EXHIBIT 7.4
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 22, 1997
AMONG
SANMINA CORPORATION
SANM ACQUISITION SUBSIDIARY, INC.
AND
ELEXSYS INTERNATIONAL, INC.
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ARTICLE I The Merger................................................................................................. 1
SECTION 1.1 The Merger........................................................................................... 1
SECTION 1.2 Closing.............................................................................................. 2
SECTION 1.3 Effective Time....................................................................................... 2
SECTION 1.4 Effects of the Merger................................................................................ 2
SECTION 1.5 Certificate of Incorporation and Bylaws.............................................................. 2
SECTION 1.6 Directors............................................................................................ 2
SECTION 1.7 Officers............................................................................................. 2
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange
of Certificates................................................................................................... 3
SECTION 2.1 Effect on Capital Stock.............................................................................. 3
SECTION 2.2 Exchange of Certificates............................................................................. 3
ARTICLE III Representations and Warranties........................................................................... 6
SECTION 3.1 Representations and Warranties of the Company........................................................ 6
(a) Organization, Standing and Corporate Power........................................................... 6
(b) Subsidiaries......................................................................................... 7
(c) Capital Structure.................................................................................... 7
(d) Authority; Noncontravention.......................................................................... 8
(e) SEC Documents........................................................................................ 9
(f) Information Supplied................................................................................. 10
(g) Absence of Certain Changes or Events................................................................. 10
(h) Litigation........................................................................................... 10
(i) Contracts............................................................................................ 10
(j) Compliance with Laws................................................................................. 11
(k) Labor Matters........................................................................................ 13
(l) Absence of Changes in Benefit Plans.................................................................. 13
(m) ERISA Compliance..................................................................................... 14
(n) Taxes................................................................................................ 15
(o) No Excess Parachute Payments......................................................................... 16
(p) Title to Properties.................................................................................. 16
(q) Intellectual Property................................................................................ 17
(r) Voting Requirements.................................................................................. 17
(s) State Takeover Statutes.............................................................................. 17
(t) Brokers.............................................................................................. 17
(u) Opinion of Financial Advisor......................................................................... 17
(v) Accounting Matters................................................................................... 18
(w) Equipment and Other Personal Property Leases......................................................... 18
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(x) Product and Service Warranties........................................................................ 18
(y) Customers............................................................................................. 18
(z) Inventory............................................................................................. 18
SECTION 3.2 Representations and Warranties of Parent and Sub...................................................... 18
(a) Organization, Standing and Corporate Power............................................................ 19
(b) Subsidiaries.......................................................................................... 19
(c) Capital Structure..................................................................................... 19
(d) Authority; Noncontravention........................................................................... 20
(e) SEC Documents......................................................................................... 21
(f) Information Supplied.................................................................................. 21
(g) Absence of Certain Changes or Events.................................................................. 22
(h) Litigation............................................................................................ 22
(i) Contracts............................................................................................. 22
(j) Compliance with Laws.................................................................................. 23
(k) Labor Matters......................................................................................... 24
(l) Absence of Changes in Benefit Plans................................................................... 25
(m) Taxes................................................................................................. 25
(n) Title to Properties................................................................................... 25
(o) Intellectual Property................................................................................. 26
(p) Voting Requirements................................................................................... 26
(q) Brokers............................................................................................... 26
(r) Opinion of Financial Advisor.......................................................................... 26
(s) Accounting Matters.................................................................................... 27
(t) Product and Service Warranties........................................................................ 27
(u) Customers............................................................................................. 27
(v) Inventory............................................................................................. 27
(w) Interim Operations of Sub............................................................................. 27
(x) Parent Common Stock................................................................................... 27
ARTICLE IV Covenants Relating to Conduct of Business................................................................. 28
SECTION 4.1 Conduct of Business by Parent and the Company......................................................... 28
SECTION 4.2 No Solicitation....................................................................................... 32
ARTICLE V Additional Agreements...................................................................................... 33
SECTION 5.1 Preparation of Form S-4 and Proxy Statement; Stockholders Meeting..................................... 33
SECTION 5.2 Letters of the Company's Accountants.................................................................. 34
SECTION 5.3 Letters of Parent's Accountants....................................................................... 35
SECTION 5.4 Access to Information; Confidentiality................................................................ 35
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SECTION 5.5 Reasonable Efforts; Notification...................................................................... 36
SECTION 5.6 Stock Options and Other Employee Benefits............................................................. 37
SECTION 5.7 Indemnification and Insurance......................................................................... 39
SECTION 5.8 Fees and Expenses..................................................................................... 41
SECTION 5.9 Public Announcements.................................................................................. 41
SECTION 5.10 Affiliates........................................................................................... 42
SECTION 5.11 Nasdaq National Market Listing....................................................................... 42
SECTION 5.12 Pooling of Interests................................................................................. 42
SECTION 5.13 Stop Transfer........................................................................................ 42
SECTION 5.14 Tax Treatment........................................................................................ 42
SECTION 5.15 Convertible Debentures............................................................................... 43
ARTICLE VI Conditions Precedent...................................................................................... 43
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger............................................ 43
SECTION 6.2 Conditions to Obligations of Parent and Sub........................................................... 44
SECTION 6.3 Conditions to Obligation of the Company............................................................... 45
ARTICLE VII Termination, Amendment and Waiver........................................................................ 46
SECTION 7.1 Termination........................................................................................... 46
SECTION 7.2 Effect of Termination................................................................................. 47
SECTION 7.3 Amendment............................................................................................. 47
SECTION 7.4 Extension; Waiver..................................................................................... 47
ARTICLE VIII General Provisions...................................................................................... 48
SECTION 8.1 Nonsurvival of Representations and Warranties......................................................... 48
SECTION 8.2 Notices............................................................................................... 48
SECTION 8.3 Definitions........................................................................................... 49
SECTION 8.4 Interpretation........................................................................................ 49
SECTION 8.5 Counterparts.......................................................................................... 49
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries........................................................ 50
SECTION 8.7 Governing Law......................................................................................... 50
SECTION 8.8 Assignment............................................................................................ 50
SECTION 8.9 Enforcement........................................................................................... 50
SECTION 8.10 Severability......................................................................................... 50
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EXHIBIT A Elexsys International, Inc. Affiliate Agreement
EXHIBIT B Sanmina Corporation Affiliate Agreement
EXHIBIT C Noncompetition Agreement
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AGREEMENT AND PLAN OF MERGER dated as of July 22, 1997, among SANMINA
CORPORATION, a Delaware corporation ("Parent"), SANM ACQUISITION SUBSIDIARY,
INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"),
and ELEXSYS INTERNATIONAL, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company,
and Parent, acting as the sole stockholder of Sub, have approved the merger of
Sub with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $1.00 per share, of the Company ("Company
Common Stock"), other than Company Common Stock owned by Parent, Sub or the
Company, will be converted into common stock, par value $.01 per share, of
Parent ("Parent Common Stock");
WHEREAS, substantially concurrently herewith and as a condition and
inducement to Parent's willingness to enter into this Agreement, Parent and
certain stockholders of the Company are entering into Stockholder Agreements
(the "Stockholder Agreements");
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
The Merger
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SECTION 1.1 The Merger. Upon the terms and subject to the conditions
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set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.3). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the DGCL.
At the election of Parent, any direct or indirect wholly owned subsidiary (as
defined in Section 8.3) of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties hereto agree to execute
an appropriate amendment to this Agreement in order to reflect such
substitution.
SECTION 1.2 Closing. The closing of the Merger (the "Closing") will
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take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of the
conditions set forth in Article VI (as such date may be extended, but not for
more than 30 days, by the Company, in its sole discretion) (the "Closing Date"),
at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, unless another date or place is agreed
to in writing by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
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Agreement, as soon as practicable on or after the Closing Date, the parties
shall file with the Delaware Secretary of State a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such other time
as Parent and the Company shall agree should be specified in the Certificate of
Merger (the time the Merger becomes effective being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
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set forth in Section 259 of the DGCL.
SECTION 1.5 Certificate of Incorporation and Bylaws.
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(a) Subject to Section 5.7(a), the Certificate of Incorporation of
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law, except that the
name of the Surviving Corporation in such Certificate of Incorporation will be
changed to be Elexsys International, Inc.
(b) Subject to Section 5.7(a), the Bylaws of Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
SECTION 1.6 Directors. The directors of Sub immediately prior to the
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Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company immediately prior to
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the Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
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ARTICLE II
Effect of the Merger on the Capital Stock of the
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Constituent Corporations; Exchange of Certificates
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SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue
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of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
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capital stock of Sub shall be converted into and become one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
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of Company Common Stock that is owned by the Company and each share of Company
Common Stock that is owned by Parent or Sub shall automatically be canceled and
retired and shall cease to exist, and no Parent Common Stock or other
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.2(e),
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each issued and outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.1(b)) shall be converted into thirty
three hundredths (0.33) (such fraction, as it may be adjusted pursuant to the
final sentence of this Section 2.1(c), being referred to as the "Exchange
Ratio") of a fully paid and nonassessable share of Parent Common Stock. As of
the Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate which immediately prior to the Effective
Time represented any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive certificates
representing the number of fully paid and nonassessable shares of Parent Common
Stock into which such shares of Company Common Stock were converted at the
Effective Time and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest. Notwithstanding
the foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination,
exchange of shares or any similar transaction or if Parent pays an extraordinary
dividend or makes an extraordinary distribution, the Exchange Ratio shall be
appropriately adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange or other
similar transaction or extraordinary dividend or distribution.
SECTION 2.2 Exchange of Certificates.
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(a) Exchange Agent. As of the Effective Time, Parent shall deposit
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with Norwest Bank Minnesota, N.A. or such other bank or trust company as may be
designated by Parent prior to the Effective Time (with the approval of the
Company) (the "Exchange Agent"), for the benefit of the
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holders of shares of Company Common Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates representing the shares of
Parent Common Stock issuable pursuant to Section 2.1 and cash sufficient to make
payments in lieu of fractional shares in accordance with Section 2.2(e) (such
shares of Parent Common Stock, together with any dividends or distributions with
respect thereto with a record date after the Effective Time, and the cash so
deposited, being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
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Effective Time, Parent 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 outstanding shares of Company Common Stock (the "Certificates")
whose shares were converted into Parent Common Stock pursuant to Section 2.1(c),
(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 customary
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article II after taking into account all the
shares of Company Common Stock then held by such holder under all such
Certificates so surrendered, cash in lieu of fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.2(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(c), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of Parent Common Stock may be issued to a person
other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.2(b), each Certificate shall be deemed at any
time after the Effective Time to represent only the shares of Parent Common
Stock into which the shares of Company Common Stock represented thereby were
converted at the Effective Time, and the right to receive cash in lieu of any
fractional shares of Parent Common Stock as contemplated by Section 2.2(e) and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(c). No interest will be paid or will accrue on any cash payable
pursuant to Sections 2.2(c) or 2.2(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
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other distributions with respect to Parent Common 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 Parent Common Stock represented thereby and no
cash payment in lieu of fractional shares shall be paid to any such holder
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pursuant to Section 2.2(e) until the holder of record of such Certificate shall
surrender such Certificate. Following surrender of any such Certificate, there
shall be paid to the record holder of the certificate representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock, and (ii) 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 whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
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of Parent Common Stock issued pursuant to this Article II (and any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued and
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock, subject, however, to the Surviving Corporation's obligation to pay
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any dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) No Fractional Shares.
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(i) No certificates or scrip representing fractional shares of
Parent Common Stock 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 any rights of a stockholder of Parent.
(ii) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount,
less the amount of any withholding taxes which may be required thereon, equal to
such fraction of a share of Parent Common Stock multiplied by the per share
closing price of Parent Common Stock as of the Closing Date as such price is
reported on the Nasdaq National Market (as published by The Wall Street Journal,
-----------------------
or, if not published therein, any other authoritative source).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
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which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for certificates evidencing Parent
Common Stock,
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any cash in lieu of fractional shares of Parent Common Stock and any dividends
or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
------------
Agent shall be liable to any person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund in each case properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
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cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent.
(i) 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
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue and pay in exchange for such lost, stolen or destroyed
Certificate (i) a certificate representing the shares of Parent Common Stock
into which the shares of Company Common Stock represented by such Certificate
were converted pursuant to Section 2.1, and (ii) any cash in lieu of fractional
shares, and unpaid dividends and distributions on such shares of Parent Common
Stock, pursuant to this Agreement.
ARTICLE III
Representations and Warranties
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SECTION 3.1 Representations and Warranties of the Company. Except as
---------------------------------------------
set forth on the disclosure schedule delivered by the Company to Parent prior to
the execution of this Agreement (the "Company Disclosure Schedule"), and except
as set forth in the Company SEC Documents (as defined in Section 3.1(e)), or in
the exhibits thereto, the Company represents and warrants to Parent and Sub as
follows:
(a) Organization, Standing and Corporate Power. The Company and each
------------------------------------------
of its subsidiaries (as defined in Section 8.3) is a corporation or other legal
entity duly organized, validly existing and in good standing (with respect to
jurisdictions that recognize such concept) under the laws of the jurisdiction of
its incorporation or organization and has all requisite corporate power and
authority to carry on its business as now being conducted. The Company and each
of its subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions that recognize such concept) in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate would not have a material adverse
effect (as defined in Section 8.3) on the Company. The Company has delivered
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to Parent complete and correct copies of its Restated Certificate of
Incorporation and Bylaws, in each case as amended to the date hereof.
(b) Subsidiaries. The Company has no subsidiaries and does not own as
------------
of the date hereof, directly or indirectly, beneficially or of record, any
shares of capital stock or other equity security of any other entity or any
other similar investment in any other entity.
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of 20,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, par value $1.00 per share (" Company Preferred Stock"). At the
close of business on July 21, 1997, (i) 9,492,676 shares of Company Common Stock
were issued and outstanding, (ii) no shares of Company Common Stock were held
by the Company in its treasury, (iii) 1,055,660 shares of Company Common Stock
were subject to issuance pursuant to outstanding options to purchase shares of
Company Common Stock, (iv) 303,797 shares of Company Common Stock were reserved
for issuance pursuant to the conversion of the Company's 5 1/2% Convertible
Subordinated Debentures due March 1, 2012 (the "Convertible Debentures"), (v)
250,000 shares of Company Common Stock were reserved for issuance under the
Company's 1996 Employee Stock Purchase Plan (the "Company ESPP") (stock options
granted by the Company are referred to in this Agreement as "Company Options"),
and (vi) no shares of Company Preferred Stock were issued or outstanding.
Except as set forth above and except for Company Common Stock issued between
July 21, 1997 and the date of this Agreement upon the exercise of options to
purchase Company Common Stock, at the close of business on July 22, 1997, no
shares of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. All outstanding shares of capital stock
of the Company are, and all shares which may be issued pursuant to Company
Options will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except for the Convertible Debentures, there are no bonds,
debentures, notes or other indebtedness of the Company outstanding having the
right to vote (or convertible into securities having the right to vote) on any
matters on which stockholders of the Company may vote. Except as set forth
above and except for (a) Company Common Stock issued between July 21, 1997 and
the date of this Agreement upon the exercise of options to purchase Company
Common Stock and (b) "rights" to purchase Company Common Stock outstanding under
the Company ESPP, as of the date of this Agreement, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company is a party, or by which it is
bound, obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of the Company or obligating the Company to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are not
any outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock or other securities of the
Company. As of the date of this Agreement, and except as contemplated by this
Agreement, there are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or by which it is
bound relating to the voting of any shares of capital stock of the Company. All
of the outstanding capital stock of the Company's subsidiaries is owned by the
Company, directly or indirectly, free and clear of any Lien (as defined in
Section 3.1(d)) or any other limitation or restriction (including any
restriction
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on the right to vote or sell the same, except as may be provided as a matter of
law), except for shares of capital stock or other similar ownership interests of
certain subsidiaries of the Company that may be owned by certain nominee equity
holders as required by the applicable law of the jurisdiction of organization of
such subsidiaries. There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries, and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of, any capital stock or other ownership
interests in, or any other equity securities of, any subsidiary of the Company.
As of the date of this Agreement, there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company.
(d) Authority; Noncontravention. The Company has the requisite
---------------------------
corporate power and authority to enter into this Agreement and, subject to the
adoption and approval of this Agreement and the approval of the Merger by the
holders of a majority of the shares of Company Common Stock outstanding on the
record date for the Stockholders Meeting (as defined in Section 5.1), to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
this Agreement and the Merger, to approval and adoption of this Agreement and
approval of the Merger by the holders of a majority of the shares of Company
Common Stock outstanding on the record date for the Stockholders Meeting. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution, and delivery of this Agreement by Parent and
Merger Sub, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors' rights or remedies in general as from time to time
in effect or (ii) the exercise by courts of equity powers. The execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated by this Agreement and compliance by the
Company with the provisions of this Agreement will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any pledge, adverse claim, lien, charge, encumbrance or
security interest of any kind or nature whatsoever (collectively, "Liens") in or
upon any of the properties or assets of the Company under any provision of (i)
the Restated Certificate of Incorporation or Bylaws of the Company, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or its properties or assets and to which the Company is a party as
of the date of this Agreement or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any (A) statute, law,
ordinance, rule or regulation applicable to the Company or (B) judgment, order
or decree applicable to the Company or its properties or assets, other than, in
the case of clause (ii) and clause (iii)(A), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate would
not (x) have a material adverse effect on the Company, (y) impair in any
material respect the ability of the Company to perform its obligations
-8-
under this Agreement, or (z) prevent or materially delay the consummation of any
of the transactions contemplated by this Agreement. No consent, approval, order
or authorization of, or registration, declaration or filing with, any third
party, including any federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required to be made or
obtained by the Company at or before the Effective Time in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated by this Agreement, except for (1)
the filing of a premerger notification and report form by the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and any applicable filings under the antitrust laws of any foreign country, (2)
the filing with the Securities and Exchange Commission (the "SEC") of a proxy
statement relating to the adoption and approval by the Company's stockholders of
this Agreement and approval by the Company's stockholders of the Merger (as
amended or supplemented from time to time, the "Proxy Statement") and such
reports under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (3) the filing of the Certificate of Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (4) such other consents, approvals, orders, authorizations, registrations,
declarations and filings, which if not obtained or made, would not, individually
or in the aggregate, have a material adverse effect on the Company or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement.
(e) SEC Documents. The Company has filed all required reports,
-------------
schedules, forms, statements and other documents with the SEC between September
30, 1994 and the date of this Agreement. All reports, schedules, forms,
statements and other documents filed by the Company with the SEC between
September 30, 1994 and the date of this Agreement (other than any exhibits to
such reports, schedules, forms, statements and documents) are collectively
referred to in this Agreement as the "Company SEC Documents." As of the time
each of the Company SEC Documents was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), (i) the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933 (the "Securities Act"), or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents, and (ii) except
to the extent that information contained in any Company SEC Document has been
revised or superseded by a later-filed Company SEC Document, none of the Company
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Company SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).
-9-
Between March 31, 1997 and the date of this Agreement, the Company has not
incurred any liabilities of the type required to be disclosed in the liabilities
column of a balance sheet prepared in accordance with U.S. generally accepted
accounting principles, except for (i) liabilities incurred in the ordinary
course of business, and (ii) liabilities that would not, individually or in the
aggregate, have a material adverse effect on the Company.
(f) Information Supplied. None of the information supplied or to be
--------------------
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock in connection with the
Merger (the "Form S-4") will, at the time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented and at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading and (ii) the Proxy Statement will, at the date it is first
mailed to the Company's stockholders and at the time of the Stockholders
Meeting, 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. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Between March 31, 1997 and
------------------------------------
the date of this Agreement, there has not occurred (i) any material adverse
change in the Company, (ii) any material change by the Company in its accounting
methods, principles or practices except as required by concurrent changes in
U.S. generally accepted accounting principles, (iii) any material reevaluation
by the Company of any of its assets, including, without limitation, writing down
the value of capitalized inventory or writing off notes or accounts receivable
other than in the ordinary course, or (iv) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital stock.
(h) Litigation. There is no suit, action or proceeding pending, and
----------
no person has overtly threatened in a writing delivered to the Company since
January 1, 1997 to commence any suit, action or proceeding, against or affecting
the Company or any of its subsidiaries that would, individually or in the
aggregate, have a material adverse effect on the Company, nor is there any
judgment, decree, injunction, or order of any Governmental Entity or arbitrator
outstanding against, or, to the knowledge of the Company, pending investigation
by any Governmental Entity involving, the Company or any of its subsidiaries
that individually or in the aggregate would have a material adverse effect on
the Company.
(i) Contracts. As of the date this Agreement, there are no contracts
---------
or agreements that are of a nature required to be filed by the Company as an
exhibit to a Report on Form 10-K under the Exchange Act and the rules and
regulations promulgated thereunder. Neither the Company nor any
-10-
of its subsidiaries is in violation of or in default under (nor does there exist
any condition which upon the passage of time or the giving of notice or both
would cause such a violation of or default under) any lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding to which any of them is a party or by which any of their
properties or assets is bound, except for violations or defaults that
individually or in the aggregate would not have a material adverse effect on the
Company.
(j) Compliance with Laws.
--------------------
(i) The Company and each of its subsidiaries is in compliance with
all applicable statutes, laws, ordinances, regulations, rules, judgments,
decrees and orders of any Governmental Entity (collectively, "Legal Provisions")
applicable to their business or operations, except for instances of possible
noncompliance that, individually or in the aggregate, would not have a material
adverse effect on the Company or prevent or materially delay the consummation of
the Merger. The Company and each of its subsidiaries has in effect all federal,
state, local and foreign governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights, including all
authorizations under Environmental Laws (as hereinafter defined) ("Permits"),
necessary for them to own, lease or operate their properties and assets and to
carry on their business substantially as now conducted, and there currently
exists no default under, or violation of, any such Permit, except for the lack
of Permits and for defaults under, or violations of, Permits which lack, default
or violation individually or in the aggregate would not have a material adverse
effect on the Company. Between January 1, 1997 and the date of this Agreement,
the Company has not received any written notice or other written communication
from any Governmental Entity alleging any violation of any Legal Provision by
the Company (except for (A) notices of violations which have been cured or
corrected in all material respects (B) notices which have been rescinded or
withdrawn, and (C) notices which would not have a material adverse effect on the
Company).
(ii) The term "Hazardous Material" means any material or substance
------------------
that has been designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment. The
term "Company Business Facility" means any property including the land, the
-------------------------
improvements thereon, the groundwater thereunder and the surface water thereon,
that is or at any time has been owned, operated, occupied, controlled or leased
by the Company or any of its subsidiaries in connection with the operation of
its business. The term "Disposal Site" means a landfill, disposal agent, waste
-------------
hauler or recycler of Hazardous Materials. The term "Environmental Laws" means
------------------
all applicable laws, rules, regulations, orders, treaties, statutes, and codes
promulgated by any Governmental Entity which prohibit, regulate or control any
Hazardous Material or any Hazardous Material Activity, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Recovery and Conservation Act of 1976, the
Federal Water Pollution Control Act, the Clean air Act, the Hazardous Materials
Transportation Act, the Clean Water Act, comparable laws, rules, regulations,
orders, treaties, statutes, and codes of other Governmental Entities the
regulations promulgated pursuant to any of the foregoing, and all amendments and
modifications of any of the foregoing, all as amended to date. The term
"Hazardous Materials Activity" means the
-----------------------------
-11-
transportation, transfer, recycling, storage, use, treatment, manufacture,
removal, remediation, release, exposure of others to, sale, or distribution of
any Hazardous Material or any product containing a Hazardous Material. The term
"Company Environmental Permit" means any approval, permit, license, clearance or
----------------------------
consent required to be obtained from any private person or any Governmental
Entity with respect to a Hazardous Materials Activity which is or was conducted
by the Company or any of its subsidiaries.
(iii) To the knowledge of the Company, no Hazardous Materials are
present on any Company Business Facility currently owned, operated, occupied,
controlled or leased by the Company or any of its subsidiaries except in such
cases as would not reasonably be expected to have a material adverse effect on
the Company. There are no underground storage tanks, asbestos which is friable
or likely to become friable or PCBs present on any Company Business Facility
currently owned, operated, occupied, controlled or leased by the Company or any
of its subsidiaries except in such cases as would not reasonably be expected to
have a material adverse effect on the Company.
(iv) The Company and each of its subsidiaries are conducting all
Hazardous Material Activities in compliance in all material respects with all
applicable Environmental Laws except where the failure to comply would not have
a material adverse effect on the Company. To the knowledge of the Company after
reasonable inquiry, the Hazardous Materials Activities of the Company and each
of its subsidiaries have not resulted in the exposure of any person to a
Hazardous Material in a manner which has resulted in said person currently
having a claim against the Company that is likely to be adversely determined
against the Company and that would reasonably be expected to have a material
adverse effect on the Company.
(v) The Company Environmental Permits held by the Company and each
of its subsidiaries are all of the Environmental Permits necessary for the
continued conduct of any Hazardous Material Activity of the Company and each of
its subsidiaries as such activities are currently being conducted, except for
those permits the absence of which could not reasonably be expected to result in
a material adverse effect on the Company. All such Company Environmental Permits
are valid and in full force and effect except where the failure to be valid and
in full force and effect would not have a material adverse effect on the
Company. The Company and its subsidiaries are in compliance in all material
respects with all covenants and conditions of any Company Environmental Permit
which are in force with respect to their Hazardous Materials Activities, except
where the failure to comply with such covenants and conditions would not have a
material adverse effect on the Company. To the knowledge of the Company, no
circumstance exists which would reasonably be expected to cause any Company
Environmental Permit to be revoked, modified, or rendered non-renewable upon
payment of the permit fee, except to the extent such revocation, modification,
or non-renewability would not have a material adverse effect on the Company.
(vi) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending against the Company or its
subsidiaries by any Governmental Entity, and no person has overtly threatened in
a writing delivered to the Company since January 1, 1997 to commence any action,
proceeding, revocation proceeding or amendment procedure against the
-12-
Company or its subsidiaries, concerning or relating to any Company Environmental
Permit or any Hazardous Materials Activity of the Company or any of its
subsidiaries, or to any Company Business Facility currently owned, operated,
occupied, controlled or leased by the Company or any of its subsidiaries, which
could reasonably be expected to have a material adverse effect on the Company.
(vii) To the knowledge of the Company after reasonable inquiry,
no action, proceeding, or claim exists, and no person has overtly threatened in
a writing delivered to the Company since January 1, 1997 to commence any action
or proceeding, against any Disposal Site or against the Company or any of its
subsidiaries with respect to any transfer or release of Hazardous Materials by
the Company to a Disposal Site which could reasonably be expected to have a
material adverse effect on the Company.
(viii) The Company has delivered to Parent or made available for
inspection by Parent and its agents and employees all material records in the
Company's possession as of the date of this Agreement concerning the current
Hazardous Materials Activities of the Company and each of its subsidiaries and
all environmental audits and environmental assessments of any Company Business
Facility conducted at the request of, or otherwise in the possession of, the
Company or any of its subsidiaries as of the date of this Agreement.
(k) Labor Matters. As of the date of this Agreement, there are no
-------------
collective bargaining agreements or other labor union agreements to which the
Company or any of its subsidiaries is a party, or by which they are bound. The
Company and each of its subsidiaries are in compliance with all federal, state
and local laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice except where the failure to comply, or the engaging in such
practice, would not have a material adverse effect on the Company. As of the
date of this Agreement, there is no unfair labor practice complaint against the
Company or any of its subsidiaries pending, and no person has overtly threatened
in a writing delivered to the Company since January 1, 1997 to commence any
unfair labor practices complaint before the National Labor Relations Board or
the United States Department of Labor. There is no labor strike, slowdown or
stoppage in progress, and no person has overtly threatened in a writing
delivered to the Company since January 1, 1997 to commence any strike, slowdown
or stoppage, against or involving the Company or any of its subsidiaries. No
written agreement restricts the Company or any of its subsidiaries from
relocating, closing or terminating any of its operations or facilities. Neither
the Company nor any of its subsidiaries has, in the past three years,
experienced any labor strike, slowdown or stoppage.
(l) Absence of Changes in Benefit Plans. Between March 31, 1997 and
-----------------------------------
the date of this Agreement, there has not been any adoption or amendment in any
material respect by the Company or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
providing benefits for which the Company or any of its subsidiaries will be
responsible to any current or former employee, officer or director of the
Company (collectively,
-13-
"Benefit Plans"). As of the date of this Agreement, there exist no employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings between the Company and any current or former employee,
officer or director of the Company, which is either currently effective or will
become effective at the Closing Date.
(m) ERISA Compliance.
----------------
(i) Each Benefit Plan has been administered in accordance with its
terms, and the Company and all the Benefit Plans are all in compliance with
applicable provisions of ERISA and the Code, except where the failure to so
administer the Benefit Plans or to so comply would not have a material adverse
effect on the Company.
(ii) Neither the Company nor any person or entity that, together
with the Company, is treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code (the Company and each such other person or entity, a
"Commonly Controlled Entity") has maintained, contributed or been obligated to
contribute to any Benefit Plan that is subject to Title IV of ERISA; and neither
the Company nor any Commonly Controlled Entity is obligated to make any
contribution, other than discretionary contributions, to any Benefit Plan.
(iii) With respect to any Benefit Plan that is an "employee
welfare benefit plan," (as defined in Section 3(l) of ERISA) there are no
agreements, written or oral, that would prevent any such plan (including any
such plan covering retirees or other former employees) from being amended or
terminated without material adverse effect on the Company on or at any time
after the Effective Time.
(iv) Neither the Company nor any of its subsidiaries contributes
to or has any material liability to the Pension Benefit Guaranty Corporation or
any other person, plan or entity under or with respect to (A) a pension plan
subject to Title IV of ERISA or Section 412 of the Code, or (B) a multiemployer
pension plan, as defined in Section 3(37) of ERISA. Neither the Company nor any
of its subsidiaries maintains an employee welfare benefit plan providing health
or medical benefits for retired employees.
(v) No employee welfare benefit plan of the Company or any of its
subsidiaries provides for continuing benefits or coverage after termination or
retirement from employment, except with respect to any "group health plan" as
defined in Section 4980B(g) of the Code and Section 607 of ERISA. With respect
to any Benefit Plan which is a "group health plan," as so defined, the Company
warrants that in all "qualified events" (including those resulting from the
Merger) occurring prior to or on the Closing Date, the Company has or will offer
to its eligible employees and their "qualified beneficiaries" the opportunity to
elect continuation coverage under Section 602 of ERISA to the extent required by
ERISA Sections 601-607 and will provide that coverage, if elected, at no expense
to Parent.
-14-
(vi) There is no Benefit Plan covering any employee or former
employee of the Company or any of its subsidiaries that, individually or
collectively, could give rise to the payment of an amount that would not be
deductible pursuant to the terms of Sections 280G or 162 of the Code.
(vii) Neither the Company nor any entity under common control with
the Company has ever participated in or withdrawn from a multi-employer plan as
defined in Section 4001(a)(3) of Title IV of ERISA, and neither the Company nor
any of its subsidiaries has incurred or owes any liability as a result of any
partial or complete withdrawal by any employer from such a multi-employer plan
as described under Sections 4201, 4203, or 4205 of ERISA.
(viii) No executive officer of the Company or, to the Company's
knowledge, other employee of the Company or any of its subsidiaries is obligated
under any agreement or judgment that would conflict with such employee's
obligation to use his best efforts to promote the interests of the Company or
would conflict with the Company's business as conducted or proposed to be
conducted. No executive officer of the Company or, to the Company's knowledge,
other employee of the Company or any of its subsidiaries is, by virtue of his or
her employment by the Company or any of its subsidiaries, in material violation
of the terms of any employment agreement or any other agreement relating to such
employee's relationship with any previous employer and no litigation is pending,
and no person has overtly threatened in a writing delivered to the Company since
January 1, 1997 to commence any litigation, against the Company with regard
thereto.
(ix) Schedule 3.1(m)(ix) to the Company Disclosure Schedule lists
all Company Options outstanding as of the date of this Agreement, showing for
each such option: (1) the number of shares issuable under each option grant, and
(2) the exercise price thereof.
(x) No employee of the Company will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or vesting
of any compensation or benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement except as described in the Company
Option Plans.
(xi) The deduction of any amount payable pursuant to the terms of
the Benefit Plans will not be subject to disallowance under Section 162(m) of
the Code.
(n) Taxes. As of the date of this Agreement, the Company has filed
-----
all tax returns and reports required to be filed by it and has paid all taxes
that are shown on such tax returns as due and payable, and the most recent
financial statements contained in the Company SEC Documents reflect an adequate
reserve for all taxes payable by the Company for all taxable periods and
portions thereof through the date of such financial statements. As of the date
of this Agreement, no material deficiencies for any taxes have been proposed,
asserted or assessed against the Company, nor is there, to the knowledge of the
Company after reasonable inquiry, any reasonable basis for the assertion of any
such deficiency. No requests for waivers of the time to assess any such taxes
are pending as of the date of this Agreement. No material special charges,
penalties, fines, liens, or similar encumbrances are owed by or pending against
the Company with respect to payment of or failure to pay any taxes. The
-15-
Company is not a party to any executory agreements extending the period for
assessment or collection of any taxes. Proper amounts have been withheld by the
Company from employee compensation payments for all periods in compliance with
the tax withholding provisions of applicable federal and state laws, except
where the failure to withhold proper amounts would not have a material adverse
effect on the Company. As of the date of this Agreement, none of the Federal
income tax returns of the Company have been examined by the United States
Internal Revenue Service for the fiscal years through September 30, 1996. The
Company has not taken any action nor does it have any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code. As used in
this Agreement, "taxes" shall include all Federal, state, local and foreign
income, property, sales, excise and other taxes, tariffs or governmental charges
of any nature whatsoever.
(o) No Excess Parachute Payments. No amount that could be received
----------------------------
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement by any employee, officer or
director of the Company or any of its subsidiaries who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.28OG-1) under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect would be an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
No such person is entitled to receive any additional payment from the Company,
the Surviving Corporation or any other person (a "Parachute Gross-Up Payment")
in the event that the excise tax of Section 4999(a) of the Code is imposed on
such person. No officer, director or employee of the Company or any of its
subsidiaries has been granted any right to receive any Parachute Gross-Up
Payment by the Company or any of its subsidiaries.
(p) Title to Properties.
-------------------
(i) The Company and each of its subsidiaries has good title to, or
valid leasehold interests in, all its material properties and assets except for
such as are no longer used or useful in the conduct of its businesses or as have
been disposed of in the ordinary course of business and except for defects in
title, easements, restrictive covenants and other encumbrances that individually
or in the aggregate would not materially interfere with the ability of the
Company and its subsidiaries to conduct their business as currently conducted.
All such material assets and properties, other than assets and properties in
which the Company or any of its subsidiaries has a leasehold interest, are free
and clear of all Liens except for Liens that (A) are created or arise in the
ordinary course of business, (B) are created, arise or exist under or in
connection with any of the contracts or other matters referred to in the Company
Disclosure Schedule or in the Company SEC Documents or the exhibits thereto, (C)
relate to any taxes or other governmental charges or levies that are not yet due
and payable, (D) relate to, or are created, arise or exist in connection with,
any legal proceeding that is being contested in good faith, or (E) individually
or in the aggregate would not materially interfere with the ability of the
Company and each of its subsidiaries to conduct their business as currently
conducted ("Company Permitted Liens").
-16-
(ii) The Company and each of its subsidiaries are in compliance
in all material respects with the terms of all material leases to which they are
a party and under which they are in occupancy, and all such leases are in full
force and effect except where the failure to be in compliance or the failure to
be in full force and effect would not have a material adverse effect on the
Company. As of the date of this Agreement, the Company and/or one or more of its
subsidiaries enjoys peaceful and undisturbed possession under all such material
leases, except for failures to do so that would not individually or in the
aggregate have a material adverse effect on the Company.
(q) Intellectual Property. The Company owns, or is validly licensed
---------------------
or otherwise has the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service ▇▇▇▇
rights, copyrights and other proprietary intellectual property rights and
computer programs (collectively, "Intellectual Property Rights") which are
material to the conduct of the business of the Company and its subsidiaries
taken as a whole. As of the date of this Agreement, no suits, actions or
proceedings are pending, and no person has overtly threatened in a writing
delivered to the Company since January 1, 1997 to commence any suit, action or
proceeding, alleging that the Company or any of its subsidiaries is infringing
the rights of any person with regard to any Intellectual Property Right, except
for suits, actions or proceedings which, individually or in the aggregate, would
not have a material adverse effect on the Company. To the knowledge of the
Company, no person is infringing the rights of the Company or any of its
subsidiaries with respect to any Intellectual Property Right, except for
infringements which individually or in the aggregate, would not have a material
adverse effect on the Company. Neither the Company nor any of its subsidiaries
is licensing, or otherwise granting, to any third party, any rights in or to any
Intellectual Property Rights which would have a material adverse effect on the
Company.
(r) Voting Requirements. The affirmative vote of the holders of a
-------------------
majority of the shares of Company Common Stock outstanding as of the record date
for the Stockholders Meeting is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement.
(s) State Takeover Statutes. The Board of Directors of the Company
-----------------------
has approved the Merger and this Agreement and such approval is sufficient to
render inapplicable to the Merger and this Agreement the provisions of Section
203 of the DGCL to the extent, if any, such Section is applicable to the Merger
and this Agreement To the best of the Company's knowledge, no other state
takeover statute or similar statute or regulation applies to or purports to
apply to the Merger or this Agreement.
(t) Brokers. No broker, investment banker, financial advisor or other
-------
person, other than ▇▇▇▇▇▇▇ & Company, the fees and expenses of which will be
paid by the Company, is entitled to any broker's, finder's or financial
advisor's fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
(u) Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of ▇▇▇▇▇▇▇ & Company, dated the date hereof, to the effect that, as of
such date, the consideration to be
-17-
received in the Merger by the Company's stockholders is fair to the Company's
stockholders from a financial point of view, a copy of which opinion has been
delivered to Parent for informational purposes only.
(v) Accounting Matters. The Company has not taken or agreed to take
------------------
any action that would prevent the business combination to be effected by the
Merger to be accounted for as a pooling of interests.
(w) Equipment and Other Personal Property Leases. All of the
--------------------------------------------
material items of equipment and personal property leased by the Company or any
of its subsidiaries from any third party is currently used by the Company and/or
one or more of its subsidiaries in the ordinary course of their businesses. All
leases in effect as of the date of this Agreement pursuant to which the Company
leases material items of equipment or other material items of personal property
are valid, subsisting and in full force and effect, and neither the Company nor
any other party thereto is in default of any of its obligations under any of
such leases, except for defaults and failures to be valid, subsisting and in
full force and effect which would not have a material adverse effect on the
Company. No consent to the consummation of the transactions contemplated by
this Agreement is required from the lessors under such leases except for any
such consent the failure to obtain which would not have a material adverse
effect on the Company.
(x) Product and Service Warranties. Between January 1, 1997 and the
------------------------------
date of this Agreement, the Company has not received any written notice pursuant
to which any third party has made any claims against the Company or its
subsidiaries regarding any product or service warranties sold or provided by the
Company or its subsidiaries, except for (i) claims which have been fully settled
and (ii) unresolved claims that would not have a material adverse effect on the
Company.
(y) Customers. As of the date of this Agreement, neither the Company
---------
nor any of its subsidiaries has received any information from any current
material Customer that such Customer will not continue as a customer of the
Company, such subsidiary or Parent after the Closing or that any such Customer
intends to terminate or materially modify any such Customer Contract, except
where the termination or modification of a customer relationship would not have
a material adverse effect on the Company.
(z) Inventory. The inventory of the Company is in all material
---------
respects of good and merchantable quality and is in all material respects usable
and saleable in the ordinary course of the Company's and its subsidiaries'
businesses, except for items of obsolete materials and materials of below
standard quality, substantially all of which have been written down to
realizable market value or for which adequate reserves have been provided.
SECTION 3.2 Representations and Warranties of Parent and Sub. Except as
------------------------------------------------
set forth on the disclosure schedule delivered by Parent to the Company prior to
the execution of this Agreement (the "Parent Disclosure Schedule"), and except
as set forth in the Parent SEC Documents (as defined in Section 3.2(e)), or in
the exhibits thereto, Parent represents and warrants to the Company as follows:
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(a) Organization, Standing and Corporate Power. Each of Parent and
------------------------------------------
Sub is a corporation duly organized, validly existing and in good standing under
the laws of Delaware and has all requisite corporate power and authority to
carry on its business as now being conducted. Each of Parent and Sub is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate would not have a material adverse
effect on Parent. Parent has delivered to the Company complete and correct
copies of its Certificate of Incorporation and Bylaws and the Certificate of
Incorporation and Bylaws of Sub, in each case as amended to the date hereof.
(b) Subsidiaries. Parent has no subsidiaries and does not own as of
------------
the date hereof, directly or indirectly, beneficially or of record, any shares
of capital stock or other equity security of any other entity or any other
similar investment in any other entity.
(c) Capital Structure. The authorized capital stock of Parent
-----------------
consists of 75,000,000 shares of Common Stock, par value $0.01 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share ("Parent
Preferred Stock"). At the close of business on July 21, 1997, (i) 17,159,618
shares of Parent Common Stock were issued and outstanding, (ii) no shares of
Parent Common Stock were held by the Company in its treasury, (iii) 2,957,152
shares of Parent Common Stock were reserved for issuance pursuant to Parent's
stock option and employee stock purchase plans ("Parent Equity Incentive
Plans"), (iv) 3,059,324 shares of Parent Common Stock were reserved for issuance
pursuant to the conversion of Parent's 5 1/4% Convertible Subordinated
Debentures due August 15, 2002 (the "Parent Convertible Debentures"), and (v) no
shares of Parent Preferred Stock were issued or outstanding. Except as set
forth above, at the close of business on July 22, 1997, no shares of capital
stock or other voting securities of Parent were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Parent are, and all
shares which may be issued pursuant to the Parent Equity Incentive Plans will
be, when issued in accordance with the terms thereof, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except for the Parent Convertible Debentures, there are no bonds, debentures,
notes or other indebtedness of Parent outstanding having the right to vote (or,
other than the Parent Convertible Debentures, convertible into securities having
the right to vote) on any matters on which stockholders of Parent may vote.
Except as set forth above, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Parent is a party, or by which it is bound, obligating Parent to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Parent or obligating Parent to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, are not any outstanding contractual obligations of Parent to
repurchase, redeem or otherwise acquire any shares of capital stock or other
securities of Parent. As of the date of this Agreement, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which Parent is a party or by which it is bound relating to the voting of any
shares of capital stock of Parent. All of the outstanding capital stock of
Parent's subsidiaries is owned by Parent, directly or indirectly, free and clear
of any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided as a matter of
law), except for shares of
-19-
capital stock or other similar ownership interests of certain subsidiaries of
Parent that may be owned by certain nominee equity holders as required by the
applicable law of the jurisdiction of organization of such subsidiaries. There
are no securities of Parent or its subsidiaries convertible into or exchangeable
for, no options or other rights to acquire from Parent or its subsidiaries, and
no other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of any
capital stock or other ownership interests in, or any other equity securities
of, any subsidiary of Parent. As of the date of this Agreement, there are no
outstanding contractual obligations of Parent or its subsidiaries to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of Parent.
(d) Authority; Noncontravention. Parent and Sub have the requisite
---------------------------
corporate power and authority to enter into this Agreement (and, in the case of
Parent, the Stockholder Agreements), and to consummate the transactions
contemplated by this Agreement (and, in the case of Parent, those contemplated
by the Stockholder Agreements). The execution and delivery of this Agreement by
Parent and Sub (and, in the case of Parent, the Stockholder Agreements), and the
consummation by Parent and Sub of the transactions contemplated by this
Agreement (and, in the case of Parent, those contemplated by the Stockholder
Agreements), have been duly authorized by all necessary corporate action on the
part of Parent and Sub. This Agreement (and, in the case of Parent, the
Stockholder Agreements) has been duly executed and delivered by Parent and Sub,
and, assuming the due authorization, execution, and delivery of this Agreement
by the Company, constitutes a valid and binding obligation of Parent and Sub,
enforceable against Parent and Sub in accordance with its terms, except as
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and similar laws, both state and federal, affecting
the enforcement of creditors' rights or remedies in general as from time to time
in effect or (ii) the exercise by courts of equity powers. The execution and
delivery of this Agreement by Parent and Sub (and, in the case of Parent, the
Stockholder Agreements), do not, and the consummation by Parent and Sub of the
transactions contemplated by this Agreement (and, in the case of Parent, the
Stockholder Agreements) and compliance by Parent and Sub with the provisions of
this Agreement (and, in the case of Parent, the Stockholder Agreements) will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under any provision of (i) the
Certificate of Incorporation or Bylaws of Parent or Sub, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or Sub
or their respective properties or assets and to which Parent or Sub is a party
as of the date of this Agreement or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any (A) statute, law,
ordinance, rule or regulation applicable to Parent or Sub or (B) judgment, order
or decree applicable to Parent, Sub or their respective properties or assets,
other than, in the case of clause (ii) and clause (iii)(A), any such conflicts,
violations, defaults, rights, losses or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Parent, (y) impair in
any material respect the ability of Parent and Sub to perform their respective
obligations under this Agreement or (z) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be
-20-
made or obtained by Parent or Sub at or before the Effective Time in connection
with the execution and delivery of this Agreement (and, in the case of Parent,
the Stockholder Agreements) by Parent and Sub or the consummation by Parent and
Sub of the transactions contemplated by this Agreement (and, in the case of
Parent, those contemplated by the Stockholder Agreements), except for (1) the
filing of a premerger notification and report form by Parent under the HSR Act
and any applicable filings under the antitrust laws of any foreign country, (2)
the filing with the SEC of the Form S-4 and such reports under the Exchange Act
as may be required in connection with this Agreement or the Stockholder
Agreements and the transactions contemplated by this Agreement or the
Stockholder Agreements, (3) the filing of the Certificate of Merger with the
Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business and (4)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings, which if not obtained or made, would not, individually
or in the aggregate, have a material adverse effect on Parent or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement.
(e) SEC Documents. Parent has filed all required reports, schedules,
-------------
forms, statements and other documents with the SEC between September 30, 1994
and the date of this Agreement. All reports, schedules, forms, statements and
other documents filed by Parent with the SEC between September 30, 1994 and the
date of this Agreement (other than any exhibits to such reports, schedules,
forms, statements and documents) are collectively referred to in this Agreement
as the "Parent SEC Documents." As of the time each of the Parent SEC Documents
was filed with the SEC (or, if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing), (i) the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and (ii) except to the extent that information contained in any
Parent SEC Document has been revised or superseded by a later-filed Parent SEC
Document, none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of
Parent as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Between March 31, 1997 and
the date of this Agreement, Parent has not incurred any liabilities of the type
required to be disclosed in the liabilities column of a balance sheet prepared
in accordance with U.S. generally accepted accounting principles, except for (i)
liabilities incurred in the ordinary course of business, and (ii) liabilities
that would not, individually or in the aggregate, have a material adverse effect
on Parent.
(f) Information Supplied. None of the information supplied or to be
--------------------
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time
-21-
the Form S-4 is filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) the Proxy
Statement will, at the date it is first mailed to the Company's stockholders or
at the time of the Stockholders Meeting, 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. The Form S-4 will
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Between March 31, 1997 and
------------------------------------
the date of this Agreement, there has not occurred (i) any material adverse
change in Parent, (ii) any material change by Parent in its accounting methods,
principles or practices except as required by concurrent changes in U.S.
generally accepted accounting principles, (iii) any material reevaluation by
Parent of any of its assets, including, without limitation, writing down the
value of capitalized inventory or writing off notes or accounts receivable other
than in the ordinary course, (iv) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of Parent's capital stock.
(h) Litigation. There is no suit, action or proceeding pending, and
----------
no person has overtly threatened in a writing delivered to Parent since January
1, 1997 to commence any suit, action or proceeding, against or affecting Parent
or any of its subsidiaries that would, individually or in the aggregate, have a
material adverse effect on Parent, nor is there any judgment, decree,
injunction, or order of any Governmental Entity or arbitrator outstanding
against, or, to the knowledge of Parent, pending investigation by any
Governmental Entity involving, Parent or any of its subsidiaries that
individually or in the aggregate would have a material adverse effect on Parent.
(i) Contracts. As of the date of this Agreement, there are no
---------
contracts or agreements that are of a nature required to be filed by Parent as
an exhibit to a Report on Form 10-K under the Exchange Act and the rules and
regulations promulgated thereunder. Neither Parent nor any of its subsidiaries
is in violation of or in default under (nor does there exist any condition which
upon the passage of time or the giving of notice or both would cause such a
violation of or default under) any lease, permit, concession, franchise, license
or any other contract, agreement, arrangement or understanding to which any of
them is a party or by which any of their properties or assets is bound, except
for violations or defaults that individually or in the aggregate would not have
a material adverse effect on Parent.
-22-
(j) Compliance with Laws.
--------------------
(i) Parent and each of its subsidiaries is in compliance with all
Legal Provisions applicable to their business or operations, except for
instances of possible noncompliance that, individually or in the aggregate,
would not have a material adverse effect on Parent or prevent or materially
delay the consummation of the Merger. Parent and each of its subsidiaries has
in effect all Permits, necessary for them to own, lease or operate their
properties and assets and to carry on their business substantially as now
conducted, and there currently exists no default under, or violation of, any
such Permit, except for the lack of Permits and for defaults under, or
violations of, Permits which lack, default or violation individually or in the
aggregate would not have a material adverse effect on Parent. Between January 1,
1997 and the date of this Agreement, Parent has not received any written notice
or other written communication from any Governmental Entity alleging any
violation of any Legal Provision by Parent (except for (A) notices of violations
which have been cured or corrected in all material respects, (B) notices which
have been rescinded or withdrawn, and (C) notices which would not have a
material adverse effect on Parent).
(ii) The term "Parent Business Facility" means any property
------------------------
including the land, the improvements thereon, the groundwater thereunder and the
surface water thereon, that is or at any time has been owned, operated,
occupied, controlled or leased by Parent or any of its subsidiaries in
connection with the operation of its business. The term "Parent Environmental
--------------------
Permit" means any approval, permit, license, clearance or consent required to be
------
obtained from any private person or any Governmental Entity with respect to a
Hazardous Materials Activity which is or was conducted by Parent or any of its
subsidiaries.
(iii) To the knowledge of Parent, no Hazardous Materials are
present on any Parent Business Facility currently owned, operated, occupied,
controlled or leased by Parent or any of its subsidiaries except in such cases
as would not reasonably be expected to have a material adverse effect on Parent.
There are no underground storage tanks, asbestos which is friable or likely to
become friable or PCBs present on any Parent Business Facility currently owned,
operated, occupied, controlled or leased by Parent or any of its subsidiaries
except in such cases as would not reasonably be expected to have a material
adverse effect on Parent.
(iv) Parent and each of its subsidiaries are conducting all
Hazardous Material Activities in compliance in all material respects with all
applicable Environmental Laws except where the failure to comply would not have
a material adverse effect on Parent. To the knowledge of Parent after
reasonable inquiry, the Hazardous Materials Activities of Parent and each of its
subsidiaries have not resulted in the exposure of any person to a Hazardous
Material in a manner which has resulted in said person currently having a claim
against Parent that is likely to be adversely determined against Parent and that
would reasonably be expected to have a material adverse effect on Parent.
(v) The Parent Environmental Permits held by Parent and each of
its subsidiaries are all of the Environmental Permits necessary for the
continued conduct of any Hazardous Material Activity of Parent and each of its
subsidiaries as such activities are currently being conducted,
-23-
except for those permits the absence of which could not reasonably be expected
to result in a material adverse effect on Parent. All such Parent Environmental
Permits are valid and in full force and effect except where the failure to be
valid and in full force and effect would not have a material adverse effect on
Parent. Parent and its subsidiaries are in compliance in all material respects
with all covenants and conditions of any Parent Environmental Permit which are
in force with respect to their Hazardous Materials Activities, except where the
failure to comply with such covenants and conditions would not have a material
adverse effect on Parent. To the knowledge of Parent, no circumstance exists
which would reasonably be expected to cause any Parent Environmental Permit to
be revoked, modified, or rendered non-renewable upon payment of the permit fee,
except to the extent such revocation, modification, or non-renewability would
not have a material adverse effect on Parent.
(vi) No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending against Parent or its
subsidiaries by any Governmental Entity, and no person has threatened in a
writing delivered to Parent since January 1, 1997 to commence any action,
proceeding, revocation proceeding or amendment procedure against Parent or its
subsidiaries, concerning or relating to any Parent Environmental Permit or any
Hazardous Materials Activity of Parent or any of its subsidiaries, or to any
Parent Business Facility currently owned, operated, occupied, controlled or
leased by Parent or any of its subsidiaries which could reasonably be expected
to have a material adverse effect on Parent.
(vii) To the knowledge of Parent after reasonable inquiry, no
action, proceeding or claim exists , and no person has overtly threatened in a
writing delivered to Parent since January 1, 1997 to commence any action or
proceeding, against any Disposal Site or against Parent or any of its
subsidiaries with respect to any transfer or release of Hazardous Materials by
Parent to a Disposal Site which could reasonably be expected to have a material
adverse effect on Parent.
(viii) Parent has delivered to the Company or made available for
inspection by the Company and its agents and employees all material records in
Parent's possession as of the date of this Agreement concerning the current
Hazardous Materials Activities of Parent and each of its subsidiaries and all
environmental audits and environmental assessments of any Parent Business
Facility conducted at the request of, or otherwise in the possession of, Parent
or any of its subsidiaries as of the date of this Agreement.
(k) Labor Matters. As of the date of this Agreement, there are no
-------------
collective bargaining agreements or other labor union agreements to which Parent
or any of its subsidiaries is a party, or by which they are bound. Parent and
each of its subsidiaries are in compliance with all federal, state and local
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, and are not engaged in any unfair labor practice
except where the failure to comply, or the engaging in such practice, would not
have a material adverse effect on Parent. As of the date of this Agreement,
there is no unfair labor practice complaint against Parent or any of its
subsidiaries pending, and no person has overtly threatened in a writing
delivered to Parent since January 1, 1997 to commence and unfair labor practices
complaint before the National Labor Relations Board
-24-
or the United States Department of Labor. There is no labor strike, slowdown or
stoppage in progress, and no person has overtly threatened in a writing
delivered to Parent since January 1, 1997 to commence any strike, slowdown or
stoppage against or involving Parent or any of its subsidiaries. No written
agreement restricts Parent or any of its subsidiaries from relocating, closing
or terminating any of its operations or facilities. Neither Parent nor any of
its subsidiaries has, in the past three years, experienced any labor strike,
slowdown or stoppage.
(l) Absence of Changes in Benefit Plans. Between March 31, 1997 and
-----------------------------------
the date of this Agreement, there has not been any adoption or amendment in any
material respect by Parent or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
providing benefits for which Parent or any of its subsidiaries will be
responsible to any current or former employee, officer or director of Parent
(collectively, "Parent Benefit Plans").
(m) Taxes. As of the date of this Agreement, Parent has filed all tax
-----
returns and reports required to be filed by it and has paid all taxes that are
shown on such tax returns as due and payable, and the most recent financial
statements contained in the Parent SEC Documents reflect an adequate reserve for
all taxes payable by Parent for all taxable periods and portions thereof through
the date of such financial statements. As of the date of this Agreement, no
material deficiencies for any taxes have been proposed, asserted or assessed
against Parent, nor is there, to the knowledge of Parent after reasonable
inquiry, any reasonable basis for the assertion of any such deficiency. No
requests for waivers of the time to assess any such taxes are pending as of the
date of this Agreement. No material special charges, penalties, fines, liens,
or similar encumbrances are owed by or pending against Parent with respect to
payment of or failure to pay any taxes. Parent is not a party to any executory
agreements extending the period for assessment or collection of any taxes.
Proper amounts have been withheld by Parent from employee compensation payments
for all periods in compliance with the tax withholding provisions of applicable
federal and state laws, except where the failure to withhold proper amounts
would not have a material adverse effect on Parent. As of the date of this
Agreement, none of the Federal income tax returns of Parent have been examined
by the United States Internal Revenue Service for the fiscal years through
September 30, 1996. Parent has not taken any action nor does it have any
knowledge of any fact or circumstance that is reasonably likely to prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
(n) Title to Properties.
-------------------
(i) Parent and each of its subsidiaries has good title to, or
valid leasehold interests in, all its material properties and assets except for
such as are no longer used or useful in the conduct of its businesses or as have
been disposed of in the ordinary course of business and except for defects in
title, easements, restrictive covenants and other encumbrances that individually
or in the aggregate would not materially interfere with the ability of Parent
and its subsidiaries to conduct their business as currently conducted. All such
material assets and properties, other than assets and properties
-25-
in which Parent or any of its subsidiaries has a leasehold interest, are free
and clear of all Liens except for Liens that (A) are created or arise in the
ordinary course of business, (B) are created, arise or exist under or in
connection with any of the contracts or other matters referred to in the Parent
Disclosure Schedule or in the Parent SEC Documents or the exhibits thereto, (C)
relate to any taxes or other governmental charges or levies that are not yet due
and payable, (D) relate to, or are created, arise or exist in connection with,
any legal proceeding that is being contested in good faith, or (E) individually
or in the aggregate would not materially interfere with the ability of Parent
and each of its subsidiaries to conduct their business as currently conducted
("Parent Permitted Liens").
(ii) Parent and each of its subsidiaries are in compliance in all
material respects with the terms of all material leases to which it is a party
and under which they are in occupancy, and all such leases are in full force and
effect, except where the failure to be in compliance or the failure to be in
full force and effect would not have a material adverse effect on Parent. As of
the date of this Agreement, Parent and/or one or more of its subsidiaries enjoys
peaceful and undisturbed possession under all such material leases, except for
failures to do so that would not individually or in the aggregate have a
material adverse effect on Parent.
(o) Intellectual Property. Parent owns, or is validly licensed or
---------------------
otherwise has the right to use all Parent Intellectual Property Rights which are
material to the conduct of the business of Parent and its subsidiaries taken as
a whole. As of the date of this Agreement, no suits, actions or proceedings are
pending, and no person has overtly threatened in a writing delivered to Parent
since January 1, 1997 to commence any suit, action or proceeding, alleging that
Parent or any of its subsidiaries is infringing the rights of any person with
regard to any Intellectual Property Right, except for suits, actions or
proceedings which, individually or in the aggregate, would not have a material
adverse effect on Parent. To the knowledge of Parent, no person is infringing
the rights of Parent or any of its subsidiaries with respect to any Intellectual
Property Right, except for infringements which individually or in the aggregate,
would not have a material adverse effect on Parent. Neither Parent nor any of
its subsidiaries is licensing, or otherwise granting, to any third party, any
rights in or to any Intellectual Property Rights which would have a material
adverse effect on Parent.
(p) Voting Requirements. Assuming the accuracy of the representations
-------------------
and warranties of the Company in Sections 3.1(c) and 3.1 (m)(x), no vote of or
other action by the holders of Parent's Common Stock (or securities convertible
into Parent's Common Stock) is required (by law, by the Marketplace Rules of The
Nasdaq Stock Market or otherwise) in connection with the execution, delivery or
performance of this Agreement or the consummation by Parent of any of the
transactions contemplated hereby.
(q) Brokers. No broker, investment banker, financial advisor or other
-------
person, other than ▇▇▇▇▇▇▇▇▇▇ Securities, the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's or financial advisor's fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent.
-26-
(r) Opinion of Financial Advisor. Parent has received the opinion of
----------------------------
▇▇▇▇▇▇▇▇▇▇ Securities, dated the date hereof, to the effect that, as of such
date, the Merger (including the consideration to be paid by Parent) is fair to
Parent's stockholders from a financial point of view, a copy of which opinion
has been delivered to the Company for informational purposes only.
(s) Accounting Matters. Parent has not taken or agreed to take any
------------------
action that would prevent the business combination to be effected by the Merger
to be accounted for as a pooling of interests.
(t) Product and Service Warranties. Between January 1, 1997 and the
------------------------------
date of this Agreement, Parent has not received any written notice pursuant to
which any third party has made any claims against Parent or its subsidiaries
regarding any produce or service warranties sold or provided by Parent or its
subsidiaries, except for (i) claims which have been fully settled and (ii)
unresolved claims that would not have a material adverse effect on Parent.
(u) Customers. As of the date of this Agreement, neither Parent nor
---------
any of its subsidiaries has received any information from any current material
Customer that such Customer will not continue as a customer of Parent, such
subsidiary or the Company after the Closing or that any such Customer intends to
terminate or materially modify any such Customer Contract, except where the
termination or modification of a customer relationship would not have a material
adverse effect on Parent.
(v) Inventory. The inventory of Parent is in all material respects of
---------
good and merchantable quality and is in all material respects usable and
saleable in the ordinary course of Parent's and its subsidiaries' businesses,
except for items of obsolete materials and materials of below standard quality,
substantially all of which have been written down to realizable market value or
for which adequate reserves have been provided.
(w) Interim Operations of Sub. Sub was formed solely for the purpose
-------------------------
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(x) Parent Common Stock. The Parent Common Stock to be issued in
-------------------
connection with the Merger (including the Parent Common Stock to be issued in
accordance with Article II and the Parent Common Stock to be issued in
accordance with Section 5.6(b)) has been duly authorized by all necessary
corporate action, and when issued in accordance with this Agreement, will be
validly issued, fully paid and nonassessable and not subject to preemptive
rights, and will be freely tradable except for restrictions on transfer
(applicable to affiliates of the Company) required in order to preserve pooling
of interests accounting treatment of the Merger. Without limiting the
generality of the foregoing and subject to the provisions of Rule 145 under the
Securities Act, none of the shares of Parent Common Stock to be issued in
connection with the Merger will constitute "restricted securities" within the
meaning of Rule 144 under the Securities Act.
-27-
ARTICLE IV
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 4.1 Conduct of Business by Parent and the Company.
---------------------------------------------
(a) Conduct of Business by Parent. During the period from the date
-----------------------------
of this Agreement to the Effective Time and except (i) to the extent the Company
shall otherwise consent in writing (which consent will not be unreasonably
withheld), (ii) as set forth in the Parent Disclosure Schedule or (iii) as
contemplated or permitted by or not inconsistent with this Agreement, Parent
shall carry on its businesses in the ordinary course consistent with the manner
as heretofore conducted and, to the extent consistent therewith, use reasonable
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and preserve its relationships
with customers, suppliers, licensors, licensees, distributors and others having
business dealings with it. Without limiting the generality of the foregoing,
except as set forth in the Parent Disclosure Schedule or as contemplated or
permitted by or not inconsistent with this Agreement, during the period from the
date of this Agreement to the Effective Time, Parent shall not, without the
written consent of the Company (which consent will not be unreasonably
withheld):
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire any shares of
capital stock of Parent or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(ii) amend its Restated Certificate of Incorporation or Bylaws;
(iii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than in the ordinary
course of business and consistent with past practice pursuant to stock option
plans, employee stock purchase plans and convertible indebtedness in effect as
of the date of this Agreement, or pursuant to acquisitions of businesses
involving the issuance by Parent of less than 1,000,000 shares in the aggregate
for all such acquisitions);
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner (including through any of its subsidiaries), any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof, except that this Section 4.1(a)(iv) shall not
prohibit Parent from effecting an acquisition of any other business if (A) such
acquisition would not materially affect the ability of Parent to, or materially
delay Parent's ability to, complete the transactions contemplated by this
Agreement, and (B) such acquisition would involve the issuance by Parent of
equity securities and, when
-28-
considered together with all other acquisitions effected by Parent, would not
involve the issuance of more than 1,000,000 shares of Parent's capital stock or
securities convertible into or exercisable for more than 1,000,000 shares of
Parent's capital stock;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any substantial part of its (or any
of its subsidiaries') material properties, assets or business, except sales made
in the ordinary course of business and except for subjecting any of its
properties to Parent Permitted Liens;
(vi) make any material payments outside the ordinary course of
business for purposes of settling any dispute;
(vii) allow Parent or any of its subsidiaries, or any significant
portion of their respective businesses or assets, to be acquired (by merger,
tender offer, purchase or otherwise);
(viii) enter into (directly or through any subsidiary) any
transaction that is extraordinary in nature or magnitude (when compared to the
transactions historically entered into by Parent); or
(ix) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by the Company. During the period from the
----------------------------------
date of this Agreement to the Effective Time and except (i) to the extent Parent
shall otherwise consent in writing (which consent will not be unreasonably
withheld), (ii) as set forth in the Company Disclosure Schedule or (iii) as
contemplated or permitted by or not inconsistent with this Agreement, the
Company shall carry on its businesses in the ordinary course consistent with the
manner as heretofore conducted and, to the extent consistent therewith, use
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with it. Without limiting the generality of the
foregoing, except as set forth in the Company Disclosure Schedule or as
contemplated or permitted by or not inconsistent with this Agreement, during the
period from the date of this Agreement to the Effective Time, the Company shall
not, without the written consent of Parent (which consent will not be
unreasonably withheld):
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) amend its Restated Certificate of Incorporation or Bylaws;
-29-
(iii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than (A) the sale of
shares of Company Common Stock in the ordinary course to employees under the
Company's ESPP (B) the issuance of shares of Company Common Stock pursuant to
the conversion of the Convertible Debentures in accordance with the terms
thereof, (C) the issuance of shares of Company Common Stock upon the exercise of
Company Options outstanding on the date of this Agreement in accordance with the
present terms of such Company Options and the issuance of shares of Company
Common Stock upon the exercise of Company Options granted after the date of this
Agreement as permitted by this Agreement, and (D) the issuance of options to
purchase up to 50,000 shares of Common Stock under the stock option plans of the
Company (the "Company Option Plans");
(iv) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner (including through any of its subsidiaries), any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof or (y) any asset except in the ordinary course
of business;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its (or any of its
subsidiaries') material properties, assets, or business except sales made in the
ordinary course of business and except for subjecting any of its properties or
assets to Company Permitted Liens;
(vi) (y) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person (other than a subsidiary of the
Company), issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company, guarantee any debt securities of
another person (other than a subsidiary of the Company), enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, except for (i) short-term borrowings incurred in the ordinary
course of business consistent with past practice, (ii) borrowings pursuant to
existing credit facilities in the ordinary course of business or pursuant to any
modifications, renewals or replacements of such credit facilities (it being
understood that the maximum amount of borrowing which may be made under such
credit facilities may be increased by up to 20% of the current maximum amount)
and (iii) borrowings under a new credit facility to be entered into by the
Company, which borrowings will not exceed $32 million (of which approximately
$20 million will be used to refinance existing bank debt) or (z) make any loans,
advances or capital contributions to, or investments in, any other person other
than a subsidiary of the Company, and other than advances to employees in the
ordinary course of business consistent with past practice;
(vii) make or agree to make any new capital expenditure or
expenditures which are outside the ordinary course of business or inconsistent
with past practice;
(viii) make any material payments outside the ordinary course of
business for purposes of settling any dispute;
-30-
(ix) except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company is a party or
waive, release or assign any material rights or claims thereunder;
(x) except as required to comply with applicable law and except
for actions which do not materially increase the Company's compensation expense
or benefits to employees taken as a whole, (A) adopt, enter into, terminate or
amend any Benefit Plan or other arrangement for the benefit or welfare of any
director, officer or current or former employee, (B) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or employee (except for normal increases of cash compensation or cash bonuses in
the ordinary course of business consistent with past practice), (C) pay any
benefit not provided for under any Benefit Plan, (D) except as permitted in
clause (B), grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Benefit Plan (including the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock or the removal of existing restrictions in
any Benefit Plans or agreements or awards made thereunder) or (E) except as
permitted in clauses (A) through (D), take any action to fund or in any other
way secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Benefit Plan;
(xi) form any subsidiary of the Company;
(xii) allow any of its subsidiaries, or any significant portion of
their respective businesses or assets, to be acquired (by merger, tender offer,
purchase or otherwise);
(xiii) enter into (directly or through any subsidiary) any
transaction that is extraordinary in nature or magnitude (when compared to the
transactions historically entered into by the Company); or
(xiv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Certain Tax Matters. From the date hereof until the Effective
-------------------
Time, (i) each of the Company and Parent will file all tax returns and reports
("Post-Signing Returns") required to be filed by it (other than the Company's
federal and state tax return for the year ended September 30, 1996, which will
be filed promptly following the receipt by the Company of information necessary
for such return); (ii) each of the Company and Parent will timely pay all taxes
due and payable with respect to such Post-Signing Returns that are so filed;
(iii) each of the Company and Parent will promptly notify the other of any
action, suit, proceeding, claim or audit (collectively, "Actions") pending
against or with respect to such party in respect of any tax where there is a
reasonable possibility of a determination or decision which would have a
material adverse effect on the other party 's tax liabilities or tax attributes,
and the Company will not settle or compromise any such Action without Parent's
consent; and (iv) each of the Company and Parent will not make any material tax
election without the consent of the other (which consent will not be
unreasonably withheld).
-31-
SECTION 4.2 No Solicitation.
---------------
(a) The Company shall not, nor shall it authorize or instruct any of
its officers, directors or employees or any investment banker, attorney or other
advisor or representative retained by it to, directly or indirectly, (i)
solicit, initiate or knowingly encourage the submission of any Takeover Proposal
(as hereinafter defined) by any person (other than Parent or its affiliates or
representatives) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action intended or reasonably expected to facilitate the
making of any inquiry or proposal to the Company that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal by any person (other
than Parent or its affiliates or their respective representatives); provided,
however, that notwithstanding anything to the contrary contained in this Section
4.2(a) or elsewhere in this Agreement, if, at any time prior to receipt of the
Stockholder Approval, the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that failure to do so would
create a substantial risk of liability for breach of its fiduciary duties to the
Company's stockholders under applicable law, the Company may, in response to a
Takeover Proposal that was unsolicited or that did not otherwise result from a
breach of this Section 4.2(a), and subject to compliance with Section 4.2(c),
(x) furnish nonpublic information with respect to the Company and its
subsidiaries to any person pursuant to a customary and reasonable
confidentiality agreement and (y) participate in discussions and negotiations
regarding such Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any investment
banker, attorney or other advisor or representative of the Company, acting on
behalf of and with the authorization of the Company, shall be deemed to be a
breach of this Section 4.2(a) by the Company. For purposes of this Agreement,
"Takeover Proposal" means any proposal or offer from any person (other than
Parent or its affiliates or their respective representatives) for any
acquisition by such person of a substantial amount of assets of the Company
(other than an acquisition of assets of the Company in the ordinary course of
business or as permitted under the terms of this Agreement) having a fair market
value (as determined by the Board of Directors of the Company in good faith) in
excess of 25% of the fair market value of all the assets of the Company and its
subsidiaries immediately prior to such acquisition or more than a 25% interest
in the total voting securities of the Company or any tender offer or exchange
offer that if consummated would result in any person beneficially owning 25% or
more of any class of equity securities of the Company or any merger,
consolidation, or business combination of the Company with any unaffiliated
third party, other than the transactions contemplated by this Agreement or the
Stockholder Agreements. Notwithstanding anything to the contrary contained in
this 4.2(a) or elsewhere in this Agreement, at any time after the date hereof,
the Company may file with the SEC a report on Form 8-K with respect to this
Agreement and may file a copy of this Agreement and any related agreements as an
exhibit to such report.
(b) Except as expressly permitted by this Section 4.2, neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent or
Sub, the approval or recommendation by such Board of Directors or any such
committee of this Agreement or the Merger, (ii) approve or recommend any
Takeover Proposal or (iii) cause the Company to enter into any letter of intent,
agreement in principle,
-32-
acquisition agreement or other similar agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing or anything else contained in this
Agreement, prior to the adoption and approval of this Agreement and the approval
of the Merger by the holders of a majority of the shares of Company Common Stock
outstanding on the record date for the Stockholders Meeting, the Board of
Directors of the Company, to the extent it determines in good faith, after
consultation with outside counsel, that failure to do so would create a
substantial risk of liability for breach of its fiduciary duties to the
Company's stockholders under applicable law, may (1) withdraw or modify its
approval or recommendation of this Agreement or the Merger and/or (2) approve or
recommend any Takeover Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.2, the Company promptly shall advise
Parent orally and in writing of any request to the Company for nonpublic
information which the Company reasonably believes could lead to a Takeover
Proposal or of any Takeover Proposal submitted to the Company, or any inquiry
directed to the Company with respect to or which the Company reasonably believes
could lead to any Takeover Proposal, the material terms and conditions of such
request, Takeover Proposal or inquiry, and the identity of the person making any
such Takeover Proposal or inquiry. The Company will keep Parent informed in all
material respects of the status and details (including amendments or proposed
amendments) of any such Takeover Proposal or inquiry, except to the extent that
the Board of Directors of the Company determines in good faith, after
consultation with outside counsel, that to do so would create a substantial risk
of liability for breach of its fiduciary duties to the Company's stockholders
under applicable law.
(d) Nothing contained in this Section 4.2 or elsewhere in this
Agreement shall prohibit the Company from (i) taking and disclosing to its
stockholders a position contemplated by Rule 14d-9 or 14e-2(a) promulgated under
the Exchange Act or (ii) making any disclosure to the Company's stockholders or
any public announcement if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure to so disclose
would be inconsistent with any applicable law, rule or regulation or any duty of
the Board of Directors; provided that the Company shall not, except in
accordance with the provisions of Section 4.2(b), withdraw or modify, or propose
to withdraw or modify, its recommendation of the Merger or approve or recommend,
or propose to approve or recommend, a Takeover Proposal.
ARTICLE V
Additional Agreements
---------------------
SECTION 5.1 Preparation of Form S-4 and Proxy Statement; Stockholders
---------------------------------------------------------
Meeting.
-------
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and the Company shall file with the SEC the
Proxy Statement and Parent shall prepare and file with the SEC the Form S-4, in
which the Proxy Statement will be included as a
-33-
prospectus. Each of the Company and Parent shall use all reasonable efforts to
have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. To the extent that presenting this Agreement and
the Merger to the Company's stockholders would not violate or otherwise be
inconsistent with applicable law, the Company will use its reasonable efforts to
cause the Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable after the Form S-4 is declared effective under the Securities
Act. Parent shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities laws or other applicable laws, rules or
regulations in connection with the issuance of Parent Common Stock pursuant to
Article II and Section 5.6(b) and under the Company Option Plans and the Company
ESPP. Each of Parent and the Company shall furnish all information concerning
itself to the other as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Proxy Statement.
(b) The Company will, as soon as reasonably practicable following the
date of this Agreement, establish a record date (which will be as soon as
practicable following the date of this Agreement) for, and, to the extent that
convening and holding a meeting would not violate or otherwise be inconsistent
with applicable law, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Stockholders Meeting") for the purpose of approving and
adopting this Agreement. Except to the extent the Board of Directors of the
Company determines in good faith, after consultation with outside counsel, that
to do so would create a substantial risk of liability for breach of its
fiduciary duties to the Company's stockholders under applicable law, the Company
will, through its Board of Directors, recommend to its stockholders approval and
adoption of this Agreement.
SECTION 5.2 Letters of the Company's Accountants.
------------------------------------
(a) The Company shall use its reasonable efforts to cause to be
delivered to Parent two letters from Deloitte and Touche LLP, the Company's
independent public accountants, one dated a date within three business days
before the date on which the Form S-4 shall become effective and one dated a
date within three business days before the Closing Date, each addressed to
Parent, in customary form, relating to the performance by Deloitte & Touche llp
of its procedures with respect to the financial statements of the Company
contained in or incorporated by reference in the Form S-4.
(b) The Company shall use its reasonable efforts to cause to be
delivered to Parent a copy of a letter from Deloitte and Touche LLP, addressed
to the Company, dated as of the Closing Date (which letter may contain customary
qualifications and assumptions), to the effect that Deloitte & Touche llp
believes that the Company would meet the applicable specific criteria for a
pooling of interests in accordance with generally accepted accounting principles
as such criteria relate only to the Company (and not to Parent).
-34-
SECTION 5.3 Letters of Parent's Accountants.
-------------------------------
(a) Parent shall use reasonable efforts to cause to be delivered to
the Company two letters from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, Parent's independent public
accountants, one dated a date within three business days before the date on
which the Form S-4 shall become effective and one dated a date within three
business days before the Closing Date, each addressed to the Company, in
customary form, relating to the performance by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ llp of its
procedures with respect to the financial statements of Parent contained in or
incorporated by reference in the Form S-4.
(b) Parent shall use its reasonable efforts to cause to be delivered
to the Company a copy of a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, addressed to Parent,
dated as of the Closing Date (which letter may contain customary qualifications
and assumptions), stating that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ llp concurs with Parent's
management's conclusion that no conditions exist that would preclude Parent from
accounting for the Merger as a pooling of interests transaction under Opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations.
SECTION 5.4 Access to Information; Confidentiality. The Company shall
--------------------------------------
afford to Parent, and to Parent's officers, employees, accountants, counsel,
financial advisors and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time or the termination
of this Agreement to all its properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall furnish
promptly to Parent (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Federal or state securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request; provided,
however, that (i) Parent shall not contact, and Parent shall ensure that none of
its officers, employees, accountants, counsel, financial advisors or other
representatives contacts, any employee of the Company or any of its subsidiaries
without the prior authorization of the Company's Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer, and (ii) Parent shall ensure that
none of its employees, accountants, counsel, financial advisors or other
representatives interferes with or otherwise disrupts the business or operations
of the Company while exercising the rights provided under this Section 5.4.
Parent shall afford to the Company, and to the Company's officers, employees,
accountants, counsel, financial advisors and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time or the termination of this Agreement to all its properties, books,
contracts, commitments, personnel and records and, during such period, Parent
shall furnish promptly to the Company (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as the
Company may reasonably request; provided, however, that (i) the Company shall
not contact, and the Company shall ensure that none of its officers, employees,
accountants, counsel, financial advisors or other representatives contacts, any
employee of Parent or any of its subsidiaries without the prior authorization of
Parent's Chief Executive Officer, Chief Operating Officer or Chief Financial
Officer, and (ii) the Company shall ensure that none of its employees,
accountants, counsel, financial advisors or other representatives interferes
with or otherwise disrupts the business or operations of Parent while exercising
the rights provided under this Section 5.4. Parent and
-35-
Company will each hold, and will cause their respective officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any and all information received from the other party,
directly or indirectly, in confidence, in accordance with the respective
Confidentiality Agreements dated as of July 3, 1997.
SECTION 5.5 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
avoid an action or proceeding by any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties (other than
consents, approval or waivers, the failure to obtain which would not have a
material adverse effect on the Company or Parent, as the case may be), (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement; provided, however, that
notwithstanding anything to the contrary contained in this Section 5.5 or
elsewhere in this Agreement, the Company shall not be required to take any
action or do any thing if the Board of Directors of the Company determines in
good faith, after consultation with outside counsel, that the taking of such
action or the doing of such thing would create a substantial risk of liability
for breach of its fiduciary duties to the Company's stockholders under
applicable law. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger or this
Agreement, use all reasonable efforts to ensure that the Merger may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and this Agreement.
(b) The Company shall give prompt notice to Parent of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate such that the condition set forth in Section 6.2(a) would
not be satisfied as a result thereof, or (ii) the failure by it to comply with
or satisfy in any material respect any covenant or agreement to be complied with
or satisfied by it under this Agreement such that the condition set forth in
Section 6.2(b) would not be satisfied as a result thereof; provided, however,
-----------------
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement. Parent shall give prompt notice to the
Company of (i) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate such that the condition set forth in
Section 6.3(a) would not be satisfied as a result thereof or (ii) the failure by
it to comply with or satisfy
-36-
in any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement such that the condition set forth in
Section 6.3(b) would not be satisfied as a result thereof; provided, however,
-----------------
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
SECTION 5.6 Stock Options and Other Employee Benefits.
-----------------------------------------
(a) Subject to Section 5.6(b), Parent and the Company shall take all
actions necessary to implement the provisions of the Company Option Plans and
the agreements evidencing Company Options, including the provisions therein
relating to acceleration and termination.
(b) The Company shall cause to be delivered to Parent, prior to the
Effective Time, a list specifying those Company Options (the "Specified
Options") with respect to which Parent is to issue shares of Parent Common Stock
pursuant to this Section 5.6(b) as of the Effective Time. As of the Effective
Time, Parent shall issue, with respect to each Specified Option that remains
unexercised as of the Effective Time, in the name of the holder thereof, a
number of shares of Parent Common Stock equal to:
A * B - A * C
-----
D
where:
A = the maximum number of shares of Company Common Stock purchasable
immediately prior to the Effective Time upon exercise of the applicable
Specified Option
B = the Exchange Ratio
C = the per share exercise price of the applicable Specified Option
D = the per share closing price of Parent Common Stock on the Nasdaq National
Market (as reported in The Wall Street Journal or, if not reported thereby,
-----------------------
any other authoritative source), on the Closing Date
No certificates or scrip representing fractional shares of Parent Common Stock
shall be issued in connection with the issuance of Parent Common Stock pursuant
to this Section 5.6(b). Any holder of a Specified Option who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock in
connection with the issuance of Parent Common Stock pursuant to this Section
5.6(b)(after aggregating all fractional shares of Parent Common Stock that
otherwise would be received by such holder pursuant to this Section 5.6(b))
shall receive, in lieu thereof, cash (without interest) in an amount, less the
amount of any withholding taxes which may be required thereon, equal to such
fraction of a share of Parent Common multiplied by the per share closing
price of Parent Common
-37-
Stock on the Nasdaq National Market, as reported in The Wall Street Journal (or,
-----------------------
if not reported thereby, any other authoritative source), on the Closing Date.
Parent agrees to use reasonable efforts to take such actions as are necessary to
provide for the reservation, issuance and listing of Parent Common Stock to be
issued pursuant to this Section 5.6(b).
(c) Subject to Section 5.6(b), all Company Option Plans shall
terminate as of the Effective Time, and the Company shall ensure that following
the Effective Time no holder of a Company Option or any participant in any
Company Option Plan shall have any right thereunder to acquire any capital stock
of the Company.
(d) Parent shall ensure that all employees of the Company and all
employees of each of the Company's subsidiaries are allowed and are eligible to
participate in Parent's employee benefit plans after the Effective Time, to the
same extent as if they were employees of Parent. Without limiting the
generality of the foregoing, (i) to the extent that any employee of the Company
or any of the Company's subsidiaries becomes eligible to participate in any
employee benefit plan of Parent after the Effective Time, Parent, the Surviving
Corporation and their subsidiaries shall credit such employee's service with the
Company or its subsidiaries, to the same extent as such service was credited
under the similar employee benefit plans of the Company and its subsidiaries
immediately prior to the Effective Time, for purposes of determining eligibility
to participate in and vesting under, and for purposes of calculating the
benefits under, such employee benefit plan of Parent, and (ii) to the extent
permitted by such employee benefit plan of Parent and applicable law, Parent,
the Surviving Corporation and its subsidiaries shall waive any pre-existing
condition limitations, waiting periods or similar limitations under such
employee benefit plan of Parent and shall provide each such employee with credit
for any co-payments previously made and any deductibles previously satisfied.
(e) At the Effective Time, each outstanding right under the currently
ongoing "offering period", to purchase Company Common Stock under the Company
ESPP (an "Assumed Purchase Right") shall be deemed to constitute a purchase
right to acquire, on the same terms and conditions as were applicable under the
Company ESPP immediately prior to the Effective Time, a number of shares of
Parent Common Stock determined as provided in the Company ESPP except that the
purchase price of such shares of Parent Common Stock under each Assumed Purchase
Right shall be eighty-five percent (85%) of the lower of (i) the quotient
determined by dividing the fair market value of the Company Common Stock on the
offering date of each offering period that is ongoing as of the Effective Time
by the Exchange Ratio or (ii) the fair market value of the Parent Common Stock
on each exercise date occurring after the Effective Time with respect to each
offering period that is ongoing as of the Effective Time. The Assumed Purchase
Rights, in accordance with their terms, shall be subject to further adjustment
upon a stock split, stock dividend, recapitalization or similar transaction
after the Effective Time. As soon as practicable after the Effective Time (and
in any event within 5 days after the Effective Time), Parent shall deliver to
the participants in the Company ESPP an appropriate notice setting forth such
participants' rights pursuant thereto and stating that the Assumed Purchase
Rights pursuant to the Company ESPP shall continue in effect on the same terms
and conditions.
-38-
(f) As soon as reasonably practical (and in any event within five
days) after the Effective Time, Parent shall file a registration statement on
Form S-8 with respect to the Assumed Purchase Rights and the shares of Parent
Common Stock issuable under the Company ESPP, and shall maintain the
effectiveness of such registration statement thereafter until the later of the
date on which no Assumed Purchase Rights remain outstanding or the Company ESPP
is terminated.
(g) Parent shall reserve sufficient shares of Parent Common Stock for
issuance with respect to the employee benefit plans referred to in this Section
5.6.
(h) This Section 5.6 will survive the consummation of the Merger and
the Effective Time, is intended to benefit and may be enforced by each of the
persons who participate in any of the employee benefit plans referred to in this
Section 5.6, and will be binding on all successors and assigns of Parent and the
Surviving Corporation.
SECTION 5.7 Indemnification and Insurance.
-----------------------------
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to (i) each indemnification agreement currently in effect between the
Company and each person who is or was a director or officer of the Company at or
prior to the Effective Time and (ii) any indemnification provision under the
Company's Restated Certificate of Incorporation or By-Laws as each is in effect
on the date hereof (the persons to be indemnified pursuant to the agreements or
provisions referred to in clauses (i) and (ii) of this Section 5.7(a) shall be
referred to as, collectively, the "Indemnified Parties"). The Certificate of
Incorporation and By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Restated Certificate of Incorporation and By-Laws on the
date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of any Indemnified
Party.
(b) Without limiting the provisions of Section 5.7(a), during the
period ending six years after the Effective Time, Parent will indemnify and hold
harmless each Indemnified Party against and from any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the extent such claim, action, suit,
proceeding or investigation arises out of or pertains to (1) any action or
omission or alleged action or omission in his or her capacity as a director or
officer of the Company or any of its subsidiaries (regardless of whether such
action or omission, or alleged action or omission, occurred prior to, on or
after the Closing Date) or (2) any of the transactions contemplated by this
Agreement; provided, however, that if, at any time prior to the sixth
-----------------
anniversary of the Effective Time, any Indemnified Party delivers to Parent a
written notice asserting a claim for indemnification under this Section 5.7(b),
then the claim asserted in such notice shall survive the sixth anniversary of
the Effective Time until such time as such claim is fully and finally resolved.
In the event of any such claim, action, suit, proceeding or investigation, (i)
Parent will have the right to control the defense thereof after the Effective
Time (it
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being understood that, by electing to control the defense thereof, Parent will
be deemed to have waived any right to object to the Indemnified Parties'
entitlement to indemnification hereunder with respect thereto), (ii) any counsel
retained by the Indemnified Parties with respect to the defense thereof for any
period after the Effective Time must be reasonably satisfactory to Parent, and
(iii) after the Effective Time, Parent will pay the reasonable fees and expenses
of such counsel, promptly after statements therefor are received (provided that
in the event that any Indemnified Party is not entitled to indemnification
hereunder, any amounts advanced on his or her behalf shall be remitted to the
Surviving Corporation); provided, however, that neither Parent nor the Surviving
-------- -------
Corporation nor any Indemnified Party, will be liable for any settlement
effected without its express written consent. The Indemnified Parties as a group
may retain only one law firm (in addition to local counsel) to represent them
with respect to any single action unless counsel for any Indemnified Party
determines in good faith that, under applicable standards of professional
conduct, a conflict exists or is reasonably likely to arise on any material
issue between the positions of any two or more Indemnified Parties.
Notwithstanding anything to the contrary contained in this Section 5.7(b) or
elsewhere in this Agreement, Parent agrees that it will not settle or compromise
or consent to the entry of any judgment or otherwise seek termination with
respect to any claim, action, suit, proceeding or investigation for which
indemnification may be sought under this Agreement unless such settlement,
compromise, consent or termination includes an unconditional release of all
Indemnified Parties from all liability arising out of such claim, action, suit,
proceeding or investigation.
(c) For six years after the Effective Time, Parent shall maintain in
effect the current level and scope of directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy (a copy of which has been
heretofore delivered to Parent); provided, however, that in no event shall
-------- -------
Parent be required to expend in any one year an amount in excess of 150% of the
annual premium currently paid by the Company for such insurance, and provided,
--------
further, that if the annual premiums of such insurance coverage exceed such
-------
amount, Parent shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(d) Parent and the Surviving Corporation jointly and severally agree
to pay all expenses, including attorneys' fees, that may be incurred by the
Indemnified Parties in enforcing the indemnity and other obligations provided
for in this Section 5.7.
(e) This Section 5.7 shall survive the consummation of the Merger and
the Effective Time, is intended to benefit and may be enforced by the Company,
Parent, the Surviving Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of Parent and the Surviving Corporation.
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SECTION 5.8 Fees and Expenses.
-----------------
(a) All fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that expenses incurred in connection with printing and
mailing the Proxy Statement and the Form S-4 shall be shared equally by Parent
and the Company.
(b) In the event that this Agreement is validly terminated pursuant to
Section 7.1(b)(iv) and Parent shall not have materially breached this Agreement,
the Company shall pay to Parent a fee in the aggregate amount of $7,500,000, in
cash, in immediately available funds, according to the following schedule:
(i) promptly, but in no event later than five business days after
the date of such termination, the Company shall pay to Parent the amount of
$2,500,000;
(ii) on the date that is 180 days after the date of such
termination, the Company shall pay to Parent the amount of $2,500,000; provided,
however, that if, prior to such 181st day, the Company shall consummate the
transaction contemplated by a Superior Proposal accepted by the Company, then
the Company shall pay to Parent such $2,500,000 amount on the date of the
consummation of such transaction; and
(iii) on the date that is 270 days after the date of such
termination, the Company shall pay to Parent the amount of $2,500,000; provided,
however, that if, prior to such 270th day, the Company shall consummate the
transaction contemplated by a Superior Proposal accepted by the Company, then
the Company shall pay to Parent such $2,500,000 amount on the date of the
consummation of such transaction.
In no event shall the receipt by the Company of any Superior Proposal or any
consummation of any transaction by the Company be a condition to any obligation
of the Company pursuant to this Section 5.8(b). For purposes of this Agreement,
a "Superior Proposal" means any bona fide proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the voting power of the Company Common Stock or all
or substantially all the assets of the Company and otherwise on terms which the
Board of Directors of the Company determines in its good faith judgment (after
consultation with its financial advisor) to be more favorable to the Company's
stockholders than the Merger and for which financing, to the extent required, is
then committed or which, in the good faith judgment of the Board of Directors of
the Company, is capable of being obtained by such third party.
SECTION 5.9 Public Announcements. Parent and Sub, on the one hand, and
--------------------
the Company, on the other hand, will consult with each other before issuing, and
to the extent reasonably practicable, give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and shall
not
-41-
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange or national securities quotation system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement shall be in the form heretofore agreed to by the parties.
SECTION 5.10 Affiliates.
----------
(a) Prior to the Closing Date, the Company shall deliver to Parent a
letter identifying all persons who in the Company's judgment are or may be
deemed to be, at the time this Agreement is submitted for approval to the
stockholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations. The Company shall
use its reasonable efforts to cause each such person to deliver to Parent at
least 30 days prior to the Closing Date a written agreement substantially in the
form attached as Exhibit A hereto.
---------
(b) As soon as practicable after the execution of this Agreement,
Parent shall deliver to the Company a letter identifying all persons who, in
Parent's reasonable judgment, are or may be deemed to be, as of the date of such
letter, "affiliates" of Parent under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations. Parent shall use its reasonable
efforts to cause each such person to deliver to the Company at least 30 days
prior to the Closing Date a written agreement substantially in the form of
Exhibit B hereto.
---------
SECTION 5.11 Nasdaq National Market Listing. Parent shall use its
------------------------------
reasonable efforts to cause the shares of Parent Common Stock to be issued
pursuant to Article II and Section 5.6(b), and such other shares of Parent
Common Stock required to be reserved for issuance with respect to the Company
ESPP and the Convertible Debentures, to be approved for listing on the Nasdaq
National Market, subject to official notice of issuance, prior to the Closing
Date.
SECTION 5.12 Pooling of Interests. Each of the Company and Parent will
--------------------
use reasonable efforts to cause the Merger to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations, and such accounting treatment to be accepted by each of
the Company's and Parent's independent public accountants, and by the SEC,
respectively, and each of the Company and Parent agrees that it will voluntarily
take no action that would cause such accounting treatment not to be obtained.
SECTION 5.13 Stop Transfer. The Company shall not register the transfer
-------------
of any Certificate representing any Subject Shares (as defined in the
Stockholder Agreements), unless such transfer is made to Parent or Sub or
otherwise in compliance with the Stockholder Agreements.
SECTION 5.14 Tax Treatment. Each of Parent and the Company shall not
-------------
(before or after the Effective Time) take any action and shall not (before or
after the Effective Time) fail to take any action
-42-
which action or failure to act would prevent, or would be reasonably likely to
prevent, the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code, and each shall use reasonable efforts to obtain the
opinions of counsel referred to in Sections 6.2(d) and 6.3(d), respectively.
SECTION 5.15 Convertible Debentures. Parent shall take such action (if
----------------------
any) as may be required by the indenture relating to the Convertible Debentures
in connection with the consummation of the Merger. Promptly after the Effective
Time, Parent shall either (i) commence a tender offer for the outstanding
Company Convertible Debentures at a price not less than the prevailing market
price for such Convertible Debentures or (ii) cause the redemption of such
Convertible Debentures in accordance with the redemption provisions of the
indenture relating thereto. Until the Convertible Debentures are acquired or
redeemed by Parent or the Company, Parent shall reserve sufficient shares of
Parent Common Stock for issuance upon conversion of the Convertible Debentures.
ARTICLE VI
Conditions Precedent
--------------------
SECTION 6.1 Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been approved and
--------------------
adopted by the affirmative vote of the holders of a majority of the shares of
Company Common Stock outstanding as of the record date for the Stockholders
Meeting.
(b) Nasdaq Market Listing. The shares of Parent Common Stock issuable
---------------------
to the Company's securityholders pursuant to Article II and Section 5.6(b),
shall have been approved for listing on the Nasdaq National Market, subject to
official notice of issuance.
(c) HSR Act. The waiting period (and any extension thereof)
-------
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(d) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction or other order issued by any U.S. federal or
state court of competent jurisdiction or other material legal restraint or
prohibition issued or promulgated by a U.S. federal or state Governmental Entity
preventing the consummation of the Merger shall be in effect.
(e) Form S-4. The Form S-4-shall have become effective under the
--------
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
-43-
(f) Pooling Letters. The Company shall have received from Deloitte &
---------------
Touche LLP, independent accountants for the Company, a letter addressed to the
Company dated the Closing Date (which may contain customary qualifications and
assumptions) to the effect that Deloitte & Touche LLP believes that the Company
would meet the applicable specific criteria for a pooling of interests in
accordance with generally accepted accounting principles as such criteria relate
only to the Company (and not to Parent), and Parent shall have been provided
with a copy of such letter; and Parent shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, independent accountants for Parent, a letter dated the Closing Date (which
may contain customary qualifications and assumptions) to the effect that ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP concurs with Parent's management's conclusion that no conditions
exist that would preclude Parent from accounting for the Merger as a pooling of
interests, and the Company shall have been provided with a copy of such letter.
SECTION 6.2 Conditions to Obligations of Parent and Sub. The
-------------------------------------------
obligations of Parent and Sub to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects as of the Closing Date as if made on
and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) any inaccuracy that does not have a material adverse effect on
the Company shall be disregarded, (ii) any inaccuracy that results from or
relates to general business, economic or industry conditions shall be
disregarded, and (iii) any inaccuracy that results from or relates to the taking
of any action contemplated or permitted by this Agreement or the announcement or
pendency of the Merger shall be disregarded).
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) Letters from Company Affiliates. Parent shall have received from
-------------------------------
each person named in the letter referred to in Section 5.10(a) an executed copy
of an agreement substantially in the form of Exhibit A hereto.
---------
(d) Tax Opinion. The opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇,
-----------
Professional Corporation, counsel to Parent, in form and substance reasonably
satisfactory to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(A) of the Code, and based on
certain letters provided by Parent and Sub and the Company, respectively, in
customary form dated on or about the date that is two business days prior to the
date the Proxy Statement is first mailed to stockholders of the Company, shall
have been delivered to Parent and shall not have been withdrawn or modified in
any material respect ; provided, however, that if ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
-------- -------
▇▇▇▇▇▇, Professional Corporation, does not render such opinion or withdraws or
modifies such opinion, this condition shall nonetheless be deemed to be
satisfied if counsel to the Company renders such
-44-
opinion to Parent. In rendering such opinion, such firm may rely on such
representations, warranties and certificates as it deems reasonable or
appropriate under the circumstances.
(e) Noncompetition Agreement. At or before the Effective Time, the
------------------------
Company and the Company's Chairman and Chief Executive Officer shall have
executed a Noncompetition Agreement in substantially the form attached hereto as
Exhibit C.
---------
SECTION 6.3 Conditions to Obligation of the Company. The obligation of
---------------------------------------
the Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Sub set forth in this Agreement (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects as of the Closing Date as if made on
and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties as of the
Closing Date, (i) any inaccuracy that does not have a material adverse effect on
Parent or Sub shall be disregarded, (ii) any inaccuracy that results from or
relates to general business, economic or industry conditions shall be
disregarded, and (iii) any inaccuracy that results from or relates to the taking
of any action contemplated or permitted or the announcement or pendency of the
Merger by this Agreement shall be disregarded).
(b) Performance of Obligations of Parent and Sub. Parent and Sub
--------------------------------------------
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date.
(c) Tax Opinion. The opinion of ▇▇▇▇▇▇ Godward LLP, counsel to the
-----------
Company, in form and substance reasonably satisfactory to the Company, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(A) of the Code, and based on certain letters provided by Parent and
Sub and the Company, respectively, in customary form dated on the date that is
two business days prior to the Proxy Statement is first mailed to stockholders
of the Company, shall have been delivered to the Company and shall not have been
withdrawn or modified in any material respect; provided, however, that if Cooley
-------- -------
Godward llp does not render such opinion or withdraws or modifies such opinion,
this condition shall nonetheless be deemed to be satisfied if counsel to Parent
renders such opinion to the Company. In rendering such opinion, such firm may
rely on such representations, warranties and certificates as it deems reasonable
or appropriate under the circumstances.
(d) Letters from Parent Affiliates. The Company shall have received
------------------------------
from each person named in the letter referred to in Section 5.10(b) an executed
copy of an agreement substantially in the form of Exhibit B hereto.
---------
(e) Indenture. Parent shall have performed all obligations required
---------
to performed by it pursuant to the first sentence of Section 5.15.
-45-
ARTICLE VII
Termination, Amendment and Waiver
---------------------------------
SECTION 7.1 Termination. This Agreement may be terminated, and the
-----------
Merger contemplated hereby may be abandoned, at any time prior to the Effective
Time, whether before or after approval of matters presented in connection with
the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated by December 31,
1997 for any reason; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date if such action or failure
to act constitutes a wilful and material breach of this Agreement;
(ii) if any temporary restraining order, preliminary or permanent
injunction or other order issued by any U.S. federal or state court of competent
jurisdiction or other material legal restraint or prohibition issued or
promulgated by a U.S. federal or state Governmental Entity having any of the
effects set forth in Section 6.1(d) shall be in effect and shall have become
final and nonappealable;
(iii) if (A) the Stockholders Meeting (including any adjournments
thereof) shall have been held and completed and the Company's stockholders shall
have taken a final vote on a proposal to approve and adopt this Agreement and to
approve the Merger, and (B) the adoption and approval of this Agreement and the
approval of the Merger by the holders of a majority of the shares of Company
Common Stock outstanding on the record date for the Stockholders Meeting shall
not have been obtained; or
(iv) if (A) the Board of Directors of the Company or any
committee thereof shall have withheld, withdrawn or modified in a manner adverse
to Parent its approval or recommendation of the Merger, or approved or
recommended any Superior Proposal or (B) the Board of Directors of the Company
shall have resolved to take any of the foregoing actions;
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any such representation or warranty of Parent shall have become inaccurate, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b), as the case may be, would not be satisfied as of the time of such breach
or as of the time such representation or warranty shall have become inaccurate;
provided, that if such inaccuracy in
-46-
Parent's representations and warranties or breach by Parent is curable by
Parent, then (i) the Company may not terminate this Agreement under this Section
7.1(c) with respect to a particular breach or inaccuracy prior to or during the
45-day period commencing upon delivery by the Company of written notice to
Parent describing such breach or inaccuracy, provided Parent continues to
exercise reasonable efforts to cure such breach or inaccuracy and (ii) the
Company may not, in any event, terminate this Agreement under this Section
7.1(c) if such inaccuracy or breach shall have been cured in all material
respects; and, provided further that the Company may not terminate this
Agreement pursuant to this Section 7.1(c) if it shall have wilfully and
materially breached this Agreement; or
(d) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if any
such representation or warranty of the Company shall have become inaccurate, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b), as the case may be, would not be satisfied as of the time of such breach
or as of the time such representation or warranty shall have become inaccurate;
provided, that if such inaccuracy in the Company's representations and
warranties or breach by the Company is curable by the Company, then (i) Parent
may not terminate this Agreement under this Section 7.1(d) with respect to a
particular breach or inaccuracy prior to or during the 45-day period commencing
upon delivery by Parent of written notice to the Company describing such breach
or inaccuracy, provided the Company continues to exercise reasonable efforts to
cure such breach or inaccuracy and (ii) Parent may not, in any event, terminate
this Agreement under this Section 7.1(d) if such inaccuracy or breach shall have
been cured in all material respects; and, provided further that Parent may not
terminate this Agreement pursuant to this Section 7.1(d) if it shall have
wilfully and materially breached this Agreement.
SECTION 7.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of the last sentence of Section 5.4, Section 5.8, Section 5.9, this
Section 7.2 and Article VIII and except to the extent that such termination
results from the wilful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties
---------
hereto at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
--------
however, that after any such approval, there shall be made no amendment that by
-------
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective Time,
-----------------
any party may to the extent legally allowed (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties made to such party
pursuant to this Agreement or in any document delivered pursuant hereto or (c)
subject to the proviso of Section 7.3, waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party to any such extension
-47-
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
ARTICLE VII
General Provisions
------------------
SECTION 8.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations or warranties contained in this Agreement or in any certificate
or instrument delivered pursuant hereto shall survive the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.2 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
Sanmina Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Jure Sola
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
if to the Company, to:
Elexsys International, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-48-
with a copy to:
▇▇▇▇▇▇ Godward LLP
Five Palo Alto Square
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
SECTION 8.3 Definitions. For purposes of this Agreement:
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an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
an "agreement," "arrangement," "contract," "commitment," "plan,"
"purchase order," "understanding" or "undertaking" when used in this Agreement
shall mean a legally binding, written agreement, arrangement, contract,
commitment, plan, purchase order, understanding or undertaking, as the case may
be;
"material adverse change" or "material adverse effect" means, when
used in connection with the Company or Parent, any change or effect that is
materially adverse to the business, financial condition or results of
operations of either the Company and its subsidiaries or Parent and its
subsidiaries, taken as a whole, as the case may be;
"person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity;
a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person;
SECTION 8.4 Interpretation. When a reference is made in this Agreement
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to a Section, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 8.5 Counterparts. This Agreement may be executed in one or more
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counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
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SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
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Agreement and the Confidentiality Agreement (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and the
Confidentiality Agreement and (b) except for the provisions of Article II,
Section 5.6, Section 5.7 and Section 5.14 are not intended to confer upon any
person other than the parties any rights or remedies.
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
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construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the rights,
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interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Sub of any of its obligations
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.9 Enforcement. The parties agree that irreparable damage would
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occur in the event that any of the provisions of this Agreement were not
performed in accordance with its 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
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or 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
bring any action relating to this Agreement or the transactions contemplated by
this Agreement in any court other than a court of the United States located in
the State of Delaware or a Delaware state court.
SECTION 8.10 Severability. If any term or other provision of this
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Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
SANMINA CORPORATION
By:/s/ Jure Sola
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Name: Jure Sola
Title: Chairman and CEO
SANM ACQUISITION SUBSIDIARY, INC.
By:/s/ Jure Sola
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Name: Jure Sola
Title: Chairman and CEO
ELEXSYS INTERNATIONAL, INC.
By:/s/ ▇▇▇▇▇▇▇ (▇▇▇▇▇) ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ (▇▇▇▇▇) ▇▇▇▇▇▇▇
Title: President