Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from
____________ to ______________
Commission File Number 0-15339
THE STROBER ORGANIZATION, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2822910
(State of Organization (IRS Employer Identification
or other Jurisdiction Number)
of Incorporation)
550 Hamilton Avenue
BROOKLYN, NEW YORK 11232
(Address of principal executive office)
(718) 832-1212
(Registrant's telephone number,
including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
filing requirements for the past 90 days.
Yes X No _____
COMMON STOCK $.01 PAR - SHARES ISSUED AND OUTSTANDING AT NOVEMBER 11, 1996 -
5,027,447
(Number of shares outstanding of each class of the Registrant's Common Stock)
<PAGE>
THE STROBER ORGANIZATION, INC. AND SUBSIDIARIES
INDEX
PAGE
Face Sheet............................................................1
Index.................................................................2
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1996 and December 31, 1995...................3
Consolidated Statements of Operations for the
Three Months Ended September 30, 1996 and 1995.............4
Consolidated Statements of Operations
for the Nine Months Ended September 30, 1996
and 1995...................................................5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1996 and 1995......6
Notes to Consolidated Financial Statements.................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................................8
Part II Other Information.........................................12
Part III Exhibits and Reports on Form 8-K..........................14
Signature............................................................15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The Strober Organization, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In Thousands)
<S> <C> <C>
ASSETS SEPT. 30, DEC. 31,
1996 1995
Current assets:
Cash $4,553 $6,007
Accounts receivable, net of allowance for 21,988 15,907
doubtful accounts of $3,162 and $2,321 in
1996 and 1995, respectively
Inventory 12,880 10,305
Deferred income taxes 921 921
Other current assets 536 347
Total current assets 40,878 33,487
Property and equipment, net 5,513 3,627
Goodwill, net of accumulated amortization of 6,569 6,726
$1,817
and $1,660 in 1996 and 1995, respectively
Other assets 771 704
Total assets $53,731 $44,544
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $725 $908
Revolving line of credit - -
Accounts payable 8,982 4,738
Accrued expenses and taxes 5,186 4,150
Total current liabilities 14,893 9,796
Long-term debt, less current installments 2,669 1,224
Total liabilities 17,562 11,020
Stockholders' equity:
Preferred stock, $.01 par value, 1000 shares -- --
authorized and unissued
Common stock, $.01 par value, 20,000 shares 52 52
authorized; issued: 5,218 and 5,027
outstanding
in 1996 and issued 5,178 and outstanding
4,987 in
1995
Additional paid-in capital 7,099 7,029
Retained earnings 29,801 27,189
Less: Treasury stock at cost, 191 shares in (783) (746)
1996
and 1995
Total stockholders' equity 36,169 33,524
Total liabilities and stockholders' equity $53,731 $44,544
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
The Strober Organization, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
(In thousands, except per share data) 1996 1995
<S> <C> <C>
Net sales $41,789 $33,864
Cost of goods sold 31,135 24,821
Gross profit 10,654 9,043
Selling, general and administrative 8,141 7,207
expenses
Income from operations 2,513 1,836
Other income (expense)
Interest expense (65) (58)
Interest income 123 135
Equity in earnings of joint venture 86 -
Gain on sale of fixed assets and other 101 8
income
Net income before income taxes 2,758 1,921
Provision for income taxes 1,158 787
Net income $1,600 $1,134
Net income per share $0.31 $0.21
Weighted average number of shares 5,170 5,358
outstanding
</TABLE>
The computation of fully diluted earnings per share
does not materially differ from that presented above.
See accompanying notes to consolidated financial statements.
<PAGE>
The Strober Organization, Inc. and Subsidiaries
Consolidated Statements of Operations
Nine Months Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
(In thousands, except per share data) 1996 1995
<S> <C> <C>
Net sales $100,898 $96,066
Cost of goods sold 74,222 70,824
Gross profit 26,676 25,242
Selling, general and administrative 22,849 21,433
expenses
Income from operations 3,827 3,809
Other income (expense)
Interest expense (156) (170)
Interest income 355 325
Equity in earnings of joint venture 182 -
Gain on sale of fixed assets and other 294 36
income
Net income before income taxes 4,502 4,000
Provision for income taxes 1,891 1,640
Net income $2,611 $2,360
Net income per share $0.51 $0.45
Weighted average number of shares 5,159 5,264
outstanding
</TABLE>
The computation of fully diluted earnings per share
does not materially differ from that presented above.
See accompanying notes to consolidated financial statements.
<PAGE>
The Strober Organization, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $2,611 $2,360
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,097 1,004
Provision for estimated losses on accounts 598 651
receivable
Changes in operating assets and liabilities:
Accounts receivable (6,679) (1,903)
Inventory (2,575) (952)
Other assets (269) 14
Accounts payable 4,244 1,202
Accrued expenses and taxes 1,038 702
Net cash provided by operating activities 65 3,078
Cash flows from investing activities:
Additions to property and equipment, net (690) (465)
Cash flows from financing activities:
Repayment of long-term debt (862) (1,278)
Proceeds from exercise of stock options 70 17
Purchase of treasury stock (37) -
Net cash (used by) financing activities (829) (1,261)
Net (decrease) increase in cash (1,454) 1,352
Cash at beginning of period 6,007 3,890
Cash at end of period $4,553 $5,242
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
THE STROBER ORGANIZATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) UNAUDITED STATEMENTS
The accompanying unaudited consolidated financial statements and other
related financial information furnished reflect all adjustments which are, in
the opinion of management, necessary to a fair presentation of the financial
position as of September 30, 1996 and the results of operations and cash flows
for the nine months ended September 30, 1996 and 1995.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is suggested
that these consolidated condensed financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's December 31, 1995 financial statements. The results of operations
for the period ended September 30, 1996 are not necessarily indicative of the
operating results for the full year.
(2) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Significant intercompany balances and
transactions have been eliminated.
(3) STATEMENTS OF CASH FLOWS-SUPPLEMENTAL DISCLOSURES
Schedule of amounts paid for interest, income taxes and capital lease
obligations.
<TABLE>
<CAPTION>
In thousands
<S> <C> <C>
1996 1995
Interest paid $117 $137
Income taxes paid $1,135 $500
Capital lease obligations $2,123 $1,074
incurred for purchase
of equipment
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain income statement amounts expressed as a
percentage of sales:
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/96 9/30/95 9/30/96 9/30/95
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 74.5% 73.3% 73.6% 73.7%
Gross profit 25.5% 26.7% 26.4% 26.3%
SG&A expenses 19.5% 21.3% 22.6% 22.3%
Income from operations 6.0% 5.4% 3.8% 4.0%
Other income (expense) .6% .3% .7% .2%
Net income before income 6.6% 5.7% 4.5% 4.2%
taxes
Provision for income taxes 2.8% 2.3% 1.9% 1.7%
Net income 3.8% 3.4% 2.6% 2.5%
</TABLE>
RESULT OF OPERATIONS
THIRD QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO THIRD QUARTER ENDED
SEPTEMBER 30, 1995
Net sales for the quarter ended September 30, 1996 increased by $7.9 million
(23%) compared to the same period in 1995. The increase in sales is primarily
the result of increased construction activity experienced in the Company's
marketing regions.
Gross profit increased by $1.6 million (18%) in the third quarter of 1996 as
compared to the same period in 1995 due to the higher sales volume. Gross
profit as a percentage of sales decreased from 26.7% to 25.5% in the third
quarter of 1996 compared to the same period in 1995.
Selling, general and administrative expenses increased by $934,000 (13%) in the
third quarter of 1996 compared to the same period in 1995.
The following table shows the components of the SG&A expenses:
THREE MONTHS ENDED
IN THOUSANDS 9/30/96 9/30/95
Delivery $3,218 $2,784
Selling 1,213 1,078
Administrative 3,710 3,354
$8,141 $7,207
The increase in delivery expenses of $434,000 resulted from increases in
variable delivery labor and trucking costs. Selling expenses increased by
$135,000 resulting from higher sales salaries. Administrative expenses
increased by $365,000 primarily due to higher legal fees and administrative
salaries. The increase in administrative costs was partially offset by
reductions in insurance and health insurance costs.
Other income-equity in earnings of joint venture of $86,000 represents the
Company's 50% ownership share of the earnings of Architectural Wall Systems LLC
(formed October 1995) for the three month period ended September 30, 1996.
Gain on sale of fixed assets and other income increased by $93,000 in the third
quarter of 1996 due primarily to a reduction of an accrued litigation
liability. Such litigation was settled in the third quarter of 1996.
Income from operations increased $677,000 in the third quarter of 1996 to
$2,513,000 compared to $1,836,000 in the same period in 1995. This increase
resulted primarily from higher gross margin dollars resulting from higher sales
volume and was partially offset by higher operating expenses. Net income
before taxes increased $837,000 in the 1996 third quarter to $2,758,000
compared to $1,921,000 in the same period in 1995 due to increased operating
income and higher other income.
The net income for the third quarter of 1996 reflects an income tax provision
of $1,158,000 compared to a provision of $787,000 for the same period in 1995.
Net income for the third quarter ended September 30, 1996 increased $466,000 to
$1,600,000 compared to $1,134,000 in the same period in 1995.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1995
Net sales for the nine month period ended September 30, 1996 increased by $4.8
million (5%) compared to the same period in 1995 due to an increase in
construction activity in the Company's marketing regions. The nine month sales
growth was partially offset by the $5.1 million decline in sales during the
first quarter of the year due to the extremely harsh weather conditions
experienced in 1996 compared to 1995.
Gross profit increased by $1.4 million (6%) in the first nine months of 1996 as
compared to the same period in 1995 due to the increased sales volume. Gross
profit as a percentage of sales was 26.4% during the first nine months of 1996
compared to 26.3% in the same period in 1995.
Selling, general and administrative expenses increased by $1.4 million (7%).
The following table shows the components of the SG&A expenses.
NINE MONTHS ENDED
IN THOUSANDS 9/30/96 9/30/95
Delivery $8,967 $8,236
Selling 3,342 3,117
Administrative 10,540 10,080
$22,849 $21,433
Delivery expenses increased $731,000 due primarily to higher facility rent,
delivery labor and trucking costs. Selling expenses increased by $225,000 due
to higher selling salaries and related expenses partially reduced by lower
advertising costs. Administrative expenses increased $460,000 due primarily to
higher legal fees, administrative salaries, facility costs and partially
reduced by lower insurance, health insurance costs and bad debt provisions.
Other income (expenses) increased $484,000 in the nine month period ended
September 30, 1996 compared to the 1995 period. This increase is primarily
attributed to the equity in earnings of the Company's joint venture in
Architectural Wall Systems LLC (formed in October 1995), gain on sales of
delivery equipment which were replaced with new equipment and a reduction in an
accrued litigation liability. Such litigation was settled in the third quarter
of 1996.
Income from operations increased $18,000 in the nine month period ended
September 30, 1996 to $3,827,000 compared to $3,809,000 in the same period in
1995. Increases in operating income of $337,000 and $677,000 in 96Q2 and 96Q3,
respectively, was impacted by a decline in operating income of $996,000 in 96Q1
resulting from inclement weather related reduced sales volume. Net income
before taxes increased $502,000 in the nine month period ended September 30,
1996 to $4,502,000 compared to $4,000,000 in the same period in 1995 due
primarily to increases in operating income and other income.
The net income for the nine month period ended September 30, 1996 reflects an
income tax provision of $1,891,000 compared to $1,640,000 in the same period of
1995. Net income for the nine month period ended September 30, 1996 increased
$251,000 to $2,611,000 compared to $2,360,000 in the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed its operations in the first nine months of 1996 without
the necessity of any borrowings other than capital lease transactions to fund
capital expenditures. The Company also maintains a revolving working capital
line of credit in the amount of $10,000,000 with the Chase Manhattan Bank, N.A.
Borrowings under the credit facility are made as needed, up to a maximum of 75%
of eligible accounts receivable and bear interest at the prime rate plus 1/2 a
percentage point or at the option of the Company at various fixed London
Interbank Offered Rate interest rates. The Company pledged as collateral for
the credit facility its accounts receivable and is required to
<PAGE>
maintain certain financial covenants. The credit facility expires on January
15, 1997. At September 30, 1996 there were no balances owed under this credit
line. The Company believes that this credit facility will provide sufficient
working capital to support current and future operations and also believes that
an extension or replacement of the revolving working capital line of credit
will be obtained.
In March 1995, the Company entered into a master lease agreement with Chase
Equipment Leasing Inc. to lease certain trucks and forklift equipment. The
agreement provides for a monthly rental payment adjusted upon changes in the 30
day London Interbank Offered Rate. The Company leased $1,988,000 of new
delivery equipment during the nine month period ended September 30, 1996.
These leases have been capitalized as incurred. The Company's outstanding
balances on these capitalized leases at September 30, 1996 was $3,253,000.
At September 30, 1996, the Company had no outstanding balance of subordinated
notes payable compared to $583,000 at December 31, 1995. These notes were
issued pursuant to the acquisition of The General Building Supply Company in
January 1988. Although the notes were due September 1, 1996, a final payment
was made on June 1, 1996.
Capital expenditures, net of dispositions, amounted to $690,000 in the nine
month period ended September 30, 1996, compared to $392,000 in the same period
in 1995.
The Company will be relocating its Brooklyn, New York facility and corporate
headquarters when the current lease expires on December 31, 1996. The Company
has executed a new 10 year lease with The Port Authority of New York and New
Jersey covering premises at Pier 3 at the Brooklyn Marine Terminals. This
larger facility is approximately 2 miles from the present Brooklyn location.
Facility improvements and fixtures associated with the relocation is estimated
at $1,500,000.
The Company has entered into a 10 year renewal lease for its facility located
at Valley Stream, New York. The present lease expires December 31, 1996.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
On July 31, 1996, an action entitled BROOKLYN BRIDGE PARK COALITION, INC.
V. PORT AUTHORITY OF NEW YORK AND NEW JERSEY AND THE STROBER ORGANIZATION, INC.
was commenced in the United States District Court, Eastern District of New
York. The Complaint alleges, among other things, common law prospective
nuisance arising out of the Company's planned relocation of its existing
Brooklyn, New York facility from the waterfront at 550 Hamilton Avenue to Pier
3, a distance of approximately two miles. The Plaintiff is seeking to restrain
the Company from constructing a building materials supply center on Pier 3.
The Company is currently evaluating the claims and intends to aggressively
defend the claim against the Company. In October 1996, the Port Authority and
Strober Bros., Inc. Building Supply Centers entered into an indemnity agreement
pursuant to which the Port Authority agreed, in the event that Strober Bros. is
unable to use the Pier 3 premises for the purposes set forth in the Pier 3
lease agreement as a result of this action or any action in New York State
court containing the same allegations in whole or in part as set forth in this
action, to indemnify Strober Bros. for up to $1.5 million for costs and
expenses incurred in connection with construction work at Pier 3.
In October 1996, a Settlement Agreement (the "SETTLEMENT AGREEMENT") was
entered into between Albert Sandler, the Company and Strober-N.J. Building
Supply Centers, Inc. (a Company subsidiary) resolving environmental claims
relating to underground storage tanks brought by Mr. Sandler in SANDLER V.
STROBER ORGANIZATION, INC., ET AL., Docket No. L-6840-94. Pursuant to the
Settlement Agreement, the Company paid $175,000 to Mr. Albert Sandler, $119,000
of which was contributed by the Company's insurers.
The Company is not a party to any other material legal proceedings. It
is, however, involved in litigation relating to claims arising out of its
operations in the normal course of business. Such claims against the Company
are generally covered by insurance. It is the opinion of management that any
uninsured liability resulting from such litigation would not have a material
adverse effect on the Company's business, financial position or earnings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Stockholders of the Company was held on
July 11, 1996.
(b) The following nominees were elected by the following vote as
Class I directors of the Company to serve until the 1999 Annual
Meeting of Stockholders or until their respective successors
shall be elected and shall qualify:
CLASS I DIRECTORS FOR WITHHELD
Emil W. Solimine 3,595,247 22,950
Eliott Zieky 3,595,247 22,950
(c) The following directors continued as directors of the Company:
Class II (Term to Expire at 1997 Stockholder Meeting)
Robert J. Gaites
Joseph Mangino, Sr.
Class III (Term to Expire at 1998 Stockholder Meeting)
David W. Bernstein
Alvin Murstein
John Yanuklis
(d) The proposal to ratify the appointment of KPMG Peat Marwick LLP
as independent public accountants for the Company for the
fiscal year ending December 31, 1996 received the required
favorable majority vote necessary for approval as follows:
FOR AGAINST ABSTAIN
3,597,205 20,162 830
(e) The proposal to approve the Company's 1996 Outside Director
Stock Option Plan received the required favorable majority vote
necessary for approval as follows:
FOR AGAINST ABSTAIN
3,152,958 413,646 3,130
Item 5. OTHER EVENTS.
On November 11, 1996, the Company issued a press release announcing that
it had entered into a definitive Agreement and Plan of Merger providing for the
acquisition of all of the Company's Common Stock at $6 per share, in cash, for
an aggregate fully-diluted purchase price of approximately $32 million. The
acquisition is led by Fidelity Ventures Limited Partnership, a private capital
investor. The Company also announced that in light of the pending merger, the
Company has decided not to proceed with the purchase of Rowley Building
Products Corp. and Rowley Building Products of New Jersey, Inc. Copies of the
press release and the Agreement and Plan of Merger are attached as exhibits
hereto and are incorporated herein by reference.
<PAGE>
PART III
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
2.1 Agreement and Plan of Merger dated November 11, 1996
2.2 Proxy Agreement dated as of November 11, 1996 among certain
stockholders of the Company, Hamilton Acquisition LLC and
Hamilton NY Acquisition Corp.
2.3 Guaranty Agreement dated as of November 11, 1996 by Fidelity
Investors Limited Partnership in favor of the Company
20 Press Release dated November 11, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K:
There was a Report on Form 8-K filed on July 1, 1996 which
reported that the Company issued a press release on each of June 27,
1996 and July 1, 1996 announcing that the Company will be relocating
its Brooklyn, New York Facility and Corporate Headquarters and that
the Company had entered into a purchase agreement to acquire the
assets of Rowley Building Products Corp. and all the capital stock
of Rowley Building Products of New Jersey, Inc., respectively.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE STROBER ORGANIZATION, INC.
By: /S/ DAVID J. POLISHOOK
--------------------------------------
David J. Polishook
Chief Financial Officer and Treasurer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger dated November 11, 1996
2.2 Proxy Agreement dated as of November 11, 1996 among
certain stockholders of the Company, Hamilton
Acquisition LLC and Hamilton NY Acquisition Corp.
2.3 Guaranty dated as of November 11, 1996 by Fidelity
Investors Limited Partnership in favor of the Company
20 Press Release dated November 11, 1996
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 2.1
Agreement and Plan of Merger dated November 11, 1996
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
PARENT,
ACQUISITION SUB
AND THE STROBER ORGANIZATION, INC.
Dated as of November 11, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. [INTENTIONALLY OMITTED]...............................2
2. THE MERGER............................................2
2.1 The Merger............................................2
2.2 Effective Time........................................2
2.3 Effects of the Merger.................................2
2.4 Certificate of Incorporation; By-Laws.................2
2.5 Directors.............................................3
2.6 Officers..............................................3
2.7 Conversion of Securities..............................3
2.8 Company Stock Options and Related Matters.............4
2.9 Taking of Necessary Action; Further Action............4
3. PAYMENT FOR SHARES; DISSENTING SHARES......................4
3.1 Payment for Shares of Company Common Stock............4
3.2 Dissenting Shares.....................................6
4.REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB..7
4.1 Organization and Qualification........................7
4.2 Authority Relative to this Agreement..................7
4.3 No Violations.........................................8
4.4 Brokerage Fees........................................9
4.5 Financing.............................................9
4.6 Arrangements..........................................9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............10
5.1 Organization and Qualification.......................10
5.2 Authority Relative to this Agreement.................10
5.3 No Violations; Consents and Approvals................11
5.4 Capitalization.......................................12
5.5 Commission Filings...................................12
5.6 Absence of Certain Changes or Events.................13
5.7 Absence of Litigation................................14
5.8 Employee Benefit Plans...............................14
5.9 Labor Matters........................................15
5.10 Taxes................................................16
5.11 Environmental Matters................................17
5.12 Books and Records....................................19
5.13 Real and Personal Property...........................19
5.14 Contracts............................................23
5.15 Trade Names..........................................24
5.16 Affiliate Transactions...............................25
5.17 Brokerage Fees.......................................25
5.18 Subsidiaries.........................................25
5.19 Disclosure...........................................25
6. CONDUCT OF BUSINESS PENDING THE MERGER....................26
6.1 Conduct of Business by the Company...................26
7. ADDITIONAL AGREEMENTS.....................................28
7.1 Proxy Statement; Other Filings.......................28
7.2 Meeting of the Company's Stockholders................29
7.3 Additional Agreements................................30
7.4 Fees and Expenses....................................30
7.5 No Solicitations.....................................31
7.6 Officers' and Directors' Insurance; Indemnification..32
7.7 Access to Information; Confidentiality...............32
7.8 Financial and Other Statements.......................33
7.9 Observer Rights......................................33
7.10 Advice of Change; Schedule Update....................33
7.11 Rowley Building Transaction..........................34
7.12 Certain Litigation...................................34
7.13 Public Announcements.................................34
7.14 Environmental Matters................................35
7.15 Stop Transfer; Reorganization Agreement..............35
7.16 Transfer Taxes.......................................35
8. CONDITIONS TO THE MERGER..................................36
8.1 Conditions to the Obligations of Each Party to
Effect the Merger....................................36
8.2 Additional Conditions to the Obligations of
the Company..........................................36
8.3 Additional Conditions to the Obligations of Parent
and Acquisition Sub..................................37
8.4 Certain Payments.....................................39
9. TERMINATION, AMENDMENT AND WAIVER.........................39
9.1 Termination..........................................39
9.2 Effect of Termination................................40
9.3 Amendment............................................42
9.4 Extension; Waiver....................................42
10. GENERAL PROVISIONS........................................42
10.1 Notices..............................................42
10.2 Interpretation.......................................43
10.3 Non-Survival of Representations, Warranties,
Covenant and Agreements..............................43
10.4 Miscellaneous........................................44
10.5 Assignment...........................................44
10.6 Knowledge; Best Efforts..............................44
10.7 Severability.........................................44
10.8 Choice of Law/Consent to Jurisdiction................44
Third-Party Beneficiary..............................45
<PAGE>
SCHEDULES AND EXHIBITS
SCHEDULE TITLE
Schedule 2.8 Company Stock Options and Related Matters
Schedule 5.1 Qualification
Schedule 5.2(b) Authority Relative to this Agreement
Schedule 5.3 No Violations; Consents and Approvals
Schedule 5.4 Capitalization
Schedule 5.5 Commission Filings
Schedule 5.6 Absence of Certain Changes or Events
Schedule 5.7 Absence of Litigation
Schedule 5.8 Employee Benefit Plans
Schedule 5.9 Labor Matters
Schedule 5.10 Taxes
Schedule 5.11 Environmental Matters
Schedule 5.12 Books and Records
Schedule 5.13 Real and Personal Property
Schedule 5.14 Contracts
Schedule 5.15 Trade Names
Schedule 5.16 Affiliate Transactions
Schedule 5.18 Subsidiaries
Schedule 6.1 Conduct of Business by the Company
Schedule 8.3(f) Third Party Consents
<PAGE>
DEFINED TERM CROSS REFERENCE
(Not Part of this Agreement)
1995 Balance Sheet Section 5.5(e)
Agreement Introduction
Acquisition Property Section 5.13(a)
Acquisition Proposal Section 7.5(a)
Acquisition Sub Introduction
Affiliate Transactions Section 5.16
Blue Sky Laws Section 4.3(b)
Board Introduction
Certificate of Merger Section 2.2
Certificates Section 3.1(b)
Claim Section 7.6
Code Section 5.8(a)
Commission Section 5.5(a)
Commission Reports Section 5.5(b)
Company Introduction
Company Common Stock Introduction
Company's Certificate Section 2.4(a)
Company Expenses Section 9.2(d)
Confidentiality Agreement Section 7.7
Corporation Section 2.4(a)
Corporation Law Introduction
Dissenting Stockholders Section 3.2(a)
Dissenting Shares Section 3.2(a)
Effective Date Section 2.2
Effective Time Section 2.2
Environmental Laws Section 5.11(a)
Environmental Permits Section 5.11(a)
ERISA Section 5.8(a)
Exchange Act Section 4.3(b)
Financing Section 4.5
Financing Letters Section 4.5
Hart-Scott-Rodino Act Section 4.3(b)
Hazardous Substances Section 5.11(b)
Indemnification Agreement Section 7.12
Intellectual Property Rights Section 5.15
IRS Section 5.10(b)
ISRA Section 4.3(b)
Leases Section 5.13(b)(i)
Managee Introduction
Managees Introduction
Leased Real Property Section 5.13(b)
Material Adverse Effect Section 4.1
Material Contracts Section 5.14
Merger Introduction
Merger Consideration Section 2.7(b)
Mortgages Section 5.13(a)(ii)
Option Section 2.8
Option Consideration Section 2.8
Optionees Section 2.8
Other Filings Section 7.1
Owned Real Property Section 5.13(a)
Parent Introduction
Parent Expenses Section 9.2(b)
Paying Agent Section 3.1(a)
Payment Fund Section 3.1(a)
Pending Litigation Section 8.3(c)
Pending Legal Proceeding Section 8.3(c)
Permitted Encumbrances Section 5.13(a)(i)
Plans Section 5.8(a)
Port Authority Section 7.12
Port Authority Lease Section 7.12
Preferred Stock Section 5.4
Principal Stockholder Introduction
Principal Stockholders Introduction
Profit Sharing Plan Shares Section 2.7(a)
Proxy Agreement Introduction
Proxy Statement Section 7.1
Reorganization Agreement Section 7.15
Requisite Rights Section 5.15(b)(i)
Rowley Building Products Section 7.11
Stock Option Plans Section 2.8
Stockholders' Meeting Section 7.2
Subsidiary Section (10.2)
Superior Proposal Section 7.5(b)
Surviving Corporation Section 2.1
Taxes Section 5.10(f)
Transfer Taxes Section 7.16
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of November
11, 1996, by and among Hamilton Acquisition LLC, a Delaware limited
liability company ("PARENT"), Hamilton NY Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("ACQUISITION SUB"),
and The Strober Organization, Inc., a Delaware corporation (the "COMPANY").
WHEREAS, the Board of Directors of the Company (the "BOARD") has, in
light of and subject to the terms and conditions set forth herein, (i)
determined that the consideration to be received by the stockholders of the
Company for each of the issued and outstanding shares of common stock, par
value $.01 per share, of the Company (the "COMPANY COMMON STOCK"), in the
Merger (as defined below) is fair to and in the best interests of the
Company and its stockholders and (ii) resolved to approve this Agreement
and the transactions contemplated hereby and to recommend approval and
adoption of this Agreement and approval of the Merger by the stockholders
of the Company;
WHEREAS, also in furtherance of such transactions, the manager or
managers, as the case may be, of Parent (as the case may be, the "MANAGER"
or "MANAGERS") and the Board of Directors of Acquisition Sub have each
unanimously approved the merger of Acquisition Sub with and into the
Company (the "MERGER") in accordance with the General Corporation Law of
the State of Delaware (the "CORPORATION LAW") and the provisions of this
Agreement pursuant to which Merger the holders of Company Common Stock
(other than the Company, Acquisition Sub, Parent and any direct or indirect
subsidiary of any them) shall receive the Merger Consideration (as defined
in Section 2.7(b) hereof); and
WHEREAS, as a condition to the willingness of Parent and Acquisition
Sub to enter into this Agreement, certain stockholders of the Company (each
individually a "PRINCIPAL STOCKHOLDER" and collectively the "PRINCIPAL
STOCKHOLDERS") have entered into a Proxy Agreement, dated as of the date
hereof, with Parent and Acquisition Sub (the "PROXY AGREEMENT") pursuant to
which each Principal Stockholder has, among other things, granted to Parent
an irrevocable proxy to vote all shares of Company Common Stock owned
(beneficially or otherwise) by such Principal Stockholder in favor of the
Merger, all upon the terms and conditions set forth in the Proxy Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, Parent, Acquisition Sub and the Company hereby
agree as follows:
1. [INTENTIONALLY OMITTED]
2. THE MERGER
1 THE MERGER. Upon the terms and subject to the conditions
contained in this Agreement, and in accordance with the relevant provisions
of the Corporation Law, at the Effective Time (as hereinafter defined),
Acquisition Sub shall be merged with and into the Company. Following the
Merger, the Company shall continue its corporate existence as the surviving
corporation in the Merger (the "SURVIVING CORPORATION") under the laws of
the State of Delaware, and the separate corporate existence of Acquisition
Sub shall cease. The name of the Surviving Corporation shall continue to
be "The Strober Organization, Inc."
2 EFFECTIVE TIME. As promptly as practicable after all of the
conditions set forth in Section 8 shall have been satisfied or, if
permissible, waived by the party entitled to the benefit of the same,
Acquisition Sub and the Company shall duly execute and file a certificate
of merger in form and substance satisfactory to the parties hereto (the
"CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware in accordance with the Corporation Law. The Merger shall become
effective at such time as the Certificate of Merger is filed with the
Secretary of State of the State of Delaware or at such later time as is
specified in the Certificate of Merger (the "EFFECTIVE TIME"). Prior to
such filing, a closing shall be held at the offices of Goodwin, Procter &
Hoar LLP, Exchange Place, Boston, Massachusetts 02109, or at such other
place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Section 8 (the date of such closing being, the "EFFECTIVE DATE").
3 EFFECTS OF THE MERGER. At the Effective Time, the Merger shall
have the effects set forth herein and in the Corporation Law. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises
of the Company and Acquisition Sub shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and
duties of the Company and Acquisition Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the
Surviving Corporation.
4 CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) At the Effective Time, the Certificate of Incorporation of
Acquisition Sub, or at the election of Parent, the Company's Restated
Certificate of Incorporation (the "COMPANY'S CERTIFICATE"), in each case as
in effect at the Effective Time, which shall in either case include the
provisions required by Section 7.6 hereof, shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance
with applicable law and such Certificate of Incorporation, PROVIDED,
HOWEVER, that at the Effective Time, Article First of the Certificate of
Incorporation of Acquisition Sub shall be amended to read as follows:
"FIRST, the name of the corporation is The Strober Organization, Inc. (the
"CORPORATION")."
(b) At the Effective Time, the By-laws of Acquisition Sub, or at
the election of Parent, the By-laws of the Company, in each case as in
effect at the Effective Time, which shall in either case include the
provisions required by Section 7.6 hereof, shall be the By-laws of the
Surviving Corporation, until duly amended in accordance with applicable
law, the Certificate of Incorporation of the Surviving Corporation and such
By-laws.
5 DIRECTORS. The directors of Acquisition Sub immediately prior to
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.
6 OFFICERS. The officers of the Surviving Corporation shall be
appointed by the directors of the Surviving Corporation.
7 CONVERSION OF SECURITIES. At the Effective Time, by virtue of
the Merger and without any action on the part of Acquisition Sub, the
Company or the holders of Company Common Stock:
(a) Each issued and outstanding share of Company Common Stock
held by the Company as a treasury share or held by any direct or indirect
subsidiary of the Company (which does not include the 23,500 shares of
Company Common Stock held by the Company's profit-sharing plan as of the
date hereof (the "PROFIT SHARING PLAN SHARES")) and each issued and
outstanding share of Company Common Stock owned by Parent, Acquisition Sub
or any other direct or indirect subsidiary of Parent immediately prior to
the Effective Time shall be canceled and retired and cease to exist without
any conversion thereof and no payment or distribution shall be made with
respect thereto;
(b) Each issued and outstanding share of Company Common Stock
immediately prior to the Effective Time, other than (i) those shares of
Company Common Stock referred to in Section 2.7(a) and (ii) Dissenting
Shares (as defined in Section 3.2 below), shall be canceled and shall be
converted automatically into and represent the right to receive an amount
equal to six dollars ($6.00) in cash (such amount of cash being referred to
herein as the "MERGER CONSIDERATION") payable, without interest, to the
holder of such share of Company Common Stock upon surrender, in the manner
provided in Section 3.1, of the certificate that formerly evidenced such
share of Company Common Stock;
(c) The shares of common stock, par value $.01 per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchangeable for, in the aggregate, One
Thousand (1,000) validly issued, fully paid and non-assessable shares of
common stock, par value $.01, of the Surviving Corporation, which shall
constitute all of the issued and outstanding shares of the Surviving
Corporation; and
(d) All of the certificates evidencing shares of Company Common
Stock, by virtue of the Merger and without any action on the part of the
stockholders of the Company or the Company, shall be deemed to be no longer
outstanding, shall not be transferable on the books of the Surviving
Corporation, and shall represent solely the right to receive the amount set
forth in Section2.7(b) hereof.
8 COMPANY STOCK OPTIONS AND RELATED MATTERS. Commencing at least
fifteen (15) days prior to the Effective Time, each holder of a then
outstanding option to purchase shares of Company Common Stock (an "OPTION")
granted under the Company's stock option plans identified on SCHEDULE 2.8
hereto (collectively, the "STOCK OPTION PLANS") (it being understood that
the aggregate number of shares of Company Common Stock subject to purchase
under such Stock Option Plans is not, or shall not at the Effective Time,
be more than 842,438 shares) shall be entitled to exercise such Option
(whether or not such Option would otherwise have been exercisable), and if
such Options are not so exercised prior to the Effective Time, immediately
prior to the Effective Time, each such holder shall be entitled to receive
from the Company in consideration for cancellation of each such Option, a
cash payment (the "OPTION CONSIDERATION") in an amount equal to the product
of (w) the number of shares provided for in such Option and (x) the excess,
if any, of the Merger Consideration over the exercise price per share of
Company Common Stock provided for in such Option, provided that the
foregoing shall be subject to the obtaining of any necessary consents of
the holders of such Options (the "OPTIONEES") and that, to the extent
required by applicable law, such Option Consideration shall be treated as
compensation and shall be net of any applicable federal or state
withholding tax. All such Option Consideration shall be deemed allocable
to the period immediately prior to the Effective Time to the extent
permitted by applicable law. Subject to the foregoing, the Stock Option
Plans and all Options issued thereunder shall terminate at the Effective
Time. In connection with the foregoing, the Company shall obtain the
consent of the Optionees to the cancellation of such Options and the
cancellation of any right to acquire equity securities of the Company from
and after the Effective Time in consideration for the payment provided
herein.
9 TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent, Acquisition
Sub and the Company, respectively, shall each use its best efforts to take
all such action as may be necessary or appropriate in order to effectuate
the Merger under the Corporation Law as promptly as practicable. If at any
time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of both of the Company and
Acquisition Sub, the officers of the Surviving Corporation are fully
authorized in the name of the Surviving Corporation, as successor by merger
to such corporations, or otherwise to take, and shall take, all such lawful
and necessary action.
3. PAYMENT FOR SHARES; DISSENTING SHARES
1 PAYMENT FOR SHARES OF COMPANY COMMON STOCK.
(a) Prior to the Effective Time, Parent shall designate a U.S.
bank or trust company having at least $50,000,000 in capital, surplus and
undivided profits that shall be subject to the Company's approval, such
approval to not be unreasonably withheld, to act as paying agent in the
Merger (the "PAYING AGENT") for purposes of effecting the exchange for the
Merger Consideration of certificates which, prior to the Effective Time,
represented shares of Company Common Stock entitled to receive the Merger
Consideration pursuant to Section 2.7(b). The Paying Agent shall not be
changed without the prior written consent of the Company, which shall not
be unreasonably withheld. Immediately following the Effective Time, Parent
or Acquisition Sub shall deposit in trust with the Paying Agent cash in an
aggregate amount equal to the product of (i) the number of shares of
Company Common Stock issued and outstanding on a fully diluted basis
immediately prior to the Effective Time (other than shares owned by, or
issuable to, upon conversion of other securities, the Company, Parent,
Acquisition Sub or any direct or indirect subsidiary of Parent or the
Company (which shall be deemed to exclude the Profit Sharing Plan Shares);
and shares of Company Common Stock known immediately prior to the Effective
Time to be Dissenting Shares (as defined in Section 3.2 below)) and (ii)
the Merger Consideration (such aggregate amount being hereinafter referred
to as the "PAYMENT FUND"). The parties hereto acknowledge that fully
diluted shares of Company Common Stock shall be determined in accordance
with generally accepted accounting principles. The Payment Fund shall be
invested by the Paying Agent as directed by the Surviving Corporation (so
long as such directions do not impair the rights of the holders of
certificates that formerly evidenced shares of Company Common Stock) in:
direct obligations of the United States of America or obligations for which
the full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest and any net earnings with
respect thereto shall be paid to the Surviving Corporation as and when
requested by the Surviving Corporation. The Paying Agent shall, pursuant
to irrevocable instructions, make the payments referred to in Section
2.7(b) out of the Payment Fund. The Payment Fund shall not be used for any
other purpose except as provided herein.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause the Paying Agent to mail to each person who was a record holder
of an outstanding certificate or certificates which immediately prior to
the Effective Time represented shares of Company Common Stock (the
"CERTIFICATES") a form letter of transmittal (which shall specify that
delivery shall be effected and risk of loss and title to Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent)
and instructions for its use in surrendering Certificates and receiving
payment therefor. Upon the surrender to the Paying Agent of such a
Certificate, together with such properly completed and duly executed letter
of transmittal and other documents that are customarily required by letters
of transmittal in similar situations, the holder thereof shall be paid,
without interest thereon, the Merger Consideration to which such holder is
entitled hereunder, and such Certificate shall forthwith be canceled.
Until so surrendered, except with respect to Dissenting Shares, each such
Certificate shall, after the Effective Time, represent solely the right to
receive the Merger Consideration, without interest, into which the shares
of Company Common Stock such Certificate theretofore represented shall have
been converted pursuant to Section 2.7(b), and the holder thereof shall not
be entitled to be paid any cash to which such holder otherwise would be
entitled. In case any payment pursuant to this Section 3.1 is to be made
to a holder other than the registered owner of a surrendered certificate,
it shall be a condition of such payment that the Certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer and
that the person requesting such exchange shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of such cash to a
person other than the registered holder of the Certificate surrendered, or
that such person shall establish to the satisfaction of the Paying Agent
that such tax has been paid or is not applicable.
(c) Promptly following the date which is one year after the
Effective Time, the Paying Agent shall return to the Surviving Corporation
all cash, certificates and other instruments in its possession that
constitute any portion of the Payment Fund (including, without limitation,
all interest and other income received by the Paying Agent in respect of
all funds made available to it), and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate shall be entitled to
look to the Surviving Corporation (subject to applicable abandoned
property, escheat and similar laws) only as a general creditor thereof with
respect to any Merger Consideration, without interest, that may be payable
upon due surrender of the Certificate or Certificates held by them.
Notwithstanding the foregoing, neither the Paying Agent nor any party
hereto shall be liable to a holder of certificates that prior to the
Effective Time evidenced shares of Company Common Stock for any Merger
Consideration delivered pursuant hereto to a public official pursuant to
applicable abandoned property, escheat or other similar laws.
(d) At the Effective Time, the Company Common Stock transfer
books shall be closed and no transfer of shares of Company Common Stock
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent, they shall be
canceled and exchanged for the Merger Consideration as provided in Section
2.7(b), subject to applicable law in the case of Dissenting Shares (as
defined below).
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact in form and
substance reasonably satisfactory to the Surviving Corporation by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Surviving Corporation in their sole discretion,
upon the posting by such person of a bond in such amount as Parent or the
Surviving Corporation may reasonably direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying
Agent will issue in exchange for such lost, stolen or destroyed
Certificate, the cash representing the Merger Consideration deliverable in
respect thereof pursuant to this Agreement.
2 DISSENTING SHARES.
(a) Any shares of Company Common Stock outstanding immediately
prior to the Effective Time as to which the holder thereof shall have not
voted in favor of the Merger or consented thereto in writing and as to
which the holder thereof shall have validly exercised such holder's
appraisal rights, if any, under Section 262 of the Corporation Law
("DISSENTING SHARES") shall not, after the Effective Time, be entitled to
vote for any purpose or be entitled to the payment of dividends or other
distributions (except dividends or other distributions payable to
stockholders of record prior to the Effective Time), nor shall such
Dissenting Shares be converted into the right to receive the Merger
Consideration hereunder. Such holders of Dissenting Shares duly making
demand for appraisal (hereinafter referred to as "DISSENTING STOCKHOLDERS")
shall be entitled to receive payment of the appraised value of such
Dissenting Shares in accordance with the provisions of such Section 262 of
the Corporation Law, except that all shares of Company Common Stock held by
stockholders who shall fail to perfect, or shall have effectively withdrawn
or lost, such stockholders' right to appraisal of such shares of Company
Common Stock under Section 262 of the Corporation Law shall thereupon be
deemed to have been converted into and to have become exchangeable for, as
of the Effective Time, the right to receive the Merger Consideration,
without any interest thereon. The Company shall give Parent (i) prompt
notice of any demands for appraisal received by the Company, withdrawals of
such demands and any other instrument served pursuant to Section 262 of the
Corporation Law and received by the Company, and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for
appraisal under the Corporation Law. The Company shall not, except with
the written consent of Parent, make any payment with respect to any demands
for appraisal, or settle or offer to settle or negotiate, any such demands.
(b) Each Dissenting Stockholder who becomes entitled under the
Corporation Law to payment for the Dissenting Shares shall receive payment
therefor after the Effective Time from the Surviving Corporation (but only
after the amount thereof shall have been agreed upon or finally determined
pursuant to the Corporation Law) and such shares of Company Common Stock
shall be canceled.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Parent and Acquisition Sub jointly and severally hereby represent and
warrant to the Company as follows:
1 ORGANIZATION AND QUALIFICATION. Parent is a limited liability
company duly organized, validly existing and in good standing under the
laws of the State of Delaware. Acquisition Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware. Each of Parent and Acquisition Sub has the requisite
power and authority to carry on its business as it is now being conducted.
Each of Parent and Acquisition Sub is duly qualified to do business and is
in good standing in each jurisdiction in which the character of its
properties, owned or leased, or the nature of its activities make such
qualification necessary, except where the failure to be so qualified or in
good standing would not have a material adverse effect on the business,
assets, results of operations, condition (financial or otherwise) or
prospects (a "MATERIAL ADVERSE EFFECT") of Parent and its subsidiaries
taken as a whole. Neither Parent nor Acquisition Sub has conducted any
business prior to the date hereof other than in furtherance of the
transactions contemplated hereby and has any assets and liabilities other
than those incident to its formation and to the consummation of the
transactions contemplated hereby. Copies of the Certificate of Formation
of Parent and the Certificate of Incorporation and By-laws of Acquisition
Sub heretofore delivered to the Company are true, complete and correct as
of the date hereof.
2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Acquisition Sub has the requisite power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Manager or Managers
(as the case may be) and, if necessary, the member or members of Parent and
by the Board of Directors and the sole stockholder of Acquisition Sub, and
no other corporate proceedings on the part of Parent or Acquisition Sub are
necessary to authorize this Agreement and the transactions contemplated
hereby (other than, with respect to the Merger, the filing and recordation
of the appropriate merger documents as required by the Corporation Law).
This Agreement has been duly and validly executed and delivered by each of
Parent and Acquisition Sub and, assuming this Agreement constitutes a valid
and binding obligation of the Company, constitutes the legal, valid and
binding obligation of each of Parent and Acquisition Sub enforceable
against each of Parent and Acquisition Sub in accordance with its terms.
3 NO VIOLATIONS.
(a) Neither the execution and delivery of this Agreement by
Parent or Acquisition Sub nor the consummation of the transactions
contemplated hereby nor compliance by Parent or Acquisition Sub with any of
the provisions hereof will: (i) violate, conflict with, or result in a
breach of any provision of, require any consent, approval or notice under,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) or result in a right of termination or
acceleration under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its subsidiaries under any of the terms, conditions or
provisions of (x) their respective Certificates of Incorporation, as
amended, or By-laws or (y) any note, bond, mortgage, indenture, deed of
trust, lease, agreement, lien, contract or other instrument or obligation
to which Parent or any of its subsidiaries is a party or to which any of
them, or any of their respective properties or assets, may be subject or by
which Parent or any of its subsidiaries is bound; or (ii) subject to
compliance with the statutes and regulations referred to in Section 4.3(b),
violate any judgment, ruling, order, writ, injunction, determination,
award, decree, statute, ordinance, rule or regulation applicable to Parent
or any of its subsidiaries or any of their respective properties or assets
(except, in the case of each of clauses (i) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances which, or
any consents, approvals or notices which if not given or received, would
not, individually or in the aggregate, have a Material Adverse Effect on
Parent and its subsidiaries taken as a whole or on the ability of Parent or
Acquisition Sub to consummate the transactions contemplated hereby or which
are cured, waived or terminated prior to the Effective Time and, except in
the case of (i) above, for those liens, security interests, charges and
encumbrances as may be imposed or otherwise created in connection with
financing the Merger and the other transactions contemplated hereby); or
(iii) cause the suspension or revocation of any authorization, consent,
approval or license currently in effect, which suspension or revocation
would have a Material Adverse Effect on Parent and its subsidiaries taken
as a whole.
(b) There is no legal impediment to Parent's or Acquisition
Sub's consummation of the transactions contemplated by this Agreement. No
filing or registration with, or authorization, consent or approval of, any
domestic public body or authority is necessary for the consummation by
Parent or Acquisition Sub of the transactions contemplated by this
Agreement, except (i) for applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HART-SCOTT-RODINO ACT"), the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), state securities
laws and regulations ("BLUE SKY LAWS") and the filing and recordation of
the Certificate of Merger, as required by the Corporation Law, and (ii) for
such filings or registrations which, if not made, or for such
authorizations, consents or approvals, which, if not received, would not,
individually or in the aggregate, have a Material Adverse Effect on Parent
and its subsidiaries taken as a whole or on the ability of Parent and
Acquisition Sub to consummate the transactions contemplated hereby.
4 BROKERAGE FEES. Neither Parent nor Acquisition Sub has retained
any financial adviser, broker, agent or finder or paid or agreed to pay any
financial adviser, broker, agent or finder on account of this Agreement or
any transaction contemplated hereby, except that Proteus International
Group Incorporated has been retained as Frederick M. Marino's financial
adviser, each in connection with the transactions contemplated hereby.
Other than the foregoing arrangements and the Company's arrangements with
Hill Thompson Capital Markets, Inc., neither Parent nor Acquisition Sub is
aware of any claim for payment of any finder's fee, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to the Merger, this Agreement or the consummation of the
transactions contemplated hereby.
5 FINANCING. Parent has delivered to the Company true and correct
copies of signed letters received by Parent with respect to the financing
(the "FINANCING LETTERS") required for the consummation of the transactions
contemplated hereby. Assuming satisfaction or waiver of all applicable
conditions set forth in the Financing Letters, such financing (the
"FINANCING") will, together with equity investments in the aggregate of
$9,000,000 being made in connection with the transactions contemplated
hereby, provide sufficient funds to (i) pay, with respect to all shares of
Company Common Stock in the Merger, the Merger Consideration pursuant to
Section 2.7(b); and (ii) prepay, redeem, refinance or renegotiate the
Company's existing indebtedness, if required to consummate the Merger, and
pay any and all fees, expenses, costs and penalties in connection with any
such prepayment, redemption, refinancing or renegotiation. Parent shall
not amend the Financing Letters (excluding amendments that solely
constitute extensions thereof provided that this provision shall not impair
the rights of, or impose additional obligations upon, either party under
Section 9.1(b) hereof) without the prior written consent of the Company,
which consent shall not be unreasonably withheld.
6 ARRANGEMENTS. Neither Parent nor Acquisition Sub has entered
into any employment agreements with any current officer of the Company,
provided, however, that discussions respecting continuation of current
compensation and benefit arrangements for a two year period have taken
place which discussions may, prior to the Effective Time, result in an
employment agreement or arrangement with such officer respecting employment
by the Surviving Corporation and/or any of its subsidiaries after the
Effective Time. Parent and Acquisition Sub represent and warrant that no
agreements, arrangements or understandings exist between any current
officer of the Company and Parent, Acquisition Sub or any entity that
controls, is controlled by or is under common control with Parent or
Acquisition Sub that could result in any payment (cash or otherwise) as a
result of the negotiation and execution of this Agreement and/or the
consummation of the transactions contemplated hereby including the Merger
except as specifically provided in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition Sub as follows:
1 ORGANIZATION AND QUALIFICATION. Each of the Company and its
subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and
has the corporate power and corporate authority to carry on its business as
it is now being conducted. Each of the Company and its subsidiaries is
duly qualified to do business and is in good standing in each jurisdiction
in which the character of its properties, owned or leased, or the nature of
its activities make such qualification necessary, except as set forth on
Schedule 5.1 hereto or where the failure to be so qualified or in good
standing would not individually or in the aggregate have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole. Copies of the
respective Certificates of Incorporation, as amended, and By-laws of the
Company and each of its subsidiaries heretofore delivered to Parent are
true, complete and correct as of the date hereof and no amendments thereto
have been effected since such copies were delivered, or are pending or
contemplated. Neither the Company nor any of its subsidiaries is in
violation of any term of its respective Certificate of Incorporation or By-
laws.
2 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) Each of the Company and its subsidiaries has the requisite
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by the Board. Except for the approval by the Company's
stockholders which is referred to in Section 7.2 below, no other corporate
proceedings on the part of the Company or any of its subsidiaries are
necessary to authorize this Agreement and the transactions contemplated
hereby (other than, with respect to the Merger, the filing and recordation
of the appropriate merger documents as required by the Corporation Law).
This Agreement has been duly and validly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and binding
obligation of Parent and Acquisition Sub, constitutes the legal, valid and
binding obligation of the Company enforceable against the Company and each
of its subsidiaries in accordance with its terms.
(b) The Board has, by resolutions duly adopted by unanimous
vote, approved the Merger, this Agreement and the transactions contemplated
hereby and has agreed to recommend that the stockholders of the Company
approve and adopt this Agreement and the Merger. In connection with the
foregoing, the Board has taken such actions and votes as are necessary on
its part to render the provisions of Section 203 of the Corporation Law and
all other applicable takeover statutes of the Corporation Law and any other
applicable takeover statutes of any other state, and any "fair price,"
takeover or similar provisions of the Company's Certificate, inapplicable
to this Agreement, the Merger and the transactions contemplated by this
Agreement. As of the date hereof, except as set forth on SCHEDULE 5.2(B)
hereto, all of the directors and executive officers of the Company have
indicated that they presently intend to vote their shares of Company Common
Stock to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger.
3 NO VIOLATIONS; CONSENTS AND APPROVALS.
(a) Except as set forth in SCHEDULE 5.3 to this Agreement,
neither the execution and delivery of this Agreement by the Company nor the
consummation of the transactions contemplated hereby nor compliance by the
Company or any of its subsidiaries with any of the provisions hereof will:
(i) violate, conflict with, or result in breach of any provision of,
require any consent, approval or notice under, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of
its subsidiaries under any of the terms, conditions or provisions of (x)
their respective Certificates of Incorporation, as amended, or By-laws or
(y) any note, bond, mortgage, indenture, deed of trust, lease, agreement,
lien, contract, or other instrument or obligation to which the Company or
any of its subsidiaries is a party or to which any of them, or any of their
respective properties or assets, may be subject or by which the Company or
any of its subsidiaries is bound; or (ii) subject to compliance with the
statutes and regulations referred to in Section 5.3(b), violate any
judgment, ruling, order, writ, injunction, determination, award, decree,
statute, ordinance, rule or regulation applicable to the Company or any of
its subsidiaries or any of their respective properties or assets (except,
in the case of each of clauses (i) and (ii) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances which, or any consents,
approvals or notices which if not given or received, would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole or on the ability of the
Company to consummate the transactions contemplated hereby or which are
cured, waived or terminated prior to the Effective Time and, except in the
case of (i) above, for those liens, security interests, charges and
encumbrances as may be imposed or otherwise created in connection with the
financing of the Merger and the other transactions contemplated hereby); or
(iii) cause the suspension or revocation of any authorization, consent,
approval or license currently in effect, which suspension or revocation
would have a Material Adverse Effect on the Company and its subsidiaries
taken as a whole.
(b) Except as set forth in SCHEDULE 5.3(B), there is no legal
impediment to the Company's consummation of the transactions contemplated
by this Agreement. No filing or registration with, or authorization,
consent or approval of, any domestic public body or authority is necessary
for the execution, delivery or consummation by the Company of the
transactions contemplated by this Agreement, except (i) for applicable
requirements of the Hart-Scott-Rodino Act, the Exchange Act, Blue Sky Laws,
the NASDAQ Listing Agreement, and the filing and recordation of the
Certificate of Merger, as required by the Corporation Law, and (ii) for
such filings or registrations which, if not made, or for such
authorizations, consents or approvals, which, if not received, would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole or on the ability of the
Company to consummate the transactions contemplated hereby.
4 CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 shares of Company Common Stock
and 1,000,000 shares of Preferred Stock, par value $.01 per share (the
"PREFERRED STOCK"). As of the date hereof, 5,027,447 shares of Company
Common Stock were issued and outstanding, 190,601 shares of Company Common
Stock were held by the Company as treasury shares and no shares of
Preferred Stock were issued and outstanding. As of the date hereof,
842,438 shares of Company Common Stock were reserved for issuance upon
exercise of Options granted pursuant to the Stock Option Plans and Options
to purchase 842,438 shares of Common Stock are outstanding as of the date
hereof. Except for the matters set forth on SCHEDULE 5.4 hereto, which
terminate upon or prior to the consummation of the Merger and will be of no
further force and effect after the Effective Time, and for the Options,
there are no options, warrants or other rights, agreements or commitments
of any character whatsoever requiring the issuance, sale or transfer by the
Company of any shares of capital stock of the Company or any securities
convertible into or exchangeable or exercisable for, or otherwise
evidencing the right to acquire, any shares of capital stock of the
Company. All of the outstanding shares of Company Common Stock have been
duly authorized and validly issued, are fully paid and non-assessable and
are not subject to, nor were they issued in violation of, any preemptive
rights.
5 COMMISSION FILINGS.
(a) The Company has heretofore delivered to Parent true and
complete copies of its (i) Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, (ii) Quarterly Report on Form 10-Q for each of the
fiscal quarters ended March 31, June 30 and September 30, 1995, and March
31 and June 30, 1996, (iii) Proxy Statement for the annual meeting of
stockholders held on July 11, 1996, and (iv) all other reports or
registration statements filed by the Company with the Securities and
Exchange Commission (the "COMMISSION") since January 1, 1996, in each case
as filed with the Commission.
(b) Except as set forth in SCHEDULE 5.5 hereto, the Company has
filed all required forms, reports and documents with the Commission since
December 31, 1992 (collectively, the "COMMISSION REPORTS"), all of which
were prepared in accordance with the applicable requirements of the
Securities Act of 1933, as amended, and the Exchange Act in all material
respects. Except to the extent, if any, as may have been appropriately
disclosed in a Commission Report filed subsequent thereto and prior to the
date hereof as of their respective dates, the Commission Reports 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, and complied as to form and substance in all material respects
with all applicable requirements of law.
(c) The Company will deliver to Parent as soon as they become
available true and complete copies of any report or statement mailed by it
to its stockholders generally or filed by it with the Commission subsequent
to the date hereof and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein
provided by Parent or Acquisition Sub, as to which the Company makes no
representation) will 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
are made, not misleading, and will comply in all material respects with all
applicable requirements of law.
(d) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Commission Reports
has been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or in SCHEDULE 5.5), and
each fairly presents in accordance with generally accepted accounting
principles the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof and the consolidated
results of their operations and changes in cash flow for the periods
indicated, except as may be indicated in the notes thereto and/or in the
consolidated financial statements contained in a Commission Report filed
subsequent thereto and prior to the date hereof, and except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
(e) Except as set forth in SCHEDULE 5.5 hereto and except as and
to the extent set forth on the consolidated balance sheet of the Company
and its subsidiaries as at December 31, 1995, including the notes thereto
(the "1995 BALANCE SHEET"), neither the Company nor any of its subsidiaries
has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which would be required to be reflected
on a consolidated balance sheet of the Company and its subsidiaries, or in
the notes thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations (a) incurred
in the ordinary course of business since December 31, 1995, or (b) any
liability or obligation existing at December 31, 1995 which, individually
or in the aggregate, is not material to the Company and its subsidiaries
taken as a whole as of such date.
6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
except as set forth in SCHEDULE 5.6 or as and to the extent disclosed in
any Commission Report filed after December 31, 1995:
(a) the Company and its subsidiaries have conducted their
businesses only in the ordinary course and in a manner reasonably
consistent with past practice, and
(b) since December 31, 1995, there has not been (i) any change
in, or event affecting, the Company or any of its subsidiaries having
a Material Adverse Effect on the Company and its subsidiaries taken as
a whole, (ii) any change by the Company in its accounting methods,
principles or practices, (iii) any entry by the Company or any of its
subsidiaries into a material contract outside the ordinary course of
business taken as a whole, (iv) any declaration, setting aside or
payment of any dividends or distributions in respect of, or any
redemption, purchase or other acquisition of, any of its securities or
(v) any increase in the benefits under or the establishment of any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or
other employee benefit plan, program, or arrangement for the benefit
of any director, officer or employee of the Company or any of its
subsidiaries pursuant to which employees are contractually entitled to
benefit that would be materially above those mandated by applicable
law, except in the ordinary course of business reasonably consistent
with past practice. No officer, director, or other employee other
than those disclosed in SCHEDULE 5.6 hereto are parties to any
severance pay agreements or change in control agreements.
7 ABSENCE OF LITIGATION. Except as disclosed in the Commission
Reports filed after December 31, 1995 or in SCHEDULE 5.7 hereto, there are
no claims, actions, proceedings or investigations pending or, to the best
knowledge of the Company, threatened against the Company or any of its
subsidiaries, or, to the best knowledge of the Company, pending or
threatened against any of its directors, officers, employees or agents, by
any claimant or involving any properties or rights of the Company or any of
its subsidiaries, at law or in equity, before any court, arbitrator or
administrative governmental regulatory authority or body that (i)
individually or in the aggregate would have or are reasonably likely to
have a Material Adverse Effect on the Company and its subsidiaries taken as
a whole or (ii) seek to delay or prevent the consummation of the
transactions contemplated hereby. Except as set forth on SCHEDULE 5.7
hereto, to the best knowledge of the Company, there are no ongoing or
threatened claims, actions, proceedings or investigations instituted by or
on behalf of the Department of Justice or any similar foreign, federal,
state, county or local government agency against the Company, any of its
subsidiaries or any of their respective directors, officers, employees or
agents involving the business, properties, rights and/or activities of the
Company and/or any of its subsidiaries. As of the date hereof, neither the
Company nor any of its subsidiaries nor any of their respective properties
are subject to any order, writ, judgment, injunction, decree, determination
or award of any court, arbitrator or governmental authority that,
individually or in the aggregate, have or are reasonably likely to have a
Material Adverse Effect on the Company and its subsidiaries taken as a
whole.
8 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 5.8 hereto includes a list of each stock option,
stock purchase, insurance, bonus, incentive compensation, severance, profit
sharing, retirement, or other material employee benefit plan, policy or
arrangement, including any employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") which the Company maintains, to which the Company or any
one of its subsidiaries contributes, or under which any of the employees or
former employees of the Company or any one of its subsidiaries are covered
(collectively, the "PLANS"). Prior to the date of this Agreement, the
Company has provided or made available to Parent a true and complete copy
of each Plan as in effect on the date hereof. Other than as specifically
disclosed in SCHEDULE 5.8 hereto, (i) none of the Plans is a multiemployer
plan within the meaning of ERISA; (ii) none of the Plans provides for or
promises retiree medical benefits or life insurance to any current or
former employee, officer or director of the Company or its subsidiaries;
(iii) each Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), is so
qualified; (iv) each Plan is now and has been operated in all material
respects in accordance with the requirements of applicable law; and (v)
with respect to Plans subject to Title IV of ERISA, the aggregate projected
benefit obligations of such Plans (determined for each such Plan as of the
date of the most recent actuarial valuation prepared for such Plan) does
not exceed the fair market value of the assets of such Plans (determined as
of the date of such valuation).
(b) Except as disclosed in SCHEDULE 5.8 hereto, the execution
of, and performance of the transactions contemplated by, this Agreement
will not (either alone or upon the occurrence of any additional subsequent
events directly related to the transactions contemplated hereby) (i)
constitute an event under any Plan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligations to
fund benefits with respect to any employee, director or consultant of the
Company or any of its subsidiaries pursuant to any Plan or (ii) result in
the triggering or imposition of any restrictions or limitations on the
right of the Company or Parent to amend or terminate any Plan. No payment
or benefit which will be required to be made pursuant to the terms of any
agreement, commitment or Plan, as a result of the transactions contemplated
by this Agreement, to any officer, director or employee of the Company or
any of its subsidiaries, could be characterized as an "excess parachute
payment" within the meaning of Section 280G of the Code or could be non-
deductible by reason of Section 162(m) of the Code.
(c) All contributions have been made in all material respects as
required by the terms of each of the Plans listed in SCHEDULE 5.8 and the
terms of any related collective bargaining agreements, and, except as set
forth in SCHEDULE 5.8 hereto, neither the Company nor any of its
subsidiaries has any knowledge or has received any notice that any such
plan is in reorganization, that increased contributions are required to
avoid a reduction in plan benefits or the imposition of any excise tax,
that any such plan is or has been (except as used in accordance with the
terms of such Plan and in accordance with applicable law) funded at a rate
less than required under Section 412 of the Code, or that any such plan is
insolvent.
9 LABOR MATTERS. Except as set forth in SCHEDULE 5.9 hereto,
neither the Company nor any of its subsidiaries is a party to, or bound by,
any collective bargaining agreement or contract or other agreement or
understanding with a labor union or labor union organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries relating to their business, except for any such proceeding
which would not have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole. There is not currently pending or, to the
best knowledge of the Company, threatened any labor dispute or labor
stoppage regarding any of the Company's, or any of its subsidiaries',
current employees or any of the labor relations or collective bargaining
contracts listed on SCHEDULE 5.9 hereto, except for that labor relations
contract listed on SCHEDULE 5.9 hereto that expires on December 31, 1996,
the negotiation of a new contract of which is expressly provided for in
Section 6.1 hereof. Except as set forth in SCHEDULE 5.9 hereto, to the
knowledge of the Company, there are no organizational efforts with respect
to the formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of its subsidiaries.
10 TAXES.
(a) Except as set forth in SCHEDULE 5.10 hereto, the Company and
each of its subsidiaries has paid or caused to be paid all material Taxes
(as defined below), owed by it through the date hereof except such as are
reserved for in the Company's balance sheet contained in the most recently
filed Commission Report and are being contested in good faith by
appropriate proceedings. Except as set forth in SCHEDULE 5.10 hereto, the
Company and its subsidiaries have timely filed and properly prepared all
foreign, federal, state and local tax returns and reports required to be
filed by any of them through the date hereof, and all such returns and
reports completely and accurately in all material respects set forth the
amount of any Taxes relating to the applicable period.
(b) Except as set forth in SCHEDULE 5.10 hereto, neither the
Internal Revenue Service (the "IRS") nor any other governmental or taxing
authority or agency is now asserting or, to the best of the Company's
knowledge, threatening to assert, against the Company or any of its
subsidiaries or any partnership, joint venture or limited liability company
in which the Company or any of its subsidiaries is a partner, joint
venturer or member, as the case may be, any deficiency or claim for any
additional material Tax or Taxes. Except as set forth in SCHEDULE 5.10
hereto, there is no dispute or claim concerning any Tax liability of the
Company or any subsidiary, either claimed or raised by any governmental or
taxing authority, or as to which any director or officer of the Company or
any of its subsidiaries has reason to believe may be claimed or raised by
any governmental or taxing authority that is material, either individually
or in the aggregate, to the Company and its subsidiaries taken as a whole.
Except as set forth in SCHEDULE 5.10, no claim has ever been made by a
taxing authority in a jurisdiction where the Company does not file reports
and returns that the Company is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of the
Company or any of its subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Taxes. The Company has never
entered into a closing agreement pursuant to Section 7121 of the Code.
(c) Except as set forth in SCHEDULE 5.10 hereto, neither the
Company nor any of its subsidiaries has received written notice of any
audit of any tax return filed by the Company or its subsidiaries, and
neither the Company nor any of its subsidiaries has been notified by any
governmental or taxing authority that any such audit is contemplated or
pending. Except as set forth in SCHEDULE 5.10 hereto, neither the Company
nor any of its subsidiaries has executed or filed with the IRS or any other
governmental or taxing authority any agreement now in effect extending the
period for assessment or collection of any Taxes, and no extension of time
with respect to any date on which a tax return was or is to be filed by the
Company is in force. True, correct and complete copies of all foreign,
federal, state and local income or franchise tax returns filed by the
Company and each of its subsidiaries for those tax years or periods for
which the applicable statute of limitations, or an extension or waiver
thereof, has not lapsed, expired, or otherwise terminated, and all
communications relating thereto have been delivered to the Parent or made
available to representatives of the Parent. EXCEPT AS SET FORTH IN
SCHEDULE 5.10, neither the Company nor any of its subsidiaries has granted
any waiver of any statute of limitations with respect to, or any extension
of a period for the assessment of, any foreign, federal, state or local
income tax.
(d) The accruals and reserves for taxes reflected in the 1995
Balance Sheet are adequate to cover all Taxes accruable through such date
(including interest and penalties, if any, thereon) in accordance with
generally accepted accounting principles.
(e) None of the Company and its subsidiaries has filed a consent
under Section 341(f) of the Code concerning collapsible corporations. None
of the Company and its subsidiaries has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. None of the Company and its
subsidiaries has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. Each of the
Company and its subsidiaries has disclosed on its federal income tax
returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of
the Code. None of the Company and its subsidiaries is a party to any tax
allocation or sharing agreement. Except as set forth in SCHEDULE 5.10,
none of the Company and its subsidiaries (A) has, except as set forth in
SCHEDULE 5.10 hereto, been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which was the Company) or (B) has any liability for the Taxes of
any person (other than any of the Company and its subsidiaries) under Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(f) The term "TAXES" shall mean, for purposes of this Agreement,
all foreign, federal, state, local, and other taxes, including without
limitation income taxes, estimated taxes, alternative minimum taxes, excise
taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes, windfall profit taxes,
environmental taxes and property taxes, whether or not measured in whole or
in part by net income, and all deficiencies or other additions to tax,
interest, fines and penalties relating to any such taxes.
11 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in SCHEDULE 5.11 hereto and for the
matters specifically identified in environmental reports received by Parent
or Acquisition Sub, and except for any other matters which, either
individually or in the aggregate, would not have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole, to the Company's
knowledge, the Company and its subsidiaries are in compliance with all
applicable federal, state and local statutes, laws, codes, regulations,
ordinances, rules, judgements, judicial decisions, decrees, injunctions,
permits, and orders relating to (i) emissions, discharges or releases to
the environment of Hazardous Substances (as hereinafter defined), (ii) the
use, storage, handling, transport or disposal of Hazardous Substances, or
(iii) any matters of environmental regulation or control or similar
protection of human health and safety (collectively, "ENVIRONMENTAL LAWS").
Except as disclosed in SCHEDULE 5.11 hereto, the Company has not received
any written notice of any pending civil or criminal litigation, violation
or formal administrative proceeding relating to the Environmental Laws
involving the Company or any of its subsidiaries. Except as disclosed in
SCHEDULE 5.11 hereto and for the matters specifically identified in
environmental reports received by Parent or Acquisition Sub, and except for
any other matters which, either individually or in the aggregate, would not
have a Material Adverse Effect on the Company and its subsidiaries taken as
a whole, to the Company's knowledge, no conditions exist which could
reasonably be expected to result in any litigation, notice or
administrative proceeding described in the preceding sentence. Except as
disclosed in SCHEDULE 5.11, and for the matters specifically identified in
environmental reports received by Parent or Acquisition Sub and except for
any other matters which, either individually or in the aggregate, would not
have a Material Adverse Effect on the Company and its subsidiaries taken as
a whole, to the Company's knowledge, the Company and each of its
subsidiaries have all permits, licenses, consents and approvals required by
Environmental Laws ("ENVIRONMENTAL PERMITS") for the conduct and operation
of their respective businesses, all such Environmental Permits are in good
standing and the Company and each of its subsidiaries are in compliance
with all material terms and conditions of such Environmental Permits.
(b) Except as disclosed in SCHEDULE 5.11 hereto and for the
matters specifically identified in the environmental reports received by
Parent and Sub, neither the Company nor any of its subsidiaries has
received any written notice (A) of any actual or alleged violation of
Environmental Laws by the Company or any of its subsidiaries, (B) of the
institution or pendency of any action, claim, proceeding or investigation
of the Company or any of its subsidiaries by any third party or
governmental entity pursuant to Environmental Laws, (C) requiring the
investigation, remediation or removal of Hazardous Substances from any of
the Company's or any of its subsidiaries' properties or any part thereof,
or (D) alleging that the Company or any of its subsidiaries are potentially
responsible parties with respect to the release or threat of release of
Hazardous Substances to the environment at any location. Except as
disclosed in SCHEDULE 5.11 hereto, and for the matters specifically
identified in environmental reports received by Parent or Acquisition Sub,
and except for any other matters which, either individually or in the
aggregate, would not have a Material Adverse Effect on the Company or its
subsidiaries, to the Company's knowledge neither the Company nor any of its
subsidiaries (i) has held, stored, released, transported or disposed of any
Hazardous Substances on, under or at any of the Company's or any of its
subsidiaries' properties or any part thereof, whether currently or formerly
leased, owned or used for any purpose; (ii) has arranged for the disposal
of Hazardous Substances at any location owned, leased or operated by any
third party; or (iii) owns or operates real or personal property that has
been the subject of any lien imposed by a governmental entity or a deed
notice or restriction, which lien, notice or restriction relates to
Hazardous Substances or the violation of any Environmental Laws. For
purposes of this Agreement, the term "HAZARDOUS SUBSTANCES" shall mean any
toxic or hazardous materials or substances or hazardous wastes, including
but not limited to oil and petroleum products, defined as, or included in
the definition of, "hazardous substances," "hazardous waste," "hazardous
materials" or "toxic substances" under any Environmental Law and any
substance with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation.
(c) No filing, approval or other action required under the New
Jersey Industrial Site Remediation Act, commonly known as ISRA or any
similar federal or State Environmental Law is required to consummate the
transactions contemplated hereby.
(d) Notwithstanding anything to the contrary in this Agreement,
(i) the representations and warranties made in Sections 5.11(a) and 5.11(b)
hereof which are qualified as to the knowledge of the Company speak as of
the date of this Agreement, (ii) to the extent any of the representations
and warranties in Sections 5.5, 5.6, 5.7, 5.11 and 5.13 would otherwise be
deemed incorrect by reason of the existence of any environmental matters or
conditions existing as of the date hereof as to which the Company does not
have knowledge as of the date hereof, such representations and warranties
shall not be deemed to be incorrect; and (iii) any inability to bring down
the representations and warranties set forth in Sections 5.5, 5.6, 5.7,
5.11 and 5.13, because of the existing unknown environmental matters or
conditions referred to in clause (ii), as may be required by Section 8.3(a)
or 8.3(b) hereof shall not constitute a condition to Parent's and
Acquisition Sub's obligations to consummate the transactions contemplated
under this Agreement and such existing environmental matters or conditions
shall not cause a failure to satisfy Section 8.3(e). Notwithstanding the
foregoing, the foregoing shall not apply to environmental matters or
conditions (a) of which the Company has knowledge as of the date hereof, or
(b) which occur after the date hereof which do not relate to such existing
environmental matters or conditions.
12 BOOKS AND RECORDS.
(a) The books of account and other financial records of the
Company and each of its subsidiaries are true, complete and correct in all
material respects and have been maintained in accordance with good business
practices.
(b) Except as set forth in SCHEDULE 5.12 the minute books and
other corporate records of the Company and each of its subsidiaries have
been made available to Parent or its representatives, contain in all
material respects accurate records of all meetings, and accurately reflect
in all material respects all other corporate actions, of the stockholders
and directors and any committees of the board of directors of the Company
and each of its subsidiaries.
13 REAL AND PERSONAL PROPERTY.
(a) OWNED REAL PROPERTY. All of the real property which is now
owned and, to the best knowledge of the Company, has ever been owned by the
Company and each of its subsidiaries (collectively referred to herein as
the "OWNED REAL PROPERTY") is identified on SCHEDULE 5.13(A) hereto.
SCHEDULE 5.13(A) hereto also sets forth by address (i) all real property
under contract to be acquired by the Company or any of its subsidiaries
(the "ACQUISITION PROPERTY"), (ii) to the knowledge of the Company, the
owner and usage of the Owned Real Property and the Acquisition Property and
(iii) whether the Owned Real Property is currently owned by the Company or
any of its subsidiaries. The Company hereby makes the following
representations and warranties with respect to the Owned Real Property
which is currently owned by the Company:
(i) TITLE AND DESCRIPTION. Each of the Company and its
subsidiaries, as the case may be, has good, clear, record and
marketable fee simple title to the Owned Real Property, free and clear
of all (A) mortgages, deeds of trust, ground leases, assessments,
leases and tenancies, claims, covenants, conditions, restrictions,
easements, judgments or other encumbrances and free of encroachments
onto or off of the Owned Real Property, except for (w) easements,
claims, conditions, covenants, restrictions and similar encumbrances
that do not interfere with the use of the Owned Real Property as
currently used and improved, (x) encroachments that do not adversely
affect the value or use of the Owned Real Property as currently used
and improved, (y) any of same which are disclosed in any title report
or title search received by, or made available by the Company to,
Parent and Acquisition Sub or (z) matters set forth on
SCHEDULE 5.13(A) ((w), (x), (y) and (z) are collectively referred to
as "PERMITTED ENCUMBRANCES").
(ii) SECURITY INTERESTS. All of the mortgages, deeds of
trust, ground leases, security interests or similar material
encumbrances on the Owned Real Property are set forth on SCHEDULE
5.13(A) (collectively, the "MORTGAGES"). Except as set forth on
SCHEDULE 5.13(A), the Company and each of its applicable subsidiaries
has obtained the consent of the holder of any Mortgage if the
transactions contemplated hereby would otherwise cause a default under
the Mortgage, and such transactions will not give the holder of any
Mortgage any remedy, or the right to charge any premium or penalty.
SCHEDULE 5.13(A) also indicates all Mortgages which are, by their
terms, by means of a separate guaranty or otherwise, recourse, in
whole or in part, to the Company or any of its subsidiaries.
(iii) CONDITION. Except as set forth on SCHEDULE 5.13(A),
to the Company's knowledge, (A) there are no material defects in the
physical condition of any improvements constituting a part of the
Owned Real Property, including, without limitation, structural
elements, mechanical systems, roofs or parking and loading areas, and
(B) all of such improvements are in good operating condition and
repair, have been well maintained and are free from infestation by
rodents or insects except for those exceptions which individually or
in the aggregate do not have a Material Adverse Effect on the Company
or its subsidiaries taken as a whole. Except as set forth on SCHEDULE
5.13(A), none of the Owned Real Property is subject to special flood
or mudslide hazards or within the 100 year flood plain. All water,
sewer, gas, electric, telephone, drainage and other utilities required
by law or necessary for the current or planned operation of the Owned
Real Property have been connected pursuant to valid permits and are
sufficient to service the Owned Real Property.
(iv) COMPLIANCE WITH LAW; GOVERNMENT APPROVALS. Neither
the Company nor any of its subsidiaries has received any notice from
any governmental authority of any violation of any law, ordinance,
regulation, license, permit or authorization issued with respect to
any of the Owned Real Property that has not been corrected heretofore,
and to the Company's knowledge no such violation exists which could
have a material adverse effect on the operation or value of any of the
Owned Real Property. Except for those matters which do not
individually or in the aggregate have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole, to the Company's
knowledge (i) all improvements constituting part of the Owned Real
Property have been completed and are now in compliance in all respects
with all applicable laws, ordinances, regulations, licenses, permits
and authorizations, and there are presently in effect all licenses,
permits and authorizations required by law, ordinance, or regulation
and (ii) the transactions contemplated hereby will not affect the
rights of the Company or any of its subsidiaries to the use of any
off-site facilities necessary to ensure compliance with all such laws,
ordinances, codes and regulations. There is at least the minimum
access required by applicable subdivision or similar law to the Owned
Real Property. Neither the Company nor any of its subsidiaries has
received any notice of any pending or threatened real estate tax
deficiency or reassessment or condemnation of all or any portion of
any of the Owned Real Property.
(b) LEASED REAL PROPERTY. SCHEDULE 5.13(B) hereto sets forth,
by address, owner, tenant, and usage, all of the real property which is now
leased or operated and, to the best knowledge of the Company, has ever been
leased or operated by the Company or any of its subsidiaries (collectively,
the "LEASED REAL PROPERTY"). The Company hereby makes the following
representations and warranties with respect to the Leased Real Property
which is now leased or operated by the Company and its subsidiaries:
(i) LEASES. The copies of the leases of the Leased Real
Property (collectively, the "LEASES") delivered by the Company to
Parent are complete, accurate, true and correct, and the information
with respect to each of the Leases set forth in SCHEDULE 5.13(B) is
complete, accurate, true and correct in all material respects as of
the date hereof. With respect to each of the Leases, except as set
forth on SCHEDULE 5.13(B):
(A) each of the Leases is in full force and
effect and has not been modified, amended, or altered, in writing
or otherwise;
(B) to the Company's knowledge, (I) all
obligations of the landlord or lessor under the Leases which have
accrued have been performed in all material respects, and (II) no
landlord or lessor is in default under any Lease in any material
respect;
(C) to the Company's knowledge, (I) all
obligations of the tenant or lessee under the Leases which have
accrued have been performed in all material respects, and neither
the Company nor any of its subsidiaries is in default under any
Lease in any material respect provided that the Company's timely
payment of its rental obligations under the Leases is not
qualified by the Company's knowledge, and (II) no circumstance
presently exists which, with notice or the passage of time, or
both, would give rise to a material default by the Company or any
of its subsidiaries; and
(D) the Company and each of its subsidiaries, as
the case may be, has obtained or will obtain prior to the Closing
the consent of each landlord or lessor under any Leases whose
consent is required to the transactions contemplated hereby and
any necessary landlord waiver or subordinations in the form
heretofore presented to the Company by Parent required by the
entities providing Parent and Acquisition Sub with the financing
to consummate the Merger and the other transactions contemplated
hereby, and, subject to obtaining the foregoing consents, the
Merger and the other transactions contemplated hereby (other than
the Financing) will not give any landlord or lessor under any
Lease any remedy, including, without limitation, any right to
declare a default under any Lease; provided, however that with
respect to those Leases marked as such on SCHEDULE 5.13(B), the
Company shall be required only to exercise its best efforts to
obtain such consent or landlord waiver.
(ii) TITLE AND DESCRIPTION. The Company and each of its
subsidiaries, as the case may be, holds a good, clear, marketable,
valid and enforceable leasehold interest in the Leased Real Property
pursuant to the Leases, subject only to the right of reversion of the
landlord or lessor under the Leases and any mortgagee thereof, free
and clear, to the Company's knowledge, of all other prior or
subordinate interests, including, without limitation, mortgages, deeds
of trust, ground leases, leases, subleases, assessments, tenancies,
claims, covenants, conditions, restrictions, easements, judgments or
other encumbrances or matters affecting title, and free of
encroachments onto or off of the Leased Real Property, except for (v)
any of the same which are disclosed in any title report or title
search received by Parent or Acquisition Sub or made available by the
Company to Parent or Acquisition Sub, (w) any rights of any person
which has been granted rights by any owner of any such property,
(x) easements, claims, conditions, covenants, restrictions and
similar encumbrances that do not materially interfere with the use of
the Leased Real Property as currently used and improved,
(y) encroachments that do not materially adversely affect the value or
use of the Leased Real Property as currently used and improved and (z)
matters set forth on SCHEDULE 5.13(B).
(iii) CONDITION. Except as set forth on SCHEDULE 5.13(B)
and except for those matters which do not individually or in the
aggregate have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole, to the Company's knowledge, (A) there
are no material defects in the physical condition of any improvements
constituting a part of the Leased Real Property, including, without
limitation, structural elements, mechanical systems, roofs or parking
and loading areas, and, (B) all of such improvements are in good
operating condition and repair, have been well maintained and are free
from infestation by rodents or insects. Except as set forth on
SCHEDULE 5.13(B), none of the Leased Real Property is subject to
special flood or mudslide hazards or within the 100 year flood plain.
Except for any which does not individually or in the aggregate have a
Material Adverse Effect on the Company or its subsidiaries taken as a
whole, all water, sewer, gas, electric, telephone, drainage and other
utilities required by law or necessary for the current or planned
operation of the Leased Real Property have been installed and
connected pursuant to valid permits, and are sufficient to service the
Leased Real Property.
(iv) COMPLIANCE WITH LAW; GOVERNMENT APPROVALS. Neither
the Company nor any of its subsidiaries has received any written
notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with
respect to any of the Leased Real Property that has not been corrected
heretofore. To the Company's knowledge, except as described on
SCHEDULE 5.13(B) and except for violations that would not have a
Material Adverse Effect on the Company and its subsidiaries taken as a
whole, (A) no such violation now exists which could have an adverse
effect on the operation or value of any of the Leased Real Property,
and (B) all improvements constituting a part of the Leased Real
Property are in compliance in all respects with all applicable laws,
ordinances, regulations, licenses, permits and authorizations, and
there are presently in effect all licenses, permits and authorizations
required by law, ordinance, or regulation. The transactions
contemplated hereby will not affect the rights of the Company or any
of its subsidiaries to use any off-site facilities necessary to ensure
compliance with all such laws, ordinances, codes and regulations.
There is at least the minimum access required by applicable
subdivision or similar law to the Leased Real Property. Neither the
Company nor any of its subsidiaries has received any notice of any
pending or threatened real estate tax deficiency or reassessment or
condemnation of all or any portion of any of the Leased Real Property.
(c) VIOLATIONS/CONDEMNATION. Except as set forth in SCHEDULE
5.13(C) hereto, neither the Company nor any of its subsidiaries has
received, with respect to any Owned Real Property currently owned, leased
or operated by the Company or Leased Real Property currently owned, leased
or operated by the Company, any written notice of default or termination or
any written notice of noncompliance with respect to applicable federal,
state or local laws and regulations relating to zoning, building, fire, use
restriction or safety or health codes which have not been remedied in all
respects which, either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole. There is no pending or, to the knowledge of
the Company or any of its subsidiaries, threatened condemnation or other
governmental taking of any of the Owned Real Property or Leased Real
Property.
(d) Notwithstanding anything to the contrary contained in this
Agreement, those representations and warranties contained in this Agreement
with respect to Owned Real Property which is not currently either leased,
operated or owned by either the Company or any of its subsidiaries, and
Leased Real Property which is not currently either leased, owned or
operated by either the Company or any of its subsidiaries, is subject to
the knowledge of the Company.
14 CONTRACTS. Except as set forth on Schedule 5.14 hereto, neither
the Company nor any of its subsidiaries is in default, or has received any
notice that it is in default, in any respect under any contract, agreement,
commitment, arrangement, lease, policy or other instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any such subsidiary is bound (excluding contracts, agreements, commitments,
arrangements, leases, policies or other instruments involving total
payments not in excess of $100,000 and which may be terminated within
90 days by the Company or any of its subsidiaries) ("MATERIAL CONTRACTS"),
except for those defaults which could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole, and there has not occurred
any event that, with the lapse of time or the giving of notice or both,
would constitute such a material default. To the Company's knowledge, no
other party to any such Material Contact is in material breach or default
of the terms thereunder or has refused or otherwise failed to materially
perform under the terms thereof.
15 TRADE NAMES.
(a) Except as set forth on SCHEDULE 5.15, the Company and each
of its applicable subsidiaries, as the case may be, owns all rights to, or
possesses a valid, subsisting and enforceable exclusive license to use (in
each case, free and clear of any liens), all trade names used by the
Company or any of its subsidiaries in the jurisdictions in which such names
are used. To the best knowledge of the Company, except as disclosed in
SCHEDULE 5.15 hereto, (i) the use of trade names by the Company and its
subsidiaries does not infringe on the rights of any person, (ii) no person
is infringing on any right of the Company or any of its subsidiaries with
respect to any of the Company's or such subsidiaries' trade names, (iii) there
is no decree, undertaking or agreement limiting the scope of the
Company's or any of its subsidiaries' right to use any of its trade names
and (iv) neither the Company nor any of its subsidiaries has granted any
license to any person for the use of the Company's or any of its
subsidiaries' trade names.
(b) Except in each case as disclosed in the Company's Commission
Reports or as set forth in SCHEDULE 5.15 hereto:
(i) to the best knowledge of the Company, the Company
owns, has the right to use, sell, license and dispose of, and has the
right to bring actions for the infringement of, and, where necessary,
has made timely and proper application for all Intellectual Property
Rights (as defined below) necessary or required for the conduct of its
business as currently conducted (such Intellectual Property Rights,
collectively, the "REQUISITE RIGHTS") and has such rights to use,
sell, license, dispose of and bring such actions as are sufficient for
such conduct of its business;
(ii) to the best knowledge of the Company, there are no
royalties, honoraria, fees or other payments payable by the Company to
any person by reason of the ownership, use, license, sale or
disposition of Requisite Rights; and
(iii) to the best knowledge of the Company, neither the
marketing, license, sale nor use of any product currently or proposed
to be licensed or sold by the Company materially violates or will
materially violate any license or agreement with any third party to
which the Company is a party or materially infringe any Intellectual
Property Right of any other party.
As used herein, the term "INTELLECTUAL PROPERTY RIGHTS" shall mean all
industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications,
copyrights, copyright applications, know-how, trade secrets, proprietary
processes and formulae, franchises, licenses, inventions, marketing
materials, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
16 AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 5.16
hereto, (i) the Company has not engaged in any transaction involving any
lease or other transaction or the transfer of any cash, property or rights
to or from the Company or any of its subsidiaries from, to or for the
benefit of any affiliate or former affiliate of the Company or any of its
subsidiaries ("AFFILIATE TRANSACTIONS") during the period commencing
January 1, 1994 through the date hereof, (ii) neither the Company nor any
of its subsidiaries has any existing commitments to engage in the future in
any material Affiliate Transactions and (iii) to the best knowledge of the
Company, no affiliate of the Company or any of its subsidiaries is party to
any contract with a third party pursuant to which (x) as a result of a
claimed breach a claim against the Company or any such subsidiary may arise
or (y) a liability (whether absolute, contingent or otherwise) might accrue
against the Company or any such subsidiary.
17 BROKERAGE FEES. The Company has not retained any financial
adviser, broker, agent or finder or paid or agreed to pay any financial
adviser, broker, agent or finder on account of this Agreement or any
transaction contemplated hereby, except that Hill Thompson Capital Markets,
Inc. has been retained as the Company's financial advisor in connection
with certain matters including the transactions contemplated hereby. The
Company has heretofore furnished to Parent a complete and correct copy of
all agreements between the Company and Hill Thompson Capital Markets, Inc.
pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereby. Other than the foregoing
arrangements and Frederick Marino's arrangements with Proteus International
Group Incorporated, the Company is not aware of any claim for payment of
any finder's fee, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to the Merger, this Agreement
or the consummation of the transactions contemplated hereby.
18 SUBSIDIARIES. The Company's subsidiaries and investments in any
other corporation, partnership, joint venture or other business
organization are listed in SCHEDULE 5.18 hereto. The Company owns
beneficially and of record all of the outstanding shares of capital stock
or other equity interest of each of its subsidiaries, and such shares or
other equity interest are duly authorized, validly issued, fully paid and
non-assessable, and are free and clear of all preemptive rights and, except
as set forth on SCHEDULE 5.18 hereto, all liens, charges, encumbrances,
equities, claims and options whatsoever. There are not any outstanding
subscriptions, options, warrants or other rights, agreements or commitments
to purchase any additional shares of such subsidiary's capital stock or any
other securities convertible into or evidencing the right to subscribe for
any capital stock of such subsidiary. Except as disclosed in SCHEDULE 5.18,
all of the outstanding shares of capital stock or other equity interest of
each of the Company's subsidiaries are owned beneficially and of record by
the Company free of any lien, restriction or encumbrance and said shares
have been duly authorized and validly issued and are outstanding, fully
paid and non-assessable.
19 DISCLOSURE. The representations, warranties and statements made
by the Company in this Agreement and in the schedules and exhibits attached
hereto and in the certificates and other documents delivered pursuant to
Section 8.3(a) and 8.3(b) hereof do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state any material
fact necessary to make such representations, warranties and statements, in
light of the circumstances under which they are made, not misleading and
may be relied upon regardless of any investigation by or independent
inquiry or knowledge of Parent, Acquisition Sub or any of their respective
employees, consultants, advisers or affiliates. Parent and Acquisition Sub
acknowledge that they are not relying on any representations and warranties
other than the representations and warranties contained in this Agreement
and the schedules and exhibits attached hereto.
6. CONDUCT OF BUSINESS PENDING THE MERGER
1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the
date of this Agreement to the Effective Time, except as otherwise
contemplated by this Agreement or as set forth in SCHEDULE 6.1 hereto, the
Company shall, and shall cause each of its subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course, reasonably
consistent with past practice in all material respects, and use their best
efforts to preserve intact their present business organizations, keep
available the services of their present advisors, managers, officers and
employees and preserve their relationships in all material respects with
customers, suppliers, licensors and others having business dealings with
them and continue existing contracts (for the term provided in such
contracts), provided that the Company shall not be required to make any
payments (cash or otherwise) outside the ordinary course or enter into or
amend any contractual arrangements or understandings to satisfy the
foregoing obligations; PROVIDED, HOWEVER, that the covenant contained in
this sentence shall not be deemed to be breached in any material respect
unless any actions or failures to act when taken together constituted
unreasonable business judgements determined on the basis of the Company's
compliances, or non-compliances, taken on the whole with this sentence; and
the Company shall have the right within ten (10) days after receipt of the
written notice from Parent to cure any such claimed breach as is reasonably
susceptible of cure. Notwithstanding the foregoing and without limiting
the generality of the foregoing, neither the Company nor any of its
subsidiaries will (except as expressly permitted by this Agreement or to
the extent that Parent shall otherwise consent in writing):
(a) (i) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or (iii) repurchase, redeem or
otherwise acquire any of its securities, except, in the case of clause
(iii), for the acquisition of shares of Company Common Stock from holders
of the Options in full or partial payment of the exercise price payable by
such holders upon exercise of the Options outstanding on the date of this
Agreement;
(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 (including
indebtedness having the right to vote) or equity equivalents (including,
without limitation, stock appreciation rights) (OTHER THAN THE ISSUANCE OF
COMPANY COMMON STOCK UPON THE EXERCISE OF THE OPTIONS OUTSTANDING ON THE
DATE OF THIS AGREEMENT IN ACCORDANCE WITH THEIR PRESENT TERMS);
(c) ACQUIRE, SELL, LEASE, ENCUMBER, TRANSFER OR DISPOSE OF ANY
ASSETS OUTSIDE THE ORDINARY COURSE OF BUSINESS WHICH ARE MATERIAL TO THE
COMPANY AND ITS SUBSIDIARIES TAKEN AS A WHOLE (WHETHER BY ASSET
ACQUISITION, STOCK ACQUISITION OR OTHERWISE), EXCEPT PURSUANT TO
OBLIGATIONS IN EFFECT ON THE DATE HEREOF WHICH HAVE BEEN DISCLOSED IN
WRITING TO PARENT AND ACQUISITION SUB PRIOR TO THE DATE HEREOF;
(d) (I) INCUR ANY INDEBTEDNESS FOR BORROWED MONEY, GUARANTEE ANY
INDEBTEDNESS, ISSUE OR SELL DEBT SECURITIES OR WARRANTS OR RIGHTS TO
ACQUIRE ANY DEBT SECURITIES, GUARANTEE (OR BECOME LIABLE FOR) ANY DEBT OF
OTHERS, MAKE ANY LOANS, ADVANCES OR CAPITAL CONTRIBUTIONS, MORTGAGE, PLEDGE
OR OTHERWISE ENCUMBER ANY MATERIAL ASSETS, OR CREATE OR SUFFER ANY MATERIAL
LIEN THEREUPON, OTHER THAN, AS TO EACH OF THE FOREGOING, IN THE ORDINARY
COURSE OF BUSINESS REASONABLY CONSISTENT WITH PRIOR PRACTICE OR (II) INCUR
ANY SHORT-TERM INDEBTEDNESS FOR BORROWED MONEY, EXCEPT, IN EACH SUCH CASE,
PURSUANT TO CREDIT FACILITIES IN EXISTENCE ON THE DATE HEREOF UNDER THE
TERMS THEREOF ON THE DATE HEREOF, WHICH CREDIT FACILITIES HAVE BEEN
DISCLOSED IN WRITING TO PARENT AND ACQUISITION SUB PRIOR TO THE DATE
HEREOF;
(e) PAY, DISCHARGE OR SATISFY ANY CLAIMS, LIABILITIES OR
OBLIGATIONS (ABSOLUTE, ACCRUED, ASSERTED OR UNASSERTED, CONTINGENT OR
OTHERWISE), OTHER THAN ANY PAYMENT, DISCHARGE OR SATISFACTION (I) IN THE
ORDINARY COURSE OF BUSINESS REASONABLY CONSISTENT WITH PAST PRACTICE, OR
(II) IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT;
(f) CHANGE ANY OF THE ACCOUNTING PRINCIPLES OR PRACTICES USED BY
IT (EXCEPT AS REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, IN
WHICH CASE WRITTEN NOTICE SHALL BE PROVIDED TO PARENT AND ACQUISITION SUB
PRIOR TO ANY SUCH CHANGE);
(g) EXCEPT AS REQUIRED BY LAW, (I) ENTER INTO, ADOPT, AMEND OR
TERMINATE ANY EMPLOYEE BENEFIT PLAN, (II) ENTER INTO, ADOPT, AMEND OR
TERMINATE ANY AGREEMENT, ARRANGEMENT, PLAN OR POLICY BETWEEN THE COMPANY OR
ANY OF ITS SUBSIDIARIES AND ONE OR MORE OF THEIR DIRECTORS OR OFFICERS, OR
(III) EXCEPT FOR NORMAL INCREASES IN THE ORDINARY COURSE OF BUSINESS
REASONABLY CONSISTENT WITH PAST PRACTICE, INCREASE IN ANY MANNER THE
COMPENSATION OR FRINGE BENEFITS OF ANY DIRECTOR, OFFICER OR EMPLOYEE OR PAY
ANY BENEFIT NOT REQUIRED BY ANY PLAN OR ARRANGEMENT AS IN EFFECT AS OF THE
DATE HEREOF;
(h) ADOPT ANY AMENDMENTS TO THE COMPANY'S CERTIFICATE OR THE
COMPANY'S BY-LAWS, EXCEPT AS EXPRESSLY PROVIDED BY THE TERMS OF THIS
AGREEMENT;
(i) ENTER INTO A NEW AGREEMENT OR AMEND ANY EXISTING AGREEMENT
WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE
COMPANY AND ITS SUBSIDIARIES TAKEN AS A WHOLE;
(j) ADOPT A PLAN OF COMPLETE OR PARTIAL LIQUIDATION OR
RESOLUTIONS PROVIDING FOR OR AUTHORIZING SUCH A LIQUIDATION OR A
DISSOLUTION, MERGER, CONSOLIDATION, RESTRUCTURING, RECAPITALIZATION OR
REORGANIZATION;
(k) ENTER INTO OR AMEND, EXTEND OR OTHERWISE ALTER ANY
COLLECTIVE BARGAINING AGREEMENT;
(l) SETTLE OR COMPROMISE ANY LITIGATION (WHETHER OR NOT
COMMENCED PRIOR TO THE DATE OF THIS AGREEMENT) OTHER THAN SETTLEMENTS OR
COMPROMISES OR LITIGATION WHERE THE AMOUNT PAID (AFTER GIVING EFFECT TO
INSURANCE PROCEEDS ACTUALLY RECEIVED) IN SETTLEMENT OR COMPROMISE DOES NOT
EXCEED $50,000;
(m) GRANT ANY NEW OR MODIFIED SEVERANCE OR TERMINATION
ARRANGEMENT OR INCREASE OR ACCELERATE ANY BENEFITS PAYABLE UNDER ITS
SEVERANCE OR TERMINATION PAY POLICIES IN EFFECT ON THE DATE HEREOF, EXCEPT
WITH RESPECT TO THE OPTIONS AND EXCEPT TO THE EXTENT PROVIDED BY THE TERMS
OF ANY SUCH ARRANGEMENTS OR POLICIES IN EFFECT ON THE DATE HEREOF WHICH
ARRANGEMENTS OR POLICIES HAVE BEEN DISCLOSED IN SCHEDULE 5.8 hereto;
(n) except as set forth on SCHEDULE 6.1 hereto, enter into any
transaction, contract or arrangement with any affiliate;
(o) except as set forth on SCHEDULE 6.1 hereto, enter into any
other material agreement, arrangement or understanding, whether oral or
written, outside the ordinary course of business;
(p) enter into an agreement to take any of the foregoing actions
or enter into an agreement that would foreseeably result in the failure of
any of the conditions to the Merger set forth in Section 8 hereof to occur
or be satisfied; or
(q) authorize any of, or commit or agree to take any of, or take
any corporate action in furtherance of, any of the foregoing actions.
Notwithstanding the foregoing, the Company may negotiate and enter
into a collective bargaining agreement with Local 282, the existing
contract of which expires December 31, 1996, on terms acceptable to the
Company, without the consent of Parent or Acquisition Sub and the absence
of an agreement with Local 282 after December 31, 1996 or a resulting
strike by Local 282 shall not be deemed to have a Material Adverse Effect
on the Company or constitute the failure of any obligations under this
Agreement.
7. ADDITIONAL AGREEMENTS
1 PROXY STATEMENT; OTHER FILINGS. As promptly as practicable, the
Company shall prepare, shall file with the Commission under the Exchange
Act, shall use its best efforts to have cleared by the Commission and
promptly thereafter shall mail to its stockholders, a Proxy Statement with
respect to the meeting of the Company's stockholders referred to in
Section 7.2. The term "PROXY STATEMENT" shall mean such proxy statement,
as the case may be, and all related proxy materials at the time such
documents initially are mailed to the Company's stockholders, and all
amendments or supplements thereto, if any, similarly filed and mailed. The
Company shall give Parent and its counsel a reasonable opportunity to
review and comment upon the Proxy Statement prior to its being filed with
the Commission and shall give Parent and its counsel a reasonable
opportunity to review all amendments and supplements to the Proxy Statement
and all responses to requests for additional information and replies to
comments prior to their being filed with, or sent to, the Commission and,
in the case of the Proxy Statement and any amendments or supplements
thereto, prior to its being disseminated to holders of shares of Company
Common Stock. As promptly as practicable, the Company, Parent and
Acquisition Sub each shall properly prepare and file any other filings
required under the Exchange Act or any other federal or state law relating
to the Merger and the transactions contemplated herein (including filings,
if any, required under the Hart-Scott-Rodino Act) (collectively, "OTHER
FILINGS"). Each of Parent and the Company shall promptly notify the other
of the receipt of any comments on, or any request for amendments or
supplements to, the Proxy Statement or any Other Filings by the Commission
or any other governmental entity or official, and each of the Company and
Parent shall supply the other with copies of all correspondence between it
and each of its subsidiaries and representatives, on the one hand, and the
Commission or the members of its staff or any other appropriate
governmental official, on the other hand, with respect to the Proxy
Statement and any of the Other Filings. The Company, Parent and
Acquisition Sub each shall use its respective best efforts to obtain and
furnish the information required to be included in the Proxy Statement and
any Other Filings, and the Company, after consultation with Parent, shall
use its best efforts to respond promptly to any comments made by the
Commission with respect to the Proxy Statement and any preliminary version
thereof. The information provided and to be provided by Parent,
Acquisition Sub and the Company, respectively, for use in the Proxy
Statement shall, on both the date the Proxy Statement is first mailed to
the Company's stockholders as referred to in Section 7.2 hereof and the
date such stockholders meeting is held, 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 are made, not misleading, or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the stockholders' meeting which shall have
become false or misleading, and shall comply in all material respects as to
form and substance with all applicable requirements of law. Parent, the
Company and Acquisition Sub each agree to correct promptly any such
information provided by it for use in the Proxy Statement which shall have
become false or misleading.
2 MEETING OF THE COMPANY'S STOCKHOLDERS. In order to consummate the
Merger, the Company, acting through the Board, shall take all action
necessary in accordance with applicable laws, the Company's Certificate and
By-laws to duly call, give notice of, convene and hold an annual or special
meeting of its stockholders as promptly as practicable to consider and vote
upon the approval and adoption of this Agreement and the approval of the
Merger and to take such other action as is necessary or desirable to
consummate the transactions contemplated hereby (the "STOCKHOLDERS'
MEETING"). Except to the extent required by law or the Company's By-Laws
(a) the Company shall not convene any meeting of its Stockholders prior to
the Stockholders' Meeting, and (b) the company shall not present any other
matter at the Stockholders' Meeting except for the matters contemplated by
this Agreement. At the Stockholders' Meeting, all the shares of Company
Common Stock owned by Parent, Acquisition Sub or any other subsidiary or
affiliate of Parent shall be voted in favor of the Merger. The stockholder
vote required for the adoption of this Agreement and the Merger shall be
the vote required by the Corporation Law. The Proxy Statement shall,
except to the extent legally required under the Corporation Law for the
discharge of the fiduciary duties of the Board as advised by its counsel,
contain the determination and the recommendation of the Board that the
stockholders of the Company approve and adopt this Agreement and the
transactions contemplated hereby including the Merger and the Company,
acting through the Board, shall use its best efforts to obtain such
approval and adoption. Parent and the Company shall coordinate and
cooperate with respect to the foregoing matters.
3 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts
(i) to take, or cause to be taken, all actions and (ii) to do, or cause to
be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with each other in connection with the
foregoing, including the taking of such actions as are necessary to obtain
any necessary consents, approvals, orders, exemptions and authorizations by
or from any public or private third party, including without limitation any
that are required to be obtained under any federal, state or local law or
regulation or any contract, agreement or instrument to which the Company or
any subsidiary is a party or by which any of their respective properties or
assets are bound, (iii) to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions
contemplated hereby, (iv) to cause to be lifted or rescinded any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby, and (v) to
effect all necessary registrations and Other Filings, including, but not
limited to, filings under the Hart-Scott-Rodino Act, if any, and
submissions of information requested by governmental authorities. Without
limiting the generality of the foregoing, Parent and Acquisition Sub will
use their best efforts to obtain appropriate financing to consummate the
Merger. For purposes of the foregoing sentence and as to the Company's
obligations under Section 5.13(b)(i)(D) hereof, the obligation of the
Company, Parent and Acquisition Sub to use their "best efforts" to obtain
waivers, consents and approvals to loan agreements, leases and other
contracts shall not include any obligation to agree to an adverse
modification of the terms of such documents or to prepay or incur
additional obligations (payment or otherwise) to such other parties.
4 FEES AND EXPENSES. Except as set forth in Section 9.2 below,
whether or not the Merger is consummated, all fees, costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such cost or
expense. Notwithstanding the foregoing, upon consummation of the Merger,
Parent may be reimbursed by the Company for all costs and expenses incurred
by Parent and Acquisition Sub in connection with this Agreement and the
transactions contemplated hereby.
5 NO SOLICITATIONS.
(a) Unless and until this Agreement shall have been terminated
in accordance with its terms, the Company agrees and covenants that (i)
neither it nor any of its subsidiaries shall, and each of them shall direct
and use its best efforts to cause its respective officers, directors,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) not to, directly or indirectly, initiate, solicit or
encourage any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, tender offer, exchange
offer, consolidation or similar transaction involving any purchase of 10%
or more of the assets or securities of the Company or any of its
subsidiaries, other than the transactions contemplated by this Agreement
(any such proposal or offer being hereinafter referred to as an
"ACQUISITION PROPOSAL") or engage in any negotiations with, or provide any
confidential information or data to, or have any discussions with, any
person relating to, an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal; (ii) the
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any persons conducted
heretofore with respect to any of the foregoing and will take the necessary
steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section; and (iii) the Company will notify
the Parent immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, the Company,
which notification shall include the terms of any such inquiries or
proposals.
(b) Notwithstanding anything set forth in this Agreement to the
contrary, the Board may furnish or cause to be furnished by any committee
thereof, any executive officer of the Company, the Company's counsel or the
Company's investment advisor information or data to or enter into
discussions or negotiations with any person that on an unsolicited basis,
makes a bona fide Acquisition Proposal, if, and only to the extent that,
the Board (x) determines in good faith, after consideration of written
advice of its financial advisors, that the Acquisition Proposal, if
consummated as proposed, may result in a transaction more favorable to the
Company's stockholders from a financial point of view than the transactions
contemplated by this Agreement (any such Acquisition Proposal being
referred to herein as a "SUPERIOR PROPOSAL") and (y) determines in good
faith, after consultation with its outside counsel, that the failure to
take such action may be a breach of the directors' fiduciary duties under
applicable law, provided that prior to furnishing such information to, or
entering into discussions or negotiations with, such person, the Company
provides written notice to Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such
person and the Company keeps Parent informed of the status of any such
discussions or negotiations and the principal terms of any such Acquisition
Proposal. Notwithstanding the foregoing (a) the Company and its
representatives (as set forth above) may advise any person expressing an
interest in the Company and/or making an Acquisition Proposal that such
person must review and comply with, and the Company must comply with, the
provisions of Section 7.5 hereof (as contained in this Agreement as filed
with the Commission) prior to the Company entering into any discussion or
negotiations with such person or providing any information or data to such
person, and any such statement to such effect (when initially made to such
person) shall not constitute a breach of this Agreement, and (b) nothing
contained herein shall preclude the Company from entering into a definitive
agreement with any person providing a bona fide Acquisition Proposal that
the Company is entitled to negotiate pursuant to the terms of this Section
7.5 provided that the Company and its representatives comply with the
obligations contained in this Section 7.5 and in Sections 9.1(f) and 9.2
hereof. As used in this Agreement, the word "person" means an individual,
a corporation, a partnership, an association, a joint-stock company, a
trust, a limited liability company, an unincorporated organization or any
other entity.
6 OFFICERS' AND DIRECTORS' INSURANCE; INDEMNIFICATION. Parent
agrees that all rights to indemnification existing in favor of, and all
limitations on the personal liability of, the directors and officers of the
Company provided for in the Company's Certificate and in each subsidiaries'
certificate of incorporation (or similar organizational document) or their
respective By-laws as in effect as of the date hereof with respect to
matters occurring prior to the Effective Time shall continue without
amendment in full force and effect for a period of not less then six (6)
years from the Closing; PROVIDED, HOWEVER, that all rights to
indemnification in respect of any claims (a "CLAIM") asserted or made
within such period shall continue until the disposition of such Claim. At
or prior to the Effective Time, Parent also shall continue the Company's
existing directors' and officers' liability insurance coverage for the
Company's directors in a form reasonably acceptable to the Company which
shall provide such directors with coverage for six years following the
Effective Time; PROVIDED, HOWEVER, that the cost of such policy shall not
exceed $200,000 in the aggregate. Notwithstanding anything to the contrary
in this Section 7.6, nothing contained in this Section 7.6 shall at any
time be construed to limit or otherwise impair or shall at any time limit
or otherwise impair the rights of any officer or director to
indemnification for acts occurring prior to the Effective Date by the
Company, any subsidiary or the Surviving Corporation under the Corporation
Law, it being understood that the provisions of this Section 7.6 constitute
a contractual obligation.
7 ACCESS TO INFORMATION; CONFIDENTIALITY. From the date hereof
until the Effective
Time, the Company shall, and shall cause its subsidiaries, officers,
employees and agents to, afford to Parent and to the officers, employees
and agents of Parent complete access at all reasonable times to their
officers, employees, agents, properties, books, records and contracts, and
shall furnish Parent such financial, operating and other data and
information as Parent may reasonably request PROVIDED, HOWEVER, that the
Company shall not be required to disclose or permit access to certain
information regarding the deliberations of the Company's Board of Directors
or committees thereof to the extent same relates solely to an Acquisition
Proposal or this Agreement. Prior to the Effective Time, Parent and
Acquisition Sub shall hold in confidence all such information on the terms
and subject to the conditions contained in that certain confidentiality
agreement between Fidelity Ventures Limited and the Company (the
"CONFIDENTIALITY AGREEMENT") the provisions of which shall survive the
termination of this Agreement. The parties hereto on behalf of the
signatories to the Confidentiality Agreement hereby waive the provisions of
the Confidentiality Agreement as and to the extent necessary to
<PAGE>
permit the making and consummation of the transactions contemplated hereby.
Upon the consummation of the Merger, such Confidentiality Agreement shall
terminate.
8 Financial and Other Statements. Notwithstanding anything
contained in Section 7.7, during the term of this Agreement, the Company
shall also provide to Parent the following documents and information:
(a) As soon as reasonably available, but in no event more than
45 days after the end of each fiscal quarter ending after the date of
this Agreement, the Company will deliver to Parent its Quarterly
Report on Form 10-Q as filed under the Exchange Act. The Company will
also deliver to Parent, contemporaneously with its being filed with
the SEC, a copy of all Current Reports on Form 8-K.
(b) Promptly upon receipt thereof, the Company will furnish to
Parent copies of all internal control reports submitted to the Company
or any subsidiary by independent accountants in connection with each
annual, interim or special audit of the books of the Company or any
such subsidiary made by such accountants.
(c) As soon as practicable, the Company will furnish to Parent
copies of all such financial statements and reports as it or any
subsidiary shall send to its stockholders, the Commission or any other
regulatory authority, to the extent any such reports furnished to any
such regulatory authority are not confidential and except as legally
prohibited thereby.
(d) With reasonable promptness, the Company will furnish to
Parent (i) monthly profit and loss statements, (ii) a listing of
accounts receivable, including aging, as of the end of each month,
(iii) inventory analysis as of the end of each month, (iv) a listing
of accounts payable, including aging, as of the end of each month, and
(v) such additional financial data as Parent may reasonably request.
9 OBSERVER RIGHTS. From the date hereof until the earlier to occur
of the Effective Time or the termination of this Agreement in accordance
with its terms, the Company shall afford a representative designated by
Parent observation rights for all meetings (whether in person, telephonic
or otherwise) of the Company's Board of Directors and shall provide Parent
and Acquisition Sub copies of all notices, minutes, consents and other
materials that it provides to its directors in the same manner and at the
same time as it provides such materials to its directors (including those
related to the committees thereof), except to the extent the same relates
solely to an Acquisition Proposal or this Agreement; provided, however,
that such representative shall agree to hold in confidence all information
so provided.
10 ADVICE OF CHANGE; SCHEDULE UPDATE. Each party will promptly
advise the other of (i) any change or the occurrence or non-occurrence of
any event having a Material Adverse Effect or which would be reasonably
likely to cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect and (ii) any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement.
11 ROWLEY BUILDING TRANSACTION. The Company shall involve Parent
and its advisors in its continued investigations of and discussions with
Rowley Building Products Corp. ("ROWLEY BUILDING PRODUCTS"), shall consult
with Parent regarding any proposed transaction involving Rowley Building
Products including the structure of the transaction, the form and substance
of the documents to be executed in connection with such transaction and the
specific nature of any post-closing obligations (payment, indemnification
or otherwise) and agrees to not consummate any such transaction without the
prior written consent of Parent.
12 CERTAIN LITIGATION. Notwithstanding anything to the contrary
contained in this Agreement, the outcome of the currently pending
litigation commenced against the Post Authority of New York and New Jersey
(the "PORT AUTHORITY") and the Company and/or one or more of its
subsidiaries in the United States District Court for the Eastern District
of New York (styled as Case No.: CV96-3793), and any related legal
proceeding in state or federal court including without limitation any
reasonably related legal proceedings instituted by individual members of
the coalition which is the plaintiff in the aforementioned proceeding
involving the lease dated March 29, 1996 between the Company and the Port
Authority (the "PORT AUTHORITY LEASE"), shall not constitute an event which
gives rise to a failure of a condition to Parent's and Acquisition Sub's
respective obligations under this Agreement (including without limitation,
if the Port Authority Lease is deemed unenforceable and the Company has not
secured or occupied another location prior to the expiration of the
Company's lease at 550 Hamilton Avenue, Brooklyn, New York), or which
otherwise provides Parent or Acquisition Sub with the right to decline to
consummate the Merger as a result of a failure of a closing condition. The
Company has, prior to the date hereof, delivered a true and correct copy of
the Indemnification Agreement, dated October 8, 1996, by and between the
Port Authority and the Company and/or one or more of its subsidiaries (the
"INDEMNIFICATION AGREEMENT"). The Company (a) shall keep Parent and its
counsel advised in writing of the status of, and material developments in,
the pending legal proceeding referred to above, (b) shall notify Parent and
its counsel in writing of the commencement of any related legal proceeding,
(c) shall preserve its rights under the Indemnification Agreement, and (d)
shall not settle or compromise the pending legal proceeding or any such
related legal proceeding without the prior written consent of Parent and
Acquisition Sub, which consent shall not be unreasonably withheld.
13 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements or announcements with respect to this Agreement or any
transaction contemplated herein and shall not issue any such press release
or make any such public statement without the prior written consent of the
other party, which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, that a party may, without the prior consent of the other party,
issue such press release or make such public statement or announcement as
may be required by law if it has used its reasonable best efforts to
consult with the other party and to obtain such party's consent but has
been unable to do so. Notwithstanding anything to the contrary set forth
in this Agreement, the Company shall not, and shall use its best efforts to
ensure that its stockholders, directors, officers, employees, agents,
advisors or affiliates do not, disclose any information concerning Parent
or any of its affiliates without the prior written consent of a majority of
the equity holders of Parent. Access to any information concerning Parent
and its affiliates shall be limited by the Company only to those employees,
advisors and representatives who have a need to receive any such
information for the purpose of consummating the Merger and the other
transactions contemplated by this Agreement and who are under an
enforceable obligation to the Company to hold such information in
confidence under similar terms and conditions as set forth in the
Confidentiality Agreement.
14 ENVIRONMENTAL MATTERS. The Company (a) shall promptly prepare
and file all such reports, notices, filings, requests for consent or
waiver, applications for permit or license and such other documents (if
any) as required by applicable federal, state and local law with respect to
those environmental matters set forth in, or referred to in, SCHEDULE 5.11
hereto, and (b) shall promptly notify Parent and its counsel in writing of
any matter, issue, discovery, notice or other event which occurs, or of
which the Company becomes aware, after the date hereof, and which would
have required disclosure on SCHEDULE 5.11 hereto had it occurred or had the
Company become aware prior to the date hereof.
15 STOP TRANSFER; REORGANIZATION AGREEMENT. The Company
acknowledges and agrees to be bound by and comply with the provisions of
the Proxy Agreement as if a party thereto with respect to transfers of
record ownership of shares of the Common Stock, and agrees to notify the
transfer agent of the provisions of the Proxy Agreement and to request that
the transfer agent place a stop transfer order on the shares that are
subject to the provisions of such agreement except for the transfers
permitted by Section 1(a) of the Proxy Agreement. The Company hereby
waives any and all rights that it might have under the Agreement and Plan
of Reorganization dated October 1, 1986 by and among the Company and the
Stockholders (as defined therein), as amended (the "REORGANIZATION
AGREEMENT"), to the extent necessary to consummate the transaction
contemplated hereby and in order for the Principal Stockholders to enter
into the Proxy Agreement. The Company further agrees not to take any
action under such Reorganization Agreement that would affect the Proxy
Agreement and the arrangements contained therein. Furthermore, the Company
agrees that, at the Effective Time, the Reorganization Agreement shall
terminate as to the Company and the Company shall have no further rights
thereunder.
16 TRANSFER TAXES. Acquisition Sub and Parent agree that either
Acquisition Sub or the Company will pay the applicable state and local
transfer taxes arising as a result of the consummation of the Merger
(collectively, the "TRANSFER TAXES") including but not limited to the New
York State Real Property Transfer Tax, the New York City Real Property
Transfer Tax and the Connecticut Real Estate Conveyance Tax, if any, and
any penalties or interest with respect to the Transfer Taxes payable as a
result of the consummation of the Merger. The Company agrees to cooperate
with Acquisition Sub in the filing of any returns with respect to the
Transfer Taxes, including supplying in a timely manner any information with
respect to the Company's real property interests that is reasonably
necessary to complete such returns.
8. CONDITIONS TO THE MERGER
1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver, where permissible, at or prior to the
Effective Time, of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby, including the Merger, shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the
extent required by the Corporation Law and the Company's Certificate.
(b) HART-SCOTT-RODINO ACT. Any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
Hart-Scott-Rodino Act shall have expired or been terminated.
(c) OTHER REGULATORY APPROVALS. All necessary approvals,
authorizations and consents of any governmental or regulatory entity
required to consummate the Merger shall have been obtained and remain in
full force and effect, and all waiting periods relating to such approvals,
authorizations and consents shall have expired or been terminated, except
where the failure to so obtain will not, either individually or in the
aggregate, have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole .
(d) NO INJUNCTIONS, ORDERS OR RESTRAINTS; ILLEGALITY. No
preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission nor any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority shall
be in effect which would (i) make the consummation of the Merger illegal,
or (ii) otherwise restrict, prevent or prohibit the consummation of the
transactions contemplated by this Agreement, including the Merger.
2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the
satisfaction, or waiver by the Company, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of Parent and Acquisition Sub in this Agreement which is
qualified as to materiality shall be true and correct and each such
representation or warranty that is not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Date. Parent and
Acquisition Sub shall each have delivered to the Company a certificate of
such party to such effect signed by the Manager or Managers (as the case
may be) of Parent dated as of the Effective Date.
(b) AGREEMENTS AND COVENANTS. Parent and Acquisition Sub shall
have performed in all material respects all obligations and complied in all
material respects with all of the respective agreements or covenants to be
performed or complied with by such party under this Agreement and the
Company shall have received a certificate signed by the Chief Executive or
Chief Financial Officer of Parent to such effect dated as of the Effective
Date.
3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND
ACQUISITION SUB. The obligations of Parent and Acquisition Sub to effect
the Merger are also subject to the satisfaction, or waiver by Parent and
Acquisition Sub, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of the Company in this Agreement which is qualified as to
materiality shall be true and correct and each such representation or
warranty that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement, as applicable, and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time. The Company shall have delivered
to Parent a certificate of the Company to such effect signed by the Chief
Executive Officer and the Chief Financial Officer of the Company as of the
Effective Date.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed
in all material respects all obligations and complied in all material
respects with all agreements or covenants of the Company to be performed or
complied with by it at or prior to the Effective Date under this Agreement
and Parent shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer and Chief Financial Officer of the
Company to such effect dated as of the Effective Date.
(c) NO ORDERS, INJUNCTIONS OR RESTRAINTS ON OPERATION OF
BUSINESS; ILLEGALITY. No pending legal proceeding in (a "PENDING
LITIGATION"), or preliminary or permanent injunction or other order, decree
or ruling issued by, a court of competent jurisdiction or pending in
(together with a Pending Litigation a "PENDING LEGAL PROCEEDING"), or
issued by, a governmental, regulatory or administrative agency or
commission nor any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority shall be in effect, which (i)
restricts, prevents or prohibits the ownership or operation by Parent (or
any of its subsidiaries) of any portion of its or the Surviving
Corporation's or its subsidiaries' business, properties or assets which is
material to such businesses as a whole, or compels Parent (or any of its
subsidiaries) to dispose of or hold separate any portion of the Surviving
Corporation's or its subsidiaries' business, properties or assets which is
material to such businesses as a whole, (ii) imposes any material
limitation on the ability of Parent or Acquisition Sub to effect the Merger
or on the ability of Parent to hold or to exercise full rights of ownership
of the shares of common stock of the Surviving Corporation, including,
without limitation, the right to vote the shares of common stock of the
Surviving Corporation on all matters presented to the stockholders of the
Surviving Corporation, (iii) imposes any limitations on the ability of
Parent or any of its affiliates or subsidiaries to control in any material
respect the business, properties and operations of the Company or the
Surviving Corporation, or (iv) occurs after the execution of this Agreement
and is otherwise reasonably likely to have a Materially Adverse Effect on
the Surviving Corporation and its subsidiaries taken as a whole.
(d) FINANCIAL MARKETS. There shall not have occurred (i) any
general suspension of trading in, or limitation on prices for, securities
on the New York Stock Exchange, the American Stock Exchange or The Nasdaq
Stock Market, Inc.'s National Market, (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States having a significant effect on the
functioning of financial markets in the United States, or (iv) any
limitation (whether or not mandatory) by any United States governmental
authority or agency on the extension of credit by banks or other financial
institutions which would have a material adverse effect on Parent's ability
to borrow sufficient funds as contemplated by the Financing Letters to pay
the Merger Consideration.
(e) NO MATERIAL ADVERSE EFFECT. Since the date of the
Agreement, there shall not have occurred any change having a Material
Adverse Effect on the Company and its subsidiaries taken as a whole
PROVIDED, HOWEVER, that the financial results of the Company for the three
months ended March 31, 1997, to the extent that they are reasonably
consistent with the financial results for the three months ended March 31,
1996, shall be excluded in determining any such change.
(f) THIRD PARTY CONSENTS. The Company shall have obtained all
consents of third parties to the consummation of the Merger and the other
transactions contemplated by this Agreement (other than the Financing,
except as specifically contemplated in this Agreement) necessary under any
contract, agreement, arrangement or understanding listed on SCHEDULE 8.3(F)
hereto and under any other contract, agreement, arrangement or
understanding the failure of which to obtain would have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole.
(g) WAIVERS OF CONTRACTUAL DEFAULTS, ACCELERATIONS, ETC. The
Company shall have obtained waivers (on terms satisfactory to Parent and
Acquisition Sub) with respect to any default, termination, acceleration of
payment or performance or modification clause contained in any contract,
agreement, commitment, arrangement, lease, policy or other instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries, or their respective properties or
assets is bound which is triggered or otherwise caused by reason of the
entering into this Agreement or the consummation of the Merger and the
other transactions contemplated by this Agreement (other than the
Financing, except as specifically contemplated in this Agreement), except
where the failure to have so obtained would not have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole, on the
Surviving Corporation and its subsidiaries taken as a whole, on the Parent
or on the ability to consummate the Merger.
(h) APPRAISAL RIGHTS. Holders of capital stock of the Company
shall not have demanded or perfected the right for appraisal of shares of
Company Stock representing more than five percent (5%) of all issued and
outstanding shares of capital stock of the Company taken as a whole as of
the Effective Date in accordance with Section 262 of the Corporation Law
and the Company shall have delivered to Parent a certificate dated as of
the Effective Date certifying to the foregoing effect.
(i) STOCK OPTION PLANS. Parent shall have received satisfactory
evidence (x) that holders of all Options have consented to the cancellation
of such Options and (y) that such Options and the Stock Option Plans will
terminate at or prior to the Effective Time.
4 CERTAIN PAYMENTS. In the event Parent and Acquisition Sub elect
to not consummate the Merger and the other transactions contemplated under
this Agreement as a result of a Pending Legal Proceeding, Parent shall
reimburse the Company for the Company Expenses (as defined in Section
9.2(d) hereof) which payment shall be payable to the Company (by wire
transfer of immediately available funds to an account designated by the
Company) within two (2) business days after demand theretofore is made in
writing by the Company.
9. TERMINATION, AMENDMENT AND WAIVER
1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of Parent, Acquisition Sub and the
Company;
(b) by either Parent and Acquisition Sub or the Company if the
Effective Time shall not have occurred on or before February 28, 1997 or
such later date as shall be mutually agreed to in each party's sole
discretion;
(c) by either Parent and Acquisition Sub or the Company if there
shall have been a material breach of any of the representations or
warranties set forth in this Agreement on the part of the other party,
which breach by its nature cannot be cured prior to the Effective Time or
within thirty (30) business days following receipt by the breaching party
of written notice of such breach from the other party hereto;
(d) by either Parent and Acquisition Sub or the Company if any
United States federal or state court of competent jurisdiction shall have
issued an injunction or taken any other action (which the parties shall use
their best efforts to stay or reverse) permanently restraining, enjoining
or otherwise prohibiting the Merger, and such injunction or other action
shall have become final and non-appealable;
(e) by the Company if either Parent or Acquisition Sub shall
have failed to perform or has breached in any material respect any of its
covenants, obligations or agreements under or contained in this Agreement
unless the failure to so perform or the breach, as the case may be, has
been caused by or results from a breach of this Agreement by the Company;
(f) by the Company if the Company enters into a binding
definitive agreement to effect a Superior Proposal (which entrance shall
not require Parent's or Acquisition Sub's consent); PROVIDED, HOWEVER, that
the Company shall notify Parent in writing at least three business days
prior to the exercise of its termination rights under this Section 9.1(f),
where such notice shall include the proposed terms of such agreement into
which the Company may enter;
(g) by Parent and Acquisition Sub if the Board shall have failed
to recommend or shall have withdrawn its recommendation or approval of the
Merger, or if the Board shall have recommended to stockholders of the
Company any Acquisition Proposal of any other person or shall have resolved
to do any of the foregoing, provided that any notice sent to Parent and
Acquisition Sub under Section 9.1(f) prior to the exercise of the
termination rights under such section shall not require the entrance into
such agreement or be deemed to constitute an act described in this Section
9.1(g) but the entrance into a binding definitive agreement to effect a
Superior Proposal shall constitute an act described in this Section 9.1(g);
(h) by Parent and Acquisition Sub if the Company shall have
failed to perform in any material respect any of its covenants, obligations
or agreements under or contained in this Agreement unless the failure to so
perform or the breach, as the case may be, has been caused by or results
from a breach of this Agreement by Parent or Acquisition Sub; or
(i) by Parent and Acquisition Sub if any United States federal
or state court of competent jurisdiction shall have issued an injunction or
taken any other action (which the parties shall use their best efforts to
stay or reverse) permanently restraining, enjoining or otherwise
prohibiting the enforcement of any of the terms of the Proxy Agreement, and
such injunction or other action shall have become final and non-appealable.
2 EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement pursuant
to Section 9.1 hereof, this Agreement shall forthwith become void and have
no effect, without any liability on the part of any party hereto or its
affiliates, trustees, directors, officers or stockholders and all rights
and obligations of any party hereto shall cease except for the agreements
contained in Sections 7.4, 7.7, 9 and 10; PROVIDED, HOWEVER, that nothing
contained in this Section 9.2(a) shall relieve any party from liability
under this Section 9 for any breach of this Agreement.
(b) If (x) Parent and Acquisition Sub terminate this Agreement
(A) pursuant to Section 9.1(g) or (B) pursuant to Section 9.1(h) as a
result of a willful breach by the Company or (y) if the Company terminates
this Agreement pursuant to Section 9.1(f), then the Company shall pay to
Parent an amount in cash equal to the sum of (i) $1,000,000, plus (ii)
Parent's and Frederick Marino's out-of-pocket costs and expenses in
connection with this Agreement and the transactions contemplated hereby
including, without limitation, fees and disbursements of its outside
counsel, accountants and other consultants retained by or on behalf of
Parent together with the other out-of-pocket costs incurred by it in
connection with analyzing, structuring, participating in the negotiations
of the terms and conditions, arranging financing, conducting due diligence
and other activities related to the Merger and the transactions
contemplated by this Agreement and the negotiations and evaluations leading
to the Merger, including, without limitation, commitment fees and expense
reimbursements paid to potential lenders (collectively, the "PARENT
EXPENSES"). Following the Company's reasonable request, Parent and Mr.
Marino shall provide such reasonable documentation of such expenses to
enable the Company to appropriately account for such expenses in its
financial records and to report such expenses in its tax returns and
reports.
(c) If Parent and Acquisition Sub terminate this Agreement
pursuant to Sections 9.1(h) (except for a termination because of a willful
breach by the Company, in which case the provisions of Section 9.2(b) will
apply), the Company shall reimburse Parent and Mr. Marino for the Parent
Expenses.
(d) If the Company terminates this Agreement pursuant to Section
9.1(e) hereof as a result of a willful breach by Parent and Acquisition
Sub, the Parent and Acquisition Sub shall pay to the Company an amount in
cash equal to the sum of (i) $1,000,000, plus (ii) the Company's
out-of-pocket costs and expenses in connection with this Agreement and the
transactions contemplated hereby including, without limitation, fees and
disbursements of its outside counsel, accountants and other consultants
retained by or on behalf of the Company together with the other
out-of-pocket costs incurred by it in connection with participating in the
negotiations of the terms and conditions of this Agreement and the other
activities related to the Merger and the other transactions contemplated by
this Agreement and the negotiations with Parent and its affiliates leading
to the Merger (collectively, the "COMPANY EXPENSES"). Following Parent's
reasonable request, the Company shall provide such reasonable documentation
of such expenses to enable Parent to appropriately account for such
expenses in its financial records and to report such expenses in its tax
returns and reports.
(e) If the Company terminates this Agreement pursuant to Section
9.1(e) (except for termination because of a willful breach by Parent and
Acquisition Sub, in which case the provisions of Section 9.2(d) will
apply), Parent shall reimburse the Company for the Company Expenses.
(f) Any payment required by this Section 9.2 shall be payable
(i) by the Company to Parent and Mr. Marino, or (ii) by Parent to the
Company, as the case may be, (by wire transfer of immediately available
funds to accounts designated by the recipients thereof) within two business
days after demand therefore is made in writing by the person entitled to
make such demand. The parties acknowledge and agree that the provisions of
this Section 9.2 are included herein in order to induce each of the parties
hereto to enter into this Agreement and to reimburse such parties for
incurring the costs and expenses related to entering into this Agreement
and consummating the transactions contemplated by this Agreement.
(g) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE SOLE AND EXCLUSIVE
REMEDIES AVAILABLE TO THEM WITH RESPECT TO ANY PROPOSED OR ACTUAL
TERMINATION OF THIS AGREEMENT OR ANY ACT OR FAILURE TO ACT PRIOR TO THE
CONSUMMATION OF THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, INCLUDING ANY MISREPRESENTATION OR BREACH OF ANY REPRESENTATION,
WARRANTY, COVENANT, AGREEMENT OR OBLIGATION UNDER THIS AGREEMENT SHALL BE
THE RIGHTS TO PAYMENT UNDER THIS SECTION 9.2. The parties hereto expressly
acknowledge and agree that, in light of the difficulty of accurately
determining actual damages with respect to the foregoing, the rights to
payment under this Section 9.2: (i) constitute a reasonable estimate of the
damages that will be suffered by reason of any such proposed or actual
termination of this Agreement or any such act or failure to act in
accordance with this Agreement, and (ii) shall be in full and complete
satisfaction of any and all damages arising as a result of the foregoing.
THE PARTIES AGREE THAT, EXCEPT AS SET FORTH IN THIS SECTION 9.2(G), THEY
SHALL NOT, IN RESPECT OF ANY PROPOSED OR ACTUAL TERMINATION OF THIS
AGREEMENT OR ANY ACT OR FAILURE TO ACT PRIOR TO THE CONSUMMATION OF THE
MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, EXERCISE
OR ATTEMPT TO EXERCISE ANY OTHER RIGHTS OR REMEDIES, IN CONTRACT, AT LAW,
IN EQUITY OR OTHERWISE AGAINST ANY OTHER PARTY HERETO.
3 AMENDMENT. This Agreement may be amended by the parties hereto
by an instrument in writing signed on behalf of each of the parties hereto
AT ANY TIME BEFORE OR AFTER ANY APPROVAL HEREOF BY THE STOCKHOLDERS OF THE
COMPANY AND ACQUISITION SUB; PROVIDED, HOWEVER, THAT AFTER ANY SUCH
APPROVAL OF THE COMPANY'S STOCKHOLDERS, NO AMENDMENT SHALL BE MADE WHICH
REDUCES THE AMOUNT OR CHANGES THE FORM OF THE MERGER CONSIDERATION OR IN
ANY WAY MATERIALLY ADVERSELY AFFECTS THE RIGHTS OF STOCKHOLDERS OF THE
COMPANY, WITHOUT THE FURTHER APPROVAL OF SUCH STOCKHOLDERS.
4 EXTENSION; WAIVER. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in a written instrument signed
on behalf of such party.
10. GENERAL PROVISIONS
1 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered if delivered personally or as of the
date sent if sent by cable, telegram or telecopier, or, as of the next
business day if sent by prepaid overnight carrier to the parties at the
following addresses (or at such other addresses as shall be specified by
the parties by like notice):
(a) if to Parent or Acquisition Sub:
c/o Fidelity Capital Associates, Inc.
82 Devonshire Street, R25C
Boston, MA 02109-3614
Attn: Mr. John J. Remondi
with a copy to: c/o Fidelity Capital Associates, Inc.
82 Devonshire Street, E2OE
Boston, MA 02109-3614
Attn: Robert M. Gervis, Esq.
and a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Laura C. Hodges Taylor, P.C.
Joseph L. Johnson III, Esq.
(b) if to the Company: 550 Hamilton Avenue
Brooklyn, New York 11232
Attention: President
with a copy to: Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102
Attn: Stanley U. North, III, Esq.
2 INTERPRETATION. When a reference is made in this Agreement to
subsidiaries of Parent, Acquisition Sub or the Company, the word
"subsidiary" means any corporation more than 50 percent of whose
outstanding voting securities, or any partnership, joint venture or other
entity more than 50 percent of whose total equity interest, is directly or
indirectly owned by Parent, Acquisition Sub or the Company, as the case may
be. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
3 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANT AND
AGREEMENTS. Except for Section 7.6, and the obligations contained in
Section 3 hereof, none of the representations, warranties, covenants and
agreements contained in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time, and thereafter
there shall be no liability on the part of either Parent, Acquisition Sub
or the Company or any of their respective officers, directors or
stockholders in respect thereof. Except as expressly set forth in this
Agreement, there are no representations or warranties of any party hereto,
express or implied.
4 MISCELLANEOUS. This Agreement (i) constitutes, together with the
Confidentiality Agreement, the entire agreement and supersedes all of the
prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, (ii)
shall be binding upon and inure to the benefits of the parties hereto and
their respective successors and permitted assigns and is not intended to
confer upon any other person (except as set forth below) any rights or
remedies hereunder and (iii) may be executed in two or more counterparts
(and via facsimile) which together shall constitute a single agreement.
Section 7.6 is intended to be for the benefit of those persons described
therein and their respective legatees, distributees, heirs, estates,
executors and other personal representatives, as fully in each case as if
each such person was a party hereto and the covenants contained therein may
be enforced by such persons. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties and
each of the persons referred to Section 7.6 and this Section 10.4 shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
the Chancery Court of the State of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity that is not
limited by this Agreement.
5 ASSIGNMENT. Except as expressly permitted by the terms hereof,
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties (and any assignment to a non-permitted
assignee shall be void and of no effect).
6 KNOWLEDGE; BEST EFFORTS. Wherever the terms "the Company's
knowledge," "the Company's best knowledge," "the receipt of notice," "the
best knowledge of the Company," and any similar term is used, in each case
each such term shall mean the knowledge or best knowledge or receipt (as
the case may be) of any of Robert Gaites, David Polishook, Richard Young,
John Yanuklis and David Bernstein and includes any fact, matters or
circumstances which any of such individuals, as an ordinary and prudent
business person employed or retained in the same capacity in the same type
and size of business as the Company should have known.
7 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be
severable.
8 CHOICE OF LAW/CONSENT TO JURISDICTION. The validity,
interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of Delaware. The parties hereby
irrevocably and unconditionally consent to the jurisdiction of the Chancery
Court of the State of Delaware for any action, suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated
hereby, and the parties agree not to commence any action, suit or
proceeding related thereto except in such court unless, as a result of
Surviving Corporation's merger with a non-Delaware entity or other similar
corporate event occurring after the Effective Time, such court
affirmatively refuses to resolve any such action, suit or proceeding. The
parties further irrevocably and unconditionally waive any objection to the
laying of venue of any action, suit or proceeding arising out of or
relating to this Agreement in the Chancery Court of the State of Delaware,
and hereby further irrevocably and unconditionally waive and agree not to
plead or claim in such court that any such action, suit or proceeding
brought in such court has been brought in an inconvenient forum. Each
party further agrees that service of any process, summons, notice or
document by U.S. registered mail to the address of such party set forth in
Section 10.1 above shall be effective service of process for any action,
suit or proceeding brought against such party in such court.
9 THIRD-PARTY BENEFICIARY. With respect to those provisions of
Section 9.2 pursuant to which certain expenses are to be reimbursed to
Frederick M. Marino, Mr. Marino is a direct and intended third-party
beneficiary of such Section 9.2.
<PAGE>
IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
HAMILTON ACQUISITION LLC
By:/S/ JOHN J. REMONDI
-----------------------------------
Name: JOHN J. REMONDI
Title: MANAGER
HAMILTON NY ACQUISITION CORP.
By:/S/ JOHN J. REMONDI
-----------------------------------
Name: JOHN J. REMONDI
Title: PRESIDENT
THE STROBER ORGANIZATION, INC.
By:/S/ ROBERT J. GAITES
----------------------------------
Name: ROBERT J. GAITES
Title:President and Chief Executive
Officer
<PAGE>
EXHIBIT 2.2
Proxy Agreement dated as of November 11, 1996 among certain
stockholders of the Company, Hamilton Acquisition LLC and
Hamilton NY Acquisition Corp.
PROXY AGREEMENT
This is a PROXY AGREEMENT (the "Agreement"), dated as of November __,
1996 by and among Hamilton Acquisition LLC, a Delaware limited liability
company ("Parent"), Hamilton NY Acquisition Corp., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Acquisition Sub"), and certain
stockholders of The Strober Organization, Inc., a Delaware corporation (the
"Company") who are signatories hereto (collectively, the "Stockholders" and
each, a "Stockholder").
BACKGROUND
A. As of the date hereof, each Stockholder owns (either beneficially
or of record) that number of shares of common stock, par value $.01 per
share (the "Common Stock"), of the Company set forth on EXHIBIT A hereto
(together with any shares of Common Stock acquired by such Stockholder
during the Proxy Term (as defined in Section 2 hereof), whether upon the
exercise of options, conversion of convertible securities or otherwise, the
"Stockholder Shares").
B. Parent, Acquisition Sub and the Company propose to enter into an
Agreement and Plan of Merger of even date herewith (as the same may be
amended from time to time, the "Merger Agreement") (all capitalized terms
used but not defined herein shall have the meanings set forth in the Merger
Agreement) which provides, upon the terms and subject to the conditions
thereof, for the merger of Acquisition Sub with the Company (the "Merger").
C. As a condition to their willingness to enter into the Merger
Agreement, Parent and Acquisition Sub have requested that each Stockholder
agree, and in order to induce the Parent and Acquisition Sub to enter into
the Merger Agreement, each of the Stockholders has agreed to, among other
things, grant Parent irrevocable proxies to vote the Stockholder Shares
owned of record or beneficially by each such Stockholder on the terms and
conditions provided herein.
TERMS
In consideration of the promises and the mutual covenants herein
contained and intending to be legally bound, the parties hereto agree as
follows:
1. TRANSFER AND VOTING OF SHARES.
(a) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. Each
Stockholder hereby agrees, while this Agreement is in effect, and except as
contemplated hereby, not to (i) offer to sell, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any of the Stockholder Shares or any other shares of Common
Stock; (ii) deposit any Stockholder Shares into a voting trust or enter
into a voting agreement with respect to any Stockholder Shares or grant any
proxy or power of attorney with respect to any such Stockholder Shares; or
(iii) take any action that would make any representation or warranty of
such Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such Stockholder from performing his or her
obligations under this Agreement or otherwise take any action that is
contrary to the transactions contemplated hereby and by the Merger
Agreement. Notwithstanding anything herein to the contrary, the parties
hereto shall be entitled (x) to pledge or hypothecate shares of Common
Stock to institutional lenders as security for personal or commercial
loans, or (ii) to transfer shares of Common Stock to charitable trusts,
descendants or trusts for the benefit of any spouse or descendant subject
to the condition precedent to any such transfer that the transferee (or in
the case of a pledge or hypothecation, the pledgee) shall execute and
deliver to the Company and to Parent the Proxy Agreement agreeing to be
personally bound thereby and appointing the transferor as the transferee's
proxy in voting all the transferred shares as long as the Proxy Agreement
remains in effect.
(b) VOTING OF SHARES; FURTHER ASSURANCES. Except as otherwise
provided in this Section 1(b), each Stockholder, by this Agreement, with
respect to those Stockholder Shares that such Stockholder owns of record,
does hereby constitute and appoint Parent, or any affiliate of Parent that
is a party to the Merger Agreement, with full power of substitution, during
and for the Proxy Term, as such Stockholder's true and lawful attorney and
irrevocable proxy, for and in such Stockholder's name, place and stead, to
vote each of such Stockholder Shares as such Stockholder's proxy, at every
meeting of the stockholders of the Company or any adjournment thereof or in
connection with any written consent of the Company's stockholders (A) in
favor of the approval and adoption of the Merger Agreement and approval of
the Merger and the other transactions contemplated by the Merger Agreement,
(B) against any proposal for any action or agreement that would result in a
material breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
could result in any of the conditions of the Company's obligations under
the Merger Agreement not being fulfilled, and (C) in favor of any other
matter directly relating to consummation of the transactions contemplated
by the Merger Agreement which is considered at any such meeting of
stockholders or in such consent, and in connection therewith to execute any
documents which are necessary or appropriate in order to effectuate the
foregoing. Each Stockholder intends this proxy to be irrevocable and
coupled with an interest during the Proxy Term and will take such further
action and execute such other instruments as may be necessary to effectuate
the intent of this proxy and hereby revokes any proxy previously granted by
such Stockholder with respect to his or her Stockholder Shares. Each
Stockholder further agrees to cause the Stockholder Shares owned by such
Stockholder beneficially to be voted in accordance with the foregoing.
Notwithstanding anything to the contrary in this Agreement (including
Section 6(b) hereof), Parent is not authorized under this Agreement to, and
shall not, directly or indirectly, vote the Stockholder Shares, execute a
written consent of the Company's stockholders or otherwise act pursuant to
this Agreement in any manner (a) to elect or remove any director of the
Company, (b) which would prevent the Company from taking the actions
permitted by Section 7.5(b) of the Merger Agreement (other than approval
and adoption of the Merger Agreement and related agreements and approval of
the transactions contemplated thereby, including the Merger), (c) to amend,
supplement or otherwise modify the By-laws or Certificate of Incorporation
of the Company (except with respect to and in connection with the Merger)
or (d) to require the Board of Directors of the Company to take or refrain
from taking any action.
(c) CERTAIN EVENTS. Each Stockholder agrees that this Agreement
and the obligations hereunder shall attach to his or her Stockholder Shares
and shall be binding upon any person or entity to which legal or beneficial
ownership of his or her Stockholder Shares shall pass, whether by operation
of law or otherwise, including without limitation such Stockholder's heirs,
guardians, administrators or successors.
2. PROXY TERM. For the purposes of this Agreement, "Proxy Term"
shall mean the period from the execution of this Agreement until the
earlier of (a) the termination of the Merger Agreement or (b) the Effective
Time (as such term is defined in the Merger Agreement).
3. PAYMENTS TO PARENT.
(a) In the event that on or after the date hereof, (i) the
Merger Agreement has been terminated pursuant to the provisions of Section
9.1(f) thereof and at the time of such termination neither Parent nor
Acquisition Sub is in breach of its obligations under the Merger Agreement
and (ii) any Stockholder thereafter sells Stockholder Shares in connection
with the consummation of a Superior Proposal (as defined in Section 7.5(b)
of the Merger Agreement) within six months of the termination of the Merger
Agreement, such selling Stockholder shall pay to Parent an amount in cash
equal to fifty percent (50%) of the product of (x) the number of such
Stockholder Shares sold and (y) the excess, if any, of (A) the per share
cash (and/or if consideration is received in such sale in the form of
securities, the "fair market value" (as defined in Section 3(b) below) of
such securities) received by such Stockholder as a result of such sale (the
"Selling Stockholder Price") over (B) the Merger Consideration (as defined
in the Merger Agreement).
(b) For purposes of this Agreement, the fair market value of any
securities listed on a national securities exchange or traded on The Nasdaq
Stock Market shall be equal to the average closing price per share of such
security as reported on such exchange or The Nasdaq Stock Market for the
twenty (20) trading days immediately preceding the effective date of the
transaction pursuant to which the Stockholder is entitled to receive such
securities.
(c) Any payment required to be made pursuant to Section 3(a) of
this Agreement shall be made within two business days after the settlement
of such sale.
4. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent and Acquisition
Sub jointly and severally hereby represent and warrant to the Stockholders
as follows:
(a) ORGANIZATION AND QUALIFICATION. Parent is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware. Acquisition Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Parent and Acquisition Sub has the requisite
power and authority to carry on its business as it is now being conducted.
Each of Parent and Acquisition Sub is duly qualified to do business and is
in good standing in each jurisdiction in which the character of its
properties, owned or leased, or the nature of its activities make such
qualification necessary, except where the failure to be so qualified or in
good standing would not have a material adverse effect on the business,
assets, results of operations, condition (financial or otherwise) or
prospects (a "Material Adverse Effect") of Parent and its subsidiaries
taken as a whole. Acquisition Sub has not conducted any business prior to
the date hereof and has no assets and liabilities other than those incident
to its formation and to the consummation of the transactions contemplated
hereby and by the Merger Agreement. Copies of the Certificate of Formation
of Parent and the Certificate of Incorporation, and By-laws of Acquisition
Sub heretofore delivered to the Company are true, complete and correct as
of the date hereof.
(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and
Acquisition Sub has the requisite power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the managers and members,
if required, of Parent and by the Board of Directors and the sole
stockholder of Acquisition Sub, if required, and no other proceedings on
the part of Parent or Acquisition Sub are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Parent and
Acquisition Sub and, assuming this Agreement constitutes a valid and
binding obligation of the Stockholders, constitutes the legal, valid and
binding obligation of each of Parent and Acquisition Sub enforceable
against each of Parent and Acquisition Sub in accordance with its terms.
(c) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Parent or Acquisition Sub nor the
consummation of the transactions contemplated hereby will (i) conflict with
or result in any breach of any provision of their respective certificates
of incorporation or by-laws; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-
R Act"), (B)pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (C) such filings and approvals as may be required
under the "blue sky," takeover or securities laws of various states, or (D)
where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not prevent or delay
consummation of the transactions contemplated by this Agreement or would
not otherwise prevent Parent or Acquisition Sub from performing their
respective obligations under this Agreement; (iii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, license, agreement
or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which any of their respective assets may be
bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained
or which, individually or in the aggregate, would not have a Material
Adverse Effect on Parent and its subsidiaries taken as a whole; or
(iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or Acquisition Sub, any of their respective
subsidiaries or any of their respective assets, except for violations which
would not have a Material Adverse Effect on Parent and its subsidiaries
taken as a whole.
5. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER. Each
Stockholder hereby severally (for himself, herself or itself only)
represents and warrants to Parent and Acquisition Sub as follows:
(a) OWNERSHIP OF SHARES. Such Stockholder owns of record or
beneficially the number of shares of Common Stock set forth on EXHIBIT A
hereto and such shares constitute all of the shares of Common Stock owned
of record or beneficially by such Stockholder. Such Stockholder has sole
voting power and sole power of disposition with respect to his or her
Stockholder Shares, with no restrictions, except those that may be imposed
by applicable federal securities laws, on such Stockholder's rights of
disposition pertaining thereto. Except as specifically set forth on
EXHIBIT A hereto, such Stockholder has not granted any proxy with respect
to his or her Stockholder Shares and neither such Stockholder nor his or
her Stockholder Shares is bound by or party to any agreement or other
instrument restricting such Stockholders' voting rights with respect to
such Stockholder Shares. Such Stockholder owns of record or beneficially
the number and type of securities issued or granted by the Company,
including without limitation options, warrants and other convertible
securities, set forth on EXHIBIT A hereto and such securities constitute,
along with such shares of Common Stock set forth on EXHIBIT A hereto, all
of the securities of the Company or instruments convertible into securities
of the Company owned of record or beneficially by such Stockholder. The
Stockholder Shares are, and immediately prior to the Effective Time will
be, duly authorized, validly issued, fully paid, non-assessable and, except
for those pledges set forth on SCHEDULE 5(A) hereto, free and clear of any
and all liens, security interests, proxies, voting trusts or agreements,
encumbrances, charges or claims of any kind whatsoever except for any
encumbrance or proxy arising under this Agreement.
(b) ORGANIZATION; AUTHORITY RELATIVE TO THIS AGREEMENT. Such
Stockholder has the legal capacity, power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
such Stockholder and, assuming this Agreement constitutes a valid and
binding obligation of Parent and Acquisition Sub, this Agreement
constitutes a legal, valid and binding agreement of such Stockholder
enforceable against such Stockholder in accordance with its terms. Except
as set forth on SCHEDULE 5(B) hereto, there is no beneficiary or holder of
a voting trust certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby; PROVIDED, HOWEVER, that any such consent has been
obtained in writing prior to the execution of this Agreement.
(c) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by such Stockholder, the performance by such
Stockholder of the obligations and transactions contemplated hereby,
including without limitation the granting of the irrevocable proxy and the
appointment of an attorney-in-fact pursuant to Section 1(b) hereof, nor the
compliance by such Stockholder with any provision hereof, will (i) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (A) in
connection with the H-S-R Act, (B) pursuant to the Exchange Act, (C) such
filings and approvals as may be required under the "blue sky," takeover or
securities laws of various states, or (D) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not prevent or delay the performance by such
Stockholder of his or her obligations under this Agreement; (ii) result in
any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default or give rise to any right of
termination, amendment, cancellation or acceleration) under, or result in
the creation of a lien or encumbrance on any of his or her Stockholder
Shares pursuant to, any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which such
Stockholder is party or by which such Stockholder or any of his or her
assets, including the Stockholder Shares, may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or which,
individually or in the aggregate, would not prevent or delay the
performance by such Stockholder of his or her obligations under this
Agreement; or (iii) conflict with or violate any order, writ, injunction,
judgment, decree, statute, law, rule or regulation applicable to such
Stockholder or any of his or her assets, including the Stockholder Shares.
(d) ACKNOWLEDGMENT OF RELIANCE. Such Stockholder understands
and acknowledges that the Parent and Acquisition Sub are entering into the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement.
(e) BROKERS. No broker, investment banker, financial adviser or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
6. CERTAIN COVENANTS OF STOCKHOLDER. Except in accordance with
Subsection 6(e), each Stockholder hereby covenants and agrees (with respect
to himself or herself but not as to the other Stockholders) as follows:
(a) NEGOTIATIONS. Unless and until this Agreement shall have
been terminated in accordance with its terms, each of the Stockholders
agrees and covenants that (i) he or she will not, directly or indirectly,
initiate, solicit or encourage any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a merger,
acquisition, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of 10% or more of the assets or
securities of the Company or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement (any such proposal or
offer being hereinafter referred to as an "ACQUISITION PROPOSAL") or engage
in any negotiations concerning, or provide any confidential information or
data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal; (ii) each of the Stockholders will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing; and (iii) each of the Stockholders will
notify Parent immediately if any such inquiries or proposals are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with any of the
Stockholders or, to the knowledge of such Stockholder, the Company, which
notification shall include the terms of any such inquiries or proposals,
PROVIDED, HOWEVER, that if the Company actually provides the information
and notice to Parent required by Section 7.5 of the Merger Agreement with
respect to any contact with the Company, such Stockholder shall not have
any obligation to provide any such duplicate information.
(b) VOTING. Each Stockholder hereby agrees that, during the
Proxy Term, at any meeting of the stockholders of the Company, however
called, or in connection with any written consent of the Company's
Stockholders, such Stockholder shall vote (or cause to be voted) his or her
Stockholder Shares, except as specifically requested by the Parent in
writing in advance: (a) in favor of the Merger; (b) against any action or
agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement; and (c) against any action or
agreement (other than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage the Merger, including, but not limited to: (i) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of any of its
subsidiaries; (ii) a sale, lease or transfer of a material amount of assets
of the Company or any of its subsidiaries or a reorganization,
recapitalization, dissolution or liquidation of the Company or its
subsidiaries; (iii) any change in the management or board of directors of
the Company, except as agreed to in writing by Parent; (iv) any material
change in the present capitalization or dividend policy of the Company; (v)
any amendment of the Company's Certificate of Incorporation; or (vi) any
other material change in the Company's corporate structure, management or
business. Such Stockholder shall not enter into any agreement or
understanding with any person or entity during the Proxy Term to vote or
give instructions to vote in any manner inconsistent with the terms of this
Section 6(b). Notwithstanding the foregoing, in the event that the Company
has properly terminated the Merger Agreement pursuant to Section 9.1(f)
thereof, a Stockholder may vote (or cause to be voted) his or her
Stockholder Shares in favor of a Superior Proposal.
(c) ADDITIONAL SHARES. Each Stockholder hereby agrees, while
this Agreement is in effect, to promptly notify Parent of the number of any
new shares of Common Stock acquired, beneficially or of record, by such
Stockholder, if any, after the date hereof whether through acquisition in
the open market, upon exercise of any option, warrant or other convertible
security, or otherwise.
(d) WAIVER OF APPRAISAL AND DISSENTER'S RIGHTS. Each
Stockholder hereby waives any rights of appraisal or rights to dissent from
the Merger that such Stockholder may have.
(e) ACTING AS DIRECTOR AND EXECUTIVE OFFICER. Notwithstanding
anything in this Section 6 to the contrary, the covenants and agreements
set forth in Section 6(a) shall not be deemed to prevent any Stockholder,
while acting in his or her capacity as a director of the Company, from
taking any action that is specifically permitted under the applicable
provisions of the Merger Agreement. Further, any Stockholder may act in
his capacity as an executive officer of the Company upon direction by the
Board of Directors of the Company pursuant to Section 7.5(b) of the Merger
Agreement.
(f) STOP TRANSFER. Each Stockholder agrees with, and covenants
to, Parent and Acquisition Sub that such Stockholder may not request that
the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of his or her
Stockholder Shares, unless such transfer is made in compliance with this
Agreement. Each Stockholder agrees, with respect to any Stockholder Shares
in certificated form, that such Stockholder will deliver to the Company
within fifteen business days after the date hereof, the certificates
representing such Stockholder Shares and the Company will inscribe upon
such certificates the following legend (the "Legend"): "The shares of
Common Stock, par value $.01 per share, of The Strober Organization, Inc.
(the "Company"), represented by this certificate are subject to a Proxy
Agreement dated as of November 11, 1996, and may not be sold or otherwise
transferred, except in accordance therewith. Copies of such Agreement may
be obtained at the principal executive offices of the Company." Each
Stockholder agrees that within ten business days after the date hereof,
such Stockholder will no longer hold any Stockholder Shares, whether
certificated or uncertificated, in "street name" or in the name of any
nominee. In the event that the Company enters into a Superior Proposal and
has terminated the Merger Agreement in accordance with Section 9.1(f)
thereof, the Company will remove the Legend from all certificates
representing Stockholder Shares and will return such certificates to the
Stockholders. Pursuant to the Merger Agreement, the Company has agreed to
notify the transfer agent of the provisions set forth in this Section and
each Stockholder agrees to provide such documentation and to take such
other actions as may be reasonably required to give effect to such
provisions with respect to such Stockholder Shares.
(g) REORGANIZATION AGREEMENT. Each Stockholder hereby agrees
that, at the Effective Time, the Reorganization Agreement shall terminate
as to such Stockholder and such Stockholder shall have no further rights
thereunder.
7. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto (as to the
Stockholders, in their capacity as stockholders) shall execute and deliver
such additional documents and take all such further action as may be
necessary or reasonably desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement and the Merger Agreement. Without limiting the generality of the
foregoing, during the Proxy Term, each Stockholder shall perform such
further acts and execute such further documents and instruments as may
reasonably be required to vest in the Parent and Acquisition Sub the power
to carry out the provisions of this Agreement including without limitation
the exercise of the power afforded by Section 1 hereof.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
(i) constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise, provided that Parent may assign any of its
rights and obligations to any wholly-owned direct or indirect subsidiary of
Parent or to any entity which controls or is under common control with
Parent, but no such assignment shall relieve Parent of its obligations
hereunder and Parent shall remain as fully and primarily liable as if there
was no such assignment.
(b) AMENDMENT. This Agreement may not be modified, amended,
altered or supplemented except by an instrument in writing signed on behalf
of all the parties hereto; PROVIDED that EXHIBIT A hereto may be
supplemented by the Parent and Acquisition Sub by adding the name and other
relevant information concerning any stockholder of the Company who agrees
to be bound by the terms of this Agreement without the agreement of any
other party hereto, and thereafter such added stockholder shall be treated
as a "Stockholder" for all purposes of this Agreement.
(c) ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof
in addition to any other remedy to which they are entitled at law or in
equity, and the parties hereto further agree to waive any requirement for
the posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief.
(d) VALIDITY. IF ANY TERM OR OTHER PROVISION OF THIS AGREEMENT
IS INVALID, ILLEGAL OR INCAPABLE OF BEING ENFORCED BY ANY RULE OF LAW OR
PUBLIC POLICY, ALL OTHER CONDITIONS AND PROVISIONS OF THIS AGREEMENT SHALL
NEVERTHELESS REMAIN IN FULL FORCE AND EFFECT SO LONG AS THE ECONOMIC OR
LEGAL SUBSTANCE OF THE TRANSACTIONS CONTEMPLATED HEREBY IS NOT AFFECTED IN
ANY MANNER MATERIALLY ADVERSE TO ANY PARTY. UPON SUCH DETERMINATION THAT
ANY TERM OR OTHER PROVISION IS INVALID, ILLEGAL OR INCAPABLE OF BEING
ENFORCED, THE PARTIES HERETO SHALL NEGOTIATE IN GOOD FAITH TO MODIFY THIS
AGREEMENT SO AS TO EFFECT THE ORIGINAL INTENT OF THE PARTIES AS CLOSELY AS
POSSIBLE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW IN AN ACCEPTABLE
MANNER TO THE END THAT THE TRANSACTIONS CONTEMPLATED HEREBY ARE FULFILLED
TO THE EXTENT POSSIBLE.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by cable, telegram, facsimile
transmission with confirmation of receipt, or telex, or by registered or
certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
if to Parent or Acquisition Sub:
Hamilton Acquisition LLC
c/o Fidelity Capital Associates, Inc.
82 Devonshire Street, R25C
Boston, MA 02109-3614
Attn: Mr. John J. Remondi
with a copy to:
Fidelity Capital Associates, Inc.
82 Devonshire Street, E20E
Boston, MA 02109-3614
Attn: Robert M. Gervis, Esq.
and a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Laura C. Hodges Taylor, P.C.
Joseph L. Johnson III, Esq.
if to Stockholders:
c/o Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, NJ 07102
Attn: Stanley U. North III, Esq.
with a copy to:
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, NJ 07102
Attn: Stanley U. North III, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
(f) CHOICE OF LAW/CONSENT TO JURISDICTION. The validity,
interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of Delaware without regard to its rules
of conflict of laws. The parties hereby irrevocably and unconditionally
consent to the jurisdiction of the Chancery Court of the State of Delaware
for any action, suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby, and the parties agree
not to commence any action, suit or proceeding related thereto except in
such court. The parties further irrevocably and unconditionally waive any
objection to the laying of venue of any action, suit or proceeding arising
out of or relating to this Agreement in the Chancery Court of the State of
Delaware, and hereby further irrevocably and unconditionally waive and
agree not to plead or claim in such court that any such action, suit or
proceeding brought in such court has been brought in an inconvenient forum.
Each party further agrees that service of any process, summons, notice or
document by U.S. registered mail (i) in the case of Parent or Acquisition
Sub, to the address of such party set forth in Section 8(e) above; or (ii)
in the case of any Stockholder, to the address of such Stockholder set
forth on EXHIBIT A hereto, shall be effective service of process for any
action, suit or proceeding brought against such party in such court.
(g) DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and via Facsimile), each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
(i) PERFORMANCE BY ACQUISITION SUB. Parent hereby agrees to
cause Acquisition Sub to comply with its obligations hereunder as
contemplated in the Merger Agreement.
(j) EXPENSES. Each of the parties hereto will pay all fees and
expenses it incurs in connection with this Agreement, whether or not
consummated, including without limitation the fees and expenses of its
financial and legal advisors.
(k) PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement.
(l) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements of Acquisition Sub, Parent and
the Stockholders pursuant to this Agreement shall survive the consummation
of the Merger or the termination of the Merger Agreement.
(m) NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this
Agreement shall not constitute or be deemed to evidence a contract,
agreement, arrangement or understanding among the parties hereto unless and
until (i) the Board of Directors of the Company has approved, for purposes
of Section 203 of the Delaware General Corporation Law and any applicable
provision of the Company's certificate of incorporation, the possible
acquisition of the Stockholder Shares by Parent and Acquisition Sub
pursuant to this Agreement and (ii) this Agreement is executed by all
parties hereto.
<PAGE>
IN WITNESS WHEREOF, Parent, Acquisition Sub and the Stockholders have
caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
HAMILTON ACQUISITION LLC
By:/S/ JOHN J. REMONDI
------------------------------
Name: JOHN J. REMONDI
Title: Manager
HAMILTON NY ACQUISITION CORP.
By:/S/ JOHN J. REMONDI
------------------------------
Name: JOHN J. REMONDI
Title: PRESIDENT
/s/ Robert J. Gaites /s/ John T. Guerin
- ------------------------------ ----------------------------------
Robert J. Gaites John T. Guerin
/s/ Sue Strober /s/ Richard D. King
- ------------------------------ ----------------------------------
Sue Strober Richard D. King
/s/ Sue Strober /s/ Steven Strober
- ------------------------------ ----------------------------------
Sue Strober, as Trustee for Steven Strober
Steven Strober
/s/ Sue Strober /s/ Hiliary Strober
- ------------------------------ ----------------------------------
Sue Strober, as Trustee for Hiliary Strober
Hilary Strober
/s/ Gordon Sandler /s/ David W. Berstein
- ------------------------------ ----------------------------------
Gordon Sandler David W. Berstein, Trustee, Trust
F/J/B/O Steven and Hilary Strober
/s/ Nathan Schwartzberg /s/ John Yanuklis
- ------------------------------ ----------------------------------
Nathan Schwartzberg John Yanuklis
/s/ Albert C. Brower
- ------------------------------
Albert C. Brower By:______________________________
Trustee, Trust F/B/O Yanuklis
Charitable Remainder Trust
<PAGE>
PROXY AGREEMENT
[SIGNATURE CONTINUATION PAGE]
/s/ Robert J. Gaites
---------------------------------
Robert J. Gaites; proxy for
Robert J. Gaites Charitable Trust
/s/ John Yanuklis
---------------------------------
John Yanuklis; proxy for
John Yanuklis Charitable trust
/s/ Albert C. Brower
---------------------------------
Albert C. Brower, proxy for
Albert C. Brower Charitable Trust
<PAGE>
<PAGE>
EXHIBIT A TO PROXY AGREEMENT
<TABLE>
<CAPTION>
NAME AND ADDRESS OF Number of Shares of Other Company Securities
STOCKHOLDER COMMON STOCK OWNED OWNED
<S> <C> <C>
Sue Strober 592,141 None
Sue Strober, trustee for son 42,325 None
Sue Strober, trustee for
daughter 42,325 None
Sue Strober, proxy for son{*} 45,600
Sue Strober, proxy for daughter{*} None
45,600
David W. Bernstein, trustee of 180,960 None
trust for Steven and Hilary
Strober{*}
Robert J. Gaites 309,955 Options for 113,053 Shares,
including 25,000 at $1.75 per
share, 25,000 at $4.75 per
share, 37,500 at $3.63 per
share, and 25,553 at $4.50 per
share.
John Yanuklis 313,254 Options for 96,904 Shares,
including 9,000 at $1.13 per
share, 14,286 at $1.75 per
share, 22,737 at $4.75 per
share, 23,503 at $3.63 per
share, and 27,378 at $4.50 per
share.
Gordon Sandler{++} 399,486 None
Richard King 200,931 None
Albert Brower 69,124 Options for 36,744 Shares,
including 3,750 at $1.13 per
share, 5,357 at $1.75 per
share, 8,211 at $4.75 per
share, 10,759 at $3.63 per
share, and 8,667 at $4.50 per
share.
Nathan Schwartzberg 127,166 None
John T. Guerin 422,249 None
John Yanuklis Charitable Trust 140,000 None
Robert J. Gaites Charitable 147,180 None
Trust
Albert C. Brower Charitable 25,000 None
Trust
Total 3,103,296
</TABLE>
**FOOTNOTES**
{*} Subject to proxy held by Sue Strober.
{++} Subject to (i) a Collateral Pledge Agreement
between Mr. Sandler and The Chase Manhattan Bank (the "BANK") and (ii) a
Forbearance Agreement between Mr. Sandler and the Bank.
<PAGE>
SCHEDULE 5(A)
TO
PROXY AGREEMENT
The certificates representing 399,486 shares of Common Stock, $.01 par
value, of the Company (the "GORDON SHARES") in the name of Gordon Sandler
("SANDLER") are in the physical possession of The Chase Manhattan Bank,
successor by merger to Chemical Bank (the "BANK"), subject to (i) that
certain Collateral Pledge Agreement between Sandler and the Bank and (ii)
that certain Forbearance Agreement between Sandler and the Bank. The
Company and the Purchaser are hereby irrevocably directed to set the record
address and the address for the transmission of payment for the Gordon
Shares as follows:
Gordon Sandler
c/o Sills Cummis Zuckerman Radin Tischman
Epstein & Gross, P.A., as Escrow Agent
One Riverfront Plaza
Newark, New Jersey 07102
Attention:Stanley U. North, III, Esq.
The Bank consents to the grant by Sandler of a proxy in respect of the
Gordon Shares pursuant to the terms of the Proxy Agreement between and
among the Company and the various other parties thereto dated the date
hereof (the "PROXY AGREEMENT"), and agrees not to take any action which is
contrary to or inconsistent with the terms of the Proxy Agreement.
CONSENTED AND AGREED TO BY:
THE CHASE MANHATTAN BANK
/S/ HARVEY CAVAYERO
- -------------------------------------------
by: HARVEY CAVAYERO, ESQ., ATTORNEY-IN-FACT
(AN AUTHORIZED OFFICER)
/S/ GORDON SANDLER
- -------------------------------------------
GORDON SANDLER
<PAGE>
EXHIBIT 2.3
Guaranty dated as of November 11, 1996 by Fidelity Investors Limited
Partnership in favor of the Company
<PAGE>
GUARANTY
GUARANTY, dated as of November 11, 1996 by Fidelity Investors Limited
Partnership, a Delaware limited partnership (the "Guarantor"), in favor of
The Strober Organization, Inc., a Delaware corporation (the "Company").
RECITALS
The Company is a party to an Agreement and Plan of Merger (the "Merger
Agreement") dated as of the date hereof by and among the Company, Hamilton
Acquisition LLC ("Parent") and Hamilton NY Acquisition Corp. ("Acquisition
Sub"), pursuant to which Acquisition Sub will be merged with and into the
Company (the "Merger"), with the resulting entity being an indirect
subsidiary of Parent. Guarantor has advised the Company that (i) the
Guarantor is a member of Parent, a Delaware limited liability company and
(ii) Parent owns all of the issued and outstanding capital stock of
Acquisition Sub. Parent and Acquisition Sub are entities newly created for
the purpose of effecting the Merger. The Company has required that the
Guarantor execute this Guaranty to provide assurances that the Company will
receive any amounts which may become due from Parent and/or Acquisition Sub
in connection with the performance of the Parent's and/or Acquisition Sub's
respective obligations under the Merger Agreement. The Guarantor is
willing to execute this Guaranty to induce the Company to enter into the
Merger Agreement.
NOW, THEREFORE in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees as follows:
Section 1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby
absolutely, unconditionally and irrevocably guarantees to the Company that
each of Parent and Acquisition Sub will perform all of its obligations
subject to and under the Merger Agreement, including the timely payment of
all amounts due thereunder and the Proxy Agreement (define) (collectively,
the "Obligations"). Anything to the contrary in this Guaranty
notwithstanding, the involvement of Parent or Acquisition Sub or both in
insolvency, bankruptcy or similar proceedings as a debtor shall not in any
manner modify, reduce or otherwise affect the Guarantor's obligation under
this Guaranty.
Section 2. WAIVERS BY GUARANTOR; AGENT'S FREEDOM TO ACT. The Guarantor
waives presentment, demand, protest, notice of acceptance and all other
notices of any kind, all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in
effect, any right to require the marshalling of assets of Parent,
Acquisition Sub or the Guarantor, and all suretyship defenses generally.
Without limiting the generality of Section 1 or the foregoing part of this
Section 2, the Guarantor agrees that the obligations of the Guarantor
hereunder shall not be released or discharged, in whole or in part, or
otherwise modified or affected by any of the following, whether or not any
one or more such events or circumstances occur at one or more times and/or
from time to time, and whether or not with notice to, or the consent of,
Guarantor (i) any compromises, settlements, extensions, rescissions,
waivers, amendments or other modifications of any kind or nature of any of
the terms or provisions of any agreement evidencing, securing or otherwise
executed in connection with the Obligations; (ii) the substitution or
release in whole or in part of any entity primarily or secondarily liable
for the Obligations; (iii) the adequacy of any rights the Company may have
against any collateral or other means of obtaining repayment of the
Obligations; or (iv) any event or circumstance which could otherwise
constitute a legal or equitable discharge or defense in whole or in part
(other than full and complete performance or payment in full of the
Obligations and performance of Guarantor's other agreements contained in
this Guaranty).
Section 3. SUBROGATION; SUBORDINATION. Until the payment and
performance in full of all Obligations, the Guarantor shall not exercise
any rights against Parent or Acquisition Sub arising as a result of payment
by the Guarantor hereunder, by way of subrogation or otherwise, and will
not prove any claim in competition with the Company in respect of any
payment hereunder in bankruptcy or insolvency proceedings of any nature;
and the Guarantor will not claim any set-off or counterclaim against Parent
or Acquisition Sub in respect of any liability of the Guarantor to Parent
or Acquisition Sub. The payment of any amounts due with respect to any
indebtedness of Parent or Acquisition Sub now or hereafter held by the
Guarantor is hereby subordinated to the prior payment in full of the
Obligations. If the Guarantor shall collect, enforce or receive any
amounts in respect of indebtedness of Parent or Acquisition Sub, such
amounts shall be collected, enforced and received by the Guarantor as
trustee for the Company and be paid over to the Company, on account of the
Obligations without affecting in any manner the liability of the Guarantor
under the other provisions of this Guaranty.
Section 4. DUE AUTHORIZATION; FINANCIAL STATEMENTS. The Guarantor
hereby represents and warrants to the Company that (a) the Guarantor is
duly authorized to execute and deliver this Agreement and to perform its
obligations hereunder and that this Guaranty constitutes the legal and
valid obligation of Guarantor and (b) the financial statements previously
delivered to the Company by the Guarantor are true and correct in all
material respects.
Section 5. TERMINATION. This Guaranty shall remain in full force and
effect until all Obligations are indefeasibly paid in full and this
Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any performance or payment of any of the Obligations or
any of the agreements of Guarantor contained in this Guaranty is rescinded
or, in the case of payments, must otherwise be returned for any reason
(including, without limitation, the insolvency, bankruptcy or
reorganization of Parent or Acquisition Sub) all as though such payment had
not been made, notwithstanding anything to the contrary in this Guaranty.
Section 6. FREEDOM TO ACT. The Company shall in its sole discretion
have the right to proceed first directly against Guarantor under this
Guaranty without proceeding against Parent or Acquisition Sub or both, as
applicable, including, without limitation, without exhausting any other
rights or remedies which the Company may have and without resorting to any
collateral or other security, if any, held by the Company.
Section 7. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon
the Guarantor, its successors and assigns, and shall inure to the benefit
of and be enforceable by the Company and its successors, transferees and
assigns, and its permitted transferees and assigns.
Section 8. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by the Guarantor
therefrom shall be effective unless the same shall be in writing and signed
by the Company and the Guarantor. No failure on the part of the Company to
exercise, and no delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of
any other right.
Section 9. NOTICES. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise specifically
provided herein, shall be deemed to have been duly made or given to a party
when delivered by hand or mailed first class mail postage prepaid or, in
the case of telegraphic or telexed notice, when transmitted, answer back
received, addressed to the address set forth beneath such party's signature
hereto, or at such other address as either party may designate in writing.
Section 10. GOVERNING LAW; CONSENT TO JURISDICTION. THE VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. THE PARTIES HEREBY
IRREVOCABLY AND UNCONDITIONALLY CONSENT TO THE JURISDICTION OF THE CHANCERY
COURT OF THE STATE OF DELAWARE FOR ANY ACTION, SUIT OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. THE PARTIES FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
OBJECTION TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT IN THE CHANCERY COURT OF THE STATE OF
DELAWARE, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVE AND
AGREE NOT TO PLEAD OR CLAIM IN SUCH COURT THAT ANY SUCH ACTION, SUIT OR
PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH PARTY FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR
DOCUMENT BY U.S. REGISTERED MAIL TO THE ADDRESS SET FORTH BENEATH SUCH
PARTY'S SIGNATURE HERETO SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY
ACTION, SUIT OR PROCEEDING BROUGHT AGAINST SUCH PARTY IN SUCH COURT.
Section 11. MISCELLANEOUS. This Guaranty constitutes the entire
agreement of the Guarantor and the Company with respect to the matters set
forth herein. The rights and remedies herein provided are cumulative and
not exclusive of any remedies provided by law or any other agreement, and
this Guaranty shall be in addition to any other guaranty of the
Obligations. Captions are for the ease of reference only and shall not
affect the meaning of the relevant provisions. The meanings of all defined
terms used in this Guaranty shall be equally applicable to the singular and
plural forms of the terms defined. If any provision of this Guaranty or
the application thereof to any person or entity or circumstance shall be
invalid or unenforceable to any extent, (i) the remainder of this Guaranty
and the application of such provision to other persons, entities or
circumstances shall not be effected thereby and (ii) each such provision
shall be enforced to the greatest extent permitted by law. This Guaranty
may be executed in two or more counterparts, each of which shall constitute
an original, but all of which when taken together shall constitute but one
agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
executed and delivered by their duly authorized officers as of the date
appearing on page one.
FIDELITY INVESTORS
LIMITED PARTNERSHIP
By:Fidelity Investors Management Corp.,
its General Partner
By:/S/ JOHN J. REMONDI
________________________________
Its: President
Address:
c/o Fidelity Capital Asociates, Inc.
82 Devonshire Street, R25C
Boston, MA 02109-3614
Attn: Mr. John J. Remondi
with a copy to:
Fidelity Capital Associates, Inc.
82 Devonshire Street, E20E
Boston, MA 02109-3614
Attn: Robert M. Gervis, Esq.
and a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Laura C. Hodges Taylor, P.C.
<PAGE>
THE STROBER ORGANIZATION, INC.
By:/S/ROBERT J. GAITES
-------------------------------------
Its: President and Chief Executive
Officer
Address:
550 Hamilton Avenue
Brooklyn, NY 11232
Attn: President
with a copy to:
Sills, Cummis, Zuckerman, Radin,
Tischman, Epstein & Gross
The Legal Center
One Riverfront Plaza
Newark, NJ 07102
attn: Stanley U. North, III, Esq.
<PAGE>
EXHIBIT 20
Press Release dated November 11, 1996
<PAGE>
THE STROBER ORGANIZATION, INC. TO BE
ACQUIRED FOR $6.00 PER SHARE IN CASH
THIRD QUARTER 1996 EARNINGS
Brooklyn, New York, November 11, 1996 - THE STROBER ORGANIZATION, INC.
(NASDAQ-STRB) today announced that it has entered into a definitive merger
agreement providing for the acquisition of all of Strober's Common Stock at
$6.00 per share, in cash, for an aggregate fully-diluted purchase price of
approximately $32 million. The merger is expected to be consummated in
January 1997.
On Friday, November 8, 1996, the business date prior to this
announcement, Strober's common stock closed at $5.25 per share.
The consummation of the merger is subject to certain conditions,
including the approval of a majority of Strober's stockholders, antitrust
clearance, as well as certain other matters. The merger agreement
terminates in the event the merger is not consummated by February 28, 1997
unless an extension is mutually agreed to by the parties to the agreement.
If the transaction is not consummated, the merger agreement generally
limits the parties' liability to reimbursement of expenses and break-up
fees. Strober's principal stockholders and certain of Strober's senior
management, who together own in excess of 62% of Strober's outstanding
common stock, have agreed to vote their shares of Strober Common Stock in
favor of the merger. Hill Thompson Capital Markets, Inc. a New York
investment banking firm, advised Strober in this transaction.
The acquisition is led by Fidelity Ventures Limited Partnership, a
private venture capital investor. The purchaser has advised the Company
that it intends to finance a portion of the purchase price and has obtained
financing commitments in connection therewith. After the merger, Strober
expects to continue to do business under the name "The Strober
Organization." It is expected that, after the merger, the new Chairman of
the Board and Chief Executive Officer of Strober will be Frederick Marino,
an experienced building products executive and former Chief Executive
Officer of Marino Industries. Robert J. Gaites, Strober's current Chairman
of the Board, Chief Executive Officer and President and John Yanuklis,
Strober's current Executive Vice President, will continue in their offices
as President and Executive Vice President, respectively, after the merger.
In addition, it is anticipated that both Mr. Gaites and Mr. Yanuklis, as
well as certain other members of Strober's management, may make a minority
investment in the purchaser at the time of, or immediately following, the
consummation of the merger.
Mr. Gaites, Strober's current Chairman of the Board, Chief Executive
Officer and President, commented that this transaction provides the Strober
stockholders with a significant premium as compared to the average market
price of Strober's Common Stock over the last five years, that all of the
Strober management and employees would be expected to remain in place and
that the ongoing business would continue to have a substantial budget for
expansion in the North East.
Mr. Gaites also stated that in light of the pending merger, the
Company has decided not to proceed with the purchase of Rowley Building
Products Corp. and Rowley Building Products of New Jersey, Inc.
Additionally, the Company announced that for the third quarter of
1996, the Company reports net income of $1,600,000 or 31 cents per share on
sales of $41,789,000. This compares with net income of $1,134,000 or 21
cents per share on net sales of $33,864,000 for the same period of 1995.
Net income for the nine month period ended September 30, 1996 was
$2,611,000 or 51 cents per share on net sales of $100,898,000 compared to
net income of $2,360,000 or 45 cents per share on net sales of $96,066,000
for the first nine months of 1995.
Mr. Gaites stated, "I am very pleased with our Company's performance
in the third quarter as sales increased 23% and net income increased by
41%. Our gross sales in October 1996 further increased 28% to $14,600,000
compared to $11,416,000 in October 1995".
THE STROBER ORGANIZATION, INC. - FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Ended
<S> <C> <C> <C> <C>
(In thousands, except 9/30/96 9/30/95 9/30/96 9/30/95
per share data)
Net Sales $41,789 $33,864 $100,898 $96,066
Net income before
income taxes 2,758 1,921 4,502 4,000
Net income 1,600 1,134 2,611 2,360
Net income per share .31 .21 .51 .45
Weighted average number
of shares outstanding 5,170 5,358 5,159 5,264
</TABLE>
Strober is a leading supplier of building materials to professional
contractors from 11 centers in New York, New Jersey, Connecticut and
Pennsylvania.
For more information contact:
Strober Representative:
David J. Polishook
Chief Financial Officer
(718) 832-1212
<PAGE>
EXHIBIT 27
Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STROBER ORGANIZATION, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,553
<SECURITIES> 0
<RECEIVABLES> 25,150
<ALLOWANCES> 3,162
<INVENTORY> 12,880
<CURRENT-ASSETS> 40,878
<PP&E> 13,473
<DEPRECIATION> 7,960
<TOTAL-ASSETS> 53,731
<CURRENT-LIABILITIES> 14,893
<BONDS> 0
<COMMON> 52
0
0
<OTHER-SE> 36,117
<TOTAL-LIABILITY-AND-EQUITY> 53,731
<SALES> 100,898
<TOTAL-REVENUES> 100,898
<CGS> 74,222
<TOTAL-COSTS> 74,222
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 598
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 4,502
<INCOME-TAX> 1,891
<INCOME-CONTINUING> 2,611
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,611
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
