EXHIBIT 10(f)
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AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 4, 1997
AMONG
NORTHROP GRUMMAN CORPORATION,
LOGICON, INC.
AND
NG ACQUISITION, INC.
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TABLE OF CONTENTS
PAGE
----
TABLE OF CONTENTS........................................................ 2
ARTICLE 1 THE MERGER..................................................... 7
SECTION 1.1. The Merger.............................................. 7
SECTION 1.2. Effective Time.......................................... 7
SECTION 1.3. Closing of the Merger................................... 7
SECTION 1.4. Effects of the Merger................................... 7
SECTION 1.5. Certificate of Incorporation and Bylaws................. 8
SECTION 1.6. Directors............................................... 8
SECTION 1.7. Officers................................................ 8
SECTION 1.8. Conversion of Shares.................................... 8
SECTION 1.9. No Appraisal Rights..................................... 8
SECTION 1.10. Exchange of Certificates................................ 9
SECTION 1.11. Stock Options........................................... 10
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 11
SECTION 2.1. Organization and Qualification; Subsidiaries............ 11
SECTION 2.2. Capitalization of the Company and its Subsidiaries...... 11
SECTION 2.3. Authority Relative to this Agreement; Recommendation.... 12
SECTION 2.4. SEC Reports; Financial Statements....................... 12
SECTION 2.5. Information Supplied.................................... 13
SECTION 2.6. Consents and Approvals; No Violations................... 13
SECTION 2.7. No Default ............................................. 13
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes.......... 14
SECTION 2.9. Litigation.............................................. 14
SECTION 2.10. Compliance with Applicable Law.......................... 14
SECTION 2.11. Employee Benefit Plans; Labor Matters................... 14
SECTION 2.12. Environmental Laws and Regulations...................... 15
SECTION 2.13. Taxes................................................... 16
SECTION 2.14. Intellectual Property; Software......................... 17
SECTION 2.15. Government Contracts.................................... 17
SECTION 2.16. Certain Business Practices.............................. 18
SECTION 2.17. Vote Required........................................... 18
SECTION 2.18. Tax Treatment; Pooling.................................. 18
SECTION 2.19. Affiliates.............................................. 18
SECTION 2.20. Opinion of Financial Adviser............................ 18
SECTION 2.21. Brokers................................................. 18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION....... 19
SECTION 3.1. Organization............................................ 19
SECTION 3.2. Capitalization of Parent and its Subsidiaries........... 19
SECTION 3.3. Authority Relative to this Agreement.................... 19
SECTION 3.4. SEC Reports; Financial Statements....................... 20
SECTION 3.5. Information Supplied.................................... 20
SECTION 3.6. Consents and Approvals; No Violations................... 20
SECTION 3.7. No Default ............................................. 21
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes.......... 21
SECTION 3.9. Litigation.............................................. 21
SECTION 3.10. Compliance with Applicable Law.......................... 21
SECTION 3.11. Employee Benefit Plans; Labor Matters................... 21
SECTION 3.12. Environmental Laws and Regulations...................... 22
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SECTION 3.13. Tax Matters............................................. 22
SECTION 3.14. Tax Treatment; Pooling.................................. 22
SECTION 3.15. Opinion of Financial Adviser............................ 22
SECTION 3.16. Brokers................................................. 22
SECTION 3.17. No Prior Activities..................................... 22
ARTICLE 4 COVENANTS...................................................... 23
SECTION 4.1. Conduct of Business of the Company...................... 23
SECTION 4.2. Conduct of Business of Parent........................... 24
SECTION 4.3. Preparation of S-4 and the Proxy Statement.............. 25
SECTION 4.4. Other Potential Acquirers............................... 25
SECTION 4.5. Comfort Letters......................................... 26
SECTION 4.6. Meeting of Stockholders................................. 26
SECTION 4.7. Stock Exchange Listing.................................. 26
SECTION 4.8. Access to Information................................... 27
SECTION 4.9. Additional Agreements; Reasonable Efforts............... 27
SECTION 4.10. Employee Benefits....................................... 27
SECTION 4.11. Public Announcements.................................... 28
SECTION 4.12. Indemnification......................................... 28
SECTION 4.13. Notification of Certain Matters......................... 28
SECTION 4.14. Affiliates; Pooling; Tax-Free Reorganization............ 28
SECTION 4.15. Additions to and Modification of Company Disclosure
Schedule................................................ 29
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER....................... 29
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger.................................................. 29
SECTION 5.2. Conditions to the Obligations of the Company............ 29
SECTION 5.3. Conditions to the Obligations of Parent and
Acquisition............................................. 30
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER................................. 31
SECTION 6.1. Termination............................................. 31
SECTION 6.2. Effect of Termination................................... 32
SECTION 6.3. Fees and Expenses....................................... 32
SECTION 6.4. Amendment............................................... 33
SECTION 6.5. Extension; Waiver....................................... 33
ARTICLE 7 MISCELLANEOUS.................................................. 33
SECTION 7.1. Nonsurvival of Representations and Warranties........... 33
SECTION 7.2. Entire Agreement; Assignment............................ 33
SECTION 7.3. Validity................................................ 34
SECTION 7.4. Notices................................................. 34
SECTION 7.5. Governing Law........................................... 34
SECTION 7.6. Descriptive Headings.................................... 34
SECTION 7.7. Parties in Interest..................................... 34
SECTION 7.8. Certain Definitions..................................... 34
SECTION 7.9. Personal Liability...................................... 35
SECTION 7.10. Specific Performance.................................... 35
SECTION 7.11. Counterparts............................................ 35
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TABLE OF EXHIBITS
Exhibit A-1............. Form of Letter Agreement with Company Affiliates
Exhibit A-2............. Form of Letter Agreement with Parent Affiliates
Exhibit B-1............. Form of Representations Relating to Tax Matters of the Company
Exhibit B-2............. Form of Representations Relating to Tax Matters of Parent and Acquisition
Exhibit C............... Matters to be Covered by Opinion of Tax Counsel to the Company
Exhibit D............... Matters to be Covered by Opinion of Legal Counsel to the Company
Exhibit E............... Matters to be Covered by Opinion of Tax Counsel to Parent
Exhibit F............... Matters to be Covered by Legal Counsel to Parent and Acquisition
TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE
Section 2.1...................... Subsidiaries
Section 2.6...................... Consents and Approval
Section 2.7...................... Defaults
Section 2.8...................... Undisclosed Liabilities
Section 2.9...................... Litigation
Section 2.11(a).................. Employee Plans
Section 2.11(b).................. Employment and Related Agreements
Section 2.11(c).................. Employee Benefits Affected by this Transaction
Section 2.11(e).................. Employee Matters
Section 2.13(b).................. Delinquent or Inaccurate Tax Returns
Section 2.13(d).................. Tax Claims
Section 2.13(e).................. Excess Parachute Payments
Section 2.14(c).................. Intellectual Property Infringement
Section 2.15(b).................. Matters Related to Government Contracts
Section 2.19..................... Affiliates, Directors and Executive Officers
Section 4.1...................... Exceptions to Ordinary Course
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TABLE OF DEFINED TERMS
CROSS REFERENCE
TERM IN AGREEMENT PAGE
---- -------------------- ----
Acquisition.......................................... Preamble 1
affiliate............................................ Section 7.8(a) 39
Agreement............................................ Preamble 1
Bid.................................................. Section 2.15(d)(i) 16
business day......................................... Section 7.8(b) 39
capital stock........................................ Section 7.8(c) 39
Certificates......................................... Section 1.10(b) 4
Closing Date......................................... Section 1.3 2
Closing.............................................. Section 1.3 2
Code................................................. Preamble 1
Company Affiliates................................... Section 2.19 16
Company Board........................................ Section 2.3(a) 8
Company Disclosure Schedule.......................... Section 2.1(a) 7
Company Financial Adviser............................ Section 2.20 17
Company Intellectual Property Rights................. Section 2.14(a) 14
Company Permits...................................... Section 2.10 11
Company Plans........................................ Section 1.11(a) 5
Company.............................................. Preamble 1
Company Rights Agreement............................. Section 2.2(a) 7
Company Rights....................................... Section 2.2(a) 7
Company Securities................................... Section 2.2(a) 8
Company Stock Option or Options...................... Section 1.11(a) 5
DGCL................................................. Section 1.1 1
Effective Time....................................... Section 1.2 2
Employee Plans....................................... Section 2.11(a) 12
Environmental Claim.................................. Section 2.12(a) 13
Environmental Laws................................... Section 2.12(a) 13
ERISA Affiliate...................................... Section 2.11(a) 12
ERISA................................................ Section 2.11(a) 11
Exchange Act......................................... Section 2.2(c) 8
Exchange Agent....................................... Section 1.10(a) 3
Exchange Fund........................................ Section 1.10(a) 3
Exchange Ratio....................................... Section 1.8(b) 3
Government Contract.................................. Section 2.15(d)(ii) 16
Governmental Entity.................................. Section 2.6 10
HSR Act.............................................. Section 2.6 9
Indemnified Liabilities.............................. Section 4.12 30
Indemnified Persons.................................. Section 4.12 30
IRS.................................................. Section 2.11(a) 12
knowledge or known................................... Section 7.8(d) 39
Lien................................................. Section 2.2(b) 8
Material Adverse Effect on Parent.................... Section 3.1(b) 17
Material Adverse Effect on the Company............... Section 2.1(b) 7
Merger Certificate................................... Section 1.2 1
Merger Consideration................................. Section 1.8(a) 3
Merger............................................... Section 1.1 1
Notice of Superior Proposal.......................... Section 4.4(b) 26
NYSE................................................. Section 1.8(b) 3
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CROSS REFERENCE
TERM IN AGREEMENT PAGE
---- --------------------- ----
Parent Benefit Plans................................ Section 3.11 ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock................................. Section 1.8(a) 3
Parent Financial Adviser............................ Section 3.15 22
Parent Permits...................................... Section 3.10 20
Parent.............................................. Preamble 1
Parent Rights....................................... Section 3.2(a) 17
Parent Securities................................... Section 3.2(a) 18
person.............................................. Section 7.8(e) 39
Proxy Statement..................................... Section 2.5 9
RSPP................................................ Section 2.2(a) 7
S-4................................................. Section 2.5 9
SEC................................................. Section 2.4(a) 9
Securities Act...................................... Section 2.4(a) 9
Shares.............................................. Section 1.8(a) 2
subsidiary or subsidiaries.......................... Section 7.8(f) 39
Superior Proposal................................... Section 4.4(c) 27
Surviving Corporation............................... Section 1.1 1
Tax or Taxes........................................ Section 2.13(a)(i) 13
Tax Return.......................................... Section 2.13(a)(ii) 14
Third Party Acquisition............................. Section 4.4(c) 27
Third Party......................................... Section 4.4(c) 27
U.S. Government..................................... Section 2.15(d)(iii) 16
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 4, 1997
is among LOGICON, INC., a Delaware corporation, ("Company"), NORTHROP GRUMMAN
CORPORATION, a Delaware corporation, ("Parent"), and NG ACQUISITION, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition").
WHEREAS the Boards of Directors of the Company, Parent and Acquisition have
each (i) determined that the Merger (as defined below) is fair and in the best
interests of their respective stockholders and (ii) approved the Merger in
accordance with this Agreement;
WHEREAS for Federal income tax purposes it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986 as amended (the "Code"); and
WHEREAS the Merger is intended to be treated as a "pooling of interests" for
financial accounting purposes.
NOW THEREFORE in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby the Company, Parent and Acquisition hereby agree as
follows:
ARTICLE 1
THE MERGER
SECTION 1.1. The Merger. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), Acquisition shall be
merged with and into the Company (the "Merger"). Following the Merger, the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Acquisition shall cease.
The Merger is intended to qualify as a tax-free reorganization under Section
368 of the Code.
SECTION 1.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, a Certificate of Merger (the "Merger Certificate") shall be
duly executed and acknowledged by Acquisition and the Company and thereafter
delivered to the Secretary of State of the State of Delaware for filing
pursuant to the DGCL on the Closing Date (as defined in Section 1.3). The
Merger shall become effective at such time as a properly executed and
certified copy of the Merger Certificate is duly filed with the Secretary of
State of the State of Delaware in accordance with the DGCL or such later time
as Parent and the Company may agree upon and set forth in the Merger
Certificate (the time the Merger becomes effective being referred to herein as
the "Effective Time").
SECTION 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the latest to occur of the conditions set forth in
Section 5.1 at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is
agreed to in writing by the parties hereto.
SECTION 1.4. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time all the properties, rights, privileges,
powers and franchises of the Company and Acquisition shall vest in the
Surviving Corporation and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
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SECTION 1.5. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law; provided, however, that Article Fourth of the
Certificate of Incorporation of the Company shall be amended to read in its
entirety as follows: "The aggregate number of shares which the Corporation
shall have the authority to issue is one thousand (1,000), $.01 par value per
share, to be designated "Common Stock". The bylaws of the Company in effect at
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 1.6. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 1.7. Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and bylaws of the
Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 1.8. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $.10 per
share, of the Company (individually a "Share" and collectively the "Shares")
issued and outstanding immediately prior to the Effective Time (other than (i)
Shares held in the Company's treasury or by any of the Company's subsidiaries
and (ii) Shares held by Parent, Acquisition or any other subsidiary of Parent)
shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be converted into and shall
become a number of fully paid and nonassessable shares of common stock, $1.00
par value per share, of Parent ("Parent Common Stock") equal to the Exchange
Ratio (as defined below) (the "Merger Consideration"). Unless the context
otherwise requires (i) each reference in this Agreement to the Shares shall
include the associated Company Rights (as such term is defined in Section
2.2(a) hereof) and (ii) each reference in this Agreement to shares of Parent
Common Stock shall include the associated Parent Rights (as such term is
defined in Section 3.2(a) hereof). Notwithstanding the foregoing if, between
the date of this Agreement and the Effective Time, the outstanding shares of
Parent Common Stock or the Shares 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 or
exchange of shares then the exchange ratio contemplated by the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) The "Exchange Ratio" shall be a fraction, the numerator of which is 52
and the denominator of which is the average of the closing prices for Parent
Common Stock as reported on the New York Stock Exchange (the "NYSE") Composite
Transactions reporting system for the 30 business days prior to the effective
date of the S-4 (as defined in Section 2.5); provided, however, that the
Exchange Ratio shall not be greater than 0.6919 nor less than 0.5661.
(c) At the Effective Time, each outstanding share of the common stock, par
value $.01 per share, of Acquisition shall be converted into one share of
common stock, par value $.10 per share, of the Surviving Corporation.
(d) At the Effective Time, each Share held in the treasury of the Company
and each Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be canceled, retired and cease to exist and no
shares of Parent Common Stock shall be delivered with respect thereto.
SECTION 1.9. No Appraisal Rights. The holders of Shares and the holders of
shares of Parent Common Stock shall not be entitled to appraisal rights.
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SECTION 1.10. Exchange of Certificates.
(a) From time to time following the Effective Time, as required by
subsections (b) and (c) below, Parent shall deliver to ▇▇▇▇▇ ▇▇▇▇▇▇
Shareholder Services, L.L.C., or such other agent or agents as may be
appointed by Parent and Acquisition (the "Exchange Agent") for the benefit of
the holders of Shares for exchange in accordance with this Article I through
the Exchange Agent: (i) certificates representing the appropriate number of
shares of Parent Common Stock and (ii) cash to be paid in lieu of fractional
shares of Parent Common Stock (such shares of Parent Common Stock and such
cash are hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 1.8 in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding Shares
(the "Certificates") whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.8: (i) a letter of
transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent and the Company 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 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 and if applicable a check
representing the cash consideration to which such holder may be entitled on
account of a fractional share of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article I and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares 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 transferee if the Certificate
representing such Shares is presented to the Exchange Agent accompanied by all
documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.10, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock and cash
in lieu of any fractional shares of Parent Common Stock as contemplated by
this Section 1.10.
(c) No dividends or other distributions declared or made after the Effective
Time 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
pursuant to Section 1.10(f) until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate there shall be paid to the record
holder of the certificates 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 1.10(f) 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 surrender and a payment date subsequent to surrender payable with respect
to such whole shares of Parent Common Stock.
(d) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor upon
the making of an affidavit of that fact by the holder thereof such shares of
Parent Common Stock and cash in lieu of fractional shares if any as may be
required pursuant to this Agreement provided, however, that Parent or its
Exchange Agent may, in its discretion, require the delivery of a suitable bond
or indemnity.
(e) All shares of Parent Common Stock issued upon the surrender for exchange
of Shares in accordance with the terms hereof (including any cash paid
pursuant to Section 1.10(c) or 1.10(f)) shall be deemed to have
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been issued in full satisfaction of all rights pertaining to such Shares;
subject, however, to the Surviving Corporation's obligation to pay 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 in accordance with the terms of this Agreement, or prior to the date
hereof 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 which were outstanding immediately prior to the
Effective Time. If after the Effective Time Certificates are presented to the
Surviving Corporation for any reason they shall be canceled and exchanged as
provided in this Article I.
(f) No fractions of a share of Parent Common Stock shall be issued in the
Merger but in lieu thereof each holder of Shares otherwise entitled to a
fraction of a share of Parent Common Stock shall upon surrender of his or her
Certificate or Certificates be entitled to receive an amount of cash (without
interest) determined by multiplying the closing price for Parent Common Stock
as reported on the NYSE Composite Transactions reporting system on the
business day five days prior to the Effective Time by the fractional share
interest to which such holder would otherwise be entitled. The parties
acknowledge that payment of the cash consideration in lieu of issuing
fractional shares was not separately bargained for consideration but merely
represents a mechanical rounding off for purposes of simplifying the corporate
and accounting complexities which would otherwise be caused by the issuance of
fractional shares.
(g) Neither Parent nor the Company shall be liable to any holder of Shares
or Parent Common Stock as the case may be for such shares (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 1.11. Stock Options.
(a) At the Effective Time, each outstanding option to purchase Shares (a
"Company Stock Option" or collectively "Company Stock Options") (i) issued
pursuant to the 1979 Restricted Stock Purchase and Stock Option Plan, 1982
Incentive Stock Plan, 1991 Stock Option Plan for Non-Employee Directors and
the 1992 Employee Incentive Stock Option Plan or (ii) issued by Geodynamics
Corporation and assumed by the Company pursuant to the agreement dated as of
on or about March 28, 1996 between the Company and Geodynamics Corporation,
whether vested or unvested, shall be converted as of the Effective Time into
options to purchase shares of Parent Common Stock in accordance with the terms
of this Section 1.11. All plans or agreements described above pursuant to
which any Company Stock Option has been issued or may be issued are referred
to collectively as the "Company Plans." Each Company Stock Option shall be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such Company Stock Option, a number of shares of Parent
Common Stock equal to the number of shares of Parent Common Stock that the
holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time at a price per share equal to (x) the
aggregate exercise price for the Shares otherwise purchasable pursuant to such
Company Stock Option divided by (y) the product of (i) the number of Shares
otherwise purchasable pursuant to such Company Stock Option, multiplied by
(ii) the Exchange Ratio; provided, however, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code ("incentive stock options" or "ISOs") the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall deliver to
the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the Company Plan and that the agreements
evidencing the grants of such Options shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 1.11
after giving effect to the Merger). Parent shall comply with the terms of the
Company Plans and ensure, to the extent required by and subject to the
provisions of such Plans, that Company Stock Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options of Parent after the Effective Time.
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(c) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon
exercise of Company Stock Options assumed in accordance with this Section
1.11. As soon as practicable after the Effective Time, Parent shall file a
registration statement on Form S-8 (or any successor or other appropriate
forms) with respect to the shares of Parent Common Stock subject to any
Company Stock Options held by persons who are directors, officers or employees
of the Company or its subsidiaries and shall use its best efforts to maintain
the effectiveness of such registration statement or registration statements
(and maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
(d) At or before the Effective Time, the Company shall cause to be effected
any necessary amendments to the Company Plans to give effect to the foregoing
provisions of this Section 1.11.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and Acquisition
as follows:
SECTION 2.1. Organization and Qualification; Subsidiaries.
(a) Section 2.1 of the Disclosure Schedule delivered by the Company to
Parent in accordance with Section 4.15 (the "Company Disclosure Schedule")
identifies each subsidiary of the Company as of the date hereof and its
respective jurisdiction of incorporation or organization, as the case may be.
Each of the Company and its subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
or organization and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted.
The Company has heretofore delivered to Acquisition or Parent accurate and
complete copies of the Certificate of Incorporation and bylaws (or similar
governing documents), as currently in effect, of the Company and its
subsidiaries.
(b) Each of the Company and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
would not have a Material Adverse Effect (as defined below) on the Company.
When used in connection with the Company or its subsidiaries, the term
"Material Adverse Effect on the Company" means any change or effect (i) that
is or is reasonably likely to be materially adverse to the business, results
of operations, condition (financial or otherwise) or prospects of the Company
and its subsidiaries, taken as whole, or (ii) that would impair the ability of
the Company to consummate the transactions contemplated hereby.
SECTION 2.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of 40,000,000
Shares, of which, as of March 31, 1997, 13,989,567 Shares were issued and
outstanding (each together with a Share purchase right (the "Company Rights")
issued pursuant to the Stockholder Rights Plan dated as of April 9, 1990
between the Company and ▇▇▇▇▇ ▇▇▇▇▇▇ Shareholder Services, L.L.C., as
successor to First Interstate Bank, N.A. (the "Company Rights Agreement")) and
2,000,000 shares of preferred stock, par value $.10 per share, no shares of
which are outstanding. All of the outstanding Shares have been validly issued
and are fully paid, nonassessable and free of preemptive rights. As of March
31, 1997, approximately 700,000 Shares were reserved for issuance and issuable
upon or otherwise deliverable in connection with the exercise of outstanding
Company Stock Options issued pursuant to the Company Plans including 66,306
Shares were reserved for issuance pursuant to Company Stock Options referred
to in Section 1.11(a)(ii) hereof and approximately 2,775,390 Shares have been
issued pursuant to the Restricted Stock Purchase Plan (the "RSPP"). Between
March 31, 1997 and the date hereof, no shares of the Company's capital stock
have been issued other than pursuant to Company Stock Options already in
existence on such date, and between March 31, 1997 and the date hereof no
stock options have been granted.
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Except as set forth above and except for the Company Rights, as of the date
hereof, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or its
subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options or other rights to acquire
from the Company or its subsidiaries, and, except as described in the Company
SEC Reports (as defined below), no obligations of the Company or its
subsidiaries to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company and (iv) no equity equivalent interests in the ownership or earnings
of the Company or its subsidiaries or other similar rights (collectively
"Company Securities"). As of the date hereof, there are no outstanding
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities. 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 or registration of any
shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's subsidiaries
(other than director's qualifying shares in the case of foreign subsidiaries)
is owned by the Company, directly or indirectly, free and clear of any Lien
(as defined below) 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). 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 securities of any subsidiary of the
Company. 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. For purposes of this Agreement, "Lien" means, with respect to any
asset (including without limitation any security), any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
(c) The Shares constitute the only class of equity securities of the Company
or its subsidiaries registered or required to be registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.3. Authority Relative to this Agreement; Recommendation.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company (the "Company Board") and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby except
the approval and adoption of this Agreement by the holders of a majority of
the outstanding Shares. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid, legal and binding agreement
of the Company enforceable, against the Company in accordance with its terms.
(b) The Company Board has unanimously resolved to recommend that the
stockholders of the Company approve and adopt this Agreement.
SECTION 2.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the Securities and Exchange Commission (the
"SEC") since March 31, 1993, each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Exchange Act, each as in effect on the
dates such forms, reports and documents were filed. None of such Company SEC
Reports, including, without limitation, any financial statements or schedules
included or incorporated by reference therein, contained when filed any untrue
statement of a material fact or omitted to state a material fact required to
be stated or incorporated by reference therein or necessary in order to make
the statements therein in light of the circumstances under which they were
made not misleading. The audited consolidated financial statements of the
Company included in the Company SEC Reports fairly present, in
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conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended.
(b) The Company has heretofore made available or promptly will make
available to Acquisition or Parent a complete and correct copy of any
amendments or modifications which are required to be filed with the SEC but
have not yet been filed with the SEC to agreements, documents or other
instruments which previously had been filed by the Company with the SEC
pursuant to the Exchange Act.
SECTION 2.5. Information Supplied. None of the information supplied or to be
supplied by the Company 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 shares of Parent Common Stock in the Merger
(the "S-4") will, at the time the S-4 is filed with the SEC 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 not misleading and (ii) the proxy
statement relating to the meeting of the Company's stockholders to be held in
connection with the Merger (the "Proxy Statement") will, at the date mailed to
stockholders of the Company and at the time of the meeting of stockholders of
the Company to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein in light
of the circumstances under which they are made not misleading. The Proxy
Statement insofar as it relates to the meeting of the Company's stockholders
to vote on the Merger will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 2.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act") and the filing and recordation of the
Merger Certificate as required by the DGCL, no filing with or notice to and no
permit, authorization, consent or approval of any United States or foreign
court or tribunal, or administrative, governmental or regulatory body, agency
or authority (a "Governmental Entity") is necessary for the execution and
delivery by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby, except where the failure to obtain
such permits, authorizations, consents or approvals or to make such filings or
give such notice would not have a Material Adverse Effect on the Company.
Neither the execution, delivery and performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or bylaws (or similar governing
documents) of the Company or any of its subsidiaries, (ii) except as set forth
in Section 2.6 of the Company Disclosure Schedule, result in a violation or
breach of or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, amendment, cancellation
or acceleration or Lien) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) except as set forth in Section 2.6 of the Company
Disclosure Schedule, violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets except, in the
case of (ii) or (iii), for violations, breaches or defaults which would not
have a Material Adverse Effect on the Company.
SECTION 2.7. No Default. Except as set forth in Section 2.7 of the Company
Disclosure Schedule, none of the Company or its subsidiaries is in breach,
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a breach, default or violation) of any term,
condition or provision of (i) its Certificate of Incorporation or bylaws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is now a party or by which any of them or
any of their respective properties or assets may be
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bound or (iii) any order, writ, injunction, decree, law, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of
their respective properties or assets except, in the case of (ii) or (iii),
for violations, breaches or defaults that would not have a Material Adverse
Effect on the Company.
SECTION 2.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by the Company in the Company SEC Reports or
as set forth in Section 2.8 of the Company Disclosure Schedule, none of the
Company or its subsidiaries has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by
generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company (including the notes thereto), other than
liabilities incurred in the ordinary course of business since December 31,
1996, none of which, individually or in the aggregate, would have a Material
Adverse Effect on the Company. Except as publicly disclosed by the Company in
the Company SEC Reports or as set forth in Section 2.8 of the Company
Disclosure Schedule, since December 31, 1996, there have been no events
changes or effects with respect to the Company or its subsidiaries having or
which reasonably could be expected to have a Material Adverse Effect on the
Company.
SECTION 2.9. Litigation. Except as publicly disclosed by the Company in the
Company SEC Reports or as set forth in Section 2.9 of the Company Disclosure
Schedule, there is no suit, claim, action, proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries or any of their respective properties or assets before any
Governmental Entity which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect on the Company or could reasonably
be expected to prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as publicly disclosed by the Company in
the Company SEC Reports, none of the Company or its subsidiaries is subject to
any outstanding order, writ, injunction or decree which insofar as can be
reasonably foreseen in the future could reasonably be expected to have a
Material Adverse Effect on the Company or could reasonably be expected to
prevent or delay the consummation of the transactions contemplated hereby.
SECTION 2.10. Compliance with Applicable Law. Except as publicly disclosed
by the Company in the Company SEC Reports, the Company and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Company Permits") except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on the Company. Except as publicly disclosed by the
Company in the Company SEC Reports, the Company and its subsidiaries are in
compliance with the terms of the Company Permits except where the failure so
to comply would not have a Material Adverse Effect on the Company. Except as
publicly disclosed by the Company in the Company SEC Reports, the businesses
of the Company and its subsidiaries are not being conducted in violation of
any law, ordinance or regulation of the United States or any foreign country
or any political subdivision thereof or of any Governmental Entity, except (i)
that no representation or warranty is made in this Section 2.10 with respect
to Environmental Laws (as defined in Section 2.12 below) and (ii) for
violations or possible violations of any United States or foreign laws,
ordinances or regulations which do not, and insofar as reasonably can be
foreseen in the future, will not result in any charges, assessments, levies,
fines or other liabilities being imposed upon or incurred by the Company that
will equal $1 million for any single violation or $5 million in the aggregate.
Except as publicly disclosed by the Company in the Company SEC Reports, no
investigation or review by any Governmental Entity with respect to the Company
or its subsidiaries is pending or, to the knowledge of the Company, threatened
nor, to the knowledge of the Company, has any Governmental Entity indicated an
intention to conduct the same, other than such investigations or reviews as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
SECTION 2.11. Employee Benefit Plans; Labor Matters.
(a) Section 2.11(a) of the Company Disclosure Schedule lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock, option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other
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similar fringe or employee benefit plans, programs or arrangements and any
current or former employment or executive compensation or severance agreements
written or otherwise maintained or contributed to for the benefit of or
relating to any employee of the Company, any trade or business (whether or not
incorporated) which is a member of a controlled group including the Company or
which is under common control with the Company within the meaning of Section
414 of the Code (an "ERISA Affiliate"), as well as each plan with respect to
which the Company or an ERISA Affiliate could incur liability under Section
4069 (if such plan has been or were terminated) or Section 4212(c) of ERISA
(together the "Employee Plans"), excluding former agreements under which the
Company has no remaining obligations and any of the foregoing that are
required to be maintained by the Company under the laws of any foreign
jurisdiction. The Company has made available to Parent a copy of (i) the most
recent annual report on Form 5500 filed with the Internal Revenue Service (the
"IRS") for each disclosed Employee Plan where such report is required and (ii)
the documents and instruments governing each such Employee Plan (other than
those referred to in Section 4(b)(4) of ERISA). No event has occurred and, to
the knowledge of the Company, there currently exists no condition or set of
circumstances in connection with which the Company or any of its subsidiaries
could be subject to any liability under the terms of any Employee Plans,
ERISA, the Code or any other applicable law, including, without limitation,
any liability under Title IV of ERISA, which would have a Material Adverse
Effect on the Company.
(b) Section 2.11(b) of the Company Disclosure Schedule sets forth a list of
(i) all employment agreements with officers of the Company; (ii) all
agreements with consultants who are individuals obligating the Company to make
annual cash payments in an amount exceeding $50,000; (iii) of all severance
agreements, programs and policies of the Company with or relating to its
employees except programs and policies required to be maintained by law; and
(vi) all plans, programs, agreements and other arrangements of the Company
with or relating to its employees which contain change in control provisions.
The Company has made available to Parent copies (or descriptions in detail
reasonably satisfactory to Parent) of all such agreements, plans, programs and
other arrangements.
(c) Except as disclosed in Section 2.11(c) of the Company Disclosure
Schedule and except for the acceleration, vesting and payment of the
performance units issued under the Company's Performance Unit Plan for the
Company's fiscal years ended March 31, 1995, 1996 and 1997, and the management
incentive bonuses for the Company fiscal year ended March 31, 1997, there will
be no payment, accrual of additional benefits, acceleration of payments or
vesting in any benefit under any Employee Plan or any agreement or arrangement
disclosed under this Section 2.11 solely by reason of entering into or in
connection with the transactions contemplated by this Agreement.
(d) No Employee Plan that is a welfare benefit plan within the meaning of
Section 3(1) of ERISA provides benefits to former employees of the Company or
its ERISA Affiliates other than pursuant to Section 4980B of the Code.
(e) There are no controversies pending or, to the knowledge of the Company,
threatened between the Company or any of its subsidiaries and any of their
respective employees which controversies have or may reasonably be expected to
have a Material Adverse Effect of the Company. Neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or its
subsidiaries except as disclosed in Section 2.11(e) of the Company Disclosure
Schedule nor does the Company know of any activities or proceedings of any
labor union to organize any such employees. The Company has no knowledge of
any strikes, slowdowns, work stoppages, lockouts or threats thereof by or with
respect to any employees of the Company or any of its subsidiaries.
SECTION 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by the Company in the Company SEC Reports
(i) each of the Company and its subsidiaries is in material compliance with
all applicable federal, state, local and foreign laws and regulations relating
to pollution or protection of human health or the environment (including,
without limitation,
A-15
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively "Environmental Laws") except for non-compliance that would not
have a Material Adverse Effect on the Company, which compliance includes, but
is not limited to, the possession by the Company and its subsidiaries of all
material permits and other governmental authorizations required under
applicable Environmental Laws and compliance with the terms and conditions
thereof; (ii) none of the Company or its subsidiaries has received written
notice of or, to the knowledge of the Company, is the subject of any action,
cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law
(an "Environmental Claim") that could reasonably be expected to have a
Material Adverse Effect on the Company; and (iii) to the knowledge of the
Company, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as disclosed in the Company SEC Reports, there are no
Environmental Claims which could reasonably be expected to have a Material
Adverse Effect on the Company that are pending or, to the knowledge of the
Company, threatened against the Company or its subsidiaries or, to the
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law.
SECTION 2.13. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Tax" (including "Taxes") means (A) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of being a member
of an affiliated, consolidated, combined or unitary group for any period,
or otherwise through operation of law, and (C) any liability for the
payment of amounts described in clauses (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and
(ii) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document required to be filed
with respect to Taxes.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, the Company and its subsidiaries have accurately prepared and timely
filed all Tax Returns they are required to have filed. Such Tax Returns are
accurate and correct in all material respects and do not contain a disclosure
statement under Section 6662 of the Code (or any predecessor provision or
comparable provision of state, local or foreign law).
(c) The Company and its subsidiaries have paid or adequately provided for
all Taxes (whether or not shown on any Tax Return) they are required to have
paid or to pay.
(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Schedule, no material claim for assessment or collection of Taxes is presently
being asserted against the Company or its subsidiaries and neither the Company
nor any of its subsidiaries is a party to any pending action, proceeding, or
investigation by any governmental taxing authority nor does the Company have
knowledge of any such threatened action, proceeding or investigation.
(e) Except as set forth in Section 2.13(e) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in connection with this Agreement or any
change of control of the Company or any of its subsidiaries, in the payment of
any "excess parachute payments" within the meaning of Section 28OG of the
Code.
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SECTION 2.14. Intellectual Property; Software.
(a) Each of the Company and its subsidiaries owns or possesses adequate
licenses or other valid rights to use all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets and
applications therefor (the "Company Intellectual Property Rights"), except
where the failure to own or possess valid rights to use such Company
Intellectual Property Rights would not have a Material Adverse Effect on the
Company.
(b) Except for any of the following which would not reasonably be expected
to have a Material Adverse Effect on the Company,
(i) the validity of the Company Intellectual Property Rights and the
title thereto of the Company or any subsidiary as the case may be is not
being questioned in any litigation to which the Company or any subsidiary
is a party, and
(ii) except as set forth in Section 2.14(c) of the Company Disclosure
Schedule, the conduct of the business of the Company and its subsidiaries
as now conducted does not to, the knowledge of the Company, infringe any
valid patents, trademarks, trade names, service marks, or copyrights of
others The consummation of the transactions completed hereby will not
result in the loss or impairment of any Company Intellectual Property
Rights.
SECTION 2.15. Government Contracts.
(a) With respect to each Government Contract or Bid to which Company or any
affiliate of the Company is a party: (i) the Company has fully complied with
all material terms and conditions and all applicable requirements of statute,
rule, regulation, order or agreement, whether incorporated expressly, by
reference or by operation of law; (ii) all representations and certifications
were current, accurate and complete when made, and the Company has fully
complied with all such representations and certifications; (iii) no allegation
has been made, either orally or in writing, that the Company is in breach or
violation of any statutory, regulatory or contractual requirement; (iv) no
termination for convenience, termination for default, cure notice or show
cause notice has been issued; (v) no cost incurred by the Company or its
subcontractors has been questioned or disallowed; and (vi) no money due to the
Company has been (or has threatened to be) withheld or set off.
(b) Neither the Company, any affiliate of the Company, nor any of the
Company's directors, officers, employees, agents or consultants is (or for the
last three years has been) (i) except as set forth in Section 2.15(b) of the
Company Disclosure Schedule, under administrative, civil or criminal
investigation, indictment or information, audit or internal investigation with
respect to any alleged irregularity, misstatement or omission regarding a
Government Contract or Bid; or (ii) suspended or debarred from doing business
with the U.S. Government or any state or local government or declared
nonresponsible or ineligible for government contracting. Except as set forth
in Section 2.15(b) of the Company Disclosure Schedule, neither the Company nor
any affiliate of the Company has made a voluntary disclosure to any U.S.
Government, state or local government entity with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract or Bid. Except as set forth in Section 2.15(b) of the
Company Disclosure Schedule, the Company knows of no circumstances that would
warrant the institution of suspension or debarment proceedings or the finding
of nonresponsibility or ineligibility on the part of the Company in the
future.
(c) Neither the U.S. Government, any state or local government nor any prime
contractor, subcontractor or vendor has asserted any claim or initiated any
dispute proceeding against the Company, nor has the Company asserted any claim
or initiated any dispute proceeding, directly or indirectly, against any such
party, concerning any Government Contract or Bid. There are no facts of which
the Company is aware upon which such a claim or dispute proceeding may be
based in the future.
(d) For purposes of this Section 2.15, the following terms shall have the
meanings set forth below:
(i) "Bid" means any quotation, bid or proposal by the Company or any of
its Affiliates which, if accepted or awarded, would lead to a contract with
the U.S. Government or any other entity, including a
A-17
prime contractor or a higher tier subcontractor to the U.S. Government, for
the design, manufacture or sale of products or the provision of services by
the Company.
(ii) "Government Contract" means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, letter
contract, purchase order, delivery order, Bid, change order, arrangement or
other commitment of any kind relating to the business of the Company
between the Company and (i) the U.S. Government, (ii) any prime contractor
to the U.S. Government or (iii) any subcontractor with respect to any
contract described in clause (i) or (ii).
(iii) "U.S. Government" means the United States government including any
and all agencies, commissions, branches, instrumentalities and departments
thereof.
SECTION 2.16. Certain Business Practices. None of the Company, any of its
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or
(iii) made any other unlawful payment.
SECTION 2.17. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve and adopt
this Agreement.
SECTION 2.18. Tax Treatment; Pooling. Neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken or agreed to take
action that would prevent the Merger from (a) constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code or (b) being
treated for financial accounting purposes as a pooling of interests in
accordance with generally accepted accounting principles and the rules
regulations and interpretations of the SEC (a "Pooling Transaction").
SECTION 2.19. Affiliates. Except for the directors and executive officers of
the Company, each of whom is listed in Section 2.19 of the Company Disclosure
Schedule, there are no persons who, to the knowledge of the Company, may be
deemed to be affiliates of the Company under Rule 145 of the Securities Act
("Company Affiliates"). Concurrently with the execution and delivery of this
Agreement, the Company has delivered to Parent an executed letter agreement
substantially in the form of Exhibit A-1 hereto from certain of the Company
Affiliates and will deliver to Parent within ten days after the date of this
Agreement an executed letter agreement substantially in the form of Exhibit ▇-
▇ hereto from all other Company Affiliates.
SECTION 2.20. Opinion of Financial Adviser. ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. Inc. (the
"Company Financial Adviser") has delivered to the Company Board its written
opinion dated the date of this Agreement to the effect that as of such date
the Merger Consideration is fair to the holders of Shares.
SECTION 2.21. Brokers. No broker, finder or investment banker (other than
the Company Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to Acquisition or Parent) is entitled to any
brokerage finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 3.1. Organization.
(a) Each of Parent and Acquisition is duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
power and authority to own, lease and operate its properties and to carry on
its businesses as now being conducted. Parent has heretofore delivered to the
Company accurate and complete copies of the Certificate of Incorporation and
bylaws as currently in effect of Parent and Acquisition.
(b) Each of Parent and Acquisition is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on Parent. When used in connection with Parent
or Acquisition the term "Material Adverse Effect on Parent" means any change
or effect that is (i) materially adverse to the business, results of
operations, condition (financial or otherwise) or prospects of Parent and its
subsidiaries, taken as a whole, or (ii) that may impair the ability of Parent
and/or Acquisition to consummate the transactions contemplated hereby.
SECTION 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized capital stock of Parent consists of 200,000,000 shares of
Parent Common Stock, of which, as of March 25, 1997, 58,007,567 shares of
Parent Common Stock were issued and outstanding (each together with a Parent
Common Stock purchase right (the "Parent Rights") issued pursuant to the
Rights Agreement dated as of August 2, 1991 and amended on September 28, 1994
between Parent and Chemical Bank, N.A.) and 10,000,000 shares of preferred
stock, $1.00 par value per share, none of which are outstanding. All of the
outstanding shares of Parent Common Stock have been validly issued and are
fully paid, nonassessable and free of preemptive rights. As of March 25, 1997,
3,054,943 shares of Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options. Between March 25, 1997 and the date hereof, no shares of
Parent's capital stock have been issued other than pursuant to stock options
already in existence on such date and except for grants of stock options to
employees officers and directors in the ordinary course of business consistent
with past practice between March 25, 1997 and the date hereof, no stock
options have been granted. Except as set forth above and except for the Parent
Rights, as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of Parent (ii) no securities of Parent or its
subsidiaries convertible into or exchangeable for shares of capital stock, or
voting securities of Parent (iii) no options or other rights to acquire from
Parent or its subsidiaries and no obligations of Parent or its subsidiaries to
issue any capital stock voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent and (iv) except
for Parent's Non-Employee Directors Equity Participation Plan, no equity
equivalent interests in the ownership or earnings of Parent or its
subsidiaries or other similar rights (collectively "Parent Securities"). As of
the date hereof, there are no outstanding obligations of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Parent Securities.
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.
(b) The Parent Common Stock constitutes the only class of equity securities
of Parent or its subsidiaries registered or required to be registered under
the Exchange Act.
SECTION 3.3. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Acquisition
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and by Parent as the sole stockholder of Acquisition and no other corporate
proceedings on the part of Parent or Acquisition are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by each of Parent
and Acquisition and constitutes a valid, legal and binding agreement of each
of Parent and Acquisition enforceable against each of Parent and Acquisition
in accordance with its terms.
SECTION 3.4. SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents ("Parent SEC
Reports") with the SEC since December 31, 1993, each of which has complied in
all material respects with all applicable requirements of the Securities Act
and the Exchange Act, each as in effect on the dates such forms reports and
documents were filed. None of such Parent SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, contained when filed any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein in
light of the circumstances under which they were made not misleading. The
audited consolidated financial statements of Parent included in the Parent SEC
Reports fairly present in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto) the consolidated financial position of Parent and its
consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended.
(b) Parent has heretofore made available or promptly will make available to
the Company a complete and correct copy of any amendments or modifications
which are required to be filed with the SEC but have not yet been filed with
the SEC to agreements documents or other instruments which previously had been
filed by Parent with the SEC pursuant to the Exchange Act.
SECTION 3.5. Information Supplied. None of the information supplied or to be
supplied by Parent or Acquisition for inclusion or incorporation by reference
to (i) the S-4 will at the time the S-4 is filed with the SEC 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 not misleading and (ii)
the Proxy Statement will at the date mailed to stockholders and at the times
of the meeting or meetings of stockholders of the Company to be held in
connection with the Merger contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made not misleading. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder.
SECTION 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents, and approvals as may be required under and
other applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act and the filing and recordation of the
Merger Certificate as required by the DGCL, no filing with or notice to, and
no permit authorization consent or approval of any Governmental Entity is
necessary for the execution and delivery by Parent or Acquisition of this
Agreement or the consummation by Parent or Acquisition of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Material Adverse Effect on Parent. Neither the
execution, delivery and performance of this Agreement by Parent or Acquisition
nor the consummation by Parent or Acquisition of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or bylaws (or similar governing
documents) of Parent or Acquisition or any of Parent's other subsidiaries,
(ii) result in a violation or breach of or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or Acquisition or any of Parent's other subsidiaries is a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or Acquisition or any of
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Parent's other subsidiaries or any of their respective properties or assets
except, in the case of (ii) or (iii), for violations, breaches or defaults
which would not have a Material Adverse Effect on Parent.
SECTION 3.7. No Default. None of Parent or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
bylaws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is now a party or by
which any of them or any of their respective properties or assets may be bound
or (iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or any of its subsidiaries or any of their respective
properties or assets except, in the case of (ii) or (iii), for violations,
breaches or defaults that would not have a Material Adverse Effect on Parent.
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by Parent in the Parent SEC Reports, none of
Parent or its subsidiaries has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise that would be required by
generally accepted accounting principles to be reflected on a consolidated
balance sheet of Parent and its consolidated subsidiaries (including the notes
thereto), other than liabilities incurred in the ordinary course of business
since December 31, 1996, none of which, individually or in the aggregate,
would have a Material Adverse Effect on Parent. Except as publicly disclosed
by Parent in the Parent SEC Reports, since December 31, 1996, there have been
no events changes or effects with respect to Parent or its subsidiaries having
or which could reasonably be expected to have a Material Adverse Effect on
Parent.
SECTION 3.9. Litigation. Except as publicly disclosed by Parent in the
Parent SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent threatened, against
Parent or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity which, individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect or could
reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement. Except as publicly disclosed by
Parent in the Parent SEC Reports, none of Parent or its subsidiaries is
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen in the future could reasonably be expected to have
a Material Adverse Effect on Parent or could reasonably be expected to prevent
or delay the consummation of the transactions contemplated hereby.
SECTION 3.10. Compliance with Applicable Law. Except as publicly disclosed
by Parent in the Parent SEC Reports, Parent and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent Permits") except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on Parent. Except as publicly disclosed by Parent in
the Parent SEC Reports, Parent and its subsidiaries are in compliance with the
terms of the Parent Permits except where the failure so to comply would not
have a Material Adverse Effect on Parent. Except as publicly disclosed by
Parent in the Parent SEC Reports, the businesses of Parent and its
subsidiaries are not being conducted in violation of any law ordinance or
regulation of any Governmental Entity except that no representation or
warranty is made in this Section 3.10 with respect to Environmental Laws and
except for violations or possible violations which do not and, insofar as
reasonably can be foreseen in the future, will not have a Material Adverse
Effect on Parent. Except as publicly disclosed by Parent in the Parent SEC
Reports, no investigation or review by any Governmental Entity with respect to
Parent or its subsidiaries is pending or, to the knowledge of Parent,
threatened nor, to the knowledge of Parent, has any Governmental Entity
indicated an intention to conduct the same, other than in each case those
which Parent reasonably believes will not have a Material Adverse Effect on
Parent.
SECTION 3.11. Employee Benefit Plans; Labor Matters. With respect to each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of ERISA)
maintained or contributed to by Parent or any of its subsidiaries or with
respect to which
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Parent or any of its subsidiaries could incur liability under Section 4069,
4212(c) or 4204 of ERISA (the "Parent Benefit Plans") no event has occurred
and, to the knowledge of Parent, there currently exists no condition or set of
circumstances in connection with which Parent or any of its subsidiaries could
be subject to any liability under the terms of the Parent Benefit Plans ERISA
the Code or any other applicable law which would have a Material Adverse
Effect on Parent. There is no pending or threatened labor dispute strike or
work stoppage against Parent or any of its subsidiaries which may reasonably
be expected to have a Material Adverse Effect on Parent.
SECTION 3.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by Parent in the Parent SEC Reports, (i)
each of Parent and its subsidiaries is in material compliance with all
Environmental Laws except for non-compliance that would not have a Material
Adverse Effect on Parent which compliance includes, but is not limited to, the
possession by Parent and its subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof; (ii) none of Parent or its
subsidiaries has received written notice of or, to the knowledge of Parent, is
the subject of any Environmental Claim that could reasonably be expected to
have a Material Adverse Effect on Parent; and (iii) to the knowledge of
Parent, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as publicly disclosed by Parent in the Parent SEC Reports, there
are no Environmental Claims which could reasonably be expected to have a
Material Adverse Effect on Parent that are pending or, to the knowledge of
Parent, threatened against Parent or any of its subsidiaries or, to the
knowledge of Parent, against any person or entity whose liability for any
Environmental Claim Parent or its subsidiaries has or may have retained or
assumed either contractually or by operation of law.
SECTION 3.13. Tax Matters. Except as publicly disclosed by Parent in the
Parent SEC Reports, Parent and its subsidiaries have accurately prepared and
duly filed with the appropriate federal, state, local and foreign taxing
authorities all tax returns information returns and reports required to be
filed with respect to Parent and its subsidiaries and have paid in full or
made adequate provision for the payment of all Taxes.
SECTION 3.14. Tax Treatment; Pooling. Neither Parent, Acquisition nor, to
the knowledge of Parent, any of its affiliates has taken, proposes to take, or
has agreed to take any action that would prevent the Merger (a) from
constituting a reorganization qualifying under the provisions of Section
368(a) of the Code or (b) from being treated as a Pooling Transaction for
financial accounting purposes. Within 10 days after the date of this
Agreement, Parent will obtain from each of its directors, officers and
affiliates a letter agreement substantially in the form of Exhibit A-2.
SECTION 3.15. Opinion of Financial Adviser. Salomon Brothers Inc. (the
"Parent Financial Adviser") has delivered to the Board of Directors of Parent
its opinion dated as of the date of this Agreement to the effect that as of
such date the Merger Consideration contemplated by the Merger is fair to the
holders of shares of Parent Common Stock.
SECTION 3.16. Brokers. No broker finder or investment banker (other than the
Parent Financial Adviser) is entitled to any brokerage finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or
Acquisition.
SECTION 3.17. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability nor engaged in
any business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
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ARTICLE 4
COVENANTS
SECTION 4.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or as described in Section 4.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company will and will cause each of its subsidiaries to conduct its operations
in the ordinary course of business consistent with past practice and, to the
extent consistent therewith, with no less diligence and effort than would be
applied in the absence of this Agreement seek, to preserve intact its current
business organizations, keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that goodwill and ongoing
businesses shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, except as otherwise expressly provided in this
Agreement or as described in Section 4.1 of the Company Disclosure Schedule,
prior to the Effective Time, neither the Company nor any of its subsidiaries
will, without the prior written consent of Parent and Acquisition:
(a) amend its Certificate of Incorporation or bylaws (or other similar
governing instrument);
(b) amend the Company Rights Agreement in any manner that would permit any
person to acquire more than 20% of the Shares, or redeem the Company Rights;
(c) authorize for issuance, issue, sell, deliver or agree or commit to issue
sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except bank loans) or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights) except for the issuance and sale of Shares pursuant to
options previously granted under the Company Plans;
(d) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock except
for quarterly cash dividends not in excess of $0.06 per Share paid in
accordance with past practice, make any other actual, constructive or deemed
distribution in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such, or redeem or otherwise acquire any of
its securities or any securities of any of subsidiaries;
(e) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries (other than the Merger);
(f) alter through merger, liquidation, reorganization, restructuring or any
other fashion the corporate structure of ownership of any subsidiary;
(g)(i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the
ordinary course of business; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
consistent with past practice and except for obligations of subsidiaries of
the Company incurred in the ordinary course of business; (iii) make any loans,
advances or capital contributions to or investments in any other person (other
than to subsidiaries of the Company or customary loans or advances to
employees in each case in the ordinary course of business consistent with past
practice) (iv) pledge or otherwise encumber shares of capital stock of the
Company or its subsidiaries; or (v) mortgage or pledge any of its material
assets, tangible or intangible, or create or suffer to exist any material Lien
thereupon (other than Tax Liens for Taxes not yet due);
(h) except as may be required by law, enter into adopt or amend or terminate
any bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
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director, officer or employee in any manner or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock appreciation
rights or performance units); provided, however, that this paragraph (g) shall
not prevent the Company or its subsidiaries from (i) entering into employment
agreements or severance agreements with new employees in the ordinary course
of business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for employees
for fiscal 1997 in the ordinary course of year-end compensation reviews
consistent with past practice (to the extent that such compensation increases
and new or amended bonus arrangements do not result in a material increase in
benefits or compensation expense to the Company);
(i) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions having a fair market value in excess of $1
million in the aggregate (other than in connection with outsourcing agreements
entered into with customers of the Company or its subsidiaries);
(j) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(k) revalue in any material respect any of its assets including without
limitation writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business;
(l)(i) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division
thereof or any equity interest therein (other than in connection with
outsourcing agreements entered into with customers of the Company or its
subsidiaries); (ii) enter into any contract or agreement other than in the
ordinary course of business consistent with past practice which would be
material to the Company and its subsidiaries, taken as a whole; (iii)
authorize any new capital expenditure or expenditures which individually is in
excess of $100,000 or in the aggregate are in excess of $500,000; provided
that none of the foregoing shall limit any capital expenditure required
pursuant to existing customer contracts;
(m) make any tax election or settle or compromise any income tax liability
material to the Company and its subsidiaries taken as a whole;
(n) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on the
Company;
(o) commence any material software development project or terminate any
material software development project that is currently ongoing, in either
case except pursuant to the terms of existing contracts with customers or
except as contemplated by the Company's project development budget previously
provided to Parent; or
(p) take or agree in writing or otherwise to take any of the actions
described in Sections 4.1(a) through 4.1(o) or any action which would make any
of the representations or warranties of the Company contained in this
Agreement untrue or incorrect.
SECTION 4.2. Conduct of Business of Parent. Except as contemplated by this
Agreement, during the period from the date hereof to the Effective Time,
Parent will and will cause each of its subsidiaries to conduct their
operations in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement, seek to preserve
intact its current business organizations, keep available the service of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement prior to the Effective Time, neither Parent nor any
of its subsidiaries will, without the prior written consent of the Company:
(a) knowingly take any action that would result in a failure to maintain the
trading of the Parent Common Stock on the NYSE;
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(b) declare, set aside or pay any dividend or other distribution in respect
of its capital stock except for customary quarterly cash dividends not in
excess of $0.40 per share, dividends payable in Parent Common Stock or
dividends by a subsidiary of Parent to Parent or another subsidiary of Parent;
(c) acquire or agree to acquire by merging or consolidating with by
purchasing an equity interest in or the assets of or by any other manner any
business or any corporation, partnership or other business organization or
division thereof or otherwise acquire or agree to acquire any assets of any
other entity (other than the purchase of assets from suppliers, clients or
vendors in the ordinary course of business and consistent with past practice)
if such transaction would prevent or materially delay the consummation of the
transactions contemplated by this Agreement;
(d) adopt or propose to adopt any amendments to its charter documents which
would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(e) take or agree in writing or otherwise to take any of the actions
described in Sections 4.1(a) through 4.1(d) or any action which would make any
of the representations or warranties of Parent contained in this Agreement
untrue or incorrect.
SECTION 4.3. Preparation of S-4 and the Proxy Statement. The Company shall
promptly prepare and file with the SEC the Proxy Statement and Parent shall
promptly prepare and file with the SEC the S-4 in which the Proxy Statement
will be included as a prospectus. Each of Parent and the Company shall use its
best efforts to have the S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is now
not so qualified) required to be taken under any applicable state securities
laws in connection with the issuance of Parent Common Stock in the Merger and
upon the exercise of Company Stock Options and the Company shall furnish all
information concerning the Company and the holders of Shares as may be
reasonably requested in connection with any such action.
SECTION 4.4. Other Potential Acquirers.
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any discussions
or negotiations with any parties with respect to any Third Party Acquisition
(as defined below). Neither the Company nor any of its affiliates shall, nor
shall the Company authorize or permit any of its or their respective officers,
directors, employees representatives or agents to, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with or provide any non-public information to any person or group (other than
Parent and Acquisition or any designees of Parent and Acquisition) concerning
any Third Party Acquisition; provided, however, that nothing herein shall
prevent the Company Board from taking and disclosing to the Company's
stockholders a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offer. The Company shall
promptly notify the Parent in the event it receives any proposal or inquiry
concerning a Third Party Acquisition including the terms and conditions
thereof and the identity of the party submitting such proposal; and shall
advise the Parent from time to time of the status and any material
developments concerning the same.
(b) Except as set forth in this Section 4.4(b) the Company Board shall not
withdraw its recommendation of the transactions contemplated hereby or approve
or recommend, or cause the Company to enter into any agreement with respect
to, any Third Party Acquisition. Notwithstanding the foregoing, if the Company
Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of, legal counsel that it is
required to do so in order to comply with its fiduciary duties, the Company
Board may withdraw its recommendation of the transactions contemplated hereby
or approve or recommend a Superior Proposal, but in each case only (i) after
providing reasonable written notice to Parent (a "Notice of Superior
Proposal") advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal and (ii) if
Parent does not, within five business days of Parent's receipt of the Notice
of Superior Proposal, make an offer which the Company Board by a majority vote
determines in its good faith judgment (based on the written
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advice of a financial adviser of nationally recognized reputation) to be as
favorable to the Company's stockholders as such Superior Proposal; provided,
however, that the Company shall not be entitled to enter into any agreement
with respect to a Superior Proposal unless and until this Agreement is
terminated by its terms pursuant to Section 6.1. Any disclosure that the
Company Board may be compelled to make with respect to the receipt of a
proposal for a Third Party Acquisition in order to comply with its fiduciary
duties or Rule 14d-9 or 14e-2 will not constitute a violation of this Section
4.4(b) provided that such disclosure states that no action will be taken by
the Company Board with respect to the withdrawal of its recommendation of the
transactions contemplated hereby or the approval or recommendation of any
Third Party Acquisition except in accordance with this Section 4.4(b).
(c) For the purposes of this Agreement, "Third Party Acquisition" means the
occurrence of any of the following events: (i) the acquisition of the Company
by merger or otherwise by any person (which includes a "person" as such term
is defined in Section 13(d)(3) of the Exchange Act) other than Parent,
Acquisition or any affiliate thereof (a "Third Party"); (ii) the acquisition
by a Third Party of more than 20% of the total assets of the Company and its
subsidiaries taken as a whole; (iii) the acquisition by a Third Party of 20%
or more of the outstanding Shares; (iv) the adoption by the Company of a plan
of liquidation or the declaration or payment of an extraordinary dividend; (v)
the repurchase by the Company or any of its subsidiaries of more than 20% of
the outstanding Shares; or (vi) the acquisition by the Company or any
subsidiary by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business whose
annual revenues, net income or assets is equal or greater than 20% of the
annual revenues, net income or assets of the Company. For purposes of this
Agreement, a "Superior Proposal" means any bona fide proposal to acquire
directly or indirectly for consideration consisting of cash and/or securities
more than 50% of the Shares then outstanding or all or substantially all the
assets of the Company and otherwise on terms which the Company Board by a
majority vote determines in its good faith judgment (based on the written
advice of a financial adviser of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger.
SECTION 4.5. Comfort Letters.
(a) The Company shall use all reasonable efforts to cause Price Waterhouse
LLP to deliver a letter dated not more than five days prior to the date on
which the S-4 shall become effective and addressed to itself and Parent and
their respective Boards of Directors in form and substance reasonably
satisfactory to Parent and customary in scope and substance for agreed-upon
procedures letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the S-4 and the
Proxy Statement.
(b) Parent shall use all reasonable efforts to cause Deloitte & Touche LLP
to deliver a letter dated not more than 5 days prior to the date of the S-4
shall become effective and addressed to itself and the Company and their
respective Boards of Directors in form and substance reasonably satisfactory
to the Company and customary in scope and substance for agreed upon procedures
letters delivered by independent accountants in connection with registration
statements and proxy statements similar to the S-4 and the Proxy Statement.
SECTION 4.6. Meeting of Stockholders. The Company shall take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
bylaws to duly call give notice of convene and hold a meeting of its
stockholders as promptly as practicable to consider and vote upon the adoption
and approval of this Agreement and the transactions contemplated hereby. The
stockholder votes required for the adoption and approval of the transactions
contemplated by this Agreement shall be the vote required by the DGCL and the
Company's Certificate of Incorporation and bylaws. The Company will, through
its Board of Directors, recommend to its stockholders approval of such matters
subject to the provisions of Section 4.4(b).
SECTION 4.7. Stock Exchange Listing. Parent shall use all reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger and the
shares of Parent Common Stock to be reserved for issuance upon exercise of
Company Stock Options to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
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SECTION 4.8. Access to Information.
(a) Between the date hereof and the Effective Time the Company will give
Parent and its authorized representatives and Parent will give the Company and
its authorized representatives reasonable access to all employees plants
offices warehouses and other facilities and to all books and records of itself
and its subsidiaries will permit the other party to make such inspections as
such party may reasonably require and will cause its officers and those of its
subsidiaries to furnish the other party with such financial and operating data
and other information with respect to the business and properties of itself
and its subsidiaries as the other party may from time to time reasonably
request.
(b) Between the date hereof and the Effective Time the Company shall furnish
to Parent and Parent will furnish to the Company within 25 business days after
the end of each calendar month (commencing with April 1997) an unaudited
balance sheet of the party furnishing such information as of the end of the
such month and the related statements of earnings, stockholders' equity
(deficit) and within 25 business days after the end of each calendar quarter
cash flows for the quarter then ended each prepared in accordance with
generally accepted accounting principles in conformity with the practices
consistently applied by such party with respect to its monthly financial
statements. All the foregoing shall be in accordance with the books and
records of the party furnishing such information and shall fairly present its
financial position (taking into account the differences between the monthly
and quarterly statements prepared by such party in conformity with its past
practices) as of the last day of the period then ended.
(c) Parent and Acquisition will hold and will cause its consultants and
advisers to hold in confidence all documents and information furnished to it
by or on behalf of the Company in connection with the transactions
contemplated by this Agreement pursuant to the terms of that certain
Confidentiality Agreement entered into between the Company and Parent dated
March 21, 1997. The Company will hold and will cause its consultants and
advisers to hold in confidence all documents and information furnished to it
by or on behalf of Parent or Acquisition in connection with the transactions
contemplated by this Agreement pursuant to the terms of that certain
Confidentiality Agreement entered into between Parent and the Company dated
May 3, 1997.
SECTION 4.9. Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take or cause to be taken all action and to do or cause
to be done all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
(i) cooperating in the preparation and filing of the Proxy Statement and the
S-4, any filings that may be required under the HSR Act and any amendments to
any thereof; (ii) obtaining consents of all third parties and Governmental
Entities necessary proper or advisable for the consummation of the
transactions contemplated by this Agreement; (iii) contesting any legal
proceeding relating to the Merger and (iv) executing any additional
instruments necessary to consummate the transactions contemplated hereby.
Subject to the terms and conditions of this Agreement Parent and Acquisition
agree to use all reasonable efforts to cause the Effective Time to occur as
soon as practicable after the Company stockholder vote with respect to the
Merger. If at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement the proper officers and
directors of each party hereto shall take all such necessary action.
SECTION 4.10. Employee Benefits. Parent will provide the employees and
retirees of the Company and its subsidiaries, for a period ending on the first
anniversary of the Effective Time, with compensation and employee benefits of
the type described in Section 2.11 of this Agreement (other than stock option
or other plans involving the potential issuance or purchase on the open market
of securities of the Company or of Parent, the provision of which by Parent
will be governed by Section 1.11) which in the aggregate are comparable to
those currently provided by the Company and its subsidiaries as the case may
be. Parent agrees and will cause the Surviving Corporation to agree that (i)
all obligations of the Company or any subsidiary under any "change of control"
or similar provisions relating to employees contained in any existing
contracts and all termination or severance agreements with executive officers
identified in Section 2.11(c) of the Company Disclosure Schedule (subject to
Section 1.11 hereof) will be honored in accordance with their terms as of the
date hereof and (ii) the RSPP of
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the Company will continue in effect with respect to the Shares issued
thereunder and Parent Common Shares issued in exchange therefor pursuant to
the Merger, and appropriate adjustments will be made to the RSPP such that
following the Effective Time such shares of Parent Common Stock shall be held
substantially in accordance with the terms of the RSPP. Notwithstanding the
foregoing, except as provided in the preceding sentence nothing contained
herein shall be construed as requiring Parent or the Surviving Corporation to
continue any specific employee benefit plans or to continue the employment of
any specific person.
SECTION 4.11. Public Announcements. Parent, Acquisition and the Company, as
the case may be, will consult with one another before issuing any press
release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement, including, without limitation,
the Merger, and shall not issue any such press release or make any such public
statement prior to such consultation except as may be required by applicable
law or by obligations pursuant to any listing agreement with the NYSE as
determined by Parent, Acquisition or the Company, as the case may be.
SECTION 4.12. Indemnification. After the Effective Time, the Surviving
Corporation shall indemnify and hold harmless (and shall also advance expenses
as incurred to the fullest extent permitted under applicable law to) each
person who is now or has been prior to the date hereof or who becomes prior to
the Effective Time an officer or director of the Company or any of the
Company's subsidiaries (the "Indemnified Persons") against (i) all losses,
claims, damages, costs, expenses (including, without limitation, counsel fees
and expenses), settlement, payments or liabilities arising out of or in
connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact
that such person is or was an officer or director of the Company or any of it
subsidiaries, whether or not pertaining to any matter existing or occurring at
or prior to the Effective Time and whether or not asserted or claimed prior to
or at or after the Effective Time ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on or arising in whole or in
part out of or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the fullest extent required or permitted under
applicable law. The parties hereto intend, to the extent not prohibited by
applicable law, that the indemnification provided for in this Section 4.12
shall apply without limitation to negligent acts or omissions by an
Indemnified Person. Parent hereby guarantees the payment and performance of
the Surviving Corporation's obligations in this Section 4.12. Each Indemnified
Person is intended to be a third party beneficiary of this Section 4.12 and
may specifically enforce its terms. This Section 4.12 shall not limit or
otherwise adversely affect any rights any Indemnified Person may have under
any agreement with the Company or under the Company's Certificate of
Incorporation or bylaws as presently in effect.
SECTION 4.13. Notification of Certain Matters. The Company shall give prompt
notice to Parent and Acquisition and Parent and Acquisition, shall give prompt
notice to the Company, of (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Company, Parent or Acquisition, as the case may
be, to comply with or satisfy any covenant condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 4.13 shall not cure such
breach or non-compliance or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 4.14. Affiliates; Pooling; Tax-Free Reorganization.
(a) The Company shall use all reasonable efforts to obtain from any Company
Affiliate who has not previously executed such letter agreement and from any
person who may be deemed to have become a Company Affiliate after the date of
this Agreement and on or prior to the Effective Time a letter agreement
substantially in the form of Exhibit A hereto as soon as practicable.
(b) Parent shall not be required to maintain the effectiveness of the S-4
for the purpose of resale of shares of Parent Common Stock by stockholders of
the Company who may be affiliates of the Company or Parent pursuant to Rule
145 under the Securities Act.
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(c) Each party hereto shall use all reasonable efforts to cause the Merger
to be treated for financial accounting purposes as a Pooling Transaction and
shall not take and shall use all reasonable efforts to prevent any affiliate
of such party from taking any actions which could prevent the Merger from
being treated for financial accounting purposes as a Pooling Transaction.
(d) The Company, on the one hand, and Parent and Acquisition, on the other
hand, shall execute and deliver to legal counsel to the Company and Parent
certificates substantially in the form attached hereto as Exhibits B-1 and B-
2, respectively, at such time or times as reasonably requested by such legal
counsel in connection with its delivery of an opinion with respect to the
transactions contemplated hereby and the Company and Parent shall each provide
a copy thereof to the other parties hereto. Prior to the Effective Time, none
of the Company, Parent or Acquisition shall take or cause to be taken any
action which would cause to be untrue (or fail to take or cause not to be
taken any action which would cause to be untrue) any of the representations in
Exhibits B-1 or B-2.
SECTION 4.15. Additions to and Modification of Company Disclosure
Schedule. Concurrently with the execution and delivery of this Agreement, the
Company has delivered a Company Disclosure Schedule that includes all of the
information required by the relevant provisions of this Agreement that is
reasonably available to the senior management of the Company at the time of
such delivery. Any failure of the Company to disclose any information required
by the relevant provisions of this Agreement in any section of the Company
Disclosure Schedule shall not constitute a breach of the applicable
representation or warranty, provided (i) that the information so omitted does
not have or reflect a Material Adverse Effect on the Company and (ii) that the
Company shall deliver to Parent and Acquisition such additions to or
modifications of any sections of the Company Disclosure Schedule necessary to
make the information set forth therein true, accurate and complete not later
than 5 days after the date of execution and delivery of this Agreement.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby shall
have been either filed or received; and
(d) the 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 and
Parent shall have received all state securities laws or "blue sky" permits and
authorizations necessary to issue shares of Parent Common Stock in exchange
for Shares in the Merger.
SECTION 5.2. Conditions to the Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction at or prior to
the Effective Time of the following conditions:
(a) the representations of Parent and Acquisition contained in this
Agreement or in any other document delivered pursuant hereto shall be true and
correct (except to the extent that the breach thereof would not have a
Material Adverse Effect on Parent) at and as of the Effective Time with the
same effect as if made at and as of
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the Effective Time (except to the extent such representations specifically
related to an earlier date, in which case such representations shall be true
and correct as of such earlier date) and, at the Closing, Parent and
Acquisition shall have delivered to the Company a certificate to that effect;
(b) each of the covenants and obligations of Parent and Acquisition to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, Parent and Acquisition shall have
delivered to the Company a certificate to that effect;
(c) the shares of Parent Common Stock issuable to the Company stockholders
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Merger shall have been authorized for listing
on the NYSE upon official notice of issuance;
(d) the Company shall have received the opinion of tax counsel to the
Company to the effect that (i) the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code; (ii) each of Parent, Acquisition and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; and (iii) no
gain or loss for Federal income tax purposes will be recognized by a
stockholder of the Company as a result of the Merger with respect to Shares
converted solely into shares of Parent Common Stock, and such opinion shall
not have been withdrawn or modified in any material respect, substantially in
the form of Exhibit C;
(e) the Company shall have received the opinion of legal counsel to Parent
as to the matters set forth in Exhibit D;
(f) Parent shall have obtained the consent or approval of each person whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement or instrument, except those for which
failure to obtain such consents and approvals would not, in the reasonable
opinion of the Company, individually or in the aggregate, have a Material
Adverse Effect on Parent; and
(g) there shall have been no events, changes or effects with respect to
Parent or its subsidiaries having or which could reasonably be expected to
have a Material Adverse Effect on Parent.
SECTION 5.3. Conditions to the Obligations of Parent and Acquisition. The
respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations of the Company contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct (except to
the extent that the breach thereof would not have a Material Adverse Effect on
the Company) at and as of the Effective Time with the same effect as if made
at and as of the Effective Time (except to the extent such representations
specifically related to an earlier date, in which case such representations
shall be true and correct as of such earlier date) and, at the Closing, the
Company shall have delivered to Parent and Acquisition a certificate to that
effect;
(b) each of the covenants and obligations of the Company to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the Effective
Time and, at the Closing, the Company shall have delivered to Parent and
Acquisition a certificate to that effect;
(c) Parent shall have received from each affiliate of the Company referred
to in Sections 2.19 and 4.14(a) an executed copy of the letter attached hereto
as Exhibit A;
(d) the shares of Parent Common Stock issuable to the Company stockholders
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Merger shall have been authorized for listing
on the NYSE upon official notice of issuance;
A-30
(e) Parent shall have received the opinion of tax counsel to Parent to the
effect that (i) the Merger will be treated for Federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code and (ii)
each of Parent, Acquisition and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, and such
opinion shall not have been withdrawn or modified in any material respect,
substantially in the form of Exhibit E;
(f) Parent shall have received the opinion of legal counsel to the Company
as to the matters set forth in Exhibit F;
(g) Parent shall have received the opinion of its certified public
accountants stating that the Merger will be accounted for under generally
accepted accounting principles as a Pooling Transaction, and such opinion
shall not have been withdrawn or modified in any material respect;
(h) the Company shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the succession
by the Surviving Corporation pursuant to the Merger to any obligation right or
interest of the Company or any subsidiary of the Company under any loan or
credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except for those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of Parent, individually or in
the aggregate, have a Material Adverse Effect on the Company; and
(i) there shall have been no events, changes or effects with respect to the
Company or its subsidiaries having or which could reasonably be expected to
have a Material Adverse Effect on the Company.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
SECTION 6.1. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time whether before or
after approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) any court of competent
jurisdiction in the United States or other United States Governmental Entity
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by September 30, 1997; provided that
no party may terminate this Agreement pursuant to this clause (ii) if such
party's failure to fulfill any of its obligations under this Agreement shall
have been the reason that the Effective Time shall not have occurred on or
before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement or if any representation or warranty of Parent or Acquisition
shall have become untrue, and such breach shall not have been cured or such
representation or warranty shall not have been made true within twenty
business days after notice by Company thereof, provided that the Company has
not breached any of its obligations hereunder; (ii) there shall have been a
breach by Parent or Acquisition of any of their respective covenants or
agreements hereunder having a Material Adverse Effect on Parent or materially
adversely affecting (or materially delaying) the consummation of the Merger,
and Parent or Acquisition, as the case may be, has not cured such breach
within twenty business days after notice by the Company thereof, provided that
the Company has not breached any of its obligations hereunder; (iii) the
Company shall have convened a meeting of its shareholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its shareholders
at such meeting (including any adjournments thereof) or (iv) the Company Board
has received a Superior Proposal, has complied with the provisions of Section
4.4(b), and concurrently complies with the provisions of Section 6.3(a); or
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(d) by Parent and Acquisition if (i) there shall have been a breach of any
representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Company shall have
become untrue, and such breach shall not have been cured or such
representation or warranty shall not have been made true within twenty
business days after notice by Parent or Acquisition thereof, provided that
neither Parent nor Acquisition has breached any of their respective
obligations hereunder; (ii) there shall have been a breach by the Company of
its covenants or agreements hereunder having a Material Adverse Effect on the
Company or materially adversely affecting (or materially delaying) the
consummation of the Merger, and the Company has not cured such breach within
twenty business days after notice by Parent or Acquisition thereof, provided
that neither Parent nor Acquisition has breached any of their respective
obligations hereunder; (iii) the Company Board shall have recommended to the
Company's stockholders a Superior Proposal; (iv) the Company Board shall have
withdrawn or materially weakened its recommendation of this Agreement or the
Merger, provided that any disclosure that the Company Board is compelled to
make with respect to the receipt of a proposal for a Third Party Acquisition
in order to comply with its fiduciary duties or Rule 14d-9 or 14e-2 shall not
constitute the withdrawal or material weakening of the Company Board's
recommendation, provided, further, that such disclosure states that no action
will be taken by the Company Board with respect to the withdrawal of its
recommendation of the transactions contemplated hereby or the approval or
recommendation of any Third Party Acquisition except in accordance with
Section 4.4(b) or (v) the Company shall have convened a meeting of its
stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders at such meeting (including any adjournments
thereof).
SECTION 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and have no effect without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders other
than the provisions of this Section 6.2 and Sections 4.8(c) and 6.3 hereof.
Nothing contained in this Section 6.2 shall relieve any party from liability
for any breach of this Agreement.
SECTION 6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Section 6.1(d)(iii) or Section 6.1(c)(iv);
(ii) Sections 6.1(d)(i) or (ii) and within twelve months thereafter the
Company enters into an agreement with respect to a Third Party Acquisition
or a Third Party Acquisition occurs involving any party (or any affiliate
thereof) (x) with whom the Company (or its agents) had negotiations with a
view to a Third Party Acquisition, (y) to whom the Company (or its agents)
furnished information with a view to a Third Party Acquisition or (z) who
had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z), after the
date hereof and prior to such termination;
(iii) Section 6.1(c)(iii) or 6.1(d)(v) and at the time of the Company
stockholders' meeting at which the Company failed to obtain the requisite
vote there shall be outstanding an offer by a Third Party to consummate a
Third Party Acquisition involving the payment of consideration to
stockholders of the Company with a value in excess of the Merger
Consideration and within twelve months thereafter the Company enters into
an agreement with respect to such Third Party Acquisition or such Third
Party Acquisition occurs; or
(iv) Section 6.1(d)(iv) and the Company Board shall have withdrawn or
materially weakened its recommendation following the receipt of an offer by
a Third Party to consummate a Third Party Acquisition involving the payment
of consideration to stockholders of the Company with a value in excess of
the Merger Consideration.
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent
and Acquisition for such damages the Company shall pay to Parent the amount of
$22.5 million as liquidated damages immediately upon the occurrence of the
event described in this Section 6.3(a) giving rise to such damages. It is
specifically agreed that the amount to be paid pursuant to this Section 6.3(a)
represents liquidated damages and not a penalty.
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(b) Upon the termination of this Agreement pursuant to Sections 6.1(c)(iii)
or 6.1(d)(i), (ii) or (v) (other than a termination requiring the Company to
pay liquidated damages as contemplated by Section 6.3(a) hereof), in addition
to any other remedies that Parent, Acquisition or their affiliates may have as
a result of such termination, the Company shall reimburse Parent, Acquisition
and their affiliates (not later than ten business days after submission of
statements therefor) for all actual, documented out-of-pocket fees and
expenses not to exceed $3 million actually and reasonably incurred by any of
them or on their behalf in connection with the Merger and the consummation of
all transactions contemplated by this Agreement (including, without
limitation, fees payable to investment bankers counsel to any of the foregoing
and accountants). Notwithstanding the foregoing, if this Agreement is
terminated pursuant to Section 6.1(d)(i) and the sole basis for such
termination is that the representation and warranty contained in the last
sentence of Section 2.8 shall have become untrue as the result of the effect
on the transactions contemplated hereby of an organizational conflict of
interest provision contained in any Government Contract of the Company, the
Company shall not be obligated, by this Section 6.3(b) or otherwise, to
reimburse Parent and Acquisition and their affiliates for any fees or expenses
incurred in connection with the Merger or the consummation of the transactions
contemplated by this Agreement.
(c) Upon the termination of this Agreement pursuant to Sections 6.1(c)(i) or
(ii), in addition to any other remedies that the Company or its affiliates may
have as a result of such termination, Parent shall reimburse the Company and
its affiliates (not later than ten business days after submission of
statements therefor) for all actual, documented out-of-pocket fees and
expenses not to exceed $3 million actually and reasonably incurred by any of
them or on their behalf in connection with the Merger and the consummation of
all transactions contemplated by this Agreement (including, without
limitation, fees payable to investment bankers, counsel to any of the
foregoing and accountants).
(d) Except as specifically provided in this Section 6.3, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 6.4. Amendment. This Agreement may be amended by action taken by the
Company, Parent and Acquisition at any time before or after approval of the
Merger by the stockholders of the Company but after any such approval no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement (including, subject to
Section 4.15, the Company Disclosure Schedule) may be amended only by an
instrument in writing signed on behalf of the parties hereto.
SECTION 6.5. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in
any document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension 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 hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
SECTION 7.2. Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule) (a) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings both written and oral between the
parties with respect to the subject matter hereof and (b) shall not be
assigned by operation of law or otherwise; provided,
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however, that Acquisition may assign any or all of its rights and obligations
under this Agreement to any subsidiary of Parent, but no such assignment shall
relieve Acquisition of its obligations hereunder if such assignee does not
perform such obligations.
SECTION 7.3. Validity. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby and to such end the
provisions of this Agreement are agreed to be severable.
SECTION 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to each other party as follows:
if to Parent or Acquisition: NORTHROP CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
if to the Company to: Logicon, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: E. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr., Esq.
with a copy to: O'Melveny & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 7.5. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to the
principles of conflicts of law thereof.
SECTION 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
SECTION 7.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as provided in Sections 4.12 and 7.2, nothing in
this Agreement express or implied is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 7.8. Certain Definitions. For the purposes of this Agreement the
term:
(a) "affiliate" means (except as otherwise provided in Sections 2.19 and
4.14) a person that, directly or indirectly, through one or more intermediaries
controls, is controlled by or is under common control with the first-mentioned
person;
A-34
(b) "business day" means any day other than a day on which the NYSE is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge" or "known" means, with respect to any matter in question,
the actual knowledge of such matter of any executive officer of the Company or
Parent, as the case may be;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other
legal entity of which the Company, Parent, the Surviving Corporation or any
such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
SECTION 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
SECTION 7.10. Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if a party
hereto is entitled to receive any payment or reimbursement of expenses
pursuant to Sections 6.3(a), (b) or (c) it shall not be entitled to specific
performance to compel the consummation of the Merger.
SECTION 7.11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.
NORTHROP GRUMMAN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
___________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Corporate Vice President and
Treasurer
LOGICON, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
___________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
NG ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
___________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
▇-▇▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF LETTER AGREEMENT WITH COMPANY AFFILIATES
May 4, 1997
Northrop Grumman Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Reference is made to the provisions of the Agreement and Plan of Merger,
dated as of May 4, 1997 (together with any amendments thereto, the "Merger
Agreement"), among Logicon, Inc., a Delaware corporation (the "Company"),
Northrop Grumman Corporation, a Delaware corporation ("Parent"), and NG
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Acquisition"), pursuant to which Acquisition will be merged with and
into the Company, with the Company continuing as the surviving corporation
(the "Merger"). This letter constitutes the undertakings of the undersigned
contemplated by the Merger Agreement.
I understand that I may be deemed to be an "affiliate" of the Company, as
such term is defined for purposes of Rule 145 ("Rule 145") promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and that the
transferability of the shares of common stock, par value $1.00 per share, of
Parent (including the associated common stock purchase rights, the "Parent
Common Stock") which I will receive upon the consummation of the Merger in
exchange for my shares of common stock, par value $.01 per share, of the
Company (including the associated common stock purchase rights, the "Shares"),
or upon exercise of certain options I hold to purchase Shares, is restricted.
Nothing herein shall be construed as an admission that I am an affiliate.
I hereby represent, warrant and covenant to Parent that:
(a) I will not transfer, sell or otherwise dispose of any of the shares
of Parent Common Stock except (i) pursuant to an effective registration
statement under the Securities Act, or (ii) as permitted by, and in
accordance with, Rule 145, if applicable, or another applicable exemption
under the Securities Act; and
(b) I will not (i) transfer, sell or otherwise dispose of any Shares
prior to the Effective Time (as defined in the Merger Agreement) or (ii)
sell or otherwise reduce my risk (within the meaning of the Securities and
Exchange Commission's Financial Reporting Release No. L, "Codification of
Financial Reporting Policies," Section 201.01 [47 F.R. 210281] (May 17,
1982)) with respect to any shares of Parent Common Stock until after such
time (the "Delivery Time") as financial results reflecting at least 30 days
of post-merger combined operations of Parent and the Company have been
published by Parent, except as permitted by Staff Accounting Bulletin No.
76 issued by the Securities and Exchange Commission; and
(c) I shall execute and deliver to ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP and
O'Melveny & ▇▇▇▇▇, counsel to Parent and the Company, respectively, a
certificate in such form as and at such time or times as may be reasonably
requested by such law firms, as the case may be, in connection with such
law firms' delivery of their tax opinions with respect to the transactions
contemplated by the Merger Agreement; and
(d) I have not taken and will not take or agree to take any action that
would prevent the Merger from qualifying, or being accounted for, as a
pooling-of-interests.
I further understand that, in order to make more effective the provisions of
the foregoing paragraph, Parent may delay delivery to me of certificates in
respect of the shares of Parent Common Stock until the Delivery Time.
I hereby acknowledge that except as otherwise provided in the Merger
Agreement, Parent is under no obligation to register the sale, transfer,
pledge or other disposition of the shares of Parent Common or to take any
other action necessary for the purpose of making an exemption from
registration available.
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I understand that Parent will issue stop transfer instructions to its
transfer agents with respect to the shares of Parent Common Stock and that a
restrictive legend will be placed on the certificates delivered to me
evidencing the shares of Parent Common Stock in substantially the following
form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), and
may not be sold or otherwise disposed of unless registered under the
Securities Act pursuant to a Registration Statement in effect at the time
or unless the proposed sale or disposition can be made in compliance with
Rule 145 or without registration in reliance on another exemption
therefrom. Reference is made to that certain letter agreement dated May 4,
1997 between the Holder and the Issuer, a copy of which is on file in the
principal office of the Issuer which contains further restrictions on the
transferability of this certificate and the shares represented hereby."
Parent agrees to cause this legend to be removed from the certificates
delivered to me evidencing the shares of Parent Common Stock promptly after
the restrictions on transferability of the shares of Parent Common Stock are
no longer applicable and after I surrender such certificates to the transfer
agent with a request for such removal.
The term Parent Common Stock as used in this letter shall mean and include
not only the common stock of Parent as presently constituted, but also any
other stock which may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Parent Common Stock.
I hereby acknowledge that the receipt of this letter by Parent is an
inducement and a condition to Parent's obligation to consummate the Merger
under the Merger Agreement and that I understand the requirements of this
letter and the limitations imposed upon the transfer, sale or other
disposition of the Shares and the shares of Parent Common Stock.
Very truly yours,
[AFFILIATE]
ACKNOWLEDGED AND ACCEPTED:
NORTHROP GRUMMAN CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
▇-▇▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF LETTER AGREEMENT WITH PARENT AFFILIATES
May 4, 1997
Northrop Grumman Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
Reference is made to the provisions of the Agreement and Plan of Merger,
dated as of May 4, 1997 (together with any amendments thereto, the "Merger
Agreement"), among Logicon, Inc., a Delaware corporation (the "Company"),
Northrop Grumman Corporation, a Delaware corporation ("Parent"), and NG
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Acquisition"), pursuant to which Acquisition will be merged with and
into the Company, with the Company continuing as the surviving corporation
(the "Merger"). This letter constitutes the undertakings of the undersigned
contemplated by the Merger Agreement.
I hereby represent, warrant and covenant to Parent that:
(a) I will not sell or otherwise reduce my risk (within the meaning of
the Securities and Exchange Commission's Financial Reporting Release No. L,
"Codification of Financial Reporting Policies," Section 201.01 [47 F.R.
210281] (May 17, 1982)) with respect to any shares of common stock, par
value $1.00 per share, of Parent ("Parent Common Stock") owned by me until
after such time (the "Delivery Time") as financial results reflecting at
least 30 days of post-merger combined operations of Parent and the Company
have been published by Parent, except as permitted by Staff Accounting
Bulletin No. 76 issued by the Securities and Exchange Commission; and
(b) I have not taken and will not take or agree to take any action that
would prevent the Merger from qualifying, or being accounted for, as a
pooling-of-interests.
I further understand that Parent shall not be bound by any attempted sale of
any Parent Common Stock, and will issue stop transfer instructions to its
transfer agents with respect to the shares of Parent Common Stock.
The term Parent Common Stock as used in this letter shall mean and include
not only the common stock of Parent as presently constituted, but also any
other stock which may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Parent Common Stock.
I hereby acknowledge that the receipt of this letter by Parent is an
inducement and a condition to Parent's obligation to consummate the Merger
under the Merger Agreement and that I understand the requirements of this
letter and the limitations imposed upon the transfer, sale or other
disposition of the shares of Parent Common Stock.
Very truly yours,
[AFFILIATE]
ACKNOWLEDGED AND ACCEPTED:
NORTHROP GRUMMAN CORPORATION
By: ___________________________________
Name: _________________________________
Title: ________________________________
▇-▇▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF REPRESENTATIONS RELATING TO TAX MATTERS OF THE COMPANY
1. As of the Effective Time, the Company will hold at least ninety percent
(90%) of the fair market value of the net assets and at least seventy percent
(70%) of the fair market value of the gross assets held by it immediately
prior to the Merger. For the purpose of determining the percentage of the
Company's net and gross assets held immediately prior to the Merger, the
following assets will be treated as property immediately prior to the Merger:
(i) assets used by the Company to pay stockholders perfecting dissenters'
rights or other expenses or liabilities incurred in connection with the Merger
and (ii) assets used to make distributions, redemptions or other payments in
respect of stock of the Company (except for regular, normal distributions) or
in respect of rights to acquire such stock (including payments treated as such
for tax purposes) that are made in contemplation of the Merger or that are
related thereto;
2. Other than in the ordinary course of business or pursuant to its
obligations under the Agreement, the Company has not disposed of any of its
assets (including any distribution of assets with respect to, or in redemption
of, stock) since January 1, 1997;
3. The Company's principal reasons for participating in the Merger are bona
fide business purposes unrelated to taxes;
4. In the Merger, Shares representing "Control" of the Company will be
exchanged solely for voting stock of Parent. For purposes of this paragraph,
Shares exchanged in the Merger for cash and other property (including, without
limitation, cash paid to stockholders of the Company perfecting dissenters'
rights or in lieu of fractional shares of Parent Common Stock) will be treated
as outstanding Shares on the date of the Merger but not exchanged for shares
of Parent Common Stock. As used herein, "Control" shall consist of direct
ownership of shares of stock possessing at least eighty percent (80%) of the
total combined voting power of shares of all classes of stock entitled to vote
and at least eighty percent (80%) of the total number of shares of all other
classes of stock of the corporation. For purposes of determining Control, a
person shall not be considered to own shares of voting stock if rights to vote
such shares (or to restrict or otherwise control the voting of such shares)
are held by a third party (including a voting trust) other than an agent of
such person;
5. The Company has no outstanding warrants, options, convertible securities
or any other type of right to acquire capital stock of the Company (or any
other equity interest in the Company) or to vote (or restrict or otherwise
control the vote of) shares of the Company's capital stock which, if
exercised, would affect Parent's acquisition and retention of Control of the
Company;
6. The payment of cash in lieu of fractional shares of Parent Common Stock
is solely for the purpose of avoiding the expense and inconvenience to Parent
of issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger to
the Company stockholders in lieu of fractional shares of Parent Common Stock
will not exceed one percent (1%) of the total consideration that will be
issued in the Merger to the Company stockholders in exchange for their Shares;
7. The Company has no plan or intention to issue additional shares of
capital stock after the Merger, or take any other action, that would result in
Parent losing Control of the Company;
8. The Company has no plan or intention to sell or otherwise dispose of any
of its assets or of any of the assets acquired from Acquisition in the Merger
except for dispositions made in the ordinary course of business or payment of
expenses, including payments to stockholders of the Company perfecting
dissenters' rights, incurred by the Company pursuant to the Merger and except
for transfers of its assets or assets of Acquisition to a corporation
controlled by the Company;
9. The fair market value of the Company's assets will, at the Effective Time
of the Merger, exceed the aggregate liabilities of the Company plus the amount
of liabilities, if any, to which such assets are subject;
A-39
10. The fair market value of the shares of Parent Common Stock received by
each stockholder of the Company will be approximately equal to the fair market
value of the Shares surrendered in exchange therefor and the aggregate
consideration received by stockholders of the Company in exchange for their
Shares will be approximately equal to the fair market value of all of the
outstanding Shares immediately prior to the Merger;
11. The Company is not an "investment company" within the meaning of
Sections 368(a)(2)(F)(iii) and (iv) of the Code;
12. The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code;
13. There is no plan or intention ("Plan") on the part of the stockholders
of the Company who own five percent (5%) or more of the Shares, and to the
best knowledge of the management of the Company, there is no Plan on the part
of the remaining stockholders of the Company to engage in a sale, exchange,
transfer, distribution (including, without limitation, a distribution by a
partnership to its partners or by a corporation to its stockholders), pledge,
disposition or any other transaction which results in a reduction in the risk
of ownership or a direct or indirect disposition (a "Sale") of shares of
Parent Common Stock received in the Merger that would reduce ownership by the
Company stockholders of Parent Common Stock to a number of shares having a
value as of the Effective Time of the Merger of less than fifty percent (50%)
of the aggregate fair market value, immediately prior to the Merger, of all
outstanding Shares. For purposes of this paragraph, Shares (i) with respect to
which a stockholder of the Company receives consideration in the Merger other
than shares of Parent Common Stock (including, without limitation, cash
received pursuant to the exercise of dissenters' rights or in lieu of
fractional shares of Parent Common Stock) and/or (ii) with respect to which a
Sale occurs prior to and in contemplation of the Merger, shall be considered
outstanding Shares exchanged for shares of Parent Common Stock in the Merger
and then disposed of pursuant to a Plan;
14. There is no intercorporate indebtedness existing between Parent and the
Company or between Acquisition and the Company that was issued, acquired, or
will be settled at a discount as a result of the Merger;
15. None of the compensation received by any shareholder-employees of the
Company will be separate consideration for, or allocable to, any of Shares
owned by them; none of the shares of Parent Common Stock received by any
shareholder-employees of the Company will be separate consideration for, or
allocable to, any employment agreement or any covenants not to compete; and
the compensation paid to any shareholder-employees of the Company will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's length for similar services;
16. To the best knowledge of the Company, during the past five (5) years,
none of the outstanding shares of its capital stock of, including the right to
acquire or vote any such shares, have directly or indirectly been owned by
Parent;
17. Up to and including the Effective Time, the Company has taken no action
that would cause the merger to fail to qualify as a "reorganization" within
the meaning of Sections (a)(1)(A) and (a)(2)(E) of the Code.
▇-▇▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF REPRESENTATIONS RELATING TO TAX MATTERS OF PARENT AND ACQUISITION
1. Pursuant to the Merger, Acquisition will merge with and into the Company,
and the Company will acquire all of the assets and liabilities of Acquisition.
Specifically, the assets transferred to the Company pursuant to the Merger
will represent at least ninety percent (90%) of the fair market value of the
net assets and at least seventy percent (70%) of the fair market value of the
gross assets held by Acquisition immediately prior to the Merger. In addition,
at least ninety percent (90%) of the fair market value of the net assets and
at least seventy percent (70%) of the fair market value of the gross assets
held by the Company immediately prior to the Merger will continue to be held
by the Company immediately after the Merger. For the purpose of determining
the percentage of the Company's and Acquisition's net and gross assets held by
the Company immediately following the Merger, the following assets will be
treated as property held by Acquisition or the Company, as the case may be,
immediately prior but not subsequent to the Merger: (i) assets used by the
Company or Acquisition (other than assets transferred from Parent to
Acquisition for such purpose) to pay stockholders perfecting dissenters'
rights or other expenses or liabilities incurred in connection with the Merger
and (ii) assets used to make distributions, redemptions or other payments in
respect of stock of the Company (except for regular, normal distributions) or
in respect of rights to acquire such stock (including payments treated as such
for tax purposes) that are made in contemplation of the Merger or that are
related thereto;
2. Acquisition was formed solely for the purpose of consummating the
transactions contemplated by the Agreement and at no time will Acquisition
conduct any business activities or other operations, or dispose of any of its
assets, other than pursuant to its obligations under the Agreement;
3. Parent's principal reasons for participating in the Merger are bona fide
business purposes not related to taxes;
4. No shares of Acquisition (or, following the Effective Time, the Company)
have been or will be used as consideration or issued to stockholders of the
Company pursuant to the Merger;
5. Prior to and at the Effective Time, Parent will be in "Control" of
Acquisition. As used herein, "Control" shall consist of direct ownership of
shares of stock possessing at least eighty percent (80%) of the total combined
voting power of all classes of stock entitled to vote and at least eighty
percent (80%) of the total number of shares of all other classes of stock of
the corporation. For purposes of determining Control, a person shall not be
considered to own shares of voting stock if rights to vote such shares (or to
restrict or otherwise control the voting of such shares) are held by a third
party (including a voting trust) other than an agent of such person;
6. In the Merger, Shares representing Control of the Company will be
exchanged solely for shares of voting stock of Parent. For purposes of this
paragraph, Shares exchanged in the Merger for cash and other property
(including, without limitation, cash paid to shareholders of the Company
perfecting dissenters' rights or in lieu of fractional shares of Parent Common
Stock) will be treated as Shares outstanding on the date of the Merger but not
exchanged for shares of voting stock of Parent. Parent has no plan or
intention to cause the Company to issue additional Shares after the Merger, or
take any other action, that would result in Parent losing Control of the
Company;
7. The payment of cash in lieu of fractional shares of Parent Common Stock
is solely for the purpose of avoiding the expense and inconvenience to Parent
of issuing fractional shares and does not represent separately bargained for
consideration. The total cash consideration that will be paid in the Merger to
the Company stockholders in lieu of fractional shares of Parent Common Stock
will not exceed one percent (1%) of the total consideration that will be
issued in the Merger to the Company stockholders in exchange for their Shares;
8. Parent has no plan or intention to reacquire any of its stock issued
pursuant to the Merger;
A-41
9. Parent has no plan or intention to liquidate the Company; to merge the
Company with or into another corporation; to sell, distribute or otherwise
dispose of the stock of the Company, including by means of a spinoff; to spin-
off any other Subsidiary of Parent; or to cause the Company to sell or
otherwise dispose of any of its assets, including by means of a spin-off, or
of any assets acquired from Acquisition, except for dispositions made in the
ordinary course of business or payment of expenses, including payments to
stockholders of the Company perfecting dissenters' rights, incurred by the
Company pursuant to the Merger and except for transfers of stock of the
Company to a corporation controlled by Parent or of assets of the Company or
Acquisition to a corporation controlled by the Company;
10. In the Merger, Acquisition will have no liabilities assumed by the
Company and will not transfer to the Company any assets subject to
liabilities, except to the extent incurred in connection with the transactions
contemplated by the Agreement;
11. During the past five (5) years, none of the outstanding shares of
Company capital stock, including the right to acquire or vote any such shares,
have directly or indirectly been owned by Parent;
12. Neither Parent nor Acquisition is an "investment company" within the
meaning of Sections 368(a)(2)(F)(iii) and (iv) of the Code;
13. Neither Parent nor Acquisition is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code;
14. The liabilities of Acquisition assumed by the Company and the
liabilities to which the transferred assets of Acquisition are subject were
incurred by Acquisition in the ordinary course of its business;
15. The fair market value of the Parent Common Stock received by each
stockholder of the Company will be approximately equal to the fair market
value of the Shares surrendered in exchange therefor, and the aggregate
consideration received by stockholders of the Company in exchange for their
Shares will be approximately equal to the fair market value of all of the
outstanding Shares immediately prior to the Merger;
16. Acquisition, Parent, the Company and the stockholders of the Company
will each pay separately its or their own expenses relating to the Merger;
17. There is no intercorporate indebtedness existing between Parent and the
Company or between Acquisition and the Company that was issued, acquired or
will be settled at a discount as a result of the Merger;
18. Any amounts paid with respect to dissenting Shares of the Company will
be paid by the Company solely from the Company's pre-Merger assets and without
reimbursement therefor by Parent or Acquisition;
19. Other than as specifically provided in this Agreement, Parent will not
reimburse any stockholder of the Company for the Company's capital stock such
stockholder may have purchased or for other obligations such stockholder may
have incurred;
20. Parent and Acquisition shall (and, following the Effective Time, Parent
shall cause the Company to) take no action with respect to the capital stock,
assets or liabilities of the Company that would cause the Merger to fail to
qualify as a "reorganization" within the meaning of Sections 368(a)(1)(A) and
(a)(2)(E) of the Code. Without limitation on the foregoing, following the
Effective Time, Parent shall cause the Company to either continue the historic
business of the Company or use a significant portion the Company's historic
business assets in a business.
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EXHIBIT C
MATTERS TO BE COVERED BY OPINION OF TAX COUNSEL TO THE COMPANY
(i) The Merger will constitute a reorganization within the meaning of
section 368(a) of the Code, and Parent, the Company and Acquisition will each
be a party to the reorganization within the meaning of section 368(b) of the
Code;
(ii) No gain or loss will be recognized by the holders of Shares upon the
receipt of shares of Parent Common Stock in exchange for such Shares, except
that a stockholder who receives cash in lieu of a fractional share interest in
Parent Common Stock will recognize gain or loss equal to the difference
between such cash and the basis allocated to the fractional share interest;
(iii) The basis of the shares of Parent Common Stock received by a holder of
Shares (including any fractional share interest treated as received) will be
the same as the basis of the shares of Shares exchanged therefor; and
(iv) The holding period of the shares of Parent Common Stock received by a
holder of Company Shares (including any fractional share interest treated as
received) will include the holding period of the shares of Shares exchanged
therefor, provided the Shares were held as a capital asset at the Effective
Time.
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EXHIBIT D
MATTERS TO BE COVERED BY OPINION OF LEGAL COUNSEL TO THE COMPANY
(i) The execution and delivery of the Agreement by the Company and the
consummation of the transactions contemplated thereby have been duly and
validly authorized by the Company Board and the holders of a majority of the
outstanding Shares and no other corporate proceedings on the part of the
Company are necessary to authorize the Agreement or to consummate the
transactions contemplated thereby;
(ii) The Company has all requisite corporate power and authority to execute
and deliver the Agreement and to consummate the transactions contemplated
thereby;
(iii) The Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms;
(iv) Neither the execution, delivery and performance of the Agreement by the
Company nor the consummation by the Company of the transactions contemplated
thereby will (a) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or bylaws (or similar governing
documents) of the Company or any of its subsidiaries, (b) result in a
violation or breach of or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound, except for such matters as would not have a
Material Adverse Effect on the Company or (c) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company
or any of its subsidiaries or any of their respective properties or assets;
(v) No filing with or notice to and no permit, authorization, consent or
approval of any Governmental Entity is necessary for the execution and
delivery by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby, except (a) for such filings,
notifications, permits, authorizations, consent or approvals as have already
been made, given or obtained, (b) for filing of the Merger Certificate in
accordance with the DGCL and (c) where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Material Adverse Effect on the Company.
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EXHIBIT E
MATTERS TO BE COVERED BY OPINION OF TAX COUNSEL TO PARENT
(i) The Merger will constitute a reorganization within the meaning of
section 368(a) of the Code, and Parent, the Company and Acquisition will each
be a party to the reorganization within the meaning of section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Acquisition upon the transfer of
its assets to the Company pursuant to the Merger;
(iii) No gain or loss will be recognized by Parent upon the issuance of
Parent Common Stock pursuant to the Merger.
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EXHIBIT F
MATTERS TO BE COVERED BY LEGAL COUNSEL TO PARENT AND ACQUISITION
(i) The execution and delivery of the Agreement by each of Parent and
Acquisition and the consummation of the transactions contemplated thereby have
been duly and validly authorized by the boards of directors of Parent and
Acquisition and by Parent as the sole stockholder of Acquisition and no other
corporate proceedings on the part of Parent or Acquisition are necessary to
authorize the Agreement or to consummate the transactions contemplated
thereby;
(ii) Each of Parent and Acquisition has all requisite corporate power and
authority to execute and deliver the Agreement and to consummate the
transactions contemplated thereby;
(iii) The Agreement has been duly and validly executed and delivered by each
of Parent and Acquisition and constitutes a valid and binding agreement of
Parent and Acquisition, enforceable against each of Parent and Acquisition in
accordance with its terms;
(iv) Neither the execution, delivery and performance of the Agreement by
Parent and Acquisition nor the consummation by Parent and Acquisition of the
transactions contemplated thereby will (a) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation or
bylaws (or similar governing documents) of Parent or Acquisition or any of
Parent's other subsidiaries, (b) result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument
or obligation to which Parent or Acquisition or any of Parent's other
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound, except for such matters as would not have a
Material Adverse Effect or (c) violate any order, writ, injunction, decree,
law, statute, rule or regulation applicable to Parent or Acquisition or any of
Parent's other subsidiaries or any of their respective properties or assets;
(v) No filing with or notice to and no permit, authorization, consent or
approval of any Governmental Entity is necessary for the execution and
delivery by Parent and Acquisition of this Agreement or the consummation by
Parent and Acquisition of the transactions contemplated hereby, except (a) for
such filings, notifications, permits, authorizations, consent or approvals as
have already been made, given or obtained, (b) for filing of the Merger
Certificate in accordance with the DGCL and (c) where the failure to obtain
such permits, authorizations, consents or approvals or to make such filings or
give such notice would not have a Material Adverse Effect on Parent.
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