AGREEMENT OF MERGER
DATED DECEMBER 31, 1999
AMONG
CENEX HARVEST STATES COOPERATIVES,
SF ACQUISITION CORP.
AND
SPARTA FOODS, INC.
TABLE OF CONTENTS
Page
SECTION 1--THE
MERGER .........................................................................
............. 1
1.1
Closing ........................................................................
.......... 1
1.2 Effective Date of
Merger ................................................................. 1
1.3 Effects of
Merger ........................................................................
1
SECTION 2--REPRESENTATIONS AND WARRANTIES OF THE
COMPANY ................................................... 1
2.1 Capital
Stock ..........................................................................
.. 1
2.2 Organization; Good
Standing .............................................................. 2
2.3 Authority;
Enforceability ................................................................
3
2.4 No
Violation ......................................................................
....... 3
2.5 Subsidiaries, Other
Interests ............................................................ 3
2.6 Financial
Statements .....................................................................
4
2.7
Taxes ..........................................................................
.......... 5
2.8 Title to
Properties .....................................................................
. 7
2.9
Inventories ....................................................................
.......... 7
2.10 Accounts
Receivable .....................................................................
. 7
2.11
Leases .........................................................................
.......... 8
2.12 Facilities,
Equipment ....................................................................
8
2.13
Insurance ......................................................................
.......... 8
2.14 Employment and Benefit
Matters ........................................................... 8
2.15
Contracts ......................................................................
.......... 11
2.16 Officers and
Directors ...................................................................
11
2.17 Corporate
Documents ......................................................................
11
2.18 Legal
Proceedings ....................................................................
.... 11
2.19 Compliance with Instruments, Orders and Legal
Requirements ............................... 12
2.20
Permits ........................................................................
.......... 12
2.21 Intellectual
Property ....................................................................
12
2.22 Capital
Expenditures ...................................................................
.. 12
2.23 Environmental
Matters .................................................................... 13
2.24 Illegal
Payments .......................................................................
.. 13
2.25 SEC
Information ....................................................................
...... 13
2.26 Board of Directors Approval; Fairness
Opinion ............................................ 13
2.27
Representations ................................................................
.......... 14
2.28 Employment
Arrangements ..................................................................
14
SECTION 3--REPRESENTATIONS AND WARRANTIES OF
BUYER ......................................................... 14
3.1 Organization, Standing of Buyer and Buyer
Subsidiary ..................................... 14
3.2 Authority;
Enforceability ................................................................
14
3.3
Litigation .....................................................................
.......... 15
3.4
Financing ......................................................................
.......... 15
SECTION 4--CONDITIONS TO OBLIGATIONS OF BUYER
AND BUYER SUBSIDIARY AT
CLOSING .......................................................... 15
4.1 Representations and
Warranties ........................................................... 15
4.2 Proxy
Statement ......................................................................
.... 15
4.3 Closing
Certificate ....................................................................
.. 16
4.4
Performance ....................................................................
.......... 16
4.5 Stockholder Approval, Dissenting
Notices ................................................. 16
4.6 Third-Party
Action .......................................................................
16
4.7 Opinion of
Counsel .......................................................................
16
4.8 Transactional
Litigation ................................................................. 16
4.9 Interim
Events .........................................................................
.. 16
4.10 Management Changes,
Employees ............................................................ 16
4.11
Warrants .......................................................................
.......... 16
4.12 Employment and Noncompetition
Agreements ................................................. 17
4.13 Transaction
Expenses .....................................................................
17
4.14 Corporate and Other
Proceedings .......................................................... 17
4.15 Material Adverse
Change .................................................................. 17
SECTION 5--CONDITIONS TO COMPANY'S OBLIGATIONS AT
CLOSING .................................................. 17
5.1 Representations and
Warranties ........................................................... 17
5.2 Closing
Certificate ....................................................................
.. 17
5.3
Performance ....................................................................
.......... 17
5.4 Stockholder
Approval .....................................................................
17
5.5 Transactional
Litigation ................................................................. 17
5.6 Corporate and Other
Proceedings .......................................................... 18
SECTION 6--COVENANTS OF COMPANY, SUBSIDIARY AND
BUYER ...................................................... 18
6.1 Non-
Disclosure .....................................................................
...... 18
6.2 Nonsurvival of Representations and
Warranties ............................................ 18
6.3 Termination of this Agreement; Termination
Fees .......................................... 18
6.4 Best Efforts, No Inconsistent
Action ..................................................... 20
6.5
Access .........................................................................
.......... 20
6.6 No Solicitation or
Negotiation ........................................................... 20
6.7 Interim Financial
Information ............................................................ 22
6.8 Interim Conduct of
Business .............................................................. 22
6.9 Section 338 Election; Tax
Status ......................................................... 23
6.10 Option to
Purchase .......................................................................
23
6.11 SEC
Reports ........................................................................
...... 27
6.12 Stock Option Plan;
Benefits .............................................................. 27
6.13 Notice of Certain
Events ................................................................. 28
6.14 Takeover
Statutes .......................................................................
. 28
6.15 Pay-
Off ............................................................................
...... 28
6.16
Update .........................................................................
.......... 29
6.17 Directors and
Officers ................................................................... 29
SECTION 7--
MISCELLANEOUS ..................................................................
................. 29
7.1 No Brokers,
Finders ......................................................................
29
7.2
Expenses .......................................................................
.......... 30
7.3 Complete Agreement; Waiver and Modification;
No Third Party
Beneficiaries .................................................... 30
7.4
Notices ........................................................................
.......... 30
7.5 Law
Governing ......................................................................
...... 31
7.6 Headings; References; "Hereof;"
Interpretation ........................................... 31
7.7 Successors and
Assigns ................................................................... 32
7.8 Counterparts, Separate Signature
Pages ................................................... 32
7.9
Severability ...................................................................
.......... 32
SECTION 8--
GLOSSARY .......................................................................
................. 32
SIGNATURES .....................................................................
............................ 37
Exhibits
Exhibit A--Plan of Merger
Exhibit B--Opinion of Company's Counsel
Schedules
AGREEMENT OF MERGER
This AGREEMENT OF MERGER dated December 31, 1999 is entered into by
CENEX HARVEST STATES COOPERATIVES, a Minnesota corporation (the "Buyer"), SF
ACQUISITION CORP., a Minnesota corporation and wholly owned subsidiary of the
Buyer ("Buyer Subsidiary"), and SPARTA FOODS, INC., a Minnesota corporation (the
"Company"). Capitalized terms used herein have the meanings stated in Section 8.
The Buyer and the Company desire that the Buyer acquire the Company
through a merger of Buyer Subsidiary with and into the Company (the "Merger"),
and the Company desires to consummate the Merger, under the terms of this
Agreement.
Therefore, in consideration of the mutual agreements contained herein,
the parties hereby agree as follows:
SECTION 1
THE MERGER
1.1 Closing. The closing (the "Closing") under this Agreement shall
take place at the offices of Dorsey & Whitney LLP within three business days
after the satisfaction (or waiver by the party entitled to waive) of all
conditions stated in Sections 4 and 5, or at such other place or on such other
date as the parties may agree in writing.
1.2 Effective Date of Merger. The Merger shall take effect upon filing
of articles of merger with respect to the Plan of Merger in the form attached as
Exhibit A (the "Plan of Merger") with the Minnesota Secretary of State in
accordance with Minnesota law (the "Effective Time").
1.3 Effects of Merger. The effects of the Merger are set forth in the
Plan of Merger.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Capital Stock.
(a) The authorized and outstanding capital stock of the Company, as of
December 31, 1999, is as follows:
AUTHORIZED
OUTSTANDING
DESIGNATION OF CLASS SHARES
SHARES
--------------------------------------------------
------------------ -------------------
Common Stock, par value $.01 per share ...........
15,000,000 10,278,916
Preferred Stock ..................................
2,500 2,500
There is no capital stock of the Company authorized or outstanding except as
stated in this Section 2.1(a). The outstanding Stock Rights of the Company, as
of December 31, 1999, are as follows:
DESIGNATION OF
SHARES SUBJECT TO
STOCK RIGHT CLASS OF STOCK
STOCK RIGHT
--------------------- -------------------
-------------------
Options Common
80,000
Warrants Common
1,135,580
There are no Stock Rights outstanding with respect to the Company except as set
forth in this Section 2.1(a), and the terms of such Stock Rights are as set
forth in Schedule 2.1. The Board of Directors of the Company has taken all
necessary action to assure that all unvested options immediately prior to the
Effective Time are accelerated. Except as disclosed in Schedule 2.1, the Company
is not a party to any stockholders agreement, registration rights agreement,
repurchase agreement or other Contract with respect to capital stock or Stock
Right issued or to be issued by it.
(b) All of the issued and outstanding capital stock of the Company has
been duly and validly authorized and issued and is fully paid and
non-assessable, and has not been issued in violation of any preemptive or
similar rights of any stockholder or any applicable securities law. Except as
disclosed in Schedule 2.1, no Person has any right to require the Company to
redeem, purchase or otherwise reacquire any capital stock issued by the Company
or any Stock Rights with respect to any capital stock issued by the Company.
There are no preemptive or similar rights in respect of any capital stock of the
Company except as set forth in Schedule 2.1.
(c) The Company has never declared or paid any dividend or made any
distribution in respect of any of its capital stock or any Stock Rights with
respect thereto. Except as set forth in Schedule 2.1, the Company has not
directly or indirectly redeemed, purchased or otherwise acquired any of the
capital stock issued by it or any Stock Rights with respect thereto.
2.2 Organization; Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Minnesota and
has all requisite corporate power and authority to own, lease and operate its
Properties and to conduct its business as currently conducted. Schedule 2.2 sets
forth (i) each jurisdiction in which the Company is qualified to do business as
a foreign corporation, (ii) the jurisdiction of incorporation of each Subsidiary
and (iii) each jurisdiction in which a Subsidiary is qualified to do business as
a foreign corporation. Except as set forth in Schedule 2.2, the Company and each
Subsidiary is in good standing in each jurisdiction shown in Schedule 2.2, and
neither the Company nor any Subsidiary is required to qualify to do business as
a foreign corporation in any other jurisdiction in which the failure to so
qualify would have a Material Adverse Effect. Neither the Company nor any
Subsidiary is a partner in any general or limited partnership or a member in any
limited liability company.
2.3 Authority; Enforceability. The Company has all requisite power and
authority under applicable corporate law to execute and deliver this Agreement
and to perform the transactions contemplated hereby and, subject to approval of
the Plan of Merger by the stockholders of the Company as contemplated hereby
(the "Stockholder Approval"), to consummate the Merger. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of the Company (subject to the Stockholder Approval), and no other approval on
the part of the Company is necessary under applicable corporate law for the
execution, delivery and performance of this Agreement. This Agreement
constitutes a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to general limitations on the availability of
equitable remedies and the effect of bankruptcy, insolvency, reorganization and
other laws of general application affecting the enforcement of creditors'
rights.
2.4 No Violation. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not violate
or conflict with the articles of incorporation or by-laws of the Company or any
Subsidiary, or violate any Legal Requirement or Order applicable to the Company
or any Subsidiary. Except as shown on Schedule 2.4, the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not require any Third-Party Action with respect to the Company
or any Subsidiary under, or conflict with or constitute a default under, or
result in the acceleration or right of acceleration of any obligations, or any
termination or right of termination under, as of the date hereof or as of the
Effective Time, any Contract. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby do not and will not
result in the creation or imposition of any material Lien, claim, charge,
restriction, equity or encumbrance of any kind upon or give any Person any
interest or right in or with respect to any of the Properties, assets, business
or Contracts of the Company or any Subsidiary.
2.5 Subsidiaries, Other Interests. Except as set forth in Schedule 2.5,
neither the Company nor any Subsidiary beneficially owns, directly or
indirectly, any Equity Interest in or debt obligation (except as a creditor in
the ordinary course of business and except for debt obligations of the Company
or a Subsidiary as specified in Schedule 2.5) of, any Person. The owner shown in
Schedule 2.5 owns the interest shown free and clear of all Third-Party Rights.
2.6 Financial Statements.
(a) Financial Statements. Except as set forth in Schedule 2.6(a), the
audited consolidated balance sheets and consolidated statements of operations
and retained earnings and of cash flows for the Company at and for each of the
years ended September 30, 1999 (the "Last Fiscal Year-End"), September 30, 1998
and September 30, 1997 (the "Audited Statements") and the unaudited consolidated
balance sheets and consolidated statements of operations and cash flows for the
Company at and for the period ended November 30, 1999 (the "Interim Statements"
and, together with the Audited Statements, the "Financial Statements") fairly
present the consolidated financial condition of the Company at the dates
indicated and the consolidated results of operations and cash flows of the
Company for the periods indicated in accordance with GAAP consistently applied
throughout the periods indicated (except as stated therein and, in the case of
the Interim Statements, the omission of certain footnote disclosures and subject
to normal year-end adjustments).
(b) Certain Indebtedness. Schedule 2.6(b) sets forth all obligations of
the Company and its Subsidiaries with respect to borrowed money, debt
securities, capitalized leases and the deferred payment of the purchase price of
property or services and the Property of the Company, if any, subject to a Lien
to secure any of such obligations.
(c) Absence of Certain Liabilities. Neither the Company nor any
Subsidiary has any liability or obligation of any nature, whether absolute,
accrued, contingent or otherwise, arising out of acts or omissions heretofore
occurring, or circumstances currently or heretofore existing, except: (i) as
accrued in the balance sheet included in the Interim Statements (the "Interim
Balance Sheet"); (ii) for liabilities and obligations incurred since the date of
the Interim Balance Sheet in the ordinary course of business consistent in
nature and amount with past practice; (iii) liabilities and obligations of a
kind not required to be accrued in a balance sheet at the date hereof prepared
in accordance with GAAP which individually (or in the aggregate for related
events, transactions, defects or circumstances) will not subject the Company
or any Subsidiary to obligations in excess of $50,000 or (iv) as shown on
Schedule 2.6(c).
(d) Absence of Certain Changes. Since the date of the Interim Balance
Sheet, except as set forth in Schedule 2.6(d):
(i) The Company and each Subsidiary has operated their
consolidated business in the ordinary course.
(ii) There has been no change or changes which, individually
or in the aggregate, has or have had or is or are reasonably likely to
have a Material Adverse Effect.
(iii) There has not been any damage, destruction or
condemnation known to the Company with respect to Property having an
aggregate net book value on the Company's consolidated books in excess
of $50,000, net of any insurance recoveries.
(iv) There has not been any material change in the accounting
methods, practices or principles of the Company.
(v) Neither the Company nor any Subsidiary has sold,
transferred or otherwise disposed of (or agreed or committed to sell,
transfer or otherwise dispose of) any Property other than the sale of
inventory in the ordinary course, or canceled, compromised, released or
assigned any debt or claim in its favor, where the aggregate amount of
such sales, transfers, dispositions, cancellations, compromises,
releases or assignments exceeds $50,000.
(vi) Neither the Company nor any Subsidiary has instituted,
settled or agreed to settle any litigation, action or proceeding before
any Governmental Agency.
(vii) Neither the Company nor any Subsidiary has assumed,
guaranteed, endorsed or otherwise become responsible (or otherwise
agreed to become responsible) for the obligations of any other Person,
except for the endorsement of negotiable instruments in the ordinary
course of business.
(viii) Neither the Company nor any Subsidiary has granted (or
agreed or committed to grant) any increase in compensation or fringe
benefits other than normal salary increases consistent with prior
periods.
(ix) Neither the Company nor any Subsidiary has entered into
any licensing or other Contract with regard to the acquisition or
disposition of any material Intellectual Property other than
non-exclusive licenses granted in the ordinary course of business
consistent with past practice.
2.7 Taxes.
(a) Except as set forth in Schedule 2.7; the Company and each
Subsidiary has properly completed and filed, within the time and in the manner
prescribed by law, all Tax returns and other documents required to be filed in
respect of all Taxes, and all such returns and other documents are true, correct
and complete. The Company has furnished to the Buyer copies of all income Tax
returns of the Company for the past three years. The Company and each Subsidiary
has, within the time and in the manner prescribed by law, paid all Taxes that
are due and payable. The Company has established reserves on its consolidated
books that are at least equal to those required by GAAP.
(b) Except as set forth in Schedule 2.7,
(i) None of such returns contained a disclosure statement
under Section 6662 of the Code or any similar provision of foreign law;
(ii) The Company has not received written notice from any
federal or foreign taxing authority asserting any deficiency against
the Company or any Subsidiary or claim for additional Taxes in
connection therewith, other than any deficiency or claim which has been
previously settled or for which appropriate reserves are included in
the Interim Statements;
(iii) There is no pending action, audit, proceeding or
investigation with respect to the assessment or collection of federal
or foreign Taxes or a claim for refund made by the Company or any
Subsidiary with respect to federal or foreign Taxes previously paid;
(iv) All amounts that are required to be collected or withheld
by the Company and each Subsidiary with respect to federal or foreign
Taxes have been duly collected or withheld, and all such amounts that
are required to be remitted to any federal or foreign taxing authority
have been duly remitted;
(v) No audit has been conducted of any federal or foreign
income tax return filed by the Company or any Subsidiary. The time
during which such returns remain open for examination has expired in
accordance with applicable statute and regulations, except for those
returns for which the normally applicable statutory/regulatory period
has not yet elapsed;
(vi) Neither the Company nor any Subsidiary has requested nor
been granted any currently effective waiver or extension of any statute
of limitations with respect to the assessment or filing of any federal
or foreign Tax or return with respect thereto;
(vii) No consent has been filed under Section 341(f) of the
Code with respect to the Company or any Subsidiary;
(viii) The Company is not required to include in income any
adjustment pursuant to Section 481(a) of the Code (or similar
provisions of foreign laws or regulations) by reason of a change in
accounting method nor does the Company have any knowledge that the
Internal Revenue Service (or other federal or foreign taxing authority)
has proposed, or is considering, any such change in accounting method;
and
(ix) Neither the Company nor any Subsidiary is a party to or
bound by nor has any continuing obligation under any tax sharing or
similar agreement or arrangement with any Person.
2.8 Title to Properties.
(a) Schedule 2.8(a) is a true and complete list of all terms of real
Property owned by the Company or Subsidiary.
(b) Schedule 2.8(b) is a true and complete summary based on the books
and records of the Company of all items of personal Property owned by the
Company or any Subsidiary.
(c) Except as set forth in Schedule 2.8(c), the Company and each
Subsidiary has good title to all tangible personal Property owned by it, in each
case free and clear of all Third-Party Rights.
(d) The Company and its Subsidiaries, taken together, own all material
items of non-inventory tangible and intangible personal Property that were owned
as of the Last Fiscal Year-End and used in generating the revenue shown in the
audited consolidated statement of operations of the Company for the fiscal year
ending on the Last Fiscal Year-End, subject to any sales or dispositions of
tangible personal Property since the Last Fiscal Year-End in the ordinary course
of business.
2.9 Inventories. Except as set forth in Schedule 2.9, since the Last
Fiscal Year-End, all sales of inventory by the Company and its Subsidiaries have
been made in the ordinary course of business and no inventory has been pledged
as collateral. Except as set forth in Schedule 2.9, all inventories are, subject
to any applicable reserves established in respect thereof on the Interim Balance
Sheet, (A) in good, merchantable and useable condition, (B) of such quality as
to meet the quality control standards of the Company and the quality control
requirements of any applicable Governmental Agency, (C) salable, if they are
finished goods, as current inventories at the current prices thereof in the
ordinary course of business, (D) reflected in the Interim Balance Sheet in
accordance with GAAP and (E) reflected in the books and records of the Company
at the lower of cost or market value on a first-in, first-out basis. None of the
inventories reflected on the Interim Balance Sheet is in a quantity in excess of
amounts that can be used or sold by the Company in the ordinary course of
business. The packaging included in the inventories is adequate in quantity to
enable the Company to continue to package and ship finished goods in accordance
with past practices.
2.10 Accounts Receivable. The consolidated accounts receivable of the
Company and its Subsidiaries (i) are bona fide and arose from valid sales in the
ordinary course of business in material conformity with all applicable Legal
Requirements, (ii) are valid and binding obligations of the debtors requiring no
further performance by the Company or any Subsidiary and (iii) except as shown
on Schedule 2.10, subject to the allowance for doubtful accounts receivable in
the Interim Balance Sheet, are fully collectible and not subject to any offsets
or counterclaims and do not represent guaranteed sale, sell-or-return
transactions or any other similar understanding. Except as shown on Schedule
2.10(b), no accounts receivable have been pledged as collateral to any Person.
The amounts shown for accounts receivable in the Financial Statements reflect an
allowance for doubtful accounts receivable in accordance with GAAP.
2.11 Leases. Schedule 2.11 lists all leases, rental agreements,
conditional sales contracts and other similar Contracts under which the Company
or any Subsidiary leases (as lessor or lessee) any real or personal Property
with rental payments exceeding $50,000 per year (collectively, the "Disclosable
Leases"). All Disclosable Leases are, in all material respects, valid and
enforceable by the Company in accordance with their terms. Neither the Company
nor any Subsidiary nor, to the knowledge of the Company, any other party to any
Disclosable Lease is in material breach thereof. The Company and each Subsidiary
enjoys peaceable possession of all real estate premises subject to Disclosable
Leases to which it is a party and to all personal Property subject to
Disclosable Leases to which it is a party.
2.12 Facilities, Equipment. The Company owns or leases all material
land, buildings and equipment used in the operation of its business. The Company
has not received any notice of any material violation of any Legal Requirement
or Order relating to the Company's facilities which has not been corrected, and
no facility of the Company is in material violation of any Legal Requirement or
Order.
2.13 Insurance. Schedule 2.13 lists and describes briefly all binders
and policies of liability, theft, life, fire and other forms of insurance and
surety bonds, insuring the Company or any Subsidiary or their respective
Properties, assets and business as of the date hereof. Except as noted in
Schedule 2.13, all listed policies and binders insure on an occurrence, rather
than claims-made, basis. All policies and binders listed in Schedule 2.13 are
valid and in good standing and in full force and effect and the premiums have
been paid when due. Except for any claims set forth in Schedule 2.13, there are
no outstanding unpaid claims under such policy or binder, and, except as set
forth in Schedule 2.13, neither the Company nor any Subsidiary has received any
notice of cancellation, general disclaimer of liability or non-renewal of any
such policy or binder.
2.14 Employment and Benefit Matters.
(a) Schedule 2.14(a) lists each of the following for each employee of
the Company and each Subsidiary: name, hire date and current salary. None of the
employees listed on Schedule 2.14(a) has given the Company or such Subsidiary
notice of his or her intention to resign his or her position with the Company or
such Subsidiary and neither the Company nor such Subsidiary has any present
intention to terminate such employees.
(b) Schedule 2.14(b) lists all of the following items which are
applicable to the Company or any Subsidiary: (i) employment Contracts with any
employee, officer or director; and (ii) Contracts or arrangements with any
Person providing for bonuses, profit sharing payments, deferred compensation,
stock options, stock purchase rights, retainer, consulting, incentive, severance
pay or retirement benefits, life, medical or other insurance, payments triggered
by a change in control or any other employee benefits or any other payments,
"fringe benefits" or perquisites which are not terminable at will without
liability to the Company or any Subsidiary or which are subject to ERISA. The
contracts or arrangements referred to in the foregoing clause (ii) are herein
called "Benefit Plans."
(c) Neither the Company nor any of its ERISA Affiliates has any union
contracts, collective bargaining, union or labor agreements or other Contract
with any group of employees, labor union or employee representative(s), nor has
the Company or any ERISA Affiliate ever participated in or contributed to any
single employer defined benefit plan or multi-employer plan within the meaning
of ERISA Section 3(37), nor is the Company currently engaged in any labor
negotiations, excepting minor grievances, nor is the Company the subject of any
union organization effort. The Company and each Subsidiary is in material
compliance with applicable Legal Requirements respecting employment and
employment practices and terms and conditions of employment, including without
limitation health and safety and wages and hours. Except as listed on Schedule
2.14(c), no complaint or other proceeding by or on behalf of any current or
former employee or group of employees is pending against the Company or any
Subsidiary before any Governmental Agency, and no claim by any current or former
employee or group of employees that the Company or any Subsidiary is not in
compliance with any Legal Requirement relating to employees or employment or
that any compensation owing has not been paid is pending against the Company or
any Subsidiary. There is no labor dispute, strike, slowdown or work stoppage
pending or threatened against the Company or any Subsidiary.
(d) True and correct copies of each Benefit Plan listed in Schedule
2.14(b) that is subject to ERISA (a "Company ERISA Plan") and related trust
agreements, insurance contracts, and summary descriptions have been delivered or
made available to the Buyer by the Company. The Company has also delivered or
made available to the Buyer a copy of the most recently filed IRS Form 5500,
with attached financial statements and accountant's opinions, if applicable, for
each Company ERISA Plan. The Company has also delivered or made available to the
Buyer a copy of, in the case of each Company ERISA Plan
intended to qualify under Section 401(a) of the Code, the most recent Internal
Revenue Service letter as to its qualification under Section 401(a) of the Code.
Nothing has occurred prior to or since the issuance of such letters to cause the
loss of qualification under the Code of any of such plans.
(e) With respect to each Company ERISA Plan, (i) there has been no
"prohibited transaction," as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, (ii) each Company ERISA Plan has been administered in
accordance with its terms and in material compliance with all Legal Requirements
(including without limitation ERISA and the Code), (iii) the Company (or, as
appropriate, an ERISA Affiliate) has prepared in good faith and timely filed all
requisite governmental reports in true and correct form and has properly and
timely filed and distributed or posted all notices and reports to participants
and beneficiaries required to be filed, distributed or posted, (iv) no suit,
administrative proceeding, action, litigation or claim has been brought or
asserted, or to the knowledge of the Company is threatened, against any Company
ERISA Plan or against the Company with respect to any Company ERISA Plan,
including without limitation any audit or inquiry by the Internal Revenue
Service or United States Department of Labor, (v) the Company and each ERISA
Affiliate have performed all material obligations required to be performed by
them under, and are not in any material respect in default under or in violation
of, and have no knowledge of any material default or violation of, any Company
ERISA Plan, (vi) neither the Company nor any ERISA Affiliate is subject to any
liability or penalty under Sections 4976 through 4980 of the Code or Title I of
ERISA, (vii) all contributions required to be made by the Company or any ERISA
Affiliate have been made on or before their due dates, (viii) no "reportable
event" within the meaning of Section 4043 of ERISA (excluding any such event for
which the 30-day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
ERISA has occurred, (ix) no Company ERISA Plan is covered by, and neither the
Company nor any ERISA Affiliate has incurred or expects to incur any material
liability under, Title IV of ERISA or Section 412 of the Code, and (x) neither
the Company nor any ERISA Affiliate is a party to, or has made any contribution
to or otherwise incurred any obligation under, any "multi-employer plan" as
defined in Section 3(37) of ERISA.
(f) The Company has complied in all material respects with (i) the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") and the proposed regulations
thereunder, (ii) the applicable requirements of the Family and Medical Leave Act
of 1993 and the regulations thereunder and (iii) the applicable requirements of
the Health Insurance Portability and Accountability Act of 1996 and the
temporary regulations thereunder. The Company has no material obligations under
COBRA with respect to any former employees or qualifying beneficiaries
thereunder.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or other ERISA Affiliate
relating to, or change in participation or coverage under, any Benefit Plan
which would materially increase the expense of maintaining such Plan above the
level of expense incurred with respect to that Plan for the most recent fiscal
year included in the Audited Statements.
(h) Schedule 2.14(h) contains a true and correct list of each employee,
former employee, director or consultant who holds any stock option as of
December 31, 1999, together with (i) the number of shares of Company Common
Stock subject thereto, (ii) the date of grant, (iii) the extent to which such
stock option is currently vested and, to the extent such stock option is not
fully vested, the vesting schedule, (iv) the exercise price, (v) whether such
stock option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO"), and (vi) the
expiration date of such stock option. Schedule 2.14(h) also sets forth the
aggregate number of ISOs and nonqualified stock options outstanding as of the
date hereof.
(i) Except as shown on Schedule 2.14(i), neither the Company nor any
Subsidiary is a party to any Contract or plan, including, without limitation,
any stock option plan, stock appreciation right plan or stock purchase plan, as
to which any benefits will be increased, or the vesting of benefits will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any benefits will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(j) Except as disclosed in Schedule 2.14(j), the Company and its ERISA
Affiliates do not maintain any plans providing benefits within the meaning of
Section 3(1) of ERISA (other than group health plan continuation coverage under
Section 601 of ERISA and 4980B(f) of the Code) to former employees or retirees.
2.15 Contracts. Except as shown on Schedules 2.11 and 2.15, and except
for Contracts fully performed or terminable at will without liability to the
Company, neither the Company nor any Subsidiary is a party to any Contract which
contemplates performance by the Company or such Subsidiary during a remaining
period of more than 90 days or involves remaining commitments for sale or
purchase in excess of $50,000. True and complete copies of each Contract
disclosable on Schedule 2.15 (a "Disclosable Contract") have been delivered to
the Buyer. Each Disclosable Contract is, in all material respects, valid and
enforceable by the Company in accordance with its terms. Neither the Company nor
any Subsidiary nor, to the knowledge of the Company, any other party to any
Disclosable Contract is in material breach thereof.
2.16 Officers and Directors. Schedule 2.16 is a true and complete list
of:
(a) the names and addresses of each of the Company's and each
Subsidiaries' officers and directors;
(b) the name of each bank or other financial institution in
which the Company or any Subsidiary has an account, deposit or safe
deposit box and the names of all persons authorized to draw thereon or
to have access thereto; and
(c) the name of each bank or other financial institution in
which the Company or any Subsidiary has a line of credit or other loan
facility.
2.17 Corporate Documents. The Company has furnished or made available
to the Buyer or its representatives true, correct and complete copies of (i) the
articles of incorporation and by-laws of the Company and each Subsidiary, (ii)
the minute books of the Company and each Subsidiary containing all records
required to be set forth of all proceedings, consents, actions and meetings of
the stockholders and board of directors of the Company or such Subsidiary; and
(iii) all material Permits and Orders with respect to the Company and any
Subsidiary.
2.18 Legal Proceedings. Except as shown on Schedule 2.18, there is no
action, suit, proceeding or investigation pending in any court or before any
arbitrator or before or by any Governmental Agency against the Company or any
Subsidiary or any of their respective Properties or businesses, and to the
knowledge of the Company, there is no such action, suit, proceeding or
investigation threatened.
2.19 Compliance with Instruments, Orders and Legal Requirements.
Neither the Company nor any Subsidiary is in material violation of, or in
default in any material respect with respect to, any term or provision of its
articles of incorporation or bylaws, or, to the knowledge of the Company, any
Order or any Legal Requirement applicable to the Company or such Subsidiary.
2.20 Permits. The Company and each Subsidiary holds all Permits
material to the conduct their consolidated business as and where now conducted.
To the knowledge of the Company, there is not pending nor threatened any
proceedings to terminate, revoke, limit or impair any material Permit.
2.21 Intellectual Property.
(a) Except as shown on Schedule 2.21(a), the Company (a) owns or has
the right to use, free and clear of any rights, liens or claims of others, all
patents, trademarks, service marks, trade names, copyrights, licenses and rights
with respect to the foregoing used in the conduct of its business as now
conducted without infringing upon the right of any person under or with respect
to any of the foregoing, (b) is not obligated or under any liability whatsoever
to make any payments of a material nature by way of royalties, fees or otherwise
to any owner of, licensor of or other claimant to, any patent, trademark, trade
name, copyright or other intangible asset with respect to the use thereof or in
connection with the conduct of its business or otherwise, (c) owns or has the
right to use all trade secrets, including know-how, customer lists, inventions,
designs, processes, computer programs and technical data necessary to the
development, operation and sale of all products and services sold or proposed to
be sold by it, free and clear of any rights, liens or claims of others, and (d)
is not using any confidential information or trade secrets of others.
(b) The Company and each of its Subsidiaries has taken all commercially
reasonable steps to protect and preserve the confidentiality of all confidential
information that is of value to it. All use, disclosure or appropriation of such
confidential information by or to a third party has been pursuant to the terms
of a written confidentiality or nondisclosure agreement between the Company or
any Subsidiary and such third party. Schedule 2.21(b) lists all such agreements
currently in effect.
2.22 Capital Expenditures. Schedule 2.22 sets forth, by nature and
amount, all budgeted capital expenditures of the Company and its Subsidiaries
for which commitments have been or are budgeted to be made, or for which
payments or current liabilities have been made or incurred or are budgeted to be
made or incurred, after the Last Fiscal Year-End in excess of $50,000.
2.23 Environmental Matters. There are no Hazardous Materials used or
present at any location used by the Company or a Subsidiary or any predecessor
of either in the conduct of its business, except for any Hazardous Materials
constituting normal office supplies. To the knowledge of the Company, no
location currently or previously used by the Company or a Subsidiary or any
predecessor of either is contaminated by any Hazardous Material or was
previously used for any purpose other than its current use. There are no
environmental materials or conditions, including on-site or off-site disposal or
releases of Hazardous Materials that could reasonably be expected to have a
Material Adverse Effect. To the knowledge of the Company, no event has occurred
and no activity has been or is being conducted by the Company, a Subsidiary or
any other Person which has resulted or could reasonably result in contamination
of any location currently or previously used by the Company or a Subsidiary or
any predecessor of either by any Hazardous Material. Neither the Company, any
Subsidiary nor any predecessor of either has received any written communication
from any Governmental Entity alleging that the
Company, Subsidiary or predecessor or any premises currently or previously
occupied by any of such Persons is contaminated by any Hazardous Materials or in
violation of any Environmental Requirement. To the knowledge of the Company, no
Government Agency has commenced any investigation or proceeding with respect to
the contamination of any location currently or previously used by the Company or
a Subsidiary or any predecessor of either by any Hazardous Material.
2.24 Illegal Payments. None of the Company, any Subsidiary or any
director, officer, employee, or agent of the Company or any Subsidiary has,
directly or indirectly, paid or delivered any fee, commission, or other sum of
money or item of property however characterized to any broker, finder, agent,
government official, or other person, in the United States or any other country,
in any manner related to the business or operations of the Company or any
Subsidiary, which the Company, any Subsidiary or any such director, officer,
employee, or agent knows or has reason to believe to have been illegal under any
law.
2.25 SEC Information. As of their respective filing dates (except as
thereafter amended) all documents that the Company has filed with the SEC (the
"Company SEC Documents") have complied in all material respects with the
applicable requirements of the Act or the Exchange Act, and none of the Company
SEC Documents has contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading except to the extent corrected by a subsequently filed
Company SEC Document filed prior to the date hereof.
2.26 Board of Directors Approval; Fairness Opinion.
(a) The Board of Directors of the Company (excluding John D. Johnson)
has unanimously approved this Agreement and the Plan of Merger and unanimously
recommended this Agreement and the Plan of Merger to the Company's stockholders.
Such approval and recommendation have not been modified or withdrawn and are in
full force and effect on the date hereof. The Company's financial adviser,
Greene Holcomb & Fisher LLC, has rendered its opinion to the Board of Directors
of the Company that the consideration to be received in the Merger is fair to
the Company's stockholders from a financial point of view. Prior to the
Company's entry into this Agreement, each of the Company's officers, directors
and 5% stockholders designated by Buyer has granted the Buyer an irrevocable
proxy to vote all Shares beneficially owned by such officer, director or
stockholder in favor of the Merger.
(b) The transactions contemplated by this Agreement are not subject to
"fair price," "moratorium," "control share acquisition" or other similar statute
(a "Takeover Statute") of any jurisdiction other than the State of Minnesota.
Section 302A.671 of the Minnesota Business Corporation Act is not applicable to
the transactions contemplated by this Agreement. The restriction contained in
Section 302A.673, Subd. 1(a) of such Act does not apply to the transactions
contemplated by this Agreement.
2.27 Representations. No representation or warranty by the Company in
this Agreement (including without limitation the Schedules and Exhibits attached
hereto), or in any document furnished by the Company at the Closing pursuant
hereto contains or will contain any untrue statement of a material fact or omits
to state a fact necessary to make the statements contained in such
representation or warranty not misleading.
2.28 Employment Arrangements. The Company has entered into agreements
in forms acceptable to Buyer with Messrs. Bachul, Ayers and Cram.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer hereby represents and warrants to the Company that, on and as
of the date hereof:
3.1 Organization, Standing of Buyer and Buyer Subsidiary. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota. Buyer Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. The Buyer and Buyer Subsidiary have full power and authority under
applicable corporate law to own, lease and operate their Properties and to carry
on the business in which they are engaged.
3.2 Authority; Enforceability. The Buyer and Buyer Subsidiary have all
necessary power and authority under applicable corporate law to execute, deliver
and perform their obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Buyer and Buyer Subsidiary has been duly
authorized by all necessary action under applicable corporate law. This
Agreement constitutes a legal, valid and binding obligation of the Buyer and
Buyer Subsidiary, enforceable in accordance with its terms, subject to general
limitations on the availability of equitable remedies and the effect of
bankruptcy, insolvency, reorganization and other laws of general application
affecting the enforcement of creditors' rights. The execution, delivery and
performance of this Agreement by the Buyer and Subsidiary and the consummation
by the Buyer and Buyer Subsidiary of all of the transactions contemplated
hereby, (x) do not require any Third-Party Action relating to the Buyer or
Subsidiary, (y) do not violate any Legal Requirement or Order applicable to the
Buyer or Buyer Subsidiary and (z) do not conflict with or constitute a default
(with or without the giving of notice or the passage of time or both) under, or
result in any acceleration or right of acceleration of any obligations under,
any Contract to which the Buyer or Buyer Subsidiary is a party, where, in each
case, the absence of such Third-Party Action or such violation, conflict,
default or acceleration would in any way adversely affect the transactions
contemplated hereby.
3.3 Litigation. There are no claims, actions, suits or other
proceedings pending, or to the knowledge of the Buyer, threatened, at law or in
equity, by or before any Governmental Agency or any arbitrator against the Buyer
which could reasonably be expected to have an adverse effect on the ability of
the Buyer to perform its obligations under this Agreement.
3.4 Financing. At the Closing Buyer shall have cash available to pay
the Merger Consideration and all fees and expenses associated with the Merger.
SECTION 4
CONDITIONS TO OBLIGATIONS OF BUYER
AND BUYER SUBSIDIARY AT CLOSING
The obligations of the Buyer and Buyer Subsidiary hereunder to be
performed at the Closing are subject to the satisfaction at or prior to the
Closing of the following conditions, except for any condition the Buyer may
waive in writing in accordance with Section 7.3.
4.1 Representations and Warranties. The representations and warranties
contained in Section 2 shall have been true in all material respects on the date
of this Agreement and shall be true in all material respects at and as of
immediately prior to the Closing (provided that those representations or
warranties made as of a particular date need only be true and correct as of such
date) with the same effect as though made at and as of immediately prior to the
Closing.
4.2 Proxy Statement. The Proxy Statement shall comply as to form in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder and shall not, at the time of (i)
first mailing thereof or (ii) the stockholders' meeting to be held in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that this condition shall not apply with respect to
information supplied by the Buyer or any affiliates or representatives of the
Buyer for inclusion in the Proxy Statement.
4.3 Closing Certificate. The Company shall have delivered to the Buyer
its certificate dated the date of the Closing that the conditions specified in
Sections 4.1 and 4.2 are satisfied. Such certificate shall be deemed a
representation and warranty of the Company under Section 2 for all purposes of
this Agreement.
4.4 Performance. The Company shall have performed and complied in all
material respects with all covenants required herein to be performed or complied
with by it on or before the Closing.
4.5 Stockholder Approval, Dissenting Notices. The Stockholder Approval
shall have been given, and notices of intent to dissent under Section 302A.473
of the Minnesota Business Corporation Act shall not have been filed with respect
to more than 5% of the outstanding Shares immediately before the Effective Time.
4.6 Third-Party Action. All Third-Party Action required in order to
consummate the Closing on the terms hereof shall have been taken.
4.7 Opinion of Counsel. The Buyer shall have received from Fredrikson &
Byron, counsel to the Company, an opinion dated the date of the Closing, in form
and substance substantially as set forth in Exhibit B.
4.8 Transactional Litigation. No action, suit or proceeding before any
Governmental Agency shall have been commenced and not dismissed, and no
investigation by any Governmental Agency shall have been commenced or overtly
threatened, against the Company, the Buyer, Subsidiary, or any of their
respective principals, officers, directors or shareholders seeking to restrain,
prevent or change the transactions contemplated hereby or questioning the
validity or legality of any of such transactions or seeking damages in
connection with any of such transactions.
4.9 Interim Events. None of the events listed in Sections 6.8(a)
through (h) shall have occurred without the Buyer's written consent.
4.10 Management Changes, Employees. The Company's key employees listed
on Schedule 4.10 shall have indicated to the Buyer, in form reasonably
satisfactory to it, their intention to continue their employment with the
Company or the Buyer on their current terms following the Merger.
4.11 Warrants. All issued and outstanding warrants of the Company shall
have been exercised and/or canceled for an amount not to exceed the number of
Shares subject thereto times the excess, if any, of the Merger Consideration (as
defined in the Plan of Merger) over the per-Share exercise price stated therein.
4.12 Employment and Noncompetition Agreements . The agreements referred
to in Section 2.28 shall remain in full force and effect.
4.13 Transaction Expenses. All legal fees and other transaction
expenses incurred by the Company in conjunction with the Merger shall have been
disclosed to the Buyer and the Buyer shall not have reasonably objected thereto.
4.14 Corporate and Other Proceedings. All corporate and other
proceedings on the part of the Company in connection with the transactions to be
consummated at the Closing, and all documents and instruments incident to such
transactions, shall be reasonably satisfactory in substance and form to the
Buyer.
4.15 Material Adverse Change. No Material Adverse Change shall have
occurred after the Last Fiscal Year-End.
SECTION 5
CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company hereunder to be performed at the Closing
are subject to the satisfaction at or prior to the Closing of the following
conditions, except for any condition the Company may waive in accordance with
Section 7.3.
5.1 Representations and Warranties. The representations and warranties
of the Buyer contained in Section 3 shall have been true in all material
respects on the date of this Agreement and shall be true in all material
respects at and as of immediately prior to the Closing with the same effect as
though made at and as of immediately prior to the Closing.
5.2 Closing Certificate. The Buyer shall have delivered to the Company
a certificate dated the date of the Closing that the conditions specified in
Section 5.1 are satisfied. Such certificate shall be deemed a representation and
warranty of the Buyer under Section 3 for all purposes of this Agreement.
5.3 Performance. The Buyer shall have performed and complied in all
material respects with all covenants required herein to be performed or complied
with by the Buyer on or before the Closing.
5.4 Stockholder Approval. The Stockholder Approval shall have been
given.
5.5 Transactional Litigation. No action, suit or proceeding before any
Governmental Agency shall have been commenced, and no investigation by any
Governmental Agency shall have been commenced or overtly threatened, against the
Company, the Buyer, Buyer Subsidiary or any of their respective principals,
officers, directors or stockholders seeking to restrain, prevent or change the
transactions contemplated hereby or questioning the validity or legality of any
of such transactions or seeking damages in connection with any of such
transactions.
5.6 Corporate and Other Proceedings. All corporate and other
proceedings on the part of the Buyer and Buyer Subsidiary in connection with the
transactions to be consummated at the Closing, and all documents and instruments
incident to such transactions, shall be reasonably satisfactory in substance and
form to the Company.
SECTION 6
COVENANTS OF COMPANY, SUBSIDIARY AND BUYER
6.1 Non-Disclosure . Each party agrees not to divulge or communicate,
or use for any purpose other than evaluating this transaction or exercising
rights as a party hereto, any information or materials concerning this
Agreement, the negotiation between the parties hereto and the transactions
contemplated hereby, except to the extent that such information (v) is or
hereafter becomes lawfully obtainable from other sources, (w) is independently
developed by the party without use of any of such information, (x) is required
to be disclosed to a Governmental Agency having jurisdiction over the party or
its Affiliates, (y) is otherwise required by law to be disclosed or (z) is
disclosed following a waiver in writing from the other parties. Promptly after
the date hereof and after the Effective Time, the Buyer and the Company will
issue a mutually agreeable press release concerning the transactions
contemplated hereby. The parties hereto will consult and cooperate with each
other and agree upon the terms and substance of all press releases,
announcements and public statements with respect to this Agreement and the
Merger; PROVIDED, HOWEVER, that such consultation and cooperation shall not
interfere with any obligation of either party hereto to disclose any information
as required by applicable law. Any press release or other announcement by any
party with respect to the Merger will be subject to the consent and approval of
the other party, which consent or approval will not be unreasonably withheld.
6.2 Nonsurvival of Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement will expire at the
Effective Time, and the Surviving Corporation (as defined in the Plan of Merger)
shall have no liability with respect to any representation or warranty and shall
not be subject to any contribution, indemnity or similar claims with respect
thereto by any Person. However, nothing in this Section 6.2 will relieve any
Person from liability for his, her or its knowing personal fraud.
6.3 Termination of this Agreement; Termination Fees.
(a) If any condition of the Closing stated in Section 4 is not
satisfied on or before June 30, 2000, then, provided the Buyer is not in
material default hereunder, the Buyer may at any time thereafter terminate any
further obligations u
