the Certificate Holder shall be entitled to receive in exchange
therefor, and the Paying Agent shall pay pursuant to irrevocable instructions
given by Parent, the amount of Notes and cash into which the shares of Common
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 3.01(c) hereof; and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of shares of
Common Stock that is not registered in the transfer records of the Company,
payment may be made to a Person other than the surrendering Certificate Holder,
if such Certificate is properly endorsed or otherwise in proper form for
transfer and the Person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a Person other than the Certificate
Holder or establish to the reasonable satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. After the Effective time, each
Certificate shall be deemed to represent only the right to receive, upon
surrender, as contemplated by this Section 3.02, the Merger Consideration. No
interest will be paid, or will accrue, on the Cash Merger Consideration payable
upon the surrender of any Certificate as contemplated by this Section 3.02.
Regardless of when a Certificate Holder shall transmit his/its Certificates for
the Merger Consideration, interest shall accrue and be payable on the Note for
only the 42-month period immediately following the Effective Time.
(ii) Notwithstanding the provisions of Section
3.02(b)(i) hereof, with respect to the Common Stock held in escrow pursuant to
that certain Acquisition Agreement, dated May 23, 1997, by and between the
Company, Xxxxxxx Distributing, Inc and New Image Laboratories, Inc. ("New
Image"), Parent shall set aside the Merger Consideration payable in respect
thereof. If it
9
shall be determined by a final, non-appealable order of a court of competent
jurisdiction or mutual agreement that New Image is entitled to all or any
portion of such Common Stock, Parent shall, upon surrender of the appropriate
Certificate(s) in accordance with the terms of this Section 3.02, pay the Merger
Consideration in respect thereof. Alternatively, if it shall be determined by a
final, non-appealable order of a court of competent jurisdiction or mutual
agreement that New Image is not entitled to such Common Stock, Parent shall be
entitled to the Cash Merger Consideration in respect thereof and the Notes in
respect thereof shall be cancelled.
(c) No Further Ownership Rights in Common Stock. The Merger
Consideration paid upon the surrender of any Certificate, in accordance with the
terms of this Article III, shall be deemed paid in full satisfaction of all
rights pertaining to the shares of Common Stock formerly represented by such
Certificate. At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Common Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, a Certificate Holder presents a Certificate to the Surviving
Corporation or the Paying Agent for any reason, such Certificate shall be
cancelled and exchanged pursuant to this Article III.
(d) No Liability. All funds and Notes deposited with the
Paying Agent that remain unclaimed by Certificate Holders for one year after the
Effective Time shall be disbursed to the Surviving Corporation, upon its written
demand, and any Certificate holders that have not theretofore complied with the
instructions for exchanging their Certificates, as provided herein, shall
thereafter deliver Certificates to the Surviving Corporation in exchange for the
Merger Consideration, as set forth in Section 3.01 hereof, without any interest
in respect of the Cash Merger Consideration. None of Parent, Buyer, the Company,
any Company Subsidiary or the Paying Agent shall be liable to any Person in
respect of any funds or Notes delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered within the six-year period immediately following the
Effective Time (or immediately prior to such earlier date that any payment
pursuant to this Article III would otherwise escheat to or become the property
of any Governmental Entity), the Cash Merger Consideration in respect of such
Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any Person previously entitled thereto, and the Note Merger Consideration in
respect of such Certificate shall, to the extent permitted by applicable law, be
cancelled.
(e) Withholding Right. Parent, Buyer or the Paying Agent
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable amounts pursuant to this Agreement to any Certificate Holder such
amounts, if any, as Parent, Buyer or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, Buyer or the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
Certificate Holder in respect of which such deduction and withholding was made
by Parent, Buyer or the Paying Agent.
10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Parent and Buyer as
follows:
Section 4.01 Organization. The Company and each of the Company
Subsidiaries 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 carry on its business as presently
being conducted. The Company and each of the Company Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except in any such jurisdictions where the failure to be so duly qualified or
licensed and in good standing could not reasonably be expected to result in a
Material Adverse Effect.
Section 4.02 Subsidiaries. Schedule 4.02 hereto sets forth a true and
complete list of the Company Subsidiaries, including the name, state of
organization of each such Subsidiary and the Company's respective ownership
interest therein. All of the issued and outstanding shares of capital stock of
each Company Subsidiary are validly issued, fully paid, non-assessable and free
of preemptive rights imposed by Applicable Law, the Company or the Company
Subsidiaries, and are owned by the Company, free and clear of any Liens,
limitations on the Company's voting rights, voting trusts or proxies.
Section 4.03 Capitalization. The authorized capital stock of the Company
consists solely of 25,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), and 1,000,000 shares of preferred stock, par value $0.01 per
share ("Preferred Stock"). At the close of business on March 31, 2003, (a)
4,410,577 shares of Common Stock were issued and outstanding, (b) 1,072,500
shares of Common Stock were reserved for issuance upon the exercise of
outstanding Equity Commitments and (c) no shares of Preferred Stock were issued.
Since March 31, 2003, no additional shares of capital stock of the Company have
been issued or reserved for issuance or become issuable. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable. None of the issued and outstanding shares
of Common Stock are, or will be, subject to preemptive rights imposed by
Applicable Law or by or through the Company. There are no bonds, debentures,
notes or other evidences of indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters that shareholders of the Company may vote. Except as set forth on
Schedule 4.03 hereto or in the Filed SEC Documents, the Company has no
outstanding Equity Commitments. There are no outstanding contractual obligations
of the Company to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company.
Section 4.04 Authority. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval and adoption of this
Agreement by the holders of a majority of the issued and outstanding shares of
Common Stock (the "Company Shareholder Approval"). The Independent Committee has
duly recommended to the Board of Directors of the Company to approve and adopt
the Merger and this Agreement. The execution, delivery and performance of this
Agreement and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject only to obtaining the Company
11
Shareholder Approval. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, moratorium, insolvency,
reorganization, or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and except for general principles of
equity.
Section 4.05 Consents _and Approvals; No Violations. Except as set forth
on Schedule 4.05 hereto and any filings, permits, authorizations, consents and
approvals as may be required under the Exchange Act (including filing with the
SEC the Proxy Statement and Form 15), state securities laws ("Blue Sky Laws"),
the AMEX Constitution and Rules and the FBCA, neither the execution, delivery or
performance of this Agreement by the Company, nor the consummation by the
Company of the transactions contemplated hereby, will (a) conflict with, or
result in any breach of, any provision of the Articles of Incorporation or
By-laws of the Company or any Company Subsidiary, (b) require any permit,
authorization, consent or approval of, or filing with, any Federal, state or
local government or any court, tribunal, administrative agency or commission or
other governmental or other regulatory authority or agency, including any
self-regulatory organization, domestic, foreign or supranational (a
"Governmental Entity") or any Person, (c) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default, or
give rise to any right of termination, amendment, cancellation or acceleration,
under the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any Company Subsidiary is a party or by which it, or any
of its properties or assets, may be bound or (d) violate any order, writ,
injunction, decree, statute, law, rule or regulation applicable to the Company
or any Company Subsidiary or any of their respective business, properties,
assets or operations (collectively, "Applicable Law"), except, in the case of
clauses (b) through (d) above, for any violations, breaches or defaults that
could not reasonably be expected to result in a Material Adverse Effect.
Section 4.06 SEC Documents; Financial Statements. Except as set forth on
Schedule 4.06 hereto, the Company has timely (in accordance with the Exchange
Act) filed with the SEC all reports, statements, forms and other documents
required to be filed by it under the Securities Act or the Exchange Act since
January 1, 2000 (as such may have been amended, the "SEC Documents"). Except as
set forth on Schedule 4.06, as of their respective filing dates (or, if amended,
as of the date of the amendment) (a) the SEC Documents comply in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the applicable rules and regulations of the SEC promulgated
thereunder and (b) none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a 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 The financial
statements of the Company (as such statements may have been amended or restated)
included in the SEC Documents (i) comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, (ii) were prepared in accordance with GAAP
except, in the case of unaudited statements, as permitted by Forms 8-K and 1O-Q
of the SEC, applied on a consistent basis during the periods involved, except as
indicated in the notes thereto and (iii) fairly present, in all material
respects, the consolidated financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods covered
thereby (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except (x) as set forth in the Filed SEC
12
Documents (as defined in Section 4.08 hereof), (y) for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the Filed SEC Documents and (z) for liabilities incurred or to be incurred in
connection with the transactions contemplated hereby, the Company does not have
any material liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, required by GAAP to be set forth on the
Company's latest consolidated balance sheet filed with the SEC or in the notes
thereto.
Section 4.07 Information Supplied. Subject in all respects to the
accuracy of the representations and warranties of Parent and Buyer set forth in
Article V hereof, the information supplied or to be supplied by or on behalf of
the Company for inclusion or incorporation by reference, as such may be timely
amended or supplemented, in (i) that portion of the Joint Proxy/Registration
Statement constituting Parent's registration statement on Form S-4 in respect of
the issuance of the Notes in the Merger (the "Registration Statement") shall
not, at the time the Joint Proxy/Registration Statement is filed with the SEC
and/or at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, (ii) that
portion of the Joint Proxy/Registration Statement constituting the Company's
proxy statement, in definitive form, relating to the Shareholders Meeting to be
held in connection with the Merger and the related transactions (the "Proxy
Statement") shall not, at the date mailed to the Company's shareholders and at
the time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Shareholders Meeting that has become false
or misleading and (iii) the Rule 13e-3 Transaction Statement on Schedule 13E-3
with respect to the Merger (the "Schedule 13E-3") shall not, at the time the
Schedule 13E-3 is filed with the SEC and at the time of the Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event relating to
the Company or any Company Subsidiary, Affiliate, Associate, officer or director
is discovered by the Company that should be set forth in an amendment or a
supplement to the Registration Statement, the Proxy Statement or the Schedule
13E-3, the Company shall promptly inform Parent and Buyer. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by or on behalf of Parent or Buyer that is contained in or
furnished in connection with the preparation of the Joint Proxy/Registration
Statement or the Schedule 13E-3. The Joint Proxy/Registration Statement shall
comply as to form in all material respects with the respective provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
Section 4.08 Absence of Certain Changes or Events. Except as disclosed
in the SEC Documents, including the exhibits thereto, filed with the SEC and
publicly available as of the date of this Agreement (the "Filed SEC Documents"),
or as set forth on Schedule 4.08 hereto, since the date of the most recent
audited financial statements included in the Filed SEC Documents, each of the
13
Company and each Company Subsidiary has conducted its business in the ordinary
course and, specifically, has not:
(a) experienced any events or circumstances that have
resulted in a Material Adverse Effect, other than those, if any, resulting from
general conditions applicable to the industries in which the Company and any
Company Subsidiary is involved or of economic and financial events of general
applicability;
(b) declared, set aside or paid any dividend or other
distribution, whether in cash, stock or property, with respect to any of the
Company's or Company Subsidiary's capital stock;
(c) split, combined or reclassified any of its capital
stock, nor issued or authorized any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock;
(d) granted, to any officer of the Company or any Company
Subsidiary, a material increase in compensation, except in the ordinary course
of business consistent with past practice or as was required under
then-effective employment agreements;
(e) granted, to any officer of the Company or any Company
Subsidiary, any material severance or termination pay, except as was required
under then-effective employment, severance or termination agreements;
(f) entered any employment, severance or termination
agreement with any director or officer of the Company or any Company Subsidiary;
(g) suffered any material damage, destruction or loss to
property, whether or not covered by insurance, that has resulted, or could
reasonably be expected to result, in a Material Adverse Effect; or
(h) made any change in accounting methods, principles or
practices materially affecting its assets, liabilities or business, except as
required by GAAP.
Section 4.09 Litigation. Except as set forth on Schedule 4.09 hereto or
as disclosed in the Filed SEC Documents, there is no Proceeding pending or, to
the Knowledge of the Company, threatened against or affecting the Company or any
Company Subsidiary that could reasonably be expected to result in a Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity outstanding against the Company or any Company
Subsidiary that has resulted, or could reasonably be expected to result, in such
an Effect.
Section 4.10 Contracts. Except as set forth on Schedule 4.10 hereto or
as disclosed in the Filed SEC Documents, there are no contracts or other
agreements that are material to the business, financial condition or results of
operations of the Company taken as a whole. Neither the Company nor any Company
Subsidiary is in violation of, or in default under, nor does there exist any
condition that upon the passage of time or the giving of notice or both would
cause such a violation of or default under, any lease, permit, license or any
other contract, agreement, arrangement or understanding to which it is a party
or by which it, or any of its properties or assets, is bound, except
14
for any violations or defaults that have not resulted, or could not reasonably
be expected to result, in a Material Adverse Effect.
Section 4.11 Compliance with Laws. Except as disclosed in the Filed SEC
Documents, to the Knowledge of the Company, each of the Company and each Company
Subsidiary is in compliance with all Applicable Laws, except for any instances
of noncompliance that have not resulted, or could not reasonably be expected to
result, in a Material Adverse Effect. Each of the Company and each Company
Subsidiary has in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates and permits, including all
authorizations under Environmental Laws (collectively, "Permits"), necessary for
it to own, lease or operate its properties and assets and to carry on its
business as presently conducted, except where any failure to have any such
Permit could not reasonably be expected to result in a Material Adverse Effect.
No default has occurred under any Permit, except for defaults that could not
reasonably be expected to result in a Material Adverse Effect. There are no
pending or, to the Knowledge of the Company, threatened investigations or
reviews by any Governmental Entity with respect to the Company or any Company
Subsidiary other than any the outcome of which could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 4.12 ENVIRONMENTAL MATTERS.
(a) Each of the Company and each Company Subsidiary is in
compliance with all applicable Environmental Laws, except for any instances of
non-compliance that have not resulted, and could not reasonably be expected to
result, in a Material Adverse Effect;
(b) To the Knowledge of the Company, there has been no
Release of Hazardous Materials, in, on, under or affecting any property now
owned, leased or operated by the Company or any Company Subsidiary, except for
any Release that has not resulted, and could not reasonably be expected to
result, in a Material Adverse Effect;
(c) Neither the Company nor any Company Subsidiary has
received any written request for information or written notice of a pending or
threatened action, demand, investigation or inquiry by any Governmental Entity
or other Person relating to any actual or potential violation of Environmental
Laws or any actual or potential obligation to investigate or remediate a Release
or threatened Release of any Hazardous Materials; and
(d) Neither the Company nor any Company Subsidiary has
contractually retained any liabilities or obligations arising under
Environmental Laws in connection with formerly owned, leased or operated
properties or facilities or in connection with any formerly owned divisions,
subsidiaries, companies or other entities, except in each case for any that, to
the Knowledge of the Company, have not resulted, and could not reasonably be
expected to result, in a Material Adverse Effect
Section 4.13 Absence of Changes in Benefit Plans; Labor Relations.
Except as disclosed in the Filed SEC Documents or as set forth on Schedule 4.13
hereto, since the date of the most recent audited financial statements included
in the Filed SEC Documents, neither the Company nor any Company Subsidiary has
adopted or materially amended any collective bargaining agreement
15
or any material bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan or arrangement providing benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary. Except
as set forth on Schedule 4.13 hereto or as disclosed in the Filed SEC Documents,
there are no material employment, consulting, severance. termination or
indemnification agreements or arrangements between the Company or any Company
Subsidiary and any current or former employee, officer or director of the
Company or any Company Subsidiary. Except as set forth on Schedule 4.13, neither
the Company nor any Company Subsidiary is a party to, or bound by, any
collective bargaining or other labor union agreement. To the Knowledge of the
Company, since January 1, 2000 neither the Company nor any Company Subsidiary
has encountered any labor union organizing activity, or had any actual or
threatened employee strikes, work stoppages, slowdowns or lockouts.
SECTION 4.14 ERISA COMPLIANCE.
(a) Schedule 4.14(a) hereto contains a complete list of all
Pension Plans, Employee Welfare Benefit Plans and all other material benefit
plans maintained, or contributed to, by the Company or any Company Subsidiary
for the benefit of current or former employees, officers or directors of the
Company or any Company Subsidiary (collectively, the "Benefit Plans"). Each of
the Company and each Company Subsidiary has made available to Parent and Buyer
true and correct copies of (i) each Benefit Plan, (ii) the most recent annual
report on Form 5500, if any, filed with the IRS with respect to each such
Benefit Plan, (iii) the most recent summary plan description for each Benefit
Plan for which such summary plan description is required and (iv) each trust
agreement and group annuity contract relating to any Benefit Plan. Each Benefit
Plan has been administered in all material respects in accordance with its
terms. Each of the Company and each Company Subsidiary and all Benefit Plans are
in compliance in all material respects with applicable provisions of ERISA and
the Code.
(b) Except as set forth on Schedule 4.14(a), any Pension
Plan intended to qualify under Section 401(a) of the Code has been the subject
of determination letters from the IRS to the effect that such Pension Plan is
qualified and exempt from Federal income taxes under Sections 401(a) and 501(a)
of the Code, and no such determination letter has been revoked nor has any such
Pension Plan been amended since the date of its most recent determination letter
or application therefor in a manner that could reasonably be expected adversely
to affect its qualification or materially increase its costs.
(c) Except as set forth on Schedule 4.14(a), neither the
Company nor any Company Subsidiary has, within the three-year period immediately
preceding the date of this Agreement, maintained, contributed to, or been
obligated to contribute to, any Benefit Plan that is subject to Title IV of
ERISA.
(d) A Company Subsidiary contributes to the National
Conference of Firemen and Oilers, Local No. 7 A.F.L.-C.I.O plan ("Union Plan"),
a multi-employer plan (as defined in Section 4001(a)(3) of ERISA). Except with
respect to the Union Plan, neither the Company nor any Company Subsidiary is
required to contribute to any multiemployer plan (as defined in Section
4001(a)(3) of ERISA). Neither the Company nor any Company Subsidiary has
withdrawn from any
16
multi-employer plan (including the Union Plan) where such withdrawal has
resulted, or would result, in any withdrawal liability (within the meaning of
Section 4201 of ERISA) that has not been fully paid. Sections 4.14(a), (b) and
(c) of this Agreement shall not apply to the Union Plan.
(e) With respect to any Employee Welfare Benefit Plan of the
Company or any Company Subsidiary, except as set forth on Schedule 4.14(a), (i)
no such Employee Welfare Benefit Plan is funded through a welfare benefits Fund
(as defined in Section 419(e) of the Code) (ii) each such Employee Welfare
Benefit Plan that is a group health plan (as defined in Section 5000(b)(l) of
the Code) materially complies with the applicable requirements of Section
4980B(f) of the Code and (iii) except as reflected in writing in such Employee
Welfare Benefit Plan or as required by Applicable Law, there are no
understandings, agreements or undertakings. written or oral, that would prevent
any such Employee Welfare Benefit Plan (including any such plan covering
retirees or other former employees) from being amended or terminated without
material liability to the Company or Company Subsidiary party to such Plan on or
at any time after the Effective Time.
(f) Schedule 4.14(a)(i) hereto lists all outstanding Company
Stock Options as of March 31, 2003, showing for each such Company Stock Options
(i) the number of shares of Common Stock issuable thereunder, (ii) the number of
vested shares, (iii) the date of grant and the expiration date and (iv) the
exercise price.
(g) Except as set forth on Schedule 4.14(a)(ii) hereto, and
except with respect to the Company Stock Options set forth on Schedule
4.14(a)(i) hereto (and subject to Section 7.05 hereof), no officer or employee
of the Company or any Company Subsidiary shall become entitled to any additional
material compensation or benefits or any acceleration of the time of payment or
vesting of any material compensation or benefits under any Benefit Plan or
otherwise as a result of the transactions contemplated by this Agreement. It
shall be assumed for purposes of the preceding sentence that no payments will be
received by, or accelerated to, any such officer or employee as a result of the
termination of such individual's employment by the Surviving Corporation after
the Effective Time.
SECTION 4.15 TAXES.
(a) Except as set forth on Schedule 4.15 hereto, each of the
Company and each Company Subsidiary has filed with the appropriate Governmental
Entity all Federal, state or local tax returns and reports required by
Applicable Law to be filed by such corporation (collectively, "Returns"), has
paid in full or made adequate provision for the payment of, all taxes of every
nature, including, but not limited to, income, sales, franchise and withholding
taxes ("Taxes") due, together with any interest, penalties, assessments and
deficiencies owed by such corporation, and the most recent financial statements
contained in the Filed SEC Documents reflect an adequate reserve for all Taxes
payable by the Company or any Company Subsidiary for all taxable periods and
portions thereof through the date of such financial statements. Except as set
forth on Schedule 4.15, neither the Company nor any Company Subsidiary is
currently the beneficiary of any extension of time within which to file any
Returns.
(b) Except as set forth on Schedule 4.15, there are no filed
or other known tax Liens upon any assets of the Company or any of the Company
Subsidiaries. Except as set forth on
17
Schedule 4.15, neither the Company nor any Company Subsidiary has waived in
writing any statute of limitations in respect of Taxes or executed or filed with
any Governmental Entity any agreement extending the period for the assessment or
collection of any Taxes, nor is subject to any pending or, to the Knowledge of
the Company, threatened Proceeding, examination or audit by any Governmental
Entity for the assessment or collection of Taxes. To the Knowledge of the
Company, no claim has been made in the past five years by a Governmental Entity
in any jurisdiction where the Company or any Company Subsidiary does not file
Returns that such corporation is or may be subject to taxation by that
jurisdiction.
(c) Each of the Company and each Company Subsidiary has
complied in all material respects with the rules of the IRS and each appropriate
state, local and foreign tax authority with respect to and applicable to the
reporting of wages of the employees of such corporation. The Company and each
Company Subsidiary has withheld and timely paid to the proper Governmental
Entity all material Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
shareholder, or other Person.
Section 4.16 No Excess Parachute Payments. Except as set forth on
Schedule 4.16 hereto, no amount that could be received pursuant to the Benefit
Plans or any executed and delivered agreements between the Company or any
Company Subsidiary and any executive officer or director thereof in effect as of
the date of this Agreement (whether in cash or property or the vesting of
property) as a result of any of the transactions contemplated by this Agreement
by any employee, officer or director of the Company or any Company Subsidiary
who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-l) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
would be an "excess parachute payment" (as such term is defined in Section
280G(b)(l) of the Code). It shall be assumed for purposes of the preceding
sentence that no payments will be received by, or accelerated to, any such
"disqualified individual" as a result of the termination of such individual's
employment by the Surviving Corporation after the Effective Time. To the
Knowledge of the Company, no disqualified individual is entitled to receive any
additional material payment from the Company, any Company Subsidiary, the
Surviving Corporation, or any other Person referred to in Q&A 10 under proposed
Treasury Regulation Section 1.280G-l (a "Parachute Gross-Up Payment") in the
event that the twenty (20%) percent parachute excise tax of Section 4999(a) of
the Code is imposed on such individual. The Board of Directors of neither the
Company nor any Company Subsidiary has, during the six months prior to the date
of this Agreement, granted to any officer, director or employee of the Company
or any Company Subsidiary any right to receive any Parachute Gross-Up Payment.
Section 4.17 Title to Properties. Except as set forth on Schedule 4.17
hereto or as disclosed in the Filed SEC Documents, each of the Company and each
Company Subsidiary has good title to, or valid leasehold or other interests in,
all the material properties and assets purported to be owned by such party
except for such property and/or assets as are no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive covenants and
similar encumbrances that, in the aggregate, do not materially interfere with
its ability to conduct its business as currently conducted. All such material
assets and properties other than assets and properties in which the Company or a
Company Subsidiary has a leasehold interest, are held free and clear of all
Liens other than (x) those set forth
18
on Schedule 4.17, (y) Permitted Liens or as disclosed in the Filed SEC
Documents. Except as set forth on Schedule 4.17 or in the Filed SEC Documents,
each of the Company and each Company Subsidiary has complied in all material
respects with the terms and conditions of all material real property leases to
which it is a party and, to the Knowledge of the Company, all such material
leases are in full force and effect.
Section 4.18 Intellectual Property. Each of the Company and each Company
Subsidiary owns, or is validly licensed or otherwise has the right to use, all
trademarks, trademark rights, trade names, trade name rights, service marks,
service xxxx rights, copyrights and other proprietary intellectual property
rights and computer programs that, to the Knowledge of the Company, are material
to the conduct of the business of such company as now operated (collectively,
the "Intellectual Property Rights"). Except as set forth on Schedule 4.18 hereto
or as disclosed in the Filed SEC Documents, no written claims are pending or, to
the Knowledge of the Company, threatened that the Company or any Company
Subsidiary is materially infringing or otherwise materially adversely affecting
the rights of any Person with regard to any Intellectual Property Right. To the
Knowledge of the Company, no Person is materially infringing the rights of the
Company or any Company Subsidiary with respect to any Intellectual Property
Right.
Section 4.19 Voting Requirements. The affirmative vote of the holders of
a majority of the issued and outstanding Common Stock is the only vote of the
holders of the Company's capital stock necessary under the FBCA to approve this
Agreement and the transactions contemplated hereby.
Section 4.20 State Statutes. Section 607.0901 (Affiliated Transactions)
and Section 607.0902 (Control-Share Acquisitions) of the FBCA are not applicable
to the Merger, this Agreement and the transactions contemplated hereby either
because (i) such statutes are not applicable by their terms or (ii) all actions
necessary to exempt the Company, Parent, Buyer, their Affiliates, the Merger,
this Agreement and the transactions contemplated hereby from such statutes have
been taken. To the Knowledge of the Company, no other state takeover or similar
statute or regulation applies or purports to apply to the Merger, this Agreement
and/or the transactions contemplated hereby.
Section 4.21 Brokers. Except for SRH, no broker, investment banker,
financial advisor or other Person, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
Section 4.22 Opinion of SRH. The Board of Directors of the Company has
received the Fairness Opinion.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.
Parent and Buyer hereby jointly and severally represent and warrant to
the Company as follows:
Section 5.01 Organization. Each of Parent and Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida and has all requisite
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corporate power and authority to carry on its business as presently conducted.
Each of Parent and Buyer is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it, or the nature of the business conducted by it, makes such
qualification or licensing necessary, except in such jurisdictions where any
failure to be so qualified or licensed (individually or in the aggregate) and in
good standing could not reasonably be expected to prevent or materially delay
the consummation of the Merger or to materially and adversely affect the
business, condition or operations of Parent and Buyer, taken as a whole. Buyer
has delivered to the Company true and correct copies of its Articles of
incorporation and By-laws, in each case as amended up to the date of this
Agreement.
Section 5.02 Authority. Each of Parent and Buyer has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Parent and Buyer of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of each of Parent and Buyer, including
the approval and adoption of this Agreement by holders of all of the outstanding
shares of each of Parent's and Buyer's common stock. No other corporate
proceedings on the part of either Parent or Buyer are necessary to authorize
this Agreement, the Merger or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Buyer and constitutes a valid and binding obligation of each of them,
enforceable against each of them in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, moratorium, insolvency,
reorganization, or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and except for general principles of
equity.
Section 5.03 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under the
Securities Act (including the filing with the SEC of the Registration
Statement), the Exchange Act (including the filing with the SEC of the Schedule
l3E-3), Blue Sky Laws and the FBCA, neither the execution, delivery or
performance of this Agreement by either Parent or Buyer, nor the consummation by
either Parent or Buyer of the transactions contemplated hereby, will (a)
conflict with, or result in any breach of any provision of, the Articles of
Incorporation or By-laws of either Parent or Buyer, (b) require any permit,
authorization, consent or approval of, or filing with, any Governmental Entity
or any Person, (c) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default, or give rise to any
right of termination, amendment, cancellation or acceleration, under the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which either Parent or
Buyer is a party or by which either, or any of their respective properties or
assets, may be bound or (d) violate any order, writ, injunction, decree,
statute, law, rule or regulation applicable to either Parent or Buyer or any of
their respective properties or assets, except, in the case of clauses (b)
through (d) above, for any violations, breaches or defaults that (individually
or in the aggregate) could not reasonably be expected to prevent or materially
delay the consummation of the Merger or materially and adversely to affect the
business, condition or operations of Parent and Buyer, taken as a whole.
Section 5.04 Information Supplied. Subject in all respects to the
accuracy of the representations and warranties of the Company set forth in
Article IV hereof, the information supplied or to be supplied by or on behalf of
Buyer and Parent for inclusion or incorporation by
20
reference, as such may be timely amended or supplemented, in (i) that portion of
the Joint Proxy/Registration Statement constituting the Registration Statement
shall not, at the time the Registration Statement is filed with the SEC and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, (ii) that portion of
the Joint Proxy/Registration Statement constituting the Proxy Statement shall
not, at the date mailed to the Company's shareholders and at the time of the
Shareholders Meeting contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the meeting of the Company's shareholders that has become false or
misleading and (iii) the Schedule 13E-3 shall not, at the time the Schedule
13E-3 is filed with the SEC and at the time of the Shareholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Effective Time, any event relating to
Parent or Buyer or any of their Affiliates, Associates, officers or directors is
discovered by Parent or Buyer that should be set forth in an amendment or a
supplement to the Registration Statement, the Proxy Statement or the Schedule
13E-3, Parent or Buyer shall promptly inform the Company. Notwithstanding the
foregoing, neither Parent nor Buyer makes any representation or warranty with
respect to any information supplied solely by or on behalf of the Company that
is contained in or furnished in connection with the preparation of the Joint
Proxy/Registration Statement or the Schedule 13E-3. The Joint Proxy/Registration
Statement and the Schedule 13E-3 shall comply as to form in all material
respects with the respective provisions of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
Section 5.05 Interim Operations of Parent and Buyer. Each of Parent and
Buyer was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has no
material liabilities, obligations or commitments, other than fees and/or costs
incurred in connection herewith and under the letters of intent from General
Electric Capital Business Asset Funding Corporation and Xxxxxxx Xxxxx Business
Financial Services, Inc. Each of Parent and Buyer has in effect all material
Permits necessary for it to own, lease and/or operate its properties and assets
and to carry on its business as presently conducted.
Section 5.06 Brokers. Except for SRH, no broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Buyer.
Section 5.07 Financing. Parent and Buyer have received letters of intent
from General Electric Capital Business Asset Funding Corporation and Xxxxxxx
Xxxxx Business Financial Services, Inc. to provide debt financing to Parent
subject to and at the consummation of the Merger in the form attached hereto as
Exhibit B. The funds made available pursuant to these financing arrangements
along with internal funds of Parent and/or the Surviving Corporation are
sufficient to pay the aggregate Merger Consideration hereunder.
21
Section 5.08 State Statutes. Section 607.0901 (Affiliated Transactions)
and Section 607.0902 (Control-Share Acquisitions) of the FBCA are not applicable
to the Merger, this Agreement and the transactions contemplated hereby either
because (i) such statutes are not applicable by their terms or (ii) all actions
necessary to exempt the Company, Parent, Buyer, their Affiliates, the Merger,
this Agreement and the transactions contemplated hereby from such statutes have
been taken. To the knowledge of Parent and Buyer, no other state takeover or
similar statute or regulation applies or purports to apply to the Merger, this
Agreement and/or the transactions contemplated hereby.
Section 5.09 No Breaches. To the knowledge of Parent and Buyer, there
exists no breach of any representation or warranty of the Company contained in
Article IV hereof.
Section 5.10 Ownership of Common Stock. As of this date, Parent
beneficially owns 1,150,606 shares of Common Stock, and Parent will promptly
take such action to evidence that such share ownership is of record.
ARTICLE VI COVENANTS.
Section 6.01 Conduct of _Business. From the date of this Agreement to
the Effective Time or the earlier termination of this Agreement pursuant to
Section 9.01 hereof, except as otherwise contemplated hereby or as Parent shall
consent to in writing, which consent shall not be unreasonably withheld or
delayed, the Company shall carry on its business in the ordinary course
consistent with past practice and, to the extent consistent therewith, use
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having significant business dealings with it. Without limiting the
generality of the foregoing, from the date of this Agreement to the Effective
Time or such earlier termination, the Company shall not, except as set forth on
Schedule 6.01 hereto, as contemplated or expressly permitted by this Agreement,
or as Parent shall consent to in writing, which consent shall not be
unreasonably withheld or delayed, in respect of subsections (f) through (m)
below, inclusive:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, (ii) split,
combine or classify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock, or (iii) purchase, redeem or otherwise acquire any shares
of capital stock of the Company or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of shares of
Common Stock upon the exercise of Company Stock Options) or as provided for
herein;
(c) amend its Articles of Incorporation or By-laws;
22
(d) subject to Section 6.02 hereof, 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 business or any
corporation, partnership, joint venture, association or other business
organization or division therefor or (ii) any assets that are material,
individually or in the aggregate, to the Company, except purchases of inventory
in the ordinary course of business consistent with past practice;
(e) sell, lease, license, mortgage, subject to any Lien or
otherwise encumber, or otherwise dispose of any of its properties or assets
including stock of the Company Subsidiaries, except sales of inventory or sales
or licenses of immaterial assets, in each case in the ordinary course of
business consistent with past practice;
(f) (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company, guarantee any debt securities of another Person, enter into any "keep
well" or other agreement to maintain any financial condition of another Person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings or guarantees incurred in the
ordinary course of business consistent with past practice or directly in
connection with the transactions contemplated hereby, or (ii) make any loans,
advances or capital contributions to, or investments in, any other Person other
than extensions of credit to customers and/or other loans or advances made in
the ordinary course of business consistent with past practice;
(g) make any material Tax election or settle or compromise
any material income tax liability;
(h) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice and/or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Filed SEC Documents or incurred
thereafter in the ordinary course of business consistent with past practice, or
waive any material benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company is a
party;
(i) except in the ordinary course of business, modify, amend
or terminate any material contract or agreement to which the Company is a party,
or waive, release or assign any material rights or claims;
(j) make any significant changes in its accounting methods
or practices, except as required by Applicable Law or GAAP;
(k) fail to maintain, and the Company shall cause the
Company Subsidiaries to not fail to maintain, with financially responsible
insurance companies, insurance in such amounts and against such risks and losses
as previously maintained by the Company and the Company Subsidiaries;
23
(l) fail to maintain in effect all existing Permits
necessary for the operations of the Company and the Company Subsidiaries; or
(m) authorize any of, or commit or agree to take any of, the
foregoing actions.
SECTION 6.02 NO SOLICITATION.
(a) The Company shall, and shall direct and use reasonable
best efforts to cause its officers, directors, employees, representatives and
agents to, terminate at the close of business 30 days from the date of this
Agreement (the "Solicitation Deadline") any discussions or negotiations with any
parties other than Parent or Buyer that may be ongoing with respect to a
Takeover Proposal, except with respect to a Superior Proposal determined to be
such prior to the Solicitation Deadline. After the Solicitation Deadline, unless
such Takeover Proposal is determined to be a Superior Proposal by the Board of
Directors of the Company prior to the Solicitation Deadline, the Company shall
not, and shall not authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(ii) participate in any discussions or negotiations regarding any Takeover
Proposal; provided, however, that if, at any time prior to the Closing, the
Board of Directors of the Company (or the Independent Committee) determines in
good faith, after consultation with outside legal counsel, that there is a
substantial likelihood it is so required by its fiduciary duties to the
Company's shareholders under Applicable Law, the Company may, in response to a
Takeover Proposal that was unsolicited or that did not otherwise result from a
breach of this Section 6.02(a), and, subject to compliance with Section 6.02(c)
hereof, (x) furnish information with respect to the Company to any person
pursuant to a customary and reasonable confidentiality agreement and (y)
participate in discussions and negotiations regarding such Takeover Proposal.
Without limiting the foregoing, any violation of the restrictions set forth in
the preceding sentence by any director or officer of the Company or any
investment banker, financial advisor, attorney, accountant or other
representative of the Company, acting on behalf and at the instruction of the
Company, shall be deemed to be a breach of this Section 6.02(a) by the Company.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or Buyer, the approval or recommendation
by such Board of Directors or such committee of this Agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) cause the Company to enter into any Acquisition Agreement,
unless the Board of Directors of the Company shall have terminated this
Agreement in accordance with Section 9.01(b)(iv) hereof. It is hereby
acknowledged by Parent and Buyer that the taking of a position by the Company
pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act in respect of an
unsolicited Takeover Proposal in the form of a tender or exchange offer shall
not be deemed to be a withdrawal, modification or proposal of the Company's
position with respect to this Agreement or the Merger.
(c) In addition to the obligations of the Company set forth
in subsections (a) and (b) of this Section 6.02, the Company shall, subject to
any applicable contractual limitations, immediately advise Parent and Buyer in
writing of any request for information or of any Takeover
24
Proposal or any inquiry regarding the making of a Takeover Proposal, the
material terms and conditions of such request, Takeover Proposal or inquiry and
the identity of the Person making such request, Takeover Proposal or inquiry.
The Company shall, to the extent reasonably practicable and permitted, keep
Parent and Buyer fully informed of the status and details (including amendments
or proposed amendments) of any such request, Takeover Proposal or inquiry.
Section 6.03 Certain Tax Matters. From the date hereof until the
Effective Time, (a) each of the Company and each Company Subsidiary will file
all Post-Signing Returns required to be filed; (b) each of the Company and each
Company Subsidiary will timely pay all Taxes shown as due and payable on the
Post-Signing Returns that are so filed; (c) each of the Company and each Company
Subsidiary will make provision in accordance with its past practice for all
Taxes payable by the Company or any Company Subsidiary, as applicable, for which
no Post-Signing Return is due prior to the Effective Time; and (d) the Company
will promptly notify Buyer of any pending Proceeding with respect to the Company
or any Company Subsidiary in respect of any Tax where there is a reasonable
possibility of a determination or decision that could reasonably be expected to
have a significant adverse effect on the Company's or any Company Subsidiary's
Tax liabilities or Tax attributes.
Section 6.04 Other Actions. The Company shall not take any action that
could reasonably be expected to result in (a) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality becoming untrue or (b) any of such representations and warranties
that are not so qualified becoming untrue in any material respect; provided,
however, the Company shall have the right to take any actions specifically
permitted by Sections 6.02 or 9.01 hereof.
Section 6.05 Filings. The Company shall promptly provide to Parent (or
its legal counsel) copies of all filings made by the Company with any
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
Section 6.06 Financing of the Merger. Parent and Buyer shall, within 70
days of the execution of this Agreement, deliver to Company fully executed
copies of commitment letters issued by General Electric Capital Business Asset
Funding Corporation and Xxxxxxx Xxxxx Business Financial Services, Inc.
evidencing such lenders' commitments to provide (in the aggregate) sufficient
debt financing to the Parent and Buyer to consummate the transactions
contemplated hereby. In the event that prior to the Effective Time any of such
financing commitment(s) is issued and subsequently revoked, the Parent and Buyer
shall immediately (within 5 business days) replace such financing commitment(s)
with new commitment(s) from comparable financial institution(s) containing the
same or substantially similar terms and provide the Company with evidence
thereof.
25
ARTICLE VII ADDITIONAL AGREEMENTS.
SECTION 7.01 PREPARATION AND FILING OF THE JOINT PROXY/REGISTRATION
STATEMENT AND THE SCHEDULE 13E-3.
(a) Preparation and Filing. The Parties shall cooperate and
jointly prepare and file with the SEC as soon as reasonably practicable after
the date hereof the Joint Proxy/Registration Statement and the Schedule 13E-3.
The Parties shall each use commercially reasonable best efforts to cause (x) the
Registration Statement to be declared effective under the Securities Act and (y)
the Joint Proxy/Registration Statement to be cleared under the Exchange Act as
promptly as practicable after such filing. Each Party shall take such action as
may be reasonably required to cause the Notes issuable in connection with the
Merger to be registered or to obtain an exemption from registration under
applicable Blue Sky Laws; provided, however, that no Party shall be required to
register or qualify as a foreign corporation or to take other action that would
subject it to service of process in any jurisdiction where it would not be,
following the Merger, so subject. The Parties shall each use commercially
reasonable best efforts to respond to any comments of the SEC or its staff to
the Joint Proxy/Registration Statement and/or the Schedule 13E-3. The Company
shall cause the Joint Proxy/Registration Statement to be mailed to the Company's
shareholders as promptly as practicable after responding to all such comments to
the Joint Proxy/Registration Statement to the satisfaction of the SEC or its
staff. Promptly upon the receipt of any comments from the SEC or its staff
and/or of any request by the SEC or its staff for amendments or supplements to
the Joint Proxy/Registration Statement and/or the Schedule 13E-3 or for
additional information, the receiving Party shall notify the other Parties and
shall promptly supply such other Parties with copies of all correspondence
between such Party or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Joint Proxy/Registration
Statement, the Schedule 13E-3 or the Merger. If at any time prior to the
Shareholders Meeting there shall occur any event that should be set forth in an
amendment or supplement to the Joint Proxy/Registration Statement, the Company
and Parent shall promptly prepare and mail to its shareholders such an amendment
or supplement. The Company will not mail the Joint Proxy/Registration Statement,
or any amendment or supplement thereto, to which Parent reasonably and timely
objects; provided, that Parent shall identify its objections and fully cooperate
with the Company to generate a mutually satisfactory Joint Proxy/Registration
Statement. Subject to Sections 4.07 and 5.04 hereof, each of the Parties shall
furnish all information concerning itself that is required or customary for
inclusion in the Joint Proxy/Registration Statement and the Schedule l3E-3. No
representation, warranty or agreement is made by any Party with respect to
information supplied by any other Party for inclusion in the Joint
Proxy/Registration Statement or the Schedule 13E-3.
(b) Letter from Company's Accountants. The Company shall use
its reasonable best efforts to cause to be delivered to Parent and Buyer letters
of Deloitte & Touche LLP, dated a date within two Business Days before the date
of the Registration Statement, and addressed to Parent and Buyer, in form and
substance reasonably satisfactory to Parent and Buyer and customary in scope and
substance for "cold comfort" letters delivered by independent public accountants
in connection with the registration statements on Form S-4.
(c) Fairness Opinion. It shall be a condition to the mailing
of the Proxy Statement to the shareholders of the Company that the Company shall
have received the Fairness
26
Opinion, to the effect that, as of the date thereof the Merger Consideration was
fair, from a financial point of view, to the holders of the Common Stock and the
Fairness Opinion shall not have been withdrawn or materially modified by SRH.
Section 7.02 Company Shareholder Approval. The Company shall, as soon as
reasonably practicable after the date hereof, subject to Section 6.02 hereof and
the timing requirements contained in Section 7.01(a) hereof, (a) take all steps
necessary to duly call, give notice of, convene and hold a special meeting of
its shareholders (the "Shareholders Meeting") for the purpose of obtaining the
Company Shareholder Approval, (b) distribute to its shareholders the Joint
Proxy/Registration Statement in accordance with applicable Federal and state law
and with its Articles of Incorporation and By-laws, (c) recommend (in the Joint
Proxy/Registration Statement and otherwise) to its shareholders approval of the
Merger, this Agreement and the transactions contemplated hereby, (d) use its
reasonable best efforts to solicit from its shareholders proxies approving the
Merger, this Agreement and the transactions contemplated hereby and (e)
cooperate and consult with Parent and Buyer with respect to each of the
foregoing matters.
Section 7.03 Access to Information; Confidentiality. The Company shall,
and the Company shall cause each Company Subsidiary to, afford to Parent, and to
Parent's officers, employees, accountants, counsel, financial advisers and other
representatives, reasonable access during normal business hours, from the date
hereof to the Effective Time or the earlier termination of this Agreement
pursuant to Section 9.01 hereof, to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request. Except as required by applicable law, Parent will hold,
and will cause its officers, employees, accountants, counsel, financial advisers
and other representatives and affiliates to hold, all information received from
the Company, any Company Subsidiary, directly or indirectly, in strict
confidence, until the Effective Time or, if the Merger shall not be consummated,
indefinitely.
SECTION 7.04 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions contained
in this Agreement, each of the Parties shall use all reasonable efforts, as
determined by it in the exercise of its reasonable business judgment, to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other Parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, without limitation, (i) obtaining all necessary waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid a Proceeding by, any Governmental
Entity, (ii) obtaining all necessary consents, approvals or waivers of any other
Person, (iii) defending any lawsuits or other Proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental Entity
vacated or reversed; provided, however, that no
27
Party shall be required to incur any significant additional expense in defending
any such Proceedings, and (iv) executing and delivering any additional
instruments necessary to consummate the transactions contemplated by, and to
carry out fully the purposes of, this Agreement. In connection with and without
limiting the foregoing, each of the Parties, shall, as determined by it in the
exercise of its reasonable business judgment, (x) take all actions necessary to
ensure that no state takeover statute or similar statute or regulation impedes
or prevents the Merger, this Agreement or any of the other transactions
contemplated by this Agreement hereby and (y) if any state takeover statute or
similar statute or regulation becomes applicable to the Merger, this Agreement
or any other transaction contemplated by this Agreement, at Parent's sole cost,
take all action reasonably necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to minimize the
effect of such statute or regulation on the Merger, this Agreement and the
transactions contemplated by this Agreement.
(b) The Company shall give prompt written notice to Parent
and buyer of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or (ii) its failure to
comply with or satisfy in any material respect any covenant, agreement or
condition to be complied with or satisfied by it under this Agreement.
SECTION 7.05 STOCK OPTION PLANS.
(a) As soon as practicable following the date of this
Agreement, but in no event later than the Closing, the Company (or, if
appropriate, the Board of Directors of the Company or any committee
administering the Stock Option Plans) shall (including by adopting resolutions
or taking any other necessary corporate actions) ensure that each outstanding
Company Stock Option heretofore granted under any Stock Option Plan, whether or
not then exercisable, shall either be (i) cancelled immediately prior to the
Effective Time in exchange for an amount in Note(s) and cash, payable at the
time of such cancellation, equal to the product of (A) the number of shares of
Common Stock subject to such Option immediately prior to the Effective Time and
(B) the excess of the Merger Consideration over the per share exercise price of
such Option (the "Net Amount") or (ii) converted immediately prior to the
Effective Time into the right solely to receive in Note(s) and cash equal to the
Net Amount. The Net Amount to be paid with respect to each outstanding Company
Stock Option in connection with the foregoing shall be satisfied first by
issuance of a Note in the aggregate principal up to that amount, not in excess
of the Net Amount, equal to the product of (A) $1.25 and (B) the number of
shares of Common Stock subject to such Option, and second, to the extent that
the Net Amount is not satisfied thereby, in cash. The Company shall not make, or
agree to make, any payment of any kind to any holder of a Company Stock Option
(except for the payment described above) without the prior written consent of
Parent, which consent shall not be unreasonably withheld or delayed.
(b) Subject to Section 7.05(a) hereof, all Company Stock
Options and Stock Option Plans shall terminate as of the Effective Time and the
provisions in any other Benefit Plan providing for the issuance, transfer or
grant of any Option shall be deleted as of the Effective Time. The Company shall
ensure that following the consummation of the Merger no holder of any
28
Company Stock Option or any participant in any Stock Option Plan shall have any
right thereunder to acquire any capital stock of the Company, any Company
Subsidiary, Parent or the Surviving Corporation.
(c) The Surviving Corporation shall be obligated to pay the
Net Amount to holders of any Company Stock Options converted in accordance with
clause (ii) of Section 7.05(a).
SECTION 7.06 INDEMNIFICATION, EXCULPATION AND INSURANCE.
(a) Parent and Buyer (on its own behalf and that of the
Surviving Corporation) agree that all rights to indemnification (including the
advancement of expenses) and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time (including with respect to the
transactions contemplated by this Agreement) existing now or at the Effective
Time in favor of the current or former directors or officers of the Company as
provided in its Articles of Incorporation and its By-laws (each as in effect on
the date hereof) shall be assumed by the Surviving Corporation in the Merger,
without further action, as of the Effective Time and shall survive the Merger
and shall continue in full force and effect without amendment, modification or
repeal in accordance with their terms for a period of not less than six years
after the Effective Time; provided, however, that if any claims are asserted or
made within such six-year period, all rights to indemnification (and to
advancement of expenses) hereunder and thereunder in respect of any such claims
shall continue, without diminution, until final disposition of all such claims.
(b) In the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges into any other Person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, proper
provision will be made so that the successors, transferees and assigns of the
Surviving Corporation or its assets shall assume the obligations set forth in
this Section 7.06. In the event the Surviving Corporation transfers any material
portion of its assets, in a single transaction or in a series of transactions,
the Surviving Corporation shall, as an express condition thereof, either
guarantee the indemnification obligations referred to in Section 7.06(a) hereof
or take such other action to ensure that the ability of the Surviving
Corporation, legal and financial, to satisfy such indemnification obligations
will not be diminished in any material respect.
(c) For a period of six years after the Effective Time, the
Surviving Corporation shall provide officers' and directors' liability insurance
in respect of acts or omissions occurring at or prior to the Effective Time,
including but not limited to, the transactions contemplated by this Agreement,
covering each person currently covered by the Company's officers' and directors'
liability insurance policy, or who becomes covered by such policy prior to the
Effective Time, on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof; provided, that, in
satisfying its obligation under this Section 7.06(c), the Surviving Corporation
shall not be obligated to pay premiums in excess of two hundred (200%) percent
of the amount per annum the Company paid in its last full fiscal year (which the
Company represents to be approximately $125,000); provided further, that the
Surviving Corporation shall nevertheless be obligated to provide such coverage
as may be obtained for such two hundred (200%) percent amount.
29
(d) The provisions of this Section 7.06 are (i) for, and
intended to be for, the benefit of, and will be enforceable by, each indemnified
party, his or her heirs and his or her legal representatives and (ii) in
addition to, and not in substitution for, or in lieu of, any other rights to
indemnification or contribution that any such Person may have by contract or
otherwise.
SECTION 7.07 FEES AND EXPENSES.
(a) Except as otherwise provided herein and as provided in
Section 7.07(b) hereof all fees and expenses incurred in connection with the
Merger, this Agreement and the transactions contemplated by this Agreement shall
be paid by the Party incurring such fees or expenses, whether or not the Merger
is consummated, except that printing and mailing costs and expenses shall be
shared equally by Parent and the Company. By way of clarification and not
limitation, the Parties agree that the fees payable in connection with the
filing of that portion of the Joint Proxy/Registration Statement constituting
the Registration Statement shall be paid by Parent. The Parties agree that,
subject to the immediately preceding sentence, of the total cost of the Joint
Proxy/Registration Statement 50% shall be allocated to Parent and 50% shall be
allocated to the Company.
(b) In the event that this Agreement is terminated by any
Party pursuant to Section 9.0l(b)(iv) or 9.01(b)(v) hereof, the Company shall
promptly, and in no event later than two Business Days after the date of such
termination, pay to Parent (i) the Termination Fee (in the case of termination
pursuant to Section 9.01(b)(iv)), (ii) the Expenses (in the case of a
termination pursuant to Section 9.01(b)(v) based on an action set forth on
Schedule 4.09) or (iii) one-half of the Termination Fee (in the case of a
termination pursuant to Section 9.01(b)(v) based an action not set forth on
Schedule 4.09), said payment (whether of the Termination Fee, the Expenses or
one-half of the Termination Fee, as the case may be) to be made by wire transfer
of immediately available funds to an account designated by Parent. The
agreements contained in this Section 7.07 are an integral part of the
transactions contemplated by this Agreement and without these agreements Parent
and Buyer would not enter into this Agreement. If the Company fails to promptly
pay the amount due pursuant to this Section 7.07 and Parent commences a
Proceeding that results in a judgment against the Company for the fee set forth
in this Section 7.07, the Company shall pay to Parent its reasonable costs and
expenses (including attorneys' fees and expenses) in connection with such
Proceeding, together with interest on the Fee at the prime rate of interest as
reported by The Wall Street Journal on the date immediately prior to the date
that the Termination Fee shall be required to be made pursuant to this
Agreement.
Section 7.08 Public Announcements. The Parties shall consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange. The
Parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in a form reasonably agreed
to by the Parties.
30
Section 7.09 Continuation of Benefits. It is the intention of the Parent
and Buyer, following the consummation of the transactions contemplated herein,
to provide employee benefits, programs, policies and arrangements for the
benefit of the employees of the Surviving Company that, in the aggregate, are
generally comparable to those provided by the Company as of the date hereof;
provided, however, that such employee benefits, programs, policies and
arrangements may be adversely affected by changes in economic conditions that
arise following the Effective Time.
SECTION 7.10 LABOR AND EMPLOYMENT.
(a) Responsibilities and liabilities under the Worker
Adjustment and Retraining Notification Act and similar state and local laws
shall rest exclusively with the Company until the Closing and, after the
Closing, such responsibilities and liabilities shall rest exclusively with
Parent and Buyer.
(b) Subject to any adverse economic conditions that may
arise after the Effective Time, Parent and Buyer presently expect to retain a
Substantial Complement of the Company's existing workforce upon consummation of
the transactions contemplated hereby for a minimum of 90 days "Substantial
Complement" shall mean either at least seventy-five (75%) percent of the
existing workforce or a workforce that has not been reduced by more than 45
employees from the total number of employees in the existing workforce,
"Existing workforce" shall be measured as the average thereof in the 90-day
period immediately preceding the Closing Date and shall include both full and
part-time employees. Notwithstanding the generality of the foregoing, changes in
economic conditions may adversely affect the foregoing expectations.
Section 7.11 Knowledge of Breach. The actual knowledge prior to or as of
the date of this Agreement of any director or officer of the Company who is also
a director, officer and/or shareholder of Parent or Buyer of a breach of, or of
information that provides the basis of a claim of a breach of, any
representation or warranty contained in Article IV hereof shall preclude Parent
and Buyer from making a claim of a breach of such representation or warranty or
for claiming a failure to meet the condition set forth in Section 8.02(b)
hereof.
Section 7.12 Parent Vote of Common Stock. Parent hereby agrees to vote,
either in person or by proxy, all shares of Common Stock owned by it in favor of
approval of this Agreement and the Merger at the Shareholders Meeting.
Section 7.13 Delisting of Common Stock. The Surviving Corporation shall
take all actions necessary to terminate the shares of Common Stock from listing
and registration with the AMEX, in accordance with the AMEX Constitution and
Rules PARA l0,379A Section 1010, and Rules 12d2-2 and 12g-4(a) promulgated under
the Exchange Act, including by delivering a copy of Form 15 to the AMEX,
promptly after the Effective Time.
Section 7.14 Reporting Obligations. Following the Effective Time, Parent
shall cause to be prepared, filed with the SEC and distributed (directly or
indirectly) to the holders of the Notes such reports required under (and in
accordance with) the Exchange Act for as long as it shall be required to do so
in accordance with Section 15(d) of the Exchange Act.
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Section 7.15 Payment Fund. Following the Effective Time, Parent shall
use its best efforts to cause to create and fund a repayment fund (the "Payment
Fund") for purposes of funding, from time-to-time, the obligation of the
Surviving Corporation to pay principal and interest on the Notes. The maximum
amount to be placed in such Payment Fund shall be an amount equal to 50% of the
aggregate principal and interest amount due under the Notes; provided, however,
notwithstanding anything herein to the contrary, the Surviving Corporation shall
be entitled, in its sole an absolute discretion, to reduce the amounts deposited
in the Payment Fund or use such monies for other corporate purposes.
ARTICLE VIII CONDITIONS.
Section 8.01 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each Party to effect the Merger shall be subject to
the satisfaction, on or prior to the Closing Date, of the following conditions,
except, to the extent permitted by applicable law, that any of such conditions
may be waived in writing pursuant to Section 9.04 hereof by the joint action of
the Parties:
(a) Company Shareholder Approval. The Company Shareholder
Approval shall have been duly obtained.
(b) No Injunctions or Restraints. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity or other legal restraint or
prohibition preventing or materially delaying the consummation of the Merger
shall be in effect; provided, however, that each of the Parties shall, subject
to Section 7.04(a)(iii) hereof, have used reasonable efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered.
(c) Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the Securities Act,
and no stop order suspending such effectiveness shall have been issued and
remain in effect and no Proceedings for such a stop order shall have been
initiated.
Section 8.02 Conditions to the Obligations of Parent and Buyer to Effect
the Merger. The obligations of Parent and Buyer to effect the Merger shall be
subject to the satisfaction, on or prior to the Closing Date, of the following
additional conditions, except that any of such conditions may be waived by
Parent and Buyer in writing pursuant to Section 9.04 hereof:
(a) Performance of Obligations of the Company. The Company
shall have performed in all material respects its agreements and covenants
contained in or contemplated by this Agreement and required to be performed by
it at or prior to the Closing Date.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (without giving effect to
any materiality or similar qualifications contained therein) shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had
32
been made on and as of the Closing Date (except for any representations and
warranties that expressly speak only as of a specific date or time other than
the date hereof or the Closing Date, which need be true and correct only as of
such date or time), except in each of clauses (i) and (ii) for (x) changes
expressly contemplated by this Agreement, and (y) such failures of
representations or warranties to be true and correct (without regard to any
materiality or similar qualifications contained therein) that could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(c) Material Adverse Effect. No Material Adverse Effect
shall have occurred since the date hereof and there shall exist no fact or
circumstance that is reasonably likely to result in a Material Adverse Effect.
(d) Consents. The Company shall have provided to Parent and
Buyer evidence reasonably satisfactory to them that all of the consents and
approvals set forth on Schedule 4.05 hereto have been obtained and not revoked.
(e) Legal Opinion of Counsel to the Company. The Company
shall have delivered to Parent and Buyer the opinion of Xxxxxx & Xxxx, P.A., as
counsel for the Company, dated as of the Closing Date, in form and substance
satisfactory to Parent and Buyer and its counsel.
(f) Financing of the Merger. Parent and Buyer shall have
obtained firm commitments, on terms acceptable to Parent and Buyer in their
reasonable discretion, for the financing of the transactions contemplated by
this Agreement.
Section 8.03 Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction, on or prior to the Closing Date, of the following additional
conditions, except that any of such conditions may be waived by the Company in
writing pursuant to Section 9.04 hereof;
(a) Performance of Obligations of Parent and Buyer. Parent
and Buyer shall have performed in all material respects their agreements and
covenants contained in or contemplated by this Agreement and required to be
performed by them at or prior to the Closing Date.
(b) Representations and Warranties. The representations and
warranties of Parent and Buyer set forth in this Agreement (without giving
effect to any materiality or similar qualifications contained therein) shall be
true and correct (i) on and as of the date hereof and (ii) on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date (except for any representations and
warranties that expressly speak only as of a specific date or time other than
the date hereof or the Closing Date, which need be true and correct only as of
such date or time), except in each of clauses (i) and (ii) for (x) changes
expressly contemplated by this Agreement, and (y) such failures of
representations or warranties to be true and correct (without regard to any
materiality or similar qualifications contained therein) that could not,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the consummation of the Merger and/or to result in a material
adverse effect on Parent and/or Buyer.
33
(c) Opinion of SRH. The Fairness Opinion shall not have been
withdrawn or materially modified.
(d) Waiver of Payment. Xx. Xxxxx X. Xxxxxx shall have
irrevocably waived, with respect to his Employment Agreement with the Company,
dated January 1, 1997, an amount equal to (i) the excess, if any, of the payment
due to Xxxxx X. Xxxxxx pursuant to his Employment Agreement as a result of the
Merger, over (ii) One Million Seven Hundred Fifty Thousand Dollars ($1,750,000);
provided, however, that such waiver shall only apply to the Merger of Buyer with
and into the Company and not any transaction involving a third party, whether
pursuant to a Superior Proposal or otherwise.
(e) Legal Opinion of Counsel to Parent and Buyer. Parent and
Buyer shall have delivered to the Company the opinion of Xxxxxxx & Xxxxxx, LLP,
as counsel for Parent and Buyer, dated as of the Closing Date, in form and
substance satisfactory to the Company and its counsel.
ARTICLE IX TERMINATION AND AMENDMENT.
Section 9.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the obtaining of Company
Shareholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Company Shareholder Approval shall not
have been duly obtained at the Shareholders Meeting, including any
adjournment(s) thereof;
(ii) if any governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree or ruling
or other action shall have become final and non-appealable;
(iii) if the Merger shall not have been consummated by
October 15, 2003 for any reason; provided, however, that the right to terminate
this Agreement under this Section 9.01(b)(iii) shall not be available to a Party
whose action or failure to act has been a principal cause of, or resulted in,
the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement; or
(iv) if the Board of Directors of the Company shall
determine that a Takeover Proposal constitutes a Superior Proposal and, subject
to Section 9.05 hereof, determines to seek to consummate such Superior Proposal;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 9.0l(b)(iv) unless and until five Business Days have elapsed
following delivery to Parent of a written notice of such determination by the
Board of Directors of the Company and during such five Business Day period the
Company (i) informs Parent of the terms and conditions of the Superior Proposal
and the identity of the Person making the Superior Proposal and (ii) otherwise
cooperates with Parent with respect thereto (subject, in the case of this clause
(ii), to the condition that the Board of Directors of the Company shall not be
required to take any action that it believes, after consultation with outside
legal counsel, would present a
34
substantial risk of liability for violating its obligations to the Company or
the Company's shareholders under Applicable Law) with the intent of enabling
Parent to agree to a modification of the terms and conditions of this Agreement
so that the transactions contemplated hereby may be effected; provided, further,
that the Company may not terminate this Agreement pursuant to this Section
9.01(b)(iv) unless at the end of such five-Business Day period the Board of
Directors of the Company shall continue to believe that the Takeover Proposal
constitutes a Superior Proposal and the Company shall make all payments required
pursuant to the terms of Section 7.07(b) hereof;
(v) if, prior to October 15, 2003, either (i) the
SEC or another Federal or State agency, or (ii) a shareholder of the Company
(other than a shareholder who is also a shareholder and/or Affiliate of the
Parent), shall initiate any action or legal proceeding (such actions or legal
proceedings to include, but shall not be limited to, a lawsuit or an
administrative proceeding which, as of December 1, 2003, the parties reasonably
believe will result in a delay in the consummation of the transactions
contemplated hereby for a period of more than ninety (90) days thereafter (such
action or legal proceeding being referred to collectively as an "Obstructing
Action"); provided, however, that in the event an Obstructing Action is
determined to exist at or as of October 15, 2003, any termination of this
Agreement pursuant to either Section 9.01(b)(ii) or this Section 9.01(b)(v)
shall be deemed to be a termination pursuant to this Section 9.01(b)(v).
(c) by the Company, if Parent and/or Buyer shall have
breached any of its respective representations, warranties, material covenants
or other material agreements contained in this Agreement, which breach or
failure to perform is incapable of being cured or has not been cured within 10
days after the giving of written notice to Parent, or
(d) by Parent, if the Company shall have breached any of its
representations, warranties, material covenants or other material agreements
contained in this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within 10 days after the giving of written
notice to the Company.
Section 9.02 Effect of Termination. In the event of a termination of
this Agreement by the Company and/or Parent as provided in Section 9.01 hereof,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Buyer, the Company or any of their respective
officers or directors, except with respect to the last sentence of Section 7.03,
Section 7.07, Section 7.08, Section 9.01, this Section 9.02 and Article X
hereof; provided, however that nothing herein shall, subject to Section 7.11
hereof, relieve any Party from liability for any breach hereof; provided,
further, however, that the Company's sole remedy for the breach of Section 6.06
by Parent and/or Buyer shall be termination of this Agreement pursuant to
Section 9.01(c).
Section 9.03 Amendment. This Agreement may be amended by the Parties, by
action taken or authorized by their respective Boards of Directors, at any time
before or after obtaining the Company Shareholder Approval, but, after any such
Approval, no amendment shall be made that requires, under Applicable Law,
further approval by such shareholders without obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the Parties.
35
Section 9.04 Extension; Waiver. At any time prior to the Effective Time,
the Parties, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of any other Party(ies), (b)
waive any inaccuracies in the representations and warranties of any other
Party(ies) contained herein or in any document delivered pursuant hereto or (c)
waive compliance with any of the agreements or conditions of any other
Party(ies) contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in a written instrument
signed by the Party against which enforcement is sought. The failure of any
Party to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of any other rights hereunder.
Section 9.05 Procedures for Termination, Amendment, Extension or Waiver.
The termination of this Agreement pursuant to Section 9.01 hereof, an amendment
of this Agreement pursuant to Section 9.03 hereof or an extension or waiver
pursuant to Section 9.04 hereof shall, in order to be effective, require (a) in
the case of each of Parent and Buyer, action by such Party's Board of Directors
or the duly authorized designee(s) of its Board of Directors or (b) in the case
of the Company, action by the Company's Board of Directors, the duly authorized
designee(s) thereof, if required by Applicable Law, the "disinterested
directors" (as determined by and defined in the FBCA) thereof or the Independent
Committee. The Parties hereby agree to cooperate and take all necessary action
to effect the foregoing, including, without limitation, amending the Joint
Proxy/Registration Statement, and/or Schedule 13E-3 and this Agreement.
ARTICLE X GENERAL PROVISIONS.
Section 10.01 Non-survival of Representations, Warranties and Covenants.
None of the representations, warranties or covenants in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. Notwithstanding the foregoing, this Section 10.01 shall not limit any
covenant or agreement of the Parties that, by its terms. contemplates
performance after the Effective Time.
Section 10.02 Notices. All notices, requests, demands and other
communications given hereunder shall be in writing and shall be deemed to have
been duly given upon receipt of; hand delivery; certified or registered mail,
return receipt requested; or telecopier transmission with confirmation of
receipt.
If to Parent and/or Buyer, to:
Eastchester Enterprises, Inc.
c/o 0000 X XxXxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxx
36
With a copy (which shall not constitute notice) to:
Xxxxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Attention: Xxx X. Xxxxxx, XX, Esq.
If to the Company, to:
The Xxxxxxx Co
0000 X. XxXxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
With copies (which shall not constitute notice) to:
Xxxxxx & Xxxx, P.A.
0000 X. Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
- and -
Xxxxxxx Xxxxx Xxxxxxx Xxxxxxxx & Xxxxxxx
Xxx Xxxxxxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Section 10.03 Interpretation. When reference is made in this Agreement
to an Article or a Section, such reference shall be to an Article or a Section
of this Agreement unless otherwise clearly indicated, The table of contents and
headings contained in this Agreement are for the sole purpose of convenience of
reference and shall not in any way affect or limit the meaning or interpretation
of any of the provisions of this Agreement. As used in this Agreement, unless
the context otherwise clearly requires, (a) the words "include", "includes" or
"including" shall be deemed to be followed by the words "without limitation",
(b) the phrase "made available" shall mean that the information referred to has
been made available if requested by the Party to whom such information is to be
made available, (c) words describing the singular number shall include the
plural and vice versa, (d) words denoting any gender shall include all genders,
(e) words denoting natural persons shall include corporations, partnerships and
other entities and vice versa and (f) the words "hereof", "herein", "hereto" and
"hereunder", and other words of similar import, shall refer to this Agreement as
a whole, and not any particular provision of this Agreement.
37
Section 10.04 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same document. This Agreement shall become
effective when one or more counterparts have been executed by each of the
Parties and delivered to each of the other Parties, it being understood that all
Parties need not execute the same counterpart.
Section 10.05 Entire Agreement; Third-Party Beneficiaries. This
Agreement, including the Schedules and Exhibits hereto, (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the Parties with respect to the subject matter hereof
and (b) except as provided in Section 7.05, Section 7.06, and Articles II and
III hereof, is not intended to confer upon any Person other than the Parties and
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities hereunder. None of the Parties have made any
representations or warranties, express or implied, except those expressly
contained herein.
Section 10.06 Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Florida.
Section 10.07 Publicity. Except as otherwise required by applicable law
or the AMEX Constitution and Rules, for so long as this Agreement is in effect,
neither the Company nor Parent (and Buyer) shall, or shall permit any of its
subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other Parties, which consent shall not be
unreasonably withheld or delayed.
Section 10.08 Assignment. Neither this Agreement nor any rights,
interests or obligations hereunder shall be assigned or delegated by any Party
without the prior written consent of the other Party(ies), and any such
purported assignment or delegation shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the Parties and their respective successors and permitted
assigns.
Section 10.09 Enforcement. The Parties agree that irreparable damage
would occur in the event that certain of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. The Parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically such provisions
of this Agreement in any Federal district court of the United States or in any
Florida state court located in Broward County, Florida; this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the Parties hereby (a) consents to submit such Party to the personal
jurisdiction of any Federal district court located in Broward County, Florida or
any Florida state court located therein in the event any dispute arises out of
this Agreement or any of the transactions contemplated hereby, (b) agrees that
such Party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (c) agrees that such
Party will not bring any action relating to this Agreement or any of the
transactions contemplated hereby in any court other than any Federal district
court located in Broward County, Florida or any Florida state court located in
Broward County, Florida and (d) waives any right to trial by jury with respect
to any Proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
38
Section 10.10 Severability. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any respect, such
provision shall (to the extent permitted under applicable law) be construed by
modifying or limiting it so as to be valid and enforceable to the maximum extent
compatible with, and permissible under, applicable law. The provisions hereof
are severable, and in the event that any provision hereof shall be held or
declared invalid or unenforceable in any court of competent jurisdiction, it
shall not invalidate, render unenforceable or otherwise affect any other
provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company, Parent and Buyer have caused this
Agreement and Plan of Merger to be signed by their respective officers thereunto
duly authorized as of the date first written above.
THE XXXXXXX CO.
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer
EASTCHESTER ENTERPRISES, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
GUNHILL ENTERPRISES, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
40
EXHIBIT A
FAIRNESS OPINION
[SUNTRUST XXXXXXXX XXXXXXXX CAPITAL MARKETS LETTERHEAD]
April 30, 2003
Board of Directors
The Xxxxxxx Company
0000 Xxxx XxXxx Xxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Ladies and Gentlemen:
We understand that The Xxxxxxx Company (the "Company") proposes to enter
into an Agreement and Plan of Merger (the "Merger Agreement") by and among the
Company, Eastchester Enterprises, Inc. and Gunhill Enterprises, Inc., a
wholly-owned subsidiary of Eastchester Enterprises, Inc. Pursuant to the Merger
Agreement, each share of the Company Common Stock issued and outstanding
immediately prior to the effective time of the merger, other than 1,150,606
shares of Company Common Stock owned by four members of the Company's Board of
Directors including Xxxxx X. Xxxxxx, Xxxxxx X. X'Xxxxxxxx, Xxxx XxXxxxx and
Xxxxxx Xxxxxxx, will be converted into the right to receive $3.25 per share of
Company Common Stock in cash and a promissory note of Eastchester Enterprises,
Inc. or Gunhill Enterprises, Inc. in the principal amount of $1.25 per share of
Company Common Stock (the "Merger Consideration"). The terms and conditions of
the Proposed Transaction are set forth in more detail in the Merger Agreement.
We have been requested by the Board of Directors of the Company to
render our opinion with respect to the fairness, from a financial point of view,
to the Company's stockholders (other than Xxxxx X. Xxxxxx, Xxxxxx X. X'Xxxxxxxx,
Xxxx XxXxxxx and Xxxxxx Xxxxxxx) of the Merger Consideration.
In arriving at our opinion, we reviewed and analyzed: (1) a draft of the
Merger Agreement dated April 29, 2003, (2) publicly available information
concerning the Company which we believe to be relevant to our inquiry, (3)
financial and operating information with respect to the business, operations and
prospects of the Company furnished to us by the Company, (4) a trading history
of the Company's Common Stock from April 2000 to the present and a comparison of
that trading history with those of other companies which we deemed relevant, (5)
a comparison of the historical financial results and present financial condition
of the Company with those of other companies which we deemed relevant, (6) a
comparison of the financial terms of the Proposed Transaction with the financial
terms of certain other recent transactions which we deemed relevant, and (7)
certain historical data relating to acquisitions of publicly traded companies,
including percentage premiums paid in such acquisitions. We have also had
discussions with the management of the Company concerning its business,
operations, assets, present condition and future prospects and undertook such
other studies, analyses and investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the financial projections of the
Company, we have assumed that such projections have been reasonably prepared
41
on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company.
In arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of the Company and have not made nor obtained any
evaluations or appraisals of the assets or liabilities of the Company. Our
opinion is necessarily based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Special Committee of the Board
of Directors of the Company in connection with the Proposed Transaction and will
receive a fee for our services which is in part contingent upon the consummation
of the Proposed Transaction. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of the rendering of this opinion. In the
ordinary course of business, we may actively trade in the common stock of the
Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Merger Consideration to be
received in the Proposed Transaction is fair to the stockholders (other than
Xxxxx X. Xxxxxx, Xxxxxx X. X'Xxxxxxxx, Xxxx XxXxxxx and Xxxxxx Xxxxxxx).
Very truly yours,
/s/ SunTrust Xxxxxxxx Xxxxxxxx Capital Markets
SUNTRUST XXXXXXXX XXXXXXXX CAPITAL MARKETS
42
EXHIBIT B
GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION AND
XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES, INC.
LETTERS OF INTENT
See attached.
43
[GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION LETTERHEAD]
April 28, 2003
Mr. Xxxxx Xxxxxxx
Chief Financial Officer
Xxxxxxx Co Inc
0000 X XxXxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Dear Xxxxx:
We are pleased to submit the following proposal for permanent financing of
certain real property described below. This proposal is subject to review and
approval by General Electric Capital Business Asset Funding Corporation or its
assigns ("GE CAPITAL") under the GE SMART Mortgage program. If approved during
such review, final terms and conditions will be established by GE CAPITAL and
will be subject to GE SMART Mortgage standard, non-negotiable documentation.
Secured Party: GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION or
its assigns.
Borrower: Eastchester Enterprises, a Corporation
Security: The note evidencing the loan shall be secured by a first deed of trust
or first mortgage on the BORROWER'S fee simple interest in the real property and
improvements thereon generally described as (A) 0000 Xxxx XxXxx Xxxx, Xx.
Xxxxxxxxxx, XX, 4829 and (B) 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx, XX, ("Property").
The loan shall be subject to the usual terms, conditions, and remedies contained
in GE CAPITAL's customary loan documents. No secondary financing or liens will
be permitted, and the entire balance of the loan will be due on sale.
Loan Amount: The lower of (A) and (B) $2,500,000; 90% of the purchase price or
cost to construct, or 75% of the property's fee simple appraised value. The cost
to construct specifically excludes developer's overhead and any leasing fees not
paid to independent third parties. GE CAPITAL shall select and engage an
appraiser to prepare an appraisal of the Property, which shall be subject to GE
CAPITAL's review and approval.
Interest Rate: This is a variable rate loan. Interest for any given month will
accrue at the rate equal to the 30-Day LIBOR rate (as published on Telerate Page
3750 as of 11:00 a.m., London Time) in effect two (2) business days prior to the
first day of that month plus 3.10% (the "Variable Rate"). Based on the average
weekly yield of 30 Day LIBOR from last week the Interest Rate today would be
4.41% for both (A) and (B).
Following loan closing, BORROWER will have the option, to be exercised only once
and upon written notice before 2PM Eastern Time using the attached Rate Lock
Letter (signed and faxed deemed as acceptable), to request that GE CAPITAL fix
the Interest Rate. Upon GE CAPITAL's receipt of such written notice, GE CAPITAL
shall fix the Interest Rate based on the closing daily yield of 7-Year U.S.
Dollar Interest Rate Swaps as published in the Federal Statistical Release H.15
for the date notification was received, plus 2.92%, provided however, it is
understood that the Interest Rate Swap in effect for the date of notification
will generally be published by the Federal Reserve H.15 two (2) business days
after such notification at which time the rate will be calculated by GE CAPITAL
and sent to the BORROWER. Based on the average weekly yield
44
of 7-Year U. S. Dollar Interest Rate Swaps from last week (3.87%) the fixed
Interest Rate today would be 6.79% for both (A) and (B).
Term/Amortization: (A) and (B): The term of this loan shall be 10 years with an
amortization of 10 years.
Payment Schedule and Adjustments: Interest only shall be paid in advance for the
month in which loan closing occurs followed by 119 principal and interest
payments due and payable, in arrears, commencing on the first day of the second
month following the date of loan closing and every succeeding month thereafter,
with all unpaid principal and interest due on the 120th installment date.
The amount of each payment during the first twelve (12) months of the term shall
be a level amount calculated as if the Loan Amount was amortized over the
Amortization Term at the Variable Rate in effect at loan closing ("Amortization
Rate"). Payments received will be applied first to accrued interest and then to
principal.
Annually, on each anniversary of loan closing, the then outstanding principal
balance will be compared with the principal balance of the loan as if amortized
at the Amortization Rate. In the event the outstanding principal balance exceeds
the principal balance of the loan if amortized at the Amortization Rate,
BORROWER shall immediately pay the amount of such underpayment to GE CAPITAL,
plus the amount of all accrued but unpaid interest. In the event the outstanding
principal balance is less than the principal balance of the loan if amortized at
the Amortization Rate, such overpayment will be applied to the outstanding
principal balance. Additionally, the amount of each payment for the ensuing
twelve (12) months will be calculated by amortizing the then outstanding
principal balance at the then current Variable Rate over the remaining
Amortization Term.
In the event BORROWER exercises its option to fix the interest rate as provided
above, a comparison of actual payments to Amortization Rate payments will be
made similar to the annual adjustment described above, a corresponding balance
adjustment will be made, and a revised payment amount and principal amortization
schedule will be calculated and provided to BORROWER for the remaining term.
Payment Provisions: Payments shall be due on the first day of each month except
that if the loan is closed on any day after the first day of the month, BORROWER
will pay at loan closing the interest for the balance of the month. Interest
shall be computed on the basis of a 360-day year composed of twelve 30-day
months.
Loan Fee: 0% of the Loan Amount to be paid at loan closing.
Recourse: GE CAPITAL shall have full recourse against BORROWER and its general
partners, if any, for any failure to make payments as and when due on the
promissory note and for the breach of any of the representations, warranties,
indemnities and covenants contained in the loan documents.
Guaranty: The loans and all of BORROWER's obligations in connection with the
loans (including without limitation BORROWER's obligations under the loan
documents and any certificate and indemnity agreement regarding hazardous
substances or environmental indemnity agreement) will be unconditionally and
irrevocably guaranteed by The Xxxxxxx Company or the new or surviving operating
entity.
Prepayment Provisions: Upon not less than fifteen (15) days' advance written
notice to GE CAPITAL, and upon payment of a prepayment premium, if any, BORROWER
shall have the right to prepay all, but not less than all, of the outstanding
balance of the loan. The prepayment premium shall be determined by adding the
Base Premium, which is calculated by multiplying the "Base Premium Factor" by
the principal balance to be prepaid, and the Variable Premium which is arrived
at by (i) calculating the decrease (expressed in basis
45
points) in the current weekly average yield of 5-Year U.S. Dollar Interest Rate
Swaps as published in Federal Reserve Statistical Release H.15 (519) ("Index"),
from the current average in effect immediately preceding the date the interest
rate is fixed per the terms of this proposal letter to the current average in
effect the week in which the prepayment is to be made, (ii) dividing the
decrease by 100, (iii) multiplying the result by the following described
applicable "Variable Premium Factor," and (iv) multiplying the product by the
principal balance to be prepaid. If the Index is unchanged or has increased from
the one in effect immediately preceding the date the rate is fixed, no Variable
Premium shall be due. The Base Premium Factor and the Variable Premium (the
Variable Premium is applicable only in the event BORROWER elects to fix the
Interest Rate) Factor shall be the amount shown on the following chart for the
month in which prepayment occurs:
Number of
Months Base Variable
Remaining Years Premium Factor Premium Factor
120 - 109 (10) .05 .047
108 - 97 (9) .04 .043
96 - 85 (8) .03 .038
84 - 73 (7) .02 .033
72 - 61 (6) .01 .029
60 - 49 (5) 0 .024
48 - 37 (4) 0 .019
36 - 25 (3) 0 .014
24 - 13 (2) 0 .010
12 - 1 (1) 0 .005
GE Capital may elect to accelerate the loan at any time after BORROWER's
default, in which event BORROWER shall, subject to the terms of the promissory
note, be obligated to pay a prepayment premium equal to the amount determined in
accordance with the foregoing schedule. No prepayment premium shall be payable
with respect to condemnation awards or insurance proceeds from fire or other
casualty which GE CAPITAL applies to prepayment, nor with respect to BORROWER's
prepayment of the loan in full during the last three (3) months of its term
unless an event of default has occurred and remains uncured.
Insurance: BORROWER, at its own expense, will provide property, rental loss (or
business interruption, as appropriate), liability and other insurance in such
amounts as GE CAPITAL may from time to time require. In flood or earthquake
hazard areas, GE CAPITAL may require flood or earthquake insurance. All
insurance policies must be in accordance with GE CAPITAL 's insurance
requirements and shall include any endorsements which GE CAPITAL may reasonably
require.
Appraisal: As a condition of loan closing, Lender shall select and engage an
appraiser to prepare an appraisal of the Property and Improvements. The report
shall be addressed to Lender and provide a final estimate of value based on the
property's fee simple interest (such fee simple value to be calculated based
upon the appraiser's determination of current market rates of revenue, expenses
(including property taxes), vacancy and capitalization for comparable real
estate). At Lender's option, a value based on the property's leased fee interest
may also be required.
If the appraisal report is based on proposed or in process construction, the
appraiser may be requested, at a subsequent date, to verify that the
construction was completed as appraised and no adverse market conditions exist
that materially affect the value conclusions.
46
Administration Fee: With this application BORROWER shall pay a non-refundable
administration fee of $6,500 per Property or $13,000. This fee includes
appraisal costs, program-specific environmental screening costs, internal
administrative review expenses, realty tax service fee, and any legal review
fee, as may be necessary. Should the application not be approved, the
Administration Fee will be refunded to BORROWER less any costs incurred by GE
CAPITAL in assessing the application. By signing this proposal letter BORROWER
authorizes GE CAPITAL's ordering of the reports noted in this paragraph.
Other Expenses: BORROWER shall pay all escrow costs, recording and transfer fees
and taxes, title charges, survey costs (if needed) and any other costs not
specifically covered by the Administration Fee, whether or not the loan is
closed.
Title Insurance: GE CAPITAL will select and engage a title company to provide
title insurance and all required endorsements including, but not limited to an
ALTA endorsement. ALTA surveys will not generally be required except in Texas,
New Mexico, Florida, Ohio, and New York, where state requirements preclude ALTA
endorsements. On occasion in other locations, a survey may be required by the
title company in order to issue required coverage.
Loan Closing Date: GE CAPITAL's obligation to fund under this proposal will
terminate on 7/28/03. Notwithstanding the foregoing, BORROWER shall have one (1)
option to extend the expiration date of any commitment for an additional sixty
(60) days upon written request by BORROWER and payment of an extension fee of
..50% of the Loan Amount on or before 7/28/03. The extension fee would be in
addition to any other Loan Fee or Forward Commitment Fee and would be due and
payable upon the exercising of such extension by BORROWER.
Other Conditions: This proposal is based upon preliminary information supplied
by BORROWER. In the event that GE CAPITAL, based upon its review and in its sole
discretion, approves this transaction, a commitment letter will be issued
setting forth the terms and conditions of the transaction.
Material Adverse Change: In the event that there shall be a material adverse
change in BORROWER's, GUARANTORS' (if any), or credit tenants' (if any)
financial condition prior to loan closing, GE CAPITAL shall have the right and
option to terminate its obligations hereunder without thereby incurring any
liability to BORROWER.
Bid Expiration: This bid expires on 5/7/03 if not accepted by BORROWER.
You may indicate your acceptance of this proposal by executing the enclosed copy
of this letter and returning it together with the Deposit and the requested
financial statements and Property information.
By accepting this proposal, BORROWER acknowledges that this letter contains the
entire proposal (superseding all previous representations and agreements, either
oral or written) and that there are no promises, agreements or understandings
outside of this letter. BORROWER further acknowledges that this proposal is not
intended and shall not be construed as a commitment by GE CAPITAL and that any
commitment is subject to GE CAPITAL's review and written approval.
We appreciate the opportunity to submit this proposal. If you have any questions
or require further information, please feel free to contact us.
47
Respectfully,
GENERAL ELECTRIC CAPITAL BUSINESS ASSET FUNDING CORPORATION
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Vice President
The above terms and conditions are hereby agreed to and accepted.
Eastchester Enterprises, a Florida corporation
By:
----------------------------------------
Title:
--------------------------------------
Date:
---------------------------------------
48
[XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC. LETTERHEAD]
October 21, 2002
Xx. Xxxxx X. Xxxxxx
Eastchester Enterprises, Inc.
0000 XxXxx Xxxx Xx.
Xxxxxxxxxx, XX 00000
Re: PROPOSAL FOR WCMA LINE OF CREDIT
Dear Xx. Xxxxxx:
Xxxxxxx Xxxxx Business Financial Services Inc. ("MLBFS") would be pleased to
consider providing the WCMA Line of Credit hereafter described for Eastchester
Enterprises, Inc. ("Customer") upon substantially the following terms:
FACILITY TYPE: WCMA LINE OF CREDIT
Advantages of the WCMA Line of Credit: The WCMA Line of Credit combines a
checking account with a revolving line of credit and certain other features to
create an automated cash management system that:
Eliminates the guesswork required with conventional bank lines of credit as
to the amount and timing of borrowed funds.
Ensures that only funds actually needed are borrowed, and that they are
borrowed only when needed at the time that a check written on the WCMA
checking account clears.
Ensures that all deposits into the WCMA checking account are automatically
applied first to pay down the line of credit (with any excess automatically
invested in money market funds).
As a result, interest expense is minimized, and the inconvenience and the
management time required by most competitive lines of credit are eliminated.
Purpose: Support working capital.
Maximum WCMA Line of Credit: An amount equal to the lesser of: (A)
$3,000,000.00, or (B) 80% of Customer's Accounts and Chattel Paper, as shown on
its regular books and records (excluding Accounts over 90 days old, directly or
indirectly due from any person or entity not domiciled in the United States or
from any shareholder, officer or employee of Customer or any affiliated entity),
and 35% of Customer's Inventory as shown on its regular books and records.
WCMA Interest Rate: Variable at a per annum rate equal to the sum of 2.25% plus
the One-Month LIBOR (as published in The Wall Street Journal, based upon actual
days elapsed over a 360-day year.
As of today, the interest rate on this facility would be 4.05%. Interest will
normally be charged to the WCMA Line of Credit each month without invoicing.
Annual Line of Credit Fee: $30,000.
49
Initial Expiration Date: December 31, 2003 (subject to renewal annually
thereafter with MLBFS' consent).
Collateral: First lien on all business assets of Customer, now owned or
hereafter acquired.
Guarantors: Customer's wholly-owned subsidiaries
The Loan Documents evidencing the WCMA Line of Credit will contain the following
covenants, as well as others of the type customarily required by lenders for
similar facilities:
No Purchase of Securities. The proceeds of the WCMA Line of Credit may not
be used to purchase or carry securities.
Continuity. Customer will continue and maintain its business, existence,
ownership and good standing.
Fixed Charge Coverage Ratio. Customer's "Fixed Charge Coverage Ratio" shall
at all times exceed 1.25 to 1. For purposes hereof, "Fixed Charge Coverage
Ratio" shall mean the ratio of: (a) income before interest (including
payments in the nature of interest under capital leases), taxes,
depreciation, amortization, and other non-cash charges, minus any internally
financed capital expenditures, to (b) the sum of the aggregate principal and
interest paid or accrued, the aggregate rental under capital leases paid or
accrued, any dividends and other distributions paid or payable to
shareholders, and taxes paid in cash; all as determined on a trailing
12-month basis as set forth in Customer's regular financial statements
prepared in accordance with GAAP.
Minimum Tangible Net Worth. Customer's "Tangible Net Worth" shall at all
times exceed $10,000,000.00. For the purposes hereof, the term "Tangible Net
Worth" shall mean Customer's net worth as shown on Customer's regular
financial statements prepared in accordance with GAAP, but excluding an
amount equal to: (i) any Intangible Assets, and (ii) any amounts now or
hereafter directly or indirectly owing to Customer by officers, shareholders
or affiliates of Customer. "Intangible Assets" shall mean the total amount
of goodwill, patents, trade names, trade or service marks, copyrights,
experimental expense, organization expense, unamortized debt discount and
expense, the excess of cost of shares acquired over book value of related
assets, and such other assets as are properly classified as "intangible
assets" of the Customer determined in accordance with GAAP.
Leverage Ratio. Customer's "Leverage Ratio" shall not at any time exceed
2.50 to 1. For purposes hereof, "Leverage Ratio" shall mean the ratio of (i)
Customer's total liabilities less any subordinated debt of Customer, to (ii)
the sum of Customer's Tangible Net Worth plus any subordinated debt of
Customer. The term "Tangible Net Worth" shall mean Customer's net worth as
shown on Customer's regular financial statements prepared in accordance with
GAAP, but excluding an amount equal to: (i) any Intangible Assets, and (ii)
any amounts now or hereafter directly or indirectly owing to Customer by
officers, shareholders or affiliates of Customer. "Intangible Assets" shall
mean the total amount of goodwill, patents, trade names, trade or service
marks, copyrights, experimental expense, organization expense, unamortized
debt discount and expense, the excess of cost of shares acquired over book
value of related assets, and such other assets as are properly classified as
"intangible assets" of the Customer determined in accordance with GAAP.
Subordinated debt shall mean any debt of Customer for borrowed money which
is subordinated in right of payment and is payable on terms and conditions
junior to MLBFS, and in a form and manner acceptable to MLBFS.
Please note that this letter is not a commitment by MLBFS, but rather a proposal
to proceed with a formal
50
credit review. You can expect a final answer in approximately 10-15 business
days from receipt of Customer's acceptance of this letter and the following
additional information:
Completed and signed loan application
Signed proposal letter
Customer's current accounts receivable and payable aging
schedules Customer's current inventory report
Copy of SCI's merger agreement
Final Fairness Opinion
Additional information and/or different terms and conditions may be required by
MLBFS' Credit Department, but will only be binding upon Customer with Customer's
approval. Of course, any final approval will be subject to customary funding
conditions applicable to the WCMA Line of Credit, including receipt of
documentation and assurances satisfactory to MLBFS and its continuing
satisfaction with the financial and business condition of Customer and each
Guarantor.
An xxxxxxx money deposit of $30,000 is requested with the acceptance of this
proposal by Customer. Upon receipt of this deposit, MLBFS will conduct or have
conducted lien, litigation and other related searches of the proposed borrower
and any business entity providing collateral. If MLBFS does not formally approve
the WCMA Line of Credit upon substantially the terms outlined above, this
deposit, which will not bear interest, will be returned to Customer. In the
event, MLBFS approves the WCMA Line of Credit, this deposit, less $150.00, will
be applied to the Fee for the initial Term required in connection with the WCMA
Line of Credit, unless Customer then chooses not to proceed, in which event it
will be retained by MLBFS.
Please indicate Customer's acceptance of this proposal on a copy of this letter
in the space set forth below, and return said copy to me with the xxxxxxx money
deposit within 10 days from the date hereof, the date upon which this proposal
will expire.
We appreciate the opportunity to furnish this proposal to you, and look forward
to becoming a part of your continued success.
If you have any questions, please do not hesitate to call.
Very truly yours,
XXXXXXX XXXXX BUSINESS FINANCIAL SERVICES INC.
By: /s/ Xxxxx Xxxxxxx III
Xxxxx Xxxxxxx III
Vice President
Finance Manager
ACCEPTED:
EASTCHESTER ENTERPRISES, INC.
By:
-------------------------
Xxxxx X. Xxxxxx
DATE ACCEPTED:
---------------
51
SCHEDULE 4.02
SUBSIDIARIES; INTEREST IN OTHER PERSONS
THE XXXXXXX CO.
SUBSIDIARY LISTING
ATTACHMENT TO SCHEDULE 4.02
APRIL 30, 2003
EMPLOYER STATE OF SHARES
NAME & ADDRESS OF ENTITY ID NUMBER INCORP OWNED
------------------------------------------------ ---------- -------- -------
FOXY PRODUCTS, INC. 00-0000000 FL 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
OLD 97 COMPANY 00-0000000 FL 100%
0000 XXXX XXXXXXXX, XXXXX, XXXXXXX 00000
SCIENTIFIC RESEARCH PRODUCTS 00-0000000 DE 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
WILLIAMSPORT XXXXXX & BEAUTY SUPPLY CORP. 00-0000000 PA 100%
0000 XXXXXXXX XXXXXX, XXXXXXXXXXXX, XX. 00000
XXXXXXX DISTRIBUTING, INC. 00-0000000 FL 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
XXXXXXX & CO. 00-0000000 FL 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
SORBIE ACQUISITION CO. 00-0000000 PA 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
XXXXXX XXXXXX OF AMERICA, INC. 00-0000000 PA 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
XXXXXX XXXXXX S A, INC. 00-0000000 PA 100%
0000 XXXX XxXXX XXXX, XX. XXXXXXXXXX, XX. 00000
XXXXXX FLAMINGO-XXXXXXX, INC. 00-0000000 FL 100%
000 XXXXXXXX XXXXX, XXXXXXXX, XX. 00000
52
SCHEDULE 4.03
CAPITALIZATION
See Schedule 4.14(a)(i) with respect to Company Stock Options.
53
SCHEDULE 4.05
CONSENTS AND APPROVALS; NO VIOLATIONS
None.
54
SCHEDULE 4.06
SEC DOCUMENTS; FINANCIAL STATEMENTS
The following SEC reports were filed late by the Company:
Form 10-Q filed December 14, 2000
Form 10-K filed June 13, 2001
Form 10-Q filed July 10, 2001
Form 10-K filed April 19, 2002
In addition, the Company is currently not in compliance with certain SEC
requirements with respect to the disclosure of its Form 10-K Part III
information. The Company expects to file such information on or prior to April
30, 2003.
55
SCHEDULE 4.08
ABSENCE OF CERTAIN CHANGES OR EVENTS
Not applicable.
56
SCHEDULE 4.09
LITIGATION
(1) Faulding Healthcare (IP) Holdings, Inc. and Faulding Consumer, Inc. v.
The Xxxxxxx Co., Old 97 Company and Xxxxx Xxxxxx, Xx., Case Number 01-019028 00,
Xxxxxxx Xxxxx for the 17th Judicial Circuit in and for Broward County, Florida
(2) The Xxxxxxx Co. v. U.S. Department of Transportation, 13th Judicial
Circuit Court of Hillsboro County, Florida
(3) Xxxx Xxxxxx v. Xxxxx X. Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx X. Xxxxxxxx,
Xxxxxx Xxxxxxx, Xxxx XxXxxxx, Xxxxxx X. X'Xxxxxxxx and The Xxxxxxx Co., Case
Number 0222253, Circuit Court for the 17th Judicial Circuit in and for Broward
County, Florida
(4) Xxxxxx Xxxxxxx v. The Xxxxxxx Co., Case Number 00-00000-00, Circuit
Court for the 17th Judicial Circuit in and for Broward County, Florida
(5) New Image Laboratories, Inc. v. The Xxxxxxx Co., Case Number 98-5060-RJK
(RZx), United States District Court for the Central District of California
57
SCHEDULE 4.10
CONTRACTS
None.
58
SCHEDULE 4.13
ABSENCE OF CHANGES IN BENEFIT PLANS;
LABOR RELATIONS
Employment Agreement, dated as of January 1, 1997, as amended March 14, 2002, by
and between The Xxxxxxx Co. and Xxxxx X. Xxxxxx.
Employment Agreement, dated as of January 1, 1996, as amended July 1 1998, by
and between The Xxxxxxx Co. and Franc Xxxxxx.
Union Agreement, dated March 1, 2000, by and between Xxxxxx Flamingo - Xxxxxxx,
Inc. and Firemen & Oilers Local No. 7 AFL-CIO.
59
SCHEDULE 4.14(a)
BENEFIT PLANS
Health insurance as provided to Company employees.
60
SCHEDULE 4.14(a)(i)
COMPANY STOCK OPTIONS
THE XXXXXXX CO.
STOCK OPTIONS OUTSTANDING
APRIL 30, 2003
01/01/03 01/01/02 01/01/01 06/30/01 06/30/02 01/01/00 09/01/00
NAME TOTAL @$3.44 @$3.00 @$3.00 @$3.05 @$3.67 @$3.75 @$3.94
-------- ------- -------- -------- -------- -------- -------- -------- --------
F XXXXXX J 142,050 10,000 10,000 10,000 10,000 37,050
P XXXXXX 0
J XXXX 2,140 1,140
B STOKKING 3,210 1,710
D SPIEGEL 11,400 11,400
J PRICE 855 855
M XXXXXXXXX 2,850 2,850
T XXXXXXX 2,850 2,850
T XXXX 4,275 4,275
J XXXXXXX 25,310 5,062 5,062
C XXXXXXX 25,310 5,062 5,062
T D'AMBROSIO 24,250 14,250
F XXXXXX 437,000 50,000 50,000 50,000 50,000 57,000
L XXXXXXXX 25,310 5,062 5,062
S SHAHEEN 25,310 5,062 5,062
------- -------- -------- -------- -------- -------- -------- --------
732,120 60,000 60,000 60,000 20,248 20,248 60,000 133,380
======= ======== ======== ======== ======== ======== ======== ========
06/30/99 06/30/00 01/01/99 08/21/98 01/01/97 01/01/98 01/28/98 06/30/98 01/01/96
NAME @$4.18 @$4.50 @$10.25 @$11.75 @$12.88 @$13.31 @$13.69 @$13.69 @$16.50
-------- -------- -------- --------- -------- -------- -------- -------- -------- --------
F XXXXXX J 10,000 10,000 10,000 25,000 10,000
P XXXXXX
J XXXX 1,000
B STOKKING 1,500
D SPIEGEL
J PRICE
M XXXXXXXXX
X XXXXXXX
T XXXX
J XXXXXXX 5,062 5,062 5,062
C XXXXXXX 5,062 5,062 5,062
T D'AMBROSIO 10,000
F XXXXXX 50,000 50,000 50,000 30,000
L XXXXXXXX 5,062 5,062 5,062
S SHAHEEN 5,062 5,062 5,062
-------- -------- --------- -------- -------- -------- -------- -------- --------
20,248 20,248 60,000 5,062 60,000 60,000 67,500 15,186 10,000
======== ======== ========= ======== ======== ======== ======== ======== ========
61
SCHEDULE 4.14(a)(ii)
ADDITIONAL MATERIAL COMPENSATION
Certain severance or termination payments due Xxxxx X. Xxxxxx pursuant to his
Employment Agreement dated as of January 1, 1997, as amended.
Certain severance or termination payments due Franc Xxxxxx pursuant to his
Employment Agreement, dated as of January 1, 1996, as amended.
62
SCHEDULE 4.15
CERTAIN TAX MATTERS
Not applicable.
63
SCHEDULE 4.16
PARACHUTE PAYMENTS
Certain severance or termination payments due Xxxxx X. Xxxxxx pursuant to his
Employment Agreement dated as of January 1, 1997, as amended.
Certain severance or termination payments due Franc Xxxxxx pursuant to his
Employment Agreement, dated as of January 1, 1996, as amended.
64
SCHEDULE 4.17
TITLE TO PROPERTIES
Not applicable.
65
SCHEDULE 4.18
INTELLECTUAL PROPERTY
None.
66
SCHEDULE 6.01
ABSENCE OF CHANGES
Not applicable.
67
