<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
August 26, 1998
--------------------------------------------------------
Date of Report (Date of earliest event reported)
Salton/Maxim Housewares, Inc.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-19557 36-3777824
- ---------------------------- ----------- -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
550 Business Center Drive, Mount Prospect, Illinois 60056
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(847) 803-4600
-------------------------------
(Registrant's telephone number)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On August 26, 1998, Salton/Maxim Housewares, Inc. (the "Company"), Columbia
Acquisition Corp., a Missouri corporation and wholly owned subsidiary of the
Company ("Merger Sub"), and Toastmaster Inc., a Missouri corporation
("Toastmaster"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Merger Sub will merge with and into Toastmaster
(the "Merger"), with Toastmaster as the surviving corporation and remaining a
wholly owned subsidiary of the Company.
Pursuant to the Merger Agreement, at the effective time of the Merger, each
share of common stock, par value $0.10 per share, of Toastmaster ("Toastmaster
Common Stock") issued and outstanding immediately before the effective time will
be converted into the right to receive $7.00 in cash (the "Merger
Consideration").
The obligations of the parties to the Merger Agreement to consummate the
Merger are conditioned upon, among other things, (i) approval of the Merger
Agreement by the holders of 66-2/3% of the outstanding shares of Toastmaster
Common Stock, and (ii) the waiting period pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, having expired or been
terminated.
Robert H. Deming (the Chairman and Chief Executive Officer of Toastmaster),
Daniel J. Stubler (President and Chief Operating Officer of Toastmaster), John
E. Thompson (Executive Vice President and Chief Financial Officer) and their
respective spouses and related trusts (collectively, the "Shareholders") have
entered into an agreement (the "Shareholders Agreement") with the Company,
pursuant to which, among other things, the Shareholders have granted the Company
an option to purchase the shares of Toastmaster Common Stock owned by them
immediately prior to consummation of the Merger at a purchase price equal to the
Merger Consideration. The Shareholders held in the aggregate approximately 41%
of the outstanding shares of Toastmaster Common Stock as of the date of the
Merger Agreement.
Copies of the Merger Agreement and the Shareholders Agreement are filed as
Exhibits 2.1 and 99.1, respectively, to this report and are incorporated herein
by this reference. The foregoing summary is qualified in its entirety by
reference of such agreements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated August 26, 1998, among
Salton/Maxim Housewares, Inc., Columbia Acquisition Corp. and
Toastmaster Inc.
99.1 Shareholders Agreement, dated August 26, 1998, between
Salton/Maxim Housewares, Inc. and certain shareholders of
Toastmaster Inc.
-1-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SALTON/MAXIM HOUSEWARES, INC.
/s/ WILLIAM B. RUE
----------------------------------
William B. Rue
President and Chief Operating Officer
August 26, 1998
-2-
<PAGE> 4
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated August 26, 1998, among
Salton/Maxim Housewares, Inc., Columbia Acquisition Corp. and
Toastmaster Inc.
99.1 Shareholders Agreement, dated August 26, 1998, between
Salton/Maxim Housewares, Inc. and certain shareholders of
Toastmaster Inc.
-3-
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 26, 1998
BY AND AMONG
SALTON/MAXIM HOUSEWARES, INC.
COLUMBIA ACQUISITION CORP.
AND
TOASTMASTER INC.
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I. THE MERGER................................................. 1
1.1. The Merger........................................... 1
1.2. Closing.............................................. 2
1.3. Effective Time....................................... 2
1.4. Effects Of The Merger................................ 2
1.5. Articles Of Incorporation; By-laws; Purposes......... 2
1.6. Directors............................................ 2
1.7. Officers............................................. 2
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS............. 3
2.1. Conversion of Shares................................. 3
2.2. Stock Options........................................ 3
2.3. Surrender of Certificates............................ 4
2.4. Dissenting Shares.................................... 6
2.5. Withholding Rights................................... 6
2.6. Lost Certificates.................................... 6
2.7. Further Assurances................................... 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ 7
3.1. Organization, Standing and Power..................... 7
3.2. Capital Structure.................................... 7
3.3. Subsidiaries......................................... 9
3.4. Authority and Absence of Conflict.................... 10
3.5. SEC Documents........................................ 11
3.6. Absence of Certain Events............................ 12
3.7. Litigation........................................... 12
3.8. Compliance with Applicable Law....................... 13
3.9. Employee Plans....................................... 13
3.10. Employment Relations................................. 16
3.11. Contracts............................................ 17
3.12. Environmental Laws and Regulations................... 18
3.13. Property and Leases.................................. 19
3.14. Intellectual Property................................ 20
3.15. Insurance............................................ 21
3.16. Takeover Statutes.................................... 21
3.17. Taxes................................................ 21
3.18. Customers............................................ 24
3.19. Interests of Certain Persons......................... 24
3.20. Information Supplied................................. 24
- i -
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.21. Required Company Vote.................................... 24
3.22. Opinion Of Financial Advisor............................. 24
3.23. Board Recommendation..................................... 25
3.24. Brokers.................................................. 25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER....................................... 25
4.1. Organization and Qualification........................... 25
4.2. Capital Stock of Parent and Purchaser.................... 26
4.3. Authority and Absence of Conflict........................ 26
4.4. Litigation............................................... 27
4.5. Brokers.................................................. 27
4.6. Proxy Statement.......................................... 27
4.7. Solvency Opinion......................................... 27
ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR
TO MERGER....................................... 27
5.1. Conduct Of Business Of The Company....................... 27
ARTICLE VI. ADDITIONAL AGREEMENTS......................................... 29
6.1. Preparation Of Proxy Statement; Shareholders Meeting..... 29
6.2. Access To Information; Confidentiality................... 30
6.3. Filings; Commercially Reasonable Best Efforts............ 31
6.4. Public Announcements..................................... 31
6.5. Notification of Certain Matters.......................... 32
6.6. Indemnification And Insurance............................ 32
6.7. Solicitation............................................. 33
6.8. Supplemental Executive Retirement Plan Funding........... 35
6.9. TMI Letter Agreement..................................... 35
ARTICLE VII. CONDITIONS PRECEDENT......................................... 35
7.1. Conditions To Each Party's Obligation To Effect The Merge 35
7.2. Conditions To Obligations Of Parent...................... 36
7.3. Conditions To Obligation Of The Company.................. 37
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER........................... 37
8.1. Termination.............................................. 37
8.2. Effect Of Termination.................................... 39
- ii -
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IX. GENERAL PROVISIONS.............................................. 39
9.1. Nonsurvival Of Representations And Warranties.............. 39
9.2. Payment Of Certain Fees and Expenses....................... 39
9.3. Notices.................................................... 39
9.4. Certain Definitions; Interpretation........................ 40
9.5. Entire Agreement........................................... 41
9.6. Counterparts............................................... 41
9.7. Severability............................................... 41
9.8. Captions................................................... 41
9.9. Amendment.................................................. 41
9.10. Waiver..................................................... 42
9.11. No Third-Party Beneficiaries; Assignability................ 42
9.12. Inclusion of Information in Schedules...................... 42
9.13. Exclusive Jurisdiction and Consent to Service of Process... 42
9.14. Waiver of Jury Trial....................................... 43
9.15. Governing Law.............................................. 43
SCHEDULES
Schedule 3.1 Organization, Standing and Power
Schedule 3.2 Capital Structure
Schedule 3.3 Subsidiaries
Schedule 3.4 Authority and Absence of Conflict
Schedule 3.6 Absence of Certain Events
Schedule 3.7 Litigation
Schedule 3.8 Compliance with Applicable Law
Schedule 3.9 Employee Plans
Schedule 3.10 Employment Relations
Schedule 3.11 Contracts
Schedule 3.12 Environmental Laws and Regulations
Schedule 3.13 Property and Leases
Schedule 3.14 Intellectual Property
Schedule 3.15 Insurance
Schedule 3.17 Taxes
Schedule 3.18 Customers
Schedule 3.19 Interests of Certain Persons
Schedule 4.4 Litigation
Schedule 6.6 Indemnification Agreements
- iii -
<PAGE> 5
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of August
26, 1998, is by and among Salton/Maxim Housewares, Inc. a Delaware corporation
("Parent"), Columbia Acquisition Corp., a Missouri corporation and a wholly
owned subsidiary of Parent ("Purchaser"), and Toastmaster Inc., a Missouri
corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company, Parent and
Purchaser have determined that the merger of Purchaser with and into the Company
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair and in the best interests of their respective
stockholders, and such Boards of Directors have approved such Merger, pursuant
to which each issued and outstanding share of common stock, par value $.10 per
share ("Common Stock"), of the Company (the "Shares") (other than (a) Shares
owned, directly or indirectly, by the Company or any subsidiary (as defined in
Section 9.4) of the Company or by Parent and (b) Dissenting Shares) will be
converted into the right to receive $7.00 per share in cash;
WHEREAS, the Merger and this Agreement require the affirmative vote, in
accordance with applicable law and the Restated Articles of Incorporation and
By-laws of the Company, of at least two-thirds of the outstanding Shares
entitled to vote thereon for the approval thereof (the "Company Shareholder
Approval");
WHEREAS, Parent and Purchaser are unwilling to enter into this
Agreement unless, contemporaneously with the execution and delivery of this
Agreement, certain beneficial and record stockholders of the Company enter into
an agreement (the "Shareholders Agreement") granting to Parent an option to
purchase all Shares beneficially owned by such shareholders under certain
circumstances;
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the provisions of The General
and Business Corporation Law of Missouri (the "MBCL"), Purchaser shall be merged
with and into the Company at the Effective Time (as defined in Section 1.3).
Upon the Effective Time, the separate existence of Purchaser shall cease, and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall continue, under the name "Toastmaster Inc.," to be
governed by the laws of the State of Missouri. Purchaser and the Company are
sometimes hereinafter referred to collectively as "Constituent Corporations."
<PAGE> 6
1.2. Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1 and subject to the satisfaction or waiver in writing by the applicable party
or parties of the latest to occur of the conditions set forth in Article VII,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. on a
date not later than the second business day after such satisfaction or waiver of
the conditions set forth in Article VII (or as soon as practicable thereafter)
(the "Closing Date"), at the offices of Sonnenschein Nath & Rosenthal, 8000
Sears Tower, Chicago, Illinois 60606, unless another date, time or place is
agreed to in writing by the parties hereto.
1.3. Effective Time. As soon as practicable following the
satisfaction, or waiver in writing by the applicable party or parties, of the
conditions set forth in Article VII, the parties shall execute appropriate
Articles of Merger (the "Articles of Merger") as provided in the MBCL and shall
make such other filings, recordings or publications required under the MBCL in
connection with the Merger. The Merger shall become effective upon the date on
which the Articles of Merger have been received for filing by the Secretary of
the State of Missouri, or such later date as is agreed upon by the parties and
specified in the Articles of Merger, and the time of such effectiveness is
hereinafter referred to as the "Effective Time."
1.4. Effects Of The Merger. The Merger shall have the effects set
forth in Section 351.450 of the MBCL.
1.5. Articles Of Incorporation; By-laws; Purposes. (a) At the
Effective Time of the Merger, and without any further action on the part of the
Company, Parent or Purchaser, the Restated Articles of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until thereafter
amended, as provided therein and under the MBCL.
(b) At the Effective Time of the Merger, and without any further
action on the part of the Company or Parent or Purchaser, the By-laws of
Purchaser as in effect at the Effective Time shall be the By-laws of the
Surviving Corporation until thereafter amended as provided therein or by
applicable law.
1.6. Directors. The directors of Purchaser at the Effective Time shall
be the initial directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
1.7. Officers. The officers of the Company at the Effective Time shall
be the initial officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed and qualified, as the case may be.
- 2 -
<PAGE> 7
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1. Conversion of Shares. At the Effective Time and by virtue of the
Merger, automatically and without any action on the part of the holders of the
Shares or of the capital stock of Parent or Purchaser:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be cancelled pursuant to Subsection 2.1(b)
below and Dissenting Shares) shall be converted into the right to receive $7.00
in cash (the "Merger Consideration"). All such Shares, when so converted, shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any such
Shares shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor, without interest, upon the surrender
of such certificate in accordance with Section 2.3.
(b) Each Share held in the treasury of the Company, if any, and
each Share owned by Parent, Purchaser or the Company, or by any direct or
indirect subsidiary of any of them, shall be cancelled and retired without
payment of any consideration therefor.
(c) All shares of common stock, par value $.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into that number of validly issued, fully paid and non-assessable
shares of common stock, par value $.01 per share, of the Surviving Corporation
equal to the aggregate number of shares of the Company issued and outstanding
immediately prior to the Effective Time.
2.2. Stock Options. The Company shall (i) terminate its Non-Statutory
Stock Option Plan, Non-Employee Directors Stock Option Plan, 1997 Non-Employee
Directors Stock Option Plan and Incentive Stock Option Plan (collectively the
"Option Plans"), immediately prior to the Effective Time without prejudice to
the rights of the holders of options awarded pursuant thereto and (ii) grant no
additional options or similar rights under the Option Plans or otherwise on or
after the date hereof. As used hereafter in this Section 2.3, "Options" shall
include each stock option granted by the Company, whether pursuant to the Option
Plans or otherwise.
The Company shall use its reasonable best efforts to obtain the consent
of each holder of any Options (whether or not then exercisable) that it does not
have the right to cancel to the cancellation of his Options (irrespective of
their exercise price), and upon obtaining such consent, shall cancel the options
covered by such consent or, in the case of Options that the Company has the
right to cancel, shall cancel such Options, such cancellation (whether or not
consent is required therefor) to take effect immediately after the Effective
Time. In consideration of each cancellation of Options, the Company shall agree
to and shall pay to
- 3 -
<PAGE> 8
such holders, immediately after the Effective Time, in respect of each Option
(whether or not then exercisable) so cancelled, an amount equal to the excess,
if any, of the Merger Consideration over the exercise price thereof, multiplied
by the number of Shares subject thereto, reduced by the amount of withholding or
other taxes required by law to be withheld.
2.3. Surrender of Certificates.
(a) From and after the Effective Time, a bank or trust
company to be designated by Parent, with the prior approval of the Company (the
"Exchange Agent"), shall act as exchange agent in effecting the exchange, for
the Merger Consideration multiplied by the number of Shares formerly represented
thereby, of certificates (the "Certificates") that, prior to the Effective Time,
represented Shares entitled to payment pursuant to Section 2.1. As of the
Effective Time, Parent shall, on behalf of Purchaser, deposit with the Exchange
Agent, for the benefit of the holders of Shares (excluding any Shares described
in Section 2.1(b) and Dissenting Shares, if any), for the payment in accordance
with this Article II, through the Exchange Agent, cash in an amount equal to the
Merger Consideration multiplied by the number of outstanding Shares immediately
prior to the Effective Time (excluding any Shares described in Section 2.1(b)
and Dissenting Shares, if any) (such cash being hereinafter referred to as the
"Payment Fund"). Upon the surrender of each Certificate and the delivery by the
Exchange Agent of the Merger Consideration in exchange for the Shares
represented by such Certificate multiplied by the number of Shares represented
by such Certificate, such Certificate shall forthwith be cancelled. Until so
surrendered and exchanged, each such Certificate (other than Certificates
representing Shares held by Parent, Purchaser or the Company or any direct or
indirect subsidiary of Parent, Purchaser or the Company and Dissenting Shares,
if any) shall represent solely the right to receive the Merger Consideration
applicable to the Shares represented by such Certificate multiplied by the
number of Shares represented by such Certificate. No interest shall be paid or
shall accrue on any amount payable on and after the Effective Time by reason of
the Merger upon the surrender of any such Certificate. Upon the surrender and
exchange of such an outstanding Certificate, the holder shall receive the Merger
Consideration applicable to the Shares represented thereby, without any interest
thereon. If the Merger Consideration is to be paid to a person other than the
person in whose name the Certificate representing Shares surrendered in exchange
therefor is registered, it shall be a condition to such payment or exchange that
such Certificate so surrendered be properly endorsed or otherwise be in proper
form for transfer, and that the person requesting such payment or exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of the
payment of such Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or such person 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 for any Merger Consideration
or interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
- 4 -
<PAGE> 9
(b) Promptly following the date of the first anniversary of the
Effective Time, the Exchange Agent shall return to the Surviving Corporation all
cash in its possession relating to the transactions described in this Agreement,
and the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing Shares may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat or
similar laws) receive in exchange therefor the Merger Consideration applicable
to the Shares represented thereby, without any interest thereon, but shall have
no greater rights against the Surviving Corporation than may be accorded to
general creditors of the Surviving Corporation under applicable law.
(c) Promptly after the Effective Time, the Exchange Agent shall
mail, to each record holder of Certificates that immediately prior to the
Effective Time represented Shares, a form of letter of transmittal and
instructions, approved by the parties, for use in surrendering such Certificates
and receiving the Merger Consideration therefor.
(d) At and after the Effective Time, holders of Certificates shall
cease to have any rights as shareholders of the Company except for the right to
surrender such Certificates in exchange for the Merger Consideration applicable
to the Shares represented thereby or the right, if any, to receive payment from
the Surviving Corporation of the "fair value" of such Shares as determined in
accordance with Section 351.455 of the MBCL and Section 2.4 hereof, and there
shall be no transfers on the stock transfer books of the Company or the
Surviving Corporation of any Shares that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent, they shall be cancelled and
exchanged for the Merger Consideration, as provided in Section 2.1 hereof,
subject to applicable law in the case of Dissenting Shares.
(e) The Exchange Agent shall invest any cash included in the
Payment Fund, as directed by the Surviving Corporation, provided that such
investment shall be (i) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or instrumentality thereof
having maturities of not more than six months from the Effective Time, (ii)
certificates of deposit, eurodollar time deposits and bankers' acceptances with
maturities not exceeding six months and overnight bank deposits with any
commercial bank, depository institution or trust company incorporated or doing
business under the laws of the United States of America, any state thereof or
the District of Columbia, provided that such commercial bank, depository
institution or trust company has, at the time of investment, (A) capital and
surplus exceeding $250 million and (B) outstanding short-term debt securities
which are rated at least A-1 by Standard & Poor's Rating Group Division of The
McGraw-Hill Companies, Inc. or at least P-1 by Moody's Investors Services, Inc.
or carry an equivalent rating by a nationally recognized rating agency if both
of the two named rating agencies cease to publish ratings of investment, (iii)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clauses (i) and (ii) above entered into
with any financial institution meeting the qualifications specified in clause
(ii) above, (iv) commercial paper having a rating in the
- 5 -
<PAGE> 10
highest rating categories from Standard & Poor's Rating Group Division of The
McGraw-Hills Companies, Inc. or Moody's Investors Services, Inc. or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease to publish ratings of investments and in each case
maturing within six months of the Effective Time and (v) money market mutual or
similar funds having assets in excess of $1 billion. Any interest and other
income resulting from such investments shall be paid to the Surviving
Corporation.
Section 2.4. Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, if required by the MBCL, but only to the extent
required thereby, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by holders of such Shares who have
properly demanded appraisal rights with respect thereto in accordance with
Section 351.455 of the MBCL, and who have not failed to perfect or who have not
effectively withdrawn or who have not lost their rights to appraisal and payment
under Section 351.455 of the MBCL (the "Dissenting Shares") will not be
converted into the right to receive the Merger Consideration, but such holder
thereof shall be entitled only to such rights to appraisal and payment under the
MBCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or loses such right, such Shares will thereupon be treated
as if they had been converted into and have become exchangeable for, at the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, as provided in Section 2.1 hereof. Upon the Company's receipt
of any notice of election to dissent in accordance with the provisions of such
Section 351.455, the Company shall promptly provide Parent with a copy of such
notice of election to dissent. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any such election to
dissent or offer to settle or settle any such election to dissent.
Section 2.5. Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any person such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code
(as defined herein), or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by the Surviving Corporation, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to a person in respect of which such deduction and withholding was made by the
Surviving Corporation.
Section 2.6. Lost Certificates. If any Certificates shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will pay the Merger Consideration in accordance with the terms of
this Agreement to the registered owner of such Shares.
- 6 -
<PAGE> 11
Section 2.7. Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations in the Merger,
all such deeds, bills of sale, assignments and assurances and do, in the name
and on behalf of such Constituent Corporations, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
Section 3.1. Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Missouri and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as now being conducted.
The Company is duly qualified to do business, and is in good standing, in each
jurisdiction set forth in Schedule 3.1, which are the only jurisdictions where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. For purposes of this
Agreement, a "Material Adverse Change" or "Material Adverse Effect" means any
change or effect, either individually or in the aggregate, that is or may be
reasonably expected to be materially adverse to the business, assets,
liabilities, properties, financial condition or results of operations of the
Company and its subsidiaries taken as a whole. Attached to Schedule 3.1 are
complete and correct copies of the Restated Articles of Incorporation and
By-Laws of the Company as currently in effect.
Section 3.2. Capital Structure. (a) The authorized capital stock of the
Company consists of 20,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock, par value $0.01 per share ("Preferred Stock"). At the close of
business on July 31, 1998: (i) 7,551,950 shares of Common Stock were issued and
outstanding; (ii) 93,900 shares of Common Stock were reserved for issuance upon
the exercise of outstanding options; and (iii) 44,825 shares of Common Stock
were held in the treasury of the Company. At the close of business on July 31,
1998: (i) no shares of Preferred Stock were issued and outstanding; and (ii) no
shares of Preferred Stock were held in the treasury of the Company.
- 7 -
<PAGE> 12
Except as set forth above, no shares of capital stock or other equity securities
of the Company are issued, reserved for issuance or outstanding. All outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable and not subject to preemptive rights. Since July 31, 1998, (i) no
shares of the Company's capital stock have been issued other than pursuant to
the exercise of Company stock options already in existence and outstanding on
such date, and (ii) the Company has not granted any stock options, warrants,
convertible securities or other rights to acquire any capital stock of the
Company.
(b) At the close of business on July 31, 1998, there are outstanding
options issued by the Company to purchase 93,900 shares of Common Stock.
Schedule 3.2 contains a complete and correct list of each outstanding option to
purchase shares of Common Stock, including: (i) the name of the holder of such
option issued by the Company; (ii) the number of shares subject thereto; (iii)
the exercise or "strike" price; (iv) the grant date; (v) the expiration date;
and (vi) the vesting terms. The Company has delivered to Parent complete and
correct copies of all outstanding options to purchase Shares. There are no
outstanding bonds, debentures, notes or other indebtedness or other securities
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. As of August 24, 1998, the only outstanding
indebtedness for borrowed money of the Company and its subsidiaries is: (i) debt
under the Loan and Security Agreement dated as of November 19, 1993, as amended,
between the Company and Fleet Capital Corporation (successor in interest to
Barclays Credit Inc.) of $46,156,993; and (ii) other indebtedness for borrowed
money not exceeding $1,752,790, the sources of which, and amounts attributable
to each such source, are set forth in Schedule 3.2.
(c) Except as otherwise set forth in this Section 3.2 or in Schedule
3.2, there are no outstanding securities, options, warrants, rights, calls,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or any of its subsidiaries, including any
securities pursuant to which rights to acquire capital stock become exercisable
only after a change of control of the Company or upon the acquisition of a
specified amount of the Common Stock or voting powers of the Company, or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, agreement
arrangement or undertaking.
(d) Except as set forth in Schedule 3.2, there are no outstanding
contractual obligations, commitments, understandings or arrangements of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire or
make any payment in respect of any shares of capital stock of the Company or any
of its subsidiaries and there are no irrevocable proxies with respect to shares
of capital stock of the Company or any of its subsidiaries. Except as set forth
in Schedule 3.2, there are no agreements or arrangements
- 8 -
<PAGE> 13
pursuant to which the Company is or could be required to register any Shares or
other securities under the Securities Act of 1933, as amended (the "Securities
Act") or other agreements or arrangements with or among the Company and any
securityholders of the Company with respect to securities of the Company. Except
as set forth in Schedule 3.2, there are no securities issued by the Company or
any of its subsidiaries or agreements, arrangements or other understandings to
which the Company or any of its subsidiaries is a party giving any person any
right to acquire equity securities of the Surviving Corporation or any of its
subsidiaries at or following the Effective Time and all securities, agreements,
arrangements and understandings relating to the right to acquire equity
securities of the Company (whether pursuant to the exercise of options, warrants
or otherwise) provide that, at and following the Effective Time, such right
shall entitle the holder thereof to receive the consideration such holder would
have received in the Merger had such holder exercised such right immediately
before the Effective Time.
(e) Except as set forth in Schedule 3.2, there are no voting trusts
or other agreements or understandings with respect is the voting of the capital
stock of the Company or any of its subsidiaries to which the Company or any of
its subsidiaries is a party.
Section 3.3. Subsidiaries. (a) Schedule 3.3 sets forth each subsidiary of
the Company and the jurisdiction of incorporation of such subsidiary. Except as
set forth in Schedule 3.3, all of the outstanding shares of capital stock and
other ownership interests of the Company's subsidiaries have been validly issued
and are fully paid and nonassessable and are owned, directly or indirectly, by
the Company. Except as set forth in Schedule 3.3, none of the shares or
ownership interests of the subsidiaries owned or held by the Company, directly
or indirectly, is subject to any Lien (as defined in Section 3.4(b)).
(b) Each subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated and has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as currently
conducted. Each subsidiary of the Company is duly qualified 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 its activities make such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect. The Company has delivered to Parent complete and
correct copies of the respective articles or certificates of incorporation or
by-laws, as amended to the date hereof, of each of its subsidiaries.
(c) Except for its subsidiaries or as otherwise set forth in Schedule
3.3, the Company does not directly or indirectly own any capital stock of or
other equity interest in any corporation, partnership or other person and
neither the Company nor any of its subsidiaries is a member of or participant in
any partnership, joint venture or similar person.
- 9 -
<PAGE> 14
Section 3.4. Authority and Absence of Conflict.
(a) Subject to obtaining the Company Shareholder Approval, the
Company has the requisite corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby have been duly and unanimously authorized by the Board of Directors of
the Company, and, except for the Company Shareholder Approval, no other
corporate proceedings on the part of the Company are necessary to authorize the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and (subject, with respect to consummation of the Merger, to the receipt
of the Company Shareholder Approval, and assuming that this Agreement
constitutes the valid and binding obligation of Parent and Purchaser)
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect affecting
the enforcement of creditors' rights generally, or by general equitable
principles regardless of whether enforceability is considered in a proceeding in
equity or at law.
(b) Except as set forth in Schedule 3.4, and assuming the receipt of
the Company Shareholder Approval, neither the execution and delivery of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor compliance by the Company with any of the
provisions hereof, will (i) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance or payment required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or other encumbrance (collectively, "Liens") upon any
of the properties or assets of the Company or any of its subsidiaries under, any
of the terms, conditions or provisions of (x) the Restated Articles of
Incorporation or by-laws of the Company or any of its subsidiaries, or (y) any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or to which any of them or any of their respective properties or
assets may be subject, or (ii) violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to the Company and
its subsidiaries or any of their respective properties or assets, except for (A)
any such violation, conflict, breach, default, termination, acceleration, Lien
that would not have a Material Adverse Effect or prevent or delay the
consummation of the transactions contemplated hereby, (B) the filing of
premerger notification reports by the parties under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
expiration of the applicable waiting period, (C) the filing with the Securities
and Exchange Commission (the "Commission") of a proxy statement in definitive
form relating to the meeting of the Company's shareholders to be held in
connection with the Merger (the "Proxy Statement") and such reports under
Section 13(a)
- 10 -
<PAGE> 15
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
such other compliance with the Exchange Act and the rules and regulations
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, and (D) the filing of the Missouri Articles of
Merger with the Secretary of the State of Missouri.
(c) Other than in connection with or in compliance with the
provisions of the MBCL, the HSR Act, and the Exchange Act, no notice to, filing
with, or authorization, consent or approval of, any state or local government or
any court, tribunal, administrative agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity") is necessary
for the consummation by the Company of the transactions contemplated by this
Agreement.
Section 3.5. SEC Documents. (a) Since January 1, 1996, the Company has
filed with the Commission all reports, schedules, statements and other documents
required to be filed by it under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act (as such documents have been filed prior
to the date hereof, and amended since the time of their filing prior to the date
hereof, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, collectively, the "Company SEC
Documents"). As of their respective dates (or if amended or superseded by a
filing prior to the date hereof, then on the date of such filing), the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the Company
SEC Documents (including any and all financial statements included therein)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in all
of the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the Commission with respect thereto, have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") (except, in the
case of unaudited consolidated quarterly statements, as permitted by Form 10-Q
of the Commission) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
the consolidated financial position of the Company and its consolidated
subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(b) Except as set forth in the Company SEC Documents, neither the
Company nor any of its subsidiaries has any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with GAAP, except for (i) liabilities and obligations incurred in
the ordinary course of business consistent with past practice since January 1,
1998 which could not reasonably be expected to have a Material Adverse Effect,
and (ii) liabilities incurred under this Agreement.
- 11 -
<PAGE> 16
(c) The Company has heretofore made available or promptly shall make
available to Parent a complete and correct copy of any amendments or
modifications, which have not yet been filed with the Commission, to agreements,
documents or other instruments which previously have been filed with the
Commission pursuant to the Exchange Act.
Section 3.6. Absence of Certain Events. Except as set forth on Schedule
3.6, since January 1, 1998, the Company and its subsidiaries have operated their
respective businesses only in the ordinary course consistent with past practice
and, except as set forth in Schedule 3.6 or in the Company SEC Documents, there
has not occurred (i) any event, occurrence or condition which, individually or
in the aggregate, has, or is reasonably likely to have, a Material Adverse
Effect; (ii) any entry into any commitment or transaction that, individually or
in the aggregate, has or is reasonably likely to have, a Material Adverse
Effect; (iii) any change by the Company in its accounting methods, principles or
practices; (iv) any amendments or changes in the respective articles or
certificate of incorporation or organization or by-laws of the Company or any of
its subsidiaries; (v) any revaluation by the Company or any of its subsidiaries
of any of their respective assets; (vi) any damage, destruction or loss which
resulted in or is reasonably likely to result in a Material Adverse Effect;
(vii) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company or any
of its subsidiaries, or any repurchase, redemption or other acquisition by the
Company or any of its subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or any of its
subsidiaries; (viii) any grant of any severance or termination pay to any
director, officer or employee of the Company or any of its Subsidiaries; (ix)
any entry into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director, officer or
employee of the Company or any of its subsidiaries; (x) any increase in benefits
payable under any existing severance or termination pay policies or employment
agreements with any director, officer or employee of the Company or any of its
subsidiaries; (xi) any increase in compensation, bonus or other benefits payable
to directors, officers or employees of the Company or any of its subsidiaries
(except for salary increases to employees other than officers in the ordinary
course of business); or (xii) any other action that would be prohibited by
Section 5.1 on and after the date of this Agreement.
Section 3.7. Litigation. Except as set forth in Schedule 3.7 or the
Company SEC Documents, there are no actions, suits or proceedings pending or, to
the best of the Company's knowledge, threatened against the Company or any of
its subsidiaries, at law or in equity, or before or by any federal, state or
local government or any court, tribunal, administrative agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity") or any arbitrator or arbitration tribunal, and no development has
occurred with respect to any pending or threatened action, suit or proceeding
that is reasonably likely to result in a Material Adverse Effect or prevent or
delay the consummation of the transactions contemplated hereby.
- 12 -
<PAGE> 17
Section 3.8. Compliance with Applicable Law. The Company and its
subsidiaries hold and at all required times have held, all permits, licenses,
variances, exceptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Permits"),
except for the failure to hold any such Permit that could not reasonably be
expected to have a Material Adverse Effect. The Company and its subsidiaries
are, and at all times have been, in compliance with the terms of the Permits,
except for any failure to comply which could not reasonably be expected to have
a Material Adverse Effect. The businesses of the Company and its subsidiaries
are not being, and have not been, conducted in violation of any applicable law,
ordinance or regulation of any Governmental Entity, except for any failure to
comply which could not reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 3.8, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the best of the Company's knowledge, threatened, nor has any
Governmental Entity, to the best of the Company's knowledge, indicated an
intention to conduct the same.
Section 3.9. Employee Plans. (a) Schedule 3.9 is a list of each "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) (hereinafter a "Pension
Plan"), "employee welfare benefit plan" (as defined in Section 3(1) of ERISA,
hereinafter a "Welfare Plan"), and each other agreement, plan, arrangement,
program or policy relating to any bonus, profit sharing, retirement, pension,
group insurance, death benefit, cafeteria, flexible spending account, medical,
dependent care, stock options, stock purchases, stock appreciation rights,
savings, compensation, employment, consulting, deferred compensation, severance,
termination pay, fringe benefits or other employee benefits, in each case
maintained or contributed to, or required to be maintained or contributed to, by
the Company, any of its subsidiaries or any other person that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code (as hereinafter defined) (each a "Commonly Controlled Entity") for
the benefit of any present or former employees of the Company or any of its
subsidiaries (all the foregoing being herein called "Benefit Plans"). The
Company has made available to Parent true, complete and correct copies of (i)
each Benefit Plan, (ii) the most recent annual report on Form 5500 as filed with
the Internal Revenue Service with respect to each applicable Benefit Plan, (iii)
the most recent summary plan description (or similar document) with respect to
each applicable Benefit Plan and (iv) each trust agreement and insurance or
annuity contract relating to any Benefit Plan.
(b) Except as set forth in Schedule 3.9, each Benefit Plan has been
administered in all material respects in accordance with its terms. Except as
set forth in Schedule 3.9, the Company, its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA, the Code, and all other laws, ordinances or regulations of any
Governmental Entities. Except as set forth in Schedule 3.9, to the best of the
Company's knowledge, there are no investigations by any Governmental Entities,
termination proceedings or other claims (except claims for benefits payable in
the normal
- 13 -
<PAGE> 18
operation of the Benefit Plans), suits or proceedings against or involving any
Benefit Plan or asserting any rights to or claims for benefits under any Benefit
Plan.
(c) Except as set forth in Schedule 3.9, (i) all contributions to the
Benefit Plans required to be made by the Company or any of its subsidiaries in
accordance with the terms of the Benefit Plans, any applicable collective
bargaining agreement and, when applicable, Section 302 of ERISA or Section 412
of the Code, have been timely made, (ii) there has been no application for or
waiver of the minimum funding standards imposed by Section 412 of the Code with
respect to any Benefit Plan that is a Pension Plan, excluding any Pension Plan
which is a multiemployer pension plan as defined in Section 4001(a)(3) of ERISA
(hereinafter a "Company Pension Plan") and (iii) no Company Pension Plan had an
"accumulated funding deficiency" within the meaning of Section 412(a) of the
Code as of the end of the most recently completed plan year.
(d) Except as set forth in Schedule 3.9, (i) each Company Pension Plan
that is intended to be a tax-qualified plan has been the subject of a
determination letter from the Internal Revenue Service to the effect that such
Company Pension Plan and each related trust is qualified and exempt from Federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, (ii)
no such determination letter has been revoked, and to the best of the Company's
knowledge, revocation has not been threatened, (iii) no event has occurred and
no circumstances exist that would adversely affect the tax-qualification of such
Company Pension Plan and (iv) such Company Pension Plan has not been amended
since the effective date of its most recent determination letter in any respect
that might adversely affect its qualifications, increase its cost or require
security under Section 307 of ERISA. The Company has made available to Parent a
copy of the most recent determination letter received with respect to each
Company Pension Plan for which such a letter has been issued, as well as a copy
of any pending application for a determination letter. The Company has also
provided to Parent a list of all Company Pension Plan amendments as to which a
favorable determination letter has not yet been received.
(e) Except as set forth in Schedule 3.9: (i) no non-exempt "prohibited
transaction" (as defined in Section 4975 of the Code or Section 406 of ERISA)
has occurred that involves the assets of any Benefit Plan; (ii) no Company
Pension Plan has been terminated or has been the subject of a "reportable event"
(as defined in Section 4043 of ERISA and the regulations thereunder) for which
the 30-day notice requirement has not been waived by the Pension Benefit
Guaranty Corporation ("PBGC"); and (iii) none of the Company, any of its
subsidiaries or, to the best of the Company's knowledge, any trustee,
administrator or other fiduciary of any Benefit Plan has engaged in any
transaction or acted in a manner that could, or has failed to act so as to,
subject the Company, any such subsidiary or any trustee, administrator or other
fiduciary to any liability for breach of fiduciary duty under ERISA or any other
applicable law.
(f) Except as set forth in Schedule 3.9, as of the most recent
valuation date for each Company Pension Plan that is a "defined benefit pension
plan" (as defined in
- 14 -
<PAGE> 19
Section 3(35) of ERISA (hereinafter a "Defined Benefit Plan")), there was not
any material amount of "unfunded benefit liabilities" (as defined in Section
4001(a)(18) of ERISA) under such Defined Benefit Plan, and the Company is not
aware of any facts or circumstances that would change the funded status of any
such Defined Benefit Plan. The Company has made available to Parent the most
recent actuarial report or valuation with respect to each Defined Benefit Plan.
(g) Except as set forth in Schedule 3.9, no Commonly Controlled Entity
has incurred any liability to a Pension Plan (other than for contributions not
yet due) or to the PBGC (other than for the payment of premiums not yet due).
(h) No Commonly Controlled Entity has (i) engaged in a transaction
described in Section 4069 of ERISA that could subject the Company to a liability
at any time after the date hereof or (ii) acted or failed to act, in a manner
that could reasonably be excepted to result in fines, penalties, taxes or
related charges under (x) Section 502(c), (i) or (1) of ERISA, (y) Section 4071
of ERISA or (z) Chapter 43 of the Code.
(i) Except as set forth in Schedule 3.9, no Commonly Controlled Entity
has announced an intention to withdraw, but has not yet completed withdrawal,
from a "multiemployer pension plan" (as defined in Section 4001(a)(3) of ERISA).
Except as set forth in Schedule 3.9, no action has been taken, and no
circumstances exist, that could reasonably be excepted to result in either a
partial or complete withdrawal from such a multiemployer pension plan by any
Commonly Controlled Entity. Schedule 3.9 also lists for each Benefit Plan that
is a multiemployer pension plan the Company's reasonable estimate, based upon
the information supplied to it by each multiemployer pension plan, of the amount
of withdrawal liability that would be incurred if each Commonly Controlled
Entity were to make a complete withdrawal from each such plan as of the dates
specified in Schedule 3.9. Schedule 3.9 also lists for each Benefit Plan that is
a multiemployer pension plan the Company's reasonable estimate, based upon the
information supplied to it by each multiemployer pension plan, of the amount of
"unfunded vested benefits" (within the meaning of Section 4211 of ERISA) as of
the dates specified in Schedule 3.9.
(j) The list of Welfare Plans in Schedule 3.9 discloses whether each
Welfare Plan is (i) unfunded, (ii) funded through a "welfare benefit fund", as
such term is defined in Section 419(e) of the Code, or other funding mechanism
or (iii) insured. Except as disclosed in Schedule 3.9, and to the best of the
Company's knowledge, there are no understandings, agreements or undertakings,
written or oral, that would prevent any such Welfare Plan from being amended or
terminated at any time after the Closing Date. The Company and its subsidiaries
comply with the applicable requirements of Section 4980B(f) of the Code with
respect to each Benefit Plan that is a group health plan, as such term is
defined in Section 5000(b)(1) of the Code.
(k) Except as provided in the employment and severance agreements
listed in Schedule 3.9, no employee of the Company or any of its subsidiaries
will be entitled to any
- 15 -
<PAGE> 20
additional material benefits or vesting of any benefits under any Benefit Plan
as a result of the transactions contemplated by this Agreement.
(l) Except as set forth in Schedule 3.9, during the period beginning
on January 1, 1998 and ending on the date of this Agreement, there has been no
change (i) in any actuarial or other assumption used to calculate funding
obligations with respect to any Company Pension Plan or (ii) in the manner in
which contributions to any Company Pension Plan are made or the basis on which
such contributions are determined.
(m) Except as set forth in Schedule 3.9, any amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement by any employee, officer
or director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangements or Benefit Plans currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(B)(1) of the Code). Schedule 3.9 sets forth (i) the Company's
reasonable estimate of the maximum amount that could be paid to each executive
officer of Company as a result of the transactions contemplated by this
Agreement under all employment, severance and termination agreements, other
compensation arrangements and Benefit Plans currently in effect and (ii) the
Company's reasonable estimate of the "base amount" (as such term is defined in
Section 280(b)(3) of the Code) for each such executive officer calculated as of
the date of this Agreement.
Section 3.10. Employment Relations. Except as set forth in Schedule 3.10
and except for any acts or omissions to act or matters referred to below which
could not reasonably be expected to have a Material Adverse Effect, (i) the
Company and its subsidiaries are, in compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice; (ii) no unfair labor practice complaint against the Company or
any of its subsidiaries is pending before the National Labor Relations Board;
(iii) there is no labor strike, dispute, slowdown or stoppage actually pending
or threatened against or involving the Company or any of its subsidiaries; (iv)
no representation question has been raised with the Company respecting the
employees of the Company or any of its subsidiaries; (v) neither the Company nor
any of its subsidiaries is a party to any collective bargaining agreement; (vi)
no collective bargaining agreement is currently being negotiated by the Company
or any of its subsidiaries; (vii) no grievance is pending or threatened against
the Company or any of its subsidiaries; (viii) neither the Company nor any of
its subsidiaries is liable for any severance pay or other payments to any
employee or former employee arising from the termination of employment under any
benefit or severance policy, practice, agreement, plan, or program of the
Company or any of its subsidiaries, nor will the Company or any of its
subsidiaries have any liability which exists or arises, or may be deemed to
exist or arise, under any applicable law or otherwise, as a result of or in
connection with the transactions contemplated hereunder or as a result of the
- 16 -
<PAGE> 21
termination by the Company and each of its subsidiaries of any persons employed
by the Company or any of its subsidiaries on or prior to the Effective Time;
(ix) each of the Company and each of its subsidiaries is in compliance with its
obligations pursuant to the Worker Adjustment and Retraining Notification Act of
1988, and all other employee notification and bargaining obligations arising
under any collective bargaining agreement, statute or otherwise; and (x) neither
the Company nor any of its subsidiaries has experienced any strike, threatened
strike, picketing or union election during the last three years.
Section 3.11. Contracts. To the best of the Company's knowledge, Schedule
3.11 sets forth a complete and accurate list of any of the following (including
all amendments and/or modifications to the following) to which the Company or
any of its subsidiaries is a party or by which Company or any of its
subsidiaries is bound (collectively, "Scheduled Contracts"):
(i) all deeds, indentures, leases, subleases or other
instruments by which an ownership, leasehold or other interest in real
property is held by the Company or any of its subsidiaries;
(ii) all contracts, commitments or agreements, including
contracts or licenses pertaining to the payment of royalties, to the
extent that any such agreement individually includes provisions that do or
could involve payments or commitments (whether fixed or contingent) to or
from the Company or any of its subsidiaries for a fixed amount, or a
reasonably expected amount, in excess of $100,000;
(iii) all management, compensation, employment or severance
contracts, commitments or agreements or contracts or agreements entered
into with any director, officer or employee of the Company or any of its
subsidiaries;
(iv) all contracts or agreements under which the Company or
any of its subsidiaries has any outstanding indebtedness, obligation or
liability for borrowed money or the deferred purchase price of property or
has the obligation to incur any such indebtedness, obligation or
liability, in each case in an amount greater than $100,000;
(v) all bonds or agreements of guarantee or indemnification
in which the Company or any of its subsidiaries acts as surety, guarantor
or indemnitor with respect to any individual obligation (fixed or
contingent) in a fixed amount or a reasonably expected amount greater than
$100,000; and
(vi) all secrecy, noncompete or other agreements which (A)
restrict the right of the Company or any of its subsidiaries to engage in
any business or (B) would restrict the right of Parent or any of
affiliates to engage in any business after the consummation of the
transactions contemplated by this Agreement;
- 17 -
<PAGE> 22
Except as set forth on Schedule 3.11, (i) neither the Company nor any
of its subsidiaries is in default under the terms of any Scheduled Contract,
(ii) no other party thereto is in default under the terms of any Scheduled
Contract and (iii) each Material Contract is in full force and effect.
Section 3.12. Environmental Laws and Regulations. Except as disclosed in
Schedule 3.12 and to the best of the Company's knowledge:
(i) The Company and its subsidiaries hold and are in
material compliance with all Environmental Permits (as defined below), and
the Company and its subsidiaries are otherwise in compliance with all
Environmental Laws (as defined below), except for any failure to hold any
Environmental Permit, or be in compliance with any Environmental Permit or
Environmental Law that could not reasonably be expected to have a Material
Adverse Effect, and there are no conditions that might prevent or
interfere in any material respect with such compliance in the future;
(ii) As of the date hereof, neither the Company nor any of its
subsidiaries has received any Environmental Claim (as defined below) and
there is no threatened Environmental Claim;
(iii) Neither the Company nor any of its subsidiaries has
entered into any consent decree, order or agreement under any
Environmental Law;
(iv) There are no (A) underground storage tanks, (B)
polychlorinated biphenyls, (C) friable asbestos or asbestos-containing
materials, (D) surface impoundments, or (E) landfills, or present at any
facility currently owned, leased or operated by the Company or any of its
subsidiaries;
(v) There are no past (including, without limitation, with
respect to assets or businesses formerly owned, leased or operated by the
Company or any of its subsidiaries) or present actions, activities,
events, conditions or circumstances, including without limitation the
release, threatened release, emission, discharge, generation, treatment,
storage or disposal of Hazardous Materials;
(vi) No modification, revocation, reissuance, alteration,
transfer, or amendment of the Environmental Permits, or any review by, or
approval of, any third party of the Environmental Permits is required in
connection with the execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby or the continuation
of the business of the Company or its subsidiaries following such
consummation;
(vii) Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be released at,
on, from or under any of the properties or facilities currently owned,
leased or otherwise used by
- 18 -
<PAGE> 23
the Company or any of its subsidiaries, in violation of, or so as could
result in liability under, any Environmental Laws;
(viii) None of the Company or its subsidiaries has
contractually assumed any liabilities or obligations under any
Environmental Laws;
(ix) For purposes of this Agreement, the following terms
shall have the following meanings: (A) "Environmental Claim" means any
written notice, claim, demand, action, suit, complaint, proceeding or
other communication by any person alleging liability or potential
liability (including without limitation liability or potential liability
for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or resulting from (1) the
presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, owned, leased or operated by the
Company or any of its subsidiaries or (2) circumstances forming the basis
of any violation or alleged violation of any Environmental Law or
Environmental Permit or (3) otherwise relating to obligations or
liabilities under any Environmental Laws; (B) "Environmental Permits"
means all permits, licenses, registrations and other governmental
authorizations required under Environmental Laws for the Company and its
subsidiaries to conduct their operations and businesses on the date hereof
and consistent with past practices; (C) "Environmental Laws" means all
applicable federal, state and local statutes, rules, regulations,
ordinances, orders, decrees and common law relating in any manner to
contamination, pollution or protection of the environment, including
without limitation the Comprehensive Environmental Response, Compensation
and Liability Act, the Solid Waste Disposal Act, the Clean Air Act, the
Clean Water Act, the Toxic Substances Control Act, the Occupational Safety
and Health Act, the Emergency Planning and Community-Right-to-Know Act,
the Safe Drinking Water Act, all as amended, and similar state laws; and
(D) "Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, friable asbestos and asbestos-containing
materials, pollutants, contaminants and all other materials, and
substances regulated pursuant to, or that could reasonably be expected to
provide the basis of liability under, any Environmental Law.
Section 3.13. Property and Leases. (a) Schedule 3.13 sets forth all of
the real property owned by the Company and each of its subsidiaries (the "Owned
Real Property"). Schedule 3.13 sets forth all of the real property and interests
in real property leased by the Company and each of its subsidiaries (the "Leased
Real Property", and together with the Owned Real Property, the "Company
Property"). Each of the Company or its subsidiaries, as the case may be, has
good and marketable fee title to the Owned Real Property, subject only to
Permitted Liens (as defined below) and those Liens described in (b) below,
except for (a) Liens set forth on Schedule 3.13, (b) Liens reflected in the
Company SEC Documents, and (c) Liens, easements, restrictions and reservations
that are reflected in the title reports or
- 19 -
<PAGE> 24
surveys, if any, delivered to Purchaser in connection with the transactions
contemplated hereby. Each of the Company or its subsidiaries, as the case may
be, has a valid and existing leasehold interest in all Leased Real Property,
subject only to Permitted Liens and those Liens described in (b) below, except
for (a) Liens set forth on Schedule 3.13 and (b) Liens reflected in the Company
SEC Documents.
(b) All Company Property and personal properties owned by the Company
or any of its subsidiaries are owned free and clear of all Liens or leased free
and clear of all Liens applicable to such leasehold interest, except for (i)
Liens for taxes and assessments or governmental charges or levies which are not
at the time of Closing due or payable or which are being contested in good faith
and (ii) Liens in respect of pledges or deposits under workers' compensation
laws or similar legislation, carriers', warehousemen's, mechanics', laborers'
and materialmen's and similar Liens, which have been incurred in the ordinary
course of business, so long as the obligations secured by such Liens are not
then delinquent or which are being contested in good faith. The Owned Real
Property and personal properties owned by the Company or any of its subsidiaries
are not subject to any Liens, building or use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever which interfere
with or are violated by the existence of the improvements thereon or the current
use and operation of each such Owned Real Property or personal properties,
respectively, to which it relates in the business of the Company and its
subsidiaries as currently conducted, except for any interference or violation
that could not reasonably be expected to have a Material Adverse Effect.
Section 3.14. Intellectual Property. (a) Schedule 3.14 lists all
Intellectual Property (as defined below) owned or used by the Company or its
subsidiaries, which is the subject of a registration or application for
registration submitted to any Governmental Entity, and summarizes the nature of
the Company's or its subsidiaries' rights therein and thereto.
(b) The Company and its subsidiaries own or have the right to use all
Intellectual Property reasonably necessary for the Company and its subsidiaries
to conduct their business as it is currently conducted and consistent with past
practice.
(c) Except as set forth on Schedule 3.14 and except for acts or
omissions or matters referred to below which could not reasonably be expected to
have a Material Adverse Effect: (i) all of the registered Intellectual Property
of the Company and its subsidiaries listed on Schedule 3.14 is subsisting and
unexpired, free of all Liens, has not been abandoned and, to the best of the
Company's knowledge, does not infringe or otherwise impair the intellectual
property rights of any third party; (ii) none of the Intellectual Property owned
by the Company or its subsidiaries is the subject of any license, security
interest or other agreement granting rights therein to any third party; (iii) to
the best of the Company's knowledge, no judgment, decree, injunction, rule or
order has been rendered by any Governmental Entity which would limit, cancel or
question the validity of, or the Company's or its subsidiaries' rights in and
to, any Intellectual Property; (iv) the Company has not received notice of any
pending or threatened suit, action or proceeding that seeks to limit,
- 20 -
<PAGE> 25
cancel or question the validity of, or the Company's or its subsidiaries' rights
in and to, any Intellectual Property; and (v) the Company and its subsidiaries
take reasonable steps to protect, maintain and safeguard the Intellectual
Property owned by the Company or its subsidiaries, including any Intellectual
Property for which improper or unauthorized disclosure would impair its value or
validity.
(d) For purposes of this Agreement "Intellectual Property" shall mean
all rights, privileges and priorities provided under U.S., state and foreign law
relating to intellectual property, including without limitation all (i) (A)
inventions, discoveries, processes, formulae, designs, methods, techniques,
procedures, concepts, developments, technology, new and useful improvements
thereof and know-how relating thereto, whether or not patented or eligible for
patent protections; (B) copyrights and copyrightable works, including computer
applications, programs, software, databases and related items; (C) trademarks,
service marks, trade names, and trade dress, the goodwill of any business
symbolized thereby, and all common-law rights relating thereto; (D) trade
secrets and other confidential information; and (ii) all registrations,
applications, recordings, and licenses or other similar agreements related to
the foregoing.
Section 3.15. Insurance. The Company has provided to Parent copies of all
policies of insurance maintained by or on behalf of the Company or its
subsidiaries. The insurance coverage provided by such policies of insurance will
be continued through the Effective Time and will not terminate or lapse by
reason of the transactions contemplated by this Agreement. Except as set forth
in Schedule 3.15, neither the Company nor any of its subsidiaries has been
denied insurance coverage by any carrier in the last three years.
Section 3.16. Takeover Statutes. The Board of Directors of the Company has
taken all appropriate action to render the restrictions on business combinations
contained in Section 351.459 of the MBCL inapplicable to this Agreement and the
Shareholders Agreement and the consummation of the transactions contemplated
hereunder and thereunder, including, without limitation, the purchase of
securities pursuant to the Shareholders Agreement.
Section 3.17. Taxes. (a) For purposes of this Agreement, (i) "Tax" or
"Taxes" shall mean all Federal, state, county, local, municipal, foreign and
other taxes, assessments, duties or similar charges of any kind whatsoever,
including all corporate franchise, income, sales (including bulk sales), use, ad
valorem, intangible, receipts, value added, profits, license, withholding,
payroll, employment, excise, premium, real property, personal property, personal
property, customs, net worth, estimated, capital, gains, transfer, stamp,
documentary, social security, alternative minimum, accumulated earnings, goods
and services, recapture, recording, severance, environmental (including but not
limited to, taxes under Section 59A of the Code), occupation and other taxes,
and including any interest, penalties and additions imposed with respect to such
amounts; (ii) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and reference to any Section of the Code shall refer to that Section in effect
at the date hereof; (iii) "Taxing Authority" shall mean any
- 21 -
<PAGE> 26
domestic, foreign, federal, national, state, county or municipal or other local
government, any subdivision, agency, commission or authority thereof, or any
quasi-governmental body exercising any taxing authority or any other authority
exercising Tax regulatory authority; and (iv) "Return" or "Returns" shall mean
all returns, reports, estimates, information returns and statements, including
any related or supporting information filed with respect to any of the
foregoing, maintained, filed or to be filed with any Taxing Authority in
connection with the determination, assessment, collection or administration of
any Taxes.
(b) Except as set forth in Schedule 3.17, the Company and each of its
subsidiaries has timely filed, with the appropriate Taxing Authority all
material Returns required to be filed on or prior to the date hereof and each
such Return was complete in all material respects at the time of filing.
(c) Except as set forth on Schedule 3.17, all Taxes (including Taxes
for which no Returns are required to be filed and including payroll and wage
withholding Taxes) of the Company and any of its subsidiaries ("Covered Taxes"),
which are due and payable have been duly and timely paid.
(d) Except as set forth on Schedule 3.17, the Company has made
available for inspection by Parent (i) complete and correct copies of all
Returns of the Company and each of its subsidiaries, with respect to Federal,
state, provincial, county, local, municipal, foreign and other income, profits,
corporate franchise, receipts, sales, excise, property, net worth and all other
Taxes, that are or have been required to be filed for taxable periods ending
with or within the last five calendar years (ii) complete and correct copies of
all material ruling requests, private letter rulings, revenue agent reports,
information document requests and responses thereto, notices of proposed
deficiencies, deficiency notices, applications for changes in method of
accounting, protests, petitions, closing agreements, settlement agreements, and
any similar documents submitted by, received by or agreed to by or on behalf of
the Company or any of the subsidiaries and relating to Covered Taxes.
(e) Except as set forth on Schedule 3.17 and for taxes not yet due,
no material Liens for Taxes exist with respect to any of the assets or
properties of the Company or any of its subsidiaries. Schedule 3.17 lists all
federal, state and local income Returns filed with respect to the Company for
taxable periods ended on or after December 31, 1994, indicates those Returns
that have been audited, and indicates those Returns that currently are the
subject of audit or any administrative or judicial proceeding. Except as set
forth on Schedule 3.17, each deficiency resulting from any audit or examination
relating to Covered Taxes by any Taxing Authority has been paid and no issues
were raised in writing by the relevant Taxing Authority during any such audit or
examination that might apply to taxable periods other than the taxable period to
which such audit or examination related. Except as set forth on Schedule 3.17,
(i) to the best of the Company's knowledge, no Returns with respect to Federal
income Taxes are currently under audit or examination by the Internal Revenue
service and any other Taxing Authority, (ii) to the best of the Company's
knowledge, no audit or examination relating to Covered Taxes is currently being
conducted
- 22 -
<PAGE> 27
by the Internal Revenue Service or any other Taxing Authority and (iii) neither
the Internal Revenue Service nor any other Taxing Authority has given notice in
writing that it will commence any such audit or examination.
(f) Except as set forth on Schedule 3.17, as of the date hereof no
Taxing Authority is asserting or, to the best of the Company's knowledge,
threatening to assert, any deficiency or claim for Covered Taxes or any
adjustment to any item of income, gain, deduction, loss, credit, or tax basis
entering into the computation of Covered Taxes.
(g) Except as set forth in Schedule 3.17, (i) no person has made with
respect to the Company or any of its subsidiaries, or with respect to any
property held by the Company or any of its subsidiaries, any consent under
Section 341 of the Code, (ii) no property owned by the Company or any of its
subsidiaries constitutes "tax-exempt use property" (as defined in Section 169(h)
of the Code), (iii) to the best of the Company's knowledge, neither the Company
nor any of its Subsidiaries is a party to any lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect prior
to the date of enactment of the Tax Equity and Fiscal Responsibility Act of 1982
and (iv) none of the assets owned by the Company or any of its Subsidiaries is
subject to a lease under Section 7701(h) of the Code or under any predecessor.
(h) There is no agreement extending, or having the effect of
extending, the period of assessment or collection of any Covered Taxes and no
unrevoked power of attorney with respect to any Covered Taxes has been executed
or filed with the Internal Revenue Service or any other Taxing Authority.
(i) Since January 1, 1995, the Company has not been a member of any
affiliated or consolidated, combined, unitary or aggregate group for purposes of
filing Returns or paying Taxes at any time except for a group for which the
Company is a parent.
(j) Except as set forth in Schedule 3.17, none of the Company or any
of its subsidiaries is a party to or is bound by any Tax sharing agreements with
any of its affiliates, or with any Taxing Authority.
(k) Except as set forth on Schedule 3.17, none of the Company or any
of the subsidiaries will be required in a taxable period beginning on or after
the Closing Date to include any amount in income pursuant to Section 481 of the
Code, by reason of a change in accounting methods or otherwise, as a result of
actions taken prior to the Closing Date.
(l) Schedule 3.17 lists each state, county, local, municipal or
foreign jurisdiction in which Company or any of the subsidiaries files or, has
filed a Return or is or has been liable for Tax on a "nexus" basis for the
current and preceding three years.
(m) The Company has an estimated consolidated net operating carryover
for regular Federal income tax purposes as of December 31, 1997 of approximately
$3,400,000
- 23 -
<PAGE> 28
for the year ended December 31, 1997 and approximately $507,000 for the year
ended December 31, 1996. The Company has tax credit carryforwards as of December
31, 1997 of approximately $300,000 for the year ended December 31, 1993 and
approximately $222,000 for the year ended December 31, 1996.
Section 3.18. Customers. Schedule 3.18 sets forth a list of the twenty
(20) largest customers of the Company and its subsidiaries, as measured by the
dollar amount of purchases by such customers, during the year ended December 31,
1997 and the six months ended June 30, 1998, calculated based on the approximate
total sales by the Company and its subsidiaries to each such customer during
each such period. To the best of the Company's knowledge, since December 31,
1997, no customer listed on Schedule 3.18 has (i) cancelled or otherwise
terminated, or threatened to cancel or otherwise terminate, its relationship
with the Company or any of its subsidiaries, or (ii) materially changed, or
requested a material change in the price or quantity of the goods, services and
products sold by the Company or any of its subsidiaries to such customer.
Section 3.19. Interests of Certain Persons. Except as disclosed in
Schedule 3.19, no officer or director of the Company, or any "associate" (as
such term is defined in Rule 14a-1 under the Exchange Act) of any such officer
or director, has any interest in any contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of the Company or
any of its subsidiaries or has indebtedness owing to the Company or any of its
subsidiaries.
Section 3.20. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement (as defined in Section 6.1(a)) will, at the date it is first
mailed to the Company's shareholders or at the time of the Shareholders Meeting
(as defined in Section 6.1(c)), 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 the light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied in writing by or on behalf of Parent or Purchaser
specifically for inclusion therein.
Section 3.21. Required Company Vote. The Company Shareholder Approval,
being the affirmative vote of at least two-thirds of the outstanding Shares, are
the only votes of the holders of any class or series of the Company's securities
necessary to approve this Agreement, the Merger and the other transactions
contemplated hereby.
Section 3.22. Opinion Of Financial Advisor. The Company has received the
opinion of Credit Suisse First Boston Corporation (the "Company Financial
Advisor"), dated the date of this Agreement, to the effect that, as of such
date, the Merger Consideration to be
- 24 -
<PAGE> 29
received by the Company's shareholders pursuant to the Merger is fair to such
holders of Shares from a financial point of view.
Section 3.23. Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has duly and unanimously, subject to the
terms and conditions set forth herein, (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are fair to and in
the best interests of the shareholders of the Company and (ii) subject to
Section 6.1(c) hereof, resolved to recommend that the holders of Shares approve
this Agreement and the transactions contemplated herein, including the Merger.
Section 3.24. Brokers. No broker, investment banker or other person, other
than the Company Financial Advisor, the fees and expenses of which will be paid
by the Company, is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. A copy of the
engagement letter between the Company Financial Advisor and the Company setting
forth the fees and expenses to be paid by the Company in connection with the
transactions contemplated by this Agreement has been provided to Parent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser each represent and warrant, jointly and severally, to
the Company as follows:
4.1. Organization and Qualification. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated
by it, or the business conducted by it, requires such qualification and where
failure to so qualify or be in good standing would have an Acquiror Material
Adverse Effect. For purposes of this Agreement, an "Acquiror Material Adverse
Effect" means any change or effect, either individually or in the aggregate,
that is or may be reasonably expected to be materially adverse to the business,
assets, liabilities, properties, financial condition or results of operations of
Parent and its subsidiaries taken as a whole. Each of Parent and Purchaser has
the requisite corporate power and authority to own, operate and use its
respective properties to carry on its respective businesses as they are now
being conducted. Copies of the respective charter documents and by-laws of
Parent and Purchaser have heretofore been delivered to the Company, and such
copies are complete and correct as of the date hereof.
- 25 -
<PAGE> 30
4.2. Capital Stock of Parent and Purchaser. As of the date hereof, and at
all times thereafter up to and including the Effective Time, all of the
outstanding shares of common stock, par value $.01 per share, of Purchaser shall
be duly authorized, validly issued, fully paid, non-assessable and owned
directly by Parent, free and clear of all Liens.
4.3. Authority and Absence of Conflict.
(a) Each of Parent and Purchaser has the requisite corporate power
and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and Purchaser and the consummation by
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by the respective Boards of Directors of Parent and Purchaser, and by
Parent as sole shareholder of Purchaser, and no other corporate proceedings on
the part of Parent or Purchaser are necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Parent and
Purchaser and (assuming that this Agreement constitutes the valid and binding
obligation of the Company) constitutes a valid and binding obligation of each of
them, enforceable against each of them in accordance with its terms except to
the extent that its enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws now or hereafter in effect
affecting the enforcement of creditors' rights generally or by general equitable
principles regardless of whether enforceability is considered in a proceeding in
equity or at law.
(b) Neither the execution and delivery of this Agreement by Parent
or Purchaser, nor the consummation by them of the transactions contemplated
hereby, nor compliance by Parent or Purchaser with any of the provisions hereof,
will (i) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Purchaser under any of the terms, conditions
or provisions of (x) the charter documents or by-laws of Parent or Purchaser or
(y) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Parent or Purchaser is a
party, or to which any of them, or any of their respective properties or assets,
may be subject, or (ii) subject to compliance with the statutes and regulations
referred to in the next subsection, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or
Purchaser or any of their respective properties or assets; except, in the case
of each of clauses (i)(y) and (ii) above, for such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of Liens which
would not prevent or delay in any material respect the consummation of the
Merger.
(c) Other than in connection with or in compliance with the
provisions of the MBCL, the HSR Act and the Exchange Act, no notice to, filing
with, or
- 26 -
<PAGE> 31
authorization, consent or approval of, any Governmental Entity is necessary for
the consummation by Parent and Purchaser of the transactions contemplated by
this Agreement, except where the failure to give such notices, make such
filings, or obtain authorizations, consents or approvals would not prevent or
delay in any material respect the consummation of the Merger.
4.4. Litigation. Except as set forth in Schedule 4.4, there are no
actions, suits or proceedings pending or, to Parent's knowledge, threatened
against Parent or any of its subsidiaries, at law or in equity, or before or by
any Governmental Entity or any arbitrator or arbitration tribunal, and no
development has occurred with respect to any pending or threatened action, suit
or proceedings that is reasonably likely to prevent or delay the consummation of
the transactions contemplated hereby.
4.5. Brokers. No agent, broker, investment banker, financial advisor or
other person or entity, other than Houlihan Lockey Howard & Zukin Financial
Advisors, Inc. ("Houlihan"), the fees and expenses of which will be paid by
Parent, is or will be entitled to any brokerage commission, finder's fee or like
payment in connection with any of the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Purchaser.
4.6. Proxy Statement. None of the information supplied in writing by
Parent or Purchaser specifically for inclusion in the Proxy Statement will, at
the date it is first mailed to the shareholders of the Company, at the time of
the Shareholders Meeting or at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.7. Solvency Opinion. Parent has received the opinion of Houlihan, dated
the date of this Agreement, with respect to the solvency of the Parent and its
consolidated subsidiaries after giving effect to the Merger and the related
financings necessary to consummate the transactions contemplated by this
Agreement. A copy of this opinion has been provided to the Company.
ARTICLE V.
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1. Conduct Of Business Of The Company. Except as otherwise contemplated
hereby or as expressly set forth in Schedule 5.1, the Company covenants and
agrees that, unless Parent shall otherwise agree in writing prior to the
Effective Time:
(a) The business of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action except
in, the ordinary course of
- 27 -
<PAGE> 32
business, and the Company shall use its reasonable best efforts to maintain and
preserve intact its and its subsidiaries' business organization, assets,
employees, officers and advantageous business relationships.
(b) Neither the Company nor any of its subsidiaries shall directly or
indirectly do any of the following: (i) except in the ordinary course of
business, sell, pledge, dispose of or encumber any assets of the Company or of
any of its subsidiaries other than any such assets the value of which do not
exceed $100,000 individually and $500,000 in the aggregate; (ii) amend its
charter or by-laws or similar organizational documents; (iii) except with
respect to the creation, amendment, or exercise of rights under any shareholders
rights plan (provided that Parent, Purchaser and its affiliates and the
transactions contemplated by this Agreement and the Shareholders Agreement are,
and continue to be, exempt from the operation of such plan), split, combine or
reclassify any shares of its capital stock or declare, set aside, make or pay
any dividend or distribution payable in cash, stock, property or otherwise with
respect to any of its capital stock (except for dividends by wholly-owned
subsidiaries of the Company); (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any capital stock of the Company;
(v) adopt a plan of liquidation or resolutions providing for the liquidation,
dissolution, merger, consolidation or other reorganization of the Company; or
(vi) authorize or propose any of the foregoing, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing, except to the
extent otherwise permitted herein.
(c) Neither the Company nor any of its subsidiaries shall, directly or
indirectly, (i) except for Shares issuable upon exercise of options outstanding
under the Option Plans on the date hereof, issue, sell, pledge, dispose of or
encumber, or authorize, propose or agree to the issuance, sale, pledge,
disposition or encumbrance of, any shares of, or any options, warrants or rights
of any kind to acquire any shares of or any securities convertible into or
exchangeable or exercisable for any shares of, its capital stock of any class or
any other securities in respect of, in lieu of, or in substitution for Shares
outstanding on the date hereof; (ii) make any material acquisition, by means of
merger, consolidation or otherwise, or material disposition (other than
disposition of assets in the ordinary course of business), of assets or
securities, or make any loans, advances or capital contributions to, or
investment in, any individual or entity (other than to the Company or a
wholly-owned subsidiary of the Company); (iii) except in the ordinary course of
business, incur any indebtedness or issue any debt securities or assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for, the obligations of any other individual or
entity; (iv) change the capitalization of the Company (other than the incurrence
of indebtedness otherwise permitted in this Agreement); (v) except in the
ordinary course, change any assumption underlying, or method of calculating, any
bad debt, contingency or other reserve; (vi) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, contingency or
otherwise), other than the payment, discharge or satisfaction of liabilities in
the ordinary course of business or as required by applicable law; (vii) waive,
release, grant or transfer any rights of value or modify or change in any
material respect any existing license, lease, contract or other document, other
than in the ordinary course of
- 28 -
<PAGE> 33
business; or (viii) authorize any of the foregoing, or enter into or modify any
contract, agreement, commitment or arrangement to do any of the foregoing.
(d) Neither the Company nor any of its subsidiaries shall (except as
required pursuant to any agreements in effect at the date hereof) adopt or amend
or take any actions to accelerate any rights or benefits under (except as may be
required by law) any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment, severance, termination or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any employee or any officer or director or former employee
or, increase (except for increases to employees other than officers in the
ordinary course of business) the compensation or fringe benefits of any employee
or former employee or pay any benefit not permitted by any existing plan,
arrangement or agreement; provided, however, the Company may take the action,
prior to the Effective Time, with respect to the SERP (as defined in Section
6.8) and the Rabbi and Secular Trusts, as contemplated by Section 6.8.
(e) Except in the ordinary course of business, neither the Company nor
any of its subsidiaries shall make any tax election or, except in the ordinary
course of business, settle or compromise any federal, state, local or foreign
income tax liability.
(f) Except in the ordinary course of business, neither the Company nor
any of its subsidiaries shall permit any insurance policy naming it as
beneficiary or a loss payee to be cancelled or terminated without notice to
Parent.
(g) Neither the Company nor any of its subsidiaries shall agree, in
writing or otherwise, to take any of the foregoing actions or any action which
would make any representation or warranty in Article III hereof untrue or
incorrect.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1. Preparation Of Proxy Statement; Shareholders Meeting. (a) Promptly
following the date of this Agreement, the Company shall prepare a proxy
statement relating to the Shareholders Meeting (the "Proxy Statement"), and the
Company shall prepare and file with the Commission the Proxy Statement. Parent
will cooperate with the Company in connection with the preparation of the Proxy
Statement including, but not limited to, furnishing to the Company any and all
information regarding Parent and Purchaser and their affiliates as may be
required to be disclosed therein. The information provided and to be provided by
Parent and the Company, respectively, for use in the Proxy Statement shall, at
the date it is first mailed to the Company's shareholders and on the date of the
Shareholders Meeting referred to below, be true and correct in all material
respects and shall not omit to state any material fact required to be stated
therein or necessary in order to make the
- 29 -
<PAGE> 34
statements in such information, in light of the circumstances under which they
are made, not misleading, and the Company and Parent each agree to correct any
information provided by it for use in the Proxy Statement which shall have
become false or misleading in any material respect.
(b) The Company will as promptly as practicable notify Parent of (i)
the receipt of any comments from the Commission and (ii) any request by the
Commission for any amendment to the Proxy Statement or for additional
information. All filings by the Company with the Commission, including the Proxy
Statement and any amendment thereto, and all mailings to the Company's
shareholders in connection with the Merger, including the Proxy Statement, shall
be subject to a reasonable opportunity to review and comment thereon and receipt
of approval by Parent (such approval not to be unreasonably withheld or
delayed). Parent will furnish to the Company the information relating to it and
its affiliates, including Purchaser, the financing for the transactions
contemplated by this Agreement and the Shareholders Agreement and any other
matters required by the Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Proxy Statement.
(c) The Company will: (i) as promptly as practicable following the date
of this Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Shareholders Meeting") for the purpose of approving this
Agreement and the transactions contemplated hereby to the extent required by the
MBCL and the Company's Restated Articles of Incorporation; and (ii) through its
Board of Directors, recommend to its shareholders approval of the foregoing
matters; provided; however that the Board of Directors may fail to make or
withdraw such recommendation, but only if the Board of Directors of the Company
shall have concluded in good faith on the basis of written advice from outside
counsel that such action is required to prevent the Board of Directors of the
Company from breaching its fiduciary duties to the shareholders of the Company
under applicable law. Any such recommendation, together with a copy of the
opinion referred to in Section 3.22, shall be included in the Proxy Statement.
6.2. Access To Information; Confidentiality. (a) From and after the date
of this Agreement and until the earlier of the Effective Time or termination of
this Agreement, the Company shall, and shall cause its subsidiaries, officers,
directors, employees and agents to, afford to Parent, and to the officers,
employees and agents of Parent, reasonable access, during normal business hours,
to the officers, employees, agents, properties, books, records and contracts of
the Company and its subsidiaries, provided that such access shall not
unreasonably disrupt the Company's business or employees and the Company
receives reasonable advance notice of a request for such access.
(b) Parent and Purchaser each hereby confirms to the Company that the
confidentiality agreement dated as of July 15, 1998 by and between Parent and
the Company ("the Confidentiality Agreement") is in full force and effect.
Purchaser hereby agrees to be bound by and to comply with the Confidentiality
Agreement to the same extent as Parent is bound thereby, and Parent and
Purchaser each agrees that it will cause the affiliates of Parent
- 30 -
<PAGE> 35
and Purchaser to be bound by and to comply with that Agreement to the same
extent that Parent is bound thereby, and Parent and Purchaser shall cause
Parent's, Purchaser's and such affiliates' officers, employees, agents and
representatives, including, without limitation, attorneys, accountants,
consultants, financial advisers and lenders and their respective counsel to
comply therewith as though they were parties thereto.
6.3. Filings; Commercially Reasonable Best Efforts. (a) Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
its commercially reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate and
effect the transactions contemplated by this Agreement and the Shareholders
Agreement, including but not limited to (i) determining whether any filings are
required to be made or consents, approvals, waivers, licenses, permits or
authorizations are required to be obtained (or, which if not obtained, would
result in an event of default, termination or acceleration of any agreement)
under any applicable law or regulation or from any governmental entities or
third parties, including parties to loan agreements or other debt instruments,
in connection with the transactions contemplated by this Agreement, including
the Merger and the transactions contemplated hereby, (ii) promptly making any
such filings, furnishing information required in connection therewith and timely
seeking to obtain any such consents, approvals, permits or authorizations, (iii)
obtaining the necessary approval of this Agreement and the transactions
contemplated hereby by the shareholders of the Company, and (iv) doing all
things necessary, proper or advisable to remove any injunctions or other
impediments or delays, legal or otherwise, to the consummation of the Merger and
the other transactions contemplated by this Agreement.
(b) In the event Parent elects to engage in a debt offering between
the date hereof and the Effective Time, then upon the request of Parent, the
Company will use its reasonable best efforts to cause its independent
accountants to promptly deliver to Parent a consent and letter in form
reasonably satisfactory to Parent and customary in scope for comfort letters
with respect to the Company's financial information included in the debt
offering memorandum.
(c) Notwithstanding the foregoing, none of Parent, Purchaser or the
Company shall be obligated to use its commercially reasonable best efforts or
take any action pursuant to this Section 6.3 if it determines in good faith,
based on the advice of outside legal counsel, that such actions would be in
breach of its Board of Directors' fiduciary duties under applicable law.
6.4. Public Announcements. Parent, Purchaser and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law, legal process or any listing agreement with a national
securities exchange.
- 31 -
<PAGE> 36
6.5. Notification of Certain Matters. The Company, Parent and Purchaser
each agree to give prompt notice (a "Default Notice") to each other at any time
from the date hereof to the Effective Time of the obtaining by it of knowledge
as to the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause a breach of any covenant, representation or
warranty contained in this Agreement so as to result in a Material Adverse
Effect or in an Acquiror Material Adverse Effect; provided that delivery of any
such notice pursuant to this Section 6.5 shall not cure such breach or
noncompliance or limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.6. Indemnification And Insurance. (a) The Restated Articles of
Incorporation and By-laws of the Company (and the articles of incorporation and
By-laws of the Surviving Corporation after the Effective Time) shall contain the
provisions with respect to indemnification set forth in the Restated Articles of
Incorporation and By-Laws of the Company on the date of this Agreement, which
provisions, and the provisions of those certain Indemnification Agreements in
effect as of the date hereof between the Company and the persons identified on
Schedule 6.6, shall not be amended, repealed or otherwise modified for a period
of six years after the Effective Time in any manner that would adversely affect
the rights thereunder of any individual who at any time prior to the Effective
Time was an employee, agent, director or officer of the Company or any of the
Company's subsidiaries, together with each such person's heirs, representatives,
successors and assigns (individually, an "Indemnified Party" and collectively
the "Indemnified Parties") in respect of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by the Agreement). Parent shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, and the Company (or the Surviving
Corporation if after the Effective Time) shall, maintain in effect for not less
than six years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company and the Company's
subsidiaries on the date hereof (provided that the Company may substitute
therefor policies having at least substantially the same coverage and containing
terms and conditions which are no less advantageous in any material respect to
the persons currently covered by such policies as insureds) with respect to
matters existing or occurring at or prior to the Effective Time ; provided,
however, that if the aggregate annual premiums for such insurance at any time
during such period shall exceed 200% of the per annum rate of premium currently
paid by the Company and its subsidiaries for such insurance on the date of this
Agreement, then Parent shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, and the Company (or the Surviving Corporation if
after the Effective Time) shall, provide the maximum coverage that shall then be
available at an annual premium equal to 200% of such rate. The Company
represents to Parent that such per annum rate of premium currently paid by the
Company and its subsidiaries is approximately $95,000. Without limiting the
foregoing, in the event any Indemnified Party becomes involved in any capacity
in any action, proceeding or investigation based in whole or in part on, or
arising in whole or in part out of, any matter, including the transactions
contemplated hereby, existing or occurring at or prior to the Effective Time ,
then to the extent permitted by law, Parent shall cause the Company (or the
Surviving Corporation if after the Effective Time) to, and the Company (or the
Surviving
- 32 -
<PAGE> 37
Corporation if after the Effective Time) shall, periodically advance to such
Indemnified Party its legal and other expenses (including the cost of any
investigation and preparation incurred in connection therewith), subject to the
provision by such Indemnified Party of an undertaking to reimburse the amounts
so advanced in the event of a final determination by a court of competent
jurisdiction that such Indemnified Party is not entitled thereto. Parent shall
cause the Company (or the Surviving Corporation if after the Effective Time) to,
and the Company (or the Surviving Corporation if after the Effective Time)
shall, pay all expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other obligations provided for
in this Section 6.6.
(b) The provisions of this Section 6.6 are intended for the benefit of,
and shall be enforceable by, the respective Indemnified Parties and shall be
binding on all successors and assigns of Parent, Purchaser, the Company and the
Surviving Corporation.
6.7. Solicitation. (a) The Company (and its subsidiaries and affiliates)
will not, and the Company (and its subsidiaries and affiliates) will use their
reasonable best efforts to ensure that their respective directors, officers,
employees, representatives and agents do not, directly or indirectly, solicit or
initiate inquiries or proposals from, or provide any confidential information
to, or participate in any discussions or negotiations with, any person or entity
(other than Parent and its subsidiaries and their respective directors,
officers, employees, representatives and agents) concerning (i) any merger, sale
of assets not in the ordinary course (except for any sale of assets otherwise
permitted under the terms of this Agreement), or other similar transaction
involving the Company or any subsidiary or division of the Company, or the sale
of any equity interest in the Company or any subsidiary, or (ii) any sale by the
Company or its subsidiaries of authorized but unissued Shares or of any shares
(whether or not outstanding) of any of the Company's subsidiaries (all such
inquiries and proposals being referred to herein as "Acquisition Proposals"),
provided, however, that nothing contained in this Section 6.7 shall prohibit the
Company or its Board of Directors from (i) subject to the provisions of Section
6.4, issuing a press release, filing any report, proxy statement or other
document with the Commission pursuant to the Exchange Act or otherwise publicly
disclosing the terms of this Agreement, including, without limitation, this
Section 6.7; (ii) proceeding with the transactions contemplated by this
Agreement; or (iii) communicating to the Company's shareholders a position as
contemplated by Rule 14e-2 promulgated under the Exchange Act; and, provided,
further, that the Board of Directors of the Company may, on behalf of the
Company, furnish or cause to be furnished information and may direct the
Company, its directors, officers, employees, representatives or agents to
furnish information, in each case pursuant to appropriate confidentiality
agreements, and to participate in discussions or negotiations with any person or
entity concerning any Acquisition Proposal which was not solicited by the
Company or any of its subsidiaries or affiliates or any of their respective
directors, officers, employees, representatives or agents, or which did not
otherwise result from a breach of this Section 6.7, if (x) the Board of
Directors of the Company shall conclude in good faith, after consultation with
its financial advisor, that such person or entity has made a bona fide
Acquisition Proposal for a transaction more favorable to the Company's
shareholders from a financial point of view than
- 33 -
<PAGE> 38
the transactions contemplated hereby, and (y), in the opinion of the Board of
Directors of the Company, only after receipt of advice from independent legal
counsel to the Company, the failure to provide such information or access or to
engage in such discussions or negotiations would cause the Board of Directors of
the Company to violate its fiduciary duties to the Company's shareholders under
applicable law (an Acquisition Proposal which satisfies clauses (x) and (y)
being referred to herein as a "Superior Proposal"). The Company will immediately
notify Parent of the terms of any proposal, discussion, negotiation or inquiry
(and will disclose any written materials received by the Company in connection
with such proposal, discussion negotiation, or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction. The Company shall, and shall cause each subsidiary to,
immediately cease and cause to be terminated any existing activities,
discussions or negotiations by the Company, any subsidiary of the Company or any
officer, director or employee of, or investment banker, attorney, accountant or
other advisor or representative of, the Company or any subsidiary with parties
conducted heretofore with respect to any of the foregoing.
(b) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval
or recommendation by the Board of Directors of the Company or any such committee
of this Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal, or (iii) enter into any
agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, the Board of Directors of the Company may (subject to the terms of
this and the following sentence) withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend a Superior
Proposal or enter into an agreement with respect to a Superior Proposal at any
time after the second business day following Parent's receipt of written notice
advising Parent that the Board of Directors of the Company has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal; provided that
the Company shall not enter into an agreement with respect to a Superior
Proposal unless the Company shall have furnished Parent with written notice not
later than noon (Chicago time) two business days in advance of any date that it
intends to enter into such agreement and shall have caused its financial and
legal advisors to negotiate with Parent to make such amendments to the terms and
conditions of this Agreement as would make this Agreement as so amended at least
as favorable to the Company's shareholders from a financial point of view as the
Superior Proposal (without taking into account Parent's option to purchase
Shares beneficially owned by certain shareholders of the Company pursuant to the
Shareholders Agreement); provided further that the Company shall not be required
to make such amendments if the Board of Directors in good faith determines that
the transactions contemplated by this Agreement as so amended are not reasonably
capable of being consummated. In addition, if the Company enters into an
agreement with respect to any Acquisition Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to Parent the Termination
Amount (as defined in Section 9.2) subject to the provisions of Section 9.2.
- 34 -
<PAGE> 39
6.8. Supplemental Executive Retirement Plan Funding. Immediately prior to
the Closing, the Company (a) shall fund fully the obligations under the
Company's Supplemental Executive Retirement Plan (the "SERP"), and (b) shall
execute and deliver the amendment to the SERP, the amendment to the Supplemental
Executive Retirement Plan II and the indemnification agreement in the form
previously delivered to Parent.
6.9. TMI Letter Agreement. The letter agreement dated June 2, 1998
between TMI Acquisition Corp. and the Company, as amended and supplemented to
date (the "TMI Letter") hereby is terminated and is of no further force or
effect. Each of Parent and Purchaser jointly and severally agrees to indemnify
and hold harmless the Company and its subsidiaries and their respective
directors, officers, employees, representatives, agents and attorneys from,
against and in respect of any and all damages, liabilities, losses, obligations
and reasonable costs and expenses (including reasonable attorneys' fees and
expenses) arising out of any claim, action or proceeding by TMI Acquisition
Corp. or any of its current or former shareholders, officers, directors,
employees, representatives, agents, attorneys or any other person or entity that
has any financial or other interests arising out of or based upon the TMI
Letter.
ARTICLE VII.
CONDITIONS PRECEDENT
7.1. Conditions To Each Party's Obligation To Effect The Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver in writing on or prior to the Closing on the Closing Date
of the following conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval shall
have been obtained.
(b) Antitrust. The waiting periods (and any extensions thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have expired
and, if applicable, the waiting periods (and any extensions thereof) applicable
to the transactions contemplated by this Agreement under the HSR Act shall have
been terminated or shall have expired.
(c) Statutes. No statute, rule, order, decree or regulation shall have
been enacted or promulgated by any domestic government or any governmental
agency or authority of competent jurisdiction which prohibits the consummation
of the Merger or the transactions contemplated hereby or the performance of this
Agreement.
(d) Violation of Law. Consummation of the Merger shall not result in
violation of any applicable United States federal or state law.
- 35 -
<PAGE> 40
(e) Litigation. No preliminary or permanent injunction, decree or other
order issued by any federal or state court of competent jurisdiction in the
United States preventing the consummation of the Merger or the transactions
contemplated hereby or the performance of this Agreement shall be in effect;
provided, however, that the parties hereto shall use their reasonable best
efforts to have any such injunction or order vacated.
7.2. Conditions To Obligations Of Parent. The obligations of Parent to
effect the Merger are further subject to the following conditions:
(a) Representations And Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in each case
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing as though made on
the Closing Date and as of the Closing, except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to "materiality" or "Material Adverse Effect" set forth
therein) would not reasonably be expected to have a Material Adverse Effect.
(b) Performance Of Obligations Of The Company. The Company shall have
performed the obligations required to be performed by it under this Agreement at
or prior to the Closing (except for such failures to perform as have not had a
Material Adverse Effect), and Parent shall have received a certificate signed on
behalf of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to such effect, to their best knowledge.
(c) No Litigation. There shall not be instituted or pending any suit,
action or proceeding (having a substantial likelihood of success) against
Parent, Purchaser, the Company or any subsidiary of the Company (i) challenging
the acquisition by Parent or Purchaser of any Shares, seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or the performance of this Agreement or seeking
to obtain from the Company, Parent or Purchaser any damages that are material in
relation to the Company and its subsidiaries taken as a whole, (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or any of
their respective subsidiaries of any material portion of the business or assets
of the Company, Parent or any of the respective subsidiaries or to compel the
Company, Parent or any of their respective subsidiaries to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective subsidiaries, in each case taken as a whole, (iii) seeking
to impose material limitations on the ability of Parent or Purchaser to acquire
or hold, or exercise full rights of ownership of, the shares of capital stock of
the Surviving Corporation, including the right to vote such capital stock on all
matters properly presented to the stockholders of the Surviving Corporation,
(iv) seeking to prohibit or impose material limitations on the ability of Parent
to effectively control in any material respect the business or operations of the
Company or its subsidiaries or (v) which otherwise is reasonably likely to have
a Material Adverse Effect.
- 36 -
<PAGE> 41
(d) Statutes. There shall not be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of a
governmental entity, to the Merger, or any other action shall be taken by any
governmental entity, other than the application or the Merger of applicable
waiting periods under HSR Act or any other applicable foreign law, that is
substantially likely to result, directly or indirectly, in any of the
consequences referred to in clauses (i) through (v) of Section 7.2(c) above.
(e) Dissenters Rights. The Company shall not have received notice of
the intent of shareholders of the Company holding an aggregate of 7.5% or more
of the outstanding Shares to object to the Merger and exercise appraisal rights
pursuant to the MBCL in respect of the Merger.
(f) Shareholders Agreement. If Parent shall have exercised the
Acquiror Option (as defined in the Shareholders Agreement), the closing of the
purchase of Shares pursuant to the Acquiror Option shall have been consummated.
7.3. Conditions To Obligation Of The Company. The obligation of the
Company to effect the Merger is further subject to the following conditions:
(a) Representations And Warranties. The representations and
warranties of Parent and Purchaser set forth in this Agreement shall be true and
correct, in each case as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing as though made on the Closing Date and as of the Closing, except where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not reasonably be expected to adversely
affect the ability of Parent to consummate the Merger and the transactions
contemplated hereby or to perform this Agreement.
(b) Performance Of Obligations Of Parent. Parent shall have
performed the obligations required to be performed by it under this Agreement at
or prior to the Closing Date (except for such failures to perform as have not
had a material adverse effect on the ability of Parent to consummate the Merger
and the transactions contemplated hereby or to perform this Agreement).
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1. Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the shareholders of the Company:
- 37 -
<PAGE> 42
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if any governmental body or
regulatory authority of the United States of America or any state thereof shall
have issued an order, decree or ruling or taken any other action, in each case
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
non-appealable; provided that the right to terminate this Agreement pursuant to
this Section 8.1(b) shall not be available to any party that has breached any of
its material agreements or obligations under Section 6.3; or
(c) by either Parent or the Company if the Merger shall not have been
consummated on or before March 31, 1999 (other than due to the failure of the
party seeking to terminate this Agreement) to perform its material obligations
under this Agreement required to be performed at or prior to the Effective
Time); or
(d) by either Parent or the Company if at the duly held meeting of the
shareholders of the Company (including any adjournment thereof) held for the
purpose of voting on the Merger, this Agreement and the consummation of the
transactions contemplated hereby, the holders at least two-thirds of the
outstanding Shares shall not have approved the Merger, this Agreement and the
consummation of the transactions contemplated hereby; or
(e) by the Board of Directors of Parent, (i) if the Company shall have
breached any of its representations and warranties or failed to comply with any
of the covenants or agreements (without, in each instance, giving effect to any
limitation as to "materiality" or "material adverse effect" set forth therein)
contained in this Agreement to be complied with or performed by the Company at
or prior to consummation of the Merger and such breach or failure shall have
resulted in a Material Adverse Effect and shall not have been cured within 20
business days following receipt by the Company of notice of such breach or
failure, or (ii) the Company shall have received from a third party a bona fide
Acquisition Proposal, and the Board of Directors of the Company, shall have
accepted such a proposal or (iii) the Board of Directors of the Company shall
have failed to recommend to the Company Shareholders that they give the Company
Shareholder Approval or shall have withdrawn or modified in a manner adverse to
Parent or Purchaser its approval or recommendation with respect to the Merger,
or
(f) by the Board of Directors of the Company, if (i) Parent or
Purchaser shall have breached any of its representations and warranties or
failed to comply with any of the covenants or agreements (without, in each
instance, giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) contained in this Agreement to be complied
with or performed by Parent or Purchaser at or prior to consummation of the
Merger and such breach or failure shall have resulted in an Acquiror Material
Adverse Effect and shall not have been cured within 20 business days following
receipt by the breaching party of notice of such breach or failure, or (ii) if
the Company
- 38 -
<PAGE> 43
enters into a written agreement concerning a transaction that constitutes a
Superior Proposal, provided that the Company shall have complied with the
provisions of Section 6.7(a) and (b) hereof (including the payment of the
Termination Amount).
8.2. Effect Of Termination. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 8.1, no party hereto (or
any of its directors, officers, employees, agents, legal and financial advisors
or other representatives) shall have any liability or further obligation to any
other party to this Agreement, except as provided in this Section 8.1 and
Sections 6.2(b), 9.1 and 9.2 of this Agreement, and except that nothing herein
will relieve any party from liability for its breach of this Agreement.
ARTICLE IX.
GENERAL PROVISIONS
9.1. Nonsurvival Of Representations And Warranties. The representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall expire with, and be terminated and extinguished upon,
consummation of the Merger. This Section 9.1 have no effect upon any other
obligation of the parties hereto, whether to be performed before or after the
Effective Time. The Confidentiality Agreement shall survive the termination of
this Agreement and the provisions of such Confidentiality Agreement shall apply
to all information and material delivered by any party hereunder.
9.2. Payment Of Certain Fees and Expenses. (a) All costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses.
(b) Notwithstanding the foregoing, if this Agreement is terminated
pursuant to Section 8.1(d), 8.1(e)(ii) or (iii) or 8.1(f)(ii) hereof, then the
Company shall pay to Parent (i) concurrently with such termination, an amount
equal to U.S. $2.0 million (the "Termination Fee"), plus (ii) promptly, but in
no event later than two days after being furnished documentation in respect
thereto by Parent ("Documentation"), Parent's or its affiliates' out-of-pocket
fees and expenses (including legal, investment banking, financing commitment
fees, and commercial banking fees and expenses) actually incurred in connection
with the Merger, due diligence investigation, the negotiation and execution of
this Agreement and the transactions contemplated hereby in an amount not to
exceed $750,000 in the aggregate (the "Termination Expenses"), and together with
the Termination Fee, the "Termination Amount"). Any payments required to be made
pursuant to this Section shall be made by wire transfer of same day funds to an
account designated by Parent.
9.3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given; as of the date of delivery,
if delivered personally; upon receipt of confirmation, if telecopied or upon the
next business day when
- 39 -
<PAGE> 44
delivered during normal business hours to an overnight courier service, such as
Federal Express, in each case to the parties at the following addresses or at
such other addresses as shall be specified by the parties by like notice; unless
the sending party has knowledge that such notice or other communication
hereunder was not received by the intended recipient:
(a) If to Parent or Purchaser:
Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mount Prospect, Illinois 60056
Attention: Chairman
Telecopy: (847) 803-8080
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Neal Aizenstein, esq.
Telecopy: (312) 876-7934
If to the Company:
Toastmaster Inc.
1801 North Stadium Boulevard
Columbia, Missouri 65202
Attention: Chairman
Telecopy: (573) 446-5646
with a copy to:
Stinson, Mag & Fizzell P.C.
1201 Walnut Street
Kansas City, Missouri 64106
Attention: John A. Granda
Telecopy: (816) 641-3495
9.4. Certain Definitions; Interpretation. (a) When a reference is made in
this Agreement to subsidiaries of Parent, Purchaser or the Company, the word
"subsidiaries" means any corporation 50 percent or more of whose outstanding
voting securities, or any partnership, joint venture or other entity 50 percent
or more of whose total equity interest, is directly or indirectly owned by
Parent, Purchaser or the Company, as the case may be. As used in this Agreement,
the term "affiliate(s)" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act and the term "knowledge" means the actual knowledge of any of the
- 40 -
<PAGE> 45
executive officers of the parties and, with respect to Section 3.9 and Section
3.12, the actual knowledge of the most senior officer or employee in charge of
employee benefit and environmental matters, respectively, in each cause with the
requirement of due inquiry but without any attribution of knowledge from any
other person.
(b) References to "includes" and "including" mean "includes without
limitation" and "including without limitation.
(c) No provision of this Agreement or the Shareholders Agreement
shall be interpreted in favor of, or against, any of the parties by reason of
the extent to which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is inconsistent
with any prior draft hereof or thereof.
9.5. Entire Agreement. This Agreement (including the Schedules and the
exhibits hereto), the Shareholders Agreement and the Confidentiality Agreement
contain the entire agreement between the parties with respect to the
transactions contemplated hereby, and supersedes all written or oral
negotiations, representations, warranties, commitments, offers, bids, bid
solicitations, and other understandings prior to the date hereof, including,
without limitation, the letter agreement dated June 2, 1998 between TMI
Acquisition Corp and the Company.
9.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.7. Severability. If any term or provision of this Agreement or the
Shareholders Agreement or the application thereof to either party or set of
circumstances shall, in any jurisdiction and to any extent, be finally held
invalid or unenforceable, such term or provision shall only be ineffective as to
such jurisdiction, and only to the extent of such invalidity or
unenforceability, without invalidating or rendering unenforceable any other
terms or provisions of this Agreement or the Shareholders Agreement under any
other circumstances, and the parties shall negotiate in good faith a substitute
provision which comes as close as possible to the invalidated or unenforceable
term or provision, and which puts each party in a position as nearly comparable
as possible to the position it would have been in but for the finding of
invalidity or unenforceability, while remaining valid and enforceable.
9.8. Captions. The captions of the various Articles and Sections of this
Agreement have been inserted only for convenience of reference and shall not be
deemed to modify, explain, enlarge or restrict any provision of this Agreement
or affect the construction hereof.
9.9. Amendment. Subject to the applicable provisions of the MBCL, this
Agreement may be amended by the parties hereto, at any time before or after any
required
- 41 -
<PAGE> 46
approval of matters presented in connection with the Merger by the shareholders
of the Company; provided, however, that after any such approval, there shall be
made no amendment that by law requires further approval by such shareholders
without the further approval of such shareholders. This Agreement may not be
amended except by an instrument in writing signed by the parties hereto.
9.10. Waiver. Subject to the applicable provisions of the MBCL, at any
time prior to the Effective Time, any party hereto may (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, or (b) subject to the proviso of Section 9.9, waive compliance with any
of the agreements or conditions contained herein. At any time prior to
consummation of the Merger any party hereto may waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by such party. Except as otherwise provided in this Agreement, neither
the failure nor any delay by a any party in exercising any right, power or
privilege under this Agreement or the document referred to in this Agreement or
therein will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege.
9.11. No Third-Party Beneficiaries; Assignability. Except for Sections
2.2, 2.3 and 6.6 (which are intended for the benefit of, and may be enforced by,
the persons or entities specified therein), this Agreement is not intended to
confer or impose upon any person not a party hereto any rights, remedies,
obligations or liabilities hereunder. This Agreement shall not be assigned by
any party hereto, by operation of law or otherwise. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
9.12. Inclusion of Information in Schedules. The inclusion of any
information in any disclosure schedule (i) shall not be deemed an admission that
any such information is material for purposes of the representation and warranty
to which it relates or any other representation and warranty or for any other
purpose related to the Agreement or the transactions contemplated hereby,
including, without limitation, for purposes of any covenants, closing conditions
or any other remedies the parties may have, and (ii) shall not be used or
interpreted in any manner to create a standard of materiality for any such
purpose.
9.13. Exclusive Jurisdiction and Consent to Service of Process. The
parties agree that any action arising out of or relating to this Agreement or
the transactions contemplated hereby shall be brought by the parties only in a
Missouri state court or a federal court sitting in that state, which shall be
the exclusive venue of any such action. Each party waives any objection which
such party may now or hereafter have to the laying of venue of any such action,
and irrevocably consents and submits to the jurisdiction of any such court (and
the
- 42 -
<PAGE> 47
appropriate appellate courts) in any such action. Any and all service of process
and any other notice in any such action shall be effective against such party
when transmitted in accordance with Section 9.3. Nothing contained herein shall
be deemed to affect the right of any party to serve process in any manner
permitted by law.
9.14. Waiver of Jury Trial. THE COMPANY, PARENT AND PURCHASER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY
JURY IN ANY ACTION INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
9.15. Governing Law. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of Missouri,
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
SALTON/MAXIM HOUSEWARES, INC.
By: _____________________________
Title: Chairman and Chief
Executive Officer
COLUMBIA ACQUISITION CORP.
By: _____________________________
Title: President
TOASTMASTER INC.
By: _____________________________
Title: President
- 43 -
<PAGE> 1
EXHIBIT 99.1
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated ("Agreement") as of August 26, 1998 by and
between Salton/Maxim Housewares, Inc., a Delaware corporation ("Acquiror"), and
the other parties signatory hereto (each a "Stockholder").
RECITALS
Concurrently herewith, Acquiror, Salt Acquisition Corp., a Missouri
corporation ("Newco"), and Toastmaster Inc., a Missouri corporation (the
"Company"), are entering into an Agreement and Plan of Merger of even date
herewith (as such agreement may be amended from time to time, the "Merger
Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement) pursuant to which (and subject to
the terms and conditions specified therein) Newco will be merged with and into
the Company (the "Merger"), whereby each share of common stock, par value $.10
per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive $7.00 cash, other than (i) shares of Company Common Stock owned,
directly or indirectly, by the Company or any subsidiary of the Company or by
Acquiror and (ii) Dissenting Shares.
As a condition to Acquiror's entering into the Merger Agreement, Acquiror
requires that each Stockholder enter into, and each such Stockholder has agreed
to enter into, this Agreement with Acquiror.
AGREEMENT
To implement the foregoing and in consideration of the mutual agreements
contained herein, the parties hereby agree as follows:
1. Representations and Warranties of Stockholders. Each Stockholder
hereby severally and not jointly represents and warrants to Acquiror as follows:
(a) OWNERSHIP OF SHARES. (i) Such Stockholder is either (i) the record
holder or beneficial owner, either alone or with such Stockholder's spouse,
of the number of or (ii) trustee of a trust that is the record holder or
beneficial owner of, and whose beneficiaries are the beneficial owners
(such trustee, a "Trustee") of shares of Company Common Stock as is set
forth opposite such Stockholder's name on Schedule I hereto (such shares
shall constitute the "Existing Shares", and together with any shares of
Company Common Stock acquired of record or beneficially by such Stockholder
in any capacity after the date hereof and prior to the termination hereof,
whether upon exercise of options, conversion of convertible securities,
purchase, exchange or otherwise, shall constitute the "Shares").
(ii) On the date hereof, the Existing Shares set forth opposite
such Stockholder's name on Schedule I hereto constitute all of the
outstanding shares
<PAGE> 2
of Company Common Stock owned of record or beneficially by such
Stockholder. Such Stockholder does not have record or beneficial
ownership of any Shares not set forth on Schedule I hereto.
(iii) Such Stockholder has sole power, or shared power with such
Stockholder's spouse, of disposition with respect to all of the
Existing Shares set forth opposite such Stockholder's name on Schedule
I and sole power, or shared power with such Stockholder's spouse, to
demand dissenter's or appraisal rights, in each case with respect to
all of the Existing Shares set forth opposite such Stockholder's name
on Schedule I, with no restrictions on such rights, subject to
applicable federal securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. Such Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party or by which such Stockholder is bound
including, without limitation, any trust agreement, voting agreement,
stockholders agreement, voting trust, partnership or other agreement. This
Agreement has been duly and validly executed and delivered by such
Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms. There is no beneficiary of or holder of interest in any trust of
which a Stockholder is Trustee whose consent is required for the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby. If such Stockholder is married and such Stockholder's
Shares constitute community property, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such Stockholder's spouse, enforceable against such person in
accordance with its terms. The Stockholders Agreement dated November 13,
1991, as amended on December 30, 1993 (as so amended, the "Existing
Stockholders Agreement"), has been amended so that the provisions of the
Existing Stockholders Agreement will not apply to the Acquiror Option.
(c) NO CONFLICTS. Except for filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if
applicable, and the expiration or termination of any applicable waiting
period thereunder, (A) no filing with, and no permit, authorization,
consent or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated hereby
and (B) neither the execution and delivery of this Agreement by such
Stockholder nor the consummation by such Stockholder of the transactions
contemplated hereby nor compliance by such Stockholder with any of the
provisions hereof shall (x) conflict with or result in any breach of any
applicable trust, partnership agreement or other agreements or
organizational documents applicable to such Stockholder, (y) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or
2
<PAGE> 3
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind to
which such Stockholder is a party or by which such Stockholder or any of
such Stockholder's properties or assets may be bound or (z) violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to such Stockholder or any of such Stockholder's properties or
assets.
(d) Such Stockholder's Shares and the certificates representing such
Shares are now and at all times during the term hereof will be held by such
Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
(e) No broker, investment banker, financial adviser or other person is
entitled to any broker's, finder's, financial adviser's or other similar
fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of such Stockholder in his or
her capacity as such.
(f) Such Stockholder understands and acknowledges that Acquiror is
entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement with Acquiror.
2. OPTION GRANTED TO ACQUIROR. (a) Each Stockholder, severally and not
jointly, hereby grants to Acquiror an irrevocable option to purchase all, but
not less than all, of such Stockholder's Shares at any time prior to the
termination of the Merger Agreement in accordance with its terms, on the terms
and subject to the conditions set forth herein (collectively, with respect to
all the Stockholder's Shares, the "Acquiror Option"), which Acquiror Option
shall attach to each Stockholder's Shares and be binding upon any person or
entity to which legal or beneficial ownership of such Shares shall pass, whether
by operation of law or otherwise, including without limitation such
Stockholder's heirs, guardians, administrators or successors or as a result of
any divorce.
(b) If Acquiror wishes to exercise the Acquiror Option, Acquiror shall
send a written notice to each Stockholder of its election to exercise the
Acquiror Option, any time prior to the Closing, which exercise shall be
subject to the fulfillment of the conditions specified in Section 2(e)
hereof. The place and date of the closing of the Acquiror Option ("Acquiror
Option Closing") shall be the same as the Closing, and the time of the
Acquiror Option Closing shall be immediately prior to the Closing.
(c) At the Acquiror Option Closing, each Stockholder shall deliver to
Acquiror all of such Stockholder's Shares by delivery of a certificate or
certificates evidencing such Shares, duly endorsed to Acquiror or
accompanied by stock powers duly executed
3
<PAGE> 4
in favor of Acquiror, with all necessary stock transfer stamps affixed
(provided that the cost of such transfer stamps is reimbursed by Acquiror).
(d) At the Acquiror Option Closing, Acquiror shall pay to the
Stockholders, by wire transfer in immediately available funds to the
account of such Stockholders specified in writing no more than one business
day prior to the Acquiror Option Closing, an amount equal to the product of
$7.00 and the number of Shares purchased pursuant to the exercise of the
Acquiror Option.
(e) Each of the following conditions must be satisfied at the time the
Acquiror Option is exercised and at the time of the Acquiror Option
Closing:
(i) no court, arbitrator or governmental body, agency or
official shall have issued any order, decree or ruling (which has not
been stayed or suspended pending appeal) and there shall not be any
effective statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the purchase and sale of the Shares
pursuant to the exercise of the Acquiror Option;
(ii) any waiting period applicable to the consummation of the
purchase and sale of the Shares pursuant to the exercise of the
Acquiror Option under the HSR Act shall have expired or been
terminated; and
(iii) all of the conditions set forth in Article VII of the Merger
Agreement shall have been satisfied or waived.
3. CERTAIN COVENANTS OF STOCKHOLDERS. Except in accordance with the
terms of this Agreement, each Stockholder hereby severally covenants and agrees
as follows:
3.1 NO SOLICITATION. Prior to the termination of the Merger Agreement
in accordance with its terms, no Stockholder shall, in its capacity as such,
directly or indirectly (including through advisors, agents or other
intermediaries), solicit (including by way of furnishing information) or respond
to any inquiries or the making of any proposal by any person or entity (other
than Acquiror, Newco or any affiliate thereof) with respect to the Company that
constitutes or could reasonably be expected to lead to an Acquisition Proposal
(as defined in Section 6.7 in the Merger Agreement), provided, however, that the
foregoing shall not restrict a Stockholder who is also a director of the Company
from taking actions in such Stockholder's capacity as a director to the extent
and in the circumstances permitted by Section 6.7 of the Merger Agreement. If
any Stockholder in its capacity as such receives any such inquiry or proposal,
then such Stockholder shall promptly inform Acquiror of the terms and
conditions, if any, of such inquiry or proposal and the identity of the person
making it. Each Stockholder, in its capacity as such, will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing.
4
<PAGE> 5
3.2 RESTRICTION ON TRANSFER, PROXIES AND NONINTERFERENCE; RESTRICTION
ON WITHDRAWAL. Prior to the termination of the Merger Agreement in accordance
with its terms, no Stockholder shall, directly or indirectly: (i) except
pursuant to the terms of the Merger Agreement and to Acquiror pursuant to this
Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, enforce or permit the execution of the provisions of any
redemption agreement with the Company or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, or exercise any discretionary powers to distribute, any or all
of such Stockholder's Shares or any interest therein, including any trust income
or principal, except in each case to a Permitted Transferee who is or agrees in
a writing executed by the Acquiror to become bound by this Agreement; (ii) grant
any proxies or powers of attorney with respect to any Shares, deposit any Shares
into a voting trust or enter into a voting agreement with respect to any Shares;
or (iii) take any action that would make any representation or warranty of such
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling such Stockholder from performing such Stockholder's
obligations under this Agreement. For purposes of the Agreement, "Permitted
Transferees" means, with respect to a Stockholder, any of the following persons:
(a) the spouse of such Stockholder, provided that at all relevant times of
determination such Stockholder is not separated or divorced from, or is not
involved in separation or divorce proceedings with, such spouse; (b) the issue
of such Stockholder; (c) any charitable foundation or similar organization
founded by such Stockholder; (d) a trust of which there are no principal
beneficiaries other than (i) such Stockholder, (ii) such Stockholder's spouse
(provided that at all relevant times of determination such Stockholder is not
separated or divorced from, or is not involved in separation or divorce
proceedings with, such spouse), (iii) the issue of such Stockholder, or (iv) any
charitable foundation or similar organization founded by such Stockholder; (e)
the legal representative of such Stockholder in the event such Stockholder
becomes mentally incompetent; and (f) the beneficiaries under (i) the will of
such Stockholder or the will of such Stockholder's spouse, or (ii) a trust
described in clause (d) above. Notwithstanding anything herein to the contrary,
Robert H. Deming and/or Beverly A. Deming may donate in the aggregate up to
200,000 Shares to the University of Colorado Foundation and/or the Robert H. and
Beverly A. Deming Foundation, tax exempt organizations.
3.3 WAIVER OF APPRAISAL AND DISSENTER'S RIGHTS. Each Stockholder
hereby waives any rights of appraisal or rights to dissent from the Merger that
such Stockholder may have. Each Trustee represents that no beneficiary who is a
beneficial owner of Shares under any trust has any right of appraisal or right
to dissent from the Merger which has not been so waived.
3.4 NO TERMINATION OR CLOSURE OF TRUSTS. Unless, in connection
therewith, the Shares held by any trust which are presently subject to the terms
of this Agreement are transferred upon termination to one or more Stockholders
and remain subject in all respects to the terms of this Agreement, or other
Permitted Transferees who upon receipt of such Shares become signatories to this
Agreement, the Stockholders who are Trustees shall not take any action to
terminate, close or liquidate any such trust and shall take all steps necessary
5
<PAGE> 6
to maintain the existence thereof at least until the termination of the Merger
Agreement in accordance with its terms.
4. FURTHER ASSURANCES. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
5. CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation such Stockholder's heirs, guardians, administrators or successors or
as a result of any divorce.
6. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Acquiror
that such Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of such Stockholder's Shares, unless such transfer is made in
compliance with this Agreement.
7. TERMINATION. In the event the Merger Agreement is terminated in
accordance with its terms, the obligations set forth in this Agreement shall
also terminate.
8. MISCELLANEOUS.
8.1 Entire Agreement; Assignment. This Agreement, together with the
Merger Agreement (and the Exhibits and Schedule thereto) and the Confidentiality
Agreement (i) constitute the entire agreement between the parties with respect
to the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise without the prior written consent of the other party.
8.2 AMENDMENTS. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto; provided that Schedule I may be supplemented by
Acquiror by adding the name and other relevant information concerning any
stockholder of the Company who is or agrees to be bound by the terms of this
Agreement without the agreement of any other party hereto, and thereafter such
added stockholder shall be treated as a "Stockholder" for all purposes of this
Agreement.
8.3 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given; as of the date of
delivery, if delivered personally; upon receipt of confirmation, if telecopied
or upon the next business day when delivered during normal business hours to an
overnight courier service, such as Federal Express, in each case to the parties
at the following addresses or at such other addresses as shall be
6
<PAGE> 7
specified by the parties by like notice; unless the sending party has knowledge
that such notice or other communication hereunder was not received by the
intended recipient:
If to the Stockholders:
Toastmaster Inc.
1801 North Stadium Boulevard
Columbia, Missouri 65202
Attention: Chairman
Telecopy: (573) 446-5646
with a copy to:
Stinson, Mag & Fizzell P.C.
1201 Walnut Street
Kansas City, Missouri 64106
Attention: John A. Granda
Telecopy: (816) 641-3495
If to Acquiror:
Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mount Prospect, Illinois 60056
Attn: Chairman
Telecopy: (847) 803-8080
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attn: Neal Aizenstein, Esq.
Telecopy: (312) 876-7934
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
8.4 GOVERNING LAW. The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of Missouri,
without giving effect to the principles of conflict of laws thereof.
8.5 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with
7
<PAGE> 8
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but both of which
shall constitute one and the same Agreement.
8.7 DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
8.8 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any party or set of circumstances shall, in any
jurisdiction and to any extent, be finally held invalid or unenforceable, such
term or provision shall only be ineffective as to such jurisdiction, and only to
the extent of such invalidity or unenforceability, without invalidating or
rendering unenforceable any other terms or provisions of this Agreement under
any other circumstances, and the parties shall negotiate in good faith a
substitute provision which comes as close as possible to the invalidated or
unenforceable term or provision, and which puts each party in a position as
nearly comparable as possible to the position it would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
8.9 DEFINITIONS; CONSTRUCTION. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting
of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all
other Persons with whom such Person would constitute a "group" as
described in Section 13(d)(3) of the Exchange Act.
(b) "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity.
(c) In the event of a stock dividend or distribution, or any
change in the Company Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the Shares may be changed
or exchanged. In addition, in the event of any change in the Company's
capital stock by reason of stock dividends, stock splits, mergers,
consolidations, recapitalizations, combinations, conversions, exchanges
of shares, extraordinary or liquidating dividends, or other changes in
the
8
<PAGE> 9
corporate or capital structure of the Company which would have the
effect of diluting or changing the Acquiror's rights hereunder, the
number and kind of shares or securities subject to the Option and the
purchase price per Share (but not the total purchase price) shall be
appropriately and equitably adjusted so that the Acquiror shall receive
upon exercise or the Acquiror Option the number and class of shares or
other securities or property that the Acquiror would have received in
respect of the Shares purchasable upon exercise of the Acquiror Option
if the Acquiror Option had been exercised immediately prior to such
event. Each Stockholder shall take such steps in connection with such
consolidation, merger, liquidation or other such action as may be
necessary to assure that the provisions hereof shall thereafter apply
as nearly as possible to any securities or property thereafter
deliverable upon exercise of the Acquiror Option.
8.10 STOCKHOLDER CAPACITY. Notwithstanding anything herein to the
contrary, no person executing this Agreement who is, or becomes during the term
hereof, a director of the Company makes any agreement or understanding herein in
his or her capacity as such director, and the agreements set forth herein shall
in no way restrict any director in the exercise of his or her fiduciary duties
as a director of the Company. Each Stockholder has executed this Agreement
solely in his or her capacity as the record or beneficial holder of such
Stockholder's Shares or as the trustee of a trust whose beneficiaries are the
beneficial owners of such Stockholder's Shares.
IN WITNESS WHEREOF, Acquiror and each Stockholder have caused this
Agreement to be duly executed as of the day and year first above written.
______________________________________ SALTON/MAXIM HOUSEWARES, INC.
John E. Thompson
______________________________________ By:_________________________________
Elaine A. Thompson
Name:_______________________________
______________________________________ Title:______________________________
Robert H. Deming
______________________________________
Beverly A. Deming
______________________________________
Daniel J. Stubler
9
<PAGE> 10
_________________________________________
Andrea F. Stubler
_________________________________________
Beverly A. Deming, as Trustee Under
Indenture 73180 for the benefit of
Stephen R.H. Deming, Robert S. G. Deming,
Douglas R. B. Deming and Bruce
R. J. Deming
_________________________________________
Beverly A. Deming, as Trustee Under
Agreement of Robert H. Deming dated
August 1, 1991 for the benefit of
Christine M. Deming, Nicole R. Deming,
Neil K. Deming, Charlene A. Deming,
Douglas H. Deming and Kaylyn M. Deming
10
<PAGE> 11
SCHEDULE I
Record Holder Number of Shares
- ------------- ----------------
John E. Thompson 664,985*
Elaine A. Thompson, as custodian for children 26,880
Robert H. Deming 127,684
Beverly A. Deming 345,445
Daniel J. Stubler 906,000
Andrea F. Stubler, as trustee for children 126,271
Beverly A. Deming, as Trustee Under 477,046
Indenture 73180 for the benefit of
Stephen R.H. Deming, Robert S. G.
Deming, Douglas R. B. Deming and
Bruce R. J. Deming
Beverly A. Deming, as Trustee Under 389,418
Agreement of Robert H. Deming dated
August 1, 1991 for the benefit of
Christine M. Deming, Nicole R. Deming,
Neil K. Deming, Charlene A. Deming,
Douglas H. Deming and Kaylyn M. Deming
- ----------------
* Includes 609,685 shares held in Mr. Thompson's recovable trust.
11
