AGREEMENT AND PLAN OF MERGER
among
GENERAL BEARING CORP.,
FISCO INDUSTRIES LTD.,
WORLD MACHINERY COMPANY
and
THE STOCKHOLDERS OF WORLD MACHINERY COMPANY SIGNATORY HERETO
Dated as of July 2, 2000
NY/286183.2
<PAGE>
This AGREEMENT AND PLAN OF MERGER, dated as of July 2, 2000, is
entered into by and among GENERAL BEARING CORP., a Delaware corporation
("Parent"), FISCO INDUSTRIES LTD., a New York corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), WORLD MACHINERY COMPANY, a Delaware
corporation (the "Company") and those stockholders of the Company who are
signatories hereto (the "Company Stockholders").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have approved the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth in this Agreement and Plan of
Merger, including, without limitation, the exhibits attached hereto
(collectively, this "Agreement");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have determined that it is advisable and in the best interests
of their respective shareholders for Merger Sub to merge with and into the
Company as set forth below (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $1.00 per share, of the Company ("Company
Common Stock"), other than shares owned directly or indirectly by Parent, Merger
Sub or by the Company, will be converted into shares of common stock, par value
$0.01 per share, of Parent ("Parent Common Stock") in accordance with the
provisions of Article II of this Agreement;
WHEREAS, for federal income tax purposes, the Merger is intended to
qualify as a reorganization under the provisions of Section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code"), and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement and the Delaware General Corporation Law
(the "DGCL"), Merger Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 1.3) of the Merger. Following the Merger,
the separate corporate existence of Merger Sub shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL.
NY/286183.2
<PAGE>
SECTION 1.2 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties which
shall be no later than the first business day after the satisfaction or waiver
of the conditions set forth in Article VI (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions) (the "Closing Date") at such place as the parties
may mutually agree.
SECTION 1.3 Effective Time. On the Closing Date, the parties shall
execute and file in the office of the Secretary of State of Delaware a
certificate of merger (a "Certificate of Merger") executed in accordance with
the DGCL and shall make all other filings or recordings, and take such other and
further action as may be required under the DGCL. The Merger shall become
effective at the time of filing of the Certificate of Merger, or at such later
time as is agreed upon by the parties hereto and set forth therein (such time as
the Merger becomes effective is referred to herein as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the DGCL.
SECTION 1.5 Certificate of Incorporation and By-Laws of the
Surviving Corporation.
(a) The Certificate of Incorporation of the Merger Sub as in effect
immediately prior to the Effective Time shall become the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, and
thereafter may be amended as provided therein and as permitted by law and this
Agreement.
(b) The By-Laws of the Merger Sub as in effect immediately prior to
the Effective Time shall become the By-Laws of the Surviving Corporation after
the Effective Time, and thereafter may be amended as provided therein and as
permitted by law and this Agreement.
SECTION 1.6 Directors. The directors of the Merger Sub immediately
prior to the Effective Time shall become the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Merger Sub immediately
prior to the Effective Time shall become the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Capital Stock of Merger Sub. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or any shares of capital stock of Merger Sub,
each share of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and non-assessable share of common stock, par value $0.01
per share, of the Surviving Corporation.
2
NY/286183.2
<PAGE>
SECTION 2.2 Cancellation of Treasury Stock and Parent Owned Stock.
As of the Effective Time, by virtue of the Merger and without any action on the
part of the holder of any shares of Company Common Stock or any shares of
capital stock of Merger Sub, each share of Company Common Stock issued and held,
immediately prior to the Effective Time, in the Company's treasury or by any of
the Company's direct or indirect wholly owned subsidiaries, and each share of
Company Common Stock that is owned by Parent, Merger Sub or any other subsidiary
of Parent, shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
SECTION 2.3 Conversion of Company Common Stock.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Company Common Stock or any
shares of capital stock of Merger Sub, subject to this Section 2.3 and Section
2.4(f), each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled in accordance with
Section 2.2 (the "Canceled Shares") shall be converted into 1,025.4735 shares of
duly authorized, validly issued and non- assessable shares of Parent Common
Stock (the "Merger Consideration"). No holder of Company Common Stock shall be
entitled to receive fractional shares of Parent Common Stock, and the number of
shares of Parent Common Stock to which each such holder shall be entitled shall
be rounded to the nearest whole number. At the Effective Time, all such shares
of Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration.
(b) The Company represents and warrants that the holders of the
Company Common Stock are not entitled to appraisal rights under the DGCL or
otherwise.
SECTION 2.4 Exchange of Certificates.
(a) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall deliver, or cause to be delivered, to each holder
of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock upon surrender to the Parent of a Certificate for
cancellation, together with such other documents as may be reasonably required
by Parent, a certificate representing that number of whole shares of Parent
Common Stock which such holder's shares of Company Common Stock have been
converted into pursuant to this Article II, and the Certificate so surrendered
shall forthwith be canceled. Notwithstanding the foregoing, certificates
representing 300,000 shares of Parent Common Stock (allocated among the Company
Stockholders in proportion to their percentage ownership of Company Common Stock
relative to each other (the "Escrow Shares")) shall be deposited in escrow
pursuant to the terms of the escrow agreement, dated the date hereof, among the
Parent, the Company Stockholders and American Stock Transfer & Trust Company, as
escrow agent (the "Escrow Agreement"). Until surrendered as contemplated by this
Section 2.4, each Certificate shall be deemed at all times after the Effective
Time to represent only the right to receive upon such surrender the number of
whole shares of Parent Common Stock into which the shares of Company Common
Stock formerly represented thereby have been converted.
(b) No Further Rights in Company Common Stock. All shares of Parent
Common Stock issued upon conversion of the shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
3
NY/286183.2
<PAGE>
(c) Withholding Rights. The Surviving Corporation shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect of which such deduction
and withholding was made by the Surviving Corporation.
(d) Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation considers or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Merger Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of this agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Company Stockholders hereby represent and
warrant to Parent and Merger Sub that, except as set forth in the corresponding
sections or subsections of the disclosure letter delivered by the Company to
Parent and Merger Sub on the date hereof (the "Company Disclosure Letter"):
SECTION 3.1 Organization, Qualification, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority, corporate
and otherwise, to own its properties and assets and to carry on its business as
it is now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its properties or the
conduct of its business requires such qualification, except for jurisdictions in
which such failure to be so qualified or to be in good standing would not in the
aggregate have a Material Adverse Effect on the Company. The copies of the
Company's certificate of incorporation and by-laws which have been made
available to Parent are complete and correct and in full force and effect on the
date hereof. Each of the Company's Subsidiaries is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority, corporate
and otherwise, to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not in the aggregate
have a Material Adverse Effect on the Company. All the outstanding shares of
capital stock of, or other ownership interests in, the Company's Subsidiaries
are validly issued, fully paid and non-assessable and are owned by the Company,
directly or indirectly, free and clear of all liens, claims, charges or
encumbrances. There are no existing options, rights of first refusal, preemptive
rights, calls or commitments of any character relating to the issued or unissued
capital stock or other securities of, or other ownership interests in, any
Subsidiary of the Company. The
4
NY/286183.2
<PAGE>
Company has made available to Parent a complete and correct copy of the charter
and by-laws or other organizational documents of each of the Subsidiaries, each
as amended to the date hereof and each such document is in full force and
effect. As used in this Agreement, "Subsidiary" means with respect to the
Company, Parent or Merger Sub, as the case may be, any entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such party or by one or more of
its respective Subsidiaries or by such party and one or more of its respective
Subsidiaries.
SECTION 3.2 Capital Stock. The authorized capital stock of the
Company consists of 10,000 shares of the Company Common Stock. As of the date
hereof, 3,062 shares of the Company Common Stock are issued and outstanding. All
the outstanding shares of the Company Common Stock have been validly issued and
are fully paid and non-assessable. There are no outstanding subscriptions,
options, warrants, rights or other arrangements or commitments obligating the
Company to issue any shares of its stock.
SECTION 3.3 Corporate Authority Relative to this Agreement. No
Violation. The Company has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the Board of Directors of
the Company and by the holders of the outstanding shares of Company Common
Stock. No other corporate proceedings on the part of the Company are necessary
to authorize this Agreement and the transactions contemplated hereby. The Board
of Directors of the Company has determined that the transactions contemplated by
this Agreement are advisable and in the best interest of its stockholders and to
recommend to such stockholders that they vote in favor thereof. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
this Agreement, has been duly and validly executed and delivered by the other
parties hereto and constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except insofar as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies). Other than the filing of the
Certificate of Merger with the Delaware Secretary of State and any necessary
state filings to maintain the good standing or qualification of the Surviving
Corporation (collectively, the "Company Required Approvals"), no authorization,
consent or approval of, or filing with, any governmental body or authority is
necessary for the consummation by the Company of the transactions contemplated
by this Agreement except for such authorizations, consents, approvals or
filings, the failure to obtain or make which would not, in the aggregate, have a
Material Adverse Effect on the Company; provided that the Company makes no
representation with respect to such of the foregoing as are required by reason
of facts specifically pertaining to Parent as any of its Subsidiaries.
(a) The execution, delivery and performance of this Agreement by
the Company do not, and the consummation by the Company of the Merger and
the other transactions contemplated hereby will not, constitute or result
in (A) a breach or violation of, or a default under, the charter or
by-laws of the Company or the comparable governing instruments of any of
its Subsidiaries, (B) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge,
security interest or other encumbrance on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both)
pursuant to, any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") binding upon the Company or
any of its Subsidiaries or governmental or non-governmental permit or
license to which the Company or any of its Subsidiaries is subject or (C)
any change in the rights or obligations of any party under any of the
Contracts, except, in the case of clause (B) or (C) above, for any
breach, violation, default, acceleration, creation or
5
NY/286183.2
<PAGE>
change that, individually or in the aggregate, is not reasonably likely
to have a Material Adverse Effect on the Company or prevent, materially
delay or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement.
SECTION 3.4 Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial statements
provided by the Company ("Company Financial Statements") to Parent (including
any related notes and schedules) fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and their results of operations and cash flows for the periods or
as of the dates then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and United States or
international generally accepted accounting principles ("GAAP") consistently
applied during the periods involved (except as otherwise disclosed in the notes
thereto and except that the unaudited financial statements therein do not
contain all of the footnote disclosures required by GAAP).
SECTION 3.5 No Undisclosed Liabilities. Neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and there is no existing condition,
situation or set of circumstances which reasonably could be expected to result
in such a liability except liabilities or obligations set forth in the Company
Financial Statements or which would not in the aggregate have a Material Adverse
Effect on the Company. Notwithstanding anything to the contrary in this Section
3.5 or elsewhere in this Agreement, no undisclosed liability shall be deemed to
violate this Agreement if such liability (i) relates to any matter that is the
subject of another representation and warranty under this Article III, (ii) such
other representation and warranty is qualified by the term "to the knowledge of
the Company", and (iii) the Company has no knowledge of such liability.
SECTION 3.6 No Violation of Law. The businesses of the Company and
its Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority except for violations or
possible violations which would not in the aggregate have a Material Adverse
Effect on the Company. The Company and its Subsidiaries have all permits,
licenses and governmental authorizations material to ownership or occupancy of
their respective properties and assets and the carrying on of their respective
businesses, except for such permits, licenses and governmental authorizations
the failure of which to have would not have in the aggregate a Material Adverse
Effect on the Company.
SECTION 3.7 Environmental Laws and Regulations. (a) The Company and
each of its Subsidiaries is in material compliance with all applicable federal,
state, local and foreign laws and regulations relating to pollution or
protection of human health or the Environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance which would not
in the aggregate have a Material Adverse Effect on the Company, which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of material permits and other governmental authorizations required
under applicable Environmental Laws, and material compliance with the terms and
conditions thereof, (b) neither the Company nor any of its Subsidiaries has
received written notice of, or, to the Knowledge of the Company, is the subject
of, any actions, causes of action, claims, investigations, demands or notices by
any Person alleging liability under or non-compliance with any Environmental Law
or that the Company or any Subsidiary is a potentially responsible party at any
Superfund site or state equivalent site ("Environmental Claims") which would in
the aggregate have a Material Adverse Effect on the Company, (c) to the
Knowledge of the Company, there are no circumstances that are reasonably likely
to prevent or interfere with such material compliance in the future, (d) to the
Knowledge of the Company, the Company and its Subsidiaries have not disposed of
or released hazardous materials (at a concentration or level which requires
6
NY/286183.2
<PAGE>
remedial action under any Environmental Law) at any real property currently
owned or leased by the Company or any Subsidiary or at any other real property,
except for such disposals or releases as would not in the aggregate have a
Material Adverse Effect on the Company, and (e) neither the Company nor its
Subsidiaries have agreed to indemnify any predecessor or other party with
respect to any environmental liability, other than customary indemnity
provisions contained in agreements entered into in the ordinary course of
business which would not in the aggregate have a Material Adverse Effect on the
Company.
SECTION 3.8 Absence of Certain Changes or Events. Other than as
previously disclosed in writing to Parent, since January 1, 2000 the businesses
of the Company and its Subsidiaries have been conducted in the ordinary course
and there has not been any event, occurrence, development or state of
circumstances or facts that has had a Material Adverse Effect on the Company.
Since January 1, 2000, no dividends or distributions have been declared or paid
on or made with respect to the shares of capital stock or other equity interests
of the Company or its Subsidiaries nor have any such shares been repurchased or
redeemed, other than dividends or distributions paid to the Company or a
Subsidiary.
SECTION 3.9 Investigations; Litigation.
(a) To the knowledge of the Company, no investigation or review by
any governmental body or authority with respect to the Company or any of
its Subsidiaries which would in the aggregate have a Material Adverse
Effect on the Company is pending nor has any governmental body or
authority notified the Company of an intention to conduct the same; and
(b) There are no actions, suits or proceedings pending (or, to the
Company's Knowledge, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties or before any
federal, state, local or foreign governmental body or authority, which
would, in the aggregate, have a Material Adverse Effect on the Company.
SECTION 3.10 Tax Matters. All federal, state, local and foreign Tax
Returns required to be filed by or on behalf of the Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which the Company or any of its Subsidiaries is a member (a "Company Group")
have been timely filed or requests for extensions to file such returns or
reports have been timely filed and granted and have not expired, and all returns
filed are complete and accurate except to the extent any failure to file or any
inaccuracies in filed returns would not, individually or in the aggregate, have
a Material Adverse Effect on the Company. All Taxes due and owing by the
Company, any Subsidiary of the Company or any Company Group have been paid, or
adequately reserved for, except to the extent any failure to pay or reserve
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. Except as set forth in Section 3.10 of the Company Disclosure
Letter, there is no audit examination, deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any Taxes due and owing by
the Company, any Subsidiary of the Company or any Company Group nor has the
Company or any Subsidiary filed any waiver of the statute of limitations
applicable to the assessment or collection of any Tax, in each case, which
would, individually or in the aggregate, have a Material Adverse Effect on the
Company. All assessments for Taxes due and owing by the Company, any Subsidiary
of the Company or any Company Group with respect to completed and settled
examinations or concluded litigation have been paid. Neither the Company nor any
Subsidiary is a party to any tax indemnity agreement, tax sharing agreement or
other agreement under which the Company or any Subsidiary could become liable to
another person as a result of the imposition of a Tax upon any person, or the
assessment or collection of a Tax, except for such agreements as would not in
the aggregate have a Material Adverse Effect. The Company and each of its
Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except to the extent any
7
NY/286183.2
<PAGE>
such failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
SECTION 3.11 Real Property; Title. The Company and its Subsidiaries
have good and marketable title to all real properties owned by them except where
the failure to have such title would not in the aggregate have a Material
Adverse Effect.
SECTION 3.12 Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use
all patents, trademarks, trade names, service marks, copyrights and
any applications therefor, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary
information or materials that are used in the business of the
Company and its Subsidiaries as currently conducted, except for any
such failures to own, be licensed or possess that, would not have a
Material Adverse Effect on the Company, and to the Knowledge of the
Company, all patents, trademarks, trade names, service marks and
copyrights held by the Company and/or its Subsidiaries are valid
and subsisting.
(ii) Except as set forth in Schedule 3.12 of the Company
Disclosure Letter or as would not have a Material Adverse Effect on
the Company:
(A) the Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the
performance of its obligations hereunder, in
violation of any licenses, sublicenses and other
agreements as to which the Company is a party and
pursuant to which the Company is authorized to use
any third-party patents, trademarks, service marks,
and copyrights ("Third-Party Intellectual Property
Rights");
(B) no claims with respect to (I) the patents, registered
and material unregistered trademarks and service
marks, registered copyrights, trade names, and any
applications therefor owned by the Company or any of
its Subsidiaries (the "Company Intellectual Property
Rights"); (II) any trade secret material to the
Company; or (III) Third-Party Intellectual Property
Rights are currently pending or, to the Knowledge of
the Company, are threatened by any Person;
(C) the Company does not Know of any valid grounds for
any bona fide claims (I) to the effect that the sale,
licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by the
Company or any of its Subsidiaries, infringes on any
copyright, patent, trademark, service mark or trade
secret; (II) against the use by the Company or any of
its Subsidiaries, of any trademarks, trade names,
trade secrets, copyrights, patents, technology,
know-how or computer software programs and
applications used in the business of the Company or
any of its Subsidiaries as currently conducted or as
proposed to be conducted; (III) challenging the
ownership, validity or effectiveness of any of the
Company Intellectual Property Rights or other trade
secret material to the Company; or (IV) challenging
the license or legally enforceable right to use of
the Third-Party Intellectual Rights by the Company or
any of its Subsidiaries; and
8
NY/286183.2
<PAGE>
(D) to the Knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of
any of the Company Intellectual Property Rights by
any third party, including any employee or former
employee of the of the Company or any of its
Subsidiaries.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that except as set forth in the corresponding sections or
subsections of the Parent Disclosure Letter delivered to the Company on the date
hereof:
SECTION 4.1 Organization, Qualification, Etc. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all
requisite power and authority, corporate and otherwise, to own its properties
and assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not in the aggregate have a Material Adverse
Effect on Parent or Merger Sub. The copies of Parent's Certificate of
Incorporation, as amended, and By-laws and Merger Sub's charter and by-laws
which have been made available to the Company are complete and correct and in
full force and effect on the date hereof. Each of Parent's Subsidiaries is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has all
requisite power and authority, corporate and otherwise, to own its properties
and to carry on its business as it is now being conducted, and is duly qualified
to do business and is in good standing in each jurisdiction in which the
ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not in the aggregate have a Material Adverse
Effect on Parent or Merger Sub. All the outstanding shares of capital stock of,
or other ownership interests in, Parent's Subsidiaries and Merger Sub are
validly issued, fully paid and non-assessable and are owned by Parent, directly
or indirectly, free and clear of all liens, claims, charges or encumbrances,
except for restrictions contained in credit agreements and similar instruments
to which Parent is a party. Except as disclosed in the Parent SEC Reports, there
are no existing options (except for those set forth in Section 4.2 below),
rights of first refusal, preemptive rights, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, any Subsidiary of Parent or Merger Sub.
SECTION 4.2 Capital Stock. The authorized capital stock of Parent
consists of 19,000,000 shares of Parent Common Stock, and 1,000,000 shares of
Preferred Stock, par value $.01 per share. The shares of Parent Common Stock to
be issued in the Merger or upon the exercise of the Company stock options,
warrants, conversion rights or other rights or upon vesting or payment of other
Company equity- based awards thereafter will, when issued, be validly issued
fully paid and non-assessable. As of January 1 , 2000, 3,924,950 shares of
Parent Common Stock and no shares of Parent Preferred Stock were issued and
outstanding. All the outstanding shares of Parent Common Stock have been validly
issued and are fully paid and non-assessable. As of January 1, 2000, there were
no outstanding subscriptions, options, warrants, rights or other arrangements or
commitments obligating Parent to issue any shares of its capital stock other
than (i) options and other rights to receive or acquire an aggregate of 259,800
shares of Parent Common Stock
9
NY/286183.2
<PAGE>
pursuant to the Stock Option Plan of Parent and (ii) warrants to purchase 90,000
shares of Parent Common Stock issued to the underwriter of Parent's initial
public offering.
SECTION 4.3 Corporate Authority Relative to this Agreement. No
Violation.
(a) Each of Parent and Merger Sub has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Boards of Directors of Parent and Merger Sub
and no other corporate or stockholder proceedings on the part of Parent
or Merger Sub are necessary to authorize this Agreement, the issuance of
the Parent Common Stock and the other transactions contemplated hereby.
The Board of Directors of Parent has determined that the transactions
contemplated by this Agreement are advisable and in the best interest of
its stockholders. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming this Agreement has been
duly and validly executed and delivered by the other parties hereto, this
Agreement constitutes the valid and binding agreements of Parent and
Merger Sub, enforceable against each of them in accordance with its terms
(except insofar as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies). Other than in connection with or in compliance with the
provisions of the DGCL, the Securities Act, the Exchange Act and the
securities or blue sky laws of the various states, and, other than the
filing of the Certificate of Merger with the Delaware Secretary of State
and any necessary state filings to maintain the good standing or
qualification of the Surviving Corporation (collectively, the "Parent
Required Approvals"), no authorization, consent or approval of, or filing
with, any governmental body or authority is necessary for the
consummation by Parent of the transactions contemplated by this
Agreement, except for such authorizations, consents, approvals or
filings, the failure to obtain or make which would not, in the aggregate,
have a Material Adverse Effect on Parent; provided that Parent makes no
representation with respect to such of the foregoing as are required by
reason or facts specifically pertaining to Company or any of its
Subsidiaries.
(b) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default
under, the charter or by-laws of Parent and Merger Sub or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or
violation of, or a default under, the acceleration of any obligations or
the creation of a lien, pledge, security interest or other encumbrance on
the assets of Parent or any of its Subsidiaries (with or without notice,
lapse of time or both) pursuant to, any Contracts binding upon Parent or
any of its Subsidiaries or any Law or governmental or non-governmental
permit or license to which Parent or any of its Subsidiaries is subject
or (C) any change in the rights or obligations of any party under any of
the Contracts, except, in the case of clause (B) or (C) above, for any
breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, would not have a Material Adverse
Effect on Parent or prevent, materially delay or materially impair the
ability of Parent or Merger Sub to consummate the transactions
contemplated by this Agreement.
SECTION 4.4 Reports and Financial Statements. Parent has delivered
or made available to the Company and the Company Stockholders true and complete
copies of: (i) the Annual Report on Form 10-K for the fiscal year ended January
1, 2000; (ii) the Quarterly Report on Form 10-Q for the quarter ended April 1,
2000; and (iii) the Proxy Statement for the Annual Meeting of Stockholders to be
held on July 25, 2000.
10
NY/286183.2
<PAGE>
As of their respective dates, such reports, proxy statements and
prospectuses filed on or prior to the date hereof (collectively, "Parent SEC
Reports") (i) complied as to form in all material respect with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations promulgated thereunder and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, that the
foregoing clause (ii) shall not apply to the financial statements included in
the Parent SEC Reports (which are covered by the following sentence). The
audited consolidated financial statements and unaudited consolidated interim
financial statements included in the Parent SEC Reports (including any related
notes and schedules) fairly present in all material respects the financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the results of their operations and their cash flows for the periods or as of
the dates then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved (except as otherwise disclosed in the notes thereto and
except that the unaudited financial statements therein do not contain all of the
footnote disclosures required by GAAP). Since December 31, 1998 , Parent has
timely filed all material reports, registration statements and other filings
required to be filed by it with the SEC under the rules and regulations of the
SEC.
SECTION 4.5 No Undisclosed Liabilities. Neither Parent nor any of
its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, and there is no existing condition,
situation or set of circumstances which reasonably could be expected to result
in such a liability except (a) liabilities or obligations reflected in any of
the Parent SEC Reports and (b) liabilities or obligations which would not in the
aggregate have a Material Adverse Effect on Parent.
SECTION 4.6 No Violation of Law. The businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 4.6 with respect to
Environmental Laws) except (a) as described in any of the Parent SEC Reports and
(b) for violations or possible violations which would not in the aggregate have
a Material Adverse Effect on Parent.
SECTION 4.7 Absence of Certain Changes or Events. Other than as
disclosed in the Parent SEC Reports, since January 1, 2000, the businesses of
Parent and its Subsidiaries have been conducted in all material respects in the
ordinary course and there has not been any event, occurrence, development or
state of circumstances or facts that has had a Material Adverse Effect on
Parent.
SECTION 4.8 Investigations; Litigation. Except as disclosed in any
of the Parent SEC Reports:
(a) no investigation or review by any governmental body or
authority with respect to Parent or any of its Subsidiaries which would
in the aggregate have a Material Adverse Effect on Parent is pending nor
to the Knowledge of Parent, has any governmental body or authority
notified Parent of an intention to conduct the same; and
(b) there are no actions, suits or proceedings pending (or, to
Parent's Knowledge, threatened) against or affecting Parent or its
Subsidiaries, or any of their respective properties, or before any
federal, state, local or foreign governmental body or authority which
would in the aggregate have a Material Adverse Effect on Parent.
11
NY/286183.2
<PAGE>
SECTION 4.9 Accounting and Tax Matters. Neither Parent nor any of
its Subsidiaries has taken or agreed to take any action, nor do the executive
officers of Parent have any knowledge of any fact or circumstance, that would
prevent Parent from accounting for the business combination to be effected by
the Merger as a "pooling-of-interests" or prevent the Merger and the other
transactions contemplated by the Agreement from qualifying as a "Reorganization"
within the meaning of Section 368(a) of the Code.
ARTICLE V.
COVENANTS
SECTION 5.1 Approvals and Consents; Cooperation.
(a) The Company and Parent shall together, or pursuant to an
allocation of responsibility to be agreed upon between them:
(i) as soon as is reasonably practicable take all such action
as may be required under state blue sky or securities laws in
connection with the transactions contemplated by this Agreement;
(ii) promptly prepare and file with the Nasdaq Small Cap
Market such listing applications or other notices, as may be
required, covering the shares of Parent Common Stock issuable in
the Merger or upon exercise of the Company stock options, warrants,
conversion rights or other rights or vesting or payment of other
Company equity-based awards and use its reasonable best efforts to
obtain, prior to the Effective Time, approval for the listing of
such Parent Common Stock; and
(iii) cooperate with one another in order to lift any
injunctions or remove any other impediment to the consummation of
the transactions contemplated herein.
(b) Subject to the limitations contained herein; the Company and
Parent shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions.
SECTION 5.2 Further Assurances. 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 of the Company and Parent shall
take all such necessary action.
SECTION 5.3 Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable efforts to cause the Merger to qualify, and will not knowingly
take any actions or cause any actions to be taken which could prevent the Merger
from qualifying, as a reorganization under the provisions of Section 368 (a) of
the Code. Following the Effective Time, neither the Surviving Corporation,
Parent nor any of their affiliates shall knowingly take any action or knowingly
cause any action to be taken which would cause the Merger to fail to qualify as
a reorganization under Section 368(a) of the Code.
12
NY/286183.2
<PAGE>
SECTION 5.4 Conveyance Taxes. Each of Parent and the Company,
respectively, shall timely pay any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes or fees not including any
income tax, gross receipt tax or any similar tax measured with respect to gross
or net income (collectively, the "Conveyance Taxes") imposed on it at or prior
to the Effective Time in connection with the transactions contemplated hereunder
that are required to be paid in connection therewith. Parent and the Company
shall cooperate in the preparation, execution and filing of all Tax Returns,
questionnaires, applications, or other documents regarding any such Conveyance
Taxes.
ARTICLE VI.
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
by the requisite affirmative vote of the stockholders of the Company in
accordance with the Company's Certificate of Incorporation, as amended,
and the DGCL.
(b) No Injunction or Restraint. No statute, rule, regulation,
executive order, decree, preliminary or permanent injunction or
restraining order shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits the consummation of
the transactions contemplated hereby. No action or proceeding by any
Governmental Entity shall have been commenced (and be pending), or, to
the knowledge of the parties hereto, threatened, against the Company or
Parent or any of their respective affiliates, partners, associates,
officers or directors, or any officers or directors of such partners,
seeking to prevent or delay the transactions contemplated hereby or
challenging any of the terms of provisions of this Agreement or seeking
material damages in connection therewith.
(c) Consents. All consents and approvals of Governmental Entities
necessary for consummation of the transactions contemplated hereby shall
have been obtained, other than those which, if not obtained, would not in
the aggregate have a Material Adverse Effect.
SECTION 6.2 Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver by Parent on or prior to the Closing Date of the
following further conditions:
(a) Company Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in
all material respects as of the Effective Time except (i) for changes
specifically permitted by the terms of this Agreement and (ii) that the
accuracy of representations and warranties that by their terms speak as
of the date of this Agreement or some other date will be determined as of
such date.
(b) The Company shall have performed in all material respects all
obligations and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
it prior to the Effective Time.
13
NY/286183.2
<PAGE>
(c) The Company shall have delivered to Parent a certificate, dated
the Effective Time and signed by its Chief Executive Officer, Chief
Financial Officer or a Senior Vice President, certifying to both such
effects.
SECTION 6.3 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver by the Company on or prior to the Closing Date of the
following further conditions:
(a) Parent and Merger Sub Representations and Warranties. The
representations and warranties of Parent and Merger Sub contained herein
shall be true and correct in all material respects except (i) for changes
specifically permitted by the terms of this Agreement and (ii) that the
accuracy of representations and warranties that by their terms speak as
of the date of this Agreement or some other date will be determined as of
such date.
(b) Parent shall have performed in all respects all obligations and
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it prior
to the Effective Time.
(c) Parent shall have delivered to the Company a certificate, dated
the Effective Time and signed by its Chief Executive Officer, Chief
Financial Officer or a Senior Vice President, certifying to both such
effects.
(d) Registration Rights Agreement. The Company and the Parent shall
have entered into a registration rights agreement relating to the Parent
Common Stock substantially in the form of Exhibit C hereto.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
shareholders of the Company or of Parent:
(a) by mutual written consent of Parent and the Company;
(b) by Parent (provided that Parent is not then in material breach
of any representation, warranty, covenant or other agreement contained
herein), upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company has become untrue, in
either case continuing ten (10) days following notice to the Company of
such breach or untruth and of a nature such that the conditions set forth
in Section 6.2(a) or Section 6.2(b), as the case may be, would be
incapable of being satisfied by August 31, 2000;
(c) by the Company (provided that the Company is not then in
material breach of any representation, warranty, covenant or other
agreement contained herein), upon a breach of any representation,
warranty, covenant or agreement on the part of Parent or Merger Sub set
forth in this Agreement, or if any representation or warranty of Parent
or Merger Sub has become untrue, in either case continuing ten (10) days
following notice to Parent of such breach or untruth and of a nature such
14
NY/286183.2
<PAGE>
that the conditions set forth in Section 6.3(a) or Section 6.3(b), as the
case may be, would be incapable of being satisfied by August 31, 2000;
(d) by either Parent or the Company if any Governmental Entity has
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
Merger and such order, decree or filing or other action has become final
and non-appealable; or
(e) by either Parent or the Company, if the Merger has not occurred
by August 31, 2000, unless the failure to consummate the Merger is the
result of a breach of covenant set forth in this Agreement or material
breach of any representation or warranty set forth in this Agreement by
the party seeking to terminate this Agreement.
SECTION 7.2 Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7. 1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors.
SECTION 7.3 Amendment. This Agreement may be amended by the parties
at any time before or after approval hereof by the shareholders of the Company;
provided, however, that after such shareholder approval there shall not be made
any amendment that by law requires further approval by the shareholders of the
Company or Parent without the further approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a 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. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 Indemnification. The Company, until the Effective Date,
and the Company Stockholders, jointly and severally, shall indemnify and hold
harmless the Parent (the "Indemnified Party") from and against any claims,
damages, losses, liabilities, costs and expenses, including, without limitation,
any settlement costs and any reasonable legal expenses incurred in connection
with investigating or defending any actions or threatened actions sustained or
required to be paid by reason of, arising out of or caused by any
misrepresentation or breach of a representation, warranty, covenant or agreement
by or of the Company in this Agreement (collectively, "Losses").
15
NY/286183.2
<PAGE>
SECTION 8.2 Survival of Representations. The representations and
warranties contained in this Agreement and the right of any party to bring any
claim in respect of such representations and warranties shall survive the
execution and delivery of this Agreement until March 31, 2002 (the "Survival
Period"). This Section 8.2 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 8.3 Limitation of Liability. The Parent's right to
indemnification under Section 8.2 shall be subject to the following limitations:
(i) except as provided herein, the Parent's right to be
recompensed for any Losses shall be limited to receiving the return of Parent
Common Stock issued to the Company Stockholders, the number of such shares to be
determined by dividing the amount of such Losses by the fair market value of the
Parent Common Stock (the fair market value to be equal to the closing bid price
for the Parent Common Stock as reported on the Nasdaq Small Cap Market on the
day of determination of the Losses for which indemnification is made, or if no
closing bid price is reported on such date, the immediately preceding date for
which a closing bid price is reported); provided, however, this Section 8.3
shall not limit the transfer of shares by any Company Stockholder (except for
Escrow Shares); provided, further if any shares are transferred by a Company
Stockholder, then the Company's right to be recompensed by such Company
Stockholder shall not be limited to the return of Parent Common Stock by such
Company Stockholder and the Parent's right to indemnification hereunder may be
satisfied, to the extent provided herein, from any other assets of such Company
Stockholder except that the liability of such Company Stockholder shall not
exceed (in addition to any shares of Parent Common Stock not so transferred),
the fair market value of Parent Common Stock (determined in accordance with this
Section 8.3) so transferred at the time of transfer; and
(ii) the Company shall be entitled to recover any Loss only
to the extent the aggregate of Losses exceeds $250,000.
SECTION 8.4 Company Stockholders' Representative.
(a) The Company Stockholders appoint David Gussack as the stockholders'
representative (the "Stockholders' Representative"), with full and unqualified
power to delegate to one or more Persons the authority granted to him hereunder,
to act as each of their agent and attorney-in-fact, with full power of
substitution, to take all actions called for by this Section 8 and the Escrow
Agreement, on their individual and collective behalf, in accordance with the
terms of this Section 8 and the Escrow Agreement,
(b) The Stockholders' Representative shall have no liability whatsoever
to any existing or former stockholder of the Company or to any other Person
arising out of the matters contemplated by this Section 8 or the Escrow
Agreement except only to the extent of any Loss caused exclusively by the
Stockholders' Representative's willful misconduct or bad faith. In any event,
any such liability shall be limited to direct damages resulting from such
conduct and in no event shall the Stockholders' Representative be liable for
special, incidental or consequential damages incurred or suffered by any Person.
The Stockholders' Representative shall incur no liability to any existing or
former stockholder of the Company or to any other Person with respect to any
action taken or suffered by him in reliance upon any note, direction,
instruction, consent, statement or other documents believed by him to be genuine
and duly authorized. The Stockholders' Representative may, in all questions
arising under the Escrow Agreement, rely on the advice of counsel and for
anything done, omitted or suffered in good faith by the Stockholders'
Representative based on such advice, the Stockholders' Representative shall not
be liable to any existing or former stockholder of the Company or to any other
person.
16
NY/286183.2
<PAGE>
(c) In the event of the death or permanent disability of the
Stockholders' Representative, or his resignation, a successor Stockholders'
Representative shall be appointed by a majority vote of the Company
Stockholders, with each such stockholder (or his or her successors or assigns)
to be given a vote equal to the number of votes represented by the shares of
capital stock of the Company held by such stockholder immediately prior to the
Effective Time.
SECTION 8.5 Notice of Claims. If the Indemnified Party believes
that it has suffered or incurred any Loss, it shall notify the Escrow Agent and
the Stockholders' Representative promptly in writing (at their respective
addresses set forth in the Escrow Agreement), and in any event within the
applicable time period specified in Section 8.2, describing such Loss, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such Loss shall have occurred (a "Claim Notice").
If any legal action is instituted by a third party with respect to which any of
the Indemnified Parties intend to claim indemnity under this Section, such
Indemnified Party shall promptly give a Claim Notice to notify the Escrow Agent
and the Stockholders' Representative with respect to such legal action. In any
event, a failure or delay in notifying the Escrow Agent and the Stockholders'
Representative shall not affect the Indemnified Party's right to indemnity,
except only to the extent such failure or delay materially and adversely
prejudices the ability to defend against any legal action.
SECTION 8.6 Defense of Third Party Claims. The Indemnified Party
shall have the right to conduct and control, through counsel of their own
choosing, reasonably acceptable to the Stockholders' Representative, any third
party legal action or other claim, but the Stockholders' Representative may, at
its election, participate in the defense thereof at its sole cost and expense;
provided, however, that if the Indemnified Party shall fail to defend any such
legal action or other claim, then the Stockholders' Representative may defend,
through counsel of its own choosing, such legal action or other claim, and so
long as it gives Parent at least 15 days' notice of the terms of the proposed
settlement thereof and permits Parent to then undertake the defense thereof,
except as set forth below, settle such legal action or other claim and recover
from the Company Stockholders the amount of such settlement or of any judgment
and the costs and expense of such defense. Neither Parent nor the Stockholders'
Representative shall compromise or settle any such legal action or other claim
without the prior written consent of the other, which consent shall not be
unreasonably withheld, except that under no circumstances shall Siemens be
required to consent to the entry of an order for injunctive or other
non-monetary relief. All costs and expenses reasonably incurred in defending any
such third party legal action or other claim, including the amount of any
settlement or of any judgment, shall be paid out of the Indemnity Amount.
SECTION 8.7 Exclusive Remedy. The indemnification provided in this
Section 8 shall be the sole and exclusive remedy available following the Closing
to the Indemnified Party for the subject matter covered by such indemnification
and any claim arising under this Agreement.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1 Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by facsimile transmission or
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such address for a party as shall be specified by like notice):
17
NY/286183.2
<PAGE>
(a) if to the Company, to:
World Machinery Company
44 High Street
West Nyack, New York 10994
Attention: Seymour Gussack
Facsimile No.: (914)358-3619
(b) if to the Company Stockholders:
44 High Street
West Nyack, New York 10994
Attention: David Gussack
Facsimile No.: (914)358-6277
(c) if to Parent or Merger Sub, to:
General Bearing Corp.
44 High Street
West Nyack, New York 10994
Attention: John Stein, Esq.
Facsimile No.: (914) 358-3619
SECTION 9.2 Definitions. For purposes of this Agreement:
(a) "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries controls, is controlled by, or is
under common control with, such first person.
(b) "Antitrust Laws" mean and include the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state or foreign statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
(c) "Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
(d) "Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
(e) "Knowledge", "Know" or "Known" means, with respect to the
matter in question, if any of the executive officers of the Company or Parent,
listed on Schedule 8.4(f) hereof, as the case may be, has actual knowledge of
such matter.
18
NY/286183.2
<PAGE>
(f) "Lien" means any encumbrance, hypothecation, infringement,
lien, mortgage, pledge, restriction, security interest, title retention or other
security arrangement, or any adverse right or interest, charge or claim of any
nature whatsoever of, on, or with respect to any asset, property or property
interest; provided, however, that the term "lien" shall not include (i) liens
for water and sewer charges and current taxes not yet due and payable or being
contested in good faith, (ii) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's and other similar liens arising or incurred in the
ordinary course of business (iii) all liens approved in writing by the other
party hereto or (iv) restrictions on transfer imposed by federal or state
securities laws.
(g) "Material Adverse Change" or "Material Adverse Effect" means
any adverse change in the business, financial condition or results of operations
of the Company or Parent, as the case may be, or its respective Subsidiaries
that is material to the Company or Parent, as the case may be, and its
respective Subsidiaries taken as a whole, excluding any such adverse change that
is due to (i) any sales or dispositions or other actions pursuant to Section 5.7
or (ii) the announcement or anticipated consummation of the transactions
contemplated by this Agreement.
(h) "Person" means any natural person, firm, individual, business
trust, trust, association, corporation, partnership, joint venture, company,
unincorporated entity or Governmental Entity.
(i) "Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any taxing authority, including, without limitation, taxes or other charges on
or with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation, or net worth,
and taxes or other charges in the nature of excise, withholding, ad valorem or
value added.
(j) "Tax Return" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any Tax,
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
SECTION 9.3 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
SECTION 9.4 Entire Agreement, No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement.
SECTION 9.5 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Merger Sub of
any of its obligations under this Agreement. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
19
NY/286183.2
<PAGE>
SECTION 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to any applicable conflicts of law.
SECTION 9.7 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
of the State of New York located in New York county in the State of New York,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any federal court or of the State of New York
located in the Borough of Manhattan in the State of New York in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated b y this Agreement in any court other than
a federal or state court sitting in the State of Delaware.
SECTION 9.8 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
SECTION 9.9 Interpretation. Headings of the Articles and Sections
of this Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever. The disclosure of any matter in
any section of a Disclosure Letter hereto shall not be deemed to constitute an
admission by any party or to otherwise imply that any such matter is material or
may have a Material Adverse Effect for purposes of this Agreement.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
GENERAL BEARING CORP.
By:____________________________________
Name:
Title:
20
NY/286183.2
<PAGE>
FISCO INDUSTRIES LTD.
By:____________________________________
Name:
Title:
WORLD MACHINERY COMPANY
By:____________________________________
Name:
Title:
------------------------------- ---------------------------------------
Faith Gussack Seymour Gussack
------------------------------- ---------------------------------------
Amy Gussack David Gussack
------------------------------- ---------------------------------------
Lisa Gussack Nina Gussack
21
NY/286183.2
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I.
THE MERGER
<S> <C> <C>
SECTION 1.1 The Merger...............................................................................1
SECTION 1.2 Closing..................................................................................2
SECTION 1.3 Effective Time...........................................................................2
SECTION 1.4 Effects of the Merger....................................................................2
SECTION 1.5 Certificate of Incorporation and By-Laws of the Surviving Corporation....................2
SECTION 1.6 Directors................................................................................2
SECTION 1.7 Officers.................................................................................2
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.1 Capital Stock of Merger Sub..............................................................2
SECTION 2.2 Cancellation of Treasury Stock and Parent Owned Stock....................................3
SECTION 2.3 Conversion of Company Common Stock.......................................................3
SECTION 2.4 Exchange of Certificates.................................................................3
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization, Qualification, Etc.........................................................4
SECTION 3.2 Capital Stock............................................................................5
SECTION 3.3 Corporate Authority Relative to this Agreement. No Violation............................5
SECTION 3.4 Financial Statements.....................................................................6
SECTION 3.5 No Undisclosed Liabilities...............................................................6
SECTION 3.6 No Violation of Law......................................................................6
SECTION 3.7 Environmental Laws and Regulations.......................................................6
SECTION 3.8 Absence of Certain Changes or Events.....................................................7
SECTION 3.9 Investigations; Litigation...............................................................7
SECTION 3.10 Tax Matters........................................................................7
SECTION 3.11 Real Property; Title...............................................................8
SECTION 3.12 Intellectual Property..............................................................8
i
NY/286183.2
<PAGE>
Page
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.1 Organization, Qualification, Etc.........................................................9
SECTION 4.2 Capital Stock...........................................................................10
SECTION 4.3 Corporate Authority Relative to this Agreement..........................................10
SECTION 4.4 Reports and Financial Statements........................................................11
SECTION 4.5 No Undisclosed Liabilities..............................................................11
SECTION 4.6 No Violation of Law.....................................................................11
SECTION 4.7 Absence of Certain Changes or Events....................................................12
SECTION 4.8 Investigations; Litigation..............................................................12
SECTION 4.9 Accounting and Tax Matters..............................................................12
ARTICLE V.
COVENANTS
SECTION 5.1 Approvals and Consents; Cooperation.....................................................12
SECTION 5.2 Further Assurances......................................................................13
SECTION 5.3 Plan of Reorganization..................................................................13
SECTION 5.4 Conveyance Taxes........................................................................13
ARTICLE VI.
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to the Obligations of Each Party.............................................13
SECTION 6.2 Conditions to the Obligations of Parent and Merger Sub..................................14
SECTION 6.3 Conditions to the Obligations of the Company............................................14
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination.............................................................................15
SECTION 7.2 Effect of Termination...................................................................15
SECTION 7.3 Amendment...............................................................................15
SECTION 7.4 Extension; Waiver.......................................................................16
ii
NY/286183.2
<PAGE>
Page
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 Indemnification.........................................................................16
SECTION 8.2 Survival of Representations............................................................16
SECTION 8.3 Limitation of Liability.................................................................16
SECTION 8.4 Company Stockholders' Representative. ..........................17
SECTION 8.5 Notice of Claims........................................................................17
SECTION 8.6 Defense of Third Party Claims...........................................................17
SECTION 8.7 Exclusive Remedy........................................................................18
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1 Notices.................................................................................18
SECTION 9.2 Definitions.............................................................................19
SECTION 9.3 Counterparts............................................................................20
SECTION 9.4 Entire Agreement, No Third-Party Beneficiaries..........................................20
SECTION 9.5 Assignment..............................................................................20
SECTION 9.6 Governing Law...........................................................................21
SECTION 9.7 Enforcement.............................................................................21
SECTION 9.8 Severability............................................................................21
SECTION 9.9 Interpretation..........................................................................21
</TABLE>
iii
NY/286183.2
