SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
September 17, 1996
Trident Rowan Group, Inc.
(Formerly known as Detomaso Industries, Inc.)
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(Exact name of registrant as specified in its charter)
New York 0-2642 52-0466460
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
P.O. Box 856 107 Monmouth Street, Red Bank, New Jersey 07701
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(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 842-7200
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Item 5. Other Events.
Subject to an Escrow Agreement, on August 14, 1996 Trident Rowan Group,
Inc. (f/k/a De Tomaso Industries, Inc.; the "Company"), The Carey Winston
Company, a Delaware corporation and a subsidiary of the Company entered into an
Agreement and Plan of Merger providing for the acquisition by the Company of
Carey Winston for a purchase price valued at $7,600,000, subject to adjustment,
payable, to the extent of at least 80%, in common stock of the Company and not
more than 20% in cash. As part of the Agreement the Company agreed to lend to
Carey Winston prior to closing up to $2,000,000. The Closing is conditioned
upon, among other things, the Company completing a public offering resulting in
proceeds to the Company after underwriting discounts and commissions of not less
than $10,000,000. If the Closing does not occur, under certain circumstances,
the Company's loan will continue, on a subordinated basis, for a 3-year period.
Carey Winston is engaged in the business of providing real estate management and
services in the Washington D.C. and Baltimore, Maryland regions. Funds used by
the Company to make the Loan referred to above and for closing purposes are
derived from the general working capital of the Company. On September 17, 1996
certain conditions were satisfied, resulting in release from escrow of the
Agreement and $1,000,000 of such loan.
Following Closing the Company will file a supplemental Form 8-K to report
the consummated acquisition under Item 2 of Form 8-K, together with financial
statements of Carey Winston and pro forma financial statements of the Company
and of Carey Winston.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) 99.1 Agreement and Plan of Merger Dated as of August 14, 1996 Among
De Tomaso Industries, Inc., The Carey Winston Company and
DTI Acquisition Corp.
99.2 Promissory Note dated September 17, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 19, 1996 TRIDENT ROWAN GROUP, INC.
By: s/ Howard E. Chase
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President
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EXHIBIT 99.1
AGREEMENT
AND PLAN OF MERGER
Dated as of
August 14, 1996
Among
De Tomaso Industries, Inc.
The Carey Winston Company
and
DTI Acquisition Corp.
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AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of August 14,
1996, by and among De Tomaso Industries, Inc., a Maryland corporation ("DTI"),
The Carey Winston Company, a Delaware corporation ("CW"), and DTI Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of DTI (the
"Subsidiary").
WHEREAS, the respective Boards of Directors of DTI, the Subsidiary and CW,
and the sole stockholder of the Subsidiary, have approved the merger (the
"Merger") of the Subsidiary with and into CW upon the terms and subject to the
conditions set forth herein, as a result of which CW will become a wholly owned
subsidiary of DTI and the stockholders of CW (the "Stockholders") will be
entitled to receive the consideration provided in this Agreement;
WHEREAS, this Agreement constitutes a plan of reorganization pursuant to
Section 368(a)(2)(e) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the covenants, representations,
warranties and mutual agreements hereinafter set forth, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Surviving Corporation. In accordance with the provisions of this
Agreement and the General Corporation Law of the State of Delaware (the "GCL"),
at the Effective Time (as
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defined in Section 1.5), upon the terms and conditions of this Agreement, and in
reliance upon the representations, warranties and covenants contained herein,
the Subsidiary shall be merged with and into CW and CW shall be the surviving
corporation (sometimes hereinafter called the "Surviving Corporation") in the
Merger and continue its corporate existence under the laws of the State of
Delaware. At the Effective Time the separate existence of the Subsidiary shall
cease.
1.2 Certificate of Incorporation. The Certificate of Incorporation of the
Subsidiary shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law.
1.3 By-Laws. The By-Laws of the Subsidiary as in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended as provided by law.
1.4 Directors and Officers. The directors of the Subsidiary at the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-Laws
of the Surviving Corporation and until his successor is duly elected and
qualified. The officers of the Surviving Corporation at the Effective Time shall
be the officers of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the Surviving Corporation
and until his successor is duly elected and qualified.
1.5 Effective Time. The Merger shall become effective at the time of
filing of a properly executed certificate of merger (the "Certificate of
Merger") on behalf of CW and the Subsidiary with the Secretary of State of the
State of Delaware in accordance with the GCL. The
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Certificate of Merger shall be filed simultaneously with the Closing provided
for in Section 2.1 hereof. The date and time when the Merger shall become
effective is herein referred to as the "Effective Time".
1.6 Effects of the Merger. The Merger shall have the effects set forth in
the GCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the properties, rights, privileges, powers and
franchises of CW and the Subsidiary shall vest in the Surviving Corporation, and
all debts, liabilities and duties of CW and the Subsidiary shall become the
debts, liabilities and duties of the Surviving Corporation.
1.7 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further assignments
or assurances in law or any other acts are necessary or desirable (a) to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation, title
to and possession of any property or right of the Subsidiary acquired or to be
acquired by reason of, or as a result of, the Merger, or (b) otherwise to carry
out the purposes of this Agreement, the Subsidiary and its proper officers and
directors shall be deemed to have granted to the Surviving Corporation an
irrevocable power of attorney to execute and deliver all such proper deeds,
assignments and assurances in law and to do all acts necessary or proper to
vest, perfect or confirm title to and possession of such property or rights in
the Surviving Corporation and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of the Surviving Corporation
are fully authorized in the name of the Subsidiary or otherwise to take any and
all such actions.
1.8 Conversion of CW Common Stock.
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(a) Subject to Section 1.9 in respect of Dissenting Shares, the
shares of Voting Common Stock, $.17 par value per share and Non-Voting Common
Stock, $.01 per share, of CW (together the "CW Shares") owned by each
Stockholder issued and outstanding immediately prior to the Effective Time,
including for purposes hereof all CW Shares which may be issued pursuant to
options, convertible securities, agreements, etc. as set forth in Schedule 4.3,
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into such number of shares of DTI Common Stock, par value
$2.50 per share ("DTI Merger Shares"), (rounded up or down to the nearest whole
number or, in the case of .5 to the nearest odd number) as is equal to the
product of (i) 723,809 DTI Merger Shares, subject to adjustment as provided in
Sections 1.8(c) and (d) below, multiplied by (ii) a fraction, the numerator of
which is the number of CW Shares owned by such Stockholder immediately prior to
the Effective Time and the denominator of which is the then total number of
outstanding CW Shares, provided, however, that for purposes of this Agreement
(and subject to adjustment in accordance with Section 1.8(d) below), the DTI
Merger Shares shall be deemed to have an aggregate value of $7,600,000 and any
Stockholder who does not assert appraisal rights (as described in Section 1.9)
may elect (the "Cash Election Right"), by irrevocable notice given to CW by each
such Stockholder (a copy of which shall be given to DTI), to receive $10.50 cash
(the "Merger Cash") in lieu of each DTI Merger Share which such Stockholder
would have otherwise received hereunder, which notice shall be given not later
than fifteen (15) days prior to the Closing, provided further that in no event
shall DTI be required to pay more than $1,520,000 of Merger Cash (reduced by the
amount of cash,
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if any, required pursuant to Section 1.9(a) below), and if the Stockholders in
the aggregate elect to receive more than $1,520,000 of Merger Cash (reduced by
the amount of cash, if any, required pursuant to Section 1.9(a) below), then the
cash for each such cash electing Stockholder shall be reduced pro rata. CW shall
certify to DTI the amount of Merger Cash and the number of DTI Merger Shares to
be issued to each CW Stockholder (the DTI Merger Shares plus the amount of
Merger Cash, is collectively referred to herein as the "Merger Consideration").
Subject to the Cash Election Right, no Stockholder has received or will receive,
directly or indirectly, from DTI any consideration other than the DTI Merger
Shares to induce or cause such Stockholder to sell the CW Shares pursuant to
this Agreement, and DTI has not agreed to assume, nor will it assume, any
expense or other liability, whether fixed or contingent, of any Stockholder, nor
has it acquired or agreed to acquire any property subject to such liability.
(b) Each CW Share held in CW's treasury immediately prior to the
Effective Time shall, by virtue of the Merger, be canceled and retired and
returned to the status of authorized but unissued common stock, without any
conversion thereof.
(c) If, during the 20 trading day period following the effective
date of the "DTI Public Offering" (as defined in Section 2.1), the average
closing price of DTI Common Stock as reported in the NASDAQ NMS or the NASDAQ
Small Capitalization Market (the "Average Closing Price") is less than $10.50
per share, then the total number of DTI Merger Shares to be issued pursuant to
the Merger shall be increased to such number as is equal to $7,600,000 (subject
to adjustment in accordance with Section 1.8(d) below) divided by the Average
Closing Price, rounded to the nearest whole number.
(d) If, prior to the Effective Time, CW shall consummate any
acquisition which is approved in writing by DTI, and if the consideration for
such acquisition includes the issue of CW Shares (an "Approved Stock Deal") then
(i) the Merger Consideration shall be increased by
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the value of the purchase price attributed to the CW Shares issued in the
Approved Stock Deal, (ii) the total number of DTI Merger Shares to be issued
pursuant to the Merger shall be increased to such number as is equal to the sum
of (x) $7,600,000 plus (y) the purchase price so attributed to the CW Shares so
issued, divided by the lesser of $10.50 or the Average Closing Price, and (iii)
the term "CW Shares" as used in this Agreement shall include the CW Shares so
issued, provided that if any Stockholder exercises the Cash Election Right, then
the maximum amount of the Merger Cash shall be increased from $1,520,000 by
adding thereto twenty percent (20%) of the purchase price attributed to the CW
Shares issued in the Approved Stock Deal (and such increased amount shall be
reduced by the amount of cash, if any, required pursuant to Section 1.9(a)
below), and the number of DTI Merger Shares which would have resulted in the
absence of such Cash Election Right shall be reduced by the amount of the Merger
Consideration represented by such increase in Merger Cash.
(e) Any cash and promissory notes received by CW prior to Closing
from issuance of CW Shares to optionees holding options previously granted by
CW, as listed in Schedule 4.3(a) hereof, will become (and will remain) assets of
the Surviving Corporation after Closing, and CW shall cause any Merger
Consideration received by each of such optionees under this Agreement to be
pledged to secure the payment of each such optionee's promissory note. The two
(2) optionees holding options previously granted by CW, as listed in Schedule
4.3(b) hereof, will be "rolled over" tax free if such roll over can be
accomplished without impact on the earnings of CW or DTI as a result of such
roll over (or otherwise assumed by DTI) into comparably-valued DTI options or,
if not, such options shall be cancelled and DTI and CW shall use their best
efforts to determine what other consideration shall be given by DTI to such
optionees. The option
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previously granted by CW, as listed in Schedule 4.3(c) hereof, will be waived by
the optionee in all respects at Closing, in consideration of the Surviving
Corporation's full cancellation of such optionee's note/account payable due to
the Surviving Corporation in the amount indicated in Schedule 4.3(c). CW shall
cause the options previously granted by CW, as listed in Schedule 4.3(d) hereof,
to be exercised at Closing, and the resulting number of DTI Merger Shares,
determined in accordance with Section 1.8, shall be registered in the name of
"Christopher Sanger, Trustee for [name of former optionee]". Christopher Sanger
shall thereafter cause such DTI Merger Shares to be re-registered in each such
former optionee's own name, in such amounts and at such times as each such
optionee shall thereafter become entitled, under this terms of his existing
option with CW. Notwithstanding anything to the contrary contained herein, none
of the transactions referred to in this Section 1.8(e) shall result in any
change in the amount of Merger Consideration payable under this Agreement.
1.9 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means CW
Shares held as of the Effective Time by a Stockholder who has not voted such CW
Shares in favor of the adoption of this Agreement and the Merger and with
respect to which appraisal shall have been duly demanded and perfected in
accordance with Section 262 of the GCL Law and not effectively withdrawn or
forfeited prior to the Effective Time. Dissenting Shares shall not be converted
into or represent the right to receive the Merger Consideration, unless such
Stockholder shall have forfeited his right to appraisal under the GCL or
withdrawn, with the consent of CW, his demand for appraisal, and the amount of
Merger Cash to be paid hereunder (in the aggregate) and the Merger Consideration
shall be reduced by the amount of Merger Consideration which such
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Dissenting Shares would have been entitled to receive pursuant to the Merger had
they not been Dissenting Shares. If such Stockholder has so forfeited or
withdrawn his right to appraisal of Dissenting Shares, then as of the occurrence
of such event, such holder's Dissenting Shares shall cease to be Dissenting
Shares and shall be converted into and represent the right to receive the Merger
Consideration payable in respect of such CW Shares pursuant to Section 1.8(a).
(b) CW shall give DTI (i) prompt notice of any written demands for
appraisal of any CW Shares, withdrawals of such demands, and any other
instruments that relate to such demands received by CW and (ii) the opportunity
to direct all negotiations and proceedings with respect to any demands for
appraisal under the GCL. CW shall not, except with the prior written consent of
DTI make any payment with respect to any demands for appraisal of CW Shares or
offer to settle or settle any such demands.
(c) In no event shall DTI or Subsidiary be obligated to close the
transactions contemplated hereby if the holders of more than an acceptable
number of the outstanding shares of CW Common Stock (as determined by DTI in its
reasonably exercised sole judgment) demand and perfect appraisal rights, unless
same are forfeited or withdrawn as of the Effective Time.
1.10 Subsidiary Common Stock. Each share of common stock, par value $.01
per share of the Subsidiary (the "Subsidiary Common Stock") 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 fully paid and nonassessable share of common
stock, $.50 par value per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock"). From and after the Effective Time each outstanding
certificate theretofore representing shares of the Subsidiary Common Stock shall
be deemed for all purposes
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to evidence ownership of and to represent the number of shares of the Surviving
Corporation Common Stock into which such shares of the Subsidiary Common Stock
shall have been converted. Promptly after the Effective Time, the Surviving
Corporation shall issue to DTI a stock certificate or certificates representing
all such shares of the Surviving Corporation Common Stock, and the certificate
or certificates that formerly represented shares of the Subsidiary Common Stock
shall be canceled.
ARTICLE II
THE CLOSING
2.1 Time and Place. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Morrison Cohen
Singer & Weinstein, LLP, 750 Lexington Avenue, New York, New York 10022 on (i)
the 35th day following the closing of a registered public offering of shares of
DTI common stock (the "DTI Public Offering") resulting in proceeds to DTI, after
underwriting discounts and commissions, of not less than $15,000,000, which
offering DTI shall use its good faith efforts to consummate, or (ii) such
earlier date as CW and DTI shall mutually determine. The date of the Closing is
hereinafter sometimes referred to as the "Closing Date."
2.2 Certificate of Merger. At the Closing and, as a condition to the
obligation of all parties hereto, CW and the Subsidiary shall execute a
Certificate of Merger and cause same to be filed and recorded with the Secretary
of State of the State of Delaware in accordance with the GCL.
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ARTICLE III
RELATED AGREEMENTS AND TRANSACTIONS
3.1 Escrow. At the Closing, DTI, CW, such party as the Stockholders shall
designate to serve as their agent and an escrow agent shall enter into an escrow
agreement (the "Escrow Agreement"), in the form of Exhibit A hereto, pursuant to
which twenty-five percent (25%) of the Merger Consideration, but consisting
solely of DTI Merger Shares, shall be delivered to the Escrow Agent, to be held
in escrow in accordance with the terms of the Escrow Agreement.
3.2 DTI Loan.
(a) DTI shall lend to CW up to $2,000,000 (the "DTI Loan"), of which
$1,000,000 shall be advanced within three (3) days of execution hereof (or as
otherwise provided in an escrow letter agreement (the "Escrow Letter") between
DTI and CW dated the date hereof) and $1,000,000 (the "Drawdown Loan") shall be
advanced in multiples of $100,000 each, by notice of drawdown given to DTI at
any time after October 15, 1996, with funding thereof to occur within five (5)
business days following receipt of notice of each such drawdown.
(b) Such indebtedness shall be evidenced by CW's promissory note
(the "Note"), the form of which Note is attached as Exhibit B. The Note shall be
dated and delivered on the date hereof or as otherwise provided in the Escrow
Letter and the proceeds thereof shall be used only for general working capital
purposes, for acquisitions of businesses approved by DTI and for payment of up
to $550,000 of accrued compensation to employees of CW.
(c) If all or any portion of the DTI Loan is not funded when and as
required by Section 3.2(a), then in addition to the interest rate reduction
provided for in the Note, CW may, by notice given at any time prior to DTI
funding such portion, notify DTI that CW has
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elected to terminate this Agreement, whereupon the parties shall have no further
rights, liabilities and obligations under this Agreement, except that the Note
and CW's obligations thereunder shall continue in full force and effect. The
Note shall be subordinated in right of payment to certain institutional
indebtedness of CW, as provided in the Note.
3.3 Employment Agreements. Each of the CW employees set forth in Schedule
3.3 and the Surviving Corporation shall, at the Closing, enter into Employment
Agreements, the form of which is annexed hereto as Exhibit C.
3.4 Employee Stock Options. At the Effective Time, the CW employees and
other persons listed on Schedule 3.4 hereto shall receive options to purchase an
aggregate of 800,000 shares of DTI common stock under the DTI 1995 Non-Qualified
Stock Option Plan (the "DTI Plan") at an exercise price equal to the greater of
$12.26 per share or the closing price for DTI Common Stock on the Closing Date
as reported in the NASDAQ NMS or the NASDAQ Small Capitalization Market. The
specific terms of such DTI options and the number of options for each such
employee or other person shall be those specified on Schedule 3.4 hereto, and
such options shall be in all respects subject to the terms and conditions of the
DTI Plan and the separate award agreements with respect thereto. In addition to
the foregoing, DTI shall, prior to the Closing, create and adopt an option plan
which provides for the annual granting of options, at prices not to exceed the
then applicable closing price for DTI Common Stock, based on profitability
and/or independent contractor agents' production levels.
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3.5 Taxes.
Treatment as Reorganization. The parties hereto (i) recognize that
the transaction contemplated by this Agreement is intended to qualify as a
reorganization within the meaning of Section 368(a)(2)(e) of the Code; (ii)
agree to so treat the transaction and to refrain from taking any action which
will cause the transaction not to so qualify; and (iii) agree to execute any
other and further documentation as CW's or DTI's counsel may deem reasonably
appropriate to accomplish and perfect such qualification.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CW
CW represents and warrants to DTI as follows:
4.1 Corporate Organization; Etc. CW and each subsidiary, partnership,
limited liability company or other entity in which CW has a controlling equity
interest (collectively with CW, the "CW Companies") is a corporation or
organization duly organized, validly existing and in good standing under the
laws of the state of its incorporation or organization and has full corporate,
partnership or other similar power and authority to carry on its business as it
is now being conducted and to own the properties and assets it now owns. Except
as set forth on Schedule 4.1, each of the CW Companies is duly qualified or
licensed to do business as a foreign corporation or entity in good standing in
all jurisdictions in which the ownership of property or the conduct of its
business requires such qualification. Schedule 4.1 lists all of the
jurisdictions where the CW Companies are qualified to do business. The copies of
the Certificate of Incorporation, By-laws and Organizational Documents of the CW
Companies heretofore delivered
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to DTI, are complete and correct copies of such instruments as presently in
effect. The copies of the corporate minutes or records of corporate action or
other similar organization action of the CW Companies and stock transfer books
or records of the CW Companies to be delivered or made available to DTI prior to
the Closing will be accurate and complete copies of such minutes, records and
stock transfers and such minutes, records and transfer books will reflect in all
material respects the corporate or other organization actions of their
respective board of directors, stockholders and equity owners and will be
accurate and complete.
4.2 Authorization. Etc. CW has full corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby. The
Board of Directors of CW has taken and the Stockholders of CW will have taken on
or before the Closing, all action required by law, its Certificate of
Incorporation or By-Laws to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and
subject to obtaining such stockholder approval, this Agreement is a valid and
binding agreement of CW enforceable in accordance with its terms.
4.3 Capitalization. As of the date of this Agreement, the authorized
capital stock of CW is as described in Schedule 4.3. Except as set forth in
Schedule 4.3, all issued and outstanding shares of capital stock of CW are
validly issued, fully paid (in cash or by promissory note) and nonassessable;
and are all owned beneficially and of record by those stockholders in the
amounts set forth on Schedule 4.3, except that shares described as owned of
record by the CW Employee Stock Ownership Trust are beneficially owned by the
beneficiaries of such Trust. Except as set forth on Schedule 4.3, as of the date
of this Agreement, there are no outstanding (a) securities convertible into,
exchangeable for or evidencing the right to purchase any shares of
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capital stock of any of the CW Companies; (b) options, warrants, calls or other
rights to purchase or subscribe to capital stock of any of the CW Companies or
securities convertible into, exchangeable for or evidencing the right to
purchase, any shares of capital stock of any of the CW Companies; or (c)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any shares of capital stock of any of the CW
Companies, any such convertible or exchangeable securities or any such other
securities evidencing the right to purchase any such options, warrants or
rights.
4.4 No Violation. Except as set forth in Schedule 4.4 neither the
execution and delivery of this Agreement by CW nor the consummation of the
transactions contemplated hereby will violate any provision of the Certificate
of Incorporation or By-laws of CW, or violate, or be in conflict with, or
constitute a default under, or cause the amendment, modification or acceleration
of, or give any party the right to amend, modify or refuse to perform, or modify
the time within which acts are to be performed or rights or benefits are to be
received under, or cause the acceleration of the maturity of any debt or
obligation pursuant to, or result in the creation or imposition of any security
interest, lien or other encumbrance upon any property or assets of CW under, any
real property lease or loan agreement or any other agreement, understanding,
restriction or commitment which is material to the business, operations or
prospects of CW to which CW is a party or by which CW is bound, or to which the
property of CW is subject, or violate any statute or law or any judgment,
decree, order, regulation or rule of any court or governmental or regulatory
authority or agency.
4.5 Consents and Approvals of Governmental Authorities. Except as set
forth in Schedule 4.5, and except as required in connection with the DTI Public
Offering, no consent,
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approval or authorization of, or declaration, filing or registration with, any
federal, state, local or foreign governmental or regulatory authority is
required in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
4.6 Financial Statements. CW has heretofore delivered to DTI: (i)
consolidated balance sheets of the CW Companies as at October 31, 1993, 1994 and
1995 and statements of income, cash flow and stockholders' equity for each of
the years then ended, audited by CW's independent public accountants (the
"Audited Statements"); and on or before September 6, 1996 CW will deliver to DTI
(ii) an unaudited consolidated balance sheet of the CW Companies as at June 30,
1996 (the "Balance Sheet") and statement of income for the eight (8) month
period then ended. The Audited Statements and the Balance Sheets and the notes
thereto fairly present (in all material respects in respect of the Balance Sheet
and Notes thereto) the assets, liabilities and financial condition of the CW
Companies on a consolidated basis as at the respective dates thereof, and such
statements of income, cash flow and stockholders' equity and the notes thereto
fairly present the results of operations, cash flow and stockholders' equity for
the periods therein referred to, all in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
subject in the case of the Balance Sheet to the absence of footnotes, normal
year end adjustments and any other adjustments described therein.
4.7 No Undisclosed Liabilities. The CW Companies have no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise), and, to
the knowledge of CW, there is no factual basis for any suit, investigation,
complaint, claim or demand giving rise to any such liability or obligation,
which were not fully reflected or reserved against in the Balance Sheet or
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included in the Schedules hereto, except for liabilities and obligations (i)
incurred since the date thereof in the ordinary course of business and
consistent with past practice since the date thereof (none of which results
from, arises out of or relates to a breach of contract or warranty, tort which
is not fully insured against, infringement or violation of law) or (ii) incurred
in connection with the consummation of the transactions contemplated hereby, or
in connection with Approved Stock Deals, or (iii) described in the footnotes to
the audited financial statements for the fiscal year ended October 31, 1995.
4.8 Intentionally Omitted.
4.9 Title to Properties; Encumbrances. The CW Companies have good, valid
and marketable title to all their properties and assets (real, personal and
mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the Balance Sheet. All properties and assets
reflected in the Balance Sheet have been valued in accordance with Generally
Accepted Accounting Principles, consistently applied; and none of such
properties or assets are subject to any mortgage, pledge, lien, security
interest, encumbrance or charge of any kind except (a) liens for indebtedness
shown on the Balance Sheet as securing specified liabilities or obligations with
respect to which no default exists; (b) minor imperfections of title, if any,
none of which are substantial in amount, detract from the value or impair the
use of the property subject thereto, or impair the operations of the CW
Companies, which have arisen only in the ordinary course of business and
consistent with past practice since the date of the Balance Sheet; and (c) liens
for current taxes not yet due and payable. The rights, properties and other
assets presently owned, leased or licensed by the CW Companies and described
elsewhere in this Agreement include all rights, properties and other assets
necessary to permit the CW Companies
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to conduct their business in the same manner as its business has been conducted
prior to the date hereof.
4.10 Equipment. All equipment material to the business, operations or
prospects of the CW Companies is in good operating condition and repair and is
adequate for the uses to which it is being put; and none of such equipment is in
need of maintenance, repairs or replacements except for those incurred in the
normal course of business which are not material in nature or cost. The CW
Companies have not received notification that any of them or any plant,
structure, equipment or real property owned or leased by any of them is in
violation of any applicable building, zoning, health, occupational safety or
other law, ordinance or regulation in respect of such plants or structures or
their operations and CW has no knowledge that any such violation exists nor is
CW aware of anything that would lead to any of the foregoing.
4.11 Leases. Schedule 4.11 hereto contains an accurate and complete list
of all leases material to the business, operations or prospects of the CW
Companies pursuant to which the CW Companies lease real or personal property,
true and complete copies of which have heretofore been delivered or made
available to DTI. Except as set forth in Schedule 4.11, all such leases are
valid, binding and enforceable in accordance with their terms, and are in full
force and effect; there are no existing defaults thereunder; no event of default
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder; and all lessors under such leases have consented (where such consent
is necessary) to the consummation of the transactions contemplated by this
Agreement without requiring modification of the rights or obligations of the
lessee under such leases.
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4.12 No Condemnation or Expropriation. Neither the whole nor any portion
of the leaseholds or any other assets of any of the CW Companies is subject to
any governmental decree or order to be sold or is being condemned, expropriated
or otherwise taken by any public authority with or without payment of
compensation therefor, nor has any such condemnation, expropriation or taking
been proposed.
4.13 Litigation. Except as set forth in Schedule 4.13, There is no action,
suit, claim, counterclaim, arbitration, proceeding or investigation pending or,
to the best knowledge and belief of CW, threatened against or involving any of
the CW Companies which is not fully insured against, or which questions or
challenges the validity of this Agreement or any action taken or to be taken
pursuant to this Agreement or in connection with the transactions contemplated
hereby and CW does not know or have any reason to know of any valid basis for
any such action, proceeding or investigation. None of the CW Companies is in
default under or in violation of, nor is there any valid basis for any claim of
default under or violation of, any contracts, commitments or restrictions to
which it is a party or by which it is bound except as described in Schedule 4.13
hereto. None of the CW Companies is subject to any judgment, order or decree
entered in any lawsuit or proceeding which may have an adverse effect on its
business practices or on its ability to acquire any property or conduct its
business.
4.14 Subsidiaries. Except as set forth in Schedule 4.14 or in the Audited
Statements, CW does not, directly or indirectly, own or have the power to vote
or to acquire the power to vote, or to exercise a controlling influence with
respect to, equity interests or any option, right, warrant or other right or
instrument convertible into or exchangeable or exercisable for any such equity
interest of any corporation, partnership, limited liability company, or other
entity.
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Schedule 4.14 also lists the percentage interest owned by CW in each such
corporation, partnership, limited liability company or other entity.
4.15 Taxes.
(a) Except as set forth in Schedule 4.15, each of the CW Companies
has complied with all tax laws in all jurisdictions in which it is or has been
subject to taxation of any nature whatsoever and has timely filed, or caused to
be filed, all federal, state, local and foreign tax returns and reports of any
nature whatsoever which are required to be filed by it and has paid or caused to
be paid all taxes shown to be due thereon; all such tax returns and reports are
true, accurate and complete; there are no taxes being contested by any of the CW
Companies; there are no unpaid penalties or interest relating to tax
deficiencies of any nature whatsoever owed by any of the CW Companies; there is
no taxable income required to be reported by any of the CW Companies in any tax
period ending after the Closing Date, which income is attributable to a change
in accounting methods which required or permitted the deferral of gross or net
income to a later tax period; there are, and will hereafter be, no tax
deficiencies payable by any of the CW Companies of any kind for any tax periods
(or portion thereof) ending on or before the Closing Date; except for extensions
of the statute of limitations no longer in effect, none of the CW Companies has
heretofore granted at the request of any taxing authority any extension of the
statute of limitations relating to any tax filing of any of the CW Companies for
any prior year; all taxes and other assessments or levies which any of the CW
Companies is required by law to withhold or to collect have been duly withheld
and collected, and have been paid on a timely basis to the proper governmental
authorities or, if not yet due, are held by CW in a separate bank account or
otherwise segregated on the books of CW for payment; and each of the CW
Companies
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has made adequate provision for payment of taxes of any nature whatsoever
(except that ad valorem real property taxes are accrued on the basis of the
prior year's assessed values and millage rates) payable by it for any period for
which returns are not yet due.
(b) Except as set forth in Schedule 4,15, there are no federal,
state, local or foreign tax liens upon any property or assets of any of the CW
Companies, whether for income, payroll, sales, or taxes of any other kind,
except liens for taxes not yet due and payable; none of the CW Companies has
received a notice that it is delinquent in the payment of any tax or estimated
tax payments, and has not requested any extension of time within which to file
any tax return which has not since been filed. CW has heretofore made available
to DTI (or will do so promptly upon request) true and complete copies of (i) all
audit reports received from any taxing authority within the last five years,
(ii) all federal income tax returns of the CW Companies for all fiscal years
ending on or after October 31, 1991, and (iii) all other tax returns filed with
respect to the CW Companies for all fiscal years ending on or after October 31,
1991. Except as set forth in Schedule 4.15, no notices respecting asserted or
assessed deficiencies for any tax have been received by any of the CW Companies.
Except as set forth on Schedule 4.15, no investigation by any tax agency or
authority is presently pending or threatened, and none of the CW Companies is a
party to any action or proceeding by any governmental authority for the
assessment or collection of taxes, nor has any such event been asserted
threatened. None of the CW Companies has filed any consent of the type described
under Section 341(f) of the Code or made any election or deemed election
pursuant to Section 338 of the Code.
4.16 Insurance. CW has made available to DTI an accurate and complete
description of all policies of fire, liability, workmen's compensation and other
forms of insurance owned or
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held by the CW Companies. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
of the Closing have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which any of
the CW Companies is a party; are valid, outstanding and enforceable policies;
will remain in full force and effect through the respective expiration dates;
and will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. There are no risks which CW, its
board of directors or officers have designated as being self insured, other than
liability of directors and officers for serving in such capacities. None of the
CW Companies has been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance
during the last three years.
4.17 Employee Benefits.
(a) Definitions.
(i) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(ii) "Member of the Controlled Group" shall mean CW and each
other trade or business, whether or not incorporated, which would be treated as
a single employer with CW under Section 4001 of ERISA or Section 414(b), (c),
(m) or (o) of the Code.
(iii) "Multiemployer Plan" shall mean a multiemployer plan
described in Section 414(f) of the Code or clauses (i) and (ii) of Section 3(37)
of ERISA.
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(b) Except for the plans, policies or arrangements listed on
Schedule 4.17, which Schedule includes all plans, policies and arrangements
maintained by a Member of the Controlled Group in the past or present
(hereinafter referred collectively to as the "Plans" and individually as a
"Plan"), no Member of the Controlled Group (as defined below), directly or
indirectly, maintains, sponsors, contributes to or has any obligation or
liability with respect to any "employee benefit plan," as defined in Section
3(3) of ERISA, any fringe benefit plan, any equity compensation plan or
arrangement (including, without limitation, stock options, restricted stock and
stock purchase plans), any plan, policy or arrangement for the provision of
executive compensation, incentive benefits. bonuses or severance benefits, any
employment contract, collective bargaining agreement, deferred compensation
agreement, cafeteria plan (within the meaning of Section 125 of the Code) or
split-dollar insurance arrangement, any participation or similar agreement with
a multiemployer pension fund, or any other plan, policy or arrangement for the
provision of employee benefits.
(c) No Plan is subject to Title IV of ERISA and no Plan is a
Multiemployer Plan.
(d) No Plan provides benefits, including, without limitation, death
or medical benefits, after termination of employment or retirement other than
(i) benefits required under Section 4980B of the Code and Sections 601 through
608 of ERISA (collectively, "COBRA") to the extent the "applicable premium" (as
defined under COBRA) is paid by the recipient, (ii) benefits provided through
insurance contracts which result in no additional cost to any Member of the
Controlled Group and (iii) benefits provided under a Plan intended to be
qualified under Section 401(a) of the Code.
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(e) Except as set forth in Schedule 4.17, each Plan complies in all
material respects by its terms and in operation with the requirements provided
by any and all statutes, orders or governmental rules or regulations applicable
to the Plan, including but not limited to ERISA and the Code.
(f) Except as set forth in Schedule 4.17, all reports, forms and
other documents required to be filed with any government entity with respect to
any Plan (including without limitation, summary plan descriptions, Forms 5500
and summary annual reports) have been timely filed and are accurate.
(g) Except as set forth in Schedule 4.17, each Plan that is intended
to qualify under Section 401(a) of the Code and Section 501(a) of the Code, and
its related trust has been determined by the Internal Revenue Service to so
qualify. Each such Plan and its related trust is operated in accordance with its
terms.
(h) Except as set forth in Schedule 4.17, full payment has been made
of all amounts which a Member of the Controlled Group is required, under
applicable law or under the Plan, to have paid as a Plan contribution or
benefit.
(i) The liability of each Member of the Controlled Group with
respect to each Plan has been fully funded based on reasonable and proper
actuarial assumptions, has been fully insured, or has been fully reserved for on
its financial statements.
(j) Except as set forth in Schedule 4.17, as of the Closing Date, no
Plan will have benefit liabilities (as defined in Section 4001(a) (16) of ERISA)
exceeding the assets of such Plan or has been completely or partially
terminated.
(k) Except as set forth in Schedule 4.17, with respect to each Plan:
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(i) no breach of fiduciary duty has occurred and no prohibited
transactions (as defined in Section 406 or 407 of ERISA or Section 4975 of the
Code) have occurred for which a statutory exemption is not available;
(ii) except for routine claims for benefits, no action or
claims are pending, threatened or imminent against or with respect to the Plan,
any employer who is participating (or who has participated) in any Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the Plan;
(iii) No Member of the Controlled Group nor any Plan fiduciary
has any knowledge of any facts which could give rise to any such action or
claim; and
(iv) no audits or investigations by any governmental agency
are pending or to the best of CW's knowledge, threatened with respect to the
Plan.
(l) No Member of the Controlled Group has any liability or is
threatened with any liability (whether joint or several) (i) for the termination
of any single employer plan under Sections 4062 or 4064 of ERISA or any multiple
employer plan under Section 4063 of ERISA, (ii) for any lien imposed under
Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for any interest
payments required under Section 302(e) of ERISA or Section 412(m) of the Code,
(iv) for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of
the Code, (v) for any minimum funding contributions under Section 302(c) (11) of
ERISA or Section 412(c) (11) of the Code, (vi) to a fine under Section 502 of
ERISA, (vii) for any transaction within the meaning of Section 4069 of ERISA, or
(viii) for withdrawal liability with respect to any Multiemployer Plan.
(m) All of the Plans, to the extent applicable, are in compliance in
all material respects with the continuation of group health coverage provisions
of COBRA.
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(n) Except as set forth in Schedule 4.17, true, correct and complete
copies of all documents creating or evidencing any Plan have been delivered to
DTI, and true, correct and complete copies of all reports, forms and other
documents required to be filed with any governmental entity (including, without
limitation, summary plan descriptions, Forms 5500 and summary annual reports for
all plans subject to ERISA) have been delivered to DTI. There are no
negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by the foregoing
documents, except as set forth in Schedule 4.17.
(o) Except as set forth in Schedule 4.17, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or officer of CW to severance pay, unemployment compensation or
any other similar payment, (ii) accelerate the time of payment or vesting under
any Plan, (iii) increase the amount of compensation due any such employee or
officer, (iv) directly or indirectly cause CW to transfer or set aside any
assets to fund or otherwise provide for the benefits under any Plan for any
current or former employee, officer or director, or (v) result in any non-exempt
prohibited transaction described in ERISA Section 406 or Code Section 4975.
4.18 Toxic and Hazardous Substances and Other Environmental, Health and
Safety Issues. No underground tanks or any treatment, storage recycling or
disposal facilities are now located, or at any time have been located, on the
real property leased or used at any time by any of the CW Companies or their
predecessors in interest and there are no present or past Environmental
Conditions (as hereinafter defined) in any way relating to the business,
property or assets of any of the CW Companies. "Environmental Condition" means
(i) any environmental
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pollution, including, without limitation, any environmental pollution arising
from or in connection with (a) any "Contaminant" (as hereinafter defined),
irritant or pollutant from any spill, discharge, leak, emission, escape,
injection, deposit, emanation, dumping or release of any kind, in any amount
whatsoever; or (b) any substance or exposure of any type in any work place or
elsewhere; or (c) any medium, including, without limitation, air, land, surface
waters or ground waters; or (d) any generation, transportation, treatment,
discharge, storage or disposal of any waste materials, raw materials, petroleum
or petroleum products, hazardous materials, hazardous substances, hazardous
constituents, toxic materials or products of any kind; or (e) the storage, use
or handling of any solid waste, hazardous waste, raw materials, hazardous
materials, radioactive materials, infectious waste, toxic materials, petroleum
or petroleum products, or other substances, and/or (ii) any noncompliance with
any federal, state or local environmental or health and safety related law,
rule, regulation, permit, or order, agreement or other binding determination of
any governmental authority issued as a result of, or in connection with, any of
the foregoing. The operation of the business of the CW Companies does not
violate and has not violated any applicable law, rule, regulation, order,
agreement or other binding determination of any governmental authority, whether
state, federal, or local, relating to land, air, water, or noise pollution, or
the production, storage, labeling, transportation or disposal of any solid
waste, hazardous waste, hazardous substances, toxic substances or hazardous
constituents. None of the CW Companies and no other person has stored any
chemical substances, including, without limitation, any solid waste, petroleum,
petroleum products, PCB's, asbestos, irritants or any "Hazardous Substances,"
"Pollutants," "Hazardous Constituents" or "Contaminants," as such terms are
defined in the Comprehensive Environmental Response, Compensation, and Liability
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Act of 1980, amended ("CERCLA") (collectively, the "Contaminants"), on, above,
beneath or about any of the properties or assets used at any time in the
business of any of the CW Companies, except in accordance with applicable laws.
None of the CW Companies has received any notice advising it that it is
potentially responsible for response or other costs or remediation with respect
to a release or threatened release of Contaminants, and no facts exist which
might give rise to such responsibility. None of the CW Companies and no other
person with whom any of the CW Companies has a contractual relationship of any
kind, has transported, buried, dumped or otherwise disposed of any Contaminants
on, above, beneath or about any real property. None of the CW Companies has
violated and has any liability under and/or has any knowledge of any alleged or
potential violation of any environmental ordinance, law, rule, regulation or
order relating to the operation of the business of any of the CW Companies,
including, without limitation, CERCLA; the Toxic Substances Control Act of 1976,
as amended; the Resource Conservation Recovery Act of 1976, as amended; the
Clean Air Act, as amended; the Federal Water Pollution Control Act, as amended;
or any other federal, state or local law or the common law. Each of the CW
Companies has obtained all environmental, health and safety permits necessary,
and made all notifications necessary, for the current use of the real property
and the operation of its business; all such permits and notifications are in
good standing and has made timely application for renewal of such permits where
necessary; and each of the CW Companies is in compliance with all terms and
conditions of such permits and notifications. None of the CW Companies has
caused or allowed any Contaminants to be used, manufactured, stored, placed,
processed or released on or off-site of any of the real property used or leased
by it except in
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accordance with applicable law. The words "used" or "leased" as referred to in
this Section 4.18, do not include real properties in which CW acts as a managing
or leasing agent for an owner.
4.19 Bank Accounts. Schedule 4.19 sets forth the names and locations of
all banks, trust companies, savings and loan associations, brokerage houses and
other financial institutions at which each of the CW Companies maintains
corporate accounts or safety deposit boxes of any nature, and the names of all
persons authorized to draw thereon or make withdrawals therefrom. At the
Closing, CW shall make available to DTI all records, including all signature or
authorization cards, pertaining to such accounts.
4.20 Contracts and Commitments. Except as set forth in Schedule 4.20:
(a) None of the CW Companies has any agreements, contracts,
commitments or restrictions (oral or written) (x) for brokerage services,
leasing services, facilities management services, property management services
or other services of any kind, with respect to which CW reasonably believes, as
a result of services heretofore performed, or, in the case of facilities
management or property management agreements as a result of an existing
relationship with the other party to such agreement, that more than $150,000 of
fees will be realized by CW in the 12 month period following the date hereof
("Material Income Agreements") and, all Material Income Agreements (i) are
listed and reasonably described in Schedule 4.20, (ii) are generally consistent
with the standard form of CW agreement used for such service, a copy of which is
attached as part of Schedule 4.20, and (iii) are within a commission range or
other compensation formula described in Schedule 4.20, or (y) which obligate any
of the CW Companies to incur expenses in excess of $150,000 per year, which are
not described in any of the other Schedules hereto;
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(b) No purchase contract or commitment of any of the CW Companies is
in excess of the normal, ordinary and usual requirements of business;
(c) None of the CW Companies has any outstanding contracts with
officers, employees, agents, consultants advisors, salesmen, sales
representatives, distributors or dealers except for such contracts as are
cancelable by it on notice of not more than ninety (90) days and without
liability, penalty or premium caused by such termination, or any agreement or
arrangement providing for the payment of any bonus or commission based on sales
or earnings not consistent with the standard arrangement described in Schedule
4.20;
(d) None of the CW Companies has any employment agreement, or any
other agreement that contains any severance or termination pay liabilities or
obligations, or any practice, policy, arrangement, understanding or agreement
(oral or written) pursuant to which material personal benefits or perquisites
(limited to those in excess of $100,000 annually) or not directly related to the
performance of services for the CW Companies are provided to any employee,
officer, director, stockholder or affiliate of any CW Company
(e) None of the CW Companies is restricted by agreement from
carrying on its business in any geographic location;
(f) Except as set forth in the Audited Statements or the Balance
Sheet, none of the CW Companies has any debt obligation for borrowed money,
including guarantees of or agreements to acquire any such debt obligation of
others;
(g) Except as set forth in the Audited Statements or the Balance
Sheet, none of the CW Companies has any outstanding loan to any person,
including recoverable draws or advances on commissions made to certain of its
independent contractor agents;
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(h) None of the CW Companies has given any irrevocable power of
attorney to any person, firm or corporation for any purpose whatsoever and does
not have any obligations or liabilities (whether absolute, accrued, contingent
or otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor,
or otherwise in respect of the obligation of any other person or entity;
(i) None of the CW Companies is subject to any obligation or
requirement to provide funds to or make an investment (in the form of a loan,
capital contribution or otherwise) in any person or entity; or
(j) None of the CW Companies has any agreements, commitments or
restrictions which were entered into outside the ordinary course of business.
4.21 Accounts Receivable. Except as set forth in Schedule 4.21, all notes
and accounts receivable of CW, on a consolidated basis, all of which are
reflected in the Balance Sheet, net of a ten percent (10%) reserve, are fully
realizable and subject to no set-offs or counterclaims.
4.22 Personnel. CW has heretofore made available to DTI a true and
complete list of:
(a) the names and current salaries of all officers and other
salaried employees and independent contractor agents of each of the CW
Companies; and
(b) the wage rates for non-salaried and non-executive salaried
employees of each of the CW Companies by classification.
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4.23 Labor Difficulties.
(a) Each of the CW Companies is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(b) Except for 4 properties under management by the CW Companies,
none of the CW Companies has any collective bargaining or union contracts or
agreements;
(c) There is no unfair labor practice, wrongful termination or
employment discrimination charge or complaint against any of the CW Companies
pending, or to the best knowledge of CW, threatened, except as set forth on
Schedule 4.23;
(d) There is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or affecting any of the CW Companies;
(e) No representation question exists respecting the employees of
any of the CW Companies; and
(f) No certification petition respecting the employees of any of the
CW Companies has been filed with the National Labor Relations Board.
4.24 Consents. No consent of any person (other than such consent of the CW
Stockholders as is required by law and such consent of the participants in the
CW Employee Stock Ownership Plan as is required by its governing instruments
and/or ERISA regulations) is necessary to the consummation of the transactions
contemplated hereby, including without limitation, consents from parties to
loans, or to any contracts, leases or other agreements which are material to the
operation, business or prospects of the CW Companies.
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4.25 Clients. Except to the extent set forth in Schedule 4.25, CW has not
been advised by any of the ten largest clients of the CW Companies of a refusal
to deal with any of the CW Companies in the future based upon past actions or
performance of any of the CW Companies, or for any other reason.
4.26 Compliance with Law. Except as set forth in the Schedules hereto, the
operations of the CW Companies have been conducted in accordance with all
applicable laws, regulations and other requirements of all national governmental
authorities, and of all states, municipalities and other political subdivisions
and agencies thereof, having jurisdiction over the CW Companies, including,
without limitation, all such laws, regulations and requirements relating to real
estate brokerage, antipollution, consumer protection, environmental, equal
opportunity, health, occupational safety, pension and securities matters; none
of the CW Companies has received any notification of any asserted present or
past failure by it to comply with such laws, rules or regulations; and each of
the CW Companies has all permits, governmental licenses, registrations and
approvals necessary to carry out its business as currently conducted and as
required by applicable law or regulation.
4.27 Insolvency. None of the CW Companies is a party (other than as a
creditor) to any pending insolvency proceeding of any nature, including, without
limitation, bankruptcy, receivership, reorganization, composition or arrangement
with creditors, voluntary or involuntary, and none of the CW Companies has made
any assignment for the benefit of creditors, or taken any action with a view to,
or which would constitute the basis for, the institution of any such insolvency
proceeding against it.
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4.28 Disclosure. No representations or warranties by CW in this Agreement
and no statement contained in any document (including without limitation,
financial statements and exhibits), certificate, or other writing furnished or
to be furnished by CW to DTI pursuant to the provisions hereof or in connection
with the transactions contemplated hereby, contains or will contain, any untrue
statement of material fact or omits or will omit to state any material fact
necessary in order to make the statements herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DTI
DTI hereby represents and warrants to CW as follows:
5.1 Corporate Organization; Etc. Each of DTI and Subsidiary is a
corporation duly organized, validly existing and in good standing under its
jurisdiction of incorporation and has full corporate power and authority to
carry on its business as it is now being conducted and to own the properties and
assets it now owns; is duly qualified or licensed to do business as a foreign
corporation in good standing in all jurisdictions in which the ownership of
property or the conduct of its business requires such qualification.
5.2 Capitalization. As of the date of this Agreement, the authorized
capital stock of DTI consists of 2,000,000 shares of Preferred Stock, $2.50 par
value per share, of which, 0 shares are issued and outstanding and 10,000,000
shares of Common Stock, $2.50 par value per share, of which 4,714,332 shares are
issued and outstanding and an aggregate of 2,000,000 shares are reserved for
issuance pursuant to the DTI Plan. As of the date hereof, the authorized capital
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stock of the Subsidiary consists of 1,000 shares of Common Stock, $.01 par value
per share, of which 100 shares are issued and outstanding. All issued and
outstanding shares of DTI Common Stock are validly issued, fully paid and
nonassessable. As of the date of this Agreement, there are no outstanding (a)
securities convertible into, exchangeable for or evidencing the right to
purchase any shares of DTI capital stock; (b) options, warrants, calls or other
rights to purchase or subscribe to DTI capital stock or securities convertible
into, exchangeable for or evidencing the right to purchase, any shares of DTI
capital stock, except for options to purchase an aggregate of 982,500 shares and
20,000 shares of DTI Common Stock pursuant to the DTI Plan and the DTI Outside
Directors Plan, respectively; or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance of any
shares of DTI capital stock, any such convertible or exchangeable securities or
any such other securities evidencing the right to purchase any such options,
warrants or rights, other than in connection with the DTI Public Offering.
5.3 Authorization, Etc. Each of DTI and the Subsidiary has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. The Boards of Directors of DTI and the
Subsidiary (and DTI as the sole stockholder of the Subsidiary) have taken all
action required by law, their respective Certificates of Incorporation or
By-Laws to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and this Agreement is a
valid and binding agreement of each of DTI and the Subsidiary, enforceable in
accordance with its terms.
5.4 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or By-Laws of DTI or the
Subsidiary, or violate, or be in conflict with, or
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constitute a default under, or cause the acceleration of the maturity of any
debt or obligation pursuant to, or result in the creation or imposition of any
security interest, lien or other encumbrance upon any property or assets of DTI
or the Subsidiary under any agreement or commitment to which DTI or the
Subsidiary is a party or by which DTI or the Subsidiary is subject, or violate
any statute or law or any judgment, decree, order, regulation or rule of any
court or governmental authority.
5.5 Consents and Approvals of Governmental Authorities. Except as
described in Article VI and except as required in connection with the DTI Public
Offering, no consent, approval or authorization of, or declaration, filing or
registration with, any governmental authority is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby by DTI or the Subsidiary.
5.6 SEC Reports; Financial Statements. DTI has heretofore delivered to
each Stockholder its (i) Annual Report on Form 10-K with Form 10-K/A No. 1 and
10-K/A No. 2 for the year ended December 31, 1995 as filed with the Securities
and Exchange Commission ("SEC"), (ii) Quarterly Report on Form 10-Q for the
three months ended March 31, 1996 with Form 10-Q/A, as filed with the SEC, and
(iii) its preliminary proxy statement relating to DTI's annual meeting of
stockholders to be held on or about August 15, 1996, as filed with the SEC. As
of their respective dates, such reports and statements 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. The audited
consolidated financial statements and unaudited interim financial statements of
DTI
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included in such reports have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), are true,
complete and accurate and fairly present the financial position of DTI and its
consolidated subsidiaries as at the dates thereof and the results of their
operations, cash flows and stockholders' equity for the periods then ended,
subject in the case of the unaudited interim financial statements, to normal
year-end adjustments and any other adjustments described therein.
5.7 Validity of DTI Merger Shares and Options. The DTI Merger Shares will,
when issued as provided herein, be duly authorized, validly issued, fully paid
and nonassessable. The 800,000 Options to be granted hereunder will, when
granted as provided herein, be duly authorized, and upon purchase of the shares
underlying such options in accordance with the DTI Plan and the option award
certificates, such shares will be duly authorized, validly issued, fully paid
and nonassessable.
5.8 No Undisclosed Liabilities: Etc. DTI has no liabilities or obligations
of any nature (absolute, accrued, contingent or otherwise), and there is no
factual basis for any suit, investigation, complaint, claim or demand giving
rise to any such liability or obligation, which were not fully reflected or
reserved against in the Quarterly Report on Form 10-Q with Form 10- Q-A for the
quarter ended March 31, 1996, except for liabilities and obligations (i)
incurred in the ordinary course of business and consistent with past practice
since the date thereof (none of which results from, arises out of or relates to
a breach of contract or warranty, tort, infringement or violation of law), (ii)
incurred in connection with the consummation of the transactions contemplated
hereby, or (iii) described in the footnotes to any of the Annual or Quarterly
Reports referred to in Section 5.6 hereof.
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5.9 Disclosure. No representations or warranties by DTI in this Agreement
and no statement contained in any document (including without limitation,
financial statements and exhibits), certificate, or other writing furnished or
to be furnished by DTI to CW pursuant to the provisions hereof or in connection
with the transactions contemplated hereby, contains or will contain, any untrue
statement of material fact or omits or will omit to state any material fact
necessary in order to make the statements herein or therein not misleading.
5.10 DTI Public Offering; Stock Repurchase Program. DTI has no knowledge
that The DTI Public Offering will not be completed by March 31, 1997 or that its
intended stock repurchase program will not be completed prior thereto.
ARTICLE VI
DTI SHARE TRANSFER RESTRICTIONS
6.1 Registration Statement. Contemporaneously with the preparation of a
Registration Statement for the DTI Public Offering, DTI shall prepare and shall
file with the SEC a Registration Statement on Form S-4 under the Securities Act
of 1933, as amended (the "1933 Act") such that the DTI Merger Shares are
saleable in the public markets subject to compliance with the provisions of Rule
145 of the Rules and Regulations of the SEC promulgated under the 1933 Act. DTI
shall also take any and all such actions as may be necessary or as it may deem
advisable for the purpose of complying with all applicable state securities laws
in connection with the offering and issuance of the DTI Merger Shares.
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6.2 Agreements from Certain CW Affiliates. Concurrently with the execution
of this Agreement, CW shall deliver to DTI a list of all persons or entities who
are at such time "Affiliates" of CW as that term is used in paragraphs (c) and
(d) of Rule 145 under the 1933 Act (the "CW Affiliates"). In order to help
insure that the issuance of DTI Merger Shares will comply with the 1933 Act, CW
shall use all reasonable efforts to cause each CW Affiliate to execute and
deliver to DTI prior to the closing a written agreement substantially in the
form attached hereto as Exhibit D (the "Affiliate Agreement").
6.3 Lock-Up. CW acknowledges that the DTI Merger Shares shall be subject
to such "Lock-Up" provisions as the underwriter in the DTI Public Offering shall
require from affiliates of DTI. At the Closing, CW shall cause all of its
Stockholders (except for those exercising Dissenter's Rights under Section 1.9
hereinabove) to deliver such Lock-Up Agreement as shall be required.
6.4 Escrow. Twenty-five percent (25%) of the Merger Consideration, but
consisting solely of DTI Merger Shares and excluding any Merger Cash issued to
each Stockholder of CW (the "Initial Collateral"), shall be held in escrow
pursuant to the Escrow Agreement for a fifteen (15) month period following the
Closing Date; four-fifths of the Initial Collateral shall thereafter continue to
be held in escrow until the expiration of a two (2) year period following the
Closing Date, and three-fifths of the Initial Collateral shall thereafter
continue to be held in escrow until the expiration of a three (3) year period
following the Closing Date, subject to the provisions of such Escrow Agreement.
The remaining portion of the Initial Collateral held during the third and final
year of the escrow shall secure only CW's indemnity relating to breach of those
representations and warranties (in excess of the Threshold) given in Section
4.15 above.
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6.5 Legend, Etc. DTI may endorse on any certificate for DTI Merger Shares
to be delivered pursuant to this Agreement an appropriate legend referring to
the provisions of this Article 6 and that DTI may instruct its transfer agents
not to transfer any such DTI Merger Shares unless advised by DTI that such
provisions have been complied with.
6.6 CW Cooperation. CW shall promptly provide to DTI all information and
materials with respect to CW, its directors, officers and stockholders, which
DTI reasonably requests in connection with the preparation of the Registration
Statement on Form S-4.
ARTICLE VII
COVENANTS
7.1 Conduct of Business of CW. From and after the date of execution hereof
to and including the Closing Date, except with the prior written consent of DTI,
CW shall:
(a) use its best efforts to (i) preserve CW's business organization
intact, (ii) keep available the services of the present officers, employees,
sales representatives and agents thereof, and (iii) preserve the present
relationships between the CW Companies and their suppliers, customers and others
having business relations with them;
(b) operate only in the ordinary course of business, consistent with
past practices, maintain supplies necessary for its normal operation and pay its
obligations as they come due;
(c) use its best efforts to maintain all property of the CW
Companies in at least the same operating condition, repair and working order as
such property is presently in, normal
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wear and tear and unavoidable casualty loss excepted, and maintain insurance
upon all such property in such amounts and of such kinds as in effect on the
date hereof;
(d) maintain the books, accounts and records of the CW Companies in
the usual, regular and ordinary manner, and comply in all material respects with
all laws and contractual obligations applicable to it;
(e) duly and timely file all reports or returns required to be filed
with any federal, state, foreign, local and other authorities and will promptly
pay all taxes lawfully levied or assessed upon any of the CW Companies or their
properties or upon any part thereof; and
(f) maintain insurance in such amounts and against such risks as is
in effect on the date of execution hereof
7.2 Negative Covenants. From and after the date of execution hereof to and
including the Closing Date, CW shall not, except with the prior written consent
of DTI, which consent shall not be unreasonably withheld to the extent that any
of the following actions are taken for the purpose of effecting an Approved
Stock Deal or any other acquisition of the business or assets of another party
which is within the scope of the CW business plan previously submitted to DTI:
(a) amend its Certificate of Incorporation or By-laws;
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities except as will result in the capitalization
described in Schedule 4.3, or amend any of the terms of any such securities or
agreements outstanding as of the date hereof;
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(c) split, combine or reclassify any shares of its capital stock or
(issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of capital stock of CW, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any of its securities;
(d) except in the ordinary course of business, (i) incur, assume or
become subject to, or agree to incur, assume or become subject to, or pay any
debt, any obligation or liability, whether accrued, absolute, contingent or
otherwise (except normal trade or business obligations with customers, suppliers
and non-stockholder employees incurred in the ordinary and usual course of
business); (ii) mortgage, pledge, or subject to lien or any encumbrance any of
its assets; (iii) sell, assign, transfer, convey, lease or otherwise dispose of
any of its assets other than in the ordinary and usual course of its business;
(iv) waive or release any rights of substantial value, or cancel or compromise
any debt owing to it or any claims held by it other than in the ordinary and
usual course of business in an amount not exceeding $25,000; (v) transfer or
grant any rights to any of its patents, know-how, trademarks, tradenames or
inventions; (vi) make any modifications or changes to, or terminate, any plans
or material contract except for purchase and supply orders which are modified,
changed or terminated in the ordinary course of business; (vii) make any
material capital expenditures unless commitments therefor are outstanding as of
the date of execution hereof or such planned capital expenditures are listed in
Schedule 7.2; (viii) enter into any collective bargaining agreement or, through
negotiations or otherwise, make any commitment or incur any liability to any
labor organization except as otherwise expressly provided for herein; (ix) enter
into any lease agreement having an aggregate value in excess of
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$25,000 except for storage space leases in conjunction with CW's headquarters
office relocation; (x) make any investment of a capital nature either by
purchase of stock or securities, contributions to capital, property or assets of
any other individual, firm or corporation; (xi) enter into any transaction with
any Stockholder or any entity controlled by or under common control with any
Stockholder; (xii) enter into any other transaction which is not in the ordinary
course of business except as otherwise provided for herein;
(e) make or grant any increase in compensation or commissions
payable to officers, shareholder-employees or directors, in any amount; create
or make any change in any employee pension or retirement plans or other employee
bonus or benefit plans (except for institution of a new 401(k) Plan having no
mandatory company contributions, or for required ESOP or ERISA plan
distributions required by law) or pay any bonus, profit sharing or other
extraordinary compensation to any of the foregoing persons; enter into any
employment or consulting agreement or other agreement for personal services
unless in the ordinary course of business and then only if such agreement is
terminable without liability on thirty days' notice or less; provided that this
Section 7.2(e) shall not restrict CW from awarding and/or paying (i) any bonuses
presently due to CW's executives attributable to CW's fiscal year ended October
31, 1995; or (ii) any performance or profit-based incentive bonus earned by a CW
Department or Division/Office Manager for CW's fiscal year ending October 31,
1996; or (iii) any bonus to CW's senior executives for CW's fiscal year ending
October 31, 1996 in an amount not to exceed $500,000 in the aggregate, and not
be to awarded or paid without prior consultation with DTI.
(f) make any change affecting the banking or safe deposit
arrangements referred to in Section 4.19 hereof;
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(g) acquire, merge or consolidate with any other corporation or
acquire any portion of the business or assets of any other person or form any
subsidiary, enter into any partnership or any joint venture;
(h) make loans or advances to any officer, director or other
shareholder-employee or any of them, except travel advances or recoverable draws
of advances to agents made in the ordinary course of business;
(i) take, or otherwise agree to take, any of the actions described
in this Section 7.2.
7.3 Access. Prior to Closing, each party may make or cause to be made such
investigation of the business, properties and assets of the other and its
financial and legal condition as such party deems necessary or advisable to
familiarize themselves therewith, provided that such investigation shall not
unreasonably interfere with normal operations of the other party. Prior to
Closing, each party shall permit the other and their authorized representatives
to have full access to the premises, books and records of the other party at
reasonable hours, and prior to Closing each party shall furnish to the other
such financial and operating data and other information with respect to its
business, properties and assets as shall be from time to time reasonably
requested. No investigation by either party heretofore or hereafter made shall
affect the representations and warranties contained herein.
7.4 Post Closing Undertaking. From and after the Closing, DTI shall
operate the business of the CW Companies in accordance with Exhibit 7.4,
provided that DTI may, at any time, change such manner of operation if DTI
determines that changes are necessary or appropriate. DTI shall use its best
efforts to make available to Surviving Corporation a minimum
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of $2,000,000 (in addition to the $2,000,000 DTI Loan described in Section 3.2),
during the 18 month period following the Closing, subject to other capital
requirements, as determined from time to time by DTI. Such $2,000,000 DTI Loan
shall be contributed to the capital of CW following the Closing, and any portion
thereof not funded by DTI prior to the Closing under this Agreement shall be
fully funded to CW on the Closing Date.
7.5 Disclosure. Subject to applicable requirements of law, each of DTI and
CW shall not disclose the terms of this transaction and shall not make any
public announcement of this transaction without the consent of the other party,
and any Confidentiality Agreement previously executed by the parties shall
survive the execution of this Agreement and shall remain in full force and
effect.
7.6 Postponement or Abandonment of DTI Public Offering. DTI will not
postpone or abandon the DTI Public Offering without consulting with CW in regard
thereto, provided that the foregoing shall not require the consent or approval
of CW if DTI determines to abandon or postpone such DTI Public Offering.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Each Party's Obligations. The respective obligations of
each party to consummate the Merger are subject to the satisfaction of the
following conditions by March 31, 1997:
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(a) The S-4 Registration Statement shall have become effective in
accordance with the provisions of the 1933 Act and no stop order suspending the
effectiveness of such Registration Statement shall have been issued by the SEC
and remain in effect; and
(b) No party hereto shall be subject to any order or injunction of a
court of competent jurisdiction or government regulatory agency which prohibits
the consummation of the transactions contemplated by this Agreement.
8.2 Conditions to Obligations of DTI and Subsidiary. The obligation of
each of DTI and the Subsidiary to consummate the Merger is subject to the
satisfaction of the following additional conditions by March 31 1997:
(a) All representations and warranties of CW set forth in this
Agreement shall be true and correct when made on the date hereof and shall be
true and correct in all material respects as of the Effective Time as if made as
of the Effective Time and there shall be delivered to CW a certificate from the
President of CW to such effect;
(b) CW shall have performed or complied with in all material
respects all of its agreements and covenants required to be performed or
complied with under this Agreement;
(c) CW shall have delivered to DTI:
(i) certificates representing 100% of the CW Shares for
cancellation;
(ii) a certificate from the Secretary of CW to the effect that
the holders of not more than an acceptable number of the outstanding shares of
CW Common Stock (as determined by DTI) have demanded, perfected and not
forfeited or withdrawn appraisal rights;
(iii) the opinion of Tucker, Flyer & Lewis, counsel to CW,
reasonably satisfactory to DTI;
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(iv) a long-form good standing certificate and certified
charter documents with respect to each of the CW Companies from the Secretary of
State of their respective State of incorporation or organization and good
standing certificates from the States in which they carry on a regular course of
business, listed on Schedule 4.1 hereto, all bearing a date within ten (10) days
of the Closing Date;
(v) certified resolutions of the Board of Directors of CW and
the stockholders of CW approving this Agreement, the transactions contemplated
hereby and consummation of the Merger;
(vi) such financial statements for CW as DTI shall require in
order to be able to timely file a Current Report on Form 8-K;
(vii) a certificate from the President and Secretary of CW
with respect to the number of DTI Merger Shares and amount of Merger Cash to be
delivered to each CW Stockholder;
(viii) a check to DTI for all interest accrued on the DTI Loan
and the Note through the Closing Date; and
(ix) such other documents and agreements as are contemplated
by this Agreement or as DTI may reasonably request, including without limitation
the Escrow Agreement and all documents required thereunder.
(d) DTI shall have completed the DTI Public Offering, resulting in
proceeds to DTI, after underwriting discounts and commissions, of not less than
$10,000,000.
8.3 Conditions to Obligations of CW. The obligation of CW to consummate
the Merger is subject to the satisfaction of the following additional conditions
by March 31, 1997:
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(a) All representations and warranties of DTI set forth in this
Agreement shall be true and correct when made on the date hereof and shall be
true and correct in all material respects as of the Effective Time as if made as
of the Effective Time and there shall be delivered to DTI a Certificate from the
President of DTI to such effect;
(b) DTI and Subsidiary shall have performed or complied with in all
material respects all of their agreements and covenants required to be performed
or complied with under this Agreement;
(c) DTI shall have completed the DTI Public Offering, resulting in
proceeds to DTI, after underwriting discounts and commissions, of not less than
$15,000,000.
(d) CW shall not have terminated this Agreement as a result of DTI
having defaulted in funding any sums called for by CW pursuant to the DTI Loan
and the Note.
(e) DTI and Subsidiary shall have delivered to CW:
(i) the Merger Consideration, and any theretofore unfunded
portion of the DTI Loan;
(ii) the opinion of Morrison Cohen Singer & Weinstein, LLP,
counsel to DTI, reasonably satisfactory to CW;
(iii) a long-form good standing certificate and certified
charter documents with respect to DTI and the Subsidiary from the Secretary of
State of their respective State of incorporation, bearing a date within ten (10)
days of the Closing Date;
(iv) certified resolutions of the Board of Directors of DTI
approving this Agreement and the transactions contemplated hereby; and
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(v) certified resolutions of the Board of Directors and sole
stockholder of the Subsidiary approving this Agreement, the transactions
contemplated hereby and consummation of the Merger;
(vi) such other documents and agreements as are contemplated
by this Agreement or as CW may reasonably request, including without limitation
the Escrow Agreement and all documents required thereunder;
(vii) The Note referred to in Section 3.2(b) above, properly
endorsed by DTI as "canceled" by reason of the conversion of the DTI Loan to CW
working capital.
8.4 Statutory Requirements. If CW shall not obtain such vote of the CW
Stockholders as is required by applicable law to authorize the transactions
contemplated hereby, then CW shall not be required to consummate the Merger, but
such failure shall not relieve CW from the provisions of Section 10.2 hereof
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES: INDEMNIFICATION
9.1 Survival of Representations and Warranties. All representations and
warranties made by any party in this Agreement or pursuant hereto, shall survive
the Closing hereunder and any investigation at any time made by or on behalf of
any other party for a period of two years following the Closing; provided,
however, that the representations and warranties set forth in Sections 4.1, 4.2,
4.3, 4.7, 4.15, 4.17 and 4.18 hereof shall survive until the expiration of the
respective statutes of limitation relating to the matters contained in such
representations and warranties (taking into account any tolling thereof).
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9.2 Statements as Representations: Schedule Disclosures. All statements
contained herein or in any certificate, schedule, list, exhibit, document or
other writing delivered pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed representations and warranties within the
meaning of Section 9.1 hereof. Disclosure of any matter in one Schedule hereto
shall be deemed to provide disclosure as to such matter in any other Schedule
hereto.
9.3 Agreement to Indemnify.
(a) Subject to Section 9.6, CW agrees to indemnify, defend and hold
harmless DTI and each subsidiary and affiliate of DTI, and their respective
directors, officers, employees or agents (and the CW Stockholders (except for
those exercising Dissenters Rights) agree to secure such CW indemnity with
recourse limited to the DTI Merger Shares, to be delivered and held under the
Escrow Agreement) from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest, penalties and attorney's fees, to the
extent not covered by insurance, (collectively "Damages"), asserted against or
imposed upon or incurred by DTI or any subsidiary or affiliate of DTI or any of
their respective directors, officers, employees or agents resulting from (i) a
breach of any representation, warranty or covenant of CW contained in or made
pursuant to this Agreement, or (ii) the operation of the business of any of the
CW Companies at any time through the Effective Time.
(b) Subject to Section 9.6, DTI agrees to indemnify, defend and hold
harmless CW and each of its directors, officers, employees or agents from and
against all Damages asserted against or imposed upon or incurred by CW resulting
from (i) a breach of any representation, warranty or covenant of DTI or
Subsidiary contained in or made pursuant to this Agreement, or
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(ii) the ownership of the Surviving Corporation or the operation of the business
of the Surviving Corporation at any time from and after the Effective Time.
9.4 Indemnification for Claims. The obligations and liabilities of the
party owing the indemnity under Section 9.3 hereof ("Indemnitor") to the party
to whom an indemnity is owed ("Indemnitee") with respect to claims for Damages
resulting from the assertion of liability by third parties ("Claims"), shall be
subject to the following terms:
(a) Indemnitee will give Indemnitor prompt notice of any Claim
asserted against or imposed upon or incurred by Indemnitee, and the Indemnitor
shall undertake the defense thereof by representatives of its own choosing.
Failure by Indemnitee to give any such notice shall not affect the obligations
of Indemnitor to indemnify hereunder.
(b) In the event that Indemnitor, within a reasonable time after
notice of any such Claim, fails to defend Indemnitee, then Indemnitee will (upon
further notice to Indemnitor) have the right to undertake the defense,
compromise or settlement of such Claim for the account of the Indemnitor,
subject to the right thereof to assume the defense of such Claim at any time
prior to settlement, compromise or final determination thereof.
(c) Anything in this Section 9.4 to the contrary notwithstanding,
(i) if there is a reasonable probability that a Claim may materially and
adversely affect Indemnitee, then Indemnitee shall have the right to defend,
compromise or settle such Claim, and (ii) Indemnitor shall not, without
Indemnitee's prior written consent, settle or compromise any Claim or consent to
entry of any judgement which does not include as an unconditional term thereof
the release by the claimant or the plaintiff of Indemnitee from all liability in
respect of such Claim.
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(d) Any notice to be given to or by CW and the CW Stockholders,
whether as Indemnitor or as Indemnitee shall be given to or by CW on behalf of
CW and the CW Stockholders.
9.5 Payment of Damages. Subject to Section 9.6 below, payment of any
Damages incurred by an Indemnitee shall be made upon Indemnitee's demand
therefor, except payment of any Damages relating to any Claim, shall be made by
Indemnitor no later than the time that such Damages are required to be
satisfied. Damages may be satisfied by delivery of shares of DTI Common Stock,
valued as provided in the Escrow Agreement.
9.6 Limitations on Indemnification. Neither DTI nor CW shall have any
liability pursuant to this Article IX unless the aggregate amount of all Damages
incurred or paid by the other party exceeds $200,000 (the "Threshold") and, in
such event, (i) the indemnitor shall be required to pay such Damages only to the
extent they exceed the Threshold, and (ii) except to the extent that such
Damages arise from or are caused by the indemnifying party's making of a false
representation with knowledge thereof or in a grossly negligent manner,
liability for Damages shall be limited to $500,000, in excess of the Threshold.
9.7 Remedies Cumulative. The remedies provided herein shall be cumulative
and, except as expressly provided in the next sentence hereof, no party shall
assert any other rights or seek any other remedies against any other party or
their respective successors or assigns with respect to the subject matter
hereof. However, nothing in this Article IX shall preclude the right of CW or
DTI to bring an action for fraud or limit a party's maximum recovery for a fraud
action.
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9.8 Indemnification Under Escrow Agreement. Subject to Section 9.6, but
without limiting DTI's other rights and remedies, DTI may assert against the
collateral then being held under the Escrow Agreement, a right to indemnity and
to be held harmless against any Damages under Section 9.3(a). In no event shall
the Damages recoverable from CW exceed the Merger Consideration.
ARTICLE X
TERMINATION
10.1 DTI or CW Termination. If this Agreement shall be terminated by DTI
or CW due to the conditions set forth in Section 8.1 not being satisfied by
March 31, 1997, then the parties hereto shall not have any further right,
liability or obligation hereunder, provided that the Note shall continue in
effect in accordance with its terms.
10.2 DTI Termination. If this Agreement shall be terminated by DTI due to
failure of CW to satisfy the conditions set forth in Section 8.2 by March 31,
1997, then the parties hereto shall not have any further right, liability or
obligation hereunder, provided that the Note shall continue in effect in
accordance with its terms and may be accelerated as provided therein and, as
liquidated damages and not as a penalty, CW shall, within fifteen (15) days of
such termination, pay to DTI all costs and expenses incurred by DTI in
connection with this Agreement (excluding costs and expenses related to the DTI
Public Offering) not to exceed a maximum of $200,000; and if (a) CW has failed
to satisfy the conditions contained in Section 8.2(c)(ii) or 8.2(c)(v) due to
the intentional acts or omissions of Thomas Nordlinger, Brendan McCarthy, Nathan
Isikoff or Christopher Sanger (or any of them) and (b) within twelve (12) months
following termination of
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this Agreement by reason of such failure a "Change of Control" of CW shall
occur, then in consideration of the value contributed to CW by DTI as a result
of the proposed transaction described herein and for other good and valuable
consideration, CW shall, not later than the closing of such Change of Control,
pay to DTI the sum of $500,000. For purposes hereof, a "Change of Control" shall
mean a merger, consolidation, sale of all or substantially all of CW's assets,
or any transaction or series of transactions which result in more than fifty
percent (50%) of the outstanding stock of CW being owned by persons who are not,
on the date hereof, Stockholders.
10.3 CW Termination. If this Agreement shall be terminated by CW due to
failure of DTI or Subsidiary to satisfy the conditions set forth in Section 8.3
by March 31, 1997, the parties shall not have any further right, liability or
obligation hereunder, provided that the Note shall continue in effect in
accordance with its terms. Notwithstanding the foregoing however, if the
condition described in Section 8.3(c) is not satisfied but the condition in
Section 8.2(d) is satisfied, CW may, at its option, exercisable by notice given
to DTI within fifteen (15) days following completion of the DTI Public Offering,
waive the condition in Section 8.3(c), in which event the parties shall be
obligated to close the transactions described herein in accordance with the
terms hereof.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Commissions and Finder's Fees. Except as provided in Section 11.4,
each of the parties represents that the negotiations relative to this Agreement
and the transactions
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contemplated hereby have been carried on directly by CW and DTI, in such manner
as not to give rise to any claims against any of the parties hereto for a
brokerage commission, finders fee or other like payment. Insofar as any such
claims are made which are alleged to be based on an agreement or arrangements
made by, or on behalf of, a party, such party agrees to indemnify and hold the
other party harmless from and against all liability, loss, cost, charge or
expense, including reasonable counsel fees, arising therefrom.
11.2 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified and supplemented by written agreement of DTI Subsidiary
and CW with respect to any of the terms contained herein.
11.3 Waiver of Compliance. Any failure of CW on the one hand, or DTI and
Subsidiary, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by DTI or CW, respectively,
but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11.4 Expenses. Each of the parties hereto will pay its own expenses
incurred by it or on its behalf in connection with this Agreement or any
transaction contemplated by this Agreement, except that CW shall not incur more
than $175,000 of transactional costs in negotiating and effecting this Agreement
and the Merger (including without limitation, investment bankers' fees, legal
fees of outside counsel and fees of outside auditors).
11.5 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when
54
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delivered if by hand, by express delivery or facsimile transmission (with copy
by mail) or three business days after same is mailed, by certified or registered
mail with postage prepaid:
(a) If to CW to:
The Carey Winston Company
6700 Rockledge Drive, 4th Floor
Bethesda, MD 20817
Fax # (301) 656-0112
Attn: Thomas L. Nordlinger, President and CEO
with a copy to:
Christopher Sanger, Executive Vice President and
General Counsel
6700 Rockledge Drive, 4th Floor
Bethesda, MD 20817
Fax # (301) 656-0112
or to such other person or address as CW shall furnish to DTI in writing.
(b) If to DTI, to:
De Tomaso Industries, Inc.
Finprogetti S.p.A.
Via Fieno, 8
20123 Milano, Italy
FAX: 39-272010136
ATTN: Howard E. Chase, President
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
FAX: (212) 735-8708
ATTN: Stephen I. Budow, Esq.
or to such other person or address as DTI shall furnish to CW in writing.
55
<PAGE>
11.6 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other party.
11.7 Governing Law; Etc. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware without regard to its conflicts of law doctrine, except
that matters relating to the validity of corporate action, shall be governed by
the laws of the state of incorporation of the relevant corporation. In the event
of a breach of this Agreement by CW, on the one hand, or DTI on the other hand,
the non-breaching party shall be entitled to recover its costs and expenses
(including reasonable legal fees) incurred in enforcing this Agreement.
11.8 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9 Effectiveness; Binding Effect. This Agreement shall become effective
as to each party hereto when and only when this Agreement shall have been
executed by all parties hereto.
11.10 Headings. The headings of the Sections and Articles of this
Agreement are included for convenience only and shall not constitute a part
hereof.
11.11 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto, the Confidentiality Agreement between the parties, and all
other documents and certificates delivered pursuant to the terms hereof, set
forth the entire agreement and understanding of the
56
<PAGE>
parties hereto in respect of the subject matter contained herein, and supersede
all prior agreements, promises, covenants, arrangements, communications,
representation or warranties, whether oral or written, by any officer, employee
or representative of any party hereto.
11.12 Third Party. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to confer
upon or give to any person or entity other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
11.13 Severability. If in any jurisdiction, any provision of this
Agreement or its application to any party or circumstance is restricted,
prohibited or unenforceable, such provision shall, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of such provision in any other
jurisdiction or its application to other parties or circumstances. In addition,
if any one or more of the provisions contained in this Agreement shall for any
reason in any jurisdiction be held to be excessively broad due to time,
duration, geographical scope, activity or subject, it shall be construed, by
limiting and reducing it, so as to be enforceable to the maximum extent
compatible with the applicable law of such jurisdiction as it shall then appear.
57
<PAGE>
IN WITNESS WHEREOF, each of DTI, Subsidiary and CW have executed this
Agreement by its duly authorized officer, all as of the day and year first above
written.
DE TOMASO INDUSTRIES, INC.
By:/S/Howard E. Chase
-----------------------------------
Howard E. Chase, President
DTI ACQUISITION CORP.
By:/S/Howard E. Chase
-----------------------------------
Howard E. Chase, President
THE CAREY WINSTON COMPANY
By:/S/Thomas L. Nordlinger
-----------------------------------
Name: Thomas L. Nordlinger
Title: President and Chief Executive
Officer
58
EXHIBIT 99.2
PROMISSORY NOTE
$2,000,000.00 September 17, 1996
FOR VALUE RECEIVED, the undersigned, THE CAREY WINSTON COMPANY, a
Delaware corporation having an address at 5550 Friendship Boulevard, Suite 500,
Chevy Chase, Maryland 20815 (the "Borrower"), hereby promises to pay to the
order of DE TOMASO INDUSTRIES, INC., a Maryland corporation having an address at
c/o Finprogetti S.p.A., Via Fieno 8, 20123 Milano, Italy (the "Lender"), the
principal sum of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00), plus such
additional amount, not in excess of an additional ONE MILLION AND 00/100 DOLLARS
($1,000,000.00) (the "Drawdown Loan"), as Lender shall have loaned to Borrower
pursuant to Section 3.2 of the Agreement and Plan of Merger described below, on
September 16, 1999 (the "Maturity Date"), together with interest thereon from
time to time as provided herein.
This Promissory Note (the "Note") is issued by the Borrower pursuant
to an Agreement and Plan of Merger (the "Agreement"), dated as of August 14,
1996, among the Borrower, the Lender and DTI Acquisition Corp., a Delaware
corporation. The Lender is entitled to the benefits of this Note and the
Agreement, as it relates to this Note, and may enforce the agreements of the
Borrower contained herein and therein and exercise the remedies provided for
hereby and thereby or otherwise available in respect hereto or thereto.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to them in the Agreement.
Interest on the outstanding principal amount of this Note, at a rate
of Ten Percent (10%) per annum, shall accrue from the date hereof on the amount
of principal from time to time outstanding until repayment of the entire
principal sum and payment of all accrued interest in full. Interest shall accrue
and be computed on the basis of a 360-day year consisting of twelve 30-day
months, and shall be payable in arrears on the first (1st) day of April, July,
October and January of each year while any amount is outstanding under this
Note, and on the Maturity Date. If Lender shall fail to loan any portion of the
Drawdown Loan when and as required by the Agreement, then the rate of interest
payable hereunder shall be reduced to a rate of Five Percent (5%) per annum,
provided that the normal rate of Ten Percent (10%) shall be reinstated (x) if
and when Lender funds such portion of the Drawdown Loan provided that same
occurs prior to Borrower terminating the Agreement as provided therein, or (y)
upon the failure of Borrower to pay the principal amount hereof when due and
payable, whether at maturity, by acceleration or otherwise.
In no event shall any interest to be paid hereunder exceed the
maximum rate permitted by law. In any such event, this Note shall automatically
be deemed amended to permit interest charges at an amount equal to, but not
greater than, the maximum rate permitted by law.
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<PAGE>
Principal and interest are payable in lawful money of the United
States of America in immediately available funds at the address indicated above
or at such other place designated in writing by the Lender from time to time.
Principal shall be prepayable without premium or penalty, in whole or in
installments of One Hundred Thousand Dollars ($100,000) or multiples thereof, at
any time and from time to time, together with accrued interest on the amount so
prepaid.
The occurrence of any of the following events shall constitute an
Event of Default by Borrower hereunder:
1. the Borrower shall default in the payment of the principal
of this Note, when and as the same shall become due and payable, whether at
maturity, by acceleration or otherwise; or
2. the Borrower shall default in the payment of interest on
this Note according to its terms, when and as the same shall become due and
payable and such default shall continue for a period of five (5) days; or
3. any representation or warranty made by the Borrower in the
Agreement shall have been incorrect in any material respect when made, or any
covenant made by the Borrower in the Agreement shall have been breached,
provided that Lender shall have notified Borrower thereof prior to the Agreement
having been terminated in accordance with its terms; or
4. the Closing shall not occur due to failure by Borrower to
satisfy any of the conditions described in Section 8.2 of the Agreement; or
5. an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(a) relief in respect of the Borrower, or of a substantial part of its property
or assets, under any Federal or state bankruptcy, insolvency, receivership or
similar law, (b) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower, or for a
substantial part of his property or assets, or (c) the winding up or liquidation
of the Borrower's business; and such proceeding or petition shall continue
undismissed for 60 days, or an order or decree approving or ordering any of the
foregoing shall be entered; or
6. the Borrower shall (a) voluntarily commence any proceeding
or file any petition seeking relief under any Federal or state bankruptcy,
insolvency, receivership or similar law, (b) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding or the filing
of any petition described in paragraph 5 above, (c) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower, or for a substantial part of its property or
assets, (d) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (e) make a general assignment for the
benefit of creditors, (f) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (g) take any action for the
purpose of effecting any of the foregoing.
2
<PAGE>
Upon the occurrence of an Event of Default the entire unpaid
principal amount of this Note, together with accrued interest and all
obligations of the Borrower hereunder to the Lender, may be declared by the
Lender to be immediately due and payable, provided that upon the occurrence of
an Event of Default described in paragraph number 5 or 6 above, the outstanding
principal of and all accrued interest on this Note shall automatically become
immediately due and payable, and provided further that upon the occurrence of an
Event of Default described in paragraph number 3 or 4 above, the Borrower will
have ninety (90) days from the date of such Event of Default to pay the entire
unpaid principal balance plus accrued interest under this Note.
Upon the occurrence of any one or more Events of Default, the Lender
may proceed (but if the Event of Default occurs under paragraph number 3 or 4
above, only upon the expiration of the aforesaid ninety (90) day period)to
protect and enforce its rights hereunder by suit in equity, action at law or by
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in the Agreement or this Note or in aid of the
exercise of any power granted in the Agreement or this Note, or may proceed to
enforce the payment of this Note, or to enforce any other legal or equitable
right of the Lender. No remedy herein conferred upon the Lender is intended to
be exclusive of any other remedy and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or
under the Agreement or now or hereafter existing at law or in equity or by
statute or otherwise. No course of dealing between the Borrower and the Lender
or any delay on the part of the Lender in exercising any rights hereunder shall
operate as a waiver of any right.
All the covenants, stipulations, promises and agreements contained
in this Note by or on behalf of the Borrower shall bind its successors and
assigns, whether or not so expressed.
The Borrower hereby waives presentment, demand for payment, notice
of dishonor, protest and notice of protest, any or all other notices or demands
in connection with this Note, and, to the fullest extent permitted by law, all
rights to plead any statute of limitations as a defense to any action hereunder.
Any failure of the Lender hereof to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any time and from time to time thereafter.
Should the indebtedness represented by this Note, or any part
thereof, be collected at law or in equity or in bankruptcy, receivership or
other court proceedings, or this Note be placed
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in the hands of attorneys for collection after default, the undersigned agrees
to pay, in addition to the principal, interest or other amounts due and payable
thereon, reasonable attorneys' and collection fees.
Payment of principal and interest under this Note shall be
subordinated, (without necessity for any further documentation) to such bona
fide institutional indebtedness of Borrower ("Senior Indebtedness"), incurred
prior to or after the date hereof for legitimate business purposes, the terms of
which require subordination of this Note thereto, which Senior Indebtedness does
not exceed, in the aggregate, $1,200,000, plus an additional $500,000, as well
as arbitrage lines of credit (or loans made thereunder) which are one hundred
percent (100%) collateralized with U.S. Treasury bills; provided that unless and
until Lender is notified by a holder of Senior Indebtedness that a default has
occurred in respect of such Senior Indebtedness and such holder has accelerated
such Senior Indebtedness, the foregoing subordination shall not restrict
Lender's right to any payment hereunder, and, upon receipt of such notice, such
subordination shall apply only to such Senior Indebtedness.
Notwithstanding anything to the contrary contained in this Note or
the Agreement, at the Closing the entire principal amount of this Note then
outstanding (it being understood that to the extent not theretofore funded, same
shall be drawn down and funded) shall be contributed to Borrower's capital,
Borrower shall pay to Lender all accrued interest hereunder, and this Note shall
be canceled and of no further force and effect.
This Note shall be governed by and construed in accordance with the
laws of the State of Maryland.
THE CAREY WINSTON COMPANY
By:/S/Thomas L. Nordlinger
-----------------------------------------
Name: Thomas L. Nordlinger
Title: President and Chief Executive Officer
SUBORDINATION PROVISIONS CONFIRMED:
De Tomaso Industries, Inc.
By:/S/Howard E. Chase
-----------------------------------------
Howard E. Chase, President
4
