[CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
by and among
HONEYWELL INTERNATIONAL INC.,
HII-2 ACQUISITION CORP.
and
PITTWAY CORPORATION
dated as of
December 20, 1999
Table of Contents
Page No.
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ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer..........................................................2
Section 1.2 Company Actions....................................................4
Section 1.3 Directors..........................................................6
Section 1.4 The Merger.........................................................8
Section 1.5 Effective Time.....................................................8
Section 1.6 Closing............................................................9
Section 1.7 Directors and Officers of the
Surviving Corporation..............................................9
Section 1.8 Stockholders' Meeting..............................................9
Section 1.9 Merger Without Meeting of
Stockholders......................................................10
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock.......................................10
Section 2.2 Exchange of Certificates..........................................11
Section 2.3 Dissenters' Rights................................................13
Section 2.4 Company Plans.....................................................13
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Section 3.1 Organization......................................................15
Section 3.2 Capitalization....................................................16
Section 3.3 Authorization; Validity of Agreement;
Company Action....................................................18
Section 3.4 Consents and Approvals; No Violations.............................19
Section 3.5 SEC Reports and Financial Statements..............................20
Section 3.6 Absence of Certain Change.........................................21
Section 3.7 No Undisclosed Liabilities........................................21
Section 3.8 Specified Contracts...............................................21
Section 3.9 Litigation........................................................22
Section 3.10 Employee Benefit Plans............................................23
Section 3.11 Labor Matters.....................................................26
Section 3.12 Tax Matters; Government Benefits..................................27
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Section 3.13 Intellectual Property.............................................30
Section 3.15 Insurance.........................................................33
Section 3.16 Compliance with Laws..............................................33
Section 3.17 Restrictions on Business Activities...............................34
Section 3.18 Vote Required.....................................................34
Section 3.19 Interested Party Transactions.....................................34
Section 3.20 Environmental Laws................................................34
Section 3.21 Real Property.....................................................37
Section 3.22 Opinion of Financial Advisor......................................37
Section 3.23 Brokers...........................................................37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Section 4.1 Organization......................................................38
Section 4.2 Authorization; Validity of Agreement;
Necessary Action..................................................38
Section 4.3 Consents and Approvals; No Violations.............................38
Section 4.4 Financing.........................................................39
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company.................................39
Section 5.2 Access; Confidentiality...........................................43
Section 5.3 Consents and Approvals............................................44
Section 5.4 No Solicitation...................................................45
Section 5.5 Additional Agreements.............................................48
Section 5.6 Publicity.........................................................48
Section 5.7 Notification of Certain Matters...................................49
Section 5.8 Directors' and Officers' Insurance
and Indemnification...............................................49
Section 5.9 Purchaser Compliance..............................................50
Section 5.10 Employee Benefits.................................................50
Section 5.11 Compliance with ISRA..............................................52
Section 5.12 Compliance with Connecticut Transfer Act..........................53
Section 5.13 Tax Opinion.......................................................54
Section 5.14 Indemnification...................................................56
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger..............................................59
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ARTICLE VII
TERMINATION
Section 7.1 Termination.......................................................60
Section 7.2 Effect of Termination.............................................62
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses.................................................62
Section 8.2 Amendment and Modification........................................63
Section 8.3 Nonsurvival of Representations
and Warranties....................................................64
Section 8.4 Notices...........................................................64
Section 8.5 Interpretation....................................................65
Section 8.6 Counterparts......................................................65
Section 8.7 Entire Agreement; No Third Party
Beneficiaries.....................................................65
Section 8.8 Severability......................................................65
Section 8.9 Governing Law.....................................................66
Section 8.10 Assignment........................................................66
Annex A.............................Certain Conditions of the Offer
Exhibit A...........................Stockholder Agreement
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Index of Defined Terms
Defined Term Page No.
------------ --------
1999 Premium.....................................................................50
Stockholders.........................................1, 2, 6, 7, 17, 22, 48, 54, 58
Stockholders Agreement........................................................... 1
Acquisition Proposal.............................................................45
Agreement........................................................................ 1
Appointment Date.................................................................40
Balance Sheet....................................................................28
Board of Directors............................................................... 1
By-laws.......................................................................... 8
Certificates.....................................................................11
Class A Common Stock............................................................. 2
Closing.......................................................................... 9
Closing Date..................................................................... 9
Code.............................................................................23
Common Capital Stock.............................................................16
Common Stock..................................................................... 2
Company.......................................................................... 1
Company Agreements...............................................................19
Company Disclosure Schedule......................................................15
Company Employee.................................................................50
Company Material Adverse Effect..................................................16
Company SEC Documents............................................................20
Confidentiality Agreement........................................................44
D&O Insurance....................................................................50
DGCL............................................................................. 5
Dissenting Stockholders..........................................................11
Effective Time................................................................... 8
Encumbrances.....................................................................18
Environmental Claim..............................................................36
Environmental Laws...............................................................36
ERISA............................................................................23
ERISA Affiliate..................................................................23
Exchange Act..................................................................... 2
Financial Statements.............................................................20
Form.............................................................................53
fully diluted basis.............................................................. 2
GAAP........... .................................................................20
Governmental Entity..............................................................19
Hazardous Materials..............................................................36
HSR Act..........................................................................19
Indemnified Party................................................................49
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Independent Directors.............................................................7
Intellectual Property............................................................30
Liens............................................................................37
Merger............................................................................8
Merger Consideration.............................................................11
Minimum Condition.................................................................2
NJDEP............................................................................52
Offer.............................................................................2
Offer Documents...................................................................3
Offer Price.......................................................................2
Offer to Purchase.................................................................2
Parent............................................................................1
Parent Material Adverse Effect...................................................38
Paying Agent.....................................................................11
PBGC.............................................................................24
Plans............................................................................23
Preferred Stock..................................................................16
Proxy Statement...................................................................9
Purchaser.........................................................................1
Purchaser Common Stock...........................................................10
Schedule 14D-9....................................................................5
Schedule 14D-l....................................................................3
SEC...............................................................................3
Secretary of State................................................................8
Securities Act...................................................................20
Severance Agreements.............................................................51
Shares............................................................................2
Software.........................................................................30
Special Meeting...................................................................9
Subsidiary.......................................................................16
Surviving Corporation.............................................................8
Tax..............................................................................30
Tax Return.......................................................................30
Taxes............................................................................30
Termination Fee..................................................................63
Title IV Plan....................................................................23
Trade Secrets....................................................................30
Transactions......................................................................5
Voting Debt......................................................................17
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this
"Agreement"), dated as of December 20, 1999, by and among Honeywell
International Inc., a Delaware corporation ("Parent"), HII-2 Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of Parent (the
"Purchaser"), and Pittway Corporation, a Delaware corporation (the "Company").
WHEREAS, the Board of Directors (the "Board of Directors") of
each of Parent, the Purchaser and the Company has approved, and deems it
advisable and in the best interests of its respective stockholders to
consummate, the acquisition of the Company by Parent upon the terms and subject
to the conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to Parent's and Purchaser's willingness to enter
into this Agreement, Parent and Purchaser have entered into a Stockholders
Agreement, dated as of the date hereof, the form of which is attached hereto as
Exhibit A hereto (the "Stockholders Agreement"), with each of the stockholders
named therein (the "Stockholders") pursuant to which the Stockholders have (x)
agreed, among other things, to tender substantially all of the Shares (as
defined herein) owned by the Stockholders pursuant to the Offer (as defined
herein) and (y) granted to Parent an option to purchase substantially all of
the Shares owned by the Stockholders (which option is exercisable under certain
circumstances following the initial expiration date of the Offer), in each case
subject to the terms and on the conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
(a) As promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof), the
Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) a tender offer (the
"Offer") for all of the outstanding shares of Common Stock of the par value of
$1.00 per share of the Company (the "Common Stock"), and all of the outstanding
shares of Class A Stock of the par value of $1.00 per share of the Company (the
"Class A Stock") (the shares of Common Stock and the shares of Class A Stock are
sometimes referred to together as the "Shares"), at a price of $45.50 per Share,
net to the seller in cash (such price, or any such higher price per Share as may
be paid in the Offer, being referred to herein as the "Offer Price"), subject to
there being validly tendered and not withdrawn prior to the expiration of the
Offer, that number of Shares which represents at the time of acceptance for
payment of any Shares pursuant to the Offer (the "Share Purchase Date") at least
(i) two-thirds of the outstanding Shares (determined on a fully diluted basis)
and (ii) Shares entitled to cast at least two-thirds of the votes (counting the
Class A Stock as entitled to cast 1/10th of a vote per share) that may be cast
by all holders of Shares on the Merger (as defined in Section 1.4) (determined
on a fully diluted basis)(the "Minimum Condition") and to the other conditions
set forth in Annex A hereto, and shall consummate the Offer in accordance with
its terms ("fully diluted basis" means issued and outstanding Shares and Shares
subject to issuance at the discretion of the holders under stock options or
other stock based awards outstanding at the Share Purchase Date, excluding any
portions of such options or awards surrendered to the Company pursuant to
Section 2.4 of this Agreement). The obligation of the Purchaser to accept for
payment and to pay for any Shares validly tendered on or prior to the expiration
of the Offer and not withdrawn shall be subject only to the Minimum Condition
and the other conditions set forth in Annex A hereto. The Offer shall be made
by means of an offer to purchase (the "Offer to
2
Purchase") containing the terms set forth in this Agreement, the Minimum
Condition and the other conditions set forth in Annex A hereto. The Purchaser
shall not amend or waive the Minimum Condition and shall not decrease the Offer
Price or decrease the number of Shares sought, or amend any other condition of
the Offer without the written consent of the Company; provided, however, that
if on the initial scheduled expiration date of the Offer, which shall be 30
business days after the date on which the execution of this Agreement is
announced to the public (it being understood that for such purpose Christmas Eve
and New Years Eve shall not be deemed to be "business days"), all conditions to
the Offer shall not have been satisfied or waived, the Purchaser may, from time
to time, in its sole discretion, extend the expiration date for one or more
periods. The Purchaser shall, on the terms and subject to the prior satisfaction
or waiver of the conditions of the Offer, accept for payment the Shares tendered
as soon as it is legally permitted to do so under applicable law and pay for
such Shares promptly; provided, however, that if, immediately prior to the
initial expiration date of the Offer (as it may be extended), the Shares
tendered and not withdrawn pursuant to the Offer equal less than 90% of the
outstanding shares of each of the Common Stock and the Class A Stock, the
Purchaser may extend the Offer for one or more periods not to exceed seven
business days in the aggregate, notwithstanding that all conditions to the Offer
are satisfied as of such expiration date of the Offer.
(b) As soon as practicable on the date the Offer is commenced,
Parent and the Purchaser shall file with the United States Securities and
Exchange Commission (the "SEC") 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-l"). The Schedule 14D-1 will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
and summary advertisement (collectively, together with any amendments and
supplements thereto, the "Offer Documents"). The Offer Documents will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or neces-
3
sary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by Parent or the Purchaser with respect to information furnished by the
Company to Parent or the Purchaser, in writing, expressly for inclusion in the
Offer Documents. The information supplied by the Company to Parent or the
Purchaser, in writing, expressly for inclusion in the Offer Documents and by
Parent or the Purchaser to the Company, in writing, expressly for inclusion in
the Schedule 14D-9 (as hereinafter defined) will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) Each of Parent and the Purchaser will take all steps
necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, will promptly
correct any information provided by it for use in the Offer Documents if and to
the extent that it shall have become false or misleading in any material respect
and the Purchaser will take all steps necessary to cause the Offer Documents as
so corrected to be filed with the SEC and to be disseminated to holders of the
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given the opportunity to
review the Schedule 14D-1 before it is filed with the SEC. In addition, Parent
and the Purchaser will provide the Company and its counsel in writing with any
comments, whether written or oral, Parent, the Purchaser or their counsel may
receive from time to time from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
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Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that its Board of Directors, at a meeting duly called and held, has
(i) determined that each of this Agreement, the Offer and the Merger (as defined
in Section 1.4) are fair to and in the best interests of the stockholders of the
Company, (ii) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (collectively, the "Transactions"), and such
approval constitutes approval of the Offer, this Agreement, the Transactions
(including the Merger), and the Stockholders Agreement and the transactions
contemplated thereby, for purposes of Section 203 of the Delaware General
Corporation Law, as amended (the "DGCL") such that Section 203 of the DGCL will
not apply to the transactions contemplated by this Agreement or the Stockholders
Agreement, and (iii) resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares thereunder to the Purchaser and approve
and adopt this Agreement and the Merger. The Company represents that the actions
set forth in this Section 1.2(a) and all other actions it has taken in
connection therewith are sufficient to render the relevant provisions of Section
203 of the DGCL inapplicable to the Offer and the Merger and the other
transactions contemplated by this Agreement and the Stockholders Agreement.
(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall, subject to the provisions
of Section 5.4(d), contain the recommendation referred to in clause (iii) of
Section 1.2(a). The Schedule 14D-9 will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by the Company
with respect to information furnished by Parent or the Purchaser for
5
inclusion in the Schedule 14D-9. The Company further 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 the Shares, in each case as and to the extent
required by applicable federal securities laws. Each of the Company, on the one
hand, and Parent and the Purchaser, on the other hand, agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false and misleading in any material
respect and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated
to holders of the Shares, in each case as and to the extent required by
applicable federal securities laws. Parent and its counsel shall be given the
opportunity to review the Schedule 14D-9 before it is filed with the SEC. In
addition, the Company agrees to provide Parent, the Purchaser and their counsel
with any comments, whether written or oral, that the Company or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule
14D-9 promptly after the receipt of such comments or other communications.
(c) In connection with the Offer, the Company will promptly
furnish or cause to be furnished to the Purchaser mailing labels, security
position listings and any available listing, or computer file containing the
names and addresses of all recordholders of the Shares as of a recent date, and
shall furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and the Purchaser shall hold in
confidence the information contained in any of such labels and lists and the
additional information referred to in the preceding sentence, will use such
information only in connection with the Offer, and, if this Agreement is
terminated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or representatives.
6
Section 1.3 Directors.
(a) Prior to the Share Purchase Date, the Company shall have
taken all action as may be necessary so that effective immediately after the
Share Purchase Date, the size of the Board of Directors of the Company (the
"Board") shall be reduced to eight, all directors, other than two of the
directors (as shall be designated by the Board) shall resign and six persons
designated by Parent shall be elected to fill the vacancies so created.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-l promulgated
thereunder in order to fulfill its obligations under Section 1.3(a), including
mailing to stockholders the information required by such Section 14(f) and Rule
14f-1 as is necessary to enable Parent's designees to be elected to the Board.
Parent or the Purchaser will supply the Company and be solely responsible for
any information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.3 are in addition to and shall not limit any rights
which the Purchaser, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
(c) As provided in Section 1.3(a), following the Share Purchase
Date and prior to the Effective Time, the Board shall have at least two
directors who are directors on the date hereof and who are persons not employed
by the Company (the "Independent Directors"). If after the Share Purchase Date
and prior to the Effective Time, one of the Independent Directors shall no
longer continue to serve for any reason whatsoever, the other Independent
Director shall be entitled to designate a person to fill such vacancy who shall
be deemed to be one of the Independent Directors for purposes of this Agreement.
If after the Share Purchase Date and prior to the Effective Time there is no
Independent Director for any reason, the other directors, pursuant to the
Company's Certificate of Incorporation (the "Certificate of Incorporation")
and the Company's Bylaws, shall designate two persons to fill such vacancies
who shall not be stockholders, affiliates or associates of Parent or the
Purchaser and such persons shall be deemed to be Inde-
7
pendent Directors for purposes of this Agreement. Following the Share Purchase
Date and prior to the Effective Time, neither Parent nor Purchaser will take
any action to cause any Independent Director to be removed other than for cause.
Notwithstanding anything in this Agreement to the contrary, after the Share
Purchase Date and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors shall be required to (a) amend or
terminate this Agreement by the Company, (b) exercise or waive any of the
Company's rights, benefits or remedies hereunder, or (c) take any other action
by the Board under or in connection with this Agreement.
Section 1.4 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Company and the Purchaser shall
consummate a merger (the "Merger") pursuant to which (a) the Purchaser shall be
merged with and into the Company and the separate corporate existence of the
Purchaser shall thereupon cease, (b) the Company shall be the successor or
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue to be governed by the laws of the
State of Delaware, and (c) the separate corporate existence of the Company with
all its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger, except as set forth in this Section 1.4. Pursuant to
the Merger, (x) the Certificate of Incorporation shall be amended in its
entirety to read as the Certificate of Incorporation of the Purchaser, in
effect immediately prior to the Effective Time, except that Article FIRST
thereof shall read as follows: "FIRST: The name of the corporation is PITTWAY
CORPORATION." and, as so amended, shall be the certificate of incorporation of
the Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (y) the By-Laws of the Purchaser (the
"By-laws"), as in effect immediately prior to the Effective Time, shall be the
By-laws of the Surviving Corporation until thereafter amended as provided by
law, by such Certificate of Incorporation or by such By-laws. The Merger shall
have the effects specified in the DGCL and in Article II.
Section 1.5 Effective Time. Parent, the Purchaser and the
Company will cause a Certificate of Merger to be executed and filed on the
Closing Date (as defined in Section 1.6) (or on such other date as Parent
8
and the Company may agree) with the Secretary of State of Delaware (the
"Secretary of State") as provided in the DGCL. The Merger shall become effective
on the date on which the Certificate of Merger is duly filed with the Secretary
of State or such time as is agreed upon by the parties and specified in the
Certificate of Merger, and such time is hereinafter referred to as the
"Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing")
shall take place at 10:00 a.m. on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the corporate offices of Parent, unless another date or place is agreed to in
writing by the parties hereto.
Section 1.7 Directors and Officers of the Surviving Corporation.
The directors of the Purchaser and the officers of the Company at the Effective
Time shall, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors shall have
been duly elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
the By-laws.
Section 1.8 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the
Merger, the Company, acting through the Board, shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as promptly as
practicable following the acceptance for payment and purchase of Shares
by the Purchaser pursuant to the Offer for the purpose of considering
and taking action upon the approval of the Merger and the adoption of
this Agreement; and
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use
its best efforts (x) to obtain and furnish the information
9
required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive
proxy or information statement, including any amendment or supplement
thereto (the "Proxy Statement") to be mailed to its stockholders,
provided that no amendment or supplement to the Proxy Statement will
be made by the Company without consultation with Parent and its
counsel and (y) to obtain the necessary approvals of the Merger and
this Agreement by its stockholders.
(b) Parent shall vote, or cause to be voted, all of the Shares
owned by it, the Purchaser or any of its other subsidiaries and affiliates
immediately following the Share Purchase Date in favor of the approval of the
Merger and the approval and adoption of this Agreement.
Section 1.9 Merger Without Meeting of Stockholders.
Notwithstanding Section 1.8, in the event that Parent, the Purchaser and any
other Subsidiaries of Parent shall acquire in the aggregate at least 90% of the
outstanding shares of each class of capital stock of the Company, pursuant to
the Offer or otherwise, the parties hereto shall, at the request of Parent and
subject to Article VI hereof, take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holders
of any Shares or holders of common stock, par value $.01 per share, of the
Purchaser (the "Purchaser Common Stock"):
(a) The Purchaser Common Stock. Each issued and outstanding
share of the Purchaser Common Stock shall
10
be converted into and become one fully paid and nonassessable share of common
stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
Shares that are owned by the Company as treasury stock and any Shares owned by
Parent, the Purchaser or any other wholly owned Subsidiary of Parent shall be
cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other
than Shares to be cancelled in accordance with Section 2.1(b) and any Shares
which are held by stockholders exercising appraisal rights, if any, pursuant to
Section 262 of the DGCL ("Dissenting Stockholders")) shall be converted into
the right to receive the Offer Price, payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the certificate
formerly representing such Share in the manner provided in Section 2.2. All such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section 2.2,
without interest, or the right, if any, to receive payment from the Surviving
Corporation of the "fair value" of such Shares as determined in accordance with
Section 262 of the DGCL.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust company
reasonably acceptable to the Company to act as agent for the holders of the
Shares in connection with the Merger (the "Paying Agent") to receive in trust
the funds to which holders of the Shares shall become entitled pursuant to
Section 2.1(c). Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Paying Agent shall mail to each holder of record of a
certifi-
11
cate or certificates, which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"), whose Shares were converted pursuant to
Section 2.1 into the right to receive the Merger Consideration (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration for each Share formerly represented by such Certificate
and the Certificate so surrendered shall forthwith be cancelled. If payment of
the Merger Consideration is to be made to a person other than the person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration in cash as contemplated by
this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in the Shares. At
the Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If, after
the
12
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 Dissenters' Rights. If any Dissenting Stockholder
shall have demanded to be paid the fair value of such holder's Shares, as
provided in Section 262 of the DGCL, the Company shall give Parent notice
thereof and Parent 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 Parent,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. If any Dissenting Stockholder shall fail to perfect
or shall have effectively withdrawn or lost the right to pursue appraisal
rights, the Shares held by such Dissenting Stockholder shall thereupon be
treated as though such Shares had been converted into the Merger Consideration
pursuant to Section 2.1.
Section 2.4 Company Plans.
(a) Promptly following commencement of the Offer, the Company
will offer to each holder of an option then outstanding under the Company's 1990
Stock Awards Plan, 1996 Director Stock Option Plan or 1998 Director Stock Option
Plan (each an "Option") the opportunity to surrender to the Company, effective
immediately following
13
the Share Purchase Date, the portion of such Option which is then exercisable or
which would then by its terms vest or otherwise become exercisable on or prior
to December 31, 2000 (the "Vested Option Portion") in return for the payment by
the Company, immediately following the Share Purchase Date, of an Option Cash
Amount as more fully described below. The Option Cash Amount shall be paid only
when the amount set forth in clause (i) below is positive. The Option Cash
Amount payable for the Vested Option Portion of each Option so surrendered shall
be equal to the product of (i) the Offer Price minus the exercise price per
Share of the Vested Option Portion of such Option and (ii) the number of Shares
covered by the Vested Option Portion of such Option.
(b) Promptly following the commencement of the Offer, the Company
will offer to each holder of a performance shares award then outstanding under
the Company's 1990 Stock Awards Plan (each a "Performance Shares Award") the
opportunity to surrender to the Company, effective immediately following the
Share Purchase Date, the portion of such Performance Shares Award which is then
vested or which would then by its terms vest on or prior to December 31, 2000
(the "Vested Performance Shares Award Portion") in return for the payment by the
Company, immediately following the Share Purchase Date, of a Performance Shares
Award Cash Amount as more fully described below. The Performance Shares Award
Cash Amount payable for each Vested Performance Shares Award Portion so
surrendered shall be equal to the product of (i) the Offer Price and (ii) the
number of shares covered by the Vested Performance Shares Award Portion of such
Performance Shares Award.
(c) Promptly following commencement of the Offer, the Company
will offer to each holder of a bonus shares award then outstanding under the
Company's 1990 Stock Awards Plan (each a "Bonus Shares Award") the opportunity
to surrender to the Company, effective immediately following the Share Purchase
Date, such Bonus Shares Award in return for the payment by the Company,
immediately following the Share Purchase Date, of an amount equal to the product
of (i) the Offer Price and (ii) the number of shares covered by such Bonus
Shares Award.
14
(d) Promptly following commencement of the Offer, the Company
will offer to each holder of a stock appreciation right then outstanding under
the Company's 1990 Stock Awards Plan (each a "SAR") the opportunity to exercise
such SAR at any time.
(e) All payments by the Company pursuant to (a), (b),(c) and (d)
above shall be made net of applicable withholding taxes.
(f) Any portion of any Option, Performance Shares Award, Bonus
Shares Award or SAR that is outstanding at the Share Purchase Date and has not
been surrendered to the Company pursuant to this Section 2.4 shall continue
thereafter in accordance with its terms, except that pursuant to action
heretofore taken by the Board or the Compensation Committee of the Board, as
applicable, (i) each such portion shall immediately vest and be exercisable or
payable in full in the event of termination of employment by the employer at or
after the Share Purchase Date without cause, death or disability and (ii) from
and after the Effective Time each such portion that is outstanding at the
Effective Time shall thereafter represent the right to acquire, in lieu of each
share of Class A Stock acquirable immediately prior to the Effective Time upon
exercise or payment, cash in the amount of the Offer Price.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the appropriate section of the schedule to
this Agreement setting forth exceptions to the Company's representations and
warranties set forth herein (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and the Purchaser as set forth below. The
Company Disclosure Schedule is arranged in sections corresponding to sections
of this Agreement to be modified by such disclosure schedule.
Section 3.1 Organization.
15
(a) Each of the Company and its Subsidiaries is a corporation or
other legal entity duly organized, validly existing and in good standing, where
applicable, under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or other similar power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not, individually or in the
aggregate, have a Company Material Adverse Effect (as defined below). As used in
this Agreement, the term "Subsidiary" shall mean all corporations or other
entities in which the Company or the Parent, as the case may be, owns a majority
of the issued and outstanding capital stock or similar interests. As used in
this Agreement, "Company Material Adverse Effect" with reference to any events,
changes or effects, shall mean such events, changes or effects that are
materially adverse to the business, assets, liabilities, properties, results of
operations or financial condition of the Company and its Subsidiaries taken as a
whole. As used in this Agreement, "to the knowledge of the Company" means the
actual knowledge, without any special inquiry, of the following executives of
the Company: King Harris, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇.
(b) The Company and each of its Subsidiaries is duly qualified or
licensed to do business and in good standing (where applicable) in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not individually or in the aggregate have a Company Material
Adverse Effect. Except as set forth in Section 3.1 of the Company Disclosure
Schedule, or in Exhibit 21 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, or for insignificant wholly-owned Subsidiaries,
the Company does not own (i) any equity interest in any corporation or other
entity or (ii) marketable securities, in either instance, where the Company's
equity interest in any entity exceeds five
16
percent of the outstanding equity of such entity on the date hereof.
Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
120,000,000 shares of Common Stock, 100,000,000 shares of Class A Stock (the
Class A Stock and the Common Stock together shall be referred to sometimes as
the "Common Capital Stock"), and 2,000,000 shares of preferred stock, with no
par value per share (the "Preferred Stock"). As of December 1, 1999 (i)
7,877,664 shares of Common Stock are issued and outstanding, (ii) no shares of
Common Stock are issued and held in the treasury of the Company, (iii)
34,877,405 shares of Class A Stock are issued and outstanding, (iv) no shares of
Class A Stock are issued and held in the treasury of the Company, (v) no shares
of Preferred Stock are issued and outstanding, (vi) 3,398,699 Shares are subject
to issuance to employees and directors pursuant to options outstanding on the
date hereof at a weighted average exercise price of $19.03 per share, and (vii)
328,840 Shares are reserved for future issuance to employees and directors
pursuant to awards other than options outstanding under the Company's 1990 Stock
Awards Plan, 1996 Director Stock Option Plan or 1998 Director Stock Option Plan
(collectively, the "Company Stock Plans"). Since December 1, 1999, the Company
has not (i) issued or granted additional options or other awards, under any of
the Company Stock Plans. All the outstanding shares of the Company's capital
stock are, and all Shares which may be issued pursuant to the exercise or
payment of outstanding options or other awards under Company Stock Plans will
be, when issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and non-assessable. There are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above and
except as set forth in Section 3.2(a) of the Company Disclosure Schedule and
except for the Transactions, as of the date hereof, (i) there are no shares of
capital stock of the Company authorized, issued or outstanding (ii) there are no
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character,
17
relating to the issued or unissued capital stock of the Company or any of its
Subsidiaries, obligating the Company or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, the Company or any
of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interests, or obligating the Company or any of its Subsidiaries
to grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment and (iii) except as set forth
in Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Shares, or the capital stock of the Company, or
any Subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity.
(b) Except for director's qualifying shares which may be required
in certain jurisdictions, and except as set forth in Section 3.2(b) of the
Company Disclosure Schedule, all of the outstanding shares of capital stock of
each of the Company's Subsidiaries are beneficially owned by the Company,
directly or indirectly, and all such shares have been validly issued and are
fully paid and, in the case of its domestic Subsidiaries, nonassessable and are
owned by either the Company or one of its Subsidiaries free and clear of all
liens, charges, claims or encumbrances ("Encumbrances").
(c) There are no voting trusts or other agreements or
understandings to which the Company, any of its Subsidiaries or any of its
directors is a party with respect to the voting of the capital stock of the
Company or any of the Subsidiaries, except that the ▇▇▇▇▇▇ Group (as defined in
the Certificate of Incorporation) may be deemed a group for purposes of Section
13(d)of the Exchange Act.
(d) Set forth on Section 3.2(d) of the Company Disclosure
Schedule is a list describing all options or other awards, including stock
appreciation rights, outstanding under the Company Stock Plans.
18
Section 3.3 Authorization; Validity of Agreement; Company
Action. The Company has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining the approval of its
stockholders as required by applicable law, to consummate the Transactions. The
execution, delivery and performance by the Company of this Agreement, and the
consummation by it of the Transactions, have been duly authorized by the Board
and, except for obtaining the approval of its stockholders as contemplated by
Section 1.8 hereof, no other corporate action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the Transactions. This Agreement has
been duly executed and delivered by the Company and, assuming due and valid
authorization, execution and delivery hereof by Parent and the Purchaser, is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
Section 3.4 Consents and Approvals; No Violations. Except for the
filings set forth in Section 3.4 of the Company Disclosure Schedule, or
contemplated by Sections 5.11 and 5.12, and the filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the laws of any foreign
jurisdiction, and the DGCL, none of the execution, delivery or performance of
this Agreement by the Company, the consummation by the Company of the
Transactions or compliance by the Company with any of the provisions hereof
will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation, the Bylaws or similar organizational documents of
the Company or any of its Subsidiaries, (ii) require any filing with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency (a "Governmental Entity"), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiar-
19
ies is a party or by which any of them or any of their properties or assets may
be bound (the "Company Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any of its
Subsidiaries or any of their properties or assets, excluding from the foregoing
clauses (ii), (iii) and (iv) such violations, breaches or defaults, and such
failures to make filings, or obtain permits, authorizations, consents or
approvals, which would not, individually or in the aggregate, have a Company
Material Adverse Effect or a material adverse effect on the ability of the
Company to consummate the Transactions. Section 3.4 of the Company Disclosure
Schedule sets forth a list of all third party consents and approvals required to
be obtained in connection with this Agreement under the Specified Contracts
prior to the consummation of the Transactions.
Section 3.5 SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed by it since
January 1, 1996 and prior to the date hereof, under the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act") (as such documents
have been amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. None of the Company's Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) The financial statements of the Company included in the
Company SEC Documents (the "Financial Statements") have been prepared from, and
are in accordance with, the books and records of the Company and its
20
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the period involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position and the consolidated results
of operations and cash flows (subject, in the case of unaudited interim
financial statements, to normal year end adjustments and the absence of footnote
disclosures as permitted by Regulation S-X) of the Company and its consolidated
Subsidiaries as of the times and for the periods referred to therein.
Section 3.6 Absence of Certain Change. Except as disclosed in
Section 3.6 of the Company Disclosure Schedule or in the Company SEC Documents
filed prior to the date hereof, (A) since September 30, 1999, (i) to the
knowledge of the Company, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary and usual course, (ii) there have not
occurred prior to the date hereof any events or changes (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) having or reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect, (iii) there has not been the
destruction of any material property, (iv) the Company has not taken any action
which would have been prohibited under Section 5.1 had it taken place after the
date hereof, and (B) since December 31, 1998 and prior to the date hereof there
has been no material adverse change in the business relationship of the Company
and any of the top five customers of the Company by revenue.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed
in the Financial Statements and (b) for liabilities and obligations (i) incurred
in the ordinary course of business and consistent with past practice since
September 30, 1999, (ii) pursuant to the terms of this Agreement, (iii) as set
forth in Section 3.7 of the Company Disclosure Schedule, or (iv) as required to
be disclosed in Section 3.9 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
21
nature, whether or not accrued, contingent or otherwise, whether or not required
by GAAP to be reflected in, reserved against or otherwise described in the
consolidated balance sheet of the Company (including the notes thereto) which,
individually or in the aggregate, are reasonably likely to have a Company
Material Adverse Effect.
Section 3.8 Specified Contracts. Except as set forth in Section
3.8 of the Company Disclosure Schedule, there have been made available to
Parent and its representatives true, correct and complete copies of all of the
following contracts to which Company or any of its Subsidiaries is a party or by
which any of them is bound (collectively, the "Specified Contracts"): (i)
contracts with any directors and those persons identified in the last sentence
of Section 3.1(a); (ii) collective bargaining agreements for which the Company
or any of its domestic Subsidiaries is a party; (iii) pending contracts (A) for
the sale of any of the assets of Company or any of its Subsidiaries, other than
contracts entered into in the ordinary course of business or (B) for the grant
to any person of any preferential rights to purchase any of its assets, other
than in the ordinary course of business; (iv) contracts which restrict, in any
material respect, the Company or any of its Subsidiaries from competing in any
line of business or with any person in any geographical area; (v) indentures,
credit agreements, security agreements, mortgages, guarantees, promissory notes
and other contracts relating to the borrowing of money involving indebtedness
for borrowed money, in each case, in excess of $2,500,000; (vi) contracts with
any stockholders of Company beneficially owning 5% or more of the Company's
outstanding capital stock on the date hereof; (vii) acquisition, merger, asset
purchase or sale agreements with a purchase price in excess of $10,000,000
entered into since July 1, 1995 (other than agreements for the purchase and sale
of materials or products in the ordinary course of business); (viii) contracts
relating to any material joint venture, partnership, strategic alliance or other
similar agreement; and (ix) all other agreements, contracts or instruments
entered into which, to the knowledge of the Company, are material to the Company
and its Subsidiaries taken as a whole. A list of the Specified Contracts is set
forth on Section 3.8 of the Company Disclosure Schedule. The provisions of this
22
Section 3.8 shall be limited to the knowledge of the Company as they relate to
its foreign Subsidiaries.
Section 3.9 Litigation. Except as set forth in Section 3.9 of the
Company Disclosure Schedule, or the Company SEC Documents, as of the date
hereof, to the knowledge of the Company, there are no suits, claims, actions,
proceedings, including, without limitation, arbitration proceedings or
alternative dispute resolution proceedings, or investigations pending or
threatened against the Company or any of its Subsidiaries before any
Governmental Entity in which damages in excess of $500,000 are being sought or
that, either individually or in the aggregate, would be reasonably likely to
have a Company Material Adverse Effect.
Section 3.10 Employee Benefit Plans.
(a) For purposes of this Agreement, the term "Plans" shall
include: each deferred compensation and each incentive compensation, stock
purchase, stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of the Company or any of its Subsidiaries (the
"Plans"). Each of the Plans that is subject to section 302 or Title IV of ERISA
or section 412 of the Code (as defined below) is hereinafter referred to in this
Section 3.10 as a "Title IV Plan." Set forth on Section 3.8 or 3.10(a) of the
Company Disclosure Schedule is a list of each material Plan covering domestic
employees (excluding employment agreements).
23
(b) With respect to each material domestic Plan, the Company has
made available, or will make available on or before January 15, 2000, to
Purchaser true and complete copies of the Plan and any amendments thereto (or if
the Plan is not a written Plan, a description thereof), any related trust or
other funding vehicle, any reports or summaries required under ERISA or the
Internal Revenue Code of 1986, as amended (the "Code") and the most recent
determination letter received from the Internal Revenue Service with respect to
each Plan intended to qualify under section 401 of the Code.
(c) No material liability under Title IV or section 302 of ERISA
has been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to the
Company or any ERISA Affiliate of incurring any such liability, other than
liability for premiums due the Pension Benefit Guaranty Corporation ("PBGC")
(which premiums have been paid when due).
(d) The PBGC has not instituted proceedings to terminate any
Title IV Plan and no condition exists that presents a material risk that such
proceedings will be instituted.
(e) No Title IV Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year for each Title IV Plan. All contributions required
to be made with respect to any Plan have been timely made.
(f) No Title IV Plan is a "multiemployer pension plan," as
defined in section 3(37) of ERISA, nor is any Title IV Plan a plan described in
section 4063(a) of ERISA. Neither the Company nor any ERISA Affiliate has made
or suffered a "complete withdrawal" or a "partial withdrawal," as such terms
are respectively defined in sections 4203 and 4205 of ERISA (or any liability
resulting therefrom has been satisfied in full).
(g) Neither the Company nor any of its Subsidiaries, any Plan,
any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any of its
24
Subsidiaries, any Plan, any such trust, or any trustee or administrator (as
defined in section 3(16)(A) of ERISA) thereof, or any party in interest (as
defined in ERISA Section 3(14)) or fiduciary with respect to any Plan or any
such trust could be subject to either a material civil penalty assessed pursuant
to section 409 or 502(i) of ERISA or a material tax imposed pursuant to section
4975 or 4976 of the Code.
(h) Each Plan has been operated and administered, in all
material respects, in accordance with its terms and applicable law, including
but not limited to ERISA and the Code.
(i) Each Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has received a determination from the Internal
Revenue Service indicating that such Plan is so qualified and the trusts
maintained thereunder are exempt from taxation under section 501(a) of the Code
and to the knowledge of the Company there is no basis to believe that any such
Plan would not be so qualified (excluding amendments to any Plans required to be
made in the future to comply with requirements of law).
(j) No Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for domestic employees or former
employees of the Company or any of its Subsidiaries for periods extending
beyond their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary).
(k) Except as disclosed in Section 3.10(k) of the Company
Disclosure Schedule, or as set forth in Section 5.10, the consummation of the
Transactions will not, either alone or in combination with another event, except
as expressly provided in this Agreement, (i) entitle any current or former
employee or officer of the Company or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer.
25
(l) There are no pending, or to the knowledge of the Company,
threatened or anticipated claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
(m) To the knowledge of the Company, with respect to each Plan
established or maintained outside of the United States of America primarily for
benefit of employees of the Company or any of its Subsidiaries residing outside
the United States of America (a "Foreign Benefit Plan"): (i) all employer and
employee contributions to each Foreign Benefit Plan required by law or by the
terms of such Foreign Benefit Plan have been made, or, if applicable, accrued,
in accordance with normal accounting practices; (ii) the fair market value of
the assets of each funded Foreign Benefit Plan, the liability of each insurer
for any Foreign Benefit Plan funded through insurance or the book reserve
established for any Foreign Benefit Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations, as of September 30, 1999, with respect to all current and former
participants in such plan according to the actuarial assumptions and valuations
most recently used to determine employer contributions to such Foreign Benefit
Plan and none of the Transactions shall cause such assets or insurance
obligations to be less than such benefit obligations; and (iii) each Foreign
Benefit Plan required to be registered has been registered and has been
maintained in good standing with applicable regulatory authorities.
(n) Prior to the date hereof, the Company has amended its Change
of Control Plan, its employment agreement with ▇▇▇ ▇. ▇▇▇▇▇▇▇ and any other
relevant plan to delete any requirement to fund a grantor trust as a result of
this Agreement or the Transactions so long as the Company is not in breach of
any such employment agreement or any other employment agreement between the
Company or a Subsidiary of the Company and the individuals who participate in
such plan. A copy of the amended plans and agreement(s) are attached as Section
3.10(n) of the Company Disclosure Schedule.
Section 3.11 Labor Matters. Except as set forth in Section 3.11
of the Company Disclosure Schedule or the Company SEC Documents, (i) there are
no controver-
26
sies pending or, to the knowledge of the Company, threatened, between the
Company or any of its Subsidiaries and any of their respective employees, which
controversies have had, or would reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect; (ii) neither the Company
nor any of its United States Subsidiaries is in breach of any material
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its United States Subsidiaries which would
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect, nor to the knowledge of the Company are there any
activities or proceedings of any labor union to organize any significant number
of such employees; (iii) neither the Company nor any of its Subsidiaries is in
breach of any material collective bargaining agreement or other labor union
contract, nor, to the knowledge of the Company, are there any activities or
proceedings of any labor unions to organize employees, or of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or any of its Subsidiaries which would reasonably
be expected, individually or in the aggregate, to have a Company Material
Adverse Effect; and (iv) there are no (A) unfair labor practice charges,
material grievances or material complaints pending or threatened by or on
behalf of any employee or group of employees of the Company or any of its
Subsidiaries, or (B) complaints, charges or claims against the Company or any
of its Subsidiaries pending or threatened to be brought or filed, with any
Governmental Entity or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment of any
individual by the Company or any of its Subsidiaries.
Section 3.12 Tax Matters; Government Benefits.
(a) The Company and each of its eligible domestic Subsidiaries
are members of the affiliated group (within the meaning of Section 1504(a) of
the Code), of which the Company is the common parent. The Company and each of
its Subsidiaries have duly filed all Tax Returns (as hereinafter defined) that
are required to be filed excluding only such Tax Returns as to which,
individually or in the aggregate, any failure to file does not have a Company
Material Adverse Effect and have duly paid or
27
caused to be duly paid in full or made provision in accordance with GAAP for the
payment of all Taxes (as hereinafter defined) due with respect to all periods
covered by such Tax Returns. All such Tax Returns are correct and complete in
all material respects and accurately reflect, in all material respects, all
liability for Taxes for the periods covered thereby. All Tax liabilities of the
Company and each of its Subsidiaries for results of operations through September
30, 1999 (whether or not shown on any Tax Return) have been paid or have been
adequately reflected on the Company's balance sheet as of September 30, 1999
included in the Financial Statements (the "Balance Sheet") other than those
Taxes as to which the failure to pay or provide reserves will not have a Company
Material Adverse Effect. Since September 30, 1999, the Company has not incurred
liability for any Taxes other than in the ordinary course of business. Neither
the Company nor any of its Subsidiaries has received written notice of any
material claim made by an authority in a jurisdiction where neither the Company
nor any of its Subsidiaries file Tax Returns, that the Company is or may be
subject to taxation by that jurisdiction.
(b) The federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Internal Revenue Service (or the
applicable statutes of limitation for the assessment of federal income Taxes for
such periods have expired) for all periods through and including December 31,
1995, and no material deficiencies were asserted as a result of such
examinations that have not been resolved or fully paid or accrued. Neither the
Company nor any of its Subsidiaries has waived any statute of limitations in
any jurisdiction in respect of Taxes or Tax Returns or agreed to any extension
of time with respect to a Tax assessment or deficiency except in the ordinary
course consistent with past practice.
(c) Except as set forth on Section 3.12(c) of the Company
Disclosure Schedule, no federal, state, local or foreign audits, examinations or
other administrative proceedings have been commenced with regard to any Taxes or
Tax Returns of the Company or of any of its Subsidiaries other than in the
ordinary course of business, consistent with past practice. No written
notification has been received by the Company or by any of its Subsidiaries
that such an audit, examination or other proceeding
28
is pending or threatened with respect to any Taxes due from or with respect to
or attributable to the Company or any of its Subsidiaries or any Tax Return
filed by or with respect to the Company or any of its Subsidiaries. To the
knowledge of the Company, there is no dispute or claim concerning any material
Tax liabilities of the Company, or any of its Subsidiaries either claimed or
raised by any taxing authority in writing which, individually or in the
aggregate, are material to the Company and which are not reserved for in the
Financial Statements.
(d) Except as set forth on Section 3.12(d) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any agreement, plan, contract or arrangement that is reasonably likely to
result, separately or in the aggregate, in a payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
(e) Neither the Company nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor provision)
concerning collapsible corporations, 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 or any of its
Subsidiaries.
(f) To the knowledge of the Company, no taxing authority is
asserting or threatening to assert a claim against the Company or any of its
Subsidiaries under or as a result of Section 482 of the Code or any similar
provision of state, local or foreign law.
(g) Except as set forth in Section 3.12(g) of the Company
Disclosure Schedule, to the knowledge of the Company, neither the Company nor
any of its Subsidiaries is a party to any material tax sharing, tax indemnity or
other similar agreement or arrangement with any entity not included in the
Company's consolidated financial statements most recently filed by the Company
with the SEC.
(h) Except as set forth in Section 3.12(h) of the Company
Disclosure Schedule, to the knowledge of the Company, none of the Company or any
of its Subsidiaries
29
has been a member of any affiliated group within the meaning of Section 1504(a)
of the Code, or any similar affiliated or consolidated group for tax purposes
under state, local or foreign law (other than a group the common parent of which
is the Company) to the extent that being such a member is reasonably likely to
give rise to a material tax liability, or has any material liability for Taxes
of any person (other than the Company and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
law, or as a transferee or successor, by contract or otherwise.
(i) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Tax" or "Taxes" shall mean all taxes, charges, fees,
duties, levies, penalties or other assessments imposed by any federal,
state, local or foreign governmental authority, including, but not
limited to, income, gross receipts, excise, property, sales, gain, use,
license, custom duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, and other
taxes, and shall include interest, penalties or additions attributable
thereto; and
(ii) "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating
to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
Section 3.13 Intellectual Property.
(a) As used herein, the term "Intellectual Property" means all
trademarks, service marks, trade names, Internet domain names and logos,
together with goodwill, registrations and applications relating to the
foregoing; registered patents, registered and unregistered copyrights (including
registrations and applications for any of the foregoing); computer programs,
including any and all software implementations of algorithms, models and
methodologies whether in source code or object code form, databases and
compilations, including any and all data and collections of data, all
docu-
30
mentation, including user manuals and training materials, related to any of
the foregoing and the content and information contained on any Web site
(collectively, "Software"); confidential information, technology, know-how,
inventions, processes, formulae, algorithms, models and methodologies (such
confidential items, collectively "Trade Secrets") held for use or used in the
business of the Company as conducted on the date hereof or as presently
contemplated to be conducted and any licenses to use any of the foregoing.
(b) As used herein, the term "License Agreements" means all
agreements granting or obtaining any right to use or practice any rights under
any Intellectual Property, to which the Company or any of its Subsidiaries is
a party or otherwise bound, as licensee or licensor thereunder, including,
without limitation, license agreements, settlement agreements and covenants not
to ▇▇▇.
(c) Except as set forth in Section 3.13(c) of the Company
Disclosure Schedule or as would not have, individually, or in the aggregate, a
Company Material Adverse Effect:
(i) the Company or its Subsidiaries own or have the right to use
all Intellectual Property, free and clear of all liens or other encumbrances;
(ii) any Intellectual Property owned or used by the Company or
any of its Subsidiaries has been duly maintained, is valid and subsisting, in
full force and effect and has not been cancelled, expired or abandoned;
(iii) the Company has not received any notice of actual or
alleged infringement by the Company or any of its Subsidiaries or an offer of
license from any third party of any intellectual property of such third party,
and to the knowledge of the Company, there is no basis for such a claim against,
or offer to, the Company or any of its Subsidiaries;
(iv) the Company has not received written notice from any third
party regarding any assertion or claim challenging the validity of any
Intellectual Property owned or used by the Company or any of its Subsid-
31
iaries and to the knowledge of the Company there is no basis for such a claim;
(v) to the knowledge of the Company, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property
owned by the Company or any of its Subsidiaries;
(vi) the License Agreements are valid and binding obligations of
the Company or any of its Subsidiaries, enforceable in accordance with their
terms, and there exists no event or condition which will result in a violation
or breach of, or constitute a default by the Company or any of its Subsidiaries
or the other party thereto, under any such License Agreement;
(vii) the Company and each of its Subsidiaries take reasonable
measures to protect the confidentiality of Trade Secrets;
(viii) the consummation of the Transactions will not result in
the loss or impairment of the Company's or any of its Subsidiaries' rights to
own or use any of the Intellectual Property, nor will such consummation require
the consent of any third party in respect of any Intellectual Property; and
(ix) all material Software used or held for use by the Company
(a) was developed by employees of the Company or any of its Subsidiaries within
the scope of their employment; (b) was developed by independent contractors who
have assigned all of their rights to the Company or any of its Subsidiaries
pursuant to written agreement; or (c) is leased or licensed pursuant to the
License Agreements.
Section 3.14. Year 2000 Compliance. Except as set forth in
Section 3.14 of the Company Disclosure Schedule, all Software and systems used
by and products, systems and/or services sold by the Company and each Subsidiary
of the Company are Year 2000 Compliant, except for such failures which,
individually or in the aggregate, have not had and are not reasonably likely to
have a Company Material Adverse Effect. As used herein, "Year 2000 Compliant"
and "Year 2000 Compliance" mean for all dates and times, including, without
limitation dates and times after December 31, 1999 and in the multi-century
32
scenario, when used on a stand-alone system or in combination with other
software or systems: (i) the application system functions and receives and
processes dates and times correctly without abnormal results; (ii) all date
related calculations are correct (including, without limitation, age
calculations), duration calculations and scheduling calculations); (iii) all
manipulations and comparisons of date-related data produce correct results for
all valid date values within the scope of the application; (iv) there is no
century ambiguity; and (v) leap years are accounted for and correctly identified
(including, without limitation, that 2000 is recognized as a leap year). The
Company and each of its Subsidiaries have taken such steps, as the Company
and/or such Subsidiaries believed were reasonable, to ascertain, for entities
that (x) provide data of any type that includes date information or which is
otherwise derived from, dependent on or related to date information ("Date
Data") to the Company or any of its Subsidiaries, (y) processes in any way Date
Data for the Company or any of its Subsidiaries or (z) otherwise provides any
product or service to the Company or any of its Subsidiaries that is dependent
on Year 2000 Compliance, that such entities' Date Data and related software and
systems that are used for, or on behalf of, the Company or any of its
Subsidiaries are Year 2000 Compliant, and to the knowledge of the Company, all
of the software and systems of the Company and each of its Subsidiaries are Year
2000 Compliant, except for any failure to be Year 2000 Compliant that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.15 Insurance. Except as disclosed in Section 3.15 of
the Company Disclosure Schedule or the Company SEC Reports, all material fire
and casualty, general liability, business interruption, product liability and
sprinkler and water damage insurance policies maintained by the Company or any
of its Subsidiaries are with reputable insurance carriers, provide coverage for
all normal risks incident to the business of the Company and its Subsidiaries
and their respective properties and assets and are in character and amount
appropriate for the business conducted by the Company, except as would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
33
Section 3.16 Compliance with Laws. (i) The Company and its
Subsidiaries are in compliance with, and have not violated, in any material
respect, any applicable law, rule or regulation of any United States federal,
State, local, or foreign government or agency thereof which affects the
business, properties or assets of the Company and its Subsidiaries, and (ii) no
notice, charge, claim, action or assertion has been received by the Company or
any of its Subsidiaries or has been filed, commenced or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries alleging
any such violation except, in case of each of clause (i) and (ii), as would not
have, individually or in the aggregate, a Company Material Adverse Effect. To
the knowledge of the Company, all licenses, permits and approvals required under
such laws, rules and regulations are in full force and effect.
Section 3.17 Restrictions on Business Activities. To the
knowledge of the Company, except for this Agreement or as set forth in Section
3.17 of the Company Disclosure Schedule or the Company SEC Documents, there is
no agreement, judgment, injunction, order or decree binding upon the Company or
any of its Subsidiaries which has or would reasonably be expected to have the
effect of prohibiting or impairing the conduct of business by the Company or
any of its Subsidiaries as currently conducted by the Company or such
Subsidiary, except for any prohibition or impairment as would not reasonably be
expected, individually or in the aggregate, to have a Company Material Adverse
Effect.
Section 3.18 Vote Required. The affirmative vote of the holders
of shares of Common Capital Stock entitled to cast at least two-thirds of the
votes which the outstanding shares of Common Capital Stock are entitled to cast
at the time on matters other than the election of directors is the only vote of
the holders of any class or series of the Company's capital stock which may be
necessary to approve this Agreement or the Transactions. The restrictions
contained in Section 203 of the DGCL are not applicable to this Agreement, the
Stockholders Agreement and the transactions contemplated hereby and thereby,
including the Offer, the Merger and the acquisition of Shares pursuant to the
Stockholders Agreement. No other State takeover statute or similar state
34
statute applies or purports to apply to the Offer, the Merger or the other
Transactions.
Section 3.19 Interested Party Transactions. Except as set forth
in Section 3.19 of the Company Disclosure Schedule or the Company SEC Documents
or as otherwise contemplated by this Agreement, for events as to which the
amounts involved do not, in the aggregate, exceed $300,000 since the Company's
proxy statement dated April 5, 1999, no event has occurred that would be
required to be reported as a Certain Relationship or Related Transaction
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Section 3.20 Environmental Laws.
Except, for purposes of Sections 3.20(a)-(f), such matters as
would not have, individually or in the aggregate, a Company Material Adverse
Effect:
(a) Except as set forth in Section 3.20(a) of the Company
Disclosure Schedule, the Company and its Subsidiaries have always been and are
in compliance with all applicable Environmental Laws (as defined below) (which
compliance includes, without limitation, the possession by the Company and its
Subsidiaries of all permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof).
(b) Except as set forth in Section 3.20(b) of the Company
Disclosure Schedule, there is no Environmental Claim (as defined below) pending
or, to the Company's knowledge, threatened against the Company or any of its
Subsidiaries or, to the Company's knowledge, against any person or entity whose
liability for any Environmental Claim the Company or any of its Subsidiaries has
or may have retained or assumed either contractually or by operation of law.
(c) Except as disclosed in Section 3.20(c) of the Company
Disclosure Schedule, to the knowledge of Company, there are no pending
proceedings related to the issuance or renewal of permits or authorizations
required under Environmental Laws.
35
(d) Except as disclosed in Section 3.20(d) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject
to any judicial or administrative orders or decrees pursuant to any
Environmental Law.
(e) Except as set forth in Section 3.20(e) of the Company
Disclosure Schedule, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without limitation,
the release or presence of any Hazardous Material (as defined below), which
could reasonably be expected to form the basis of any Environmental Claim (as
defined below) against the Company or any of its Subsidiaries, or to the
Company's knowledge, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
(f) Except as set forth in Section 3.20(f) of the Company
Disclosure Schedule, the Company and its Subsidiaries have not and, to the
knowledge of the Company, no other person has placed, stored, deposited,
discharged, buried, dumped or disposed of Hazardous Materials or any other
wastes produced by, or resulting from, any business, commercial or industrial
activities, operations or processes, on, beneath or adjacent to any property
currently or formerly owned, operated or leased by the Company or any of its
Subsidiaries, except (x) for inventories of such substances to be used, and
wastes generated therefrom, which have been disposed of in compliance with
Environmental Laws in the ordinary course of business of the Company and its
Subsidiaries.
(g) For purposes of this Agreement, (i) "Environmental Laws"
means all federal, State, local and foreign laws and regulations relating to
pollution or protection of human health, safety or the environment enacted as of
the date of this Agreement, including, without limitation, laws relating to
releases or threatened releases of Hazardous Materials or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials; (ii) "Environmental
Claim" means any claim,
36
action, cause of action, investigation or notice (written or oral) by any person
or entity alleging potential liability (including, without limitation, potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release, of any
Hazardous Materials at any location, whether or not owned, leased or operated by
the Company or any of its Subsidiaries, or (b) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law; (iii)
"Hazardous Materials" means all substances defined as Hazardous Substances,
Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. 'SS' 300.5, or defined as such by, or
regulated as such under, any Environmental Law.
Section 3.21 Real Property. The Company or one of its
Subsidiaries has good and marketable title to each parcel of real property owned
by the Company or its Subsidiaries and a valid leasehold interest in all real
property leased by the Company and its Subsidiaries free and clear of all
pledges, claims, liens, charges, mortgages, conditional sale or title retention
agreements, hypothecations, collateral assignments, security interests,
easements and other encumbrances of any kind or nature whatsoever (collectively,
"Liens") except (A) those reflected or reserved against in the latest balance
sheet of the Company included in the Company SEC Documents or Section 3.21 of
the Company Disclosure Schedule, (B) taxes and general and special assessments
not in default and payable without penalty and interest, and (C) other Liens
that individually or in the aggregate do not materially detract from the value
of such property or its intended use.
Section 3.22 Opinion of Financial Advisor. The Company has
received the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, LLC, dated December 18, 1999,
to the effect that, as of such date, the consideration to be received by the
holders of Shares pursuant to this Agreement is fair to such holders from a
financial point of view, a copy of which opinion has been delivered to Parent
and the Purchaser.
37
Section 3.23 Brokers. No broker, finder or investment banker
(other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, LLC the fees and expenses of whom will be
paid by the Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
heretofore furnished to Parent a complete and correct copy of all agreements
between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, LLC pursuant to which such firm
would be entitled to any payment relating to the transactions contemplated
hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
The Parent and Purchaser represent and warrant to the Company as
set forth below.
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite corporate or other similar power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not have, individually or in the
aggregate, a Parent Material Adverse Effect. As used in this Agreement, "Parent
Material Adverse Effect," with reference to any events, changes or effects,
shall mean such events, changes or effects that are materially adverse to the
Parent and its Subsidiaries, taken as a whole.
Section 4.2 Authorization; Validity of Agreement; Necessary
Action. Each of Parent and the Purchaser has full corporate power and authority
to execute and deliver this Agreement and to consummate the Transactions. The
execution, delivery and performance by Parent and the Purchaser of this
Agreement and the consummation of the Merger and of the Transactions have been
duly authorized by the Board of Directors of Parent and the Purchaser and by
Parent as the sole stockholder of the
38
Purchaser and no other corporate action on the part of Parent or the Purchaser
is necessary to authorize the execution and delivery by Parent and the Purchaser
of this Agreement and the consummation of the Transactions. This Agreement has
been duly executed and delivered by Parent and the Purchaser, as the case may
be, and, assuming due and valid authorization, execution and delivery hereof by
the Company, is a valid and binding obligation of each of Parent and the
Purchaser, as the case may be, enforceable against each of them in accordance
with its terms.
Section 4.3 Consents and Approvals; No Violations. Except for
the filings contemplated by Sections 5.11 and 5.12 and except for the filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the HSR Act, the laws of any
jurisdiction, and the DGCL, none of the execution, delivery or performance of
this Agreement by Parent or the Purchaser, the consummation by Parent or the
Purchaser of the Transactions or compliance by Parent or the Purchaser with any
of the provisions hereof will (i) conflict with or result in any breach of any
provision of the respective certificate of incorporation or by-laws of Parent or
the Purchaser, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity, (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent, or any of its Subsidiaries or the Purchaser is a party or by
which any of them or any of their respective properties or assets may be bound,
or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent, any of its Subsidiaries or any of their
properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv)
such violations, breaches, defaults or such failures to make filings, or obtain
permits, authorizations, consents or approvals which would not, individually or
in the aggregate, have a material adverse effect on the ability of Parent and
Purchaser to consummate the Transactions.
39
Section 4.4 Financing. As of the date hereof, Parent and
Purchaser have, and on the Share Purchase Date and at the Effective Time, Parent
and Purchaser will have, sufficient cash resources available to finance the
Transactions.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, (ii) as set forth on Section 5.1 of the Company Disclosure Schedule
or (iii) with the consent of Parent, which consent will not be unreasonably
withheld, after the date hereof, and prior to the time the directors designated
by the Purchaser have been elected to, and shall constitute a majority of, the
Board pursuant to Section 1.3 (the "Appointment Date"):
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent consistent
therewith, each of the Company and its Subsidiaries shall use its commercially
reasonable best efforts and shall cooperate with Parent to preserve its business
organization intact and maintain its existing relations with customers,
suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly, (i) except (x)
upon exercise or payment of stock options or other awards outstanding under the
Company Stock Plans or (y) pursuant to outstanding obligations to the former
stockholders of Alarm Suppliers, Inc., sell, pledge, dispose of or encumber any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitment or rights of any kind to acquire, any shares of
capital stock of any class of the Company or any of its Subsidiaries,(ii) amend
its Certificate of Incorporation or By-laws or similar organizational
documents; or (iii) split, combine or reclassify the outstanding Shares or any
outstanding capital stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i)
declare, set aside or pay any dividend
40
or other distribution payable in cash, stock or property with respect to its
capital stock other than dividends paid by Subsidiaries of the Company in the
ordinary course of business consistent with past practice; provided, that the
Company may declare and pay the regular quarterly cash dividends in amounts not
to exceed $.0217 per share of Common Stock and $.03 per share of Class A Stock
to holders of shares of Common Stock and Class A Stock;(ii) transfer, lease,
license, sell, mortgage, pledge, dispose of, or encumber any assets other than
in the ordinary and usual course of business and consistent with past practice,
or incur or modify any indebtedness or other liability, other than in the
ordinary and usual course of business and consistent with past practice; or
(iii) redeem, purchase or otherwise acquire directly or indirectly any of its
capital stock;
(d) neither the Company nor any of its Subsidiaries shall,
except as required by any collective bargaining agreement, grant any increase
in the compensation payable or to become payable by the Company or any of its
Subsidiaries to any of its officers or employees except that the Company and its
Subsidiaries may grant base salary increases consistent with past practice for
employees normally occurring at or after the 1999 year end for year 2000;
provided, that such increases in base salaries may not exceed five percent (5%)
in the aggre gate for all such employees (except for salaries paid to managers
of businesses acquired by the Company after October 1, 1998, in which case such
salaries shall be determined in a manner consistent with the Company's past
practice with respect to salaries paid to managers of acquired companies);
provided, further, that any increases in the base salaries payable to the
Company's top ten most highly compensated executives must be consistent with
past practice for such executives (unless agreed to, on a case by case basis, by
Parent) and, in any event, such increases may not exceed ten percent (10%) of
base salary (x) for each such executive and (y) in the aggregate for all such
executives;
(e) neither the Company nor any of its Subsidiaries shall (A)
adopt any new, or (B) amend or otherwise increase, or accelerate the payment or
vesting of the amounts payable or to become payable under, any existing, bonus,
incentive compensation, deferred compensation, severance, profit sharing, stock
option, stock purchase,
41
insurance, pension, retirement or other employee benefit plan, agreement or
arrangement; provided, that the Company may pay cash bonuses to any or all of
its managers covering 1999 performance so long as the amount of each such bonus
is consistent with past practice (unless agreed to, on a case by case basis, by
Parent) and the aggregate amount of such bonuses (excluding the bonuses payable
under previously agreed to formulas so long as the amounts paid are per such
existing formulas) do not exceed by twenty percent (20%) the aggregate amount of
the bonuses (in cash or otherwise) paid to such managers for 1998 performance,
except for bonuses paid to managers of businesses acquired by the Company after
October 1, 1998, in which case such bonuses shall be consistent with the
Company's past practice with respect to bonus policies for acquired businesses;
and provided, further, that the Company may, before the completion of the Offer
(x) modify the termination for "Good Reason" provision in executive employment
contracts such that "Good Reason" would include a reduction in yearly total
compensation opportunity offered to a given executive for reasonable
performance, and (y) eliminate the "Adjustments" clause in each of such
executive employment agreements;
(f) neither the Company nor any of its Subsidiaries shall enter
into any employment or severance agreement with or otherwise grant any severance
or termi nation pay to any officer, director or employee of the Company or any
of its Subsidiaries; provided, that employment agreements with additional
executives may be entered into upon agreement of Parent and the Company;
(g) neither the Company nor any of its Subsidiaries shall permit
any insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent, except in the ordinary course
of business and consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall enter
into any contract or transaction relating to the purchase of assets other than
in the ordinary course of business consistent with prior practices;
(i) neither the Company nor any of its Subsidiaries shall enter
into any contract or transaction
42
relating to the lending of any material amount of money to, or the purchase of
any stock of, or other equity interest in, or material amount of assets of, any
corporation or other entity, or enter into any joint venture or partnership
(collectively, "Investments"), other than those Investments in progress on the
date hereof;
(j) make any capital expenditures which are significantly in
excess of the amounts set forth in the budgets previously provided to Parent in
writing;
(k) neither the Company nor any of its Subsidiaries shall change
any of the accounting methods used by it unless required by GAAP, make any
material Tax election except in the ordinary course of business consistent with
past practice, change any material Tax election already made, adopt any material
Tax accounting method except in the ordinary course of business consistent with
past practice, change any material Tax accounting method unless required by
GAAP, or, except in the ordinary course consistent with past practice, enter
into any closing agreement, settle any Tax claim or assessment or consent to any
Tax claim or assessment or any waiver of the statute of limitations for any such
claim or assessment; and
(l) neither the Company nor any of its Subsidiaries will take
any action with the intent of causing any of the conditions to the Offer set
forth in Annex A not to be satisfied.
Section 5.2 Access; Confidentiality.
(a) Upon reasonable notice, the Company shall (and shall cause
each of its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financing sources and other representatives of Parent, access, during
normal business hours during the period prior to the Appointment Date, to all
its employees, properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to the Parent (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as Parent may reasonably re-
43
quest. Access shall include the right to conduct such environmental studies and
tests as Parent, in its reasonable discretion, shall deem appropriate. After
the Appointment Date, the Company shall provide Parent and such persons as
Parent shall designate with all such information, at such time as Parent shall
request. Nothing, however, contained in this Section 5.2 shall require
disclosure of the names of bidders, the disclosure of which is not required
under Section 5.4. Unless otherwise required by law and until the Appointment
Date, Parent will hold any such information which is nonpublic in confidence in
accordance with the provisions of the letter agreement dated July 15, 1999
related to the Transactions, as amended November 19, 1999 (the "Confidentiality
Agreement").
(b) Following the execution of this Agreement, Parent and the
Company shall cooperate with each other and make all reasonable efforts to
minimize any disruption to the business which may result from the announcement
of the Transactions.
Section 5.3 Consents and Approvals.
(a) Each of the Company, Parent and the Purchaser will use its
commercially reasonable best efforts to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
Transactions (which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with this
Agreement and the Transactions. Each of the Company, Parent and the Purchaser
will, and will cause its Subsidiaries to, use its commercially reasonable best
efforts to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, the Purchaser, the Company or any of their
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
44
(b) The Company and Parent shall each use its commercially
reasonable best efforts to file as soon as practicable notifications under the
HSR Act and to respond as promptly as practicable to any inquiries received
from the Federal Trade Commission and the Antitrust Division of the Department
of Justice for additional information or documentation and to respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Govern mental Entity in connection with antitrust
matters.
(c) The Company and Parent shall each use its commercially
reasonable best efforts to file as soon as practicable any other forms or
notifications which may be required by any foreign Governmental Entity and to
obtain as promptly as reasonably possible any approvals which may be required in
connection therewith.
Section 5.4 No Solicitation.
(a) Neither the Company nor any of its Subsidiaries shall (and
the Company shall use its best efforts to cause its officers, directors,
employees, representatives and agents, including, but not limited to, investment
bankers, attorneys and accountants (collectively, "Agents"), not to), directly
or indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any proposal or offer to acquire all or a
substantial part of the business and properties of the Company or any of its
Subsidiaries or any capital stock of the Company or any of its Subsidiaries,
whether by merger, tender offer, exchange offer, sale of assets or similar
transactions involving the Company or any Subsidiary, division or operating or
principal business unit of the Company (an "Acquisition Proposal"). The Company
will immediately cease any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing, if any.
(b) Notwithstanding the foregoing, prior to the Share Purchase
Date, the Company may furnish information concerning its business, properties
or assets to any corporation, partnership, person or other entity or
45
group, and may participate in discussions and negotiations with such entity or
group, if (x) such person has on an unsolicited basis submitted to the Company
(1) an Acquisition Proposal believed by the Board in good faith to be bona fide,
or (2) an expression of interest believed by the Board in good faith to be bona
fide indicating such person's desire to pursue the possibility of making an
Acquisition Proposal on terms financially superior to the Offer and the Merger
(an "Indication of Interest") and, in either such case, the Board determines in
good faith (i) after consulting with its financial advisors, that such person
has the financial capability to consummate such Acquisition Proposal or, in the
case of an Indication of Interest, a transaction on terms financially superior
to the Offer and Merger, and (ii) after receipt of advice from outside legal
counsel to the Company, that such action by the Company is appropriate in
furtherance of the best interests of the Company's stockholders, and (y) such
person has signed a confidentiality agreement substantially identical to the
Confi dentiality Agreement (it being understood that the Board and/or its
financial advisors may, in any event, discuss with any person submitting an
Acquisition Proposal or Indication of Interest such person's bona fides and/or
financial capability). The Company will promptly provide to Parent any written
material information regarding the Company provided to such person which was not
previously provided or otherwise made available to Parent.
(c) The Company will promptly following receipt of an Acquisition
Proposal or Indication of Interest (and in any event not later than 24 hours
after receipt thereof) notify Parent of the receipt of the Acquisition Proposal
or Indication of Interest, as the case may be, and any stated, whether in
writing or other wise, material terms (other than the identity of the person
submitting such Acquisition Proposal or Indication of Interest) of such
Indication of Interest or Acquisition Proposal. The Company will promptly
notify Parent of any material changes in any disclosed Indication of Interest or
Acquisition Proposal. The foregoing notwithstanding, the Company shall not be
required to disclose the terms of any Indication of Interest unless and until
the Company publicly discloses the existence of such Indication of Interest.
46
(d) The Board may withdraw or modify its approval or
recommendation of the Offer and/or the Merger, provided (i) the Board believes
in good faith, after receipt of advice from outside legal counsel to the
Company, that the failure to do so could reasonably be expected to cause the
Board to violate its fiduciary duties to the Company's stockholders under
applicable law, and (ii) the Company notifies Parent of any such withdrawal or
modification prior to its release to the public.
(e) At any time after 5:00 P.M., Central Time, on the second full
business day following the business day on which notice is given (it being under
stood that Christmas Eve and New Years Eve shall not be deemed to be "business
days" for such purpose) to Parent of the Company's intent to do so and if the
Company has otherwise complied with the terms of this Section 5.4 (including,
without limitation, the provisions of Section 5.4(c)), the Board may, provided
that the notice identifies the person submitting the Acquisition Proposal,
cause the Company to enter into an agreement with respect to such Acquisition
Proposal. Parent agrees that neither it nor any of its Subsidiaries nor any of
the officers, directors, employees, representatives or agents, including, but
not limited to investment bankers, attorneys and accountants, of any of the
foregoing shall, directly or indirectly, contact, on behalf or at the direction
of Parent or any of its Subsidiaries, any person disclosed to Parent as having
submitted an Acquisition Proposal with respect to such Acquisition Proposal, the
Offer, the Merger, or any arrangement or understanding in connection therewith
(other than contacts not intended to dissuade, and that are not reasonably
likely to have the effect of dissuading, such person from pursuing such
Acquisition Proposal), so long as such person is subject to similar
restrictions. In the event the Company is going to enter into an agreement with
respect to an Acquisition Proposal pursuant to the second preceding sentence,
the Company will not do so unless it has terminated this Agreement pursuant to
Section 7.1(c)(ii) and paid or caused to be paid to Parent the Termination Fee
(as defined below) not later than simultaneously with entering into such agree
ment. In the event that any notice given pursuant to this Section 5.4(e) is
given on a non-business day, the notice shall be deemed to have been given on
the next following business day.
47
(f) Nothing contained in this Section 5.4 or any other provision
hereof, however, shall prohibit the Company or the Board from (i) taking and
disclosing to the Company's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act, or (ii) making such disclosure to the Company's stock
holders as, in the good faith judgment of the Board, after receiving advice from
outside counsel, is required under applicable law, provided that the Company may
not, except as permitted by Section 5.4(d) or (e), withdraw or modify its
approval or recommendation of the Offer or the Merger or enter into any
agreement with respect to any Acquisition Proposal.
(g) Notwithstanding the foregoing provisions of this Section 5.4,
it is agreed and understood that the Company (i) will include in the joint press
release announcing this Agreement a statement to the effect that, consistent
with its fiduciary obligations and subject to the terms of this Agreement, the
Board has preserved its ability to respond to third parties where appropriate,
(ii) will file this Agreement, the Stockholders Agreement and such press release
as exhibits to a Current Report on Form 8-K and (iii) may repeat such statement
in other public disclosures and in private communications with financial
analysts, its stockholders and others.
(h) Nothing contained in this Section 5.4 shall prohibit Parent
from purchasing Shares pursuant to the Offer or the Stockholders Agreement.
Section 5.5 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all
commercially reasonable best efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, or to remove any injunction or other
impediments or delays, legal or otherwise, to achieve the satisfaction of the
Minimum Condition and all conditions set forth in Annex A and Article VI, and to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of the Company, Parent and the Purchaser shall
48
use all commercially reasonable best efforts to take, or cause to be taken, all
such necessary actions.
Section 5.6 Publicity. The initial press release (the "Press
Release") with respect to the execution of this Agreement shall be a joint
press release acceptable to Parent and the Company. Thereafter, except as
provided in Section 5.4(g), so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other public announcement with respect to
the Merger, this Agreement or the other Transactions without the prior
consultation of the other party, except as such party believes, after receiving
the advice of outside counsel, may be required by law or by any listing
agreement with a national securities exchange or trading market, in which case,
such party shall contact the other party prior to, or if impracticable as soon
as reasonably practicable after, making any such disclosure.
Section 5.7 Notification of Certain Matters. The Company shall
give prompt notice to Parent and Parent shall give prompt notice to the Company,
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the completion of the Offer and (ii) any material failure of the Company, Parent
or the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice. If requested by Parent, the Company shall confirm
the satisfaction of the condition to the Offer set forth in paragraph (f) of
Annex A hereto.
Section 5.8 Directors' and Officers' Insurance and
Indemnification.
(a) From and after the Share Purchase Date, Parent shall cause
the Company or any successor to the Company (including, without limitation, the
Surviving Corporation) to indemnify, defend and hold harmless the
49
present and former directors, officers and employees of the Company and its
Subsidiaries, and persons who become any of the foregoing prior to the Effective
Time (each an "Indemnified Party") against all losses, claims, damages,
liabilities, costs, fees and expenses (including reasonable fees and
disbursements of counsel and judgments, fines, losses, claims, liabilities and
amounts paid in settlement (provided that any such settlement is effected with
the written consent of the Parent or the Surviving Corporation which consent
shall not unreasonably be withheld or delayed)) arising out of actions or
omissions occurring at or prior to the Effective Time to the full extent
permitted under applicable Delaware law. Parent further agrees to advance
expenses to any Indemnified Party promptly upon receipt of an undertaking from
such Indemnified Party that such expenses shall be repaid should it be
ultimately determined that such Indemnified Party is not entitled to
indemnification hereunder.
(b) Parent shall, or shall cause the Company or any successor to
the Company (including without limitation, the Surviving Corporation) to,
maintain the Company's existing officers' and directors' liability insurance
("D&O Insurance") for a period of not less than six years after the Share
Purchase Date; provided, that the Parent may substitute therefor policies of
substantially equivalent coverage and amounts containing terms no less
favorable to the directors or officers who are Indemnified Parties; provided,
further, if the existing D&O Insurance protecting such directors and officers
expires, is terminated or cancelled during such period, Parent or the Surviving
Corporation will use all reason able efforts to obtain substantially similar D&O
Insurance; provided, further, however, that in no event shall the Company be
required to pay aggregate annual premiums for insurance under this Section
5.8(b) in excess of 175% of the aggregate premiums paid by the Company in 1999
on an annualized basis for such purpose (the "1999 Premium"); and provided,
further, that if the Parent or the Surviving Corporation is unable to obtain the
amount of insurance required by this Section 5.8(b) for such aggregate premium,
Parent or the Surviving Corporation shall obtain as much insurance as can be
obtained for an annual premium not in excess of 175% of the 1999 Premium.
50
Section 5.9 Purchaser Compliance. Parent shall cause the
Purchaser to comply with all of its obligations under or related to this
Agreement.
Section 5.10 Employee Benefits.
(a) Parent shall cause the Company, and following the Merger,
the Surviving Corporation, to provide for a period of not less than one year
following the Share Purchase Date to each person who is an employee of the
Company or its Subsidiaries immediately prior to the Share Purchase Date (a
"Company Employee") who remains in the employ of the Company or any of its
Subsidiaries with employee benefits that are generally comparable, in the
aggregate, to the employee benefits provided to such employees immediately prior
to the date hereof. For purposes of all employee benefit plans, programs and
arrangements maintained by or contributed to by Parent and its Subsidiaries
(including, after the Share Purchase Date, the Company and any successor
thereto, including without limitation, the Surviving Corporation), Parent shall,
or shall cause its Subsidiaries to, cause each such plan, program or arrangement
made available to such employees to treat the prior service with the Company,
its affiliates or other entities of each Company Employee (to the same extent
such service is recognized under analogous plans, programs or arrangements of
the Company or its affiliates prior to the Share Purchase Date) as service
rendered to Parent or its Subsidiaries, as the case may be, for purposes of
eligibility to participate in and vesting thereunder (but not benefit accrual,
except to the extent required by law); provided, however, that such crediting of
service shall not operate to duplicate any benefit or the funding of such
benefit. Company Employees shall also be given credit for any deductible or
co-payment amounts paid in respect of the plan year in which the Share Purchase
Date occurs, to the extent that, following the Share Purchase Date, they
participate in any other plan for which deductibles or co-payments are required.
Parent shall also cause each Parent benefit plan made available to Company
Employees to waive any preexisting condition which was waived or otherwise
covered under the terms of any Company Plan immediately prior to the Share
Purchase Date or waiting period limitation which would otherwise be applicable
to a Company Employee on or after the Share Purchase Date.
51
(b) Parent shall cause the Surviving Corporation to honor the
employment agreements and change of control plans listed in Section 5.10(a) to
the Company Disclosure Schedule (the "Severance Agreements"), except to the
extent modified or superseded by a separate agreement entered into by the
employee and the Company or Parent or Purchaser.
(c) Parent shall establish a severance program covering any
domestic Company employees whose employment may be terminated within one year of
the Share Purchase Date other than for cause, death or disability. The severance
program shall provide severance benefits of not less than one week of salary for
each year of service up to a maximum of 52 weeks. Parent shall further provide,
or arrange to have provided, outplacement assistance appropriate for each
employee level. In addition, Parent shall establish "pay to stay" programs for
Company em ployees as appropriate. Parent shall establish such other plans or
programs as contemplated by Section 5.10(c) of the Company Disclosure Schedule.
(d) The provisions of this Section 5.10 shall not be applicable
to employees subject to collective bargaining agreements whose employment shall
be subject to the terms of such agreements.
Section 5.11 Compliance with ISRA.
(a) The Company and its Subsidiaries shall be responsible, prior
and subsequent to the Share Purchase Date, for compliance with the New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. (together, with the
regulations and guidance promulgated thereunder, "ISRA").
(b) Prior to the Share Purchase Date, the Company and its
Subsidiaries and Parent and the Purchaser shall reasonably cooperate with one
another with respect to compliance with ISRA, including, but not limited to,
providing Parent and the Purchaser with advance copies of all submittals to be
filed in connection with ISRA and reasonably incorporating comments provided by
Parent and/or the Purchaser into such filings, providing copies of
correspondence and documents received from the New Jersey Department of
Environmental Protection ("NJDEP") to Purchaser on a timely basis, and
undertaking strategic
52
actions with respect to ISRA compliance only after consultation with Parent
and/or the Purchaser; provided, that nothing herein shall require the Company
and its Subsidiaries to undertake any action that would cause any of them to
violate the requirements of ISRA. Without limiting the generality of the
foregoing, the Company shall, at the reasonable request of Parent and/or the
Purchaser, file an application for a Letter of Non-Applicability or another
appropriate exemption or limitation on the scope of ISRA review if, in the
reasonable judgment of Purchaser, such application is reasonably likely to be
approved by the NJDEP.
(c) Without limiting the generality of Section 5.11(b), to the
extent that it is determined that ISRA is applicable to the Merger or the
purchase of Shares pursuant to the Offer, the Company and its Subsidiaries
shall reasonably cooperate with Parent and the Purchaser, and Parent and the
Purchaser shall reasonably cooperate with the Company and its Subsidiaries, to
take all actions necessary to obtain approval from the NJDEP to effectuate the
Merger. To the extent that it is not possible to obtain a No Further Action
Letter (as defined in ISRA) or an approval of a Remediation Workplan (as defined
in ISRA) or some other approval that would exempt or limit the application of
ISRA to the transaction prior to the date the Merger is to scheduled to become
effective or the Share Purchase Date, Parent and the Purchaser and the Company
and its Subsidiaries agree that the Company and/or its relevant Subsidiaries
shall enter into a Remediation Agreement with the NJDEP in order to allow the
Merger and the purchase of Shares pursuant to the Offer to proceed.
Section 5.12 Compliance with Connecticut Transfer Act.
(a) The Company and its Subsidiaries shall be responsible, prior
and subsequent to the Share Purchase Date, for compliance with the Connecticut
Transfer Act.
(b) Prior to the Share Purchase Date, the Company and its
Subsidiaries and Parent and the Purchaser shall reasonably cooperate with one
another with respect to compliance with the Connecticut Transfer Act, including,
but not limited to, the Company and its Subsidiaries reasonably consulting
with Purchaser regarding whether
53
the Company and its Subsidiaries, for each property in Connecticut that is
subject to the Connecticut Transfer Act, will provide a Form I, Form II, Form
III or Form IV (as such terms are defined by the Connecticut Transfer Act)
(hereinafter, reference to the "Form" shall mean a Form I, Form II, Form III or
Form IV) to Parent and the Purchaser at the Share Purchase Date. The Company and
its Subsidiaries shall provide a copy, in draft form, of (i) the Form it intends
to provide to Parent and the Purchaser for each property that is subject to the
Connecticut Transfer Act and (ii) any Environmental Assessment forms (if such
forms are required under the Connecticut Transfer Act), at least 10 business
days prior to the Share Purchase Date, and the use and contents of such Form and
such Environmental Assessment form shall be subject to Parent's and the
Purchaser's reasonable approval; provided, that nothing herein shall require
the Company and its Subsidiaries to undertake any action that would cause any of
them to violate the requirements of the Connecticut Transfer Act.
Section 5.13 Tax Opinion.
(a) On or prior to the date hereof, Parent has received an
opinion of counsel from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ stating that it is their opinion that,
based on the representations contained in the representation letters referred to
in such opinion and previously delivered to Parent from King Harris, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇ (the "Listed Officers"), and from
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Listed
Directors"), and assuming the accuracy of the facts set forth in Section 5.13 of
the Company Disclosure Schedule (the "Tax Schedule"), the Spinoff will not fail
to qualify as a distribution on which no gain or loss was recognized by the
Indemnified Company Stockholders under Section 355 of the Code due to violation
of the "device" or "continuity of shareholder interest" requirements of Section
355 of the Code and the regulations thereunder (an "Indemnifiable
Disqualification") as a result of (1) the negotiation (which began with the
exploratory-meetings between representatives of Parent and/or Honeywell Inc. and
the Company commencing in May 1999), execution and delivery of this Agreement or
(2) any of the transactions contemplated by this Agree ment or the Stockholders
Agreement, assuming the Transactions are consummated as contemplated in the
Agreement.
54
(b) For purposes of this Section 5.13 and Section 5.14 and Annex
A hereto:
(i) "Spinee" means Penton Media, Inc., a Delaware corporation.
(ii) "Spinoff" means the distribution by the Company of all of
the outstanding capital stock of Spinee to the stockholders of the Company of
record at the close of business on July 31, 1998 (and such stockholders, without
regard to whether they currently or hereafter hold any capital stock of the
Company or Spinee, are referred to as the "Indemnified Company Stockholders").
(iii) "Indemnified Tax" means:
(1) any Tax imposed on and payable by an Indemnified Company
Stockholder resulting from an Indemnifiable Disqualification as a result of (x)
the negotiation (which began with the exploratory meetings between
representatives of Parent and/or Honeywell Inc. and the Company commencing in
May 1999), execution and delivery of this Agreement, (y) any of the transactions
contemplated by this Agreement or the Stockholders Agreement, or (z) any action
or inaction on the part of Parent or the Company at or after the Share Purchase
Date, less
(2) if it is determined that the Spinoff failed to qualify as a
distribution to which Section 355 of the Code applied, any refund or credit of
Taxes paid which such Indemnified Company Stockholder would be entitled to
receive (assuming, whether or not true, that the Indemnified Company Stockholder
had filed a claim for such refund or credit (including a protective refund
claim) promptly upon receipt of the notice described in Section 5.14(b)(iii)) as
a result of any increase in the tax basis (as compared to the tax basis that
would exist if the Spinoff qualified as a distribution to which Section 355 of
the Code applied) of shares of capital stock of the Company or shares of Spinee
capital stock received by the Indemnified Company Stockholder in the Spinoff
which the Indemnified Company Stockholder has sold or otherwise disposed of on
or before the date Parent's indemnification payment to the Indemnified Company
Stockholder is made hereunder, and less (without duplication)
55
(3) if it is determined that the Spinoff failed to qualify as a
distribution to which Section 355 of the Code applied, the deemed present value
of any future Tax savings available to such Indemnified Company Stockholder as a
result of any increase in the tax basis (as compared to the tax basis that would
exist if the Spinoff qualified as a distribution to which Section 355 of the
Code applied) of the shares of Spinee capital stock received by the Indemnified
Company Stockholder in the Spinoff. The deemed present value of such future tax
savings shall be equal to 68% of the Tax savings that would be available to such
Indemnified Company Stockholder if taxable gain or loss with respect to any
shares of Spinee capital stock received by the Indemnified Company Stockholder
in the Spinoff then held by the Indemnified Company Stockholder were recognized
on the date Parent's indemnification payment to the Indemnified Company
Stockholder is made hereunder.
Section 5.14 Indemnification.
(a) Parent agrees, subject to the terms and conditions of this
Section 5.14, to indemnify, defend and hold harmless each Indemnified Company
Stockholder from any Indemnified Tax.
(b) Parent's obligation to indemnify a particular Indemnified
Company Stockholder from an Indemnified Tax shall be of no force or effect if:
(i) any of the fact statements set forth in the Tax
Schedule are not true and correct or any Listed Officer or Listed Director fails
to cooperate with Parent in Parent's defense against the Indemnified Tax as
reasonably requested by Parent and with Parent responsible for the reasonable
out-of-pocket expenses of the Listed Officer or Listed Director, and the
untruthfulness or incorrectness of such fact or such failure to cooperate is
material to a determination that an Indemnifiable Disqualification has occurred;
or
(ii) in the case of a Listed Officer or Listed Director,
any representation made by any Listed Officer or Listed Director in any such
person's representation letter is not true and correct and such failure is
material to a determination that an Indemnifiable Disqualification has
occurred; or
56
(iii) the Indemnified Company Stockholder does not notify
Parent within 15 business days of the Indemnified Company Stockholder's receipt
of any written question or other notice from the Internal Revenue Service to
the effect that the Internal Revenue Service is reviewing the Spinoff (in which
event, notwithstanding the introduction to this subsection (b), Parent's
obligation to indemnify, defend and hold harmless the Indemnified Company
Stockholder from the Indemnified Tax shall not cease to be of any force or
effect, but instead shall be reduced to the extent such failure adversely
affects Parent's ability to defend against the Indemnified Tax); or
(iv) provided that Parent agrees to undertake the defense
against the Indemnified Tax in a writing given to the Indemnified Company
Stockholder within 15 business days following such notification and thereafter
diligently pursues such defense, the Indemnified Company Stockholder: (x) does
not permit Parent to control such defense or takes any action inconsistent with
such per mission, (y) does not cooperate with Parent in such defense as
reasonably requested by Parent and with Parent responsible for the reasonable
out-of-pocket expenses of the Indemnified Company Stockholder, or (z) consents
to the entry of any judgment or enters into any settlement with respect to the
Indemnified Tax without Parent's prior written consent (which shall not be
unreasonably withheld, determined solely with regard to the impact of the
settlement on the Parent) (it being understood that the Indemnified Company
Stockholder may retain separate counsel to monitor such defense, at the
Indemnified Company Stockholder's expense); or
(v) Parent's ability to defend against the Indemnified Tax
with respect to an Indemnified Company Stockholder is adversely affected as a
result of another Indemnified Company Stockholder who is a Listed Officer,
Listed Director, or a party to the Stockholders Agreement (x) failing to permit
Parent to control such other Indemnified Company Stockholder's defense against
an Indemnified Tax in a proceeding to which the proviso in Section 5.14 (b)(iv)
applied or (y) consenting to the entry of any judgment or entering into any
settlement with respect to an Indemnified Tax in a proceeding to which the
proviso in Section 5.14 (b)(iv) applied without Parent's prior written consent
(which shall not be unrea-
57
sonably withheld), in which event, notwithstanding the introduction to this
subsection (b), Parent's obligation to indemnify, defend and hold harmless the
Indemnified Company Stockholder from the Indemnified Tax shall not cease to be
of any force or effect, but instead shall be reduced to the extent such failure
or consent or entry adversely affects Parent's ability to defend against the
Indemnified Tax).
(c) In the event (i) Parent does not agree to undertake the
defense of the Indemnified Tax in a writing given to the Indemnified Company
Stockholder within 15 business days following such notification, or does not
thereafter diligently pursue such defense, and (ii) Parent does not agree to pay
the Indemnified Tax in a writing given to the Indemnified Company Stockholder
within 15 business days following such notification, and (iii) the Indemnified
Company Stockholder wishes to conduct its own defense of the Indemnified Tax,
and (iv) the Indemnified Company Stockholder gives written notification to
Parent that the Indemnified Company Stockholder intends to commence, no sooner
than 15 business days from such notice, its own defense of such Indemnified Tax,
the Indemnified Company Stockholder thereafter may conduct such defense and may,
without Parent's consent, consent to the entry of any judgment or enter into any
settlement with respect to the Indemnified Tax. In the event such conditions are
met, the Indemnified Tax shall include any costs reasonably incurred by the
Indemnified Company Stockholder in defending against or contesting the validity
of the Indemnified Tax. For the avoidance of doubt, Parent shall not be
obligated to indemnify any Indemnified Company Stockholder for costs of defense
where Parent has decided not to contest the Indemnified Tax and has so advised
the Indemnified Company Stockholder, and agreed to pay the Indemnified Tax, in
a writing given to the Indemnified Stockholder within the 15 business day period
described above.
(d) Amounts to be paid by Parent to the Indemnified Company
Stockholder pursuant to this Section will be increased by such additional
amounts (the "Additional Amounts") as necessary so that the amounts received by
the Indemnified Company Stockholder, net of any Taxes thereon (including Taxes
on such Additional Amounts), will not be less than the amounts the Indemnified
Company Stockholder would have received if such Taxes had not
58
been imposed. The Additional Amounts shall be determined by using the maximum
income tax rate applicable to long-term capital gains or ordinary income (based
on the respective portions of the amounts received by the Indemnified Company
Stockholder so characterized) for the year the payment is made.
(e) In the event (i) Parent pays an amount to an Indemnified
Company Stockholder pursuant to this Section with respect to such Indemnified
Company Stockholder and (ii) it is subsequently determined that such
Indemnified Company Stockholder is not entitled to indemnification hereunder,
such Indemnified Company Stockholder shall be obligated, promptly upon written
demand, to reimburse Parent for such amount paid.
(f) Each Indemnified Company Stockholder is an express third
party beneficiary of the provisions of this Section, and the benefits of this
Section shall not be withdrawn from or denied to any Indemnified Company
Stockholder without such Indemnified Company Stockholder's written consent.
Notwithstanding the preceding sentence, no such written consent is required to
the extent subsection (b) above operates to eliminate the benefits of this
Section 5.14.
ARTICLE VI
CONDITIONS
Section 6.1 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 on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
the Company, Parent or the Purchaser, as the case may be, to the extent
permitted by applicable law:
(a) Shareholder Approval. This Agreement shall have been approved
and adopted by the requisite vote of the holders of the Shares, if required by
applicable law, in order to consummate the Merger;
(b) Statutes; Court Orders. No statute, rule or regulation shall
have been enacted or promulgated by
59
any governmental authority which prohibits the consummation of the Merger; and
there shall be no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the Merger; provided, that Parent shall employ
its commercially reasonable best efforts to oppose, contest and resolve such
order or injunction;
(c) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer; and
(d) Other Government Approvals. Any other material governmental
approvals required to be obtained prior to the consummation of the Merger shall
have been obtained; provided, that Parent shall employ its commercially
reasonable best efforts to obtain any such required approvals.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the
Transactions contemplated herein may be abandoned at any time prior to the Share
Purchase Date:
(a) By the mutual written consent of Parent and the Company.
(b) By either of the Company or Parent:
(i) if (x) the Offer shall have expired without any Shares
being purchased therein or (y) the Purchaser shall not have accepted for
payment all Shares tendered pursuant to the Offer by February 20, 2000
or, in the event that the failure of the conditions to the Offer as of
February 20, 2000 is as a result of any waiting periods under applicable
laws having not expired, or any approvals under applicable laws
having not been received, by February 20, 2000, June 30, 2000,
provided, however, that the right to terminate this Agreement under this
Section 7.1(b)(i) shall not be available (A) to any party whose failure
to fulfill any obligation under
60
this Agreement has been the cause of, or resulted in, the failure of
Parent or the Purchaser, as the case may be, to purchase the Shares
pursuant to the Offer on or prior to such date, or (B) after Purchaser
shall have purchased Shares pursuant to the Offer; or
(ii) if any Governmental Entity 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 reasonable
efforts to lift), which permanently restrains, enjoins or otherwise
prohibits the acceptance for payment of, or payment for, Shares pursuant
to the Offer or the Merger and such order, decree, ruling or other
action shall have become final and non-appealable.
(c) By the Company:
(i) if Parent, the Purchaser or any of their affiliates
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 7.1(c)(i) if the Company is at such time in breach of its
obligations under this Agreement such as to cause a material adverse
effect on the Company and its Subsidiaries, taken as a whole;
(ii) in connection with entering into a definitive
agreement in accordance with Section 5.4(e), provided it has complied
with all provisions thereof, including the notice provisions therein,
and that it makes simultaneous payment of the Termination Fee; or
(iii) if Parent or the Purchaser shall have breached in
any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement,
which breach cannot be or has not been cured, in all material respects,
within 30 days after the giving of written notice to Parent or the
Purchaser, as applicable.
61
(d) By Parent:
(i) if, due to an occurrence, not involving a breach by
Parent or the Purchaser of their obligations hereunder, which makes it
impossible to satisfy any of the conditions set forth in Annex A hereto,
Parent, the Purchaser, or any of their affiliates 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;
(ii) if prior to the Share Purchase Date, the Company
shall have breached any representation, warranty, covenant or other
agreement contained in this Agreement which (A) would give rise to the
failure of a condition set forth in paragraph (f) or (g) of Annex A
hereto and (B) cannot be or has not been cured, in all material
respects, within 30 days after the giving of written notice to the
Company;
(iii) if either Parent or the Purchaser is entitled to
terminate the Offer as a result of the occurrence of any event set forth
in paragraph (e) of Annex A hereto; or
(iv) if either Parent or the Purchaser is entitled to
terminate the Offer as a result of the occurrence of any event set forth
in paragraph (h) of Annex A hereto.
Section 7.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to its terms, written notice thereof
shall forthwith be given to the other party or parties 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
the Parent or the Company except (A) for fraud or for breach of this Agreement
prior to such termination and (B) as set forth in Sections 5.2(a) (the last
sentence thereof), 7.2 and 8.1. Any termination of this Agreement shall not
affect, and the Company agrees not to rescind or modify, any approval previously
granted under Section 203 of the DGCL with respect to the Stockholders Agreement
or the transactions contemplated thereby. The provisions of Section 5.14 shall
survive any termination of this Agreement if
62
the option granted to Parent pursuant to Section 2.1(a) of the Stockholders
Agreement is exercised.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses.
(a) Except as contemplated by this Agreement, including Section
8.1(b) hereof, all costs and expenses incurred in connection with this Agreement
and the consummation of the Transactions shall be paid by the party incurring
such expenses.
(b) If (x) the Company shall terminate this Agreement pursuant to
Section 7.1(c)(ii), (y) either the Company or Parent terminates this Agreement
pursuant to Section 7.1(b)(i) or Parent terminates this Agreement pursuant to
Section 7.1(d)(ii) and, in the case of this subclause (y), (a) prior thereto
there shall have been publicly announced another Acquisition Proposal that is
financially superior to the Offer and Merger (either at the time it is made or
at any time prior to the termination of this Agreement) or Indication of
Interest and (b) an Acquisition Proposal shall be consummated on or prior to
November 15, 2000, or (z) Parent terminates this Agreement pursuant to Section
7.1(d)(iv) and, in the case of this subclause (z), an Acquisition Proposal on
terms financially superior to the Offer and Merger shall be consummated on or
prior to November 15, 2000, the Company shall pay to Parent an amount equal to
$80,000,000 (eighty million dollars) (the "Termination Fee"), which Termination
Fee shall be payable in same day funds and, in the case of clause (x), no later
than the termination of this Agreement; provided, however, that no Termination
Fee shall be payable if the Purchaser or Parent was in material breach of its
representations, warranties or obligations under this Agreement at the time of
its termination. No separate additional amount shall be payable hereunder to
Parent to reimburse it for out-of-pocket expenses.
(c) If Parent shall terminate this Agreement pursuant to Section
7.1(d)(iii) hereof, the Company shall pay to Parent an amount equal to 50% of
the Termination
63
Fee, which amount shall be payable in same day funds upon the termination of
this Agreement and, if an Acquisition Proposal shall be consummated on or prior
to November 15, 2000, the Company shall pay to Parent an amount equal to the
Termination Fee less any amount theretofore paid pursuant to this Section
8.1(c), which amount shall be payable in same day funds no later than the
consummation of such Acquisition Proposal.
Section 8.2 Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, by action taken
by their respective Boards of Directors (which in the case of the Company shall
include approvals as contemplated in Section 1.3(c)), at any time prior to the
Closing Date with respect to any of the terms contained herein.
Section 8.3 Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the completion of the Offer.
Section 8.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
Honeywell International Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone No.:▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP
64
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
if to the Company, to:
Pittway Corporation
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and CEO
Telephone No.:▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.5 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term "affiliates"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in
counterparts, each of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries This
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein): (a) constitute the entire agreement
and supersedes all prior agreements and
65
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Sections 2.4, 5.8 and 5.14,
are not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
Section 8.8 Severability. Any term or provision of this
Agreement that is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision.
Section 8.9 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 8.10 Assignment. Neither this Agreement not any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that the Purchaser may assign, in
its sole discretion, any or all of its rights, interests and obligations
hereunder to Parent or to any direct or indirect wholly owned Subsidiary of
Parent (in which event such Subsidiary shall become a party to this Agreement
and the parties will make such amendments as are appropriate to reflect such
assignment. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
66
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective duly authorized officers
as of the date first written above.
HONEYWELL INTERNATIONAL INC.
By /S/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------
Name: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President, Home and Building
Control-Solutions and Services,
Authorized Signatory
HII-2 ACQUISITION CORP.
By /S/ J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------------------
Name: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
PITTWAY CORPORATION
By /S/ King Harris
-------------------------------------------------------
Name: King Harris
Title: President and CEO
67
ANNEX A
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other
provisions of the Offer, and in addition to (and not in limitation of) the
Purchaser's rights to extend and amend the Offer at any time in its sole
discretion (subject to the provisions of this Agreement), the Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating
to the Purchaser's obligation to pay for or return tendered Shares promptly
after termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and, subject to the terms of the Merger
Agreement, may terminate or amend the Offer as to any Shares not then paid for,
if (i) any applicable waiting period under the HSR Act has not expired or
terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any
time on or after the date of this Agreement and before the Share Purchase Date,
any of the following events shall occur:
(a)(i) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity against the Purchaser, Parent, the Company
or any Subsidiary of the Company or (ii) there shall be instituted or pending
any suit, action or proceeding before any court which, in the case of either (i)
or (ii), in the good faith judgment of Parent and Purchaser, after consulting
with legal counsel, is likely to result in any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) that will constitute a Company Material Adverse Effect or
is materially adverse to the ability of Parent to consummate this Agreement, the
Offer, the acquisition of Shares pursuant to the Offer or the Merger, and which
in the case of either (i) or (ii), is (A) seeking to prohibit or impose any
material limitations on Parent's or the Purchaser's ownership or operation (or
that of any of their respective Subsidiaries or affiliates) of all or a material
portion of the businesses or assets of the Company and its Subsidiaries taken as
a whole, or to compel Parent or the Purchaser or their respective Subsidiaries
and affiliates to dispose of or hold separate any material portion of the
business or assets of the
A-1
Company or Parent and their respective Subsidiaries, in each case taken as a
whole, (B) challenging the acquisition by Parent or the Purchaser of any Shares
under the Offer, seeking to restrain or prohibit the making or consummation of
the Offer or the Merger or the performance of any of the other transactions
contemplated by this Agreement, or seeking to obtain from the Company, Parent or
the Purchaser any damages that are material in relation to the Company and its
Subsidiaries taken as a whole, (C) seeking to impose material limitations on the
ability of the Purchaser, or render the Purchaser unable, to accept for payment,
pay for or purchase some or all of the Shares pursuant to the Offer and the
Merger, (D) seeking to impose material limitations on the ability of Purchaser
or Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's stockholders, or (E) which
otherwise is reasonably likely to have a Company Material Adverse Effect;
provided, that Parent shall employ its commercially reasonable best efforts to
oppose, contest and resolve any such pending or threatened suit, action or
proceeding;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of a
Government Entity, to the Offer or the Merger, or any other action shall be
taken by any Governmental Entity, other than the application to the Offer or the
Merger of applicable waiting periods under HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to in
clauses (A) through (E) of paragraph (a) above; provided, that Parent shall
employ its commercially reasonable best efforts to oppose, contest and resolve
any such judgment, order, injunction or enforcement by any such Government
Entity;
(c) there shall have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory) or (ii) any limitation (whether or not
mandatory) by any United States governmental authority on the extension of
credit generally by banks or other financial institutions, in each instance to
the extent,
A-2
but only to the extent, that such events affect Parent's ability to obtain
financing for the Offer;
(d) there shall have occurred any events, changes or effects
after the date of this Agreement which, either individually or in the aggregate,
has had or is reasonably likely to have a Company Material Adverse Effect;
provided that (i) any adverse change in the business relationship of the Company
or any of its Subsidiaries with any of its customers as a result of (x) the
Company's entering into this Agreement or (y) the Transactions, (ii) any effect
of any such adverse change on the business, assets, liabilities, properties,
results of operations or financial condition of the Company and its
Subsidiaries, (iii) any adverse effect of any decision by any customer of the
Company or any of its Subsidiaries that accounted for 5% or more of the
consolidated net sales of the Company for the fiscal year ending December 31,
1999 to change the mix or channel of purchasing of products ordered or to be
ordered from the Company or any of it Subsidiaries, (iv) any adverse effect on
the business relationship between the Company and its Subsidiaries, on the one
hand, and Protection One Alarm Monitoring, Inc. and its affiliates, on the other
hand, resulting from the financial condition of Protection One Alarm
Monitoring, Inc. and its affiliates and (v) any adverse effect of changes in
foreign currency exchange rates shall be excluded when making any determination
whether a Company Material Adverse Effect has occurred;
(e)(i) the Board or any committee thereof shall have withdrawn or
modified in a manner adverse to Parent or the Purchaser its approval or
recommendation of the Offer, the Merger or this Agreement, approved or
recommended any Acquisition Proposal or, upon the request of Parent, failed to
reaffirm its approval or recommendation of the Offer, the Merger or this
Agreement, or (ii) the Company shall have entered into any agreement with
respect to any Acquisition Proposal in accordance with Section 5.4(e) of this
Agreement;
(f) the representations and warranties of the Company set forth
in this Agreement (which for these purposes shall exclude all qualifications or
exceptions relating to "materiality" and/or Company Material Adverse Effect)
shall not be true and correct, in each case (i)
A-3
as of the date referred to in any representation or warranty which addresses
matters as of a particular date, or (ii) as to all other representations and
warranties, as of the date of this Agreement and as of the scheduled expiration
of the Offer, such that the aggregate effect of all such representations and
warranties which are not true and correct shall have had or be reasonably likely
to have a Company Material Adverse Effect;
(g) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant with the Company to be performed or
complied with by it under this Agreement other than any failure which, except
for the provisions of Section 1.3(a), would not have, or be reasonably likely to
have, either individually or in the aggregate, a Company Material Adverse
Effect;
(h) any person (other than any person beneficially owning (as
defined in Rule 13d-3 promulgated under the Exchange Act), or part of a group
beneficially owning, 20% or more of the outstanding Common Capital Stock on the
date of this Agreement) acquires beneficial ownership of at least 20% (or, with
respect to any person beneficially owning, or part of a group beneficially
owning, 10% or more on the date of this Agreement or with respect to any group
of which such a person may be or become a member, 25%) of the outstanding Common
Capital Stock;
(i) this Agreement shall have been terminated in accordance with
its terms; or
(j) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ shall have withdrawn its tax opinion
delivered pursuant to Section 5.13 of this Agreement and advised Parent in
writing that, on account of such counsel's discovery of additional facts (a
description of which shall be included in such writing) subsequent to the date
of such opinion establishing that any of the fact statements set forth in the
Tax Schedule are not true and correct, it has become such counsel's opinion that
it is more likely than not that the Spinoff will fail to qualify as a
distribution to which Section 355 of the Code applies as a result of (1) the
negotiation (which began with the exploratory meeting between representatives
of Parent and/or Honeywell Inc. and the Company commencing in May, 1999),
execution and delivery
A-4
of this Agreement, (2) any of the Transactions, or (3) any action or inaction on
the part of the Company at or before the Share Purchase Date.
The foregoing conditions are for the sole benefit of Parent and
the Purchaser, may be asserted by Parent or the Purchaser and may be waived by
Parent or the Purchaser in whole or in part at any time and from time to time in
the sole discretion of Parent or the Purchaser, subject in each case to the
terms of this Agreement. The failure by Parent or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
A-5