SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report: August 19, 2002
(Date of earliest event reported)
REFAC
(Exact Name of Registrant as Specified in Charter)
Delaware 0-7704 13-1681234
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
115 River Road, Edgewater, New Jersey 07020
(Address of Principal Executive Offices)
(201) 943-4400
(Registrant's telephone number, including area code)
Item 5. Other events
On August 19, 2002, the registrant entered into an Agreement and
Plan of Merger with Palisade Concentrated Equity Partnership, L.P. and
Palisade Merger Corp. A copy of such agreement is filed herewith as Exhibit
10.1.
In connection with the signing of the Merger Agreement, the
registrant entered into an Amendment No.1 of the Rights Agreement with
American Stock Transfer and Trust Company. A copy of such amendment is
filed herewith as Exhibit 4.1 and is incorporated herein by reference.
In addition, the Company amended its employment agreements with
Robert L. Tuchman, President and Chief Executive Officer, and Raymond A.
Cardonne, Chief Financial Officer. Copies of such amendments are filed
herewith as Exhibits 10.2 and 10.3, respectively and are incorporated
herein by reference.
Attached hereto as Exhibit 99 is a press release issued by the
registrant regarding the merger.
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.
REFAC
Date: August 20, 2002 By: /s/ Robert L. Tuchman
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Robert L. Tuchman
Chief Executive Officer, President
and General Counsel
EXHIBITS
4.1 Amendment No.1 to the Rights Agreement, dated as of August 19,
2002, between Refac and American Stock Transfer & Trust Company,
incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A, dated August 20, 2002.
10.1 Agreement and Plan of Merger among Palisade Concentrated Equity
Partnership, L.P., Palisade Merger Corp. and Refac, dated as of
August 19, 2002.
10.2 Third Amended and Restated Employment Agreement among Refac and
Robert Tuchman, dated as of August 19, 2002.
10.3 First Amendment of the Employment Agreement among Refac and
Raymond A. Cardonne, dated as of August 19, 2002.
99. Press release issued on August 20, 2002 by Refac.
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
dated as of August 19, 2002
by and among
PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.
PALISADE MERGER CORP.
and
REFAC
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 19,
2002 (this "Agreement"), is made and entered into by and among Palisade
Concentrated Equity Partnership, L.P., a Delaware limited partnership
("Palisade"), Palisade Merger Corp., a Delaware corporation and a direct
wholly-owned subsidiary of Palisade ("Merger Sub"), and Refac, a Delaware
corporation (the "Company").
WHEREAS, the general partner of Palisade has determined
that it is in the best interests of Palisade to consummate, and has
approved, and the respective Boards of Directors of Merger Sub and the
Company have each determined that it is advisable and in the best interests
of their respective stockholders to consummate, and have approved, the
business combination transaction provided for herein in which Merger Sub
would merge with and into the Company (the "Merger"), with the Company
surviving;
WHEREAS, Palisade, Merger Sub and the Company desire to
make certain representations, warranties and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
The Merger
1.01 The Merger. At the Effective Time (as defined in Section
1.02), upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
(the "DGCL"), the Merger shall be effected, and Merger Sub shall be merged
with and into the Company. Following the Merger, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all of the rights and obligations of Merger Sub in accordance
with the DGCL. The separate corporate existence of the Company with all its
rights, privileges, powers, immunities and franchises shall continue
unaffected by the Merger. As a result of the Merger, the outstanding shares
of capital stock of the Company shall be converted or canceled in the
manner provided in Article II.
1.02 Effective Time. At the Closing (as defined in Section 1.03), a
certificate of merger (the "Certificate of Merger") shall be duly prepared
and executed by the Company and Merger Sub and thereafter delivered to the
Secretary of State of the State of Delaware (the "Secretary of State") for
filing, as provided in Section 251 of the DGCL, on the Closing Date (as
defined in Section 1.03). The Merger shall become effective at the time of
the filing of the Certificate of Merger with the Secretary of State (the
date and time being referred to herein as the "Effective Time").
1.03 Closing. The closing of the Merger (the "Closing") will take
place at the offices of Cadwalader, Wickersham & Taft, 100 Maiden Lane, New
York, NY 10038, or at such other place as the parties hereto mutually
agree, on a date and at a time to be specified by the parties, which shall
in no event be later than 10:00 a.m., local time, on the third business day
following satisfaction of the conditions set forth in Section 8.01,
provided that the other closing conditions set forth in Article VIII have
been satisfied or, if permissible, waived in accordance with this
Agreement, or on such other date as the parties hereto mutually agree (the
"Closing Date"). At the Closing there shall be delivered to Palisade,
Merger Sub and the Company the certificates and other documents and
instruments required to be delivered under Article VIII.
1.04 Effects of the Merger. Subject to the foregoing and the
provisions of Article III, the effects of the Merger shall be as provided
in the applicable provisions of the DGCL.
1.05 Further Assurances. Each party hereto will execute such
further documents and instruments and take such further actions as may
reasonably be requested by one or more of the others (a) to consummate the
Merger, (b) to continue the corporate existence of the Surviving
Corporation under the laws of the State of Delaware, (c) to vest the
Surviving Corporation with full title to all assets, properties, rights,
privileges, powers, approvals, immunities and franchises of either of the
Company and Merger Sub or (d) to effect the other purposes of this
Agreement.
ARTICLE II
Conversion of Shares
2.01 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Palisade, Merger Sub,
the Company or the holder of any of the following securities:
(a) Capital Stock of Merger Sub. Each issued and outstanding share
of the common stock, par value $.001 per share, of Merger Sub (the "Merger
Sub Common Stock") shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, par value $.001 per
share, of the Surviving Corporation (the "Surviving Corporation Stock").
(b) Cancellation of Treasury Stock and Stock Owned by the Company,
Palisade or Merger Sub. All shares of common stock, par value $.10 per
share, of the Company ("Company Common Stock") (together with the
associated Company Rights (as defined in Section 4.02), if any) that are
owned by Palisade, Merger Sub or any parent or subsidiary of Palisade, or
by the Company as treasury stock or by any wholly-owned Subsidiary (as
defined in Section 4.01) of the Company (collectively, the "Cancelled
Shares"), shall be canceled and retired and shall cease to exist and no
cash, stock of the Surviving Corporation or other consideration shall be
delivered in exchange therefor.
(c) Merger Consideration. Each share of Company Common Stock
(other than the Cancelled Shares) issued and outstanding immediately prior
to the Effective Time shall be converted into the right to receive the
following:
(i) An amount equal to $3.60 in cash without any interest
thereon (plus any cash in lieu of fractional shares as described
in Section 2.02(e))(the "Cash Consideration"); and
(ii) 0.2 shares of Surviving Corporation Stock, subject
to cash in lieu of fractional shares of the Surviving Corporation
Stock, if any, pursuant to Section 2.02(e)(the "Stock
Consideration," and together with the Cash Consideration, the
"Merger Consideration"), and each such one whole share of
Surviving Corporation Stock shall be validly issued, fully paid
and nonassesable and shall entitle the holder thereof to a Payment
Right described in Section 2.01(d) of this Agreement.
All of the shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist as
of the Effective Time, 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, upon the surrender of such
certificate in accordance with Section 2.02, without interest.
(d) Payment Right. Each holder of the shares of Surviving
Corporation Stock issued pursuant to Section 2.01(c)(ii) shall be entitled
to receive in exchange for each such one whole share $5.50 (subject to
Sections 2.01(d)(i) and (ii), below)(the "Payment Right"), if such holder
(or such holder's estate or heirs, or any other Person (as defined in
Section 4.01) to whom such holder transfers such shares without value)
tenders such shares of Surviving Corporation Stock to the Surviving
Corporation as provided in Section 2.01(f), provided that such holder (or
such holder's estate or heirs, or any other Person to whom such holder
transfers such shares without value) continues to beneficially own such
shares of Surviving Corporation Stock obtained pursuant to Section
2.01(c)(ii) during the entire period between the Closing Date and June 30,
2005, and provided further that:
(i) If the Surviving Corporation has not realized Liquid
Distributable Assets (as defined below) of at least $14 million by
March 31, 2003, then the Payment Right shall be equal to (A) $5.50
minus (B) an amount equal to the product of (x) the difference
between $14 million and the actual amount of Liquid Distributable
Assets realized and (y) 1.25, divided by (z) the sum of (1)
697,062 and (2) twenty percent of the number of shares of Company
Common Stock issued between the date of this Agreement and the
Closing Date pursuant to the exercise of Company Options (as
defined in Section 2.01(h)).
(ii) In addition to (i) above, if the Surviving
Corporation has not realized Liquid Distributable Assets of at
least $18 million by June 30, 2005, then the Payment Right shall
be equal to (A) the lesser of $5.50 and the Payment Right
calculated pursuant to 2.01(d)(i) above, minus (B) an amount equal
to the June 30, 2005 Deficiency divided by the sum of (1) 697,062
and (2) twenty percent of the number of shares of Company Common
Stock issued between the date of this Agreement and the Closing
Date pursuant to the exercise of Company Options. For purposes of
this Section 2.01(d)(ii), "June 30, 2005 Deficiency" shall mean
the difference between $18 million and the sum of (x) the actual
amount of Liquid Distributable Assets realized by June 30, 2005
and (y) the shortfall, if any, between $14 million and the amount
of Liquid Distributable Assets realized by March 31, 2003.
For purposes of this Section 2.01(d), "Liquid
Distributable Assets" shall mean an amount of assets generated through (A)
the sale of the Surviving Corporation's business segments and assets
existing as of the Closing Date, Receivables (as defined below) and tax
refunds collected after the Closing Date for taxes paid prior to the
Closing Date plus the value of Tax Attributes (as defined below), plus (B)
the Company's cash and cash equivalents as of the Closing Date, plus (C)
interest earned or imputed on the items set forth in clauses (A) and (B),
calculated net of (w) taxes paid, (x) actual operating expenses and
liabilities incurred through March 31, 2003 or June 30, 2005, as
applicable, (y) any incentive paid or payable to Robert Tuchman and/or Ray
Cardonne with respect to the periods from the Closing Date through March
31, 2003, or June 30, 2005, as applicable, net of related tax benefits, and
(z) any reserve necessary to cover future costs of completing the sale of
business segments and assets of the Surviving Corporation (in calculating
such reserves, future expectancies of additional Liquid Distributable
Assets shall be taken into account). Notwithstanding the foregoing, Liquid
Distributable Assets shall be calculated (1) as if the payment of fees and
expenses pursuant to Section 9.03(b) had not occurred and (2) without
including any proceeds resulting from exercise of Company Options pursuant
to Section 2.01(h).
For purposes of this Agreement, the terms:
(I) "Tax Attribute" shall mean, (1) as of March 31, 2003,
any item of loss, deduction, expense, credit or other tax
attribute held by the Surviving Corporation or its Subsidiaries
immediately after March 31, 2003 that is available to offset
taxable income of the Company (or, after the Effective Time, the
Surviving Corporation) or its Subsidiaries attributable to any
taxable period (whether such taxable period begins before, on or
after the Closing Date), to the extent such tax attribute has not
been used to obtain a tax refund described in Section 2.01(d)(A)
above; and (2) as of June 30, 2005, any item of loss, deduction,
expense, credit or other tax attribute held by the Surviving
Corporation or its Subsidiaries immediately after March 31, 2003
that is actually used (or can be used, upon filing of a tax return
for any taxable period ending before, on, or which includes June
30, 2005) to offset taxable income of the Company (or, after the
Effective Time, the Surviving Corporation) or its Subsidiaries
attributable to any taxable period ending on or before June 30,
2005, or, in the case of a taxable period that includes June 30,
2005, the portion of such taxable period that ends on June 30,
2005, to the extent such tax attribute has not been used to obtain
a tax refund described in Section 2.01(d)(A) above. With respect
to any taxable period that includes but does not end on June 30,
2005, the amount of taxable income attributable to such taxable
period that may be offset by Tax Attributes shall be the amount of
taxable income which would be offset if the relevant taxable
period had ended on June 30, 2005. For purposes of this Agreement,
the amount of any Tax Attribute held by the Surviving Corporation
and its Subsidiaries immediately after March 31, 2003 shall be
determined as if the taxable period of the Surviving Corporation
and its Subsidiaries that includes March 31, 2003 ended on March
31, 2003.
(II) "Receivables" shall mean (1) as of March 31, 2003,
the collection of revenue streams existing as of the Closing Date
and the collection, maturity or conversion of the Surviving
Corporation's assets existing as of the Closing Date (including,
but not limited to, note payments and accounts receivable), and
(2) as of June 30, 2005, the amounts actually collected pursuant
to clause (1) by the Surviving Corporation through such date.
The Surviving Corporation shall determine the amounts of
Liquid Distributable Assets, which shall include the amount of Liquid
Distributable Assets available on the Closing Date, through March 31, 2003,
and thereafter through June 30, 2005, as applicable. From and after the
Closing Date, Palisade shall cause the Surviving Corporation to, and the
Surviving Corporation shall, maintain a separate accounting with respect to
the Liquid Distributable Assets, and the costs related thereto shall be
excluded in determining the amount of Liquid Distributable Assets. To the
extent the Surviving Corporation incurs any indebtedness, pays any interest
with respect to such indebtedness, acquires any assets, incurs any expenses
or takes any other action not directly related to efforts to monetize the
Company's assets, or to operate the Company's business, in each case as of
the Closing Date, any such indebtedness, interest, expenses or other action
shall be excluded under such accounting in determining the amount of Liquid
Distributable Assets and Tax Attributes.
(e) Contingent Fund. From and after the date on which the Liquid
Distributable Assets (excluding uncollected Receivables and unused Tax
Attributes) exceed $14 million, the Surviving Corporation shall, and
Palisade shall cause the Surviving Corporation to, at all times maintain a
fund (the "Contingent Fund") comprised of such portion of the Liquid
Distributable Assets (collected subsequent and in addition to the $14
million specified in the immediately preceding clause) necessary to make
the payments to all Persons entitled thereto pursuant to Section 2.01(d);
provided that from time to time the Surviving Corporation may withdraw
assets from the Contingent Fund to the extent the Surviving Corporation
determines, based upon the books and records of its transfer agent, that,
due to the transfer for value of shares of Surviving Corporation Stock
issued pursuant to Section 2.01(c)(ii), the assets in the Contingent Fund,
in the aggregate, exceed the aggregate amount payable pursuant to Section
2.01(d). In the event the cash in the Contingent Fund shall be insufficient
to make the payments to all Persons entitled thereto pursuant to Section
2.01(d), funds of the Surviving Corporation shall be used to make such
remaining payments. If there is an acquisition, merger, recapitalization,
dissolution or any similar transaction involving the Surviving Corporation
before all such payments are made, Palisade shall take such action as may
be required to ensure that such payments be paid when due to all Persons
entitled thereto, which action may include, without limitation, setting
aside funds or requiring the acquiring company to assume in writing the
obligations pursuant to Section 2.01(d).
(f) Payment of the Payment Amount.
(i) On or before July 15, 2005, the Surviving Corporation
shall calculate the fair market value of the Liquid Distributable
Assets and provide written notice of such calculation, along with
all material supporting documentation related to such calculation,
to the Board Observers (as defined in Section 3.04(a)). The
Surviving Corporation shall permit the Board Observers (or their
advisors) full access to the books and records of the Surviving
Corporation for the purpose of verifying the calculation of Liquid
Distributable Assets.
(ii) If, using the Surviving Corporation's calculation of
Liquid Distributable Assets pursuant to paragraph (i) above, the
Payment Right per share is less than $5.50, the Board Observers
shall promptly review such calculation and, if either Board
Observer disagrees with such calculation, such Board Observer
shall provide written notice of such disagreement to the Surviving
Corporation on or before August 5, 2005. Upon receiving such
notice, the Surviving Corporation and the Board Observers shall in
good faith work together to resolve such disagreement by August
31, 2005.
(iii) If the Surviving Corporation and the Board
Observers are unable to agree upon the fair market value of the
Liquid Distributable Assets by August 31, 2005, the Surviving
Corporation shall promptly select an independent
nationally-recognized accounting firm or financial advisors
reasonably acceptable to the Board Observers to determine such
fair market value; provided that such accounting firm or financial
advisors shall not, at any time following August 31, 2000, have
directly or indirectly been retained by, performed any services
for, or otherwise had any relationship with Palisade or the
Surviving Corporation or any affiliate, associate or Subsidiary of
either of them. Such independent accounting firm or financial
advisor shall complete its calculation of the fair market value of
the Liquid Distributable Assets on or before October 15, 2005.
Such calculation shall be binding upon Palisade, the Surviving
Corporation and the Board Observers and shall not be subject to
appeal to any Governmental or Regulatory Authority (as defined in
Section 4.04(a)), absent fraud or manifest error.
(iv) As soon as possible, but no later than 10 business
days, following the determination of the fair market value of the
Liquid Distributable Assets pursuant to paragraphs (i)-(iii)
above, the Surviving Corporation shall, and Palisade shall cause
the Surviving Corporation to, mail to each holder of Surviving
Corporation Stock who is entitled to receive the Payment Right
pursuant to Section 2.01(d): (A) a letter of transmittal (which
shall be in such form and have such other provisions not
inconsistent with this Agreement as the Surviving Corporation and
the Board Observers may reasonably specify) and (B) instructions
for use in exchanging such shares of Surviving Corporation Stock
for the amount of the Payment Right, specifying that the Payment
Right amount shall be paid only with respect to any such shares of
Surviving Corporation Stock exchanged on or before the ninetieth
day following the date on which such instructions were first
mailed to such holders. Upon the tendering for exchange to the
Surviving Corporation of such shares of Surviving Corporation
Stock on or before such ninetieth day and such other documents as
may reasonably be required, together with such letter of
transmittal, duly executed, the holder of such shares shall be
entitled to receive a check representing an amount equal to the
Payment Amount multiplied by the number of shares of Surviving
Corporation Stock tendered by such holder to the Surviving
Corporation. The holder of any shares of Surviving Corporation
Stock entitled to receive the Payment Right pursuant to Section
2.01(d) who does not tender such shares for exchange to the
Surviving Corporation prior to such ninetieth day in accordance
with this Section 2.01(f) shall not be entitled to receive any
Payment Right amounts with respect to such shares, and to the
extent any such shares are tendered to the Surviving Corporation
following such ninetieth day, the Surviving Corporation shall
promptly return such shares to the holder.
(g) Dissenting Shares.
(i) Notwithstanding any provision of this Agreement to
the contrary, each outstanding share of Company Common Stock the
holder of which (x) has not voted in favor of the Merger, (y) has
perfected such holder's right to an appraisal of such holder's
shares in accordance with the applicable provisions of the DGCL
and (z) has not effectively withdrawn or lost such right to
appraisal (a "Dissenting Share"), shall not be converted into or
represent a right to receive the Merger Consideration pursuant to
Section 2.01(c), but the holder thereof shall be entitled only to
such rights as are granted by the applicable provisions of the
DGCL; provided, however, that any Dissenting Share held by a
Person at the Effective Time who shall, after the Effective Time,
withdraw the demand for appraisal or lose the right of appraisal,
in either case pursuant to the DGCL, shall be deemed to be
converted into, as of the Effective Time, the right to receive the
Merger Consideration pursuant to Section 2.01(c).
(ii) The Company shall give Palisade and Merger Sub (x)
prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other instruments served pursuant to
the applicable provisions of the DGCL relating to the appraisal
process received by the Company and (y) the opportunity to direct
all negotiations and proceedings with respect to demands for
appraisal under the DGCL. Except with the prior written consent of
Palisade, the Company will not voluntarily (A) make any payment
with respect to any demands for appraisal or (B) settle or offer
to settle any such demands.
(h) Company Options. Each option to purchase Company Common Stock
outstanding immediately prior to the Effective Time (the "Company Option")
granted (1) pursuant to the Company's 1998 Stock Incentive Plan or 1990
Stock Option and Incentive Plan (the "Company Option Plans"), or (2) to
Karl D. Kirk, Paul J. Mulhauser, David Schiff and John Moldauer pursuant to
stock option agreements dated November 25, 1997 in connection with the
Company's acquisition of an industrial design business, whether or not then
exercisable, shall continue to have, and be subject to, except as set forth
below, the same terms and conditions set forth in the applicable Company
Option Plan and award agreement evidencing such option in effect
immediately prior to the Effective Time. Upon the exercise of any Company
Option, the holder of such Company Option shall be entitled to receive from
Palisade, with respect to each share of Company Common Stock that would
have been issued upon such exercise prior to the Effective Time the
following: (i) if the Company Option is exercised on or prior to June 30,
2005, the Merger Consideration pursuant to Section 2.01(c) hereof or (ii)
if the Company Option is exercised after June 30, 2005, $3.60 in cash and
0.2 shares of Surviving Corporation Stock, subject to Section 2.02(e).
Notwithstanding the foregoing, adjustments with respect to any Company
Options that are "incentive stock options" as defined in Section 422 of the
Code shall be effected in a manner that is consistent with Section 424(a)
of the Code and that is most similar to the foregoing treatment of the
other Company Options so as to preserve the benefits of such "incentive
stock options."
2.02 Exchange of Certificates.
(a) Exchange Agent. Palisade shall designate a federally insured
bank or trust company reasonably satisfactory to the Company to act as
agent (the "Exchange Agent") for the holders of shares of the Company
Common Stock ("Shares") in connection with the Merger to receive in trust
the funds to which holders of the Shares shall become entitled pursuant to
Section 2.01(c). At the Effective Time, Palisade or Merger Sub shall
deposit, or cause to be deposited, with the Exchange Agent for the benefit
of holders of Shares the aggregate consideration to which such holders
shall be entitled at the Effective Time pursuant to Section 2.01(c),
including certificates representing shares of Surviving Corporation Stock
issuable pursuant to Section 2.01(c)(ii) and cash in lieu of fractional
shares of the Surviving Corporation Stock pursuant to Section 2.02(e)(the
"Exchange Fund"). The Exchange Fund shall be invested as directed by
Palisade or the Surviving Corporation pending payment thereof by the
Exchange Agent to holders of the Shares, subject to Section 2.02(h) of this
Agreement.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, Palisade shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates, which immediately prior
to the Effective Time represented issued and outstanding Shares (the
"Certificates"), whose Shares were converted pursuant to Section 2.01 into
the right to receive the Merger Consideration, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions not inconsistent with this Agreement as Palisade and the
Company may reasonably specify), (ii) instructions for use in surrendering
the Certificates in exchange for payment of the Merger Consideration and
(iii) a form on which such holder shall specify its address to be used by
the Surviving Corporation in connection with the payment of the Payment
Amount pursuant to Section 2.01(f). Upon surrender of a Certificate for
cancellation to the Exchange Agent and such other documents, as may
reasonably be required by the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) a certificate representing the
number of whole shares of Surviving Corporation Stock (which shall be in
certificated form unless uncertificated book-entry form is requested)
representing the Stock Consideration to which such holder shall be
entitled, (B) a check representing the amount of the Cash Consideration to
which such holder shall be entitled and (C) a check representing the amount
of cash in lieu of fractional shares of Surviving Corporation Stock, if
any, plus the amount of any dividends (other than stock dividends) and
other distributions, if any, pursuant to Section 2.02(c), and, in the case
of (B) and (C), after giving effect to any required withholding tax, and
the Certificate so surrendered shall forthwith be cancelled. No interest
will be paid or will accrue on any cash payable pursuant to this Section
2.02(b). If payment of the Merger Consideration is to be made to a Person
other than the Person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form
for transfer and that the Person requesting such payment shall have paid
any transfer and other taxes required by reason of the payment of the
Merger Consideration to a Person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration as
contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made with respect to shares of Surviving
Corporation Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares
of Surviving Corporation Stock that such holder would be entitled to
receive upon surrender of such Certificate until such holder shall
surrender such Certificate in accordance with Section 2.02(b). Subject to
the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to such holder of shares of Surviving Corporation Stock
issuable in exchange therefor, without interest, promptly after the time of
such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Surviving Corporation Stock, and (b) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Effective Time but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such shares of
Surviving Corporation Stock.
(d) No Further Rights. At and after the Effective Time, each
holder of a Certificate or Certificates that represented issued and
outstanding Shares immediately prior to the Effective Time shall cease to
have any rights as a shareholder of the Company, except for the right to
receive the Merger Consideration (without interest thereupon) upon
surrender of its Certificate or Certificates or the rights granted by the
applicable provisions of the DGCL as contemplated by Section 2.01(g). All
Merger Consideration given or paid for the surrender of Certificates in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Shares represented thereby.
At the Effective Time, the stock transfer books of the Company shall be
closed, and there shall be no further registration or transfer of any
Shares that were issued and outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to Palisade,
the Surviving Corporation or the Exchange Agent for any reason, they shall
be canceled and exchanged as provided herein.
(e) No Fractional Shares of Surviving Corporation Stock.
(i) No certificates or scrip or shares of Surviving
Corporation Stock representing fractional shares of Surviving
Corporation Stock or book-entry credit of the same shall be issued
upon the surrender for exchange of Certificates and such
fractional share interests will not entitle the owner thereof to
vote or to have any rights of a stockholder of the Surviving
Corporation or a holder of shares of the Surviving Corporation
Stock.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of the Company Common Stock
exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of the Surviving
Corporation Stock (after taking into account all Certificates
delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to the product of (i) such
fractional part of a share of Surviving Corporation Stock
multiplied by (ii) $4.70.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of the Shares (including interest
thereon) six months after the date of the mailing required by Section
2.02(b) shall be delivered to the Surviving Corporation, upon demand
thereby, and holders of Certificates previously representing the Shares who
have not theretofore complied with this Section 2.02 shall thereafter look
only to the Surviving Corporation or Palisade for payment of any claim to
the Merger Consideration.
(g) No Liability. None of Palisade, the Surviving Corporation or
the Exchange Agent shall be liable to any Person in respect of any Shares
or cash from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to the date on which any
cash or any dividends or distributions with respect to Shares represented
by such Certificates would otherwise escheat to or become the property of
any Governmental or Regulatory Authority (as defined in Section 4.04(a)),
any such cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable Laws (as defined in Section
4.04(a)), become the property of the Surviving Corporation, free and clear
of all claims or interest of any Person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund in United States government
securities with a maturity period of 30 days or less or in certificates of
deposit issued by any United States bank with at least $5 billion in
assets, as directed by Palisade, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Palisade upon
termination of the Exchange Fund pursuant to Section 2.02(d). In the event
the cash in the Exchange Fund shall be insufficient to fully satisfy all of
the payment obligations to be made by the Exchange Agent thereunder, then
Palisade shall promptly deposit cash into the Exchange Fund in an amount
which is equal to the deficiency in the amount of cash required to fully
satisfy such payment obligations.
(i) Withholding Rights. Each of the Surviving Corporation and
Palisade shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as it is required to deduct and withhold with respect to the making
of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations promulgated thereunder, or any
provision of state, local or foreign tax law. To the extent that amounts
are so withheld by the Surviving Corporation or Palisade, as the case may
be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Shares in respect of which
such deduction and withholding was made by the Surviving Corporation or
Palisade, as the case may be.
2.03 Adjustments. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding Shares
shall occur by reason of any reclassification, recapitalization, stock
split or combination, exchange or similar readjustment of Shares, or stock
dividend thereon with a record date during such period, the Merger
Consideration and any other amounts payable pursuant to this Agreement
shall be appropriately adjusted.
2.04 Lost Certificates. If any Certificate 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 Palisade or the Surviving Corporation, the posting by such
Person of a bond, in such reasonable amount as Palisade or 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,
in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration to be paid in respect of the Shares represented by such
Certificate, as contemplated by this Article.
ARTICLE III
Certain Governance Matters
3.01 Certificate of Incorporation of the Surviving Corporation.
Except for Article I, which shall be amended to read "The name of the
Corporation is REFAC (the "Corporation").", the certificate of
incorporation of Merger Sub in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law. A copy of the certificate of incorporation
of Merger Sub is attached to this Agreement as Exhibit 3.01.
3.02 Bylaws of the Surviving Corporation. The bylaws of Merger Sub
in effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law. A copy of the
by-laws of Merger Sub is attached to this Agreement as Exhibit 3.02.
3.03 Board of Directors of the Surviving Corporation. From and
after the Effective Time, the directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation,
until their resignation or removal or until their respective successors are
duly elected and qualified. The Company shall, and shall cause each of its
Subsidiaries to, procure, prior to the Closing Date, the resignation of
each of its directors (or other individuals acting in a similar capacity),
effective as of the Effective Time.
3.04 Board Observers.
(a) Prior to Closing, the Company shall have the right to
designate in a non-voting observer capacity two representatives ("Board
Observers") to attend and observe all meetings of the Surviving
Corporation's board of directors, and such Board Observers shall be
entitled to receive notices of and to attend meetings of the Surviving
Corporation's board of directors, concurrently with the members of the
Surviving Corporation's board of directors, and in the same manner. Until
the amount of the Payment Right is determined, Palisade shall cause there
to be at all times two Board Observers; in the event either Board Observer
shall be unable or unwilling to serve, his successor shall be chosen by the
remaining Board Observer. Such Board Observers agree to be bound by the
Confidentiality Agreement (as defined in Section 7.01); provided, however,
that the Surviving Corporation may exclude such Board Observers from access
to any material or meeting or portions thereof if the Surviving Corporation
reasonably believes that such exclusion is necessary to preserve
attorney-client privilege. The Surviving Corporation shall pay the Board
Observers $1,000 for each meeting of the Surviving Corporation's board of
directors attended by the Board Observers and reimburse the Board Observers
for reasonable expenses incurred in connection with such meeting.
(b) From and after the Effective Time, the Company shall
indemnify, defend and hold harmless each Board Observer against all losses,
claims, damages, costs, expenses (including attorneys' fees and expenses),
liabilities or judgments, fines or amounts that are paid in settlement in
connection with any pending, threatened or actual claim, action, suit,
proceeding or investigation based in whole or in part or arising in whole
or part out of the fact that such person is or was a Board Observer to the
same extent directors of the Company are permitted to be indemnified on the
date hereof pursuant to applicable law and the Company's Certificate of
Incorporation and By-Laws. Upon the appointment of any Board Observer, the
Surviving Corporation shall reasonably promptly enter into an
indemnification agreement with such Board Observer. The Surviving
Corporation shall purchase indemnification insurance for such Board
Observer if such insurance is available for a nominal fee (not exceeding
$7,500 in the aggregate for both Board Observers).
3.05 Officers of the Surviving Corporation. From and after the
Effective Time, the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until
their resignation or removal or until their respective successors are duly
elected and qualified.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to Palisade and Merger Sub as
follows:
4.01 Organization and Qualification. Each of the Company and its
material Subsidiaries (as defined below) is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has full power and authority to conduct its business as
and to the extent now conducted in all material respects and to own, use
and lease its material assets and properties. Each of the Company and its
material Subsidiaries is in all material respects duly qualified, licensed
or admitted to do business and is in good standing in each jurisdiction in
which the ownership, use or leasing of its assets and properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary. Schedule 4.01 sets forth the name and jurisdiction of
incorporation or organization of each Subsidiary of the Company and the
ownership or other interest of the Company and each of its other
Subsidiaries therein and, if not wholly-owned, directly or indirectly, by
the Company, the other equity holders of such Subsidiaries and their
ownership or other interest therein. The Company has heretofore delivered
to Merger Sub true and complete copies of the certificates or articles of
incorporation, certificates of limited partnership or certificates of
formation and by-laws, partnership agreements or operating agreements, or
any other comparable organizational documents, each as amended to date, of
the Company and any of its material Subsidiaries (collectively,
"Organization Documents"). The Organization Documents are in full force and
effect. Except as disclosed in Schedule 4.01, the Company does not directly
or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any Person. As used in this Agreement, any reference to any
event, change or effect being "material" or "materially adverse" or having
a "material adverse effect" on or with respect to an entity (or group of
entities taken as a whole) means such event, change or effect is material
or materially adverse, as the case may be, to the aggregate business,
condition (financial or otherwise), properties, assets (including
intangible assets), liabilities (including contingent liabilities) and
results of operations of such entity or the ability of such entity to
consummate the transactions contemplated by this Agreement (or, if with
respect thereto, of such group of entities taken as a whole). As used in
this Agreement, "Subsidiary" means, with respect to any Person, whether
incorporated or unincorporated, of which at least fifty percent (50%) of
either the equity interests in, or the voting control of, such Person (or a
general partner or managing member of such Person) is, directly or
indirectly through Subsidiaries or otherwise, beneficially owned by such
party. As used in this Agreement, "Person" means any individual,
corporation, partnership, company, limited liability company, joint
venture, association, trust, unincorporated organization or other entity or
other business association or other entity.
4.02 Capital Stock.
(a) The authorized capital stock of the Company consists solely of
(x) 20,000,000 shares of Company Common Stock, par value $.10 per share and
(y) 100,000 shares designated as Serial Preferred Stock, par value $5 per
share and 5,000 shares designated as 6% Preferred Stock, par value $100 per
share (together, the "Company Preferred Stock"). As of August 16, 2002, (i)
3,796,511 shares of Company Common Stock were issued and outstanding, (ii)
1,655,626 shares of Company Common Stock were held in the treasury of the
Company and (iii) 350,000 shares of Company Common Stock were issuable upon
exercise of outstanding options to purchase shares of Company Common Stock.
No shares of Company Preferred Stock are issued and outstanding, and 10,000
shares are designated as Series A Preferred Stock ("Company Series A
Preferred Stock") and are reserved for issuance in accordance with the
Rights Agreement dated as of April 30, 2002, between the Company and
American Stock Transfer & Trust Company, as Rights Agent (the "Company
Rights Agreement"), pursuant to which the Company has issued rights (the
"Company Rights") to purchase shares of Company Series A Preferred Stock.
All of the issued and outstanding shares of Company Common Stock are, and
all shares reserved for issuance will be, upon issuance in accordance with
the terms specified in the instruments or agreements pursuant to which they
are issuable, duly authorized, validly issued, fully paid and
nonassessable. Other than Company Options, there are no outstanding
subscriptions, options, warrants, rights (including phantom stock or stock
appreciation rights), calls, preemptive rights or other agreements,
contracts, commitments, understandings or arrangements, including any right
of conversion or exchange under any outstanding security, instrument or
agreement, obligating the Company or any of its Subsidiaries to issue or
sell any shares of capital stock of the Company or any of its Subsidiaries
(collectively, referred to as "Company Awards") or to grant, extend or
enter into any Company Awards with respect thereto or of any other
character to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound relating to issued or
unissued capital stock of the Company or any of its Subsidiaries. Schedule
4.02 sets forth (i) each plan, arrangement or agreement pursuant to which
Company Options may be granted or under which Company Options have been
granted and are outstanding, (ii) the name of each holder of a Company
Option, the number of shares of Common Stock subject to such Company
Option, the grant date, exercise price and vesting information, and (iii) a
listing of all Company Options which shall vest at the Effective Time of
the Merger.
(b) Except as disclosed in Schedule 4.02, all of the outstanding
shares of capital stock or other equity interests of each Subsidiary of the
Company are duly authorized, validly issued, fully paid and nonassessable
and are owned, beneficially and of record, by the Company (or a Subsidiary
which is wholly owned, directly or indirectly, by the Company) and are free
and clear of any liens, claims, mortgages, encumbrances, pledges, security
interests, options, agreements, rights of first refusal, equities and
charges of any kind, including any restriction on the right to vote, sell
or otherwise dispose of shares (each a "Lien"). Except as disclosed in
Schedule 4.02, there are no (i) outstanding Company Options obligating the
Company or any of its Subsidiaries to issue or sell any shares of capital
stock or other equity interests of any Subsidiary of the Company or to
grant, extend or enter into any such Company Option or (ii) voting trusts,
proxies or other commitments, understandings, restrictions or arrangements
in favor of any Person other than the Company or a Subsidiary wholly owned,
directly or indirectly, by the Company with respect to the voting of or the
right to participate in dividends or other earnings on any capital stock or
other equity interests of any Subsidiary of the Company.
(c) There are, and at the Effective Time there will be, no
outstanding contractual obligations of the Company or any Subsidiary of the
Company to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any capital stock or other equity interests of any
Subsidiary of the Company or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any
Subsidiary of the Company or any other Person.
(d) No bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into or exercisable for securities having the
right to vote) on any matters on which shareholders of the Company or any
of its Subsidiaries may vote are issued or outstanding.
4.03 Authority Relative to this Agreement. The Company has full
corporate power and authority to enter into this Agreement and, subject to
obtaining the Company Stockholders' Approval (as defined in Section 4.22),
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The Board of Directors of the Company has (i)
unanimously approved and adopted the plan of merger set forth in this
Agreement and duly and validly approved the execution, delivery,
consummation and performance of this Agreement and the other transactions
contemplated by this Agreement, subject (in the case of the consummation of
the Merger) to the Company's Stockholders' Approval, (ii) declared that the
Merger and this Agreement and the other transactions contemplated by this
Agreement are advisable to the Company and its stockholders and (iii)
resolved to recommend approval and adoption of this Agreement by the
Company's stockholders; provided that any withdrawal or modification of the
Board of Directors' approval or recommendation of the Merger or this
Agreement permitted by Section 6.02 shall not constitute a breach of this
representation. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Palisade and Merger Sub, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Company
does not, and the performance by the Company of its obligations hereunder
and the consummation of the transactions contemplated hereby will not
conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in or give
to any Person any right of payment or reimbursement, purchase, first offer,
first refusal, termination, cancellation, modification or acceleration of,
or result in the creation or imposition of any Lien upon any of the assets
or properties of the Company or any of its Subsidiaries under any of the
terms, conditions or provisions of (i) any Organization Document, or (ii)
subject to the obtaining of the Company Stockholders' Approval and the
taking of the actions described in Section 4.04(b), (x) any statute, law,
rule, regulation or ordinance (collectively referred to as "Laws"), or any
judgment, decree, order, writ, permit or license (collectively referred to
as "Orders"), including any Company Permit (as defined in Section 4.10), of
any court, tribunal, arbitrator, authority, agency, commission, official or
other instrumentality or self-regulated entity of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision (each, a "Governmental or Regulatory Authority"),
applicable to the Company or any of its Subsidiaries or any of their
respective assets or properties, or (y) assuming the consents set forth in
Schedule 4.04(a) are obtained, any note, bond, mortgage, security
agreement, indenture, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind
(collectively referred to as "Obligations") to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults under, rights of any Person for payment or
reimbursement, purchases, first offers, first refusals, terminations,
cancellations, modifications, accelerations and creations and impositions
of Liens which, individually or in the aggregate, are not having and would
not be reasonably expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of the Proxy Statement (as defined
in Section 4.09) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act") and (ii) for the filing of
the Certificate of Merger and other appropriate merger documents required
by the DGCL with the Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company and its
Subsidiaries are qualified to do business, no consent, approval,
authorization, permit or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party
is necessary or required under any of the terms, conditions or provisions
of any Law or Order of any Governmental or Regulatory Authority or any
Obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound for the execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder or the consummation of the transactions contemplated hereby,
other than such consents, approvals, actions, filings and notices which the
failure to make or obtain, as the case may be, individually or in the
aggregate, are not having and would not be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
4.05 Company SEC Reports and Financial Statements. Each form,
report, schedule, registration statement, definitive proxy statement and
other document (together with all amendments thereof and supplements
thereto) required to be filed by the Company or any of its Subsidiaries
with the SEC (as such documents have since the time of their filing been
amended or supplemented prior to the date hereof, the "Company SEC
Reports") has been filed. The Company SEC Reports (i) complied as to form
in all material respects with the requirements of the Securities Act of
1933, as amended, and the rules and regulations thereunder (the "Securities
Act"), or the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
interim consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto and
except with respect to unaudited statements as permitted by Form 10-Q of
the SEC) and fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments) the
consolidated financial position of the Company and its consolidated
subsidiaries as at the respective dates thereof and the consolidated
results of their operations and cash flows for the respective periods then
ended. Each Subsidiary of the Company is treated as a consolidated
subsidiary of the Company in the Company Financial Statements for all
periods covered thereby.
4.06 Absence of Certain Changes or Events. Except as set forth in
Schedule 4.06, since June 30, 2002, (i) there have not been any changes,
events or developments having, or that would be reasonably expected to
have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries taken as a whole, (ii) none of the actions,
events or circumstances listed in Section 6.01 have been taken or occurred
or exist, and (iii) the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past
practice, except that, in each case of (i), (ii) and (iii) above, the
Company is in the process of attempting to monetize its existing assets
(through a sale or liquidation of the business or assets of the Company or
the capital stock or other equity interests of the Company's Subsidiaries
or otherwise (such efforts, the "Liquidation"), and will continue such
efforts.
4.07 Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet as of June 30, 2002,
included in the Company Financial Statements or as disclosed in Schedule
4.07, neither the Company nor any of its Subsidiaries has any liabilities
or obligations (whether absolute, accrued, contingent, fixed or otherwise,
or whether due or to become due) of any nature, except liabilities or
obligations (i) which were incurred in the ordinary course of business
consistent with past practice and (ii) which have not been, and would not
be reasonably expected to be, individually or in the aggregate, materially
adverse to the Company and its Subsidiaries taken as a whole.
4.08 Legal Proceedings. There are no material actions, suits,
arbitrations or proceedings pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against, relating to or affecting the
Company and its Subsidiaries, nor are there any material Governmental or
Regulatory Authority investigations or audits pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened against, relating to
or affecting, the Company or any of its Subsidiaries or any of their
respective assets and properties, and there are no facts or circumstances
known to the Company or any of its Subsidiaries that would be reasonably
expected to give rise to any such material action, suit, arbitration,
proceeding, investigation or audit, and (ii) neither the Company nor any of
its Subsidiaries is subject to any material Order of any Governmental or
Regulatory Authority. There are no pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened material claims for
indemnification by the Company or any of its Subsidiaries in favor of
directors, officers, employees and agents of the Company.
4.09 Proxy Statement; Other Filings.
(a) None of the information provided by the Company for inclusion
in the proxy statement relating to the Company Stockholders' Meeting, as
amended and supplemented from time to time (the "Proxy Statement"), at the
date of mailing and at the date of the Company Stockholders' Meeting, will
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The information provided in writing by the Company
for inclusion in the Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act.
(b) All documents that the Company is responsible for filing with
any Governmental or Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable law.
4.10 Compliance with Laws and Orders. The Company and its
Subsidiaries hold all franchises, grants, authorizations, permits,
licenses, variances, exemptions, easements, exceptions, consents,
certificates, orders and approvals of all Governmental and Regulatory
Authorities necessary for the Company and its Subsidiaries to own, lease
and operate their respective properties and for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold
such Company Permits which, individually or in the aggregate, are not
having and would not be reasonably expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole. The Company
and its Subsidiaries are in compliance with the terms of the Company
Permits, except for failures so to comply which, individually or in the
aggregate, are not having and would not be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a
whole. No suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened, except where such suspension or cancellation, individually or
in the aggregate, has not resulted and would not be reasonably expected to
result in a material adverse effect on the Company and its Subsidiaries
taken as a whole. The Company and its Subsidiaries are not in violation of
or default under (i) any Law or Order of any Governmental or Regulatory
Authority or (ii) any Company Permit, except for violations which,
individually or in the aggregate, are not having and would not be
reasonably expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
4.11 Compliance with Agreements; Material Contracts.
(a) Neither the Company nor any of its Subsidiaries, nor to the
knowledge of the Company or any of its Subsidiaries any other party
thereto, is in breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred which,
with notice or lapse of time or both, would be reasonably expected to
result in a breach or violation of, or default under, (i) its Organization
Documents or (ii) any Obligations to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective assets or properties is bound, except in the
case of clause (ii) for breaches, violations and defaults which,
individually or in the aggregate, are not having and would not be
reasonably expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(b) The Company has heretofore made available to Merger Sub and
Palisade true, correct and complete copies of all written, and written
summaries of all oral, contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which the
Company or any Subsidiary is a party affecting the obligations of any party
thereunder) to which the Company or any Subsidiary is a party or by which
any of their respective properties or assets are bound that involve
payments from, have a value to, or would be reasonably expected to result
in liabilities to, the Company or any of its Subsidiaries of at least
$100,000 (collectively, the "Material Contracts"). Without limiting the
generality of the foregoing, the term "Material Contracts" shall include
the following:
(i) each loan agreement, note, bond, mortgage, indenture,
guaranty or any other agreement and instrument (the "Debt
Instruments") in effect as of the date hereof and pursuant to
which any indebtedness for borrowed money or the deferred purchase
price for any property constituting obligations of the Company or
any of its Subsidiaries is outstanding (the "Debt"), which Debt
Instruments, together with the outstanding principal balance
thereof and the interest accrued thereon (individually and in the
aggregate) as of the date hereof are set forth on Schedule
4.11(b)(i);
(ii) each interest rate cap, interest rate collar,
interest rate swap, currency hedging transaction, or other similar
arrangement to which the Company or any of its Subsidiaries is a
party or an obligor;
(iii) all letters of credit, guarantees, performance
bonds and similar instruments or arrangements for which the
Company or any of its Subsidiaries has any obligations (including
contingent obligations), which obligations, together with the
amounts and beneficiaries thereof are set forth on Schedule
4.11(b)(iii);
(iv) all agreements that limit or after the Effective
Time will limit the freedom of the Company or any of its
Subsidiaries to own, operate, transfer, pledge or otherwise
dispose of or encumber any Real Property Asset; and
(v) all agreements of the Company or any of its
Subsidiaries to indemnify its current or former directors or
officers that are within the scope of Section 7.08(a) hereof.
(c) Except as set forth in Schedule 4.11(c): (i) each of the
Material Contracts constitutes the valid and legally binding obligation of
the Company or any of its Subsidiaries, as the case may be, enforceable in
accordance with its terms, and is in full force and effect; (ii) there is
no material default under any Material Contract either by the Company or
any of its Subsidiaries, as the case may be, or, to the Company's (or any
of its Subsidiaries') knowledge, by any other party thereto, and no event
has occurred that with the lapse of time or the giving of notice or both
would constitute a material default thereunder by the Company or any of its
Subsidiaries or, to the Company's (or any of its Subsidiaries') knowledge,
any other party; (iii) no party to any Material Contract has given notice
to the Company (or any of its Subsidiaries) of or made a claim against the
Company (or any of its Subsidiaries) with respect to any breach or default
thereunder; (iv) each contract or agreement to which the Company or any
Subsidiary is a party (other than Material Contracts) constitutes the valid
and legally binding obligation of the Company or any of its Subsidiaries,
as the case may be, enforceable in accordance with its terms, and is in
full force and effect; and (v) there is no default under any such contracts
or agreements either by the Company or any of its Subsidiaries, as the case
may be, or, to the Company's (or any of its Subsidiaries') knowledge, by
any other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default thereunder
by the Company or any of its Subsidiaries or, to the Company's (or any of
its Subsidiaries') knowledge, any other party except for such defaults
which, individually or in the aggregate, are not having and would not be
reasonably expected to have a material adverse effect on the Company and
any of its Subsidiaries, taken as a whole.
4.12 Taxes.
(a) The Company and each of its Subsidiaries have timely filed all
Tax Returns (as defined below) required to be filed by each of them, and
any such Tax Returns are true, complete and correct, except to the extent
that any failure to file or any inaccuracies in any filed Tax Return are
not having and would not reasonably be expected to, individually or in the
aggregate, have a material adverse effect on the Company and its
Subsidiaries taken as a whole. The Company and each of its Subsidiaries
have, within the time and manner prescribed by law paid, withheld or
remitted all Taxes due for all taxable periods through the date hereof,
except to the extent that any failure to pay, withhold or remit,
individually or in the aggregate, has not and would not reasonably be
expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole. The most recent financial statements
contained in the Company SEC Reports reflect an adequate reserve for all
Taxes payable by the Company for all taxable periods and portions thereof
accrued through the date of such financial statements, and all information
set forth on such financial statements relating to Tax matters is true and
complete in all material respects. Since June 30, 2002, neither the Company
nor any of its Subsidiaries has engaged in any material transaction, or
taken any other material action, which would result in any obligation to
pay a material amount of Taxes, other than in connection with any
Liquidation.
(b) Except as provided in Schedule 4.12, no audits or other
administrative proceedings or court proceedings are pending or, to the
knowledge of the Company, threatened with respect to any Taxes or Tax
Returns of the Company or any of its Subsidiaries, and no deficiencies for
any Taxes have been proposed, asserted or assessed against the Company or
any of its Subsidiaries that have not been fully paid or are not adequately
reserved for in the most recent financial statements contained in the
Company SEC Reports, except to the extent any such proceedings or
deficiencies, individually or in the aggregate, have not and would not
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole. No requests for waivers of the time to
assess any material Taxes of the Company or any of its Subsidiaries have
been granted and remain in effect or are pending.
(c) Neither the Company nor any affiliated, consolidated, combined
or unitary group of which the Company is a member, has waived any statute
of limitations or agreed to any extension of time within which to file any
Tax Return that has not expired, or agreed to pay any Taxes that have not
since been paid, except to the extent that any such waiver or agreement to
extend, individually or in the aggregate, has not and would not reasonably
be expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(d) No material Liens for Taxes exist with respect to any assets
or properties of the Company and its Subsidiaries, except for statutory
Liens for Taxes not yet due and payable, and the Company and its
Subsidiaries have no knowledge of any claim relating to Taxes that, if
adversely determined, would result in any material Lien that would be
reasonably expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(e) Neither the Company nor any of its Subsidiaries (i) is a party
to or bound by any written Tax sharing, Tax indemnity or similar agreement
with respect to material Taxes pursuant to which it will have any
obligation to make any payment after the Closing Date (other than pursuant
to an agreement between members of the affiliate group, within the meaning
of Section 1504(a) of the Code, filing consolidated income tax returns of
which the Company is the common parent, which will terminate on or before
the Closing Date), or (ii) has any material liability for Taxes of any
person (other than members of the affiliated group, within the meaning of
Section 1504(a) of the Code, filing consolidated federal income tax returns
of which the Company is the common parent) under Treasury Regulation ss.
1.1502-6, Treasury Regulation ss. 1.1502-78 or similar provision of state,
local or foreign law, as a transferee or successor, by contract, or
otherwise.
(f) The Company and each of its Subsidiaries have complied in all
material respects with all applicable laws relating to the withholding and
payment over of material Taxes (including, but not limited to, withholding
of Taxes pursuant to Sections 1441, 1442, 3102 and 3402 of the Code or any
comparable provision of any state, local or foreign laws), and have, within
the time and in the manner prescribed by applicable law, withheld from and
paid over to the proper taxing authorities all material amounts required to
be so withheld and paid over to a taxing authority.
(g) The Company and each of its Subsidiaries have provided or
otherwise made available to Palisade complete and accurate copies of all
material (i) Tax Returns, (ii) examination reports, and (iii) statements of
deficiencies for all open years.
(h) Neither the Company nor any of its Subsidiaries has made a
distribution or has been the subject of a distribution intended to qualify
under Section 355 of the Internal Revenue Code within the last two years.
(i) Neither the Company nor any of its Subsidiaries has executed
or entered into a closing agreement pursuant to Section 7121 of the Code or
any similar provision of state, local or foreign law.
(j) There are no requests for rulings or determinations in respect
of any Tax pending between the Company or any of its Subsidiaries and any
taxing authority.
(k) As used in this Agreement, "Taxes" shall include (i) all
federal, state, local or foreign taxes, levies, fees, charges or
assessments including, without limitation, all net income, gross income,
franchise, profits or gross receipts, ad valorem, capital gains, sales,
use, real, or personal property, capital stock, license, payroll, estimated
withholding, employment, compensation, utility, severance, production,
excise, stamp, occupation, transfer and gains taxes, and customs duties,
and includes any interest or penalties on or additions to any such taxes
and (ii) any transferee liability in respect of any items described in
clause (i) above. As used in this Agreement, "Tax Return" means report,
return, claim for refund or other written information required to be
supplied to a taxing authority in connection with Taxes, including any
schedule or attachment thereto.
4.13 Company Employee Benefit Plans.
(a) Schedule 4.13 sets forth (i) each collective bargaining
agreement to which the Company or any Subsidiary of the Company is a party,
(ii) with respect to any current or former employee, officer or director of
the Company or any Subsidiary of the Company, each change of control,
retention or retirement agreement, plan or arrangement in effect, (iii)
each stock option or phantom stock plan of the Company or any of its
Subsidiaries under which the Company or any of its Subsidiaries has any
liability with respect to current or former directors, officers or
employees of the Company or any of its Subsidiaries, (iv) each material
bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, retirement, vacation,
severance, salary continuation, sick leave, disability, death benefit,
hospitalization, medical, employee loan, educational assistance, or other
plan, program or arrangement of the Company or any of its Subsidiaries
under which the Company or any of its Subsidiaries has any liability with
respect to current or former directors, officers or employees of the
Company or any of its Subsidiaries, and (v) each material employment,
retention, consulting, individual compensation, termination or severance
agreement of the Company or any of its Subsidiaries under which the Company
or any of its Subsidiaries has any liability with respect to current or
former directors, officers or employees of the Company or any of its
Subsidiaries (such agreements, plans, arrangements and programs set forth
in (i), (ii), (iii) and (iv) above, collectively the "Company Benefit
Plans"). None of the Company Benefit Plans is subject to Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(b) With respect to each Company Benefit Plan a complete and
correct copy of each of the following documents (if applicable) has been
made available to Palisade: (i) the most recent document constituting the
Company Benefit Plan and all amendments thereto, and any related trust
documents; (ii) the most recent summary plan description, and all related
summaries of material modifications; (iii) the most recent IRS
determination letter; (iv) the most recent Form 5500 (including schedules
and attachments); and (v) a description of any nonwritten Company Benefit
Plan.
(c) Except as contemplated by Sections 2.01(h) and 7.07 of this
Agreement and as set forth on Schedule 4.13, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee of the Company or any Subsidiary of the Company
to any bonus, severance pay, unemployment compensation or any similar
payment, (ii), accelerate the time of payment or vesting, or increase the
amount of any compensation due to, any current or former employee of the
Company or any Subsidiary of the Company, or (iii) result in an "excess
parachute payment" within the meaning of Section 280G of the Code.
4.14 ERISA Compliance.
Except as disclosed in Schedule 4.14:
(a) With respect to the Company Benefit Plans no event has
occurred and, to the knowledge of the Company or any of its Subsidiaries,
there exists no condition or set of circumstances, in connection with which
the Company or any of its Subsidiaries would be subject to any material
liability under ERISA, the Code, or any other applicable law.
(b) Each Company Benefit Plan has been operated and administered
in all material respects in accordance with its terms. The Company Benefit
Plans are in compliance in all material respects with the applicable
provisions of ERISA, the Code and all other applicable laws. Each Company
Benefit Plan that is intended to be qualified under Section 401(a) or
501(c)(9) of the Code and any trust qualified under Section 501(a) of the
Code so qualifies and has received a favorable determination letter from
the IRS to such effect. To the knowledge of the Company, no fact or event
has occurred since the date of any determination letter from the IRS which
would be reasonably expected to adversely affect such favorable
determination. There are no audits or proceedings initiated pursuant to the
Employee Plans Compliance Resolution System or similar proceedings pending
with the IRS or Department of Labor with respect to any Company Benefit
Plan.
(c) (i) Neither the Company nor any trade or business, whether or
not incorporated (an "ERISA Affiliate"), which together with the Company
would be deemed to be a "single employer" within the meaning of Section
4001(b) of ERISA, has incurred any liability under Title IV of ERISA and no
condition exists that presents a risk to the Company or any ERISA Affiliate
of the Company of incurring any such liability (other than liability for
benefits or premiums to the Pension Benefit Guaranty Corporation arising in
the ordinary course). No Company Benefit Plan is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA nor does the Company have any
direct, indirect or contingent liability with respect to any multiemployer
plan.
(d) As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against the Company or any of its Subsidiaries
pending or, to the knowledge of the Company, threatened, which may
interfere with the business activities of the Company. As of the date of
this Agreement, neither the Company or any of its Subsidiaries nor any of
their respective representatives or employees has committed any material
unfair labor practice in connection with the operation of the business of
the Company, and there is no charge or complaint against the Company by the
National Labor Relations Board or any comparable governmental agency
pending or threatened in writing.
(e) No Company Benefit Plan provides medical or life insurance
benefits (whether or not insured) with respect to current or former
employees after retirement or other termination of service, other than such
coverage as is provided in accordance with Part 6 of Title I of ERISA or
Section 4980B of the Code.
(f) There are no pending or, to the knowledge of the Company,
threatened material actions, claims, or proceedings against or relating to
any Company Benefit Plan (other than routine benefit claims by Persons
entitled to benefits thereunder), and, to the knowledge of the Company,
there are no facts or circumstances which would form a reasonable basis for
any of the foregoing.
(g) There are no unfunded Company Benefit Plan obligations with
respect to any employee of the Company or any Subsidiary of the Company,
which are not fairly reflected by reserves shown on the most recent audited
financial statements of the Company.
(h) Schedule 4.14 lists the number of employees in the aggregate,
the number of full-time personnel and the number of contract workers of the
Company and its Subsidiaries as of August 16, 2002. Except as disclosed on
Schedule 4.14, (i) none of the employees is represented by a union, and to
Company's knowledge no union organizing efforts have been conducted within
the last five years or are now being conducted and (ii) the Company and its
Subsidiaries has not as of the date hereof incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act, as
it may have been amended from time to time, or any similar state law.
4.15 Environmental Matters. Except as, individually or in the
aggregate, would not be reasonably expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole and the
operations of the Company and its Subsidiaries have been and are in
compliance with all Environmental Laws (as defined below), and with all
licenses required by Environmental Laws, (ii) there are no pending or, to
the knowledge of the Company and its Subsidiaries, threatened, Governmental
administrative or judicial enforcement actions under or pursuant to
Environmental Laws against the Company or any of its Subsidiaries, and
(iii) neither the Company nor any of its Subsidiaries is subject to any
Environmental Liabilities (as defined below).
As used in this Agreement, "Environmental Laws" means any and all
federal, state, foreign, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, injunctions, orders, decrees,
requirements of any Governmental or Regulatory Authority, any and all
common law requirements, rules and bases of liability regulating, relating
to or imposing liability or standards of conduct concerning pollution,
Hazardous Materials or protection of human health, safety or the
environment, as currently in effect and include without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C.ss.ss. 9601, et seq., the Hazardous Materials Transportation Act, 49
U.S.C. ss.ss. 1801, et seq., the Resource Conservation and Recovery Act, 42
U.S.C.ss.ss. 6901, et seq., the Clean Water Act, 33 U.S.C.ss.ss. 1251, et
seq., the Clean Air Act, 42 U.S.C.ss.ss. 7401, et seq., the Toxic
Substances Control Act, 15 U.S.C.ss.ss. 2601, et seq., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.ss.ss. 136, et seq.,
Occupational Safety and Health Act 29 U.S.C.ss.ss. 651, et seq. and the Oil
Pollution Act of 1990, 33 U.S.C.ss.ss. 2701, et seq., as such laws have
been amended or supplemented, and the regulations promulgated pursuant
thereto, and all analogous state or local statutes. As used in this
Agreement, "Environmental Liabilities" with respect to any Person means any
and all liabilities, whether absolute, accrued, contingent, fixed or
otherwise, of or relating to such Person or any of its Subsidiaries
(including any entity which is, in whole or in part, a predecessor of such
Person or any of such Subsidiaries), which (i) arise under or relate to
matters covered by Environmental Laws and (ii) relate to actions occurring
or conditions existing on or prior to the Closing Date. As used in this
Agreement, "Hazardous Materials" means any materials or wastes, defined,
listed, classified or regulated as hazardous, toxic, a pollutant or a
contaminant in or under any Environmental Laws which includes, without
limitation, petroleum, petroleum products, friable asbestos, urea
formaldehyde, radioactive materials and polychlorinated biphenyls.
4.16 Real Property.
(a) Schedule 4.16(a) contains a true and complete list of all leases
(including any amendments, assignments and modifications thereto) (the
"Leases") pursuant to which the Company or any Subsidiary of the Company
leases real property from a third party (the "Real Property Assets").The
Company has made available to Palisade and Merger Sub true, correct and
complete copies of all the Leases. Schedule 4.16(a) sets forth the date,
term, property, tenant, expiration date and the rent payable under each
Lease. Each of the Leases is in full force and effect. There is no default
under any Lease either by the Company or any of its Subsidiaries or, to the
knowledge of the Company or any of its Subsidiaries, any other party
thereto and to the knowledge of the Company no event has occurred that with
the lapse of time or the giving of notice or both would constitute a
default in any material respect thereunder by the Company or any of its
Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns any real
property.
(c) As of the date of this Agreement, the Company or the
applicable Subsidiary has good title to its leasehold interest in the
applicable Real Property Asset as provided in the applicable Lease, in each
case free and clear of all Liens except for (i) Liens, encumbrances,
defects, exceptions, easements, rights of way, restrictions, covenants,
claims or other charges (collectively "Title Defects") listed or identified
in the title report or commitment relating to each Real Property Asset
(copies of which have been made available to Palisade and Merger Sub), (ii)
easements, rights of way, restrictive covenants and similar encumbrances
that are not Title Defects and which do not, individually or in the
aggregate, have a material adverse effect on the Company and its
Subsidiaries taken as a whole, (iii) taxes or assessments, special or
otherwise, not due and payable or being contested in good faith and (iv)
mechanics' and materialmen's liens for amounts not yet due and payable (all
such matters described in clauses (i) through (iv), "Permitted Liens").
(d) There are no pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened condemnation proceedings against or
affecting any Real Property Asset.
4.17 Intellectual Property Rights. The Company and its
Subsidiaries have all right, title and interest in, or a valid and binding
license or right to use, all Intellectual Property (as defined below) that
individually or in the aggregate is material to the conduct of the
businesses of the Company and its Subsidiaries taken as a whole, and the
consummation of the Merger will not alter or impair any such rights or
interests in any material respect. Schedule 4.17(a) sets forth a complete
and accurate list of all registrations and applications for Intellectual
Property held by the Company and its Subsidiaries. Schedule 4.17(b) sets
forth a complete and accurate list of all material license agreements
relating to the Intellectual Property to which the Company or any of its
Subsidiaries is a party. The Company and its Subsidiaries are the sole and
exclusive owners of all Intellectual Property listed on Schedule 4.17(a),
free and clear of all Liens and free of all material licenses except as set
forth on Schedule 4.17(b). There are no oppositions, cancellations,
invalidity proceedings, interferences or re-examination proceedings
presently pending with respect to any Intellectual Property owned by the
Company that individually or in the aggregate is material to the conduct of
the businesses of the Company and its Subsidiaries taken as a whole. To the
Company's knowledge the conduct of the business of the Company and its
Subsidiaries and the Intellectual Property does not infringe any
Intellectual Property rights of any Person, and neither the Company nor any
of its Subsidiaries has received any notice from any other Person
pertaining to or challenging the right of the Company or any of its
Subsidiaries to use any Intellectual Property within the past three years.
Neither the Company nor any of its Subsidiaries has made any claim of a
violation or infringement by others of its rights to or in connection with
any Intellectual Property within the past three years, and to the Company's
knowledge no such right is being infringed by any third party. The Company
and its Subsidiaries take all measures that are reasonably necessary to
protect the confidentiality of their trade-secrets and other confidential
information. For purposes of this Agreement, "Intellectual Property" means
all patents and patent rights, trademarks and trademark rights, trade names
and trade name rights, service marks and service mark rights, service names
and service name rights, copyrights and copyright rights, and all
applications for registration and registrations for such trademarks,
copyrights and patents and all brand names, mask works, confidential and
proprietary information, including proprietary formulas, designs, know-how
and processes, trade secret and related non-disclosure rights and any other
proprietary intellectual property rights.
4.18 Non-Competition Agreements. Except as disclosed in Schedule
4.18, neither the Company nor any of its Subsidiaries is a party to, nor
are any of their respective assets or properties subject to, any contract
or agreement which purports to restrict or prohibit in any material respect
the Company or any of its Subsidiaries (or will so restrict or prohibit
Palisade or its affiliates immediately following the consummation of the
Merger) from, directly or indirectly, engaging in any business or activity.
4.19 Agreements with Regulatory Agencies. Neither the Company nor
any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of (each, a "Company Regulatory
Agreement"), any Governmental or Regulatory Authority that restricts the
conduct of its business or that in any manner relates to its management or
its business or would be reasonably expected, following consummation of the
Merger, to impair the conduct of the business of the Surviving Corporation,
Palisade or any Subsidiary of Palisade, as presently conducted. Neither the
Company nor any of its Subsidiaries has been advised by any Governmental or
Regulatory Authority that such Governmental or Regulatory Authority is
considering issuing or requesting any such Company Regulatory Agreement.
4.20 Rights Agreement. The Company has amended the Company Rights
Agreement or has taken such other action as may be necessary thereunder to
(i) render the Company Rights Agreement inapplicable to the approval,
execution and delivery of this Agreement and the consummation of the Merger
and (ii) ensure that (x) neither Palisade, Merger Sub nor any of their
Subsidiaries is an Acquiring Person (as defined in the Company Rights
Agreement) pursuant to the Company Rights Agreement and (y) a Stock
Acquisition Date or Distribution Date (in each case as defined in the
Company Rights Agreement) does not occur by reason of the approval,
execution or delivery of this Agreement, or the consummation of the Merger.
4.21 Opinion of Fleet Securities. The Board of Directors of the
Company has received the written opinion of Fleet Securities, Inc. ("Fleet
Securities") to the effect that, as of the date of this Agreement, the
Merger Consideration is fair from a financial point of view to the
stockholders of the Company. The Company has delivered a signed copy of
such written opinion to Palisade. Fleet Securities has authorized the
inclusion of its opinion in the Proxy Statement.
4.22 Voting Requirements. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock at the Company
Stockholders' Meeting called to adopt this Agreement and approve the Merger
(the "Company Stockholders' Approval") is the only vote of the holders of
any class or series of capital stock of the Company or any of its
Subsidiaries necessary to adopt this Agreement and approve the Merger and
the transactions contemplated hereby.
4.23 State Takeover Statutes. Prior to the date hereof, the Board
of Directors of the Company has taken all action necessary to exempt under
or make not subject to (x) the provisions of Section 203 of the DGCL and
(y) any other state or federal takeover law or state or federal law that
purports to limit or restrict business combinations or the ability to
acquire or vote shares the execution of this Agreement, the Merger and the
transactions contemplated hereby ("Takeover Statutes").
4.24 Brokers and Finders. No agent, broker, finder, investment
banker, financial advisor or other firm or Person, other than Fleet
Securities, is entitled to any broker's, finder's or other fee or
commission in connection with the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Company. Prior to the date of this Agreement, the Company has
delivered to Palisade a complete and correct copy of all agreements between
the Company and Fleet Securities under which Fleet Securities would be
entitled to any payment relating to the Merger or the other transactions
contemplated by this Agreement.
4.25 Insurance. The Company has made available to Palisade or its
advisors a list of, and true and complete copies of, all material insurance
policies and fidelity bonds relating to the assets, business, operations,
employees, officers or directors of the Company and any of its
Subsidiaries, and (i) there is no claim by the Company or any of its
Subsidiaries pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds or in respect of which such underwriters have
reserved their rights, (ii) all premiums payable under all such policies
and bonds have been timely paid and the Company and its Subsidiaries have
otherwise complied in all material respects with the terms and conditions
of all such policies and bonds, (iii) such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance
coverage) remain in full force and effect, (iv) all material fire and
casualty, general liability, business interruption, product liability,
professional liability and sprinkler and water damage insurance policies
maintained by the Company or any of its Subsidiaries provide full and
adequate coverage for all normal risks incident to the business of the
Company and its Subsidiaries and their respective properties and assets,
except as would not, individually or in the aggregate, have a material
adverse effect on the Company or any of its Subsidiaries taken as a whole
and (v) neither the Company nor any Subsidiary of the Company has received
written notice from any insurance company of any defects or inadequacies in
any of its property or assets that would adversely affect the insurability,
or increase the costs of insuring, such property or assets except as would
not, individually or in the aggregate, have or reasonably be expected to
have a material adverse effect.
4.26 Certain Business Practices. None of the Company, any of its
Subsidiaries or any directors or officers of the Company or any of its
Subsidiaries, nor to the Company's knowledge, agents or employees of the
Company or any of its Subsidiaries, has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns or (c) made any other unlawful payment.
4.27 Investment Company. None of the Company or any of its
Subsidiaries is (or had been at any point in the past), nor is the Company
or any of its Subsidiaries (or had been at any point in the past)
controlled by or affiliated with, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
4.28 Employees. Schedule 4.28 sets forth the following information
concerning each employee of the Company and its Subsidiaries whose
compensation (including base salary and bonuses) exceeded $50,000 for the
calendar year ended December 31, 2001: (a) name; (b) entity employed by;
(c) base salary and bonuses paid in 2001; (d) whether or not the employee
has an employment contract, and if so, its expiration date; (e) if the
employee has been granted Company Options, the number of Shares for which
the Company Options are exercisable; and (f) if there is an employment
contract, whether it is assignable by its terms.
4.29 Related Party Transactions. Except as set forth in the
Company SEC Reports, since the date of the Company's proxy statement, dated
May 20, 2002, no event has occurred that would be required to be reported
as a Certain Relationship or Related Transaction, pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
ARTICLE V
Representations and Warranties of Palisade and Merger Sub
Palisade and Merger Sub, jointly and severally, represent and
warrant to the Company as follows:
5.01 Organization and Qualification. Each of Palisade and Merger
Sub is an entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and has full power and
authority to conduct its business as and to the extent now conducted and to
own, use and lease its assets and properties, except for such failures to
be so organized, existing and in good standing or to have such power and
authority which, individually or in the aggregate, are not having and would
not be reasonably expected to have a material adverse effect on Palisade or
Merger Sub. Merger Sub is a direct, wholly-owned subsidiary of Palisade and
was formed solely for the purpose of engaging in the transactions
contemplated by the Agreement, has engaged in no other business activities
and has conducted its operations only as contemplated hereby. Each of
Palisade and Merger Sub is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the
ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for such failures to be so qualified, licensed or
admitted and in good standing which, individually or in the aggregate, (i)
are not having and would not be reasonably expected to have a material
adverse effect on Palisade or Merger Sub, and (ii) would not be reasonably
expected to have a material adverse effect on the validity or
enforceability of this Agreement or on the ability of Palisade and Merger
Sub to perform their obligations hereunder. Attached hereto as Exhibits
3.01 and 3.02 are true, complete and correct copies of the Certificate of
Incorporation and By-Laws of Merger Sub as of the date of this Agreement,
and Palisade shall provide to the Company immediately prior to the
Effective Time true, complete and correct copies of any amendment to the
Certificate of Incorporation or By-Laws of Merger Sub.
5.02 Capital Stock of Merger Sub. The authorized capital stock of
Merger Sub consists of 20,000,000 shares of Merger Sub Common Stock and
1,000,000 shares of preferred stock, par value $0.001 per share. There are
no outstanding shares of preferred stock of Merger Sub. There are 2,837,000
shares of Merger Sub Common Stock issued and outstanding, and no shares of
Merger Sub Common Stock held in the treasury of Merger Sub. There are no
outstanding subscriptions, options, warrants, rights (including phantom
stock or stock appreciation rights), calls, preemptive rights or other
agreements, contracts, commitments, understandings or arrangements,
including any right of conversion or exchange under any outstanding
security, instrument or agreement, obligating Merger Sub to issue or sell
any shares of capital stock of Merger Sub (collectively, referred to as
"Merger Sub Options") or to grant, extend or enter into any Merger Sub
Option with respect thereto or of any other character to which Merger Sub
is a party or by which Merger Sub is bound relating to issued or unissued
capital stock of Merger Sub.
5.03 Authority Relative to this Agreement. Each of Palisade and
Merger Sub has full organizational power and authority to enter into this
Agreement and to perform its obligations hereunder and to consummate the
Merger. The execution, delivery and performance of this Agreement by
Palisade and Merger Sub and the consummation by Palisade and Merger Sub of
the Merger have been duly and validly approved by their respective Boards
of Directors and the general partner, and no other proceedings on the part
of Palisade or Merger Sub is necessary to authorize the execution, delivery
and performance of this Agreement by Palisade and Merger Sub and the
consummation by Merger Sub of the Merger. This Agreement has been duly and
validly executed and delivered by Palisade and Merger Sub and, assuming the
due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of Palisade and Merger Sub enforceable
against Palisade and Merger Sub in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
5.04 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by each of
Palisade and Merger Sub do not, and the performance by each of Palisade and
Merger Sub of its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, result in or give to any Person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon
any of the assets or properties of Palisade or Merger Sub, any of the
terms, conditions or provisions of (i) the organizational documents of
Palisade or Merger Sub, or (ii) subject to the taking of the actions
described in Section 5.04(b), (x) any Laws or Orders of any Governmental or
Regulatory Authority applicable to Palisade or Merger Sub or any of the
respective assets or properties of Palisade or Merger Sub or any of their
Subsidiaries, or (y) any Obligations to which Palisade is a party or by
which Palisade or any of the respective assets or properties of Palisade is
bound, excluding from the foregoing clauses (x) and (y) conflicts,
violations, breaches, defaults, terminations, modifications, accelerations
and creations and impositions of Liens which, individually or in the
aggregate, would not be reasonably expected to have a material adverse
effect on Palisade or Merger Sub or on the ability of Palisade and Merger
Sub to consummate the transactions contemplated by this Agreement.
(b) Except for the filing of the Certificate of Merger and other
appropriate merger documents required by the DGCL with the Secretary of
State and appropriate documents with the relevant authorities of other
states in which the Company or its Subsidiaries are qualified to do
business, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party
is necessary or required under any of the terms, conditions or provisions
of any Law or Order of any Governmental or Regulatory Authority or any
Obligation to which Palisade is a party or by which Palisade or any of its
assets or properties is bound for the execution and delivery of this
Agreement by each of Palisade and Merger Sub, the performance by each of
Palisade and Merger Sub of its obligations hereunder or the consummation of
the transactions contemplated hereby, other than such consents, approvals,
actions, filings and notices which the failure to make or obtain, as the
case may be, individually or in the aggregate, would not be reasonably
expected to have a material adverse effect on Palisade or Merger Sub or on
the ability of Palisade and Merger Sub to consummate the transactions
contemplated by this Agreement.
5.05 Proxy Statement. None of the information provided in writing
by Palisade for inclusion in the Proxy Statement at the date of mailing and
at the date of the Company Stockholders' Meeting, will 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 are made, not misleading.
Notwithstanding the foregoing, Palisade makes no representation or warranty
with respect to any information supplied by the Company which is contained
in the Proxy Statement.
5.06 Legal Proceedings. There are no actions, suits, arbitrations
or proceedings pending or, to the knowledge of Palisade or Merger Sub,
threatened against, relating to or affecting, nor to the knowledge of
Palisade or Merger Sub, are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, Palisade, Merger Sub or any of their respective assets and
properties which, if determined adversely to Palisade or Merger Sub,
individually or in the aggregate, would be reasonably expected to have a
material adverse effect on Palisade or Merger Sub or on the ability of
Palisade and Merger Sub to consummate the transactions contemplated by this
Agreement, and there are no facts or circumstances known to Palisade or
Merger Sub that would be reasonably expected to give rise to any such
action, suit, arbitration, proceeding, investigation or audit, and Palisade
is not subject to any Order of any Governmental or Regulatory Authority
which, individually or in the aggregate, is having or would be reasonably
expected to have a material adverse effect on Palisade or on the ability of
Palisade and Merger Sub to consummate the transactions contemplated by this
Agreement.
5.07 Sufficient Funds. Palisade and Merger Sub will have available
on the Closing Date sufficient funds to pay the Merger Consideration set
forth in Section 2.01(c) with respect to all shares of Company Common Stock
entitled thereto and all of its fees and expenses in connection with this
Agreement and the transactions contemplated hereby, except as provided in
Section 9.03(b). Palisade and Merger Sub shall not use any of the Company's
assets to pay the Merger Consideration. There are no debt financing or
other financing commitments or agreements applicable to the Surviving
Corporation arising out of or relating to this Agreement or any of the
transactions contemplated hereby. A true and complete limited partnership
agreement of Palisade has been provided to the Company.
5.08 Brokers and Finders. No agent, broker, finder, investment
banker, financial advisor or other firm or Person is entitled to any
broker's, finder's or other fee or commission in connection with the Merger
or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Palisade.
5.09 Ownership of Company Common Stock. Except as disclosed on
Schedule 13D (and any amendments thereto) filed by Palisade and its
affiliates with the SEC, none of Palisade, Merger Sub or any of their
affiliates owns any shares of Company Common Stock.
ARTICLE VI
Covenants of the company
6.01 Conduct of Business of the Company. Except as (i) otherwise
expressly permitted by this Agreement, (ii) expressly contemplated by the
exceptions to clauses (a) through (r) below or (iii) consented to by
Palisade in writing, during the period from the date of this Agreement to
the Closing Date, the Company agrees that it shall, and shall cause each of
its Subsidiaries to, carry on its business in the ordinary course
consistent with past practice and in compliance in all material respects
with all applicable laws and regulations and, to the extent consistent
therewith, will use its best efforts to, and will cause each of its
Subsidiaries to, preserve intact the business organization of the Company
and each of its Subsidiaries. Subject to the above exceptions, during the
period from the date of this Agreement to the Closing Date, the Company
agrees that it shall not, and shall cause each of its Subsidiaries not to,
without the prior written consent of Palisade:
(a) amend or propose to amend its Organization Documents;
(b) (i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine,
reclassify or take similar action with respect to any of its capital stock
or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
(iii) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization
(other than in connection with any Liquidation) or (iv) directly or
indirectly redeem, repurchase or otherwise acquire any shares of its
capital stock or any option with respect thereto;
(c) issue, sell, grant, pledge or otherwise encumber, or authorize
or propose such action to be taken with respect to, any shares of its
capital stock or any Company Option (other than the issuance of Company
Common Stock, pursuant to the exercise of Company Options outstanding on
the date of this Agreement);
(d) adopt or amend any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, pension,
retirement, employment, consulting or other employee benefit agreement,
trust, plan or other arrangement for the benefit or welfare of any
director, officer or employee of the Company or any of its Subsidiaries
(other than in connection with any Liquidation);
(e) except in the ordinary course of business, increase in any
manner the compensation of any director, officer or employee of the Company
or any of its Subsidiaries, provided that the Company may enter into
retention bonus arrangements or agreements with any officer or employee if
the value of such arrangement or agreement does not exceed $15,000;
(f) increase in any manner the fringe benefits of any director,
officer or employee of the Company or any of its Subsidiaries or pay any
benefit not required by any existing agreement or place any assets in any
trust for the benefit of any director, officer or employee of the Company
or any of its Subsidiaries, provided that the Company shall pay the fees
and expenses of the special committee of its Board of Directors formed in
connection with the Company's pursuit of the transactions contemplated by
this Agreement and its pursuit of the Liquidations;
(g) other than as set forth on Schedule 6.01(g), enter into or
modify any employment, severance, termination or similar agreement or
arrangement with any director, officer, consultant or employee of the
Company or any of its Subsidiaries, or otherwise increase or accelerate any
requirement to provide to any such person any severance, termination or
similar payment or benefit (other than in connection with any Liquidation),
provided that the Company may enter into severance arrangements or
agreements with any officer or employee if the value of such arrangement or
agreement does not exceed $15,000;
(h) directly or indirectly acquire any interest in, make any
investment in or make any capital contribution to (including, without
limitation, by merger, consolidation, or acquisition or disposition of
stock or assets) any Person or any division thereof;
(i) directly or indirectly acquire, enter into an option to
acquire, lease or agree to manage, in whole or in part, any properties or
material assets of any Person;
(j) (i) incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness of another Person, other than indebtedness
or guarantees of indebtedness owing to the Company or any wholly-owned
Subsidiary of the Company, (ii) issue or sell any debt securities or rights
to acquire debt securities, (iii) make any loans, advances or capital
contributions to any other Person other than to the Company or to any of
its wholly-owned Subsidiaries or (iv) enter into any interest rate cap,
interest rate collar, interest rate swap, currency hedging transaction or
any other agreement relating to a similar transaction;
(k) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, (i) in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent Company Financial Statements or incurred
since the date of such financial statements in the ordinary course of
business consistent with past practice, (ii) the repayment of outstanding
indebtedness under the Debt Instruments as and when the same becomes due or
(iii) in connection with any Liquidation;
(l) waive any claims or rights, other than in the ordinary course
of business for amounts not exceeding $10,000 for any individual claim or
right, or $50,000 in the aggregate for all such claims or rights (other
than in connection with any Liquidation);
(m) make any change in any method of accounting or accounting
practice or policy except as required by any changes in GAAP;
(n) create or incur any Lien on any property or assets of the
Company or any of its Subsidiaries, other than Permitted Liens (other than
in connection with any Liquidation);
(o) amend or otherwise modify in any material respect any of the
terms or conditions of any indebtedness, guarantees of indebtedness or any
other securities of the Company or any of its Subsidiaries (other than in
connection with any Liquidation);
(p) execute any definitive or binding agreement relating to
Heli-Coil and Dodge licensing rights; provided that any such agreement may
be executed if the cash amount to be received by the Company and its
Subsidiaries is greater than or equal to 95% of the cash amount indicated
in the description of such agreement in Schedule 4.06 to this Agreement;
(q) take any action that would be reasonably expected to cause the
condition set forth in Section 8.02(a) hereof not to be satisfied at the
Effective Time; or
(r) enter into or authorize or propose to enter into any contract,
agreement, commitment or arrangement to do or engage in any of the
foregoing.
6.02 No Solicitation.
(a) From and after the date of this Agreement until the Closing
Date, the Company agrees that it, its Subsidiaries and affiliates (as
defined in the Exchange Act) and their respective directors, officers,
advisors, employees, representatives and other agents shall not directly or
indirectly (i) solicit, initiate, encourage, facilitate the submission of
or entertain any proposals or offers relating to, (ii) provide any
information to any third party in response to any submissions, proposals or
offers relating to, or whose purpose in receiving such information might
relate to, (iii) engage in any negotiations or discussions with any Person
relating to, or (iv) otherwise cooperate in any way with any Person in
connection with any acquisition, merger, recapitalization, dissolution or
any similar transaction involving all or substantially all of the Company,
its business or assets (other than in connection with any Liquidation) or
80% or more of the Company's capital stock or other equity interests, other
than the Merger (an "Alternative Transaction"). The Company shall promptly
notify Palisade (and continuously update such information as reasonably
necessary) of the receipt of any such proposals or offers made on or prior
to the Closing Date (including the terms and conditions of such proposal or
offer and the identity of any Person making such proposal or offer), of the
status of the consideration thereof by the Company's Board of Directors and
of any actions taken in connection therewith. From and after the date of
this Agreement until the Closing Date, the Company agrees that it, its
subsidiaries and affiliates and their respective directors, officers,
advisors, employees, representatives and other agents shall not directly or
indirectly take any other action (or fail to take any required action) or
permit any person on its behalf to take any other action (or fail to take
any required action) that would be materially inconsistent with, materially
delay or materially adversely affect the consummation of the Merger.
Nothing contained in this paragraph, however, shall prevent the Company's
Board of Directors, if it determine in good faith that its fiduciary duty
so requires, after consultation with its outside legal counsel, from (i)
participating in negotiations or discussions with a third party or parties
with respect to an Alternative Transaction proposed in writing by a third
party which had not been directly or indirectly solicited, initiated or
encouraged by the Company, its Subsidiaries or affiliates, or their
respective directors, officers, advisors, employees, representatives and
other agents on or after the date of this Agreement, provided that (A) the
Company's Board of Directors determines (after consultation with the
Company's outside financial advisors) that such third party is capable of
making a Superior Offer (as defined below) and (B) the Company shall
promptly notify Palisade (and update such notification as necessary) of the
receipt of any such offer (including the terms and conditions of such offer
and the identity of any Person making such offer), of the status of the
Company's Board of Directors' consideration thereof and of any actions
taken in connection therewith, or (ii) providing information to a third
party in response to a written proposal for an Alternative Transaction or
written indication of interest from a third party which had not been
directly or indirectly solicited, initiated or encouraged by the Company,
its Subsidiaries or affiliates, or their respective directors, officers,
advisors, employees, representatives and other agents (but not taking any
other action proscribed by this Section 6.02) on or after the date hereof,
provided that (A) the Company's Board of Directors determines that such
third party is capable of making a Superior Offer following receipt of such
information and (B) the Company shall promptly notify Palisade (and
continuously update such notification as reasonably necessary) of the
receipt of the Alternative Transaction proposal or request to receive such
information (including the terms and conditions of such proposal or request
and the identity of any Person making such proposal or request), of the
status of the consideration thereof by the Company's Board of Directors and
of any action taken in connection therewith. For purposes of this
Agreement, the term "Superior Offer" shall mean a bona fide written offer
(other than with respect to any Liquidation) made by a third party (x) to
purchase the Company or its business or assets or 80% or more of the
Company's capital stock or other equity that the Company's Board of
Directors, after consultation with its outside financial advisor,
determines in good faith to be more favorable economically to the Company
and its stockholders than that provided for in this Agreement and (y) that
the Company's Board of Directors determines in good faith is likely to
result in a transaction that will actually be consummated.
(b) The Company agrees that upon the execution of this Agreement,
it shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations by the Company, its Subsidiaries or
affiliates, or their respective directors, officers, advisors, employees,
representatives, or other agents with any parties conducted heretofore with
respect to any of the foregoing, promptly inform the foregoing persons (if
any) of the obligations undertaken in this Section 6.02, and request that
such parties promptly return all documents (and all copies thereof)
furnished to them by the Company, its Subsidiaries or any of the foregoing
persons.
(c) Except as expressly permitted by Section 6.02, the Company
agrees that its Board of Directors shall not (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Palisade or
Merger Sub, the approval or recommendation by the Company's Board of
Directors of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Alternative Transaction or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to an
Alternative Transaction. Notwithstanding the foregoing, upon having
received a proposal that the Company's Board of Directors determines to be
a Superior Offer, the Company's Board of Directors may (i) withdraw or
modify in a manner adverse to Palisade or Merger Sub its approval or
recommendation of the Merger or this Agreement, (ii) approve or recommend
the Superior Offer, (iii) cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement related to the Superior Offer and/or (iv) terminate this
Agreement pursuant to Section 9.01(d)(i), and shall promptly notify
Palisade in writing of any such determination; provided, however, that the
Company may take any such action only (x) after providing reasonable
written notice to Palisade of its intent to do so and (y) if Palisade does
not make, within five (5) business days of receipt of such notice an offer
that the Company's Board of Directors determines in good faith, after
consultation with its financial advisor, to be at least as favorable to the
Company's stockholders from a financial point of view as such Superior
Offer, and then only upon termination of this Agreement pursuant to Section
9.01(d)(i).
(d) Nothing contained in this Section 6.02 or Section 7.04 shall
prohibit the Company from taking or disclosing to its stockholders a
position contemplated by Rule 14e-9 or Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's stockholders
which, in the good faith judgment of the Company's Board of Directors,
after consulting with the Company's legal advisors, is necessary under
applicable law.
6.03 Tax Matters. The Company agrees that during the period from
the date of this Agreement to the Effective Time, the Company and its
Subsidiaries shall: (i) properly prepare, in the ordinary course of
business, and timely file (taking into account extensions) all material Tax
Returns required to be filed by it (or them) on or before the Closing Date
("Post-signing Returns"); (ii) consult with Palisade with respect to all
material matters contained in such Post-signing Returns; (iii) pay all
material Taxes due and payable in respect of such material Post-signing
Returns that are so filed; (iv) properly reserve (and reflect such reserve
in its books and records and financial statements), in accordance with past
practice and in the ordinary course of business, for all material Taxes
payable by it (or them) for which no Post-signing Return is due prior to
the Effective Time; (v) notify Palisade of any material federal, state or
foreign suit, claim, action, investigation, proceeding or audit pending
against or with respect to the Company or any of its Subsidiaries in
respect of any material Tax matter (collectively, "Tax Actions"), including
(without limitation) Tax liabilities and refund claims, and not settle or
compromise any such material Tax Action without notifying Palisade; (vi)
not make or revoke any material Tax election or adopt or change a material
tax accounting method without notifying Palisade; and (vii) terminate all
material Tax sharing agreements to which the Company or any of its
Subsidiaries is a party.
ARTICLE VII
Additional Agreements
7.01 Access to Information; Confidentiality. The Company agrees
that throughout the period from the date hereof to the Effective Time, it
shall, and shall cause its Subsidiaries to, provide Palisade and its
representatives with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants
of the Company and their respective assets, properties, books and records,
but only to the extent that such access does not unreasonably interfere
with the business and operations of the Company and its Subsidiaries. No
information or knowledge obtained thereby shall affect or be deemed to
modify any representation or warranty by any party hereunder. Palisade and
Merger Sub will hold, and will cause its representatives to hold, any
non-public information obtained pursuant to Section 7.01(a) in strict
confidence, pursuant to the terms and conditions set forth in the letter
agreement between the Company and Palisade Capital, dated as of June 5,
2002 (the "Confidentiality Agreement").
7.02 Notification of Certain Matters. Each party shall give prompt
notice to the other if any of the following occurs after the date of this
Agreement: (i) receipt of any notice or other communication in writing from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Agreement, (ii) receipt of any notice from any Governmental or Regulatory
Authority in connection with the transactions contemplated by this
Agreement, or (iii) the commencement of any legal proceedings (or, to its
knowledge, any investigation or threatened commencement of any legal
proceeding) involving or affecting the notifying party or any of its
Subsidiaries, or any of its properties or assets, or, to its knowledge, any
employee, agent, director or officer, in his or her capacity as such, of
such notifying party or of any of its Subsidiaries, or the Merger or the
other transactions contemplated by this Agreement.
7.03 Preparation of Proxy Statement.
(a) As promptly as practicable after the execution of this
Agreement, the Company shall prepare and shall file with the SEC the
preliminary Proxy Statement relating to the Company Stockholders' Approval
(as defined in Section 4.22). Each party will notify the other promptly of
the receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Proxy Statement or for additional
information, and will supply the other with copies of all correspondence
between such party or any of its representatives and the SEC, with respect
to the Proxy Statement. The Proxy Statement shall comply in all material
respects with all applicable requirements of law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Proxy Statement, Palisade or the Company shall promptly inform the other of
such occurrences and cooperate in filing with the SEC and/or mailing to the
shareholders of the Company such amendment or supplement to the Proxy
Statement. As promptly as practicable after comments are received from the
SEC with respect to the preliminary Proxy Statement and after the
furnishing by the Company and Palisade of all information required to be
contained therein, the Company shall file with the SEC the definitive Proxy
Statement and shall mail the definitive Proxy Statement to the Company's
stockholders.
(b) None of the preliminary Proxy Statement, the definitive Proxy
Statement or any amendments or supplements thereto shall be filed with the
SEC or mailed or delivered to the Company Stockholders until Palisade shall
have been given a reasonable opportunity to review such preliminary Proxy
Statement, definitive Proxy Statement or amendment or supplement thereto,
as the case may be; provided that, notwithstanding such review, the Company
will retain full responsibility for the accuracy and completeness thereof,
except as to material relating to Palisade or any of its affiliates which
has been supplied by Palisade to the Company in writing for inclusion
therein.
(c) The Proxy Statement shall include the recommendation of the
Board of Directors of the Company to the stockholders of the Company that
they vote in favor of the adoption of this Agreement and the Merger;
provided, however, that the Board of Directors of the Company may withdraw,
modify or change any such recommendation to the extent permitted under
Section 6.02. In addition, the Proxy Statement will include a copy of the
written opinion of Fleet Securities referred to in Section 4.21.
7.04 Approval of Company Stockholders. The Company shall, through
its Board of Directors, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Stockholders' Meeting") for the
purpose of voting on the adoption of this Agreement and the approval of the
Merger as soon as reasonably practicable after the date hereof. The Company
shall use its reasonable best efforts (through its agents or otherwise) to
solicit from its stockholders proxies in favor of the adoption of this
Agreement and the approval of the Merger, and shall take all other action
reasonably necessary or advisable to secure the Company Stockholders'
Approval, except to the extent that the Board of Directors of the Company
determines in good faith, after consultation with the Company's legal
counsel, that doing so would cause the Board of Directors of the Company to
breach its fiduciary duties to the Company's stockholders under applicable
Law.
7.05 Reasonable Best Efforts; Cooperation. Subject to the terms and
conditions of this Agreement, each of the parties agrees to use all
reasonable best efforts to do, or cause to be done, all actions, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to satisfy the conditions set forth in Article VIII and
to consummate and make effective the Merger and the transactions
contemplated herein, including, but not limited to, (i) the obtaining of
all consents, approvals or actions of, making of all filings with and
giving all notices to Governmental or Regulatory Authorities or any other
public or private third parties required of Palisade or the Company to
consummate the Merger and (ii) the providing of such other information and
communications to such Governmental or Regulatory Authorities or other
public or private third parties as the other party or such Governmental or
Regulatory Authorities or other public or private third parties may
reasonably request.
7.06 Public Announcements. So long as this Agreement is in effect
neither the Company, Palisade nor Merger Sub shall issue or cause the
publication of any press release or of any other public announcement with
respect to the Merger or the transactions contemplated by this Agreement
without the prior consent of the other parties hereto, provided that a
party may make such a disclosure, without such consent, if it has
reasonably determined that such a disclosure must be made in order to
comply with applicable law or the rules of any national securities exchange
or the National Association of Securities Dealers, Inc. and, prior to such
a disclosure, if practicable, it promptly advises the other parties hereto
and consults with such parties concerning the information proposed to be
disclosed and provides such other parties with a reasonable opportunity to
review such disclosure.
7.07 Employee Benefit Plans.
To the extent disclosed in accordance with Section 4.13:
(a) Palisade and the Surviving Corporation shall cause the Company
Benefit Plans in effect at the date of this Agreement to remain in effect
until the second anniversary of the Effective Time or, to the extent such
Company Benefit Plans are not continued, the Surviving Corporation will
maintain until such date benefit plans which are no less favorable, in the
aggregate, to the employees of the Company at the Effective Time ("Affected
Employees") who are covered by such Company Benefit Plans; provided,
however, that nothing contained herein shall be construed as requiring the
Surviving Corporation to continue any specific plan.
(b) The Surviving Corporation shall honor without modification all
employee severance plans (or policies) and employment and severance
agreements of the Company or any of its Subsidiaries.
(c) The Surviving Corporation shall provide severance pay in
accordance with the terms of applicable Company Benefit Plans in effect on
the date hereof to any Company employee who is not party to an employment,
severance, change in control or similar agreement and who is terminated by
the Surviving Corporation during the period beginning on the Closing Date
and ending one year following the Closing Date.
(d) Palisade acknowledges that for purposes of all of the Company
Benefit Plans, the consummation of the transactions contemplated by this
Agreement will constitute a "Change in Control" of the Company and a
"Company Sale" (as such terms are defined in the applicable Company Benefit
Plans). Palisade agrees (i) to cause the Surviving Corporation after
consummation of the transactions contemplated by this Agreement to pay all
amounts provided under such Company Benefit Plans, as a result of a Change
in Control of the Company and/or Company Sale in accordance with their
terms, and (ii) to cause the Surviving Corporation to honor, all rights,
privileges and modifications to or with respect to any such Company Benefit
Plans which became effective as a result of such Change in Control.
(e) The Surviving Corporation shall give the Affected Employees
full credit for purposes of eligibility, vesting and the determination of
the level of benefits under any employee benefit plans or arrangements
maintained by the Surviving Corporation or any Subsidiary of the Surviving
Corporation for such Affected Employees' service with the Company or any
Subsidiary of the Company to the same extent recognized by the Company
immediately prior to the Effective Time; provided, however, that such
service need not be credited to benefit accrual under any defined benefit
pension plan to the extent that it would result in a duplication of
benefits.
(f) The Surviving Corporation shall (i) waive all limitations as
to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be
eligible to participate in after the Effective Time, other than limitations
or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Effective Time under
any welfare plan maintained for the Affected Employees immediately prior to
the Effective Time, and (ii) provide each Affected Employee with credit for
any co-payments and deductibles paid prior to the Effective Time in the
year in which the Effective Time occurs for purposes of satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans
that such employees are eligible to participate in after the Effective
Time.
7.08 Directors' and Officers' Indemnification and Insurance.
(a) Palisade and Merger Sub agree that all rights to
indemnification for acts or omissions occurring prior to the Effective Time
now existing in favor of the current or former directors, officers,
employees, fiduciaries or agents (the "Indemnified Parties") of the Company
and its Subsidiaries as provided in its certificate of incorporation or
bylaws or existing indemnification contracts shall survive the Merger and
shall continue in full force and effect in accordance with their terms.
(b) It is understood and agreed that the Company shall, and from
and after the Effective Time, the Surviving Corporation shall, indemnify,
defend and hold harmless the Indemnified Parties against all losses,
claims, damages, costs, expenses (including attorneys' fees and expenses),
liabilities or judgments, fines or amounts that are paid in settlement in
connection with any pending, threatened or actual claim, action, suit,
proceeding or investigation based in whole or in part or arising in whole
or part out of the fact that such Person is or was a director, officer,
employee or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, employee benefit plan, trust or other
enterprise or by reason of anything done or not done by such Person in any
such capacity whether pertaining to any matter existing or occurring at or
prior to the Effective Time or any acts or omissions occurring or existing
at or prior to the Effective Time and whether asserted or claimed prior to,
or at or after, the Effective Time ("Indemnified Liabilities"), including
all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the fullest extent that a
corporation is permitted to indemnify its current or former directors,
officers, employees or agents under applicable law (and the Company and the
Surviving Corporation, as the case may be, shall pay expenses in advance of
the final disposition of any such action or proceeding to each Indemnified
Party to the fullest extent that a corporation may do so with respect to
its current or former directors, officers, employees or agents under
applicable law). In the event any such claim, action, suit, proceeding or
investigation (each a "Claim"), is brought against any Indemnified Parties
(whether arising before or after the Effective Time) in which there exists
no actual or potential conflict that makes representation of both the
indemnifying party and the Indemnified Party inappropriate under applicable
standards of professional conduct, the indemnifying party shall have the
right to assume and direct all aspects of the defense thereof, including
settlement, and the Indemnified Party shall cooperate in the defense of any
such matter, provided that the indemnifying party shall reimburse the
Indemnified Party's reasonable out-of-pocket expenses in connection
therewith. The Indemnified Party shall have the right to participate with
its own counsel and at its own expense in (but not control) the defense of
any such matter in which there exists no such actual or potential conflict.
In the event any Claim is brought against an Indemnified Party (whether
arising before or after the Effective Time) in which an actual or potential
conflict exists between the interests of the indemnifying party and the
Indemnified Party, the Indemnified Party may assume and direct all aspects
of the defense thereof, including settlement, and may retain counsel and
the Company (or, after the Effective Time, the Surviving Corporation) shall
pay all reasonable fees and expenses of such counsel as promptly as
statements therefore are received. The indemnifying party may not settle
any Claim unless (i) the Indemnified Party gives its prior written consent,
which shall not be unreasonably withheld or (ii) the terms of the
settlement provide that the Indemnified Party shall have no responsibility
for the discharge of any settlement amount and impose no other obligations
or duties on the Indemnified Party and the settlement provides the
Indemnified Party with a full release with respect to such matter. In no
event shall the indemnifying party be liable for any settlement effected
without its prior written consent; provided that if such indemnifying party
elected not to assume and direct the defense of such action, such
indemnifying party's consent to such settlement shall not be unreasonably
withheld or delayed. Any Indemnified Party wishing to claim indemnification
under this Section 7.08(b) shall promptly notify the Surviving Corporation
upon learning of any claim, action, suit, proceeding or investigation
giving rise to such claim for indemnification (but the failure to so
promptly notify shall not relieve the indemnifying party from any liability
which it may have under this Section 7.08(b) except to the extent
prejudiced by such failure), and shall deliver to the Surviving Corporation
the undertaking contemplated by Section 145(e) of the DGCL. If the
indemnifying party does not assume the defense of any Claim, or if, after
commencing or undertaking such defense or withdraws from the defense
thereof, the Indemnified Parties as a group may retain only one law firm in
each jurisdiction to represent them with respect to any single action
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties in which case the Indemnified Parties may retain
separate counsel. The Company (or, after the Effective Time, the Surviving
Corporation) shall pay all reasonable fees and expenses of counsel retained
by the Indemnified Parties pursuant to the preceding sentence as promptly
as statements therefor are received.
(c) The Surviving Corporation shall, until the sixth anniversary
of the Effective Time, cause to be maintained in effect, to the extent
available, the policies of directors' and officers' liability insurance
maintained by the Company as of the date hereof (or policies of at least
the same coverage and amounts containing terms that are no less
advantageous to the insured parties) with respect to claims arising from
facts or events that occurred on or prior to the Effective Time; provided
that if such insurance cannot reasonably be obtained for an annual premium
of 200% of the last annual premium paid by the Company prior to the date of
this Agreement, then the Surviving Corporation shall only be required to
obtain, and cause to be maintained in effect, as much of such insurance as
may be obtained at an annual premium of 200% of the last such annual
premium.
(d) The provisions of this Section 7.08 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and his or
her heirs and legal representatives, and shall be in addition to any other
rights an Indemnified Party may have under the organizational documents of
the Surviving Corporation, under the DGCL or otherwise.
(e) In the event the Company or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving entity
of such consolidation or merger or (ii) transfers all or substantially all
of its properties and assets to any Person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the
Company or the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 7.08.
7.09 Notice and Cure. Each of Palisade and the Company will notify
the other promptly in writing of, and contemporaneously will provide the
other with true and complete copies of any and all information or documents
relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance occurring after
the date of this Agreement that causes or will cause any covenant or
agreement of Palisade or the Company, as the case may be, under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of Palisade or the Company, as the case may be,
contained in this Agreement as if the same were made on or as of the date
of such event, transaction or circumstance. Each of Palisade and the
Company also will notify the other promptly in writing of, and will use all
commercially reasonable efforts to cure, before the Closing, any violation
or breach of any representation, warranty, covenant or agreement made by
Palisade or the Company, as the case may be, in this Agreement, whether
occurring or arising prior to, on or after the date of this Agreement. No
notice given pursuant to this Section 7.09 shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition
contained herein.
7.10 Liquidation Following Closing. Palisade shall use its
reasonable best efforts to cause the Liquidation of all of the Liquidated
Distributable Assets from and after the Closing and to maximize the amount
realized pursuant to such Liquidation.
7.11 Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Palisade and the Company and its respective general
partner and the Board of Directors shall grant such approvals and take such
actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions.
7.12 Merger Sub Compliance. Palisade shall guarantee and cause
Merger Sub to comply with all of Merger Sub's obligations under or related
to this Agreement.
ARTICLE VIII
Conditions
8.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger and
consummate the other transactions contemplated by this Agreement are
subject to the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Stockholder Approval. This Agreement and the consummation of
the Merger shall have been adopted and approved by the requisite vote of
the stockholders of the Company under the DGCL and the Company's
Certificate of Incorporation.
(b) No Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental or Regulatory Authority shall
have enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) which is then in effect and
has the effect of making illegal or otherwise preventing or prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.
8.02 Conditions to Obligations of Palisade and Merger Sub. The
obligations of Palisade and Merger Sub to effect the Merger and consummate
the other transactions contemplated by this Agreement are further subject
to the fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in
part by Palisade and Merger Sub in their sole discretion):
(a) Representations and Warranties. (i) Each of the
representations and warranties made by the Company in Sections 4.01
(Organization and Qualification), 4.02 (Capital Stock), 4.03 (Authority
Relative to this Agreement) and 4.24 (Brokers and Finders) shall be true
and correct in all respects as of the Closing Date as though made on and as
of the Closing Date (other than representations and warranties made as of a
specified date, the accuracy of which will be determined as of the
specified date) and (ii) each of the representations and warranties made by
the Company in this Agreement (other than those set forth in Sections 4.01
(Organization and Qualification), 4.02 (Capital Stock), 4.03 (Authority
Relative to this Agreement) and 4.24 (Brokers and Finders)) shall be true
and correct in all respects (but without regard to any materiality
qualifications or references to material adverse effect contained in any
specific representation or warranty) as of the Closing Date as though made
on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date; provided, however, that the condition set
forth in clause (ii) of this Section 8.02(a) shall be deemed to have been
satisfied unless (A) the individual impact of an inaccuracy in or a breach
of each such representation or warranty (x) results in, or would be
reasonably expected to result in, liability to or payments from (or the
failure to disclose liability to or payment from) the Company and its
Subsidiaries exceeding $100,000 or (y) results in the imposition of (or the
failure to disclose the existence of) any non-monetary obligation to which
the Company, any of its Subsidiaries or any of their respective businesses,
assets or properties are subject and (B) the aggregate impact of all such
inaccuracies or breaches described in clause (A) above is having or is
reasonably expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole. The Company shall have delivered to
Palisade a certificate, dated the Closing Date and executed on behalf of
the Company by its Chairman of the Board, President or any Vice President,
to such effect.
(b) Consents and Approvals. All consents, approvals and actions
of, filings with and notices to any Governmental or Regulatory Authority or
any other public or private third parties required of the Company or any of
its Subsidiaries in any material respect to consummate the Merger and the
other transactions contemplated hereby, shall have been obtained, all in
form and substance reasonably satisfactory to Palisade, and no such
consent, approval or action of any federal, state or other regulatory body
shall contain any term or condition which would be reasonably expected to
result in a material diminution of the benefits of the Merger to Palisade
or the Surviving Corporation.
(c) Performance of Obligations. The Company shall have performed
and complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with
by the Company at or prior to the Closing, and the Company shall have
delivered to Palisade a certificate, dated the Closing Date and executed on
behalf of the Company by its Chairman of the Board, President or any Vice
President, to such effect.
(d) Certificates and Other Deliveries. The Company shall have
delivered to Palisade (i) certificates executed by the Company by its Chief
Executive Officer, President or Chief Financial Officer to the effect that
the conditions set forth in Sections 8.02(a) and (b) hereof have been
satisfied and (ii) duly adopted resolutions of the Board of Directors of
the Company and the consents of its stockholders, in each case approving
the execution, delivery and performance of this Agreement and the
instruments contemplated hereby.
(e) Dissenting Shares. The aggregate number of Dissenting Shares
shall not exceed ten percent (10%) of the total number of Shares (other
than Cancelled Shares) outstanding on the Closing Date.
8.03 Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger and consummate the other transactions
contemplated by this Agreement are further subject to the fulfillment, at
or prior to the Closing, of each of the following additional conditions
(all or any of which may be waived in whole or in part by the Company in
its sole discretion):
(a) Representations and Warranties. Each of the representations
and warranties made by Palisade and Merger Sub in Sections 5.01
(Organization and Qualification), 5.02 (Capital Stock of Merger Sub), 5.03
(Authority Relative to this Agreement) and 5.07 (Sufficient Funds) shall be
true and correct in all respects as of the Closing Date as though made on
and as of the Closing Date (other than representations and warranties made
as of a specified date, the accuracy of which will be determined as of the
specified date) and (ii) each of the representations and warranties made by
Palisade and Merger Sub in this Agreement (other than those set forth in
Sections 5.01 (Organization and Qualification) and 5.03 (Authority Relative
to this Agreement)) shall be true and correct in all respects (but without
regard to any materiality qualifications or references to material adverse
effect contained in any specific representation or warranty) as of the
Closing Date as though made on and as of the Closing Date or, in the case
of representations and warranties made as of a specified date earlier than
the Closing Date, on and as of such earlier date; provided that this
condition shall be deemed to have been satisfied unless the individual or
aggregate impact of all inaccuracies of all such representations and
warranties results in, or would be reasonably expected to have, a material
adverse effect (i) on Palisade or Merger Sub or (ii) on the validity or
enforceability of this Agreement or on the ability of Palisade and Merger
Sub to perform their obligations hereunder. Palisade and Merger Sub shall
each have delivered to the Company a certificate, dated the Closing Date
and executed on behalf of Palisade by its Chairman of the Board, President
or any Vice President and on behalf of Merger Sub by its Chairman of the
Board, President or any Vice President, to such effect.
(b) Performance of Obligations. Palisade and Merger Sub shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed or
complied with by Palisade or Merger Sub at or prior to the Closing, and
Palisade and Merger Sub shall each have delivered to the Company a
certificate, dated the Closing Date and executed on behalf of Palisade by
its Chairman of the Board, President or any Vice President and on behalf of
Merger Sub by its Chairman of the Board, President or any Vice President,
to such effect.
(c) Certificates and Other Deliveries. Palisade shall have
delivered, or caused to be delivered, to the Company (i) a certificate
executed on its behalf by its general partner to the effect that the
conditions set forth in Sections 8.03(a) and (b) have been satisfied and
(ii) duly adopted resolutions of the general partner of Palisade and of the
Board of Directors of Merger Sub approving the execution, delivery and
performance of this Agreement and the instruments contemplated hereby, each
certified by their respective authorized representatives.
ARTICLE IX
Termination, Amendment and Waiver
9.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, by action taken or authorized by the general partner or
Board of Directors of the terminating party, as the case may be:
(a) by mutual written agreement of Palisade and the Company;
(b) by either the Company or Palisade, if:
(i) at any time after December 31, 2002 (the "Termination
Date"), the Merger shall not have been consummated on or prior to
such date; provided that the right to terminate the Agreement
pursuant to this Section 9.01(b)(i) shall not be available to any
party whose breach of or failure to perform any provision of this
Agreement results in the failure of the Merger to be consummated
by such time; provided further, that the Termination Date may be
extended for up to three months by Palisade or the Company by
written notice to the other if the Merger would have been
consummated by the Termination Date but for the failure to obtain
any regulatory approval necessary to consummate the Merger and
such regulatory approval can reasonably be expected to be obtained
within such three-month period; provided further, that the
Termination Date shall be extended to January 31, 2003, without
the taking of any further action by Palisade or the Company, if
the SEC has not advised the Company prior to October 31, 2002 that
the SEC has no further comments on the Proxy Statement/Prospectus;
(ii) upon a vote at a duly held Company Stockholders'
Meeting or an adjournment thereof at which the Company
Stockholders' Approval shall have been voted upon, the Company
Stockholders' Approval shall not have been obtained; or
(iii) any court of competent jurisdiction or other
competent Governmental or Regulatory Authority shall have issued
any Law or Order making illegal or otherwise preventing or
prohibiting the Merger and such Order shall have become final and
nonappealable.
(c) by Palisade, if:
(i) (x) the Company's Board of Directors shall have (A)
failed to make the recommendation contemplated by Section 7.03(c)
in the Proxy Statement, (B) withdrawn or modified adversely to
Palisade its approval or recommendation of the Merger, or (C)
approved or recommended an Alternative Transaction to its
stockholders, or (y) a tender offer or exchange offer for any
outstanding shares of capital stock of the Company is commenced
and the Board of Directors of the Company shall (within 5 days
after commencement of such tender offer) fail to recommend against
acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its
stockholders) or (z) the Company shall have entered into any
written agreement with respect to an Alternative Transaction
(whether or not binding), other than a confidentiality agreement;
or
(ii) a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement shall have occurred, which
breach or failure to perform renders any of the conditions set
forth in Sections 8.01 or 8.02 incapable of being satisfied;
provided that if such breach or failure to perform is curable by
the Company prior to the Termination Date through the exercise of
reasonable best efforts, then for so long as the Company continues
to exercise such reasonable best efforts, Palisade may not
terminate this Agreement under this Section 9.01(c)(ii);
(d) by the Company, if:
(i) prior to obtaining the Company Stockholders'
Approval, the Company's Board of Directors shall have determined,
under circumstances not involving any breach of the provisions of
Section 6.02, to recommend a Superior Offer to its stockholders or
to enter into a binding written agreement with respect to a
Superior Offer; provided that the Company has complied with all of
the provisions of Section 6.02; or
(ii) a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of
Palisade or Merger Sub set forth in this Agreement shall have
occurred, which breach or failure to perform renders any of the
conditions set forth in Sections 8.01 or 8.03 incapable of being
satisfied; provided that if such breach or failure to perform is
curable by Palisade or Merger Sub prior to the Termination Date
through the exercise of reasonable best efforts, then for so long
as the Palisade or Merger Sub continues to exercise such
reasonable best efforts, the Company may not terminate this
Agreement under this Section 9.01(d)(ii).
The party desiring to terminate this Agreement pursuant to this
Section 9.01 (other than pursuant to Section 9.01(a)) shall give written
notice of such termination to the other parties.
9.02 Effect of Termination. If this Agreement is validly
terminated by either the Company or Palisade pursuant to Section 9.01, this
Agreement will forthwith become null and void and there will be no
liability or obligation on the part of either the Company or Palisade (or
any of their respective representatives or affiliates), except (i) that the
provisions of Sections 7.01(b) (Confidentiality), 7.06 (Public
Announcements), and Article X (General Provisions) will continue to apply
following any such termination, (ii) that nothing contained herein shall
relieve any party hereto from liability for breach of its representations,
warranties, covenants or agreements contained in this Agreement and (iii)
as provided in Section 9.03.
9.03 Fees and Expenses.
(a) Except as provided in this Section 9.03, whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such cost or expense.
(b) On the Closing Date, the Company shall reimburse Palisade for
reasonable fees and expenses of legal counsel incurred by Palisade in
connection with the Merger, provided that such reimbursement shall not
exceed $125,000.
(c) In the event that Palisade terminates this Agreement pursuant
to Section 9.01(c)(i), or the Company terminates this Agreement pursuant to
Section 9.01(d)(i), then the Company shall pay to Palisade, following two
business days after such termination, a fee in an amount equal to $500,000.
In the event that either party terminates this Agreement pursuant to
Section 9.01(b)(ii) or Palisade terminates this Agreement Pursuant to
Section 9.01(c)(ii), the Company shall pay to Palisade $300,000 following
two business days after such termination (inclusive of any amount paid
pursuant to Section 9.03(b)), and such payment shall constitute liquidated
damages for such termination. The prevailing party in any legal action
undertaken to enforce this Agreement or any provision hereof shall be
entitled to recover from the other party the reasonable costs and expenses
(including attorneys' and expert witness' fees and expenses) incurred in
connection with such action.
9.04 Amendment. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the respective Boards of
Directors of Merger Sub and the Company, and the general partner of
Palisade, at any time prior to the Effective Time, whether prior to or
after adoption of this Agreement at the Company Stockholders' Meeting, but
after such adoption and approval only to the extent permitted by applicable
law. Any such amendment after the Effective Time (to the extent permitted
by applicable law) shall be subject to the prior approval of (i) the
general partner of Palisade, (ii) the board of directors of the Surviving
Corporation and (iii) the Board Observers. No such amendment, supplement or
modification shall be effective unless set forth in a written instrument
duly executed by or on behalf of each party hereto.
9.05 Waiver. At any time prior to the Effective Time any party
hereto, by action taken by or on behalf of its respective Boards of
Directors and the general partner, may to the extent permitted by
applicable law (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties
hereto contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the covenants, agreements or conditions
of the other parties hereto contained herein. No such extension or waiver
shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party extending the time of performance or waiving
any such inaccuracy or non-compliance. No waiver by any party of any term
or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion.
ARTICLE X
General Provisions
10.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article II (Conversion of
Shares) and in Sections 7.07 (Employee Benefit Plans) and 7.08
(Indemnification and Insurance), which shall survive the Effective Time;
provided that the Confidentiality Agreement shall survive the termination
of this Agreement pursuant to the terms thereof.
10.02 Knowledge. With respect to any representations or warranties
contained herein which are made to the knowledge of the Company, Palisade
or Merger Sub or any of their respective Subsidiaries, as the case may be,
the actual knowledge of the senior officers (including without limitation
the Chief Executive Officer, Chief Financial Officer, the general counsel
and the chief environmental, tax and employee benefits officer) of the
Company, Palisade or Merger Sub, as the case may be, shall be imputed to
the Company, Palisade, Merger Sub or the Subsidiary.
10.03 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given
only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the parties at the following addresses or
facsimile numbers:
If to Palisade or Merger Sub, to:
Palisade Capital
One Bridge Plaza
Fort Lee, NJ 07024
Telephone: (201) 585-7733
Facsimile: (201) 585-9798
Attention: Mark Hoffman
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Telephone: (212) 504-6177
Facsimile: (212) 504-6666
Attention: Michael C. Ryan, Esq.
If to the Company, to:
Refac
115 River Road
Edgewater, NJ 07020
Telephone: (201) 943-4400
Facsimile: (201) 943-7400
Attention: Robert L. Tuchman, President and CEO
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Telephone: (212) 735-2760
Facsimile: (917) 777-2760
Attention: Stephen M. Banker, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 10.03, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given upon receipt,
and (iii) if delivered by mail in the manner described above to the address
as provided in this Section 10.03, be deemed given upon receipt (in each
case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice is to be
delivered pursuant to this Section 10.03). Any party from time to time may
change its address, facsimile number or other information for the purpose
of notices to that party by giving notice specifying such change to the
other parties hereto.
10.04 Schedules; Entire Agreement. References in this Agreement to
"Schedules" refer to the schedules delivered by Company to Palisade as of
the date of this Agreement. This Agreement (including the Schedules)
supersedes all prior discussions and agreements both written and oral among
the parties hereto with respect to the subject matter hereof, and contains
the sole and entire agreement among the parties hereto with respect to the
subject matter hereof and thereof, except for the Confidentiality
Agreement.
10.05 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and except as provided in
(i) Sections 2.01(d) and 2.01(f)(which are intended to be for the benefit
of the Persons entitled to the Payment Right, and may be enforced by any of
such Persons) and (ii) Section 7.08 (which is intended to be for the
benefit of the Persons entitled to therein, and may be enforced by any of
such Persons), it is not the intention of the parties to confer third party
beneficiary rights upon any other Person.
10.06 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any
attempt to do so will be void, except that Merger Sub may assign any or all
of its rights, interests and obligations hereunder to another direct or
indirect wholly owned Subsidiary of Palisade, provided that any such
Subsidiary agrees in writing to be bound by all of the terms, conditions
and provisions contained herein and Palisade shall guarantee the
performance of such Subsidiary pursuant to such contract. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit
of and is enforceable by the parties hereto and their respective successors
and assigns.
10.07 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
10.08 Invalid Provisions. If any provision of this Agreement (other
than any provision of Article II) is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially
and adversely affected thereby, (i) such provision will be fully severable,
(ii) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (iii)
the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the legal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a
part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
possible.
10.09 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable
to a contract executed and performed in such State without giving effect to
the conflicts of laws principles thereof.
10.10 Specific Performance. The parties to this Agreement agree
that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.11 Jurisdiction. Each of the parties to this Agreement (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of New York or any New York state court in the event
any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not initiate any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the State of
New York or a New York state court.
10.12 Interpretation. Any statute, regulation, or other law
defined or referred to herein (or in any agreement or instrument that is
referred to herein) means such statute, regulation or other law as, from
time to time, may be amended, modified or supplemented, including (in the
case of statutes) by succession of comparable successor statutes.
References to a Person are also to its predecessors and permitted
successors and assigns.
10.13 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized as of the
date first above written.
PALISADE CONCENTRATED EQUITY
PARTNERSHIP, L.P.
By: Palisade Concentrated Holdings, L.L.C.,
General Partner
By: /s/ Steven Berman
--------------------------
Steven Berman, Member
PALISADE MERGER CORP.
By: /s/ Steven Berman
--------------------------
Steven Berman, President
REFAC
By: /s/ Robert L. Tuchman
--------------------------
Robert L. Tuchman, President and CEO
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have
the meanings ascribed to them in the corresponding Sections of this
Agreement listed below:
A
Affected Employees...................................................................... Section 7.04
Agreement............................................................................... Preamble
Alternative Transaction................................................................. Section 6.02(a)
B
Board Observers......................................................................... Section 2.02(i)
C
Cancelled Shares........................................................................ Section 2.01(b)
Cash Consideration...................................................................... Section 2.01(c)
Certificate of Merger................................................................... Section 1.02
Certificates............................................................................ Section 2.02(b)
Change in Control....................................................................... Section 7.07(d)
Claim................................................................................... Section 7.08(b)
Closing................................................................................. Section 1.03
Closing Date............................................................................ Section 1.03
Code.................................................................................... Section 2.02(i)
Company................................................................................. Preamble
Company Awards.......................................................................... Section 4.02(a)
Company Benefit Plans................................................................... Section 4.13(a)
Company Common Stock.................................................................... Section 2.01(b)
Company Financial Statements............................................................ Section 4.05
Company Option.......................................................................... Section 2.01(g)(i)
Company Option Plans.................................................................... Section 2.01(g)(i)
Company Permits......................................................................... Section 4.10
Company Preferred Stock................................................................. Section 4.02(a)
Company Regulatory Agreement............................................................ Section 4.19
Company Rights.......................................................................... Section 4.02(a)
Company Rights Agreement................................................................ Section 4.02(a)
Company Sale............................................................................ Section 7.07(d)
Company SEC Reports..................................................................... Section 4.05
Company Series A Preferred Stock........................................................ Section 4.02(a)
Company Stockholders' Approval.......................................................... Section 4.22
Company Stockholders' Meeting........................................................... Section 7.04
Confidentiality Agreement............................................................... Section 6.02(a)
Contingent Fund......................................................................... Section 2.01(b)
D
Debt.................................................................................... Section 4.11(b)(i)
Debt Instruments........................................................................ Section 4.11(b)(i)
DGCL.................................................................................... Section 1.01
Dissenting Share........................................................................ Section 2.01(g)(i)
E
Effective Time.......................................................................... Section 1.02
Environmental Laws...................................................................... Section 4.15
Environmental Liabilities............................................................... Section 4.15
ERISA................................................................................... Section 4.13(a)
ERISA Affiliate......................................................................... Section 4.14(c)
Exchange Act............................................................................ Section 4.04(b)
Exchange Agent.......................................................................... Section 2.02(a)
Exchange Fund........................................................................... Section 2.02(a)
F
Fleet Securities........................................................................ Section 4.19
G
GAAP.................................................................................... Section 4.05
Governmental or Regulatory Authority.................................................... Section 4.04(a)
H
Hazardous Materials..................................................................... Section 4.15
I
Indemnified Liabilities................................................................. Section 7.08(b)
Indemnified Parties..................................................................... Section 7.08(a)
Intellectual Property................................................................... Section 4.17
J
June 30, 2005 Deficiency................................................................ Section 2.01(c)
L
Laws.................................................................................... Section 4.04(a)
Leases.................................................................................. Section 4.16(a)
Lien.................................................................................... Section 4.02(b)
Liquid Distributable Assets............................................................. Section 2.01(c)
Liquidation............................................................................. Section 4.05
M
material................................................................................ Section 4.01
material adverse effect................................................................. Section 4.01
Material Contracts...................................................................... Section 4.11(b)
materially adverse...................................................................... Section 4.01
Merger.................................................................................. Preamble
Merger Consideration.................................................................... Section 2.01(c)
Merger Sub.............................................................................. Preamble
Merger Sub Common Stock................................................................. Section 2.01(b)
Merger Sub Options...................................................................... Section 5.02
O
Obligations............................................................................. Section 4.04(a)
Orders.................................................................................. Section 4.04(a)
Organization Documents.................................................................. Section 4.01
P
Palisade................................................................................ Preamble
Payment Right........................................................................... Section 2.01(c)
Permitted Liens......................................................................... Section 4.16(c)
Person.................................................................................. Section 4.01
Post-signing Returns.................................................................... Section 6.02(a)
Proxy Statement......................................................................... Section 4.09(a)
R
Real Property Assets.................................................................... Section 4.16(a)
Receivables............................................................................. Section 2.01(b)
S
SEC..................................................................................... Section 4.04(b)
Secretary of State...................................................................... Section 1.02
Securities Act.......................................................................... Section 4.05
Shares.................................................................................. Section 2.02(a)
Stock Consideration..................................................................... Section 2.01(c)
Subsidiary.............................................................................. Section 4.01
Superior Offer.......................................................................... Section 6.02(a)
Surviving Corporation................................................................... Section 1.01
Surviving Corporation Stock............................................................. Section 2.01(b)
T
Takeover Statutes....................................................................... Section 4.23
Tax Actions............................................................................. Section 6.02(a)
Tax Attribute........................................................................... Section 2.01(b)
Tax Return.............................................................................. Section 4.12(k)
Taxes................................................................................... Section 4.12(k)
Termination Date........................................................................ Section 9.01(b)(i)
Title Defects........................................................................... Section 4.16(c)
EXHIBIT 10.2
THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT
BETWEEN
ROBERT L. TUCHMAN
AND
REFAC
(formerly REFAC TECHNOLOGY DEVELOPMENT CORPORATION)
Dated as of August 19, 2002
THIS THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement") made as of August 19, 2002 between REFAC, a Delaware
corporation ("REFAC"), and Robert L. Tuchman ("TUCHMAN").
TUCHMAN is currently employed by REFAC under a Second Amended and
Restated Employment Agreement dated as of December 13, 1996 and amended by
agreements dated as of January 20, 1999 and March 21, 2002 (the "Prior
Agreement").
REFAC intends to enter into an Agreement and Plan of Merger by and
among REFAC, Palisade Concentrated Equity Partnership, L.P. ("Palisade")
and Palisade Merger Corp. (the "Merger Sub") (the "Merger Agreement")
pursuant to which the Merger Sub will merge with and into REFAC (the
"Merger") and REFAC will become a subsidiary of Palisade;
Following the Merger, the parties hereto desire to continue
TUCHMAN's employment upon the terms and conditions hereinafter set forth.
Effective as of the "Effective Time" (as defined in the Merger
Agreement), the parties hereto desire to modify the contractual
arrangements between them and replace them with this Agreement.
In consideration of the premises and the respective agreements of
the parties herein contained, the parties hereto, intending to be legally
bound, agree as follows:
1. Employment. Subject to the provisions hereof, following the
Effective Time, REFAC shall continue to employ TUCHMAN and TUCHMAN shall
continue to serve as the Chief Executive Officer, President, and General
Counsel of REFAC with full responsibility for the supervision of all
corporate affairs.
2. Term. The employment of TUCHMAN by REFAC hereunder will
continue from the Effective Time until March 31, 2004, (the "Employment
Period") unless further extended by agreement of TUCHMAN and REFAC or until
sooner terminated as hereinafter provided.
3. Duties.
(a) Regular Duties. During the Employment Period, TUCHMAN will
continue to perform such duties and have such powers as are customary for
the chief executive officer, president and general counsel of publicly-held
corporations of a size and engaging in a business comparable to REFAC.
(b) Liquidation. In addition to the services rendered under
Section 3(a) above, TUCHMAN shall be responsible for REFAC's efforts to
liquidate.
(c) Responsible to the Board. TUCHMAN will report and be directly
responsible to the Board of Directors of REFAC (the "Board").
(d) Time Devoted to REFAC's Affairs. TUCHMAN will devote
substantially all his working time and efforts to the business and affairs
of REFAC and will not, without the express prior authorization of the
Board, have any active engagement in or responsibility with respect to any
business or commercial enterprise other than REFAC or a subsidiary of
REFAC.
(e) Post Employment Services. It is contemplated that some of
REFAC's assets may be sold in exchange for contract rights that include
periodic payments and that some of the royalty agreements might be
collected until maturity rather than sold. In such event and with respect
to such contracts, TUCHMAN agrees to be responsible for the contract
administration, which shall include invoicing (where appropriate),
collecting the periodic payments, monitoring performance, and record
keeping. TUCHMAN shall be reimbursed for all of his out-of-pocket costs
associated therewith and will perform these services on a part-time basis.
4. Place of Performance. In connection with TUCHMAN's employment
by REFAC, TUCHMAN will be based in the New York City metropolitan area,
except for required travel on REFAC's business to an extent consistent with
REFAC's business requirements and his responsibilities hereunder.
5. Base Salary and Incentive Compensation.
(a) Base Salary. During the Employment Period, TUCHMAN's salary
will be $300,000 per annum. Payment of such salary will be made in
accordance with REFAC's customary pay practices for senior officers and
will be subject to such payroll deductions as are required by law or by the
terms of any applicable benefit plan of REFAC.
(b) Incentive Compensation. During the Employment Period, TUCHMAN
shall use reasonable efforts, consistent with prudent and reasonable
business judgment, to convert REFAC's assets into cash and securities in
order to maximize the payment available to REFAC's stockholders pursuant to
Section 2.01(d) of the Merger Agreement. As incentive compensation for this
undertaking, upon a Payment Event (as such term is hereinafter defined)
TUCHMAN (or in the case of death, TUCHMAN's estate) will be entitled to
receive a bonus or bonuses (each, a "Success Bonus") in consideration of
his successful performance of the duties described in Section 3(b) hereof
equal to 16% of the amount, if any, by which the "Eligible Consideration"
(as hereinafter defined) exceeds $17,843,602, payable in accordance with
the terms of this Section 5. For purposes of this Agreement, "Payment
Event" shall mean (i) each Liquidation (as hereinafter defined) during the
Employment Period, (ii) termination of TUCHMAN's employment with REFAC
during the Employment Period due to his death, Disability (as hereinafter
defined) or termination by REFAC without Cause (as hereinafter defined),
and (iii) the expiration of the term of this Agreement. In the event that
TUCHMAN receives a Success Bonus in respect of a Liquidation, he will
remain eligible for additional Success Bonus payments in the event of a
subsequent Liquidation (or Liquidations) or other Payment Event. In the
event that TUCHMAN receives a Success Bonus in respect of a Payment Event
subsequent to a Liquidation, such amount shall be reduced by the amount of
any Success Bonus previously paid to TUCHMAN (hereinafter, the "Offset
Adjustment"). In the event that TUCHMAN receives a Success Bonus in respect
of Payment Event that is not a Liquidation, TUCHMAN will not be eligible
for additional Success Bonus payments upon the occurrence of any subsequent
event.
(1) Eligible Consideration - Liquidation, Expiration of Term.
In the event of each Liquidation or the expiration of the
term of this Agreement, "Eligible Consideration" shall
mean the sum of (i) the aggregate amount of cash and the
fair market value (as determined by the Board in its sole
discretion) of securities that would be available for
distribution to REFAC's stockholders if REFAC completely
liquidated on the date of such Liquidation or expiration,
as applicable, plus (ii) the amount of any expenditure by
the Company, made between the Effective Time and the date
of such Liquidation or expiration, as applicable, that is
unrelated to a Liquidation or the continued operation of
the Company as conducted at the Effective Time (other
than expenditures to purchase securities described in
subparagraph (i)), plus (iii) the total amounts paid or
payable upon completion of future services to TUCHMAN
pursuant to Sections 6 and 7 of this Agreement and any
incentive compensation paid to Raymond Cardonne with
respect to any Company Sale, as defined in his employment
agreement with REFAC, plus (iv) any incentive
compensation paid to TUCHMAN or Raymond Cardonne with
respect any prior Liquidation, plus (v) any amount paid
by REFAC to Palisade pursuant to Section 9.03(b) of the
Merger Agreement, minus (vi) the amount of cash and the
fair market value of assets (as determined by the Board
in its sole discretion) reserved to cover actual or
potential liabilities or claims against or relating to
REFAC, including unpaid legal and other fees and expenses
incurred by REFAC in connection with the Liquidation and
any unpaid Retention Payment, as defined below (but
excluding TUCHMAN's incentive compensation hereunder and
Raymond Cardonne's incentive compensation under his
employment agreement with REFAC), minus (vii) REFAC's
total proceeds from exercises of options for common stock
of REFAC that occur between the date of the Merger
Agreement and the Effective Time.
(2) Eligible Consideration - Termination Due to Death or
Disability or By REFAC Without Cause or By TUCHMAN for
Good Reason. In the event that TUCHMAN's employment is
terminated by REFAC without Cause or by TUCHMAN for Good
Reason or due to TUCHMAN's Disability or is terminated
upon TUCHMAN's death, in any such case during the
Employment Period, "Eligible Consideration" shall mean
the sum of (i) the aggregate amount of cash and the fair
market value (as determined by the Board in its sole
discretion) of securities that would be available for
distribution to REFAC's stockholders if REFAC completely
liquidated on the date of such termination, plus (ii) the
amount of any expenditure by the Company, made between
the Effective Time and the date of such termination, that
is unrelated to a Liquidation or the continued operation
of the Company as conducted at the Effective Time (other
than expenditures to purchase securities described in
subparagraph (i)), plus (iii) the total amounts paid or
payable upon completion of future services to TUCHMAN
pursuant to Sections 6 and 7 of this Agreement and any
incentive compensation paid to Raymond Cardonne with
respect to any Company Sale, as defined in his employment
agreement with REFAC, plus (iv) any compensation paid to
TUCHMAN or Raymond Cardonne with respect to any prior
Liquidation, plus (v) any amount paid by REFAC to
Palisade pursuant to Section 9.03(b) of the Merger
Agreement, plus (vi) the amount (as determined by the
Board in its sole discretion) that reasonably may be
realized upon the sale of REFAC's remaining assets that
are derived from the assets of REFAC as of the Effective
Time, minus (vii) the cash and fair market value of
assets (as determined by the Board in its sole
discretion) needed to be reserved for actual or potential
liabilities or claims against or relating to REFAC,
including any unpaid Retention Payment (but excluding
TUCHMAN's incentive compensation hereunder and Raymond
Cardonne's incentive compensation under his employment
agreement with REFAC), minus (viii) legal and other fees
and expenses expected by the Board, in its sole
discretion, to be incurred by REFAC in connection with
the sale of REFAC's assets, minus (ix) REFAC's total
proceeds from exercises of options for common stock of
REFAC that occur between the date of the Merger Agreement
and the Effective Time.
(c) Calculation of Eligible Consideration. The Board in its sole
discretion shall make all calculations and determinations necessary to the
calculation of the Eligible Consideration. Distributable Amount shall be
determined exclusively with respect to the assets and businesses of REFAC
as of the Effective Time. In the case of a Liquidation, the Eligible
Consideration shall be calculated immediately prior to each date of an
actual distribution to stockholders. In the case of a Payment Event other
than a Liquidation, the Eligible Consideration shall be calculated
immediately upon the occurrence of such Payment Event.
(d) Payment of Success Bonus. (i) In the event of a Liquidation,
REFAC shall pay TUCHMAN the Success Bonus at the time of the consummation
of such Liquidation. In the event of a Payment Event other than a
Liquidation, REFAC shall pay TUCHMAN the Success Bonus as soon as
practicable following the occurrence of such Payment Event.
(ii) Notwithstanding the foregoing, in the event that some or all
of the Eligible Consideration consists of securities or other property, the
Board may, in its sole discretion, pay TUCHMAN a ratable portion of his
Success Bonus in such securities or other property, which shall be valued
by the Board in its sole discretion. If there are restrictions imposed upon
the consideration (including, without limitation, transfer restrictions or
forfeiture conditions), the Board may, in its sole discretion, require
TUCHMAN to consent to the imposition of similar restrictions upon any share
of such consideration conveyed to him. Payment of such incentive
compensation shall be made within thirty (30) days after the date of
calculation except that the Board may also elect to pay TUCHMAN his share
of any consideration that it receives in installment payments within thirty
(30) days after receipt.
(e) Liquidation Defined. For purposes of this Agreement, a
"Liquidation" shall mean any sale of assets of REFAC during the Employment
Period.
6. Signing Bonus. At the Effective Time, REFAC will pay TUCHMAN a
one time cash bonus of $800,000.
7. Retention Payments. If TUCHMAN is employed by REFAC, Palisade
or one of their respective subsidiaries on the retention payment dates set
forth below (each, a "Retention Payment Date"), REFAC will pay to TUCHMAN
the retention payment set forth below with respect to such Retention
Payment Date (each, a "Retention Payment") within seven (7) days following
such Retention Payment Date:
--------------------------------------------------
Retention Payment Retention Payment Date
--------------------------------------------------
$200,000 First anniversary of the
Effective Time
--------------------------------------------------
$100,000 January 1, 2004
--------------------------------------------------
$155,000 March 31, 2004
--------------------------------------------------
8. Fringe Benefits, Expenses and Related Matters.
(a) Expenses. During Employment Period, TUCHMAN will be entitled
to receive prompt reimbursement for all reasonable expenses incurred by
TUCHMAN in performing services hereunder, including all reasonable expenses
of travel and living expenses while away from home on business or at the
request of and in the service of REFAC, provided that such expenses are
incurred and accounted for in accordance with the policies and procedures
established by REFAC.
(b) Automobile. During the Employment Period, REFAC will provide
TUCHMAN with an automobile with a maximum monthly lease payment of $650.
(c) Other Benefits. TUCHMAN will be entitled to participate in or
receive benefits under any employee benefit plan or arrangement now or in
the future made available by REFAC generally to its executive employees,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements, including health insurance
and life insurance benefits.
(d) Vacations. TUCHMAN will be entitled to four weeks of paid
vacation per calendar year, prorated for any portion thereof and to all
paid holidays given by REFAC in accordance with REFAC's regular paid
holidays policy.
9. Facilities and Support Services Furnished. REFAC will furnish
TUCHMAN with office space, secretarial assistance and such other facilities
and services as shall be suitable to TUCHMAN's position and adequate for
the performance of his duties as herein set forth.
10. Termination. TUCHMAN's employment hereunder may be terminated
under the following circumstances:
(a) Death. TUCHMAN's employment hereunder will terminate
immediately upon his death.
(b) Disability. REFAC may terminate TUCHMAN's employment hereunder
if TUCHMAN should become permanently disabled. For the purposes of this
Agreement, permanent disability ("Disability") means TUCHMAN's inability,
by virtue of physical or mental illness or injury, to perform his regular
duties on a full-time, continuous basis for 120 consecutive days. TUCHMAN's
disability will be established if a qualified medical doctor selected by
the parties so certifies in writing. If the parties are unable to agree on
the selection of such a doctor, each party will designate a qualified
medical doctor who together will select a third doctor who will make the
determination. TUCHMAN will make himself available for an examination by a
doctor selected in accordance with this paragraph (b).
(c) Cause. REFAC may terminate TUCHMAN's employment hereunder for
Cause at any time during the Employment Period hereof as hereinafter set
forth. For purposes of this Agreement, REFAC will have "Cause" to terminate
TUCHMAN's employment hereunder upon (i) the willful and continued failure,
in the reasonable judgment of the Board, by TUCHMAN to perform
substantially his duties with REFAC (other than any such failure resulting
from his death or Disability) after a written demand for substantial
performance is delivered to TUCHMAN by the Board which specifically
identifies the manner in which it is believed that TUCHMAN has not
substantially performed his duties or (ii) the conviction of TUCHMAN (or
the entering by TUCHMAN of a plea of guilty or nolo contendere) for any
felony or any lesser crime which involved REFAC or its property. For
purposes of clause (i) of this definition, no act, or failure to act, on
TUCHMAN's part shall be deemed "willful" unless done, or omitted to be
done, by TUCHMAN not in good faith and without reasonable belief that his
act, or failure to act, was in the best interest of the Company.
Notwithstanding the foregoing, TUCHMAN will not be deemed to have been
terminated for Cause within the meaning of clause (i) without (1)
reasonable notice to TUCHMAN setting forth the reasons for REFAC's
intention to terminate for Cause, (2) an opportunity for TUCHMAN, together
with his counsel, to be heard before the Board, and (3) delivery to TUCHMAN
of a Notice of Termination, as defined in paragraph (e) of this Section 10,
from the Board finding that, in the good faith opinion of the Board, clause
(i) hereof may be invoked, and specifying the particulars thereof in
detail.
(d) Good Reason. TUCHMAN may terminate his employment with REFAC
for Good Reason at any time during the Employment Period. For purposes of
this Agreement, TUCHMAN will have "Good Reason" to terminate his employment
with REFAC upon: (i) the assignment to TUCHMAN of any duties materially
inconsistent with his status as Chief Executive Officer of REFAC or a
substantial adverse alteration in the nature or status of his
responsibilities, giving due regard to the intention of Palisade for REFAC
to acquire new businesses which may not be under the management control of
TUCHMAN; (ii) a reduction by REFAC in TUCHMAN's Base Salary set forth in
Section 5 hereof; (iii) the relocation of TUCHMAN's principal place of
employment to a location more than thirty-five (35) miles from TUCHMAN's
principal place of employment; (iv) the failure by REFAC to pay to TUCHMAN
any portion of the Executive's current compensation within seven (7) days
of the date such compensation is due; and (v) any other material breach of
this Agreement by REFAC which is not cured within ten (10) days of a
written notice by TUCHMAN. TUCHMAN's right to terminate his employment for
Good Reason shall not be affected by his incapacity due to physical or
mental illness. TUCHMAN's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(e) Notice of Termination. Any termination of TUCHMAN's employment
by REFAC or by TUCHMAN (other than termination pursuant to Section 10(a))
during the Employment Period will be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" means a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of TUCHMAN's employment under the provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean (i) if
TUCHMAN's employment is terminated by his death, the date of his death,
(ii) if TUCHMAN's employment is terminated pursuant to paragraph (b) of
this Section 10, three weeks after Notice of Termination, (iii) if
TUCHMAN's employment is terminated pursuant to paragraph (c) or (d) of this
Section 10, the date specified in the Notice of Termination, and (iv) if
TUCHMAN's employment is terminated for any other reason, the date specified
in the Notice of Termination.
(g) TUCHMAN Cooperation. From and after the earlier to occur of
(i) delivery of a Notice of Termination and (ii) termination of TUCHMAN's
employment hereunder (other than termination due to TUCHMAN's death)
TUCHMAN will, to the best of his knowledge, disclose or provide for the
disclosure to REFAC or any successor thereof, orally or in writing as
appropriate, all information of a material nature relating to existing or
prospective clients and licensees and as to any other matters in which
TUCHMAN shall prior to his Date of Termination have been personally
involved or as to which TUCHMAN will have acquired special knowledge, and
TUCHMAN will thereafter answer to the best of his knowledge any questions
that REFAC may from time to time submit with respect to any such aforesaid
matters.
11. Compensation Upon Termination or During Disability.
(a) Disability. During any period that TUCHMAN fails or is unable
to perform his duties hereunder as a result of Disability, TUCHMAN will
continue to receive his full salary at the rate then in effect for such
period until his employment is terminated, provided that such payments will
be reduced by the amounts, if any, paid to TUCHMAN under any disability
benefit plans of REFAC or under the Social Security disability insurance
program. Following the termination of his employment, TUCHMAN's benefits
will be determined in accordance with REFAC's retirement, insurance, and
other applicable programs and plans then in effect, if any.
(b) Death. If TUCHMAN's employment should be terminated by his
death, REFAC will (i) pay any accrued salary and other compensation and
benefits through the date of death to TUCHMAN's spouse, or, if he leaves no
spouse, to his estate and (ii) pay or cause the payment to TUCHMAN's
beneficiary, or if he specified no beneficiary, to his estate, the death
benefits payable pursuant to REFAC's life insurance program in effect at
the date of death, if any.
(c) Cause. If TUCHMAN's employment should be terminated by REFAC
for Cause or by TUCHMAN during the Employment Period, REFAC will pay
TUCHMAN his full salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts
to which TUCHMAN is entitled as of the Date of Termination under any
benefit plan of REFAC at the time such payments are due, and REFAC will
have no further obligations to TUCHMAN under this Agreement.
(d) Without Cause. TUCHMAN's employment with REFAC may not be
terminated by REFAC during the Employment Period for reasons other than
those described in Section 10(a), 10(b) or 10(c) unless, prior to such
termination TUCHMAN has together with his counsel had an opportunity to
appear and be heard at a meeting of the Board which was called and held
(after reasonable notice to TUCHMAN) for the purpose of considering such a
termination. In the event that TUCHMAN's employment is terminated by REFAC
during the Employment Period for reasons other than those described in
Section 10(a), 10(b) or 10(c), REFAC will (i) pay TUCHMAN a lump sum equal
to the sum of (A) his full salary that would have been payable for the
remainder of the Employment Period absent such termination at the rate in
effect at the time Notice of Termination is given and (B) all Retention
Payments not previously paid and (ii) will provide, except to the extent
that TUCHMAN shall receive similar benefits from a subsequent employer, the
life, health and similar welfare benefits which TUCHMAN would have been
entitled to during the remainder of the Employment Period absent such
termination under any such benefit plan of REFAC.
(e) Good Reason. In the event that TUCHMAN's employment is
terminated by TUCHMAN during the Employment Period for Good Reason, REFAC
will (i) pay TUCHMAN a lump sum equal to the sum of (A) his full salary
that would have been payable for the remainder of the Employment Period
absent such termination at the rate in effect at the time Notice of
Termination is given and (B) all Retention Payments not previously paid and
(ii) will provide, except to the extent that TUCHMAN shall receive similar
benefits from a subsequent employer, the life, health and similar welfare
benefits which TUCHMAN would have been entitled to during the remainder of
the Employment Period absent such termination under any such benefit plan
of REFAC.
(f) Mitigation of Payments. TUCHMAN will not be required to
mitigate the amount of any lump sum payment or bonus entitlement provided
for in this Section 11 by reducing it by the amount of any compensation
earned by TUCHMAN as the result of employment by another employer after the
Date of Termination, or otherwise. However, he will be required to mitigate
the costs of the other benefits provided for in this Section.
12. Noncompetition. TUCHMAN will not, except as hereinafter set
forth, engage in any Competitive Activity (as hereinafter defined) during
the Employment Period. For purposes of this Section, "Competitive Activity"
will mean directly or indirectly: owning, managing, controlling, investing
in, or otherwise being connected with, in any manner, whether as an
officer, director, employee, partner, investor, consultant, lender or
otherwise, any business entity or activity which is engaged in, or is in
any way related to, the business of establishing, acquiring or
administrating manufacturing licenses and joint ventures from or with third
parties in the United States; it will also mean the direct or indirect
solicitation or representation for any such business purpose of or for any
existing or prospective client of REFAC or any of its subsidiaries. Nothing
herein contained will prohibit TUCHMAN from (i) investing in securities of
a business entity if the securities of such entity are listed for trading
on a national securities exchange or traded in the over-the-counter market
and TUCHMAN's holdings therein represent less than five (5%) percent of the
total number of shares or principal amount of other securities of such
entity outstanding or (ii) at any time subsequent to the termination of
this Agreement, engaging in the design, development and licensing of
children's toys, games, stationery products and characters in or with which
REFAC, prior to such termination, shall not have been directly, indirectly
or prospectively engaged for REFAC's own account or in the normal course of
REFAC's business.
13. Section 162 (m). In the event that any payment or benefit
received or to be received by TUCHMAN in connection with his employment by
REFAC would otherwise not be deductible (in whole or part), by REFAC as a
result of the operation of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), the delivery of the non-deductible portion
of such payment or benefit to TUCHMAN by REFAC shall be deferred until the
earliest date on which it may be delivered to TUCHMAN without being subject
to the limit on deductibility imposed by Section 162(m) of the Code.
14. Successors; Binding Agreement.
(a) Should any entity succeed (whether by purchase, merger,
consolidation or similar transaction) to all or substantially all of the
business and/or assets of REFAC, TUCHMAN shall continue to perform all of
his duties and obligations hereunder.
(b) REFAC will require any successor (whether by purchase, merger,
consolidation or similar transaction) to all or substantially all of the
business and/or assets of REFAC, by agreement in form and substance
reasonably satisfactory to TUCHMAN, to expressly assume and agree to
perform this Agreement in substantially the same manner and to
substantially the same extent that REFAC would be required to perform it if
no such succession had taken place.
(c) This Agreement and all rights of TUCHMAN hereunder shall inure
to the benefit of and be enforceable by TUCHMAN's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If TUCHMAN should die while any
amounts would still be payable to him hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to TUCHMAN's devisee, legatee,
or other designee or, if there be no such designee, to TUCHMAN's estate.
15. Notice. For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to TUCHMAN:
Robert L. Tuchman
1 Vultee Drive
Florham Park, NJ 07932
If to REFAC:
REFAC
The Hudson River Pier
115 River Road
Edgewater, New Jersey 07020
Copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Attention: Stephen Banker, Esq.
or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
16. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by TUCHMAN and such other officer
of REFAC as may be specifically designated by the Board. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without
regard to its conflicts of law principles. All compensation payable to
TUCHMAN pursuant to this Agreement shall be subject to all applicable
withholding taxes, normal payroll withholding and any other amounts
required by law to be withheld.
17. Validity. If any term or provision of this Agreement or the
application thereof to any person, entity or circumstance should to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to any person, entity or circumstance
other than those as to which it is held invalid or unenforceable shall not
be affected thereby, and each term and provision of this Agreement
(including, to the extent permitted by law, any such term or provision
which has been held to be otherwise invalid or unenforceable) shall be
deemed valid and enforceable to the fullest extent permitted by law.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
19. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement will be settled exclusively by arbitration
in accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
20. Confidentiality. As an officer and director of REFAC, TUCHMAN
is privy to information generally regarded as confidential and often
proprietary with respect to REFAC, its business relationships, negotiations
and activities. Such information may include details of REFAC's business
and client relationships (past, present and prospective) and related REFAC
and client plans, products, property rights, technical and market data.
By reason of the foregoing:
(a) TUCHMAN will not at any time divulge or negligently permit the
communication of any of the foregoing types of information in any way that
could conflict with the interests of REFAC and its clients and the
responsibilities of REFAC to its clients and business associates.
(b) For a period of two (2) years after any Date of Termination,
TUCHMAN will not without REFAC's prior written approval by a designated
REFAC officer, directly or indirectly, either as a principal, agent,
employee or employer or in any other capacity, solicit, serve, engage or
assist in the business of any REFAC client or business associate or of any
prospective client or business associate with whom REFAC shall have been in
contact for business purposes at any time prior to the termination date of
TUCHMAN's employment by REFAC.
(c) For a period of two (2) years after any Date of Termination,
neither TUCHMAN nor any company which TUCHMAN directly or indirectly owns,
controls or manages shall employ or solicit the employment of any present
or future REFAC employee.
21. Breach of Confidentiality Covenant. Each of the parties hereto
acknowledges that in the event of any breach of Section 20 of this
Agreement by TUCHMAN, REFAC would be irreparably harmed and could not be
made whole by monetary damages. Therefore REFAC, in addition to any other
remedy to which it may be entitled at law or in equity, may compel specific
performance of Section 20 of this Agreement. TUCHMAN hereby acknowledges
and agrees that the covenants contained in Section 20 of this Agreement are
reasonable and fully necessary for the protection of the legitimate
interests of REFAC and are not oppressive to the interest of TUCHMAN.
22. Entire Agreement. This Agreement shall not be effective and
shall have no force or effect unless and until the Effective Time occurs.
The Prior Agreement shall remain in force and effect in accordance with its
terms until the Effective Time. At the Effective Time, this Agreement shall
supersede the Prior Agreement in its entirety and the Prior Agreement shall
be of no further force or effect. Under no circumstances shall the
consummation of the Merger, shareholder approval thereof or any other event
relating thereto be deemed a "Company Sale" for any purposes under the
Prior Agreement. Subject to the foregoing, this Agreement sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, agreements,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
/s/ Robert L. Tuchman
---------------------------
Robert L. Tuchman
REFAC
By: /s/ Neil Austrian
------------------------
Name: Neil Austrian
Title: Director
EXHIBIT 10.3
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
BETWEEN
RAYMOND A. CARDONNE, JR.
AND
REFAC
This First Amendment (this "Amendment") to the Employment
Agreement (the "Agreement") made as of March 21, 2002 between REFAC, a
Delaware corporation ("REFAC"), and Raymond A. Cardonne ("CARDONNE").
CARDONNE is currently employed by REFAC pursuant to the Agreement;
REFAC intends to enter into an Agreement and Plan of Merger by and
among REFAC, Palisade Concentrated Equity Partnership, L.P. ("Palisade")
and Palisade Merger Corp. (the "Merger Sub") (the "Merger Agreement")
pursuant to which the Merger Sub will merge with and into REFAC (the
"Merger") and REFAC will become a subsidiary of Palisade;
Following the Merger, the parties hereto desire to continue
CARDONNE's employment upon the terms and conditions set forth in the
Agreement, subject to the modifications set forth in this Amendment.
Effective as of the "Effective Time" (as defined in the Merger
Agreement), the Agreement shall be amended as follows:
1. Following the Effective Time, the definition of "Distributable
Amount" set forth in Section 5(b)(1) shall read as follows:
"Distributable Amount" shall mean the sum of (i) the aggregate
amount of cash and the fair market value (as determined by the
Board in its sole discretion) of securities that would be
available for distribution to REFAC's stockholders if REFAC
completely liquidated on the date of the Liquidation or
expiration, as applicable, plus (ii) the amount of any expenditure
by the Company, made between the Effective Time (as defined in the
Agreement and Plan of Merger by and among REFAC, Palisade
Concentrated Equity Partnership, L.P. ("Palisade") and Palisade
Merger Corp. (the "Merger Agreement")) and the date of the
Liquidation or expiration, as applicable, that is unrelated to a
Liquidation or the continued operation of the Company as conducted
at the Effective Time (other than expenditures to purchase
securities described in subparagraph (i)), plus (iii) the total
amounts paid or payable upon completion of future services to
Robert L. Tuchman pursuant to Sections 6 and 7 of his employment
agreement with REFAC and any incentive compensation paid to
CARDONNE with respect to any Company Sale, plus (iv) any
compensation paid to CARDONNE or Robert L. Tuchman with respect to
any prior Liquidation, plus (v) any amount paid by REFAC to
Palisade pursuant to Section 9.03(b) of the Merger Agreement,
minus (vi) the amount of cash and the fair market value of assets
(as determined by the Board in its sole discretion) reserved to
cover actual or potential liabilities or claims against or
relating to REFAC, including unpaid legal and other fees and
expenses incurred by REFAC in connection with the Liquidation and
any unpaid retention payment under Robert L. Tuchman's employment
agreement with REFAC (but excluding CARDONNE's incentive
compensation hereunder and Robert L. Tuchman's incentive
compensation under his employment agreement with REFAC), minus
(vii) REFAC's total proceeds from exercises of options for common
stock of REFAC that occur between the date of the Merger Agreement
and the Effective Time.
2. Following the Effective Time, the definition of "Eligible
Consideration" set forth in Section 5(b)(2) shall read as follows:
In the event that CARDONNE's employment is terminated by REFAC
without Cause or due to CARDONNE's Disability or is terminated
upon CARDONNE's death, in any such case prior to the expiration of
the term of this Agreement, "Eligible Consideration" shall mean
the sum of (i) the aggregate amount of cash and the fair market
value (as determined by the Board in its sole discretion) of
securities that would be available for distribution to REFAC's
stockholders if REFAC completely liquidated on the date of such
termination, plus (ii) the amount of any expenditure by the
Company, made between the Effective Time and the date of such
termination, that is unrelated to a Liquidation or the continued
operation of the Company as conducted at the Effective Time (other
than expenditures to purchase securities described in subparagraph
(i)), plus (iii) the total amounts paid or payable upon completion
of future services to Robert L. Tuchman pursuant to Sections 6 and
7 of his employment agreement with REFAC and any incentive
compensation paid to CARDONNE with respect to any Company Sale,
plus (iv) any compensation paid to CARDONNE or Robert L. Tuchman
with respect to any prior Liquidation, plus (v) any amount paid by
REFAC to Palisade pursuant to Section 9.03(b) of the Merger
Agreement, plus (vi) the amount (as determined by the Board in its
sole discretion) that reasonably may be realized upon the sale of
REFAC's remaining assets that are derived from the assets of REFAC
as of the Effective Time, minus (vii) the cash and fair market
value of assets (as determined by the Board in its sole
discretion) needed to be reserved for actual or potential
liabilities or claims against or relating to REFAC, including any
unpaid retention payment under Robert L. Tuchman's employment
agreement with REFAC (but excluding CARDONNE's incentive
compensation hereunder and Robert L. Tuchman's incentive
compensation under his employment agreement with REFAC), minus
(viii) legal and other fees and expenses expected by the Board, in
its sole discretion, to be incurred by REFAC in connection with
the sale of REFAC's assets, minus (ix) $10 million, minus (x)
REFAC's total proceeds from exercises of options for common stock
of REFAC that occur between the date of the Merger Agreement and
the Effective Time.
3. Following the Effective Time, the definition of "Liquidation"
set forth in Section 5(f) shall be amended to read as follows:
(f) Liquidation Defined. For purposes of this Agreement, a
"Liquidation" shall mean any sale of assets of REFAC during the
period between the Effective Time and March 31, 2004.
IN WITNESS WHEREOF, the parties have executed this Amendment on
August 19, 2002.
/s/ Raymond A. Cardonne
----------------------
Raymond A. Cardonne
REFAC
By: /s/ Neil Austrian
-----------------------
Name: Neil Austrian
Title: Director
EXHIBIT 99
REFAC ANNOUNCES TRANSACTION WITH PALISADE
-----------------------------------------
ARTICLE 11
Edgewater, New Jersey, August 20, 2002 - Refac (AMEX:
REF) and Palisade Concentrated Equity Partnership, L.P. today jointly
announced that they have entered into a merger agreement which provides for
the merger of a Palisade subsidiary with Refac. As a result of the merger,
Palisade will own approximately 80% of the outstanding stock of Refac.
Following the merger, Refac will continue its liquidation of assets
announced in March 2002. Palisade intends to use Refac as a vehicle for
future acquisitions.
In the merger, Refac shareholders will receive $3.60 per
share, along with 0.2 shares of new common stock of Refac. In addition,
shareholders will have the right to sell the new Refac shares to Refac for
a price of up to $5.50 per share, depending upon the Company's liquid
distributable assets as of March 31, 2003 and June 30, 2005. This right to
sell the shares will be limited to stockholders who hold their shares until
the amount of liquid distributable assets at June 30, 2005 is determined.
"We are pleased to announce the Palisade transaction."
said Robert L. Tuchman, Chairman and CEO of Refac. "We believe it provides
maximum value to the Company's shareholders. Shareholders will not only get
an immediate cash payment representing a premium over the market price, but
they will also have the opportunity to participate in any growth under
Palisade's leadership."
The merger is conditioned, among other things, upon
approval by a majority of Refac's shareholders. The Company will schedule a
special meeting of its shareholders to vote on the merger.
Refac also announced that it had amended its shareholder
rights plan so that the rights would not be triggered by the Palisade
transaction.
Refac also today reported a consolidated net loss for the
six months ended June 30, 2002 of $4,738,000 or $1.25 per share, on a
diluted basis, which consists of a net income from continuing operations of
$482,000, or $0.13 per share, on revenues of $1,342,000, a loss, net of
expected tax benefits, from discontinued operations of $3,137,000, or $0.83
per share, and a loss, net of expected tax benefits, from a cumulative
effect of change in accounting principle of $2,083,000 or $0.55 per share.
During the same period in 2001, the Company had net
income from continuing operations of $2,205,000 or $0.58 per share, on a
fully diluted basis, on revenues of $3,963,000 and a loss from discontinued
operations, net of tax, of $1,372,000 or $0.36 per share. The Company's
planned liquidation of its licensing-related securities (KeyCorp) was
completed during the second quarter of 2001 and such gains and dividends
accounted for revenues and net income of $1,828,000 and $1,210,000.
Quarter Ended June 30, 2002 compared to 2001 - For the
second quarter of 2002, the Company had a consolidated net loss of
$2,520,000 or $0.66 per share, on a diluted basis, consisting of net income
from continuing operations of $266,000, or $0.07 per share, on revenues of
$715,000 and a loss, net of expected tax benefit, from discontinued
operations of $2,786,000, or $0.73 per share.
During the comparable period in 2001, the Company had a
consolidated net income of $305,000, or $0.08 per share, on a diluted
basis, consisting of net income from continuing operations of $954,000 or
$0.25 per share, on a fully diluted basis, on revenues of $1,708,000 and a
loss, net of tax, from discontinued operations of $649,000 or $0.17 per
share. During the quarter ended June 30, 2001 gains and dividends from
licensing-related securities accounted for revenues and net income of
$588,000 and $390,000, respectively.
Discontinued Operations - Discontinued operations include
the Company's product development and graphic design consulting businesses
and its consumer electronics business. For accounting purposes, an
operation is considered discontinued when it meets the "held for sale"
criteria of Financial Accounting Standards Board's Statement of Financial
Accounting Standards ("SFAS") 144, "Accounting for the Impairment or
Disposal of Long-lived Assets". On March 21, 2002, the Company decided to
reposition itself for sale or liquidation and, as a result of the actions
taken to accomplish this repositioning, all of its business segments other
than licensing have been classified as "discontinued operations".
Goodwill and Other Asset Impairments - The Company
previously reported that it was obtaining appraisals required for
impairment testing for goodwill (SFAS 142) "Goodwill and Other Intangibles"
and its other long-term assets (SFAS 144) and that it expected that there
would be a material impairment charge reflected in the second quarter
results. Pursuant to SFAS 142, the Company engaged an independent valuation
consultant to perform a transitional fair value based impairment test and
recorded an impairment loss of $2,083,000 measured as of January 1, 2002,
net of expected tax benefit, in the June 30, 2002 quarter as a cumulative
effect of change in accounting principle. Pursuant to SFAS 142 and 144, the
Company evaluated the impairment of the remaining goodwill and other
long-lived assets and recorded an additional impairment loss of $1,889,000,
net of expected tax benefit, in the June 30, 2002 quarter which is
reflected in the results of the discontinued operations.
Commenting on the results and the status of the Company's
repositioning, Refac CEO, Robert L. Tuchman noted that, "The impairment
charges recognized in the second quarter reflect the adverse effect the
economic slowdown has had on our creative services group and consumer
products business. In August, we sold our graphics design group back to a
company formed by the individual from whom we had originally purchased it
in 1999 at a loss of $914,000, net of tax, which is reflected in the
current period impairment charges. The buyer also subleased 3,492 square
feet of space with a term commencing November 1, 2002 and terminating
November 15, 2009, the date that the Company's lease for its premises
terminates. The aggregate rent for during the term of this sublease is
$565,809. As a result, the Company now has remaining 20,120 square feet of
space available for sublease for which it is actively seeking subtenants.
While we are continuing to operate our product design
group, we have found it increasingly difficult to instill confidence in
prospective accounts as to our continuity and stability and we plan to wind
up operations of this group by the end of the year if we cannot find a
buyer. The impairment charge in the current quarter reduces the carrying
value of goodwill for the product design group to zero.
We are also continuing to operate our consumer
electronics business, Refac Consumer Products, Inc., while looking for a
buyer. However, in an effort to limit our investment and risk, we have
changed our marketing approach and are closing out our domestic inventory
position. As soon as this liquidation is completed, we will no longer
warehouse goods in the United States. Our second quarter results include a
write-down in inventory of $657,000. We also terminated our sales
management and consulting agreement with Griffin International, Inc. and
wrote off $155,000, which represented the balance of the related prepaid
consulting fee. In the future, we will manufacture goods only against
customer orders and will seek to sell such products on a letter of credit
basis, FOB Hong Kong.
While our licensing operations are still considered a
continuing business, we have not undertaken any new technology licensing
projects during the current or preceding three fiscal years. While
continuing to manage established licensing relationships, we are looking to
liquidate our portfolio through the sale of our rights and/or the
collection of monies due and to become due under outstanding license
agreements. In this regard, we have just sold our Heli-Coil and Dodge
licensing rights and related sublicense agreements to Emhart LLC for
$4,000,000 and our Gough licensing property and accounts receivable to
Gough Holdings (Engineerings), Ltd. for $450,000, payable in five
semi-annual installments, without interest, commencing September 30, 2002.
Our product development group has designed certain
products pursuant to an agreement with OXO International, a division of
World Kitchen, Inc. ("WKI") in exchange for royalties based upon the sales
of such products. In May, WKI filed a petition of bankruptcy for
reorganization under Chapter 11 and the discontinued loss for the second
quarter includes a write-off of $82,578 in accrued royalties due from OXO
resulting from our design services. The OXO agreement and relationship is
now being managed as part of our licensing operations and we are working
with OXO to resolve the status of our agreement and future entitlements."
Refac
Consolidated Operating Results
Six Months Ended June 30,
2002 2001
------------------------------------
Total revenues $1,342,000 $3,963,000
Net income from continuing operations $482,000 $2,205,000
Loss from discontinued operations, net of taxes ($3,137,000) ($1,372,000)
Loss from cumulative effect of change in accounting principle ($2,083,000) -
Net income (loss) ($4,738,000) $833,000
Diluted income per share from continuing operations $0.13 $0.58
Loss per diluted share from discontinued operations ($0.83) ($0.36)
Loss per diluted share from cumulative effect of change in accounting ($0.55) ($0.00)
principle
Net income (loss) per diluted share $(1.25) $0.22
Number of diluted shares 3,804,832 3,797,881
Three Months Ended June 30,
2002 2001
------------------------------------
Total revenues $715,000 $1,708,000
Net income from continuing operations $266,000 $954,000
Loss from discontinued operations, net of taxes ($2,786,000) ($649,000)
Net income (loss) ($2,520,000) $305,000
Diluted income per share from continuing operations $0.07 $0.25
Loss per diluted share from discontinued operations ($0.73) ($0.17)
Net income (loss) per diluted share ($0.66) $0.08
Number of diluted shares 3,812,127 3,795,261
* * * * *
Statements about the Company's future expectations and all other
statements in this document other than historical facts are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934,
and as that term is defined in the Private Securities Litigation Reform Act
of 1995. The Company intends that the "forward-looking statements"
contained herein be subject to the above-mentioned statutory safe harbors.
Since these statements involve risks and uncertainties and are subject to
change at any time, the Company's actual results could differ materially
from expected or inferred results. There are no assurances as to the
amounts to be realized in connection with the sale of the Company's assets.
# # #