AGREEMENT AND PLAN OF MERGER
dated as of August 26, 1999
by and among
RECOVERY ENGINEERING, INC.,
THE PROCTER AND ▇▇▇▇▇▇ COMPANY
and
▇▇▇▇▇▇▇, INC.
TABLE OF CONTENTS
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Page
ARTICLE I
THE OFFER
SECTION 1.1. The Offer 2
SECTION 1.2. Actions by the Parent and Merger Sub 3
SECTION 1.3. Actions by the Company 3
SECTION 1.4. Directors 5
ARTICLE II
THE MERGER
SECTION 2.1. The Merger 6
SECTION 2.2. Effective Time of the Merger 6
SECTION 2.3. Closing 6
SECTION 2.4. Effects of the Merger 7
SECTION 2.5. Articles of Incorporation and Bylaws 7
SECTION 2.6. Directors 7
SECTION 2.7. Officers 7
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. Conversion of Capital Stock 7
SECTION 3.2. Exchange of Certificates 9
SECTION 3.3. Adjustments to Prevent Dilution 10
SECTION 3.4. Dissenting Shares 11
SECTION 3.5. Merger Without Meeting of Shareholders 11
ARTICLE IV
REPRESENTATIONS AND WARRANTEES OF THE COMPANY
SECTION 4.1. Organization and Qualifications; Subsidiaries 11
SECTION 4.2. Articles of Incorporation and Bylaws 12
SECTION 4.3. Capitalization 12
SECTION 4.4. Authority Relative to This Agreement 14
SECTION 4.5. No Conflict; Required Filings and Consents; Certain Contracts 14
SECTION 4.6. Compliance 15
SECTION 4.7. SEC Reports and Financial Statements 15
SECTION 4.8. Absence of Certain Changes or Events 16
SECTION 4.9. Litigation 16
SECTION 4.10. Information Statement 16
SECTION 4.11. Employee Benefit Plans 17
SECTION 4.12. Labor and Employment Matters 18
SECTION 4.13. Vote Required 18
SECTION 4.14. Opinion of Financial Advisor 19
SECTION 4.15. Brokers 19
SECTION 4.16. Taxes 19
SECTION 4.17. Licenses and Permits 20
SECTION 4.18. Title to Assets 21
SECTION 4.19. Material Contracts 21
SECTION 4.20. Intellectual Property Rights 22
SECTION 4.21. State Takeover Statutes Inapplicable 23
SECTION 4.22. Rights Agreement 23
SECTION 4.23. Year 2000 23
SECTION 4.24. Insurance 24
SECTION 4.25. Environmental Matters 24
ARTICLE V
REPRESENTATIONS AND WARRANTEES OF THE PARENT
AND MERGER SUB
SECTION 5.1. Organization and Qualifications; Subsidiaries 26
SECTION 5.2. Certificate of Incorporation and Bylaws 26
SECTION 5.3. Authority Relative to This Agreement 26
SECTION 5.4. No Conflict 27
SECTION 5.5. Offer Documents 27
SECTION 5.6. Board Approval 27
SECTION 5.7. Vote Required 28
SECTION 5.8. No Arrangements Triggering Section 302A.673 of the MBCA 28
SECTION 5.9. Merger Sub 28
SECTION 5.10. Financing 28
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. Conduct of Business of the Company Pending the Merger 28
ARTICLE VII
ADDITIONAL COVENANTS
SECTION 7.1. Access to Information 31
SECTION 7.2. No Solicitation 31
SECTION 7.3. Directors and Officers Indemnification and Insurance 33
SECTION 7.4. Notification of Certain Matters 35
SECTION 7.5. Restructuring of Merger 35
SECTION 7.6. Company Shareholder Meeting 35
SECTION 7.7. Proxy Statements 35
SECTION 7.8. Further Action, Reasonable Efforts 36
SECTION 7.9. Public Announcements 37
SECTION 7.10. Employee Benefits 37
SECTION 7.11. Confidentiality Agreement 38
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to Each Party's Obligation to Effect the Merger 39
SECTION 8.2. Conditions to Obligations of the Company to Effect the Merger 39
SECTION 8.3. Conditions to Obligations of the Parent and Merger Sub to Effect the Merger 39
ARTICLE IX
TERMINATION WAIVER, AMENDMENT AND CLOSING
SECTION 9.1. Termination 40
SECTION 9.2. Effect of Termination 41
SECTION 9.3. Termination Fee 41
SECTION 9.4. Amendment or Supplement 42
SECTION 9.5. Extension of Time, Waiver, Etc 42
ARTICLE X
MISCELLANEOUS
SECTION 10.1. No Survival of Representations and Warranties 42
SECTION 10.2. Expenses 42
SECTION 10.3. Counterparts 43
SECTION 10.4. Governing Law 43
SECTION 10.5. Notices 43
SECTION 10.6. Miscellaneous 44
SECTION 10.7. Severability 44
SECTION 10.8. Enforcement of Agreement 44
EXHIBIT A - CONDITIONS OF THE OFFER
LIST OF DEFINED TERMS
Section Where Defined
Action Section 7.3
Acquisition Proposal Section 7.2
Agreement Introduction
Ancillary Documents Section 4.4
Articles of Merger Section 2.2
Audit Section 4.16
Benefit Plans Section 4.11
Blue Sky Laws Section 4.5
Board Section 1.3
Board of Directors Section 1.3
Cap Section 4.11
Certificates Section 3.1
Claim Section 7.3
Closing Section 2.3
Closing Date Section 2.3
Code Section 4.11
Company Introduction
Company Benefit Plans Section 4.11
Company Common Stock Section 1.1
Company Disclosure Letter Section 4.3
Company ESPP Section 3.2
Company Material Adverse Effect Section 4.1
Company Meeting Section 6.6
Company Option Plans Section 4.3
Company Performance Component Section 7.10
Company Preferred Stock Section 4.3
Company SEC Reports Section 4.7
Company Shares Trust Section 2.2
Company Stock Options Section 4.3
Confidentiality Agreement Section 7.1
Continuing Directors Section 1.3
Contracts Section 4.5
Convertible Notes Preambles
Covered Person Section 7.3
Current Plan Section 7.10
Derivative Section 4.19
Dissenting Shares Section 3.4
Effective Time Section 2.2
Environmental Costs Section 4.25
Environment Laws Section 4.25
ERISA Section 4.11
Excess Shares Section 2.2
Exchange Act Section 1.1
Exchange Fund Section 3.2
Excluded Options Section 3.1
Fairness Opinion Section 1.3
Financial Advisor Section 1.3
Governmental Entity Section 4.5
Hazardous Substances Section 4.25
HSR Act Section 4.5
Indemnified Party Section 7.3
Information Statement Section 4.10
Intellectual Property Rights Section 4.20
Laws Section 4.5
Liens Section 4.3
Litigation Section 4.9
Losses Section 7.3
Material Contracts Section 4.19
Maximum Premium Section 7.3
MBCA Section 1.3
Merger Section 2.1
Merger Consideration Section 1.1
Merger Filing Section 2.2
Merger Sub Introduction
Minimum Condition Exhibit A
Offer Section 1.1
Offer Documents Section 1.2
Option Agreement Preambles
Options Section 4.3
Parent Introduction
Parent Material Adverse Effect Section 5.1
Parent Plan Section 7.10
Paying Agent Section 3.2
Percentage Section 1.4
Permits Section 4.17
Plan Options Section 4.3
Proxy Statement Section 7.7
REI Barbados Section 4.1
Representatives Section 7.1
Required Company Vote Section 4.13
Rights Section 4.3
Rights Amendment Section 4.22
Rights Agreement Section 1.3
Schedule 14D-9 Section 1.3
SEC Section 1.1
Securities Act Section 4.7
Shareholders Meeting Section 7.6
Stock Purchase Date Section 3.2
Subsidiary Section 4.1
Superior Proposal Section 7.2
Surviving Corporation Section 2.1
Systems Section 4.23
Taxes Section 4.16
Tax Authority Section 4.16
Tax Returns Section 4.16
Tender and Option Agreement Preambles
Termination Fee Section 9.4
Third Party Options Section 4.3
Transactions Section 4.4
Warrant Section 3.3
Year 2000 Compliant Section 4.23
1999 Balance Sheet Section 4.18
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is dated as of August 26, 1999 (this
"Agreement"), by and among The Procter and ▇▇▇▇▇▇ Company, an Ohio corporation
(the "Parent"), Recovery Engineering, Inc., a Minnesota corporation (the
"Company"), and ▇▇▇▇▇▇▇, Inc., a Minnesota corporation and a wholly owned
subsidiary of the Parent ("Merger Sub").
WHEREAS, the Boards of Directors of the Parent and the Company each
have determined that it is in the best interests of their respective companies
and shareholders for the Parent to acquire the Company upon the terms and
subject to the conditions set forth herein;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company has entered into an agreement (the "Option Agreement ")
with the Parent and Merger Sub pursuant to which the Company has granted to
Merger Sub an unconditional, irrevocable option to purchase up to 1,202,875
newly-issued shares of Company Common Stock (defined terms used herein not
previously defined having the meanings as hereinafter defined) of the Company
and the associated Rights, representing 19.9% of the outstanding shares of
Company Common Stock as of the date of this Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, certain shareholders of the Company have entered into an agreement
(the "Tender and Option Agreement") with the Parent and Merger Sub pursuant to
which such shareholders have agreed to take certain actions with respect to the
shares of Company Common Stock now or hereafter beneficially owned by such
shareholders and have granted to the Parent and Merger Sub an unconditional,
irrevocable option to purchase such shares of Company Common Stock on the terms
and conditions set forth therein;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company has entered into consulting, employment and/or non-
compete agreements with Messrs. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; and
WHEREAS, the holders of the $15 million principal amount of 5%
Convertible Notes due 2003 (the "Convertible Notes") of the Company have
consented in writing to the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer.
(a) The Offer. Subject to the provisions of this Agreement and this
Agreement not having been terminated, as promptly as practicable but in no event
later than September 1, 1999, Merger Sub shall, and the Parent shall cause
Merger Sub to, commence, within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), an offer to purchase all of the outstanding
shares of common stock, par value $.01 per share (the "Company Common Stock"),
of the Company, together with the associated Rights, at a price equal to $35.25
per share of Company Common Stock (the "Merger Consideration"), net to the
seller in cash (the "Offer"). Except where the context otherwise requires, all
references herein to the shares of Company Common Stock shall include the
associated Rights. The obligation of Merger Sub to, and of the Parent to cause
Merger Sub to, commence the Offer and to accept for payment, and pay for, any
shares of Company Common Stock tendered pursuant to the Offer shall be subject
to the conditions set forth in Exhibit A and to the other terms and conditions
of this Agreement. Subject to the provisions of this Agreement, the Offer shall
expire 20 business days after the date of its commencement, unless this
Agreement is terminated in accordance with Article IX, in which case the Offer
(whether or not previously extended in accordance with the terms hereof) shall
expire on such date of termination.
(b) Waiver. Without the prior written consent of the Company,
Merger Sub shall not (i) waive the Minimum Condition (as defined in Exhibit A),
(ii) reduce the number of shares of Company Common Stock subject to the Offer,
(iii) reduce the Merger Consideration, (iv) extend the Offer if all of the Offer
conditions are satisfied or waived, (v) change the form of consideration payable
in the Offer, or (vi) amend or modify any term or condition of the Offer
(including the conditions set forth in Exhibit A) in any manner adverse to the
holders of Company Common Stock. Notwithstanding anything herein to the
contrary, Merger Sub may, in its reasonable discretion without the consent of
the Company, extend the Offer at any time and from time to time (i) if at the
then scheduled expiration date of the Offer any of the conditions to Merger
Sub's obligation to accept for payment and pay for shares of Company Common
Stock shall not have been satisfied or waived; (ii) for any period required by
any rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "SEC") or its staff applicable to the Offer; (iii) for any
period required by applicable Laws in connection with an increase in the
consideration to be paid pursuant to the Offer; and (iv) if all Offer conditions
are satisfied or waived but the number of shares of Company Common Stock
tendered is 80% or more, but less than 90%, of the then outstanding number of
shares of Company Common Stock, for an aggregate period of not more than 10
business days (for all such extensions under this clause (iv)) beyond the latest
expiration date that would be permitted under clause (i), (ii) or (iii) of this
sentence. In addition, if any condition set forth in Exhibit A is not satisfied
at the scheduled expiration of the Offer but is reasonably capable of being
satisfied within three business days thereof, Merger Sub shall, and Parent shall
cause Merger Sub to, extend the Offer for three business days and the Parent and
the Company shall each use reasonable efforts to cause such condition to become
satisfied during such three business day period. Subject to the terms and
conditions of the Offer and this Agreement (including the right of termination
in accordance with Article IX), Merger Sub shall, and the Parent shall cause
Merger Sub to, accept for payment and pay for, in accordance with the terms of
the Offer, all shares of Company Common Stock validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the expiration of the Offer
but in no event later than two business days after expiration of the Offer.
Notwithstanding the immediately preceding sentence and subject to the applicable
rules of the SEC and the terms and conditions of the Offer, Merger Sub expressly
reserves the right to delay payment for shares of Company Common Stock in order
to comply in whole or in part with applicable Laws. Any such delay shall be
effected in compliance with Rule 14e-1(c) under the Exchange Act.
SECTION 1.2. Actions by the Parent and Merger Sub.
(a) Offer Documents. As soon as reasonably practicable following
execution of this Agreement, but in no event later than five business days from
the date hereof, the Parent and Merger Sub shall prepare and file with the SEC a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer, which shall
contain an offer to purchase and a related letter of transmittal and any other
ancillary documents pursuant to which the Offer shall be made (such Schedule
14D-1 and the documents therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "Offer Documents").
The Company and its counsel shall be given an opportunity to review and
comment upon the Offer Documents (and shall provide any comments thereon as
soon as practicable) prior to the filing thereof with the SEC. The Offer
Documents shall comply as to form in all material respects with the requirements
of the Exchange Act, and on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, the Offer Documents
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Parent or Merger
Sub with respect to information supplied by the Company for inclusion in the
Offer Documents. Each of the Parent, Merger Sub and the Company agrees promptly
to correct any information provided by it for use in the Offer Documents if and
to the extent that such information shall have become false or misleading in any
material respect, and each of the Parent, Merger Sub and the Company further
agrees to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the SEC and to be disseminated to holders of shares of Company
Common Stock, in each case as and to the extent required by applicable federal
securities laws. The Parent and Merger Sub agree to provide the Company and its
counsel in writing with any comments the Parent, Merger Sub or their counsel may
receive from the SEC or its staff with respect to the Offer Documents promptly
after receipt of such comments and with copies of any written responses and
telephonic notification of any verbal responses by the Parent, Merger Sub or
their counsel.
(b) Funds. The Parent shall provide or cause to be provided to
Merger Sub all of the funds necessary to purchase any shares of Company Common
Stock that Merger Sub becomes obligated to purchase pursuant to the Offer.
SECTION 1.3 Actions by the Company.
(a) Company Approvals. The Company hereby approves of and consents to
the Offer and represents and warrants that the Board of Directors of the Company
(the "Board of Directors" or the "Board") at a meeting duly called and held has
duly adopted resolutions (i) approving this Agreement, the Option Agreement, the
Ancillary Documents, the Offer and the Merger, determining that the Merger is
advisable and that the terms of the Offer and the Merger are fair to, and in the
best interests of, the Company and the Company's shareholders and recommending
that the Company's shareholders accept the Offer and approve the Merger and this
Agreement, and (ii) taking all action necessary so that Sections 302A.671,
302A.673 and 302A.675 of the Minnesota Business Corporation Act (the "MBCA"),
and the Rights Agreement, dated as of January 30, 1996, between the Company and
Norwest Bank Minnesota, N.A., as Rights Agent, as amended (the "Rights
Agreement"), are and, through the Effective Time, will be inapplicable to the
Parent and Merger Sub, the Offer, the Merger, this Agreement, the Option
Agreement, the Tender and Option Agreement, any of the Ancillary Documents or
any of the transactions contemplated hereby or thereby. The Company further
represents and warrants that the Board of Directors has received the written
opinion of ▇▇▇▇▇▇▇, Sachs & Co. (the "Financial Advisor") that the proposed
consideration to be received by the holders of shares of Company Common Stock
pursuant to the Offer and the Merger is fair to such holders from a financial
point of view (the "Fairness Opinion"). The Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board of Directors
described in the first sentence of this Section 1.3(a). The Company hereby
represents and warrants that it has been authorized by the Financial Advisor to
permit the inclusion of the Fairness Opinion and references thereto, subject to
prior review and consent by the Financial Advisor (such consent not to be
unreasonably withheld), in the Offer Documents, the Schedule 14D-9 and the Proxy
Statement. The Company has been advised by its directors and executive officers
that they intend to tender into the Offer all shares of Company Common Stock
beneficially owned by them on the date hereof.
(b) Schedule 14D-9. On the date the Offer Documents are filed with
the SEC, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended from time to time, the "Schedule 14D-9") containing the recommendations
described in Section 1.3(a) and shall disseminate the Schedule 14D-9 to the
shareholders of the Company as required by Rule 14d-9 promulgated under the
Exchange Act. To the extent practicable, the Company shall cooperate with Merger
Sub and/or the Parent in mailing or otherwise disseminating the Schedule 14D-9
with the appropriate Offer Documents to the Company's shareholders. The Parent
and its counsel shall be given an opportunity to review and comment upon the
Schedule 14D-9 (and shall provide any comments thereon as soon as practicable)
prior to the filing thereof with the SEC. The Schedule 14D-9 shall comply as to
form in all material respects with the requirements of the Exchange Act and, on
the date filed with the SEC and on the date first published, sent or given to
the Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by the Parent or Merger
Sub for inclusion in the Schedule 14D-9. Each of the Company, the Parent and
Merger Sub agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of shares of Company Common Stock, in each case as
and to the extent required by applicable federal securities laws. The Company
agrees to provide the Parent and Merger Sub and their counsel in writing with
any comments the Company or its counsel may receive from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such comments
and with copies of any written response and telephonic notification of any
verbal responses by the Company or its counsel.
(c) Mailing. In connection with the Offer, the Company shall cause
its transfer agent to furnish Merger Sub with mailing labels containing the
names and addresses of the record holders of Company Common Stock as of a recent
date and thereafter, until expiration of the Offer, of those persons becoming
record holders subsequent to such recent date, together with copies of all lists
of shareholders, security position listings and computer files and all other
information in the Company's possession or control regarding the beneficial
owners of Company Common Stock, and shall furnish to Merger Sub such information
and assistance (including updated lists of shareholders, security position
listings and computer files) as Merger Sub may reasonably request in
communicating the Offer to the Company's shareholders. Subject to the
requirements of applicable Laws, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Offer and the Merger, the Parent and Merger Sub and each of their affiliates
and associates shall hold in confidence the information contained in any of such
labels, lists and files, shall use such information only in connection with the
Offer and the Merger, and, if this Agreement is terminated, shall promptly
deliver to the Company all copies of such information then in their possession
or under their control.
(d) Change in Law. Subject to the terms and conditions of this
Agreement, if there shall occur a change in Law or in a binding judicial
interpretation of existing Law which would, in the absence of action by the
Company or the Board, prevent Merger Sub, were it to acquire a majority of the
shares of Company Common Stock then outstanding on a fully diluted basis, from
approving and adopting this Agreement by its affirmative vote as the holder of a
majority of the outstanding shares of Company Common Stock and without the
affirmative vote of any other shareholder, the Company will use its reasonable
efforts to promptly take or cause such action to be taken.
SECTION 1.4. Directors.
(a) Appointment of Directors. Promptly upon the purchase of shares
of Company Common Stock pursuant to the Offer, and from lime to time thereafter,
the Parent shall be entitled to designate such number of directors, rounded up
to the next whole number, as will give the Parent representation on the Board of
Directors equal to the product of (i) the number of directors then on the Board
of Directors and (ii) the percentage that the number of shares of Company Common
Stock purchased by Merger Sub or the Parent or any affiliate pursuant to the
Offer bears to the number of shares of Company Common Stock then outstanding
(the "Percentage"), and the Company shall, upon request by the Parent, promptly
increase the size of the Board of Directors and/or exercise its reasonable
efforts to secure the resignations of such number of directors as is necessary
to enable the Parent's designees to be elected to the Board of
Directors and shall cause the Parent's designees to be so elected. At the
request of the Parent, the Company will use its reasonable efforts to cause such
individuals designated by the Parent to constitute the same Percentage of (i)
each committee of the Board of Directors, (ii) the board of directors of REI
Barbados and (iii) the committees of the board of directors of REI Barbados. The
Company's obligations to appoint designees to the Board of Directors shall be
subject to Section 14(f) of the Exchange Act. The Company shall take, at its
expense, all action necessary to effect any such election, and shall include in
the Schedule 14D-9 the information required by Section 14(f) of the Exchange Act
and Rule 14f-l promulgated thereunder. The Parent will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, directors and affiliates required by Section 14(f) and Rule 14f-l.
Notwithstanding anything stated herein, if shares of Company Common Stock are
purchased pursuant to the Offer, Parent and Merger Sub shall use reasonable
efforts to assure that until the Effective Time, the Company's Board of
Directors has at least one director who is a director on the date hereof and is
not an employee of the Company.
(b) Continuing Directors. Following the election or appointment of
the Parent's designees pursuant to this Section 1.4 and prior to the Effective
Time, the approval of a majority of the directors of the Company then in office
who are not designated by the Parent (the "Continuing Directors") shall be
required to authorize (and such authorization shall constitute the authorization
of the Board of Directors and no other action on the part of the Company,
including any action by any other director of the Company, shall be required to
authorize) any amendment to the Company's articles of incorporation or by-laws,
any termination of this Agreement by the Company, any amendment of this
Agreement requiring action by the Board of Directors, any extension of time for
the performance of any of the obligations or other acts of the Parent or Merger
Sub, and any waiver of compliance with any of the agreements or conditions
contained herein for the benefit of the Company.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 2.2), in accordance
with the MBCA, Merger Sub shall be merged with and into the Company in
accordance with this Agreement and the separate existence of Merger Sub shall
cease (the "Merger"). The Company shall be the surviving corporation in the
Merger (hereinafter sometimes referred to as the "Surviving Corporation").
SECTION 2.2. Effective Time of the Merger. Upon the terms and subject to
the conditions hereof, articles of merger (the "Articles of Merger") shall be
duly prepared by the Surviving Corporation and executed by the Surviving
Corporation and, if required under the MBCA, Merger Sub, and thereafter
delivered to the Secretary of State of the State of Minnesota, for filing, on
the Closing Date (as defined in Section 2.3). The Merger shall become effective
as of the date and at such time as the Articles of Merger pursuant to Section
302A.615 of the MBCA (the "Merger Filing") with the Secretary of State of the
State of Minnesota or at such subsequent date or time as shall be agreed by the
Company and the Parent and specified in the Articles of Merger and in
accordance with the MBCA (the time the Merger becomes effective pursuant to the
MBCA being referred to herein as the "Effective Time").
SECTION 2.3. Closing. Subject to the satisfaction or waiver of all of the
conditions to closing contained in Article VIII hereof, the closing of the
Merger (the "Closing") will take place at 10:00 a.m., Minneapolis, Minnesota
time, on a date to be specified by the parties, which shall be no later than two
business days after the satisfaction or waiver of the conditions to Closing
contained in Article VIII, at the offices of Robins, Kaplan, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.P., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
unless another date or place is agreed to in writing by the parties hereto. The
date and time at which the Closing occurs is referred to herein as the "Closing
Date."
SECTION 2.4. Effects of the Merger. The Merger shall have the effects set
forth in the MBCA, including Section 302A.641 of the MBCA. 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 Merger
Sub shall vest in the Surviving Corporation and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 2.5. Articles of Incorporation and Bylaws.
(a) The articles of incorporation of Merger Sub in effect at the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until amended in accordance with the terms thereof and with
applicable Laws.
(b) The bylaws of Merger Sub in effect at the Effective Time shall be
the bylaws of the Surviving Corporation until amended in accordance with the
terms thereof and with applicable Laws.
SECTION 2.6. Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, each to
hold office from the Effective Time in accordance with the articles of
incorporation and bylaws of the Surviving Corporation and until his or her
successor is duly elected and qualified.
SECTION 2.7. Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, each to
hold office from the Effective Time in accordance with the articles of
incorporation and bylaws of the Surviving Corporation and until his or her
successor is duly appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or of the holder of any shares of capital stock
of Merger Sub:
(a) Capital Stock of Merger Subsidiary. Each issued and outstanding
share of common stock, par value $.01 per share, of Merger Sub shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Parent-Owned Stock. Any shares of Company Common
Stock owned by the Parent, the Company, or any of their respective Subsidiaries
shall automatically be cancelled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(subject to Section 3.1(b) and other than Dissenting Shares) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive cash in the amount of the Merger
Consideration. As a result of the Merger and without any action on the part of
the holder thereof, at the Effective Time all shares of Company Common Stock
shall cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of shares of Company Common Stock (other than the
Parent, the Company or any of their respective Subsidiaries) shall thereafter
cease to have any rights with respect to such shares of Company Common Stock,
except the right to receive, without interest, the Merger Consideration in
accordance with Section 3.2 upon the surrender of a certificate or certificates
(a "Certificate") representing such shares of Company Common Stock or, with
respect to Dissenting Shares, payment of the appraised value of Dissenting
Shares in accordance with Section 3.6.
(d) Stock Options. All Company Stock Options outstanding immediately
prior to the Effective Time under the Company Option Plans, whether or not then
exercisable, shall (by all appropriate and necessary action taken prior to the
date of this Agreement of the Board of Directors or such committee or committees
of the Board of Directors as are vested with authority to administer the Company
Option Plans) be canceled. In cancellation thereof, each holder of an Option
(other than Excluded Options) shall be entitled to receive, for each share of
Company Common Stock subject to an Option (other than Excluded Options), an
amount in cash equal to the excess, if any, of the Merger Consideration over the
per share exercise price of such Option, without interest. The amounts payable
pursuant to this Section 3.1(d) shall be subject to all applicable withholding
of taxes. The Company shall use its reasonable efforts to obtain all necessary
consents, if any, of the holders of Options to the cancellation of the Options
in accordance with this Section 3.1(d). "Excluded Options" shall mean the
options of the holders set forth in Section 3.1(d) of the Company Disclosure
Letter which such holders have agreed will be cancelled without payment at the
Effective Time.
(e) Warrants. All warrants (individually, a "Warrant" and
collectively, the "Warrants") to purchase Company Common Stock outstanding
immediately prior to the Effective Time, whether or not then exercisable, shall
(by all appropriate and necessary action taken prior to the date of the Board of
Directors) be canceled and each holder of a Warrant shall be entitled to
receive, for each share of Company Common Stock subject to a Warrant, an amount
in cash equal to the excess, if any, of the Merger Consideration over the per
share exercise price of such Warrant, without interest. The amounts payable
pursuant to this Section 3.1(e) shall be subject to all applicable withholding
of taxes. The Company shall use its reasonable efforts to obtain all necessary
consents, if any, of the holders of Warrants to the cancellation of the Warrants
in accordance with this Section 3.1(e).
(f) Convertible Notes. The Convertible Notes outstanding immediately
prior to the Effective Time shall be canceled and the holders of the Convertible
Notes shall be entitled to receive an amount in cash equal to (i) the Merger
Consideration, times (ii) the number of shares of Company Common Stock that
would be issuable to such holders upon conversion of the Convertible Notes,
based on the Merger Consideration (i.e., one share of Company Common Stock for
each $14.85 principal amount of the Convertible Notes). No consideration or
other value shall be paid to the holders of the Convertible Notes under this
Section 3.1(f) in respect of the reset rights granted to the holders of the
Convertible Notes pursuant to Section 9.6(j) of the Securities Purchase
Agreement dated as of July 19, 1996, as amended by Amendment No. 1, dated as of
March 31, 1997,and as further amended by the letter agreement dated April 24,
1997, between the Company and the other parties thereto. At the Effective Time,
such reset rights shall be cancelled and shall expire. The amounts payable
pursuant to this Section 3.1(f) shall be subject to all applicable withholding
of taxes. The Company shall use its reasonable efforts to obtain all necessary
consents, if any, of the holders of the Convertible Notes to the cancellation of
the Convertible Notes in accordance with this Section 3.1(f).
SECTION 3.2. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, the Parent shall
appoint a commercial bank or trust company having net capital of not less than
$20 million, or such other party reasonably satisfactory to the Company, to act
as paying agent hereunder for payment of the Merger Consideration upon surrender
of Certificates (the "Paying Agent"). The Parent shall take all steps necessary
to cause the Surviving Corporation, the Company or Merger Sub to provide the
Paying Agent with cash in amounts necessary to pay for all the shares of Company
Common Stock pursuant to Section 3.1(c) and, in connection with the Options,
pursuant to Section 3.1(d), in connection with the Warrants, pursuant to Section
3.1(e), and in connection with the Convertible Notes, pursuant to Section
3.1(f), as and when such amounts are needed by the Paying Agent to fund the
payment of checks presented to the Paying Agent. Such amounts shall hereinafter
be referred to as the "Exchange Fund."
(b) Mailing. As soon as practicable after the Effective Time, the
Parent shall cause the Paying Agent to mail to each holder of record of shares
of Company Common Stock immediately prior to the Effective Time (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and which letter shall be in such form and have
such other provisions as the Parent may reasonably specify and (ii) instructions
for effecting the surrender of such Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate to the Paying Agent together with
such letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be required by
the Paying Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the amount of cash into which shares of Company Common Stock
theretofore represented by such Certificate shall have
been converted pursuant to Section 3.1, and the shares represented by the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or will accrue on the cash payable upon surrender of any Certificate. In the
event of a transfer of ownership of Company Common Stock which is not registered
in the transfer records of the Company, payment may be made with respect to such
Company Common Stock to such a transferee if the Certificate representing such
shares of Company Common Stock is presented to the Paying Agent, accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 3.2, each Certificate shall be deemed, at any time
after the Effective Time, to represent only the right to receive upon such
surrender the amount of cash into which shares of Company Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1.
(c) No Transfers. At and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article
III.
(d) Unclaimed Portion of Exchange Fund. Any portion of the Exchange
Fund (including the proceeds of any interest and other income received by the
Paying Agent in respect of all such funds) that remains unclaimed by the former
shareholders of the Company six months after the Effective Time shall be
delivered to the Surviving Corporation. Any former shareholders of the Company
who have not theretofore complied with this Article III shall thereafter look
only to the Surviving Corporation for payment of any Merger Consideration that
may be payable upon surrender of any Certificates such shareholder holds, as
determined pursuant to this Agreement, without any interest thereon.
(e) No Liability. None of the Parent, the Company, the Surviving
Corporation, the Paying Agent or any other person shall be liable to any former
holder of shares of Company Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
Laws.
(f) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration payable in respect thereof pursuant to this
Agreement.
(g) Company ESPP. Prior to any public announcement that it has
entered into this Agreement, the Company shall have taken all corporate action
necessary to amend its 1994 Stock Purchase Plan (the "Company ESPP") such that,
following the amendment of the Company ESPP, (i) no person shall commence to
participate therein, (ii) no participant shall be permitted to increase the
amount of payroll deductions in respect thereof, (iii) the "Stock Purchase
Date"
(as defined in the Company ESPP) to occur on or first following amendment of the
ESPP (whichever is earlier) shall be the final date on which Company Common
Stock is purchased thereunder, and (iv) the Company ESPP shall be terminated
effective on the Effective Date. Promptly following such Stock Purchase Date,
any payroll deductions not applied to the purchase of shares of Company Common
Stock shall be remitted to participants.
SECTION 3.3. Adjustments to Prevent Dilution. In the event that prior
to the Effective Time there is a change in the number of shares of Company
Common Stock or securities convertible or exchangeable into or exercisable for
shares of Company Common Stock issued and outstanding as a result of a
reclassification, stock split (including a reverse stock split), stock dividend
or distribution or similar transaction, the Merger Consideration shall be
equitably adjusted to eliminate the effects of that event.
SECTION 3.4. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, if required by the MBCA, but only to the extent
required thereby, shares of Company Common Stock outstanding immediately prior
to the Effective Time and held by a holder who has not voted in favor of the
Merger and who has demanded appraisal for such shares in accordance with Section
302A.473 of the MBCA ("Dissenting Shares") shall not be converted into the right
to receive the Merger Consideration as provided in Sections 3.1 and 3.2, unless
and until such holder fails to perfect or withdraws or otherwise loses his right
to appraisal and payment under the MBCA. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as of
the Effective Time into the right to receive the Merger Consideration, if any,
to which such holder is entitled, without interest or dividends thereon. The
Company shall give the Parent prompt notice of any demands received by the
Company for appraisal of shares and, prior to the Effective Time, the Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company shall not,
except with the prior written consent of the Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
SECTION 3.5. Merger Without Meeting of Shareholders.
Notwithstanding the foregoing, if Merger Sub, or any other direct or indirect
Subsidiary of the Parent, shall acquire at least 90 percent of the outstanding
shares of Company Common Stock pursuant to the Offer, the parties hereto shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
meeting of shareholders of the Company, in accordance with Section 302A.621 of
the MBCA.
ARTICLE IV
REPRESENTATIONS AND WARRANTEES OF THE COMPANY
Subject to the letter of the Company, dated the date hereof and
addressed to the Parent and Merger Sub (the "Company Disclosure Letter"), the
Company hereby represents and warrants to the Parent and Merger Sub that:
SECTION 4.1. Organization and Qualifications; Subsidiaries.
(a) Each of the Company and Recovery Engineering International,
Ltd., a Barbados corporation ("REI Barbados") (i) is a corporation, partnership
or other legal entity duly incorporated or organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and (ii) has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except, in the case of this clause
(ii), where the failure to have such power, authority and governmental approvals
would not, individually or in the aggregate, have a Company Material Adverse
Effect (as defined below). Each of the Company and REI Barbados is duly
qualified or licensed as a foreign corporation to transact business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Company Material Adverse Effect. For purposes of this Agreement, a "Company
Material Adverse Effect" shall mean any change or effect (i) that is materially
adverse to the business, assets, financial condition or results of operations of
the Company and REI Barbados, taken as a whole, (ii) that materially adversely
affects the ability of the Company to consummate the transactions contemplated
by this Agreement or that would prevent or materially delay consummation of the
Merger, or (iii) that materially adversely affects the ability of the Company to
conduct its business after the Closing consistent with the manner conducted in
the past.
(b) For purposes of this Agreement, a "Subsidiary" means, with
respect to the Parent, the Company or any other person, any entity of which the
Parent, the Company or such other person, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
stock or other equity interests the holders of which are generally entitled to
more than 50% of the vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
SECTION 4.2. Articles of Incorporation and Bylaws. The Company has
heretofore made available to the Parent a complete and correct copy of the
articles of incorporation and the bylaws or equivalent organizational documents,
each as amended to the date hereof, of the Company and REI Barbados. Such
articles of incorporation, bylaws and equivalent organizational documents are in
full force and effect. The Company is not in violation of any provision of its
articles of incorporation or bylaws. REI Barbados is not in violation of any
provision of its articles of incorporation, bylaws or equivalent organizational
documents, except for such violations that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
SECTION 4.3. Capitalization.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of capital stock, all of which is Company Common Stock. As of
August 25, 1999, (i)(A) 6,044,601 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable, (B)
6,044,601 common stock purchase rights ("Rights") issued pursuant to the Rights
Agreement were issued and outstanding, and (C) no class or series of preferred
stock of the Company had been established; and (ii)(A) options to purchase
("Plan Options") 1,279,667 shares of Company Common Stock which were
granted pursuant to the Company's 1986 Stock Option Plan, the Company's 1994
Stock Option and Incentive Plan, and the Company's 1993 Director Stock Option
Plan (the "Company Option Plans") were outstanding, (B) no shares of Company
Common Stock were reserved for issuance pursuant to options under the Company
Option Plans, (C) 80,000 shares of Company Common Stock were reserved for
issuance upon exercise of outstanding options and warrants listed in Section 4.3
of the Company Disclosure Letter (the "Third Party Options" and, together with
the Plan Options, the "Company Stock Options"), (D) 44,385 shares of Company
Common Stock were reserved for issuance pursuant to the Company ESPP (with
approximately 750 shares expected to be issued under the ESPP between the date
hereof and the Closing Date, based on current prices for the Company Common
Stock and the current contribution rates of participants in the Company ESPP at
the date of this Agreement), (E) up to 1,377,410 shares of Company Common Stock
were reserved for issuance upon conversion of the Convertible Notes at a
conversion price described in Section 4.3 of the Company Disclosure Letter, (F)
no shares of Company Common Stock were held by the Company in its treasury and
(G) no shares of Company Common Stock were held by REI Barbados. The number of
shares of Company Common Stock issuable upon conversion of the Convertible
Notes, based on the Merger Consideration, is 1,010,101 shares. Except as set
forth above, no shares of capital stock or other voting securities of the
Company are issued, reserved for issuance or outstanding and, since August 25,
1999, no shares of capital stock or other voting securities or options in
respect thereof have been issued except upon the exercise of the Company Stock
Options outstanding on August 25, 1999. Except as set forth in this Section 4.3
or in Section 4.3 of the Company Disclosure Letter, and except as contemplated
by this Agreement and the Ancillary Documents, there are no options, warrants,
calls, rights, subscriptions, convertible or exchangeable securities or other
rights, agreements, arrangements or commitments of any kind or character to
which the Company or REI Barbados is a party (collectively, "Options") relating
to the issued or unissued capital stock of the Company or REI Barbados, or
obligating the Company or REI Barbados to issue, transfer, grant or sell any
shares of capital stock of, or other equity interests in, or securities
convertible into or exchangeable for any capital stock or other equity interests
in, the Company or REI Barbados. Section 4.3 of the Company Disclosure Letter
sets forth, for each Company Stock Option, the holder and the exercise price
thereof. After the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of capital stock of the Company
or the Surviving Corporation pursuant to any Company Option Plan. Except as set
forth in Section 4.3 of the Company Disclosure Letter, there are no voting
trusts or other agreements or understandings to which the Company or REI
Barbados is a party with respect to the voting of capital stock of the Company
or REI Barbados. All shares of outstanding Company Common Stock have been duly
authorized, validly issued and are nonassessable and all shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except as
set forth in Section 4.3 of the Company Disclosure Letter, there are no
outstanding contractual obligations of the Company or REI Barbados to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any other shares of capital stock of the Company or REI Barbados, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in REI Barbados or any other person.
(b) Each outstanding share of capital stock of REI Barbados is
duly authorized, validly issued, fully paid and nonassessable and each such
share is owned by the Company free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
voting rights, charges and other encumbrances of any nature whatsoever
(collectively, "Liens"). Section 4.3 of the Company Disclosure Letter sets forth
the authorized capital stock and the number of issued and outstanding shares of
capital stock of REI Barbados. Except for REI Barbados, neither the Company nor
REI Barbados owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business, trust
or other entity. REI Barbados (i) has not engaged in any business activity, (ii)
does not have any liabilities of any kind, (iii) has assets with a value of less
than $5,000, (iv) has not entered into any Contracts, and (v) is not the subject
of any Litigation.
SECTION 4.4. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
the Option Agreement and the documents contemplated hereby or thereby or
executed in connection herewith or therewith to which the Company is a party
(the Option Agreement and such other agreements and documents, collectively, the
"Ancillary Documents"), to perform its obligations hereunder and thereunder and,
subject to adoption of this Agreement by the Required Company Vote (as defined
in Section 4.13), if required by applicable Laws, to consummate the transactions
contemplated hereby and thereby (the "Transactions"). The execution and delivery
of this Agreement and any Ancillary Document by the Company and the consummation
by the Company of the Transactions have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or any Ancillary Document or
to consummate the Transactions (other than (i) the Required Company Vote, if
required by applicable Laws, and (ii) the Merger Filing). This Agreement and any
Ancillary Document have each been or will be duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery thereof by the Parent and Merger Sub, constitute or will constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium or other similar laws relating to
creditors rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 4.5. No Conflict; Required Filings and Consents; Certain
Contracts.
(a) Except as set forth in Section 4.5(a) of the Company
Disclosure Letter, the execution and delivery of this Agreement and the
Ancillary Documents by the Company do not, and the performance of its
obligations under this Agreement and the Ancillary Documents and the
consummation of the Transactions by the Company will not, (i) conflict with or
violate the articles of incorporation or bylaws or equivalent organizational
documents of the Company or REI Barbados, (ii) subject to the making of the
filings and obtaining the approvals identified in Section 4.5(b), conflict with
or violate any law, rule, regulation, order, judgment or decree (collectively,
"Laws") applicable to the Company or REI Barbados or by which any property or
asset of the Company or REI Barbados is bound or affected or, directly or
indirectly, result in any of the consequences referred to in subsection (a) of
Exhibit A hereto, or (iii) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss (by the Company, REI Barbados
or the Surviving Corporation) or modification in a manner materially adverse to
the Company and REI Barbados of any material right or benefit under, or give to
others any right of termination, amendment, acceleration, repurchase or
repayment, increased payments or cancellation of, or result in the creation of a
Lien or other encumbrance on any property or asset of the Company or REI
Barbados pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, or other instrument or obligation, whether
written or oral (collectively, "Contracts"), to which the Company or REI
Barbados is a party or by which the Company or REI Barbados or any property or
asset of the Company or REI Barbados is bound or affected, except, in the case
of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement and the
Ancillary Documents by the Company do not, and the performance of its
obligations under this Agreement and the Ancillary Documents and the
consummation of the Transactions by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
federal, state or local governmental or regulatory agency, authority, commission
or instrumentality, whether domestic or foreign (each a "Governmental Entity"),
except (i) for (A) applicable requirements of the Exchange Act and state
securities or "blue sky" laws ("Blue Sky Laws"), (B) the pre-merger notification
requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), and (C) the
Merger Filing, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(c) Except as set forth in Section 4.5(c) of the Company
Disclosure Letter or in the Contracts filed (or incorporated) as exhibits to the
Company's Annual Report on Form 10-K for the year ended January 3, 1999 or the
other Company SEC Reports (as defined in Section 4.7) filed thereafter, there
are no Contracts to which the Company is a party or by which the Company or any
asset of the Company is bound, which by its terms limits in any material respect
the ability of the Company or, after consummation of the Transactions, would by
its terms limit in any material respect the ability of the Parent or any of its
affiliates, to engage in any business in any area or for any period.
SECTION 4.6. Compliance. Except as set forth in Section 4.6 of the
Company Disclosure Letter, neither the Company nor REI Barbados is in conflict
with, or in default or violation of, (i) any Law applicable to the Company or
REI Barbados or by which any property or asset of the Company or REI Barbados is
bound or affected, or (ii) any Contract to which the Company or REI Barbados is
a party or by which the Company or REI Barbados or any property or asset of the
Company or REI Barbados is bound or affected, except for any such conflicts,
defaults or violations that would not, individually or in the aggregate, have a
Company Material Adverse Effect.
SECTION 4.7. SEC Reports and Financial Statements. Each form, report,
schedule, registration statement and definitive proxy statement filed by the
Company with the SEC since January 1, 1996 and prior to the date hereof
(including exhibits and any amendments thereto) (as such documents have been
amended prior to the date hereof, the "Company SEC Reports"), as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and the Exchange Act and the rules and regulations thereunder. None of the
Company SEC Reports, as of their respective dates, contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Company has made
available to the Parent true, accurate and complete copies of all of the Company
SEC Reports. The consolidated financial statements (including any notes and
related schedules) of the Company and REI Barbados included in such reports
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly present in all material respects (subject, in the case of the
unaudited interim financial statements, to normal, year-end audit adjustments)
the consolidated financial position of the Company and REI Barbados as at the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended. Neither the Company nor REI Barbados has any
liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise) of any nature, except liabilities,
obligations or contingencies (a) which are reflected on the audited balance
sheet of the Company and REI Barbados as at January 3, 1999 (including the notes
thereto), or (b) which (i) were incurred in the ordinary course of business
after January 3, 1999 and consistent with past practices and which would not,
individually or in the aggregate, have a Company Material Adverse Effect, (ii)
are disclosed or reflected in the Company SEC Reports filed after January 3,
1999 and prior to the date of this Agreement or (iii) would not, individually or
in the aggregate, have a Company Material Adverse Effect. Since January 1, 1996,
the Company has timely filed with the SEC all forms, reports and other documents
required to be filed prior to the date hereof, and REI Barbados has not filed,
or been required to file, any form, report or other document with the SEC, in
each case, pursuant to the Securities Act, the Exchange Act or the rules and
regulations thereunder.
SECTION 4.8. Absence of Certain Changes or Events. Except as set forth
in Section 4.8 of the Company Disclosure Letter, as contemplated by this
Agreement or as disclosed in any Company SEC Report filed prior to the date of
this Agreement, since January 3, 1999, (i) the Company and REI Barbados have
conducted their respective businesses only in the ordinary course, consistent
with past practice, (ii) there has not occurred or arisen any event that,
individually or in the aggregate, has had or would be reasonably expected to
have a Company Material Adverse Effect excluding any circumstance, fact, change,
development, effect or impairment resulting from (A) the entering into of this
Agreement and the announcement thereof and the transactions contemplated hereby
and (B) changes in general economic, financial, regulatory, political or market
conditions, and (iii) neither the Company nor REI Barbados has taken any action
which, if taken after the date hereof, would constitute a violation of or
require the Parent's consent under Section 6.1.
SECTION 4.9. Litigation. Except as disclosed in Section 4.9 of the
Company Disclosure Letter or in the Company SEC Reports, there are (i) no
claims, suits, actions, proceedings, arbitrations, investigations or audits
(collectively, "Litigation") pending or, to the knowledge of the Company's
executive officers, threatened, or (ii) no investigations or reviews by any
Governmental Entity pending or, to the knowledge of the Company's executive
officers, threatened, against, relating to or affecting the Company or REI
Barbados, which in either case would have, individually or in the aggregate, a
Company Material Adverse Effect, nor is there any judgment, decree, order,
injunction, writ or rule of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator outstanding against the
Company or REI Barbados.
SECTION 4.10. Information Statement. None of the information contained
in the Schedule 14D-9, the information statement, if any, filed by the Company
in connection with the Offer pursuant to Rule 14f-1 under the Exchange Act (the
"Information Statement"), or incorporated by reference therein or any amendment
or supplement thereto, at the respective times such documents are filed with the
SEC or first published, sent or given to the Company's shareholders, contain or
will contain any untrue statement of a material fact or omit or will omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading, except that no representation is made by the Company
with respect to information supplied by the Parent or Merger Sub specifically
for inclusion in the Schedule 14D-9 or Information Statement or any amendment or
supplement. None of the information supplied or to be supplied by the Company
for inclusion or incorporation by reference in the Offer Documents will, at the
date of filing with the SEC, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time the
Company's executive officers shall obtain knowledge of any facts with respect to
itself, any of its officers and directors or REI Barbados that would require the
supplement or amendment to any of the foregoing documents in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or to comply with applicable Laws, such amendment or
supplement shall be promptly filed with the SEC and, as required by Law,
disseminated to the shareholders of the Company, and in the event the Parent
shall advise the Company as to its obtaining knowledge of any facts that would
make it necessary to supplement or amend any of the foregoing documents, the
Company shall promptly amend or supplement such document as required and
distribute the same to its shareholders.
SECTION 4.11. Employee Benefit Plans.
(a) Section 4.11 of the Company Disclosure Letter sets forth a
list of each material pension, retirement, savings, disability, dental, health,
life, death benefit, group insurance, profit-sharing, deferred compensation,
stock purchase, stock option (or other equity award), bonus, incentive,
termination, severance pay or other employee benefit plan, trust,
arrangement, contract, commitment, agreement or policy (collectively, "Benefit
Plans") sponsored or maintained by the Company or REI Barbados, in which present
or former employees or directors of the Company or REI Barbados (or any
beneficiary or dependent of the foregoing) participate, or pursuant to which the
Company or REI Barbados may have any liability (contingent or otherwise)
(collectively, the "Company Benefit Plans"). True and complete copies of the
Company Benefit Plans (together with such other information related thereto as
the Parent may reasonably have requested) have been delivered to the Parent.
(b) Except as set forth in Section 4.11 of the Company Disclosure
Letter and except as would not, individually or in the aggregate, have a Company
Material Adverse Effect: (A) the Company Benefit Plans have been administered
and are in compliance with the terms of such plan and all applicable Laws, (B)
no "reportable event" (as such term is used in Section 4043 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (other than those
events for which the 30 day notice has been waived pursuant to the regulations),
"prohibited transaction" (as such term is used in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") or
"accumulated funding deficiency" (as such term is used in Section 412 or 4971 of
the Code) has heretofore occurred with respect to any Company Benefit Plan and
(C) each Company Benefit Plan intended to qualify under Section 401(a) of the
Code has received a favorable determination from the IRS regarding its qualified
status and no event has occurred that could reasonably be expected to result in
the loss of such qualified status.
(c) There is no litigation or administrative or other proceeding,
or any claim, suit, audit or investigation, involving any Company Benefit Plan
(other than routine claims for benefits), nor, to the knowledge of the Company's
executive officers, is any such proceeding threatened, in each case that,
individually or in the aggregate, would have a Company Material Adverse Effect.
Neither the Company nor REI Barbados has incurred, nor, to the knowledge of the
Company's executive officers, is reasonably likely to incur any withdrawal
liability with respect to any "multiemployer plan" (within the meaning of
Section 3(37) of ERISA) which remains unsatisfied in an amount which would have
a Company Material Adverse Effect. The termination of, or withdrawal from, any
Company Benefit Plan or multiemployer plan to which the Company or REI Barbados
contributes, will not subject the Company or REI Barbados to any liability under
Title IV of ERISA that individually or in the aggregate would have a Company
Material Adverse Effect.
(d) At no time has the Company or REI Barbados (i) contributed to
or been required to contribute to, or incurred any withdrawal liability (within
the meaning of Section 4201 of ERISA) under, any "multiemployer plan" (within
the meaning of Sections 3(37) or 4001(a)(3) of ERISA), or (ii) contributed to or
been required to contribute to any "defined benefit plan" (within the meaning of
Section 3(35) of ERISA).
(e) Other than as set forth on Section 4.11 of the Company
Disclosure Letter, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Company
Benefit Plan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any current
or former employee or director of the Company or REI Barbados, or (ii) result in
the triggering or imposition of any restrictions or limitations on the right of
the Company, the Parent or any of their Subsidiaries to amend or terminate any
Company Benefit Plan. No payment or benefit which will or may be made by the
Company, the Parent or any of their Subsidiaries will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
SECTION 4.12. Labor and Employment Matters. Except as set forth in
Section 4.12 of the Company Disclosure Letter, (a) neither the Company nor REI
Barbados is a party to, or bound by, any collective bargaining agreement or
other Contract or understanding with a labor union or labor organization; and
(b) there is no (i) unfair labor practice, labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending or, to the
knowledge of the Company's executive officers, threatened against the Company or
REI Barbados, (ii) activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or REI Barbados, or (iii)
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees.
SECTION 4.13. Vote Required. Unless the Merger may be consummated in
accordance with Section 302A.621 of the MBCA, in which case no vote of the
holders of the shares of Company Common Stock is required to approve this
Agreement and the Transactions, the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote (the
"Required Company Vote") is the only vote or approval of the holders of any
class or series of the Company's capital stock necessary to adopt this Agreement
and approve the transactions contemplated hereby, except those approvals which
have heretofore been obtained (assuming that neither the Parent nor its
affiliates or associates (as defined in Section 302A.011 of the MBCA) are
"interested shareholders" of the Company under Section 302A.673 of the MBCA
immediately before the execution and delivery of this Agreement).
SECTION 4.14. Opinion of Financial Advisor. The Company's Board of
Directors has received the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., dated August 25,
1999, to the effect that, as of such date, the Merger Consideration to be
received by the shareholders of the Company is fair, from a financial point of
view, to such shareholders.
SECTION 4.15. Brokers. Except as set forth in Section 4.15 of the
Company Disclosure Letter, no broker, finder or investment banker (other than
▇▇▇▇▇▇▇, Sachs & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The Company has previously delivered to Parent a
full and accurate copy of the Company's engagement letter with ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
Co. Section 4.15 of the Company Disclosure Letter sets forth the Company's
obligations to ▇▇▇▇▇▇▇, Sachs & Co. in connection with its role as financial
advisor to the Company.
SECTION 4.16. Taxes.
(a) Except as set forth in Section 4.16(a) of the Company
Disclosure Letter:
(i) The Company and REI Barbados have timely filed (or
have had timely filed on their behalf) all Tax Returns required to be filed by
any of them. All such Tax Returns are true, correct and complete in all respects
except for such instances which, individually or in the aggregate, would not
have a Company Material Adverse Effect.
(ii) The Company and REI Barbados have paid (or have had
paid on their behalf) all Taxes due, except for Taxes the non-payment of which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(iii) The most recent financial statements contained in the
Company SEC Reports reflect full reserves for all Taxes payable by the Company
and REI Barbados for all Tax periods and portions thereof through the date of
such financial statements, except to the extent that any failure to so reserve,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(iv) The Federal income Tax Returns of the Company have
not been audited. There are no taxable years currently under Audit, and the
Company has not been notified that any Audit by a Taxing Authority will commence
with respect to the Company or REI Barbados. There are no outstanding waivers or
pending requests for waivers to extend the statutory period of limitations to
assess any Taxes on the Company or REI Barbados, except to the extent any such
waiver or request for waiver, individually or in the aggregate, would not have a
Company Material Adverse Effect.
(v) No deficiency or adjustment for any Taxes has been
proposed, asserted or assessed against the Company or REI Barbados that has not
been paid or fully reserved for on the financial statements of the Company,
except for deficiencies or adjustments that, individually or in the aggregate,
would not have a Company Material Adverse Effect, and, to the knowledge of the
Company's executive officers, no such deficiency or adjustment has been
threatened. There are no Liens for material Taxes upon the assets or property of
the Company or REI Barbados, except Liens for current Taxes not yet due.
(vi) The Company and REI Barbados have withheld and paid
over to the relevant Tax Authority all Taxes required to have been withheld and
paid in connection with payments to employees, independent contractors,
creditors, shareholders or other third parties, except for such Taxes which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(vii) Neither the Company nor REI Barbados is a party to
any Tax sharing, Tax allocation, Tax indemnity or similar agreement.
(viii) No "consent" within the meaning of Section 341(f) of
the Code has been filed with respect to the Company or REI Barbados.
(b) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Audit" shall mean any audit, assessment of Taxes,
other examination by any Tax Authority, proceeding or appeal of such proceeding
relating to Taxes.
(ii) "Taxes" shall mean all Federal, state, local and
foreign income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, excise, employment, payroll, premium, alternative or added
minimum, transfer, stamp, customs, duties or other taxes, and other assessments
of a similar nature (whether imposed directly or through withholding), including
any interest, additions to tax, or penalties applicable thereto and including
any liability in respect of any tax as a transferee or successor, by Law,
Contract or otherwise.
(iii) "Tax Authority" shall mean the Internal Revenue
Service and any other domestic or foreign governmental authority responsible for
the administration of any Taxes.
(iv) "Tax Returns" shall mean all Federal, state, local
and foreign tax returns, declarations, statements, reports, schedules and forms
relating to Taxes, including, without limitation, any information returns,
claims for refund, declaration of estimated Tax and any amended tax return
relating to Taxes.
SECTION 4.17. Licenses and Permits. Except as set forth in Section
4.17 of the Company Disclosure Letter, the Company and REI Barbados have all
necessary licenses, permits, certificates of need, approvals and authorizations
(collectively, "Permits") from all Governmental Entities required to lawfully
conduct their respective businesses as presently conducted, except for those
Permits the lack of which, individually or in the aggregate, would not have a
Company Material Adverse Effect, and (a) no Permit is subject to revocation or
forfeiture by virtue of any existing circumstances, (b) there is no Litigation
pending or, to the knowledge of the Company's executive officers, threatened to
modify or revoke any Permit, and (c) no Permit is subject to any outstanding
order, decree, judgment, stipulation, or investigation that would be likely to
affect such Permit, except for instances of any of the foregoing items (a)
through (c) which, individually or in the aggregate, would not have a Company
Material Adverse Effect.
SECTION 4.18. Title to Assets.
(a) Section 4.18(a) of the Company Disclosure Letter sets
forth a complete and accurate list of all leased and owned real properties of
the Company. The Company has good and marketable title to all of its real and
personal properties and assets reflected on the Balance Sheet of the Company at
July 4, 1999 included in the Company's Quarterly Report on Form 10-Q for the
period ended July 4, 1999 (the "1999 Balance Sheet"), free and clear of all
Liens except for (i) Liens which secure indebtedness which is properly reflected
in the 1999 Balance Sheet; (ii) Liens for Taxes accrued but not yet payable;
(iii) Liens arising as a matter of law in the ordinary course of business with
respect to obligations incurred after the date of the 1999 Balance Sheet,
provided that the obligations secured by such Liens are not delinquent; and (iv)
such imperfections of title and Liens, if any, as individually or in the
aggregate would not have a Company Material Adverse Effect. Except as set forth
in Section 4.18(a) of the Company Disclosure Letter, the Company owns, or has
valid leasehold interests in, all properties and assets used by it in the
conduct of its business, except where the absence of such ownership or leasehold
interests would not individually or in the aggregate have a Company Material
Adverse Effect.
(b) Except as set forth in Section 4.18(b) of the Company
Disclosure Letter, the Company does not have any legal obligation, absolute or
contingent, to any other person to sell or dispose of any of its assets, other
than orders for sale of inventory in the ordinary course of business, with an
aggregate value in excess of $250,000.
SECTION 4.19. Material Contracts. Section 4.19 of the Company
Disclosure Letter sets forth a list as of the date hereof of all (i) Contracts
for borrowed money or guarantees thereof, (ii) Contracts involving any rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), or any combination of
these transactions (each a "Derivative" and collectively, "Derivatives"), (iii)
Contracts containing covenants by the Company restricting its ability or the
ability of any affiliates of the Company to engage in any line of business, (iv)
Contracts to purchase materials, supplies or other assets, other than purchase
orders entered into in the ordinary course of business consistent with the
customary past practice of the Company and other Contracts involving obligations
of less than $250,000 individually and $500,000 in the aggregate, (v) Contracts
to purchase or acquire advertising or other product promotion or brand support
other than spot orders purchased in the ordinary course of business or involving
commitments by the Company of less than $250,000, (vi) Contracts with
distributors, sub-distributors or sales agents for the Company or in which the
Company acts as distributor or sales agent for others, (vii) Contracts in which
the Company's surviving liability (including indemnities) could exceed $250,000
and involving the sale or other disposition by the Company of one or more
business units, divisions or entities (including former Subsidiaries); (viii)
Contracts involving the sale, disposition or licensing of other material assets
of the Company (including intellectual property), other than the sale of
inventory in the ordinary course of business, (ix) Contracts involving the
investment, including by way of capital contribution, loan or advance, by the
Company in any other person, firm or entity, other than cash and cash
equivalents and other than investments no longer owned by the Company, (x) other
Contracts under which the unpaid liability of the Company is $250,000 or more or
are otherwise material, and (xi) promotion Contracts with a term of longer than
three (3) months (all Contracts described in each of the categories (i) through
(xi) above, "Material Contracts"). All Material Contracts to which the Company
is a party or by which any of its assets are bound are valid and binding, in
full force and effect and enforceable against the parties thereto in accordance
with their respective terms, except where the failure to be so valid and
binding, in full force and effect or enforceable would not individually or in
the aggregate have a Company Material Adverse Effect. There is not under any
such Contract, any existing default, or event, which after notice or lapse of
time, or both, would constitute a default, by the Company, or to the knowledge
of the Company's executive officers, any other party, other than any such
defaults or events which, individually or in the aggregate, would not have a
Company Material Adverse Effect.
SECTION 4.20. Intellectual Property Rights.
(a) The Company and REI Barbados have and will, after giving
effect to the consummation of the Transactions, have to the same extent and on
the same terms as prior to the Closing, (i) valid rights to use, whether through
ownership, licensing or otherwise, all patents, trademarks, service marks, trade
dress, trade names, domain names, copyrights, trade secrets (where recognized by
applicable law), licenses, information, proprietary rights and processes that
are used in its business as now conducted (collectively the "Intellectual
Property Rights"), and (ii) except as disclosed in Section 4.20 of the Company
Disclosure Letter, the right to require the applicant of any Intellectual
Property Right which is an application to transfer ownership thereof and of the
related registration to the Company or REI Barbados once it issues.
(b) Except as disclosed in Section 4.20 of the Company
Disclosure Letter, no Intellectual Property Right is subject to any outstanding
judgment, injunction, order, decree or agreement restricting the use thereof by
the Company or REI Barbados, except for any judgment, injunction, order, decree
or agreement which would not reasonably be expected to have a Company Material
Adverse Effect.
(c) Each Intellectual Property Right which is a patent, patent
application, trademark registration, trademark application, service ▇▇▇▇
registration, service ▇▇▇▇ application, domain name (with respect to domain
names, to the knowledge of the Company's executive officers), copyright
registration or copyright application, is set forth on Section 4.20 of the
Company Disclosure Letter. All registered patents, trademarks, domain names,
service marks and copyrights listed on Section 4.20 of the Company Disclosure
Letter are valid (when in use) and existing and in full force and effect, and
owned by the Company or REI Barbados free and clear of any Liens. Section 4.20
of the Company Disclosure Letter sets forth a complete and accurate list of all
Contracts in which the Company is a licensor or licensee of Intellectual
Property Rights.
(d) To the knowledge of the Company's executive officers, other
than as set forth on Section 4.20 of the Company Disclosure Letter: (i) no third
party has interfered with, infringed upon, misappropriated or otherwise come
into conflict with any of the Intellectual Property Rights except in such a way
as would not jeopardize the validity of such Intellectual Property Rights or the
ability of the Company or REI Barbados to use the registered patents or the
Intellectual Property Rights in substantially the manner they are used on the
date hereof, and (ii) neither the Company nor REI Barbados, by using the
Intellectual Property Rights, has materially interfered with, infringed upon,
misappropriated or otherwise come into conflict with any material registered
trademark of any third party nor, by using such registered patents, any material
registered patent of any third party.
SECTION 4.21. State Takeover Statutes Inapplicable. From and after
the date hereof and at all times at or prior to the Effective Time, (i) Sections
302A.67l, 302A.673 and 302A.675 of the MBCA will be inapplicable to the Offer,
the Merger, this Agreement, the Ancillary Documents, the Tender and Option
Agreement and the transactions contemplated hereby and thereby, and the Company
has received an opinion to that effect from Robins, Kaplan, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
L.L.P., and (ii) no other takeover Law in effect on the date hereof could affect
the ability of the Parent or Merger Sub to consummate the transactions
contemplated hereby or thereby or have, either individually or in the aggregate,
a Company Material Adverse Effect or a Parent Material Adverse Effect.
SECTION 4.22. Rights Agreement. Pursuant to action of the Board of
Directors on August 25, 1999, the Company amended (the "Rights Amendment") the
Rights Agreement so that the Rights Agreement will not affect or be affected by
this Agreement, the Option Agreement, the Tender and Option Agreement, the
Offer, the announcement of the Offer, the purchase of shares of Company Common
Stock by the Parent or Merger Sub pursuant to the Offer, the Merger, or any
transaction contemplated hereby or thereby, and the Company has received an
opinion to that effect from Robins, Kaplan, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. The
Distribution Date (as defined in the Rights Agreement) has not occurred. The
Rights Amendment has been duly authorized, executed and delivered by the Company
and is valid and enforceable in accordance with its terms.
SECTION 4.23. Year 2000.
(a) The Company is in the process of conducting an inventory and
assessment of all software, computers, network equipment, technical
infrastructure, production equipment and other equipment and systems that are
material to the operation of its business and that rely on, utilize or perform
date or time processing ("Systems") to ensure that the Systems are Year 2000
Compliant.
(b) The Company reasonably expects that implementation and
testing of the Systems to ensure that they are Year 2000 Compliant will be
completed by September 30, 1999. Any failure of any of the Company's Systems to
be Year 2000 Compliant has not had and is not reasonably expected to have a
Company Material Adverse Effect.
(c) In addition to upgrading its own Systems, the Company has
contacted certain significant suppliers to determine whether their Systems are
Year 2000 Compliant. The Company has not received any information which would
indicate that the Systems of its suppliers will not be Year 2000 Compliant to
the extent the same could reasonably be expected to result in any significant
disruption to the Company's sources of supplies.
(d) "Year 2000 Compliant" means a System will at all times: (i)
consistently and accurately handle and process date and time information and
data values before, during and after January 1, 2000, including but not limited
to accepting date input, providing date output, and performing calculations on
or utilizing dates or portions of dates; (ii) function accurately and in
accordance with its specifications without interruption, abnormal endings,
degradation, change in operation or other impact, or disruption of other
systems, resulting from processing date or time data with values, before, during
and after January 1, 2000; (iii) respond to and process two-digit date input in
a way that resolves any ambiguity as to century; and (iv) store and provide
output of date information in ways that are unambiguous as to century.
SECTION 4.24. Insurance. The Company and REI Barbados maintain in
force insurance policies and bonds in such amounts and against such liabilities
and hazards as are consistent with industry practice. A complete list of all
material insurance policies is set forth in Section 4.24 of the Company
Disclosure Letter. Except as set forth in Section 4.24 of the Company Disclosure
Letter, neither the Company nor REI Barbados is now liable, nor will any of them
become liable, for any retroactive premium adjustment not reflected in the 1999
Balance Sheet or otherwise provided for as set forth in Section 4.24 of the
Company Disclosure Letter. All policies are valid and enforceable and in full
force and effect, all premiums owing in respect thereof have been timely paid,
and neither the Company nor REI Barbados has received any notice of premium
increase or cancellation with respect to any of its insurance policies or bonds.
Except as set forth in Section 4.24 of the Company Disclosure Letter and except
for any matters which, individually or in the aggregate, would not have a
Company Material Adverse Effect, there are no claims pending as to which the
insurer has denied liability or is reserving its rights, and all claims have
been timely and properly filed. Within the last three years, neither the Company
nor REI Barbados has been refused any insurance coverage sought or applied for,
and the Company has no reason to believe that their existing insurance coverage
cannot be renewed as and when the same shall expire, upon terms and conditions
standard in the market at the time renewal is sought.
SECTION 4.25. Environmental Matters.
(a) Except as disclosed on Section 4.25 of the Company
Disclosure Letter and except as to matters that would not reasonably be expected
to have a Company Material Adverse Effect:
(i) no written notice, request for information, order,
complaint or penalty has been received, and there are no judicial or
administrative actions, suits or proceedings pending or, to the knowledge of the
Company's executive officers, threatened, which allege a violation of any
Environmental Laws, in each case relating to the Company and arising out of any
Environmental Laws;
(ii) the Company has all environmental permits necessary
for its operations to comply with all applicable Environmental Laws, and is in
compliance with the terms of such environmental permits, has made all
appropriate filings for the issuance or renewal of such environmental permits
and is in compliance with all other applicable Environmental Laws;
(iii) all of the facilities currently owned, leased or
operated by the Company are free of any Hazardous Substances (except those
authorized pursuant to and in accordance with applicable Environmental Laws) and
are free of all contamination arising from, relating to, or resulting from any
such Hazardous Substances, and there has been no release or other dissemination
at any time during the ownership or occupancy by the Company or REI Barbados of
such facilities of any Hazardous Substances at, on, about, under or within any
such facilities (other than pursuant to and in accordance with applicable
Environmental Laws) and there are no facilities formerly owned or operated by
the Company or REI Barbados which are not currently owned by them;
(iv) neither the Company nor REI Barbados has used any
waste disposal site, or otherwise disposed of, transported or arranged for the
transportation of any Hazardous Substances to any place or location in violation
of any Environmental Laws; and
(v) all written environmental audits and reports conducted
within the past five years by the Company or REI Barbados of any property
currently owned or leased or operated by the Company or REI Barbados have been
delivered to the Parent prior to the date hereof.
(b) The following terms shall have the meaning set forth below:
(i) "Hazardous Substances" means any pollutant,
contaminant or any toxic, radioactive or other hazardous substance as such terms
are defined in, or identified pursuant to, any Environmental Law.
(ii) "Environmental Costs" means any reasonable
investigation, testing, sampling, cleanup, remediation, removal or other
response costs, costs to achieve and maintain compliance with Environmental
Laws, expenses of consultants, counsel and other experts, liabilities (including
liabilities for damages for personal injury or property damage and natural
resources damage), civil or criminal fines or penalties, judgments and amounts
paid in settlement in each case arising out of or relating to or resulting from
any environmental matter.
(iii) "Environmental Laws" means any and all common and
statutory laws, regulations, ordinances and rules, in each case as in effect on
the date hereof, that have as their principal purpose the protection of the
environment.
ARTICLE V
REPRESENTATIONS AND WARRANTEES OF THE PARENT
AND MERGER SUB
The Parent and Merger Sub hereby represent and warrant to the Company
that:
SECTION 5.1. Organization and Qualifications; Subsidiaries. Each of
the Parent and Merger Sub is a corporation, partnership or other legal entity
duly incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Parent Material Adverse Effect (as
defined below). For purposes of this Agreement, a "Parent Material Adverse
Effect" shall mean any change or effect that adversely affects the ability of
the Parent to consummate the transactions contemplated by this Agreement in any
material respect, or that would prevent or delay in any material respect
consummation of the Merger.
SECTION 5.2. Certificate of Incorporation and Bylaws. The
Parent has heretofore made available to the Company a complete and correct copy
of the
certificate of incorporation and the bylaws or equivalent organizational
documents, each as amended to the date hereof, of the Parent and Merger Sub.
Such certificates of incorporation, bylaws and equivalent organizational
documents are in full force and effect. The Parent is not in violation of any
provision of its certificate of incorporation or bylaws. Merger Sub is not in
violation of any provision of its certificate of incorporation, bylaws or
equivalent organizational documents, except for such violations as would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
SECTION 5.3. Authority Relative to This Agreement. Each of the
Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement, the Ancillary Documents and the Tender and Option
Agreement, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, the Ancillary Documents and the Tender and Option Agreement by
the Parent and Merger Sub and the consummation by the Parent and Merger Sub of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Parent or Merger Sub are necessary to authorize this
Agreement, the Ancillary Documents and the Tender and Option Agreement or to
consummate the transactions contemplated hereby or thereby (other than the
Merger Filing). This Agreement, the Ancillary Documents and the Tender and
Option Agreement have each been duly and validly executed and delivered by the
Parent and Merger Sub and, assuming the due authorization, execution and
delivery thereof by the Company, constitute the legal, valid and binding
obligation of the Parent and Merger Sub, enforceable against the Parent and
Merger Sub in accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, moratorium or other similar laws relating
to creditors rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 5.4. No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Parent and Merger Sub do not, and the performance of their respective
obligations under this Agreement, the Ancillary Documents and the Tender and
Option Agreement and the consummation of the transactions contemplated hereby
and thereby by the Parent and Merger Sub will not, (i) conflict with or violate
the articles of incorporation or bylaws or equivalent organizational documents
of the Parent or Merger Sub, (ii) subject to making the filings and obtaining
the approvals identified in Section 4.5(b), conflict with or violate any Law
applicable to the Parent or Merger Sub or by which any property or asset of the
Parent or Merger Sub is bound or affected, except, in the case of clause (ii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would not, individually or in the aggregate, have a Parent Material
Adverse Effect.
(b) The execution and delivery of this Agreement, the
Ancillary Documents and the Tender and Option Agreement by the Parent and Merger
Sub do not, and the performance of their respective obligations under this
Agreement, the Ancillary Documents and the Tender and Option Agreement and the
consummation of the transactions contemplated hereby and thereby by the Parent
and Merger Sub will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity, except (i) for
(A) applicable requirements, if any, of the Exchange Act or the Blue Sky laws,
(B) the premerger notification requirements of the HSR Act, and (C) the Merger
Filing, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not,
individually or in the aggregate, prevent or delay in any material respect
consummation of the Merger, or otherwise prevent the Parent or Merger Sub from
performing its respective obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a Parent Material
Adverse Effect.
SECTION 5.5. Offer Documents. None of the information contained in
the Offer Documents or any schedule thereto required to be filed with the SEC or
in any amendment or supplement thereto will contain, on the date of filing with
the SEC, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Parent or Merger Sub
with respect to information supplied by the Company specifically for inclusion
in the Offer Documents or any schedule thereto required to be filed with the SEC
or in any amendment or supplement thereto. None of the information supplied by
the Parent or Merger Sub specifically for inclusion in the Schedule 14D-9 will,
at the date of filing with the SEC, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 5.6. Board Approval. The Board of Directors of the
Parent by resolutions duly adopted at a meeting duly called and held, has
approved this Agreement, the Merger and the other transactions contemplated
hereby.
SECTION 5.7. Vote Required . No vote of the holders of any class or
series of the Parent's capital stock is necessary to adopt this Agreement and
approve the transactions contemplated hereby.
SECTION 5.8. No Arrangements Triggering Section 302A.673 of the MBCA.
Neither the Parent nor, to the best of the knowledge of Parent's executive
officers, any of its affiliates or associates (each as defined in Section
302A.011 of the MBCA) is party to any contract, agreement or other arrangement,
that would cause it to be an "interested shareholder" within the meaning of
Section 302A.011(Subd. 49) of the MBCA.
SECTION 5.9. Merger Sub. Merger Sub has not conducted any activities
other than in connection with the organization of Merger Sub, the negotiation
and execution of this Agreement, and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
SECTION 5.10. Financing. At the consummation of the Offer and at the
Effective Time, the Parent will have or will cause Merger Sub to have funds
available to the Parent or Merger Sub sufficient to consummate the Offer and the
Merger on the terms contemplated hereby.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. Conduct of Business of the Company Pending the Merger.
The Company covenants and agrees that, except as expressly permitted or
contemplated by this Agreement or as set forth in Section 6.1 of the Company
Disclosure Letter, until the Effective Time, unless the Parent shall otherwise
agree in writing prior to the taking of any action otherwise prohibited by the
terms of this Section 6.1, the Company shall, and shall cause REI Barbados to,
conduct its operations and business in the ordinary and usual course of
business, and consistent with past practice and use its reasonable efforts to
preserve intact its business organizations' goodwill, maintain in effect all
existing material qualifications, licenses, permits, approvals and other
authorizations, substantially comply with all applicable Laws, keep available
the services of its present executive officers and key employees, and preserve
the goodwill and business relationships with suppliers, distributors, customers
and others having business relationships with it. Without limiting the
generality of the foregoing, and except as otherwise expressly permitted by this
Agreement or as set forth in Section 6.1 of the Company Disclosure Letter, prior
to the Effective Time, without the prior written consent of the Parent, the
Company will not, and will cause REI Barbados not to:
(a) except to the extent required by Law or the rules and
regulations of The Nasdaq Stock Market, amend or otherwise change the articles
of incorporation or bylaws of the Company;
(b) issue or authorize or propose the issuance of, sell, pledge
or dispose of, grant or otherwise create, or agree to issue or authorize or
propose the issuance, sale, pledge or disposition of, grant or otherwise create
any additional shares of, or any Options to acquire any shares of, its capital
stock or any debt or equity securities convertible into or exchangeable for such
capital stock or accelerate any right to convert or exchange or acquire
any securities of the Company for any such shares or ownership interest or take
any action to cause to be exercisable any otherwise unexercisable option under
any Company Stock Option granted under any Company Option Plan, other than (i)
the issuance of 1,010,101 shares of Company Common Stock upon the conversion of
the Convertible Notes, (ii) any such issuance pursuant to the exercise of
Company Stock Options granted prior to the date hereof under the Company Option
Plans, in accordance with their respective terms as in effect on the date
hereof, (iii) the issuance of shares of Company Common Stock pursuant to the
Company ESPP in accordance with its terms as in effect on the date hereof in
accordance with Section 3.2(g).
(c) purchase, redeem or otherwise acquire or retire, or offer to
purchase, redeem or otherwise acquire or retire, (i) any shares of its capital
stock (including any Options with respect to its capital stock and any security
convertible or exchangeable into its capital stock), or (ii) any long-term debt;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, or subdivide, reclassify, recapitalize, split, combine or
exchange any of its shares of capital stock or otherwise change its
capitalization as it exists on the date hereof;
(e) incur or become contingently liable with respect to any
indebtedness for borrowed money or the deferred purchase price for property or
services or pursuant to any capital lease or other financing or guarantee any
such indebtedness or issue any debt securities;
(f) except as may be required by applicable Laws, or as
contemplated by this Agreement, (i) increase the compensation payable or to
become payable to, or enter into any employment agreement with, its executive
officers or employees, except to non-executive officers in the ordinary course
of business consistent with past practice; (ii) grant any severance or
termination pay to any director, executive officer or employee of the Company or
REI Barbados, except pursuant to existing Company Benefit Plans; (iii) enter
into any severance agreement with any director, executive officer or employee;
or (iv) except as required by applicable Laws, establish, adopt, enter into,
terminate, withdraw from or amend in any material respect or take action to
accelerate or waive (or otherwise diminish) any rights or benefits under any
Company Benefit Plan or any other plan, program or arrangement, or any material
employment policy;
(g) take any action, other than reasonable actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including Tax accounting policies, procedures
and elections relating to Taxes that would apply to the Company after the
Merger), except as may be required by generally accepted accounting principles,
or settle any material Audit, make any material Tax election or settle any
material Tax liability or, except as required by Law, amend in any material
respect any material Tax Return;
(h) acquire or agree to acquire by merging or consolidating
with, or by purchasing an equity interest in or a portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business entity;
(i) mortgage or otherwise encumber or subject to any Lien, or
sell, transfer or otherwise dispose of (by merger or otherwise), any of its
properties or assets, other than encumbrances and Liens that are incurred in the
ordinary course of business and consistent with past practice and sales,
transfers and dispositions of inventory in the ordinary course of business and
consistent with past practice;
(j) settle or compromise any material pending or threatened
Litigation;
(k) make any advance, loan, extension of credit or capital
contribution to, or purchase or acquire (by merger or otherwise) any stock,
bonds, notes, debentures or other securities of, or any assets constituting a
business unit of, or make any other investment in, any person, firm or entity,
except (a) extensions of trade credit and endorsements of negotiable instruments
and other negotiable documents in the ordinary course of business, (b)
investments in cash and cash equivalents, and (c) payroll and travel advances in
the ordinary course of business;
(l) make any capital expenditures in the aggregate for the
Company and REI Barbados in excess of the amounts specified in the Company's
budget for capital expenditures, a true and complete copy of which has
previously been delivered to the Parent;
(m) waive, amend or allow to lapse any term or condition of any
confidentiality or "standstill" agreement to which the Company is a party;
(n) enter into (a) any Contracts with distributors or sales
agents other than Contracts terminable without penalty on less than 30 days'
notice, (b) any Contracts to distribute products for others or which restrict
the ability of the Company, REI Barbados or the Company's affiliates to compete
or (c) any other Contracts that would constitute Material Contracts; or amend
any of the foregoing agreements as they exist on the date hereof;
(o) amend, change or waive (or exempt any person or entity from
the effect of) the Rights Agreement, or redeem the Rights, except in connection
with the transactions contemplated under this Agreement or the Ancillary
Documents;
(p) change any of the accounting principles or practices used by
the Company;
(q) effect any material change in the Company's advertising,
product promotion or brand support policies or programs or commit to any
significant new product promotion or advertising campaign;
(r) effect any material change in the Company's billing
practices or sales terms, or cause or permit a material acceleration or delay in
the manufacture, shipment or sale of inventory, the collection of accounts or
notes receivable or the payment of accounts or notes payable;
(s) enter into any Contracts for Derivatives;
(t) waive, relinquish, release or terminate any right or claim,
including any such right or claim under any Material Contract, except in the
ordinary course of business consistent with the customary past practice of the
Company, or permit any rights of material value to use any Intellectual Property
to lapse or be forfeited;
(u) take any action to cause the Company Common Stock to be
delisted from the NASDAQ National Market prior to the completion of the Offer;
(v) take any action that would reasonably be expected to result
in the conditions contained in Section 8.2(a) or 8.2(b) not to be satisfied; or
(w) authorize any of, or commit or agree to take any of, the
foregoing actions.
ARTICLE VII
ADDITIONAL COVENANTS
SECTION 7.1. Access to Information.
(a) From the date hereof to the Effective Time, the Company
shall (and shall cause REI Barbados and their respective officers, directors,
employees, auditors and agents to) afford the officers, employees, auditors,
agents and advisors (the "Representatives") of the Parent access at all
reasonable times to its officers, employees, agents, properties, offices, plants
and other facilities, books, records (including auditors work papers) and Tax
Returns, and shall furnish such Representatives with all financial, operating
and other data and information as may be reasonably requested, and permit the
Parent to make such copies of documents and such inspections and investigations,
including, without limitation, such environmental assessments and testing as the
Parent may request. All information so obtained will be subject to the
Confidentiality Agreement, dated June 24, 1999, between and the Financial
Advisor on behalf of the Company and the Parent, as amended on July 27, 1999
(the "Confidentiality Agreement").
(b) No investigation pursuant to this Section 7.1 shall affect
any representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 7.2. No Solicitation.
(a) The Company shall not, nor shall it permit REI Barbados, or
any officer or director to, and shall use its best efforts to cause the
employees, agents or Representatives of the Company and REI Barbados (including,
without limitation, any investment banker, attorney or accountant retained by
the Company or REI Barbados), not to, directly or indirectly, (i) initiate,
solicit or knowingly encourage, facilitate or assist (including by furnishing
any information or providing any access to the properties, books or records of
the Company) any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of assets representing a material portion of the assets of the
Company and REI Barbados, taken as a whole, sale of shares of capital stock
representing, individually or in the aggregate, 10% or more of the voting power
of the Company, including, without limitation, by way of a tender offer or
exchange offer by any person for shares of capital stock representing 10% or
more of the voting power of the Company, other than the Transactions (any of the
foregoing inquiries or proposals being referred to in this Agreement as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning,
or provide to any person or entity any information or data relating to the
Company or REI Barbados for the purposes of making, any Acquisition Proposal,
(iii) agree to, approve or recommend any Acquisition Proposal or (iv) take any
other action inconsistent with the obligations and commitments assumed by the
Company pursuant to this Section 7.2; provided, however, that nothing contained
in this Agreement shall prevent the Company or its Board of Directors from (A)
furnishing nonpublic information to, entering into customary confidentiality
agreements with, or entering into discussions or negotiations with, any person
or entity in connection with an unsolicited bona fide written Acquisition
Proposal to the Company or its shareholders, if the Company provides the Parent
with at least 2 business days' notice of its intent to do so and the Acquisition
Proposal is made in writing prior to Merger Sub and/or the Parent having
purchased any shares of Company Common Stock under the Offer and the Board of
Directors of the Company, by action of a majority of the entire Board of
Directors of the Company, determines in good faith that such Acquisition
Proposal constitutes, or is reasonably likely to lead to, a Superior Proposal or
(B) taking and disclosing to its shareholders a position with respect to such
Acquisition Proposal or making any other public disclosure that, in the opinion
of the Company's counsel, is required by applicable Laws; provided, however,
that the Board of Directors will not recommend that the shareholders of the
Company tender their shares of Company Common Stock into any tender offer unless
(i) the Board of Directors determines that such tender offer constitutes a
Superior Proposal and (ii) the Company has provided the Parent and Merger Sub
with not less than two business days' prior notice of its intent to do so. For
purposes of this Agreement, "Superior Proposal" means a bona fide written
Acquisition Proposal which was not solicited, encouraged or knowingly
facilitated in violation of this Section 7.2, and which was received in writing
by the Company prior to Merger Sub and/or the Parent having purchased any shares
of Company Common Stock under the Offer and which a majority of the members of
the Board of Directors of the Company determines in their good faith judgment
(after consultation with independent financial advisors) to be more favorable
from a financial point of view to the Company and its shareholders than the
Merger, after giving effect to any increase in the Merger Consideration offered
by the Parent and Merger Sub, and is reasonably capable of being completed,
taking into account all legal, financial, regulatory and other aspects of such
proposal; provided, however, that an Acquisition Proposal shall not constitute a
Superior Proposal if the Acquisition Proposal is subject to a financing
condition unless the Board of Directors, by action of a majority of the entire
Board of Directors in good faith, based on the advice of the Financial Advisor
or other nationally recognized investment banking firm, determines that the
Acquisition Proposal is readily financeable. The Company will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
by the Company or its Representatives with any parties conducted heretofore with
respect to any of the foregoing, take the necessary steps to inform such parties
of the obligations undertaken in this Section 7.2., and request that such
parties promptly return all documents (and all copies thereof) furnished to them
by the Company or its Representatives in connection with such activities,
discussions and negotiations. Nothing in this Section 7.2 shall (i) permit the
Company to terminate this Agreement (except as specifically provided in Article
IX hereof), or (ii) affect any other obligation of the Company under this
Agreement. For purposes of this Agreement, an Acquisition Proposal shall not be
deemed to exist solely as a result of a person filing a report on Schedule 13G
to report ownership of the Company Common Stock.
(b) The Company shall (i) promptly notify the Parent in writing
after receipt by the Company (or its Representatives) of any Acquisition
Proposal or any inquiries indicating that any person is considering making or
wishes to make an Acquisition Proposal and provide a copy of such Acquisition
Proposal or, in connection with any non-written inquiries or Acquisition
Proposal, provide a written statement setting forth in detail a description of
the inquiry or the terms and conditions of the Acquisition Proposal, (ii)
promptly notify the Parent in writing after receipt of any request for nonpublic
information relating to it or REI Barbados or for access to its or REI Barbados'
properties, books or records by any person that, to the knowledge of the
Company's executive officers, may be considering making, or has made, an
Acquisition Proposal and (iii) promptly keep the Parent advised of the status of
any such Acquisition Proposal, indication or request including, without
limitation, the identity of the party making such Acquisition Proposal,
indication or request, and all terms relating to such Acquisition Proposal.
(c) In no event will the Company provide any non-public
information regarding the Company to any party making an Acquisition Proposal
unless such party enters into a written confidentiality agreement containing
provisions substantially similar to those contained in the Confidentiality
Agreement.
SECTION 7.3. Directors and Officers Indemnification and Insurance
(a) From and after the Effective Time, the Parent shall cause
the Surviving Corporation to and the Surviving Corporation shall indemnify,
defend and hold harmless the present and former officers, directors, employees
and agents of the Company (each a "Covered Person") against all losses,
expenses, claims, damages, liabilities or amounts ("Losses") that are paid in
settlement (provided that such settlement has been approved by the Parent, such
approval not to be unreasonably withheld) of, or otherwise in connection with,
any claim, action, suit, proceeding or investigation (a "Claim"), based in whole
or in part on the fact that such person is or was a director, officer, employee
or agent of the Company and arising out of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the Transactions),
in each case to the full extent permitted under the MBCA and the Company's
articles of incorporation and bylaws as in effect on the date of this Agreement.
The Surviving Corporation shall pay any expenses in advance of the final
disposition of any such Claim to each Covered Person to the fullest extent
permitted under the MBCA upon receipt from the Covered Person to whom expenses
are advanced of an undertaking to repay such advances required under the MBCA.
The Surviving Corporation shall cooperate in the defense of any such matter.
(b) For a period of six years after the Closing Date (or in the
event any Claim is asserted within such six year period, until final
disposition of that Claim), the Parent shall cause the Surviving Corporation to
keep in effect provisions in its articles of incorporation and bylaws providing
for exculpation of director liability, advancing expenses prior to disposition
of any Claim and its indemnification of the Covered Persons to the fullest
extent permitted under the MBCA, which provisions shall not be amended except as
required by applicable Law or except to make changes permitted by law that would
enlarge the right of indemnification of the Covered Persons.
(c) For a period of six (6) years after the Effective Time, the
Parent shall cause the Surviving Corporation to maintain in effect the current
policies of directors and officers liability insurance maintained by the Company
covering persons who are currently covered by the Company's officers and
directors liability insurance policies with respect to actions or omissions
occurring at or prior to the Effective Time to the extent that such policies are
available; provided, that policies of at least the same coverage containing
terms and conditions which are no less advantageous to the insureds may be
substituted therefor, provided, further, that in no event shall the Surviving
Corporation be required to expend amounts for premiums per annum in excess of
150% of the current annual premiums for the twelve-month period ending November
15, 1999 (which premium the Company represents and warrants to be $107,500 in
the aggregate for the policy year which began in November 1998) (the "Maximum
Premium") to maintain or procure insurance coverage pursuant to this Section
6.3, or, if the cost of such coverage exceeds the Maximum Premium, the maximum
amount of coverage that can be purchased for the Maximum Premium.
(d) From and after the Effective Time, the Parent agrees to
indemnify, defend and hold harmless the Covered Persons against all Losses that
are paid in settlement (provided that such settlement has been approved by the
Parent, such approval not to be unreasonably withheld) of, or otherwise in
connection with, a Claim based in whole or in part on the fact that such Covered
Person is or was a director or officer of the Company and arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the Transactions), in each case to the fullest extent permitted by
applicable Law and whether or not the Surviving Corporation is permitted by
applicable Law to provide any indemnity with respect to such Losses. The Parent
shall pay any expenses in advance of the final disposition of any such Claim to
each Covered Person to the fullest extent permitted by applicable Law upon
receipt from the Covered Person to whom such expenses are advanced of an
undertaking to repay such advances required under applicable Law. The Parent
shall cooperate in the defense of any such matter.
(e) If any Litigation described in this Section 7.3 (each, an
"Action") arises or occurs, the Surviving Corporation shall control the defense
of such Action with counsel selected by the Surviving Corporation, which counsel
shall be reasonably acceptable to the party seeking indemnification pursuant to
this Section 7.3 (each, an "Indemnified Party"); provided that the Indemnified
Party shall be permitted to participate in the defense of such Action through
counsel selected by the Indemnified Party, which counsel shall be reasonably
acceptable to the Surviving Corporation, at the Indemnified Party's expense.
Notwithstanding the foregoing, if there is any conflict between the Surviving
Corporation and any Indemnified Parties or there are additional defenses
available to any Indemnified Parties, the Indemnified Parties shall be permitted
to participate in the defense of such Action with counsel selected by the
Indemnified Parties, which counsel shall be reasonably acceptable to the
Surviving Corporation, and the Indemnified Parties shall be indemnified
therefor; provided that the Surviving Corporation shall not be obligated to pay
the reasonable fees and expenses of more than one counsel for all Indemnified
Parties in any single Action except to the extent that, in the opinion of
counsel for the Indemnified Parties, two or more of such Indemnified Parties
have conflicting interests in the outcome of such Action. The Surviving
Corporation shall not be liable for any settlement effected without its written
consent, which consent shall not be unreasonably withheld.
(f) The provisions of this Section 7.3 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Covered Persons.
SECTION 7.4. Notification of Certain Matters. The Parent shall give
prompt notice to the Company, and the Company shall give prompt notice to the
Parent, of (a) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any covenant, condition or
agreement contained in this Agreement or any Ancillary Document not to be
complied with or satisfied and (b) any failure of the Parent or the Company, 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 7.4 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
SECTION 7.5. Restructuring of Merger. Upon the mutual agreement of
the Parent and the Company, the Merger shall be restructured in the form of a
forward subsidiary merger of the Company into Merger Sub or any other affiliate
of the Parent, with Merger Sub or such affiliate being the surviving
corporation, or as a merger of the Company into the Parent, with the Parent
being the surviving corporation. In such event, this Agreement shall be deemed
appropriately modified to reflect such form of merger.
SECTION 7.6. Company Shareholder Meeting. Subject to Section 3.5,
the Company shall (i) call a meeting of its shareholders (the "Shareholders
Meeting") for the purpose of voting upon the Merger, (ii) hold the Shareholders
Meeting as soon as practicable following the termination or expiration of the
Offer or the purchase of shares of Company Common Stock pursuant to the Offer,
(iii) submit this Agreement and the transactions contemplated hereby for
approval of the Company's shareholders at the Shareholders Meeting, and (iv)
include in the Proxy Statement the recommendation of its Board of Directors that
its shareholders approve this Agreement and the transactions contemplated
hereby; provided, however, it need not include such recommendation if it has
received a written opinion from outside counsel that such recommendation would
violate the Board of Directors' fiduciary duties under applicable Law. If the
Parent or Merger Sub purchases any Company Common Stock pursuant to the Offer,
the record date for the Shareholders Meeting shall be a date subsequent to the
date the Parent or Merger Sub becomes a record holder of Company Common Stock
purchased pursuant to the Offer.
SECTION 7.7. Proxy Statements.
(a) If required by applicable Law, the Company will, as soon as
practicable following the termination or expiration of the Offer, prepare and
file a preliminary Proxy Statement (such proxy statement, and any amendments or
supplements thereto, the "Proxy Statement") or, if applicable, an information
statement with the SEC with respect to the Shareholders Meeting and will use its
reasonable efforts to respond to any comments of the SEC or its staff and to
cause the Proxy Statement to be cleared by the SEC as soon as practicable. The
Company will notify the Parent of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
the Parent with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. The Company shall give the
Parent and its counsel (who shall provide any comments thereon as soon as
practicable) the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give the Parent and its counsel (who shall provide
any comments thereon as soon as practicable) the opportunity to review all
amendments and supplements to the Proxy Statement and all responses to requests
for additional information and replies to comments prior to their being filed
with, or sent to, the SEC. Each of the Company and the Parent agrees to use its
reasonable efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement has been cleared by the SEC, the Company
shall mail the Proxy Statement to the shareholders of the Company. If at any
time prior to the approval of this Agreement by the Company's shareholders there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company will prepare and mail to its shareholders such
an amendment or supplement.
(b) The Company represents and warrants that the Proxy Statement
will comply as to form in all material respects with the Exchange Act and, at
the respective times filed with the SEC and distributed to shareholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, that the Company makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by the Parent or Merger Sub. The Parent represents and warrants that
none of the information supplied by the Parent or Merger Sub for inclusion in
the Proxy Statement will, at the respective times filed with the SEC and
distributed to shareholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Company shall use its reasonable efforts to obtain the
necessary approvals by its shareholders of this Agreement and the transactions
contemplated hereby.
(d) The Parent agrees, subject to applicable Law, to cause all
shares of Company Common Stock purchased by Merger Sub and/or the Parent
pursuant to the Offer and all other shares of Company Common Stock owned by the
Parent, Merger Sub or any other Subsidiary or affiliate of the Parent to be
voted in favor of the approval of this Agreement and the transactions
contemplated hereby.
SECTION 7.8. Further Action, Reasonable Efforts.
(a) Upon the terms and subject to the conditions hereof, each of
the parties hereto shall (i) make promptly its respective filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the Transactions, and (ii) use reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws and regulations to
consummate and make effective the transactions contemplated hereby, including,
without limitation, using reasonable efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Entities, make all filings and required submissions with Governmental Entities,
including foreign filings and submissions, and obtain all consents and approvals
from parties to Contracts with the Company and the Parent and their respective
Subsidiaries as are necessary for the consummation of the transactions
contemplated hereby; provided, however, that the Parent shall not be required by
any provision of this Agreement to take any action, including entering into any
consent decree that requires the divestiture of a material amount of assets of
the Parent or any of its Subsidiaries. Each of the Parent and the Company shall,
subject to the Parent's direction, use all its reasonable efforts to contest any
proceeding seeking a preliminary injunction or other legal impediment to, and to
resolve any objections as may be asserted by any Governmental Entity with
respect to, the Offer and/or the Merger under the HSR Act or any other antitrust
Laws; provided that the foregoing shall not require the Parent to take any
action that is reasonably likely to result in any of the consequences specified
in subsection (a) of Exhibit A. In case at any time after the Effective Time any
other action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable efforts to take all such action.
(b) Each party shall use its reasonable efforts not to take any
action, or enter into any transaction, which would result in a breach of any
covenant made by it in this Agreement.
(c) Each party hereto shall, subject to the fulfillment at or
before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the transactions contemplated
hereby.
SECTION 7.9. Public Announcements. The initial press release relating
to this Agreement shall be a joint press release. Thereafter, the Company and
the Parent shall consult with each other before issuing any press release or
otherwise making any public statements with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any such press release
or make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld or delayed; provided, however,
that a party may, without the prior consent of the other party, issue such press
release or make such public statement as may be required by Law or any listing
agreement or arrangement to which the Company or the Parent is a party with a
national securities exchange or The Nasdaq Stock Market if it has used all
reasonable efforts to consult with the other party and to obtain such party's
consent but has been unable to do so in a timely manner.
SECTION 7.10. Employee Benefits.
(a) For a period of at least two years after the Effective Time,
the Parent will cause the Surviving Corporation to provide for the benefit of
the employees of the Company and REI Barbados benefits in the aggregate that are
(A) substantially equivalent to the benefits provided under Company Benefit
Plans in effect on the date of this Agreement, or (B) if equal to or greater
than the benefits described in clause (A) above, the benefits provided under
benefit plans maintained by the Parent for employees of the Parent and the
Parent Subsidiaries (other than the Surviving Corporation and its Subsidiaries).
Without limiting the generality of the foregoing, all vacation, holiday,
sickness and personal days accrued by the employees of the Company and REI
Barbados shall be honored. For a period of at least two years after the
Effective Time (or for such longer or shorter period as is permitted or required
by applicable statute), the Parent will cause the Surviving Corporation to
provide for the benefit of individuals who, immediately prior to the Effective
Time, are former employees of the Company and REI Barbados with benefits that
are substantially equivalent, in the aggregate, to the benefits that are
provided to them immediately prior to the Effective Time under Company Benefit
Plans. In the event that any employee of the Surviving Corporation or one of its
Subsidiaries is at any time after the Effective Time transferred to the Parent
or any affiliate of the Parent (other than the Surviving Corporation and its
Subsidiaries) or becomes a participant in an employee benefit plan, program or
arrangement maintained by or contributed by the Parent or any affiliate of the
Parent (other than the Surviving Corporation and its Subsidiaries), the Parent
shall cause such plan, program or arrangement to treat the prior service of such
employee with the Company and REI Barbados prior to the Effective Time, to the
extent prior service is generally recognized under such plan, program or
arrangement of the Company, as service rendered to the Parent or such affiliates
for purposes of eligibility, vesting or entitlement to benefits under such
plans, program or arrangement (reduced, however, to avoid duplication of
benefits for the same period of service). The Parent shall cause to be waived
any pre-existing condition limitation under its benefit plans that might
otherwise apply to such employee or, to the extent applicable, a former
employee. The Parent agrees to recognize (or cause to be recognized) the dollar
amount of all expenses incurred by such employees or, to the extent applicable,
former employees, during the calendar year in which the Effective Time occurs
for purposes of satisfying the calendar year deductibles and co-payment
limitations for such year under the relevant benefit plans of the Parent and
their respective Subsidiaries.
(b) The Parent represents that its current intent is to cause
the Surviving Corporation to maintain its principal production facility in the
Minneapolis, Minnesota metropolitan area for a period of at least two years
after the Effective Time.
(c) With respect to the employees of the Company and REI
Barbados set forth on Section 7.10(c) of the Company Disclosure Letter, the
Parent will cause the Surviving Corporation to maintain and fund the Company's
incentive bonus plan as in effect on the date hereof (the "Current Plan")
through the performance period ending December 31, 1999. For the performance
period ending December 31, 1999, the portion of such bonuses that are based on
the Company's operating income (the "Company Performance Component") shall not
be less than 80% of the maximum amount of the Company Performance Component as
described in such plan. If an employee is terminated without cause prior to
December 31, 1999, such employee shall be paid such bonus in an amount pro rated
according to the period of the employee's service to the Company during 1999.
Effective January 1, 2000, the Current Plan shall terminate, and the employees
of the Company and REI Barbados set forth on Schedule 7.10(c) shall commence to
participate in the Parent's incentive bonus plan (the "Parent Plan") and shall
be entitled to an award from the Parent Plan which reflects (i) the actual
period of participation of such employees in the Parent Plan and (ii) the actual
performance of the applicable business unit during such period.
SECTION 7.11. Confidentiality Agreement. The Company hereby waives
the provisions of the Confidentiality Agreement as and to the extent necessary
to permit the consummation of the transactions contemplated hereby. Upon
acceptance of the shares of Company Common Stock pursuant to the Offer, the
Confidentiality Agreement shall be deemed to have terminated without further
action by the parties hereto.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the following conditions:
(a) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(b) None of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this Agreement.
(c) If required by applicable Law, this Agreement and the Merger
shall have been approved by the shareholders of the Company in accordance with
the MBCA and the Company's articles of incorporation and bylaws.
SECTION 8.2. Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by the Company:
(a) The representations and warranties of the Parent and Merger
Sub contained herein that are qualified as to materiality shall be true and
correct, and those not so qualified shall be true and correct in all material
respects, in each case at and as of the Effective Time with the same force and
effect as though made at and as of the Effective Time (except to the extent a
representation or warranty speaks specifically as of an earlier date or except
as contemplated by this Agreement).
(b) The Parent and Merger Sub have performed, in all material
respects, all obligations and complied, in all material respects, with all
covenants required by this Agreement to be performed or complied with by them
prior to the Effective Time.
(c) The Parent shall have delivered to the Company a
certificate, dated the Effective Time and signed by an executive officer of
Parent, evidencing compliance with Sections 8.2(a) and (b).
SECTION 8.3. Conditions to Obligations of the Parent and Merger Sub
to Effect the Merger. The obligations of the Parent and Merger Sub to effect the
Merger are subject to the satisfaction of the following conditions, unless
waived by the Parent and Merger Sub:
(a) The representations and warranties of the Company contained
herein that are qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, in each
case at and as of the Effective Time with the same force and effect as though
made at and as of the Effective Time (except to the extent a representation or
warranty speaks specifically as of an earlier date or except as contemplated by
this Agreement).
(b) The Company shall have performed, in all material respects,
all obligations and complied, in all material respects, with all covenants
required by this Agreement to be performed or complied with by it prior to the
Effective Time.
(c) The Company shall have delivered to the Parent a
certificate, dated the Effective Time and signed by an executive officer of the
Company, evidencing compliance with Sections 8.3(a) and (b).
(d) Merger Sub and/or the Parent shall have accepted for payment
and paid for all of the shares of Company Common Stock tendered pursuant to the
Offer.
ARTICLE IX
TERMINATION WAIVER, AMENDMENT AND CLOSING
SECTION 9.1. Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after
approval of this Agreement, the Merger and the other Transactions by the
shareholders of the Company:
(a) by the mutual written consent of the Company and the Parent;
(b) by the Company or the Parent, if (i) the Effective Time
shall not have occurred on or before 180 days from the date hereof, provided,
however, that the right to terminate this Agreement pursuant to clause (i) shall
not be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date, (ii) any Governmental Entity, the consent
of which is a condition to the obligations of the Company and the Parent to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent and all appeals of such determination shall have been taken
and have been unsuccessful, (iii) any court of competent jurisdiction shall have
issued an order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment or decree shall have become final and nonappealable, or (iv) upon a
vote at a duly held meeting or upon an adjournment thereof, the shareholders of
the Company shall have failed to approve the Merger or give any approval
required by the applicable Law in connection therewith.
(c) by the Company, if prior to Merger Sub and/or the Parent
having purchased any shares of Company Common Stock under the Offer, the Board
of Directors of the Company shall concurrently approve, and the Company shall
concurrently enter into, a definitive agreement providing for the implementation
of a Superior Proposal; provided, however, that (i) the Company is not then in
breach of Section 7.2, (ii) no termination pursuant to this Section 9.1(c) shall
be effective unless the Company shall simultaneously make the payment required
by Section 9.3, and (iii) the Company has provided to the Parent and Merger Sub
three business days' notice of its intent to so terminate the Agreement and,
with such notice, delivered to the Parent and Merger Sub a copy of the written
agreement embodying the Acquisition Proposal in its then most definitive form;
and
(d) by the Parent,
(i) upon the termination or expiration of the Offer
without the purchase of any Company Common Stock thereunder if the Minimum
Condition shall not have been satisfied;
(ii) the failure of any condition specified in subsections
(a) through (f) of Exhibit A prior to Merger Sub and/or the Parent having
purchased any shares of Company Common Stock under the Offer, regardless of
whether the Offer is made, which failure either continues through, or cannot in
the Parent's reasonable judgment be cured prior to, the date the Offer is
scheduled to expire (if the Offer has been commenced) or, if the Offer has not
commenced, would be scheduled to expire if it were commenced on the business day
after the date hereof (provided that the right to terminate this Agreement
pursuant to this clause (d)(ii) shall not be available to the Parent if the
Parent's failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of any such condition); or
(iii) the Board of Directors shall have modified or amended
its recommendation of the Offer or the Merger in any manner adverse to the
Parent or Merger Sub or shall have withdrawn or failed to confirm within five
business days of the Parent's request therefor its recommendation of the Offer
or the Merger or shall have recommended acceptance of any Acquisition Proposal
or shall have resolved to do any of the foregoing.
SECTION 9.2. Effect of Termination. In the event of termination of
this Agreement by the Company or the Parent as provided in Section 9.1 hereof,
this Agreement shall forthwith become void (except for the last sentence of
Section 1.3(c), the last sentence of Section 7.1(a), Sections 9.3, 10.2, 10.4,
10.6, 10.7 and 10.8 and this Section 9.2) and there shall be no liability on the
part of the Company, the Parent, Merger Sub or their respective officers or
directors, except for any breach of a party's obligations under such provisions.
Notwithstanding the foregoing, no party hereto shall be relieved from liability
for any willful, material breach of this Agreement.
SECTION 9.3. Termination Fee. If this Agreement is terminated:
(i) by the Company pursuant to Section 9.1(c), then the
Company shall pay to the Parent on the next business day following the date of
such termination, the Termination Fee;
(ii) by the Parent pursuant to Section 9.1(d)(iii), then
the Company shall pay to the Parent on the next business day following the date
of such termination, the Termination Fee; and
(iii) by the Parent pursuant to Section 9.1(d)(i), and (x)
at the time of such termination an Acquisition Proposal is outstanding and (y)
during the term of this Agreement or within 12 months after the termination of
this Agreement, the Board of Directors recommends an Acquisition Proposal or the
Company enters into an agreement providing for an Acquisition Proposal or a
transaction contemplated by an Acquisition Proposal occurs, then on the next
business day following the earliest of the recommendation of an Acquisition
Proposal, the entering into of an agreement providing for an Acquisition
Proposal or the occurrence of the transaction contemplated by an Acquisition
Proposal, the Company shall pay to the Parent the Termination Fee.
"Termination Fee" shall mean $11,865,000.
SECTION 9.4. Amendment or Supplement. At any time before or after
approval of this Agreement and the Transactions by the shareholders of the
Company and prior to the Effective Time, this Agreement may be amended or
supplemented in writing by the Company (subject to Section 1.4(b)) and the
Parent with respect to any of the terms contained in this Agreement, except that
following approval by the shareholders of the Company there shall be no
amendment or supplement which by Law requires further approval by such
shareholders without further approval by the shareholders of the Company.
SECTION 9.5. Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, the Company and the Parent may:
(a) extend the time for the performance of any of the
obligations or acts of the other party;
(b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant
hereto; or
(c) waive compliance with any of the agreements or conditions of
the other party contained herein; provided, however, that no failure or delay by
the Company or the Parent in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of a party hereto to any extension or waiver
contemplated by this Section 9.5 shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. No Survival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger or the termination
of this Agreement pursuant to Article IX.
SECTION 10.2. Expenses. Except as provided in Article IX, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses, except that the expenses incurred in
connection with printing the Offer Documents, the Schedule 14D-9 and the Proxy
Statement shall be paid in equal shares by the Company and the Parent.
SECTION 10.3. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered the same agreement.
SECTION 10.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without regard
to the principles of conflicts of laws thereof.
SECTION 10.5. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered by hand,
mailed by registered or certified mail (return receipt requested) or sent by
prepaid overnight courier (with proof of service) or confirmed to facsimile to
the parties as follows (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which so
hand-delivered, or sent by confirmed telecopier and on the day after it has been
so mailed or sent by courier:
To the Parent or Merger Sub:
The Procter and ▇▇▇▇▇▇ Company
One Procter and ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Treasurer
with a copy (which shall not constitute notice) to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (P.C.)
To the Company:
Recovery Engineering, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Robins, Kaplan, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
SECTION 10.6. Miscellaneous.
(a) This Agreement, together with the exhibit hereto, the
Company Disclosure Letter, the Confidentiality Agreement, the Ancillary
Documents and the Tender and Option Agreement, constitutes the entire agreement,
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and thereof.
(b) This Agreement, except for the provisions of Article II and
Section 7.3, is not intended to and shall not confer upon any person other than
the parties hereto any rights or remedies hereunder or by reason hereof.
(c) This Agreement shall not, nor shall any of the rights or
interests hereunder, be assigned by any party hereto or be assignable by
operation of law or otherwise without the prior written consent of the other
parties; provided, however, that either the Parent or Merger Sub (or both) may
assign its rights hereunder (including, without limitation, the right to make
the Offer and/or purchase shares of Company Common Stock in the Offer) to an
affiliate, but nothing shall relieve the assignor from its obligations
hereunder. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit to the parties hereto and their respective
successors and assigns.
(d) The headings contained in this Agreement are for reference
purposes and shall not affect in any way the meaning or interpretation of this
Agreement.
SECTION 10.7 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
SECTION 10.8. Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court, this being in
addition to any other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
RECOVERY ENGINEERING, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
By:__________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
THE PROCTER AND ▇▇▇▇▇▇ COMPANY
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By:__________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer
▇▇▇▇▇▇▇, INC.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By:__________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and
Treasurer
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement,
Merger Sub shall not be required to accept for payment or pay for, subject to
any applicable rules and regulations of the SEC, including Rule 14e-l(c) of the
Exchange Act, any shares of Company Common Stock not theretofore accepted for
payment or paid for and may terminate or amend the Offer as to such shares of
Company Common Stock unless (i) there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer that number of shares of Company
Common Stock which would represent at least a majority of the outstanding shares
of Company Common Stock on a fully diluted basis (the "Minimum Condition") and
(ii) any waiting period under the HSR Act applicable to the purchase of shares
of Company Common Stock pursuant to the Offer shall have expired or been
terminated. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Merger Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of Company Common Stock not theretofore
accepted for payment or paid for, and may terminate or amend the Offer if at any
time on or after the date of this Agreement and before the acceptance of such
shares of Company Common Stock for payment or the payment therefor, any of the
following conditions exist or shall occur and remain in effect at the scheduled
expiration of the Offer:
(a) there shall have been instituted or pending any
litigation before any court or other Governmental Entity which seeks to or, if
successful, would (i) challenge or restrict the acquisition by the Parent or
Merger Sub (or any of its affiliates) of shares of Company Common Stock pursuant
to the Offer or the Merger, restrain, prohibit or delay the making or
consummation of the Offer or the Merger, or obtain any damages in connection
therewith, (ii) make the purchase of or payment for some or all of the shares of
Company Common Stock pursuant to the Offer or the Merger illegal or otherwise
restrict or prohibit consummation of the Offer or the Merger, (iii) impose
limitations on the ability of the Parent or Merger Sub (or any of their
affiliates) effectively to acquire, operate or hold, or require the Parent,
Merger Sub or Company or any of their respective affiliates or Subsidiaries to
dispose of or hold separate, any portion of the assets or the business of any
one of them or their Subsidiaries or affiliates, (iv) impose limitations on the
ability of the Parent, Merger Sub or their affiliates to exercise full rights of
ownership of the shares of Company Common Stock acquired by it pursuant to the
Offer or the Merger, including, without limitation, the right to vote the shares
acquired by it on all matters properly presented to the shareholders of the
Company, (v) restrict any future business activity by the Parent, Merger Sub,
the Company or any of their affiliates, including, without limitation, requiring
the prior consent of any person or entity (including any Governmental Entity) to
future transactions by the Parent, Merger Sub, the Company or any of their
affiliates, or (vi) otherwise affect the Parent, Merger Sub, the Company or any
of their respective affiliates, which, in each such case described in (i)
through (vi), is reasonably likely to have a Company Material Adverse Effect or
a Parent Material Adverse Effect or otherwise make consummation of the Offer or
the Merger unduly burdensome; or
(b) there shall have been promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger, by any Governmental
Entity, any Law (other than the HSR Act) that is reasonably likely to result in
any of the consequences referred to in subsection (a) above; or
(c) this Agreement shall have been terminated in accordance
with its terms; or
(d) (i) any of the representations and warranties made by
the Company in this Agreement or in any Ancillary Document (which for purposes
of this clause (d) shall be read as though none of them contained any Material
Adverse Effect or materiality qualifications) shall not have been true and
correct in all respects when made, or shall thereafter have ceased to be true
and correct in all respects as if made as of such later date (other than
representations and warranties made as of a specified date), except where the
failure of the representations and warranties to be true and correct in all
respects would not in the aggregate have a Company Material Adverse Effect, or
(ii) the Company shall have breached or failed to comply in any material respect
with any of its obligations under this Agreement; or
(e) the Board of Directors shall have modified or amended
its recommendation of the Offer or the Merger in any manner adverse to the
Parent or Merger Sub or shall have withdrawn or failed to confirm within five
business days of the Parent's request therefor its recommendation of the Offer
or the Merger or shall have recommended acceptance of any Acquisition Proposal
or shall have resolved to do any of the foregoing; or
(f) any change, new event or development shall have occurred
or be threatened which, either individually or in the aggregate, would or is
likely in the future to have a Company Material Adverse Effect, other than
changes in general economic, financial, regulatory, political or market
conditions.
The foregoing conditions are for the sole benefit of the Parent and
Merger Sub and may be asserted by the Parent or Merger Sub with respect to the
consummation of the Offer regardless of the circumstances giving rise to any
such condition (other than any action or inaction by the Parent or Merger Sub)
and may be waived by the Parent or Merger Sub, in whole or in part, at any time
and from time to time, in the reasonable discretion of the Parent subject to the
terms of the Agreement. The failure by the Parent or Merger Sub at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right,
the waiver of such right with respect to any particular facts or circumstances
shall not be deemed a waiver with respect to any other facts or circumstances,
and each right will be deemed an ongoing right which may be asserted at any time
and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions,
all tendered shares of Company Common Stock not theretofore accepted for payment
shall forthwith be returned by the Paying Agent to the tendering shareholders.