AGREEMENT AND PLAN OF MERGER
between
Invacare Corporation
Inva Acquisition Corp.
And
Suburban Ostomy Supply Co., Inc.
Dated as of December 17, 1997
TABLE OF CONTENTS
ARTICLE I THE OFFER..........................................................2
1.1 The Offer........................................................2
1.2 Action by The Company............................................3
ARTICLE II THE MERGER........................................................6
2.1. The Merger......................................................6
2.2. Closing.........................................................6
2.3. Effective Time of the Merger....................................6
2.4. Effects of the Merger...........................................6
2.5. Certificate of Incorporation; By-Laws...........................7
2.6. Directors.......................................................7
2.7. Officers........................................................7
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS.............................................................7
3.1. Effect on Capital Stock.........................................7
3.2. Stock Plans.....................................................8
3.3. Exchange of Certificates........................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................11
4.1 Organization, Standing and Corporate Power......................11
4.2 Subsidiaries....................................................11
4.3 Capital Structure...............................................11
4.4 Authority; Noncontravention.....................................13
4.5 SEC Documents; Undisclosed Liabilities..........................14
4.6 Information Supplied............................................14
4.7 Absence of Certain Changes or Events............................15
4.8 Litigation; Labor Matters; Compliance with Laws.................15
4.9 Employee Benefit Plans..........................................16
4.10 Taxes..........................................................18
4.11 Environmental matters..........................................18
4.12 Material Contracts.............................................20
4.13 Brokers........................................................20
4.14 Opinion of Financial Advisor...................................21
4.15 Board Recommendation...........................................21
4.16 Required Company Vote..........................................21
4.17 State Takeover Statutes........................................21
4.18 Intellectual Property..........................................21
4.19 Related Party Transactions.....................................22
4.20 Permits........................................................22
4.21 Insurance Policies.............................................22
4.22 Certain Business Practices.....................................23
4.23 Suppliers and Customers........................................23
4.24 Product Warranties.............................................23
4.25 Sole Representations...........................................23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO..............23
5.1 Organization, Standing and Corporate Power......................23
5.2 Subsidiaries....................................................24
5.3 Capital Structure...............................................24
5.4 Authority; Noncontravention.....................................24
5.5 Brokers.........................................................25
5.6 Financing.......................................................25
5.7 Offer Documents and Schedule 14D-9..............................25
5.8 Information Supplied............................................25
5.9 Sole Representations............................................25
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER........26
6.1 Conduct of Business of the Company..............................26
6.2 Changes in Employment Arrangements..............................28
6.3 Severance.......................................................28
6.4 WARN 28
ARTICLE VII ADDITIONAL AGREEMENTS...........................................28
7.1. Preparation of Proxy Statement: Stockholder Meeting............28
7.2. Access to Information, Confidentiality.........................29
7.3. Reasonable Best Efforts........................................30
7.4 Indemnification.................................................30
7.5 Public Announcements............................................31
7.6 No Solicitation.................................................31
7.7 Resignation of Directors........................................33
7.8 Employee Benefits...............................................33
7.9 Notification of Certain Matters................................34
7.10 State Takeover Laws............................................34
7.11 Indemnification Agreements.....................................34
ARTICLE VIII CONDITIONS PRECEDENT............................................35
8.1 Conditions to Each Party's Obligation...........................35
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER................................35
9.1 Termination.....................................................35
9.2 Effect of Termination...........................................36
9.3 Amendment.......................................................36
9.4 Extension; Waiver...............................................36
9.5 Procedure for Termination, Amendment, Extension or Waiver.......37
ARTICLE X GENERAL PROVISIONS.................................................37
10.1 Nonsurvival of Representations and Warranties..................37
10.2 Fees and Expenses..............................................37
10.3 Notices........................................................38
10.4 Definitions....................................................39
10.5 Interpretation.................................................40
10.6 Counterparts...................................................40
10.7 Entire Agreement; No Third-Party Beneficiaries.................40
10.8 Governing Law.................................................40
10.9 Assignment.....................................................41
10.10 Enforcement...................................................41
1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 17th day
of December, 1997 by and between Invacare Corporation, an Ohio corporation (the
"Buyer"), Inva Acquisition Corp., a Massachusetts corporation and wholly-owned
subsidiary of Buyer ("MergerCo"), and Suburban Ostomy Supply Co., Inc., a
Massachusetts corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company, the Buyer
and MergerCo have determined that the merger of MergerCo with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, would be advisable and in the best interests of their
respective companies and stockholders, and such Boards of Directors have
approved such Merger, pursuant to which each share of common stock, no par value
per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger (as defined in Section
1.3) will be converted into the right to receive cash, other than (a) shares of
Company Common Stock owned, directly or indirectly, by the Company or any
subsidiary (as defined in Section 10.4) of the Company and (b) Dissenting Shares
(as defined in Section 3. l(d));
WHEREAS, subject to the terms and conditions of this Agreement and in
furtherance of the Merger, the Buyer will make, or will cause MergerCo to make,
a tender offer (the "Offer") to acquire any and all shares of Company Common
Stock;
WHEREAS, the Merger and this Agreement require the vote of two-thirds
in interest of the issued and outstanding shares of Company Common Stock for the
approval thereof (the "Company Stockholder Approval");
WHEREAS, simultaneously with the execution hereof, certain stockholders
of the Company have executed and delivered to Buyer and MergerCo a Stockholders
Agreement of even date herewith (the "Stockholders Agreement") pursuant to which
such stockholders have agreed to tender their shares of Company Common Stock
pursuant to the Offer and to vote for the Merger described herein, which
Stockholders Agreement has been relied upon by Buyer and MergerCo in their
decision to execute this Agreement; and
WHEREAS, Buyer, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various terms of and conditions to
the Offer and the Merger; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
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ARTICLE I
THE OFFER
1.1......The Offer.
1.1.1 General. Provided that this Agreement shall not have
been terminated in accordance with Article IX, the Buyer shall commence, or
shall cause MergerCo to commence, the Offer to acquire any and all shares of
Company Common Stock for a cash price per share equal to the Merger
Consideration (as defined in Section 3.1(c)), as promptly as reasonably
practicable after the date hereof, but in no event later than five (5) business
days after the initial public announcement of Offeror's intention to commence
the Offer. For purposes of this Article I, the party which makes the Offer,
whether the Buyer or MergerCo, shall be referred to as the "Offeror." Offeror
may not accept any shares of Company Common Stock tendered for purchase in
response to the Offer unless it accepts all such shares that are properly
tendered in accordance with the terms thereof. Acceptance by Offeror of shares
of Company Common Stock for payment pursuant to the Offer shall be irrevocable.
The Offer shall be subject: (i) to the condition that there shall be validly
tendered in accordance with the terms of the Offer prior to the expiration date
of the Offer and not withdrawn a number of shares of Company Common Stock which,
together with the shares of Company Common Stock then owned by the Buyer, and
MergerCo, represents at least two-thirds of the total number of outstanding
shares of the Company Common Stock, assuming the exercise of all outstanding
options, rights and convertible securities (if any) and the issuance of all
shares of Company Common Stock that the Company is then obligated to issue (such
total number of outstanding or issuable shares of Company Common Stock being
hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Condition")
and (ii) to the other conditions set forth in Annex I attached hereto
(collectively, the "Offer Conditions"). The Buyer and MergerCo expressly reserve
the right to waive any of the conditions to the Offer, including but not limited
to, the satisfaction of the Minimum Condition. The expiration date of the Offer
shall be twenty (20) business days after commencement. Buyer and MergerCo agree
that if all of the Offer Conditions are not satisfied on such initial expiration
date of the Offer then, provided that the Offeror determines that all such
Conditions are reasonably capable of being satisfied and subject to SEC rules
with respect to extension of time periods, Offeror shall extend the Offer from
time to time until such Conditions are satisfied or waived; provided, that
Offeror shall not be required to extend the offer beyond January 31, 1998. Buyer
and MergerCo agree that upon the initial expiration date of the Offer, as the
same may be extended in accordance with the immediately preceding sentence, if
the Offer Conditions have been satisfied, Offeror shall accept the shares of
Company Common Stock properly tendered for purchase, subject to the right to
extend the Offer not more than ten (10) business days in the aggregate if less
than 90% of the Fully Diluted Shares have been properly tendered. Without the
prior written consent of the Company, no change may be made by Offeror which
reduces the maximum number of shares of Company Common Stock to be purchased in
the Offer or which changes the form of consideration or makes any other change
in the terms and conditions of the Offer, except as may be required pursuant to
SEC rules with respect to extension of time periods, in any manner which is
adverse to the holders of shares of Company Common Stock or which imposes
conditions to the Offer in addition to those set forth above; provided, however,
that if on a scheduled expiration date of the Offer (as it may be extended in
accordance with the terms hereof), all conditions to the Offer shall not have
been satisfied or waived, the Offer may be extended from time to time without
the consent of the Company for such period of time as is reasonably expected to
be necessary to satisfy the unsatisfied conditions and provided further that if,
as of a scheduled expiration date all of the conditions to the Offer have been
satisfied, but less than 90% of the Fully Diluted Shares have been properly
tendered, Offeror may extend the Offer up to an aggregate of an additional ten
(10) business days. The Merger Consideration shall, subject to applicable
withholding of taxes, be net to the seller in cash, payable upon the terms and
subject to the conditions of the Offer. Subject to the terms and conditions of
the Offer, Offeror shall pay, as promptly as practicable after expiration of the
Offer, for all shares of Company Common Stock validly tendered and not
withdrawn. At or prior to the expiration of the Offer, Offeror will take all
steps necessary to provide its paying agent any funds necessary to make the
payments contemplated by the Offer. Upon the execution of this Agreement, the
Merger Consideration shall be the amount set forth in Section 3.1(c) payable
without interest thereon, and such initial Merger Consideration shall be
adjusted only in accordance with the following provisions. The Merger
Consideration payable in connection with the Offer shall automatically be
adjusted appropriately for any stock dividend, split or any conversion or
reclassification in respect of the Company Common Stock occurring after the date
hereof and prior to the date of consummation of the Offer, which shall occur
only in accordance with the terms of this Agreement. MergerCo shall have the
right to increase the Merger Consideration in effect hereunder at any time.
3
1.1.2 Securities Law Compliance. On the date of commencement
of the Offer, Offeror shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Offeror and the Company agree
to promptly correct any information provided by either of them for use in the
Offer Documents which shall have become false or misleading, and Offeror further
agrees to take all steps necessary to cause the Schedule 14D-1 as so corrected
to be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of shares of the Company Common Stock, in each case as
and to the extent required by applicable federal securities laws. Offeror agrees
to provide the Company with a written copy of any comments it or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule
14D-1 promptly after receipt of such comments.
1.1.3 Termination of the Offer. Offeror shall not, without the
prior written consent of the Company, (i) terminate the Offer (except in
accordance with the terms of Annex I attached hereto), or (ii) extend the
Expiration Date to a date later than March 31, 1998.
1.2......Action by The Company.
1.2.1 Approval and Recommendation of the Board. The Company
hereby approves of and consents to the making of the Offer and represents that
(a) the Board of Directors of the Company, at a meeting duly called and held on
December 16, 1997, has unanimously (i) determined that the Merger and the Offer,
taken together, are fair to, and in the best interests of, the Company and the
holders of the Company Common Stock, (ii) advised, authorized and approved this
Agreement and approved the Merger and the other transactions contemplated hereby
(including but not limited to the Offer), (iii) recommended that the
stockholders of the Company accept the Offer and authorize and approve this
Agreement and the transactions contemplated hereby, and (iv) agreed to recommend
that holders of Company Common Stock tender their shares of Company Common Stock
pursuant to the Offer, and (b) Bear, ▇▇▇▇▇▇▇ & Co., Inc. has delivered to the
Board an oral opinion on December 16, 1997, which will be confirmed promptly in
writing, to the effect that, as of such date, the consideration to be received
by the holders of shares of Company Common Stock pursuant to the Offer and the
Merger, taken together, is fair to the holders of shares of Company Common Stock
from a financial point of view. Subject to the provisions of Section 7.6 hereof
and the other provisions of this Agreement, the Company hereby consents to the
inclusion in the Offer Documents prepared in connection with the Offer of the
recommendation of the Board of Directors of the Company described in the
immediately preceding sentence.
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1.2.2 Securities Law Compliance. On the date of 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, the "Schedule 14D-9") containing, subject to the provisions of Section
6.6 hereof and the other provisions of this Agreement, the recommendation of the
Board of Directors of the Company described in Section 1.2.1 and shall mail the
Schedule 14D-9 to the stockholders of the Company. The Company and Offeror agree
to correct promptly any information provided by any of them for use in the
Schedule 14D-9 which shall have become false or misleading, 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 disseminated to holders of shares of the
Company Common Stock, in each case as and to the extent required by applicable
federal securities laws. The Company agrees to provide Offeror with a written
copy of any comments it or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9, promptly after receipt of
such comments.
1.2.3 Stockholder Lists. In connection with the Offer and the
Merger, the Company shall furnish Offeror with mailing labels containing the
names and addresses of all record holders of shares of Company Common Stock and
with security position listings of shares of Company Common Stock held in stock
depositories, each as of a recent date, and of those persons becoming record
holders subsequent to such date. The Company shall furnish Offeror with all such
additional information (including, but not limited to, updated lists of holders
of shares of Company Common Stock and their addresses, mailing labels and lists
of security positions) and such other assistance as Offeror or its agents may
reasonably request in communicating the Offer to the record and beneficial
owners of shares of the Company Common Stock. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Offeror shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated in
accordance with Section 9, shall deliver to the Company all copies of such
information then in its or any of its affiliate's possession.
5
1.2.4 Directors.
(a) Effective upon the acceptance for payment by Offeror of
shares pursuant to the Offer such that Buyer or MergerCo shall own at least a
majority of the Fully Diluted Shares, the Offeror shall be entitled to designate
the number of Directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the product of (i) the total number of directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to this Section) and (ii) the percentage that the
number of shares of Company Common Stock owned by Offeror (including shares of
Company Common Stock accepted for payment) bears to the total number of Shares
of Company Common Stock outstanding, and the Company shall take all action
necessary to cause Offeror's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such times, the Company will use its best efforts to cause
individuals designated by Offeror to constitute the same percentage as such
individuals represent on the Company's Board of Directors of (x) each committee
of the Board (other than any committee of the Board established to take action
under this Agreement), (y) each board of directors of each Subsidiary of the
Company and (z) each committee of each such board. provided; however, that in
the event that Offeror's designees are elected to the Board of Directors of the
Company, until the Effective Time, such Board of Directors shall have at least
two directors who are directors of the Company on the date of this Agreement and
who are not officers of the Company or any of its subsidiaries (the "Independent
Directors") and; provided further that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to fill such vacancy who
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors of the Company on
the date hereof shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or any of its Subsidiaries, or officers
or affiliates of Buyer or any of its subsidiaries, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, the affirmative vote
of the majority of the Independent Directors shall be required to (i) amend or
otherwise modify the Articles of Organization of the Company, (ii) approve any
amendment, modification or waiver by the Company of any provisions of this
Agreement or (iii) approve any other action by the Company that materially
adversely affects the interests of the stockholders of the Company (other than
Buyer or MergerCo) with respect to the transactions contemplated hereby,
including without limitation, any actions which would constitute a breach by the
Company of its representations, warranties or covenants contained herein.
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. Subject to applicable law, the Company shall
promptly take all action requested by Offeror necessary to effect any such
election, including mailing to its stockholders the information statement
containing the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing
with the mailing of the Schedule 14D-9 (provided that Offeror shall have
provided to the Company on a timely basis all information required to be
included in the Information Statement with respect to Offeror's designees). In
connection with the foregoing, the Company will promptly, at the option of
Offeror, either increase the size of the Company's Board of Directors and/or
obtain the resignation of such number of its current directors as is necessary
to enable Offeror's designees to be elected or appointed to, and to constitute a
majority of the Company's Board of Directors as provided above.
6
Offeror will supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
2.1......The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Massachusetts Business
Corporation Law, MergerCo shall be merged with and into the Company at the
Effective Time of the Merger (as hereafter defined). Upon the Effective Time of
the Merger, the separate existence of MergerCo shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall continue under the name ["Suburban Ostomy Supply Co., Inc."].
2.2......Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 9.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the second business day after satisfaction or waiver of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, unless another date,
time or place is agreed to in writing by the parties hereto.
2.3......Effective Time of the Merger. On the Closing Date, the parties
shall file a certificate or certificates of merger and other appropriate
documents (the "Certificate of Merger") executed in accordance with the relevant
provisions of the Massachusetts law and shall make all other filings or
recordings required under the Massachusetts Business Corporation Law in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the
Commonwealth at Massachusetts or at such other time as is specified in the
Certificate of Merger and the Articles of Merger in accordance with the
Massachusetts Corporation Business Law and as MergerCo and the Company shall
agree should be specified in the Certificate of Merger (the time the Merger
becomes effective being the "Effective Time of the Merger").
2.4......Effects of the Merger. The Merger shall have the effects
set forth in the Massachusetts Business Corporation Law.
2.5......Certificate of Incorporation; By-Laws. (a) The Articles of
Organization of MergerCo, as in effect immediately prior to the Effective Time
of the Merger, shall be amended to change the name of the Surviving Corporation
to "Suburban Ostomy Supply Co., Inc.", and, as so amended, until thereafter
further amended as provided therein and under the Massachusetts Business
Corporation Law, it shall be the Articles of Organization of the Surviving
Corporation following the Merger.
7
(b)......The By-laws of MergerCo as in effect at the Effective Time of
the Merger shall be the By-laws of the Company following the Merger until
thereafter changed or amended as provided therein or by applicable law.
2.6......Directors. The directors of MergerCo at the Effective Time of
the Merger shall be the directors of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2.7......Officers. The officers of the Company at the Effective Time of
the Merger shall be the officers of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
3.1......Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of
MergerCo:
(a)......Common Stock of MergerCo Each share of common stock of
MergerCo issued and outstanding immediately prior to the Effective Time of the
Merger shall be converted into one share of the common stock, no par value per
share, of the Company.
(b)......Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned by the Company or by any wholly owned subsidiary of the
Company shall automatically be canceled and retired and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in exchange
therefor.
(c)......Conversion of Company Common Stock. Except as otherwise
provided herein and subject to Section 3.3, each issued and outstanding share of
Company Common Stock, other than shares owned by Buyer, MergerCo or any other
direct or indirect subsidiary of Buyer (collectively, the "Excluded Shares"),
and other than Dissenting Shares and treasury stock, shall be converted into the
right to receive in cash from the Company following the Merger an amount equal
to $11.75 (the "Merger Consideration"). Contextually, the term "Merger
Consideration" shall mean the per share amount in reference to the consideration
designated on a per share basis, and otherwise shall refer to the aggregate
consideration represented by the per share amount multiplied by the total number
of shares of Company Common Stock then outstanding.
(d)......Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger held by a holder who has
the right to demand payment for and an appraisal of such shares in accordance
with the Massachusetts Business Corporation Law Chapter 156B (or any successor
provision) ("Dissenting Shares") shall not be converted into the right to
receive Merger Consideration unless such holder fails to perfect or otherwise
withdraws, forfeits or loses such holder's right to such payment or appraisal,
if any. If, after the Effective Time of the Merger, such holder fails to perfect
or withdraws, forfeits or loses any such right to appraisal, each share of such
holder shall be treated as a share that had been converted as of the Effective
Time of the Merger into the right to receive Merger Consideration in accordance
with this Section 3.1. The Company shall give prompt notice to MergerCo of any
demands received by the Company for appraisal of shares of Company Common Stock,
and MergerCo shall have the right to participate in and, at MergerCo's
reasonable discretion, to direct all communications, negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of MergerCo, make any payment with respect to, or settle
or offer to settle, any such demands.
8
(e)......Cancellation and Retirement of Excluded Shares. Each Excluded
Share issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(f)......Cancellation and Retirement of Company Common Stock. As of the
Effective Time of the Merger, all shares of Company Common Stock (other than
shares referred to in Section 3.1(b)) issued and outstanding immediately prior
to the Effective Time of the Merger, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall, to
the extent such certificate represents such shares, cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
applicable thereto, upon surrender of such certificate in accordance with
Section 3.3.
3.2......Stock Plans; Bank Warrant. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Plans (as defined below))
shall adopt such resolutions or take such other actions as may be required to
effect the following:
(i) cause written notification of the Merger to be given to
each holder of a Company Stock Option (as defined below) by the Board
of Directors as provided in the Stock Plans to the effect that each
such holder of a Company Stock Option may exercise such Company Stock
Option (whether or not such Company Stock Option was exercisable
immediately before such notification was given) no later than thirty
days from the date of such notification (the "Exercise Period"); and
(ii) adjust the terms of all outstanding employee stock
options to purchase shares of Company Common Stock ("Company Stock
Options") granted under the Company's 1995 Stock Option Plan (the
"Stock Option Plan") to provide that, at the Effective Time of the
Merger each Company Stock Option outstanding immediately prior to the
Effective Time of the Merger shall vest as a consequence of the Merger
and shall be canceled in exchange for a payment from the Company after
the Merger (subject to any applicable withholding taxes) equal to the
product of (1) the total number of shares of Company Common Stock
subject to such Company Stock Option and (2) the excess of $11.75 over
the exercise price per share of Company Common Stock subject to such
Company Stock Option and applicable withholding taxes, payable in cash
immediately following the Effective Time of the Merger;
9
(iii) cause the cancellation of the Bank Warrant (as defined
below) by causing a "Redemption Event" (as defined in the Bank Warrant)
to occur and taking such other steps as may be necessary in order to
cause such cancellation, including making all payments required to be
made in connection therewith;
(iv) except as provided herein or as otherwise agreed to by
the parties, the Stock Option Plan and any other plan, program or
arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any subsidiary shall
terminate as of the Effective Time of the Merger, and the Company shall
ensure that following the Effective Time of the Merger no holder of a
Company Stock Option nor any participant in any Stock Option Plan shall
have any right thereunder to acquire equity securities of the Company
following the Merger.
(b)......The Company hereby represents and warrants that upon taking of
the actions specified above, immediately following the Effective Time of the
Merger, and after giving effect to the payments described in this Section 3.2,
no holder of a Company Stock Option nor any participant in any Stock Option Plan
nor the holder of any warrant to purchase Company Common Stock (including the
Bank Warrant) shall have the right thereunder to acquire equity securities of
the Company, or any other benefit, after the Merger.
3.3......Exchange of Certificates.
(a)......Exchange Agent. At or prior to the Effective Time of the
Merger, Buyer shall deposit or cause to be deposited with the Exchange Agent
(who shall be appointed by the Company prior to the Closing and shall be
reasonably acceptable to MergerCo), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article III, the
aggregate Merger Consideration. Promptly after the Effective Time, the Exchange
Agent shall mail to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Company Common Stock (the "Certificates"), a letter
of transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor (or such other documents as may reasonably be
required in connection with such surrender) in customary form to be agreed by
MergerCo and the Company prior thereto.
(b)......Exchange Procedures. (i) After the Effective Time of the
Merger, each holder of an outstanding Certificate or Certificates shall, upon
surrender to the Exchange Agent of such Certificate or Certificates and
acceptance thereof by the Exchange Agent, be entitled to receive the amount of
cash into which such Certificate or Certificates surrendered shall have been
converted pursuant to this Agreement.
10
..................(ii) After the Effective Time of the Merger, there shall be no
further transfer on the records of the Company or its transfer agent of
Certificates, and if Certificates are presented to the Company for transfer,
they shall be canceled against delivery of cash. If cash is to be remitted to a
name other than that in which the Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to the Company or its transfer agent any transfer or other taxes required or
establish to the satisfaction of the Company or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 3.3(b), each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the right to receive upon such surrender
the Merger Consideration applicable thereto as contemplated by Section 3.1. No
interest will be paid or will accrue on any cash payable as Merger Consideration
or in lieu of any fractional shares of Company Common Stock.
..................(iii) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Buyer, the posting by such person of a bond in such amount as Buyer may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, or the provision of other reasonable assurances requested by Buyer,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(c)......No Further Ownership Rights in Company Common Stock Exchanged
For Cash. All cash paid upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares.
(d)......Termination of Exchange Fund. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 3.3
(the "Exchange Fund") which remains undistributed to the holders of the
Certificates for six months after the Effective Time of the Merger shall be
delivered to the Company, upon demand, and any holders of shares of Company
Common Stock prior to the Merger who have not theretofore complied with this
Article II shall thereafter look only to the Company and only as general
creditors thereof for payment of their claim for cash, if any, to which such
holders may be entitled.
(e)......No Liability. None of Buyer, MergerCo, the Company or the
Exchange Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to the later of (i) one year after the Effective Time of
the Merger and (ii) immediately prior to such date on which any cash, if any, in
respect of such Certificate would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 3.4), any such cash, dividends or
distributions in respect of such certificate shall, to the extent permitted by
applicable law, become the property of the Company, free and clear of all claims
or interest of any person previously entitled thereto.
11
(f)......Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by the Company, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and MergerCo as
follows:
4.1......Organization, Standing and Corporate Power. Each of the
Company and each of its Subsidiaries (as defined in Section 4.2) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of the
Company and each of its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect (as defined in Section 10.4) with respect to the
Company. Attached as Section 4.1 of the disclosure schedule ("Disclosure
Schedule") delivered to MergerCo by the Company at the time of execution of this
Agreement are complete and correct copies of the Restated Articles of
Organization, as amended, and bylaws, as amended, of the Company. The Company
has delivered to MergerCo complete and correct copies of the articles of
organization and by-laws (or other comparable organizational documents) of each
of its Subsidiaries, in each case as amended to the date of this Agreement.
4.2......Subsidiaries. The only direct or indirect subsidiaries of the
Company are those listed in Section 4.2 of the Disclosure Schedule (the
"Subsidiaries"). All the outstanding shares of capital stock of each such
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned (of record and beneficially) by the Company, by another wholly owned
Subsidiary of the Company or by the Company and another such wholly owned
Subsidiary, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens").
Except for the ownership interests set forth in Section 4.2 of the Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, business association,
joint venture or other entity.
4.3......Capital Structure. The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Company Common Stock, no par value, and
(ii) 1,000,000 shares of preferred stock. Subject to any Permitted Changes (as
defined in Section 6.1(d)) there are, as of the close of business on December
16, 1997: (i) 10,538,622 shares of Company Common Stock issued and outstanding;
(ii) no shares of Company Common Stock are held in the treasury of the Company;
(iii) no shares of Company Common Stock are reserved for issuance upon exercise
of authorized but unissued Company Stock Options pursuant to the Stock Option
Plan including any increases pursuant to existing contractual obligations; (iv)
795,895 shares of Company Common Stock issuable upon exercise of outstanding
Company Stock Options; and (v) 86,180 shares of Company Common Stock issuable
12
upon exercise of an outstanding warrant (the "Bank Warrant"). Section 4.3 of the
Disclosure Schedule sets forth the exercise price for the outstanding Company
Stock Options and the Bank Warrant. Except as set forth above or in Section 3.3
of the Disclosure Schedule, no shares of capital stock or other equity
securities of the Company are issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of the Company are, and all shares which may
be issued pursuant to the Stock Option Plan including any increases pursuant to
existing contractual obligations and the Bank Warrant will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. Except as set forth on Section 4.3 of the Disclosure
Schedule, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote. Except as set forth
above, there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
obligating the Company or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other equity or voting securities of the Company or of any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Other than as disclosed in the most
recent balance sheet of the Company included in the SEC Documents (as defined
below) or as set forth in Section 4.3 of the Disclosure Schedule, no
indebtedness for borrowed money of the Company or its Subsidiaries contains any
restriction upon the incurrence of indebtedness for borrowed money by the
Company or any of its Subsidiaries or restricts the ability of the Company or
any of its Subsidiaries to grant any Liens on its properties or assets. Other
than the Company Stock Options and other than as disclosed in Section 4.3 of the
Disclosure Schedule, (i) there are no outstanding contractual obligations,
commitments, understandings or arrangements of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of the Company or any of its Subsidiaries
and (ii) to the knowledge of the Company, there are no irrevocable proxies with
respect to shares of capital stock of the Company or any subsidiary of the
Company. Section 4.3 of the Disclosure Schedule sets forth the record and, to
the knowledge of the Company, beneficial ownership of, and voting power in
respect of, the capital stock of the Company held by the Company's directors,
officers and stockholders owning five percent (5%) or more of the Company's
outstanding common stock. Except as set forth on Section 4.3 of the Disclosure
Schedule, there are no agreements or arrangements pursuant to which the Company
is or could be required to register shares of Company Common Stock or other
securities under the Securities Act of 1933, as amended (the "Securities Act")
or other agreements or arrangements with or among any security holders of the
Company with respect to securities of the Company.
4.4......Authority; Noncontravention. The Company has the requisite
corporate and other power and authority to enter into this Agreement and,
subject to the Company Stockholder Approval with respect to the consummation of
the Merger, to consummate the transactions contemplated hereby. The Offer, the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby have been duly
authorized by the Company's Board of Directors, which constitutes all necessary
13
corporate action on the part of the Company, subject, in the case of the Merger,
to the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms subject,
as to enforceability, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and to
general principles of equity. Except for the Company's credit facility and
except as disclosed in Section 4.4 of the Disclosure Schedule, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by the Offer and this Agreement and compliance with the provisions
hereof will not, conflict with, or result in (a) any breach or violation of, or
default (with or without notice or lapse of time, or both) under, or right of
termination, cancellation, acceleration or "put", with respect to any obligation
or (b) the loss of a benefit or other right or (c) the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries under,
(i) the Restated Articles of Organization, as amended, or By-laws, as amended,
of the Company or the comparable organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, note purchase agreement,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (i), (ii)
and (iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not have a Material Adverse
Effect with respect to the Company or would not prevent, hinder or materially
delay the ability of the Company and/or MergerCo to consummate the transactions
contemplated by this Agreement if not cured or waived by the Closing Date. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), or any other person under any
material agreement, indenture or other instrument to which the Company or any
Subsidiary is a party or to which any of its properties is subject, is required
by or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby, except for (i) the
filing of a pre-merger notification and report form by the Company under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing with the SEC of (x) a proxy statement relating to the
Company Stockholder Approval (such proxy statement as amended or supplemented
from time to time, the "Proxy Statement"), and (y) such reports under the
Exchange Act as may be required in connection with the Offer and this Agreement
and the transactions contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the Secretary of the Commonwealth of Massachusetts
and appropriate documents with the relevant authorities of other states in which
the Company is qualified to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or notices as are
set forth in Section 4.4 of the Disclosure Schedule.
4.5......SEC Documents; Undisclosed Liabilities. The Company has timely
filed all required reports, schedules, forms, statements and other documents
with the Securities and Exchange Commission ("SEC") since October 9, 1996
14
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, as amended, the "SEC Documents").
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents (including any
and all financial statements included therein) as of such dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except to the extent revised or superseded by a subsequent filing with the SEC
(a copy of which has been provided to MergerCo prior to the date of this
Agreement), none of the SEC Documents filed by the Company since May 31, 1997
and prior to the date of this Agreement (the "Recent SEC Documents") contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in all
SEC Documents filed since October 9, 1996 (the "SEC Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments, none of
which, individually or in the aggregate is material). Except as provided for in
the balance sheet contained in the most recent audited financial statements of
the Company included in the Recent SEC Documents (the "Year End Balance Sheet")
and except as disclosed in Section 4.5 of the Disclosure Schedule, neither the
Company nor any Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) except (x) liabilities
incurred in the ordinary and usual course of business and consistent with past
practice, (y) liabilities specifically incurred in connection with the
transactions contemplated by this Agreement, and (z) other liabilities which
will not exceed $2,000,000 in the aggregate, exclusive of obligations under
Section 10.2 hereof.
4.6 Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading, except
that no representation or warranty is made by the Company with respect to the
information supplied by MergerCo or any affiliate of MergerCo in writing
specifically for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder. Neither the Schedule
14D-9 nor any information supplied by the Company for inclusion in the Offer
Documents will, at the respective times the Schedule 14D-9, the Offer Documents
15
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading (except to
the extent information contained therein is based upon information supplied
solely by the Buyer or MergerCo). The Schedule 14D-9 shall comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
4.7......Absence of Certain Changes or Events. Except as disclosed in
the Recent SEC Documents or on Section 4.7 of the Disclosure Schedule, since the
date of the Year End Balance Sheet, the Company has conducted its business only
in the ordinary course consistent with past practice, and there is not and has
not been: (i) any Material Adverse Change with respect to the Company; (ii) any
condition, event or occurrence which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or give rise to a
Material Adverse Change with respect to the Company; (iii) any event which, if
it had taken place following the execution of this Agreement, would not have
been permitted by Section 6.1 without the prior consent of MergerCo; or (iv) any
condition, event or occurrence which would reasonably be expected to prevent,
hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
4.8......Litigation; Labor Matters; Compliance with Laws. (a) Except as
disclosed in the Recent SEC Documents, there is (i) no suit, action or
proceeding or investigation pending and, (ii) to the knowledge of the Company,
no suit, action or proceeding or investigation threatened against or affecting
the Company or any of its Subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect with respect to
the Company or prevent, hinder or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries having, or
which in the future could have, any such effect.
(b)......Except as disclosed in Section 4.8 of the Disclosure Schedule,
(i) neither the Company nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) neither the Company
nor any of its Subsidiaries is the subject of any proceeding asserting that it
or any subsidiary has committed an unfair labor practice or seeking to compel it
to bargain with any labor organization as to wages or conditions of employment;
(iii) there is no strike, work stoppage or other labor dispute involving it or
any of its Subsidiaries pending or, to its knowledge, threatened; and (iv) the
Company is not liable for any severance pay. or other payments to any employee
or former employee, or any other person, arising from the termination of
employment, or other change in the legal relationship with such person, under
any benefit or severance policy, practice, agreement, plan, or program of the
Company, nor will the Company have any liability which exists or arises, or may
be deemed to exist or arise, under any applicable law or otherwise, as a result
of or in connection with the transactions contemplated hereunder or as a result
of the termination by the Company of any persons employed by the Company or any
of its Subsidiaries on or prior to the Effective Time of the Merger.
16
(c)......The ownership of the assets of and the conduct of the business
of the Company and each of its Subsidiaries have not been in violation of, and
comply with all statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees or arbitration awards applicable thereto, except for violations
or failures so to comply, if any, that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect with respect to the
Company.
4.9......Employee Benefit Plans. With respect to the employee benefit
plans (as that phrase is defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and any other benefit or
compensation plan, program, or arrangement maintained for the benefit of any
current or former employee, officer, or director of the Company or any ERISA
Affiliate (as defined below) ("Benefit Plans"), except as set forth in Section
4.9 of the Disclosure Schedule:
.................. (i) none of the Benefit Plans is a "multiemployer plan"
within the meaning of ERISA nor has the Company ever maintained or contributed
to such a Plan;
.................. (ii) none of the Benefit Plans promises or provides
retiree medical or life insurance benefits to any person;
.................. (iii) none of the Benefit Plans or any other agreement
with any employee of the Company or its Subsidiaries provides for payment of a
benefit, the increase of a benefit amount, the payment of a contingent benefit,
or the acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions contemplated
by this Agreement;
.................. (iv) each Benefit Plan intended to be qualified under
section 401 (a) of the Internal Revenue Code of 1986, as amended ("Code") has
received a favorable determination letter from the Internal Revenue Service that
it is so qualified and nothing has occurred since the date of such letter that
could reasonably be expected to result in the revocation of such determination
letter;
.................. (v) each Benefit Plan has been operated in all respects
in accordance with its terms and the requirements of all applicable law except
where the failure to do so would not have a Material Adverse Effect and all
premiums payable to the Pension Benefits Guarantee Corporation have been paid in
full;
.................. (vi) neither the Company nor any ERISA Affiliate has
liability under Title IV of ERISA in connection with the termination of, or
withdrawal from, any Benefit Plan; and
.................. (vii) the Company has provided to Buyer or MergerCo (x)
true and complete copies of all Benefit Plans, (y) the most recent annual
actuarial valuation, if any, prepared for each Benefit Plan, and (z) the most
recent annual report (Form 5500), if any, required under ERISA with respect to
each Benefit Plan;
.................. (viii) no payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be non-deductible to
the Company or subject to tax under I.R.C. ss.280G or ss.4999, respectively, nor
will the Company be required to "gross up" or otherwise compensate any such
person because of the imposition of any excise tax on a payment to such person;
17
......... (ix) as of the date hereof, subject to the requirements of
Section 412 of the Code or Section 302 of ERISA, no Pension Plan has incurred an
accumulated funding deficiency nor has any sponsor of such a Pension Plan
obtained a funding waiver (as such terms are defined in such applicable sections
and any regulations thereunder) with respect thereto;
......... (x) neither the Company nor any ERISA Affiliates has engaged in,
and neither the Company nor any Affiliate knows of any other person who or which
has engaged in, any "prohibited transaction" (within the meaning of Section 406
of ERISA or Section 4975 of the Code, excluding any transactions which are
exempt under Section 408 of ERISA or Section 4975 of the Code) with respect to
any Benefit Plan, which could reasonably be expected to subject the Company or
any Subsidiary or Buyer or MergerCo to any material liability;
......... (xi) no reportable event (as defined in ERISA and the regulations
thereunder, but excluding any such event for which the thirty (30) day notice
requirement has been waived) has occurred or is continuing with respect to any
Benefit Plan;
......... (xii) there are no actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Company, any actions,
suits or claims (other than routine claims for benefits) which can reasonably be
expected to be asserted, against the Company with respect to any Benefit Plan or
other plan or arrangement, or against any such Benefit Plan or other plan or the
assets thereof;
.................. (xiii) the Company and each ERISA Affiliate is, and at
all relevant times, has been in material compliance with the provisions of COBRA
(as defined below); and
......... (xiv) except as specifically set forth herein, the Company has
not taken any action or made any statement, promise or representation to, or
agreement with, any of its employees, officers or directors that after the
Closing, Buyer will continue or establish any Benefit Plan or other plan or
arrangement or provide any particular benefits or compensation to employees.
For purposes of this Agreement, "ERISA Affiliate" shall mean any corporation,
trade or business which controls, is controlled by, or is under common control
with, the Company within the meaning of Sections 414(b), 414(c), 414(m) or
414(o) of the Code or Section 4001(a)(14) of ERISA and "COBRA" shall mean Part 6
of Subtitle B of Title I of ERISA and Section 4980B(f) of the Code.
Schedule 4.9 of the Disclosure Schedule sets forth a complete and
accurate list of all Benefit Plans currently in effect.
4.10.....Taxes. Except as disclosed in Section 4.10 of the Disclosure
Schedule, the Company and each of its Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member (a "Consolidated Group") has
18
timely filed all Tax Returns required to be filed by it (except for certain Tax
Returns, each of which is immaterial in amount and scope, involving aggregate
liability for Taxes of no more than $100,000, which may not have been timely
filed), has paid all Taxes shown thereon to be due and has provided adequate
reserves in its financial statements for any material Taxes that have not been
Paid, whether or not shown as being due on any Tax Returns. Except as disclosed
in Section 4.10 of the Disclosure Schedule, (i) no claim for unpaid Taxes has
become a lien against the property of the Company or any of its Subsidiaries or
is being asserted against the Company or any of its Subsidiaries; (ii) no audit
of any Tax Return of the Company or any of its Subsidiaries is being conducted
by a Tax authority; (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by the Company or any of its
Subsidiaries and is currently in effect and (iv) there is no tax sharing
arrangement that will require any payment by the Company or any of its
Subsidiaries after the date of this Agreement. As used herein, "Taxes" shall
mean all taxes of any kind, including, without limitation, those on or measured
by or referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, back-up withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "Tax Return" shall mean any return, report or statement required
to be filed with any governmental authority with respect to Taxes. Except as set
forth on Schedule 4.10, there are no written or, to its knowledge, oral proposed
assessments of Taxes against the Company or any of its Subsidiaries or written
or, to its knowledge, oral proposed adjustments to any Tax Return filed, pending
against the Company or any of its Subsidiaries, or written or, to its knowledge,
oral proposed adjustments to the manner in which any Tax of the Company or any
of its Subsidiaries is determined.
4.11.....Environmental matters. Except as disclosed in Section 4.11 of
the Disclosure Schedule, which disclosed items of non-compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company:
(a)......The Company and its Subsidiaries hold and formerly held, and
are, and have been, in material compliance with, all Environmental Permits, and
the Company and its Subsidiaries are, and have been, otherwise in material
compliance with all applicable Environmental Laws;
(b)......None of the Company or its Subsidiaries has received any
Environmental Claim, and none of the Company or its Subsidiaries is aware, after
diligent inquiry, of any threatened Environmental Claim or of any circumstances,
conditions or events that could reasonably be expected to give rise to a
material Environmental Claim, against the Company or any of its Subsidiaries;
(c)......There are no (i) underground storage tanks, (ii)
polychlorinated biphenyls, (iii) asbestos or asbestos-containing materials, (iv)
urea-formaldehyde insulation, (v) sumps, (vi) surface impoundments, (vii)
landfills, (viii) sewers or septic systems or (ix) Hazardous Materials present
at any facility currently or owned, leased, operated or otherwise used or, to
the knowledge of the Company, formerly owned, leased, operated or otherwise
used, by the Company or any of its Subsidiaries that could reasonably be
expected to give rise to liability of the Company or any of its Subsidiaries
under any Environmental Laws which liability could reasonably be expected to
have a Material Adverse Effect on the Company;
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(d)......No modification, revocation, reissuance, alteration, transfer,
or amendment of the Environmental Permits, or any review by, or approval of, any
third party of the Environmental Permits is required in connection with the
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of the Company or its
Subsidiaries following such consummation;
(e)......Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be released at, on, from
or under any of the properties or facilities currently or owned, leased or
otherwise used or, to the knowledge of the Company, formerly owned, leased,
operated or otherwise used, including without limitation for receipt of the
Company's wastes, by the Company or any of its Subsidiaries, in violation of or
in a manner or to a location that could give rise to liability under any
Environmental Laws which liability could reasonably be expected to have Material
Adverse Effect on the Company;
(f)......The Company and its Subsidiaries have not assumed,
contractually or by operation of law, any liabilities or obligations under any
Environmental Laws except, in the case of those assumed by operation of law,
those assumed which in and of themselves (and irrespective of any contribution
or indemnification rights) could not reasonably be expected to have a Material
Adverse Effect on the Company.
(g)......For purposes of this Agreement, the following terms shall have
the following meanings:
"Environmental Claim" means any written or oral notice, claim, demand,
action, complaint, proceeding, request for information or other communication by
any person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, whether or not owned, leased
or operated by the Company or any of its Subsidiaries or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental Laws
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required for the Company and its Subsidiaries
and the operations of the Company's and its Subsidiaries', facilities and
otherwise to conduct its business under Environmental Laws.
"Environmental Laws" means all applicable domestic and foreign federal,
state and local statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to contamination, pollution or protection of
human health or the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste Disposal
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state and local laws.
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"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials, substances and forces, including but not
limited to electromagnetic fields, regulated pursuant to, or that could form the
basis of liability under, any Environmental Law.
4.12.....Material Contracts. The Company has provided or made available
to MergerCo true and complete copies of all written contracts, agreements
(including, but not limited to, distribution agreements and licensing
agreements), commitments, arrangements, leases (including with respect to
personal property), policies and other instruments to which it or any of its
Subsidiaries is a party or by which it or any such Subsidiary is bound which is
or was required to be filed as an exhibit to the SEC Documents ("Material
Contracts"). Neither the Company nor any of its Subsidiaries is, or has received
any notice or has any knowledge that any other party is, in breach or default in
any respect under any such Material Contract, except for those breaches or
defaults which would not reasonably be likely, either individually or in the
aggregate, to have a Material Adverse Effect with respect to the Company; and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a material breach or default. Except as set
forth on Section 4.12 of the Disclosure Schedule and subject to Section 4.23,
all Material Contracts are valid and subsisting and in full force and effect in
accordance with their terms, and the Company has duly performed its obligations
thereunder in all material respects to the extent such obligations have
occurred.
4.13.....Brokers. No broker, investment banker, financial advisor or
other person, other than Bear, ▇▇▇▇▇▇▇ & Co., Inc., the fees and expenses of
which will be paid by the Company (pursuant to a fee agreement, a copy of which
has been provided to MergerCo), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The aggregate fees payable to Bear, ▇▇▇▇▇▇▇ & Co., Inc.
pursuant to such arrangement shall not exceed $1,600,000.
4.14.....Opinion of Financial Advisor. The Company has received the
opinion of Bear, ▇▇▇▇▇▇▇ & Co., Inc. dated the date hereof, to the effect that
the consideration to be received in the Offer and the Merger by the Company's
stockholders (other than as contemplated by Section 3. 1 (b)) is fair to the
holders of Company Common Stock from a financial point of view, a signed copy of
which opinion has been delivered to MergerCo.
4.15.....Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has (a) determined that the Offer, this
Agreement and the transactions contemplated hereby, taken together, are
advisable and in the best interests of the Company and the stockholders of the
Company, and (b) subject to the other provisions hereof, resolved to recommend
that the holders of the shares of Company Common Stock approve the Offer, this
Agreement and the transactions contemplated herein, including the Merger.
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4.16.....Required Company Vote. The Company Stockholder Approval, being
the affirmative vote of two-thirds in interest of the shares of the Company
Common Stock, is the only vote of the holders of any class or series of the
Company's securities necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby.
4.17.....State Takeover Statutes. No state takeover statute or similar
statute or regulation of Massachusetts (and, to the knowledge of the Company
after due inquiry, of any other state or jurisdiction) applies or purports to
apply to the Company or any of its Subsidiaries, or to this Agreement, the
Offer, the Merger, or any of the other transactions contemplated hereby, except
any such statutes or regulations which are no longer applicable in any respect
upon the execution of this Agreement. Neither the Company nor any of its
Subsidiaries has any rights plan, preferred stock or similar arrangement which
have any of the aforementioned consequences in respect of the transactions
contemplated hereby.
4.18.....Intellectual Property. All patents, patent applications,
registered and unregistered copyrights, trade names, registered and unregistered
trademarks and trademark applications, trade secrets, formulas, customer lists
and other proprietary information of the Company or any of its Subsidiaries
("Intellectual Property") are owned by or licensed to the Company or any of its
Subsidiaries, free and clear of all Liens. All of the Company's and its
Subsidiaries' Intellectual Property consisting of patents and trademarks have
been duly registered in, filed in or issued by the United States Patent Office
or the corresponding offices of other countries wherein use of such patent or
trademark is made, and have been properly maintained and renewed in accordance
with all applicable laws and regulations in the United States and each such
country, except where the failure to be so registered, filed, issued or
maintained would not have a Material Adverse Effect on the Company. Except as
set forth in Section 4.18 of the Disclosure Schedule, use of the Intellectual
Property by the Company and its Subsidiaries does not require the consent of any
other person and the same are freely transferable (except as otherwise provided
by law). Except as set forth in Section 4.18 of the Disclosure Schedule, (a) no
other person has an interest in or right or license to use, or the right to
license any other person to use, any of the Intellectual Property, (b) there are
no claims or demands of any other person pertaining thereto and no proceedings
have been instituted, or are pending or, to the knowledge of the Company,
threatened, which challenge the Company's or its Subsidiaries' rights in respect
thereof and (c) none of the Intellectual Property is being infringed by another
person or is subject to any outstanding order, decree, ruling, charge,
injunction, judgment or stipulation.
4.19.....Related Party Transactions. Except as set forth in Section
4.19 of the Disclosure Schedule hereto, no director, officer, partner, employee,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any of its Subsidiaries (i) has borrowed any
monies from or has outstanding any indebtedness or other similar obligations to
the Company or any of its Subsidiaries; (ii) owns any direct or indirect
interest of any kind in, or is a director, officer, employee, partner, affiliate
or associate of, or consultant or lender to, or borrower from, or has the right
to participate in the management, operations or profits of, any person or entity
which is (1) a competitor, supplier, customer, distributor, lessor, tenant,
creditor or debtor of the Company or any of its Subsidiaries, (2) engaged in a
business related to the business of the Company or any of its Subsidiaries, or
(3) participating in any transaction to which the Company or any of its
Subsidiaries is a party; or (iii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its Subsidiaries.
22
Section 4.20 Permits. The Company and its Subsidiaries have all
Permits, except for those Permits the failure to have would not, individually or
in the aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole ("Material Permits"). Schedule 4.20 of the
Disclosure Schedule contains a complete list of the Material Permits, indicating
which of such Material Permits require the consent or approval of any third
party as a result of the transactions contemplated by this Agreement, exclusive
of any environmental Permits and Permits with respect to state or local sales,
use or other Taxes. All of the Permits are in full force and effect. No
outstanding written notice or, to the knowledge of the Company, oral notice of
cancellation or termination has been delivered to the Company or any subsidiary
in connection with any such Permit nor has any such cancellation or termination
been threatened. No application, action or proceeding for the modification of
any such Permits is pending or, to the knowledge of the Company, threatened that
may result in the revocation of such Permit.
Section 4.21 Insurance Policies. Schedule 4.21 of the Disclosure
Schedule contains a list of all insurance policies of the Company and its
Subsidiaries and each such policy is in full force and effect. All premiums with
respect to the insurance policies listed on Schedule 4.21 which are due and
payable prior to the Effective Time have been paid or will be paid prior to the
Effective Time, and no written notice of cancellation or termination has been
received by the Company with respect to any such policy. To the Company's
knowledge, there are no pending claims against such insurance by the Company or
any Subsidiary as to which the insurers have denied coverage or otherwise
reserved rights. To the Company's knowledge, neither the Company nor any
Subsidiary has been refused any insurance with respect to its assets or
operations during the past five years.
Section 4.22 Certain Business Practices. Neither the Company, any of
its Subsidiaries, nor to the Company's knowledge (after inquiry from the
Company) any directors, officers, agents or employees of the Company or any of
its Subsidiaries (i) has used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity; (ii) has
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; (iii)
has made any other payment prohibited by applicable Law; or (iv) in the case of
the Company, any of its Subsidiaries or any of its officers or key employees, is
a party to or bound by any noncompetition or similar agreement or obligation
with any third party, which restricts its or his or her business practices.
Section 4.23 Suppliers and Customers. As of the date hereof, and except
as set forth in Section 4.23 of the Disclosure Schedule, the Company has
received no written notice from or, to its knowledge, any oral notice from any
significant supplier to or customer of the Company's business of such supplier's
or customer's intention to materially and adversely alter its existing business
relationship with the Company; provided, however, that subject to the Company's
obligations under Sections 6.1 and 7.3, no representation or warranty is made
hereunder (or under Section 4.12) with respect to any changes after the date
hereof in the relationship between the Company and any customer or supplier, so
long as any such change is not attributable to or does not arise from a breach
by the Company of any of its representations, warranties or covenants contained
in this Agreement.
23
Section 4.24 Product Warranties. Section 4.24 of the Disclosure
Schedule sets forth complete and accurate copies of the written, and
descriptions of all oral, product warranties and guaranties by the Company or
any of its Subsidiaries currently in effect. None of the salesmen, employees,
distributors or agents of the Company or any of its Subsidiaries is authorized
to undertake obligations to any customer or to other third parties in excess of
such warranties or guaranties and, to the knowledge of the Company, there have
not been any material deviations from such warranties and guaranties.
Section 4.25 Sole Representations. The representations and warranties
contained in this Agreement are the sole representations and warranties which
the Company is making in connection with the transactions contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO
Each of Buyer and MergerCo hereby, jointly and severally, represents
and warrants to the Company as follows:
5.1......Organization, Standing and Corporate Power. Buyer and MergerCo
are corporations duly organized, validly incorporated and in good standing in
the States of Ohio and Massachusetts, respectively, and each has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Buyer and MergerCo is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary. Each of Buyer and MergerCo has delivered to the Company complete and
correct copies of its certificate of incorporation (or other organizational
documents) and by-laws.
5.2......Subsidiaries. MergerCo has no direct or indirect subsidiaries.
5.3......Capital Structure. The authorized capital stock of MergerCo
consists of 200,000 shares of common stock, without par value, all of which have
been validly issued, are fully paid and nonassessable.
5.4......Authority; Noncontravention. Each of Buyer and MergerCo has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by each of Buyer and MergerCo and the consummation by
each of Buyer and MergerCo of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of each
of Buyer and MergerCo. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of each of Buyer and MergerCo,
enforceable against each of them in accordance with its terms subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general application relating to or affecting creditors' rights and to general
24
principles of equity. Except as disclosed on Section 5.4 of the Disclosure
Schedule, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in (a)
any breach or violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration or "put" with respect to any obligation or (b) the loss of a
benefit, or other right or the creation of any Lien upon any of the properties
or assets of either Buyer or MergerCo under, (i) the certificate of
incorporation or by-laws of either Buyer or MergerCo, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to either Buyer
or MergerCo or its properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to either Buyer or MergerCo or its properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate could
not have a Material Adverse Effect with respect to either Buyer or either Buyer
or MergerCo or could not prevent, hinder or materially delay the ability of
MergerCo to consummate the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Governmental Entity or any other person under any
agreement, indenture or other instrument to which Buyer or MergerCo is a party
or to which any of its properties is subject, is required by or with respect to
either Buyer or MergerCo in connection with the execution and delivery of this
Agreement by either Buyer or MergerCo or the consummation by Buyer and MergerCo
of any of the transactions contemplated by this Agreement, except for (i) the
filing of a pre-merger notification and report form under the HSR Act, (ii) the
filing with the SEC of (y) the Offer Documents and the Proxy Statement and (z)
such reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) the filing of the
Certificate of Merger with the Secretary of State of the Commonwealth of
Massachusetts and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings or notices as may be required under the "takeover" or "blue sky" laws of
various states.
5.5......Brokers. No broker, investment banker, financial advisor or
other person, other than Wheat First Butcher & Singer, a division of Wheat,
First Securities, Inc., the fees and expenses of which will be paid by Buyer or
MergerCo, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or an behalf of MergerCo to its
affiliates.
5.6......Financing. As of the date of this Agreement, Buyer and
MergerCo have, and at all times through the expiration of the Offer and the
Effective Time, Buyer and MergerCo will have available all the funds necessary
for the acquisition of all Shares pursuant to the Offer and to perform their
respective obligations under this Agreement, including without limitation
payment in full for all shares of Company Common Stock validly tendered into the
Offer or outstanding at the Effective Time, the payment of all amounts payable
under Section 3.2, and the payment of all fees and expenses payable by Buyer and
Merger Co.
25
5.7......Offer Documents and Schedule 14D-9. The Offer Documents will
not, at the time the Offer Documents or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to stockholders of
the Company, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading (except to the extent information contained therein is based upon
information supplied solely by the Company). The Offer Documents shall comply in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder.
5.8......Information Supplied. None of the information supplied or to
be supplied by MergerCo or its affiliates in writing specifically for inclusion
or incorporation by reference in the Proxy Statement will, at the time the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
5.9......Sole Representations. The representations and warranties
contained in this Agreement are the sole representations and warranties which
Buyer or MergerCo are making in connection with the transactions contemplated
herein.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1......Conduct of Business of the Company. Except as set forth in
Section 6.1 of the Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time of the Merger (except as otherwise specifically
required by the terms of this Agreement), the Company shall, and shall cause its
Subsidiaries to, act and carry on their respective businesses in the usual,
regular and ordinary course of business consistent with past practice and use
its and their respective reasonable best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
business dealings with them and to preserve goodwill. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time of the Merger, the Company shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of MergerCo:
(a)......declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned subsidiary of the Company to
its parent in accordance with applicable law;
(b)......split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock;
26
(c)......purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities, except for the acquisition of shares of Company Common Stock from
holders of Company Stock Options in full or partial payment of the exercise
price payable by such holder upon exercise of Company Stock Options outstanding
on the date of this Agreement;
(d)......authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock or the capital stock of any
of its Subsidiaries, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights) (other than
an increase in the number of shares subject to the Stock Option Plan pursuant to
existing contractual obligations and the issuance of Company Common Stock upon
the exercise of Company Stock Options outstanding on the date of this Agreement
and in accordance with their present terms (such issuances, together with the
acquisitions of shares of Company Common Stock permitted under clause (c) above,
being referred to herein as "Permitted Changes"));
(e)......in the case of the Company, amend its articles of
organization, by-laws or other comparable charter or organizational documents;
(f)......acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof material to the
Company;
(g)......other than as specifically permitted by Section 6.1 of the
Disclosure Schedule, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
other than any such properties or assets the value of which do not exceed $1.0
million individually and $3.0 million in the aggregate, except sales of
inventory, in the ordinary course of business consistent with past practice;
(h)......incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its Subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short-term borrowings and for lease
obligations, in each case incurred in the ordinary course of business consistent
with past practice;
(i)......make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect wholly owned subsidiary of the Company and other than loans to
employees in the ordinary course of business not to exceed $1,000 in any one
case or $25,000 in the aggregate;
27
(j)......pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, (a) of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof or (b) claims settled or compromised to the extent
permitted by Section 6. 1 (n), or waive, release, grant, or transfer any rights
of material value or modify or change in any material respect any existing
license, lease, Permit, contract or other document, other than in the ordinary
course of business consistent with past practice;
(k)......adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(1)......enter into any new collective bargaining agreement;
(m)......change any material accounting principle used by it;
(n)......settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or compromises of
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise is not material to the Company;
or
(o)......authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2......Changes in Employment Arrangements. Except as set forth in
Section 6.2 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries shall adopt or amend (except as may be required by law) any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or other arrangement (including any Company Plan) for the benefit or welfare of
any employee, director or former director or employee, other than increases for
individuals other than officers and directors) in the ordinary course of
business consistent with. past practice or increase the compensation or fringe
benefits of any director, employee or former director or employee or pay any
benefit not required by any existing plan, arrangement or agreement.
6.3......Severance. Neither the Company nor any of its Subsidiaries
shall grant any new or modified severance or termination arrangement or increase
or accelerate any benefits payable under its severance or termination pay
policies in effect on the date hereof.
6.4......WARN. Neither the Company nor any of its Subsidiaries shall
effectuate a "plant closing" or "mass layoff", as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 or similar state law
("WARN") affecting in whole or in part any site of employment, facility,
operating unit or employee of the Company or any subsidiary, without the prior
written consent of MergerCo or its affiliates in advance and without complying
with the notice requirements and other provisions of WARN.
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ARTICLE VII
ADDITIONAL AGREEMENTS
7.1......Preparation of Proxy Statement: Stockholder Meeting.
(a)......As promptly as practicable after Buyer or MergerCo first
purchases Shares pursuant to the Offer, and if required by applicable law, the
Company shall prepare the Proxy Statement. The Company will use its best efforts
to cause the Proxy Statement to be mailed to the Company's stockholders as
promptly as practicable after clearance thereof with the SEC. If, at any time
prior to the Stockholders Meeting, any event, with respect to the Company, its
Subsidiaries, directors, officers, and/or the Merger or the other transactions
contemplated hereby, shall occur, which is required to be described in the Proxy
Statement, the Company shall so describe such event and, to the extent required
by applicable law, shall cause it to be disseminated to the Company's
stockholders.
(b)......The Company will immediately notify MergerCo and its
affiliates of (i) the receipt of any comments from the SEC regarding the Proxy
Statement and (ii) the approval of the Proxy Statement by the SEC. MergerCo
shall be given a reasonable opportunity to review and comment on all filings
with the SEC and all mailings to the Company's stockholders in connection with
the Merger prior to the filing or mailing thereof, and the Company shall use its
best efforts to reflect all such reasonable comments.
(c)......The Company will, as promptly as practicable following the
expiration of the Offer and in consultation with MergerCo, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of approving this Agreement and the transactions
contemplated by this Agreement. The Company will, through its Board of
Directors, recommend to its stockholders approval of the foregoing matters and
seek to obtain all votes and approvals thereof by the stockholders, as set forth
in Section 4.15; provided, however; that the obligations contained herein shall
be subject to the provisions of Section 7.6 of this Agreement. Subject to the
foregoing, such recommendation, together with a copy of the opinion referred to
in Section 4.14 shall be included in the Proxy Statement. The Company will use
its best efforts to hold such meetings as soon as practicable after the date
hereof. Notwithstanding the foregoing, if MergerCo shall acquire at least 90% of
the outstanding Company Common Stock pursuant to the Offer, MergerCo may, in its
sole discretion, and in lieu of completing the Merger in accordance with this
Agreement, cause the Company to be merged into Merger Co without a Stockholders
Meeting and in accordance with the Massachusetts Business Corporation Law;
provided, however, that in such event, the rights of stockholders of the Company
under this Agreement (including, without limitation, the right to receive the
Merger Consideration) shall not be adversely affected thereby (other than the
right to receive the Proxy Statement, attend the Stockholders Meeting and vote
on the Merger, which shall no longer be applicable).
(d)......The Company will cause its transfer agent to make stock
transfer records relating to the Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
29
7.2......Access to Information, Confidentiality.
The Company shall, and shall cause its Subsidiaries, officers,
employees, counsel, financial advisors and other representatives to, afford to
MergerCo and its representatives and to potential financing sources reasonable
access during normal business hours, in a manner initially coordinated with
Bear, ▇▇▇▇▇▇▇ & Co., Inc. and/or the chief executive officer, president or chief
financial officer of the Company, and thereafter coordinated with those persons
designated by the chief executive officer, during the period prior to the
Effective Time of the Merger to its properties, books, contracts, commitments,
personnel and records (including, without limitation, to the extent available,
the work papers of the Company's independent public accountants) and, during
such period, the Company shall, and shall cause its Subsidiaries, officers,
employees and representatives to, furnish promptly to MergerCo (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws and (ii) all other information concerning its business, properties,
financial condition, operations and personnel as MergerCo may from time to time
reasonably request. Except as required by law, each of the Company and MergerCo
will hold, and will cause its respective directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in confidence to the extent
required by and in accordance with that certain Confidentiality Agreement, dated
September 5, 1997, by and between Bear, ▇▇▇▇▇▇▇ & Co., Inc., on behalf of the
Company and Buyer, the other terms of which Confidentiality Agreement are hereby
terminated.
7.3......Reasonable Best Efforts.
(a)......Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Offer, the Merger and the other transactions
contemplated by this Agreement. The Buyer, MergerCo and the Company will use
their reasonable best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or consents, approvals,
waivers, licenses, Permits or authorizations are required to be obtained (or,
which if not obtained, would result in a breach or violation, or an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Offer, the Merger and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations. Notwithstanding
the foregoing, or any other covenant herein contained, in connection with the
receipt of any necessary approvals under the HSR Act, neither the Company nor
any of its Subsidiaries shall be entitled to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of its
Subsidiaries or any material portions thereof or any of the businesses, product
lines, properties or assets of the Company or any of its Subsidiaries, without
MergerCo's prior written consent.
30
(b)......The Company shall make, subject to the condition that the
transactions contemplated herein actually occur, any undertakings (including
undertakings to make divestitures, provided, in any case, that such divestitures
need not themselves be effective or made until after the transactions
contemplated hereby actually occur) required in order to comply with the
antitrust requirements or laws of any governmental entity, including the HSR
Act, in connection with the transactions contemplated by this Agreement;
provided that no such divestiture or undertaking shall be made unless acceptable
to MergerCo.
(c)......Each of the parties agrees to cooperate with each other in
taking, or causing to be taken, all actions necessary to delist Company Common
Stock from The NASDAQ National Stock Market ("NASDAQ"), provided that such
delisting shall not be effective until after the Effective Time of the Merger.
The parties also acknowledge that it is MergerCo's intent that Company Common
Stock following the Offer and the Merger will not be quoted on NASDAQ or listed
on any national securities exchange.
7.4......Indemnification. For six years after the Effective Time of the
Merger, the Company and the Buyer shall indemnify all present and former
directors or officers of the Company and its Subsidiaries ("Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time of the Merger, whether asserted or claimed prior to, at or after
the Effective Time of the Merger, to the fullest extent as would have been
permitted in their respective articles of organization or by-laws consistent
with applicable law, to the extent such Costs have not been paid for by
insurance and shall, in connection with defending against any action for which
indemnification is available hereunder, reimburse such officers and directors,
from time to time upon receipt of sufficient supporting documentation, for any
reasonable costs and expenses reasonably incurred by such officers and
directors; provided that such reimbursement shall be conditioned upon such
officer's or director's agreement promptly to return such amounts to the Company
if a court of competent jurisdiction shall ultimately determine that
indemnification of such officer or director is prohibited by applicable law. The
Company will maintain for a period of not less than six years from the Effective
Time of the Merger, the Company's current directors' and officers, insurance and
indemnification policy (or a policy providing substantially similar coverage) to
the extent that it provides coverage for events occurring prior to the Effective
Time of the Merger (the "D&O Insurance") for all persons who are directors and
officers of the Company on the date of this Agreement; provided that the Company
shall not be required to spend as an annual premium for such D&O Insurance an
amount in excess of 150% of the annual premium paid for directors' and officers'
insurance in effect prior to the date of this Agreement; and provided further
that the Company shall nevertheless be obligated to provide such coverage as may
be obtained for such amount. The provisions of this Section are intended for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
7.5......Public Announcements. Neither MergerCo or the Buyer, on the
one hand, nor the Company, on the other hand, will issue any press release or
public statement with respect to the transactions contemplated by this
Agreement, including the Offer and the Merger, without the other party's prior
31
consent, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with NASDAQ. In addition to the
foregoing, MergerCo and the Company will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any such
press release or other public statements with respect to such transactions. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
7.6......No Solicitation. From and after the date hereof until the
termination of this Agreement neither the Company or any of its Subsidiaries,
nor any of their respective officers, directors, employees, representatives,
agents or affiliates (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries) will
directly or indirectly initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to any Transaction Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Transaction Proposal or agree to or endorse any Transaction Proposal or
authorize or permit any of its officers, directors or employees or any of its
Subsidiaries or any investment banker, financial advisor, attorney, accountant
or other representative retained by any of its Subsidiaries to take any such
action, provided, however, that nothing contained in this Agreement shall
prohibit the Board of Directors of the Company from, prior to the acceptance for
payment of Company Common Stock pursuant to the Offer (i) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited written, bona fide proposal, to acquire the Company and/or
its Subsidiaries pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction and in
respect of which such person or entity has the necessary funds or commitments
therefor if, and only to the extent that: (A) the Board of Directors of the
Company, after consultation with their financial advisors and after consultation
with and based upon the advice of independent legal counsel (who may be the
Company's regularly engaged independent legal counsel) determines in good faith
that such action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties to stockholders under applicable law and (B)
prior to taking such action the Company receives from such person or entity an
executed confidentiality agreement containing terms and provisions substantially
similar to those contained in the Confidentiality Agreement described in Section
7.2, (ii) failing to make or withdrawing or modifying its recommendation
referred to in Section 4.15 if there exists a Transaction Proposal and the Board
of Directors of the Company, after consultation with their financial advisors
and after consultation with and based upon the advice of independent legal
counsel (who may be the Company's regularly engaged independent counsel),
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law in connection with such Transaction Proposal or (iii)
making to the Company's stockholders any recommendation and related filing with
the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect
to any tender offer, or taking any other legally required action with respect to
such tender offer (including, without limitation, the making of public
disclosures as may be necessary or reasonably advisable under applicable
securities laws) if the Board of Directors of the Company, after consultation
32
with their financial advisors and after consultation with and based upon the
advice of independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary for
the Board of Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law; and provided further, however, that, in the
event of an exercise of the Company's or it's Board of Director's (or the
Special Committee's) rights under clauses (i), (ii) or (iii) above and subject
to compliance with the next three sentences hereof, notwithstanding anything
contained in this Agreement to the contrary, such exercise of rights shall not
constitute a breach of this Agreement by the Company. The Company shall promptly
advise MergerCo orally and in writing of any request for nonpublic information
from, or discussions or negotiations with, any person or entity or of any
Transaction Proposal known to it, the material terms and conditions of such
request or Transaction Proposal and the identity of the person or entity making
such request or Transaction Proposal. The Company will promptly inform MergerCo
of any material change in the details (including amendments or proposed
amendments) of any such request for nonpublic information, the contents of any
discussions or negotiations or any material change in such Transaction Proposal.
Neither the Board of Directors of the Company nor any committee thereof shall
take any action pursuant to clauses (ii) or (iii) above until a time that is
after the later of (x) the fourth business day following MergerCo's receipt of
written notice advising MergerCo that the Board of Directors of the Company has
received a Transaction Proposal, specifying the material terms of such
Transaction Proposal and identifying the person making such Transaction Proposal
and (y) in the event of any amendment to the price or any material term of a
Transaction Proposal, two business days following MergerCo's receipt of written
notice containing the material terms of such amendment, including any change in
price (it being understood that each such further amendment to the price or any
material terms of a Transaction Proposal shall necessitate an additional written
notice to MergerCo and an additional two business day period prior to which the
Company can take any action set forth in clauses (ii) or (iii) above). For
purposes of this Agreement, "Transaction Proposal" shall mean any of the
following (other than the transactions between the Company and MergerCo
contemplated by the Offer and this Agreement) involving the Company or any of
its Subsidiaries: (i) any merger, consolidation, share exchange,
recapitalization, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 20% or
more of the assets of the Company and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for, or the acquisition (or right to acquire) of "beneficial ownership" by
any person, "group" or entity (as such terms are defined under Section 13 (d) of
the Securities Exchange Act of 1934), other than a person, group or entity which
has signed the Stockholders Agreement, of 20% or more of the outstanding shares
of capital stock of the Company or the filing of a registration statement under
the Securities Act in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
7.7......Resignation of Directors. Prior to the Effective Time of the
Merger, the Company shall deliver to MergerCo evidence satisfactory to MergerCo
of the resignation of all directors of the Company, effective at the Effective
Time of the Merger.
33
7.8......Employee Benefits. Except as contemplated by this Agreement,
Buyer agrees that, for a period of twelve (12) months following the Effective
Time, the Surviving Corporation shall maintain employee benefits plans and
arrangements (directly or in conjunction with Buyer) which, in the aggregate,
will provide a level of benefits to continuing employees of the Company and its
Subsidiaries substantially comparable in the aggregate to those provided under
the Benefit Plans set forth on Schedule 4.9 of the Disclosure Schedule
("Disclosed Benefits") as in effect immediately prior to the Effective Time
(other than discretionary benefits); provided, however, that Buyer may cause
modifications to be made to such Benefit Plans and arrangements to the extent
necessary to comply with applicable Law or to reflect widespread adjustments in
benefits (or costs thereof) provided to employees under compensation and benefit
plans of Buyer and its subsidiaries, and no specific compensation and Benefit
Plans need be provided. For purposes of determining eligibility and vesting with
respect to all Disclosed Benefits (except with respect to any defined benefit
plans), Buyer shall use the employee's hire date with the Company or such other
date as has been previously determined by the Company for credit for prior
employment with any ERISA Affiliate of the Company. Benefit Plans which provide
medical, dental, or life insurance benefits after the Effective Time to any
individual who is an active or former employee of the Company or any of its
Subsidiaries as of the Effective Time or a dependent of such an employee shall,
with respect to such individuals, waive any waiting periods, any pre-existing
conditions, and any actively-at-work exclusions to the extent so waived under
present policy and shall provide that any expenses incurred on or before the
Effective Time by such individuals shall be taken into account under such plans
for purposes of satisfying applicable deductible, coinsurance, and maximum
out-of-pocket provisions to the extent taken into account under present policy.
Nothing in this Section 7.8 shall prohibit the Company from terminating the
employment of any employee at any time with or without cause (subject to, and in
accordance with the terms of any existing employment agreements), or shall be
construed or applied to restrict the ability of the Buyer or Surviving
Corporation and its Subsidiaries to establish such types and levels of
compensation and benefits as they determine to be appropriate. Buyer agrees to
cause the Surviving Corporation (or the applicable Subsidiary employer) to honor
the existing employment agreements that are set forth on Schedule 7.8 of the
Disclosure Schedule.
7.9......Notification of Certain Matters. The Company shall give prompt
notice to Buyer and MergerCo and Buyer and MergerCo shall give prompt notice to
the Company of: (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which does or would be likely to cause (A) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (B) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied; and (ii) any
failure of the Company on the one hand, or Buyer or MergerCo on the other hand,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 7.9 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
7.10.....State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, including the Offer or the
Merger, the Company and Buyer, and their respective Boards of Directors shall
use their reasonable best efforts to grant such approvals and to take such other
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
shall otherwise use their reasonable best efforts to eliminate the effects of
any such statute or regulation on the transactions contemplated hereby.
34
7.11.....Indemnification Agreements. Prior to the expiration of the
Offer, the Company shall obtain the termination of all rights under certain
Indemnification Agreements (each, an "Indemnification Agreement") between the
Company and each of the Company's management listed on Section 7.11 of the
Disclosure Schedule (the "Indemnified Persons"), in form and substance
reasonably satisfactory to Buyer and its counsel. This covenant shall not impact
the obligations set forth in Section 7.4 hereof.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1......Conditions to Each Party's Obligation. The respective
obligation of each party to effect the Merger is subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a)......Company Stockholder Approval. The Company Stockholder
Approval shall have been obtained if required by applicable law.
(b)......HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c)......No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal restraint or prohibition shall be in effect preventing or
prohibiting the acceptance for payment of, or payment for, shares of Common
Stock pursuant to the Offer, or the consummation of the Merger; provided,
however, that the parties hereto shall, subject to the last sentence of Section
7.3 (a) hereof, use their best efforts to have any such injunction, order,
restraint or prohibition vacated.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
9.1......Termination. This Agreement may be terminated and abandoned at
any time prior to the Effective Time of the Merger, whether before or after
approval of matters presented in connection with the Merger by the stockholders
of the Company:
(a)......by mutual written consent of MergerCo and the Company; or
(b)......by either MergerCo or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting or if there shall be
in effect any other legal restraint or prohibition preventing or prohibiting the
acceptance for payment of, or payment for, shares of Company Common Stock
pursuant to the Offer or the consummation of the Merger and such order, decree,
ruling or other action shall have become final and nonappealable (other than due
to the failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to the
Effective Time of the Merger); or
35
(c)......by the Company if Offeror shall not have (i) commenced the
Offer within five (5) business days after the initial public announcement of
Buyer's intention to commence the Offer, or (ii) accepted for payment any shares
of Company Common Stock pursuant to the Offer prior to March 31, 1998 (other
than due to the failure of the Company to perform its obligations under this
Agreement); or
(d)......by the Company upon its execution, prior to Buyer's or
MergerCo's purchase of shares of Company Common Stock pursuant to the Offer, of
a binding agreement with a third party with respect to a Transaction Proposal,
provided that it has complied with all provisions of this Agreement, including
the notice provisions herein, and that it pays the Termination Fee as provided
by and defined in Section 10.2;
(e)......by MergerCo in the event of a material breach or failure to
perform in any material respect by the Company of any representation, warranty,
covenant or other agreement contained in this Agreement which cannot be or has
not been cured within 20 days after the giving of written notice to the Company;
or
(f)......by the Company in the event of a material breach or failure to
perform in any material respect by MergerCo or Buyer of any representation,
warranty, covenant or other agreement contained in this Agreement which cannot
be or has not been cured within 20 days after the giving of written notice to
MergerCo or Buyer.
(g)......by MergerCo, if Offeror terminates the Offer in accordance
with the terms of Annex I.
9.2......Effect of Termination. In the event of termination of this
Agreement by either the Company or MergerCo as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of MergerCo or the Company, other than the provisions
of Section 4.13, Section 5.5, the last sentence of Section 7.2, this Section
9.2, Section 10.2 and Section 10.7. Nothing contained in this Section shall
relieve any party for any breach of the representations, warranties, covenants
or agreements set forth in this Agreement.
9.3......Amendment. This Agreement way be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
36
9.4......Extension; Waiver. At any time prior to the Effective Time of
the Merger, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 9.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
9.5......Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to Section
9.4 shall, in order to be effective, require in the case of MergerCo or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE X
GENERAL PROVISIONS
10.1.....Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
all such representations and warranties will be extinguished on consummation of
the Merger and none of the Company, Buyer and MergerCo, nor any officer,
director or employee or shareholder thereof shall be under any liability
whatsoever with respect to any such representation or warranty after such time.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
10.2.....Fees and Expenses.
(a)......In addition to any other amounts which may be payable or
become payable pursuant to any other paragraph of this Section 10.2, the Company
shall, simultaneously with the termination of this Agreement in any of the
circumstances described in Section 10.2(b), reimburse MergerCo for all
out-of-pocket expenses and fees, in an aggregate amount not to exceed $1.5
million (including, without limitation, fees payable to all banks, investment
banking firms and other financial institutions, and their respective agents and
counsel, and all fees of counsel, accountants, financial printers, experts and
consultants to MergerCo and its affiliates), whether incurred prior to, on or
after the date hereof, in connection with the Merger and the consummation of all
transactions contemplated by this Agreement, and the financing thereof.
(b)......If any Person (other than MergerCo or any of its affiliates)
shall have made, proposed, communicated or disclosed a Transaction Proposal in a
manner which is or otherwise becomes public and this Agreement is terminated
pursuant to any of the following provisions:
(i) by the Company pursuant to Section 9.1(c) if
Offeror's failure to accept for payment shares of Company
Common Stock results from the failure of the Minimum Condition
to be satisfied or the occurrence of any of the events set
forth in subparagraph (c), other than a breach of the
representations in clauses (i) and (ii) of Section 4.7, or
subparagraphs (d) or (e) of Annex I;
37
(ii) by the Company pursuant to Section 9.1 (d);
(iii) by MergerCo pursuant to Section 9.1 (e) ),
other than a breach of the representations in clauses (i) and
(ii) of Section 4.7, or
(iv) by MergerCo pursuant to Section 9.1(g) if
Offeror has terminated the Offer as a result of the failure of
the Minimum Condition to be satisfied or the occurrence of any
of the events set forth in subparagraphs (c), other than a
breach of the representations in clauses (i) and (ii) of
Section 4.7, or subparagraphs (d) or (e) of Annex I.
then the Company shall, simultaneously with such termination of this Agreement,
pay MergerCo a fee of 4.25% of the aggregate Merger Consideration in cash, which
amount shall be payable in same day funds. No termination of this Agreement at a
time when a fee is reasonably expected to be payable pursuant to this Section
10.2(b) shall be effective until such fee is paid. Only one fee in the aggregate
of 4.25% of the aggregate Merger Consideration shall be payable pursuant to this
Section 10.2(b). No amount payable pursuant to any of the other provisions of
this Section 10.2 shall reduce the amount of the fee payable pursuant to this
paragraph (b).
(c)......Except as provided otherwise in paragraph (a) above, all costs
and expenses incurred in connection with this Agreement, and the transactions
contemplated hereby shall be paid by the party incurring such expenses,, except
that the Company shall pay all costs and expenses (i) in connection with
printing and mailing the Proxy Statement, as well as all SEC filing fees
relating to the transactions contemplated herein and (ii) of obtaining any
consents of any third party.
10.3.....Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier) 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 MergerCo or Buyer, to
.........Invacare Corporation
.........One Invacare Way
.........Elyria, Ohio 44035
.........Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
.........Chief Financial Officer, Secretary and Treasurer
38
.........with a copy to:
..................▇▇▇▇▇▇, Halter & ▇▇▇▇▇▇▇▇ LLP
..................1400 ▇▇▇▇▇▇▇▇ Investment Center
..................800 Superior Avenue
..................Cleveland, Ohio 44114
..................Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b)......if to the Company, to
..................Suburban Ostomy Supply Co., Inc.
..................75 October Hill Road
..................Holliston, Massachusetts 01746
..................Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman of the Board
..................with copies to:
..................▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
..................A Professional Corporation
..................101 Federal Street
..................Boston, MA 021 10
..................Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
10.4.....Definitions. For purposes of this Agreement:
(a)......an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b)......a "business day" means any day, other than Saturday, Sunday or
a federal holiday, and shall consist of the time period from 12:01 a.m. through
12:00 midnight Eastern time. In computing any time period under Section 14(d)(5)
or Section 14(d)(6) of the Exchange Act or under Regulation 14D or Regulation
14E, the date of the event which begins the running of such time period shall be
included except that if such event occurs on other than a business day such
period shall begin to run on and shall include the first business day
thereafter;
(c)......"knowledge", with respect to the Company means the actual
knowledge of the following officers and employees (as well as any of their
successors) of the Company and its Subsidiaries: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ and, without
duplication, the employees in charge of environmental, tax, labor, employee
benefits and real estate matters or any of the foregoing, in each case after
reasonable investigation and inquiry.
39
(d)......"Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company, any change or effect that either
individually or in the aggregate with all other such changes or effects is
materially adverse to the business, financial condition, prospects or results of
operations of the Company and its Subsidiaries taken as a whole and the terms
"material" and "materially" shall have correlative meanings; provided, however,
that no Material Adverse Change or Material Adverse Effect shall be deemed to
have occurred as a result solely of any one or more of: (i) those matters
described in a separate writing dated the date of this Agreement and
specifically referencing this Section delivered by the Company to the Buyer,
(ii) general economic conditions affecting generally the industry in which the
Company competes and general market conditions in the United States, or (iii)
changes after the date hereof in the relationship between the Company and any
customer or supplier, so long as any such change is not attributable to or does
not arise from a breach by the Company of any of its representations, warranties
or covenants contained in this Agreement.
(e)......"person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity; and
(f)......a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors
(or other governing body) or, if there are no such voting interests, 50% or more
of the equity interests of which is owned directly or indirectly by such first
person.
10.5.....Interpretation. When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words -without
limitation".
10.6.....Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
10.7.....Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement, other than Sections 7.4 and 10.2, is not intended to confer upon any
Person other than the parties any rights or remedies.
10.8.....GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS.
40
10.9.....Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties; provided, however, that Buyer or MergerCo
may, without the Company's prior written consent, assign its rights under this
Agreement to any financial institution that requires such assignment in
connection with such financial institution's agreement to provide financing to
either Buyer or MergerCo 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.
10.10....Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
41
IN WITNESS WHEREOF, Buyer, MergerCo and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INVA ACQUISITION CORP.
By: /S/ INVA ACQUISITION CORP.
-----------------------------------
Name:
Title:
SUBURBAN OSTOMY SUPPLY CO., INC.
By: /S/ SUBURBAN OSTOMY SUPPLY CO., INC.
-------------------------------------------
Name:
Title:
INVACARE CORPORATION
By: /S/ INVACARE CORPORATION
----------------------------------
Name:
Title:
42
Annex I
CONDITIONS OF THE OFFER
Not withstanding any other provision of the Offer or this
Agreement, and subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) relating to MergerCo's obligation to pay for or return
tendered shares after termination of the Offer, MergerCo shall not be required
to accept for payment or pay for any shares of Company Common Stock tendered
pursuant to the Offer and may terminate the Offer at any time after January 31,
1998, if (i) less than two-thirds of the Fully Diluted Shares of Company Common
Stock has been tendered pursuant to the Offer by the expiration of the Offer and
not withdrawn (the "Minimum Condition"); (ii) any applicable waiting period
under the HSR Act has not expired or terminated; or (iii) at any time after the
date of this Agreement, and before acceptance for payment of any shares of
Company Common Stock, any of the following events shall occur and be continuing:
(a) there shall be instituted or pending by any
Governmental Entity any suit, action or proceeding (i)
challenging the acquisition by Buyer or MergerCo of any shares
of Company Common Stock under the Offer, or seeking to
restrain or prohibit the making or consummation of the Offer
or the Merger, (ii) seeking to prohibit or materially limit
the ownership or operation by the Company, Buyer or any of
Buyer's subsidiaries of a material portion of the business or
assets of the Company or Buyer and its subsidiaries, taken as
a whole, or to compel the Company or Buyer to dispose of or
hold separate any material portion of the business or assets
of the Company or Buyer and its subsidiaries, taken as a
whole, in each case as a result of the Offer or the Merger or
(iii) seeking to impose material limitations on the ability of
Buyer or MergerCo to acquire or hold, or exercise full rights
of ownership of, any shares of Company Common Stock to be
accepted for payment pursuant to the Offer including, without
limitation, the right to vote such shares of Company Common
Stock on all matters properly presented to the stockholders of
the Company or (iv) seeking to prohibit Buyer or any of its
subsidiaries from effectively controlling in any material
respect any material portion of the business or operations of
the Company;
(b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger,
by any Governmental Entity or court, other than the
application to the Offer or the Merger of applicable waiting
periods under the HSR Act, that would result in any of the
consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
43
(c) any of the representations and warranties of the
Company and its Subsidiaries contained in this Agreement shall
not be true and correct at and as of the date of consummation
of the Offer (except to the extent such representations and
warranties speak to an earlier date), as if made at and as of
the date of consummation of the Offer, in each case except as
contemplated or permitted by this Agreement and except, in the
case of any such breach when such breach would not have,
individually or in the aggregate, a Material Adverse Effect
with respect to the Company or materially affect the ability
of the Company to consummate the Merger or the Offeror to
accept for payment or pay for shares of Company Common Stock
pursuant to the Offer;
(d) the Company shall have failed to perform the
obligations required to be performed by it under this
Agreement at or prior to the date of expiration of the Offer,
including but not limited to its obligations pursuant to
Section 7.6 hereof, except for such failures to perform as
have not had or would not individually or in the aggregate,
have a Material Adverse Effect with respect to the Company or
materially adversely affect the ability of the Company to
consummate the Merger or the Offeror to accept for payment or
pay for shares of Company Common Stock pursuant to the Offer;
(e) the Board of Directors of the Company or any
committee thereof shall have (i) withdrawn, modified or
amended in any respect adverse to Buyer or MergerCo its
approval or recommendation of the Offer or the Merger, (ii)
recommended or approved any Transaction Proposal from a person
other than Buyer, MergerCo or any of their respective
affiliates (iii) failed to publicly announce, within ten (10)
business days after the occurrence of a Transaction Proposal,
its opposition to such Transaction Proposal, or amended,
modified or withdrawn its opposition to any Transaction
Proposal in any manner adverse to Buyer or MergerCo or (iv)
resolved to do any of the foregoing;
(f) this Agreement shall have been terminated in accordance with its terms;
or
which, in the good faith judgment of Buyer or MergerCo, in its sole
discretion, make it inadvisable to proceed with such acceptance of shares of
Company Common Stock for payment or the payment therefor.