AGREEMENT AND PLAN OF MERGER
Dated as of December 21, 1998
By and Among
PEN INTERCONNECT, INC.
PEN LAMINATING, INC.
and
LAMINATING TECHNOLOGIES, INC.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 21, 1998 (this
"Agreement"), is by and among Pen Interconnect, Inc., a Utah corporation (the
"Acquiror"), Pen Laminating, Inc., a Utah corporation and a wholly owned
subsidiary of the Acquiror ("Newco"), and Laminating Technologies, Inc., a
Delaware corporation (the "Company"). The Acquiror and Newco are sometimes
referred to herein as the "Acquiror Companies."
RECITALS:
The Board of Directors of the Company has determined that the business
combination to be effected by means of the Merger is fair to, and in the best
interests of, the Company and its stockholders and has approved and adopted this
Agreement and recommended approval and adoption of this Agreement by the
stockholders of the Company.
The Board of Directors of the Acquiror has determined that the business
combination to be effected by means of the Merger is consistent with and in
furtherance of the long-term business strategy of the Acquiror and is fair to,
and in the best interests of, the Acquiror and its shareholders and has approved
and adopted this Agreement and recommended approval and adoption of this
Agreement by the shareholders of the Acquiror.
Upon the terms and subject to the conditions of this Agreement and in
accordance with the Act and the GCL, Newco will merge with and into the Company
and the Company will be the Surviving Corporation.
The parties hereto have acknowledged that the Merger will not qualify
as a reorganization within the meaning of the provisions of Section 368(a) of
the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2 Rules of Construction. Unless the context otherwise requires, as
used in this Agreement: (a) a term has the meaning ascribed to it in Annex A;
(b) an accounting term not otherwise defined in Annex A or elsewhere in this
Agreement has the meaning ascribed to it in accordance with GAAP; (c) "or" is
not exclusive; (d) "including" means "including without limitation"; (e) words
in the singular include the plural; (f) words in the plural include the
singular; (g) words applicable to one gender shall be construed to apply to each
gender, (h) the terms "hereof," "herein," "hereby," "hereto" and derivative or
similar words refer to this entire Agreement; and (i) the terms "Article" or
"Section" shall refer to the specified Article or Section of this Agreement.
ARTICLE II
TERMS OF MERGER
2.1 Statutory Merger. Subject to the terms and conditions and in
reliance upon the representations, warranties, covenants and agreements
contained herein, Newco shall merge with and into the Company at the Effective
Time. The terms and conditions of the Merger and the mode of carrying the same
into effect shall be as set forth in this Agreement. As a result of the Merger,
the separate corporate existence of each of the Constituent Corporations shall
cease and the Company shall continue as the Surviving Corporation.
2.2 Effective Time. As soon as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in Article VIII, the parties
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of the State of Delaware, in such form as
required by, and executed in accordance with the relevant provisions of, the GCL
and Articles of Merger with the Division in such form as required by, and
executed in accordance with the relevant provisions of, the Act.
2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the GCL and the Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, the Surviving Corporation
shall possess all the rights, privilges, power and franchises as of a public and
of a private nature and shall be subject to all the restrictions, disabilities
and duties of each of the Constituent Corporations; and all and singular, the
rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due to
either of the Constituent Corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of such
Constituent Corporations shall be vested in the Surviving Corporation as they
were of the respective Constituent Corporations, and the title to any real
estate vested by deed or otherwise, under the laws of the State of Delaware or
Utah, in either of such Constituent Corporations, shall not revert or be in any
way impaired by reason of the Merger; but all rights of creditors and all liens
upon any property of either of such Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the respective Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
2.4 Articles of Incorporation; Bylaws. At the Effective time, the
articles of incorporation and the bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
and the bylaws of the Surviving Corporation.
2.5 Directors and Officers. The directors of Newco immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, each to
hold office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation, and the officers of Newco immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
The Company shall have the right to appoint one director to the board of
directors of the Acquiror.
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ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
3.1 Merger Consideration; Conversion and Cancellation of Securities. At
the Effective Time, by virtue of the Merger and without any action on the part
of the Acquiror Companies, the Company or the holders of any of the following
securities:
(a) Subject to the other provisions of this Article III, each
share of Company Common Stock issued and outstanding immediately prior
to the Effective Time (excluding any Company Common Stock described in
Section 3.1(c)) shall be converted into shares of Acquiror Common Stock
pursuant to the following ratio: fifty cents ($0.50) divided by the
closing price of the Acquiror Common Stock on the fifth business day
following the effective date of the Registration Statement, but in no
event shall the denominator exceed one dollar and fifty cents ($1.50).
Notwithstanding the foregoing, if between the date of this Agreement
and the Effective Time the outstanding shares of the Acquiror Common
Stock or the Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Common Stock Exchange Ratio
shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares.
(b) All shares of Company Common Stock shall, upon conversion
thereof into shares of Acquiror Common Stock at the Effective Time,
cease to be outstanding and shall be automatically canceled and
retired, and each certificate previously evidencing Company Common
Stock outstanding immediately prior to the Effective Time (other than
Company Common Stock described in Section 3.1(c)) shall thereafter be
deemed, for all purposes other than the payment of dividends or
distributions, to represent that number of shares of Acquiror Common
Stock determined pursuant to the Common Stock Exchange Ratio and, if
applicable, the right to receive cash pursuant to Section 3.2(d) or (e)
or both. The holders of certificates previously evidencing Company
Common Stock shall cease to have any rights with respect to such
Company Common Stock except as otherwise provided herein or by law.
(c) Notwithstanding any provision of this Agreement to the
contrary, each share of Company Common Stock held in the treasury of
the Company and each share of Company Common Stock, if any, owned by
the Acquiror or any direct or indirect wholly owned Subsidiary of the
Acquiror of the Company immediately prior to the Effective Time shall
be cancelled and extinguished without conversion thereof.
(d) Each share of common stock, par value $0.01 per share, of
Newco issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation.
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(e) All outstanding options and warrants to purchase shares of
Company Common Stock shall be converted into warrants to purchase
shares of Acquiror Common Stock based upon the same conversion ratio
set forth in Section 3.1(a), above.
3.2 Exchange of Certificates.
(a) Exchange Fund. At the Closing, the Acquiror shall deposit,
or cause to be deposited, with the Exchange Agent, for the benefit of
the former holders of Company Common Stock and for exchange through the
Exchange Agent in accordance with this Article III, certificates
evidencing that number of shares of the Acquiror Common Stock equal to
the product of the Common Stock Exchange Ratio and the number of shares
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (exclusive of any such shares to be cancelled pursuant
to Section 3.1(c)). The Exchange Fund shall also include any dividends
or other distributions made with respect to the Acquiror Common Stock
to which the former holders of Company Common Stock would be entitled
pursuant to subsections (d) and (e) of this Section 3.2. The Exchange
Fund shall not be used for any purpose other than as expressly provided
in this Section 3.2.
(b) Letter of Transmittal. Promptly after the Effective Time,
the Acquiror will cause the Exchange Agent to send to each record
holder of Company Common Stock immediately prior to the Effective Time
a letter of transmittal and other appropirate materials for use in
surrendering to the Exchange Agent certificates that prior to the
Effective Time evidenced shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time,
the Exchange Agent shall distribute to each holder of record of Company
Common Stock immediately prior to the Effective Time, upon surrender to
the Exchange Agent for cancellation of one or more certificates that
theretofore evidenced shares of Company Common Stock, either (i) the
appropriate number of shares of the Acquiror Common Stock into which
such shares of Company Common Stock were converted pursuant to the
Merger and (ii) any cash to be paid in lieu of fractional interests in
shares of Acquiror Common Stock pursuant to Section 3.2(e) and any
dividends or distributions related to Acquiror Common Stock to be paid
pursuant to Section 3.2(d). If Acquiror Common Stock is to be issued to
a Person other than the Person in whose name the surrendered
certificate or certificates are registered, it shall be a condition of
issuance of the Acquiror Common Stock that the surrendered certificate
or certificates shall be properly endorsed, with signatures guaranteed,
or otherwise in proper form for transfer and that the Person requesting
such payment shall pay any transfer or other taxes required by reason
of the issuance of the Acquiror Common Stock to a Person other than the
registered holder of the surrendered certificate or certificates or
such Person shall establish to the satisfaction of the Acquiror that
such tax has been paid or is not applicable.
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(d) Distributions with Respect to Unexchanged Shares of
Company Common Stock. No dividends or other distributions declared or
made with respect to the Acquiror Common Stock with a record date after
the Effective Time shall be paid to the holder of any certificate that
theretofore evidenced shares of Company Common Stock until the holder
of such certificate shall surrender such certificate. Subject to the
effect of any applicable escheat laws, following surrender of any such
certificate, there shall be paid to the holder of the Acquiror Common
Stock issued in exchange for Company Common Stock, without interest,
(i) promptly, the amount of any cash payable with respect to a
fractional share to which such holder is entitled pursuant to Section
3.2(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such
whole shares of the Acquiror Common Stock and (ii), at the appropriate
payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a
payment date occurring after surrender, payable with respect to such
whole shares of the Acquiror Common Stock.
(e) No Fractional Shares.
(i) Notwithstanding anything herein to the contrary,
no certificates or scrip evidencing fractional shares of the
Acquiror Common Stock shall be issued in connection with the
Merger.
(ii) Any fractional interests in shares of Acquiror
Common Stock to which a holder of record of Company Common
Stock at the Effective Time would otherwise be entitled shall
not entitle such holder to vote or to any rights of a
stockholder of the Acquiror. In lieu of any such fractional
interests in shares of Acquiror Common Stock, each holder of
record of Company Common Stock at the Effective Time who, but
for the provisions of this Section 3.2(e), would be entitled
to receive a fractional interest of a share of the Acquiror
Common Stock by virtue of the Merger shall be paid cash,
without any interest thereon, as hereinafter provided. The
Acquiror shall instruct the Exchange Agent to determine the
number of whole shares and fractional shares of the Acquiror
Common Stock allocable to each holder of record of Company
Common Stock at the Effective Time, to aggregate all such
fractional shares into whole shares, to sell the whole shares
of Acquiror Common Stock obtained thereby in the open market
at then prevailing prices on behalf of holders who otherwise
would be entitled to receive fractional share interests and to
distribute to each such holder such holder's ratable share of
the total proceeds of such sale based on the fractional
interests in shares of Acquiror Common Stock to which such
holder would otherwise have been entitled compared with the
aggregate number of such fractional interests, after making
appropriate deductions of the amount, if any, required for
federal income tax withholding purposes and after deducting
any applicable transfer taxes. All brokers' fees and
commissions incurred in connection with such sales of
fractional shares shall be paid by the Acquiror.
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(f) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains unclaimed by the former holders of Company Common
Stock for 12 months after the Effective Time shall be delivered to the
Acquiror, upon demand, and any former holders of Company Common Stock
who have not theretofore complied with this Article III shall
thereafter look only to the Acquiror for the Acquiror Common Stock and
any cash to which they are entitled. Notwithstanding any other
provisions herein, neither the Exchange Agent nor any party hereto
shall be liable to any former holder of Company Common Stock for any
Acquiror Common Stock, cash in lieu of fractional share interests or
dividends or distributions thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
If any certificates evidencing Company Common Stock shall not have been
surrendered prior to the seventh anniversary of the Effective Time (or
such earlier date on which any shares of the Acquiror Common Stock, any
cash in lieu of fractional share interests or dividends or
distributions with respect to the Acquiror Common Stock to which the
holder of such certificates would otherwise be entitled would escheat
to or become the property of any governmental entity), then,
immediately prior to such date, any such shares, cash, dividends or
distributions in respect of such shares shall, to the extent permitted
by applicable Law, become the property of the Acquiror, free and clear
of all adverse claims and interests of any Person previosuly entitled
thereto.
(g) Withholding of Tax. The Acquiror shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any former holder of Company Common Stock such
amounts as the Acquiror (or any affiliate thereof) or the Exchange
Agent is required to deduct and withhold with respect to the making of
such payment under the code or state, local or foreign tax Law. To the
extent that amounts are so withheld by the Acquiror, such withheld
amounts shall be treated for all purposes of this Agreement as having
been paid to the former holder of Company Common Stock in respect of
which such deduction and withholding was made by the Acquiror.
(h) Investment of Exchange Fund. The Exchange Agent may invest
any cash included in the Exchange Fund in deposit accounts or
short-term money market instruments, as directed by the Acquiror, on a
daily basis. Any interest and other income resulting from such
investments shall be paid to the Acquiror. The Acquiror shall deposit
with the Exchange Agent as part of the Exchange Fund cash in an amount
equal to any loss of principal resulting from such investments promptly
after the incurrence of such a loss.
3.3 Closing. The Closing shall take place at the offices of ▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m. on the fifth Business Day following the date on which the conditions
to the Closing have been satisfied or waived or at such other place, time and
date as the parties hereto may agree. At the conclusion of the Closing on the
Closing Date, the parties hereto shall cause the Certificate of Merger to be
filed with the Secretary of State of the State of Delaware and Articles of
Merger to be filed with the Division.
3.4 Stock Transfer Books. At the close of business on the date of the
Effective Time, the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers of shares of Company Common
Stock thereafter on the records of the Company.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the provisions of Section 10.1(b), the Company hereby
represents and warrants to the Acquiror as follows:
4.1 Organization and Qualification; Subsidiaries. The Company is a
legal entity duly organized, validly existing and in good standing under the
Laws of the State of Delaware, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its businesses as they
are now being conducted and is duly qualified and in good standing to do
business in the jurisdictions in which the nature of the businesses conducted by
them or the ownership or leasing of their respective properties makes such
qualification necessary, other than any matters, including the failure to be so
qualified and in good standing, that could not reasonably be expected to have a
Material Adverse Effect on the Company. The Company has one non-operational
subsidiary .
4.2 Certificate of Incorporation and Bylaws. The Company has heretofore
marked for identification and delivered to the Acquiror complete and correct
copies of the certificate of incorporation and the bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of the Company. The Company is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
4.3 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 20,000,000 shares of Company Common Stock, of which, as of October
31, 1998, 3,185,100 shares were issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights created by statute, the Company's
certificate of incorporation or bylaws or any agreement to which the
Company is a party or is bound; and (ii) 5,000,000 shares of preferred
stock, of which none are issued and outstanding. Since October 31,
1998, (x) no shares of Company Common Stock have been issued by the
Company, except upon exercise of Company Stock Options outstanding
under the Company Option Plans, and (y) the Company has not granted any
options for, or other rights to purchase, shares of Company Common
Stock.
(b) Except for shares reserved for issuance upon exercise of
Company Stock Options granted pursuant to the Company Option Plans and
listed in Section 4.3(b) of the Company's Disclosure Letter, no shares
of Common Stock are reserved for issuance, and, except for Company
Stock Options, there are no contracts, agreements, commitments or
arrangements obligating the Company to offer, sell, issue or grant any
Equity Security of the company or to redeem, purchase or acquire, or
offer to purchase or acquire, any outstanding Equity Security of the
Company.
(c) Except as set forth in Section 4.3(c) of the Company's
Disclosure Letter, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which the
Company is a party or by which the Company is bound with respect to the
voting of any shares of capital stock of the Company.
7
4.4 Authorization of Agreement. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and, subject to
approval of this Agreement by the majority of the stockholders of the Company as
required by the applicable provisions of the GCL and the Company's certificate
of incorporation, each instrument required hereby to be executed and delivered
by it at the Closing, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby. The execution and delivery by
the Company of this Agreement and each instrument required hereby to be executed
and delivered by it at the Closing and the performance of its obligations
hereunder and thereunder have been duly and validly authorized by all requisite
corporate action on the part of the Company (other than, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the outstanding shares of Company Common Stock in accordance with the
applicable provisions of the GCL and the Company's certificate of
incorporation). This Agreement has been duly executed and delivered by the
Company and (assuming due authorization, execution and delivery hereof by the
other parties hereto) constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
the same may be limited by bankruptcy, involvency, reorganization of other
similar legal principles of general applicability governing the application and
availability of equitable remedies.
4.5 Approvals. Except for the applicable requirements, if any, of (a)
the Securities Act, (b) the Exchange Act, (c) state securities or blue sky laws,
(d) the HSR Act, (e) Nasdaq, (f) the filing and recordation of appropriate
merger documents as required by the GCL and the Act, and (g) those Laws,
Regulations and Orders noncompliance with which could not reasonably be expected
to have a Material Adverse Effect on the Company, no filing or registration
with, no waiting period imposed by and no Authorization of, any Governmental
Authority is required under any Law, Regulation or Order applicable to the
Company to permit the Company to execute, deliver or perform this Agreement or
any instrument required hereby to be executed and delivered by it at the
Closing.
4.6 No Violation. Assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting periods
imposed by and receipt of all Authorizations of Governmental Authorities
indicated as required in Section 4.5 and receipt of the approval of the Merger
by the stockholders of the Company as required in Section 4.5 and receipt of the
approval of the Merger by the stockholders of the Company as required by the
GCL, neither the execution and delivery by the Company of this Agreement or any
instrument required hereby to be executed and delivered by it at the Closing,
nor the performance by the Company of its obligations hereunder or thereunder
will (a) to the Knowledge of the Company, violate or breach the terms of or
cause a default under any Law, Regulation or Order applicable to the Company,
the certificate of incorporation or bylaws of the Company or any Material
contract or Material agreement to which the Company is a party or by which it or
any of its properties or assets is bound, or (b) with the passage of time, the
giving of notice or the taking of any action by a third Person, have any of the
effects set forth in clause (a) of this Section, except in any such case for any
matters described in this Section that could not reasonably be expected to have
a Material Adverse Effect on the Company. Prior to the execution of this
Agreement, the Board of Directors of the Company has taken all necessary action
to cause this Agreement and the transactions contemplated hereby to be exempt
from the provisions of Section 203 of the GCL.
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4.7 Reports.
(a) Since March 31, 1995, the Company has filed (i) all SEC
Reports required to be filed by it with the Commission and (ii) the
Company has filed all other Reports required to be filed by it with any
other Governmental Authorities, except where the failure to file any
such Reports could not reasonably be expected to have a Material
Adverse Effect on the Company. Such Reports, including all those filed
after the date of this Agreement and prior to the Effective time, (x)
were prepared in all material respects in accordance with the
requirements of applicable Law (including, with respect to the
Company's SEC Reports, the Securities Act and the Exchange Act, as the
case may be, and the applicable Regulations of the Commission
thereunder), and (y), in the case of the Company's SEC Reports, did not
at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The Company's Audited Financial Statements, the Company's
Unaudited Financial Statements and any other financial statements of
the Company (including any related notes thereto) contained in any of
the Company's SEC Reports filed by the Company with the Commission
after the date of this Agreement (i) have been or will have been
prepared in accordance with the published Regulations of the Commission
and in accordance with GAAP (except (A) to the extent required by
changes in GAAP and (B), with respect to the Company's Audited
Financial Statements, as may be indicated in the notes thereto) and
(ii) fairly present the financial position of the Company as of the
respective dates thereof and the results of their operations and cash
flows for the periods indicated (including, in the case of any
unaudited interim financial statements, reasonable estimates of normal
and recurring year-end adjustments).
(c) Except as set forth in Section 4.7(c) of the Company's
Disclosure Letter, there exist no liabilities or obligations of the
Company that are Material to the Company, whether accrued, absolute,
contingent or threatened, and that would be required to be reflected,
reserved for or disclosed under GAAP in financial statements of the
Company as of and for the period ended on the date of this
representation and warranty, other than (i) liabilities or obligations
that are adequately reflected, reserved for or disclosed in the
Company's Audited Financial Statements, (ii) liabilities or obligations
incurred in the ordinary course of business of the Company since ▇▇▇▇▇
▇▇, ▇▇▇▇, (▇▇▇) liabilities or obligations, the incurrence of which is
permitted by Section 6.2(a) and (iv) liabilities or obligations that
are not Material to the Company.
9
(d) Accounts receivable reflected on the Company's Balance
Sheet have been properly stated at their realizable value after
consideration of all allowances and reserves in accordance with GAAP.
All accounts receivable and all other receivables reflected on the
current balance sheet and all such receivables arising after the
balance sheet date are bona fide receivables and are current and
enforceable and arose in the ordinary course of business. No material
counterclaims or offsetting claims with respect to such receivables are
pending or, to the Company's knowledge have been, threatened. All
accounts payable and all other payables reflected in the current
balance sheet are bona fide payables which arose in the ordinary course
of business.
(e) Inventories reflected on the Company's Balance Sheet, as
well as all inventory items acquired since the date of the Company's
Balance Sheet that are now the property of the Company, consist of raw
materials, supplies, work in process, and finished goods, of such
quality and in such quantities as are being used and will be usable or
are being sold and will be salable in the ordinary course of business
of the Company. These inventories exclude scrap, slow-moving items, and
obsolete items and are valued at the lower of cost or market value,
determined in accordance with GAAP consistently applied. Except as
disclosed in Section 4.7(e) of the Company's Disclosure Letter, since
the date of the Company's Balance Sheet, the Company has continued to
replenish these inventories in a normal and customary manner consistent
with prudent practice prevailing in the business, and there have been
no returns or recalls of any Company Product.
(f) Except as described in Section 4.7(f) of the Company's
Disclosure Letter, all obligations associated with benefits to be
provided to present and former employees of the Company after
retirement or termination have been properly recognized as liabilities
on the Company's balance sheet in accordance with Statements of
Financial Accounting Standards Nos. 106 and 112.
4.8 No Material Adverse Effect; Conduct.
(a) Since March 31, 1998, no event (other than any event that
is of general application to all or a substantial portion of the
Company's industry and other than any event that is expressly subject
to any other representation or warranty contained in Article IV) has,
to the Knowledge of the Company, occurred that, individually or
together with other similar events, could reasonably be expected to
constitute or cause a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.8(b) of the Company's
Disclosure Letter, during the period from September 30, 1998 to the
date of this Agreement, the Company has not engaged in any conduct that
is proscribed during the period from the date of this Agreement to the
Effective Time by subsections (i) through (xii) of Section 6.2(a).
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4.9 Title to Properties.
(a) Except as set forth in Schedule 4.9(a) of the Company's
Disclosure Letter, the Company has good and marketable title to all of
the properties reflected in the Company's Balance Sheet, other than any
properties reflected in the Company's Balance Sheet that have been sold
or otherwise disposed of since the date of the Company's Balance Sheet
or are not, individually or in the aggregate, Material to the Company,
free and clear of Liens, other than (x) Liens the existence of which is
reflected in the Company's Financial Statements, (y) Permitted
Encumbrances and (z) Liens that, individually or in the aggregate, are
not Material to the Company. The Company holds under valid lease
agreements all real and personal properties reflected in the Company's
Balance Sheet as being held under leases, and enjoys peaceful and
undisturbed possession of such properties under such leases, other than
(i) any properties as to which such leases have terminated in the
ordinary course of business since the date of the company's Balance
Sheet and (ii) any properties that, individually or in the aggregate,
are not Material to the Company. The Company has not received any
written notice of any adverse claim to the title to any properties
owned by it or with respect to any lease under which any properties are
held by it, other than any claims that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company.
(b) To the Knowledge of the Company, except as set forth in
Section 4.9(b) of the Company's Disclosure Letter, no parcel of real
property so listed as owned is, or its use is, in violation of any
applicable zoning laws nor in violation of any other local, state or
federal laws and regulations affecting the use and occupancy of such
property.
(c) There is no pending or, to the Knowledge of the Company,
threatened condemnation or similar proceeding or special assessment
affecting any real property, or any part thereof, nor has the Company
received notification that any such proceeding or assessment is
contemplated by any governmental authority.
(d) Except as set forth in Section 4.9(d) of the Company's
Disclosure Letter, since December 31, 1997, there has not been (i) any
damage, destruction, change in physical condition, or loss to or of any
of the Company's equipment, facilities, material or other personal
property ("Equipment") used in, on or in connection with the business
of the Company, whether or not covered by insurance, other than
ordinary wear on Equipment; (ii) any Equipment removed from the
premises of the Company except for Equipment which was surplus to the
operation of the business of the Company; (iii) any sale, lease or
other disposition of any Equipment other than in the ordinary course;
(iv) any contract or commitment to do any of the foregoing.
4.10 Certain Obligations. Except for those listed in Section 4.10 of
the Company's Disclosure Letter, the Company is not a party to or bound by any
Material Contract. Except as set forth in Section 4.10 of the Company's
Disclosure Letter, all Material Contracts to which the Company is a party are in
full force and effect, the Company has performed its obligations thereunder to
date and, to the Knowledge of the Company, each other party thereto has
performed its obligations thereunder to date, other than any failure of a
Material Contract to be in full force and effect or any nonperformance thereof
that could not reasonably be expected to have a Material Adverse Effect on the
Company.
11
4.11 Authorizations; Compliance.
(a) The Company has obtained all Authorizations that are
necessary to carry on its businesses as currently conducted, except for
any such Authorizations as to which, individually or in the aggregate,
the failure to possess could not reasonably be expected to have a
Material Adverse Effect on the Company. Such Authorizations are in full
force and effect, have not been violated in any respect that could
reasonably be expected to have a Material Adverse Effect on the Company
and there is no action, proceeding or investigation pending or, to the
Knowledge of the Company, threatened regarding suspension, revocation
or cancellation of any such Authorizations, except for any suspensions,
revocations or cancellations of any such Authorizations that,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company.
(b) The Company does not possess any rights, privileges,
powers or franchises, contracts, arrangements or understandings that
are used in, or are necessary to the business of the Company, as
presently conducted ("Necessary Rights"), except those that will be
transferred to the Acquiror as a result of the Merger and the other
transactions contemplated by this Agreement. The Company is currently
vested with all Necessary Rights.
4.12 Litigation; Compliance with Laws. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration) pending
or, to the Knowledge of the Company, threatened against the Company, at law or
in equity, in any Court or before or by any Governmental Authority, except
actions, suits, investigations or proceedings that are disclosed in the
Company's SEC Reports, that are set forth in Section 4.12 or Section 4.15 of the
Company's Disclosure Letter or that, individually or, with respect to multiple
actions, suits or proceedings that allege similar theories of recovery based on
similar facts, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company. There are no Material claims pending or,
to the Knowledge of the Company, threatened by any Persons against the Company
for indemnification pursuant to any statute, organizational document, contract
or otherwise with respect to any claim, action, suit, investigation or
proceeding pending in any Court or before or by any Governmental Authority.
Except as set forth in Section 4.12 and Section 4.15 of the Company's Disclosure
Letter, the Company is in substantial compliance with all applicable Laws and
Regulations and is not in default with respect to any Order applicable to the
Company, except such events of noncompliance or defaults that, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company.
4.13 Employee Benefit Plans. Except as set forth in the Company's SEC
Reports or in Section 4.13 of the Company's Disclosure Letter, the Company is in
substantial compliance with each Benefit Plan except for any noncompliance that
could not reasonably be expected to have a Material Adverse Effect on the
Company.
12
4.14 Taxes.
(a) Except as set forth in Section 4.14(a) of the Company's
Disclosure Letter and except for such other matters as could not
reasonably be expected to have a Material Adverse Effect on the
Company, all returns and reports of or with respect to any Tax ("Tax
Returns") that are required to be filed by or with respect to the
Company on or before the Effective Time have been or will be timely
filed, all Taxes that are due on or before the Effective Time have been
or will be timely paid in full, all withholding Tax requirements
imposed on or with respect to the Company have been or will be
satisfied in full in all respects and no penalty, interest or other
charge is or will become due with respect to the late filing of any
such Tax Return or late payment of any such Tax.
(b) Except as set forth in Section 4.14(b) the Company's
Disclosure Letter, none of such Tax Returns has been audited by the
applicable Governmental Authority.
(c) Except as set forth in Section 4.14(c) of the Company's
Disclosure Letter, there is not in force any extension of time with
respect to the due date for the filing of any such Tax Return or any
waiver or agreement for any extension of time for the assessment or
payment of any Tax due with respect to the period covered by any such
Tax Return.
(d) Except as set forth in Section 4.14(d) of the Company's
Disclosure Letter, there is no claim against the Company for any Taxes,
and no assessment, deficiency or adjustment has been asserted or, to
the Knowledge of the Company, proposed with respect to any such Tax
Return, that, in either case, could reasonably be expected to have a
Material Adverse Effect on the Company.
(e) Except as set forth in Section 4.14(e) of the Company's
Disclosure Letter, the Company has not, during the last ten years, been
a member of an affiliated group filing a consolidated federal income
Tax Return, other than the affiliated group of which the Company is the
common parent corporation.
(f) The schedule set forth in Section 4.14(f) of the Company's
Disclosure Letter is accurate and sets forth fully the tax basis
information pertaining to net loss carry forwards of the Company;
provided, however, that the Company makes no representation or warranty
with respect to the Acquiror's ability to utilize such net loss carry
forwards.
4.15 Environmental Matters.
(a) Except for matters disclosed in the Company's SEC Reports
or in Section 4.15 of the Company's Disclosure Letter and except for
matters that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company, (i) the
properties, operations and activities of the Company are in compliance
with all applicable Environmental Laws; (ii) the Company and the
properties and the operations of the Company are not subject to any
existing, pending or, to the Knowledge of the Company, threatened
action, suit, investigation, inquiry or proceeding by or before any
Court or Governmental Authority under any Environmental Law; (iii) all
Authorizations, if any, required to be obtained or filed by the Company
under any Environmental Law in connection with the business of the
Company have been obtained or filed and are valid and currently in full
force and effect; (iv) there has been no release of any hazardous
substance, pollutant or contaminant into the environment by the Company
or in connection with its properties or operations; and (v) there has
been no exposure of any Person or property to any hazardous substance,
pollutant or contaminant in connection with the properties, operations
and activities of the Company.
13
(b) The Company has made available to the Acquiror all
internal and external environmental audits and studies and all
correspondence on environmental matters (in each case relevant to the
Company) in the possession of the Company for such matters as could be
reasonably expected to have a Material Adverse Effect on the Company.
4.16 Insurance. The Company owns and is beneficiary under all such
insurance policies underwritten by reputable insurers that, as to risks insured,
coverages and related limits and deductibles, are customary in the industry in
which the Company operates. All premiums due with respect to all such insurance
policies that are Material have been paid and, to the Knowledge of the Company,
all such policies are in full force and effect.
4.17 Affiliates. Section 4.17 of the Company's Disclosure Letter
contains a true and complete list of all Persons who are directors or executive
officers of the Company and any other Persons who, to the Knowledge of the
Company, may be deemed to be Affiliates of the Company. Concurrently with the
execution and delivery of this Agreement, the Company has delivered to the
Acquiror an executed letter agreement, substantially in the form of Annex B
hereto, from each such Person so identified.
4.18 Certain Business Practices. As of the date of this Agreement,
neither the Company nor any director, officer, employee or agent of the Company
has (a) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any unlawful payment
to any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction, made
any payment, entered into any agreement or arrangement or taken any other action
in violation of Section 1128B(b) of the Social Security Act, as amended, or (d)
made any other unlawful payment, except for any such matters that could not
reasonably be expected to have a Material Adverse Effect on the Company.
4.19 Brokers. Except as disclosed in Section 4.19 of the Company's
Disclosure Letter, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company shall be solely responsible for the
payment of these fees.
4.20 Labor Controversies. The Company is not a party to any collective
bargaining agreement and there are no grievances, disputes or controversies
pending or threatened between the Company and any union, and there have not been
and are not now existing any threats of strikes, work stoppages, organizational
efforts or demands for collective bargaining by any union or like organization
respecting the Company. The Company has complied in all material respects with
all applicable Federal, foreign, state or local laws or regulations thereof
relating to wages, hours, collective bargaining and the payment of Social
Security and similar taxes; and the Company is not liable for any arrears of
wages or any taxes or penalties for failure to comply with any of the foregoing.
The Company has complied in all material respects with all applicable Federal,
foreign, state or local laws or regulations thereof relating to occupational
safety; and the Company is not liable for any penalties for failure to comply
therewith.
14
4.21 Intellectual Property.
(a) Definitions. For the purposes of this Agreement, the
following terms have the following definitions:
(i) "Intellectual Property" shall mean any or all of
the following and all rights therein: (i) all United States,
international and foreign patents and applications (including
provisional applications) therefor that have not been
abandoned or withdrawn; (ii) all inventions (whether
patentable or not), invention disclosures, trade secrets,
proprietary information, know how, technology, technical data
and customer lists, and all documentation relating to any of
the foregoing, and all improvements thereto; (iii) all
copyrights, registered copyrights and applications therefor,
and moral or equivalent rights, throughout the world; (iv) all
industrial designs, including registered industrial designs
and applications therefor throughout the world; (v) all trade
names, logos, common law trademarks and service marks,
registered trademarks and service marks and applications
therefor that have not been abandoned or withdrawn, throughout
the world; and (vi) all databases and data collections and all
rights therein, throughout the world.
(ii) "Company Intellectual Property" shall mean any
Intellectual Property that is owned by, or filed in the name
of, the Company.
(iii) "Company Product" shall mean any product that
is distributed by or for the Company, either directly or
indirectly, or any proprietary information used by the Company
in the performance of any services provided to the Company's
customers, as of the date hereof.
(iv) "Company Registered Intellectual Property" shall
mean any Registered Intellectual Property owned by, or filed
in the name of, the Company.
(v) "Registered Intellectual Property" shall mean all
United States, international and foreign: (i) patents and
patent applications (including provisional applications) that
have not been abandoned or withdrawn; (ii) registered
trademarks and service marks and applications therefor that
have not been abandoned or withdrawn; (iii) registered
copyrights and applications therefor; and (iv) registered
industrial designs and applications therefor.
(b) Schedules of Company Registered Intellectual Property.
Section 4.21(b) of the Company's Disclosure Letter lists all Company
Intellectual Property that is included in Section 4.21(a)(ii)-(v), and
all Company Registered Intellectual Property and all patent
applications filed by or in the name of Company that have been
abandoned or withdrawn and trademark and service ▇▇▇▇ registration
applications filed by or in the name of Company that have been
abandoned or withdrawn. With respect to the Company Registered
Intellectual Property, Section 4.21(b) of the Company Disclosure Letter
also lists all declaration or renewal dates for such items occurring
within the period ending 5 years after the Effective Date.
15
(c) Schedules of Actions or Proceedings. Section 4.21(c) of
the Company's Disclosure Letter lists each proceeding or action pending
(including any mediation) as of the date hereof and to which Company is
a party before any court or tribunal (including the United States
Patent and Trademark Office, or equivalent authority anywhere in the
world) related to any Company Registered Intellectual Property.
(d) Validity of Company Intellectual Property. Except as
disclosed in Section 4.21(c) of the Company Disclosure Schedule, there
is no Company Intellectual Property or Company Registered Intellectual
Property that is subject to any proceeding or outstanding decree,
order, judgment, agreement entered pursuant to an order of a court,
tribunal or equivalent authority anywhere in the world, or stipulation
in connection with any proceeding materially restricting in any manner
the use, transfer, or licensing thereof by Company, or that would be
likely to adversely affect the validity, use or enforceability of any
Company Intellectual Property or Company Registered Intellectual
Property. Company is not a party to any proceeding or outstanding
decree, order, judgment, agreement entered pursuant to an order of a
court, tribunal or equivalent authority anywhere in the world, or
stipulation in connection with any proceeding restricting in any manner
the use, transfer, or licensing by Company of any Intellectual Property
of any third party that is incorporated into a necessary component of
any Company Product.
(e) Company Registrations Properly Maintained. Except as
disclosed in Section 4.21(e) of the Company Disclosure Letter, each
item of Company Registered Intellectual Property is subsisting; all
necessary registration, maintenance and renewal fees due as of the date
hereof in connection with such Company Registered Intellectual Property
have been paid and all documents and certificates required to be filed
with a patent, copyright, trademark or other governmental authority in
the United States or any foreign jurisdiction for the purposes of
maintaining such Company Registered Intellectual Property have been
filed with such authority, except where the failure to pay any fees or
file any such documents would not result, in Company's reasonable
judgment, in a loss of benefits to or any liability to Company, or upon
the Closing, to Acquiror.
(f) Good and Clear Title to Intellectual Property. Except as
disclosed in Section 4.21(f) of the Company Disclosure Letter, the
Company: (i) owns and has good title to, or has all necessary licenses
(either express or implied) under or to, each item of Intellectual
Property that is incorporated into a necessary component of any Company
Product, including all Company Registered Intellectual Property, but
excluding any Intellectual Property incorporated into a necessary
component of any Company Product that has been developed or created by
a third party for Company, free and clear of any Lien (other than (A)
licenses and related restrictions, (B) any Lien not material in
character, amount or extent; and which Liens do not result in a loss of
benefits to or any liability to the Company); (ii) owns and has good
and exclusive title to, or has all necessary licenses (either express
or implied) under or to, each item of Intellectual Property that is
incorporated into a necessary component of the Company Products
specified in Section 4.21(b) of the Company Disclosure Letter,
including all Company Registered Intellectual Property, but excluding
any Intellectual Property incorporated into a necessary component of
any such Company Products that has been developed or created by a third
party for the Company, free and clear of any Lien (other than (A)
licenses and related restrictions, and (B) any Lien which does not
result in a material loss of benefits to or in any material liability
to the Company, excluding any custom development work of Company
Products performed by the company for any third party; and (iii) owns
and has good title to, or has a license to each trademark and trade
name used in connection with the distribution of any Company Products.
16
(g) Third Party Intellectual Property. Except as disclosed in
Section 4.21(g) of the Company Disclosure Letter, to the extent that
any Intellectual Property incorporated into a necessary component of
any Company Products has been developed or created by a third party for
the Company, the Company either (i) has obtained ownership of, free and
clear of any Lien (other than (A) license and related restrictions, and
(B) any Lien which does not materially detract from the current manner
of manufacture, use or distribution of such Company Products that
include such Intellectual Property, or (ii) has obtained a license
under or to such third party's Intellectual Property, to the extent it
is legally possible to do so; except to the extent that the failure to
do so does not result, in the Company's reasonable judgment, in a loss
of benefits to or in any liability to the Company.
(h) No Transfer of Ownership. Except as disclosed in Section
4.21(h) of the Company Disclosure Letter, the Company has not
transferred ownership of, or granted any exclusive license with respect
to, any Company Intellectual Property owned by the Company at the time
of its development or any Company Registered Intellectual Property, to
any third party; except to the extent such Intellectual Property
pertains to custom development work of Company Products performed by
the Company for any third party.
(i) Schedule of Intellectual Property Agreements. Section
4.21(i) of the Company Disclosure Letter lists all contracts, licenses
and other agreements to which the Company is a party as of the date
hereof (i) with respect to Company Intellectual Property licensed or
transferred by the Company or any of its subsidiaries to any third
party (other than (A) those with end-users entered into in the ordinary
course of business, (B) those with distributors or resellers entered
into in the ordinary course of business, (C) those entered into in
connection with the sale or lease of hardware products and associated
software entered into in the ordinary course of business, (D) those
relating to the performance of services by the Company in the ordinary
course of business, and (E) those entered into in the ordinary course
of business on terms that do not materially deviate from the Company's
standard terms previously disclosed to Acquiror); or (ii) pursuant to
which a third party is licensing or transferring any Intellectual
Property to the Company that is incorporated into a necessary component
of a Company Product (other than (A) those entered into in connection
with the custom development work of Company Products performed by the
Company or any of its subsidiaries for any third party, (B) those that
pertain to mass-marketed products commercially available to similarly
situated businesses, (C) those that pertain to publicly available
protocols or specifications that are used in the development of Company
Products, and (D) those entered into in the ordinary course of business
on terms that do not materially deviate from the Company's standard
terms previously disclosed to Acquiror).
17
(j) Acquiror Permitted to Exercise Company's Intellectual
Property Rights. Following the Effective time, the Acquiror will be
permitted to exercise all of the Company's rights under the contracts,
licenses and agreements required to be listed in Section 4.21(i) of the
Company's Disclosure Letter to the same extent the Company would have
been permitted to exercise such rights had the transactions
contemplated by this Agreement not occurred and without the payment of
any additional amounts or consideration other than ongoing fees,
royalties or payments which the Company would have been required to pay
had the transactions contemplated by this Agreement not occurred;
except to the extent that any contract, license, agreement or activity
of Acquiror (other than this Agreement or the Merger) affects the
exercise of such rights or the payment of such amounts.
(k) Infringement Indemnifications. Section 4.21(k) of the
Company's Disclosure Letter lists or specifically refers to all
material contracts, licenses and agreements to which the Company is a
party as of the date hereof and wherein or whereby the Company has
agreed to, or assumed, any obligation or duty to warrant, indemnify,
hold harmless or otherwise assume or incur any obligation or liability
with respect to the infringement or misappropriation by the Company of
third party Intellectual Property or the infringement or
misappropriation by a third party of Company Intellectual Property or
Company Registered Intellectual Property (other than (A) those with
end-users entered into in the ordinary course of business, (B) those
with distributors or resellers entered into in the ordinary course of
business, (C) those entered into in connection with the sale or lease
of hardware products and associated software entered into in the
ordinary course of business, (D) those relating to the performance of
services by the Company in the ordinary course of business, and (E)
those entered into in the ordinary course of business on terms that do
not materially deviate from the Company's standard terms previously
disclosed to Acquiror).
(l) Operation of Company Business Not Infringing. To the
Knowledge of the Company, the operation of the business of the Company
as such business is currently being operated with respect to Company
Products (including the Company's design, development, manufacture,
marketing and sale of Company Products) is not infringing or
misappropriating the Intellectual Property of any third party to the
extent that such infringement or misappropriation will result, in the
Company's reasonable judgment, in a material loss of benefits to or in
any material liability to the Company.
18
(m) No Notice of Claim. Except as disclosed in Section 4.21 of
the Company's Disclosure Letter, the Company has not received notice
from any third party that any Company Product infringes or
misappropriates the Intellectual Property of any third party.
(n) No Present Infringement of Company Intellectual Property.
Except as disclosed in Section 4.21(n) of the Company's Disclosure
Letter, to the knowledge of the Company, no person is infringing or
misappropriating any Company Intellectual Property.
(o) Protection of Confidential Information. The Company has
taken all necessary steps to protect the Company's rights in the
Company's confidential information and trade secrets or any trade
secrets or confidential information of third parties provided to the
Company. Without limiting the foregoing, the Company makes reasonable
and customary efforts to implement a policy requiring each employee and
contractor to execute a proprietary information/confidentiality
agreement in the Company's standard form (as may have been changed over
time).
4.22 Company Common Stock. The Company has not made any
material misrepresentation to the Acquiror relating to the Company
Common Stock, and the Company has not omitted to state to the Acquiror
any material fact relating to the Company Common Stock which is
necessary in order to make the information given by or on behalf of the
Company to the Acquiror not misleading or which if disclosed would
reasonably affect the decision of a person considering an acquisition
of the Company Common Stock. No fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be
expected to have, a Material Adverse Effect on the Company, which has
not been disclosed in the Company's Financial Statements, the Company's
SEC Reports or the Company's Disclosure Letter.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
Subject to the provisions of Section 10.1(b), the Acquiror hereby
represents and warrants to the Company as follows:
5.1 Organization and Qualification; Subsidiaries. The Acquiror and
Newco are legal entities duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation or
organization, have all requisite corporate power and authority to own, lease and
operate their respective properties and to carry on their businesses as they are
now being conducted and are duly qualified and in good standing to do business
in each jurisdiction in which the nature of the business conducted by them or
the ownership or leasing of their respective properties makes such qualification
necessary, other than any matters, including the failure to be so qualified and
in good standing, that could not reasonably be expected to have a material
Adverse Effect on the Acquiror. The Acquiror has no directly or indirectly owned
Significant Subsidiaries.
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5.2 Articles of Incorporation and Bylaws. The Acquiror has heretofore
marked for identification and furnished to the Company complete and correct
copies of the articles of incorporation and the bylaws or the equivalent
organizational documents, in each case as amended or restated to the date
hereof, of the Acquiror and Newco. The Acquiror and Newco are not in violation
of any of the provisions of their respective articles of incorporation or
bylaws.
5.3 Capitalization.
(a) The authorized capital stock of the Acquiror consists of
50,000,000 shares of the Acquiror Common Stock of which as of December
16, 1998, 6,271,481 shares were issued and outstanding, all of which
are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights created by statute, the Acquiror's
articles of incorporation or bylaws or any agreement to which the
Acquiror is a party or is bound, except as set forth in Section 5.3(a)
of Acquiror's Disclosure Letter. Since December 16, 1998, (x) no shares
of Acquiror Common Stock have been issued by the Acquiror except
Acquiror Common Stock issued pursuant to the exercise of outstanding
Acquiror Stock Options and (y) the Acquiror has not granted any options
for, or other rights to purchase, shares of Acquiror Common Stock.
(b) Except as set forth in Section 5.3(b) of the Acquiror's
Disclosure Letter and SEC Reports, no shares of Acquiror Common Stock
are reserved for issuance, and, except for the Acquiror Stock Options
and the warrants listed in Section 5.3(b) of the Acquiror's Disclosure
Letter, there are no contracts, agreements, commitments or arrangements
obligating the Acquiror to offer, sell, issue or grant any Equity
Securities of the Acquiror, to redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of the Acquiror
or to grant any Lien on any shares of capital stock of the Acquiror.
(c) There are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Acquiror is
a party or by which the Acquiror is bound with respect to the voting of
any shares of capital stock of the Acquiror .
5.4 Authorization of Agreement. Each of the Acquiror and Newco has all
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement by the majority of the stockholders
of the Acquiror as required by the applicable provisions of Nasdaq, each
instrument required hereby to be executed and delivered by it at the Closing, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby. The execution and delivery by each of the
Acquiror and Newco of this Agreement and each instrument required hereby to be
executed and delivered by each of them at the Closing and the performance of
their respective obligations hereunder and thereunder have been duly and validly
authorized by all requisite corporate action on the part of the Acquiror and
Newco, respectively (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the outstanding
shares of Acquiror Common Stock in accordance with the applicable provisions of
the Nasdaq). This Agreement has been duly executed and delivered by the Acquiror
and Newco and (assuming due authorization, execution and delivery hereof by the
other party hereto) constitutes a legal, valid and binding obligation of the
Acquiror and Newco, enforceable against the Acquiror and Newco in accordance
with its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other similar legal principles of general applicability
governing the application and availability of equitable remedies.
20
5.5 Approvals. Except for the applicable requirements, if any, of (a)
the Securities Act, (b) the Exchange Act, (c) state securities or blue sky laws,
(d) the HSR Act, (e) the Nasdaq, (f) the filing and recordation of appropriate
merger documents as required by the GCL and the Act ,and (g) those Laws,
Regulations and orders noncompliance with which could not reasonably be expected
to have a Material Adverse Effect on the Acquiror or Newco, no filing or
registration with, no waiting period imposed by and no Authorization of, any
Governmental Authority is required under any Law, Regulation or Order applicable
to the Acquiror or Newco to permit the Acquiror or Newco to execute, deliver or
perform this Agreement or any instrument required hereby to be executed and
delivered by it at the Closing.
5.6 No Violation. Assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting periods
imposed by, and receipt of all Authorizations of, Governmental Authorities
indicated as required in Section 5.05, neither the execution and delivery by the
Acquiror or Newco of this Agreement or any instrument required hereby to be
executed and delivered by it at the Closing nor the performance by the Acquiror
or Newco of its obligations hereunder or thereunder will (a) violate or breach
the terms of or cause a default under any Law, Regulation or Order applicable to
the Acquiror or Newco, the articles of incorporation or bylaws of the Acquiror
or Newco or any contract or agreement to which the Acquiror or any of its
Subsidiaries is a party or by which it or any of its properties or assets is
bound, or (b), with the passage of time, the giving of notice or the taking of
any action by a third Person, have any of the effects set forth in clause (a) of
this Section, except in any such case for any matters described in this Section
that could not reasonably be expected to have a Material Adverse Effect on the
Acquiror or Newco.
5.7 Reports.
(a) Since October 1, 1995, (i) the Acquiror has filed all SEC
Reports required to be filed by the Acquiror with the Commission and
will file with the SEC the Acquiror Annual Report on Form 10-K for the
year ended September 30, 1998, and (ii) the Acquiror has filed all
other Reports required to be filed by it with any other Governmental
Authorities and Nasdaq except where the failure to file any such
Reports could not reasonably be expected to have a Material Adverse
Effect on the Acquiror. The Acquiror's Reports, including those filed
after the date of this Agreement and prior to the Effective Time, (x)
were prepared in all material respects in accordance with the
requirements of applicable Law (including, with respect to the
Acquiror's SEC Reports, the Securities Act and the Exchange Act, as the
case may be, and the applicable Regulations of the Commission
thereunder) and (y), in the case of the Acquiror's SEC Reports, did not
at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
21
(b) The Acquiror's Consolidated Audited Financial Statements
and any financial statements of the Acquiror (including any related
notes thereto) contained in any of the Acquiror's SEC Reports filed by
the Acquiror with the Commission after the date of this Agreement (i)
have been or will have been prepared in accordance with the published
Regulations of the Commission and in accordance with GAAP (except (A)
to the extent required by changes in GAAP and (B), with respect to the
Acquiror's Consolidated Audited Financial Statements, as may be
indicated in the notes thereto) and (ii) fairly present the
consolidated financial position of the Acquiror and its Subsidiaries as
of the respective dates thereof and the consolidated results of their
operations and cash flows for the periods indicated (including, in the
case of any unaudited interim financial statements, reasonable
estimates of normal and recurring year-end adjustments).
(c) Except as set forth in Section 5.7(c) of the Acquiror's
Disclosure Letter, there exists no liabilities or obligations of the
Acquiror that are Material to the Acquiror, whether accrued, absolute
or contingent, that would be required to be reflected, reserved for or
disclosed under GAAP in consolidated Financial Statements of the
Acquiror as of and for the period ended on the date of this
representation and warranty, other than (i) liabilities or obligations
that are adequately reflected, reserved for or disclosed in the
Acquiror's Financial Statements, (ii) liabilities or obligations
incurred in the ordinary course of business of the Acquiror since
September 30, 1997, (iii) liabilities or obligations the incurrence of
which is permitted by Section 6.2(b) and (iv) liabilities or
obligations that are not Material to the Acquiror.
(d) Except as set forth in Section 5.7(d) of Acquiror's
Disclosure Letter, accounts receivable reflected on the Acquiror's
balance sheet have been properly stated at their realizable value after
consideration of all allowances and reserves in accordance with GAAP.
All accounts receivable and all other receivables reflected on the
current balance sheet and all such receivables arising after the
balance sheet date are bona fide receivables and are current and
enforceable and arose in the ordinary course of business. No material
counterclaims or offsetting claims with respect to such receivables are
pending or, to the Acquiror's knowledge have been, threatened. All
accounts payable and all other payables reflected in the current
balance sheet are bona fide payables which arose in the ordinary course
of business.
(e) Except as set forth in Section 5.7(e) of Acquiror's
Disclosure Letter, inventories reflected on the Acquiror's balance
sheet, as well as all inventory items acquired since the date of the
Acquiror's balance sheet that are now the property of the Acquiror,
consist of raw materials, supplies, work in process, and finished
goods, of such quality and in such quantities as are being used and
will be usable or are being sold and will be salable in the ordinary
course of business of the Acquiror. These inventories exclude scrap,
slow-moving items, and obsolete items and are valued at the lower of
cost or market value, determined in accordance with GAAP consistently
applied. Except as disclosed in Section 5.7(e) of the Acquiror's
Disclosure Letter, since the date of the Acquiror's balance sheet, the
Acquiror has continued to replenish these inventories in a normal and
customary manner consistent with prudent practice prevailing in the
business, and there have been no returns or recalls of any Acquiror
Product.
22
(f) Except as described in Section 5.7(f) of the Acquiror's
Disclosure Letter, all obligations associated with benefits to be
provided to present and former employees of the Acquiror after
retirement or termination have been properly recognized as liabilities
on the Acquiror's balance sheet in accordance with Statements of
Financial Accounting Standards Nos. 106 and 112.
5.8 No Material Adverse Effect; Conduct.
(a) Since September 30, 1997, no event (other than any event
that is of general application to all or a substantial portion of the
Acquiror's industry and other than any event that is expressly subject
to any other representation or warranty contained in Article V) has, to
the Knowledge of the Acquiror, occurred that, individually or together
with other similar events, could reasonably be expected to constitute
or cause a Material Adverse Effect on the Acquiror.
(b) Except as set forth in Section 5.8(b) of the Acquiror's
Disclosure Letter, during the period from September 30, 1997, to the
date of this Agreement, the Acquiror has not engaged in any conduct
that is proscribed during the period from the date of this Agreement to
the Effective Time by subsections (i) through (viii) of Section 6.2(b).
5.9 Title to Properties.
(a) The Acquiror has good and marketable title to all of the
properties reflected in the Acquiror's balance sheet, other than any
properties reflected in the Acquiror's balance sheet that have been
sold or otherwise disposed of since the date of the Acquiror's balance
sheet or are not, individually or in the aggregate, Material to the
Acquiror, free and clear of Liens, other than (x) Liens the existence
of which is reflected in the Acquiror's Financial Statements, (y)
Permitted Encumbrances and (z) Liens that, individually or in the
aggregate, are not Material to the Acquiror. The Acquiror holds under
valid lease agreements all real and personal properties reflected in
the Acquiror's balance sheet as being held under capitalized leases,
and enjoys peaceful and undisturbed possession of such properties under
such leases, other than (i) any properties as to which such leases have
terminated in the ordinary course of business since the date of the
Acquiror's balance sheet and (ii) any properties that, individually or
in the aggregate, are not Material to the Acquiror. The Acquiror has
not received any written notice of any adverse claim to the title to
any properties owned by it or with respect to any lease under which any
properties are held by it, other than any claims that, individually or
in the aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Acquiror.
23
(b) To the Knowledge of the Acquiror and Newco, except as set
forth in Section 5.9(b) of the Acquiror Disclosure letter, no parcel of
real property so listed as owned is, or its use is, in violation of any
applicable zoning laws nor in violation of any other local, state or
federal laws and regulations affecting the use and occupancy of such
property.
(c) There is no pending or, to the Knowledge of the
Acquiror's, threatened condemnation or similar proceeding or special
assessment affecting any real property, or any part thereof, nor has
the Acquiror or any of its Subsidiaries received notification that any
such proceeding or assessment is contemplated by any governmental
authority.
(d) Except as set forth in Sections 5.9(d) of the Acquiror's
Disclosure Letter, since September 30, 1997, there has not been (i) any
damage, destruction, change in physical condition, or loss to or of any
of the equipment, facilities, material or other personal property
("Acquiror's Equipment") used in, on or in connection with the business
of the Acquiror, whether or not covered by insurance, other than
ordinary wear on Acquiror's Equipment; (ii) any Acquiror's Equipment
removed from the premises of the Acquiror except for Acquiror's
Equipment which was surplus to the operation of the business of the
Acquiror; (iii) any sale, lease or other disposition of any Acquiror's
Equipment other than in the ordinary course; or (iv) any contract or
commitment to do any of the foregoing.
5.10 Certain Obligations. Except for those listed in Section 5.10 of
the Acquiror's Disclosure Letter or filed as Exhibits to the Acquiror's SEC
Reports, the Acquiror is not a party to or bound by any Material Contract.
Except as set forth in Section 5.10 of the Acquiror's Disclosure Letter, all
Material Contracts to which the Acquiror is a party are in full force and
effect, the Acquiror has performed its obligations thereunder to date and, to
the Knowledge of the Acquiror, each other party thereto has performed its
obligations thereunder to date, other than any failure of any such Material
Contract to be in full force and effect or any nonperformance thereof that could
not reasonably be expected to have a Material Adverse Effect on the Acquiror.
5.11 Authorizations; Compliance. The Acquiror has obtained all
Authorizations that are necessary to carry on its businesses as currently
conducted, except for any such Authorizations as to which the failure to
possess, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Acquiror. Such Authorizations are in full
force and effect, have not been violated in any respect that could reasonably be
expected to have a Material Adverse Effect on the Acquiror and there is no
action, proceeding or investigation pending or threatened regarding suspension,
revocation or cancellation of any of such Authorizations, except in the case of
any suspension, revocation or cancellation of such Authorizations that could not
reasonably be expected to have a Material Adverse Effect on the Acquiror.
24
5.12 Litigation; Compliance with Laws. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration) pending
or, to the Knowledge of the Acquiror, threatened against the Acquiror or any of
its Subsidiaries, at law or in equity, in any Court or before or by any
Governmental Authority, except actions, suits, proceedings or investigations
that are disclosed in the Acquiror's SEC Reports, that are set forth in Section
5.12 or Section 5.15 of the Acquiror's Disclosure Letter or that, individually
or, with respect to multiple actions, suits or proceedings that allege similar
theories of recovery based on similar facts, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Acquiror. There
are no Material claims pending or, to the Knowledge of the Acquiror, threatened
by any Persons against the Acquiror or any of its Subsidiaries for
indemnification pursuant to any statute, organizational document, contract or
otherwise with respect to any claim, action, suit, investigation or proceeding
pending in any Court or before or by any Governmental Authority. Except as set
forth in Section 5.12 and Section 5.15 of the Acquiror's Disclosure Letter, the
Acquiror is in substantial compliance with all applicable Laws and Regulations
and is not in default with respect to any Order applicable to the Acquiror or
any of its Subsidiaries, except such events of noncompliance or defaults that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Acquiror.
5.13 Employee Benefit Plans. Except as set forth in the Acquiror's SEC
Reports or in Section 5.13 of the Acquiror's Disclosure Letter, the Acquiror is
in substantial compliance with each Benefit Plan except for any noncompliance
that could not reasonably be expected to have a material adverse effect on the
Company.
5.14 Taxes.
(a) Except as set forth in Section 5.14(a) of the Acquiror's
Disclosure Letter and, except for such matters as could not reasonably
be expected to have a Material Adverse Effect on the Acquiror, all Tax
Returns that are required to be filed by or with respect to the
Acquiror or any of its Subsidiaries on or before the Effective Time
have been or will be timely filed, all Taxes that are due on or before
the Effective Time have been or will be timely paid in full, all
withholding Tax requirements imposed on or with respect to the Acquiror
or any of its Subsidiaries have been or will be satisfied in full in
all respects and no penalty, interest or other charge is or will become
due with respect to the late filing of any such Tax Return or late
payment of any such Tax.
(b) Except as set forth in Section 5.14(b) of the Acquiror's
Disclosure Letter, none of such tax returns has been audited by the
applicable Governmental Authority.
(c) Except as set forth in Section 5.14(c) of the Acquiror's
Disclosure Letter, there is not in force any extension of time with
respect to the due date for the filing of any such Tax Return or any
waiver or agreement for any extension of time for the assessment or
payment of any Tax due with respect to the period covered by any such
Tax Return.
(d) Except as set forth in Section 5.14(d) of the Acquiror's
Disclosure Letter, there is no claim against the Acquiror or any of its
Subsidiaries for any Taxes, and no assessment, deficiency or adjustment
has been asserted or proposed with respect to any such Tax Return,
that, in either case, could reasonably be expected to have a Material
Adverse Effect on the Acquiror.
25
(e) Except as set forth in Section 5.14(e) of the Acquiror's
Disclosure Letter, none of the Acquiror and its Subsidiaries has,
during the last ten years, been a member of an affiliated group filing
a consolidated federal income Tax Return, other than the affiliated
group of which the Acquiror is the common parent corporation.
5.15 Environmental Matters.
(a) Except for matters disclosed in the Acquiror's SEC Reports
or in Section 5.15 of the Acquiror's Disclosure Letter and except for
matters that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Acquiror, (a) the
properties, operations and activities of the Acquiror and its
Subsidiaries are in compliance with all applicable Environmental Laws;
(b) the Acquiror and its Subsidiaries and the properties and operations
of the Acquiror and its Subsidiaries are not subject to any existing,
pending or, to the Knowledge of the Acquiror, threatened action, suit,
investigation, inquiry or proceeding by or before any Court or
Governmental Authority under any Environmental Law; (c) all
Authorizations if any, required to be obtained or filed by the Acquiror
or any of its Subsidiaries under any Environmental Law in connection
with the business of the Acquiror and its Subsidiaries have been
obtained or filed and are valid and currently in full force and effect;
(d) there has been no release of any hazardous substance, pollutant or
contaminant into the environment by the Acquiror or its Subsidiaries or
in connection with their properties or operations; and (e) there has
been no exposure of any Person or property to any hazardous substance,
pollutant or contaminant in connection with the properties, operations
and activities of the Acquiror and its Subsidiaries.
(b) The Acquiror and its Subsidiaries have made available to
the Company all internal and external environmental audits and studies
and all correspondence on environmental matters (in each case relevant
to the Acquiror or any of its Subsidiaries) in the possession of the
Acquiror or its Subsidiaries for such matters as could reasonably be
expected to have a Material Adverse Effect on the Acquiror.
5.16 Insurance. The Acquiror and its Subsidiaries own and are
beneficiaries under all such insurance policies underwritten by reputable
insurers that, as to risks insured, coverages and related limits and
deductibles, are customary for a company of the size and nature of the Acquiror
and which is similarly situated. All premiums due with respect to all such
insurance policies that are Material have been paid and, to the Knowledge of the
Acquiror, all such policies are in full force and effect.
5.17 Certain Business Practices. As of the date of this Agreement,
neither the Acquiror or any of its Subsidiaries nor any director, officer,
employee or agent of the Acquiror or any of its Subsidiaries has (a) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any unlawful payment to any
foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction, made
any payment, entered into any agreement or arrangement or taken any other action
in violation of Section 1128B(b) of the Social Security Act, as amended, or (d)
made any other unlawful payment, except for any such matters that could not
reasonably be expected to have a Material Adverse Effect on the Acquiror.
26
5.18 Newco. Newco is a wholly owned subsidiary of Acquiror.
5.19 Brokers. Except as set forth in Schedule 5.19 of Acquiror's
Disclosure Letter, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Acquiror.
5.20 Acquiror's Common Stock. The Acquiror has not made any material
misrepresentation to the Company relating to the Acquiror Common Stock, and the
Acquiror has not omitted to state to the Company any material fact relating to
the Acquiror Common Stock which is necessary in order to make the information
given by or on behalf of the Acquiror to the Company not misleading or which if
disclosed would reasonably affect the decision of a person considering an
acquisition of the Acquiror Common Stock. No fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably be
expected to have, a Material Adverse Effect on the Acquiror, which has not been
disclosed in the Acquiror's Financial Statements, theAcquiror's SEC Reports or
the Acquiror's Disclosure Letter.
5.21 Intellectual Property.
(a) Except as set forth in Schedule 5.21(a) of Acquiror's
Disclosure Letter, each of Acquiror and its Subsidiaries owns or has
the exclusive right to use pursuant to license, sublicense, agreement
or permission all Intellectual Property, free from any Liens (other
than Permitted Encumbrances) and free from any requirement of any past,
present or future royalty payments, license fees, charges or other
payments, or conditions or restrictions whatsoever. To the knowledge of
the Acquiror and its Subsidiaries, neither the Acquiror nor its
Subsidiaries infringes on or otherwise conflicts with any rights of any
Person in respect of any Intellectual Property of the Acquiror or its
Subsidiaries.
(b) Except as set forth in Schedule 5.21(b) of Acquiror's
Disclosure Letter, no claim or demand of any person has been made, nor
is there any proceeding that is pending or threatened, which: (i)
challenges the rights of each of the Acquiror or its Subsidiaries in
respect of any Intellectual Property; (ii) asserts that any of the
Acquiror or its Subsidiaries is infringing or otherwise in conflict
with, or is, except as set forth in Section 5.21(b) of the Acquiror's
Disclosure Letter, required to pay any royalty, license fee, charge or
other amount with regard to, any Intellectual Property; or (iii) claims
that any default exists under any agreement or arrangement listed in
Section 5.21(b) of the Acquiror's Disclosure Letter. None of the
Intellectual Property of the Acquiror and its Subsidiaries is subject
to any outstanding order, ruling, decree, judgment or stipulation by or
with any court, arbitrator or administrative agency.
27
(c) Except as set forth in Schedule 5.21(c) of Acquiror's
Disclosure Letter, the Intellectual Property of the Acquiror and its
Subsidiaries has been duly registered with, filed in or issued by, as
the case may be, the United States Patent and Trademark Office, United
States Copyright Office, or such other filing offices, and each of the
Acquiror and its Subsidiaries has taken such other actions to ensure
full protection under any applicable laws or regulations, and such
registrations, filings, issuances and other actions remain in full
force and effect.
ARTICLE VI
COVENANTS
6.1 Affirmative Covenants.
(a) The Company hereby covenants and agrees that, prior to the
Effective Time, unless otherwise expressly contemplated by this
Agreement or consented to in writing by the Acquiror, or except for any
matter that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Acquiror and it
Subsidiaries, it will:
(i) operate its business in the usual and ordinary
course consistent with past practices;
(ii) use all reasonable efforts to preserve
substantially intact its business organization, maintain its
rights and franchises, retain the services of its respective
key employees and maintain its relationships with its
respective customers and suppliers;
(iii) after payment of all broker and legal fees, the
Severance Payments identified in paragraph 8.3(b), and any
other fees and/or costs associated with the transaction
contemplated by this Agreement, maintain on hand prior to and
at the Effective Time a minimum cash balance of $1,100,000;
which minimum cash balance shall be subject to adjustment as
follows:
(A) the parties hereto acknowledge that
the Company is currently spending
approximately $120,000 of its cash
per month as part of its operations;
and
(B) the parties contemplate an Effective
Time of March 31, 1999; and
(C) the parties hereto acknowledge that
if the Effective Time does not occur
on or prior to said March 31, 1999
date, the Company will not be able
to maintain on hand the $1,100,000
cash balance, and that as a result
of such inability, the parties
hereto agree that if the Effective
Time occurs after March 31, 1999 for
any reason other than the Company's
failure to act in good faith, the
minimum cash balance requirement set
forth earlier in this paragraph
6.1(a)(iii), shall be adjusted
downward accordingly at a rate of
$120,000 per month for the time
period between March 31, 1999 and
the Effective Time.
28
(iv) maintain and keep its properties and assets in
as good repair and condition as at present, ordinary wear and
tear excepted, and maintain supplies and inventories in
quantities consistent with its customary business practice;
(v) maintain insurance and bonds comparable in amount
and scope of coverage to that currently maintained; except for
any matters that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on
the Company; and
(vi) use all reasonable efforts to cooperate with
Acquiror in selling the LTI Technology.
(b) The Acquiror hereby covenants and agrees that, prior to
the Effective Time, unless otherwise expressly contemplated by this
Agreement or consented to in writing by the Company, or except for any
matter that individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company, it will and
will cause each of its Subsidiaries to:
(i) operate its business in the usual and ordinary
course consistent with past practices;
(ii) use all reasonable efforts to preserve
substantially intact its business organization, maintain its
rights and franchises, retain the services of its respective
key employees and maintain its relationships with its
respective customers and suppliers;
(iii) maintain and keep its properties and assets in
as good repair and condition as at present, ordinary wear and
tear excepted, and maintain supplies and inventories in
quantities consistent with its customary business practice;
and
(iv) use all reasonable efforts to keep in full force
and effect insurance and bonds comparable in amount and scope
of coverage to that currently maintained.
29
6.2 Negative Covenants
(a) The Company covenants and agrees that, as expressly
contemplated by this Agreement or as otherwise consented to in writing
by the Acquiror, from the date of this Agreement until the Effective
Time, it will not do, any of the following:
(i) (A) increase the compensation payable to or to
become payable to any director or executive officer, (B) grant
any severance or termination pay; (C) amend or take any other
actions to increase the amount or accelerate the payment or
vesting of any benefit under any Benefit Plan (including the
acceleration of vesting, waiving of performance criteria or
the adjustment of awards or any other actions permitted upon a
change in control of such party or permitted upon a filing
under Section 13(d) or 14(d) of the Exchange Act with respect
to such party) or (D) contribute, transfer or otherwise
provide any cash, securities or other property to any grantee,
trust, escrow or other arrangement that has the effect of
providing or setting aside assets for benefits payable
pursuant to any termination, severance or other change in
control agreement; except (i) pursuant to any contract,
agreement or other legal obligation of the Company existing at
the date of this Agreement, (ii) increases in salary payable
or to become payable upon promotion to an office having
greater operational responsibilities, (iii) in the case of
severance or termination payments, pursuant to the severance
policy of the Company existing at the date of this Agreement,
and (iv) in the case of Benefit Plans, amendments required by
ERISA or other applicable Law.
(ii) except as set forth in Section 6.2(a) of the
Company's Disclosure Letter, (A) enter into any employment or
severance agreement with any director or executive officer,
either individually or as part of a class of similarly
situated persons, or (B) establish, adopt or enter into any
new Benefit Plan; except employment and severance agreements
and Benefit Plans for the benefit of any newly employed or
promoted officers or employees, in which case the terms of
such agreements and Benefit Plans shall be reasonably
consistent with those existing at the date of this Agreement,
and except Benefit Plans relating to health and life insurance
benefits established or adopted in the ordinary course of
business consistent with past practice;
(iii) declare or pay any extraordinary dividend on,
or make any other distribution in respect of outstanding
shares of capital, stock;
(iv) (A) redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of the
Company other than (1) any repurchase, forfeiture or
retirement of shares of Company Common Stock or Company Stock
Options occurring pursuant to the terms (as in effect on the
date of this Agreement) of any existing Benefit Plan of the
Company or any of its Subsidiaries, or (2) any periodic
purchase of Company Common Stock for allocation to employee's
accounts occurring pursuant to the terms (as in effect on the
date of this Agreement) of any existing employee stock
purchase plan; (B) effect any reorganization or
recapitalization; or (C) split, combine or reclassify any of
the capital stock of, or other equity interests in, the
Company or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution
for, such Equity Securities;
30
(v) (A) offer, sell, issue or grant, or authorize the
offering, sale, issuance or grant, of any Equity Securities of
the Company, other than issuances of Company Common Stock (1)
upon the exercise of Company Stock Options outstanding at the
date of this Agreement in accordance with the terms thereof
(as in effect on the date of this Agreement) or (2) that
constitutes a periodic issuance of shares of Company Common
Stock required by the terms (as in effect on the date of this
Agreement) of any Benefit Plans of the Company or any of its
Subsidiaries, (B) amend or otherwise modify the terms (as in
effect on the date of this Agreement) of any outstanding
options, warrants or rights the effect of which shall be to
make such terms more favorable to the holders thereof (except
as may be required by ERISA or other applicable Law); (C) take
any action to accelerate the vesting of any outstanding
Company Stock Options or (D) grant or suffer to exist any Lien
with respect to any outstanding equity Securities of the
Company;
(vi) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or all
or a portion of the assets of, or in any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise to
acquire any assets of any other Person (other than the
purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice);
(vii) sell, lease, exchange or otherwise dispose of,
or grant any Lien (other than a Permitted Encumbrance) with
respect to, any of the assets of the Company that are Material
to the Company, except for dispositions of assets and
inventories in the ordinary course of business and consistent
with past practice and dispositions of assets and purchase
money Liens incurred in connection with the original
acquisition of assets and secured by the assets acquired in an
amount not to exceed $100,000 in the aggregate;
(viii) adopt any amendments to its charter or bylaws
or other organizational documents that would alter the terms
of its capital stock or other equity interests or would have a
Material Adverse Effect on the Company;
(ix) (A) change any of its methods of accounting in
effect at March 31, 1998, except as may be required to comply
with GAAP, (B) make or rescind any election relating to Taxes
(other than any election that must be made periodically and
that is made consistent with past practice), (C) settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy (except where
the cost to the Company of such settlements or compromises,
individually or in the aggregate, does not exceed $100,000) or
(D) change any of its methods of reporting income or
deductions for federal income tax purposes from those employed
in the preparation of the federal income tax returns for the
taxable year ending March 31, 1998, except, in each case, as
may be required by Law and for matters that could not
reasonably be expected to have a Material Adverse Effect on
the Company;
31
(x) incur any obligations for borrowed money or
purchase money indebtedness (other than purchase money
indebtedness as to which Liens may be granted as permitted by
Section 6.2(a)(vii)) that are Material to the Company, whether
or not evidenced by a note, bond, debenture or similar
instrument, except drawings under credit lines existing at the
date of this Agreement and borrowings evidenced by short term
obligations issued in the ordinary course of business
consistent with past practice.
(xi) release any third Person from its obligations
under any existing standstill agreement relating to a
Competing Transaction or otherwise under any confidentiality
agreement or similar agreement;
(xii) enter into any Material Contract with any third
Person that provides for an exclusive arrangement with that
third Person or is substantially more restrictive on the
Company or substantially less advantageous to the Company than
Material Contracts existing on the date hereof; or
(xiii) agree in writing or otherwise to do any of the
foregoing.
(b) The Acquiror covenants and agrees that, except as
expressly set forth in the Acquiror's Disclosure Letter, as
contemplated by this Agreement, or as otherwise consented to in writing
by the Company, from the date of this Agreement until the Effective
time, it will not do, and will not permit any of its Subsidiaries to
do, any of the following:
(i) (A) increase the compensation payable to or to
become payable to any director or executive officer, (B) grant
any severance or termination pay; (C) amend or take any other
actions to increase the amount or accelerate the payment or
vesting of any benefit under any Benefit Plan (including the
acceleration of vesting, waiving of performance criteria or
the adjustment of awards or any other actions permitted upon a
change in control of such party or permitted upon a filing
under Section 13(d) or 14(d) of the Exchange Act with respect
to such party) or (D) contribute, transfer or otherwise
provide any cash, securities or other property to any grantee,
trust, escrow or other arrangement that has the effect of
providing or setting aside assets for benefits payable
pursuant to any termination, severance or other change in
control agreement; except (i) pursuant to any contract,
agreement or other legal obligation of the Acquiror or any of
its Subsidiaries existing at the date of this Agreement, (ii)
increases in salary payable or to become payable upon
promotion to an office having greater operational
responsibilities, (iii) in the case of severance or
termination payments, pursuant to the severance policy of the
Acquiror or its Subsidiaries existing at the date of this
Agreement and (iv) in the case of Benefit Plans, amendments
required by ERISA or other applicable Law.
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(ii) (A) enter into any employment or severance
agreement with any director or executive officer, either
individually or as part of a class of similarly situated
persons, or (B) establish, adopt or enter into any new Benefit
Plan; except employment and severance agreements and Benefit
Plans for the benefit of any newly employed or promoted
officers or employees, in which case the terms of such
agreements and Benefit Plans shall be reasonably consistent
with those existing at the date of this Agreement, and except
Benefit Plans relating to health and life insurance benefits
established or adopted in the ordinary course of business
consistent with past practice;
(iii) declare or pay any extraordinary dividend on,
or make any other distribution in respect of outstanding
shares of capital stock, except for dividends by a wholly
owned Subsidiary of the Company to the Company or another
wholly owned Subsidiary of the Company;
(iv) (A) redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of the
Acquiror or any of its Subsidiaries (other than (1) any such
acquisition by the Acquiror or any of its wholly owned
Subsidiaries directly from any wholly owned subsidiary of the
Acquiror, (2) any repurchase, forfeiture or retirement of
shares of the Acquiror Common Stock or the Acquiror Stock
Options occurring pursuant to the terms (as in effect on the
date of this Agreement) of any existing Benefit Plan of the
Acquiror or any of its Subsidiaries, or (3) any periodic
purchase of the Acquiror Common Stock for allocation to
employee's accounts occurring pursuant to the terms (as in
effect on the date of this Agreement) of any existing employee
stock purchase plan; (B) effect any reorganization or
recapitalization, or (C) split, combine or reclassify any of
the Equity Securities of the Acquiror or any of its
subsidiaries or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution for, such Equity Securities;
(v) (A) offer, sell, issue or grant, or authorize the
offering, sale, issuance or grant, of any Equity Securities of
the Acquiror or any of its Subsidiaries, other than issuances
of the Acquiror Common Stock (1) upon the exercise of the
Acquiror Stock Options outstanding at the date of this
Agreement in accordance with the terms thereof (as in effect
on the date of this Agreement) or (2) that constitutes a
periodic issuance of shares of Acquiror Common Stock required
by the terms (as in effect on the date of this Agreement) of
any Benefit Plan of the Acquiror or any of its Subsidiaries;
(B) amend or otherwise modify the terms (as in effect on the
date of this Agreement) of any outstanding options, warrants
or rights the effect of which shall be to make such terms more
favorable to the holders thereof (except as may be required by
ERISA or other applicable Law); (C) take any action to
accelerate the vesting of any outstanding Acquiror Stock
Options or (D) grant any Lien with respect to any Equity
Securities of the Acquiror or of any Subsidiary of the
Acquiror;
33
(vi) sell, lease, exchange or otherwise dispose of,
or grant any Lien (other than a Permitted Encumbrance) with
respect to, any of the assets of the Acquiror or any of its
Subsidiaries that are Material to the Acquiror, except for
dispositions of assets and inventories in the ordinary course
of business and consistent with past practice and dispositions
of assets and purchase money Liens incurred in connection with
the original acquisition of assets and secured by the assets
acquired in an amount not to exceed $100,000 in the aggregate;
(vii) adopt any amendments to its charter or bylaws
or other organizational documents that would alter the terms
of its capital stock or other equity interests or would have a
Material Adverse Effect on the shareholders of the Acquiror;
(viii) (A) change any of its methods of accounting in
effect at September 30, 1997, except as may be required to
comply with GAAP, (B) make or rescind any election relating to
Taxes (other than any election which must be made periodically
which is made consistent with past practice), (C) settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes (except where the cost to the Acquiror and its
subsidiaries of such settlements or compromises, individually
or in the aggregate, does not exceed $100,000) or (D) change
any of its methods of reporting income or deductions for
federal income tax purposes form those employed in the
preparation of the federal income tax returns for the taxable
year ending September 30, 1997, except, in each case, as may
be required by Law and for matters that could not reasonably
be expected to have a Material Adverse effect on the Acquiror;
(ix) enter into any Material Contract with any third
Person that provides for an exclusive arrangement with that
third Person or is substantially more restrictive on the
Acquiror or any of its Subsidiaries or substantially less
advantageous to the Acquiror or any of its Subsidiaries that
Material Contracts existing on the date hereof; or
(x) agree in writing or otherwise to do any of the
foregoing.
34
6.3 No Solicitation. From the date of this Agreement until the
Effective Time or the termination of this Agreement pursuant to Section 9.1, the
Company agrees that neither the Company nor any of the directors and officers of
the Company shall, and that it shall direct and use its best efforts to cause
the other employees, agents and representatives (including investment bankers,
attorneys and accountants) employed or retained by the Company not to, directly
or indirectly, initiate, solicit, encourage or otherwise facilitate (including
by way of furnishing information or assistance) any Acquisition Proposal or any
inquiries that may be reasonably be expected to lead to an Acquisition Proposal.
The Company further agrees that neither the Company nor any of the directors and
officers of the Company shall, and that it shall direct and use its best efforts
to cause the other employees, agents and representatives (including investment
bankers, attorneys and accountants) employed or retained by the Company or any
of its Subsidiaries not to, directly or indirectly, engage in any discussion
with or provide any confidential information or data to any Person that may
reasonably be expected to lead to an Acquisition Proposal or engage in any
negotiations concerning, or otherwise facilitate any effort or attempt to make
or implement, an Acquisition Proposal. Notwithstanding the foregoing, the Board
of Directors of the Company shall be permitted (A), to the extent applicable, to
comply, with regard to an Acquisition Proposal, with Rule 14e-2(a) promulgated
under the Exchange Act, (B) in response to an unsolicited bona fide written
Acquisition Proposal from any Person, recommend such Acquisition Proposal to the
Company's stockholders or withdraw or modify in any adverse manner its approval
or recommendation of this Agreement, or both, or (C) to engage in any
discussions or negotiations with, or provide any information to, any Person in
response to an unsolicited bona fide written Acquisition Proposal by any such
Person, if and only to the extent that, in any such case described in clause (B)
or (C), if (i) the Board of Directors of the Company shall have concluded in
good faith that such Acquisition Proposal (x) in the case of that described in
clause (B) above would, if consummated, constitute a Superior Proposal or (y),
in the case described in clause (C) above could reasonably be expected to
constitute a Superior Proposal, (ii) the Board of Directors of the Company shall
have determined in good faith on the basis of written advice of outside legal
counsel that such action is necessary for such Board of Directors to act in a
manner consistent with its fiduciary duties under applicable Law, (iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, the Board of Directors shall have
received from such Person an executed confidentiality agreement containing
customary terms and provisions and (iv) prior to providing any information or
data to any Person or entering into discussions or negotiations with any Person,
the Board of Directors of the Company shall have notified the Acquiror
immediately of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals of offers. The Company agrees that it will keep the
Acquiror informed, on a current basis, of the status of any such discussions or
negotiations. The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. The Company
agrees that it will take the necessary steps to inform promptly the individuals
or entities referred to in the first sentence of this Section 6.3 of the
obligations undertaken in this Section 6.3.
35
6.4 Access and Information.
(a) Each of the Company and the Acquiror and its Subsidiaries
shall, (i) afford to the other and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other
representatives (collectively, in the case of the Company, the
"Company's Representatives" and, in the case of the Acquiror and its
Subsidiaries, the "Acquiror's Representatives") access, at reasonable
times upon reasonable prior notice, to the officers, employees, agents,
properties, offices and other facilities of the other and to its books
and records and (ii) furnish promptly to the other and its
Representatives such information concerning its business, properties,
contracts, records and personnel (including financial, operating and
other data and information) as may be reasonably requested, from time
to time, by or on behalf of the other party.
(b) Each party to this Agreement (the Acquiror Companies being
considered one party for purposes of this Section 6.4(b)) shall hold,
and shall cause its representatives to hold, in confidence (unless and
to the extent compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of
law) all Confidential Information (as defined below) and will not
disclose the same to any third party except as may reasonably be
necessary to carry out this Agreement and the transactions contemplated
hereby, including any due diligence review by or on behalf of each
party. If this Agreement is terminated, each party shall, and shall
cause its respective representatives to, promptly return to the other
party/parties all Confidential Information furnished by such other
party/parties, including all copies and summaries thereof. As used
herein, "Confidential Information" with respect to each party shall
mean all information concerning such party obtained by each other party
and their representatives from such first party in connection with the
transactions contemplated by this Agreement, except information (i)
ascertainable or obtained from public information; (ii) received from a
third party not employed by or otherwise affiliated with the party
receiving the information; or (iii) which is or becomes known to the
public other than through a breach of this Agreement by the party
receiving the information or any of its representatives. If this
Agreement is terminated for any reason pursuant to Article IX hereof,
each of the Company and the Acquiror shall, within ten days after a
request therefor from the other, return or destroy (and provide the
other party within such ten-day time period with a certificate of an
executive officer certifying such destruction) all of the information
furnished to such party and its Representatives pursuant to the
provisions of Section 6.4(a) and all internal memoranda, analyses,
evaluations and other similar material containing, reflecting or
prepared from any such information, in each case other than information
available to the general public without restriction.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Meetings of Stockholders.
(a) The Company shall, promptly after the date of this
Agreement, take all actions necessary in accordance with the GCL and
its certificate of incorporation and bylaws to convene a special
meeting of the Company's stockholders to consider approval and adoption
of this Agreement and the Merger (the "Company Stockholders' Meeting"),
and the Company shall consult with the Acquiror in connection
therewith. Subject to the provisions of Section 6.3, the Board of
Directors shall recommend this Agreement and the Merger to the
stockholders of the Company and the Company shall use all reasonable
efforts to solicit from stockholders of the Company proxies in favor of
the approval and adoption of this Agreement and to secure the vote or
consent of stockholders required by the GCL and its certificate of
incorporation and bylaws to approve and adopt this Agreement (the
"Required Company Vote").
36
(b) The Acquiror shall, promptly after the date of this
Agreement, take all actions necessary in accordance with the Act and
its articles of incorporation and bylaws to convene a special meeting
of the Acquiror's shareholders to consider approval and adoption of
this Agreement and the Merger (the "Acquiror Shareholders' Meeting"),
and the Acquiror shall consult with the Company in connection
therewith. The Acquiror shall use all reasonable efforts to solicit
from stockholders of the Acquiror proxies in favor of the approval and
adoption of the Share Issuance and to secure the vote or consent of the
shareholders of the Acquiror required by the rules of the Nasdaq to
approve and adopt the Share Issuance (the "Required Acquiror Vote").
7.2 Registration Statement; Proxy Statements.
(a) As promptly as practicable after the execution of this
Agreement, the Acquiror and the Company shall prepare and file with the
Commission a joint proxy statement and forms of proxy to be used in
connection with the solicitation of proxies to be voted at the Acquiror
Shareholders' Meeting with respect to the Share Issuance and in
connections with the solicitation of proxies to be voted at the Company
Stockholders' Meeting with respect to this Agreement (such joint proxy
statement, together with any amendments thereof or supplements thereto
effected on or prior to the effective date of the Registration
Statement being , being the "Joint Proxy Statement"). At such time as
the Acquiror and the Company deem appropriate, the Acquiror shall
prepare and file with the Commission a registration statement on Form
S-4 (such registration statement, together with any amendments thereof
or supplements thereto, being the "Registration Statement") containing
the Joint Proxy Statement for stockholders of the Acquiror and the
Company (the Joint Proxy Statement shall also constitute a prospectus
for stockholders of the Company in connection with the registration
under the Securities Act of the offering, sale and delivery of the
Acquiror Common Stock to be issued pursuant to this Agreement in the
Merger to stockholders of the Company and, together, they shall be
referred to herein as the "Joint Proxy Statement/Prospectus"). Each of
the Acquiror Companies and the Company shall furnish all information
concerning it and the holders of its capital stock as the other may
reasonably request in connection with such actions. Each of the
Acquiror Companies and the Company will use all reasonable efforts to
have or cause the Registration Statement to become effective as
promptly as practicable, and shall take any action required to be taken
under any applicable federal or state securities Laws in connection
with the issuance of shares of the Acquiror Common Stock in the Merger.
As promptly as practicable after the Registration Statement shall have
become effective, (x) the Acquiror shall mail the Joint Proxy
Statement/Prospectus to its shareholders entitled to notice of and to
vote at the Acquiror's Shareholders' Meeting and (y) the Company shall
mail the Joint Proxy Statement/Prospectus to its stockholders entitled
to notice of and to vote at the Company Stockholders' Meeting.
37
(b) The information supplied by the Company for inclusion in
the Registration Statement shall not, at the time the Registration
Statement is declared effective, 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 not
misleading. The information supplied by the Company for inclusion in
the Joint Proxy Statement/Prospectus shall not, at the date the Joint
Proxy Statement/Prospectus (or any supplement thereto) is first mailed
to shareholders of the Acquiror, at the date (if different) the Joint
Proxy Statement/Prospectus (or any supplement thereto) is first mailed
to stockholders of the Company, at the time of the Acquiror
Shareholders' Meeting, at the time (if different) of the Company
Stockholders' Meeting or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to the Company, or its or their
respective officers or directors, should be discovered by the Company
that should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement/Prospectus, the Company
shall promptly inform the Acquiror. All documents that the Company is
responsible for filing with the Commission in connection with the
transactions contemplated herein shall comply as to form in all
material respects with the applicable requirements of the Securities
Act and the Regulations thereunder and the Exchange Act and the
Regulations thereunder.
(c) The information supplied by the Acquiror Companies for
inclusion in the Registration Statement shall not, at the time the
Registration Statement is declared effective, 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 not misleading. Such information supplied by the
Acquiror for inclusion in the Joint Proxy Statement/Prospectus shall
not, at the date (if different) the Joint Proxy Statement/Prospectus
(or any supplement thereto) is first mailed to stockholders of the
Company, at the time (if different) of the Company Stockholders'
Meeting or at the Effective Time, 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.
If at any time prior to the Effective Time any event or circumstance
relating to the Acquiror or any of its Subsidiaries, or to their
respective offices or directors, should be discovered by the Acquiror
that should be set forth in an amendment to the Registration Statement
or a supplement to the Joint Proxy Statement/Prospectus, the Acquiror
shall promptly inform the Company. All documents that the Acquiror
Companies are responsible for filing with the Commission in connection
with the transactions contemplated hereby shall comply as to form in
all material respects with the applicable requirements of the
Securities Act and the Regulations thereunder and the Exchange Act and
the Regulations thereunder.
38
(d) No amendment or supplement to the Registration Statement
or the Joint Proxy Statement/Prospectus shall be made by the Acquiror
or the Company without the approval of the other party, which shall not
be unreasonably withheld or delayed. The Acquiror and the Company each
will advise the other, promptly after it receives notice thereof, of
the time when the Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop order
suspending the effectiveness of the Registration Statement or the
solicitation of proxies pursuant to the Joint Proxy
Statement/Prospectus, the suspension of the qualification of the
Acquiror Common Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, any request by the staff of the
Commission for amendment of the Registration Statement or the Joint
Proxy Statement/Prospectus, the receipt from the staff of the
Commission of comments thereon or any request by the staff of the
Commission for additional information with respect thereto.
7.3 Payment for Non-Competition Agreement. As consideration for the
non-competition agreement to be executed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ in favor of the
Acquiror Companies, the delivery of which is a condition to closing in
accordance with Section 8.2(c), below, the Acquiror shall pay to ▇▇▇▇▇▇
thirty-six (36) equal monthly installments of $5,556, with the first payment due
at Closing and each payment due thereafter on the first day of each month.
7.4 Appropriate Action; Consents; Filings.
(a) The Company and the Acquiror shall each use all reasonable
efforts (i) to take, or to cause to be taken, all actions, and to do,
or to cause to be done, all things that, in either case, are necessary,
proper or advisable under applicable Law or otherwise to consummate and
make effective the transactions contemplated by this Agreement, (ii) to
obtain from any Governmental Authorities any Authorizations or Orders
required to be obtained by the Acquiror and its Subsidiaries or the
Company in connection with the authorization, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, (iii) to make all necessary
filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the
Securities Act (in the case of the Acquiror) and the Exchange Act and
the Regulations thereunder and any other applicable federal or state
securities Laws, (B) the HSR Act and (C) any other applicable Law. The
Acquiror and the Company shall cooperate with each other in connection
with the making of all such filings, including providing copies of all
such documents to the nonfiling party and its advisors prior to filings
and, if requested, shall accept all reasonable additions, deletions or
changes suggested in connection therewith. The Company and the Acquiror
shall furnish all information required for any application or other
filing to be made pursuant to any applicable Law or any applicable
Regulations of any Governmental Authority (including all information
required to be included in the Joint Proxy Statement/Prospectus or the
Registration Statement) in connection with the transactions
contemplated by this Agreement.
(b) Each of the Company and the Acquiror shall give prompt
notice to the other of (i) any notice or other communication from any
Person alleging that the consent of such Person is or may be required
in connection with the Merger, (ii) any notice or other communication
from any Governmental Authority in connection with the Merger, (iii)
any actions, suits, claims, investigations or proceedings commenced or
threatened in writing against, relating to or involving or otherwise
affecting the Company, the Acquiror or its Subsidiaries that relate to
the consummation of the Merger; (iv) the occurrence of a default or
event that, with notice or lapse of time or both, will become a default
under any Material Contract of the Company or the Acquiror,
respectively; and (v) any change that is reasonably likely to have a
Material Adverse Effect on the Company or the Acquiror, respectively,
to consummate the transactions contemplated by this Agreement or to
fulfill their respective obligations set forth herein.
39
(c) The Acquiror Companies and the Company agree to cooperate
and use all reasonable efforts vigorously to contest and resist any
action, including administrative or judicial action, and to have
vacated, lifted, reversed or overturned any Order (whether temporary,
preliminary or permanent) of any Court or Governmental Authority that
is in effect and that restricts, prevents or prohibits the consummation
of the Merger or any other transactions contemplated by this Agreement,
including the vigorous pursuit of all available avenues of
administrative and judicial appeal. Each of the Acquiror Companies and
the Company also agree to take any and all actions, including the
disposition of assets or the withdrawal from doing business in
particular jurisdictions, required by any Court or Governmental
Authority as a condition to the granting of any Authorization or Order
necessary for the consummation of the Merger or as may be required to
avoid, lift, vacate or reverse any legislative or judicial action that
would otherwise cause any condition to the Closing not to be satisfied;
provided, however, that in no event shall either party take, or be
required to take, any action that could reasonably be expected to have
a Material Adverse Effect on the Combined Companies.
(d) (i) Each of the Company and the Acquiror shall give any
notices to third Persons, and use, all reasonable efforts to obtain any
consents from third Persons (A) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (B)
otherwise required under any contracts, licenses, leases or other
agreements in connection with the consummation of the transactions
contemplated hereby or (C) required to prevent a Material Adverse
Effect on the Company from occurring prior to or after the Effective
Time or a Material Adverse Effect on the Acquiror from occurring after
the Effective Time.
(ii) If any party shall fail to obtain any consent
from a third Person described in subsection (d)(i) above, such
party shall use all reasonable efforts, and shall take any
such actions reasonably requested by the other parties, to
limit the adverse effect upon the Company and the Acquiror,
and its Subsidiaries, and their respective businesses
resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such
consent.
7.5 Affiliates.
(a) The Company shall use all reasonable efforts to obtain
from any Person who may be deemed to have become an Affiliate of the
Company after the date of this Agreement and on or prior to the Closing
Date a written agreement substantially in the form of Annex B hereto as
soon as practicable after attaining such status.
40
(b) The Acquiror Companies shall not be required to maintain
the effectiveness of the Registration Statement for the purpose of
resale by stockholders of the Company who may be Affiliates of the
Company pursuant to Rule 145 under the Securities Act.
7.6 Public Announcements. The Acquiror and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation.
7.7 Stock Exchange Listings. The Acquiror shall use all reasonable
efforts to cause the shares of the Acquiror Common Stock to be issued in the
Merger to be approved for listing (subject to official notice of issuance) on
Nasdaq prior to the Effective Time.
7.8 State Takeover Statute. The Company shall take all action so that
the execution, delivery and performance of this Agreement and the consummation
of the Merger and the other transactions contemplated hereby will be exempt from
Section 203 of the GCL.
7.9 Indemnification of Directors and Officers.
(a) Subject to Section 7.9(b) below, until six years after the
Effective Time, the articles of incorporation and bylaws of the
Surviving Corporation as in effect immediately after the Effective Time
shall not be amended to reduce or limit the rights of indemnity
afforded to the present and former directors, officers, employees and
agents of the Company thereunder or to reduce or limit the ability of
the Company as the Surviving Corporation to indemnify such persons or
to hinder, delay or make more difficult the exercise of such rights of
indemnity or such ability to indemnify. The Surviving Corporation will
at all times exercise the powers granted to it by its articles of
incorporation, its bylaws and applicable law to indemnify to the
fullest extent possible the present and former directors and officers
of the Company against claims made against them arising from their
service in such capacities prior to the Effective Time.
(b) If any claim or claims shall, subsequent to the Effective
Time and within six years thereafter, be made against any present or
former director, officer, employee or agent of the Company based on or
arising out of the services of such Person prior to the Effective Time
in the capacity of such Person as a director, officer, employee or
agent of the Company, the provisions of subsection (a) of this Section
respecting the articles of incorporation and bylaws of the Surviving
Corporation shall continue in effect until the final disposition of all
such claims.
(c) The Acquiror hereby agrees after the Effective Time to
guarantee the payment of the Surviving Corporation's indemnification
obligations described in subsection (a) of this Section 7.8 up to an
amount determined as of the Effective Time equal to (i) the fair market
value of any assets of the Surviving Corporation distributed to the
Acquiror or any of its Subsidiaries (other than the Surviving
Corporation), minus (ii) any liabilities of the Surviving Corporation
assumed by the Acquiror or any of its Subsidiaries (other than the
Surviving Corporation, minus (iii) the fair market value of any assets
of the Acquiror or any of its Subsidiaries (other than the Surviving
Corporation) contributed to the Surviving Corporation and plus (iv) any
liabilities of the Acquiror or any of its Subsidiaries (other than the
Surviving Corporation) assumed by the Surviving Corporation.
41
(d) Notwithstanding subsections (a), (b) or (c) of this
Section 7.10, the Acquiror and the Surviving Corporation shall be
released from the obligations imposed by such subsections if the
Acquiror shall assume the indemnification obligations of the Surviving
Corporation under its articles of incorporation and bylaws by operation
of Law or otherwise. Notwithstanding anything to the contrary in this
Section 7.10, neither the Acquiror nor the Surviving Corporation shall
be liable for any settlement effected without its written consent,
which shall not be unreasonably withheld.
(e) The Acquiror shall cause to be maintained in effect for
the period ending on the third anniversary of the Effective Time the
current policies of directors' and officers' liability insurance
maintained by the Company (or substitute policies providing at least
the same coverage and limits and containing terms and conditions that
are not materially less advantageous) with respect to claims arising
from facts or events which occurred before the Effective Time;
provided, however, that (i) neither the Acquiror nor the Surviving
Corporation shall be required to maintain any such policies to the
extent the coverage thereunder exceeds $3,000,000 and (ii) in no event
shall the Acquiror or the Surviving Corporation be required to expend
more than 100 percent of the current annual premiums paid by the
Company for such insurance.
(f) The provisions of this Section 7.08 are intended to be for
the benefit of, and shall be enforceable by, each Person entitled to
indemnification hereunder and the heirs and representatives of such
Person.
7.10 Event Notices. From and after the date of this Agreement until the
Effective Time, each party hereto shall promptly notify the other party hereto
of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause any condition to the obligations
of the latter party to effect the Merger and the other transactions contemplated
by this Agreement not to be satisfied and (ii) any failure of the former party
to comply with any covenant or agreement to be complied with by it pursuant to
this Agreement that would be likely to result in any condition to the
obligations of the latter party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied. No delivery of any notice
pursuant to this Section 7.9 shall cure any breach of any representation or
warranty of the party giving such notice contained in this Agreement or
otherwise limit or affect the remedies available hereunder to the party
receiving such notice.
42
ARTICLE VIII
CLOSING CONDITIONS
8.1 Conditions to Obligations of Each Party Under This Agreement. The
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of the following conditions, any or all of which may be
waived by the parties hereto, in whole or in part, to the extent permitted by
applicable Law:
(a) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by the
Commission under the Securities Act, no stop order suspending the
effectiveness of the Registration Statement shall have been issued by
the Commission and no proceedings for that purpose shall have been
initiated by the Commission.
(b) Stockholder Approval. This Agreement shall have been
approved and adopted by the requisite vote of the stockholders of the
Company as required by the GCL. The Share Issuance shall have been
approved and adopted by the requisite vote of the shareholders of the
Acquiror as required by the Act and by the rules of Nasdaq.
(c) No Order. No Court or Governmental Authority shall have
enacted, issued, promulgated, enforced or entered any Law, Regulation
or Order (whether temporary, preliminary or permanent) that is in
effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(d) Fairness Opinions. Each party hereto shall have received
from its own financial advisors a fairness opinion which recommends the
consummation of the merger contemplated herein to the board of
directors of such party, and the board of directors of such party must
be able to rely on such recommendation in recommending the merger to
its shareholders.
(e) Listing on Nasdaq. The Acquiror's Common Stock shall be
(i) listed on Nasdaq and (ii) trading at a price per Share of at least
$1.00 for the 30 days immediately prior to the Effective Time. The
Acquiror shall also be in substantial compliance with all requirements
for continued listing on Nasdaq.
(f) Foreign Governmental Authorities. The parties hereto shall
have received all Authorizations and Orders of foreign Governmental
Authorities necessary in order to consummate the Merger in accordance
with applicable Law, except for any such Authorizations and Orders the
nonreceipt of which could not reasonably be expected to have a Material
Adverse Effect on the Acquiror (including the Surviving Corporation).
(g) Non-Competition Agreement. The Acquiror and/or the Company
shall have executed and delivered to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ the non-competition
agreement described in Section 8.2(c) below.
43
8.2 Additional Conditions to Obligations of the Acquiror Companies. The
obligations of the Acquiror Companies to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of the following conditions, any or all of which may be
waived by the Acquiror Companies, in whole or in part, to the extent permitted
by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this
Agreement which is qualified as to materiality shall be true and
correct, and each of such representations and warranties that is not so
qualified shall be true and correct in all material respects, as of the
date of this Agreement and as of the Closing Date as though made again
on and as of the Closing Date, and the Acquiror shall have received a
certificate of the Chief Executive Officer and the Chief Financial
Officer of the Company, dated the Closing date, to such effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and the Acquiror shall have received a
certificate of the Chief Executive Officer and the Chief Financial
Officer of the Company, dated the Closing date, to such effect.
(c) Non-Competition Agreement. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have
delivered to the Company a non-competition agreement, in a form
substantially the same as the agreement attached as Schedule 8.2(c),
wherein he agrees not to compete with the Acquiror Companies for a
period of three years. The consideration for the non-competition shall
be paid in accordance with Section 7.3, above.
8.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any or all of which may be waived by the
Company, in whole or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of the Acquiror contained in this
Agreement which is qualified as to materiality shall be true and
correct, and each of such representations and warranties that is not so
qualified shall be true and correct in all material respects, as of the
date of this Agreement and as of the Closing Date as though made again
on and as of the Closing Date, and the Company shall have received a
certificate of the Chief Executive Officer and the Chief Financial
Officer of the Acquiror, dated the Closing Date, to such effect.
(b) Severance Payments. The Acquiror shall have delivered to
the Company the sum of $200,000 by cash or certified check for
severance payment to six key employees of the Company.
(c) Agreements and Covenants. The Acquiror Companies shall
have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied
with by them on or prior to the Closing Date, and the Company shall
have received a certificate of the Chief Executive Officer and the
Chief Financial Officer of the Acquiror, dated the Closing Date, to
such effect.
44
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective time, whether before or after approval of this Agreement by the
stockholders of the Company and before or after approval of the Share Issuance
by the shareholders of the Acquiror:
(a) by mutual consent of the Acquiror and the Company;
(b) by the Acquiror, upon a Material breach of any
representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement or if any representation or
warranty of the Company shall have become untrue in any Material
respect, in either case such that the conditions set forth in Section
8.2 would not be satisfied (a "Terminating Company Breach"); provided
that, if such Terminating Company Breach is curable by the Company
through the exercise of reasonable efforts and for so long as the
Company continues to exercise such reasonable efforts, the Acquiror may
not terminate this Agreement under this Section 9.1(b);
(c) by the Company, upon a Material breach of any
representation, warranty, covenant or agreement on the part of the
Acquiror companies set forth in this Agreement or if any representation
or warranty of the Acquiror Companies shall have become untrue in any
Material respect, in either case such that the conditions set forth in
Section 8.3 would not be satisfied (a "Terminating Acquiror Breach");
provided that, if such Terminating Acquiror Breach is curable by the
Acquiror Companies through the exercise of their reasonable efforts and
for so long as the Acquiror Companies continue to exercise such
reasonable efforts, the Company may not terminate this Agreement under
this Section 9.1(c);
(d) by either the Acquiror or the Company, if there shall be
any final and nonappealable Order that prevents the consummation of the
Merger, unless the party relying on such Order has not complied with
its obligations under Section 7.3;
(e) by either the Acquiror or the Company, if the Merger shall
not have been consummated before April 30, 1999; provided, however,
that this Agreement may be extended by mutual written agreement of the
parties to a date not later than May 31, 1999.
(f) by either the Acquiror or the Company, if this Agreement
shall fail to receive the Required Company Vote by the shareholders of
the Company at the Company Shareholders' Meeting;
45
(g) by either the Acquiror or the Company, if this Agreement
shall fail to receive the Required Acquiror Vote by the stockholders of
the Acquiror at the Acquiror Stockholders' Meeting; or
(h) by the Company, upon two Business Days' prior written
notice to the Acquiror, if the Board of Directors of the Company shall
approve a Superior Proposal; provided, however, that (i) the Company
shall have complied with Section 6.3, (ii) the Board of Directors of
the Company shall have concluded in good faith, after giving effect to
all concessions that may be offered by the Acquiror pursuant to clause
(iv) below, on the advice of its financial advisers, that such proposal
is a Superior Proposal, (iii) the Board of Directors of the Company
shall have concluded in good faith, after receipt of the written advice
of outside counsel, that, notwithstanding all concessions that may be
offered by the Acquiror in negotiations entered into pursuant to clause
(iv) below, such action is necessary for the Board of Directors of the
Company to act in a manner consistent with its fiduciary duties under
applicable Law and (iv), prior to such termination, the Company shall,
and shall cause its respective financial and legal advisers to,
negotiate with the Acquiror to make such adjustments in the terms and
conditions of this Agreement as would enable the Company to proceed
with the transactions contemplated herein on such adjusted terms.
(i) by the Company, if the Acquiror Annual Report, to be filed
with the SEC, contains any Material differences from prior SEC Reports,
except for those differences disclosed in Section 9.1(i) of the
Acquiror's Disclosure Letter.
The right of any party hereto to terminate this Agreement pursuant to
this Section 9.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
9.2 Effect of Termination. Except as provided in Section 9.5 or Section
10.1 of this Agreement, in the event of the termination of this Agreement
pursuant to Section 9.1, this Agreement shall forthwith become void, there shall
be no liability on the part of the Acquiror Companies or the Company or any of
their respective officers or directors to the other and all rights and
obligations of any party hereto shall cease, except that nothing herein shall
relieve any party from liability for any misrepresentation or breach of any
covenant or agreement under this Agreement.
9.3 Amendment. This Agreement may be amended by the parties hereto by
action authorized by their respective Boards of Directors at any time prior to
the Effective Time; provided, however, that, after approval of this Agreement by
the stockholders of the Company, or approval of the Share Issuance by the
shareholders of the Acquiror, no amendment may be made which would reduce the
amount or change the type of consideration into which each share of Company
common Stock shall be converted pursuant to this Agreement upon consummation of
the Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
46
9.4 Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance by the other party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby. For purposes of this Section 9.4, the
Acquiror Companies shall be deemed to be one party.
9.5 Fees, Expenses and Other Payments.
(a) Except as provided in Section 9.5(b) of this Agreement,
all Expenses incurred by the parties hereto shall be borne solely and
entirely by the party which has incurred such Expenses; provided,
however, that all Expenses related to printing, filing and mailing the
Registration Statement and the Joint Proxy Statement/Prospectus and all
Commission and other regulatory filing fees incurred in connection with
the Registration Statement and the Joint Proxy Statement/Prospectus
shall be for the account of the Acquiror; and provided, further, that
the Acquiror may, at its option, but subject to Section 7.4(c), pay any
Expenses of the Company that are solely and directly related to the
Merger.
(b) The Company agrees that, if this Agreement is terminated
pursuant to Section 9.1(b) (breach), or Section 9.1(h) (fiduciary out),
the Company shall promptly (but not later than five Business Days after
receipt of notice from the Acquiror that the amount is due) pay to the
Acquiror, as liquidated damages and expense reimbursement, an amount in
cash equal to $50,000 (the "Termination Fee");
(c) The Acquiror agrees that: (i) if this Agreement is
terminated pursuant to Section 9.1(c) (breach), the Acquiror shall
promptly (but not later than five Business Days after receipt of notice
from the Company that the amount is due) pay to the Company, as
liquidated damages and expense reimbursement, an amount in cash equal
to $50,000 (the "Termination Fee"); or (ii) if this Agreement is
terminated pursuant to Section 9.1(i) (Material difference in the
Acquiror Annual Report), the Acquiror shall promptly (but not later
than five Business Days after receipt of notice from the Company that
the amount is due) pay to the Company, as liquidated damages and
expense reimbursement, an amount in cash equal to $10,000 (the "Annual
Report Termination Fee").
(d) The Termination Fee or the Annual Report Termination Fee
shall be the sole and exclusive remedy of the Company or the Acquiror,
as the case may be (the "Fee Recipient"), for damages as a result of a
termination of this Agreement pursuant to the reasons set forth in
paragraphs 9.5(b) or 9.5(c) hereof. Because the actual damages that the
Fee Recipient would sustain if the Agreement is terminated pursuant to
the reasons set forth in paragraphs 9.5(b) or 9.5(c) hereof are
uncertain and would be impossible or very difficult to ascertain
accurately, the parties hereto agree in good faith that the Termination
Fee would be reasonable and just compensation and reimbursement of
expenses for the harm caused by such termination. Therefore, the Fee
Recipient agrees to accept said Termination Fee, if due and paid
hereunder, as liquidated damages and expense reimbursement, and not as
penalty, in the event of a termination pursuant to the reasons set
forth in paragraphs 9.5(b) or 9.5(c) hereof.
47
(e) If either party hereunder shall fail to pay the party any
fee due hereunder, the breaching party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee
at the publicly announced prime interest rate of Citibank, N.A., in
effect from time to time, from the date such fee was required to be
paid until payment in full.
ARTICLE X
GENERAL PROVISIONS
10.1 Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 10.1(b) of this Agreement,
the representations, warranties, covenants and agreements of each party
hereto shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any other party hereto,
any Person controlling any such party or any of their officers,
directors, representatives or agents whether prior to or after the
execution of this Agreement.
(b) The representations and warranties in this Agreement shall
terminate at the Effective Time and the representations, warranties,
covenants and agreements of each of the parties hereto shall terminate
upon the termination of this Agreement pursuant to Section 9.1, except
that the covenants and agreements set forth in Sections 9.2 and 9.5 and
in Article X hereof shall survive such termination of this Agreement.
10.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses or sent by electronic transmission to the telecopier number specified
below:
(a) If to any of the Acquiror Companies, to:
Pen Interconnect, Inc..
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
48
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, to:
Laminating Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman and Chief Executive Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇
Suite 2800 Suntrust Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed delivered on the day the sender receives telecopier
confirmation that such notice was received at the telecopier number of the
addressee. Notice given by mail as set out above shall be deemed delivered three
days after the date the same is postmarked.
10.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
49
10.5 Entire Agreement. This Agreement (together with the Annexes, the
Company's Disclosure Letter and the Acquiror's Disclosure Letter) constitutes
the entire agreement of the parties, and supersedes all prior agreements and
undertakings, both written and oral, among the parties, with respect to the
subject matter hereof.
10.6 Assignment. This Agreement shall not be assigned by operation of
Law or otherwise.
10.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, other than Section 7.11 which is intended also to benefit
the present and former directors, officers, employees and agents of the Company
therein referenced, and their heirs and representatives, is intended to or shall
confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
10.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty, covenant or agreement herein, nor
shall any single or partial exercise of any such right preclude other or further
exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative with, and not exclusive of, any rights or remedies
otherwise available.
10.9 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the Laws of the State of Utah, regardless of the Laws that
might otherwise govern under applicable principles of conflicts of law;
provided, however, that any matter involving the internal corporate affairs of
the Company shall be governed by the provisions of the GCL.
10.10 Time. Time is of the essence in the performance of the terms of
this Agreement.
10.11 Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
50
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
offices thereunto duly authorized.
PEN INTERCONNECT, INC.
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
PEN LAMINATING, INC.
By:/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
LAMINATING TECHNOLOGIES, INC.
By:/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer
51
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Acquiror" shall mean Pen Interconnect, Inc., a Utah corporation, and
its successors from time to time.
"Acquiror Annual Report" shall mean the Annual report on Form 10-K of
the Acquiror for the year ended September 30, 1998 to be filed with the
Commission.
"Acquiror Benefit Plans" shall mean Benefit Plans with respect to the
Acquiror and its Subsidiaries.
"Acquiror Common Stock" shall mean the common shares, without par
value, of the Acquiror.
"Acquiror Companies" shall have the meaning ascribed to such term in
the first paragraph of this Agreement.
"Acquiror Representatives" shall have the meaning ascribed to such term
in Section 6.4.
"Acquiror Stock Options" shall mean stock options granted pursuant to
the Acquiror Stock Plans.
"Acquiror Stock Plans" shall mean the Acquiror's Stock Option Plan.
"Acquiror Stockholders' Meeting" shall have the meaning ascribed to
such term in Section 7.1(b).
"Acquiror's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Acquiror and its Subsidiaries as of September
30, 1996, September 30, 1997, and September 30, 1998 (which year is not yet
complete) and the related consolidated statements of operations and cash flows
for the fiscal, years ended September 30, 1996, 1997 and 1998 (which year is not
yet complete), together with the notes thereto, all as audited, or to be
audited, by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, independent accountants. The Acquiror anticipates
that the Acquiror's Audited Consolidated Financial Statements for the year ended
September 30, 1998 will be complete by December 31, 1998 and will be included in
the Acquiror's Annual Report on Form 10-K for the year ended September 30, 1998
to be filed with the Commission.
"Acquiror's Consolidated Balance Sheet" shall mean the consolidated
balance sheet of the Acquiror as of September 30, 1998 included in the
Acquiror's Audited Consolidated Financial Statements.
Annex-1
"Acquiror's Disclosure Letter" shall mean a letter of even date
herewith delivered by the Acquiror to the company with the execution of the
Agreement, which, among other things, shall identify exceptions to the
Acquiror's representations and warranties contained in Article V by specific
section and subsection references.
"Acquisition Proposal" shall mean any proposal or offer with respect to
a merger, consolidation, share exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase or sale of all or any significant portion of the assets or 5% or
more of the Equity Securities of the Company that, in any case, could be
reasonably expected to interfere with the consummation of the Merger or the
other transactions contemplated by this Agreement.
"Act" shall mean the Utah Revised Business Corporation Act.
"Affiliate" shall, with respect to any Person, mean any other Person
that controls, is controlled by or is under common control with the former.
"Agreement" shall mean the Agreement and Plan of Merger made and
entered into as of December 21, 1998 among the Acquiror, Newco and the company,
including any amendments thereto and each Annex (including this Annex A) and
Schedule thereto (including the Acquiror's Disclosure Letter and the company's
Disclosure Letter).
"Articles of Merger" shall have the meaning ascribed to such term in
Section 2.2.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders, certificates, registrations or other approvals granted
by any Governmental Authority.
"Benefit Plans" shall mean, with respect to a specified Person, any
employee pension benefit plan (whether or not insured), as defined in Section
3(2) of ERISA, any employee welfare benefit plan (whether or not insured) as
defined in Section 3(1) of ERISA, any plans that would be employee pension
benefit plans or employee welfare benefit plans if they were subject to ERISA,
such as foreign plans and plans for directors, any stock bonus, stock ownership,
stock option, stock purchase, stock appreciation rights, phantom stock,
severance, employment, change-in-control, deferred compensation and any bonus or
incentive compensation plan, agreement, program or policy (whether qualified or
nonqualified, written or oral) sponsored, maintained, or contributed to by the
specified Person or any of its Subsidiaries for the benefit of any of the
present or former directors, officers, employees, agents, consultants or other
similar representatives providing services to or for the specified Person or any
of its Subsidiaries in connection with such services or any such plans which
have been so sponsored, maintained or contributed to within six years prior to
the date of this Agreement; provided, however, that such term shall not include
(a) routine employment policies and procedures developed and applied in the
ordinary course of business and consistent with past practice, including wage,
vacation, holiday and sick or other leave policies, (b) workers compensation
insurance and (c) directors and officers liability insurance.
Annex-2
"Business Day" means any day other than a day on which banks in the
State of Utah are authorized or obligated to be closed.
"Certificate of Merger" shall have the meaning ascribed to such term in
Section 2.4.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 3.3, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 3.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Combined Companies" shall mean the Acquiror, the Surviving Corporation
and their Subsidiaries after giving effect to the Merger.
"Commission" shall mean the Securities and exchange Commission.
"Common Stock Exchange Ratio" shall mean the ratio of conversion of
Company Common Stock into Acquiror Common Stock pursuant to the Merger as
provided in Section 3.1(a).
"Company" shall mean Laminating Technologies, Inc., a Delaware
corporation, and its successors from time to time.
"Company Benefit Plans" shall mean Benefit Plans with respect to the
Company and its Subsidiaries.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Option Plans" shall mean the Company's Amended and Restated
1996 Stock Option Plan.
"Company Representatives" shall have the meaning ascribed to such term
in Section 6.4.
"Company Stock Options" shall mean stock options granted pursuant to
the Company Option Plans.
"Company Stockholders' Meeting" shall have the meaning ascribed to such
term in Section 7.1(a).
"Company's Audited Financial Statements" shall mean the balance sheets
of the Company as of March 31, 1997 and 1998 and the related consolidated and
combined statements of operations and cash flows for the fiscal, years ended
March 31, 1996, 1997 and 1998, together with the notes thereto, all as audited
by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co., independent accountants, under their report with
respect thereto dated May 7, 1998 and included in the Company's Annual Report on
form 10-K for the fiscal year ended March 31, 1998 filed with the Commission.
Annex-3
"Company's Balance Sheet" shall mean the consolidated balance sheet of
the Company as of March 31, 1998 included in the Company's Audited Financial
Statements.
"Company's Financial Statements" shall mean the Company's Audited
Financial Statements and the Company's Unaudited Financial Statements.
"Company's Disclosure Letter" shall mean a letter of even date herewith
delivered by the Company to the Acquiror Companies concurrently with the
execution of the Agreement, which, among other things, shall identify exceptions
to the Company's representations and warranties contained in Article IV by
specific section and subsection references.
"Company's Unaudited Financial Statements" shall mean the unaudited
consolidated balance sheet of the Company as of September 30, 1997 and 1998 and
the related consolidated statements of operations and cash flows for the three
month periods ended September 30, 1997 and 1998, together with the notes
thereto, included in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 filed with the Commission.
"Competing Transaction" shall mean any merger, consolidated, share
exchange, business combination or similar transaction involving the Company or
the acquisition in any manner, directly or indirectly, of a Material equity
interest in any voting securities of, or a substantial portion of the assets of,
the Company other than the transactions contemplated by this Agreement.
"Constituent Corporations" shall mean the Company and Newco.
"Control" (including the terms "controlled," "controlled by" and "under
common control with") means (except where another definition is expressly
indicated) the possession, directly or indirectly or as trustee or executor, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Division" shall mean the Utah Division of Corporations and Commercial
Code.
"Effective Time" shall mean the date and time of the completion of the
filling of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 2.02 and the Articles of Merger with the
Division.
Annex-4
"Environmental Law or Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Authority
pertaining to health or the environment currently in effect and applicable to a
specified Person and its Subsidiaries, including the Clean Air Act, as amended,
the Comprehensive Environmental, Response, Compensation and Liability Act of
1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe
Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, the Oil Pollution Act of 1990, as amended
("OPA"), any state or local Laws implementing the foregoing federal Laws, and
all other environmental conservation or protection Laws. For purposes of the
Agreement, the terms "hazardous substance" and "release" have the meanings
specified in CERCLA; provided, however, that, to the extent the Laws of the
state or locality in which the property is located establish a meaning for
"hazardous substance" or "release" that is broader than that specified in either
CERCLA, such broader meaning shall apply, and the term "hazardous substance"
shall include all dehydration and treating wastes, waste (or spilled) oil, and
waste (or spilled) petroleum products, and (to the extent in excess of
background levels) radioactive material, even if such are specifically exempt
from classification as hazardous substances pursuant to CERCLA or RCRA or the
analogous statutes of any jurisdiction applicable to the specified Person or its
Subsidiaries or any of their respective properties or assets.
"Equity Securities" shall mean, with respect to a specified Person, any
shares of capital stock of, or other equity interests in, or any securities that
are convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity interests in,
such Person.
"ERISA" shall mean the employee Retirement Income Security Act of 1974,
as amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean __________________________________.
"Exchange Fund" shall mean the fund of Acquiror Common Stock, cash in
lieu of fractional share interests and dividends and distributions, if any, with
respect to such shares of Acquiror Common Stock established at the Exchange
Agent pursuant to Section 3.2(a).
"Expenses" shall mean all reasonable out-of-pocket expenses (including
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its Affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Registration Statement, the Joint Proxy
Statement, the Acquiror Proxy Statement and the Company Proxy Statement, the
solicitation of stockholder approvals and all other matters related to the
consummation of the transactions contemplated hereby.
Annex-5
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a specified
Person.
"GCL" shall mean the General Corporation Law of the State of Delaware,
as in effect on the date of this Agreement and from time to time thereafter
during the pendency hereof.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or any
domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Joint Proxy Statement/Prospectus" shall have the meaning ascribed to
such term in Section 7.2(a).
"Knowledge" shall mean, with respect to either the Company or the
Acquiror, the knowledge of any executive officer of such party after reasonable
inquiry.
"Law" shall mean all laws, statutes and ordinances of the United
States, any state of the United States, any foreign country, any foreign state
and any political subdivision thereof, including all decisions of Courts having
the effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Laws of any jurisdiction.
"LTI Technology" shall mean all assets, technology and Intellectual
Property (as defined in Section 4.21) owned by the Company.
"Material" shall mean material to the (a) consolidated business,
condition (financial and other), results of operations, properties or prospects
of a specified Person and its Subsidiaries, if any, taken as a whole or (b) to
the specified Person's ability to perform its obligations under this Agreement
or fulfill the conditions to Closing; provided, however, that, as used in this
definition the word "material" shall have the meaning accorded thereto pursuant
to Section 11 of the Securities Act.
"Material Adverse Effect" shall mean any change or effect that would be
material and adverse (a) to the consolidated business, condition (financial or
otherwise), results of operations, properties or prospects of a specified Person
and its Subsidiaries, if any, taken as a whole or (b) to the specified Person's
ability to perform its obligations under this Agreement or fulfill the
conditions to Closing; provided, however, that, as used in this definition the
word "material" shall have the meaning accorded thereto pursuant to Section 11
of the Securities Act.
Annex-6
"Material Contract" shall mean each contract, lease, indenture,
agreement, arrangement or understanding to which a specified Person or any of
its Subsidiaries is a party or to which any of the assets or operations of such
specified Person or any of its Subsidiaries is subject that is of a type that
would be required to be included as an exhibit to a registration statement on
Form S-1 pursuant to Paragraph (2), (4) or (10) of Item 601(b) of Regulation S-K
under the Securities Act if such a registration statement were to be filed by
such Person under the Securities Act on the date of determination.
Notwithstanding the foregoing, such term shall, in the case of the Company,
include any of the following contracts, agreements or commitments, whether oral
or written:
(1) Any collective bargaining agreement or other agreement
with any labor union;
(2) any agreement, contract or commitment with any other
Person, other than any agency or representation agreement relating to
operations of the Company or any of its Subsidiaries in any foreign
nation or state entered into in the ordinary course of business,
containing any covenant limiting the freedom of such specified Person
or any of its Subsidiaries to engage in any line of business or to
compete with any other Person;
(3) any partnership, joint venture or profit sharing agreement
with any Person;
(4) any employment or consulting agreement, contract or
commitment between the Company and any employee, officer or director
thereof (i) having more than one year to run from the date hereof, (ii)
providing for an obligation to pay or accrue compensation of $25,000 or
more per annum or (iii) providing for the payment or accrual of any
additional compensation upon a change in control of such Person or any
of its Subsidiaries or upon any termination of such employment or
consulting relationship following a change in control of such Person or
any of its Subsidiaries;
(5) any agency or representation agreement relating to
operations of the Company in any foreign nation or state with any
Person that is not terminable by the Company without penalty upon not
more than one year's notice; and
(6) any confidentiality agreement, development agreement or
license agreement relating to the products of the Company.
"Merger" shall mean the merger of Newco with and into the
Company as provided in Article II of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq National Market.
Annex-7
"Newco" shall mean Pen Merger, Inc., a Utah corporation and a wholly
owned Subsidiary of the Acquiror.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person or one of its Subsidiaries shall have set aside on
its books adequate reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of record and
similar charges not delinquent or which are filed of record but are
being contested in good faith by appropriate proceedings; provided
that, in the latter case, the specified Person or one of its
Subsidiaries shall have set aside on its books adequate reserves with
respect thereto;
(3) liens in respect of judgments or awards with respect to
which the specified Person or one of its Subsidiaries shall in good
faith currently be prosecuting an appeal or other proceeding for review
and with respect to which such Person or such Subsidiary shall have
secured a stay of execution pending such appeal or such proceeding for
review; provided that such Person or such Subsidiary shall have set
aside on its books adequate reserves with respect thereto;
(4) easements, leases, reservations or other rights of others
in, or minor defects and irregularities in title to, property or assets
of a specified Person or any of its Subsidiaries; provided that such
easements, leases, reservations, rights, defects or irregularities do
not materially impair the use of such property or assets for the
purposes for which they are held;
(5) any lien or privilege vested in any lessor, licensor or
permittor for rent or other obligations of a specified Person or any of
its Subsidiaries thereunder so long as the payment of such rent or the
performance of such obligations is not delinquent;
(6) liens for taxes or assessments not yet due or not yet
delinquent;
(7) all rights to consent by, required notices to, filings
with, or other actions by governmental or tribal entities in connection
with the sale or conveyance of oil and gas leases or interests therein
if the same are customarily obtained subsequent to such sale or
conveyance;
(8) rights of reassignment;
Annex-8
(9) easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and
rights-of-way, on, over or in respect of any of the oil and gas
properties of a party hereto;
(10) all other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities
affecting the properties of a party hereto that are not such as to
adversely interfere with the operation, value or use of such
properties;
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Registration Statement" shall have the meaning ascribed to such term
in Section 7.2(a).
"Regulation" shall mean any rule or regulation of any Governmental
Authority having the effect of Law or of any rule or regulation of any
self-regulatory organization, such as Nasdaq.
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the Commission).
"Representatives" shall mean, collectively, the Company's
Representatives and the Acquiror's Representatives.
"Required Acquiror Vote" shall have the meaning ascribed to such term
in Section 7.1(b).
"Required Company Vote" shall have the meaning ascribed to such term in
Section 7.1(a).
"SEC Reports" shall mean (1) all Annual Reports on Form 10-K, (2) All
Quarterly Reports on Form 10-Q, (3) all proxy statements relating to meetings of
stockholders (whether annual or special), (4) all Current Reports on Form 8-K
and (5) all other reports, schedules, registration statements or other documents
required to be filed during a specified period by a specified Person with the
Commission pursuant to the Securities Act or the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Issuance" shall mean the issuance of shares of Acquiror Common
Stock to be issued in the Merger.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
Annex-9
"Superior Proposal" means a bona fide Acquisition Proposal that the
Board of Directors of the Company determines in its good faith judgment (after
consultation with its financial advisers and legal counsel), taking into account
all legal, financial, regulatory and other aspects of the proposal or offer and
the Person making the proposal or offer, (i) would, if consummated, result in a
transaction that is more favorable to the Company's stockholders, from a
strategic and financial point of view, than the transactions contemplated by
this Agreement and (ii) is reasonably capable of being completed.
"Surviving Corporation" shall mean the Company as the corporation
surviving the Merger.
"Tax Returns" shall have the meaning ascribed to such term in Section
4.14(a) of the Agreement.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any such tax or any contest or dispute thereof.
"Terminating Acquiror Breach" shall have the meaning ascribed to such
term in Section 9.10(c) of the Agreement.
"Terminating Company Breach" shall have the meaning ascribed to such
term in Section 9.01(b) of the Agreement.
"Termination Fee" shall have the meaning ascribed to such term in
Section 9.05(b).
"Title Defect" shall mean any encumbrance, encroachment, irregularity,
defect in or objection to a party's title to or contractual right in the
properties of such party (expressly excluding Permitted Encumbrances), that
alone or in combination with other defects renders such party's title to any of
such properties less than Marketable Title. Materialmen's, mechanics',
repairmen's, employees', contractors', operators' or other similar liens or
charges arising in the ordinary course of business incidental to construction,
maintenance or operation of such properties shall not constitute a Title Defect
(i) if they have not been filed pursuant to Law, (ii) if filed, they have not
yet become due and payable or payment is being withheld as provided by Law or
(iii) if their validity is being contested in good faith by appropriate action.
Annex-10
ANNEX B
Laminating Technologies, Inc. Affiliates
AFFILIATE'S AGREEMENT
[Date]
Pen Interconnect, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of Laminating Technologies, Inc.,
a Delaware corporation (the "Company"), as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the Regulations of the Commission under
the Securities Act.
Pursuant to the terms and subject to the conditions of that certain
Agreement and Plan of Merger by and among Pen Interconnect, Inc., a Utah
corporation (the "Acquiror"), Pen Merger, Inc., a newly formed Utah corporation
and a wholly owned, indirect Subsidiary of the Acquiror ("Newco"), and the
Company dated as of December 21, 1998 (the "Merger Agreement"), providing for,
among other things, the merger of Newco with and into the Company (the
"Merger"), the undersigned will be entitled to receive shares of Acquiror Common
Stock in exchange for shares of Company Common Stock owned by the undersigned at
the Effective Time of the Merger as determined pursuant to the Merger Agreement.
Capitalized terms used but not defined herein are defined in Annex A to the
Merger Agreement and are used herein with the same meanings as ascribed to them
therein.
In consideration of the agreements contained herein, the Acquiror's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned will not make any sale, transfer or other disposition of
the Acquiror Common Stock received by the undersigned pursuant to the Merger in
violation of the Securities Act or the applicable Regulations thereunder. The
undersigned has been advised that the offering, sale and delivery of the shares
of Acquiror common Stock pursuant to the Merger will have been registered with
the Commission under the Securities Act on a Registration Statement on Form S-4.
The undersigned has also been advised, however, that, since the undersigned may
be deemed to be an Affiliate of the Company at the time the Merger is submitted
for a vote of the stockholders of the Company, the Acquiror Common Stock
received by the undersigned pursuant to the Merger can be sold by the
undersigned only (i) pursuant to an effective registration statement under the
Securities Act, (ii) in conformity with the volume and other limitations of Rule
145 promulgated by the Commission under the Securities Act or (iii) in reliance
upon an exemption from registration that is available under the Securities Act.
Annex-11
The undersigned also understands that instructions will be given to the
transfer agent for the Acquiror Common Stock with respect to the Acquiror Common
Stock to be received by the undersigned pursuant to the Merger and that there
will be placed on the certificates representing such shares of Acquiror Common
Stock, or any substitutions therefor, a legend stating in substance as follows:
"These shares were issued in a transaction to which
Rule 145 promulgated under the Securities Act of 1933, as
amended, applies. These shares may only be transferred in
accordance with the terms of such Rule and an Affiliate's
Agreement between the original holder of such shares and Pen
Interconnect, Inc., a copy of which agreement is on file at
the principal offices of Pen Interconnect, Inc."
It is understood and agreed that the legend set forth above shall be
removed upon surrender of certificates bearing such legend by delivery of
substitute certificates without such legend if the undersigned shall have
delivered to the Acquiror an opinion of counsel, in form and substance
reasonably satisfactory to the Acquiror, to the effect that (i) the sale or
disposition of the shares represented by the surrendered certificates may be
effected without registration of the offering, sale and delivery of such shares
under the Securities Act and (ii)( the shares to be so transferred may be
publicly offered, sold and delivered by the transferee thereof without
compliance with the registration provisions of the Securities Act.
By its execution hereof, the Acquiror agrees that it will, as long as
the undersigned owns any shares of Acquiror Common Stock to be received by the
undersigned pursuant to the Merger that are subject to the restrictions on sale,
transfer or other disposition herein set forth, take all reasonable efforts to
make timely filings with the commission of all reports required to be filed by
it pursuant to the Exchange Act and will promptly furnish upon written request
of the undersigned a written statement confirming that such reports have been so
timely filed.
If you are in agreement with the foregoing, please so indicate by
signing below and returning a copy of this letter to the undersigned, at which
time this letter shall become a binding agreement between us.
Very truly yours,
By:
Name:
Title:
Date:
Address:
Annex-12
ACCEPTED this ____ day of ___________, 1998 PEN INTERCONNECT, INC.
By: ________________________
Name:
Title:
Annex-13