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EXHIBIT (C)(1)
AGREEMENT AND PLAN OF MERGER
Dated as of June 16, 1997
among
PARK-OHIO INDUSTRIES, INC.;
P O ACQUISITION CORPORATION
and
ARDEN INDUSTRIAL PRODUCTS, INC.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................ 1
1.1 Definitions................................................ 1
1.2 Other Terms................................................ 6
1.3 Other Definitional Provisions.............................. 6
ARTICLE II THE TENDER OFFER........................................... 7
2.1 Tender Offer............................................... 7
ARTICLE III THE MERGER................................................. 10
3.1 Merger..................................................... 10
3.2 Closing.................................................... 10
3.3 Effective Time............................................. 10
3.4 Effects of the Merger...................................... 10
3.5 Articles of Incorporation and Bylaws....................... 10
3.6 Directors.................................................. 11
3.7 Officers................................................... 11
3.8 Board of Directors; Committees............................. 11
ARTICLE IV EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES......... 12
4.1 Effect on Capital Stock.................................... 12
4.2 Exchange of Certificates................................... 12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............. 15
5.1 Organization, Standing and Corporate Power................. 15
5.2 Subsidiaries............................................... 15
5.3 Capitalization............................................. 15
5.4 Authority; Enforceability; No Conflicts; and Consents...... 16
5.5 Vote Required.............................................. 17
5.6 Compliance with Applicable Laws............................ 17
5.7 Company SEC Documents; Undisclosed Liabilities............. 18
5.8 Absence of Changes or Events............................... 19
5.9 Litigation................................................. 20
5.10 Taxes...................................................... 20
5.11 Employee Benefits.......................................... 22
5.12 Title to Properties........................................ 25
5.13 Insurance.................................................. 25
5.14 Labor Matters.............................................. 25
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5.15 Intellectual Property...................................... 25
5.16 No Restrictions on the Offer or the Merger................. 27
5.17 Dispositions............................................... 27
5.18 Brokers and Intermediaries................................. 27
5.19 Opinion of Financial Advisor............................... 27
5.20 Transactions With Affiliates............................... 27
5.21 Business Relations......................................... 28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
MERGER SUB................................................. 28
6.1 Organization, Standing and Corporate Power................. 28
6.2 Authority; Enforceability; No Conflicts and Consents....... 28
6.3 Brokers.................................................... 30
6.4 Ownership of Shares........................................ 30
6.5 Financing.................................................. 30
ARTICLE VII COVENANTS RELATING TO CONDUCT OF BUSINESS.................. 30
7.1 Conduct of Business of the Company......................... 30
7.2 Access to Information...................................... 33
ARTICLE VIII ADDITIONAL AGREEMENTS...................................... 34
8.1 Preparation of Proxy Statement; Shareholders' Meeting...... 34
8.2 Efforts; Notification...................................... 36
8.3 Supplemental Disclosure.................................... 37
8.4 Announcements.............................................. 37
8.5 No Solicitation............................................ 37
8.6 Stock Options.............................................. 39
8.7 Transfer Taxes............................................. 39
8.8 Directors and Officers' Indemnification and Insurance...... 40
ARTICLE IX CONDITIONS PRECEDENT....................................... 41
9.1 Conditions to Each Party's Obligation to Effect the Merger. 41
9.2 Conditions of Obligations of Acquiror...................... 42
ARTICLE X TERMINATION................................................ 43
10.1 Termination................................................ 43
10.2 Effect of Termination...................................... 46
10.3 Termination Fee............................................ 46
ARTICLE XI GENERAL PROVISIONS......................................... 46
11.1 Effectiveness of Representations, Warranties and Agreements 46
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11.2 Expenses................................................... 46
11.3 Governing Law.............................................. 47
11.4 Notices.................................................... 47
11.5 Entire Agreement........................................... 48
11.6 Disclosure Schedule........................................ 48
11.7 Headings; References....................................... 48
11.8 Counterparts............................................... 49
11.9 Parties in Interest; Assignment............................ 49
11.10 Severability; Enforcement.................................. 49
11.11 Acquiror Guarantee......................................... 49
ANNEX A ................................................................... 51
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1997, among
Park-Ohio Industries, Inc. an Ohio corporation ("Acquiror"), P O Acquisition
Corporation, a Minnesota corporation and wholly-owned subsidiary of Acquiror
("Merger Sub"), and Arden Industrial Products, Inc., a Minnesota corporation
(the "Company")
W I T N E S S E T H:
WHEREAS, the boards of directors of Acquiror and the Company have
approved, and deem it advisable and in the best interests of their respective
shareholders to consummate the acquisition of the Company by Acquiror upon the
terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the acquisition be accomplished by a
merger of Merger Sub with and into the Company ("Merger"), with the Company
continuing as the surviving corporation (the "Surviving Corporation"); and
WHEREAS, Acquiror, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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1.1 DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"Acquisition Proposal" shall have the meaning set forth in Section
8.5(c).
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such other Person.
"Applicable Laws" shall mean, with respect to any Person, all statutes,
laws, ordinances, rules, orders, judgments, decrees, arbitration awards and
regulations of any Governmental Authority applicable to such Person and its
business, properties and assets.
"Articles of Merger" shall have the meaning set forth in Section 3.3.
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"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to close.
"Certificates" shall have the meaning set forth in Section 4.2 (b).
"Closing" shall have the meaning set forth in Section 3.2.
"Closing Date" shall have the meaning set forth in Section 3.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, the
regulations promulgated thereunder, and the judicial and administrative
interpretations thereof.
"Company Common Stock" shall have the meaning set forth in Section
4.1(b).
"Company Disclosure Schedule" shall have the meaning set forth in
Section 11.6.
"Company Representatives" shall have the meaning set forth in Section
8.5.
"Company SEC Documents" shall have the meaning set forth in Section
5.7.
"Company Shareholder Approval" shall have the meaning set forth in
Section 5.4(a).
"Company Shareholders' Meeting" shall have the meaning set forth in
Section 8.1(d).
"Confidentiality Agreement" shall have the meaning set forth in Section
7.2.
"Dissenting Shares" shall have the meaning set forth in Section 4.2(d).
"DOJ" shall mean the Department of Justice.
"Effective Time" shall have the meaning set forth in Section 3.3.
"Employee Benefit Plans" shall have the meaning set forth in Section
5.11(a).
"Encumbrances" shall mean any and all mortgages, security interests,
liens, claims, pledges, restrictions, leases, title exceptions, rights of
others, charges or other encumbrances.
"Environmental Laws" shall mean all applicable United States, foreign,
state, provincial, and local laws, regulations, ordinances or orders relating to
the protection of the environment, including but not limited to the Clean Air
Act, 42 U.S.C. Section 7401 et. seq., the Clean Water Act ("CWA"), 33 U.S.C.
Section 1251 et. seq., the Resource Conservation Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et. seq., the Toxic Substances Control Act ("TSCA"), 15
U.S.C. Section 2601 et. seq., the Comprehensive
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Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et. seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et. seq., any administrative or judicial judgment, order or decree;
and any other state, federal or local law, regulation, rule, ordinance or order,
currently in existence which govern:
(a) the existence, cleanup and/or remedy of contamination on
property;
(b) the emission or discharge of Hazardous Substances into the
environment;
(c) the control of hazardous waste;
(d) the use, generation, transport, treatment, storage,
disposal, removal or recovery of Hazardous Substances,
including building materials; or
(e) the protection of health and safety.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the applicable regulations promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is part of the same controlled group, or under common control
with, or part of an affiliated service group that includes, the Company within
the meaning of Code Sections 414(b), (c), (m) or (o) and the regulations
promulgated thereunder and/or ERISA Section 4001(a)(14).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section 4.2(a).
"Exchange Fund" shall have the meaning set forth in Section 4.2(a).
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States of America as of the date of the applicable determination.
"General Disclosure Schedule" shall have the meaning set forth in
Article V.
"Governmental Authority" shall mean any foreign, Federal, state,
municipal or other governmental authority, department, commission, board,
bureau, agency or instrumentality.
"Hazardous Substances" shall mean
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(a) any oil, flammable substances, explosives, radioactive
materials, hazardous wastes or substances, toxic wastes or
substances or any other wastes, materials, conditions or
pollutants which (1) pose a hazard to the environment or to
persons on or about the Real Property or (2) cause the Real
Property to be in violation of any Environmental Law;
(b) asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other
equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas;
(c) any chemical, material or substance defined as, or included
in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words
of similar import under any applicable local, state or
federal law or under the regulations adopted pursuant
thereto, including but not limited to Environmental Laws;
(d) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by a governmental
authority.
"HSR Act" shall have the meaning set forth in Section 5.4(c).
"Improvements" shall mean, with respect to any Real Property, all
buildings, fixtures, improvements and facilities located on or attached to such
Real Property or owned or leased by the Company and used in, on or at such Real
Property, together with any and all loading docks, parking lots, garages, and
other facilities serving any such buildings; and landscaping and site
improvements.
"IRS" shall mean the United States Internal Revenue Service.
"Legal Proceedings" shall mean any civil or criminal judicial,
administrative or arbitral actions, suits, proceedings, hearings (public or
private) or governmental proceedings.
"Material Adverse Effect" shall mean, with respect to any Person, any
change, occurrence or effect that is or is reasonably likely to be materially
adverse to the assets, business, results of operations or condition (financial
or otherwise) of such Person and its Subsidiaries taken as a whole.
"MBCA" shall mean the Minnesota Business Corporation Act.
"Merger" shall have the meaning set forth in the second recital to this
Agreement. "Merger Consideration" shall have the meaning set forth in Section
4.1(b).
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"Offer" shall have the meaning set forth in Section 2.1(a).
"Options" shall have the meaning set forth in Section 8.6.
"Permits" shall have the meaning set forth in Section 5.6(a).
"Permitted Encumbrances" shall mean only the following title
exceptions:
(a) taxes either not delinquent or being diligently contested;
(b) mechanics', materialmen's or similar statutory liens being
diligently contested;
(c) other exceptions that do not and would not, individually or
in the aggregate, have a Material Adverse Effect with
respect to the Company;
(d) encumbrances related to indebtedness disclosed in the
Company SEC Documents filed and publicly available prior to
the date of this Agreement, and
(e) encumbrances related to indebtedness other than described in
the preceding clause (d) described in the General Disclosure
Schedule.
"Person" shall mean an individual, corporation, partnership, trust or
unincorporated organization or a government or any agency or political
subdivision thereof.
"Proxy Statement" shall mean the proxy or information statement
relating to the Company Shareholder Approval in connection with the consummation
of the transactions contemplated by this Agreement, as such proxy statement may
be amended or supplemented from time to time.
"Real Property" shall have the meaning set forth in Section 5.12.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, placing, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment, whether intentional or unintentional.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SEC" shall mean the Securities and Exchange Commission.
"Short Form Merger" shall have the meaning set forth in Section 8.1(e).
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"Subsidiary" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture, limited liability company or other
legal entity of which such Person owns, either directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or similar governing
body of such corporation, partnership, joint venture or other legal entity and
(ii) each partnership or limited liability company in which such Person or
another Subsidiary of such Person is the general partner, managing partner or
otherwise controls.
"Surviving Corporation" shall have the meaning set forth in the second
recital of this Agreement.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts, levies,
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes, any liability in
respect of Taxes imposed by contract, tax sharing agreement, tax indemnity
agreement or any similar agreement.
"Tax Return" shall mean any report, return, document, declaration or
any other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including without
limitation, information returns, any document with respect to or accompanying
payments or estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return document, declaration
or other information.
"Third Party" shall mean a party or parties unaffiliated with either
the Company or Acquiror.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein," and "hereunder" and words of
similar import, when used in this Agreement, shall refer to
this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
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(c) The terms "dollars" and "$" shall mean United States
dollars.
ARTICLE II
THE TENDER OFFER
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2.1 TENDER OFFER.
(a) Provided that this Agreement shall not have been terminated
in accordance with Article X hereof and none of the events
set forth in Annex A hereto shall have occurred or be
existing (or, if any of such events has occurred or is
existing, shall not have been waived in writing by Merger
Sub), within fifteen business days of the date hereof,
Merger Sub will commence a tender offer (the "Offer") for
all of the outstanding shares of Company Common Stock at a
price of $6.00 per share in cash, net to the seller ("Offer
Price"), subject only to the conditions set forth in Annex A
hereto. Subject to the terms and conditions of the Offer,
which conditions may be waived by Merger Sub in its sole
discretion, Merger Sub will accept for payment and promptly
pay for all shares of Company Common Stock duly tendered and
not withdrawn pursuant to the Offer at the earliest time
following expiration of the Offer that all conditions to the
Offer shall have been satisfied or waived by Merger Sub. The
obligation of Merger Sub to commence the Offer shall be
subject only to the conditions set forth in Annex A hereto
and the obligation of Merger Sub to accept for payment,
purchase and pay for Company Common Stock tendered pursuant
to the Offer shall be subject only to such conditions, and
to the further condition that a number of Company Common
Stock representing not less than 50.1% of the combined
voting power of the voting securities of the Company on a
fully diluted basis shall have been validly tendered and not
withdrawn prior to the expiration date of the Offer. The
Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this
Agreement and the conditions set forth in Annex A hereto.
Without the written consent of the Company, Merger Sub shall
not decrease the Offer Price, change the number of shares of
Company Common Stock sought to an amount less than 50.1% of
the outstanding shares of Company Common Stock, change the
form of consideration to be paid pursuant to the Offer or
impose conditions to the Offer in addition to those set
forth in Annex A hereto, or amend any other term or
condition of the Offer in any manner, except as may be
required pursuant to the SEC's rules with respect to the
extension of time periods, which is adverse to the holders
of shares of Company Common Stock; provided, however, that
if on a scheduled expiration date of the Offer (as it may be
extended in accordance with the terms hereof), all
conditions to the
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Offer shall not have been satisfied or waived, the Offer may
be extended from time to time without the consent of the
Company for such period of time as is reasonably expected to
be necessary to satisfy the unsatisfied conditions and
provided further that if as of a scheduled expiration date
all of the conditions to the Offer have been satisfied and
in excess of 80% but less than 90% of the outstanding shares
of Company Common Stock have been tendered, Merger Sub may
extend the Offer up to an additional ten business days.
(b) Acquiror and Merger Sub shall file with the SEC on the date
the Offer is commenced a Tender Offer Statement on Schedule
14D-1 with respect to the Offer (together with all
amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-1") which will include,
as exhibits, the Offer to Purchase and a form of letter of
transmittal and summary advertisement. The Company's Board
of Directors shall recommend acceptance of the Offer to its
shareholders in a Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") to be filed with the
SEC on the date the Offer is commenced; provided, however,
that if the Company's Board of Directors determines to amend
or withdraw its recommendation in accordance with Section
8.5 hereof, such amendment or withdrawal shall not
constitute a breach of this Agreement. Acquiror and Merger
Sub represent that the Schedule 14D-1, and the Company
represents that the Schedule 14D-9, will comply in all
material respects with the provisions of applicable federal
and Minnesota securities laws and, on the date filed with
the SEC and on the date first published, sent or given to
the Company's shareholders, 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 statement therein, in light of the circumstances
under which they were made, not misleading, except that no
representation is made by Acquiror or Merger Sub with
respect to information supplied by the Company in writing
for inclusion in the Schedule 14D-1. The information
supplied by the Company for inclusion in the Schedule 14D-1
will not, on the date filed with the SEC and on the date
first published, sent or given to the Company's
shareholders, 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, the information supplied by Acquiror
and Merger Sub for inclusion in the Schedule 14D-9 will not,
on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders,
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
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that no representation is made by the Company with respect
to information supplied by Acquiror or Merger Sub in writing
for inclusion in the Schedule 14D-9. Each of Acquiror and
Merger Sub further agrees to take all steps necessary to
cause the Schedule 14D-1, and the Company agrees to take all
steps necessary to cause the Schedule 14D-9, 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. Each of
Acquiror and Merger Sub, on the one hand, and the Company,
on the other hand, agrees promptly to correct any
information in the Schedule 14D-1 or Schedule 14D-9, as
applicable, if and to the extent that it shall have become
false or misleading in any material respect, and Acquiror,
Merger Sub and the Company further agree to take all steps
necessary to cause the Schedule 14D-1 or Schedule 14D-9, as
applicable, 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 Company and its
counsel and investment advisers shall be given the
opportunity to review the Schedule 14D-1 before it is filed
with the SEC and Acquiror and its counsel shall be given the
opportunity to review the Schedule 14D-9 before it is filed
with the SEC. In addition, Acquiror and the Company agree to
provide each other and its counsel in writing with any
comments it or its counsel may receive from time to time
from the SEC or its staff with respect to the Schedule 14D-1
or Schedule 14D-9, as applicable, promptly after the receipt
of such comments.
(c) The Schedule 14D-9 shall set forth, and Company hereby
represents, that (a) the Board of Directors of Company has
at a meeting duly called and held and at which a quorum was
present and acting throughout, by the requisite vote of all
directors present, (i) determined that the Offer and the
Merger are in the best interests of Company and its
shareholders, (ii) approved the Offer, this Agreement and
the Merger, and (iii) subject to the fiduciary duties of the
Board of Directors, recommended acceptance of the Offer and
approval and adoption of this Agreement and the Merger by
the holders of shares of Company Common Stock.
(d) In connection with the Offer, the Company will cause its
Transfer Agent to furnish promptly to Merger Sub a list, as
of the most recent available date, of the record holders of
shares of Company Common Stock and their addresses, as well
as mailing labels containing the names and addresses of all
record holders of shares of Company Common Stock and lists
of security positions of shares of Company Common Stock held
in stock depositories. The Company will furnish Merger Sub
with such additional information (including, but not limited
to, updated lists of holders of shares of Company
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Common Stock and their addresses, mailing labels and lists
of security positions) and such other assistance as Acquiror
or Merger Sub or their agents may reasonably request in
communicating the Offer to the record and beneficial holders
of shares of Company Common Stock.
ARTICLE III
THE MERGER
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3.1 MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the MBCA, Merger Sub shall be merged with
and into Company at the Effective Time. Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the Surviving Corporation and shall continue to be governed by the laws of the
State of Minnesota in accordance with the MBCA and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger.
3.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.1, the closing of the Merger (the "Closing") will take place at 9:00 a.m.,
Cleveland time, on the later of the first Business Day following the date on
which the last of the conditions set forth in Article IX is fulfilled or waived
or July 25, 1997 (the "Closing Date"), at the offices of Squire, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
unless another date, time or place is agreed to by the parties hereto.
3.3 EFFECTIVE TIME. On the Closing Date, or as soon as practicable
thereafter, the parties hereto shall cause the Merger to be consummated by
filing Articles of Merger (the "Articles of Merger") executed in accordance with
the relevant provisions of the MBCA with the Secretary of State of the State of
Minnesota. The Merger shall become effective at such time as the Articles of
Merger is so duly filed or at such time thereafter as is provided in the
Articles of Merger (the "Effective Time").
3.4 EFFECTS OF THE MERGER. The Merger shall have the effects as set
forth in Section 302A.641 of the MBCA.
3.5 ARTICLES OF INCORPORATION AND BYLAWS.
(a) The Articles of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation after
the Effective Time, until duly amended in accordance with
its terms and the MBCA.
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(b) The Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving
Corporation after the Effective Time until duly amended as
provided therein, by the MBCA or the Articles of
Incorporation of the Surviving Corporation.
3.6 DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignations or removal or until their respective successors
are duly elected and qualified, as the case may be.
3.7 OFFICERS. The officers of the Company immediately prior to the
Effective Time shall remain the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
3.8 BOARD OF DIRECTORS; COMMITTEES. If requested by Acquiror, the
Company will, subject to compliance with applicable law and promptly following
the purchase by Merger Sub of more than 50 percent of the outstanding Company
Common Stock pursuant to the Offer, take all actions necessary to cause persons
designated by Acquiror to become directors of the Company so that the total
number of such persons equals that number of directors, rounded up to the next
whole number, which represents the product of (x) the total number of directors
on the Board of Directors multiplied by (y) the percentage that the number of
shares of Company Common stock so accepted for payment bears to the number of
shares of Company Common Stock outstanding at the time of such acceptance for
payment. In furtherance thereof, the Company will increase the size of the
Board, or use its reasonable efforts to secure the resignation of directors, or
both, as is necessary to permit Acquiror's designees to be elected to the
Company's Board of Directors; provided, however, that prior to the Effective
Time, the Company's Board of Directors shall always have at least three members
who are neither officers of Acquiror nor designees, shareholders or affiliates
of Acquiror. At such time, the Company, if so requested, will use its reasonable
efforts to also cause persons designated by Acquiror to constitute the same
percentage of each committee of the Board of Directors. The Company's
obligations to appoint designees to the Board of Directors shall be subject to
Section 14(f) of the Securities Exchange Act of 1934 (the "Exchange Act") and
Rule 14f-1 thereunder. The Company shall promptly take all actions required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 3.8 and shall provide for inclusion in Acquiror's Schedule 14D-1 being
mailed to shareholders contemporaneously with the commencement of the Offer such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfill its obligations under
this Section 3.8. Acquiror will supply the Company and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1. Notwithstanding anything in
this Agreement to the contrary, prior to the Effective Time, the affirmative
vote of a majority of the directors of the Company which are not officers of
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Acquiror or designees, shareholders of affiliates of Acquiror shall be required
to (i) amend or terminate this Agreement on behalf the Company, (ii) exercise or
waive any of the Company's rights or remedies hereunder, (iii) extend the time
for performance of Merger Sub's obligations hereunder or (iv) take any other
action by the Company in connection with this Agreement required to be taken by
the Board of Directors.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
--------------------------------------------
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
------------------------------------------------------
4.1 EFFECT ON CAPITAL STOCK. At 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 the holder of any shares of the capital stock of Merger Sub, the
Merger shall have the following effects on such shares of capital stock:
(a) Capital Stock of Merger Sub. Each share of the capital stock
of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into one share of
Company Common Stock.
(b) Conversion of Company Common Stock. Each share of Common
Stock, par value $0.01 per share ("Company Common Stock"),
of the Company, issued and outstanding immediately prior to
the Effective Time (excluding Dissenting Shares, if any),
shall be converted into the right to receive $6.00 net to
seller in cash without interest (the "Merger
Consideration"). All such shares, by virtue of the Merger,
shall no longer be outstanding and shall be canceled and
retired and shall cease to exist.
(c) No Rights as Shareholders After Effective Time. On and after
the Effective Time, holders of certificates which
immediately prior to the Effective Time represented
outstanding shares of Company Common Stock shall cease to
have any rights as shareholders of the Company except the
right to receive the consideration set forth in this Article
IV for each such share held by them or, if applicable,
payments due to holders of Dissenting Shares, if any, in
accordance with Section 4.2(d).
4.2 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Prior to the Effective Time, Acquiror shall
designate a bank or trust company to act as exchange agent
in the Merger which shall be reasonably satisfactory to the
Company (the "Exchange Agent"), and Acquiror shall make
available to the Exchange Agent for the benefit of the
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17
holders of shares of Company Common Stock for exchange in
accordance with this Article IV, through the Exchange Agent,
the Merger Consideration deliverable pursuant to Section
4.1(b) in exchange for outstanding shares of Company Common
Stock (the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Merger
Consideration deliverable pursuant to Section 4.1(b) out of
the Exchange Fund upon the holder's satisfaction of the
exchange procedures set forth in subsection (b) below.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, Acquiror shall instruct the Exchange
Agent to mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time
evidenced outstanding shares of Company Common Stock (the
"Certificates"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Acquiror
reasonably may specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for
payment of the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed and completed
in accordance with the instructions thereto, and such other
customary documents as may be required by the Exchange
Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor payment evidencing the Merger
Consideration, less any required tax withholdings, and the
Certificates so surrendered shall forthwith be canceled. No
interest will be paid or will accrue on the amount payable
upon the surrender of any such Certificate. If payment is to
be made to a person other than the registered holder of the
Certificate surrendered, it shall be a condition of such
payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to
a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the
Surviving Corporation or the Exchange Agent that such tax
has been paid or is not applicable. One hundred and eighty
days following the Effective Time, the Surviving Corporation
shall be entitled to cause the Exchange Agent to deliver to
it any funds (including any interest received with respect
thereto) made available to the Exchange Agent which have not
been disbursed to holders of Certificates formerly
representing Company Common Stock outstanding on the
Effective Time or Options outstanding, and thereafter such
holders shall be entitled to look to the Surviving
Corporation only as general creditors thereof with respect
to the cash payable upon due surrender of their
Certificates. The Surviving
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18
Corporation shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the exchange
of cash for Company Common Stock.
(c) Transfer Books. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving
Corporation of any shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If,
after the Effective Time, certificates for such shares of
Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged as
provided in this Section 4.2 subject to the satisfaction of
the exchange procedures set forth above and the MBCA in the
case of Dissenting Shares.
(d) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock
which immediately prior to the Effective Time are held by
shareholders who have properly exercised and perfected
appraisal rights under Section 302A.473 of the MBCA (the
"Dissenting Shares"), shall not be converted into the right
to receive the Merger Consideration, but the holders of
Dissenting Shares shall be entitled to receive such
consideration as shall be determined pursuant to Section
302A.473 of the MBCA; provided, however, that if any such
holder shall have failed to perfect or shall withdraw or
lose his right to appraisal and payment under the MBCA, such
holder's shares of Company Common Stock shall thereupon be
deemed to have been converted as of the Effective Time into
the right to receive the Merger Consideration, without any
interest thereon, and such shares of Company Common Stock
shall no longer be Dissenting Shares. The Company shall give
Acquiror notice of any Dissenting Shares and Acquiror shall
have the right to participate in all negotiations and
proceedings with respect to any such demands. Neither the
Company nor the Surviving Corporation shall, except with the
prior written consent of Acquiror, voluntarily make any
payment with respect to, or settle or offer to settle, any
such demand for payment.
(e) No Liability. None of Company, Acquiror or Merger Sub shall
be liable to any holder of shares of Company Common Stock
for such cash that has been delivered to a public official
pursuant to any applicable abandoned property, escheat or
similar laws.
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19
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Acquiror and Merger Sub
that except as set forth in the schedules referred to herein or in a separate
general schedule (the "General Disclosure Schedule"):
5.1 ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized and validly existing and is in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted.
The Company is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualifications or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a Material Adverse
Effect on the Company. The Company has delivered to Acquiror complete and
correct copies of the Articles of Incorporation and bylaws, or similar
organizational documents, of the Company, in each case as amended to the date of
this Agreement, all of which are in full force and effect.
5.2 SUBSIDIARIES. The Company has no Subsidiaries.
5.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 25,000,000 shares of Company Common Stock and no shares of preferred
stock. As of June 10, 1997, (i) 6,989,456 of Company Common Stock were issued
and outstanding, and (ii) 815,459 shares of Company Common Stock were reserved
for issuance upon exercise of outstanding Options. Except as set forth above, no
shares of common stock or other voting or equity securities of the Company are
reserved for issuance. Except as set forth in Schedule 5.3, there are no
outstanding stock appreciation rights and there are no other outstanding
contractual rights the value of which is derived from the financial performance
of the Company or the value of shares of Company Common Stock. All outstanding
shares of Company Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights. There are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of the Company may vote. Except as set
forth above there are no outstanding securities, options, warrants, calls,
rights, commitments, subscriptions, agreements, voting trusts, arrangements or
undertakings of any kind to which the Company is a party or by which the Company
is bound, obligating the Company to issue, deliver or sell or cause to be
issued, delivered or sold, additional shares of capital stock or other voting or
equity securities of the Company or obligating the Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking or to vote any such security.
Except as set forth on Schedule 5.3, there are no outstanding contractual
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20
obligations of the Company to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company.
5.4 AUTHORITY; ENFORCEABILITY; NO CONFLICTS; AND CONSENTS.
(a) The Company has the requisite corporate power and authority
to enter into this Agreement and, subject to obtaining the
Company Shareholder Approval, to consummate the transactions
contemplated by this Agreement. The execution and delivery
of this Agreement by the Company and the consummation by the
Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of the
consummation of the Merger, to adoption of this Agreement by
the holders of a majority of the outstanding shares of
Company Common Stock (the "Company Shareholder Approval"),
at a special meeting of the holders of Company Common Stock.
This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes the valid
and binding obligations of Acquiror and Merger Sub,
constitutes the valid and binding obligations of the
Company, enforceable against the Company in accordance with
its terms.
(b) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any breach
or violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation
or cause loss of a material benefit under, or result in the
creation or maturation of any Encumbrance or purchase right
upon any of the properties or assets of the Company under,
(i) the Articles of Incorporation or Bylaws of the Company,
(ii) other than severance agreements, severance plans and
employment agreements disclosed in the Company SEC
Documents, the Options or as set forth in Schedule 5.4 and
subject to the governmental filings and other matters
referred to in Section 5.4(c), any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
arrangement, obligation, instrument, concession, franchise,
permit or license applicable to the Company or its
properties or assets or (iii) subject to the governmental
filings and other matters referred to in Section 5.4(c), any
judgment, order, award, decree, statute, law, ordinance,
rule or regulation applicable to the Company or its
properties or assets, other than, in the case of clauses
(ii) or (iii), any such conflicts, violations, defaults,
rights or liens that individually or in the aggregate would
not (X) have a Material Adverse Effect on the Company, (Y)
impair, in any material respect, the ability of the Company
to perform its obligations under
- 16 -
21
this Agreement or (Z) prevent or significantly delay the
consummation of any of the transactions contemplated by this
Agreement.
(c) No consent, approval, order, permit or authorization of, or
registration, declaration or filing with, any Governmental
Authority is required by the Company in connection with the
execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the filing of
a premerger notification and report form by the Company
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), (▇▇) as required by the Exchange Act
and Chapter 80B of the Minnesota Statutes, (iii) the filing
of the Articles of Merger with the Secretary of State of the
State of Minnesota and appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do business, and (iv) such other consents,
approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained
or made would not, individually or in the aggregate, (X)
have a Material Adverse Effect on the Company, (Y) impair,
in any material respect, the ability of the Company to
perform its obligations under this Agreement or (Z) prevent
or significantly delay the consummation of the transactions
contemplated by this Agreement.
5.5 VOTE REQUIRED. The Company Shareholder Approval is the only vote of
the holders of the Company's capital stock necessary to approve this Agreement
and the transactions contemplated hereby.
5.6 COMPLIANCE WITH APPLICABLE LAWS.
(a) The Company has in effect all Federal, state, local and
foreign governmental approvals, authorizations,
certificates, filings, franchises, licenses, notices,
permits and rights, including all authorizations under
Environmental Laws ("Permits"), necessary for it to own,
lease or operate its properties and assets and to carry on
its business as now conducted other than such Permits the
absence of which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company,
and there has occurred no default under any such Permit
other than such defaults which, individually or in the
aggregate, would not have a Material Adverse Effect on the
Company. Except as disclosed in the Company SEC Documents
filed and publicly available prior to the date of this
Agreement and the General Disclosure Schedule, the Company
is in compliance with all Applicable Laws, except for such
noncompliance which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company. No
investigation or review by any Governmental Authority
concerning any such possible noncompliance
- 17 -
22
by the Company is pending or, to the knowledge of the
Company, threatened.
(b) The Company is, and has been, in compliance with all
applicable Environmental Laws, except as set forth on
Schedule 5.6 and except for such noncompliance which,
individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(c) There have been no Releases of Hazardous Substances in, on,
under or affecting any properties currently or formerly
owned, operated, or leased by the Company in violation of,
or as would reasonably be anticipated to result in liability
under, applicable Environmental Laws, and the Company has
not disposed of any Hazardous Substances or any other
substance in a manner that has led to, or could reasonably
be anticipated to lead to, a Release in violation of
applicable Environmental Laws except, in each case, as
disclosed on Schedule 5.6.
5.7 COMPANY SEC DOCUMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has delivered to Acquiror each registration
statement, schedule, report, proxy statement or information
statement prepared by it since it became obligated to file
with the SEC, including, without limitation, (i) the
Company's Annual Reports on Form 10-K (ii) the Company's
Quarterly Reports on Form 10-Q and periodic Reports on Form
8-K and (iii) the Company's Proxy Statements, each in the
form (including exhibits and any amendments thereto) filed
with the SEC (collectively together with any similar
documents or documents filed by the Company with the SEC
pursuant to the terms hereof, the "Company SEC Documents")
which documents are all filings required to be made by the
Company during such period. As of their respective dates,
(i) the Company SEC Documents (including any financial
statements filed as a part thereof or incorporated by
reference therein) complied, and any Company SEC Documents
filed with the SEC subsequent to the date hereof will
comply, in all material respects with the requirements of
the Securities Act or the Exchange Act, as applicable, to
such Company SEC Documents, and (ii) none of the Company SEC
Documents contained or will contain at the time of filing
any untrue statement of a material fact or omitted or will
omit at the time of filing to state a material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are
made, not misleading. Each of the balance sheets included in
or incorporated by reference into the Company SEC Documents
(including the related notes and schedules) fairly presents
the financial position of the Company as of its date and
each of the statements of income, of
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23
shareholders' equity and of cash flows included in or
incorporated by reference into the Company SEC Documents
(including the related notes and schedules) fairly presents
the results of operations, retained earnings and cash flows,
as the case may be, of the Company for the periods set forth
therein (subject to, in the case of unaudited statements,
normal year-end audit adjustments which will not be material
in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as
may be noted therein. Other than the Company SEC Documents,
the Company has not filed any other definitive reports or
statements with the SEC between June 30, 1996 and the date
hereof.
(b) Except as disclosed in the Company SEC Documents filed and
publicly available prior to the date of this Agreement or in
the Company Disclosure Schedule, the Company does not have
any material indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise)
(i) required by GAAP to be reflected on a balance sheet of
the Company or in the notes, exhibits or schedules thereto
(except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice
since March 31, 1997) or (ii) which reasonably could be
expected to have a Material Adverse Effect on the Company.
5.8 ABSENCE OF CHANGES OR EVENTS. Except as disclosed in the Company
SEC Documents filed and publicly available prior to the date of this Agreement
or as set forth in the Company Disclosure Schedule or permitted by Section 7.1
of this Agreement, since March 31, 1997, the Company has conducted its business
only in the ordinary course, and there has not been (i) any change or occurrence
(other than those which relate to the industries the Company operates in
generally or the economy in general) which resulted in or is reasonably likely
to have a Material Adverse Effect on the Company, (ii) any declaration, setting
aside or payment of any dividend or other distribution with respect to the
Company Common Stock, (iii) any issuance of any shares of Company Common Stock
or other capital stock of the Company or any securities convertible into or
exchangeable or exercisable for capital stock of the Company, (iv) any split,
combination or reclassification of any of the capital stock of the Company or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock of the
Company, (v) (X) any granting by the Company to any director or officer of the
Company of any increase in compensation, except as required under employment
agreements, (Y) any granting by the Company to any such person of any increase
in severance or termination pay, except as disclosed in Schedule 5.8 or, (Z) any
entry by the Company into any employment, severance or termination agreement
with any such person, (vi) other than those listed on Schedule 5.8, any
acquisition of or commitment to purchase or build any property or project
involving an expenditure in excess of $1 million in the aggregate, (vii) any
damage, destruction or loss not covered by insurance, that has or reasonably
could be expected to have a Material Adverse Effect on the Company or (viii) any
change in accounting methods,
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24
principles or practices by the Company affecting its assets, liabilities or
business, except insofar as may have been required by a change in GAAP.
5.9 LITIGATION. Except as disclosed in Schedule 5.9 or in the Company
SEC Documents filed and publicly available prior to the date of this Agreement,
there are no Legal Proceedings pending against the Company or, to the knowledge
of the Company, threatened that, individually or in the aggregate, could
reasonably be expected to (i) have a Material Adverse Effect on the Company, or
(ii) prevent, or significantly delay, the consummation of the transactions
contemplated by this Agreement. Except as disclosed in Schedule 5.9 or as set
forth in the Company SEC Documents filed and publicly available prior to the
date of this Agreement, there is no judgment, order, injunction or decree of any
Governmental Authority outstanding against the Company.
5.10 TAXES. Except as disclosed in Schedule 5.10:
(a) The Company, and each affiliated group (as defined in
Section 1504(a) of the Code without regard to the
limitations of Section 1504(b) of the Code) of which the
Company is or has ever been a member, has timely filed all
Federal income Tax Returns and all other material Tax
Returns and reports required to be filed by it, and such Tax
Returns and reports are complete and accurate in all
material respects. The Company is entitled to file and be
included in a federal income tax return in accordance with
the requirements therefor prescribed in the Code. The
Company has paid all taxes shown due on such Tax Returns.
The most recent financial statements contained in the
Company SEC Documents reflect an adequate reserve for all
Taxes payable by the Company for all taxable periods and
portions thereof through the date of such financial
statements.
(b) No material deficiencies for any Taxes and no deficiencies
for any federal or state income taxes have been proposed,
asserted or assessed against the Company that have not been
fully paid or adequately provided for in the appropriate
financial statements of the Company, no requests for waivers
or extensions of the time to assess any Taxes are pending,
and no such waivers or extensions have been agreed to by the
Company. No material issues relating to Taxes have been
raised in writing by the relevant taxing authority during
any presently pending audit or examination, and no
representative of the Company has any knowledge or
information that any relevant taxing authority is
contemplating raising any such material issue relating to
Taxes.
(c) No liens for Taxes exist with respect to any assets or
properties of the Company, except for statutory liens for
Taxes not yet due.
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25
(d) The Company is not a party to or obligated under any tax
sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement
or other agreement relating to Taxes with any taxing
authority).
(e) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without
limitation, as a result of any termination of employment
prior to or following the Effective Time) none of Acquiror,
Merger Sub, the Company or the Surviving Corporation, or any
of their respective Subsidiaries will be obligated to make a
payment to an individual employed by the Company who is a
"disqualified individual", that would be characterized as an
"excess parachute payment" (as such terms are defined in
Section 280G of the Code) without regard to whether such
payment is reasonable compensation for personal services
performed or to be performed in the future; and the Company
otherwise has not made or has or will not become obligated
to make any such payment.
(f) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the
payment and withholding of Taxes. No tax is required to be
withheld pursuant to Section 1445 of the Code as a result of
the transactions contemplated by this Agreement.
(g) No Federal, state, local or foreign audits or other
administrative proceedings or court proceedings are
presently pending with regard to any Federal income or
material state, local or foreign Taxes or Tax Returns of the
Company and the Company has not received a written notice of
any material pending audit or proceeding, nor does the
Company or any representative of the Company have any
knowledge or information that any such audit or proceeding
is contemplated by any relevant taxing authority.
(h) The Company has not agreed or is required to make any
adjustment under Section 481(a) of the Code.
(i) The Company has not, with regard to any assets or property
held or acquired by it, filed a consent to the application
of Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company.
(j) No property owned by the Company (i) is property required to
be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986; (ii)
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26
constitutes "tax exempt use property" within the meaning of
Section 168(h)(1) of the Code; or (iii) is "tax exempt bond
financed property" within the meaning of Section 168(g) of
the Code.
(k) The Company has never been a member of an affiliated group
of corporations within the meaning of section 1504 of the
Code.
(l) The Company is not and has not been a party to any joint
venture, partnership, limited liability company, or any
other arrangement or contract that could be treated as a
partnership for purposes of any Tax.
(m) All material elections with respect to Taxes affecting the
Company are set forth in Schedule 5.10.
(n) The Company does not have and has not had a "permanent
establishment" in any foreign country, as such term is
defined in any applicable Tax treaty or convention between
the United States and such foreign country.
5.11 EMPLOYEE BENEFITS.
(a) Schedule 5.11(a) contains a complete and accurate list of
all pension, retirement, savings, disability, medical,
dental, health, life (including without limitation any
individual life insurance policy under which any employee,
former employee, officer or director of Company is the named
insured and as to which Company makes premium payments,
whether or not Company is the owner, beneficiary or both of
such policy), death benefit, group insurance,
profit-sharing, deferred compensation, stock option, stock
purchase, bonus, incentive, vacation pay, holiday pay,
severance pay, personal leave, employee discounts,
perquisites, educational benefit or similar programs, or
other employee benefit plan, trust, arrangement, contract,
agreement, policy or commitment (including, without
limitation, any pension plan as defined in Section 3(2) of
ERISA ("Pension Plan"), any multiemployer plan within the
meaning of Sections 4001 and 3(37) of ERISA ("Multiemployer
Plan") and any welfare plan as defined in Section 3(1) of
ERISA ("Welfare Plan")), whether or not any of the foregoing
is funded or insured and whether written or oral now or
heretofore maintained, or contributed to, by the Company or
any ERISA Affiliate for the benefit of any current or former
employee, director or officer of the Company (the
"Employees") or other Persons (all of the foregoing being
herein called the "Employee Benefit Plans"). Except as set
forth in Schedule 5.11(a), neither the Company nor any of
its ERISA Affiliates has any formal plan to create any
additional material Employee Benefit Plan or to modify or
change any existing Employee Benefit Plan in a material
respect.
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27
(b) Except as set forth in Schedule 5.11(b), each Employee
Benefit Plan has been operated and administered in all
respects in accordance with its terms and with applicable
law, including, but not limited to, ERISA, and the Code, and
all filings, disclosures and notices required by ERISA or
the Code (including notices under Section 4980B of the Code)
have been timely made. Each Pension Plan which is intended
to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal
Revenue Service with respect to the plan and trust documents
and all amendments thereto prior to the expiration of the
applicable remedial amendment period for such Employee
Benefit Plan, and the Company is not aware of any
circumstances likely to result in revocation of any such
favorable determination letter. Except as set forth in
Schedule 5.11(b), there is no pending or, to the best
knowledge of the Company, threatened legal action, suit or
claim relating to the Employee Benefit Plans. The Company
has not engaged in a transaction with respect to any
Employee Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof, would
reasonably be expected to subject the Company to a tax or
penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA.
(c) No liability to the Pension Benefit Guaranty Corporation
(the "PBGC") or otherwise with respect to the termination of
a plan under Title IV of ERISA has been or is expected to be
incurred by the Company or any ERISA Affiliate with respect
to any Pension Plan that is an ongoing, frozen or terminated
"single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, other than liability for payment of
PBGC premiums. The Company and its ERISA Affiliates do not
have any liability for and do not expect to incur any
withdrawal liability with respect to any Multiemployer Plan
under Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate) or any liability in
connection with the reorganization or termination of any
Multiemployer Plan. No notice of a "reportable event",
within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been
required to be filed for any Employee Benefit Plan or by any
ERISA Affiliate Plan within the 12-month period ending on
the date hereof. The PBGC has not instituted proceedings to
terminate any Pension Plan and, to the Company's knowledge,
no condition exists that presents a material risk that such
proceedings will be instituted.
(d) To the best knowledge of the Company, (i) all contributions
required to be made under the terms of any Employee Benefit
Plan or any collective bargaining agreement have been timely
made or properly reflected on the books of the Company. To
the best knowledge of the Company, (i) no
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28
Pension Plan has or reasonably expects to have an
"accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302
of ERISA; and (ii) all required payments to the PBGC with
respect to each Pension Plan have been made on or before
their due dates. Neither the Company nor any ERISA Affiliate
has provided, or is required to provide, security to any
Pension Plan pursuant to Section 401(a)(29) of the Code.
(e) As of the last day of the most recent prior plan year, the
market value of assets of each Pension Plan which is a
single employer plan covered under Title IV of ERISA (a
Title IV Plan) equaled or exceeded (and will, as of the
Closing Date, equal or exceed) the present value of "benefit
liabilities" (within the meaning of ERISA Section
4001(a)(16)) thereunder determined in accordance with both
(1) the Title IV Plan's actuarial valuation assumptions in
effect for such prior plan year, and (2) the provisions of
Title IV of ERISA on a Title IV Plan termination basis
(assuming such Title IV Plan terminated on each of such
dates).
(f) Except as set forth on Schedule 5.11(f), the Company has no
obligations to provide retiree health and life benefits
under any Employee Benefit Plan, other than benefits
mandated by Section 4980B of the Code.
(g) Except as set forth on Schedule 5.11(g), the Company does
not maintain any Employee Benefit Plans covering foreign
Employees, and all such Employee Benefit Plans are in
compliance with applicable local law and, are funded in
accordance with applicable law.
(h) With respect to each Employee Benefit Plan, the Company has
provided or will make available to Acquiror upon request, if
applicable, true and complete copies of existing: (a) plan
documents and amendments thereto; (b) trust instruments and
insurance contracts; (c) Forms 5500 filed with the IRS
during the preceding five (5) years; (d) most recent
actuarial valuation report and financial statement; (e) the
most recent summary plan description; (f) forms filed with
the PBGC during the preceding five (5) years; (g) post-1988
determination letters issued by the IRS; (h) any Form 5310
or Form 5330 filed with the IRS; and (i) nondiscrimination
tests performed under ERISA and the Code (including 401(k)
and 401(m) tests) during the preceding five (5) years.
(i) Except as set forth on Schedule 5.11(i), the consummation of
the transactions contemplated by this Agreement would not
reasonably be expected to, directly or indirectly, (A)
entitle, any Employee to severance pay, unemployment
compensation or any other severance payment, (B) result in
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29
any payment becoming due or increase the amount of
compensation due to any Employee, (C) increase the benefits
payable under any Employee Benefit Plan or (D) result in the
acceleration of the time of payment or the vesting of any
benefits under any Employee Benefit Plan.
5.12 TITLE TO PROPERTIES. Schedule 5.12 sets forth a complete list of
all material real property owned in fee by the Company and sets forth all
material real property leased by the Company as lessee as of the date hereof
(such owned and leased material real property, including all Improvements,
referred to collectively as the "Real Property"). Except as set forth in
Schedule 5.12, each of the Company has good and valid title to, or a valid
leasehold interest in, the Real Property held by it. Except as set forth in
Schedule 5.12, the Real Property is free of Encumbrances, except for Permitted
Encumbrances, and the consummation of the transactions contemplated by this
Agreement will not create any Encumbrance on any of the Real Property which,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. The Company enjoys peaceful and undisturbed possession under all leases
of Real Property, except for such breaches of the right to peaceful and
undisturbed possession that do not materially interfere with the ability of the
Company to conduct its business.
5.13 INSURANCE. All insurance policies identified in Schedule 5.13 and
relating to the business of the Company are in full force and effect, and the
Company is not in default under any of them.
5.14 LABOR MATTERS. Except as set forth in Schedule 5.14, the Company
is not the subject of any material proceeding asserting that the Company has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor union or labor organization nor is there pending or, to the knowledge
of the management of the Company, threatened, nor has there been for the past
five years, any material labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company. Except as set forth in Schedule
5.14, the Company is not a party to or otherwise bound by any labor or
collective bargaining agreements.
5.15 INTELLECTUAL PROPERTY.
(a) The Company owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs
or applications, and tangible or intangible proprietary
information or materials that are used in the business of
the Company as currently conducted, except for any such
failures to own, be licensed or possess that, individually
or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on the Company.
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30
Except as disclosed in Schedule 5.15 or the Company SEC Documents or as is not
reasonably likely to have a Material Adverse Effect on the Company:
(i) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the
performance of its obligations hereunder, in
violation of any licenses, sublicenses and other
agreements as to which the Company is a party and
pursuant to which the Company is authorized to use
any third-party patents, trademarks, service marks,
and copyrights ("Third-Party Intellectual Property
Rights");
(ii) No claims with respect to the patents, registered and
material unregistered trademarks and service marks,
registered copyrights, trade names, and any
applications therefor owned by the Company (the
"Company Intellectual Property Rights"), any trade
secret material to the Company, or Third Party
Intellectual Property Rights to the extent arising
out of any use, reproduction, or distribution of such
Third Party Intellectual Property Rights by or
through the Company, are currently pending or, to the
knowledge of the management of the Company, are
overtly threatened by any person;
(iii) the Company does not know of any valid grounds for
any material bona fide claims (A) to the effect that
the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for
use, sale or license by the Company, infringes on any
copyright, patent, trademark, service ▇▇▇▇, or trade
secret; (B) against the use by the Company of any
trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how, or computer software
programs and applications used in the business of the
Company as currently conducted or as proposed to be
conducted; (C) challenging the ownership, validity,
or effectiveness of any of the Company Intellectual
Property Rights or other trade secret material to the
Company; or (D) challenging the license or legally
enforceable right to use of the Third Party
Intellectual Property Rights by the Company;
(iv) to the knowledge of the management of the Company,
all material patents, registered trademarks and
service marks, and copyrights held by the Company are
valid, enforceable and subsisting; and
(v) to the knowledge of the management of the Company,
there is no material unauthorized use, infringement
or misappropriation of any of the Company
Intellectual Property Rights by any third party,
including any employee or former employee of the
Company.
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31
5.16 NO RESTRICTIONS ON THE OFFER OR THE MERGER. No state takeover
statute or similar statute or regulation, including without limitation Sections
302A.671 to 302A.675 of the MBCA, and no provision of the articles of
incorporation, by-laws or other governing instruments (including, without
limitation any shareholder control agreement contemplated by Section 302A.457 of
the MBCA) of the Company (i) imposes restrictions materially adversely affecting
(or materially delaying) the consummation of the Offer or the Merger or (ii)
would, as a result of the Offer, the Merger, the transactions contemplated
hereby or the acquisition of securities of the Company or the Surviving
Corporation by Acquiror or Merger Sub, (A) restrict or impair the ability of
Acquiror to vote or otherwise to exercise the rights of a stockholder with
respect to securities of the Company or the Surviving Corporation that may be
acquired or controlled by Acquiror or (B) entitle any person, entity or group to
acquire securities of the Company or the Surviving Corporation on a basis not
available to Acquiror. A committee of the Board of Directors of the Company has
approved the Offer and Merger in satisfaction of Sections 302A.011, subdivision
38, paragraph (h), and ▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇ (▇), of the MBCA.
5.17 DISPOSITIONS. Except as set forth in Schedule 5.17, as of the date
hereof the Company has not received any claims for indemnification,
contribution, breach or otherwise that are unresolved with respect to any
businesses, corporations, properties or assets (other than inventory sold in the
ordinary course) sold by it.
5.18 BROKERS AND INTERMEDIARIES. No broker, investment banker,
financial advisor or other person, other than ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated and
▇▇▇▇▇▇▇ Associates, Inc.(whose fee arrangements have been disclosed to Acquiror
in writing and will not be modified subsequent to the date of this Agreement
except as to ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated to the extent requested by the Board of
Directors of the Company as necessary or desirable to assist the Board of
Directors in the exercise of its fiduciary duties to the Company's shareholders
under Applicable Law in connection with an expansion of ▇▇▇▇ ▇▇▇▇▇▇▇▇
Incorporated's engagement), the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
5.19 OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has received the opinion of ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated to the effect
that, as of the date of this Agreement, the cash consideration to be received in
the Offer and the Merger by the holders of Company Common Stock (other than
Acquiror and its affiliates) is fair to such holders from a financial point of
view.
5.20 TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement and except to the extent disclosed in the Company
SEC Documents or as set forth in Schedule 5.20, from January 1, 1995 through the
date of this Agreement, there have been no transactions, agreements,
arrangements or understandings between the Company, on
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32
the one hand, and the Company's affiliates or other Persons, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
5.21 BUSINESS RELATIONS. Except as set forth in Schedule 5.21, since
June 30, 1996, none of the suppliers or vendors for which Company distributes
any material amount of products has advised the Company that it has or intends
to cease to use Company as a supplier of such products, no significant business
relationships which Company has with such principal suppliers or vendors has
been terminated or materially adversely affected, and Company has not been
advised that any such business relationship may be terminated or materially
adversely affected by any such principal supplier or vendor. Except as set forth
in Schedule 5.21, since June 30, 1996, none of the customers of Company which in
the Company's 1996 Fiscal Year purchased $500,000 or more of the Company's
products has advised the Company that it has or intends to cease to use Company
as a supplier of products or has or intends to modify any significant business
relationships with the Company in a materially adverse manner, and Company has
not been advised that any such business relationship may be terminated or may be
materially adversely affected by any such principal customer.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
---------------------------------------------------------
Acquiror and Merger Sub each hereby represents and warrants to the
Company as follows:
6.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of Acquiror and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Acquiror and Merger Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualifications
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect on Acquiror. Acquiror and Merger Sub each has delivered
to the Company complete and correct copies of its Articles of Incorporation and
by-laws (or comparable charter documents) in each case as amended to the date of
this Agreement.
6.2 AUTHORITY; ENFORCEABILITY; NO CONFLICTS AND CONSENTS.
(a) Each of Acquiror and Merger Sub has the requisite corporate
power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement.
The execution and delivery of this
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33
Agreement by Acquiror and Merger Sub and the consummation by
Acquiror and Merger Sub of the transactions contemplated by
this Agreement have been duly authorized by all necessary
corporate action on the part of Acquiror and Merger Sub.
This Agreement has been duly executed and delivered by
Acquiror and Merger Sub and, assuming this Agreement
constitutes the valid and binding obligations of the
Company, constitutes valid and binding obligations of each
of Acquiror and Merger Sub, enforceable against Acquiror and
Merger Sub in accordance with its terms.
(b) The execution and delivery of this Agreement do not, and the
consummation of the transaction contemplated by this
Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of
termination, cancellation, or acceleration of any obligation
or cause loss of a material benefit under, or result in the
creation or maturation of any Encumbrance or purchase right
upon any of the properties or assets of Acquiror or Merger
Sub under, (i) the Articles of Incorporation or by-laws (or
comparable charter documents) of Acquiror or Merger Sub,
(ii) subject to the governmental filings and other matters
referred to in Section 6.2(c), any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
applicable to Acquiror or Merger Sub or (iii) subject to the
governmental filings and other matters referred to in
Section 6.2(c), any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or
Merger Sub or their respective properties or assets, other
than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights or liens that
individually or in the aggregate would not (Y) impair, in
any material respect, the ability of Acquiror or Merger Sub
to perform its obligations under this Agreement or (Z)
prevent or significantly delay the consummation of any of
the transactions contemplated by this Agreement.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental
Authority is required by Acquiror or Merger Sub in
connection with the execution and delivery of this Agreement
or the consummation by Acquiror of any of the transactions
contemplated by this Agreement, except for (i) the filing of
a premerger notification and report form by Acquiror under
the HSR Act, (ii) such reports and filings under the
Exchange Act and Chapter 80B of the Minnesota Statutes as
may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the
filing of the Articles of Merger with the Minnesota
Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do
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34
business, (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not,
individually or in the aggregate, (Y) impair, in any
material respect, the ability of Acquiror or Merger Sub to
perform its obligations under this Agreement or (Z) prevent
or significantly delay the consummation of the transactions
contemplated by this Agreement.
6.3 BROKERS. No broker, investment banker, financial advisor or other
person, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Acquiror.
6.4 OWNERSHIP OF SHARES. As of the date of this Agreement Acquiror and
its Affiliates own 320,200 shares of Company Common Stock.
6.5 FINANCING. Either Acquiror or Merger Sub has or will have
sufficient funds available to purchase all of the Company Common Stock
outstanding on a fully diluted basis and to pay all related fees and expenses.
Acquiror has furnished the Company with a commitment from financial
institution(s) to provide such funds and will either maintain such commitment
letter in force until the earlier of completion of purchase of all of the
Company Common Stock or creation of the Exchange Fund or replace such commitment
with a similar commitment in form and substance satisfactory to the Company.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
7.1 CONDUCT OF BUSINESS OF THE COMPANY. The Company shall carry on its
business in the ordinary course and use its best efforts to preserve intact its
current business organizations, keep available the services of its current
officers and key employees and preserve its relationships consistent with past
practice with customers, suppliers and others having business dealings with it
to the end that its goodwill and ongoing business shall be unimpaired in all
material respects at the Effective Time. Without limiting the generality of the
foregoing, prior to the Effective Time, except as otherwise provided by the
terms of this Agreement, the Company shall not, without the written consent of
Acquiror, which consent may not be unreasonably withheld:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of
its capital stock, (B) split, combine or reclassify
any of its capital stock or, except pursuant to the
exercise of Options existing on the date hereof,
issue or authorize the issuance of any other
securities in respect of, in lieu of or in
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35
substitution for shares of its capital stock or
other equity interests or (C) purchase, redeem or
otherwise acquire or amend any shares of capital
stock or other equity interests of the Company or
any other securities thereof or any rights,
warrants or options to acquire any such shares,
interests or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber
or amend any shares of its capital stock, any other
voting securities or any securities convertible
into, or any rights, warrants or options to
acquire, any such shares, interests, voting
securities or convertible securities (other than
the issuance of Company Common Stock upon the
exercise of Options outstanding on the date of this
Agreement in accordance with their present terms);
(iii) amend its Articles of Incorporation, Bylaws or
other comparable charter or organizational
documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing all or
substantially all of the assets of, or by any other
manner, any business or any corporation,
partnership, joint venture, association or other
business organization or division thereof or (B)
any assets except (x) purchases of inventory,
furnishings and equipment in the ordinary course of
business consistent in nature and amount with past
practice, (y) expenditures listed on Schedule 7.1
or (z) other expenditures in an amount not to
exceed $2,000 in any single instance or $25,000 in
the aggregate;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise
dispose of any of its properties or assets, except
sales in the ordinary course of business consistent
with past practice;
(vi) (A) other than (1) ordinary course working capital
borrowings, of which not more than $3 million may
be outstanding at any one time plus amounts
necessary to make payments to holders of options
upon cancellation as is provided for in Section 8.6
of this Agreement, (2) borrowings required to
finance specific projects listed on Schedule 7.1,
incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person,
issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the
Company, guarantee any debt securities of another
person, enter into any "keep well" or other
agreement to maintain any financial statement
condition of another person or enter into any
arrangement having the economic effect of any of
the foregoing or (B) make any
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36
loans, advances or capital contributions to, or
investments in, any other person other than
advances to employees, suppliers or customers in
the ordinary course of business consistent with
past practice;
(vii) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge,
settlement or satisfaction, (A) in the ordinary
course of business consistent with past practice or
(B) in accordance with their terms of liabilities
reflected or reserved against in the most recent
financial statements (or the notes thereto) of the
Company included in the Company SEC Documents filed
and publicly available prior to the date of this
Agreement or incurred in the ordinary course of
business consistent with past practice since the
date of such financial statements or waive the
benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to
which the Company is a party;
(viii) except as required to comply with Applicable Law,
(A) adopt, enter into, terminate or amend any
Employee Benefit Plan or other arrangement for the
benefit or welfare of any director, officer or
current or former employee including any collective
bargaining agreements or arrangements, (B) increase
in any manner the compensation or fringe benefits
of, or pay any bonus to, any director, officer or
employee (except for normal increases or bonuses as
contractually required pursuant to agreements
disclosed in the Company SEC Documents filed and
publicly available prior to the date of this
Agreement or in Schedule 5.8), grant any severance
or termination pay to, or enter into any employment
or severance agreement with any director, officer
or other employee of the Company or, (C) pay any
benefit subject to the requirements of ERISA that
is not provided for under any Employee Benefit
Plan, (D) except for payments or awards in cash
permitted by clause (B), grant any awards under any
bonus, incentive, performance or other compensation
plan or arrangement or Employee Benefit Plan
(including the grant of stock options, stock
appreciation rights, stock based or stock related
awards, performance units or restricted stock, or
the removal of existing restrictions in any
Employee Benefit Plans or agreements or awards made
thereunder) (E) take any action to fund or in any
other way secure the payment of compensation or
benefits under any employee plan, agreement,
contract or arrangement or Employee Benefit Plan
other than in the ordinary
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37
course of business consistent with past practice,
(F) unless requested to do so by Acquiror, which
the Company agrees to do following the acquisition
of Company Common Stock in the Offer if so
requested by Acquiror, take any action to
accelerate the payment or vesting of compensation
or benefits under any employee plan, agreement,
contract or arrangement or Employee Benefit Plan,
or (G) establish, adopt, enter into, or make any
new grants or awards under or amend, any collective
bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock,
pension, retirement, employee stock ownership,
deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any
directors, officers or employees, including without
limitation, the Employees;
(ix) except in the ordinary course of business, modify,
amend or terminate any contract or agreement set
forth in the Company SEC Documents to which the
Company is a party or waive, release or assign any
material rights or claims;
(x) conduct its business in a manner or take, or cause
to be taken, any other action that would prevent or
materially delay the Company or Acquiror from
consummating the transactions contemplated hereby
in accordance with the terms of this Agreement
(regardless of whether such action would otherwise
be permitted or not prohibited hereunder),
including, without limitation, any action which may
materially limit the ability of the Company or
Acquiror to consummate the transactions
contemplated hereby as a result of antitrust or
other regulatory concerns; or
(xi) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled
or terminated without notice to Acquiror, except in
the ordinary and usual course of business;
(xii) make or amend any federal, state, or local Tax
election, agree to waive or extend any statute of
limitations, or resolve or agree to resolve any
audit or proceeding relating to Taxes that is
referenced in section 5.10 of this Agreement; or
(xiii) authorize any of, or commit or agree to take any
of, the foregoing actions.
7.2 ACCESS TO INFORMATION. The Company shall afford to Acquiror and
Merger Sub and to the officers, employees, accountants, counsel, financial
advisors and other
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38
representatives of Acquiror and Merger Sub, reasonable access during normal
business hours (during the period prior to the Effective Time) to all its
properties, books, environmental reports, contracts, commitments, personnel,
consultants, customers, suppliers, accountants, attorneys, and records
(including the work papers of the Company's independent accountants) and, during
such period, the Company shall furnish promptly to the other party (a) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as such other party may reasonably request provided, however, that (i)
no contact shall be made with any customers and suppliers of the Company other
than through a representative of the Company and (ii) the Company shall be
permitted to have a representative of the Company participate in any meetings or
discussions with any of the Company's customers and suppliers. Except as
required by Applicable Law, Acquiror and Merger Sub will hold, and will cause
its respective officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
confidence to the extent required by, and in accordance with, the provisions of
the letter, dated April 15, 1997, between the Company and Acquiror (the
"Confidentiality Agreement").
ARTICLE VIII
ADDITIONAL AGREEMENTS
---------------------
8.1 PREPARATION OF PROXY STATEMENT; SHAREHOLDERS' MEETING.
(a) If required following termination of the Offer, the Company
shall prepare and file with the SEC the Proxy Statement. The
Company shall use reasonable efforts to have the Proxy
Statement cleared by the SEC, as promptly as practicable
thereafter. The Proxy Statement shall not be filed, and no
amendment or supplement thereto will be made by the Company,
without consultation with Acquiror and its counsel.
(b) Each of the Company, Acquiror and Merger Sub covenants that
none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in the Proxy
Statement will, at the date it is first mailed to the
shareholders of the Company, or at the time of the Company
Shareholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the
requirements of the Exchange Act. Notwithstanding the
foregoing, (i) no representation or covenant is made by the
Company with respect to statements made therein based on
information supplied in writing
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39
by Acquiror or Merger Sub specifically for inclusion. If at
any time prior to the Effective Time there shall occur (i)
any event with respect to the Company, or with respect to
other information supplied by the Company for inclusion in
the Proxy Statement or (ii) any event with respect to
Acquiror or Merger Sub, or with respect to information
supplied by Acquiror or Merger Sub for inclusion in the
Proxy Statement, in either case which event is required to
be described in an amendment of, or a supplement to, the
Proxy Statement, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the shareholders of
the Company.
(c) The Company shall promptly notify Acquiror and Merger Sub of
the receipt of any comments from the SEC or its staff or any
other appropriate government official and of any requests by
the SEC or its staff or any other appropriate government
official for amendments or supplements to any of the filings
with the SEC in connection with the Merger and other
transactions contemplated hereby or for additional
information and shall supply Acquiror and Merger Sub with
copies of all correspondence between the Company or any of
its representatives, and the SEC or its staff or any other
appropriate government official, with respect thereto. The
Company shall use reasonable efforts to respond to any
comments of the SEC with respect to the Proxy Statement,
shall provide promptly to Acquiror and Merger Sub any
information such party may obtain that could necessitate
amending any such document and shall consult with counsel to
Acquiror with respect to such comments.
(d) If required following the termination of the Offer, the
Company shall take all action necessary in accordance with
Applicable Law and its Articles of Incorporation and Bylaws
to convene and hold a meeting of its shareholders (the
"Company Shareholders' Meeting") as promptly as practicable
for the purpose of obtaining the Company Shareholder
Approval. The Company shall, through its Board of Directors,
recommend to its shareholders the adoption of this Agreement
and the transactions contemplated hereby and shall use
reasonable efforts to solicit from its shareholders proxies
in favor of adoption of this Agreement and to take all other
lawful action necessary to secure the Company Shareholder
Approval. Notwithstanding the foregoing, the Company's
obligation to convene and hold the Company Shareholders'
Meeting and to recommend the adoption of this Agreement and
to solicit proxies from its shareholders shall be subject to
any action (including any withdrawal or change of its
recommendation) taken by, or upon authority of, the Board of
Directors of the Company which the Board of Directors
determines, based on the advice of outside legal counsel to
the Company, is
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required in the exercise of its fiduciary duties to the
Company's shareholders under Applicable Law.
(e) If at any time after the satisfaction or waiver of the
conditions set forth in Article IX, Acquiror and Merger Sub
own ninety percent (90%) or more of the Company Common Stock
then outstanding, then the previous provisions of this
Section 8.1 shall not apply and, as soon as practicable
after the satisfaction or waiver of the conditions set forth
in Article IX, the parties hereto will cause the Merger to
be consummated by filing the Articles of Merger with the
Secretary of State of the State of Minnesota in accordance
with Sections 302A.621 and 302A.641 of the MBCA, and make
all other filings or recordings required by the MBCA in
connection with the Merger, including, without limitation,
the notice to shareholders required by Subdivision 2 of
Section 302A.621 of the MBCA. Such Merger in accordance with
Sections 302A.621 and 302A.641 of the MBCA is referred to
herein as the "Short Form Merger."
8.2 EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary
registrations and filings (including filings with
Governmental Authorities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any
Governmental Authority (including in respect of any
Applicable Law), (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this
Agreement or the consummation of any of the transactions
contemplated by this Agreement, including seeking to have
any stay or temporary restraining order entered by any court
or other Governmental Authority vacated or reversed and (iv)
the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
(b) The Company shall give prompt notice to Acquiror and Merger
Sub, and Acquiror and Merger Sub shall give prompt notice to
the Company, of (i)
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any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any material
respect (including in the case of representations or
warranties by the Company or Acquiror and Merger Sub, as
applicable, such party's receiving knowledge of any fact,
event or circumstance which may cause any representation
qualified as to the knowledge of such party to be or become
untrue or inaccurate in any material respect) or (ii) the
failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied
with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the
representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties
under this Agreement.
8.3 SUPPLEMENTAL DISCLOSURE. The Company shall confer on a regular
basis with Acquiror or Merger Sub, report on operational matters and promptly
notify Acquiror or Merger Sub of, and furnish Acquiror or Merger Sub with, any
information it may reasonably request with respect to, any event or condition or
the existence of any fact that would cause any of the conditions to Acquiror's
or Merger Sub's obligation to consummate the Offer or the Merger not to be
completed, and Acquiror and Merger Sub shall promptly notify the Company of, and
furnish the Company any information it may reasonably request with respect to,
any event or condition or the existence of any fact that would cause any of the
conditions to the Company's obligation to consummate the Merger not to be
completed.
8.4 ANNOUNCEMENTS. Prior to the Closing, the Company will not issue any
press release or otherwise make any public statement with respect to this
Agreement and the transactions contemplated hereby without the prior consent of
Acquiror (which consent shall not be unreasonably withheld), except as may be
required by Applicable Law or applicable stock exchange regulations, in which
event Company shall, if possible, allow Acquiror reasonable time to comment on
such release or announcement in advance of such issuance. The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties.
8.5 NO SOLICITATION.
(a) From and after the date hereof until the Effective Time, the
Company shall not, nor shall it authorize any of its
officers, directors, employees, agents, investment bankers,
attorneys, financial advisors or other representatives
(collectively, "Company Representatives") to (i) solicit,
initiate or knowingly encourage the submission of, any
Acquisition Proposal, (ii) enter into any agreement with
respect to any Acquisition Proposal, or (iii) participate in
any discussions or negotiations regarding, or furnish to any
Person any non-public information with respect to, or take
any other action to knowingly facilitate any inquiries or
the making of any proposal that constitutes or
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would reasonably be expected to lead to, an Acquisition
Proposal; provided, however, that, notwithstanding anything
to the contrary in this Agreement, (i) the Company may
participate in discussions or negotiations with, and may
furnish information concerning the Company and its business,
properties and assets to, a third party who, without any
solicitation by the Company or any Company Representatives
after the date of this Agreement, seeks to engage in such
discussions or negotiations or requests such information, if
(1) the Board of Directors of the Company determines, based
on the advice of the Company's outside legal counsel, that
failing to engage in such discussion or negotiations or
provide such information would violate the fiduciary duties
of the Board of Directors of the Company to its
shareholders, (2) prior to engaging in discussions or
negotiations with, or furnishing information to, such Third
Party, the Company shall receive from such Third Party an
executed confidentiality agreement in reasonably customary
form on terms not more favorable to such Person or entity
than the terms contained in the Confidentiality Agreement,
and (3) the Acquisition Proposal would result in the holders
of Company Common Stock being entitled to receive
consideration which, in the aggregate, would be greater than
$6.00 per share (collectively, a "Permitted Acquisition
Proposal"), and (ii) the Board of Directors of the Company
may take and disclose to the Company's shareholders a
position with regard to a tender offer or exchange offer
contemplated by Rules 14d-9 and 14e-2(a) promulgated under
the Exchange Act and may make such disclosure to the
shareholders of the Company as may be required under
Applicable Law; provided, that the Board of Directors of the
Company shall not recommend that the shareholders of the
Company tender their shares of Company Common Stock unless
such recommendation is permitted by Section 8.5(d).
(b) The Company shall immediately notify Acquiror and Merger Sub
of any Acquisition Proposal, including the identity of the
Third Party making any such Acquisition Proposal and the
material terms and conditions of any Acquisition Proposal.
(c) As used in this Agreement, "Acquisition Proposal" shall mean
any proposal or offer from any person relating to (i) any
direct or indirect acquisition or purchase of more than 10%
of either the capital stock of the Company or the assets of
the Company, (ii) any tender offer or exchange offer that if
consummated would result in any person beneficially owning
10% or more of the capital stock of the Company or (iii) any
merger, consolidation or business combination, involving the
Company other than the transactions contemplated by this
Agreement.
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43
(d) Notwithstanding anything to the contrary in this Agreement,
the Board of Directors of the Company shall be permitted
from time to time to take the following actions in the
circumstances described below: (i) to withdraw or modify its
approval or recommendation of this Agreement, the Offer or
the Merger in a manner adverse to Acquiror and Merger Sub;
or (ii) to approve or recommend or enter into an agreement
with respect to a Permitted Acquisition Proposal; if, in
each such case, (A) a Permitted Acquisition Proposal is
publicly proposed, publicly disclosed or communicated to the
Company and (B) the Board of Directors of the Company
determines, based on the advice of the Company's outside
legal counsel, that such action is required in order to
comply with its fiduciary duties to the shareholders of the
Company. No action by the Board of Directors of the Company
permitted by the preceding sentence (each, a "Permitted
Action") shall constitute a breach of this Agreement by the
Company.
8.6 STOCK OPTIONS. Prior to the Effective Time, the Company shall take
such actions as may be necessary such that at the Effective Time, each then
outstanding option to purchase shares of Company Common Stock whether or not
then vested or exercisable in accordance with its terms (collectively, the
"Options"), shall be canceled and entitle the holder thereof, upon surrender to
the Company, to receive an amount of cash equal to the product of (x) the amount
by which the Merger Consideration exceeds the exercise price per share of
Company Common Stock subject to such Option (whether vested or unvested) and (y)
the number of shares of Company Common Stock issuable pursuant to the
unexercised portion of such Option (whether vested or unvested), less any
required withholding of taxes (such amount being hereinafter referred to as, the
"Option Consideration"). The surrender of an Option to the Company in exchange
for the Option Consideration shall be deemed a release of any and all rights the
holder had or may have had in respect of such Option. The Company's 1993 Stock
Option Plan and all other Options to acquire Company Common Stock shall
terminate as of the Effective Time and the provisions in any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company shall be canceled as of the
Effective Time, and the Company shall take all permitted action necessary,
including receiving applicable consents from optionees, to ensure that following
the Effective Time no participant in any Company's 1993 Stock Option Plan or
other plans, programs or arrangements shall have any right thereunder to acquire
equity securities of the Company or the Surviving Corporation and to terminate
all such plans. Acquiror agrees to advance funds to the Company to the extent
such funds are required by the Company in order to carry out its obligations
under the terms of this Section 8.6.
8.7 TRANSFER TAXES. The Company, Acquiror and Merger Sub shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer and stamp taxes, any transfer,
recording, registration and other fees and any similar taxes that become payable
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44
in connection with the transactions contemplated by this Agreement ("Transfer
Taxes"). The Company shall pay or cause to be paid any such Transfer Taxes.
8.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The
Articles of Incorporation and By-Laws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in Article V of the Articles of Incorporation of the Company and in the
Company's By-Laws, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers or employees of the Company, unless such
modification is required by law. The Company shall, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and after the Effective Time, the
Surviving Corporation shall, to the fullest extent permitted under applicable
law, indemnify and hold harmless, each present and former director, officer and
employee of the Company or any of its subsidiaries (collectively, the
"Indemnified Parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission in their capacity as an officer, director or employee
whether occurring before or after the Effective Time for a period of six years
after the Effective Time In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Company or the Surviving Corporation, as the case may be, shall
pay the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to the Company or the
Surviving Corporation, promptly after statements therefor are received, and (ii)
the Company and the Surviving Corporation will cooperate in the defense of any
such matter, provided further, that neither the Company nor the Surviving
Corporation shall be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld); and provided
further, that neither the Company nor the Surviving Corporation shall be
obligated pursuant to this Section 8.8 to pay for the fees and disbursements of
more than one counsel for all Indemnified Parties in any single action except to
the extent that two or more of such Indemnified Parties have conflicting
interests in the outcome of such action; and provided further that, in the event
that any proceeding or proceedings for indemnification are asserted or made
within such six-year period, all right to indemnification in respect of any such
proceeding or proceedings shall continue until the disposition of any and all
such proceedings. In the event that the Surviving Corporation lacks sufficient
funds to indemnify any Indemnified Party in full as contemplated by this Section
8.8, Acquiror shall be responsible for the payment of, and shall pay, any such
deficiency. Acquiror shall use its best efforts to cause to be maintained in
effect for three years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company (provided
that Acquiror may substitute therefor policies of at least the same coverage
containing terms and conditions which are not
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45
materially less advantageous) with respect to matters occurring prior to the
Effective Time to the extent available; provided that in no event shall Acquiror
or the Company be required to expend more than an amount per year equal to 175%
of current annual premiums paid by the Company (the "Premium Amount") to
maintain or procure insurance coverage pursuant hereto; and further provided
that if Acquiror or the Company are not able to obtain the insurance called for
by this Section, Acquiror or the Company will obtain as much comparable
insurance as is available for the Premium Amount per year. In the event the
Surviving Corporation or Acquiror or any of their successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation or Acquiror shall assume the
obligations set forth in this Section 8.8.
ARTICLE IX
CONDITIONS PRECEDENT
--------------------
9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver on or prior to the Closing Date of each of the following
conditions:
(a) Shareholder Approval. The Company shall have obtained the
Company Shareholder Approval or Merger Sub shall have
acquired sufficient shares of Company Common Stock in the
Offer to effect a Short Form Merger.
(b) HSR Act. The applicable waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall
have expired or been earlier terminated.
(c) No Injunctions or Restraints. Subject to fulfillment by each
party of its obligations under Section 8.2(a) of this
Agreement no statute, rule, regulation, decree, preliminary
or permanent injunction, temporary restraining order or
other order of any nature of any court or Governmental
Authority shall be in effect that restrains, prevents or
materially changes the transactions contemplated hereby;
provided, however, that in the case of a decree, injunction
or other order, the party invoking this condition shall have
used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as
possible any decree, injunction or other order.
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46
(d) Merger Sub (or another Subsidiary of Acquiror) shall have
acquired shares of Company Common Stock pursuant to the
Offer.
9.2 CONDITIONS OF OBLIGATIONS OF ACQUIROR. The obligations of Acquiror
and Merger Sub to effect the Merger are further subject to the satisfaction of
each of the following conditions, any or all of which may be waived on or prior
to the Closing Date in whole or in part by Acquiror and Merger Sub:
(a) Agreements. The Company shall have performed in all material
respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date and
shall have complied or be in compliance in all material
respects with any agreement or covenant of the Company to be
performed by it under this Agreement at or prior to the
Closing Date.
(b) Consents. All necessary approvals or authorizations of any
Governmental Authority in connection with the Merger shall
have been obtained except where the failure to have obtained
or made any such approval or authorization would not have a
Material Adverse Effect on the Company.
(c) Litigation. Subject to fulfillment by each party of its
obligations under Section 8.2(a) there shall not have been
entered any order by any Governmental Authority in any suit,
action or proceeding, which (i) requires the payment of
damages by Acquiror, Merger Sub or the Company in connection
with the Offer or the Merger which damages are material to
the value of the Company, (ii) prohibits or limits the
ownership or operation by Acquiror and its Subsidiaries of,
or compels Acquiror or any of its Subsidiaries to dispose of
or hold separate, any business or assets which are material
to Acquiror and its Subsidiaries taken as a whole, in each
case as a result of the Offer or the Merger or any of the
other transactions contemplated by this Agreement, or (iii)
imposes limitations on the ability of Acquiror to acquire or
hold, or exercise full rights of ownership of, shares of
capital stock of the Company, which limitations would have a
Material Adverse Effect with respect to the value of the
Company to the Acquiror.
(d) Representations and Warranties. There shall not have been a
breach of any representation or warranty on the part of the
Company having a Material Adverse Effect on the Company or
the Company's value to Acquiror or materially adversely
affecting (or materially delaying) the consummation of the
Offer or the Merger.
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ARTICLE X
TERMINATION
-----------
10.1 TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Merger contemplated
herein may be abandoned at any time prior to the Effective Time, whether before
or after shareholder approval hereof;
(a) By the mutual consent of the Board of Directors of Acquiror
and the Board of Directors of the Company.
(b) By either of the Board of Directors of the Company or the
Board of Directors of Acquiror:
(i) if Acquiror or Merger Sub has not purchased shares
of Company Common Stock in accordance with the
terms of the Offer on or prior to September 23,
1997; provided, however, that the right to
terminate this Agreement under this Section
10.1(b)(i) shall not be available to any party
whose failure to fulfill any obligations under this
Agreement has been the cause of, or resulted in,
the failure to satisfy the conditions to the Offer;
or
(ii) if any Governmental Authority shall have issued an
order, decree or ruling or taken any other action
(which order, decree, ruling or other action the
parties hereto shall use their best efforts to
lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order,
decree, ruling or other action shall have become
final and non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of Company
Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have taken a
Permitted Action; provided that the fee provided
for in Section 10.3 must be paid at or prior to
such termination;
(ii) if prior to the purchase of shares of Company
Common Stock pursuant to the Offer, Acquiror or
Merger Sub (y) breaches or fails in any material
respect to perform or comply with any of its
material covenants and agreements contained herein
or (z) breaches its representations and warranties
in any material respect; provided, however, that if
any such breach is cured prior to termination, the
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48
Company may not terminate this Agreement pursuant
to this Section 10.1(c)(ii);
(iii) if Acquiror or Merger Sub shall have terminated the
Offer, or the Offer shall have expired, without
Merger Sub purchasing any shares of Company Common
Stock pursuant thereto; provided that the Company
may not terminate this Agreement pursuant to this
Section 10.1(c)(iii) if the Company is in material
breach of this Agreement;
(iv) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a
failure to satisfy any of the conditions set forth
in Annex A hereto, Acquiror or Merger Sub shall
have failed to commence the Offer on or prior to
five business days following the date of the
initial public announcement of the Offer; provided,
that the Company may not terminate this Agreement
pursuant to this Section 10.1(c)(iv) if the Company
is in material breach of this Agreement; or
(v) The commitment from financial institution(s) to
provide funds for acquisition of the Company Common
Stock described in section 6.6 shall cease to be in
force or replaced by a similar commitment in form
and substance satisfactory to the Company.
(d) By the Board of Directors of Acquiror:
(i) if, due to an occurrence that if occurring after
the commencement of the Offer would result in a
failure to satisfy any of the conditions set forth
in Annex A hereto, Acquiror or Merger Sub shall
have failed to commence the Offer on or prior to
five business days following the date of the
initial public announcement of the Offer; provided
that Acquiror may not terminate this Agreement
pursuant to this Section 10.1(d)(i) if Acquiror or
Merger Sub is in material breach of this Agreement;
(ii) if (A) prior to the purchase of shares of Company
Common Stock pursuant to the Offer, the Board of
Directors of the Company takes a Permitted Action,
or (B) prior to the purchase of shares of Company
Common Stock pursuant to the Offer, it shall have
been publicly disclosed or Acquiror or Merger Sub
shall have learned that any person, entity or
"group" (as that term is defined in Section
13(d)(3) of the Exchange Act) (an "Acquiring
Person"), shall have acquired beneficial ownership
(determined pursuant to Rule 13d-3 promulgated
under the Exchange Act) of more than 20% of any
class or series of
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49
capital stock of the Company (including shares of
Company Common Stock), through the acquisition of
stock, the formation of a group or otherwise, or
shall have been granted any option, right or
warrant, conditional or otherwise, to acquire
beneficial ownership of more than 20% of any class
or series of capital stock of the Company
(including shares of Company Common Stock); or (C)
prior to the purchase of shares of Company Common
Stock pursuant to the Offer, it shall have been
publicly disclosed or Acquiror or Merger Sub shall
have learned that any Acquiring Person, shall have
acquired beneficial ownership (determined pursuant
to Rule 13d-3 promulgated under the Exchange Act)
of more than 10% of any class or series of capital
stock of the Company (including shares of Company
Common Stock), through the acquisition of stock,
the formation of a group or otherwise, or shall
have been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial
ownership of more than 10% of any class or series
of capital stock of the Company (including shares
of Company Common Stock) and such Acquiring Person
shall have manifested an intent to acquire any
additional shares of Company Common Stock for any
reason other than passive investment;
(iii) if Acquiror or Merger Sub, as the case may be,
shall have terminated the Offer following the
occurrence of any of the events described in Annex
A, or the Offer shall have expired without Acquiror
or Merger Sub, as the case may be, purchasing any
shares of Company Common Stock thereunder, provided
that Acquiror or Merger Sub may not terminate this
Agreement pursuant to this Section 10.1(d)(iii) if
Acquiror or Merger Sub is in material breach of
this Agreement;
(iv) if the Company breaches or fails in any material
respect to perform or comply with any of its
material covenants and agreements contained herein;
or
(v) if, within ten days of the date hereof, Acquiror
notifies Company that its due diligence has
revealed information not previously disclosed to or
known to Acquiror which materially and adversely
affects the value of the Company Common Stock to
Acquiror. Any notice of termination of the
Agreement pursuant to this clause shall be
accompanied by a notice from Acquiror of the nature
of the information so revealed and the basis for
Acquiror's assertion that such information has such
a material adverse effect.
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50
10.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 10.1, written notice thereof shall forthwith be
given to the other party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null and void,
and there shall be no liability on the part of Acquiror, Merger Sub or the
Company except (A) for fraud or for material breach of this Agreement and (B) as
set forth in Sections 7.2, 10.3 and 11.2 hereof. Notwithstanding the foregoing,
the liability of the Company or Acquiror and Merger Sub together under the terms
of this Section 10.2 shall be limited to a maximum of One Million Dollars
($1,000,000.00); provided, that these limitations shall not apply to the breach
attributable to willful misconduct or gross negligence of the breaching party
and shall not affect the Company's obligation to pay the termination fee
pursuant to Section 10.3. Any payment made by the Company pursuant to Section
10.3 will preclude any liability for payments under this Section 10.2.
10.3 TERMINATION FEE. If (y) the Board of Directors of the Company
shall terminate this Agreement pursuant to Section 10.1(c)(i) hereof or (z) the
Board of Directors of Acquiror shall terminate this Agreement pursuant to
Section 10.1(d)(ii)(A) hereof, the Company shall pay to Acquiror (not later than
the date of termination of this Agreement) an amount equal to $1.5 million. The
Company acknowledges that the agreements contained in this Section 10.3 are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Acquiror and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 10.3, and, in order to obtain such payment, Acquiror or
Merger Sub commences a suit which results in a judgment against the Company for
the amount set forth in this Section, the Company shall pay to Acquiror or
Merger Sub its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the annual rate of
interest charged to Acquiror under its credit facility.
ARTICLE XI
GENERAL PROVISIONS
------------------
11.1 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Article
X, except that the agreements set forth in Articles III and IV shall survive the
Effective Time and those set forth in Sections 10.2, 10.3 and Article 11 hereof
shall survive termination.
11.2 EXPENSES. Each of the parties hereto shall pay the fees and
expenses of its respective counsel, accountants and other experts and shall pay
all other costs and expenses incurred by it in connection with the negotiation,
preparation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
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11.3 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Minnesota without reference to
choice of law principles, including all matters of construction, validity and
performance.
11.4 NOTICES. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
deposited in the United States mail (registered or certified, return receipt
requested), properly addressed and postage prepaid, or delivered by telecopy:
If to the Company, to:
Arden Industrial Products
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ Rumble & ▇▇▇▇▇▇
Professional Association
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ Towers
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: C. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Acquiror, to:
Park-Ohio Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Park-Ohio Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Such names and addresses may be changed by notice given in accordance with this
Section 11.4.
11.5 ENTIRE AGREEMENT. This Agreement (including the Company Disclosure
Schedule, and the Exhibits attached hereto, all of which are a part hereof) and
the Confidentiality Agreement contain the entire understanding of the parties
hereto with respect to the subject matter contained herein and therein,
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter. There are no restrictions, promises, representations,
warranties, agreements or undertakings of any party hereto with respect to the
transactions contemplated by this Agreement other than those set forth herein or
made hereunder.
11.6 DISCLOSURE SCHEDULE. The disclosure schedules, including the
General Disclosure Schedule, dated the date hereof, delivered by the Company to
Acquiror (the "Company Disclosure Schedule") are incorporated into this
Agreement by reference and made a part hereof.
11.7 HEADINGS; REFERENCES. The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Articles," "Sections" or "Exhibits" shall be deemed to be references
to Articles or Sections hereof or Exhibits hereto unless otherwise indicated.
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11.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
11.9 PARTIES IN INTEREST; ASSIGNMENT. Neither this Agreement nor any of
the rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Subject
to the preceding sentence this Agreement shall inure to the benefit of and be
binding upon the Company, Acquiror and Merger Sub and shall inure to the sole
benefit of the Company, Acquiror and Merger Sub and their respective successors
and permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies under or by
reason of this Agreement.
11.10 SEVERABILITY; ENFORCEMENT. Except to the extent that the
application of this Section 11.10 would have any adverse effect with respect to
Acquiror or the Company, the invalidity of any portion hereof shall not affect
the validity, force or effect of the remaining portions hereof. If it is ever
held that any restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, each party agrees that a court of competent
jurisdiction may enforce such restriction to the maximum extent permitted by
law, and each party hereby consents and agrees that such scope may be judicially
modified accordingly in any proceeding brought to enforce such restriction.
11.11 ACQUIROR GUARANTEE. Acquiror hereby irrevocably and
unconditionally guarantees to the Company the prompt and complete performance by
Merger Sub of each and every obligation Merger Sub may have under this
Agreement. At the Company's discretion, Acquiror may be joined in any action,
suit or proceeding brought by the Company against Merger Sub in connection with
this Agreement and Acquiror shall conclusively be bound by the judgment in any
action, suit or proceeding brought by the Company against Merger Sub as if
Acquiror were a party thereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
Acquiror:
PARK-OHIO INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
Merger Sub:
P O ACQUISITION CORPORATION
By:
--------------------------------
Name:
Title:
Company:
ARDEN INDUSTRIAL PRODUCTS, INC.
By:
--------------------------------
Name:
Title:
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ANNEX A
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer and provided that Merger Sub shall not be obligated to accept for
payment any shares of Company Common Stock until expiration of all applicable
waiting periods under the HSR Act, Merger Sub shall not be required to accept
for payment or pay for, or may delay the acceptance for payment of or payment
for, any tendered shares of Company Common Stock, or may, in its sole
discretion, terminate or amend the Offer as to any shares of Company Common
Stock not then paid for if 3,910,263 shares of Company Common Stock shall not
have been properly and validly tendered pursuant to the Offer and not withdrawn
prior to the expiration of the Offer, or, if on or after June 23, 1997, (or as
to clause (j) below at anytime) and at or before the time of payment for any of
such shares of Company Common Stock (whether or not any shares of Company Common
Stock have theretofore been accepted for payment), any of the following events
shall occur:
(a) there shall have occurred (i) any general suspension of
trading in securities on the NYSE or in the over-the-counter
market, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United
States, (iii) a commencement or escalation of a war, armed
hostilities or other international or national calamity
directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory) by any governmental or
regulatory authority, agency, commission or other entity,
domestic or foreign ("Governmental Entity"), on, or any
other event which might affect, the extension of credit by
banks or other lending institutions, or (v) or in the case
of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or
worsening thereof;
(b) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or
agreements under the Merger Agreement or there shall have
been a breach of any representation or warranty on the part
of the Company having a Material Adverse Effect on the
Company or the Company's value to Acquiror or materially
adversely affecting (or materially delaying) the
consummation of the Offer or the Merger;
(c) there shall be instituted or pending any action, litigation,
proceeding, investigation or other application (hereinafter,
an "Action"), (including a worsening of any existing Action)
before any United States court or other Governmental Entity
by any United States Governmental Entity: (i) challenging
the acquisition by Acquiror or Merger Sub of shares of
Company Common Stock, seeking to restrain or prohibit the
consummation of the transactions contemplated by the Offer
or the Merger, or seeking to obtain any damages which
damages are material to the Company; (ii) seeking to
prohibit, or impose any material limitations on, Acquiror's
or Merger Sub's ownership
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56
or operation of all the Company's business or assets or to
compel Acquiror or Merger Sub to dispose of or hold separate
all or any portion of the Company's business or assets as a
result of the transactions contemplated by the Offer of the
Merger which limitations would have a material adverse
effect with respect to the value of the Company to Acquiror;
(iii) seeking to make the acceptance for payment, purchase
of, or payment for, some or all of the shares of Company
Common Stock illegal or render Merger Sub unable to, or
result in a material delay in, or materially restrict, the
ability of Merger Sub to accept for payment, purchase or pay
for some or all of the shares of Company Common Stock; (iv)
seeking to impose material limitations on the ability of
Acquiror or Merger Sub effectively to acquire or hold or to
exercise full rights of ownership of the shares of Company
Common Stock including, without limitation, the right to
vote the shares of Company Common Stock purchased by them on
an equal basis with all other shares of Company Common Stock
on all matters properly presented to the shareholders; or
(v) that in any event is reasonably likely to have a
Material Adverse Effect on the Company or the value of the
shares of Company Common Stock to Acquiror or Merger Sub as
a result of consummation of the transactions contemplated by
the Offer and the Merger;
(d) any statute, rule, regulation, order or injunction shall be
enacted, promulgated, entered, enforced or deemed or become
applicable to the Offer or the Merger, or any other action
shall have been taken, proposed or threatened, by any United
States court or other Governmental Authority other than the
application to the Offer or the Merger of waiting periods
under the HSR Act, that, directly or indirectly, can
reasonably be expected to result in any of the effects of,
or have any of the consequences sought to be obtained or
achieved in, any Action referred to in clauses (i) through
(v) of paragraph (c) above;
(e) a tender or exchange offer for some portion or all of the
shares of Company Common Stock shall have been commenced or
publicly proposed to be made by another person (including
the Company), or it shall have been publicly disclosed that
(i) any person (including the Company), entity or "group"
(as defined in Section 13(d) of the Exchange Act and the
rules promulgated thereunder), shall have become the
beneficial owner (as defined in Section 13(d) of the
Exchange Act and the rules promulgated thereunder) of more
than 20% of the shares of Company Common Stock; (ii) any
person (including the Company), entity or "group" (as
defined in Section 13(d) of the Exchange Act and the rules
promulgated thereunder), shall have become the beneficial
owner (as defined in Section 13(d) of the Exchange Act and
the rules promulgated thereunder) of more than 10% of the
shares of Company Common Stock for any reason other than
passive investment or (iii) any Person, entity or group
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57
shall have entered into a definitive agreement or an
agreement in principle with respect to an acquisition
proposal with or involving the Company;
(f) any change shall have occurred in the financial condition,
properties, businesses or results of operations of the
Company that is or is reasonably likely to have a Material
Adverse Effect on the Company;
(g) the Board of Directors of the Company (or a special
committee thereof) shall have amended, modified or withdrawn
its recommendation of the Offer or the Merger, or shall have
failed to publicly reconfirm such recommendation upon
request by Acquiror or Merger Sub, or shall have endorsed,
approved or recommended any other Acquisition Proposal, or
shall have resolved to do any of the foregoing;
(h) the Merger Agreement shall have been terminated by the
Company or Acquiror or Merger Sub in accordance with its
terms or Acquiror or Merger Sub shall have reached an
agreement or understanding in writing with the Company
providing for termination or amendment of the Offer or delay
in payment for the shares of Company Common Stock;
(i) any Action is instituted or pending by a non-governmental
Person (or there shall be a worsening of an existing Action)
which, in the reasonable judgment of Acquiror, has a
reasonable likelihood of success, and if successful on the
merits, is more likely than not to have a Material Adverse
Effect on the Company or the value of the shares of Company
Common Stock to Acquiror as a result of the consummation of
the transactions contemplated by the Offer and the Merger;
or
(j) if there has been any (y) Release of Hazardous Substances
in, on, under or affecting any properties currently or
formerly owned, operated or leased by the Company in
violation of, or as would reasonably be anticipated to
result in liability under, applicable Environmental Laws or
(z) disposal of Hazardous Substances or any other substance
in a manner that has led to, or could reasonably be
anticipated to lead to, a Release in violation of applicable
Environmental Laws except, in either case, as disclosed on
Schedule 5.6 of the Company Disclosure Schedule and except
in either case for those which, individually or in the
aggregate, are not reasonably likely to have a Material
Adverse Effect on the Company,
which, in the sole judgment of Acquiror and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by Acquiror or
Merger Sub giving rise to any such conditions, makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for shares
of Company Common Stock.
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58
The foregoing conditions are for the sole benefit of Acquiror and
Merger Sub and may be asserted by Acquiror or Merger Sub regardless of the
circumstances (including any action or inaction by Acquiror or Merger Sub)
giving rise to such condition or may be waived by Acquiror or Merger Sub, by
express and specific action to that effect, in whole or in part at any time and
from time to time in its sole discretion.
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