Exhibit 2.3
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 17, 1997 (this
"AGREEMENT"), among Just For Feet, Inc., an Alabama corporation ("PARENT"), IAC
Acquisition Corporation, a Michigan corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), Imperial Acquisition Corporation, a Michigan corporation
(the "COMPANY"), and each of the shareholders of the Company identified on
Exhibit "A" attached hereto (individually, a "SHAREHOLDER" and collectively, the
"SHAREHOLDERS").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each determined that it is advisable and in the best interests of their
respective shareholders for Parent to enter into a business combination with the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent and Merger Sub have each approved the merger of Merger Sub with and into
the Company (the "MERGER") in accordance with the applicable provisions of the
Michigan Business Corporation Act (the "MBCA") and the Board of Directors of the
Company has approved the Merger in accordance with the applicable provisions of
the MBCA, and upon the terms and subject to the conditions set forth herein;
WHEREAS, Parent, Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and the regulations promulgated thereunder;
WHEREAS, pursuant to the Merger, each outstanding share (a "SHARE") of the
Company's common stock, $.01 par value (the "COMPANY COMMON STOCK"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 1.7), upon the terms and subject to the conditions set forth herein;
WHEREAS, Shareholders believe the Merger is in their respective best
interests and desire to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub, Company and Shareholders hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in Section 1.2), and
subject to and upon the terms and conditions of this Agreement, and the MBCA,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "SURVIVING CORPORATION."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the consummation of the Merger (the "CLOSING" and the date thereof
being the "CLOSING DATE") will take place as promptly as practicable (and in any
event within two business days) after satisfaction or waiver of the conditions
set forth in Article VI, at the offices of Xxxxx, Xxxxxxxx & Xxxxxxx, LLP, 0000
Xxxxxxxxx Xxxx, X.X., Xxxxx 0000, Xxxxxxx, Xxxxxxx, unless another date, time or
place is agreed to in writing by the parties hereto.
SECTION 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the MBCA (the "CERTIFICATE OF MERGER"), together with
any required related certificates, with the Department of Consumer and Industry
Services of the State of Michigan, in such form as required by, and executed in
accordance with, the relevant provisions of the MBCA (the time of such filing
being the "EFFECTIVE TIME").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the MBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.4 Articles of Incorporation, By-Laws.
(a) Articles of Incorporation. At the Effective Time the Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
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Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the MBCA and such Articles of
Incorporation.
(b) By-Laws. The By-Laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the MBCA, the Articles of Incorporation of
the Surviving Corporation and such By-Laws.
SECTION 1.5 Directors and Officers. The Board of Directors of Merger Sub
immediately prior to the Effective Time shall be the initial Board of Directors
of the Surviving Corporation, each member to hold office in accordance with the
Articles of Incorporation and By-Laws of the Surviving Corporation, and the
officers of Merger Sub immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Securities. Each Share issued and outstanding immediately
prior to the Effective Time (excluding any Shares to be canceled pursuant to
Section 1.6(b)) shall be converted into the right to receive in accordance with
Exhibit "B" a pro rata portion (the "PRO RATA PORTION") of the Merger
Consideration described in Section 1.7 below.
(b) Cancellation. Each Share held in the treasury of the Company and each
Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist.
(c) Stock Options.
(i) At the Effective Time, each outstanding option to purchase Company
Common Stock (a "STOCK OPTION") granted under the Company's Employee Stock
Option Plan (the "COMPANY STOCK OPTION PLAN"), whether vested or unvested,
shall be deemed assumed by Parent and deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
Stock Option prior to the Effective Time, the number (rounded down to the
nearest whole number) of Parent Shares (as defined in Section 1.7) as the
holder of such Stock Option would have been entitled to receive pursuant to
the Merger had such holder exercised such option in full immediately prior
to the Effective Time (not taking into account whether or not such option
was in fact exercisable), at a price per share equal to (x) the aggregate
exercise price for Company Common Stock otherwise purchasable pursuant to
such Stock Option divided by (y) the number of Parent Shares deemed
purchasable pursuant to such Stock Option.
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(ii) As soon as practicable after the Effective Time, Parent shall
deliver to each holder of an outstanding Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto, and such Stock Option
shall continue in effect on the same terms and conditions.
(iii) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of Parent Shares for delivery pursuant to the
terms set forth in this Section 1.6(c).
(iv) Subject to any applicable limitations under the Securities Act
of 1933, as amended, and the rules and regulations thereunder (the
"SECURITIES ACT"), Parent shall file a Registration Statement on Form S-8
(or any successor form), effective within fifteen (15) days after the
Effective Time, with respect to the shares of Parent Common Stock (as
defined in Section 1.7) issuable upon exercise of the Stock Options and use
all reasonable efforts to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or
prospectuses relating thereto) for so long as such options shall remain
outstanding.
(d) Capital Stock of Merger Sub. Each share of common stock, without par
value, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, without par value, of the Surviving
Corporation.
SECTION 1.7 Merger Consideration.
(a) Aggregate Consideration. The aggregate consideration to be paid by
Parent in respect of the Shares issued and outstanding as of the Effective Time
pursuant to the Merger shall be Twenty Five Million Fifty Nine Thousand Six
Hundred Dollars ($25,059,600) (the "MERGER CONSIDERATION"), through conversion
of such Shares into the right to receive that number of validly issued, fully
paid and nonassessable shares ("PARENT SHARES") of the Common Stock, $.0001 par
value, of Parent ("PARENT COMMON STOCK") which results by dividing the Merger
Consideration by the average of the Last Sale Prices for Parent Common Stock for
the period of ten (10) Trading Days that ends on and includes the Trading Day
immediately preceding the Closing Date (the "AVERAGE PRICE"); provided, however,
that each holder of such Shares may elect to receive all or any part of the
Merger Consideration in cash in lieu of Parent Shares, provided, further,
however, that the amount of cash comprising a portion of the Merger
Consideration received by all holders of the Shares may not exceed the lesser of
Five Million Dollars ($5,000,000) in the aggregate or twenty percent (20%) of
the total Merger Consideration, as the same may be adjusted pursuant to Section
1.7(b) below. Any cash consideration to be paid hereunder shall be paid by
certified or bank xxxxxx'x check or wire transfer, in any case in immediately
available funds, on the Closing Date. For purposes of this Agreement a "TRADING
DAY" shall mean a day in which the Parent Common Stock is traded on the over the
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counter market and the "LAST SALE PRICE" shall be the last sale price for Parent
Common Stock as reported by the Nasdaq Stock Market for such Trading Day.
(b) Potential Adjustment to Merger Consideration. If Company's
consolidated earnings before interest, taxes, depreciation and amortization, as
determined in accordance with the conventions hereinafter described ("EBITDA")
for the Company's fiscal year ending February 28, 1997, is less than $5,000,000
then the Merger Consideration shall be adjusted downward Four and 70/100
Dollars ($4.70) for each One Dollar ($1.00) of the amount of such shortfall.
If, on the other hand, the Company's EBITDA for the Company's fiscal year ending
February 28, 1997, is more than $5,600,000 then the Merger Consideration shall
be adjusted upward Four and 70/100 Dollars ($4.70) for each One Dollar ($1.00)
of the amount of such overage (any adjustment up or down to the Merger
Consideration pursuant to this provision being hereinafter referred to as the
"EBITDA ADJUSTMENT"). For purposes of this Agreement the Company's EBITDA shall
be determined as set forth in Section 1.7(c) in accordance with generally
accepted accounting principles in the same manner as the Company has
historically determined the same; provided, however, that the following
adjustments shall be made: (i) any legal or professional fees associated with
this transaction that were incurred during the applicable fiscal year shall be
ignored; (ii) any legal or professional fees that were incurred during the
applicable fiscal year with respect to the Internal Revenue Service's audit of
the Company's 1993 and 1994 tax returns shall be ignored; (iii) rental income
relating to the applicable fiscal year shall be included after adjusting the
same to add back interest expense and depreciation incurred or taken in the
applicable fiscal year in arriving at "rental income, net," as set forth in the
Company's consolidated statement of operations for such fiscal year; and (iv)
any adjustment to the LIFO reserve shall be ignored.
(c) Determination of EBITDA. Company's EBITDA for the fiscal year ending
February 28, 1997, and any resulting EBITA Adjustment, shall be determined by
Company's independent certified public accountants at least ten (10) days prior
to the Closing Date (the "EBITDA DETERMINATION"). Immediately after receiving
the EBITDA Determination, Company shall deliver same to the Parent. The Parent
and its accountants shall be given full access upon request to all work papers
or other materials used by the Company and its accountants in the preparation of
the EBITDA Determination. If the Parent does not deliver a list of written
objections to the EBITDA Determination ("OBJECTION NOTICE") to Company and the
Shareholders within ten (10) days following delivery to the Parent, the EBITDA
Determination shall become final and binding upon the parties. If the Parent
delivers an Objection Notice within such ten (10) day period, the parties will
endeavor to reconcile any differences and agree upon a final EBITDA
Determination. If the parties are unable to agree upon a final EBITDA
Determination within five (5) days following delivery of the Objection Notice,
at the request of either party the outstanding matters shall be submitted for
resolution by a mutually acceptable accounting firm of recognized national
standing with offices in the Atlanta, Georgia area. If the parties are unable
to agree upon a mutually acceptable accounting firm, one will be selected at
random from a list of the six (6) largest Atlanta offices of such certified
public accounting firms having no prior affiliation with Parent, Company, the
Surviving Corporation or the Shareholders. Each of Parent and the Shareholders
shall bear 50% of the fees and expenses of the accounting firm so selected.
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Such accounting firm shall promptly prepare a final EBITDA Determination and the
determination of such accounting firm shall be final and binding upon the
parties. Notwithstanding anything contained in this Agreement to the contrary,
the Closing will be postponed until such time as the EBITDA Determination is
finally determined in accordance with this Section 1.7(c).
(d) No Fractional Shares. No fractional shares of Parent Common Stock
shall be issued in connection with the Merger, and no certificates for any such
fractional shares shall be issued. In lieu of such fractional shares, any
holder of Shares who would otherwise be entitled to receive a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock issuable to such shareholder) shall, upon surrender of such
shareholder's Company Common Stock certificate(s), be paid in cash the valuation
rate determined pursuant to this Section 1.7.
SECTION 1.8 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Company Common Stock thereafter on the records of the Company.
SECTION 1.9 No Further Ownership Rights in Company Common Stock. The Merger
Consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and there shall be no further
registration of transfers on the records of the Surviving Corporation of Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
Until surrendered and exchanged in accordance with this Section, each
certificate of Company Common Stock shall, after the Effective Time, represent
solely the right to receive the Merger Consideration in respect of the Shares of
Company Common Stock evidenced by such certificate and shall have no other
rights. No interest shall accrue or be payable on any Merger Consideration.
SECTION 1.10 Tax Consequences. It is intended by the parties hereto that
the Merger shall (i) constitute a reorganization within the meaning of Section
368 of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
SECTION 1.11 Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as practicable. 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 to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
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SECTION 1.12 Material Adverse Effect. When used in connection with the
Company or any of its subsidiaries, or Parent or any of its subsidiaries, as the
case may be, the term "MATERIAL ADVERSE EFFECT" means any change, effect or
circumstance that, individually or when taken together with all other such
changes, effects or circumstances that have occurred prior to the date of
determination of the occurrence of the Material Adverse Effect, (a) is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operations of the Company
and its subsidiaries or Parent and its subsidiaries, as the case may be, in each
case taken as a whole, or (b) is or is reasonably likely to prevent the
consummation of the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
Subject to Section 8.9 below, the Company and Shareholders, jointly and
severally, hereby represent and warrant to Parent and Merger Sub that, except as
set forth in the written disclosure schedule delivered on or prior to the date
hereof by the Company to Parent that is arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article II (the "COMPANY
DISCLOSURE SCHEDULE"):
SECTION 2.1 Organization and Qualification; Subsidiaries. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority necessary to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power,
authority and approvals could not reasonably be expected to have a Material
Adverse Effect. Each of the Company and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not reasonably be expected
to have a Material Adverse Effect. A true and complete list of all of the
Company's subsidiaries, together with the jurisdiction of incorporation of each
subsidiary, the authorized capitalization of each subsidiary, and the percentage
of each subsidiary's outstanding capital stock owned by the Company or another
subsidiary, is set forth in Section 2.1 of the Company Disclosure Schedule.
Except as set forth in Section 2.1 of the Company Disclosure Schedule, the
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
SECTION 2.2 Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws as amended to date, and has furnished or made
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available to Parent the Articles of Incorporation and By-Laws (or equivalent
organizational documents) of each of its subsidiaries (the "SUBSIDIARY
DOCUMENTS"). Such Articles of Incorporation, By-Laws and Subsidiary Documents
are in full force and effect.
SECTION 2.3 Capitalization. The authorized capital stock of the Company
consists of 3,000,000 shares of Company Common Stock and 5,000 shares of
preferred stock, without par value, none of which is issued and outstanding and
none of which is held in treasury. As of February 28, 1997, (i) 841,002 shares
of Company Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable, and no shares were held in treasury, (ii)
no shares of Company Common Stock were held by subsidiaries of the Company, and
(iii) 30,000 shares of Company Common Stock were reserved for future issuance
pursuant to outstanding stock options granted under the Company Stock Option
Plan. All of the shares of capital stock of the Company are owned of record and
beneficially by the persons or entities set forth in Section 2.3 of the Company
Disclosure Schedule in the respective numbers set forth in Section 2.3 of the
Company Disclosure Schedule, which sets forth the address and position with
Company of each such person or entity. No change in such capitalization has
occurred between February 28, 1997 and the date hereof. Except as set forth in
Section 2.3 or Section 2.15 of the Company Disclosure Schedule, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company or
any of its subsidiaries or obligating the Company or any of its subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any of its subsidiaries. All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. Except as disclosed in Section
2.3 of the Company Disclosure Schedule, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution, guaranty or otherwise) in any such subsidiary or any other
entity. All of the outstanding shares of capital stock of each of the Company's
subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and all such shares are owned by the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the voting rights
of the registered holder, marital interests, community property interests,
charges or other encumbrances of any nature whatsoever (collectively, "LIENS").
SECTION 2.4 Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
(including the requisite approval of all shareholders entitled to vote on
matters pertaining to this Agreement), and no other corporate proceedings on the
part of the Company (or its shareholders) are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement has
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been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Merger Sub, as
applicable, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms.
SECTION 2.5 Shareholders.
(a) Each Shareholder has full power, legal right and authority to enter
into, execute and deliver this Agreement and the other agreements, documents and
instruments to be executed and delivered by one or more of the Shareholders as
contemplated hereby (such other agreements, documents and instruments being
sometimes hereinafter collectively referred to as the "ANCILLARY INSTRUMENTS"),
and to carry out the transactions contemplated hereby and thereby.
(b) This Agreement has been duly and validly executed and delivered by each
Shareholder and is, and when executed and delivered each Ancillary Instrument to
be executed and delivered by the Shareholders pursuant hereto will be, the
legal, valid and binding obligation of such Shareholder, enforceable in
accordance with its terms.
(c) Except as set forth on Section 2.5(c) of the Company Disclosure
Schedule, each Shareholder has good and marketable title to the Shares of
Company Common Stock shown on Section 2.3 of the Company Disclosure Schedule as
being owned by such Shareholder, and, except as set forth on Section 2.5(c) of
the Company Disclosure Schedule, immediately prior to the Effective Time each
Shareholder will have good and marketable title to the Shares of Company Common
Stock, in each case free and clear of all Liens.
(d) Each Shareholder warrants and represents that the holders of the Shares
of the Company Common Stock held by such Shareholder or such Shareholder's
associates (specifically including any individual retirement accounts in which
such Shareholder or such Shareholder's spouse is a beneficiary) have voted to
approve the execution and delivery of this Agreement by the Company and the
consummation of the Merger.
SECTION 2.6 Books and Records. The minute books and other similar records
of the Company and its subsidiaries as made available to Parent and Merger Sub
prior to the execution of this Agreement contain a true and complete record, in
all material respects, of all action taken at all meetings and by all written
consents in lieu of meetings of the stockholders, the boards of directors and
committees of the boards of directors of the Company and its subsidiaries. The
stock transfer ledgers and other similar records of the Company and its
subsidiaries as made available to Parent and Merger Sub prior to the execution
of this Agreement accurately reflect all record transfers prior to the execution
of this Agreement in the capital stock of the Company and its subsidiaries.
Except as set forth in Section 2.6 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries has any of its books and records
recorded, stored, maintained, operated or otherwise wholly or partly dependent
upon or held by any means (including any electronic, mechanical or photographic
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process, whether computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and direct control
of the Company or one or more of its subsidiaries.
SECTION 2.7 No Conflict; Required Filings and Consents.
(a) Section 2.7(a) of the Company Disclosure Schedule (with paragraph
references corresponding to those set forth below) contains a true and complete
list of each of the following contracts, agreements, leases, licenses, evidences
of indebtedness, mortgages, indentures, security agreements or other contracts
or arrangements (whether written or oral) (collectively "CONTRACTS") (true and
complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been delivered to Parent and Merger Sub
prior to the execution of this Agreement), to which the Company or any of its
subsidiaries is a party or by which any of their respective assets or properties
is bound:
(i) (A) all Contracts (excluding Company Employee Plans as defined in
Section 2.15) providing for a commitment of employment or consultation
services for a specified or unspecified term or otherwise relating to
employment or the termination of employment, the name, position and rate of
compensation of each person party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct (excluding Company Employee Plans and any such Contracts referred
to in clause (A)) involving an obligation of the Company or any of its
subsidiaries to make payments in any year, other than with respect to
salary or incentive compensation payments in the ordinary course of
business, to any employee exceeding $30,000;
(ii) all Contracts with any person containing any provision or
covenant prohibiting or limiting the ability of the Company or any of its
subsidiaries to engage in any business activity or compete with any person
or prohibiting or limiting the ability of any person to compete with the
Company or any of its subsidiaries;
(iii) all partnership, joint venture, shareholders' or other similar
Contracts with any person;
(iv) all loan agreements, indentures, mortgages, pledges, conditional
sale or title retention agreements, security agreements, guaranties,
standby letters of credit, equipment leases or lease purchase agreements
and other contracts relating to indebtedness to which the Company or any of
its subsidiaries is a party or by which any of them is bound, other than
office equipment and vehicle leases entered into in the ordinary course of
business in an aggregate amount not exceeding $100,000;
(v) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees, other than routine purchase
or sales orders for purchases and sales in the ordinary course of business
consistent with past practices;
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(vi) all Contracts relating to (A) the future disposition or
acquisition of any assets or properties of the Company or any of its
subsidiaries, other than dispositions or acquisitions in the ordinary
course of business consistent with past practice, and (B) any merger or
other business combination;
(vii) all Contracts that (A) limit or contain restrictions on the
ability of the Company or any of its subsidiaries to declare or pay
dividends on, to make any other distribution in respect of or to issue or
purchase, redeem or otherwise acquire its capital stock, to incur
indebtedness, to incur or suffer to exist any Lien, to purchase or sell any
assets or properties, to change the lines of business in which it
participates or engages or to engage in any business combination or (B)
require the Company or any of its subsidiaries to maintain specified
financial ratios or levels of net worth or other indicia of financial
condition; and
(viii) all other Contracts (other than Company Employee Plans, leases
listed in Section 2.17(b) of the Company Disclosure Schedule and insurance
policies listed in Section 2.22 of the Company Disclosure Schedule) that
(A) involve the payment or potential payment, pursuant to the terms of any
such Contract, by or to the Company or any of its subsidiaries of more than
$50,000 annually, or (B) cannot be terminated within ninety (90) days after
giving notice of termination without resulting in any material cost or
penalty to the Company or any of its subsidiaries.
(b) To the best knowledge of Company and each Shareholder, except as
disclosed in the applicable Section of the Company Disclosure Schedule wherein a
Contract is disclosed, each Contract required to be disclosed in any Section of
the Company Disclosure Schedule (i) constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of each party thereto, (ii)
neither the Company nor any of its subsidiaries has breached, is in default
under, or has received written notice of any breach of or default under, any of
such Contracts, (iii) no other party to any of such Contracts has breached or is
in default of any of its obligations thereunder, and (iv) each of such Contracts
is in full force and effect, except in any such case under clauses (i), (ii),
(iii) and (iv) of this Section 2.7(b) for breaches, defaults or failures to be
in full force and effect that has not had and could not reasonably be expected
to have a Material Adverse Effect on the Company.
(c) Except as set forth in Section 2.7(c) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby will not, (i) conflict with or violate the
Articles of Incorporation or By-Laws of the Company, (ii) conflict with or
violate any federal, foreign, state or provincial law, rule, regulation, order,
judgment or decree (collectively, "LAWS") applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default under),
or impair the Company's or any of its subsidiaries' rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
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its subsidiaries pursuant to, any Contract to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties is bound or affected, except in any
such case under clauses (i), (ii) or (iii) of this Section 2.7(c) for any such
conflicts, violations, breaches, defaults or other occurrences that either
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect on the Company.
(d) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any federal, foreign, state or provincial governmental or regulatory
authority except the pre-merger notification requirements of the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), any
required foreign anti-trust or similar filings and the filing and recordation of
appropriate merger or other documents as required by the MBCA.
SECTION 2.8 Compliance, Permits.
(a) Except as disclosed in Section 2.8(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any Law applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected or (ii) any license, permit, franchise or Contract that is not the
subject of Section 2.7 to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except in any such case under
clauses (i) or (ii) of this Section 2.8(a) for any such conflicts, defaults or
violations which could not reasonably be expected to have a Material Adverse
Effect on the Company.
(b) Except as disclosed in Section 2.8(b) of the Company Disclosure
Schedule, the Company and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business of the Company and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "COMPANY PERMITS"). The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 2.8 Financial Statements. The Company has previously furnished
to Parent (a) audited consolidated balance sheets of the Company as of February
28, 1994, 1995 and February 29, 1996, and (b) the related audited consolidated
statements of income, statements of stockholders' equity and statements of cash
flows for the fiscal years then ended together with the related notes thereto
and the reports thereon of Xxxxxx Xxxxxxxx LLP. The Company has also furnished
Parent the unaudited consolidated balance sheet and statement of income of the
Company as of and for the eleven months ended January 31, 1997 (the "RECENT
FINANCIAL STATEMENTS"). The consolidated balance sheet of the Company as of
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February 29, 1996, together with the related notes thereto and the report
thereon of Xxxxxx Xxxxxxxx LLP, is hereinafter referred to as the "1996 BALANCE
SHEET". All such financial statements referred to in this Section 2.9 present
fairly the financial position of the Company as of their respective dates, and
each of the related statements of income and (where applicable) stockholders'
equity and cash flows included therein present fairly the results of operations
and (where applicable) cash flows for the fiscal years and periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments, and all such financial statements have been prepared in accordance
with Generally Accepted Accounting Principles applied on a consistent basis,
except as otherwise noted therein and except, as to unaudited financial
statements, that no statements of stockholders' equity have been prepared, and
no notes to such financial statements are included.
SECTION 2.10 Accounts Receivable. All accounts receivable of Company and
its subsidiaries reflected on the Recent Financial Statements, and those arising
since the date thereof, represent arm's length sales actually made in the
ordinary course of business; are to the knowledge of Company and the
Shareholders collectible (net of the reserve shown on the Recent Financial
Statements for doubtful accounts) in the ordinary course of business; to the
knowledge of Company and the Shareholders are subject to no counterclaim or set
off and are not in dispute. Section 2.10 of the Company Disclosure Schedule
contains an aged schedule of accounts receivable included in the Recent
Financial Statements and as of a date not more than twenty days prior to the
date hereof.
SECTION 2.11 Inventory. All inventory of Company and its subsidiaries
reflected on the Recent Financial Statements consists of a quality and quantity
useable and saleable in the ordinary course of business, in the aggregate, had a
commercial value at least equal to the value shown on such balance sheet and is
valued in accordance with generally accepted accounting principles at the lower
of cost (on a LIFO basis) or market. All inventory purchased since the date of
the Recent Financial Statements consists of a quality and quantity useable and
saleable in the ordinary course of business. Except as set forth in Section
2.11 of the Company Disclosure Schedule, all inventory of the Company and its
subsidiaries is located on premises owned or leased by the Company or its
subsidiaries as reflected in this Agreement.
SECTION 2.12 Absence of Certain Changes or Events. Except as set forth
in Section 2.12 of the Company Disclosure Schedule, since January 31, 1997, each
of the Company and its subsidiaries has conducted its business in the ordinary
course and there has not occurred: (a) any Material Adverse Effect; (b) any
amendments or changes in the Articles of Incorporation or By-laws of the
Company; (c) any damage to, destruction or loss of any asset of the Company
(whether or not covered by insurance) that could reasonably be expected to have
a Material Adverse Effect; (d) any material change by the Company in its
accounting methods, principles or practices; (e) any material revaluation by the
Company of any of its assets, including, without limitation, writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business; (f) any other action or event that would have
required the consent of Parent pursuant to Section 4.1 had such action or event
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occurred after the date of this Agreement; or (g) any sale of a material amount
of property or assets of the Company or any of its subsidiaries, except in the
ordinary course of business.
SECTION 2.13 Absence of Undisclosed Liabilities. Except as and to the
extent specifically disclosed in the Recent Financial Statements, or in Section
2.13 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has any liabilities, commitments or obligations (secured or
unsecured, and whether accrued, known, unknown, absolute, contingent, direct,
indirect or otherwise), other than commercial liabilities and obligations
incurred since the date of the Recent Financial Statements in the ordinary
course of business and consistent with past practice and none of which has or
will have a Material Adverse Effect. Except as and to the extent described in
the Recent Financial Statements or in Section 2.13 of the Company Disclosure
Schedule, none of Company or any of the Shareholders has knowledge of any basis
for the assertion against Company or any of its subsidiaries of any liability or
of any circumstances, conditions, happenings, events or arrangements,
contractual or otherwise, which may give rise to liabilities, except commercial
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice.
SECTION 2.14 Absence of Litigation. Except as set forth in Section 2.14
of the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company or any
Shareholder, threatened against the Company or any of its subsidiaries, or any
properties or rights of the Company or any of its subsidiaries, before any
federal or state court, arbitrator or administrative, governmental or regulatory
authority or body, and neither the Company nor the Shareholders have knowledge
of any facts or circumstances that are reasonably likely to give rise to any
such claims, actions, suits, proceedings or investigations.
SECTION 2.15 Employee Benefit Plan; Employment Agreements.
(a) Section 2.15(a) of the Company Disclosure Schedule lists all employee
pension plans (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), all employee welfare plans (as
defined in Section 3(1) of ERISA), and all other bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any employment, executive compensation, consulting or severance agreements,
written or otherwise, for the benefit of, or relating to, any current or former
employee (including any beneficiary of any such employee) of, or any current or
former consultant (including any beneficiary of any such consultant) to, the
Company, any trade or business (whether or not incorporated) which is a member
of a controlled group including the Company or which is under common control
with the Company (an "ERISA AFFILIATE") within the meaning of Section 414 of the
Code, or any subsidiary of the Company under which the Company currently has a
liability, as well as each plan with respect to which the Company or an ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or
were terminated) or Section 4212(c) of ERISA (all such plans, practices and
programs are referred to as the "COMPANY EMPLOYEE PLANS"). There have been made
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available to Parent copies of (i) each such written Company Employee Plan (other
than those referred to in Section 4(b)(4) of ERISA), and (ii) the most recent
annual report on Form 5500 series, with accompanying schedules and attachments,
filed with respect to each Company Employee Plan required to make such a filing.
Except as set forth in Section 2.15(a) of the Company Disclosure Schedule,
neither the Company nor any subsidiary of the Company has any commitment or
intention to create, modify, terminate or increase benefits or vesting under any
Company Employee Plan.
(b) (i) Except in each case as set forth in Section 2.15(b) of the Company
Disclosure Schedule, none of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, and neither the
Company nor any ERISA Affiliate has ever maintained, contributed to, or been
required to contribute to, any plan that is or was a "multi-employer plan" as
such term is defined in Section 3(37) of ERISA, a pension plan subject to Title
IV of ERISA or a plan subject to Part 3 of Title I of ERISA; (ii) there has
been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Code, with respect to any Company Employee Plan;
(iii) except for any defaults or failures so to comply that, individually or
together with all other such failures, have not and will not result in a
material liability of the Company or any of its subsidiaries, all Company
Employee Plans are in compliance with the requirements prescribed by any and all
Laws (including ERISA and the Code), currently in effect with respect thereto
(including all applicable requirements for notification to participants or the
Department of Labor, Internal Revenue Service (the "IRS") or Secretary of the
Treasury), and the Company and each of its subsidiaries have performed all
material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and the Company and
Shareholders have no knowledge of any default or violation by any other party
to, any of the Company Employee Plans; (iv) each Company Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, and nothing has occurred which may reasonably be expected
to impair such determination; (v) there are no lawsuits or other claims (other
than claims for benefits in the ordinary course) pending or, to the best
knowledge of the Company and the Shareholders, threatened with respect to any
Company Employee Plan. Each Company Employee Plan which is a "group health
plan" as defined in Section 607(l) of ERISA or Section 5000(b)(1) of the Code
has been operated in compliance with the applicable requirements of Section 601
of ERISA and Section 4980B(f) of the Code, except for any failures to comply
that, individually or together with all other such failures, have not and will
not result in a material liability of the Company or any of its subsidiaries.
Except as set forth in Section 2.15(b) of the Company Disclosure Schedule, there
are no restrictions on the rights of the Company or any of its subsidiaries to
amend or terminate any Company Employee Plan. No Company Employee Plan has
provided any "disqualified benefit" (as such term is defined in Section 4976(b)
of the Code) with respect to which an excise tax could be imposed.
(c) Section 2.3 or Section 2.15(c) of the Company Disclosure Schedule sets
forth a true and complete list of each current or former employee, officer or
director of the Company or any of its subsidiaries who holds (i) any option to
purchase Company Common Stock as of the date hereof, together with the number of
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shares of Company Common Stock subject to such option, the option price of such
option (to the extent determined as of the date hereof), whether such option is
intended to qualify as an incentive stock option within the meaning of Section
422(b) of the Code (an "ISO"), and the expiration date of such option; and (ii)
any other right, directly or indirectly, to acquire Company Common Stock,
together with the number of shares of Company Common Stock subject to such
right.
(d) Section 2.15(d) of the Company Disclosure Schedule sets forth a true
and complete list of: (i) all employment agreements with officers of the Company
or any of its subsidiaries; (ii) all agreements with consultants who are
individuals obligating the Company or any of its subsidiaries to make annual
cash payments in an amount exceeding $150,000; (iii) all employees of, or
consultants to, the Company or any of its subsidiaries who have executed a non-
competition agreement with the Company or any of its subsidiaries; (iv) all
severance agreements, programs and policies of the Company or any of its
subsidiaries with or relating to its employees, in each case with outstanding
commitments exceeding $150,000, excluding programs and policies required to be
maintained by law; and (v) all plans, programs, agreements and other
arrangements of the Company or any of its subsidiaries with or relating to its
employees which contain change in control provisions. The actuarial present
values of all accrued deferred compensation entitlements (including entitlements
under any executive compensation, supplemental retirement, or employment
agreement) of employees and former employees of the Company and its
subsidiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Code or Section 302 of
ERISA, have been fully reflected on the Company's financial statements to the
extent required by and in accordance with generally accepted accounting
principles.
(e) Full payment has been made of all amounts which the Company is
required, under applicable law or under any Company Employee Plan or any
agreement relating to any Company Employee Plan to which the Company is a party,
to have paid as contributions thereto as of the last day of the most recent
fiscal year of such Company Employee Plan ended prior to the date hereof. All
such contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any governmental entity, and to
the best knowledge of the Company no event has occurred and no condition or
circumstance has existed that could give rise to any such challenge or
disallowance. The Company has made adequate provision for reserves to meet
contributions and any other liabilities that have not been paid or satisfied
because they are not yet due under the terms of any Company Employee Plan,
applicable laws or related agreements. Benefits under all Company Employee Plans
are as represented and have not been increased subsequent to the date as of
which documents have been provided. There is no unfunded liability with respect
to any Company Employee Plan that is not intended to be qualified under Section
401(a) of the Code. No Company Employee Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, based on
actuarial assumptions set forth in such Plan's must recent actuarial valuation.
No liability under Subtitle C or D of Title IV of ERISA has been or is expected
to be incurred by the Company or any of its subsidiaries with respect to any
ongoing, frozen or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
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waived, has been required to be filed for any Company Employee Plan subject to
Title IV of ERISA.
SECTION 2.16 Labor Matters.
(a) Except as set forth in Section 2.16(a) of the Company Disclosure
Schedule: (i) there are no controversies pending or, to the knowledge of the
Company or any of its subsidiaries or Shareholders, threatened, between the
Company or any of its subsidiaries and any of their respective employees; (ii)
neither the Company nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or its subsidiaries, nor does the Company or any of its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) neither the Company, any of its
subsidiaries nor any of the Shareholders has any knowledge of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or any of its subsidiaries.
(b) Section 2.16(b) of the Company Disclosure Schedule contains a true and
correct list of all employees to whom the Company or any of its subsidiaries is
paying compensation, including bonuses and incentives, at an annual rate in
excess of Thirty Thousand Dollars ($30,000) for services rendered or otherwise;
and in the case of salaried employees such list identifies the current annual
rate of compensation for each employee (including a complete and accurate
description of any bonus arrangements) and in the case of hourly or commission
employees identifies certain reasonable ranges of rates and the number of
employees falling within each such range.
SECTION 2.17 Title to Property.
(a) Except as set forth in Section 2.17(a) of the Company Disclosure
Schedule, the Company and each of its subsidiaries have good and defensible
title to all of their properties and assets, free and clear of all liens,
charges and encumbrances, except liens for taxes not yet due and payable and
such liens or other imperfections of title, if any, as do not materially detract
from the value of or interfere with the present use of the property affected
thereby; and, except as set forth in Section 2.17(a) of the Company Disclosure
Schedule to the knowledge of the Company and the Shareholders, all leases
pursuant to which the Company or any of its subsidiaries lease from others any
real or personal property, are in good standing, valid and effective in
accordance with their respective terms, and there is not, to the knowledge of
the Company or Shareholders, under any of such leases, any existing default or
event of default (or event which with notice or lapse of time, or both, would
constitute a default). Except as set forth in Section 2.17(a) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries owes any
brokerage commissions with respect to any leased space.
(b) Section 2.17(b) of the Company Disclosure Schedule sets forth all real
property owned, used or occupied by the Company or any of its subsidiaries (the
"REAL PROPERTY"). Section 2.17(b) of the Company Disclosure Schedule also
identifies the leases (oral or written) and all amendments thereto and
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extensions thereof, under which the Company or any of its subsidiaries now uses
any such Real Property, as well as any guarantors of tenant's obligations under
such leases, true and correct copies of which written leases (or descriptions of
oral leases or arrangements) the Company has delivered to Parent and Merger Sub.
There are now in full force and effect duly issued certificates of occupancy (or
application for such certificates has been properly made) permitting the Real
Property and improvements located thereon that is in a jurisdiction that issues
such certificates to be legally used and occupied as the same are now
constituted.
(c) Section 2.17(c) of the Company Disclosure Schedule further identifies
all loans of which the Company or the Shareholders have knowledge encumbering
the fee interest of the Company or any of its subsidiaries in any Real Property
and all loans encumbering the leasehold interest of the Company or any of its
subsidiaries in any Real Property, all agreements entered into by the Company or
any of its subsidiaries with any lender affecting the Real Property, any lease
or the rights of the Company or any of its subsidiaries under any lease, with
all sub tenants, tenants, assignees, licensees, concessionaires or other
entities, other than the Company or any of its subsidiaries, having a right to
occupy all or any portion of the Real Property, true and correct copies of which
agreements the Company has delivered to Parent and Merger Sub (or if an oral
arrangement, are fully described on Section 2.17(c) of the Company Disclosure
Schedule. To the knowledge of the Company and the Shareholders, no fact or
condition exists which would prohibit or adversely affect the ordinary rights of
access to and from the Real Property from and to the existing highways and roads
and there is no pending or threatened restriction or denial, governmental or
otherwise, upon such ingress and egress. All of the Real Property is serviced
by public utilities, or utilities are available to the Real Property. To the
knowledge of Company and the Shareholders, there are no easements or
restrictions of record that would materially, adversely interfere with the use
of the Real Property in connection with the conduct of the business of the
Company and its subsidiaries as presently conducted. There is not, to the
knowledge of Company or the Shareholders, (i) any claim of adverse possession or
prescriptive rights involving any of the Real Property, (ii) any part of any
Real Property which encroaches on or over the boundaries of neighboring or
adjacent properties or (iii) any structure of any other party which encroaches
on or over the boundaries of any Real Property. To the knowledge of Company and
the Shareholders, none of the Real Property is located in a flood plain, flood
hazard area, wetland or lakeshore erosion area within the meaning of any Law,
regulation or ordinance. To the knowledge of Company and the Shareholders, no
public improvements have been commenced and none are planned which in either
case may result in special assessments against or otherwise materially adversely
affect any Real Property. None of the Company or the Shareholders has notice or
knowledge of any (i) planned or proposed increase in assessed valuations of any
Real Property, (ii) governmental agency or court order requiring repair,
alteration, or correction of any existing condition affecting any Real Property
or the systems or improvements thereat, (iii) condition or defect which could
give rise to an order of the sort referred to in "(ii)" above or (iv)
underground storage tanks located on any Real Property.
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(d) Neither the whole nor any portion of the Real Property or any other
assets of the Company or its subsidiaries is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority with or without payment of compensation therefor, nor to
the knowledge of Company and the Shareholders has any such condemnation,
expropriation or taking been proposed.
(e) Shareholders have delivered to Parent and Merger Sub prior to the
execution of this Agreement true and complete copies of (i) all deeds, leases,
mortgages, deeds of trust, certificates of occupancy, title insurance policies,
title reports, surveys and similar documents, and all amendments thereof, with
respect to the real property owned by the Company or any of its subsidiaries,
and (ii) all leases (including any amendments and renewal letters) with respect
to the real property leased by the Company or any of its subsidiaries.
SECTION 2.18 Condition of Property. Except as set forth in Section 2.18 of
the Company Disclosure Schedule, all material property and assets owned or
utilized by the Company or any of its subsidiaries are in good operating
condition and repair, free from any defects (except such minor defects or
repairs as do not interfere with the use thereof in the conduct of the normal
operations of the Company and its subsidiaries, as the case may be), have been
maintained consistent with the standards generally followed in the industry and
are sufficient to carry on the business of the Company and its subsidiaries, as
the case may be, as conducted during the preceding 24 months.
SECTION 2.19 Taxes.
(a) For purposes of this Agreement, "TAX" or "TAXES" shall mean taxes,
fees, levies, duties, tariffs, imposts, and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without limitation) (i)
income, franchise, profits, gross receipts, ad valorem, net worth, value added,
sales, use, service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social security, workers'
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
(ii) interest, penalties, additional taxes and additions to tax imposed with
respect thereto; and "TAX RETURNS" shall mean returns, reports, and information
statements with respect to Taxes required to be filed with the IRS or any other
federal, foreign, state or provincial taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary tax returns.
(b) Other than as disclosed in Section 2.19(b) of the Company Disclosure
Schedule, (i) the Company and its subsidiaries have timely filed all Tax Returns
required to be filed by them, (ii) the Company and its subsidiaries have paid
and discharged all Taxes due and have withheld all Taxes required to be withheld
with respect to employees in connection with or with respect to the periods or
transactions covered by such Tax Returns and have paid all other Taxes as are
due, except such as are being contested in good faith by appropriate proceedings
(to the extent that any such proceedings are required) and with respect to which
the Company is maintaining adequate reserves, and (iii) there are no other Taxes
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that would be due if asserted by a taxing authority, except with respect to
which the Company is maintaining adequate reserves. Except as disclosed in
Section 2.19(b) of the Company Disclosure Schedule: (i) there are no tax liens
on any assets of the Company or any subsidiary thereof; (ii) neither the
Company nor any of its subsidiaries has granted any waiver of any statute of
limitations with respect to, or any extension of a period for the assessment of,
any Tax; (iii) neither the Company nor any of its subsidiaries has received any
written notice of any Tax deficiency outstanding, proposed or assessed against
the Company or any of its subsidiaries, or of any audit or other examination
threatened, proposed or currently in progress of any Tax Return of the Company
or any of its subsidiaries; (iv) there is no contract, agreement, plan or
arrangement, including but not limited to the provisions of the Agreement,
covering any employee or former employee of the Company or any of its
subsidiaries that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Section 280G or subject
to the excise tax pursuant to Section 4999 of the Code; (v) neither the Company
nor any of its subsidiaries is a party to or bound by any tax indemnity, tax
sharing or tax allocation agreements; (vi) neither the Company nor any of its
subsidiaries has filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company; and (vii) except for the group of which the Company and its
subsidiaries are now presently members, since 1988, neither the Company nor any
of its subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. The accruals and
reserves for Taxes (including deferred taxes) reflected in the Recent Financial
Statements are adequate to cover all Taxes required to be accrued through the
date thereof (including interest and penalties, if any, thereon and Taxes being
contested) in accordance with generally accepted accounting principles.
SECTION 2.20 Environmental Matters. Except as set forth in Section 2.20
of the Company Disclosure Schedule, and except in all cases, in the aggregate,
that have not had and could not reasonably be expected to have a Material
Adverse Effect, the Company and each of its subsidiaries: (i) have obtained all
approvals which are required to be obtained under all applicable federal, state,
foreign or local laws or any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
by the Company or its subsidiaries or their respective agents ("ENVIRONMENTAL
LAWS"); (ii) are in compliance with all terms and conditions of such required
Approvals, and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in applicable Environmental Laws; (iii) as of the date
hereof, are not aware of nor have received notice of any past or present
violations of Environmental Laws or any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise to
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any common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, against the Company or any of its subsidiaries based
on or resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous or toxic
material or waste; and (iv) have taken all actions necessary under applicable
Environmental Laws to register any products or materials required to be
registered by the Company or its subsidiaries (or any of their respective
agents) thereunder.
SECTION 2.21 Intellectual Property.
(a) Except as disclosed in Section 2.21(a) of the Company Disclosure
Schedule, the Company, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all trademarks, trade names,
service marks, copyrights, and any applications therefor that are material to
the business of the Company and its subsidiaries as currently conducted (the
"COMPANY INTELLECTUAL PROPERTY RIGHTS").
(b) Section 2.21(b) of the Company Disclosure Schedule sets forth a
complete list of all trademarks, registered copyrights, trade names and service
marks, and any applications therefor, included in the Company Intellectual
Property Rights, and specifies, where applicable, the jurisdictions in which
each such Company Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration has been filed,
including the respective registration or application numbers and the names of
all registered owners.
SECTION 2.22 Insurance. Section 2.22 of the Company Disclosure Schedule
contains a true and complete list (including the names and addresses of the
insurers, the names of the persons to whom such policies have been issued, the
expiration dates thereof, the annual premiums and payment terms thereof, whether
it is a "claims made" or an "occurrence" policy and a brief description of the
interests insured thereby) of all liability, property, workers' compensation,
direc tors' and officers' liability and other insurance policies currently in
effect that insure the business, operations or employees of the Company or any
of its subsidiaries or affect or relate to the ownership, use or operation of
any of the assets and properties of the Company or any of its subsidiaries and
that (i) have been issued to the Company or any of its subsidiaries or (ii) have
been issued to any person (other than the Company or any of its subsidiaries)
for the benefit of the Company or any of its subsidiaries. Except as disclosed
in Section 2.22 of the Company Disclosure Schedule, the insurance coverage
provided by any of the policies described in clause (i) above will not terminate
or lapse by reason of the transactions contemplated by this Agreement. Each
policy listed in Section 2.22 of the Company Disclosure Schedule is valid and
binding and in full force and effect, no premiums due thereunder have not been
paid and neither the Company, any subsidiary of the Company nor the person to
whom such policy has been issued has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder. The
insurance policies listed in Section 2.22 of the Company Disclosure Schedule are
placed with financially sound and reputable insurers and, in light of the
respective business, operations and assets and properties of the Company and its
subsidiaries, are in amounts and have coverages that are reasonable and
customary for persons engaged in such businesses and operations and having such
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assets and properties. Neither the Company, any of its subsidiaries nor the
person to whom such policy has been issued has received notice that any insurer
under any policy referred to in this Section is denying liability with respect
to a claim thereunder or defending under a reservation of rights clause.
SECTION 2.23 Major Customers and Suppliers.
(a) Except as disclosed in Section 2.23(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries, individually or
collectively, has any customer who purchased more than $20,000 in goods or
services during either of the two (2) most recent fiscal years ended February
29, 1996 and February 28, 1997. None of the Company or any of the Shareholders
has any knowledge or information of any facts indicating that any of the
customers so listed will not continue to be customers of the applicable business
after the Effective Time at substantially the same level of purchases as
heretofore.
(b) Section 2.23(b) of the Company Disclosure Schedule contains a list of
the ten (10) largest suppliers to the Company and its subsidiaries for each of
the two (2) most recent fiscal years ended February 29, 1996 and February 28,
1997 (determined on the basis of the total dollar amount of purchases), showing
the total dollar amount of purchases from each such supplier during each such
year. None of Company or any of the Shareholders has any knowledge or
information of any facts indicating that any of the suppliers so listed will not
continue to be suppliers to the applicable business after the Closing and will
not continue to supply the applicable business at competitive prices.
SECTION 2.24 Product Warranty and Product Liability. Neither the Company
nor any of its subsidiaries offers any warranty or warranties in connection with
the sales of its Products (as defined below) and, other than manufacturers'
warranties that may be available, there are no warranties, commitments or
obligations with respect to the return, repair or replacement of Products. The
Company or its subsidiaries does occasionally accept returns of defective
Products as part of its customer service operations. To the knowledge of Company
and the Shareholders, the aggregate annual cost to the Company and its
subsidiaries of performing warranty obligations for customers, or accepting
returns of purportedly defective Products from customers, has not exceeded
$20,000 in each of the five (5) preceding fiscal years. As used in this Section
2.24, the term "Products" means any and all products currently or at any time
previously manufactured, distributed or sold by the Company or any of its
subsidiaries, or by any predecessor of the Company or any of its subsidiaries
under any brand name or xxxx under which products are or have been manufactured,
distributed or sold by the Company or any of its subsidiaries.
SECTION 2.25 Bank Accounts. Section 2.25 of the Company Disclosure
Schedule sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which the
Company or any of its subsidiaries maintains a safe deposit box, lock box or
checking, savings, custodial or other account of any nature, the type and number
of each such account and the signatories therefore, a description of any
compensating balance
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arrangements, and the names of all persons authorized to draw thereon, make
withdrawals therefrom or have access thereto.
SECTION 2.26 Relationships with Affiliates and Associates.
(a) All leases, contracts, agreements or other arrangements between Company
and any of its subsidiaries, on the one hand, and any Shareholder or any
affiliate or associate of any of the Shareholders, on the other hand, are
described and identified as such on Section 2.26(a) of the Company Disclosure
Schedule.
(b) No Shareholder or affiliate or associate of any Shareholder has any
direct or indirect interest in (i) any entity which does business with the
Company or any of its subsidiaries or is competitive with the business of any of
the Company or any of its subsidiaries, or (ii) any property, asset or right
which is used by the Company or any of its subsidiaries in the conduct of its or
their business.
(c) All obligations of any Shareholder or any affiliate or associate of a
Shareholder to the Company or any of its subsidiaries, and all obligations of
the Company or any of its subsidiaries to a Shareholder or any affiliate or
associate of a Shareholder other than in their capacities as employees, officers
or directors of the Company, are listed on Section 2.26(c) of the Company
Disclosure Schedule.
SECTION 2.27 Assets Necessary to Business. Except as set forth on Section
2.27 of the Company Disclosure Schedule, the Company and its subsidiaries
presently have and at the Closing will have good, valid and marketable title to
all property and assets, tangible and intangible, and all leases, licenses and
other agreements, necessary to permit the business of the Company and its
subsidiaries to be continued after Closing in substantially the same manner as
presently conducted and as conducted during the preceding 24 months.
SECTION 2.28 Brokers. No broker, finder or investment banker (other than
Xxxxx Xxxxxx Inc., the fees and expenses of whom will be paid by the Company
subject to the limits established in Section 9.5 below) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or its subsidiaries or affiliates. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements
between the Company and Xxxxx Xxxxxx Inc. pursuant to which such firm would be
entitled to any payment relating to the transactions contemplated hereunder.
SECTION 2.29 Securities Law Matters. Each of the Shareholders acquiring
Parent Common Stock pursuant to this Agreement is acquiring such stock for
investment for such Shareholder's own account, not on behalf of others and not
with a view to resell or otherwise distribute such Parent Common Stock except
pursuant to either a valid registration under the Securities Act and applicable
state securities laws or a valid exemption from such registration requirements.
Each such Shareholder acknowledges that the Parent Common Stock has not been
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registered under the Securities Act, or under any state securities laws and,
therefore, cannot be resold unless registered under the Securities Act and
applicable state securities laws or unless an exemption from registration is
available and, as a result, such Shareholder must bear the risk of an investment
in Parent Common Stock for an indefinite period of time. The financial
condition of each such Shareholder is currently adequate to bear the substantial
economic risk of an investment in Parent Common Stock. Each such Shareholder
has sufficient knowledge and experience in investment and business matters to
understand the economic risk of such an investment and the risk involved in a
commercial enterprise such as Parent. Each Shareholder is a bona fide resident
of the State of Michigan or Connecticut as set forth in Section 2.29 of the
Company Disclosure Schedule and all communications and information, written or
oral, concerning the Parent Common Stock and this Agreement have been directed
to such Shareholders and have been received in such States, as the case may be.
Each Shareholder has received and carefully read all of the Parent SEC Reports
(as that term is defined in Section 3.7(a)). Each such Shareholder has had an
opportunity to ask questions of, and receive answers from, officers of Parent
concerning Parent and the Parent Common Stock and to obtain any additional
information which such Shareholder reasonably requested. Each of the
Shareholders is an "accredited investor" within the meaning of Regulation D
under the Securities Act, and Section 2.29 of the Company Disclosure Schedule
sets forth for each such Shareholder the basis on which the Shareholder
qualifies as an "accredited investor."
SECTION 2.30 Full Disclosure. No representation or warranty by the
Company and/or the Shareholders in this Agreement, nor the Company Disclosure
Schedule or any certificate (or any statement furnished pursuant to Section 5.6
below), furnished or to be furnished by or on behalf of the Company or any
Shareholder to Parent or Merger Sub pursuant to this Agreement, contains or
shall contain any untrue statement of material fact or omits or shall omit a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that, except as set forth in the written disclosure schedule
delivered on or prior to the date hereof by Parent to the Company that is
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III (the "PARENT DISCLOSURE SCHEDULE"):
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of Parent
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to own, lease and operate the
properties it purports to own, operate or lease and to carry on its business as
it is now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority and Approvals could not
reasonably be expected to have a Material Adverse Effect. Each of Parent and
each of its subsidiaries is duly qualified or licensed as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
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character of its properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.2 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against each of them in
accordance with its terms.
SECTION 3.3 No Conflict, Required Filings and Consents.
(a) Except as set forth in Section 3.3(a) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Certificate of Incorporation or By-Laws of
Parent or Merger Sub, (ii) conflict with or violate any Law applicable to Parent
or any of its subsidiaries or by which its or their respective properties are
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or impair Parent's or any of its subsidiaries' rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of Parent or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its subsidiaries or its or any of their respective properties are bound or
affected, except in any such case under clause (i), (ii) or (iii) of this
Section 3.3(a) for any such conflicts, violations, breaches, defaults or other
occurrences that could not reasonably be expected to have a Material Adverse
Effect.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance of this Agreement by Parent and Merger Sub will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except for applicable requirements, if any, of the Securities Act, the
Securities Exchange Act of 1934 (the "EXCHANGE ACT"), state securities or "blue
sky" laws or regulations, the pre-merger notification requirements of the HSR
Act, or any foreign antitrust or similar filings and the filing and recordation
of appropriate merger or other documents as required by the MBCA.
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SECTION 3.4 Certificate and By-Laws. Parent has heretofore furnished to
the Company a complete and correct copy of its Certificate of Incorporation and
By-Laws, as amended to date. Such Certificate of Incorporation and By-Laws are
in full force and effect. Neither Parent nor Merger Sub is in violation of any
of the provisions of its Certificate of Incorporation or Articles of
Incorporation, respectively, or By-Laws.
SECTION 3.5 Financing. Parent and Merger Sub have sufficient funds
available (through existing credit agreements or otherwise) to complete the
transactions contemplated hereby and to pay all fees and expenses related
thereto.
SECTION 3.6 Capitalization. As of February 28, 1997, the authorized
capital stock of Parent consisted of (i)70,000,000 shares of Parent Common Stock
of which 28,569,946 shares were issued and outstanding, all of which are validly
issued, fully paid and non-assessable, none of which were held in treasury,
4,500,000 shares were reserved for future issuance under Parent's Employee Stock
Option Plan of which 2,703,404 were subject to unexercised options, and 281,250
shares were reserved for future issuance under the Parent's Non-Employee
Director Stock Option Plan of which 192,500 were subject to unexercised options,
and (ii) 5,000,000 shares of preferred stock, $ .0001 par value per share, of
which no shares were issued and outstanding and none of which were held in
treasury. No material change in such capitalization has occurred between
February 28, 1997 and the date hereof. The authorized capital stock of Merger
Sub consists of 1,000 shares of common stock without par value of which 100
shares are issued and outstanding. Except as set forth in Section 3.6 of the
Parent Disclosure Schedule, as of the date hereof there are no options, warrants
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to issue or sell
any shares of capital stock of, or other equity interests in, Parent or any of
its subsidiaries. All shares of Parent Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Section
3.6 of the Parent Disclosure Schedule as of the date hereof, there are no
obligations, contingent or otherwise, of Parent or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock or the
capital stock of any subsidiary or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any such
subsidiary or any other entity. Except as set forth in Section 3.6 of the
Parent Disclosure Schedule, all of the outstanding shares of capital stock of
each of Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and all such shares are owned by Parent or another subsidiary of
Parent free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Parent's voting rights, charges or other encumbrances
of any nature whatsoever.
SECTION 3.7 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be filed
with the Securities and Exchange Commission (such agency and any successor
federal agency having similar powers being hereinafter referred to as the "SEC")
and has heretofore delivered to the Company, in the form filed with the SEC, (i)
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its last three Annual Reports on Form 10-K, (ii) Reports on Form 10-Q for the
quarters ended since its last 10-K, (iii) all proxy statements relating to
Parent's meetings of Shareholders (whether annual or special) since January 1,
1994, (iv) all other reports or registration statements filed by Parent with the
SEC since January 1, 1994, including Parent's most recent Prospectus dated June
13, 1996, and (v) all amendments and supplements to all such reports and
registration statements filed by Parent with the SEC (collectively, the "PARENT
SEC REPORTS"). The Parent SEC Reports (i) were prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) All financial statements included or incorporated in the Parent SEC
Reports present fairly the financial position of the Parent as of their
respective dates, and each of the related statements of income and (where
applicable) stockholders' equity and cash flows included therein present fairly
the results of operations and (where applicable) cash flows for the fiscal years
and periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments, and all such financial statements have been prepared
in accordance with Generally Accepted Accounting Principles applied on a
consistent basis, except as otherwise noted therein and except, as to unaudited
financial statements, that no statements of stockholders' equity have been
prepared, and no notes to such financial statements are included.
SECTION 3.8 Absence of Certain Changes or Events. Except as set forth in
Section 3.8 of the Parent Disclosure Schedule or in the Parent SEC Reports,
since October 31, 1996, Parent has conducted its business in the ordinary course
and there has not occurred: (i) any Material Adverse Effect; (ii) any amendments
or changes in the Certificate of Incorporation or By-Laws of Parent; (iii) any
damage to, destruction or loss of any assets of the Parent (whether or not
covered by insurance) that could have a Material Adverse Effect; (iv) any
material change by Parent in its accounting methods, principles or practices;
(v) any material revaluation by Parent of any of its assets, including without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (vi) any other action
or event that would have required the consent of the Company pursuant to Section
4.2 had such action or event occurred after the date of this Agreement; or (vii)
any sale of a material amount of assets of Parent or any of its subsidiaries
except in the ordinary course of business.
SECTION 3.9 Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, except for obligations
or liabilities incurred in connection with its incorporation or organization and
-27-
the transactions contemplated by this Agreement and except for this Agreement
and any other agreements or arrangements contemplated by this Agreement, Merger
Sub has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the Merger. The
Company and Shareholders, jointly and severally, covenant and agree that, during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, unless Parent shall
otherwise agree in writing, the Company shall conduct its business and shall
cause the businesses of its subsidiaries to be conducted only in, and the
Company and its subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice other than
actions taken by the Company or its subsidiaries in contemplation of the Merger;
and the Company and Shareholders shall use all reasonable commercial efforts to
preserve intact the business organization of the Company and its subsidiaries,
to keep available the services of the present officers, employees and
consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, neither the Company nor any of its subsidiaries
shall, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, directly
or indirectly do, or propose to do, any of the following without the prior
written consent of Parent:
(a) amend or otherwise change the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class, or any options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock, or any other ownership interest
(including, without limitation, any phantom interest) in the Company, any of its
subsidiaries or affiliates (except for the issuance of shares of Company Common
Stock issuable pursuant to Stock Options which were granted under the Company
Stock Option Plan and are outstanding on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company or any
of its subsidiaries (except for (i) sales of assets in the ordinary course of
business and in a manner consistent with past practice, (ii) dispositions of
obsolete or worthless assets, and (iii) sales of immaterial assets not in excess
of $100,000 in the aggregate);
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(d) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of the Company
may declare and pay a dividend to its parent, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) amend the terms or change the period of exercisability
of, purchase, repurchase, redeem or otherwise acquire, or permit any subsidiary
to purchase, repurchase, redeem or otherwise acquire, any of its securities or
any securities of its subsidiaries, including, without limitation, shares of
Company Common Stock or any option, warrant or right, directly or indirectly, to
acquire shares of Company Common Stock, or propose to do any of the foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) incur any indebtedness for borrowed money, other than draws in the
ordinary course of business under the Company's bank line of credit, or issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any person or, except
in the ordinary course of business consistent with past practice, make any loans
or advances; (iii) enter into or amend any material contract or agreement
calling for aggregate payments in excess of $50,000; (iv) authorize any capital
expenditures or purchase of fixed assets which are, in the aggregate, in excess
of $100,000 for the Company and its subsidiaries taken as a whole; or (v) enter
into or amend any contract, agreement, commitment or arrangement to effect any
of the matters prohibited by this Section 4.1(e);
(f) increase the compensation payable or to become payable to its officers
or employees, or grant any severance or termination pay to, or enter into any
employment or severance agreement with any director, officer or other employee
of the Company or any of its subsidiaries, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or
employees, except, in each case, as may be required by law, provided the Company
and its subsidiaries may increase wages (by not more than ten percent (10%) for
any individual or in the aggregate) in the ordinary course of business
consistent with past practice;
(g) take any action to change accounting policies or procedures (including,
without limitation, procedures with respect to revenue recognition, payments of
accounts payable and collection of accounts receivable);
(h) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
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the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the 1996 Balance Sheet or incurred in the ordinary course of business since the
date of the 1996 Balance Sheet and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1 (a) through (i) above, or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder.
SECTION 4.2 Conduct of Business by Parent Pending the Merger. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent covenants and agrees
that, unless the Company shall otherwise agree in writing, Parent shall not
directly or indirectly do, or propose to do, any of the following without the
prior written consent of the Company:
(a) amend or otherwise change Parent's Certificate or By-Laws;
(b) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of Parent may
declare and pay a dividend to its parent; or
(c) take or agree in writing or otherwise to take any action which would
make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect or prevent Parent from performing or cause Parent
not to perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 HSR Act. As promptly as practicable after the date of the
execution of this Agreement, the Company and Parent shall file notifications
under and in accordance with the HSR Act and any applicable antitrust or similar
acts in connection with the Merger and the transactions contemplated hereby and
to respond as promptly as practicable to any inquiries received from the Federal
Trade Commission (the "FTC"), the Antitrust Division of the Department of
Justice (the "ANTITRUST DIVISION"), and any applicable foreign agencies or
authorities having jurisdiction for additional information or documentation and
to respond as promptly as practicable to all inquiries and requests received
from any State Attorney General or other governmental authority in connection
with antitrust matters.
SECTION 5.2 Registration Requirements
(a) Certain Definitions. In addition to any definitions elsewhere provided
-------------------
for in this Agreement, including this Section 5.2, the following terms shall
have the following respective meanings when used in this Section 5.2:
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(i) The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (as defined below), and the declaration
or ordering of effectiveness of such registration statement.
(ii) "REGISTRABLE SECURITIES" means (A) the shares of Parent Common
-
Stock issued as a part of the Merger Consideration to those certain persons
holding Shares of the Company Common Stock at the Effective Time (the
"REGISTRABLE SHARES"), and (B) any other shares of Parent Common Stock
-
issued as a dividend or other distribution with respect to the Registrable
Shares.
(b) Registration on Form S-3. Not later than fifteen (15) days following
------------------------
the Effective Date, Parent agrees to prepare and file with the SEC a
Registration Statement on Form S-3 under the Securities Act (the "REGISTRATION
STATEMENT") and proceed to use reasonable efforts to obtain all such
qualifications and compliances as may reasonably be requested by the
Shareholders and as would permit or facilitate the resale by the Shareholders
and the Requesting Holders (as such term is defined in Section 5.2(c) below) of
all of the Registrable Securities.
(c) Right to Include Registrable Securities in an Incidental Registration.
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If the Parent proposes to register any of its Parent Common Stock under the
Securities Act, whether or not for sale for its own account, on a form and in a
manner which would permit registration of Registrable Securities for sale to the
public under the Securities Act, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so,
describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration, and upon the written
request of any such holder delivered to the Parent within ten (10) business days
after the giving of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method or
methods of disposition thereof), the Parent will use its reasonable efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Parent has been so requested to register by the holders of Registrable
Securities (hereinafter "REQUESTING HOLDER"), to the extent required to permit
the disposition of the Registrable Securities in accordance with the intended
methods thereof, provided that:
--------
(i) if, at any time after giving such written notice of its intention
to register any of its securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Parent shall determine for any reason not to register such securities, the
Parent may, at its election, give written notice of such determination to
each holder of Registrable Securities and thereupon shall be relieved of
its obligation to register any Registrable Securities in connection with
such registration (but not from its obligation to pay the registration
expenses in connection therewith as provided in Section 5.2(d));
(ii) if (A) the registration so proposed by the Parent involves an
-
underwritten offering of the securities so being registered, whether or not
for sale for the account of the Parent, to be distributed by or through one
or more
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underwriters of recognized standing under underwriting terms appropriate
for such a transaction, and (B) the managing underwriter of such
underwritten offering shall advise the Parent in writing that, in its
judgment, the distribution of all or a specified portion of such
Registrable Securities concurrently with the securities being distributed
by such underwriters will materially adversely affect the distribution of
such securities by such underwriters (such written advice to state the
reasons therefor), then the Parent will promptly furnish each such holder
of Registrable Securities with a copy of such written advice and may
require, by written notice to each such holder accompanying such written
advice, that the distribution of all or a specified portion of such
Registrable Securities be excluded from such distribution (in case of an
exclusion of a portion of such Registrable Securities, such portion to be
allocated among such holders in proportion to the respective numbers of
shares of Registrable Securities owned by such holders);
(iii) the Parent shall not be obligated to effect any registration of
Registrable Securities under this Section 5.2(c) incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option
or other employee benefit plans or incidental to the registration of any
non-equity securities not convertible into equity securities; and
(iv) if any registration pursuant to Section 5.2(c) shall be in
connection with an underwritten public offering, each holder of Registrable
Securities agrees by acquisition of such Registrable Securities, if so
required by the managing underwriter, not to effect any public sale or
distribution of Registrable Securities (other than as part of such
underwritten public offering) within seven days prior to the effective date
of such registration statement or for such period after the effective date
of such registration statement as is required by the underwriters with
respect to company insiders.
(d) Expenses of Registration. Parent shall pay all of the reasonable out-
------------------------
of-pocket expenses incurred in connection with any registration statement
prepared and filed pursuant to this Section 5.2, including, without limitation,
all SEC and blue sky registration and filing fees, printing expenses, transfer
agent and registrar fees, the fees and disbursements of Parent's outside counsel
and independent accountants including expenses incurred in connection with any
special audits incidental to or required by such registration. Any underwriting
discounts, fees and disbursements of counsel to the Shareholders or Requesting
Holders, selling commissions and stock transfer taxes applicable to the
Registrable Securities registered on behalf of Shareholders or Requesting
Holders shall be borne by the Shareholders and Requesting Holders.
(e) Registration Procedures. If and whenever the Parent is required to use
-----------------------
its reasonable efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 5.2(b) and 5.2(c), the Parent
will promptly:
(i) cooperate with any underwriters and the holders of such
Registrable Securities, and will enter into a usual and customary
underwriting agreement with respect thereto and take all such other
reasonable actions as are necessary
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or advisable to permit, expedite and facilitate the disposition of such
Registrable Securities in the manner contemplated by the related
registration statement, and the Parent will provide to the holders of such
Registrable Securities, any underwriter participating in any distribution
thereof pursuant to a registration statement, and any attorney, accountant
or other agent retained by any holder of Registrable Securities or
underwriter, reasonable access to appropriate Parent officers and employees
to answer questions and to supply information reasonably requested by any
such holders of Registrable Securities, underwriter, attorney, accountant
or agent in connection with such registration statement;
(ii) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable efforts to
cause such registration statement to become effective and in the case of a
registration pursuant to Section 5.2(b) hereof, to remain effective until
the earlier of the resale of all of the Registrable Securities so
registered or three hundred sixty five (365) days subsequent to the
effective date of the Registration Statement;
(iii) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
and to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities and other securities covered by
such registration statement until the earlier of such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement or, subject to subdivision (ii) above, the
expiration of such registration statement; and will furnish, upon request,
to each such seller and each Requesting Holder prior to the filing thereof
a copy of any amendment or supplement to such registration statement or
prospectus and shall not file any such amendment or supplement to which any
such seller or holder shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or of the rules or regulations
thereunder;
(iv) furnish to each seller of such Registrable Securities and each
Requesting Holder and the underwriters (if any) such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement (including
each preliminary prospectus and any summary prospectus), in conformity with
the requirements of the Securities Act, such documents, if any,
incorporated by reference in such registration statement or prospectus, and
such other documents, as such seller or Requesting Holder may reasonably
request;
(v) use its reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of the states of the United
States as each seller shall reasonably request, to keep such registration
or qualification in effect for so long as such registration statement
remains in effect, and do any and all other acts and things which may be
necessary or advisable to enable
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such seller to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement, except that
the Corporation shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (v) be
obligated to be so qualified, or to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;
(vi) upon request, furnish to each seller of Registrable Securities
and each Requesting Holder a signed counterpart, addressed to such seller
and such holder, of (A) an opinion of counsel for the Parent, dated the
-
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing
under the underwriting agreement), and (B) a "comfort" letter, dated the
-
effective date of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent public
accountants who have certified the Parent's financial statements included
in such registration statement, covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and, in the case of the accountants' letter, such other
financial matters, as the principal underwriter for such sellers or such
holders may reasonably request;
(vii) in the event of the issuance of any stop order suspending the
effectiveness of any registration statement or of any order suspending or
preventing the use of any prospectus or suspending the qualification of any
Registrable Securities for sale in any jurisdiction, use its reasonable
efforts to obtain its withdrawal;
(viii) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement; and
(x) use its reasonable efforts to list all Stock covered by such
registration statement on each securities exchange on which any of the
Common Stock is then listed or on the Nasdaq Stock Market if the Parent's
shares trade on such market.
(f) Suspension of Effectiveness. Notwithstanding anything contained in
---------------------------
this Section 5.2 to the contrary, the Parent may delay filing a registration
statement (for up to thirty (30) days in the case of Section 5.2(b)), and may
withhold efforts to cause the registration statement to become effective, if the
Parent reasonably determines in good faith that such registration would (1)
interfere with or affect the negotiation or completion of any transaction that
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is being contemplated by the Parent (whether or not a final decision has been
made to undertake such transaction) at the time the right to delay is exercised,
or (2) involve initial or continuing disclosure obligations that might not be in
the best interest of the Parent's shareholders. If, after a registration
statement becomes effective, the Parent advises the holders of registered shares
that the Parent considers it appropriate for the registration statement to be
amended, the holders of such shares shall suspend any further sales of their
registered shares until the Parent advises them that the registration statement
has been amended; and the Parent agrees to cause the registration statement to
be amended promptly after providing such advice.
(g) Information by Seller. The Parent may require each seller of
---------------------
Registrable Securities as to which any registration is being effected to furnish
the Parent such information regarding such seller and the distribution of such
securities as the Parent may from time to time reasonably request in writing and
as shall be required by law or by the SEC in connection therewith. All
information provided to Parent by such seller shall be accurate and complete in
all material respects.
(h) Indemnification.
---------------
(i) Parent will indemnify Shareholders and each person
controlling Shareholders within the meaning of Section 15 of the Securities
Act, with respect to any registration, qualification or compliance which
has been effected pursuant to this Agreement, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including
any of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they
were made, not misleading, or any violation by Parent of any rule or
regulation promulgated under the Securities Act applicable to Parent in
connection with any such registration, qualification or compliance, and
Parent will reimburse Shareholders and each person controlling Shareholders
for any legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage,
liability or action, provided that Parent will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to Parent specifically for inclusion in such
registration statement, prospectus, offering circular or other document by
Shareholders or a controlling person of either of the Shareholders seeking
indemnification.
(ii) Each Shareholder and Requesting Holder will indemnify
Parent, each of its directors and officers and each underwriter, if any, of
the Parent's securities covered by such a registration statement and each
person who controls Parent or such underwriter within the meaning of
Section 15 of the Securities
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Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in the registration
statement, prospectus, offering circular or other document, or any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse Parent, such directors, officers or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in the registration statement, prospectus, offering
circular or other document solely in reliance upon and in conformity with
written information furnished to Parent by such Shareholder or Requesting
Holder specifically for inclusion in such registration statement,
prospectus, offering circular or other document, provided that in no event
shall any indemnity under this subsection exceed the gross proceeds
received by Shareholders from the sale of any of the Registrable
Securities.
(i) Supplemental Covenants with Respect to Registrable Securities. With a
-------------------------------------------------------------
view to making available the benefits of certain rules and regulations of the
SEC which may at any time permit the sale of the Registrable Securities to the
public without registration, at all times from and after the lapse of the
Registration Statement, Parent agrees to:
(i) Make and keep public information available concerning the
Parent, as those terms are understood and defined in Rule 144 under the
Securities Act;
(ii) File with the SEC in a timely manner all reports and other
documents required of Parent under the Securities Act and the Exchange Act;
and
(iii) So long as Shareholders owns any Registrable Securities,
furnish to Shareholders forthwith upon request a written statement by
Parent as to its compliance with the reporting requirements of said Rule
144, and of the Securities Act and the Exchange Act, (i) an opinion of
counsel addressed to the Parent's transfer agent necessary to the effect
the transfer of any and all Registrable Securities sold by the
Shareholders; and (ii) a copy of the most recent annual or quarterly report
of Parent, and such other reports and documents of Parent, and such other
reports and documents so filed as Shareholders may reasonably request in
availing itself of any rule or regulation of the SEC allowing Shareholders
to sell any such Registerable Securities without registration.
SECTION 5.3 Access to Information; Confidentiality.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject (from which such party
shall use reasonable efforts to be released), the Company shall (and shall cause
each of its subsidiaries to) afford to the officers, employees, accountants,
counsel and other representatives of the Parent, reasonable access, during the
period to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Company each shall (and
shall cause each of its subsidiaries to) furnish promptly to the Parent all
-36-
information concerning its business, properties and personnel as such party may
reasonably request, and the Company shall make available to the Parent the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the Company's (or its subsidiary's) business,
properties and personnel as Parent may reasonably request. Parent shall keep
such information confidential in accordance with the terms of the
confidentiality agreement, dated November 15, 1996, between Parent and the
Company.
(b) Subject to the terms and conditions of that certain confidentiality
agreement, dated March 13, 1997, between the Shareholders and Parent, from the
date hereof through the Effective Time, the Parent shall provide to the
Shareholders certain confidential non-public information reasonably requested by
the Shareholders concerning the Parent and its business operations (such
agreement, together with the confidentiality agreement referred to in Section
5.3(a) being hereinafter collectively referred to as the "CONFIDENTIALITY
AGREEMENTS").
SECTION 5.4 Consents; Approvals. The Company, Shareholders and Parent
shall each use their reasonable efforts to obtain all consents, waivers,
approvals, authorizations or orders (including, without limitation, all United
States and foreign governmental and regulatory rulings and approvals), and the
Company and Parent shall make all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby, in each case as promptly as practicable; the
parties agreeing, however, that the Company and Shareholders shall bear the
principal responsibility for obtaining any necessary landlord consents. To
faciliate the obtaining of any required landlord consents, the Parent agrees
that it will refrain, and will cause the Company and its subsidiaries to
refrain, from any act or omission that would result in the consolidated net
worth of the Company immediately after the Effective Time being less than
consolidated net worth of the Company immediately prior to the Effective Time.
SECTION 5.5 Director and Officer Indemnification.
(a) The By-laws of the Surviving Corporation shall contain the provisions
with respect to indemnification set forth in the By-laws of the Company as of
January 31, 1997, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time were present or former directors, officers, employees or agents of the
Company ("INDEMNIFIED AGENTS"), unless such modification is required by law.
(b) From and after the Effective Time and to the fullest extent permitted
by law, the Surviving Corporation shall honor the indemnity obligations of the
Company referenced in Section 5.5(a); provided, however, that no Shareholder
shall be entitled to any indemnification with respect to any actual or alleged
act or omission relating to this Agreement or the Merger.
(c) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Agents, shall be binding on all successors and assigns of
the
-37-
Surviving Corporation and the Parent and shall be enforceable by the Indemnified
Agents.
SECTION 5.6 Notification of Certain Matters. Prior to Closing, the
Company and Shareholders shall give prompt notice to Parent, and Parent shall
give prompt notice to the Company and Shareholders, of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained in this Agreement to
become untrue or inaccurate in any respect (but subject to any materiality
limitations expressly provided for in any such representations or warranties),
or (ii) any failure of the Company, Shareholders, Parent or Merger Sub, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by he, she or it hereunder; provided, however,
that the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice, except if and to the extent provided in Section 8.5 below.
SECTION 5.7 Further Action/Tax Treatment. Upon the terms and subject to
the conditions hereof each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. Each of Parent, Merger Sub and the Company shall use its
best efforts to cause the Merger to qualify, and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
SECTION 5.8 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of counsel be required by law.
SECTION 5.9 Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed at or before the Effective Time.
SECTION 5.10 Employment and Non-Competition Agreements.
(a) At the Closing, Company shall cause those persons identified on
Exhibit "C" to duly execute and deliver an Employment and Non-Compete Agreement
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substantially in the form of Exhibit "D" and to terminate in writing any
existing agreement to which Company or its subsidiaries is a party respecting
employment.
(b) At the Closing, each of the Shareholders identified on Exhibit "A"
shall execute and deliver a Non-Competition Agreement substantially in the form
of Exhibit "E".
SECTION 5.11 Benefit Plans.
(a) Parent shall cause the Surviving Corporation to ensure that all persons
employed by the Company and its subsidiaries immediately preceding the Effective
Time, including those on vacation, leave of absence or disability (the
"EFFECTIVE TIME EMPLOYEES"), will be employed by the Surviving Corporation or
the Parent on and after the Effective Time for a period of at least one year, on
substantially the same terms (including salary, employee benefits, job
responsibility and location) as those provided to Effective Time Employees
immediately prior to the Effective Time; provided, however, that the Surviving
Corporation shall not be required to employ persons who were on disability or
other leave of absence on or prior to the Effective Time and who do not return
to work with the Surviving Corporation or the Parent after the Effective Time.
(b) Parent shall not, and shall cause the Surviving Corporation not to, at
any time prior to 60 days after the Closing Date, effectuate a "plant closing"
or "mass layoff" as those terms are defined in the Worker Adjustment and
Restraining Notification Act of 1988 ("WARN") affecting in whole or in part any
facility, site of employment, operating unit or employee of the Company or any
subsidiary of the Company without complying fully with the requirements of WARN.
(c) Effective as of the Effective Time and for a period of at least one
year thereafter, Parent shall cause the Surviving Corporation to continue to
maintain, as sponsoring employer, the employee benefit plans listed in Section
5.11(c) of the Company Disclosure Schedule, and to continue health and welfare
benefits that are comparable to those currently provided by the Company or its
subsidiaries. Notwithstanding the foregoing sentence, however, the Surviving
Corporation shall not be obligated to maintain any employee benefit plan listed
in Section 5.11(c) of the Company Disclosure Schedule if maintaining such plan
would result in a loss of tax benefits or advantages due to a discrimination
problem under the Code or ERISA. All welfare benefit plans of Parent or the
Surviving Corporation in which the Company's or its subsidiaries' employees
participate after the Effective Time shall (i) recognize expenses and claims
that were incurred by the such employees in the plan year in which the Effective
Time occurs for purposes of computing deductible amounts and copayments under
the Company's plans as of the Effective Time and (ii) provide coverage for pre-
existing health conditions to the extent covered under the applicable plans or
programs of the Company as of the Effective Time. In addition, employees of the
Surviving Corporation shall receive credit for their prior service with the
Company and its subsidiaries for eligibility and vesting purposes and for
vacation accrual purposes.
(d) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
-39-
and the Effective Time Employees, shall be binding upon all successors and
assigns of the Surviving Corporation and the Parent, and shall be enforceable by
the Effective Time Employees.
SECTION 5.12 No Solicitations.
(a) No Shareholder will take, nor permit the Company, any of its
subsidiaries or any affiliate of a Shareholder (or authorize or permit any
investment banker, financial advisor, attorney, accountant or other person
retained by or acting for or on behalf of a Shareholder, the Company, any
subsidiary or any such affiliate) to take, directly or indirectly, any action to
solicit, encourage, receive, negotiate, assist or otherwise facilitate
(including by furnishing confidential information with respect to the Company or
any subsidiary or permitting access to the assets and properties and books and
records of the Company or any subsidiary) any offer or inquiry from any person
concerning an Acquisition Proposal (as hereinafter defined). If any
Shareholder, the Company, any subsidiary or any such affiliate (or any such
person acting for or on their behalf) receives from any person any offer,
inquiry or informational request referred to above, the Shareholders will
promptly advise such person, by written notice, of the terms of this Section
5.12 and will promptly, orally and in writing, advise Parent and Merger Sub of
such offer, inquiry or request and deliver a copy of such notice to Parent and
Merger Sub.
(b) For purposes of this Agreement the term "ACQUISITION PROPOSAL" means
any proposal for a merger or other business combination to which the Company or
any of its subsidiaries is a party or the direct or indirect acquisition of any
equity interest in, or a substantial portion of the assets of, the Company or
any of its subsidiaries, other than the transactions contemplated by this
Agreement.
SECTION 5.13 General Releases. At the Closing, each Shareholder shall
deliver general releases to Parent and Merger Sub, substantially in the form of
Exhibit "F", releasing Company and its directors, officers, agents and employees
from all claims arising out of events occurring prior to the Effective Time,
except (i) as may be described in written contracts and expressly described and
excepted from such releases, (ii) in the case of Shareholders who are employees
of Company, compensation for current periods expressly described and excepted
from such releases, (iii) in the case of Shareholders who are officers or
directors claims for indemnification for acts or omissions taken in their
capacity as such, provided such acts or omissions do not relate to this
Agreement or the Merger, or (iv) claims under this Agreement or any of the
Ancillary Instruments. Such releases shall also contain waivers of any right of
contribution or other recourse against Company with respect to representations,
warranties or covenants made herein by Company.
SECTION 5.14 Escrow Agreement. At the Closing, Company shall cause each of
those Shareholders identified on Exhibit "A" to duly execute and deliver an
Escrow Agreement, substantially in the form of Exhibit "G", and to deposit with
the named escrow agent, as security for such Shareholder's indemnity
obligations under this Agreement, a pro rata portion of the shares of Parent
Common Stock issued to such Shareholder as Merger Consideration, such pro rata
share to be equal to the percent (10%) of the total number of shares issued to
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such Shareholder or to such Shareholder's associates, specifically including any
individual retirement accounts in which the Shareholder of such Shareholder's
spouse is a beneficiary, rounded to the nearest whole number.
SECTION 5.15 Shareholder's Debt. Prior to the Closing, each Shareholder
shall repay in full, and shall cause such Shareholder's affiliates and
associates to repay in full, all obligations owed to the Company or any of its
subsidiaries.
SECTION 5.16 Shareholder Agreements. Prior to Closing, Company and the
Shareholders shall agree to terminate any Contract to which one or more of such
persons is a party that in any way relates to the voting of shares of capital
stock of Company or the transfer thereof.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act and any applicable foreign antitrust or similar acts
shall have expired or been terminated;
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any proceeding brought
by any administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
and there shall not be any action taken, or any statute, rule, regulation or
order enacted, entered, enforced or deemed applicable to the Merger, which makes
the consummation of the Merger illegal; and
(c) Governmental Actions. There shall not have been instituted, pending or
threatened any action or proceeding (or any investigation or other inquiry that
might result in such an action or proceeding) by any governmental authority or
administrative agency before any governmental authority, administrative agency
or court of competent jurisdiction, nor shall there be in effect any judgment,
decree or order of any governmental authority, administrative agency or court of
competent jurisdiction, in either case, seeking to prohibit or limit Parent from
exercising all material rights and privileges pertaining to its ownership of the
Surviving Corporation or the ownership or operation by Parent or any of its
subsidiaries of all or a material portion of the business or assets of Parent or
any of its subsidiaries, or seeking to compel Parent or any of its subsidiaries
to dispose of or hold separate all or any material portion of the business or
assets of Parent or any of its subsidiaries (including the Surviving Corporation
and its subsidiaries), as a result of the Merger or the transactions
contemplated by this Agreement.
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SECTION 6.2 Additional Conditions to Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger are also subject
to the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company and Shareholders contained in this Agreement shall be true and
correct in all respects at and as of the Effective Time with the same force and
effect as if made at and as of such time, except for (i) changes contemplated by
this Agreement, (ii) those representations and warranties which address matters
only as of a particular date (which shall have been true and correct as of such
date), and Parent and Merger Sub shall have received a certificate to such
effect signed by each Shareholder and the President and the Chief Financial
Officer of the Company;
(b) Agreements and Covenants. The Shareholders and Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by he, she or it at
or prior to the Effective Time, and Parent and Merger Sub shall have received a
certificate to such effect signed by each Shareholder and the President and the
Chief Financial Officer of the Company; and
(c) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by the
Company for the due authorization, execution and delivery of this Agreement and
the consummation by it of the transactions contemplated hereby shall have been
obtained and made by the Company, except where the failure to receive such
consents, etc. could not reasonably be expected to have a Material Adverse
Effect on the Company or Parent, the parties agreeing that the failure to obtain
required landlord consents for at least ninety five percent (95%) of all the
Real Property leased by the Company or its subsidiaries shall be reasonably
deemed to have a Material Adverse Effect on the Company;
(d) Opinion of Counsel. The Parent and Merger Sub shall have received a
written opinion of Xxxxxx Xxxxxxx, PLLC, counsel to the Company and
Shareholders, substantially in the form of Exhibit "H" attached hereto.
(e) Audited Financial Statements. The Parent and Merger Sub shall have
received the audited consolidated financial statements (including a balance
sheet and statement of income) of the Company and its subsidiaries for the
fiscal year ended February 28, 1997, and an unqualified report thereon from
Xxxxxx Xxxxxxxx, which confirms, to the reasonable satisfaction of the Parent
and the Merger Sub, that the Recent Financial Statements provided to the Parent
and Merger Sub were correct in all material respects.
(f) Compliance with Securities Laws. The Parent shall have received from
each person or entity receiving Parent Common Stock in connection with the
Merger (other than the Shareholders) an investment letter in form and substance
reasonably acceptable to Parent that is comparable to the representations and
warranties of the Shareholders set forth in Section 2.29 of this Agreement, or
Parent shall have otherwise received evidence reasonably satisfactory to it that
the issuance of the Parent Common Stock in the Merger is exempt from
registration under the Securities Act.
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SECTION 6.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall be true and correct in
all respects on and as of the Effective Time with the same force and effect as
if made at and as of such time, except for (i) changes contemplated by this
Agreement, (ii) those representations and warranties which address matters only
as of a particular date (which shall have been true and correct as of such
date), and the Company shall have received a certificate to such effect signed
by the Chairman and the Chief Financial Officer of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate to such effect
signed by the Chairman and the Chief Financial Officer of Parent;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by Parent and Merger Sub for the authorization, execution and delivery of
this Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Merger Sub, except where
the failure to receive such consents, etc. could not reasonably be expected to
have a Material Adverse Effect on the Company or Parent;
(d) Opinion of Counsel. The Shareholders shall have received a written
opinion of Xxxxx, Xxxxxxxx & Xxxxxxx, LLC, counsel to the Parent and Merger Sub,
substantially in the form of Exhibit "I" attached hereto; and
(e) Tax Opinion. The Shareholders shall have received a written opinion of
Xxxxxx Xxxxxxx PLLC in form and substance reasonably satisfactory to them, to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368 of the Code.
(f) The Provident Bank. The Parent shall have furnished the Shareholders
with written evidence reasonably satisfactory to Shareholders of the payment to
The Provident Bank ("PROVIDENT") of all amounts due to it by the Company and
Xxxxx X. Xxxxxxx ("XXXXXXX") pursuant to the terms of that certain Purchase and
Sale of Stock Agreement between Company and Provident dated August 31, 1994, as
amended on December 13, 1996.
(g) Release from Personal Guaranties. The Parent shall have furnished
Xxxxxxx with written evidence reasonably satisfactory to him that Michigan
National Bank has released Xxxxxxx and his spouse from any personal guaranties
relating to amounts owed by the Company or its subsidiaries to Michigan National
Bank.
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ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of Directors of
Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by May 15, 1997, (provided that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger (provided that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party who has not complied with its
obligations under Section 5.7 and such noncompliance materially contributed to
the issuance of any such order, decree or ruling or the taking of such action);
or
(d) by Parent or the Company, respectively (i) if any representation or
warranty of the Company or Parent, respectively, set forth in this Agreement
shall be untrue when made, or (ii) upon a breach of any covenant or agreement on
the part of the Company or Parent, respectively, set forth in this Agreement,
such that in either case of (i) or (ii) above the conditions set forth in
Section 6.2(a) or 6.2(b), or Section 6.3(a) or 6.3(b), as the case may be, would
not be satisfied (either (i) or (ii) above being a "TERMINATING BREACH"),
provided, that, if such Terminating Breach is curable prior to May 15, 1997, by
the Company or Parent, as the case may be, through the exercise of its
reasonable efforts and for so long as the Company or Parent, as the case may be,
continues to exercise such reasonable efforts, neither Parent nor the Company,
respectively, may terminate this Agreement under this Section 7.1(d); or
(e) by Parent, if any representation or warranty of the Company shall have
become untrue such that the condition set forth in Section 6.2(a) would not be
satisfied, or by the Company, if any representation or warranty of Parent shall
have become untrue such that the condition set forth in Section 6.3(a) would not
be satisfied, in either case other than by reason of a Terminating Breach.
SECTION 7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or Shareholders except (i) as set forth in
Section 9.5 hereof, (ii) the Confidentiality Agreements shall survive as
provided therein, and (iii) nothing herein shall relieve any party from
liability for any breach hereof.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 By Shareholders. All representations, warranties, covenants,
and agreements of the parties herein shall survive the Closing subject to and in
accordance with Section 9.1 below. Subject to the terms and conditions of this
Article VIII, each Shareholder, jointly and severally, shall indemnify and hold
harmless Parent, Merger Sub and the Surviving Corporation (hereinafter
collectively, the "PARENT INDEMNITEES") from and against all Claims asserted
against, resulting to, imposed upon, or incurred by any of Parent Indemnitees,
directly or indirectly, by reason of, arising out of or resulting from (a) the
inaccuracy (as of the date hereof, the date referred to in the applicable
representation or warranty and as of the Closing Date) or breach of any
representation or warranty of Company or of any Shareholder contained in or made
pursuant to this Agreement or any closing certificates delivered in connection
therewith; provided, however, that for purposes of this Section 8.1 any
qualification of a representation or warranty by reference to the materiality of
matters stated therein shall be disregarded, in determining any inaccuracy,
untruth, incompleteness or breach thereof, (b) the breach of any covenant or
agreement of Company or of any Shareholder contained in this Agreement or any
closing certificates delivered in connection therewith, (c) any Claims resulting
from the manner in which Company has filed Tax Returns, except for Claims
relating to the ongoing audit disclosed in Section 2.19(b) of the Company
Disclosure Schedule, (d) any pollution, threat to human health or the
environment, or exposure to, or manufacture, processing, distribution, use,
treatment, generation, transport or handling, disposal, emission, discharge,
storage or release of any pollutant, contaminant or hazardous or toxic material
or waste that (1) is related in any way to Company's or its subsidiary's or any
previous owner's or operator's ownership, operation or occupancy of the
business, properties and assets presently or formerly owned or used by Company
or any of its subsidiaries, and which (2) in whole or in part occurred, existed,
arose out of conditions or circumstances that existed, or was caused on or
before the Effective Time, whether or not disclosed pursuant to Section 2.20 or
otherwise, (e) the demand or attempted demand by any Shareholder relating to
rights, if any, for appraisal arising out of the Merger in accordance with the
MBCA, (f) any Claim by any person or entity, whether or not identified in this
Agreement, that such person has or had any rights to the capital stock, or
payment of any distribution with respect thereto (other than a portion of the
Merger Consideration as provided for in this Agreement), of Company or any
present or former subsidiary or affiliate, except for the Claim of Provident
pursuant to that certain Purchase and Sale of Stock Agreement between Provident
and Company dated August 31, 1994, as amended December 13, 1996, or (g) any
failure to collect any accounts, notes or other receivables of Company or its
subsidiaries existing on the Closing Date (net of reserves on the Recent
Financial Statements) not later than 120 days after Closing. As used in this
Article VIII, the term "CLAIM" shall include (i) all losses, damages (including,
without limitation, consequential damages with respect to third party claims but
not with respect to independent claims of Parent, Merger Sub, Company and/or the
Shareholders), judgments, awards, settlements, costs and expenses (including,
without limitation, interest (including prejudgment interest in any litigated
matter), penalties, court costs and attorneys fees and expenses (including those
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incurred to enforce rights under this Article VIII)); and (ii) all demands,
claims, suits, actions, costs of investigation, causes of action, proceedings
and assessments, whether or not ultimately determined to be valid.
SECTION 8.2 By Parent and Merger Sub. Subject to the terms and conditions
of this Article VIII, Parent and Merger Sub, jointly and severally, hereby agree
to indemnify and hold harmless each Shareholder and, prior to the Closing, the
Company (hereinafter collectively, the "COMPANY INDEMNITEES") from and against
all Claims asserted against, resulting to, imposed upon or incurred by any such
Shareholder, directly or indirectly, by reason of, arising out of, or resulting
from (a) the inaccuracy (as of the date hereof, the date referred to in the
applicable representation or warranty and as of the Closing Date) or breach of
any representation or warranty of Parent or Merger Sub contained in or made
pursuant to this Agreement or any closing certificates delivered in connection
therewith; provided, however, that for purposes of this Section 8.2 any
qualification of a representation or warranty by reference to the materiality of
matters stated therein shall be disregarded, in determining any inaccuracy,
untruth, incompleteness or breach thereof, or (b) the breach of any covenant or
agreement of Parent or Merger Sub contained in this Agreement or any closing
certificates delivered in connection therewith.
SECTION 8.3 Indemnification of Third-Party Claims. Promptly after receipt
by any person entitled to indemnification under this Article VIII (an
"INDEMNIFIED PARTY") of notice of the commencement of any action by a third
party (a "THIRD PARTY CLAIM") in respect of which the Indemnified Party will
seek indemnification under this Article VIII, the Indemnified Party shall notify
each person that is obligated to provide such indemnification (an "INDEMNIFYING
PARTY") thereof in writing, but any failure to so notify the Indemnifying Party
shall not relieve it from any obligation or liability that it may have to the
Indemnified Party other than to the extent the Indemnifying Party is actually
prejudiced thereby. The Indemnifying Party shall be entitled to participate in
the defense of such action and, provided that within fifteen (15) days after
receipt of such written notice the Indemnifying Party confirms in writing its
responsibility therefor and reasonably demonstrates that it will be able to pay
the full amount of potential liability in connection with any such claim, to
assume control of such defense with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that:
-----------------------
(i) the Indemnified Party shall be entitled to participate in the
defense of such claim and to employ counsel at its own expense to assist in
the handling of such claim; provided, however, that the employment of such
-----------------------
counsel shall be at the expense of the Indemnifying Party only if the
Indemnified Party determines in good faith that such participation is
appropriate in light of defenses not available to the Indemnifying Party,
conflicts of interest or other similar circumstances;
(ii) the Indemnifying Party shall obtain the prior written approval
of the Indemnified Party before entering into any settlement of such claim
or ceasing to defend against such claim (with such approval not to be
unreasonably withheld);
(iii) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to each
Indemnified Party of a release from all liability in respect of such claim;
and
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(iv) the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and
the Indemnified Party shall be entitled to have sole control over, the
defense or settlement of (A) any claim to the extent the claim seeks an
order, injunction, non-monetary or other equitable relief against the
Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or
prospects of the Indemnified Party or (B) any claim relating to Taxes.
If the Indemnifying Party does not assume control of the defense of such
claim as provided in this Section 8.3, the Indemnified Party shall defend such
claim in such manner as it may deem appropriate at the cost and expense of the
Indemnifying Party, and the Indemnifying Party will promptly reimburse the
Indemnified Party therefor in accordance with this Section 8.3. The
reimbursement of fees, costs and expenses required by this Section 8.3 shall be
made by periodic payments during the course of the investigations or defense, as
and when bills are received or expenses incurred. Nothing contain in this
Section 8.3 shall be read to limit indemnification under this Article VIII to
only Third Party Claims; the parties hereto acknowledge and agree that
indemnification rights under this Article VIII exist with respect to losses that
arise independent of any Third Party Claims.
SECTION 8.4 Payment.
(a) The Indemnifying Party shall promptly pay the Indemnified Party any
amount due under this Article VIII. Upon judgment, determination, settlement or
compromise of any Third Party Claim, the Indemnifying Party shall pay promptly
on behalf of the Indemnified Party, and/or to the Indemnified Party in
reimbursement of any amount theretofore required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and all other
Claims of the Indemnified Party with respect thereto, unless in the case of a
judgment an appeal is made from the judgment. If the Indemnifying Party desires
to appeal from an adverse judgment, then the Indemnifying Party shall post and
pay the cost of the security or bond to stay execution of the judgment pending
appeal. Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed and be subrogated to all rights of such
Indemnified Party with respect to the Claim to which such indemnification
related.
(b) To the extent that any Indemnifying Party shall be required to
indemnify any Indemnified Party pursuant to this Article VIII, such
indemnification obligation may be satisfied for all purposes hereunder by
delivering to such Indemnified Party certificates, duly endorsed for transfer,
representing that number of shares of Parent Common Stock having a value,
rounded to the nearest share, equal to the amount due such Indemnified Party
hereunder, with each such share of Parent Common Stock being deemed for purposes
hereof to have a value equal to the Average Price.
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SECTION 8.5 Waiver. The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the Closing, and regardless of
whether such breach, violation or failure is deemed to be "material" for
purposes of Article VI; provided, however, that if any party notifies the other
in writing pursuant to Section 5.6 of any fact or circumstance occurring
subsequent to the date hereof, that causes any representation or warranty
contained in this Agreement to become untrue or inaccurate, and if the
occurrence at issue did not result from the breach of any covenant on the part
of the disclosing party, and if the other party elects to consummate the Closing
despite the disclosure of such fact or circumstance, then such other party shall
be deemed to have waived any rights to indemnification hereunder with respect to
such subsequently disclosed fact or circumstance but only if such fact or
circumstance is accurately and fully disclosed and then only to the extent so
disclosed. Notwithstanding anything contained in this Agreement to the contrary
any party may elect to postpone the Closing for up to two (2) business days in
order to review and consider any material disclosures that are submitted to it
by the other party, pursuant to Section 5.6 above, less than two (2) business
days prior to the Closing Date.
SECTION 8.6 Adjustments. All indemnification or reimbursement payments
required pursuant to this Agreement shall be made net of all tax and insurance
benefits actually received by the Indemnified Party. In the event that any
claim for indemnification asserted hereunder is, or may be, the subject of any
insurance coverage or other right to indemnification or contribution from any
third person, the Indemnified Parties expressly agree that they shall promptly
notify the applicable insurance carrier of any such claim or loss and tender
defense thereof to such carrier, and shall also promptly notify any potential
third party indemnitor or contributor which may be liable for any portion of
such loses or claims. The Indemnified Parties agree to pursue, at the cost and
expense of the Indemnifying Party, such claims diligently and to reasonably
cooperate, at the cost and expense of the Indemnifying Party, with each
applicable insurance carrier and third party indemnitor or contributor.
SECTION 8.7 Limitations on Right to Indemnification. Notwithstanding
anything to the contrary in this Agreement:
(a) The indemnification obligations under this Article VIII of the
Shareholders, on one hand, and Parent, Merger Sub and the other indemnifying
parties under Section 8.2, on the other hand, shall only be applicable when the
aggregate amount of losses, liabilities, damages, expenses or other charges that
are the subject of a proper claim for indemnification under this Article VIII
(collectively "LOSSES") exceed, in the aggregate, the sum of $250,000 (the
"BASKET") and shall only be applicable to the extent that any such Losses exceed
the Basket; and
(b) The liability of each Shareholder pursuant to this Article VIII shall
not exceed an amount equal to twenty-four percent (24%) of the sum of all of the
Merger Consideration received by such Shareholder or such Shareholder's
associates (specifically including any individual retirement accounts in which
such Shareholder or such Shareholder's spouse is a beneficiary) e.g., assuming
no adjustment to the Merger Consideration pursuant to Section 1.7(b) above, such
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Shareholder's pro rata share of Six Million Dollars ($6,000,000.00), such pro
rata share being based on the ownership of the Company Common Stock at the
Effective Time by each Shareholder or such Shareholder's associates
(specifically including any individual retirement accounts in which the
Shareholder or such Shareholder's spouse is a beneficiary), as a percentage of
the total of all of the Company Common Stock held at the Effective Time by all
of the Shareholders including any associates of such Shareholders (specifically
including any individual retirement accounts in which any of the Shareholders or
any spouse of any of the Shareholders is a beneficiary);
PROVIDED, HOWEVER, that the provisions of this Section 8.7 shall have no
applicability to the obligations or liabilities of any party under Sections 1.7,
5.2 or 9.5 of this Agreement. As between the Shareholders, each Shareholder
shall have a claim for contribution against the other for any indemnification
claims paid by a Shareholder under this Article VIII; such right of contribution
shall be pro rata based on each Shareholder's ownership of the Company Common
Stock at the Effective Time as a percentage of the total of all of the Company
Common Stock held by both Shareholders at the Effective Time.
SECTION 8.8 Exclusive Remedy. Except as otherwise specifically provided for
in this Agreement, and except for claims based on fraud or claims requesting
injunctive or other forms of equitable relief, the sole and exclusive remedy of
the Parent Indemnitees and the Company Indemnitees shall be restricted to the
indemnification rights set forth in this Article VIII.
SECTION 8.9 Special Provision Relating to Shareholder Liability.
Notwithstanding anything contained in this Agreement to the contrary, the
parties hereto acknowledge and agree that (i) Xxxxxx Xxxxxx ("XXXXXX") shall
bear no liability with respect to the breach of any representation or warranty
on the part of any Shareholder other than Xxxxxx, and (ii) with respect to any
circumstance where Xxxxxx and the other Shareholders are jointly liable under
this Article VIII (excluding any breach of a Shareholder representation,
warranty or covenant by Xxxxxx with respect to himself or the Shares held by him
or his associates, specifically including any individual retirement accounts in
which Xxxxxx or his spouse is a beneficiary), Xxxxxx'x liability with respect to
any indemnification matter for which a Claim is made against him shall be
limited to his pro rata share of such liability, such pro rata share being based
on the ownership of the Company Common Stock at the Effective Time by Xxxxxx or
his associates (specifically including any individual retirement accounts in
which Xxxxxx or his spouse is a beneficiary), as a percentage of the total of
all of the Company Common Stock held at the Effective Time by all of the
Shareholders including any associates of such Shareholders (specifically
including any individual retirement accounts in which any of the Shareholders or
any spouse of any of the Shareholders is a beneficiary); PROVIDED, HOWEVER, that
this provision shall in no way operate to release, lessen or otherwise affect
the joint and several liability of any Shareholder other than Xxxxxx.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Survival of Representations, Warranties and Agreements;
Interpretation.
(a) The representations, warranties and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers or directors, whether prior
to or after the execution of this Agreement. The representations, warranties,
covenants and agreements contained in this Agreement will survive the Closing
(a) indefinitely with respect to the representations and warranties contained in
Sections 2.3, 2.4, 2.5, 2.28, and 3.5 and the covenants and agreements contained
in Sections 1.11, 9.4 and 9.5, (b) until sixty (60) days after the expiration of
all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section
2.15, 2.19 and 2.20 and Article VIII (specifically including, without
limitation, clauses (c), (d), (e), (f) and (g) of Section 8.1), (c) until June
1, 1998, in the case of all other representations and warranties and any
covenant or agreement to be performed in whole or in part on or prior to the
Closing or (d) with respect to each other covenant or agreement contained in
this Agreement, until sixty (60) days following the last date on which such
covenant or agreement is to be performed or, if no such date is specified,
indefinitely, except that any representation, warranty, covenant or agreement
that would otherwise terminate in accordance with clause (b), (c) or (d) above
will continue to survive if a notice of an indemnity claim shall have been
timely given under Article VIII on or prior to such termination date, until the
related claim for indemnification has been satisfied or otherwise resolved.
(b) Notwithstanding anything to the contrary contained in this Agreement,
any of the Exhibits, the Company Disclosure Schedule or the Parent Disclosure
Schedule, any information disclosed in one section of this Agreement, an
Exhibit, the Company Disclosure Schedule or the Parent Disclosure Schedule shall
be deemed to be disclosed with respect to this Agreement, the Exhibits and all
sections of the Company Disclosure Schedule or the Parent Disclosure Schedule,
as the case may be, into which they are specifically incorporated by reference.
SECTION 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
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(a) If to Parent or Merger Sub:
Just For Feet, Inc.
000 Xxxxxx Xxxxxx Xxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Chairman and Chief Executive Officer
With a copy to:
Xxxxxx Xxx Xxxxxxxx, Esq.
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
Suite 1800
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) If to the Company or a Shareholder:
Imperial Acquisition Corporation
X-0000 X. Xxxx Xxxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Chairman
With a copy to:
Xxxxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
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SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "ASSOCIATES" means, with respect to any person, any corporation or
other business organization of which such person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such person has a
substantial beneficial interest or as to which such person serves as a trustee
or in a similar capacity and any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person.
(b) "AFFILIATES" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation, any
partnership or joint venture in which the first mentioned person (either alone,
or through or together with any other subsidiary) has, directly or indirectly,
an interest of 5% or more;
(c) "BUSINESS DAY" means any day other than a day on which banks in the
sate of Michigan are required or authorized to be closed;
(d) "CONTROL" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(f) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, Parent or any other
person means any corporation, partnership, joint venture or other legal entity
of which the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity; and
(g) "TO THE KNOWLEDGE" or "KNOWN" and words of similar import shall
mean actual knowledge through conscious awareness of a person of facts, or the
absence of facts, after having made reasonable inquiry of the appropriate
employees, which in the case of the Company shall be those persons identified in
Section 9.3(f) of the Company Disclosure Schedule and in the case of the Parent
or Merger Sub shall be those persons identified in Section 9.3(f) of the Parent
Disclosure Schedule, having supervisory responsibility for such matter or having
direct access to the relevant information.
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SECTION 9.4 SHAREHOLDERS' AGENT; POWER OF ATTORNEY.
(a) Xxxxxxx is hereby appointed and constituted as "SHAREHOLDERS' AGENT"
hereunder, to exercise the powers on behalf of Shareholders set forth in this
Agreement; and Xxxxxxx hereby accepts such appointment. In the event of the
death, resignation or inability to act of Xxxxxxx, and upon receipt by Parent
and Merger Sub of evidence of the same which is satisfactory to Parent and
Merger Sub, Xxxxx Xxxxxxx shall be successor Shareholders' Agent with all powers
of his predecessor.
(b) The Shareholders' Agent is hereby appointed and constituted the true
and lawful attorney in fact of each Shareholder, with full power in his or her
name and on his or her behalf:
(i) to act on such Shareholder's behalf according to the terms of
this Agreement, including, without limitation, to give and receive notices
on behalf of all the Shareholders; and to act on their behalf in connection
with any matter as to which the Shareholders jointly and severally are an
"Indemnified Party" or "Indemnifying Party" under Article VIII hereof; all
in the absolute discretion of the Shareholders' Agent;
(ii) in general, to do all things and to perform all acts, including,
without limitation, executing and delivering all agreements, certificates,
receipts, instructions and other instruments contemplated by or deemed
advisable in connection with this Agreement.
This power of attorney, and all authority hereby conferred, is granted subject
to the interests of the other Shareholders and Merger Sub hereunder and in
consideration of the mutual covenants and agreements made herein, and shall be
irrevocable and shall not be terminated by any act of any Shareholder or by
operation of law, whether by the death or incapacity of any Shareholder or by
the occurrence of any other event. Each Shareholder shall, jointly and
severally, hold the Shareholders' Agent free and harmless from any and all loss,
damage or liability which they, or any one of them, may sustain as a result of
any action taken in good faith hereunder.
SECTION 9.5 Expenses.
(a) If the transactions contemplated hereby are consummated, then the
Shareholders agree to pay, and to indemnify and hold Parent, Merger Sub and
Company harmless from and against, each of the following:
(i) Any sales, use, excise, transfer or other similar tax imposed
with respect to the transactions provided for in this Agreement, and any
interest or penalties related thereto.
(ii) All fees and expenses of the Company or its subsidiaries
attributable to legal counsel (e.g. Xxxxxx Xxxxxxx, PLLC) (whether incurred
by or at the direction of the Shareholders, Company or any of its
subsidiaries) which are, in the aggregate, in excess of $100,000, in
connection with the transactions contemplated hereby.
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(iii) All fees and expenses of the Company or its subsidiaries
attributable to outside accountants (e.g. Xxxxxx Xxxxxxxx LLP) (whether
incurred by or at the direct of the Shareholders, Company or any of its
subsidiaries) which are, in the aggregate, in excess of $100,000, in
connection with the transactions contemplated hereby.
(iv) All fees and expenses of the Company or its subsidiaries
attributable to investment banking and other professional counsel (e.g.
Xxxxx Xxxxxx Inc.) (other than legal and accounting) (whether incurred by
or at the direct of the Shareholders, Company or any of its subsidiaries)
which are, in the aggregate, in excess of $700,000, in connection with the
transactions contemplated hereby;
Provided, however, that no claim shall exist under clauses (ii), (iii) or (iv)
unless the aggregate of such fees and expenses exceeds $900,000 and then only to
the extent of such excess.
(b) The Parent agrees to pay all filing fees related to the filings by the
Company, Parent and Merger Sub under the HSR Act. Except as otherwise provided
in this Agreement, each of the parties shall bear its own expenses and the
expenses of its counsel and other agents in connection with the transactions
contemplated hereby, regardless of whether or not the transactions contemplated
hereby are consummated.
(c) Regardless of whether or not the transactions contemplated hereby are
consummated, the parties agree that the prevailing party in any action brought
with respect to or to enforce any right or remedy under this Section 9.5 (or the
balance of this Agreement in the event that Article VIII is no longer effective)
shall be entitled to recover from the other party or parties all reasonable
costs and expenses of any nature whatsoever incurred by the prevailing party in
connection with such action, including without limitation attorneys' fees and
prejudgment interest.
SECTION 9.6 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 9.7 Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, or (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
SECTION 9.8 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.9 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
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economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party.
SECTION 9.10 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Agreements), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof.
SECTION 9.11 Assignment; Guarantee of Merger Sub Obligations. Prior to
Closing, this Agreement shall not be assigned by operation of law or otherwise.
After Closing, this Agreement may be freely assigned by operation of law or
otherwise. Parent guarantees the full and punctual performance by Merger Sub of
all the obligations hereunder of Merger Sub.
SECTION 9.12 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Sections 5.5 and 5.11 (which are intended to be for the benefit of the
Indemnified Agents and the Effective Time Employees, respectively, and may be
enforced by such Indemnified Agents and Effective Date Employees, respectively).
SECTION 9.13 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
SECTION 9.14 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Michigan
applicable to contracts executed and fully performed within the State of
Michigan.
SECTION 9.15 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
ARTICLE X
SPECIAL PROVISIONS RELATING TO POOLING OF INTERESTS ACCOUNTING
SECTION 10.1. Efforts to Obtain Pooling of Interests Accounting Treatment.
The parties hereto acknowledge and agree that it is beneficial for all parties
if the Merger can be accounted for on a "pooling of interests basis for
financial accounting and SEC purposes."
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Accordingly, each party agrees to utilize its respective best efforts to cause
the Merger to be appropriately accounted for on a pooling of interests basis;
provided that no party shall be required to take any action that would expose it
to liability in excess of the economic benefit to such party resulting from the
transaction qualifying for "pooling of interests" accounting. Each party
acknowledges and agrees that no assurances can be given that the Merger can be
properly accounted for on a pooling of interest basis.
SECTION 10.2 Alternative Provisions if Pooling of Interests Accounting is
Available. If, but only if, the Parent has determined in its sole discretion
that the Merger may be accounted for on a pooling of interests basis, then this
Agreement shall be deemed to be revised as follows:
(a) SECTION 1.7(a) shall be deleted in its entirety and the following
substituted in lieu thereof:
"The aggregate consideration to be paid by Parent in respect of the
Shares issued and outstanding as of the Effective Time pursuant to the
Merger shall be Thirty Million Dollars ($30,000,000) (the "MERGER
CONSIDERATION"), through conversion of such Shares into the right to
receive that number of validly issued, fully paid and nonassessable shares
("PARENT SHARES") of the common Stock, $.0001 par value, of Parent ("PARENT
COMMON STOCK") which results by dividing the Merger Consideration by the
average of the Last Sale Prices for Parent Common Stock for the period of
ten (10) Trading Days that ends on and includes the Trading Day immediately
preceding the Closing Date (the "AVERAGE PRICE"). For purposes of this
Agreement, a "Trading Day" shall mean a day in which the Parent Common
Stock is traded on the over the counter market and the "Last Sale Price"
shall be the last sale price for Parent Common Stock as reported by the
Nasdaq Stock Market for such Trading Day."
(b) SECTION 1.7(b) shall be revised by deleting all references to "Four and
70/100 Dollars ($4.70)" and substituting in lieu thereof a reference to "Five
and 70/100 Dollars ($5.70)."
(c) SECTION 6.1 shall be revised by adding the following provision to the
end thereof:
"(d) Availability of Pooling of Interest Account. The Parent and
Shareholders shall have each delivered to the other a written instrument
acknowledging that this Agreement has been revised pursuant to Article X
hereof."
(d) SECTION 8.4(b) shall be revised to read as follows:
"(b) To the extent that any Indemnifying Party shall be required to
indemnify any Indemnified Party pursuant to this Article VIII, such
indemnification obligation shall be satisfied for all purposes hereunder by
delivering to such Indemnified Party certificates, duly endorsed for
transfer, representing that number of shares of Parent Common Stock having
a value, rounded to the nearest share, equal to the amount due such
Indemnified Party hereunder, with each such share of Parent Common Stock
being deemed for purposes hereof to have a value equal to the Average
Price. To the extent that any
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Shareholder has insufficient shares of Parent Common Stock to satisfy any
indemnification obligation hereunder, such Shareholder shall satisfy the
remaining amount of such obligation by cash payment to the Indemnified
Party."
(e) SECTION 8.7(b) shall be revised to read as follows:
"(b) The liability of each Shareholder pursuant to this Article VIII
shall not exceed an amount equal to ten percent (10%) of the sum of all of
the Merger Consideration received by such Shareholder, e.g. such
Shareholder pro rata share of Three Million Dollars ($3,000,000), such pro
rata share being based on each Shareholder's ownership of the Company
Common Stock at the Effective Time as a percentage of the total of all of
the Company Common Stock held by both Shareholders at the Effective Time;"
(f) SECTION 9.1(a) of the Agreement shall be deleted in its entirety and
the following substituted in lieu thereof:
"SECTION 9.1(a) Survival of Representations, Warranties and
Agreements; Interpretation.
(a) The representations, warranties and agreements of each party
hereto shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any other party hereto, any
person controlling any such party or any of their officers or directors,
whether prior to or after the execution of this Agreement. The
representations, warranties, covenants and agreements contained in this
Agreement will survive the Closing (a) indefinitely with respect to the
representations and warranties contained in Sections 2.3, 2.4, 2.5, 2.28,
and 3.2 and the covenants and agreements contained in Sections 1.11, 9.4
and 9.5, (b) until the earlier of (i) the date of the audit report on the
first audited financial statements after the Closing Date containing
combined operations of Parent and the Subsidiary Corporation, or (ii) the
first anniversary of the Closing Date in the case of all other
representations and warranties and any covenant or agreement to be
performed in whole or in part on or prior to the Closing, (c) with respect
to each other covenant or agreement contained in this Agreement, until
sixty (60) days following the last date on which such covenant or agreement
is to be performed or, if no such date is specified, indefinitely, or (d)
until sixty (60) days after the expiration of all applicable statutes of
limitation (including all periods of extension, whether automatic or
permissive) with respect to matters covered by Article VIII (specifically
including, without limitation, clauses (c), (d), (e), (f) and (g) of
Section 8.1), except that any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with clause (b), (c)
or (d) above will continue to survive if a notice of an indemnity claim
shall have been timely given under Article VIII on or prior to such
termination date, until the related claim for indemnification has been
satisfied or otherwise resolved."
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(g) Transfer or Disposal of Securities by Shareholders. (A) The
Shareholders hereby jointly and severally each covenants, represents and
warrants to Parent and Merger Sub that: During the two year period prior to
November 15, 1996, no Shareholder has or will transfer or otherwise dispose of
any securities of Company held by a Shareholder, except for transfers or other
dispositions by operation of law upon the death of a Shareholder or by the
estate of a Shareholder if necessary to pay estate taxes or other transfers or
dispositions that Parent determines will not prevent Parent from accounting for
the Merger as a pooling of interests, taking into account the actions of other
Affiliates, and except if and to the extent provided for in Section 10.1 above.
(B) Beginning thirty (30) days prior to the Effective Time, no Shareholder
will sell, transfer or otherwise dispose of any securities of Company or Parent,
including shares of Parent Common Stock received by a Shareholder in the Merger,
until after such time as financial results covering at least thirty (30) days of
combined operations of Company and Parent have been published by Parent, in the
form of a quarterly earnings report, an effective registration statement filed
with the SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public
filing or announcement which includes the combined results of operations, except
for transfers or other dispositions that Parent determines, taking into account
the actions of other Affiliates, will not prevent Parent from accounting for the
Merger as a pooling of interests.
SECTION 10.3. Acknowledgments with respect to this Article X. If the
Parent determines that the Merger can not be accounted for on a "pooling of
interests" basis, then at the Closing, each party agrees to deliver to the other
a written acknowledgment of such determination, and such party's agreement that
the provisions of this Article X shall be of no further force or effect.
[signatures begin on next page]
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IN WITNESS WHEREOF, Parent, Merger Sub, Company and each Shareholder have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
"PARENT"
JUST FOR FEET, INC.
By:___________________________________
Name:
Title:
"MERGER SUB"
IAC ACQUISITION CORPORATION
By:___________________________________
Name:
Title:
[signatures continued on next page]
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"COMPANY"
IMPERIAL ACQUISITION CORPORATION
By:___________________________________
Name:
Title:
"SHAREHOLDERS"
______________________________________
Name: XXXXX X. XXXXXXX
______________________________________
Name: XXXXX X. XXXXXXX
______________________________________
Name: XXXXXX XXXXXX
The undersigned hereby executes this Agreement solely for the purpose of
certifying, representing and warranting to the Parent and Merger Sub that (i)
the undersigned is the spouse of Xxxxxx Xxxxxx, a named Shareholder in this
Agreement; (ii) the undersigned is the beneficiary of an XXX custodial account
with Michigan National Bank; (iii) such account is self-directed and the
undersigned maintains the authority to vote any shares of Company Common Stock
held in such XXX; (iv) the undersigned has approved the execution and delivery
of this Agreement by the Company and the consummation of the Merger Contemplated
herein; (v) the undersigned will refrain from the exercise of any dissenter's
rights, and (vi) the undersigned has executed this Agreement to induce the
Parent and Merger Sub to execute and deliver this Agreement and to consummate
the Merger and with full knowledge that the Parent and Merger Sub will rely upon
the truth and accuracy of above statements of the undersigned.
_______________________________
XXXXXXX XXXXXX
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EXHIBIT "A"
-----------
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxx Xxxxxx
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EXHIBIT "B"
-----------
Pro Rata Portion of
Number of Merger
Name of Shareholder Shares Held Total Shares Issued Consolidation
------------------- ----------- ------------------- -------------------
Xxxxx X. Xxxxxxx 730,000 841,002 86.8012%
and Xxxxx X. Xxxxxxx,
jointly
Xxxxxx Xxxxxx 58,749 841,002 6.9856%
Xxxxx Xxxxx 2,000 841,002 0.2378%
XXX custodial account 39,753 841,002 4.7269%
with Michigan National
Bank, Xxxxxx Xxxxxx,
beneficiary
XXX custodial account 10,500 841,002 1.2485%
with Michigan National
Bank, Xxxxxxx Xxxxxx,
beneficiary
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EXHIBIT "C"
-----------
Xxxx Xxxxx
Xxxx Xxxxx
Xxx Xxxx
Xxxx Xxxxxxx
Xxxx Xxx
Xxx Xxxxx
Xxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx (Art) Xxxxxx
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