AGREEMENT AND PLAN OF MERGER
AMONG
THE XXXXXXX COMPANIES, INC.
ZACQ CORP.
AND
PMC INTERNATIONAL, INC.
DATED AS OF NOVEMBER 3, 1998
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of November 3, 1998, among THE
XXXXXXX COMPANIES, INC., a Wisconsin corporation (the "Purchaser"), ZACQ CORP.,
a Colorado corporation (the "Sub"), which is a wholly-owned subsidiary of the
Purchaser, and PMC INTERNATIONAL, INC., a Colorado corporation (the "Company").
W I T N E S S E T H:
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WHEREAS, the respective Boards of Directors of the Purchaser, the Sub and
the Company have each determined that it is advisable and in the best interest
of each such corporation and its shareholders, on the terms and subject to the
conditions of this Agreement, (a) for the Sub to commence a cash tender offer to
purchase all outstanding shares of common stock, par value $0.01 per share, of
the Company, including scrip (the "Common Stock") and $0.325 Cumulative
Convertible Series A Preferred Stock, without par value, of the Company (the
"Preferred Stock") and (b) following the consummation of the cash tender offer,
to merge the Sub into the Company; and
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving that Offer (as hereafter defined) and the Merger (as hereafter
defined) and recommends that the holders of the Common Stock and Preferred Stock
accept the Offer;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements, and upon the terms and subject to the conditions
hereafter set forth, the parties hereto do hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.01 hereof, as promptly as
practicable (but in any event within five business days of the date of this
Agreement), the Purchaser shall cause the Sub to commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) an offer to purchase all outstanding shares of Common Stock (including
scrip) and Preferred Stock not owned by the Purchaser or the Sub at a price of
$0.60 per share of Common Stock (including scrip), net to the seller in cash and
$2.50 per share of Preferred Stock, net to the seller in cash, which offer shall
remain open for at least 20 business days (the "Offer") and, subject to the
conditions of the Offer set forth in Exhibit A hereto, shall use its best
efforts to consummate the Offer, including, if necessary, conversion of
convertible loans including a $3,500,000 credit facility and options outstanding
into Common Stock or Preferred Stock of the Company, as the case may be, in
order to consummate the Offer. The obligations of the Purchaser and the Sub to
consummate the Offer, to accept for payment and to pay for any shares of Common
Stock and Preferred Stock tendered shall be subject only to those conditions set
forth in Exhibit A hereto.
(b) Neither the Purchaser nor the Sub will, without the prior written
consent of the Board of Directors of the Company, decrease the amount or change
the form of the consideration payable in the Offer, decrease the number of
shares of Common Stock or Preferred Stock sought pursuant to the Offer, change
the conditions to the Offer, impose additional conditions or terms to the Offer,
amend or waive the condition that there be validly tendered and not properly
withdrawn prior to the expiration of the Offer a number of shares of Common
Stock and Preferred Stock which when added to the number of shares of Common
Stock and Preferred Stock owned by the Purchaser and its affiliates constitutes
at least two-thirds of the then outstanding shares of Common Stock and two-
thirds of the then outstanding shares of Preferred Stock, respectively, on a
fully diluted basis, or amend any term of the Offer in any manner adverse to
holders of shares of Common Stock or Preferred Stock. Assuming the prior
satisfaction or waiver of the conditions to the Offer, the Purchaser covenants
and agrees to accept for payment and pay for, in accordance with the terms of
the Offer, shares of Common Stock and Preferred Stock tendered pursuant to the
Offer as soon as it is permitted to do so under applicable Law, provided that
the Purchaser and the Sub shall have the right, upon consultation with the
Company, to extend the Offer (if without such extension the Purchaser would be
unable to consummate the Offer) to a date not later than the 35th business day
following the commencement of the Offer or for such longer period as may be
required by Law.
(c) Notwithstanding anything to the contrary in this Agreement, the
Purchaser and the Sub further agree that, subject to the terms and conditions of
this Agreement, in the event that the conditions to the Offer set forth in
paragraphs (a) or (b) of Exhibit A hereto shall occur or exist (and shall not
have been waived), the Sub shall, at the Company's request, extend the Offer to
a date not later than the 40th business day following the commencement of the
Offer; provided, however, if the condition set forth in paragraph (d)(i) of
Exhibit A shall not have been satisfied, the Purchaser and the Sub shall, if
reasonably requested by the Company, extend the Offer for five business days to
enable the Company to cure such breach.
(d) As soon as practicable on or before the date of commencement of the
Offer, but not later than five business days after the execution of this
Agreement, the Purchaser and the Sub shall file with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer which will contain the offer to purchase and form of the related
letter of transmittal (together with any supplements or amendments thereto, the
"Offer Documents"). The Offer Documents will comply in all material respects
with the provisions of applicable federal securities Laws and, on the date filed
with the SEC and on the date first published, sent or given to the holders of
the Common Stock and Preferred Stock of the Company, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Purchaser or the Sub with respect to
information supplied by the Company in writing for inclusion in the Offer
Documents. The Purchaser, the Sub and the Company each agrees promptly to
correct any information provided by it for use in the Offer Documents if and to
the extent that it shall be
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discovered to have been or to have become false or misleading in any material
respect and the Purchaser and the Sub each further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and disseminated to the holders of the Common Stock and Preferred Stock of the
Company, in each case as and to the extent required by applicable federal
securities Laws. The Purchaser and the Sub agree to provide the Company and its
counsel in writing with any comments the Purchaser, the Sub or their counsel may
receive from the SEC or its staff with respect to the Offer Documents promptly
after the receipt of such comments.
SECTION 1.02 Company Actions. The Company hereby consents to the Offer,
recommends its acceptance by the Company's shareholders and represents that (a)
its Board of Directors or a duly authorized committee thereof (at a meeting duly
called and held) has (i) determined that the Offer and the Merger (as
hereinafter defined) taken together, are fair to the holders of the Common Stock
and Preferred Stock of the Company and (ii) resolved, subject to its fiduciary
duties under applicable Laws as advised by counsel, to recommend acceptance of
the Offer and approval and adoption of this Agreement by the holders of the
Common Stock and Preferred Stock of the Company, and (b) Value Investing
Partners, Inc. has advised the Company's Board of Directors that the $0.60 per
share of Common Stock and $2.50 per share of Preferred Stock cash consideration
to be received by holders of Common Stock and Preferred Stock of the Company,
respectively, in the Offer and the Merger, taken together, is fair to such
shareholders (other than the Purchaser and its affiliates) from a financial
point of view. The Company hereby agrees to file with the SEC as soon as
practicable after the commencement of the Offer a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") containing the recommendations described in the
first sentence of this Section 1.02. The Company, the Purchaser and the Sub
each agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall be discovered to have been or
to have become false or misleading in any material respect and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to the holders of the
Company's Common Stock and Preferred Stock and to the extent required by
applicable federal securities Laws. The Company agrees to provide the Purchaser
and the Sub and their counsel, in writing, with any comments the Company or its
counsel may receive from the SEC or its Staff with respect to the Schedule 14D-9
promptly after the receipt of such comments. Notwithstanding anything contained
in this Section 1.02, if the Board of Directors of the Company determines in the
exercise of its fiduciary duties to withdraw, modify or amend its
recommendation, such withdrawal, modification or amendment shall not constitute
a breach of this Agreement. The Company hereby consents to the inclusion in the
Offer of the recommendation referred to in the first sentence of this Section
1.02. In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings and any available
listing or computer file containing the names and addresses of the record
holders of the shares of Common Stock and Preferred Stock as of a recent date
and will furnish the Purchaser with such information and assistance as the
Purchaser or its agents may reasonably request in communicating the Offer to the
holders of the Common Stock and Preferred Stock of the Company. Subject to the
requirements of applicable Law, and except for such steps as are necessary to
disseminate the documents constituting the Offer and any other documents
necessary to consummate the Merger, the Purchaser and the Sub and each of their
affiliates and associates shall hold in confidence the information contained in
any of such labels, listings and files, will use such information only in
connection with the Offer and the
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Merger, and, if this Agreement is terminated, will deliver to the Company the
information and all copies of such information then in their possession and in
the possession of their legal, accounting and financial advisors.
SECTION 1.03 Directors. (a) Promptly upon the purchase by the Purchaser
or any of its affiliates of such number of shares of Common Stock which, when
added to the number of shares of Common Stock owned by the Purchaser and the
Sub, represents at least two-thirds of the outstanding shares of Common Stock,
and from time to time thereafter, the Purchaser shall be entitled to designate
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as will give the Purchaser, subject to compliance with
Section 14(f) of the Exchange Act, representation on the Board of Directors of
the Company equal to the product of the number of directors on the Board of
Directors of the Company and the percentage that such number of shares of Common
Stock so owned bears to the number of shares of Common Stock outstanding, and
the Company, through action of its Board of Directors, if necessary, shall, upon
request by the Purchaser, promptly, at the Company's election, either increase
the size of the Board of Directors of the Company or exercise its reasonable
best efforts to secure the resignations of such number of directors as is
necessary to enable the Purchaser's designees to be elected to the Board of
Directors of the Company and shall cause the Purchaser's designees to be so
elected to the Board of Directors.
(b) The obligations to appoint designees to its Board of Directors
hereunder shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill the obligations
under this Section 1.03 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 1.03.
The Purchaser will supply to the Company, in writing, and be solely responsible
for any information with respect to itself and its nominees, officers, directors
and affiliates required by Section 14(f) and Rule 14f-1.
ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Colorado Business
Corporation Act (the "Colorado Law"), the Sub shall be merged with and into the
Company (the "Merger") as soon as practicable following the satisfaction or
waiver, if permissible, of the conditions set forth in Article VII hereof.
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation"), and the separate corporate existence of the Sub
shall cease.
SECTION 2.02 Effective Time. The Merger shall be consummated by filing
with the Colorado Secretary of State articles of merger in such form as is
required by, and executed in accordance with, the relevant provisions of the
Colorado Law (the time of such filing or such other time as may be set forth in
the articles of merger being the "Effective Time").
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SECTION 2.03 Effects of the Merger. The Merger shall have the effects set
forth in the Colorado Law. As of the Effective Time, the Company shall be a
wholly-owned subsidiary of the Purchaser.
SECTION 2.04 Articles of Incorporation and By-Laws. The Articles of
Incorporation and Bylaws of the Company shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation.
SECTION 2.05 Directors and Officers. The directors of the Company at the
Effective Time shall continue as the directors of the Surviving Corporation
until their successors are duly elected and qualified. The officers of the
Company at the Effective Time shall continue as the officers of the Surviving
Corporation until their successors are duly appointed and qualified.
SECTION 2.06 Conversion of Shares. (a) Each share of Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Common Stock owned by the Purchaser or any affiliate of the Purchaser or held in
the treasury of the Company, and Dissenting Shares (as defined in Section 3.01
hereof) representing shares of Common Stock) shall, as of the Effective Time,
and by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive from the Surviving Corporation
the equivalent of $0.60 net to the holder in cash or any higher price paid per
share of Common Stock pursuant to the Offer (the "Common Stock Merger
Consideration"), payable to the holder thereof, without interest thereon, upon
the surrender of the certificate formerly representing such share of Common
Stock. At and after the Effective Time, each holder of a certificate or
certificates that represented issued and outstanding shares of Common Stock
immediately prior to the Effective Time (other than shares of Common Stock owned
by the Purchaser or any affiliate of the Purchaser and Dissenting Shares
representing shares of Common Stock) shall cease to have any rights as a
shareholder of the Company, except for the right to surrender such certificate
or certificates in exchange for the Common Stock Merger Consideration or to
perfect the right to receive payment for such shares pursuant to Article 113 of
Title 7 of the Colorado Revised Statutes and Section 3.01 hereof if such holder
has validly exercised and not withdrawn such right to receive payment for such
shares.
(b) Each share of Preferred Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Preferred Stock owned by the
Purchaser or any affiliate of the Purchaser or held in the treasury of the
Company, and Dissenting Shares (as defined in Section 3.01 hereof) representing
shares of Preferred Stock) shall, as of the Effective Time, and by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive from the Surviving Corporation $2.50 net to the holder
in cash or any higher price paid per share of Preferred Stock pursuant to the
Offer (the "Preferred Stock Merger Consideration"), payable to the holder
thereof, without interest thereon, upon the surrender of the certificate
formerly representing such share of Preferred Stock. At and after the Effective
Time, each holder of a certificate or certificates that represented issued and
outstanding shares of Preferred Stock immediately prior to the Effective Time
(other than shares of Preferred Stock owned by the Purchaser or any affiliate of
the Purchaser and Dissenting Shares representing shares of Preferred Stock)
shall cease to have any rights as a shareholder of the Company, except for the
right to surrender such certificate or certificates in exchange for the
Preferred Stock Merger Consideration
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or to perfect the right to receive payment for such shares pursuant to Article
113 of Title 7 of the Colorado Revised Statutes and Section 3.01 hereof if such
holder has validly exercised and not withdrawn such right to receive payment for
such shares.
(c) Each share of Common Stock and Preferred Stock held by the Pur chaser
or any of its affiliates or held in the Company's treasury or by a subsidiary of
the Company shall, as of the Effective Time, and by virtue of the Merger and
without any action on the part of the holder thereof, cease to be outstanding,
and be canceled and be retired without payment of any consideration therefor.
(d) The Purchaser and the Sub acknowledge that each share of Common Stock
outstanding immediately prior to the date hereof which was granted to
participants pursuant to the Stock Option Plans (as defined in Section 2.07
hereof) as of the date of acquisition of shares of Common Stock pursuant to the
Offer, will become fully vested and free of any and all restrictions to which
such shares of Common Stock are otherwise subject.
(e) Each certificate for scrip issued and outstanding immediately prior to
the Effective Time shall, as of the Effective Time, and by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive from the Surviving Corporation the equivalent of $0.60 net to
the holder in cash or any higher price paid per share of Common Stock pursuant
to the Offer, payable to the holder thereof, without interest thereon, upon the
surrender of the certificate formerly representing such scrip. At and after the
Effective Time, each holder of a certificate or certificates that represented
scrip immediately prior to the Effective Time shall cease to have any rights as
a holder of scrip of the Company, except for the right to surrender such
certificate or certificates in exchange for the Common Stock Merger
Consideration.
SECTION 2.07 Stock Options and Warrants. Promptly after the date hereof,
the Company shall give written notice of the Merger under its applicable Stock
Option Plans to the holders of all outstanding options to purchase Common Stock
granted to officers, employees, directors or consultants (or other persons) of
the Company ("Options"). Upon the occurrence of the Merger and in accordance
with their terms, all options, stock option plans, programs, arrangements or
agreements pursuant to which Options have or may be granted by the Company
(collectively, "Stock Option Plans") shall automatically terminate and be of no
further force and effect whatsoever, without the necessity for any additional
notice or action by the Surviving Corporation under the applicable Stock Option
Plans or otherwise. Each warrant to purchase Common Stock of the Company issued
and outstanding immediately prior to the Effective Time shall, as of the
Effective Time, automatically be converted solely into the right to receive from
the Company upon exercise thereof, in lieu of each share of Common Stock
issuable upon such exercise thereof immediately prior to the Effective Date, the
Common Stock Merger Consideration.
SECTION 2.08 Conversion of Sub Common Stock. Each share of common stock,
par value $.01 per share, of the Sub issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and exchangeable for one share of
common stock of the Surviving Corporation.
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SECTION 2.09 Shareholders' Meeting. If approval by the Company's
shareholders is required by applicable Law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable Law:
(a) duly call, give notice of, convene and hold an annual or special
meeting (the "Shareholders' Meeting") of holders of shares of Common Stock and
Preferred Stock of the Company as soon as practicable following the consummation
of the Offer for the purpose of considering and taking action on this Agreement;
(b) subject to its fiduciary duties under applicable Laws as advised by
counsel, include in the Proxy Statement (as hereinafter defined) the
recommendation of the Board of Directors that shareholders of the Company vote
in favor of the approval and adoption of this Agreement; and
(c) use its best efforts (i) if a Proxy Statement or Information Statement,
as selected by the Purchaser, is required to be filed, to obtain and furnish the
information required to be included by it in the Proxy Statement, and, after
consultation with the Purchaser, respond promptly to any comments made by the
SEC with respect to the Proxy Statement and any preliminary version thereof and
cause the Proxy Statement to be mailed to its shareholders at the earliest
practicable time following the expiration of the Offer, and (ii) subject to
fiduciary duties of the Board of Directors under applicable Law as advised by
counsel, to obtain the necessary approvals of the Merger and this Agreement by
its shareholders. The Purchaser agrees that, at the Shareholders' Meeting, all
of the shares of Common Stock and Preferred Stock acquired pursuant to the Offer
or otherwise by the Purchaser, the Sub or any other affiliate of the Purchaser
will be voted in favor of the Merger and this Agreement.
SECTION 2.10 Merger Without Meeting of Shareholders. Notwithstanding the
foregoing, if, following the completion of the Offer, the Merger may be
consummated under Colorado Law without a vote of the Company's shareholders, the
parties hereto agree to take all necessary and appropriate action to cause the
Merger to become effective without a meeting of the shareholders, as soon as
practicable after the acquisition of shares of Common Stock and Preferred Stock
pursuant to the Offer, but in no event later than 30 days thereafter.
SECTION 2.11 Closing. Upon the terms and subject to the conditions
hereof, as soon as practicable after consummation of the Offer, and if required
by Law, after the vote of the shareholders of the Company in favor of the
adoption of this Agreement has been obtained, the Company (or the Purchaser or
the Sub, if appropriate) shall execute in the manner required by the Colorado
Law and deliver to the Secretary of State of the State of Colorado the duly
executed articles of merger, and the parties shall take all such other and
further actions as may be required by Law to make the Merger effective. Prior
to the filing referred to in this Section, a closing (the "Closing") will be
held at the offices of the Company (or such other place as the parties may
agree) for the purpose of confirming all the foregoing.
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ARTICLE III.
DISSENTING SHARES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, in the event that appraisal rights are available in
connection with the Merger pursuant to Colorado Law, shares of Common Stock or
Preferred Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by shareholders who did not vote in favor of
the Merger and who comply with all of the relevant provisions of Article 113 of
Title 7 of the Colorado Revised Statutes (the "Dissenting Shares") shall not be
converted into or be exchangeable for the right to receive the Common Stock
Merger Consideration or the Preferred Stock Merger Consideration, as
appropriate, unless and until such holders shall have failed to perfect or shall
have effectively withdrawn or lost their rights to appraisal under Colorado Law.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right, such holder's shares of Common Stock or Preferred
Stock shall thereupon be deemed to have been converted into and to have become
exchangeable for the right to receive, as of the Effective Time, the Common
Stock Merger Consideration or Preferred Stock Merger Consideration, as
appropriate, without any interest thereon.
SECTION 3.02 Exchange of Certificates. (a) The Purchaser shall
deposit or cause to be deposited in trust for the benefit of the Surviving
Corporation with an exchange agent selected by the Purchaser (the "Exchange
Agent") at the Effective Time cash in an aggregate amount necessary to make the
payments pursuant to Section 2.06 hereof to holders (other than the Purchaser,
or the Sub or any of their respective affiliates) of shares of Common Stock and
Preferred Stock that are issued and outstanding immediately prior to the
Effective Time (such amounts being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, make
the payments provided for in the preceding sentence out of the Exchange Fund.
The Exchange Agent shall invest the Exchange Fund as the Purchaser directs,
provided that all such investments shall be in obligations of or guaranteed by
the United States of America, in commercial paper obligations receiving the
highest rating from either Xxxxx'x Investors Services, Inc. or Standard & Poor's
Corporation, or in certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $50 million.
The Exchange Fund shall not be used for any other purpose, except as provided in
this Agreement. If for any reason (including, without limitation, losses
sustained by such investments) the Exchange Fund is inadequate to pay the amount
holders of Common Stock and Preferred Stock shall be entitled to hereunder, the
Surviving Corporation shall remain solely liable for the payment thereof.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Exchange Agent to mail to each record holder, as of the Effective
Time, other than the Purchaser or any of its affiliates and other than holders
of Dissenting Shares, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented scrip shares or shares of
Common Stock or Preferred Stock (the "Certificates") a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificate for payment therefor. Upon surrender to the
Exchange
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Agent of a Certificate, together with such letter of transmittal duly executed,
and any other required documents, the holder of such Certificate shall be paid
in exchange therefor cash in an amount equal to the product of the amount of
scrip or the number of shares of Common Stock, formerly represented by such
Certificate multiplied by the Common Stock Merger Consideration or the number of
shares of Preferred Stock formerly represented by such Certificate multiplied by
the Preferred Stock Merger Consideration, respectively, and such Certificate
shall forthwith be canceled. No interest will be paid or accrued on the cash
payable upon the surrender of the Certificates. If payment is to be made to a
person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.02, each
Certificate (other than Certificates representing shares of Common Stock or
Preferred Stock owned by the Purchaser or any affiliate of the Purchaser, and
Dissenting Shares) shall represent for all purposes the right to receive the
Common Stock Merger Consideration or Preferred Stock Merger Consideration, as
appropriate, in cash multiplied by the number of shares of scrip, Common Stock
or Preferred Stock, respectively, evidenced by such Certificate, without any
interest thereon.
(c) After the Effective Time, there shall be no transfers of shares of
Common Stock or Preferred Stock or of scrip which were outstanding immediately
prior to the Effective Time on the stock transfer books of the Surviving
Corporation. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in this Article III. As of the Effective Time, the stock ledger of the Company
shall be closed.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains unclaimed by the holders of scrip or the
shareholders of the Company for six months after the Effective Time shall be
paid to the Surviving Corporation. Any shareholders of the Company who have not
theretofore complied with Section 3.01 hereof shall thereafter look only to the
Surviving Corporation for payment of their claim for the Common Stock Merger
Consideration or Preferred Stock Merger Consideration, as appropriate, without
any interest thereon.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchaser and the Sub as
follows:
SECTION 4.01 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Colorado and
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has all requisite corporate power and authority to carry on its business as it
is now being conducted. The Company is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be in good standing or so
qualified would not have a Material Adverse Effect. Each of the Company's
wholly owned subsidiaries is duly organized, validly existing and in good
standing under the applicable laws of its state of incorporation.
SECTION 4.02 Capitalization. The authorized capital stock of the
Company consists of (a) 50,000,000 shares of Common Stock, par value $.01 per
share, of which, as of October 22, 1998, 4,446,828.5 shares were issued and
outstanding (including scrip) and (b) 5,000,000 shares of Preferred Stock,
without par value, of which 450,000 shares have been designated as $0.325
Cumulative Series A Preferred Stock ("Preferred Stock"), of which, as of October
22, 1998, 138,182 shares were issued and outstanding. All of the issued and
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive
rights. As of October 22, 1998, 943,290 shares of Common Stock and no shares of
Preferred Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of all outstanding Options under the
Stock Option Plans or warrants. Except as set forth above and except for the
conversion rights granted to the Purchaser in that certain Convertible
Promissory Note given by the Company, dated October 15, 1998 (the "Note) and the
$3,500,000 credit facility being entered into by the Purchasers concurrently
with this Agreement and the options to purchase 4,500,000 shares of Common Stock
and the options to purchase 111,818 shares of Preferred Stock granted to
Purchaser, there are not as of the date hereof, and at the Effective Time there
will not be, any outstanding or authorized subscriptions, options, warrants,
calls, rights, commitments or any other agreements of any character obligating
the Company to issue any additional shares of Common Stock, Preferred Stock or
any other shares of capital stock of the Company or any other securities
convertible into or evidencing the right to subscribe for any such shares.
SECTION 4.03 Corporate Power and Authority. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than, with respect to the Merger, if
required, the approval and adoption of this Agreement by the Company's
shareholders). This Agreement has been duly and validly executed and delivered
by the Company and, assuming this Agreement constitutes a valid and binding
obligation of each of the Purchaser and the Sub, this Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms.
SECTION 4.04 Reports. (a) Except as set forth in Schedule 4.04,
since January 1, 1997, the Company has filed all required forms, reports and
documents with the SEC required to be filed by it pursuant to the federal
securities Laws and the SEC's rules and regulations thereunder, all of which
have complied, after giving effect to all amendments thereof filed prior to
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the date hereof, in all material respects with all applicable requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, and the rules promulgated thereunder (collectively, the "SEC Reports").
None of the SEC Reports, including without limitation any financial statements
or schedules included therein, at the time filed, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The consolidated balance sheets and the related consolidated
statements of net earnings and of changes in financial position (including the
related notes thereto) of the Company included in the SEC Reports fairly present
the consolidated financial position of the Company and its subsidiaries as of
their respective dates, and the results of consolidated operations and changes
in consolidated financial position for the periods presented therein, all in
conformity with generally accepted accounting principles applied on a consistent
basis (subject, in the case of the unaudited interim financial statements, to
normal year-end adjustments), except as otherwise noted therein, and except that
the quarterly financial statements do not contain all of the footnote
disclosures required by generally accepted accounting principles.
SECTION 4.05 Offer Documents; Proxy Statement; Information Statement;
Other Information. The letter to shareholders, notice of meeting, proxy
statement and form of proxy, or the information statement, as the case may be
and as selected by Purchaser, to be distributed to shareholders in connection
with the Merger, are collectively referred to herein as the "Proxy Statement".
The Schedule 14D-9 and, if required for the consummation of the Merger under
applicable Law, the Proxy Statement will comply in all material respects with
the applicable federal securities Laws and, on the date filed with the SEC,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by the Purchaser or any affiliate of the
Purchaser, in writing, for inclusion in the Schedule 14D-9 or the Proxy
Statement or any amendments or supplements thereto. None of the information
relating to the Company and its subsidiaries supplied in writing by the Company
for inclusion in the Offer Documents or the Proxy Statement, including any
amendments or supplements to either of the foregoing, or any schedules required
to be filed with the SEC in connection therewith, will, at the respective times
the Offer Documents or Proxy Statement or any amendments or supplements thereto
are filed with the SEC or mailed to the shareholders of the Company, as the case
may be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
SECTION 4.06 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in a breach of any provision of the Articles of Incorporation or By-laws
of the Company or its subsidiaries; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) pursuant to the applicable requirements of
the Exchange Act, the Investment
-11-
Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and
regulations of the NASD (as defined hereafter), (B) the filing of the articles
of merger pursuant to the Colorado Law, or (C) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a Material Adverse Effect or a
material adverse effect on the consummation of the transactions contemplated
hereby; or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or its subsidiaries, except for violations
which would not in the aggregate have a Material Adverse Effect or a material
adverse effect on the consummation of the transactions contemplated hereby.
SECTION 4.07 Brokerage Fees and Commissions. Except for those fees
and expenses payable to Value Investing Partners, Inc. and Putnam, Lovell, Xx
Xxxxxxxxx & Xxxxxxxx, Inc. collectively limited to less than $276,000, the
Company hereby represents and warrants to the Purchaser with respect to the
Company, that no person or entity is entitled to receive from the Company, or
any of its subsidiaries any investment banking, brokerage or finder's fee in
connection with this Agreement or the transactions contemplated hereby based
upon arrangements made by or on behalf of the Company.
SECTION 4.08 Events Subsequent to June 30, 1998. Except as described
on Schedule 4.08, in the Company's Form 10-QSB for the quarter ended June 30,
1998, as amended as of September 16, 1998, or related to transactions involving
the Purchaser or the Purchaser's affiliates since June 30, 1998, there has not
been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of the Company and its
subsidiaries. Without limiting the foregoing, since that date and except as
provided in Schedule 4.08:
(i) The Company and its subsidiaries have not sold, leased,
transferred, or assigned any of its assets, tangible or intangible other
than for a fair consideration in the ordinary course of business;
(ii) the Company and its subsidiaries have not entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either requiring payment by the Company of
more than $25,000 or other than in the ordinary course of business (except
for product purchase orders and agreements in the ordinary course of
business and in amounts and on terms consistent with past practices);
(iii) no party (including the Company or its subsidiaries) has
accelerated, terminated, modified, or canceled any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) involving more than $25,000 to which the Company or its
subsidiaries is a party or by which it is bound;
(iv) the Company and its subsidiaries have not imposed or
permitted other parties to impose any security interest upon any of its or
their assets, tangible or intangible;
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(v) the Company and its subsidiaries have not made any capital
expenditure (or series of related capital expenditures) either involving
more than $25,000 or outside the ordinary course of business;
(vi) the Company and its subsidiaries have not issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed
any indebtedness for borrowed money or capitalized lease obligation
involving more than $25,000 in the aggregate;
(vii) the Company and its subsidiaries have not granted any
license or sublicense of any rights under or with respect to any
intellectual property;
(viii) the Company and its subsidiaries have not made any loan
to, or entered into any other transaction with, any of its or their
directors, officers, and employees outside the ordinary course of business;
(ix) the Company and its subsidiaries have not granted any
increase in the base compensation of any of its or their directors,
officers, and employees outside the ordinary course of business;
(x) the Company and its subsidiaries have not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its or their
directors, officers, employees, registered representatives or agents
outside the ordinary course of business; and
(xi) the Company and its subsidiaries have not issued any shares
of capital stock of any class (including shares of Common Stock or
Preferred Stock), or securities convertible into such shares or other
convertible securities or any rights, warrants or options to acquire any
such shares or other convertible securities.
SECTION 4.09 Intellectual Property. The Company and its
subsidiaries own or have the right to use pursuant to license, sublicense,
agreement, or permission all intellectual property necessary for the operation
of the business of the Company and its subsidiaries as presently conducted
(excluding property for which the loss of ownership or right to use would result
in a loss of not more than $10,000 annually in revenue) and there is no pending
or threatened challenge to the ownership or right of the Company and its
subsidiaries to use any of the foregoing.
SECTION 4.10 Litigation. Except litigation disclosed on Schedule
4.10, there is no action, order, writ, injunction, judgment or decree
outstanding or any claim, suit, litigation, proceeding, labor dispute, arbitral
action, governmental audit or investigation (collectively, "Actions") pending or
threatened against the Company or any of its subsidiaries and the Company does
not have any knowledge of an event that reasonably can be expected to result in
pending or threatened material litigation.
SECTION 4.11 Contracts. Except as disclosed on Schedule 4.11, all
contracts involving more than $50,000 to which the Company and/or its
subsidiaries are a party are valid and
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binding and in full force and effect and there are no defaults thereunder by the
Company, or to the knowledge of the Company by any other party thereto or events
which with notice or the passage of time would constitute a default by the
Company or to the knowledge of the Company by any other party thereto, except
for such defaults and events as to which requisite waivers or consents have been
obtained; and neither the execution of this Agreement nor the effectuation of
this plan of merger will constitute a default under or breach of any such
contract.
SECTION 4.12 Subsidiaries. The Company is the sole beneficial
holder and record owner of all of the issued and outstanding capital stock of
Portfolio Management Consultants, Inc., Portfolio Brokerage Services, Inc.,
Portfolio Technology Services, Inc. and PMC Investment Services, Inc. (the
"subsidiaries"), which the Company owns free and clear of all liens, except as
set forth on Schedule 4.12. There are no outstanding options or other rights to
purchase the securities of any of the subsidiaries. The Company does not own
any interest in any other corporation, partnership, or other entity, except for
any publicly traded securities held in trading accounts.
SECTION 4.13 Accounts Receivable. Except as identified on Schedule
4.13, all accounts receivable shown on the June 30, 1998 balance sheets or
incurred since the date thereof, represent arm's length transactions actually
made in the ordinary course of business and are believed collectible in the
ordinary course of business without the necessity of commencing legal
proceedings, and are not subject to counterclaim or set-off or in dispute.
SECTION 4.14 Title to Assets. The Company and its subsidiaries own
good and valid title to the assets and properties which they own or purport to
own, free and clear of any and all Liens affecting material assets and
properties of the Company and its subsidiaries, except those Liens identified on
the Schedule 4.14 and Liens for taxes not yet due and payable and such other
Liens or minor imperfections of title, if any, which do not materially detract
from the value or interfere with the present use of the affected asset or which
individually or in the aggregate would not have a Material Adverse Effect. As
used in this Agreement, the term "Lien" shall mean, with respect to any asset:
(a) any mortgage, pledge, lien, covenant, lease or security interest; and (b)
the interest of a vendor or lessor under any conditional sale agreement,
financing lease or other title retention agreement relating to such asset.
SECTION 4.15 Insurance Policies. The Company and its subsidiaries
currently maintain valid insurance as is reasonably prudent for the Company
(including its subsidiaries) and its business. No property damage, personal
injury or liability claims have been made, or are pending, against the Company
or its subsidiaries that are not covered by insurance. Within the past two (2)
years, no insurance company has canceled any insurance (of any type) maintained
by the Company (including its subsidiaries).
SECTION 4.16 Employee Benefit Plans.
(a) Definition. As used in this Agreement, the term "Employee Benefit
Plans" shall mean any pension plan, profit sharing plan, bonus plan, incentive
compensation plan, stock ownership plan, stock purchase plan, stock option plan,
stock appreciation rights plan, employee welfare plan, retirement plan, deferred
compensation plan, fringe benefit program,
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insurance plan, severance plan, disability plan, health care plan, sick leave
plan, death benefit plan, defined contribution plan, or any other plan or
program to provide retirement income, fringe benefits or other benefits to
former or current employees of the Company or its subsidiaries.
(b) Existing Plans. Except for the Employee Benefit Plans of the
Company identified as the "Existing Plans" on Schedule 4.16, the Company and its
subsidiaries do not maintain, nor is it bound by, any Employee Benefit Plan.
All of the Existing Plans are, to the extent applicable, in compliance in all
material respects with ERISA, the Code and all other applicable Laws. Except as
disclosed on Schedule 4.16, all of the Existing Plans that are intended to meet
the requirements of Section 401(a) or 403(a) of the Code have been determined to
be "qualified" within the meaning of the Code and, there are no facts that would
adversely affect the qualified status of any of such Existing Plans. Except as
disclosed on Schedule 4.16, each Existing Plan has been administered in all
material respects in accordance with its terms and is in compliance in all
material respects with all applicable Laws. Any Employee Benefit Plan that is
not an Existing Plan that has been terminated was done so in compliance in all
material respects with all applicable Laws, and, there is no basis for further
liability or obligation of the Company or its subsidiaries pursuant to any past
Employee Benefit Plan.
(c) Certain Matters. With respect to each Existing Plan which is
subject to either Title IV of ERISA or Section 412 of the Code, there are no
unfunded benefit liabilities as defined in Section 4001(a)(18) of ERISA, there
has occurred no failure to meet the minimum funding standards of Section 412 of
the Code, there is no "accumulated funding deficiency" within the meaning of
Section 412 of the Code, no such Existing Plan has terminated or has filed a
Notice of Intent to terminate, the Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any such Existing Plan and there is no
outstanding liability under Section 4062 of ERISA.
(d) Prohibited Transactions; Reportable Events. There have been no
prohibited transaction within the meaning of Section 4975 of the Code or Section
406 of ERISA or reportable event as described in Section 4043 of ERISA has
occurred with respect to any of the Existing Plans.
(e) Multiemployer Plans. Neither Company nor its subsidiaries is
contributing to, nor has it ever contributed to, any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
(f) Claims. There are no pending or threatened claims with respect to
any of the Existing Plans, other than claims for benefits arising in the
ordinary course of business .
(g) Welfare Benefits. Except as disclosed on Schedule 4.16, neither
the Company nor any Existing Plan provides or has any obligation to provide (or
contribute to the cost of) post-retirement (or post-termination of service)
welfare benefits with respect to current or former employees, registered
representatives or agents of the Company or its subsidiaries, including without
limitation post-retirement medical, dental, life insurance, severance or any
similar benefit, whether provided on an insured or self-insured basis.
-15-
(h) Welfare Plans. Except as otherwise provided in this Agreement,
each Existing Plan that is an "employee welfare benefit plan" as defined in
ERISA may be amended or terminated at any time after the Effective Time of
Merger without liability to the Company or any of its subsidiaries.
(i) COBRA. With respect to each Existing Plan, the Company has
complied in all material respects with the applicable health care continuation
and notice provisions of the Consolidation Omnibus Budget Reconciliation Act of
1985 and the proposed regulations thereunder, and the applicable requirements of
the Family and Medical Leave Act of 1993 and the regulations thereunder.
(j) The Merger. The Merger and the consummation of the transactions
contemplated by this Agreement will not entitle any current or former employee,
registered representatives or agents, of the Company or its subsidiaries to
severance benefits or any other payment, except as set forth in the Schedule
4.16(g), or accelerate the time of paying or vesting, or increase the amount of
compensation due any such person.
(k) Copies. Correct and complete copies of all Existing Plans,
together with recent summary plan descriptions, have been delivered by the
Company to the Purchaser.
SECTION 4.17 Taxes.
(a) Tax Returns. The Company and its subsidiaries have timely and
properly filed all federal, state, local and foreign tax returns (including but
not limited to income, business, franchise, sales, payroll, employee withholding
and social security and unemployment) which were required to be filed. The
Company and its subsidiaries have paid or made adequate provision, in reserves
reflected in its financial statements included in the SEC Reports in accordance
with generally accepted accounting principles, for the payment of all taxes
(including interest and penalties) and withholding amounts owed by them or
assessable against them. No material tax deficiencies have been proposed or
assessed against the Company (or its subsidiaries) and there is no basis in fact
for the assessment of any tax or penalty tax against the Company (or its
subsidiaries). No issue has been raised in any prior tax audit which, by
application of the same or similar principles, could reasonably be expected upon
a future tax audit to result in a proposed material deficiency for any period.
(b) Extensions. The Company and its subsidiaries have not consented
to any extension of the statute of limitation with respect to any open federal
or state tax returns.
(c) Tax Liens. There are no tax Liens upon any property or assets of
the Company (or its subsidiaries) except for Liens for current taxes not yet due
and payable.
(d) Delivery of Tax Returns. The Company has made available, and will
deliver upon request, to the Purchaser correct and complete copies of all tax
returns and reports of each of the Company and its subsidiaries filed for all
periods for which a tax audit or adjustment is not barred by the applicable
statute of limitations. No examination or audit of any tax return or
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report for any period not barred by the applicable statute of limitations has
occurred, no such examination is in progress and, to the knowledge of the
Company, no such examination or audit is planned.
(e) Employment Taxes. The Company and its subsidiaries have properly
withheld and timely paid all withholding and employment taxes which any of them
was required to withhold and pay relating to salaries, compensation and other
amounts heretofore paid to its employees or other Persons. All Forms W-2 and
1099 required to be filed with respect thereto have been timely and properly
filed.
(f) Tax Sharing Agreements. The Company and its subsidiaries are not
parties to any agreement relating to allocating or sharing any taxes.
(g) Excess Parachute Payments. The Company and its subsidiaries are
not parties to any contract that could result, on account of the Merger or
otherwise, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(h) Liabilities of Other Persons. The Company and its subsidiaries do
not have any liability for taxes of any kind of any Person other than the
Company and its subsidiaries under any contract or under Treasury Regulations
Section 1.1502-6 (or any similar provision of Law) as a transferee or successor
or otherwise.
SECTION 4.18 Labor Matters. Except as set forth in Schedule 4.18,
there are no pending and unresolved material claims by any Person against any of
the Company or its subsidiaries arising out of any Law relating to
discrimination against employees or employee practices or occupational or safety
and health standards. There is no pending or, to the knowledge of the Company,
threatened, labor dispute, strike or work stoppage.
SECTION 4.19 Vote Required. The affirmative vote of the holders of
two-thirds of the outstanding shares of Common Stock and two-thirds of the
outstanding shares of Preferred Stock, respectively, are the only vote of the
holders of any class or series of capital stock or other securities of the
Company entitled to vote necessary to approve the Merger, this Agreement and the
transactions contemplated by this Agreement.
SECTION 4.20 Year 2000 Compliance. The Company has in place
adequate and reasonable plans so that all of the material computer hardware and
software systems of the Company and its subsidiaries (including, without
limitation, those related to their facilities, accounting and bookkeeping
records and record keeping activities) are presently or will be prior to
December 31, 1999 Year 2000 Compliant. As used in this Agreement, the phrase
"Year 2000 Compliant" shall mean with respect to the Company's material hardware
and software systems, that such hardware and software is designed to be used
prior to, during, and after the calendar Year 2000 A.D., and such hardware and
software used during each such time period will accurately receive, provide and
process date/time data from, into and between the twentieth and twenty-first
centuries, and will not malfunction, cease to function, or provide invalid or
incorrect
-17-
results as a result of date/time data, to the extent that other hardware and
software, used in combination with the Company's hardware and software, properly
exchanges date/time data with the Company's hardware and software.
SECTION 4.21 Undisclosed Liabilities. The Company and its
subsidiaries have no material liabilities of any nature except as disclosed in
the SEC Reports or which do not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 4.22 Compliance with Laws and Orders. Except as set forth
in Schedule 4.22, the Company and its subsidiaries are in compliance with all
applicable Laws and orders, including, without limitation, those applicable to
discrimination in employment, occupational safety and health, securities,
broker-dealer and investment advisor regulation, employment, retirement, labor
relations and the protection of the environment. Except as set forth in
Schedule 4.22, neither the Company nor its subsidiaries has received notice of
any violation or alleged violation of, and is not subject to liability for past
or continuing violation of any Laws or court or regulatory orders. All reports
and returns required to be filed by the Company with any government entity or
the National Association of Securities Dealers, Inc. ("NASD") have been filed,
and, after giving effect to any amendment thereof, were accurate and complete
when filed. Without limiting the generality of the foregoing, except as set
forth in Schedule 4.22:
(i) The operation of the Company's business and its subsidiaries
does not violate any provision of the Securities Act, the Securities
Exchange Act, the Advisers Act, the rules and regulations of the
Securities and Exchange Commission, the rules and regulations of the
NASD or state securities Laws and regulations and state Laws and
regulations respecting broker-dealers and investment advisors so as to
give rise to or constitute the grounds for a suit, action, claim or
demand by any government entity, the NASD or any person or persons
seeking compensation or damages or seeking to impose any penalty or to
restrain, enjoin or otherwise prohibit any aspect of the conduct of
the business in the manner in which it is now conducted.
(ii) The Company and its subsidiaries and their respective
employees and registered representatives and other associated persons
have all licenses, permits, approvals, authorizations, consents of all
government entities and the NASD required for the conduct of the
Business. All such licenses, permits, approvals, authorizations and
consents are in full force and effect and will not be affected or made
subject to loss, limitation or any obligation to reapply as a result
of the transactions contemplated hereby.
SECTION 4.23 Disclosures. No statement of fact by the Company
and/or its subsidiaries contained in this Agreement or in the Disclosure
Schedules contains or will contain any untrue statement of material fact
necessary in order to make the statements herein or therein contained, in light
of the circumstances under which they were made, not misleading as the date of
which it speaks.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND SUB
The Purchaser and the Sub represent and warrant to the Company as
follows:
Section 5.01 Organization and Qualification. Each of the Purchaser
and the Sub is a corporation duly organized, validly existing and in active
status or, if applicable, good standing under the Laws of the jurisdiction of
its incorporation and has all requisite corporate power and authority to carry
on its business as it is now being conducted. Each of the Purchaser and the Sub
is duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except where
the failure to be in good standing or so qualified would not in the aggregate
have a material adverse effect on the financial condition or results of
operations of the Purchaser and its subsidiaries taken as a whole. The Sub is a
corporation wholly owned by the Purchaser that was recently formed for the
purpose of engaging in the transactions described in this Agreement and has not
engaged in any activity other than those incident to the foregoing.
SECTION 5.02 Corporate Power and Authority. Each of the Purchaser
and the Sub has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by the Purchaser and the Sub of this Agreement and
the consummation by the Purchaser and the Sub of the trans actions contemplated
hereby have been duly authorized by the respective Boards of Directors of the
Purchaser and the Sub, and the shareholder of the Sub, and no other corporate
proceedings on the part of the Purchaser or the Sub are necessary to authorize
this Agreement, or commence the Offer or to consummate the transactions so
contemplated by this Agreement (including the Offer). This Agreement has been
duly and validly executed and delivered by each of the Purchaser and the Sub
and, assuming this Agreement constitutes a valid and binding obligation of the
Company, this Agreement constitutes the legal, valid and binding obligation of
each of the Purchaser and the Sub, enforceable against each of the Purchaser and
the Sub in accordance with its terms.
SECTION 5.03 Offer Documents; Proxy Statement. The Offer Documents
and the Offer will comply in all material respects with applicable federal
securities Laws, except that no representation is made by the Purchaser with
respect to information supplied by the Company, in writing, for inclusion in the
Offer Documents or any amendments or supplements thereto. None of the
information supplied by the Purchaser and its affiliates, in writing, for
inclusion in the Proxy Statement or any amendments or supplements thereto will,
at the respective times the Proxy Statement or any amendments or supplements
thereto are filed with the SEC, at the time that the Proxy Statement or any
amendment or supplement thereto is mailed to the Company's shareholders, or, at
the time of the Shareholders' Meeting or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
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SECTION 5.04 Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Purchaser and the Sub nor the
consummation by the Purchaser or the Sub of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
respective Articles of Incorporation or by-laws (or other similar governing
documents) of the Purchaser or the Sub; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) pursuant to the applicable requirements of
the Exchange Act, (B) the filing of the articles of merger pursuant to Colorado
Law, (C) any consents, approvals, authorizations or permits, filings or
notifications required to be given or made to any foreign jurisdiction, or (D)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not in the aggregate have any
material adverse effect on the financial condition or results of operations of
the Purchaser and its subsidiaries taken as a whole or a material adverse effect
on the consummation of the transactions contemplated hereby; or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Purchaser, except for violations which would not have in the aggregate any
material adverse effect on the financial condition or results of operations of
the Purchaser and its subsidiaries taken as a whole or a material adverse effect
on the consummation of the transactions contemplated hereby.
SECTION 5.05 Financing. The Purchaser and the Sub have and will
have, immediately prior to the consummation of the Offer, and at the Closing,
sufficient funds necessary to consummate timely the Offer and the Merger and the
other transactions contemplated hereby including the payment of related fees and
expenses.
SECTION 5.06 Financial Statements. The Purchaser has delivered to
the Company copies of the audited consolidated and unaudited consolidating
balance sheets of the Purchaser as of December 31, 1997 and June 30, 1998,
respectively, and the related audited consolidated statements of income,
shareholders' equity and cash flows for the fiscal year ended December 31, 1997
(including the related notes thereto) (the "Purchaser Financial Statements").
The Purchaser Financial Statements fairly present the consolidated financial
position of Purchaser as of their respective dates, and the results of
consolidated operations and changes in consolidated financial position for the
periods therein, all in conformity with generally accepted accounting
principles.
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
contemplated by this Agreement or as set forth in Schedule 6.01, during the
period from the date of this Agreement to the Effective Time, the Company and
its subsidiaries will each conduct its operations according to their ordinary
and usual course of business and consistent with past practice. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, or as set forth in Schedule 6.01, prior to the
Effective Time, neither the Company nor any of it subsidiaries, as the case may
be, will, without the prior written consent of the Purchaser, (i) issue, sell,
pledge or encumber, or authorize or propose the issuance, sale, pledge or
encumbrance of (A)
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any shares of capital stock of any class (including the shares of Common Stock
or Preferred Stock), or securities convertible into any such shares, or any
rights, warrants or options to acquire any such shares or other convertible
securities, or grant or accelerate any right to convert or exchange any
securities of the Company or any of its subsidiaries for such shares, other than
shares of Common Stock issuable upon exercise of currently outstanding Options,
or (B) any other securities in respect of, in lieu of or in substitution for
shares of Common Stock or Preferred Stock outstanding on the date hereof; (ii)
redeem, purchase or otherwise acquire, or propose to redeem, purchase or
otherwise acquire, any of its outstanding securities (including the shares of
Common Stock and Preferred Stock) or declare any dividends on Common Stock or
Preferred Stock; (iii) split, combine or reclassify any shares of its capital
stock or declare or pay any dividend or distribution on any shares of capital
stock of the Company; (iv) except pursuant to agreements or arrangements in
effect on the date hereof which have been disclosed to the Purchaser, authorize
any capital expenditure in excess of $50,000 in the aggregate, make any
acquisition or disposition of a material amount of assets or securities, or,
except for routine contracts with customers and clients consistent with past
practices, enter into or amend or terminate any contract, material to the
business of the Company and its subsidiaries taken as a whole, or release or
relinquish any contact rights or claims, material to the business of the Company
and its subsidiaries taken as a whole; (v) pledge or encumber any material
assets of the Company except in the ordinary course of business; (vi) except for
loans from Purchaser or Sub, incur any long-term debt for borrowed money or
short-term debt for borrowed money in an aggregate amount in excess of $10,000;
(vii) propose or adopt any amendments to the Articles of Incorporation or By-
Laws of the Company or any of its subsidiaries; (viii) adopt a plan of complete
or partial liquidation or resolutions providing for the complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its subsidiaries; (ix) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except wholly
owned subsidiaries of the Company in the ordinary course of business and
consistent with past practice; (x) make any loans, advances or capital
contributions to, or investments in, any other person (other than loans or
advances to subsidiaries and loans or advances to employees in accordance with
past practices); (xi) except as required by applicable Laws, adopt or amend any
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, severance, termination, employment or other employee benefit plan,
agreement, trust, fund, policy or other arrangement for the benefit or welfare
of any registered representative, agent, employee or director or former employee
or director or, except as required by applicable Laws or in the ordinary course
of business, increase the compensation or fringe benefits of any employee or pay
any employee or pay any benefit not required by any existing plan, arrangement
or agreement; (xii) make any tax election or settle or compromise any federal,
state, local or foreign income tax liability, except in the ordinary course of
business and consistent with past practice; (xiii) agree in writing or otherwise
to take any of the foregoing actions or (xiv) fail to comply in all material
respects with all applicable Laws. Following the date of this Agreement, the
Company will review its financing documents to determine if the consent of any
third party is required in connection with the transactions contemplated hereby.
If following such review, the Company becomes actually aware that any such
consent is required, it will so notify the Purchaser, and the parties hereto
shall use their respective best efforts to secure such consent; provided,
however, that for this purpose "best efforts" shall not require the Company or
the Purchaser to make any payment in order to secure any such consents.
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SECTION 6.02 No Solicitation. Neither the Company nor any of its
subsidiaries, nor any of their respective officers, directors, employees,
representatives, agents or affiliates, shall, directly or indirectly, encourage,
solicit, initiate or, except as is required in the exercise of the fiduciary
duties of the Company's directors and officers under applicable Laws upon advice
of counsel to the Company, participate in any way in discussions or negotiations
with, or knowingly provide any information to, any corporation, partnership,
person or other entity or group (other than the Purchaser or any affiliate or an
associate of the Purchaser) concerning any merger, sale of substantially all the
assets, sale of shares of capital stock or similar transactions involving the
Company or any material subsidiary or division of the Company; provided,
however, that nothing contained in this Section 6.02 shall prohibit the Company
or its Board of Directors from (i) taking and disclosing to the Company's
shareholders a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, (ii) making such
disclosure to the Company's shareholders which, in the judgment of the Board of
Directors with the advice of counsel, may be required under applicable Law or
(iii) providing information to, or parti cipating in discussions or
negotiations with, any party that has actually made, and which the Board of
Directors believes in good faith would be capable of effecting an acquisition of
the Company on terms that are superior, from a financial point of view, to the
Offer and the Merger if the Board of Directors in good faith believes, upon the
written advice of counsel, that the failure to so disclose would constitute a
breach of their fiduciary duty to the Company and its shareholders. The Company
will promptly communicate to the Purchaser if it is furnishing information to or
engaging in negotiations with any third party with respect to the acquisition of
the Company or any of its assets or subsidiaries.
SECTION 6.03 Access to Information. Subject to the existing
confidentiality agreement among the parties, the Company and its subsidiaries
will, upon reasonable notice to Xxxxxxx Xxxxx or her designee, allow the
Purchaser and its authorized representatives reasonable access during regular
business hours to its offices, other facilities and books and records. The
Company will also make its employees available for interviews with the
Purchaser, with Company personnel present, for reasonable purposes in a manner
reasonably acceptable to Xx. Xxxxx.
SECTION 6.04 Notification of Certain Matters. Each of the Company
and the Purchaser shall give prompt notice to the other party of any notice or
other communication from (i) the SEC, NASD or any other regulatory body relating
to the Merger, the Offer or any of the transactions contemplated by this
Agreement or (ii) any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
SECTION 6.05 Best Efforts. Subject to the terms and conditions
herein provided, and with respect to the Company, to the fiduciary duties of the
Board of Directors of the Company under applicable Laws, each of the parties
hereto agrees to use its best efforts to take, or cause to be taken, all
appropriate action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, in the
case of the Purchaser and the Sub, the filings required under the Colorado
Securities Act, as amended, with respect to the Offer and Merger and, in the
case of the Company, obtaining the consents of the fiduciary clients pursuant
to
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Section 6.11 hereof. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall take all
such necessary action.
SECTION 6.06 Indemnification and Insurance. (a) The Purchaser will
honor the Surviving Corporation's performance of all contracts, agreements and
commitments of the Company or any of its subsidiaries, including those reflected
in their Articles of Incorporation and Bylaws, which indemnify any officer or
director of the Company or any of its subsidiaries, as disclosed on Schedule
6.06(b), against claims made against them arising from their service, but only
to the extent that such contract, agreement or commitment was entered into
before the date of this Agreement and is listed on Schedule 6.06.
(b) Any indemnified party wishing to claim indemnification under this
Section, upon learning of any such action, suit, claim, proceeding or
investigation, shall promptly notify the Purchaser and the Surviving Corporation
thereof and the Purchaser and the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that any failure so to notify the
Purchaser and the Surviving Corporation of any obligation to indemnify such
indemnified party or of any other obligation imposed by this Section shall not
affect such obligations unless such failure to so notify materially prejudices
the rights of the Purchaser and the Surviving Corporation to defend any such
action, suit, claim, proceeding or investigation. The indemnified parties as a
group shall retain only one counsel in each jurisdiction to represent them with
respect to any single action; provided, however, in the event that there is,
under applicable standards of professional conduct, a conflict between the
positions of any two or more indemnified parties, the Purchaser and such
indemnified parties may retain, at the expense of the Purchaser and the
Surviving Corporation, as the case may be, such number of additional counsel as
are necessary to eliminate all conflicts of the type referred to above.
(c) In the event any claim is made against directors, officers or
employees of the Company that is covered or potentially covered by insurance,
the Surviving Corporation and the Purchaser shall do nothing that would in their
reasonable discretion forfeit, jeopardize, restrict or limit the insurance
coverage available for that claim until the final disposition of that claim.
(d) The Surviving Corporation and the Purchaser agree that until six
years from the date hereof, the Articles and the Bylaws of the Surviving
Corporation will not be amended to reduce or limit the rights to indemnity
currently afforded thereunder. To the knowledge of the Company, there are no
pending or threatened claims which are reasonably anticipated to result in a
claim for indemnification.
SECTION 6.07 Company Indebtedness. Prior to the Effective Time, the
Company shall cooperate with the Purchaser in taking such actions as are
reasonably appropriate or necessary in connection with the redemption,
prepayment, modification, satisfaction or elimination of any outstanding long-
term indebtedness of the Company or any of its subsidiaries with respect to
which a consent is required to be obtained to effectuate the Merger and the
transactions contemplated by this Agreement and has not been so obtained
(provided that prior to consummation of the Merger, the Company shall not be
required to actually redeem, prepay, modify, satisfy or
-23-
eliminate any such outstanding long-term indebtedness, make any payment or
undertake any obligation in order to secure any such consents or take any steps
which would irrevocably lead to any of the foregoing).
SECTION 6.08 Benefit Plans. (a) Schedule 6.08(a) includes all
employee benefit plans, programs, policies and agreements which provide
compensation or other benefits upon a termination of employment, voluntary or
involuntary, for the 20 highest paid employees of the Company or its
subsidiaries or which include a "change of control" provision, and a complete
and correct copy (or model form) of each such plan, program, policy and
agreement has been provided to Purchaser. Schedule 6.08(a) also sets forth the
annual compensation and average annual compensation, as the case may be, as of
the date of this Agreement for purposes of calculating the amount payable for
each of the 20 highest paid employees of the Company or its subsidiaries and any
other employee covered by a change of control provision under any of the plans,
programs, policies and agreements listed on Schedule 6.08(a).
(b) If any salaried or non-union hourly employee of the Company or any
of its subsidiaries is or becomes a participant in any written employee benefit
plan or program of the Purchaser or any member of its controlled group within
the meaning of Section 414(b) or (c) of the Internal Revenue Code of 1986, as
amended (the "Code"), such employee shall be credited under such plan or program
with all service prior to the Effective Time with the Company and its
subsidiaries (and any predecessor employer) to the extent credit was given by
the Company and its subsidiaries for purposes of eligibility for all purposes
and vesting under such plan or program.
(c) The Purchaser and the Sub acknowledge that consummation of the
Offer will constitute a change of control of the Company (to the extent such
concept is relevant) for purposes of any and all of the agreements and plans
specified on Schedule 6.08(a).
SECTION 6.09 No Default. From the date of this Agreement to the
Effective Date, the Company shall not do any act or omit to do any act, or
permit any act or omission to act, which will cause a material breach of any
material contract to which the Company and/or its subsidiaries is a party.
SECTION 6.10 Preservation of Relationships. From the date of this
Agreement to the Effective Date, the Company and its subsidiaries shall use
reasonable best efforts to preserve their business organization intact, to
retain the services of their present officers and key employees and to preserve
the goodwill of suppliers, customers, creditors and others having material
business relationships with them.
SECTION 6.11 Obtaining Consents. The Company and its subsidiaries
shall use their reasonable best efforts to obtain consents to the assignments of
the contracts under the Advisers Act, as amended, required for the consummations
of transactions contemplated hereby.
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ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, at or prior to the
Effective Time, of the following conditions:
(a) this Agreement shall have been adopted by the affirmative vote of
the shareholders of the Company owning at least two-thirds of the Company's
outstanding Common Stock and two-thirds of the Company's outstanding Preferred
Stock in accordance with applicable Law, if such vote is required by applicable
Law;
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or governmental authority which prohibits, restrains,
enjoins or restricts the consummation of the Merger; provided, however, that the
parties shall use their best efforts to have any such order, decree or
injunction vacated or reversed;
(c) the Sub shall have purchased all shares of Common Stock and
Preferred Stock validly tendered and not withdrawn pursuant to the Offer;
provided, however, that this condition shall not be applicable to the
obligations of the Purchaser or the Sub in violation of the terms of this
Agreement or the Offer if the Sub fails to purchase shares of Common Stock and
Preferred Stock tendered pursuant to the Offer;
SECTION 7.02 Opinion of Counsel for the Company. Prior to beginning
the Offer, Purchaser shall have been furnished with an opinion of Holme, Xxxxxxx
& Xxxx LLP, counsel for the Company.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of the Company, but prior to the Effective Time:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company (excluding any representative of the Purchaser or an
affiliate of the Purchaser), the Purchaser and the Sub;
(b) by either the Purchaser or the Company, if the Effective Time
shall not have occurred on or before March 31, 1999 (provided that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
any party whose failure to fulfill any obligation
-25-
under this Agreement has been the cause of or resulted in the failure of the
Effective Time to occur on or before such date);
(c) by either the Purchaser or the Company, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling, or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
the parties shall use their best efforts to have any such order, decree, ruling
or injunction vacated or reversed;
(d) by the Purchaser, if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth in Exhibit
A hereto, the Sub shall have (A) failed to commence the Offer as provided in
Section 1.01 hereof within 20 days following the date of this Agreement; (B)
terminated the Offer or the Offer shall have expired without the purchase of
shares of Common Stock and Preferred Stock thereunder at any time after the
latest date, if any, to which the Offer shall have been extended pursuant to
Section 1.01(c) hereof or (C) failed to pay for shares of Common Stock or
Preferred Stock pursuant to the Offer by the 40th business day following such
commencement, unless such failure to commence, termination or failure to pay for
shares of Common Stock or Preferred Stock shall have been caused by or resulted
from the failure of the Sub or the Purchaser to perform in any respect its
material covenants and agreements contained in this Agreement or Offer; or (ii)
prior to the purchase of shares of Common Stock and Preferred Stock pursuant to
the Offer, the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to the Purchaser its approval or recommendation of
the Offer, this Agreement or the Merger, or shall have recommended another
offer, or shall have resolved to do any of the foregoing; provided, however, the
Purchaser shall have no right to terminate this Agreement and abandon the Merger
if the Company withdraws or modifies its recommendation of the Offer, this
Agreement or the Merger, by reason of taking and disclosing to the Company's
shareholders a position contemplated by Rule 14e-2(a)(2) or (3) promulgated
under the Exchange Act with respect to another proposal, and if within ten days
of taking and disclosing to its shareholders the aforementioned position, the
Company publicly reconfirms its recommendation of the Offer, this Agreement or
the Merger and takes and discloses to the Company's shareholders a
recommendation to reject such other proposal as contemplated by Rule 14e-2(a)(1)
promulgated under the Exchange Act; or
(e) by the Company, if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any of the conditions set forth in Exhibit
A hereto or otherwise, the Sub shall have (A) failed to commence the Offer as
provided in Section 1.01 hereof within 20 days following the date of this
Agreement, (B) terminated the Offer or the Offer shall have expired without the
purchase of shares of Common Stock and Preferred Stock thereunder at any time
after the latest date, if any, to which the Offer shall have been extended
pursuant to Section 1.01(c) hereof or (C) failed to pay for shares of Common
Stock or Preferred Stock pursuant to the Offer by the 40th business day
following such commencement, unless such failure to commence, termination or
failure to pay for shares of Common Stock or Preferred Stock shall have been
caused by or resulted from the occurrence or existence of the condition
described in paragraph (d) or (g) of Exhibit A hereto, or (ii) prior to the
purchase of shares of Common Stock and Preferred Stock pursuant to the Offer,
-26-
(A) a corporation, partnership, person or other entity or group shall have made
a bona fide proposal that the Board of Directors of the Company believes, in
good faith after consultation with its legal and financial advisors, is more
favorable to the Company and its shareholders than the Offer and the Merger and
(B) the Sub does not make, within ten days of the Sub receiving notice of such
third party proposal, an offer which the Board of Directors believes, in good
faith after consultation with its legal and financial advisors, is at least as
favorable to the Company's shareholders as such third party proposal, it being
understood that the Company shall remain obligated to pay the fees to the
Purchaser pursuant to Section 9.09 hereof.
SECTION 8.02 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 8.01 hereof, this
Agreement, except for the provisions of this Section 8.02 and Section 9.09
hereof, shall forthwith become void and have no effect, without any liability on
the part of any party or its directors, officers or shareholders. Nothing in
this Section 8.02 shall relieve any party to this Agreement of liability for
breach of this Agreement.
SECTION 8.03 Amendment. To the extent permitted by applicable Law,
this Agreement may be amended by action taken by or on behalf of the Boards of
the Company (excluding any representative of the Purchaser or an affiliate of
the Purchaser), the Purchaser and the Sub at any time before or after adoption
of this Agreement by the shareholders of the Company; provided, however, that,
after any such shareholder approval, no amendment shall be made which decreases
the Common Stock Merger Consideration or Preferred Stock Merger Consideration or
which adversely affects the rights of the Company's shareholders hereunder
without the approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company (excluding any representatives or directors
appointed by or elected on behalf of the Purchaser or an affiliate of the
Purchaser), the Purchaser or the Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. The
representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms contemplates performance
after the Effective Time.
SECTION 9.02 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof except the Confidentiality Agreement, dated September __, 1998,
between the Company and the Purchaser and (b) shall not be assigned by operation
of Law or otherwise, provided that the Purchaser or the Sub may assign any of
their rights and obligations to any wholly-owned, direct or indirect subsidiary
of the Purchaser, but no such assignment shall relieve the Purchaser or the Sub
of its obligations hereunder. It is understood and agreed that either the
Purchaser, or any wholly-owned subsidiary of the Purchaser, may purchase shares
of Common Stock under the Offer.
SECTION 9.03 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agree ment, which shall remain in full force and
effect.
SECTION 9.04 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by cable, telegram, telecopier or
telex, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to the Purchaser or the Sub:
The Xxxxxxx Companies Inc.
000 X. Xxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attention: S. Xxxxxxx X'Xxxxx, Esq.
with a copy to:
Xxxxxxx & Xxxxx
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
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if to the Company:
PMC International, Inc.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: X.X. Xxxxxx and Xxxxx X. XxxXxxxxx
with a copy to:
Holme Xxxxxxx & Xxxx LLP
Suite 4100, 1700 Lincoln
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Colorado regardless of the
Laws that might otherwise govern under principles of conflicts of Laws
applicable thereto.
SECTION 9.06 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 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 confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except for all of Articles II and III and Section 6.06.
SECTION 9.08 Counterparts. This Agreement may be executed in
counterparts, manually or by facsimile, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
SECTION 9.09 Expenses. (a) All costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
(b) The Purchaser acknowledges and agrees that the Company has
disclosed that it is indebted for fees and expenses (including fees and expenses
of its counsel and advisors) incurred by it in connection with the transactions
contemplated by this Agreement as set forth in Schedule 9.09. To the best
knowledge of the Company, the fees and expenses listed in Schedule 9.09
represent the only significant fees and expenses incurred by the Company in
connection with the transactions contemplated by this Agreement. It is
understood that certain of
-29-
such fees and expenses may be paid by the Company prior to the execution of this
Agreement, and the Purchaser agrees to refrain from taking any action which
would interfere with the payment of the foregoing fees and expenses by the
Company.
(c) If this agreement or the transactions contemplated hereby are
terminated or abandoned (unless at such time the Purchaser or the Sub shall be
in breach in any material respect of any of its obligations or representations
and warranties hereunder) and prior to or contemporaneously with such
termination or abandonment, any corporation, partnership, person, other entity
or group (as defined in Section 13(d)(3) of the Exchange Act) other than the
Purchaser or any of its subsidiaries or affiliates (collectively, "Person"),
shall have acquired or beneficially owns (and failed to tender such shares) (as
defined in Rule 13d-3 promulgated under the Exchange Act) at least 33.34% of the
then outstanding shares of Common Stock, then the Company shall promptly (and in
any event within 2 days of receipt by the Company of written notice from the
Purchaser) pay the Purchaser the sum of (x) two hundred fifty thousand dollars
and (y) all actual, documented out-of-pocket expenses relating to the Offer and
the Merger in an amount up to one hundred thousand dollars.
SECTION 9.10 Certain Definitions. For purposes of this Agreement:
(a) "subsidiary" shall mean, when used with reference to an entity,
any corporation, a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity.
(b) "Material Adverse Effect" shall mean any material adverse change
in the financial condition or results of operations of the Company and its
subsidiaries taken as a whole including, without limitation, information whether
written or oral, that Ernst & Young LLP intends to cancel or substantially
reduce the relationship with the Company and its subsidiary, as determined by
the Purchaser in its reasonable discretion.
(c) "Law" shall mean any federal, state, local or other law, rule,
regulation or governmental requirement of any kind and the rules, regulations
and orders promulgated thereunder by any regulatory agencies.
(d) "Person" shall mean a natural person, corporation, trust
partnership, limited liability company, governmental entity, agency or branch or
department thereof, or any other legal entity.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, as the same may be in effect from
time to time.
(f) "ERISA" shall mean the Employee Retirement Income Security Act of
1976, as amended, as the same may be in effect from time to time.
(g) "knowledge" shall mean actual knowledge of the officers and
directors of the Company or any knowledge which any such officer or director
should have by virtue of his
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or her position with or relationship to the Company and its subsidiaries from
operating or managing the Company and its subsidiaries.
SECTION 9.11 Performance by Sub. The Purchaser hereby agrees to
cause the Sub to comply with its obligations hereunder and under the Offer and
to cause the Sub to consummate the Merger as contemplated herein.
SECTION 9.12 Publicity. So long as this Agreement is in effect,
each of the Purchaser and the Sub, on the one hand, and the Company, on the
other hand, promptly shall consult and cooperate with the other prior to issuing
any press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to consultation, except as
may be required by Law or by obligations pursuant to any listing agreement with
any national securities exchange and except to allow internal communications
with employees.
SECTION 9.13 Agreement of Shareholders. Simultaneously herewith,
those shareholders named on Schedule 9.13 have entered into a letter agreement
with the Purchaser and the Sub pursuant to which such shareholders have agreed
to tender (and not withdraw) all shares of Common Stock and/or Preferred Stock
held by such shareholder to the Sub pursuant to the Offer on the terms set forth
in such letter agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above written.
THE XXXXXXX COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
___________________________
Senior Vice President
____________________
and CFO
____________________
ZACQ CORP.
By: /s/ Xxxxxxx X. Xxxxxxxx
___________________________
President
__________________
__________________
PMC INTERNATIONAL, INC.
By: /s/ X.X. Xxxxxx
___________________________
Chief Executive
_________________
Officer
_________________
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EXHIBIT A
The capitalized terms used in this Exhibit A have the meanings set
forth in the attached Agreement, except that the term "Merger Agreement" shall
be deemed to refer to the attached Agreement.
Notwithstanding any other provisions of the Offer, the Purchaser shall
not be required to accept for payment, purchase or pay for any shares of Common
Stock or Preferred Stock tendered, and may terminate or, subject to the terms of
the Merger Agreement, amend the Offer and may postpone the acceptance for
payment of and payment for scrip, or shares of Common Stock or Preferred Stock,
if (A) on or prior to the time at which the Offer shall have expired (i) the
number of shares of Common Stock or certificates for scrip validly tendered and
not withdrawn immediately prior to the expiration of the Offer, when added to
the shares of Common Stock then owned by the Purchaser and its affiliates, shall
not constitute two-thirds of the shares of Common Stock outstanding on a fully
diluted basis, (ii) the number of shares of Preferred Stock validly tendered
and not withdrawn immediately prior to the expiration of the Offer, when added
to the shares of Preferred Stock then owned by the Purchaser and its affiliates,
shall not constitute two-thirds of the shares of Preferred Stock outstanding on
a fully diluted basis or (B) at any time on or after October ___, 1998 and
before the time of acceptance for payment for any such shares of Common Stock
and Preferred Stock any of the following conditions exist or shall occur and
remain in effect:
(a) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the American
Stock Exchange, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
a commencement of a war, armed hostilities or other national or
international calamity directly or indirectly involving the United
States, (iv) any material limitation (whether or not mandatory) by any
governmental authority on, or any other event which might materially
and adversely affect the extension of credit by lending institutions,
or (v) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof; or
(b) there shall have been any statute, rule or regulation
enacted, promulgated, entered or enforced or deemed applicable, or any
decree, order or injunction entered or enforced by any government or
governmental authority in the United States or by any court in the
United States that (i) restrains or prohibits the making or
consummation of the Offer or the consummation of the Merger, (ii)
prohibits or restricts the ownership or operation by the Purchaser (or
any of its affiliates or subsidiaries) of any portion of its or the
Company's business or assets which is material to the business of all
such entities taken as a whole or (iii) imposes material limitations
on the ability of the Purchaser effectively to acquire or to hold or
to exercise full rights of ownership of the shares of Common Stock or
Preferred Stock, including, without limitation, the right to vote the
shares of Common Stock or Preferred Stock purchased by the Purchaser
on all matters properly presented to
A-1
the shareholders of the Company; provided, however, that the Purchaser
and the Sub shall have used their best efforts to have any such
decree, order or injunction vacated or reversed, including, without
limitation, by proffering their willingness to accept an order
embodying any arrangement required to be made by the Purchaser or the
Sub pursuant to Section 7.01(b) of the Merger Agreement (and
notwithstanding anything in this subsection (b) to the contrary, no
terms, conditions or provisions of an order embodying such an
arrangement shall constitute a basis for the Purchaser asserting
nonfulfillment of the conditions contained in this subsection (b)); or
(c) the Merger Agreement shall have been terminated in accordance
with its terms; or
(d) (i) the Company shall have breached or failed to perform any
of its covenants or agreements which breach or failure to perform is
material to the obliga tions of the Company under the Merger
Agreement taken as a whole, (ii) any of the representations and
warranties of the Company set forth in the Merger Agreement shall not
have been true in any respect which is material to the Company and its
subsidiaries taken as a whole, in each case, when made or (iii) a
Material Adverse Effect has occurred, provided that the aggregate
effect under (i), (ii), and (iii) shall be in excess of $250,000; or
(e) the Board of Directors of the Company shall have publicly
withdrawn or modified in any material respect adverse to the Purchaser
its recommendation of the Offer; provided, however, the Purchaser
shall have no right to terminate the Offer or not accept for payment
or pay for any scrip or shares of Common Stock or Preferred Stock if
the Company withdraws or modifies its recommendation of the Offer and
the Merger, by reason of taking and disclosing to the Company's
shareholders a position contemplated by Rule 14e-2(a)(2) or (3)
promulgated under the Exchange Act with respect to another proposal,
and if within ten days of taking and disclosing to its shareholders
the aforementioned position, the Company publicly reconfirms its
recommendation of the Offer and Merger and takes and discloses to the
Company's shareholders a recommendation to reject such other proposal
as contemplated by Rule 14e-2(a)(1) promulgated under the Exchange
Act; or
(f) the Purchaser and the Company shall have agreed that the
Purchaser shall terminate the Offer, or
(g) the Company has not delivered to Purchaser consents
conforming with the requirements of the Advisers Act from investment
advisors with assets under management with the Company representing in
the aggregate at least 80% of the total assets under management by the
Company as of October 1, 1998.
which, in the reasonable judgment of the Purchaser, makes it inadvisable to
proceed with the Offer or with such acceptance for payment or payments.
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Subject to the terms and provisions of the Merger Agreement the
foregoing conditions are for the sole benefit of the Purchaser and may be
asserted by the Purchaser regardless of the circumstances giving rise to any
such condition and may be waived by the Purchaser in whole or in part, at any
time and from time to time, in the sole discretion of the Purchaser. The
failure by the Purchaser at any time to exercise any of the foregoing rights
will not be deemed a waiver of any right and each right will be deemed an
ongoing right which may be asserted at any time and from time to time.
A-3
