SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 22, 1999
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FRESHSTART VENTURE CAPITAL CORP.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 0-26214 13-3134761
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(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
FORMATION)
24-25 JACKSON AVENUE, LONG ISLAND CITY, NY 11101
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (718) 361-9595
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(FORMER NAME OR FORMER ADDRESS, IF CHANGES SINCE LAST REPORT)
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ITEM 5. OTHER EVENTS.
On December 22, 1999, an Agreement and Plan of Merger (the "Merger
Agreement") was executed by and among Medallion Financial Corp. ("Medallion"),
FS Merger Corp., a wholly owned subsidiary of Medallion ("Merger Corp."), and
Freshstart Venture Capital Corp. ("Freshstart"). Under the terms and subject to
the satisfaction of certain conditions contained in the Merger Agreement, it is
anticipated that Merger Corp. will merge with and into Freshstart (the "Merger")
and that Freshstart will become a wholly-owned subsidiary of Medallion.
Following the satisfaction of pre-closing conditions, including the approval of
the shareholders of Freshstart and regulatory approval, it is expected that
closing of the Merger will occur during the first half of next year.
The Merger Agreement contemplates the issuance of shares of common stock of
Medallion as consideration for the surrender and exchange of the outstanding
shares of common stock of Freshstart. The number of shares to be issued by
Medallion as the merger consideration is dependent upon the market price of
Medallion common stock at the time of closing the Merger. If the fair market
value of Medallion common stock is less than $16.00 per share, then each
outstanding share of Freshstart common stock will receive a fraction of a share
of Medallion common stock having a fair market value equal to $4.025. If the
market price of Medallion common stock is greater than $27.51 per share, then
each outstanding share of Freshstart common stock will receive a fraction of a
share of Medallion common stock having a fair market equal to $4.875. If the
market price of Medallion common stock is between $16.01 and $27.50 per share,
then each outstanding share of Freshstart common stock will receive a fraction
of a share of Medallion common stock having a fair market value ranging between
$4.125 and $4.625. If the fair market price of the Medallion common stock is
less than $12.00 per share, Medallion has the right to terminate the Merger
Agreement. The Merger Agreement contains other customary terms and provisions,
including representations, warranties, covenants and conditions. The Merger
Agreement contemplates that the Merger will be accounted for under the pooling
method of accounting.
In addition, Zindel Zelmanovitch, the President and a director of
Freshstart, and Neil Greenbaum, the Secretary and a director of the Freshstart,
executed a Voting Agreement pursuant to which Messrs. Zelmanovich and Greenbaum
agreed, among other things, to vote the shares of Freshstart beneficially owned
by them in favor of the Merger.
(c) EXHIBITS.
(i) Agreement and Plan of Merger dated as of December 22, 1999 by and among
Medallion Financial Corp., FS Merger Corp. and Freshstart Venture Capital Corp.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly authorized and caused the undersigned to sign this
Report on the Registrant's behalf.
FRESHSTART VENTURE CAPITAL CORP.
By: /s/ ZINDEL ZELMANOVITCH
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Name: Zindel Zelmanovitch
Title: President
Dated: December 29, 1999
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 22, 1999
BY AND AMONG
MEDALLION FINANCIAL CORP.,
FS MERGER CORP.,
AND
FRESHSTART VENTURE CAPITAL CORP.
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TABLE OF CONTENTS
PAGE
ARTICLE I. The Merger; Effect of Merger......................................1
Section 1.1. The Merger ...................................................1
Section 1.2. Effective Time of the Merger..................................2
Section 1.3. Effects of Merger.............................................2
ARTICLE II. The Surviving Corporation........................................2
Section 2.1. Certificate of Incorporation..................................2
Section 2.2. By-Laws ......................................................2
Section 2.3. Officers and Directors........................................2
ARTICLE III. Conversion of Shares.............................................3
Section 3.1. Conversion of Shares..........................................3
Section 3.2. Appraisal Rights..............................................4
Section 3.3. Parent to Make Certificates Available.........................5
Section 3.4. Dividends; Transfer Taxes.....................................5
Section 3.5. No Fractional Securities......................................6
Section 3.6. Closing of Company Transfer Books.............................6
Section 3.7. Stockholder Approval..........................................6
Section 3.8. Tax Treatment ................................................7
ARTICLE IV. Representations and Warranties of the Company.....................7
Section 4.1. Execution and Delivery........................................7
Section 4.2. Consents and Approvals........................................7
Section 4.3. No Breach ....................................................8
Section 4.4. Organization, Standing and Authority..........................8
Section 4.5. Capitalization of the Company.................................9
Section 4.6. Options and Other Stock Rights................................9
Section 4.7. Subsidiaries .................................................9
Section 4.8. Corporate Records.............................................9
Section 4.9. Information in Disclosure Documents..........................10
Section 4.10. SEC Documents; Financial Statements.........................10
Section 4.11. Liabilities ................................................11
Section 4.12. No Material Adverse Change..................................12
Section 4.13. Compliance with Laws........................................12
Section 4.14. Permits ....................................................12
Section 4.15. Actions and Proceedings.....................................12
Section 4.16. Contracts and Other Agreements..............................12
Section 4.17. Investment Portfolio........................................15
Section 4.18. Real Property ..............................................16
Section 4.19. Intellectual Property.......................................17
Section 4.20. Receivables ................................................17
Section 4.21. Banking ....................................................18
Section 4.22. Liens ......................................................18
Section 4.23. Employee Benefit Plans......................................18
Section 4.24. Employee Relations..........................................20
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Section 4.25. Insurance ..................................................20
Section 4.26. Officers, Directors, Employees, Consultants.................20
Section 4.27. Transactions with Directors, Officers and Affiliates........21
Section 4.28. Operations of the Company...................................21
Section 4.29. Brokerage ..................................................23
Section 4.30. Taxes ......................................................23
Section 4.31. Execution and Validity of Employment Agreements.............25
Section 4.32. Environmental Laws..........................................25
Section 4.33. Accounting Matters..........................................26
Section 4.34. Company Action .............................................26
Section 4.35. Opinion of Financial Advisor................................26
Section 4.36. Hart-Scott-Rodino...........................................27
ARTICLE V. Representations and Warranties of Parent and Sub..................27
Section 5.1. Execution and Delivery.......................................27
Section 5.2. Consents and Approvals.......................................27
Section 5.3. No Breach ...................................................28
Section 5.4. SEC Documents; Financial Statements..........................28
Section 5.5. Shares of Parent Common Stock................................29
Section 5.6. Organization, Standing and Authority of Parent and Sub.......29
Section 5.7. Capitalization ..............................................30
Section 5.8. Brokerage ...................................................30
Section 5.9. Information in Disclosure Documents..........................30
Section 5.10. No Material Adverse Change..................................30
Section 5.11. Sub Action .................................................31
Section 5.12. Options and Other Stock Rights..............................31
Section 5.13. Information in Disclosure Documents.........................31
Section 5.14. Liabilities ................................................32
Section 5.15. Compliance with Laws........................................32
Section 5.16. Permits ....................................................32
Section 5.17. Actions and Proceedings.....................................32
Section 5.18. Loan Portfolio .............................................33
ARTICLE VI. Covenants and Agreements.........................................33
Section 6.1. Conduct of Business..........................................33
Section 6.2. Litigation Involving the Company.............................34
Section 6.3. Continued Effectiveness of Representations and
Warranties of the Parties..................................34
Section 6.4. Corporate Examinations and Investigations....................35
Section 6.5. Preparation of Company Restated Financial Statements.........35
Section 6.6. Registration Statement/Proxy Statement.......................36
Section 6.7. Compliance with the Securities Act...........................36
Section 6.8. Nasdaq Listing ..............................................37
Section 6.9. Acquisition Proposals........................................37
Section 6.10. No Shopping ................................................37
Section 6.11. Parent and Sub Approvals....................................38
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Section 6.12. Company Approvals...........................................38
Section 6.13. Distribution ...............................................38
Section 6.14. Expenses ...................................................38
Section 6.15. Further Assurances..........................................38
Section 6.16. Hart-Scott-Rodino...........................................39
Section 6.17. SBA Approval ...............................................39
Section 6.18. Execution of Non-Compete/Non-Solicitation Agreements........39
Section 6.19. East Coast Waiver...........................................39
Section 6.20. Compliance with Legal Requirements..........................40
Section 6.21. Indemnification of Company Officers and Directors...........40
ARTICLE VII. Conditions Precedent to Each Party's Obligation to Effect
the Merger...................................................40
Section 7.1. Company Stockholder Approval.................................40
Section 7.2. Listing of Shares............................................40
Section 7.3. Hart-Scott-Rodino............................................40
Section 7.4. Effectiveness of Registration Statement......................41
Section 7.5. SBA Approval ................................................41
Section 7.6. Litigation ..................................................41
ARTICLE VIII. Conditions Precedent to the Obligation of Parent and Sub to
Effect the Merger..............................................41
Section 8.1. Representations and Covenants................................41
Section 8.2. Absence of Material Adverse Change...........................42
Section 8.3. Receipt of Agreements........................................42
Section 8.4. Accountant's Letters.........................................42
Section 8.5. Dissenting Shares............................................43
Section 8.6. Opinions of Counsel to the Company...........................43
Section 8.7. Tax Opinion .................................................43
Section 8.8. Closing Conditions...........................................43
ARTICLE IX. Conditions Precedent to the Obligation of the Company to
Effect the Merger..............................................43
Section 9.1. Representations and Covenants................................43
Section 9.2. Absence of Material Adverse Change...........................44
Section 9.3. Receipt of Agreements........................................44
Section 9.4. Accountant's Letter..........................................44
Section 9.5. Opinion of Counsel to Parent.................................44
Section 9.6. Tax Opinion 44
Section 9.7. Fairness Opinion.............................................44
Section 9.8. Closing Conditions...........................................45
ARTICLE X. Closing ..........................................................45
ARTICLE XI. Survival of Representations and Warranties; Indemnification......45
Section 11.1. Survival of Representations and Warranties..................45
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ARTICLE XII. Termination of Agreement........................................45
Section 12.1. Termination 45
Section 12.2. Effect of Termination.......................................46
ARTICLE XIII. Definitions ...................................................46
Section 13.1. Definitions ................................................46
ARTICLE XIV. Miscellaneous ..................................................52
Section 14.1. Publicity ..................................................52
Section 14.2. Notices ....................................................52
Section 14.3. Entire Agreement............................................53
Section 14.4. Waivers and Amendments; Non Contractual Remedies;
Preservation of Remedies; Liability.........................53
Section 14.5. Governing Law ..............................................54
Section 14.6. Binding Effect; No Assignment...............................54
Section 14.7. Third Party Beneficiaries...................................54
Section 14.8. Counterparts ...............................................54
Section 14.9. Exhibits and Schedules......................................54
Section 14.10. Headings ...................................................54
Section 14.11. Submission to Jurisdiction; Venue...........................54
Section 14.12. Specific Performance........................................55
Section 14.13. Severability ...............................................55
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EXHIBITS
Exhibit A Forms of Agreements entered into by each of the Named Executives
Exhibit B Form of East Coast Agreement
Exhibit C Form of Opinion of Berlack, Israels & Liberman LLP as Counsel to
the Company
Exhibit D Form of Opinion of Willkie Farr & Gallagher as Counsel to Parent
and Sub
Exhibit E Form of Affiliate Letter
COMPANY DISCLOSURE SCHEDULE
SECTION DESCRIPTION
4.4 Foreign Qualification; Organizational Documents
4.5 Stockholders; Option Holders
4.7 Subsidiary Qualification; Subsidiary Organizational
Documents; Investments
4.12 No Material Adverse Change
4.13 Compliance with Laws
4.15 Actions and Proceedings
4.16 Contracts and Other Agreements
4.17 Loan Portfolio
4.18 Real Property
4.21 Bank Accounts
4.23 Employee Benefit Plans
4.25 Insurance
4.26 Officers, Directors, Employees, Consultants
4.27 Transactions with Directors, Officers and Affiliates
4.28 Subsequent Events
4.30 Tax Jurisdictions
PARENT DISCLOSURE SCHEDULE
SECTION DESCRIPTION
5.6 Parent and Sub Organizational Documents
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of December 22, 1999, is made by and among Medallion Financial Corp., a Delaware
corporation ("Parent"), FS Merger Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and FreshStart Venture Capital Corp., a New
York corporation (the "Company"). Certain terms used in this Agreement are
defined in Article XIII.
W I T N E S S E T H:
WHEREAS, Parent and Sub desire to effect a business
combination by means of the merger of Sub with and into the Company;
WHEREAS, the Board of Directors of Parent and Sub and the
stockholder of Sub and the Board of Directors of the Company have approved the
merger of Sub with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth herein;
WHEREAS, as a condition and inducement to Parent to enter into
this Agreement and to incur the obligations set forth herein, Parent and the
Company have entered in the Stock Option Agreement, dated August 12, 1999,
between the Company and Parent (the "Option Agreement"), pursuant to which,
among other things, the Company has granted Parent an option to purchase shares
of Company Common Stock subject to certain conditions;
WHEREAS, for federal income tax purposes, it is intended that
the Merger qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER; EFFECT OF MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the
conditions of this Agreement and in accordance with the applicable provisions of
the Delaware General Corporation Law, as amended, and any rules and regulations
thereunder (the "Delaware Corporation Law") and the New York Business
Corporation Law, as amended, and any rules and regulations thereunder (the "New
York Corporation Law"), Sub shall be merged with and into the Company and the
separate existence of Sub shall thereupon cease. The name of the Company, as the
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surviving corporation in the Merger (the "Surviving Corporation"), shall by
virtue of the Merger be changed to such name as Parent, in its sole discretion,
may choose.
Section 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall
become effective at such time as a properly executed Certificate of Merger or
other appropriate document is duly filed with the Secretaries of State of
Delaware and New York, which filing shall be made as soon as practicable
following fulfillment or waiver of the conditions set forth in Articles VII,
VIII and IX hereof or such later time as is specified in such filing (the
"Effective Time").
Section 1.3. EFFECTS OF MERGER.
(a) The Merger shall have the effects set forth in Section 259
of the Delaware Corporation Law and Section 906 of the New York Corporation Law.
(b) By virtue of the approval of the Merger by the holders of
Company Common Stock, the holders of all Company Common Stock immediately prior
to the Effective Time (collectively, the "Company Stockholders" or individually,
a "Company Stockholder"), whether or not such stockholder voted in favor of the
Merger, shall be deemed to have approved the terms and conditions of this
Agreement, including, but not limited to, Article XI of this Agreement.
ARTICLE II.
THE SURVIVING CORPORATION
Section 2.1. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation, and
thereafter may be amended in accordance with its terms and as provided by the
New York Corporation Law, except as provided by Section 6.21 hereof.
Section 2.2. BY-LAWS. The by-laws of the Company as in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation, and thereafter may be amended in accordance with their terms and as
provided by the New York Corporation Law.
Section 2.3. OFFICERS AND DIRECTORS. The officers and the
directors of Sub immediately prior to the Effective Time shall be the officers
and directors of the Surviving Corporation after the Effective Time, in each
case until their respective successors are duly elected and qualified.
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ARTICLE III.
CONVERSION OF SHARES
Section 3.1. CONVERSION OF SHARES.
(a) Subject to Sections 3.2 hereof, at the Effective Time, by
virtue of the Merger and without any action on the part of any Company
Stockholder:
(1) CONVERSION OF COMPANY COMMON STOCK. Each outstanding share
of Company Common Stock shall be converted into that number of fully paid and
nonassessable shares of Parent Common Stock (or fraction thereof) equal to the
quotient (such quotient, the "Exchange Ratio") obtained by dividing (to five
places after the decimal point):
(a) (x) $4.025 by (y) the average of the closing sale prices
per share of Parent Common Stock on the Nasdaq National Market for the 10
trading days which immediately precede the Business Day three Business Days
preceding the Closing Date (the "Determination Period"); if such average is
between $12.00 and $15.99; or
(b) (x) $4.125 by (y) the average of the closing sale prices
per share of Parent Common Stock on the Nasdaq National Market for the
Determination Period; if such average is between $16.00 and $19.50; or
(c) (x) $4.375 by (y) the average of the closing sale prices
per share of Parent Common Stock on the Nasdaq National Market for the
Determination Period; if such average is between $19.51 and $23.50; or
(d) (x) $4.625 by (y) the average of the closing sale prices
per share of Parent Common Stock on the Nasdaq National Market for the
Determination Period; if such average is between $23.51 and $27.50; or
(e) (x) $4.875 by (y) the average of the closing sale prices
per share of Parent Common Stock on the Nasdaq National Market for the
Determination Period; if such average exceeds $27.51,;
If the average of the closing sale prices per share of Parent Common Stock on
the Nasdaq National Market for the Determination Period is less than $12.00,
then each outstanding share of Company Common Stock shall be converted into that
number of fully paid and nonassessable shares of Parent Common Stock (or
fraction thereof) equal to the quotient obtained by dividing (to five places
after the decimal point): (x) $4.025 by (y) the average of the closing sale
prices per share of Parent Common Stock on the Nasdaq National Market for the
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Determination Period; PROVIDED, HOWEVER, Parent shall have the right to
terminate this Agreement pursuant to Article XII;
(f) If at any time after the commencement of the Determination
Period, but prior to the Effective Time, the outstanding shares of Parent Common
Stock shall be changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period, the Exchange Ratio shall be
correspondingly adjusted.
(2) CANCELLATION OF COMPANY TREASURY STOCK. All shares of Company Common Stock
which are held in the treasury of the Company shall be canceled and shall cease
to exist.
(b) Each issued and outstanding share of capital stock of Sub
shall be converted into one validly issued, fully paid and nonassessable share
of common stock, par value $.01 per share, of the Surviving Corporation.
Section 3.2. APPRAISAL RIGHTS. Notwithstanding anything in
this Agreement to the contrary, but only in the circumstances and to the extent
provided by the New York Corporation Law, shares of Company Common Stock that
are outstanding immediately prior to the Effective Time and that are held by
Company Stockholders who were entitled to but did not vote such shares in favor
of the Merger and who shall have properly and timely delivered to the Company a
written demand for appraisal of their shares of Company Common Stock in
accordance with Sections 910 and 623 of the New York Corporation Law
("Dissenting Shares") shall not be converted into the right to receive, or be
exchangeable for, shares of Parent Common Stock. Instead, the holders thereof
shall be entitled to payment of the fair value of such shares in accordance with
the provisions of Sections 910 and 623 of the New York Corporation Law;
PROVIDED, HOWEVER, that (i) if any holder of Dissenting Shares shall
subsequently withdraw his demand for payment of the fair value of such
Dissenting Shares or (ii) if any holder fails to establish and perfect his
entitlement to the relief provided in Sections 910 and 623 of the New York
Corporation Law, the rights and obligations of such holder to receive such fair
value shall terminate, and such Dissenting Shares shall thereupon be deemed to
have been converted into the right to receive, and to have become exchangeable
for, as of the Effective Time, shares of Parent Common Stock in accordance with
Section 3.1(a) hereof. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of Dissenting Shares, and Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company will not make
any payment with respect to, or settle or offer to settle, the demands of any
Dissenting Shares without the written consent of Parent. The Company shall
comply with the notice provisions of Section 623 of the New York Corporation
Law.
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Section 3.3. PARENT TO MAKE CERTIFICATES AVAILABLE.
(a) Prior to the Closing, Parent shall select a person or
persons to act as exchange agent for the Merger (the "Exchange Agent"), which
person or persons shall be reasonably acceptable to the Company. On the Closing
Date, Parent shall deliver to the Exchange Agent, in trust for the benefit of
the Company Stockholders (other than Company Stockholders who hold Dissenting
Shares), a stock certificate (issued in the name of the Exchange Agent or its
nominee) representing the Share Consideration. As soon as reasonably practicable
after the Effective Time but in no event more than five Business Days after the
Effective Time, Parent shall cause the Exchange Agent to send a notice and a
letter of transmittal to each Company Stockholder advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent for cancellation such holder's certificates representing Company Common
Stock ("Certificates"), in exchange for the Share Consideration. Each Company
Stockholder will be entitled to receive, upon surrender to the Exchange Agent
for cancellation of one or more Certificates, certificates representing the
number of shares of Parent Common Stock into which such shares are converted in
the Merger, without consideration of fractional shares as provided in Section
3.5. Parent Common Stock into which Company Common Stock shall be converted in
the Merger shall be deemed to have been issued at the Effective Time (the "Share
Consideration"). In the event that any Company Stockholder's Certificates have
been lost, stolen or destroyed, such Company Stockholder will be entitled to
receive the Share Consideration only after providing an affidavit of loss and
indemnity bond, in form satisfactory to the Exchange Agent.
(b) Any Company Stockholder who has not exchanged his
Certificates for Parent Common Stock in accordance with subsection (a) within
six months after the Effective Time shall have no further claim upon the
Exchange Agent, and shall thereafter look only to Parent and the Surviving
Corporation for payment in respect of his shares of Company Common Stock. Until
so surrendered, Certificates shall represent solely the right to receive the
Share Consideration. If any Certificates entitled to payment pursuant to Section
3.1 shall not have been surrendered for such payment prior to such date on which
any payment in respect thereof would otherwise escheat to or become the property
of any Governmental Entity, the shares of Company Common Stock represented
thereby shall, to the extent permitted by applicable law, be deemed to be
canceled and no money or other property will be due to the holder thereof.
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Section 3.4. DIVIDENDS; TRANSFER TAXES. No Distributions that
are declared or made with respect to Parent Common Stock will be paid to persons
entitled to receive certificates representing Parent Common Stock pursuant to
this Agreement until such persons surrender their Certificates. Upon such
surrender, there shall be paid to the person in whose name the certificates
representing such Parent Common Stock shall be issued Distributions which shall
have become payable with respect to such Parent Common Stock in respect of a
record date after the Effective Time. In no event shall the person entitled to
receive such Distributions be entitled to receive interest on such
Distributions. In the event that any certificates for any shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it shall be a
condition of such exchange that the Certificate or Certificates so surrendered
shall be properly endorsed or be otherwise in proper form for transfer
(including signature guarantee) and that the person requesting such exchange
shall pay to the Exchange Agent any transfer or other taxes required by reason
of the issuance of certificates for such shares of Parent Common Stock in a name
other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable to a holder of shares of Company
Common Stock for any shares of Parent Common Stock or dividends thereon
delivered to a public official pursuant to any applicable escheat laws.
Section 3.5. NO FRACTIONAL SECURITIES. Notwithstanding any
other provision of this Agreement, no certificates or scrip for shares of common
stock representing less than one share of Parent Common Stock shall be issued
upon the surrender for exchange of Certificates pursuant to this Article III and
no Distribution that is declared or made with respect to Parent Common Stock,
stock split or interest shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. Each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to (x) such fractional part of a share of
Parent Common Stock multiplied by (y) the average of the closing sale prices per
share of Parent Common Stock on the Nasdaq National Market for the Determination
Period.
Section 3.6. CLOSING OF COMPANY TRANSFER BOOKS. Immediately
prior to the Effective Time, the Company Common Stock transfer books shall be
closed and no transfer of Company Common Stock shall thereafter be made.
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Section 3.7. STOCKHOLDER APPROVAL. The Company shall take all
action necessary, in accordance with applicable law and its Certificate of
Incorporation and By-Laws, to convene a special meeting of the holders of
Company Common Stock (the "Company Meeting") as promptly as practicable for the
purpose of considering and taking action upon this Agreement. The Board of
Directors of the Company has approved the Merger and adopted this Agreement and
recommended that holders of Company Common Stock vote in favor of and approve
the Merger and the adoption of this Agreement at the Company Meeting.
Section 3.8. TAX TREATMENT. The Merger is intended to
constitute a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code, and Parent and the Company shall not report the transaction on any tax
return in a manner or take any action inconsistent therewith.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that,
except as set forth in the disclosure schedule attached hereto (the "Company
Disclosure Schedule"), which Company Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article IV and may be amended from time to time pursuant to the provisions
hereof:
Section 4.1. EXECUTION AND DELIVERY. The Company has the
corporate power and authority to enter into this Agreement and each agreement,
document or instrument contemplated hereby or to be executed in connection
herewith to which the Company is a party (the "Company Documents") and, subject
to approval of this Agreement by the holders of the Company Common Stock, to
carry out its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the Company Documents and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by the Company's Board of Directors. This Agreement constitutes the
valid and binding obligation of the Company and the Company Documents, when
executed and delivered, will constitute the valid and binding obligations of the
Company, in each case enforceable in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought. Except for the approval of the holders of a majority of the
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outstanding shares of Company Common Stock, no other corporate proceedings on
the part of the Company are necessary after the date of this Agreement to
authorize this Agreement and the Company Documents and the transactions
contemplated hereby and thereby.
Section 4.2. CONSENTS AND APPROVALS. The execution and
delivery by the Company of this Agreement and the Company Documents, the
performance by the Company of its obligations hereunder and thereunder, and the
consummation by the Company of the transactions contemplated hereby and thereby,
as the case may be, do not require the Company to obtain any consent, approval
or action of, or make any filing or registration with, or give any notice to,
any person or any Governmental Entity, other than (i) in connection, or in
compliance, with the provisions of the H-S-R Act, if applicable, and the
Exchange Act, which will be duly obtained or made, as the case may be, on or
prior to the Closing, and will be in full force and effect on the Closing Date,
(ii) in the case of the performance by the Company of its obligations hereunder
and under the Company Documents and the consummation by the Company of the
transactions contemplated hereby and by the Company Documents, the approval of
the holders of the Company Common Stock as specified in Section 4.1, (iii) the
approval of the United States Small Business Administration (the "SBA") and (iv)
the filing of the Certificate of Merger with the Secretaries of State of
Delaware and New York.
Section 4.3. NO BREACH. The execution, delivery and
performance by the Company of this Agreement and the Company Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
in accordance with the terms and conditions hereof and thereof will not (i)
violate any provision of the Certificate of Incorporation or By-Laws of the
Company; (ii) violate, conflict with or result in the breach of any of the terms
of, result in any modification of the effect of, otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both, constitute) a default under, any contract or other agreement or
instrument to which the Company is a party or by or to which the assets or
properties of the Company may be bound or subject; (iii) violate any order,
judgment, injunction, award or decree of any Governmental Entity against, or
binding upon, or any agreement with, or condition imposed by, any Governmental
Entity, binding upon the Company, or upon the securities, assets or business of
the Company; (iv) violate any statute, law or regulation of any jurisdiction as
such statute, law or regulation relates to the Company, or to the securities,
assets or business of the Company; (v) result in the creation or imposition of
any lien or other encumbrance or the acceleration of any indebtedness or other
obligation of the Company; or (vi) result in the breach of any of the terms or
conditions of, constitute a default under, or otherwise cause a violation of,
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any Permit of the Company; except in the case of (ii) through (vi) above, for
violations, conflicts, breaches, defaults, modifications, impairments, liens or
other encumbrances that would not, individually or in the aggregate, have a
material adverse effect on the business, properties, assets, condition
(financial or otherwise), liabilities, operations or prospects of the Company,
or adversely affect the consummation of the transactions contemplated hereby (a
"Company Material Adverse Effect").
Section 4.4. ORGANIZATION, STANDING AND AUTHORITY. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of New York and has all requisite corporate power and
authority to own, lease and operate its assets, properties and business and to
carry on its business as now being conducted or currently proposed to be
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of such activities make
such qualification necessary, except where the failure to so qualify would not,
individually or in the aggregate, have a Company Material Adverse Effect. All
such jurisdictions are set forth on SECTION 4.4 OF THE COMPANY DISCLOSURE
SCHEDULE. The copies of the Certificate of Incorporation and By-Laws of the
Company included as part of SECTION 4.4 OF THE COMPANY DISCLOSURE SCHEDULE
constitute accurate and complete copies of such organizational instruments and
accurately reflect all amendments thereto through the date hereof.
Section 4.5. CAPITALIZATION OF THE COMPANY. The authorized
capital stock of the Company consists of 5,000,000 shares of Company Common
Stock and 10,000,000 shares of Company Preferred Stock. As of the date of this
Agreement there were 2,172,688 shares of Company Common Stock and 1,410,000
shares of Company Preferred Stock outstanding. As of the date hereof, there are
no bonds, debentures, notes or other indebtedness having the right to vote on
any matters on which the Company's stockholders may vote issued or outstanding.
Section 4.6. OPTIONS AND OTHER STOCK RIGHTS. Except for
options to purchase Company Common Stock pursuant to the Stock Option Agreement,
between the Company and Parent, dated August 17, 1999, there is no (i)
outstanding option, warrant, call, unsatisfied preemptive right or other
agreement of any kind to purchase or otherwise to receive from the Company any
of the outstanding, authorized but unissued, unauthorized or treasury shares of
Company Common Stock, Company Preferred Stock or any other security of the
Company, (ii) outstanding security of any kind convertible into any security of
the Company, and (iii) outstanding contract or other agreement to purchase,
redeem or otherwise acquire any outstanding shares of Company Common Stock,
Company Preferred Stock or any other security of the Company.
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Section 4.7. SUBSIDIARIES.
(a) The Company does not have any direct or indirect
Subsidiaries.
(b) As of the date hereof, the Company has not made any
advances to or investments in, and does not own any securities of or other
interests in, any other person.
Section 4.8. CORPORATE RECORDS. The minute books of the
Company reflect, for the period beginning three years prior to the date hereof
through and including the date hereof, and true and complete copies of all such
records have heretofore been delivered to Parent, all as in effect on the date
hereof. For the period beginning on the date of the Company's incorporation
through and including the date three years prior to the date hereof, to the best
of the Company's knowledge, the minute books of the Company reflect all actions
taken at all meetings, and by consents in lieu of meetings, of the stockholders
of the Company, the Board of Directs of the Company and all committees thereof.
Section 4.9. INFORMATION IN DISCLOSURE DOCUMENTS. None of the
information with respect to the Company to be included in (i) the joint
prospectus/proxy statement of the Company and Parent (the "Proxy Statement")
required to be mailed to the stockholders of the Company in connection with the
Merger and (ii) the Registration Statement to be filed with the Commission by
Parent on Form N-14 under the Securities Act for the purpose of registering the
shares of Parent Common Stock to be issued in the Merger (the "Registration
Statement") will, in the case of the Proxy Statement or any amendments or
supplements thereto, at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Company Meeting, or,
in the case of the Registration Statement, at the time it becomes effective and
at the Effective Date, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading; PROVIDED, HOWEVER, that this provision shall not
apply to statements or omissions in the Registration Statement or Proxy
Statement based upon information furnished by Parent for use therein. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. No representation or
warranty made by the Company contained in this Agreement and no statement
contained in any certificate, list, exhibit or other instrument specified in
this Agreement, including without limitation the Company Disclosure Schedule, as
the same may be amended pursuant to the provisions hereof, contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
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Section 4.10. SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) The Company has filed and will file with the SEC all
forms, reports, schedules, statements, exhibits and other documents (other than
registration statements on Form S-8 or reports on Form 11-K, in each case
relating to employee benefit plans) (collectively, the "Company SEC Documents")
required to be filed on or before the date hereof or the Closing Date,
respectively, by it under the Securities Act or the Exchange Act. The Company
has furnished or made available to Parent true and correct copies of all Company
SEC Documents filed by the Company since June 1, 1998 and will promptly furnish
to Parent any other Company SEC Document filed by or on behalf of the Company
with the SEC from the date hereof to the Closing Date. At the time filed, the
Company SEC Documents filed by the Company since June 1, 1998 (i) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with the applicable
requirements of the Securities Act or Exchange Act, as the case may be.
(b) The audited consolidated financial statements of the
Company for the three years ended May 31, 1999, together with the reports and
opinions thereon of Michael C. Finkelstein and the unaudited consolidated
financial statements of the Company for the three months ended August 31, 1999
(the "Company Interim Financial Statements"), which are included in the Company
SEC Documents and have previously been delivered to Parent, are collectively
referred to herein as the "Company Financial Statements". The Company Financial
Statements comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto; and fairly present, in all material respects, on a consolidated basis,
the financial position of the Company at, and the results of its operations for,
each of the periods then ended and were prepared in conformity with GAAP applied
on a consistent basis, except as otherwise disclosed therein and, subject, in
the case of the Company Interim Financial Statements, to normal year-end
adjustments, the absence of footnote disclosures, and any other adjustments
described therein.
(c) As at November 30, 1999, and as reflected in the Company's
Form 10-Q, which will be filed on or before January 15, 2000, the Company had a
total stockholders' equity of at least $8,480,000, including $1,410,000 of
Company Preferred Stock, and minimum total investments at book value of at least
$23,000,617, which is net of participations of $15,628,448 and a reduction of
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$751,000 to state investments at fair value (compared to a fair value adjustment
to book value of $316,000, at August 31, 1999, resulting in a net adjustment of
$435,000, during the quarter ended at November 30, 1999).
Section 4.11. LIABILITIES.
(a) The Company does not have any direct or indirect
liability, contingent or otherwise, that is required by GAAP to be reflected or
reserved for on the financial statements of the Company (collectively, the
"Liabilities"), that was not adequately reflected or reserved against on the
Audited Financial Statements for the period ended May 31, 1999 or on the Company
Interim Financial Statements for the three-month period ended August 31, 1999,
other than (i) liabilities incurred in the ordinary course of business since
June 1, 1999 consistent with past practices, or (ii) liabilities permitted by
this Agreement to be incurred in connection with the transactions contemplated
by this Agreement.
(b) No payments are due to the SBA as a result of the
transactions contemplated hereby, including, without limitation, any accrued
interest or dividends resulting from the Company's previous repurchase of its 3%
preferred stock from the SBA.
Section 4.12. NO MATERIAL ADVERSE CHANGE. Except as disclosed
in SECTION 4.12 OF THE COMPANY DISCLOSURE SCHEDULE, since August 31, 1999, there
has been no material adverse change in the management, assets, Liabilities,
properties, business, operations, financial condition, results of operations or
prospects of the Company.
Section 4.13. COMPLIANCE WITH LAWS. Except as disclosed in
SECTION 4.13 OF THE COMPANY DISCLOSURE SCHEDULE, the Company is not in violation
of any applicable order, judgment, injunction, award or decree, law, ordinance
or regulation or any other requirement of any Governmental Entity applicable to
the Company or any of its businesses. The Company has not received notice that
any such violation has been alleged or is being investigated.
Section 4.14. PERMITS. The Company has obtained all Permits
that are necessary for the ownership and conduct of its businesses as presently
conducted or currently proposed to be conducted, other than any Permits, the
absence of which would not, individually or in the aggregate, have a Company
Material Adverse Effect; such Permits are in full force and effect and are
sufficient for the ownership and conduct of such businesses as presently
conducted or currently proposed to be conducted; no violations exist or have
been recorded in respect of any Permit; and no proceeding is pending or, to the
knowledge of the Company, threatened, that would suspend, revoke or limit any
Permit.
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Section 4.15. ACTIONS AND PROCEEDINGS. There are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its directors,
officers or employees (in their capacities as such). Except as disclosed in
SECTION 4.15 OF THE COMPANY DISCLOSURE SCHEDULE, as of the date of this
Agreement there is no claim, action, suit, litigation, legal, administrative or
arbitration proceeding, whether formal or informal (including, without
limitation, any claim or notice of intent to institute any matter), which is
pending or, to the Company's knowledge, threatened against or involving the
Company or any of its directors, officers or employees (in their capacities as
such) or properties, capital stock or assets.
Section 4.16. CONTRACTS AND OTHER AGREEMENTS.
(a) SECTION 4.16 OF THE COMPANY DISCLOSURE SCHEDULE sets forth
as of the date of this Agreement each contract and other agreement as described
below (whether or not in writing) which is currently in effect (unless indicated
otherwise below) to which the Company is a party or by or to which its assets or
properties are bound, excluding agreements with portfolio companies included in
the Company's investment portfolio:
(i) contracts and other agreements with any current or
former officer, director, employee, consultant, agent or other
representative of the Company, other than pursuant to Plans
described in SECTION 4.23 OF THE COMPANY DISCLOSURE SCHEDULE;
(ii) contracts and other agreements with any labor union
or association representing any employee;
(iii) contracts and other agreements for the purchase or
sale of equipment or services, which involve the receipt or
payment by the Company of an amount in excess of $2,000 per
month (in the aggregate in the case of any related series of
contracts and other agreements);
(iv) contracts and other agreements for the sale of any of
the assets or properties of the Company or for the grant to
any person of any preferential rights to purchase any of the
assets or properties of the Company, which involve the receipt
or payment by the Company of an amount in excess of $10,000
(in the aggregate in the case of any related series of
contracts and other agreements);
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(v) contracts and other agreements calling for an
aggregate purchase price or payments in any one year of more
than $10,000 payable by the Company in any one case (in the
aggregate in the case of any related series of contracts and
other agreements); (vi) contracts and other agreements,
whether or not currently in effect, relating to the
acquisition by the Company of any business of, or the
disposition of any business involving the Company to, any
other person;
(vii) contracts relating to the disposition or acquisition
of any investment or of any interest in any person, which
involved the receipt or payment by the Company of an amount in
excess of $10,000 (in the aggregate in the case of any related
series of contracts and other agreements);
(viii) joint venture and similar agreements which would
involve the receipt or payment by the Company of an amount in
excess of $50,000 (in the aggregate in the case of any related
series of contracts or other agreements);
(ix) contracts and other agreements, whether or not
currently in effect, under which the Company agreed to
indemnify any party or to share tax liability of any party,
which could involve the payment by the Company of an amount in
excess of $10,000 (in the aggregate in the case of any related
series of contracts or other agreements);
(x) contracts and other agreements containing covenants of
the Company, or, to the Company's knowledge, its officers,
directors or employees, not to compete in or solicit employees
in any line of business or with any person in any geographical
area or covenants of any other person not to compete with or
solicit employees from the Company in any line of business or
in any geographical area;
(xi) contracts and other agreements relating to the making
of any loan or other extension of credit by the Company or of
any loan by the Company to a stockholder, officer or director
of the Company or from a stockholder of the Company to the
Company;
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(xii) contracts and other agreements relating to the
borrowing of money by, or indebtedness of, the Company or the
direct or indirect guaranty by the Company of any obligation
or indebtedness of any other person or Governmental Entity
(other than any accounts receivable or accounts payable of the
Company), including, without limitation, any (a) agreement or
arrangement relating to the maintenance of compensating
balances, (b) agreement or arrangement with respect to lines
of credit, (c) agreement to advance or supply funds to any
other person other than in the ordinary course of business,
(d) agreement to pay for property, products or services of any
other person even if such property, products or services are
not conveyed, delivered or rendered, (e) keep-well, make-whole
or maintenance of working capital or earnings or similar
agreement, and (f) guaranty with respect to any lease or other
similar periodic payments to be made by any such person;
(xiii) contracts and other agreements relating to the
provision by or to the Company of third party management or
administration services, which involve the receipt or payment
by the Company of an amount in excess of $10,000 (in the
aggregate in the case of any related series of contracts and
other agreements);
(xiv) each Lease and lease of personal property which
requires annual lease payments in excess of $10,000;
(xv) contracts and other agreements pursuant to which the
Company obtains or grants insurance or reinsurance;
(xvi) contracts and other agreements between the Company
and any Governmental Entity;
(xvii) contracts and other agreements which require
payments generated by a change in control of the Company;
(xviii) contracts and other agreements with any
stockholder, director or officer of the Company; and
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(xix) contracts and other agreements, whether or not
currently in effect, relating to disposal of any controlled or
hazardous substance or waste.
(b)(c) There have been made available to Parent prior to the
date hereof true and complete copies of all of the contracts and other
agreements set forth in SECTION 4.16 OF THE COMPANY DISCLOSURE SCHEDULE. Each
such contract and other agreement is valid, in full force and effect and binding
upon the Company and, to the Company's knowledge, the other parties thereto in
accordance with its terms, and the Company is not in default under any of them
and the Company has no knowledge of any threat of cancellation or termination
thereunder, nor will the consummation of the transactions contemplated by this
Agreement result in a default under any such contract or other agreement or the
right to terminate such contract or other agreement. No Permits or other
documents or agreements with, or issued by or filed with, any person, have been
granted to any other person that provide the right to use any real or tangible
personal property comprising any portion of the assets of the Company. The
Company is not a party to any contract, commitment, arrangement or agreement
which would, following the Closing, restrain or restrict Parent or any affiliate
of Parent, from operating the business of the Company in the manner in which it
is currently operated.
Section 4.17. INVESTMENT PORTFOLIO.
(a) The Company's investment portfolio was acquired in the
ordinary course of business, and a true and complete list of the investments in
such portfolio, as of the date hereof, with information included thereon as to
the principal terms of, interest rate, and maturity date thereof, and type and
value of collateral thereon (if any), as of such date, is listed in SECTION 4.17
OF THE COMPANY DISCLOSURE SCHEDULE. Except as disclosed in SECTION 4.17 OF THE
COMPANY DISCLOSURE SCHEDULE, none of the investments included in such portfolio
is in default in the payment of principal or interest or materially impaired. By
virtue of the preemption provisions contained in the Small Business Investment
Act of 1958, the loans included in the Company's investment portfolio need not
comply with the laws and regulations of each of the various states in which the
Company does business or in which the Company's borrowers are located.
(b) SECTION 4.17 OF THE COMPANY DISCLOSURE SCHEDULE sets forth
as of the date of this Agreement each contract and other agreement between the
Company and the portfolio companies in which it has invested. Each such contract
and other agreement is valid, in full force and effect and binding upon the
Company and, to the Company's knowledge, the other parties thereto in accordance
with its terms, and the Company is not in default under any of them and the
Company has no knowledge of any threat of cancellation or termination
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thereunder, nor will the consummation of the transactions contemplated by this
Agreement result in a default under any such contract or other agreement or the
right to terminate such contract or other agreement.
Section 4.18. REAL PROPERTY.
(a) SECTION 4.18 OF THE COMPANY DISCLOSURE SCHEDULE sets forth
a list and summary description of all leases, subleases, licenses, occupancy
agreements or other agreements, written and oral, together with any amendments
or modifications thereto (each a "Lease" and collectively, the "Leases") with
respect to (A) all real property leased by the Company (whether as lessor or
lessee and including those in the names of nominees or other entities) and used
or occupied in connection with the business of the Company (the "Leased Real
Property") and (B) all real property leased or subleased by the Company, as
lessor or sublessor, to third parties (such SECTION 4.18 OF THE COMPANY
DISCLOSURE SCHEDULE to include the date of each Lease, the address of the
respective Leased Real Property, the amount of square feet of such Leased Real
Property, the Lease term commencement date, the Lease term expiration date, any
renewal options and any early termination provisions in each case with respect
to each portion of the Leased Real Property). The Company does not own any real
property.
(b) Each Lease is, with respect to the Company, in full force
and effect, and to the Company's knowledge, is in full force and effect with
respect to each other party thereto. The Company has performed all obligations
required to be performed by it to date under, and is not in default in respect
of, any Lease, and no event has occurred which, with due notice or lapse of time
or both, would constitute such a default by the Company. To the knowledge of the
Company, there is no default asserted thereunder by any other party thereto and
there are no unasserted defaults. All rentals and other payments due under each
such Lease have been duly paid.
(c) The Company has not received any notice of any violation
of any applicable building, zoning, land use or other similar statutes, laws,
ordinances, regulations, permits or other requirements (including, without
limitation, the Americans with Disabilities Act) in respect of the Leased Real
Properties, which has not been heretofore remedied, and there does not exist any
such violations which, individually or in the aggregate, could have a Company
Material Adverse Effect. The Company has not received any notice that any
operations on or uses of the Leased Real Properties constitute non-conforming
uses under any applicable building, zoning, land use or other similar statutes,
laws, ordinances, regulations, permits or other requirements. The Company has no
knowledge of nor has received any notice (other than published notice not
actually received) of any pending or contemplated rezoning proceeding affecting
the Leased Real Properties.
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(d) The Company has not received notice from any insurance
carrier regarding defects or inadequacies in the Leased Real Properties, which,
if not corrected, would result in termination of the Company's insurance
coverage therefor or an increase in the cost thereof.
(e) To the knowledge of the Company, there is no pending or
threatened: (i) condemnation of any part of the Leased Real Properties by any
Governmental Entity; (ii) special assessment against any part of the Leased Real
Properties; or (iii) litigation against the Company for breach of any
restrictive covenant affecting any part of the Leased Real Properties.
(f) The improvements at the Leased Real Properties are in good
condition and repair, ordinary wear and tear excepted, and have not suffered any
casualty or other damage which has not been repaired.
Section 4.19. INTELLECTUAL PROPERTY.
The Company owns, or is licensed or otherwise has adequate
right to use, all patents, patent rights, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights, copyrights,
know-how, technology, trade secrets and other proprietary information
(collectively, the "Intellectual Property Rights") which are material to the
conduct of the business of the Company. No claims have been asserted by any
Person, and the Company has not asserted a claim against any Person, with
respect to any of the Intellectual Property Rights owned or used by the Company,
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto to which the Company is a party, in any case that
would be reasonably likely to have a Material Adverse Effect on the Company.
Section 4.20. RECEIVABLES . All accounts receivable and vendor
receivables reflected in the Company Interim Financial Statements, and all
accounts receivable and vendor receivables arising subsequent to August 31,
1999, represent bona fide transactions that have arisen in the ordinary course
of business, are valid and existing and represent moneys due. The Company has
made and will make adjustments to the carrying value of such receivables
reasonably considered adequate for receivables not collectible in the ordinary
course of its business in accordance with GAAP, consistently applied.
Section 4.21. BANKING. SECTION 4.21 OF THE COMPANY DISCLOSURE
SCHEDULE contains a complete list of all of the bank accounts and lines of
credit owned or used by the Company, and the names of all persons with authority
to withdraw funds from, or execute drafts or checks on, each such account.
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Section 4.22. LIENS. The Company has good and marketable title
to all of its respective assets and properties, in each case free and clear of
any lien or other encumbrance, except for (i) liens or other encumbrances
securing taxes, assessments, governmental charges or levies, or the claims of
materialmen, carriers, landlords and like persons, all of which are not yet
delinquent or which are being contested in good faith or (ii) liens or other
encumbrances of a character that do not detract from the value of the property
subject thereto or impair the use of or the access to the property subject
thereto, or impair the operation of the Company or detract from its business.
Section 4.23. EMPLOYEE BENEFIT PLANS.
(a) SECTION 4.23(A) OF THE COMPANY DISCLOSURE SCHEDULE sets
forth all "employee benefit plans", as defined in Section 3(3) of ERISA, and all
other employee benefit arrangements or payroll practices, including, without
limitation, any such arrangements or payroll practices providing severance pay,
sick leave, vacation pay, salary continuation for disability, retirement
benefits, deferred compensation, bonus pay, incentive pay, stock options,
hospitalization insurance, medical insurance, life insurance, scholarships or
tuition reimbursements, maintained by the Company or to which the Company is
obligated to contribute thereunder for current or former employees of the
Company or to which the Company has contributed or has been obligated to
contribute thereunder within the six-year period preceding the date hereof. Each
of the employee benefit plans, practices and arrangements set forth in SECTION
4.23 OF THE COMPANY DISCLOSURE SCHEDULE shall hereafter be referred to as a
"Plan" (or "Plans" as the context may require).
(b) None of the Plans is a "multiemployer plan," as defined in
Section 3(37) of ERISA or a "defined benefit plan," as defined in Section 3(35)
of ERISA.
(c) Each of the Plans that are intended to qualify under
Section 401(a) of the Code, and the trusts maintained pursuant thereto, have
been determined to be exempt from federal income taxation under Section 501 of
the Code by the IRS (or remain within the remedial amendment period for
obtaining an initial determination of exemption from tax), and nothing has
occurred with respect to the operation of any such Plan which could cause the
loss of such qualification or exemption or the imposition of any liability,
penalty or tax under ERISA or the Code.
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(d) All contributions (including all employer contributions
and employee salary reduction contributions) required to have been made under
the Plans or by law to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof (including any valid
extensions), and all contributions for any period ending on or before the
Effective Time which are not yet due will have been paid or accrued on or prior
to the Effective Time.
(e) There has been no violation of ERISA, the Code or other
applicable law with respect to the filing of applicable reports, documents and
notices regarding the Plans with the Secretary of Labor or the Secretary of the
Treasury, or the furnishing of required reports, documents or notices to the
participants or beneficiaries of the Plans.
(f) True, correct and complete copies of the following
documents, with respect to each of the Plans, have been delivered to Parent by
the Company: (i) all plans and related trust documents, and amendments thereto;
(ii) the most recent IRS Forms 5500; (iii) the last IRS determination letter;
and (iv) summary plan descriptions.
(g) There are no pending actions, claims or lawsuits which
have been asserted or instituted against the Plans, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of the Plans with respect to the operation of such Plans
(other than routine benefit claims or actions seeking qualified domestic
relations orders), nor does the Company have knowledge of any threatened claim
or lawsuit.
(h) The Plans have been maintained in accordance with their
terms and with all provisions of ERISA and the Code (including rules and
regulations thereunder) and other applicable federal and state laws and
regulations, and neither the Company nor any "party in interest" or
"disqualified person" with respect to the Plans has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or 4975 of the Code that
could result in liability to the Company or Parent. No fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any Plan.
(i) None of the Plans provide retiree life or retiree health
benefits except as may be required under applicable state law, Section 4980B of
the Code or Section 601 of ERISA or at the expense of the participant or the
participant's beneficiary. The Company have complied with the notice and health
care continuation requirements of Section 4980B of the Code and Sections 601
through 608 of ERISA.
(j) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment becoming due to any employee (current, former or retired) of the
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Company, (ii) increase any benefits otherwise payable under any Plan or (iii)
result in the acceleration of the time of payment or vesting of any benefits
under any Plan.
Section 4.24. EMPLOYEE RELATIONS.
(a) The Company is in compliance with all laws regarding
employment, wages, hours, equal opportunity, collective bargaining and payment
of social security and other taxes. The Company is not engaged in any unfair
labor practice or discriminatory employment practice and no complaint of any
such practice against the Company has been filed or, to the Company's knowledge,
threatened to be filed with or by the National Labor Relations Board, the Equal
Employment Opportunity Commission or any other administrative agency, federal or
state, that regulates labor or employment practices, nor is any grievance filed
or, to the Company's knowledge, threatened to be filed, against the Company by
any employee pursuant to any collective bargaining or other employment agreement
to which the Company is a party or is bound. The Company is in compliance with
all applicable foreign, federal, state and local laws and regulations regarding
occupational safety and health standards, and has received no complaints from
any foreign, federal, state or local agency or regulatory body alleging
violations of any such laws and regulations.
(b) The employment of all persons employed by the Company is
terminable at will without any penalty or severance obligation of any kind on
the part of the employer. All sums due for employee compensation and benefits
and all vacation time owing to any employees of the Company have been duly and
adequately accrued on the accounting records of the Company. All employees of
the Company are either United States citizens or resident aliens specifically
authorized to engage in employment in the United States in accordance with all
applicable laws.
Section 4.25. INSURANCE. SECTION 4.25 OF THE COMPANY
DISCLOSURE SCHEDULE sets forth a list of all policies or binders of errors and
omissions, fire, liability, product liability, workmen's compensation, vehicular
and other insurance held by or on behalf of the Company (collectively, the
"Insurance Policies"). Such Insurance Policies are in full force and effect and
are in amounts of a nature which are adequate and customary for the Company's
business. In addition, SECTION 4.25 OF THE COMPANY DISCLOSURE SCHEDULE sets
forth in respect of the Insurance Policies (i) a description of occurrences
reported involving amounts in excess of $10,000 and (ii) the aggregate amount
paid out under each such policy during the period from January 1, 1995 through
the date hereof. There have been no disputes regarding denial or nonpayment of
claims under any Insurance Policy.
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Section 4.26. OFFICERS, DIRECTORS, EMPLOYEES, CONSULTANTS.
SECTION 4.26 OF THE COMPANY DISCLOSURE SCHEDULE sets forth (i) the name of each
officer and director of the Company and the amount of compensation paid during
fiscal 1999 and the amount reasonably expected to be paid during fiscal 2000,
(ii) the name of each other employee or class of employees of the Company who
either (x) received compensation in fiscal 1999 in excess of $25,000 or (y) is
anticipated to receive, based on current compensation levels, compensation in
fiscal 2000 in excess of $25,000, indicating the amount of such compensation for
such persons for fiscal 1999 and fiscal 2000; and (iii) a list of all employees
employed by the Company at November 30, 1999. The Company does not employ any
person as a consultant, whose employment cannot be terminated on not less than
30 days' notice without penalty.
Section 4.27. TRANSACTIONS WITH DIRECTORS, OFFICERS AND
AFFILIATES. Except as disclosed in the Company SEC Documents or in SECTION 4.27
OF THE COMPANY DISCLOSURE SCHEDULE, since January 1, 1998, there have been no
transactions between the Company and any director, officer, employee,
stockholder or other affiliate of the Company or loans, guarantees or pledges
to, by or for the Company from, to, by or for any of such persons. Since January
1, 1998, other than as disclosed in the Company SEC Documents or on SECTION 4.27
OF THE COMPANY DISCLOSURE SCHEDULE, none of the officers, directors or employees
of the Company, or any spouse or relative of any of such persons, has been a
director or officer of, or has had any direct or indirect interest in, any firm,
corporation, association or business enterprise which during such period has
been a supplier, customer or sales agent of the Company or has competed with or
been engaged in any business of the kind being conducted by the Company, except
for an investment in less than 5% of the outstanding equity of any such firm,
corporation, association or business enterprise, the equity of which is publicly
traded.
Section 4.28. OPERATIONS OF THE COMPANY. Except as disclosed
in SECTION 4.16 OR 4.28 OF THE COMPANY DISCLOSURE SCHEDULE and except as may
result from the transactions contemplated by this Agreement, since May 31, 1999,
the Company has not:
(i) amended its Certificate of Incorporation or by-laws or
merged with or into or consolidated with any other person,
subdivided or in any way reclassified any shares of its
capital stock or changed or agreed to change in any manner the
rights of its outstanding capital stock or the character of
its business;
(ii) issued or sold or purchased, or issued options or
rights to subscribe to, or entered into any contracts or
commitments to issue or sell or purchase, any shares of its
capital stock or any of its bonds, notes, debentures or other
evidences of indebtedness;
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(iii) entered into or amended any agreement with any labor
union or association representing any employee, or, except for
Plans referred to in SECTION 4.23 OF THE COMPANY DISCLOSURE
SCHEDULE, made any wage or salary increase or bonus, or
increase in any other direct or indirect compensation, for or
to any of its officers, directors, employees, consultants,
agents or other representatives in excess of $10,000, or
commitment or agreement to make or pay the same;
(iv) except in the ordinary course of business consistent
with past practice, declared or made any Distributions to any
stockholder or made any direct or indirect redemption,
retirement, purchase or other acquisition of any shares of its
capital stock;
(v) made any change in its accounting methods or practices
or made any change in depreciation or amortization policies,
except as required by law or GAAP;
(vi) made any loan or advance to its stockholders or to
any of the directors, officers or employees of the Company,
consultants, agents or other representatives, or otherwise
than in the ordinary course of business made any other loan or
advance;
(vii) except in the ordinary course of business consistent
with past practice, (A) entered into any Lease; (B) sold,
abandoned or made any other disposition of any of its assets
or properties; (C) granted or suffered any lien or other
encumbrance on any of its assets or properties; (D) entered
into or amended any contract or other agreement to which it is
a party, or by or to which it or its assets or properties are
bound or subject which if existing on the date hereof would
need to be disclosed in SECTION 4.16 OF THE COMPANY DISCLOSURE
SCHEDULE;
(viii) made or entered into any agreement to make any
acquisition of all or a substantial part of the assets,
properties, securities or business of any other person, other
than investments in portfolio companies identified on SECTION
4.17 OF THE COMPANY DISCLOSURE SCHEDULE;
(ix) paid, directly or indirectly, any of its Liabilities
before the same became due in accordance with its terms or
otherwise than in the ordinary course of business;
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(x) terminated or failed to renew, or received any written
threat (that was not subsequently withdrawn) to terminate or
fail to renew, any contract or other agreement that is or was
material to the assets, liabilities, properties, business,
operations, condition (financial or otherwise), operations or
prospects of the Company;
(xi) made any revaluation of any assets or write-down of
the value of any receivables of the Company in excess of
$10,000, other than revaluations of the Company's investment
portfolio on a quarterly basis in the normal course of
business consistent with past practice;
(xii) except in the ordinary course of business consistent
with past practice, accelerated the collection, or sale to
third parties, of any receivables of the Company, or delayed
the payment of any payables of the Company;
(xiii) entered into any other contract or other agreement
or other transaction that obligates the Company to pay an
amount in excess of $10,000, which contract is not terminable
by the Company upon not more than 30 days' notice; or
(xiv) suffered any damage, destruction or loss, whether
covered by insurance or not, which has had or could have a
Company Material Adverse Effect.
Section 4.29. BROKERAGE. Except for First Colonial Securities
Group, no broker, agent or finder has acted, directly or indirectly, for the
Company or, to the knowledge of the Company, any of the Company Stockholders,
nor has the Company or, to the knowledge of the Company, any of the Company
Stockholders, incurred any obligation to pay any brokerage fee, agent's
commission or finder's fee or other commission in connection with the
transactions contemplated by this Agreement.
Section 4.30. TAXES.
(a) The Company has duly and timely filed all federal, state,
local, foreign and other tax returns and reports required to be filed by it on
or before the date hereof, and has either (i) paid all Taxes of the Company due
and payable or (ii) has accrued on the consolidated balance sheet of the Company
included in the Company Interim Financial Statements previously furnished to
Parent (in accordance with GAAP applied on a basis consistent with that of prior
years) all Taxes required to be accrued by the Company on or before the date
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hereof. All of such returns or reports are true, accurate and complete and
reflect the Tax liability in all material respects for which the Company could
be held responsible and all Taxes for which the Company could be held
responsible as shown on such returns or reports as due and payable have been
paid.
(b) The Company is not delinquent in the payment of any Taxes
for which the Company could be held responsible, nor has the Company requested
any extension of time within which to file any Tax return which return has not
since been filed, nor has the Company waived or tolled the running of any
statute of limitations with respect to any such Taxes.
(c) No deficiency for any Tax has been threatened, asserted or
assessed against the Company, and there are neither unresolved questions or
claims, nor proceedings or actions pending (including an audit of any tax return
filed by the Company with any federal, state, local or foreign taxing
authority), concerning either the Tax liability of the Company or the collection
or assessment of any Tax for any period for which returns have been filed or
were due.
(d) The Company has delivered to Parent true and correct
copies of any filed tax returns (including information returns and Forms 1120)
of the Company which refer to any period of time from June 1, 1994, through the
date of this Agreement or to any event which occurred during that period of
time. The Company has not filed an election under Section 341(f) of the Code
that is applicable to the Company or any asset held by the Company. In addition,
none of the Company's debt is corporate acquisition indebtedness within the
meaning of Section 279 of the Code. The Company has not agreed, nor is required,
to make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise. The Company is not subject to or a member of any
joint venture, partnership or other arrangement or contract which is treated as
a partnership for federal income tax purposes. The Company has withheld and, if
due, paid all Taxes required to have been withheld and, if due, paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party. There are no pending claims or
assessments for Taxes payable by the Company. Neither the Company nor any of its
affiliates 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.
(e) SECTION 4.30 OF THE COMPANY DISCLOSURE SCHEDULE lists each
state in which the Company is required to file Tax returns.
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(f) Except as disclosed in SECTION 4.30 OF THE COMPANY
DISCLOSURE SCHEDULE, the amount of the Company's earnings and profits, as
defined for purposes of Subchapter C of the Code, at the end of fiscal year
1999, is set forth on, or can be determined from the information set forth in,
the financial statements of the Company for the year ended May 31, 1999 and/or
the income tax returns (including information returns and Forms 1120) of the
Company through the date hereof, furnished to Parent by the Company. It is not
anticipated that there will be any change in any such amount other than by
virtue of the ordinary conduct of the Company's business from May 31, 1999
through the date of the Closing.
(g) The Company intends to elect regulated investment company
status under Subchapter M of the Code for its fiscal year ending May 31, 2000.
(h) For each taxable year of its operation, the Company has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company; all of the Company's issued and outstanding
shares have been offered and sold in compliance in all material respects with
applicable federal and state securities laws.
Section 4.31. EXECUTION AND VALIDITY OF AGREEMENTS WITH
EXECUTIVES. The Company is not a party to any contract, commitment, arrangement
or agreement which could, following the Closing, restrain or restrict the
parties to the Agreements with Executives from performing their respective
obligations thereunder.
Section 4.32. ENVIRONMENTAL LAWS.
(a) The Company (i) is in compliance in all respects with all
Environmental Laws; (ii) has obtained all necessary Environmental Permits, the
failure of which to obtain could have a Company Material Adverse Effect, all of
which are in full force and effect; and (iii) is in compliance with all terms
and conditions of such Environmental Permits.
(b) The Company has not violated or done any act which could
give rise to material liability under, and has not otherwise failed to act in a
manner which would expose it to material liability under, any Environmental Law.
No event has occurred which, upon the passage of time, the giving of notice, or
failure to act would reasonably be expected to give rise to material liability
to the Company under any Environmental Law.
(c) To the Company's knowledge, no Hazardous Material has been
released, spilled, discharged, dumped, disposed of, or otherwise come to be
located in, at or beneath any of the Leased Real Property or any properties or
assets formerly owned, operated or otherwise controlled by the Company and used
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in the conduct of the Company's business (i) in violation of any Environmental
Law, or (ii) in such manner as would reasonably be expected to cause an
environmental liability of the Company.
(d) To the Company's knowledge, there have been and are no:
(i) aboveground or underground storage tanks; (ii) surface impoundments for
Hazardous Materials; (iii) wetlands as defined under Environmental Law or (iv)
asbestos containing materials or PCBs or PCB-containing equipment, located
within any portion of the Leased Real Property, which individually or in the
aggregate could have a Company Material Adverse Effect.
(e) No liens have been placed upon any Leased Real Property in
connection with any actual or alleged liability under any Environmental Law.
(f) (i) There is no pending or, to the knowledge of the
Company, threatened, claim, litigation or administrative proceeding against the
Company arising under any Environmental Law; (ii) the Company has no ongoing
negotiations with or agreements with any Governmental Entity relating to any
Remedial Action or other environmentally-related claim; (iii) the Company has
not submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any applicable Environmental Law reporting a release of a Hazardous
Material into the environment; and (iv) the Company has not received any notice,
claim, demand, suit or request for information from any Governmental Entity or
private entity with respect to any liability or alleged liability under any
Environmental Law, nor to the knowledge of the Company, has any other entity
whose liability therefor, in whole or in part, may be attributed to the Company,
received such notice, claim, demand, suit or request for information. Neither
the Company, nor to the Company's knowledge, any prior owner or operator of the
Leased Real Property has generated, disposed of, or arranged for the disposal of
any Hazardous Material except in compliance with Environmental Law.
(g) The Company has not, and, to the knowledge of the Company,
no other entity whose liability therefor, in whole or in part, may be attributed
to the Company has, disposed of any Hazardous Material at any location which is
identified on the current or proposed (i) National Priorities List under 40
C.F.R. 300 Appendix B, (ii) CERCLIS list or (iii) the Leaking Underground
Storage Tank list or any analogous state list.
(h) The Company has provided to Parent all environmental
studies and reports pertaining to the Leased Real Property, the operations
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conducted thereon and the Company made by or at the direction of the Company or
otherwise in the Company's possession.
Section 4.33. ACCOUNTING MATTERS. Neither the Company nor, to
the knowledge of the Company, any Company Stockholder or any affiliates thereof,
has taken or agreed to take any action that would prevent Parent from accounting
for the business combination to be effected by the Merger as a "pooling of
interests".
Section 4.34. COMPANY ACTION. The Board of Directors of the
Company (at a meeting duly called and held) has by the requisite vote of all
directors present (a) determined that the Merger is advisable and fair and in
the best interests of the Company and its stockholders, (b) approved the Merger
in accordance with the applicable provisions of the New York Corporation Law and
(c) recommended the approval of this Agreement and the Merger by the holders of
the Company Common Stock and directed that the Merger be submitted for
consideration by the Company's stockholders at the Company Meeting.
Section 4.35. OPINION OF FINANCIAL ADVISOR. The Board of
Directors of the Company has received, on the date of this Agreement, the oral
opinion of First Colonial Securities Group, to be confirmed in writing, to the
effect that, as of such date, the aggregate Share Consideration to be received
by the Company's shareholders in the Merger is fair to the Company's
shareholders from a financial point of view. A copy of the written opinion of
First Colonial Securities Group will be delivered to Parent as soon as
practicable after the date of this Agreement.
Section 4.36 HART-SCOTT-RODINO. The Company, together with all
entities which it controls, has (i) annual net sales of less than $25,000,000
and (ii) total assets of less than $25,000,000, each determined pursuant to
Section 801.11 of the Premerger Notification Rules to the H-S-R Act.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company that,
except as set forth in the disclosure schedule attached hereto (the "Parent
Disclosure Schedule"), which Parent Disclosure Schedule and shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article V:
Section 5.1. EXECUTION AND DELIVERY. Each of Parent and Sub
has the corporate power and authority to enter into this Agreement and each
agreement, document or instrument contemplated hereby or to be delivered in
connection herewith to which such person is a party (the "Parent Documents") and
to carry out its respective obligations hereunder and thereunder. The execution,
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delivery and performance by Parent and Sub of this Agreement and the Parent
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Parent and Sub, as applicable (and, in the case of this Agreement,
by the Board of Directors of Sub and by Parent as the sole stockholder of Sub).
This Agreement constitutes the valid and binding obligation of Parent and Sub
and the Parent Documents will constitute the valid and binding obligations of
Parent and Sub, when executed by such person, in each case, enforceable in
accordance with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding therefor may be brought. No other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or the Parent Documents and the transactions contemplated hereby and
thereby.
Section 5.2. CONSENTS AND APPROVALS. The execution and
delivery by Parent and Sub of this Agreement and the Parent Documents to which
such person is a party, the performance by Parent and Sub of their respective
obligations hereunder and thereunder and the consummation by Parent and Sub of
the transactions contemplated hereby and thereby do not require Parent or Sub to
obtain any consent, approval or action of, or make any filing or registration
with or give any notice to, any Governmental Entity, other than (i) in
connection, or in compliance, with the provisions of the H-S-R Act, the
Securities Act, the Exchange Act and the corporation, securities or blue sky
laws or regulations of various states, all of which will be duly obtained or
made, as the case may be, on or prior to the Closing, and will be in full force
and effect on the Closing Date, (ii) the approval of the SBA, (iii) the filing
of the Certificate of Merger with the Secretaries of State of Delaware and New
York and (iv) as to which the failure to so obtain, file or register would not
have a material adverse effect on the business, properties, assets, condition
(financial or otherwise), liabilities, or operations of Parent and its
Subsidiaries, taken as a whole, or prevent the consummation of the transactions
contemplated hereby (a "Parent Material Adverse Effect").
Section 5.3. NO BREACH. The execution, delivery and
performance by Parent and Sub of this Agreement and the Parent Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby in accordance with the terms and conditions hereof and thereof will
not (i) violate any provision of the Certificate of Incorporation or By-Laws of
Parent or Sub; (ii) violate, conflict with or result in the breach of any of the
terms of, result in any modification of the effect of, otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both, constitute) a default under, any contract or other agreement or
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instrument to which Parent or Sub is a party or by or to which the assets or
properties of Parent or Sub may be bound or subject; (iii) violate any order,
judgment, injunction, award or decree of any Governmental Entity against, or
binding upon, or any agreement with, or condition imposed by, any Governmental
Entity, binding upon Parent or Sub, or upon the securities, assets or business
of Parent or Sub; (iv) violate any statute, law or regulation of any
jurisdiction as such statute, law or regulation relates to Parent or Sub, or to
the securities, assets or business of Parent or Sub; (v) result in the creation
or imposition of any lien or other encumbrance or the acceleration of any
indebtedness or other obligation of Parent or Sub; or (vi) result in the breach
of any of the terms or conditions of, constitute a default under, or otherwise
cause an impairment of, any Permit of Parent or Sub; except in the case of (ii)
through (vi) for violations, conflicts, breaches, defaults, modifications,
impairments, liens or other encumbrances that would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
Section 5.4. SEC DOCUMENTS; FINANCIAL STATEMENTS.
(a) Parent has filed and will file with the SEC all forms,
reports, schedules, statements, exhibits and other documents (other than
registration statements on Form S-8 or reports on Form 11-K, in each case
relating to employee benefit plans) (collectively, the "Parent SEC Documents")
required to be filed on or before the date hereof or the Closing Date,
respectively, by it under the Securities Act or the Exchange Act. Parent has
furnished or made available to the Company true and correct copies of all Parent
SEC Documents filed by Parent since December 31, 1997 and will promptly furnish
to the Company any other Parent SEC Document filed by or on behalf of Parent
with the SEC from the date hereof to the Closing Date. At the time filed, the
Parent SEC Documents filed by Parent since December 31, 1998 (i) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with the applicable
requirements of the Securities Act or Exchange Act, as the case may be.
(b) The audited consolidated financial statements of Parent
for the period from January 1, 1998 to December 31, 1998, together with the
report and opinion thereon of Arthur Andersen LLP, and the unaudited
consolidated financial statements of Parent for the nine months ended September
30, 1999 (the "Parent Interim Financial Statements"), which are included in the
Parent SEC Documents and have previously been delivered to the Company, are
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collectively referred to herein as the "Parent Financial Statements". The Parent
Financial Statements comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto; and fairly present, in all material respects, on a consolidated
basis, the financial position of Parent at, and the results of its operations
for, each of the periods then ended and were prepared in conformity with GAAP
applied on a consistent basis, except as otherwise disclosed therein and,
subject, in the case of the Parent Interim Financial Statements, to normal
year-end adjustments, the absence of footnote disclosures, and any other
adjustments described therein.
Section 5.5. SHARES OF PARENT COMMON STOCK. The shares of
Parent Common Stock will, when issued and delivered to the Company Stockholders
pursuant to Section 3.1(a), be duly authorized, validly issued, fully paid,
non-assessable, and free of all liens and other encumbrances of any kind or
nature whatsoever.
Section 5.6. ORGANIZATION, STANDING AND AUTHORITY OF PARENT
AND SUB. Each of Parent and Sub is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, and has all requisite
power and authority to own, lease and operate its assets, properties and
businesses and to carry on its businesses as now being conducted or currently
proposed to be conducted. Parent is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of such activities
make such qualification necessary, except where the failure to so qualify would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
Sub has not engaged in any business (other than certain organizational matters)
since the date of its incorporation. The copies of the Certificate of
Incorporation and By-Laws of Parent and Sub included as part of SECTION 5.6 OF
THE PARENT DISCLOSURE SCHEDULE constitute accurate and complete copies of such
organizational instruments and accurately reflect all amendments thereto through
the date hereof.
Section 5.7. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of
50,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred
stock, par value $.01 per share. As of November 8, 1999, there were 14,020,133
shares of Parent Common Stock and no shares of preferred stock outstanding and
there have been no material changes in such numbers through the date hereof. As
of the date hereof, there are no bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which Parent's stockholders may vote
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issued or outstanding. All outstanding shares of Parent Common Stock are duly
authorized and are validly issued, fully paid and nonassessable.
(b) The authorized capital stock of Sub consists of 100 shares
of Sub Common Stock, all of which are duly authorized, validly issued, fully
paid and nonassessable.
Section 5.8. BROKERAGE. No broker, agent or finder has acted,
directly or indirectly, for Parent or Sub. Parent and Sub have not incurred any
obligation to pay any brokerage fees, agent's commissions or finder's fee or
commission in connection with the transactions contemplated by this Agreement.
Section 5.9. INFORMATION IN DISCLOSURE DOCUMENTS. None of the
information supplied by Parent or Sub for inclusion in the Registration
Statement and the Proxy Statement will, in the case of the Proxy Statement or
any amendments or supplements thereto, at the time of the mailing of the Proxy
Statement and any amendments or supplements thereto, or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; PROVIDED, HOWEVER, that this provision shall not apply to
statements or omissions in the Registration Statement or Proxy Statement based
upon information furnished by the Company for use therein. The Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act, and the rules and regulations promulgated thereunder. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. No
representation or warranty made by Parent contained in this Agreement and no
statement contained in any certificate, list, exhibit or other instrument
specified in this Agreement, including without limitation the Parent Disclosure
Schedule, contains any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
Section 5.10. NO MATERIAL ADVERSE CHANGE. Since December 31,
1998, there has been no material adverse change in the management, assets,
liabilities, properties, business, operations, financial condition or results of
operations of Parent.
Section 5.11. SUB ACTION. The Board of Directors of Sub (at a
meeting duly called and held) has by the requisite vote of all directors present
approved the Merger in accordance with the provisions of Section 251 of the
Delaware Corporation Law.
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Section 5.12 OPTIONS AND OTHER STOCK RIGHTS. Except for
options to purchase Parent Common Stock outstanding under Parent's 1996 Stock
Option Plan and Parent's Amended and Restated 1996 Non-Employee Directors Stock
Option Plan, each as amended to date, there is no (i) outstanding option,
warrant, call, unsatisfied preemptive right or other agreement of any kind to
purchase or otherwise to receive from Parent any of the outstanding, authorized
but unissued, unauthorized or treasury shares of Parent Common Stock, Parent
Preferred Stock or any other security of the Parent, (ii) outstanding security
of any kind convertible into any security of Parent, and (iii) outstanding
contract or other agreement to purchase, redeem or otherwise acquire any
outstanding shares of Parent Common Stock, Parent Preferred Stock or any other
security of Parent.
Section 5.13. INFORMATION IN DISCLOSURE DOCUMENTS. None of the
information with respect to Parent or its subsidiaries to be included in (i) the
joint prospectus/proxy statement of the Company and Parent (the "Proxy
Statement") required to be mailed to the stockholders of the Company in
connection with the Merger and (ii) the Registration Statement to be filed with
the Commission by Parent on Form N-14 under the Securities Act for the purpose
of registering the shares of Parent Common Stock to be issued in the Merger (the
"Registration Statement") will, in the case of the Proxy Statement or any
amendments or supplements thereto, at the time of the mailing of the Proxy
Statement and any amendments or supplements thereto, and at the time of the
Company Meeting, or, in the case of the Registration Statement, at the time it
becomes effective and at the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that this provision shall not apply to statements or omissions in the
Registration Statement or Proxy Statement based upon information furnished by
the Company for use therein. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. No representation or warranty made by Parent contained
in this Agreement and no statement contained in any certificate, list, exhibit
or other instrument specified in this Agreement, as the same may be amended
pursuant to the provisions hereof, contains any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
Section 5.14. LIABILITIES. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, except (a) liabilities or obligations
disclosed or reserved against in the unaudited consolidated interim financial
statements of Parent as of and for the three months ended September 30, 1999
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included in Parent SEC Documents or disclosed in the footnotes thereto or in the
footnotes to the audited consolidated financial statements of Parent as of and
for the fiscal year ended December 31, 1998 included in Parent SEC Documents or
otherwise disclosed in Parent's 1998 Form 10-K or in Parent's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999, and (b) liabilities or
obligations which do not, individually or in the aggregate, have a Material
Adverse Effect on Parent.
Section 5.15. COMPLIANCE WITH LAWS. Except as disclosed in
SECTION 5.15 OF THE PARENT DISCLOSURE SCHEDULE, Parent is not in violation of
any applicable order, judgment, injunction, award or decree, law, ordinance or
regulation or any other requirement of any Governmental Entity applicable to
Parent or any of its businesses; Parent has not received notice that any such
violation has been alleged or is being investigated.
Section 5.16. PERMITS. Parent has obtained all Permits that
are necessary for the ownership and conduct of its businesses as presently
conducted or currently proposed to be conducted, other than any Permits, the
absence of which would not, individually or in the aggregate, have a Parent
Material Adverse Effect; such Permits are in full force and effect and are
sufficient for the ownership and conduct of such businesses as presently
conducted or currently proposed to be conducted; no violations exist or have
been recorded in respect of any Permit; and no proceeding is pending or, to the
knowledge of Parent, threatened, that would suspend, revoke or limit any Permit.
Section 5.17. ACTIONS AND PROCEEDINGS. There are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Parent or any of its directors,
officers or employees (in their capacities as such). Except as disclosed in
SECTION 5.17 OF THE PARENT DISCLOSURE Schedule, as of the date of this Agreement
there is no claim, action, suit, litigation, legal, administrative or
arbitration proceeding, whether formal or informal (including, without
limitation, any claim or notice of intent to institute any matter), which is
pending or, to Parent's knowledge, threatened against or involving the Company
or any of its directors, officers or employees (in their capacities as such) or
properties, capital stock or assets, except where the failure of any of the
foregoing to be true does not individually or in the aggregate have a Parent
Material Adverse Effect on Parent.
Section 5.18. LOAN PORTFOLIO. Parent's loan portfolio was
acquired in the ordinary course of business. All loans included in such
portfolio comply with all laws and regulations of each of the states to which
Parent is subject relating thereto.
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ARTICLE VI.
COVENANTS AND AGREEMENTS
Each of Parent, Sub and the Company (as applicable) covenant
and agree as follows:
Section 6.1. CONDUCT OF BUSINESS. (a) Prior to the Effective
Date, unless Parent shall otherwise agree in writing:
(i) The Company shall carry on its respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, and shall use its best efforts to preserve intact their
present business organizations, keep available the services of their present
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
goodwill and on-going businesses shall be unimpaired at the Effective Date,
except such impairment as would not have a Company Material Adverse Effect. The
Company shall (i) maintain insurance coverages and its books, accounts and
records in the usual manner consistent with prior practices; (ii) comply in all
material respects with all laws, ordinances and regulations of Governmental
Entities applicable to the Company; (iii) maintain and keep its properties and
equipment in good repair, working order and condition, ordinary wear and tear
excepted; and (iv) perform in all material respects its obligations under all
contracts and commitments to which it is a party or by which it is bound, in
each case other than where the failure to so maintain, comply or perform, either
individually or in the aggregate, would result in a Company Material Adverse
Effect.
(ii) The Company shall not undertake any of the actions
specified in Section 4.28.
(iii) The Company shall not take or cause to be taken any
action, whether before or after the Effective Date, which would disqualify the
Merger as a "pooling of interests" for accounting purposes or as a
"reorganization" within the meaning of Section 368(a) of the Code.
(iv) The Company shall not (i) originate any loans secured by
taxicab medallions ("Medallion Loans") in an amount greater than 97% of the
purchase price or the fair market value whichever is lower; (ii) originate any
subordinated Medallion Loans; or (iii) originate any loans to small businesses
secured by equipment and other collateral; without the consent of Parent.
(b) Prior to the Effective Date, unless the Company shall
otherwise consent in writing (which shall not be unreasonably withheld), Parent
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shall in all material respects carry on its respective businesses in the usual,
regular and ordinary course, PROVIDED, THAT for purposes of this Section 6.1(b),
"ordinary course" shall mean any activities or business related, directly or
indirectly, to lending, financing, leasing and the like, as well as to the
taxicab industry in general.
Section 6.2. LITIGATION INVOLVING THE COMPANY. Prior to the
Closing Date, the Company shall notify Parent of any actions or proceedings of
the type required to be described in Sections 4.15, 4.30 or 4.32 that are
threatened or commenced against the Company, or against any officer or director,
property or asset of the Company, or with respect to the Company's affairs,
promptly upon the Company becoming aware thereof, and of any requests of the
Company or, to the knowledge of the Company, any Company Stockholder, for
additional information or documentary materials by any Governmental Entity in
connection with the transactions contemplated hereby promptly upon the Company
becoming aware thereof. As to compliance with such requests for such
information, the Company shall consult with and obtain the consent of Parent,
which consent shall not be withheld unreasonably; provided that such consent
shall be unnecessary where such information is required by law to be provided.
Section 6.3. CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND
WARRANTIES OF THE PARTIES. From the date hereof through the Closing Date, (a)
the Company shall use all reasonable efforts to conduct its affairs in such a
manner so that, except as otherwise contemplated or permitted by this Agreement,
the representations and warranties of the Company contained in Article IV shall
continue to be true and correct in all material respects (or in ALL respects in
the case of any representation or warranty which refers to a Company Material
Adverse Effect or otherwise includes a concept of materiality) on and as of the
Closing Date as if made on and as of the Closing Date, (i) except that any such
representations and warranties that are given as of a particular date and relate
solely to a particular date or period shall be true and correct in all material
respects (or in ALL respects in the case of any representation or warranty which
refers to a Company Material Adverse Effect or otherwise includes a concept of
materiality) as of such date or period, and (ii) in the case of Section 4.12
only, except for such changes with respect thereto (x) which are contemplated by
this Agreement or (y) which are attributable to the execution of this Agreement,
or the announcement or contemplation of the transactions proposed herein; (b)
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Parent and Sub shall use their respective reasonable efforts to conduct their
affairs in such a manner so that, except as otherwise contemplated or permitted
by this Agreement, the representations and warranties contained in Article V
shall continue to be true and correct in all material respects (or in ALL
respects in the case of any representation or warranty which refers to a Parent
Material Adverse Effect or otherwise includes a concept of materiality) on and
as of the Closing Date as if made on and as of the Closing Date, (i) except that
any such representations and warranties that are given as of a particular date
and relate solely to a particular date or period shall be true and correct in
all material respects (or in ALL respects in the case of any representation or
warranty which refers to a Parent Material Adverse Effect or otherwise includes
a concept of materiality) as of such date or period, and (ii) in the case of
Section 5.10 only, except for such changes with respect thereto (x) which are
contemplated by this Agreement or (y) which are attributable to the execution of
this Agreement, or the announcement or contemplation of the transactions
proposed herein; (c) the Company shall promptly notify Parent and Sub of any
event, condition or circumstance occurring from the date hereof through the
Closing Date of which the Company becomes aware that would cause any material
revisions to the Company Disclosure Schedule provided by the Company pursuant to
this Agreement, or that would constitute a violation or breach of this Agreement
by the Company; and (d) Parent and Sub shall promptly notify the Company of any
event, condition or circumstance occurring from the date hereof through the
Closing Date of which it becomes aware that would cause any material revisions
to the Parent Disclosure Schedule provided by Parent or Sub pursuant to this
Agreement, or that would constitute a violation or breach of this Agreement by
Parent or Sub. No such notification shall be deemed an amendment to the
Disclosure Schedules to this Agreement, except as otherwise provided by this
Agreement.
Section 6.4. CORPORATE EXAMINATIONS AND INVESTIGATIONS.
(a) The Company shall cooperate with Parent as Parent shall
reasonably request in connection with the Parent's due diligence review of the
Company, to the extent necessary to confirm the accuracy of the Company's
representations and warranties.
(b) If this Agreement terminates, the parties hereto and their
respective affiliates shall keep confidential and shall not use or retain in any
manner any information or documents obtained from any other party concerning its
assets, liabilities, properties, business or operations, unless readily
ascertainable from public or published information or trade sources or already
known or subsequently developed by it independently of any investigation of any
other party, or received from a third party not under an obligation to such
other party to keep such information confidential.
Section 6.5. PREPARATION OF COMPANY RESTATED FINANCIAL
STATEMENTS. Promptly after the execution of this Agreement, the Company shall
cause to be prepared (i) the consolidated balance sheet of the Company as of
December 31, 1996, 1997 , 1998 and , if required in order to make all necessary
filings with the SEC, 1999, together with the respective related consolidated
statements of income, shareholders' equity and cash flows for the 12 months
ended December 31, 1999 (if applicable), 1998, 1997, and 1996, and (ii) the
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information required by Item 301 "Selected Financial Data" of Regulation S-K of
the SEC for the 12 months ended December 31, 1996, 1995 and 1994 (the "Company
Restated Financial Statements"). The Company Restated Financial Statements shall
be prepared in accordance with GAAP applied on a basis consistent with that used
in, and in accordance with the same accounting principles applied in, the
preparation of the Company Financial Statements and shall include all
information and schedules as are required by Regulation S-X of the SEC. The
Company shall cause Michael C. Finkelstein to audit the Company's Restated
Financial Statements, other than the Selected Financial Data for 1996, 1995 and
1994, and shall cause Michael C. Finkelstein to issue, on or prior to the
Effective Date, an opinion containing no qualifications or exceptions with
respect to the scope of its audit or otherwise on the Company Restated Financial
Statements that such accountants have audited the Company Restated Financial
Statements in accordance with generally accepted auditing standards and that the
Company Restated Financial Statements were prepared in accordance with GAAP. The
Company shall cause the Company Restated Financial Statements, together with the
opinion of Michael C. Finkelstein referenced above, to be delivered to Parent on
or prior to the Effective Date. In connection with the preparation of Parent's
securities law filings, Arthur Andersen LLP shall have access to Michael C.
Finkelstein's work papers and personnel.
Section 6.6. REGISTRATION STATEMENT/PROXY STATEMENT. As
promptly as practicable after the execution of this Agreement, the Company and
Parent shall prepare and file with the SEC preliminary proxy materials which
shall constitute the preliminary Proxy Statement and a preliminary prospectus
with respect to the Parent Common Stock to be issued in connection with the
Merger. As promptly as practicable after comments are received from the SEC with
respect to the preliminary proxy materials and after the furnishing by the
Company and Parent of all information required to be contained therein, the
Company shall file with the SEC the definitive Proxy Statement and Parent shall
file with the SEC the definitive Proxy Statement and the Registration Statement
and Parent and the Company shall use all reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable.
Section 6.7. COMPLIANCE WITH THE SECURITIES ACT.
(a) Prior to the Effective Date the Company shall cause to be
delivered to Parent an opinion (satisfactory to counsel for Parent) of Berlack,
Israels & Liberman LLP, identifying all persons who were, in its opinion, at the
time of the Company Meeting convened in accordance with Section 3.7,
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"affiliates" of the Company as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act (the "Affiliates").
(b) The Company shall use its best efforts to obtain a written
agreement from each person who is identified as a possible Affiliate in the
opinion referred to in clause (a) above, in the form previously approved by the
parties, that he or she will not offer to sell, sell or otherwise dispose of any
of the Parent Common Stock issued to him or her pursuant to the Merger, except
in compliance with Rule 145 or another exemption from the registration
requirements of the Securities Act. The Company shall deliver such written
agreements to Parent on or prior to the Effective Date. The Company shall use
its best efforts to cause each person who is identified as an Affiliate in such
opinion to deliver to Parent, on or prior to the earlier of (i) the mailing of
the Proxy Statement/Prospectus or (ii) the 30th day prior to the Effective Date,
a written agreement, in substantially the form attached hereto as EXHIBIT E,
that such Affiliate will not thereafter sell or in any other way reduce such
Affiliate's risk relative to any Parent Common Stock received in the Merger
(within the meaning of the SEC's Financial Reporting Release No. 1,
"CODIFICATION OF FINANCING REPORTING POLICIES, " ss. 201.01 (47 F.R. 21030)
(April 15, 1982)), until such time as financial results (including combined
sales and net income) covering at least 30 days of post-merger operations have
been published, except as permitted by Staff Accounting Bulletin No. 76 issued
by the SEC. As soon as is reasonably practicable but in no event later than 45
days after the end of the first fiscal quarter of Parent ending at least 30 days
after the Effective Date, Parent will publish results including at least 30 days
of combined operations of Parent and the Company as referred to in the written
agreements provided for by this Section 6.7(b).
Section 6.8. NASDAQ LISTING. Parent shall use its reasonable
best efforts to list on the Nasdaq National Market, the Parent Common Stock to
be issued pursuant to the Merger.
Section 6.9. ACQUISITION PROPOSALS. The Company will notify
Parent promptly if any inquiries or proposals are received by, any information
is requested from, or any negotiations or discussions are sought to be initiated
or continued with, the Company or, to the knowledge of the Company, any of the
Company Stockholders, in each case in connection with any acquisition, business
combination or purchase of all or any material portion of the assets of, or any
equity interest in, the Company, and will furnish to Parent a copy of any such
proposal received by any of them.
Section 6.10. NO SHOPPING. Subject to the fiduciary duties of
the Board of Directors of the Company, as advised in writing by outside counsel,
prior to the earlier of (i) the Effective Time or (ii) the termination of this
Agreement, the Company shall not, directly or indirectly, through any officer,
director, employee, representative, agent, financial advisor or otherwise (x)
solicit, initiate or knowingly encourage (including by way of furnishing
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information) inquiries or submission of proposals or offers from any person
relating to any sale of all or any portion of the assets, business, properties
of (other than immaterial or insubstantial assets), or any equity interest in,
the Company or any business combination with the Company, whether by merger,
consolidation, purchase of assets, tender offer, recapitalization, liquidation,
dissolution or otherwise or any other transaction, the consummation of which
would or could impede, interfere with, prevent or materially delay the Merger
(each, an "Acquisition Proposal") or (y) participate in any negotiation
regarding, or furnish to any other person any information with respect to, or
otherwise knowingly cooperate in any way with, or knowingly assist in,
facilitate or encourage, any effort or attempt by any other person to do or seek
to do any of the foregoing.
Section 6.11. PARENT AND SUB APPROVALS. Parent and Sub shall
take all reasonable steps necessary or appropriate to obtain as promptly as
practicable all necessary approvals, authorizations and consents of any person
or Governmental Entity required to be obtained by Parent and Sub to consummate
the transactions contemplated hereby, and will cooperate with the Company in
seeking to obtain all such approvals, authorizations and consents. Parent and
Sub shall use all reasonable efforts to provide such information to such
persons, bodies and authorities as such persons, bodies or authorities or the
Company may reasonably request.
Section 6.12. COMPANY APPROVALS. The Company shall take all
reasonable steps necessary or appropriate to obtain as promptly as practicable
all necessary approvals, authorizations and consents of any third party or
Governmental Entity required to be obtained by the Company to consummate the
transactions contemplated hereby and will cooperate with Parent in seeking to
obtain all such approvals, authorizations and consents. The Company shall use
all reasonable efforts to provide such information to such persons, bodies and
authorities as such persons, bodies and authorities or Parent may reasonably
request.
Section 6.13. DISTRIBUTION. The Company shall not declare, set
aside or pay any Distribution, except in the ordinary course of business
consistent with past practice, without the consent of Parent which shall not be
unreasonably withheld.
Section 6.14. EXPENSES . Except as otherwise specifically
provided herein, Parent, Sub and the Company shall bear their respective
expenses incurred in connection with the preparation, execution and performance
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of this Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of investment bankers, agents,
representatives, counsel and accountants ("Transaction Expenses"). In any
action, suit or proceeding under or to enforce any provision of this Agreement,
the prevailing party shall be entitled to recover its reasonable attorney's fees
and other out-of-pocket expenses from the losing party.
Section 6.15. FURTHER ASSURANCES.
(a) Each of Parent, Sub and the Company shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each of Parent, Sub and the Company shall use all
reasonable efforts to cause all actions to effectuate the Closing for which such
party is responsible under this Agreement to be taken as promptly as
practicable, including using all reasonable efforts to obtain all necessary
waivers, consents and approvals (including, but not limited to, if applicable,
filings under the H-S-R Act and with all applicable Governmental Entities) and
to lift any injunction or other legal bar to the Merger (and, in each case, to
proceed with the Merger as expeditiously as possible). Notwithstanding the
foregoing, there shall be no action required to be taken and no action will be
taken in order to consummate and make effective the transactions contemplated by
this Agreement if such action, either alone or together with another action,
would result in a Company Material Adverse Effect or a Parent Material Adverse
Effect.
(b) In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Parent, the Company and the Surviving
Corporation shall take all such necessary action.
Section 6.16. HART-SCOTT-RODINO. If applicable, each of the
Company and Parent (i) shall use their best efforts to file, and to cause their
"ultimate parent entities" to file, as soon as practicable a "Notification and
Report Form For Certain Mergers and Acquisitions" under the H-S-R Act with
respect to the Merger and the transactions contemplated hereby, (ii) shall take
all other actions as may be necessary, desirable or convenient to obtain the
required approval under the H-S-R Act and (iii) will comply at the earliest
practicable date with any request for additional information received by it from
the FTC or Justice pursuant to the H-S-R Act.
Section 6.17. SBA APPROVAL. Each of the Company and Parent (i)
shall use their best efforts, and shall take all actions as may be necessary,
desirable or convenient, to obtain the approval of the SBA with respect to the
Merger and the transactions contemplated hereby and (ii) will comply at the
earliest practicable date with any request for additional information received
by it from the SBA.
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Section 6.18. EXECUTION OF AGREEMENTS WITH EXECUTIVES. Each of
the Named Executives shall execute and deliver an agreement as of the date
hereof, in substantially the forms attached hereto as EXHIBITS A-1 AND A-2 (the
"Agreements with Executives"), which Agreements with Executives shall become
effective as of the Closing Date.
Section 6.19. EAST COAST AGREEMENT. Parent and Zindel
Zelmanovitch shall execute and deliver an agreement as of the date hereof, in
substantially the form attached hereto as EXHIBIT B (the "East Coast
Agreement").
Section 6.20. COMPLIANCE WITH LEGAL REQUIREMENTS. Immediately
after the Merger, the Company shall hold at least 90% of the fair market value
of its net assets and at least 70% of the fair market value of its gross assets
held immediately prior to the Merger.
Section 6.21. INDEMNIFICATION OF COMPANY OFFICERS AND
DIRECTORS. Parent agrees, for a period of six years following the Effective
Time, not to amend the indemnification provisions set forth in the Certificate
of Incorporation or By-Laws of the Surviving Corporation in a manner that would
adversely affect the rights of the Company's officers, directors and employees
to indemnification thereunder and agrees to cause the Surviving Corporation to
fulfill and honor such obligations to the maximum extent permitted by law;
PROVIDED, HOWEVER, that nothing in this Section 6.21 shall prevent Parent from
effecting any merger, reorganization or consolidation of the Surviving
Corporation, PROVIDED THAT, Parent agrees to satisfy any amounts that would have
been payable by the Surviving Corporation (or any successor) and that were not
otherwise paid pursuant to the indemnification provisions set forth in the
Certificate of Incorporation or By-Laws of the Surviving Corporation for a
period commencing at the Effective Time and continuing six years thereafter.
ARTICLE VII.
CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION
TO EFFECT THE MERGER
The respective obligations of each party to effect the Merger
shall be subject to the satisfaction on or prior to the Closing of the following
conditions, any one or more of which may be waived by them, to the extent
permitted by law:
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Section 7.1. COMPANY STOCKHOLDER APPROVAL. This Agreement and
the transactions contemplated hereby shall have been approved and adopted by the
requisite vote of the Company's stockholders.
Section 7.2. LISTING OF SHARES. The shares of Parent Common
Stock issuable in the Merger shall have been approved for listing on the Nasdaq
National Market.
Section 7.3. HART-SCOTT-RODINO. If applicable, all applicable
waiting periods with respect to any "Notification and Report Form For Certain
Mergers and Acquisitions" required to be filed by Parent, the Company or any of
their "ultimate parent entities" in compliance with the H-S-R Act in connection
with the transactions contemplated hereby shall have passed, or early
termination of such waiting periods shall have been granted.
Section 7.4. EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act. No stop order suspending the effectiveness of
the Registration Statement shall have been issued by the SEC and remain in
effect.
Section 7.5. SBA APPROVAL. The SBA shall have approved the
Merger, this Agreement and the transactions contemplated hereby, including the
waiver of any payments due to the SBA as a result of the Company's previous
repurchase of its 3% preferred stock from the SBA and any accrued interest or
dividends due to the SBA as a result of the transactions contemplated hereby and
any liens on the Company's assets or properties in favor of the SBA.
Section 7.6. LITIGATION. No action, suit or proceeding shall
have been instituted and be continuing or be threatened by any Governmental
Entity to restrain, modify or prevent the carrying out of the transactions
contemplated hereby; no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Merger or limiting or restricting Parent's conduct or operation of the business
of the Company after the Merger shall have been issued; no action, suit or
proceeding seeking any of the foregoing shall have been instituted by any third
party that has or is reasonably likely to materially impair the Company's or
Parent's ability to consummate the transactions contemplated hereby or have a
Company Material Adverse Effect.
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ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATION OF
PARENT AND SUB TO EFFECT THE MERGER
The obligation of Parent and Sub to effect the Merger shall be
subject to the satisfaction on or prior to the Closing of the following
additional conditions, any one or more of which may be waived by them, to the
extent permitted by law:
Section 8.1. REPRESENTATIONS AND COVENANTS. The
representations and warranties of the Company contained in this Agreement
(including those contained in the Company Disclosure Schedule, as the same may
be amended from time to time pursuant to the provisions hereof) shall be true
and correct in all material respects (or in ALL respects in the case of any
representation or warranty which refers to a Company Material Adverse Effect or
otherwise includes a concept of materiality) on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date, (i)
except that any such representations and warranties that are given as of a
particular date and relate solely to a particular date or period shall be true
and correct in all material respects (or in ALL respects in the case of any
representation or warranty which refers to a Company Material Adverse Effect or
otherwise includes a concept of materiality) as of such date or period, and (ii)
in the case of Section 4.12 only, except for such changes with respect thereto
(x) which are contemplated by this Agreement or (y) which are attributable to
the execution of this Agreement, or the announcement or contemplation of the
transactions proposed herein. The Company and the Company Stockholders who are
parties to a Voting Agreement, dated the date hereof (the "Voting Agreement"),
shall have performed and complied, respectively, in all material respects with
all covenants and agreements required by this Agreement and the Voting Agreement
to be performed or complied with by the Company or such Company Stockholders on
or prior to the Closing Date. The Company shall have delivered to Parent and Sub
certificates, dated the Closing Date, and signed by an Executive Officer of the
Company to the foregoing effect.
Section 8.2. ABSENCE OF MATERIAL ADVERSE CHANGE. There shall
have been no material adverse change in the business, operations or financial
condition of the Company, except for such changes with respect thereto (x) which
are contemplated by this Agreement or (y) which are attributable to the
execution of this Agreement, or the announcement or contemplation of the
transactions proposed herein.
Section 8.3. RECEIPT OF AGREEMENTS. On the date hereof, Parent
shall have received executed originals of (i) the Voting Agreement, (ii) the
Agreements with Executives and (iii) the East Coast Agreement.
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Section 8.4. ACCOUNTANT'S LETTERS.
(a) Parent shall have received a letter from Arthur Andersen
LLP regarding the firm's concurrence with Parent management's conclusions as to
the appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with this Agreement.
(b) Parent shall have received a letter of Michael C.
Finkelstein, the Company's independent auditor, dated a date within two Business
Days before the date on which the Registration Statement shall become effective
and addressed to Parent, in form and substance reasonably satisfactory to Parent
and customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
Section 8.5. DISSENTING SHARES. The number of shares of
Company Common Stock for which written demand for payment has been made pursuant
to Section 910 of the New York Corporation Law, shall not exceed 4% in the
aggregate, of the total number of shares of Company Common Stock outstanding
immediately before the Effective Time.
Section 8.6. OPINIONS OF COUNSEL TO THE COMPANY. Parent shall
have received the opinion of Berlack, Israels & Liberman LLP, counsel to the
Company, dated the Closing Date, in substantially the form of EXHIBIT C.
Section 8.7. TAX OPINION. Parent shall have received a
favorable opinion of Willkie Farr & Gallagher, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that the Company, Parent and Sub will
each be a party to that reorganization within the meaning of Section 368(b) of
the Code.
Section 8.8. CLOSING CONDITIONS. Documentation or other
information shall have been received in a form reasonably satisfactory to Parent
and Sub which evidences that the conditions set forth in this Article VIII have
been satisfied.
ARTICLE IX.
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO EFFECT THE MERGER
The obligation of the Company to effect the Merger shall be
subject to the satisfaction on or prior to the Closing of the following
additional conditions, any one or more of which may be waived by the Company, to
the extent permitted by law:
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Section 9.1. REPRESENTATIONS AND COVENANTS. The
representations and warranties of Parent and Sub contained in this Agreement
shall be true and correct in all material respects (or in ALL respects in the
case of any representation or warranty which refers to a Parent Material Adverse
Effect or that includes a concept of materiality) on and as of the Closing Date
with the same force and effect as though made on and as of the Closing Date, (i)
except that any such representations and warranties that are given as of a
particular date and relate solely to a particular date or period shall be true
and correct in all material respects (or in all respects in the case of any
representation or warranty which refers to a Parent Material Adverse Effect or
that includes a concept of materiality) as of such date or period, and (ii) in
the case of Section 5.10 only, except for such changes with respect thereto (x)
which are contemplated by this Agreement or (y) which are attributable to the
execution of this Agreement, or the announcement or contemplation of the
transactions proposed herein. Parent and Sub shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by Parent or Sub on or prior to the
Closing Date. Parent and Sub shall have delivered to the Company certificates of
an Executive Officer of Parent and Sub, dated the Closing Date, to the foregoing
effect.
Section 9.2. ABSENCE OF MATERIAL ADVERSE CHANGE. There shall
have been no material adverse change in the business, operations or financial
condition of Parent and its Subsidiaries, taken as a whole, except for such
changes with respect thereto (x) which are contemplated by this Agreement or (y)
which are attributable to the execution of this Agreement or the announcement or
contemplation of the transactions proposed herein.
Section 9.3. RECEIPT OF AGREEMENTS. On the date hereof, the
Company shall have received executed originals of the Agreements with
Executives.
Section 9.4. ACCOUNTANT'S LETTER. The Company shall have
received a letter from Michael C. Finkelstein indicating that Michael C.
Finkelstein has performed certain specified procedures and nothing has come to
such firm's attention which would cause it to believe that matters exist which
would preclude Parent from accounting for the merger as a pooling of interests
under Accounting Principles Board Opinion No. 16 without consideration of the
Agreement and any actions contemplated thereby.
Section 9.5. OPINION OF COUNSEL TO PARENT. The Company
Stockholders shall have received the opinion of Willkie Farr & Gallagher,
counsel to Parent, dated the date of the Closing, in substantially the form of
EXHIBIT D.
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Section 9.6. TAX OPINION. The Company shall have received a
favorable opinion of Berlack, Israel & Liberman LLP, counsel to the Company, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that the
Company, Parent and Sub will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
Section 9.7. FAIRNESS OPINION. The Company shall have received
the written opinion of First Colonial Securities Group, dated the Closing Date,
to the effect that, as of such date, the aggregate Share Consideration to be
received by the Company's Shareholders in the Merger is fair to the Company's
Shareholders from a financial point of view.
Section 9.8. CLOSING CONDITIONS. Documentation or other
information shall have been received in a form reasonably satisfactory to the
Company which evidences that the conditions set forth in this Article IX have
been satisfied.
ARTICLE X.
CLOSING
The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Willkie Farr & Gallagher,
787 Seventh Avenue, New York, New York, at 10:00 a.m. local time on the Closing
Date or at such other time and place as the parties may mutually agree.
ARTICLE XI.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 11.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any right of Parent and Sub to investigate fully the affairs of
the Company, or any right of the Company to investigate fully the accuracy of
the representations and warranties of Parent and Sub, and notwithstanding any
knowledge of facts determined or determinable by Parent, Sub or the Company, as
the case may be, pursuant to such investigation or right of investigation,
Parent, Sub and the Company, as the case may be, have the right to rely fully
upon the representations, warranties, covenants and agreements of the Company,
Parent and Sub, as the case may be, contained in this Agreement. The
representations and warranties of Parent, Sub and the Company and the covenants
to be performed by the Company prior to the Effective Time shall survive the
execution and delivery hereof and the Closing hereunder in accordance with the
applicable statute of limitations, PROVIDED, HOWEVER, that the representation of
the Company contained in Section 4.33 hereof shall survive only until the
Effective Time.
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ARTICLE XII.
TERMINATION OF AGREEMENT
Section 12.1. TERMINATION. This Agreement may be terminated
prior to the Closing as follows:
(a) by either Parent or the Company if the Merger shall not
have been consummated on or before June 30, 2000;
(b) by the Company if any of the conditions specified in
Article VII or IX have not been met or waived by the Company at such time as any
such condition is no longer capable of satisfaction;
(c) by Parent if any of the conditions specified in Article
VII or VIII have not been met or waived by Parent at such time as any such
condition is no longer capable of satisfaction;
(d) by Parent if the Company or the Company Stockholders who
are parties to the Voting Agreement shall have breached any of their respective
obligations under Article VI of this Agreement or the Voting Agreement in any
material respect and such breach continues for a period of ten days after the
receipt of notice of the breach from Parent;
(e) by the Company if Parent or Sub shall have breached any of
their respective obligations under Article VI of this Agreement in any material
respect and such breach continues for a period of ten days after the receipt of
notice of the breach from the Company;
(f) by the Company if its Board of Directors, in the exercise
of its fiduciary duties, accepts an Acquisition Proposal;
(g) by Parent if the average of the closing sales prices per
share of Parent Common Stock on the NASDAQ National Market for the Determination
Period is less than $12.00; or
(h) at any time on or prior to the Closing Date, by mutual
written consent of Parent, Sub and the Company.
Section 12.2. EFFECT OF TERMINATION. If this Agreement is
terminated and the transactions contemplated hereby are not consummated as
described above, this Agreement shall become void and be of no further force and
effect, except for the provisions of this Agreement relating to the obligations
of parties under Sections 6.4(c), 6.14, 6.15, 12.2 and 12.3. None of the parties
hereto shall have any liability in respect to a termination of this Agreement
prior to Closing, except to the extent that termination results from the
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intentional, willful or knowing violation of the representations, warranties,
covenants or agreements of such party under this Agreement and except as
provided in Section 12.3 hereof.
ARTICLE XIII.
DEFINITIONS
Section 13.1. DEFINITIONS. The following terms when used in
this Agreement shall have the following meanings:
"AGREEMENTS WITH EXECUTIVES" has the meaning set forth in
Section 6.18.
"ACQUISITION PROPOSAL" has the meaning set forth in Section
6.10.
"AFFILIATE" (or "AFFILIATES" as the context may require), with
respect to any person, means any other person controlling, controlled by or
under common control with such person.
"AFFILIATES" has the meaning set forth in Section 6.7(a).
"AGREEMENT" has the meaning set forth in the preamble.
"BUSINESS DAY" means any day other than a Saturday or a
Sunday, or a day on which banking institutions in the State of New York are
obligated by law or executive order to close.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C.ss.ss. 9601 et seq. as amended.
"CERTIFICATES" has the meaning set forth in Section 3.3(a).
"CLOSING" has the meaning set forth in Article X.
"CLOSING DATE" means (a) the third Business Day following the
day on which the last of all conditions to the consummation of the transactions
contemplated hereby (other than conditions which contemplate only delivery or
filing of one or more documents contemporaneously with the Closing) have been
satisfied or waived, or (b) such other date as the parties hereto agree in
writing.
"CODE" has the meaning set forth in the recitals.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY COMMON STOCK" means the common stock of the Company,
having a par value of $.01 (one cent) per share.
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"COMPANY DISCLOSURE SCHEDULE" has the meaning set forth in the
preamble to Article IV.
"COMPANY DOCUMENTS" has the meaning set forth in Section 4.1.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in
Section 4.10.
"COMPANY INTERIM FINANCIAL STATEMENTS" has the meaning set
forth in Section 4.10.
"COMPANY MATERIAL ADVERSE EFFECT" has the meaning set forth in
Section 4.3.
"COMPANY MEETING" has the meaning set forth in Section 3.8(a).
"COMPANY PREFERRED STOCK" means the 4% preferred stock of the
Company, having a par value of one ($1.00) dollar per share, and which is
restricted solely for issuance to the SBA.
"COMPANY RESTATED FINANCIAL STATEMENTS" has the meaning set
forth in Section 6.5.
"COMPANY SEC DOCUMENTS" has the meaning set forth in Section
4.10.
"COMPANY STOCKHOLDERS" has the meaning set forth in Section
1.3(b).
"CONTRACTS AND OTHER AGREEMENTS" mean all contracts,
agreements, supply agreements, undertakings, indentures, notes, bonds, loans,
instruments, leases, mortgages, commitments or other binding arrangements.
"DELAWARE CORPORATION LAW" has the meaning set forth in
Section 1.1.
"DETERMINATION PERIOD" has the meaning set forth in Section
3.1.
"DISSENTING SHARES" has the meaning set forth in Section 3.2.
"DISTRIBUTION" means any distribution of cash, securities or
property on or in respect of the Company Common Stock, or Parent Common Stock,
as the case may be, whether as a dividend or otherwise.
"EFFECTIVE TIME" has the meaning set forth in Section 1.2.
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"ENVIRONMENTAL LAWS" means all federal, state, and local laws,
ordinances, rules, regulations, codes, duties under the common law or orders,
including, without limitation, any requirements imposed under any Permits,
licenses, judgments, decrees, agreements or recorded covenants, conditions,
restrictions or easements, the purpose of which is to protect the environment,
human health, safety or welfare, or which pertain to Hazardous Materials.
"ENVIRONMENTAL PERMITS" shall mean all Permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation by the
Company of its properties.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the regulations and rulings issued thereunder.
"EXCHANGE AGENT" has the meaning set forth in Section 3.3(a).
"EXCHANGE RATIO" has the meaning set forth in Section
3.1(a)(1).
"EXECUTIVE OFFICERS" means, as to Parent and the Company,
respectively, its chairman of the board, its president, any vice president
(executive, senior or other), secretary, treasurer or chief financial officer,
if any, or any other officer or employee having supervisory responsibility for a
principal business function.
"FORM S-8" has the meaning set forth in Section 6.22.
"FTC" means the Federal Trade Commission or any successor
agency or department.
"GAAP" means generally accepted accounting principles in the
United States of America from time to time in effect.
"GOVERNMENTAL ENTITIES" means (a) any international, foreign,
federal, state, county, local or municipal government or administrative agency
or political subdivision thereof, (b) any governmental agency, authority, board,
bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental agency, tribunal or entity
that is vested by a governmental agency with applicable jurisdiction, or (e) any
arbitration tribunal or other non-governmental authority with applicable
jurisdiction.
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"HAZARDOUS MATERIALS" means (i) any substance or material
regulated or identified under Environmental Laws; (ii) gasoline, diesel fuel or
other petroleum hydrocarbons, PCBs or asbestos; or (iii) any pollutant, toxic
substance, or contaminant.
"H-S-R ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"INSURANCE POLICIES" has the meaning set forth in Section
4.25.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
Section 4.19(a).
"IRS" means the Internal Revenue Service or any successor
agency or department.
"JUSTICE" means the Antitrust Division of the Department of
Justice or any successor agency or department.
"LEASED REAL PROPERTY" has the meaning set forth in Section
4.18(a).
"LEASES" has the meaning set forth in Section 4.18(a).
"LIABILITIES" has the meaning set forth in Section 4.11.
"LIEN OR OTHER ENCUMBRANCE" (or "LIENS OR OTHER ENCUMBRANCES"
or "LIENS OR OTHER ENCUMBRANCE" or "LIEN OR OTHER ENCUMBRANCES" as the context
may require or any similar formulation) means any lien, claim, pledge, mortgage,
assessment, security interest, charge, option, right of first refusal, easement,
servitude, adverse claim, transfer restriction under any stockholder or similar
agreement or other encumbrance of any kind.
"MERGER" has the meaning set forth in the recitals.
"NAMED EXECUTIVE" means each of Zindel Zelmanovitch and Neil
Greenbaum.
"NEW PARENT STOCK OPTION" has the meaning set forth in Section
3.6.
"NEW YORK CORPORATION LAW" has the meaning set forth in
Section 1.1.
"1940 ACT" shall mean the Investment Company Act of 1940, as
amended, and the regulations and rulings issued thereunder.
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"PARENT" has the meaning set forth in the preamble.
"PARENT COMMON STOCK" means the common stock, par value $.01
per share, of Parent.
"PARENT DISCLOSURE SCHEDULE" has the meaning set forth in the
preamble to Article V.
"PARENT DOCUMENTS" has the meaning set forth in Section 5.1.
"PARENT FINANCIAL STATEMENTS" has the meaning set forth in
Section 5.4.
"PARENT INTERIM FINANCIAL STATEMENTS" has the meaning set
forth in Section 5.4.
"PARENT MATERIAL ADVERSE EFFECT" has the meaning set forth in
Section 5.2.
"PARENT SEC DOCUMENTS" has the meaning set forth in Section
5.4.
"PERMITS" (or "PERMIT" as the context may require) mean all
licenses, permits, certificates, certificates of occupancy, orders, approvals,
registrations, authorizations, inspections, qualifications and filings with and
under all federal, state, local or foreign laws and Governmental Entities.
"PERSON" (or "PERSONS" as the context may require) means any
individual, corporation, partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, Governmental Entity or
other entity.
"PLAN" or "PLANS" has the meaning set forth in Section
4.23(a).
"PROPERTY" (or "PROPERTIES" as the context may require) means
real, personal or mixed property, tangible or intangible.
"PROXY STATEMENT" has the meaning set forth in Section 4.9.
"RECEIVING PARTY" has the meaning set forth in Section 14.1.
"REGISTRATION STATEMENT" has the meaning set forth in Section
4.9.
"RELEASING PARTY" has the meaning set forth in Section 14.1.
"REMEDIAL ACTION" shall mean any action required to (i) clean
up, remove or treat Hazardous Materials; (ii) prevent a release or threat of
release of any Hazardous Material; (iii) perform pre-remedial studies,
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investigations or post-remedial monitoring and care; (iv) cure a violation of
Environmental Law or (v) take corrective action under sections 3004(u), 3004(v)
or 3008(h) of the Resource Conservation Recovery Act, 42 U.S.C. ss.ss. 6901 ET
seq. or analogous state law.
"SBA" has the meaning set forth in Section 4.2.
"SEC" means the Securities and Exchange Commission or any
successor agency or department.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the regulations and rulings issued thereunder.
"SHARE CONSIDERATION" has the meaning set forth in Section
3.3(a).
"SUB" has the meaning set forth in the preamble hereof.
"SUB COMMON STOCK" means the common stock, par value $.01 per
share, of Sub.
"SUBSIDIARIES" (or "SUBSIDIARY" as the context may require),
means each entity as to which a person, directly or indirectly, owns or has the
power to vote, or to exercise a controlling influence with respect to, 50% or
more of the securities of any class of such entity, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such entity.
"SURVIVING CORPORATION" has the meaning set forth in Section
1.1.
"TAXES" (or "TAX" as the context may require) means all
federal, state, county, local, foreign and other taxes (including, without
limitation, income, intangibles, premium, excise, sales, use, gross receipts,
franchise, ad valorem, severance, capital levy, transfer, employment and
payroll-related, and property taxes, import duties and other governmental
charges and assessments), and includes interest, additions to tax and penalties
with respect thereto.
"TRANSACTION EXPENSES" has the meaning set forth in Section
6.14.
"VOTING AGREEMENT" has the meaning set forth in Section 8.1.
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ARTICLE XIV.
MISCELLANEOUS
Section 14.1. PUBLICITY. So long as this Agreement is in
effect, prior to making a press release or other public statement with respect
to the transactions contemplated by this Agreement, any party (a "Releasing
Party") will consult with the other party (the "Receiving Party") and provide
such other party with a draft of such press release, except as may otherwise be
required by law or stock exchange regulations.
Section 14.2. NOTICES. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, sent by facsimile transmission or sent by certified, registered,
express mail or nationally recognized courier service, postage prepaid. Any such
notice shall be deemed given when so delivered personally or successfully sent
by facsimile transmission or, if mailed, five days after the date of deposit in
the United States mails, as follows:
(i) IF TO PARENT OR SUB TO:
Medallion Financial Corp.
437 Madison Avenue
New York, NY 10022
Attention: Andrew Murstein, President
Telecopy No.: (212) 328-2125
AND
Medallion Financial Corp.
437 Madison Avenue
New York, NY 10022
Attention: Allen S. Greene, Chief Operating Officer
Telecopy No.: (212) 328-2125
WITH A CONCURRENT COPY TO:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Christopher E. Manno, Esq.
Telecopy No.: (212) 728-8111
(ii) IF TO THE COMPANY TO:
FreshStart Venture Capital Corp.
24-25 Jackson Avenue
Long Island City, NY 11101
Attention: Zindel Zelmanovitch, President
Telecopy No.: (718) 361-8295
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WITH, PRIOR TO THE CLOSING, A CONCURRENT COPY TO:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, NY 10036
Attention: Alan N. Forman
Telecopy No.: (212) 704-0196
Any party may by notice given in accordance with this Section
14.2 to the other parties designate another address or person for receipt of
notices hereunder.
Section 14.3. ENTIRE AGREEMENT. This Agreement (including the
exhibits and schedules hereto) and the agreements contemplated hereby, including
but not limited to the Option Agreement, contain the entire agreement among the
parties with respect to the subject matter hereof, and supersede all prior
agreements, written or oral, with respect thereto.
Section 14.4. WAIVERS AND AMENDMENTS; NON CONTRACTUAL
REMEDIES; PRESERVATION OF REMEDIES; LIABILITY. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by each of the parties or, in the case of
waiver, by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and, except as provided (i) in Section 12.2 and (ii) if the Closing
occurs, in Section 11.2(a), are not exclusive of any rights or remedies that any
party may otherwise have at law or in equity. The rights and remedies of any
party based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty, covenant or agreement contained in this
Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy
or breach is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy or breach. The
limitations on claims set forth in this Section 14.4 and elsewhere in this
Agreement (including Article XI) shall not apply in the case of fraud on the
part of the Company.
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SECTION 14.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
Section 14.6. BINDING EFFECT; NO ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns and heirs and legal representatives. Neither
this Agreement, nor any right hereunder, may be assigned by any party without
the prior written consent of the other party hereto; PROVIDED, HOWEVER, that
Parent and Merger Subsidiary may assign their rights (but not their obligations)
hereto to their Subsidiaries.
Section 14.7. THIRD PARTY BENEFICIARIES. Except for Sections
3.6, 6.22(b) and 6.23, nothing in this Agreement is intended or shall be
construed to give any person, other than the parties hereto, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
Section 14.8. COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
Section 14.9. EXHIBITS AND SCHEDULES. The exhibits and
schedules hereto are a part of this Agreement as if fully set forth herein. All
references herein to Articles, Sections, subsections, clauses, exhibits and
schedules shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require.
Section 14.10. HEADINGS. The headings in this Agreement are
for reference only, and shall not affect the interpretation of this Agreement.
Section 14.11. SUBMISSION TO JURISDICTION; VENUE. Any action
or proceeding against any party hereto with respect to this Agreement shall be
brought in the courts of the State of Delaware or of the United States for the
District of Delaware, and, by execution and delivery of this Agreement, each
party hereto hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Each party hereto irrevocably consents to the service of process at any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
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at its address set forth in Section 14.2, such service to become effective 30
days after such mailing. Nothing herein shall affect the right of any party
hereto to serve process on any other party hereto in any other manner permitted
by law. Each party hereto irrevocably waives any objection which it may now have
or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
Section 14.12. SPECIFIC PERFORMANCE. 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 any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
Section 14.13. SEVERABILITY. If any court of competent
jurisdiction determines that any provision of this Agreement is not enforceable
in accordance with its terms, then such provision shall be deemed to be modified
so as to apply such provision, as modified, to the protection of the legitimate
interests of the parties hereto to the fullest extent legally permissible and
shall not affect the validity or enforceability of the remaining provisions of
this Agreement.
[Signature Pages Follow.]
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
MEDALLION FINANCIAL CORP.
By: /s/ ALVIN MURSTEIN
------------------------------
Name: Alvin Murstein
Title: Chief Executive Officer
FS MERGER CORP.
By: /s/ ALVIN MURSTEIN
------------------------------
Name: Alvin Murstein
Title: Chief Executive Officer
FRESHSTART VENTURE CAPITAL CORP.
By: /s/ ZINDEL ZELMANOVITCH
------------------------------
Name: Zindel Zelmanovitch
Title: President
