EXHIBIT 99(d)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
▇▇▇▇▇▇▇ CORPORATION
("Parent"),
KING DC ACQUISITION CORP.,
("Purchaser"),
and
KOLLMORGEN CORPORATION
(the "Company")
May 4, 2000
TABLE OF CONTENTS
Page
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ARTICLE ONE
THE OFFER......................................................................2
Section 1.1 The Offer................................................2
Section 1.2 Company Actions..........................................3
Section 1.3 Directors................................................4
ARTICLE TWO
THE MERGER.....................................................................5
Section 2.1 The Merger...............................................5
Section 2.2 Effective Time...........................................5
Section 2.3 Effects of the Merger....................................5
Section 2.4 Certificate of Incorporation and By-Laws
of the Surviving Corporation...........................6
Section 2.5 Directors................................................6
Section 2.6 Officers.................................................6
Section 2.7 Conversion of Common Shares..............................6
Section 2.8 Conversion of Purchaser Common Stock.....................6
Section 2.9 Options; Stock Plans.....................................7
Section 2.10 Shareholders' Meeting....................................7
Section 2.11 Merger Without Meeting of Shareholders...................8
ARTICLE THREE
DISSENTING SHARES; PAYMENT FOR SHARES..........................................8
Section 3.1 Dissenting Shares........................................8
Section 3.2 Payment for Common Shares................................8
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................9
Section 4.1 Organization and Qualification; Subsidiaries.............9
Section 4.2 Capitalization; Subsidiaries............................10
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Section 4.3 Authority Relative to this Agreement
and Related Matters...................................11
Section 4.4 No Conflict; Required Filings and Consents..............11
Section 4.5 SEC Reports and Financial Statements....................12
Section 4.6 Environmental Matters...................................13
Section 4.7 Compliance with Applicable Laws.........................15
Section 4.8 Change of Control.......................................16
Section 4.9 Litigation..............................................16
Section 4.10 Information.............................................16
Section 4.11 Certain Approvals.......................................17
Section 4.12 Employee Benefit Plans..................................17
Section 4.13 Intellectual Property...................................20
Section 4.14 Taxes...................................................21
Section 4.15 Absence of Certain Changes..............................22
Section 4.16 Labor Matters...........................................22
Section 4.17 Relationships with Customers, Suppliers,
Distributors and Sales Representatives................23
Section 4.18 Contracts...............................................23
Section 4.19 Rights Agreement........................................24
Section 4.20 Product Recalls.........................................24
Section 4.21 Brokers.................................................24
Section 4.22 Opinion of Financial Advisor............................24
Section 4.23 Year 2000 Compliance....................................24
Section 4.24 Government Contracts....................................24
Section 4.25 Government Contracting Audits...........................27
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER....................27
Section 5.1 Organization and Qualification..........................27
Section 5.2 Authority Relative to this Agreement....................28
Section 5.3 No Conflict; Required Filings and Consents..............28
Section 5.4 Information.............................................29
Section 5.5 Financing...............................................29
Section 5.6 Ownership of Purchaser; No Prior Activities.............29
ARTICLE SIX
COVENANTS.....................................................................30
Section 6.1 Conduct of Business of the Company......................30
Section 6.2 Access to Information...................................32
Section 6.3 Efforts.................................................33
Section 6.4 Public Announcements....................................34
Section 6.5 Employee Benefit Arrangements...........................34
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Section 6.6 Indemnification.........................................35
Section 6.7 Notification of Certain Matters.........................36
Section 6.8 Rights Agreement........................................36
Section 6.9 State Takeover Laws.....................................36
Section 6.10 No Solicitation.........................................36
Section 6.11 Parent Agreement Concerning Purchaser...................37
Section 6.12 Convertible Debentures..................................38
ARTICLE SEVEN
CONDITIONS TO CONSUMMATION OF THE MERGER......................................38
Section 7.1 Conditions..............................................38
ARTICLE EIGHT
TERMINATION; AMENDMENTS; WAIVER...............................................38
Section 8.1 Termination.............................................38
Section 8.2 Effect of Termination...................................40
Section 8.3 Fees and Expenses.......................................40
Section 8.4 Amendment...............................................40
Section 8.5 Extension; Waiver.......................................41
ARTICLE NINE
MISCELLANEOUS.................................................................41
Section 9.1 Non-Survival of Representations and Warranties..........41
Section 9.2 Entire Agreement; Assignment............................41
Section 9.3 Validity................................................41
Section 9.4 Notices.................................................41
Section 9.5 Governing Law; Jurisdiction.............................42
Section 9.6 Descriptive Headings....................................43
Section 9.7 Counterparts............................................43
Section 9.8 Parties in Interest.....................................43
Section 9.9 Certain Definitions.....................................43
Section 9.10 Specific Performance....................................43
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 4,
2000, by and among ▇▇▇▇▇▇▇ Corporation, a Delaware corporation ("Parent"), King
DC Acquisition Corp., a New York corporation and a wholly owned subsidiary of
Parent (the "Purchaser"), and Kollmorgen Corporation, a New York corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the acquisition of the Company by Parent on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to
commence a tender offer (the "Offer") to purchase all of the Company's common
stock, par value $2.50 per share (the "Common Shares"), including the associated
preferred share purchase rights (the "Rights") issued pursuant to the Amended
and Restated Rights Agreement, dated as of December 20, 1988, amended and
restated as of March 27, 1990, amended and restated as of October 22, 1998, and
further amended and restated as of December 13, 1999 between the Company and
BankBoston, N.A., as Rights Agent (the "Rights Agreement") (which Rights
together with the Common Shares are hereinafter referred to as the "Shares"), at
a price per Share of $23.00 net to the seller in cash (such amount or any
greater amount per Share paid pursuant to the Offer being hereinafter referred
to as the "Offer Price");
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, on the terms and subject to the conditions set forth herein, unanimously
(i) approved the Offer and the Merger (as hereinafter defined), (ii) adopted
this Agreement and is recommending that the Company's shareholders accept the
Offer, the Merger, tender their Shares to the Purchaser and approve this
Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company and Parent as the sole Shareholder of the Purchaser have approved the
merger of the Purchaser with and into the Company with the Company as the
surviving corporation, as set forth below (the "Merger"), in accordance with the
Business Corporation Law of the State of New York (the "BCL"), and upon the
terms and subject to the conditions set forth in this Agreement, whereby each of
the issued and outstanding Common Shares not owned directly or indirectly by
Parent, the Purchaser or the Company will be converted into the right to receive
the Offer Price in cash; and
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company agree as follows:
ARTICLE ONE
THE OFFER
SECTION 1.1 The Offer.
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(a) Provided that this Agreement shall not have been terminated in
accordance with Article Eight hereof and none of the events set forth in Annex I
hereto (the "Tender Offer Conditions") shall have occurred, as promptly as
reasonably practicable, but in no event later than May 15, 2000, Parent shall
cause the Purchaser to commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder), the "Exchange Act") an offer to purchase all
outstanding Shares at the Offer Price, shall, upon commencement of the Offer but
after affording the Company a reasonable opportunity to review and comment
thereon, file Schedule TO and all other necessary documents with the Securities
and Exchange Commission (the "SEC") and make all deliveries, mailings and
telephonic notices required by Rule 14d-3 under the Exchange Act, in each case
in connection with the Offer (the "Offer Documents") and shall use its
reasonable best efforts to consummate the Offer, subject to the terms and
conditions thereof. The obligation of the Purchaser to accept for payment or pay
for any Shares tendered pursuant to the Offer will be subject only to the
satisfaction or waiver of the conditions set forth in Annex I hereto.
(b) Without the prior written consent of the Company, the Purchaser
shall not decrease the Offer Price or change the form of consideration payable
in the Offer, decrease the number of Shares sought to be purchased in the Offer,
impose additional conditions to the Offer or amend any other term of the Offer
in any manner adverse to the holders of Common Shares. The Offer shall remain
open until the date that is 20 business days (as such term is defined in Rule
14d-1(c)(6) under the Exchange Act) after the commencement of the Offer (the
"Expiration Date"), unless the Purchaser shall have extended the period of time
for which the Offer is open pursuant to, and in accordance with, the two
succeeding sentences or as may be required by applicable law, in which event the
term "Expiration Date" shall mean the latest time and date as the Offer, as so
extended, may expire. If at any Expiration Date, any of the Tender Offer
Conditions is not satisfied or waived by the Purchaser, the Purchaser may extend
the Offer from time to time; provided, however, that, on the scheduled
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expiration date of the Offer, (i) if the waiting period under the HSR Act or
under any material applicable foreign statutes or regulations applicable to the
Merger shall have not expired or been terminated, the Purchaser shall extend the
Offer from time to time until the expiration or termination under the HSR Act or
any other applicable foreign statutes or regulations, (ii) if any of the
conditions set forth in paragraphs (a) or (b) of Annex I hereto shall have
occurred and be continuing, the Purchaser shall extend the Offer from time to
time until the earlier of (A) five business days after the time such condition
shall no longer exist or (B) such time at which the matters described in such
paragraphs (a) or (b) shall have become final and nonappealable; or (iii) if all
of the Tender Offer Conditions are satisfied and more than 70% but less than 90%
of the outstanding Common Shares on a fully diluted basis (excluding Options (as
defined herein) which are not exercisable for 30 days) have been validly
tendered and not withdrawn in the Offer, the Purchaser shall have the right, in
its sole discretion, to extend the Offer from time to time up to a maximum of
seven additional business days in the aggregate. Subject to the terms of the
Offer and this Agreement and the satisfaction of all the Tender Offer Conditions
as of any Expiration Date, the Purchaser will accept for payment and
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pay for all Shares validly tendered and not validly withdrawn pursuant to the
Offer as soon as practicable after such expiration date of the Offer. Without
the prior written consent of the Company, the Purchaser shall not accept for
payment or pay for any Shares in the Offer if, as a result, Purchaser would
acquire less than the number of Shares necessary to satisfy the Minimum
Condition (as defined in Annex I hereto).
(c) Parent and the Purchaser represent that the Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading, except
that no representation is made by Parent or the Purchaser with respect to
information supplied by the Company in writing for inclusion in the Offer
Documents. Each of Parent and the Purchaser, on the one hand, and the Company,
on the other hand, agrees promptly to correct any information provided by it for
use in the Offer Documents if and to the extent that it shall have become false
or misleading in any material respect and the Purchaser further agrees to take
all steps necessary to cause the Offer Documents as so corrected to be filed
with the SEC and to be disseminated to shareholders of the Company, in each
case, as and to the extent required by applicable federal securities laws.
SECTION 1.2 Company Actions.
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(a) The Company shall, after affording Parent a reasonable opportunity
to review and comment thereon, file with the SEC and mail to the holders of
Common Shares, as promptly as practicable on the date of the filing by Parent
and the Purchaser of the Offer Documents, a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with any amendments or supplements
thereto, the "Schedule 14D-9") reflecting the recommendation of the Company
Board that holders of Shares tender their Shares pursuant to the Offer and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby
represents, that the Company Board, at a meeting duly called and held at which a
quorum was present throughout, has unanimously (i) determined that each of the
transactions contemplated hereby, including each of the Offer and the Merger, is
fair to and in the best interests of the Company and its shareholders, (ii)
approved the Offer and adopted this Agreement in accordance with the BCL, (iii)
recommended acceptance of the Offer and approval of this Agreement by the
Company's shareholders (if such approval is required by applicable law), and
(iv) taken all other action necessary to render the Rights inapplicable to the
Offer and the Merger; provided, however, that such recommendation and approval
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may be withdrawn, modified or amended only prior to the acceptance of payment of
Common Shares pursuant to the Offer, and only to the extent that the Company
Board determines in good faith, after consultation with its outside legal
counsel, that failure to take such action would result in a breach of the
Company Board's fiduciary obligations under applicable law. The Company further
represents that, as of the date of this Agreement, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
("SSB"), the Company's financial advisor, has delivered to the Company Board its
written opinion that, as of the date of this Agreement, the consideration to be
received by the holders of Common Shares (other than Parent or any of its
affiliates) pursuant to the Offer and the Merger is fair to such holders from a
financial point of view, a copy of the written opinion of which such advisor has
consented to include in the Schedule 14D-9. The Company hereby consents to the
inclusion in
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the Offer Documents of the recommendations of the Company Board described in
this Section 1.2(a).
(b) The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. Each of
the Company, on the one hand, and Parent and the Purchaser, on the other hand,
agree promptly to correct any information provided by either of them for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of Shares, in each case, as and to the extent
required by applicable federal securities law.
(c) In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings, any available non-
objecting beneficial owner lists and any available listing or computer list
containing the names and addresses of the record holders of the Common Shares as
of the most recent practicable date and shall furnish the Purchaser with such
additional available information (including, but not limited to, updated lists
of holders of Common Shares and their addresses, mailing labels and lists of
security positions and non-objecting beneficial owner lists) and such other
assistance as the Purchaser or its agents may reasonably request in
communicating the Offer to the Company's record and beneficial shareholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, the Purchaser and their affiliates,
associates, agents and advisors, shall keep such information confidential and
use the information contained in any such labels, listings and files only in
connection with the Offer and the Merger and, should the Offer terminate or if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
SECTION 1.3 Directors.
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(a) Subject to compliance with applicable law, promptly upon the payment
by the Purchaser for Shares pursuant to the Offer representing at least such
number of Shares as shall satisfy the Minimum Condition, and from time to time
thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors on the Company Board (determined after
giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Common Shares beneficially owned by
Parent or its affiliates bears to the total number of Common Shares then
outstanding, and the Company shall, upon request of Parent, promptly take all
actions necessary to cause Parent's designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors; provided,
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however, that prior to the Effective Time (as defined in Section 2.2), the
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Company Board shall always have at least two members who are not officers,
directors, employees or designees of the Pur-
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chaser or any of its affiliates, including the Company ("Purchaser Insiders").
If the number of directors who are not Purchaser Insiders is reduced below two
prior to the Effective Time, the remaining director who is not a Purchaser
Insider shall be entitled to designate a person to fill such vacancy who is not
a Purchaser Insider and who shall be a director not deemed to be a Purchaser
Insider for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
The Company shall promptly take all actions required pursuant to such Section
and Rule in order to fulfill its obligations under this Section 1.3 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under such Section and Rule in order
to fulfill its obligations under this Section 1.3. Parent will supply to the
Company any information with respect to itself and its officers, directors and
affiliates required by such Section and Rule.
(c) Following the election or appointment of Parent's designees pursuant
to this Section 1.3 and prior to the Effective Time, any amendment or
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or the Purchaser or waiver of any of the Company's rights hereunder, will
require the concurrence of a majority of the directors of the Company then in
office who are not Purchaser Insiders (or in the case where there are two or
fewer directors who are not Purchaser Insiders, the concurrence of one director
who is not a Purchaser Insider) if such amendment, termination, extension or
waiver could be reasonably likely to have an adverse effect on the minority
shareholders of the Company.
ARTICLE TWO
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the
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satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the BCL, at the Effective Time the
Purchaser shall be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser shall cease and the Company shall
continue as the surviving corporation (the "Surviving Corporation"), and shall
continue its corporate existence under the laws of the State of New York.
SECTION 2.2 Effective Time. As soon as practicable after the
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satisfaction or waiver of the conditions set forth in Sections 7.1(a) and
7.1(b), but subject to Sections 7.1(c) and 7.1(d), the Merger shall become
effective as set forth in the certificate of merger which shall be filed with
the Secretary of State of the State of New York. The parties shall take such
other and further actions as may be required by law to make the Merger
effective. The time the Merger becomes effective in accordance with applicable
law is referred to herein as the "Effective Time."
SECTION 2.3 Effects of the Merger. At and after the Effective Time
---------------------
the Merger shall have the effects set forth in Section 906 of the BCL. Without
limiting the generality of the
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foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and the Purchaser shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and the Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 2.4 Certificate of Incorporation and By-Laws of the Surviving
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Corporation.
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(a) The Certificate of Incorporation of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended, subject to
the provisions of Section 6.6 of this Agreement, in accordance with the
provisions thereof and hereof and applicable law.
(b) The By-Laws of the Purchaser in effect at the Effective Time shall
be the By-Laws of the Surviving Corporation until amended, subject to the
provisions of Section 6.6 of this Agreement, in accordance with the provisions
thereof and applicable law.
SECTION 2.5 Directors. Subject to applicable law, the directors of the
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Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 2.6 Officers. The individuals specified by Parent prior to the
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Effective Time shall, subject to applicable law, be the initial officers of the
Surviving Corporation and shall hold office until their respective successors
are duly elected and qualified, or their earlier death, resignation or removal.
SECTION 2.7 Conversion of Common Shares. At the Effective Time, by
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virtue of the Merger and without any action on the part of the holders thereof,
each Common Share issued and outstanding immediately prior to the Effective Time
(other than (i) any Common Shares held by Parent, the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company, which Common Shares, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto and (ii) Dissenting Shares (as defined in Section 3.1)), shall
be cancelled and retired and shall be converted into the right to receive the
Offer Price in cash (the "Merger Price"), payable to the holder thereof, without
interest thereon, upon surrender of the certificate formerly representing such
Common Share.
SECTION 2.8 Conversion of Purchaser Common Stock. The Purchaser has
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outstanding 10 shares of common stock, par value $.01 per share, all of which
are entitled to vote with respect to approval of this Agreement. At the
Effective Time, each share of common stock of the Purchaser issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of
common stock, par value $.01 per share, of the Surviving Corporation.
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SECTION 2.9 Options; Stock Plans. Prior to the Effective Time, the
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Company Board (or, if appropriate, any committee thereof) shall adopt
appropriate resolutions and take all other actions necessary to provide for the
cancellation or exercise, effective at the Effective Time, of all the
outstanding stock options or similar rights (the "Options") heretofore granted
under any stock option or similar plan of the Company (the "Stock Plans"),
without any payment therefor except as otherwise provided in this Section 2.9.
Immediately prior to the Effective Time, the Company shall accelerate the
vesting of all unvested Options and each then vested Option shall thereafter no
longer be exercisable but shall entitle each holder thereof, in cancellation and
settlement therefor, to a payment in cash by the Company (subject to any
applicable withholding taxes), at the Effective Time, equal to the product of
(i) the total number of Common Shares subject to such vested Option and (ii) the
excess, if any, of the Merger Price (or such greater price as provided in an
applicable option agreement) over the exercise price per Common Share subject to
such vested Option (such amounts payable hereunder being referred to as the
"Cash Payment"). All other Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary shall terminate as of the
Effective Time. The Company will use its reasonable best efforts to obtain all
necessary consents to ensure that after the Effective Time, holders of Options
will have no rights other than the rights of the holders of vested Options to
receive the Cash Payment in cancellation and settlement thereof.
SECTION 2.10 Shareholders' Meeting.
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(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as
practicable following the acceptance for payment of and payment for
Common Shares by the Purchaser pursuant to the Offer for the purpose of
considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use its reasonable efforts (x) to obtain
and furnish the information required to be included by the SEC in the
Proxy Statement (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with respect
to the preliminary proxy statement and cause a definitive proxy
statement (the "Proxy Statement") to be mailed to its shareholders and
(y) to obtain the necessary approvals of the Merger and this Agreement
by its shareholders; and
(iii) subject to Section 1.2(a), include in the Proxy Statement
the recommendation of the Company Board that shareholders of the Company
vote in favor of the approval of this Agreement; and
(iv) include in the Proxy Statement the opinion of SSB referred
to in Section 1.2(a).
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(b) Parent agrees that it will vote, or cause to be voted, all of the
Common Shares then owned by it, the Purchaser or any of its other subsidiaries
in favor of the approval of the Merger and of this Agreement.
SECTION 2.11 Merger Without Meeting of Shareholders. Notwithstanding
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Section 2.10, in the event that Parent, the Purchaser or any other subsidiary of
Parent shall acquire at least 90% of the outstanding Common Shares pursuant to
the Offer or otherwise, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Common Shares by
the Purchaser pursuant to the Offer without a meeting of shareholders of the
Company, in accordance with Section 905 of the BCL.
ARTICLE THREE
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1 Dissenting Shares. Notwithstanding Section 2.7, Common
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Shares outstanding immediately prior to the Effective Time and held by a holder
who has the right to receive payment of the fair value of his shares pursuant to
Section 910 of the BCL and has complied with the provisions of Section 623 of
the BCL ("Dissenting Shares") shall not be converted into a right to receive the
Merger Price, unless such holder fails to perfect or withdraws or otherwise
loses his right to appraisal. If after the Effective Time such holder fails to
perfect or withdraws or loses his right to appraisal, such Common Shares shall
be treated as if they had been converted as of the Effective Time into a right
to receive the Merger Price. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of Common Shares, and Parent shall
have the right to participate in and to control all negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.
SECTION 3.2 Payment for Common Shares.
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(a) From and after the Effective Time, such bank or trust company as
shall be designated by Parent and reasonably acceptable to the Company shall act
as paying agent (the "Paying Agent") in effecting the payment of the Merger
Price in respect of certificates (the "Certificates") that, prior to the
Effective Time, represented Common Shares entitled to payment of the Merger
Price pursuant to Section 2.7. Promptly following the Effective Time, Parent or
the Purchaser shall deposit, or cause to be deposited, with the Paying Agent the
aggregate Merger Price to which holders of Common Shares shall be entitled at
the Effective Time pursuant to Section 2.7.
(b) Promptly after the Effective Time, Parent shall cause the Paying
Agent to mail to each record holder of Certificates that immediately prior to
the Effective Time represented Common Shares a form of letter of transmittal
which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent, and instructions for use in surrendering such Certificates and
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receiving the Merger Price in respect thereof. Upon the surrender of each such
Certificate, the Paying Agent shall pay the holder of such Certificate the
Merger Price multiplied by the number of Common Shares formerly represented by
such Certificate, in consideration therefor, and such Certificate shall
forthwith be cancelled. Until so surrendered, each such Certificate (other than
Certificates representing Common Shares held by Parent or the Purchaser, any
wholly owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company or Dissenting Shares)
shall represent solely the right to receive the aggregate Merger Price relating
thereto. No interest or dividends shall be paid or accrued on the Merger Price.
If the Merger Price (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate formerly representing Common
Shares surrendered therefor is registered, it shall be a condition to such right
to receive such Merger Price that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Common Shares shall pay to the Paying Agent any
transfer or other similar taxes required by reason of the payment of the Merger
Price to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days after the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Common Share
may surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price relating thereto, without any
interest thereon.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Common Shares are presented to the
Surviving Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Merger Price relating
thereto, as provided in this Article Three.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as
follows:
SECTION 4.1 Organization and Qualification; Subsidiaries. The
--------------------------------------------
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York. Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each of its
subsidiaries has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and, except as set forth on Section 4.1 of the Company Disclosure Schedule, is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties
-9-
owned, operated or leased by it makes such qualification, licensing or good
standing necessary, except where the failure to have such power or authority, or
the failure to be so qualified, licensed or in good standing, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. The term "Material Adverse Effect on the
Company," as used in this Agreement, means any change in or effect on the
business, financial condition or results of operations of the Company or any of
its subsidiaries that would reasonably be expected to be materially adverse to
the Company and its subsidiaries taken as a whole; provided, however, that
-------- -------
"Material Adverse Effect on the Company" shall not include any change, effect,
condition, event or circumstance to the extent attributable to (i) changes,
effects, conditions, events or circumstances that generally affect the
industries in which the Company operates, (ii) general economic conditions or
change, effects, conditions or circumstances affecting the U.S. securities
markets generally or (iii) changes, effects, conditions, events or circumstances
arising from the announcement of the execution of this Agreement. The Company
has heretofore provided or made available to Parent and the Purchaser a complete
and correct copy of the Restated Certificate of Incorporation and the By-Laws or
comparable organizational documents, each as amended to the date hereof, of the
Company and each of its United States subsidiaries and has provided a complete
and correct copy of the Rights Agreement as amended to the date hereof.
SECTION 4.2 Capitalization; Subsidiaries. The authorized capital
----------------------------
stock of the Company consists of 25,000,000 Common Shares and 500,000 shares of
preferred stock of a par value of $1.00 per share ("Preferred Stock"). As of the
close of business on May 2, 2000, 10,357,822 Common Shares were issued and
outstanding, all of which are entitled to vote on this Agreement, and 425,711
Common Shares were held in treasury. The Company has no shares of Preferred
Stock issued and outstanding. As of May 4, 2000, there were 1,538,545 Shares
reserved for issuance pursuant to outstanding Options and rights granted under
the Stock Plans. Section 4.2 of the Disclosure Schedule delivered to Parent by
the Company prior to the date hereof (the "Company Disclosure Schedule") sets
forth the holders of all outstanding Options and the number, exercise prices and
expiration dates of each grant to such holders. Since January 1, 2000, the
Company has not issued any shares of capital stock except pursuant to the
exercise of Options outstanding as of such date, except for issuance of director
fee shares in the ordinary course consistent with past practice. All the
outstanding Common Shares are, and all Common Shares which may be issued
pursuant to the exercise of outstanding Options will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and nonassessable and are not subject to, nor were they issued in
violation of, any preemptive rights. Except for the 8 3/4% Convertible
Debentures Due 2009 (the "Convertible Debentures"), there are no bonds,
debentures, notes or other indebtedness having general voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its subsidiaries issued and outstanding. Except as set forth in this
Section 4.2, and except for the Rights and the Convertible Debentures, there are
no existing options, warrants, calls, subscriptions or other rights, agreements,
arrangements or commitments of any character to which the Company or any of its
subsidiaries is a party or by which any of them is bound, obligating the Company
or any of its subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligating the Company or any of its subsidiaries to grant, extend or enter into
any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment. Ex-
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cept as contemplated by this Agreement or the Rights Agreement and except for
the Company's obligations in respect of the Options under the Stock Plans, there
are no outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or the
capital stock of the Company or any of its subsidiaries. Each of the outstanding
shares of capital stock of each of the Company's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and, except as set
forth in Section 4.2 of the Company Disclosure Schedule, such shares of the
Company's subsidiaries are owned by the Company or by another subsidiary of the
Company or by a Director as qualifying shares (all of which are owned
beneficially by the Company) in each case free and clear of any lien, claim,
option, charge, security interest, limitation, encumbrance and restriction of
any kind (any of the foregoing being a "Lien"). Set forth in Section 4.2 of the
Company Disclosure Schedule is a complete and correct list of each subsidiary
(direct or indirect) of the Company and each entity in which the Company owns,
directly or indirectly, any equity interest.
SECTION 4.3 Authority Relative to this Agreement and Related Matters.
--------------------------------------------------------
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and, except for any required approval by the Company's
shareholders in connection with consummation of the Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Company Board and no other corporate proceedings on the part of the Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of this Agreement by the affirmative vote of the holders of two-thirds
of the then outstanding Common Shares entitled to vote thereon, to the extent
required by applicable law and the filing of the certificate of merger pursuant
to the BCL). This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due and valid authorization, execution and
delivery of this Agreement by Parent and the Purchaser, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
SECTION 4.4 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming (i) the filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and any foreign
or supranational antitrust laws are made and the waiting periods thereunder have
been terminated or have expired, (ii) the requirements of the Exchange Act and
any applicable state securities, "blue sky" or takeover law are met, (iii) the
filing of the certificate of merger and other appropriate merger documents, if
any, as required by the BCL, is made, (iv) the requirements under applicable
security and export control regulations are met and (v) with respect to the
Merger, approval of this Agreement by the holders of two-thirds of the
outstanding Common Shares, if required by the BCL, is received, none of the
execution and delivery of this Agreement by the Company, the consummation by the
Company of the transactions contemplated hereby or compliance by the Company
with any of the provisions hereof will (i) conflict with or violate the Restated
Certificate of Incorporation or By-Laws of the Company or the comparable
organizational documents of any of its subsidiaries, (ii) except as disclosed on
Section 4.4(a) of the Company Disclosure Schedule, conflict with or violate in
any material respect any statute, ordinance, rule, regulation, order, judgment,
decree, permit or license applicable to the Company or any of its subsidiaries,
or by which any of them
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or any of their respective properties or assets may be bound or affected, or
(iii) except as disclosed on Section 4.4(a) of the Company Disclosure Schedule,
result in a violation or breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in any loss of any benefit, or the creation of any Lien on any of the
properties or assets of the Company or any of its subsidiaries (any of the
foregoing referred to in clause (ii) or this clause (iii) being a "Violation")
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or any of their respective properties may be bound or affected,
other than, in the case of clause (ii) or (iii) above, any such Violations that,
individually or in the aggregate, would not (A) reasonably be expected to have a
Material Adverse Effect on the Company, (B) materially impair the ability of the
Company to perform its obligations under this Agreement or (C) prevent or
materially delay consummation of the Offer or the Merger.
(b) Except as set forth in Section 4.4(b) of the Company Disclosure
Schedule, none of the execution and delivery of this Agreement by the Company,
the consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof will require any
consent, waiver, approval, authorization or permit of, or registration or filing
with or notification to (any of the foregoing being a "Consent"), any government
or subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (each a "Governmental
Entity"), including, without limitation, the U.S. Departments of Defense, State
and Commerce except for (i) compliance with any applicable requirements of the
Exchange Act, (ii) the filing of the certificate of merger pursuant to the BCL,
(iii) compliance with the HSR Act and any requirements of any foreign or
supranational antitrust laws, and (iv) such filings, authorizations, orders and
approvals as to which failure to obtain or make would not (x) reasonably be
expected to have a Material Adverse Effect on the Company or (y) prevent or
materially delay the consummation of the Offer or the Merger.
SECTION 4.5 SEC Reports and Financial Statements.
------------------------------------
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements required to be filed by
the Company with the SEC since January 1, 1998 (as they have been amended since
the time of their filing, and including any documents filed as exhibits thereto,
collectively, the "SEC Reports") and complete and correct copies of all such
forms, reports, schedules, registration statements, and proxy statements are
available to Parent through public sources. As of their respective dates, the
SEC Reports (including but not limited to any financial statements or schedules
included or incorporated by reference therein) complied as to form in all
material respects with the requirements of the Exchange Act or the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations of
the SEC promulgated thereunder applicable, as the case may be, to such SEC
Reports, and none of the SEC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
-12-
(b) The consolidated balance sheets as of December 31, 1999 and 1998 and
the consolidated statements of income, common shareholders' equity and cash
flows for each of the three fiscal years in the period ended December 31, 1999
(including the related notes and schedules thereto) of the Company contained in
the Company's Form 10-K for the fiscal year ended December 31, 1999 (the "1999
Financial Statements") present fairly in all material respects the consolidated
financial position and the consolidated results of operations and cash flows of
the Company and its consolidated subsidiaries as of the dates or for the periods
presented therein and were prepared in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved except as otherwise noted therein, including the related notes.
(c) Except as reflected, reserved against or otherwise disclosed in the
1999 Financial Statements or as set forth in Section 4.5(c) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has any
material liabilities or obligations (absolute, accrued, fixed, contingent or
otherwise) other than liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1999 which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(d) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications which have not yet been filed
with the SEC to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Securities Act and the
rules and regulations promulgated thereunder or the Exchange Act and the rules
and regulations promulgated thereunder.
(e) Proper accounting controls are, and since January 1, 1996, have
been, in place to ensure that no portion of any international sales
representative commission or contingent fee or other payment is included,
directly or indirectly, in the contract price of any sale to the United States
Government pursuant to the Foreign Military Sales ("FMS") program, or any sale
to a foreign government financed in whole or in part with funding from the U.S.
Foreign Military Finance ("FMF") program, except as permitted thereunder.
(f) All payments to international sales representatives since January 1,
1996 including commission and contingent fee payments to international sales
representatives or others on FMS and FMF contracts, (i) have been accurately
reported in all material respects on the Company books and records, and (ii)
have been made consistent in all material respects with all applicable United
States and foreign laws and regulations.
SECTION 4.6 Environmental Matters.
---------------------
Except as may be set forth in Section 4.6 of the Company Disclosure
Schedule:
(a) The business and operations of the Company and its subsidiaries
comply with all applicable Environmental Laws; the Company and its subsidiaries
have obtained all Governmental Permits relating to Environmental Laws necessary
for the operation of their businesses; and all such Governmental Permits are in
full force and effect and the Company and its subsidiaries are in compliance
with such permits except, in the case of each of the foregoing, for such events
as would not reasonably be expected to, individually or in the aggregate, have a
Material
-13-
Adverse Effect on the Company. Neither the Company nor any of its subsidiaries
has received written notice of, or, to the knowledge of the Company, is subject
to, any ongoing or currently applicable investigation by, order from or written
claim by any person (including without limitation any Governmental Entity or
prior owner or operator of any of the Company Property) respecting (i) any
Environmental Law, (ii) any Remedial Action or (iii) any claim arising from the
Release or threatened Release of a Contaminant into the environment except as
would not reasonably be expected to individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has been served with any pending judicial or administrative
proceeding, order, judgment or decree, or entered into a settlement alleging or
addressing a violation of or liability under any Environmental Law, except as
would not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect on the Company.
(b) Neither the Company nor any of its subsidiaries has (i) reported a
Release of a hazardous substance pursuant to Section 103(a) of CERCLA, or any
state equivalent; (ii) filed a notice pursuant to Section 103(c) of CERCLA; or
(iii) filed any notice under any applicable Environmental Law reporting a
violation of any applicable Environmental Law. There is not now with respect to
the operations of the Company or any of its subsidiaries, nor to the knowledge
of the Company has there ever been, on or in any Company Property: (A) any
Release, (B) any treatment, recycling, disposal or storage, other than short
term storage prior to removal by a licensed transporter for off-site disposal,
of any hazardous waste, as that term is defined under RCRA or any state
equivalent, or (C) any underground storage tank or surface impoundment or
landfill or waste pile, except, in the case of each of the foregoing, for such
events which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
(c) Except as set forth on Section 4.6(c) of the Company Disclosure
Schedule, to the knowledge of the Company, there is not now on or in any Company
Property any polychlorinated biphenyls (PCB) used in the Company's operations in
pigments, hydraulic oils, electrical transformers or other equipment except as
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company.
(d) To the knowledge of the Company, any asbestos-containing material or
presumed asbestos-containing material which is on or part of any Company
Property presently owned, leased or operated by the Company or any of its
subsidiaries, as currently configured and operated, is in good repair according
to the current standards and practices governing such material, and its presence
or condition does not materially violate any currently applicable Environmental
Law. None of the products manufactured, distributed or sold by the Company or
any of its subsidiaries contained asbestos or asbestos-containing material.
(e) For purposes of this Section:
(i) "Company Property" means any real property, plant, building
or facility now or, to the Company's knowledge, previously owned, leased
or operated primarily by the Company or any of its present or, to the
Company's knowledge, past subsidiaries.
-14-
(ii) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, in effect as of the Closing Date, and
any regulations promulgated thereunder in effect as of the Closing Date.
(iii) "Contaminant" means any waste, pollutant, hazardous or
toxic substance or waste, petroleum, petroleum-based substance or waste,
special waste, hazardous material or any constituent of any such
substance, waste or material, in each case to the extent regulated by
Environmental Law.
(iv) "Environmental Law" means all foreign, federal, state and
local laws or regulations relating to or addressing the environment or
health and safety as related to Contaminants, including but not limited
to CERCLA, OSHA and RCRA and any foreign or state equivalent thereof.
(v) "Governmental Permits" means any permits, licenses,
certificates, orders, consents, authorizations, and other approvals
from, or required by, any Governmental Entity that are used by, or are
necessary to own and to operate, the business of the Company and its
subsidiaries as currently configured and operated, together with any
applications for the issuance, renewal, modification or extension
thereof and all supporting information and analyses.
(vi) "OSHA" means the Occupational Safety and Health Act, as
amended, and any regulations promulgated thereunder, in each case in
effect as of the Closing Date.
(vii) "RCRA" means the Resource Conservation and Recovery Act,
as amended, and any regulations promulgated thereunder, in each case in
effect as of the Closing Date.
(viii) "Release" means release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration of a Contaminant into the environment, including the movement
of Contaminants through or in the air, soil, surface water or
groundwater of Company Property.
SECTION 4.7 Compliance with Applicable Laws. (a) Except with respect
-------------------------------
to Environmental Laws (which are covered in Section 4.6), and except as set
forth on Section 4.7 of the Company Disclosure Schedule the Company and its
subsidiaries hold all permits, registrations, clearances, licenses, variances,
exemptions, orders and approvals of all Governmental Entities material to the
Company and required for them to own their assets, conduct their business, and
perform their contracts (the "Company Permits"). The Company and its
subsidiaries are in compliance in all material respects with the terms of the
Company Permits. Except with respect to Environmental Laws which are covered in
Section 4.6, the business operations of the Company and its subsidiaries have
been conducted in compliance in all respects material to the Company with all
laws, ordinances and regulations of any Governmental Entity.
(b) The Company and its subsidiaries have not made, directly or
indirectly, any payment or promise to pay, or gift or promise to give or
authorized such a promise or gift, of any money or anything of value, directly
or indirectly, to (i) any foreign official (as such term is defined in the
Foreign Corrupt Practices Act of 1977, as amended (the "FCPA") for the purpose
of
-15-
influencing any official act or decision of such official or inducing him or her
to do or omit to do any act in violation of his or her lawful duty, to affect
any act or decision of such official, or to secure any improper advantage, or
inducing him or her to use his or her influence to affect any act or decision of
a foreign government, or any agency or subdivision thereof or (ii) any foreign
political party or official thereof or candidate for foreign political office
for the purpose of influencing any official act or decision of such party,
official or candidate or inducing him or her to do any act in violation of his
or her lawful duty, or to secure any improper advantage, or inducing such party,
official or candidate to use his, her or its influence to affect any act or
decision of a foreign government or agency or subdivision thereof, in the case
of both clauses (i) and (ii) above in order to assist the Company or any of its
subsidiaries in obtaining or retaining business for or directing business to the
Company or any of its subsidiaries or under circumstances which would subject
the Company or any of its subsidiaries to liability under the FCPA (or any
comparable foreign statute or regulation). To its knowledge, the Company has not
made any bribe, kickback or other illegal payment in violation of any foreign or
domestic law.
SECTION 4.8 Change of Control. Except as set forth on Section 4.4(a)
-----------------
or Section 4.8 of the Company Disclosure Schedules, the transactions
contemplated by this Agreement will not constitute a "change of control" under,
require the consent from or the giving of notice to a third party pursuant to,
permit a third party to terminate or accelerate vesting or repurchase rights or
create any other detriment under the terms, conditions or provisions of any
material note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound.
SECTION 4.9 Litigation. Except as set forth on Section 4.9 of the
----------
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
the Company or any of its subsidiaries, individually or in the aggregate, which
would reasonably be expected to (i) have a Material Adverse Effect on the
Company and its subsidiaries or (ii) prevent or materially delay the
consummation of the Offer and the Merger. Except as disclosed in the SEC
Reports filed prior to the date of this Agreement, neither the Company nor any
of its subsidiaries is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, would reasonably be expected to
(i) have a Material Adverse Effect on the Company or (ii) prevent or materially
delay the consummation of the Offer and the Merger.
SECTION 4.10 Information. None of the information supplied by the
-----------
Company specifically for inclusion or incorporation by reference in (i) the
Offer Documents, (ii) the Proxy Statement or (iii) any other document to be
filed with the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement (the "Other Filings") will, at the
respective times filed with the SEC or other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to shareholders, at the time of the Special Meeting and 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 made therein, in light of the circumstances under which they
were made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, except that no representation is made by the Company
with respect to any forward-looking information which may
-16-
have been supplied by the Company, whether or not included by Parent or the
Purchaser in any Offer Document or in the Proxy Statement or statements made
therein based on information supplied by Parent or the Purchaser in writing
specifically for inclusion in the Proxy Statement.
SECTION 4.11 Certain Approvals. The Company has taken all necessary
-----------------
action to ensure that Section 912 of the BCL shall not apply to or be triggered
by this Agreement or the consummation of the transactions contemplated hereby.
To the knowledge of the Company, no state takeover statute or similar statute or
regulation applies or purports to apply to the Offer, the Merger or the
transactions contemplated by this Agreement.
SECTION 4.12 Employee Benefit Plans.
----------------------
(a) Section 4.12(a) of the Company Disclosure Schedule includes a
complete list of all material employee benefit plans, programs, and other
arrangements providing incentive compensation or benefits to any employee or
former employee or beneficiary or dependent thereof, whether or not written, and
whether covering one person or more than one person, sponsored or maintained by
the Company or any of its subsidiaries or to which the Company or any of its
subsidiaries contributes or is obligated to contribute ("Plans") except for
Foreign Plans (as hereinafter defined), a complete list of which the Company
shall deliver to Parent within ten business days after the date of this
Agreement. Without limiting the generality of the foregoing, the term "Plans"
includes all employee welfare benefit plans within the meaning of Section 3(1)
of the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder ("ERISA") and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
(b) With respect to each material Plan (other than a Foreign Plan), the
Company has, except as set forth on Section 4.12(b) of the Company Disclosure
Schedule, delivered or made available to Parent a true, correct and complete
copy of: (i) each material Plan document and each material document, if any,
prepared in connection with such Plan, including without limitation, benefit
schedules, trust agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; (v) the most recent actuarial report, if any;
and (vi) the most recent determination letter from the Internal Revenue Service
(the "IRS"), if any. Except as set forth on Section 4.12(b) of the Company
Disclosure Schedule, there are no material amendments to any Plan that have been
adopted or approved nor has the Company or any of its subsidiaries undertaken to
make any such amendments.
(c) Section 4.12(c) of the Company Disclosure Schedule identifies each
Plan that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Internal Revenue Code of 1986, as amended, and the Treasury
Regulations thereunder (the "Code") ("Qualified Plans"). Except as set forth on
Section 4.12(b) of the Company Disclosure Schedule, the IRS has issued a
favorable determination letter with respect to each Qualified Plan that has not
been revoked, and to the Company's knowledge there are no existing circumstances
nor any events that have occurred that could reasonably be expected to adversely
affect the qualified status of any Qualified Plan or the related trust. Each
Plan which is intended to meet the requirements of
-17-
Code Section 501(c)(9), meets such requirements and provides no disqualified
benefits (as such term is defined in Code Section 4976(b)).
(d) All material contributions required to be made to any Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any Plan, for any period through the date hereof have been
timely made or paid in full or, to the extent not required to be made or paid on
or before the date hereof, have been fully reflected in the financial statements
of the Company included in the SEC Reports to the extent required under
generally accepted accounting principles.
(e) The Company and each of its subsidiaries has complied, and is now in
compliance, in all material respects with all provisions of ERISA, the Code and
all laws and regulations applicable to the Plans. There is not now, nor, to the
Company's knowledge, do any circumstances exist that could give rise to, any
requirement for the posting of material security with respect to a Plan or the
imposition of any material lien on the assets of the Company or any of its
subsidiaries under ERISA or the Code. To the Company's knowledge, no non-exempt
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) has occurred with respect to any Plan that could reasonably be
expected to result in the imposition of any material penalty or tax on the
Company.
(f) With respect to each Plan that is subject to Title IV or Section 302
of ERISA or Section 412 or 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived; (ii) no reportable event within the
meaning of Section 4043(c) of ERISA for which the 30-day notice requirement has
not been waived has occurred during the last six years, and the consummation of
the transactions contemplated by this agreement will not result in the
occurrence of any such reportable event; (iv) all premiums to the Pension
Benefit Guaranty Corporation (the "PBGC") have been timely paid in full; (v) no
liability (other than for premiums to the PBGC) under Title IV of ERISA that
could have a Material Adverse Effect on the Company has been or is to the
Company's knowledge expected to be incurred by the Company or any of its
subsidiaries; and (vi) the PBGC has not instituted proceedings to terminate any
such Plan and, to the Company's knowledge, no condition exists that could
reasonably be expected to result in the institution of proceedings or which
could reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any such
Plan.
(g) Except as set forth on Section 4.12(g) of the Company Disclosure
Schedule, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of which are not under common control, within
the meaning of Section 4063 of ERISA and which is subject to Title IV of ERISA
(a "Multiple Employer Plan"), nor has the Company or any of its subsidiaries, or
any of their respective ERISA Affiliates (as defined in the next sentence), at
any time during the last six years, contributed to or been obligated to
contribute to any Multiemployer Plan or Multiple Employer Plan. An "ERISA
Affiliate" means any entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the Company or any of its subsidiaries, or that is a
member of
-18-
the same "controlled group" as the Company or any of its subsidiaries, pursuant
to Section 4001(a)(14) of ERISA. With respect to each Plan that is a
Multiemployer Plan: (i) if the Company or any of its subsidiaries or any of
their respective ERISA Affiliates were to experience a withdrawal or partial
withdrawal from such plan, no material withdrawal liability under Title IV of
ERISA would be incurred; and (ii) none of the Company and its subsidiaries, nor
any of their respective ERISA Affiliates, has received any notification, nor has
any reason to believe, that any such Plan is in reorganization, has been
terminated, is insolvent, or may reasonably be expected to be in reorganization,
to be insolvent, or to be terminated.
(h) There does not now exist, nor to the Company's knowledge do any
circumstances exist that could reasonably be expected to result in, any material
liability under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections
412 and 4971 of the Code, (iv) the continuation coverage requirements of Section
601 et seq. of ERISA and Section 4980B of the Code, or (v) corresponding or
similar provisions of foreign laws or regulations known to the Company, other
than a liability that arises solely out of, or relate solely to, the Plans, that
would be a liability of the Company or any of its subsidiaries following the
Closing. Without limiting the generality of the foregoing, to the Company's
knowledge none of the Company, its subsidiaries nor any ERISA Affiliate of the
Company or any of its subsidiaries has engaged in any transaction described in
Section 4069 or Section 4204 or 4212 of ERISA.
(i) Except as set forth in the SEC Reports or on Section 4.12(i) of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries has
any liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA
and at no expense to the Company and its subsidiaries.
(j) There are no pending or to the Company's knowledge threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the assets of
any of the trusts under any of the Plans which could reasonably be expected to
result in any material liability of the Company or any of its subsidiaries to
the Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan that could have a Material Adverse
Effect on the Company.
(k) Except as set forth on Section 4.8 or 4.12(k) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (either alone or
in conjunction with any other event) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of the Company or any of its
subsidiaries or result in any limitation on the right of the Company or any of
its subsidiaries to amend, merge, terminate or receive a reversion of assets
from any Plan or related trust. Without limiting the generality of the
foregoing, the aggregate amounts paid or payable (whether in cash, in property,
or in the form of benefits) by the Company or any of its subsidiaries in
connection with the transactions contemplated hereby (either solely as a result
thereof or as a result of such transactions in conjunction with any other event)
that will be "excess parachute payments" within the meaning of Section 280G of
the Code, will not exceed the amounts set forth on Section 4.12(k) of the
Company Disclosure Schedule.
-19-
(l) With respect to employee benefit plans, programs, and other
arrangements providing incentive compensation or other benefits to any employee
or former employee or dependent thereof, which plan, program or arrangement is
subject to the laws of any jurisdiction outside of the United States ("Foreign
Plans"): (i) the Foreign Plans have been maintained in all material respects in
accordance with all applicable requirements, (ii) if they are intended to
qualify for special tax treatment, meet all requirements for such treatment, and
(iii) if they are intended to be funded and/or book-reserved are fully funded
and/or book reserved, as appropriate, based upon reasonable actuarial
assumptions.
SECTION 4.13 Intellectual Property.
---------------------
(a) Set forth on Section 4.13(a) of the Company Disclosure Schedule is a
list of all material patents, patent applications, trademark registrations and
trademark applications, service ▇▇▇▇ registrations and service ▇▇▇▇
applications, certification ▇▇▇▇ registrations and certification ▇▇▇▇
applications, copyright registrations and copyright registration applications,
mask works registrations and mask works registration applications, both domestic
and foreign, which are owned by the Company or any of its subsidiaries. The
assets described on Section 4.13(a) of the Company Disclosure Schedule and all
other material computer software, trade secrets, trademarks, trade names,
service marks, certification marks, copyrights, know-how, methods, processes,
procedures, apparatus, equipment, industrial property, discoveries, inventions,
patent disclosures, designs, drawings, plans, specifications, engineering data,
manuals, development projects, research and development work in progress,
technology or other proprietary rights or confidential information which are
owned by or material to the Company or any of its subsidiaries are referred to
as the "Intellectual Property." The Company and its subsidiaries own all right,
title and interest in and to the Intellectual Property validly and beneficially,
free and clear of all material Liens, with the sole and exclusive right to use
the same, subject to those licenses listed on Section 4.13(b) of the Company
Disclosure Schedule.
(b) Set forth on Section 4.13(b) of the Company Disclosure Schedule is a
list of (i) all material licenses, assignments and other transfers of
Intellectual Property granted to others by the Company or any of its
subsidiaries, and (ii) all material licenses, assignments and other transfers of
patents, trade names, trademarks, service marks, copyrights, mask works
registrations, software, trade secrets, know-how, technology or other
proprietary rights or information granted to the Company or any of its
subsidiaries by others. Except as set forth on Section 4.13(b) of the Company
Disclosure Schedule, none of the material licenses, assignments or other
transfers described above is subject to termination or cancellation or change in
its terms or provisions as a result of this Agreement or the transactions
provided for in this Agreement.
(c) Except as set forth on Section 4.13(c) of the Company Disclosure
Schedule to the best knowledge of the Company, there is no material unauthorized
use, infringement or misappropriation of any Intellectual Property. The
Intellectual Property constitutes all the intellectual property necessary or
appropriate to conduct the business of the Company as presently conducted.
(d) Except as set forth on Section 4.13(d) of the Company Disclosure
Schedule, no material claim with respect to the Intellectual Property has been
asserted or, to the best knowledge of the Company, is threatened by any person
nor does the Company know of any
-20-
valid ground for any bona fide claims (i) to the effect that the manufacture,
sale or use of any product or process as used (currently or in the past) or
offered or proposed for use or sale by the Company infringes on any copyright,
trade secret, patent, tradename or other intellectual property right of any
person, (ii) against the Company relating to the use of any Intellectual
Property, or (iii) challenging the ownership, validity or effectiveness of any
Intellectual Property. All granted and issued patents and all registered
trademarks and service marks listed in Section 4.13(a) of the Company Disclosure
Schedule and all copyrights held by the Company are valid, enforceable and
subsisting.
(e) No Intellectual Property is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any manner the
licensing, assignment or other transfer, use or enforceability thereof by the
Company. The Company has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property, except
indemnities agreed to in the ordinary course of business in connection with the
sale, delivery or transfer of Company products and services or included as part
of the Company's license agreements. The Company or its subsidiaries have the
exclusive right to file, prosecute and maintain all applications and
registrations with respect to Intellectual Property owned by the Company or its
subsidiaries.
SECTION 4.14 Taxes.
-----
(a) The Company and each of its subsidiaries has filed all federal,
state, local and foreign income Tax Returns (as hereinafter defined) required to
be filed by it, and all other Tax Returns required to be filed by it. All such
Tax Returns were correct in all material respects. The Company and each of its
subsidiaries has paid or caused to be paid all Taxes (as hereinafter defined)
shown as due and payable on such Tax Returns in respect of the periods covered
by such returns and has made adequate provision in the Company's financial
statements for payment of all Taxes anticipated to be payable in respect of all
taxable periods or portions thereof ending on or before the date hereof. Except
as set forth on Section 4.14(a) of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is currently the beneficiary of any
extension of time within which to file any Tax Return. There are no security
interests on any of the assets of Company or any of its subsidiaries that arose
in connection with any failure to pay any Tax. There is no claim or dispute
concerning any material Tax liability of the Company or its subsidiaries either
(i) claimed or raised by any authority in writing or (ii) as to which any of the
directors and officers (and employees responsible for Tax matters) of the
Company and its subsidiaries has knowledge based on personal contact with any
agent of such authority. No issue has been raised in writing in any examination
by any authority with respect to the Company or any subsidiary which, by
application of similar principles, reasonably could be expected to result in a
proposed material deficiency or increase in Tax for any other period not so
examined. Section 4.14 of the Company Disclosure Schedule lists the periods
through which the Tax Returns required to be filed by the Company or any of its
subsidiaries have been examined by the IRS or other appropriate taxing
authority, or the period during which any assessments may be made by the IRS or
other appropriate taxing authority has expired. All material deficiencies and
assessments asserted as a result of such examinations or other audits by
federal, state, local or foreign taxing authorities have been paid, fully
settled or adequately provided for in the Company's
-21-
financial statements, and no issue or claim has been asserted in writing for
Taxes by any taxing authority for any prior period, other than those heretofore
paid or provided for in the Company's financial statements. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Return of the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its subsidiaries. Neither
the Company nor any of its subsidiaries (i) has been a member of a group filing
consolidated returns for federal income Tax purposes (except for the group of
which the Company is the common parent), (ii) has any liability for the Taxes of
any person (other than the Company and its subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferor or successor, by contract or otherwise, or (iii) except as
set forth on Section 4.14(a) of the Company Disclosure Schedule, is a party to a
Tax sharing or Tax indemnity agreement or any other agreement of a similar
nature involving a material amount of Taxes that remains in effect.
(b) For purposes of this Agreement, the term "Tax" or "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, withholding, capital stock and franchise taxes, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, including any interest, penalties or additions thereto. For purposes of
this Agreement, the term "Tax Return" means any report, return or other
information or document required to be supplied to a taxing authority in
connection with Taxes.
SECTION 4.15 Absence of Certain Changes. Except as disclosed in the
--------------------------
SEC Reports filed prior to the date of this Agreement and except as set forth on
Section 4.15 of the Company Disclosure Schedule, since December 31, 1999 to the
date of this Agreement, (i) there has not been any Material Adverse Effect on
the Company; and (ii) the businesses of the Company and each of its subsidiaries
have been conducted only in the ordinary course and in a manner consistent with
past practice.
SECTION 4.16 Labor Matters. (a) Except as set forth on Section 4.16
-------------
of the Company Disclosure Schedule, as of the date of this Agreement no
employees of the Company or of any of its subsidiaries are represented by any
labor union or any collective bargaining organization. As of the date of this
Agreement, no labor organization or group of employees of the Company or any of
its subsidiaries has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations
tribunal or authority. To the Company's knowledge as of the date hereof no facts
or event exists that is likely to give rise to a violation of Section 4.16(a) on
or before the Effective Time.
(b) With respect to employees of and services providers the Company:
(i) The Company complies and has complied materially with all
applicable domestic and foreign laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, including without limitation any such laws respecting employment
discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
re-
-22-
quirements, and no claims or investigations are pending or, to the
Company's knowledge, threatened with respect to such laws, either by
private individuals or by governmental agencies; and all U.S. employees
are at will except as set forth in Section 4.16 of the Company
Disclosure Schedule;
(ii) To the Company's knowledge it is not nor has it been
engaged in any unfair labor practice. There is not now, nor within the
past three years has there been, any unfair labor practice complaint
against the Company pending or, to the Company's knowledge, threatened,
before the National Labor Relations Board or any other comparable
foreign or domestic authority or any workers' council;
(iii) As of the date of this Agreement, no material grievance or
arbitration proceeding arising out of or under collective bargaining
agreements or employment relationships (involving more than one
employee) is pending, and no claims therefor exist or have, to the
Company's Knowledge, been threatened; no labor strike, lock-out,
slowdown, or work stoppage is pending or threatened against or directly
affecting the Company; and, to the Company's knowledge as of the date
hereof, no fact or event exists that is likely to give rise to a
violation of Section 4.16(b)(iii) on or before the Effective Time; and
(iv) All persons who are or were performing services for the
Company and are or were classified as independent contractors do or did
satisfy and have satisfied the requirements of law to be so classified,
and the Company has fully and accurately reported their compensation on
IRS Forms 1099 when required to do so.
SECTION 4.17 Relationships with Customers, Suppliers, Distributors and
---------------------------------------------------------
Sales Representatives. Except as set forth on Section 4.17 of the Company
---------------------
Disclosure Schedule, the Company has not received written notice that any
customer, supplier, distributor or sales representative intends to cancel,
terminate or otherwise modify its relationship with the Company or any
subsidiary, which action would reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 4.18 Contracts. Each material note, bond, mortgage, indenture,
---------
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of the properties or assets may be bound including, without limitation, all
contracts in which the Company assumed or retained environmental liabilities in
connection with the sales of companies or properties (the "Material Contracts")
is valid and binding and in full force and effect, except where failure to be
valid and binding and in full force and effect would not have a Material Adverse
Effect on the Company, and there are no defaults by the Company or any of its
subsidiaries or, to the Company's knowledge, any other party thereto, except
those defaults that would not have a Material Adverse Effect on the Company.
None of the Material Contracts with any affiliate of the Company are on terms
less favorable to the Company than those that would be obtained from
unaffiliated third parties. Except as set forth in Section 4.18 of the
Disclosure Schedule, the Company is not party to any Contracts which after the
Effective Time would have the effect of limiting the freedom of parent or its
subsidiaries (other than the Company and its subsidiaries) to compete in any
line of business in any geographic area or to hire any individual or group of
individuals.
-23-
SECTION 4.19 Rights Agreement. The Company and the Company Board have
----------------
authorized all necessary action to amend the Rights Agreement (without redeeming
the Rights) so that upon execution of such amendment (which will occur promptly
after the date of this Agreement) none of the execution or delivery of this
Agreement, the making of the Offer, the acquisition of Common Shares pursuant to
the Offer or the consummation of the Merger in each case in accordance with the
terms and conditions of this Agreement will (i) cause any Rights issued pursuant
to the Rights Agreement to become exercisable or to separate from the stock
certificates to which they are attached, (ii) cause Parent, the Purchaser or any
of their Affiliates or Associates to be an Acquiring Person (as each such term
is defined in the Rights Agreement) or (iii) trigger other provisions of the
Rights Agreement, including giving rise to a Distribution Date or a Triggering
Event (as each such term is defined in the Rights Agreement), and such amendment
shall be in full force and effect from and after the date hereof.
SECTION 4.20 Product Recalls. The Company is not aware of any pattern
---------------
or series of claims against the Company or any of its subsidiaries which
reasonably could be expected to result in a generalized product recall relating
to products sold by the Company or any of its subsidiaries, regardless of
whether such product recall is formal, informal, voluntary or involuntary.
SECTION 4.21 Brokers. Except for the engagement of SSB, none of the
-------
Company, any of its subsidiaries, or any of their respective officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement. The Company has previously delivered to Parent
a copy of the Company's engagement letters with SSB.
SECTION 4.22 Opinion of Financial Advisor. The Company Board has
----------------------------
received the written opinion of SSB to the effect that, as of May 4, 2000, the
consideration to be received by the holders of Common Shares (other than Parent
or any of its affiliates) pursuant to the Offer and the Merger, is fair to such
holders from a financial point of view.
SECTION 4.23 Year 2000 Compliance. Except as could not reasonably be
--------------------
expected to have a Material Adverse Effect on the Company, to the knowledge of
the Company none of the assets or properties owned or utilized by the Company
has failed or will fail to perform because of the Year 2000 Problem. The term
"Year 2000 Problem" means the material inability of any hardware, software or
process to recognize and correctly calculate dates on and after January 1, 2000,
or the failure of computer systems, products or services to perform any of their
intended functions in a proper manner in connection with data containing any
date on or after January 1, 2000.
SECTION 4.24 Government Contracts.
--------------------
(a) The Company Disclosure Schedule sets forth (i) a list of all
material current and open Government Bids to which the Company or any of the
Company's subsidiaries is a party as of the date of this Agreement and (ii) a
list of all Government Contracts for which there are or could reasonably be
expected to be outstanding performance obli-
-24-
gations, except for non-material Government Contracts with foreign government
entities. With respect to any Government Contract or Government Bid (regardless
whether there is an outstanding performance obligation) and except as set forth
on Section 4.24 of the Company Disclosure Schedule, (A) the Company and its
subsidiaries have complied in all material respects with all material terms and
conditions of each such contract or bid, including clauses, provisions, and
requirements incorporated expressly by reference or by operation of law therein;
(B) the Company and its subsidiaries have complied in all material respects with
all requirements of all applicable laws, regulations, directions, or agreements
pertaining to each Government Contract or Government Bid, and to the Company's
performance on its Government Contracts; and (C) all representations and
certifications executed, acknowledged or set forth in, or pertaining to each
Government Contract or Government Bid were, when given, and are complete and
correct in all material respects as of their effective date, and the Company and
its subsidiaries have complied in all material respects with all such
representations and certifications.
(b) As of the date of this Agreement, and except as set forth on Section
4.24 of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries has received from a party to a Government Contract or Government
Bid (or any prime contractor, sub-contractor or other Person thereunder) any
written show-cause notice, stop work order, cure notice, notice of convenience
or default termination, or notice of default or violation concerning a
Government Contract.
(c) Neither the Company nor any of its subsidiaries has received from a
party to whom a Government Bid has been submitted any written negative
determination of responsibility concerning a Government Bid.
(d) Except as set forth on Section 4.24 of the Company Disclosure
Schedule, the Company has no knowledge of a request within three years prior to
the date hereof by any Governmental Entity for a contract price adjustment for
any reason, including, without limitation, based upon a claim of defective
pricing or any cost incurred by the Company and its Subsidiaries which has been
questioned, challenged or disallowed or has been the subject of any
investigation, and no money due to the Company or its subsidiaries has been (or
has been attempted to be) withheld or set off with respect to any Government
Contract, which contract price adjustment, withheld or set off amount (i) is
reasonably expected to have a Material Adverse Effect on the Company or (ii) is
not otherwise fully reflected or reserved for in the 1999 Financial Statements.
(e) Except as set forth on Section 4.24 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries nor, to the knowledge
of the Company, any of their respective directors, officers, employees,
consultants or agents is (or during the last three years has been) under
administrative, civil or criminal investigation, indictment or information or
equivalent official governmental charge or allegation by any Governmental Entity
with respect to any alleged irregularity, misstatement or omission or other
matter arising under or relating to any Government Contract. Except as set forth
on Section 4.24 of the Company Disclosure Schedule, since January 1, 1996, the
Company and its subsidiaries have not conducted or initiated any internal
investigation, or made a voluntary disclosure to the U.S. Government, with
respect to any alleged irregularity, misstatement, omission or other matter
arising under or relating to any Government Contract or Government Bid. To the
knowledge of the Company, there is no irregularity, misstatement or omission or
other matter arising under or relating to any Government Contract or Government
Bid that has led or could reasonably be expected to lead, either before or after
the Effective Time, to a Material Adverse Effect.
-25-
(f) Except as set forth on Section 4.24(f) of the Company Disclosure
Schedule, there exist (i) no outstanding claims, requests for equitable
adjustment or other contractual action for relief against the Company or its
subsidiaries, either by any Governmental Entity or by any prime contractor,
subcontractor, vendor or other Person, arising under or relating to any
Government Contract or Government Bid, and (ii) no disputes between the Company
or its subsidiaries and the U.S. Government under the Contract Disputes Act of
1978, as amended (the "Contract Disputes Act") or any other federal statute or
between the Company or its subsidiaries and any prime contractor, subcontractor,
vendor or other Person arising under or relating to any Government Contract or
Government Bid. The Company has no knowledge of any fact which could reasonably
be expected to result in a claim or a dispute under clause (i) or (ii) of the
immediately preceding sentence. To the knowledge of the Company, the Company and
its subsidiaries have no interest in any pending or potential material claim
under the Contract Disputes Act against the U.S. Government or any prime
contractor, subcontractor or vendor arising under or relating to any Government
Contract or Government Bid.
(g) Neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any of their respective directors, officers,
employees, consultants or agents is (or during the last three years has been)
suspended or debarred or proposed to be suspended or debarred or declared
ineligible from doing business with any Governmental Entity or is (or during
such period was) the subject of a finding of nonresponsibility or ineligibility
for contracting with any Governmental Entity. To the knowledge of the Company,
no facts or circumstances exist that would warrant the institution of suspension
or debarment proceedings or the finding of nonresponsibility or ineligibility on
the part of the Company and its subsidiaries or any such director, officer,
employee, consultant or agent.
(h) The cost accounting systems with respect to Government Contracts of
the Company and its subsidiaries are in compliance in all material respects with
all applicable laws.
(i) Section 4.24(i) of the Company Disclosure Schedule identifies by
description or inventory number all material Customer Furnished Items. Customer
Furnished Items are defined as all personal property, equipment and fixtures
loaned, bailed or otherwise furnished to the Company or its subsidiaries by or
on behalf of the U.S. Government or any other customer ("Customer Furnished
Items"). Section 4.24(i) of the Company Disclosure Schedule also identifies each
Government Contract or other executory contract pursuant to which each such
Customer Furnished Item is furnished. The Company and its subsidiaries have
complied in all material respects with all of their obligations relating to the
Customer Furnished Items, and, upon the return thereof to the U.S. Government or
other customer who provided such Customer Furnished Item in the condition
thereof on the date hereof, would have no material liability with respect
thereto.
(j) The Company is not in violation of (i) any laws, directives, or
regulations relating to security clearances of the protection of classified
information or (ii) its security agreements relating thereto.
(k) For purposes of this Agreement, (i) the term "Government Bids" shall
mean any written quotations, bids or proposals that, if accepted, would bind any
Person to perform the resultant Government Contract to furnish products or
services to (A) any Governmental Entity,
-26-
(B) any prime contractor of any Governmental Entity, or (C) any
subcontractor, at any tier level, to any contract described in clauses (A) or
(B) above; and (ii) the term "Government Contract" shall mean a written,
mutually binding legal relationship with (A) any Governmental Entity, (B) any
prime contractor of any Governmental Entity, or (C) any subcontractor, at any
tier level, to any contract described in clauses (A) or (B) above which
obligates any Person to furnish products or services.
SECTION 4.25 Government Contracting Audits.
-----------------------------
(a) Section 4.25(a) of the Company Disclosure Schedule sets forth a list
and description of each final audit or investigation, or in the absence thereof,
a draft thereof, received by the Company and its subsidiaries since January 1,
1996 any performed by or for any prime or higher-tiered contractor or
subcontractor, or Governmental Entity, including the Defense Contract Audit
Agency, the Defense Contract Management Command, Defense Contract Administrative
Service Management Area, the Defense Criminal Investigative Service, any
governmental procurement agencies under the supervision of the Secretary of
Defense, any investigative agency, any Inspector General, the Department of
Justice, or the General Accounting Office (other than routine audits by resident
auditors, none of which is material to the business of the Company and its
subsidiaries, taken as a whole). Section 4.25(a) of the Company Disclosure
Schedule also briefly describes the current status of such matters.
(b) Section 4.25(b) of the Company Disclosure Schedule sets forth a list
and description of each settlement agreement concerning Government Contracts or
Government Bids between the Company or any of its subsidiaries and the U.S.
Government which currently has or is expected to have a binding effect on the
Company or its subsidiaries after the Effective Time, and under which the
Company or its subsidiaries have material unperformed obligations with respect
thereto.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as
follows:
SECTION 5.1 Organization and Qualification. Parent is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of Delaware
and each material subsidiary of Parent is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. Parent and each of
its material subsidiaries (including the Purchaser) has the requisite corporate
power and authority to own, operate or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction in which the nature of
its business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or in
good standing, would not have a Ma-
-27-
terial Adverse Effect on Parent. The term "Material Adverse Effect on Parent",
as used in this Agreement, means any change in or effect on the business,
financial condition or results of operations of Parent or any of its
subsidiaries that would be materially adverse to Parent and its subsidiaries
taken as a whole; provided, however, that "Material Adverse Effect on Parent"
-------- -------
shall not include any change, effect, condition, event or circumstance to the
extent attributable to (i) changes, effects, conditions, events or circumstances
that generally affect the industries in which Parent operates, (ii) general
economic conditions or change, effects, conditions or circumstances affecting
the U.S. securities markets generally or (iii) changes, effects, conditions,
events or circumstances arising from the announcement of the execution of this
Agreement.
SECTION 5.2 Authority Relative to this Agreement. Each of Parent and
------------------------------------
the Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and the Purchaser and the
consummation by Parent and the Purchaser of the transactions contemplated hereby
have been duly and validly authorized and approved by the respective Boards of
Directors of Parent and the Purchaser and by Parent as sole Shareholder of the
Purchaser and no other corporate proceedings on the part of Parent or the
Purchaser are necessary to authorize or approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Purchaser and, assuming the due and valid
authorization, execution and delivery by the Company, constitutes a valid and
binding obligation of each of Parent and the Purchaser enforceable against each
of them in accordance with its terms.
SECTION 5.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming (i) the filings required under the HSR Act and any foreign
or supranational antitrust laws are made and the waiting periods thereunder have
been terminated or have expired, (ii) the requirements of the Exchange Act and
any applicable state securities, "blue sky" or takeover law are met, (iii) the
requirements under applicable security and export control regulations are met
and (iv) the filing of the certificate of merger and other appropriate merger
documents, if any, as required by the BCL, is made, none of the execution and
delivery of this Agreement by Parent or the Purchaser, the consummation by
Parent or the Purchaser of the transactions contemplated hereby or compliance by
Parent or the Purchaser with any of the provisions hereof will (i) conflict with
or violate the organizational documents of Parent or the Purchaser, (ii)
conflict with or violate in any material respect any statute, ordinance, rule,
regulation, order, judgment, decree, permit or license applicable to Parent or
the Purchaser or any of their subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a Violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or the Purchaser or any of their subsidiaries is a party or by
which Parent or the Purchaser or any of their subsidiaries or any of their
respective properties or assets may be bound or affected, which would impair the
ability of Parent or the Purchaser to perform its obligations under this
Agreement, or prevent or materially delay the consummation of the transactions
contemplated hereby.
(b) None of the execution and delivery of this Agreement by Parent and
the Purchaser, the consummation by Parent and the Purchaser of the transactions
contemplated hereby
-28-
or compliance by Parent and the Purchaser with any of the provisions hereof will
require any Consent of any Governmental Entity, except for (i) compliance with
any applicable requirements of the Exchange Act and any state securities "blue
sky" or takeover law, (ii) the filing of a certificate of merger pursuant to the
BCL, and (iii) compliance with the HSR Act and any requirements of any foreign
or supranational antitrust laws.
(c) Neither Parent nor the Purchaser is known to be subject to foreign
ownership, control or influence ("FOCI") as that term is used under Section 3 of
the National Industrial Security Program Operating Manual published by the U.S.
Department of Defense pursuant to Executive Order No. 12829.
SECTION 5.4 Information. None of the information supplied or to be
-----------
supplied by Parent and the Purchaser in writing specifically for inclusion in
(i) the Schedule 14D-9, (ii) the Proxy Statement or (iii) the Other Filings
will, at the respective times filed with the SEC or such other Governmental
Entity and, in addition, in the case of the Proxy Statement, at the date it or
any amendment or supplement is mailed to shareholders, at the time of the
Special Meeting and 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 made therein, in light of the
circumstances under which they were made, not misleading.
SECTION 5.5 Financing. Parent has possession of, or has available to
---------
it under existing lines of credit, sufficient funds to consummate the
transactions contemplated by this Agreement, and will cause the Purchaser to
have sufficient funds available to consummate the Offer and the Merger and the
transactions contemplated hereby.
SECTION 5.6 Ownership of Purchaser; No Prior Activities.
-------------------------------------------
(a) Purchaser was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the Effective Time, all of the outstanding capital stock of
Purchaser will be owned directly by Parent. As of the Effective Time, there will
be no options, warrants or other rights (including registration rights),
agreements, arrangements or commitments to which Purchaser is a party of any
character relating to the issued or unissued capital stock of, or other equity
interests in, Purchaser or obligating Purchaser to grant, issue or sell any
shares of the capital stock of, or other equity interests in, Purchaser, by
sale, lease, license or otherwise. There are no obligations, contingent or
otherwise, of Purchaser to repurchase, redeem or otherwise acquire any shares of
the capital stock of Purchaser.
(c) As of the date hereof and the Effective Time, except for obligations
or liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Purchaser has not and will not
have incurred, directly or indirectly, through any subsidiary or affiliates, any
obligations or liabilities or engaged in any business activities of any type
whatsoever or entered into any agreements or arrangements with any person.
-29-
ARTICLE SIX
COVENANTS
SECTION 6.1 Conduct of Business of the Company. Except as required by
----------------------------------
this Agreement or otherwise with the prior written consent of Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of its subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its reasonable best efforts, and will cause each of its subsidiaries to use its
reasonable best efforts, to preserve intact the business organization of the
Company and each of its subsidiaries, to keep available the services of its and
their present officers and key employees, and to preserve the good will of those
having business relationships with it, including, without limitation,
maintaining satisfactory relationships with suppliers, distributors, customers,
licensors and others having business relationships with the Company. Without
limiting the generality of the foregoing, and except as otherwise required by
this Agreement or as set forth on Section 6.1 of the Company Disclosure
Schedule, the Company will not, and will not permit any of its subsidiaries to,
prior to the Effective Time, without the prior written consent of Parent:
(a) adopt any amendment to its Certificate of Incorporation or By-Laws
or comparable organizational documents or the Rights Agreement (other than the
amendment contemplated by Section 4.19);
(b) sell, pledge or encumber any stock owned by it in any of its
subsidiaries;
(c) (i) issue, reissue or sell, or authorize the issuance, reissuance or
sale of (A) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of Common Shares (and the related Rights), in accordance with the terms of the
instruments governing such issuance on the date hereof, pursuant to the exercise
of Options outstanding on the date hereof or the Convertible Debentures
outstanding on the date hereof pursuant to the terms of the governing instrument
related to such Convertible Debentures (or, if a Triggering Event (as defined in
the Rights Agreement) by a party other than Parent or the Purchaser shall occur,
Rights) or (B) any other securities in respect of, in lieu of, or in
substitution for, Common Shares outstanding on the date hereof, or (ii) make any
other changes in its capital structure;
(d) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock except for regular quarterly
dividends or the Common Shares declared and paid at times and in an amount
consistent with past practices other than between any of the Company and any of
its wholly owned subsidiaries;
(e) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities;
-30-
(f) increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees (whether from the Company or any
of its subsidiaries), or pay or award any benefit not required by any existing
plan or arrangement to any officer, director or employee (including, without
limitation, the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units pursuant to the Stock Plans or otherwise),
or grant any severance or termination pay to any officer, director or other
employee of the Company or any of its subsidiaries (other than as required by
existing agreements or policies described in the Company Disclosure Schedule),
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company or any of its subsidiaries or establish, adopt,
enter into, amend or waive any performance or vesting criteria or accelerate
vesting, exercisability or funding under any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, savings,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees of
the Company or its subsidiaries (any of the foregoing being an "Employee Benefit
Arrangement"), except, in each case, to the extent required by applicable law or
regulation or existing term of any such Employee Benefit Arrangement described
in the Company Disclosure Schedule, except for increases in compensation in the
ordinary course consistent with past practice (in timing and magnitude) for
employees other than officers, up to 2% of the payroll for such employees in the
aggregate;
(g) acquire, mortgage, encumber, sell, lease, license or dispose of any
significant assets (including Intellectual Property) or securities, except
pursuant to existing contracts or commitments or the sale or purchase of goods
in the ordinary course of business consistent with past practice, or enter into
any commitment or transaction outside the ordinary course of business consistent
with past practice other than transactions between a wholly owned subsidiary of
the Company and the Company or another wholly owned subsidiary of the Company;
(h) (i) incur, assume or pre-pay any long-term debt or incur or assume
any short-term debt, except that the Company and its subsidiaries may incur,
assume or pre-pay debt in the ordinary course of business in an amount not to
exceed $1,000,000 per day and $5,000,000 in the aggregate and for purposes
consistent with past practice under existing lines of credit, (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, (iii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
contingent or otherwise), except in the ordinary course of business consistent
with past practice and in accordance with their terms, (iv) make any loans,
advances or capital contributions to, or investments in, any other person,
except for loans, advances, capital contributions or investments between any
wholly owned subsidiary of the Company and the Company or another wholly owned
subsidiary of the Company, (v) authorize or make capital expenditures which are
in excess of $50,000 or $500,000 in the aggregate, (vi) accelerate or delay
collection of notes or accounts receivable in advance of or beyond their regular
due dates or the dates when the same would have been collected in the ordinary
course of business consistent with past practice, (vii) delay or accelerate
payment of any account payable beyond or in advance of its due date or the date
such liability would have been paid in the ordinary course of business
consistent with past practice, or (viii) vary the Company's inventory practices
in any material respect from the Company's past practices;
-31-
(i) settle or compromise any suit or claim or threatened suit or claim
where the amount involved is greater than $100,000;
(j) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any contract (and, in any case, only if
the amount involved is less than $200,000), (ii) waive, release, relinquish or
assign any contract (or any of the Company's rights thereunder), right or claim,
or (iii) cancel or forgive any indebtedness owed to the Company or any of its
subsidiaries;
(k) make any tax election inconsistent with past practice that is not
required by law or settle or compromise any tax liability;
(l) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to the Purchaser,
except in the ordinary course of business consistent with past practice;
(m) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or, except in the ordinary course of business consistent with past practice, any
assets;
(n) enter into any contract or agreement other than in the ordinary
course of business consistent with past practice;
(o) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any change in its methods of
accounting, including tax accounting policies and procedures;
(p) agree in writing or otherwise to take any of the foregoing actions
prohibited under this Section 6.1 or any action which would cause any
representation or warranty in this Agreement to be or become untrue or
incorrect; or
(q) make any Government Bid where the amount involved is greater than
$500,000; provided that if the profit margin to be received by the Company on
the bid is less than 5% then such amount shall not be greater than $100,000.
SECTION 6.2 Access to Information. Subject to applicable law, from the
---------------------
date of this Agreement until the Effective Time, the Company will, and will
cause its subsidiaries, and each of their respective officers, directors,
employees, counsel, advisors and representatives (collectively, the "Company
Representatives") to, give Parent and the Purchaser and their respective
officers, employees, counsel, advisors and representatives (collectively, the
"Parent Representatives") full access, during normal business hours, to the
offices and other facilities and to the books and records of the Company and its
subsidiaries and will cause the Company Representatives and the Company's
subsidiaries to furnish Parent, the Purchaser and the Parent Representatives
with such financial and operating data and such other information with respect
to the business and operations of the Company and its subsidiaries as Parent and
the Purchaser may from time to time reasonably request. The Company shall
furnish promptly to Parent and the Purchaser a copy of each report, schedule,
registration statement and other document filed by it or its subsidiaries during
such period pursuant to the requirements of federal or state securities
-32-
laws. Parent and the Purchaser agree that any information furnished pursuant to
this Section 6.2 will be subject to the provisions of the letter agreement dated
September 13, 1999 between the Parent and the Company (the "Confidentiality
Agreement").
SECTION 6.3 Efforts.
-------
(a) Subject to the terms and conditions provided herein, each of the
Company, Parent and the Purchaser shall, and the Company shall cause each of its
subsidiaries to, cooperate and use all reasonable efforts to make, or cause to
be made, all filings necessary or proper under applicable laws and regulations,
and to take all other actions necessary or advisable to consummate and make
effective the transactions contemplated by this Agreement, including but not
limited to cooperation in the preparation and filing of the Offer Documents, the
Schedule 14D-9 and any actions or filings related thereto, the Proxy Statement,
any required filings under the HSR Act, or other foreign filings and any
amendments to any thereof, and cooperation in obtaining approvals necessary from
Government Entities to continue fully existing operations.
In addition, if at any time prior to the Effective Time any event or
circumstance relating to either the Company or Parent or the Purchaser or any of
their respective subsidiaries should be discovered by the Company or Parent, as
the case may be, which should be set forth in an amendment to the Offer
Documents or Schedule 14D-9, the discovering party will promptly inform the
other party of such event or circumstance. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
(b) Parent and the Company shall file as soon as practicable (but not
later than five business days in the case of the HSR Act filings) after the date
of this Agreement notifications under the HSR Act or under any material
applicable foreign statutes or regulations applicable to the Merger and shall
respond as promptly as practicable to all inquiries or requests received from
the Federal Trade Commission or the Antitrust Division of the Department of
Justice or such other domestic or foreign antitrust regulatory authority, as
applicable for additional information or documentation and shall respond as
promptly as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters. The parties shall cooperate with each other in connection with the
making of all such filings or responses, including providing copies of all such
documents to the other party and its advisors prior to filing or responding.
(c) Each of the parties will use its reasonable best efforts to obtain
as promptly as practicable all Consents of any Governmental Entity or any other
person required in connection with, and waivers of any Violations that may be
caused by, the consummation of the transactions contemplated by the Offer and
this Agreement, provided, however, that, notwithstanding any other provision of
-------- -------
this Agreement, the Company shall not, without Parent's prior written consent,
and Parent shall not be obligated to, agree to divest, hold separate or
otherwise materially restrict the use or operation of any business or assets of
Parent or the Company, which divestiture, agreement to hold separate, or other
restriction would reasonably be expected to have a Material Adverse Effect on
Parent or the Company, as the case may be. ▇▇▇▇▇▇▇ represents that it cur-
-33-
rently has no pending acquisitions in the motion controls area (except for those
being announced on the date hereof) and there are no such acquisitions currently
intended in the near term.
SECTION 6.4 Public Announcements. The Company, on the one hand, and
--------------------
Parent and the Purchaser, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Offer, the Merger and the other transactions
contemplated hereby, agree to provide to the other party for review a copy of
any such press release or statement, and shall not issue any such press release
or make any such public statement prior to such consultation and review, unless
required by applicable law or any listing agreement with a securities exchange.
SECTION 6.5 Employee Benefit Arrangements.
-----------------------------
(a) Parent agrees that the Company will honor, and, from and after the
Effective Time, Parent will cause the Surviving Corporation to honor, in
accordance with their respective terms as in effect on the date hereof, the
employment, severance, bonus, supplemental retirement, and split dollar life
insurance agreements and arrangements to which the Company is a party which are
set forth on Section 6.5 of the Company Disclosure Schedule covering current and
former directors, officers and employees, subject to any amendment or
termination that may be permitted by the terms thereof.
(b) Parent agrees that (i) for the period ending December 31, 2000, the
Surviving Corporation shall continue the compensation and employee benefit and
welfare plans and programs of the Company other than those providing equity-
based compensation to the extent practicable as in effect on the date hereof,
and (ii) thereafter the Surviving Corporation shall provide employees of the
Company and its subsidiaries as a whole (A) compensation (including bonus and
incentive awards) programs and plans and (B) employee benefit and welfare plans,
programs, contracts, agreements and policies (including insurance and pension
plans), fringe benefits and vacation policies which are substantially the same
as or not less favorable in the aggregate to such employees than those generally
in effect with respect to similarly situated employees of Parent.
Notwithstanding the forgoing, in no event shall severance benefits available to
employees of the Company or its subsidiaries through the first anniversary of
the Effective Date be less favorable than the severance benefits in effect as of
the date of this Agreement, as set forth on Section 6.5 of the Company
Disclosure Schedule. Without limiting the generality of the foregoing, following
the Effective Time Parent shall provide, or cause to be provided, to persons who
are as of the Effective Time retired salaried employees of the Company and its
subsidiaries retiree medical benefits that are substantially comparable to those
provided to them as of the Effective Time.
(c) For all purposes under the employee benefit plans of Parent and its
affiliates providing benefits to each employee of the Company (a "Company
Employee") after the Effective Time, each Company Employee shall be credited
with his or her years of service with the Company and its affiliates before the
Effective Time, to the same extent as such Company Employee was entitled, before
the Effective Time, to credit for such service for purposes of vesting, service
and benefit accruals under any similar Plans, except to the extent such credit
would result in a duplication of benefits and except for purposes of accrual of
benefits under defined benefit pension plans. In addition, and without limiting
the generality of the foregoing: (i) each Com-
-34-
pany Employee shall be immediately eligible to participate, without any waiting
time, in any and all employee benefit plans sponsored by Parent and its
affiliates for the benefit of Company Employees (such plans, collectively, the
"New Plans") to the extent coverage under such New Plan replaces coverage under
a comparable Plan in which such Company Employee participated immediately before
the Effective Time (such plans, collectively, the "Old Plan"); and (ii) for
purposes of each New Plan providing medical, dental, pharmaceutical and/or
vision benefits to any Company Employee, Parent shall cause all pre-existing
condition exclusions and actively-at-work requirements of such New Plan to be
waived for such employee and his or her covered dependents to the extent
currently applicable to such persons.
SECTION 6.6 Indemnification.
---------------
(a) The certificate of incorporation and the by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Restated Certificate of
Incorporation and By-Laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law. Parent shall guarantee the obligations of the Surviving
Corporation with respect to the indemnification provisions contained in the
Surviving Corporation's certificate of incorporation and by-laws.
(b) Parent and the Surviving Corporation shall, until the fourth
anniversary of the Effective Time or such earlier date as may be mutually agreed
upon by Parent, the Surviving Corporation, and the applicable Indemnified Party,
cause to be maintained in effect, to the extent available, the policies of
directors' and officers' liability insurance maintained by the Company and its
subsidiaries as of the date hereof (or policies of at least the same coverage
and amounts containing terms that are not less advantageous to the insured
parties) with respect to claims arising from facts or events that occurred on or
prior to the Effective Time. In lieu of the purchase of such insurance by Parent
or the Surviving corporation, the Surviving Corporation may purchase a six-year
extended reporting period endorsement ("reporting tail coverage") under the
Company's directors' and liability insurance coverage. In no event shall Parent
or the Surviving Corporation be obligated to expend in order to maintain or
procure insurance coverage pursuant to this paragraph (b) any amount per year
(in the case of ongoing annual coverage) in excess of 150% of the aggregate
premiums paid by the Company and the Subsidiaries in the fiscal year ending
December 31, 1999 for directors' and officers' liability insurance, which amount
has been disclosed to Parent.
(c) The Company and, following the purchase of any Shares by Purchaser
pursuant to the Offer, Parent shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective,
indemnify, defend and hold harmless, and, from and after the Effective Time,
Parent shall cause the Surviving Corporation to the fullest extent permitted
under applicable law, to indemnify, defend and hold harmless, the present and
former officers, directors, employees and agents of the Company or any of its
subsidiaries in their capacities as such (each an "Indemnified Party") against
all losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring on or prior to the Effective Time (including, without
limitation, actions or omissions relating to the transactions contemplated
hereby).
-35-
(d) In the event Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 6.6.
(e) This Section 6.6 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Indemnified Parties and their
respective heirs, executors and personal representatives, and shall be binding
on all successors and assigns of the Company, Parent and the Surviving
Corporation. This Section 6.6 shall not limit or otherwise adversely affect any
rights any Indemnified Party may have under any agreement with the Company or
any of its subsidiary or the Company's or any such subsidiary's Certificate of
Incorporation or By-Laws.
SECTION 6.7 Notification of Certain Matters. Parent and the Company
-------------------------------
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Time or (ii)
to cause any covenant, condition or agreement under this Agreement not to be
complied with or satisfied, and (b) any failure of the Company, Parent or
Purchaser, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
--------
however, that no such notification shall affect the representations or
-------
warranties of any party or the conditions to the obligations of any party
hereunder. Each of the Company, Parent and the Purchaser shall give prompt
notice to the other parties hereof of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.
SECTION 6.8 Rights Agreement. The Company covenants and agrees that
----------------
it will not (i) redeem the Rights, (ii) amend the Rights Agreement or (iii) take
any action which would allow any Person (as defined in the Rights Agreement)
other than Parent or the Purchaser to acquire beneficial ownership of 20% or
more of the Common Shares without causing a Distribution Date or a Triggering
Event (as each such term is defined in the Rights Agreement) to occur. The Board
of Directors of the Company shall not make a determination that Parent, the
Purchaser or any of their respective Affiliates or Associates is an "Acquiring
Person" for purposes of the Rights Agreement.
SECTION 6.9 State Takeover Laws. The Company shall, upon the request
-------------------
of the Purchaser, take all reasonable steps to assist in any challenge by the
Purchaser to the validity or applicability to the transactions contemplated by
this Agreement, including the Offer and the Merger, of any state takeover law.
SECTION 6.10 No Solicitation.
---------------
(a) The Company shall, and shall direct its affiliates and their
respective officers, directors, employees, representatives and agents to
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any Acquisition
-36-
Transaction (as hereinafter defined). The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate or
encourage, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any merger, liquidation,
recapitalization, consolidation or other business combination involving the
Company or its subsidiaries or acquisition of more than 5% of capital stock or
any material portion of the assets of the Company or its subsidiaries, or any
combination of the foregoing (other than the Offer and the Merger) (an
"Acquisition Transaction"), or negotiate, explore or otherwise engage in
substantive discussions with any person (other than the Purchaser, Parent or
their respective directors, officers, employees, agents and representatives)
with respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by this Agreement;
provided that the Company may, prior to the purchase of Common Shares pursuant
to the Offer, furnish information to, and negotiate or otherwise engage in
substantive discussions with, any person who delivers a written proposal for an
Acquisition Transaction if the Company Board determines in good faith by a
majority vote, after consultation with its outside legal counsel and financial
advisors, that such a transaction is reasonably likely to result in a
transaction that is superior in comparison to the Offer and the Merger and the
terms of this Agreement to the Company's shareholders from a financial point of
view and to the Company, taking into account the terms and conditions thereof,
the likelihood of consummation and the time required to complete such
transaction (a "Superior Proposal"), and prior to furnishing non-public
information to any such party, the Company shall have (i) entered into a
confidentiality agreement with such party containing confidentiality terms at
least as favorable to the Company as those of the Confidentiality Agreement and
(ii) shall provide Parent or Purchaser copies of all proposed written
agreements, arrangements, or understandings, including the forms of any
agreements supplied by third parties, and all applicable financial statements
and evidence of any planned financing with respect to such Superior Proposal
(and a description of all material oral agreements with respect thereto).
(b) From and after the execution of this Agreement, the Company shall
immediately advise the Purchaser in writing of the receipt, directly or
indirectly, of any proposal with respect to an Acquisition Transaction, and of
any discussions, negotiations or proposals relating to an Acquisition
Transaction, identify the offeror and furnish to the Purchaser a copy of any
such proposal, if it is in writing, or a written summary of any such proposal
relating to an Acquisition Transaction if it is not in writing. The Company
shall promptly advise Parent of any significant developments relating to such
proposal, including the results of any discussions or negotiations with respect
thereto.
(c) Nothing contained in this Section 6.10 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or as otherwise required by law.
SECTION 6.11 Parent Agreement Concerning Purchaser. Parent agrees to
-------------------------------------
cause the Purchaser to comply with its obligations under this Agreement.
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SECTION 6.12 Convertible Debentures. As of the Effective Time, Parent
----------------------
shall enter into such supplemental indentures as may be required under the terms
of the indenture for the Convertible Debentures.
ARTICLE SEVEN
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions. The respective obligations of Parent, the
----------
Purchaser and the Company to consummate the Merger are subject to the
satisfaction, at or before the Effective Time, of each of the following
conditions:
(a) Shareholder Approval. The shareholders of the Company shall have
--------------------
duly approved the transactions contemplated by this Agreement, if required by
applicable law.
(b) Purchase of Common Shares. The Purchaser shall have accepted for
-------------------------
payment and paid for Common Shares in an amount sufficient to meet the Minimum
Condition and otherwise pursuant to the Offer in accordance with the terms
hereof, provided, however, that this condition shall be deemed to be satisfied
-------- -------
with respect to the obligation of Parent and the Purchaser to effect the Merger
if the Purchaser fails to accept for payment or pay for Common Shares pursuant
to the Offer in violation of the terms of the Offer or of this Agreement.
(c) Injunctions; Illegality. The consummation of the Merger shall not be
-----------------------
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity and there
shall not have been any statute, rule or regulation enacted, promulgated or
deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger, or has the effect of making the acquisition of
Common Shares in the Merger illegal.
(d) Regulatory Approval. Any waiting period (and any extension thereof)
-------------------
under the HSR Act or under any material applicable foreign statutes or
regulations applicable to the Merger shall have expired or terminated.
ARTICLE EIGHT
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding approval thereof by the shareholders of the Company (with
any termination by Parent also being an effective termination by the Purchaser):
(a) by the mutual written consent of Parent and the Company, by action
of their respective Boards of Directors;
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(b) by Parent or the Company if (i) Purchaser fails to commence the
Offer on or prior to May 15, 2000 or (ii) Purchaser shall not have accepted for
payment and paid for the Common Shares pursuant to the Offer in accordance with
the terms hereof and thereof on or before September 30, 2000; provided, however,
-------- -------
that a party may not terminate this Agreement pursuant to this Section 8.1(b) if
such failure to accept for payment and pay for the Common Shares is due to such
party's material breach of this Agreement;
(c) by Parent or the Company if the Offer is terminated or withdrawn
pursuant to its terms and the terms of this Agreement without any Common Shares
being purchased thereunder, other than due to a breach hereof by the terminating
party;
(d) by Parent or the Company if any court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Common Shares pursuant to the Offer
or the Merger and such order, decree or ruling or other action shall have become
final and nonappealable, provided that the party seeking to terminate this
--------
Agreement shall have used its reasonable best efforts to remove or lift such
order, decree or ruling;
(e) by the Company if, prior to the acceptance for payment of Common
Shares pursuant to the Offer, the Company Board shall have determined to
recommend a Superior Proposal to its shareholders and to enter into a binding
written agreement concerning such Superior Proposal after making the
determination required by Section 6.10(a); provided that the Company may not
--------
exercise its right to terminate under this Section 8.1(e) (and may not enter
into a binding written agreement with respect to any Superior Proposal) unless
and until (i) the Company shall have provided the Purchaser and Parent prior
written notice at least five business days prior to such termination that the
Company Board has authorized and intends to effect the termination of this
Agreement pursuant to this Section 8.1(e), including copies of all proposed
written agreements, arrangements, or understandings, including the forms of any
agreements supplied by third parties, and all applicable financial statements
and evidence of any planned financing with respect to such Superior Proposal
(and a description of all material oral agreements with respect thereto), (ii)
the Company Board shall have determined, in good faith and after consultation
with its legal and financial advisors, that the foregoing Acquisition
Transaction constituted at the time of its determination to terminate this
Agreement and, at the end of the 5-business day period referred to in clause (i)
above still constitutes a Superior Proposal and (iii) prior to such termination,
the Company shall have paid to Parent the Termination Fee and the Expense Fee
described in Section 8.3(b);
(f) by Parent prior to the purchase of Common Shares pursuant to the
Offer, if the Company Board (i) shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in any manner adverse to the Purchaser or
Parent its approval or recommendation of the Offer, this Agreement or the
Merger, (ii) shall have approved or recommended an Acquisition Transaction,
(iii) or the Company shall have breached Section 6.8, or (iv) shall have
resolved to effect any of the foregoing;
(g) by Parent prior to the purchase of Common Shares pursuant to the
Offer if the Minimum Condition (as defined in Annex I) shall not have been
satisfied by the close of busi-
-39-
ness on the business day immediately preceding September 30, 2000 and an
Acquisition Transaction shall have been publicly announced or disclosed.
SECTION 8.2 Effect of Termination. In the event of the termination of
---------------------
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party or its
directors, officers or shareholders, other than the provisions of the last
sentence of Section 6.2 and the provisions of this Section 8.2 and Section 8.3,
which shall survive any such termination. Nothing contained in this Section 8.2
shall relieve any party from liability for any willful breach of this Agreement.
SECTION 8.3 Fees and Expenses.
-----------------
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
the Offer, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such costs and expenses.
(b) In the event that this Agreement is terminated pursuant to Section
8.1(e) or Section 8.1(f) (other than Section 8.1(f)(i) if no Acquisition
Proposal shall have been publicly announced or disclosed), then the Company
shall promptly (and in any event within one business day after such termination
or, in the case of any such termination by the Company, prior to such
termination) pay Parent an amount equal to (i) a termination fee of $10,000,000
(the "Termination Fee"), provided that in no event shall more than one
Termination Fee be payable by the Company plus (ii) Parent's aggregate Expenses
not exceeding $1,000,000 (the "Expense Fee"). Parent's "Expenses" shall mean all
documented out-of-pocket fees and expenses incurred or paid by or on behalf of
Parent in connection with or in contemplation of the Merger or the consummation
of any of the transactions contemplated by this Agreement, including all fees
and expenses of counsel, investment banking firms, accountants, experts and
consultants to Parent.
(c) In the event that this Agreement is terminated pursuant to Section
8.1(f)(i) (if no Acquisition Proposal shall have been publicly announced or
disclosed) or Section 8.1(g) hereof and within 12 months of the date of
termination of this Agreement a transaction constituting an Acquisition
Transaction is consummated, the Company shall, prior to or simultaneously with
the consummation of such transaction, pay Parent the Termination Fee and the
Expense Fee; provided, however, that in no event shall the Company be obligated
-------- -------
to pay more than one Termination Fee and Expense Fee pursuant to this Section
8.3.
(d) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the costs and expenses (including attorneys' and expert witness fees)
incurred in connection with such action.
SECTION 8.4 Amendment. Subject to Section 1.3(c), this Agreement may
---------
be amended by the Company, Parent and the Purchaser at any time before or after
any approval of this Agreement by the shareholders of the Company but, after any
such approval, no amendment shall be made which decreases the Merger Price or
which adversely affects the rights of the Company's shareholders hereunder
without the approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
-40-
SECTION 8.5 Extension; Waiver. Subject to Section 1.3(c), at any time
-----------------
prior to the Effective Time, Parent and the Purchaser, on the one hand, and the
Company, on the other hand, may (i) extend the time for the performance of any
of the obligations or other acts of the other, (ii) waive any inaccuracies in
the representations and warranties contained herein of the other or in any
document, certificate or writing delivered pursuant hereto by the other or (iii)
waive compliance by the other with any of the agreements or conditions. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE NINE
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 3.2 and Section 6.6 shall survive the Effective Time indefinitely
(except to the extent a shorter period of time is explicitly specified therein).
SECTION 9.2 Entire Agreement; Assignment.
----------------------------
(a) This Agreement (including the documents and the instruments referred
to herein, including, without limitation, the Confidentiality Agreement)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder will be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party (except that Parent may assign its rights and the Purchaser may assign its
rights, interest and obligations to any direct or indirect subsidiary of Parent
without the consent of the Company, provided that no such assignment shall
relieve Parent of any liability for any breach by such assignee). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.3 Validity. The invalidity or unenforceability of any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.4 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
-41-
If to Parent or the Purchaser:
▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Kollmorgen Corporation
Reservoir Place, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Shearman & Sterling
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ O'M ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 9.5 Governing Law; Jurisdiction. This Agreement shall be
---------------------------
governed by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal or state court sitting in the State of Delaware.
-42-
SECTION 9.6 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 9.8 Parties in Interest. Except with respect to Section 6.6
-------------------
(which is intended to be for the benefit of the persons identified therein, and
may be enforced by such persons), this Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 9.9 Certain Definitions. As used in this Agreement:
-------------------
(a) the term "affiliate", as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act); and
(c) the term "Subsidiary" or "subsidiaries" means, with respect to
Parent, the Company or any other person, any corporation, partnership, joint
venture or other legal entity of which Parent, the Company or such other person,
as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to more than 50% of the vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
SECTION 9.10 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
-43-
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its respective officer thereunto duly authorized,
all as of the day and year first above written.
▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
KING DC ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
KOLLMORGEN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
-44-
ANNEX I
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or, subject to
any applicable rules and regulations of the Commission, including Rule 14e-1(c)
promulgated under the Exchange Act, pay for any tendered Common Shares and may
terminate or, subject to the terms of the Merger Agreement, amend the Offer, if
(i) there shall not be validly tendered and not properly withdrawn prior to the
Expiration Date for the Offer that number of Common Shares which, when added to
any Common Shares already owned by Parent or any of its subsidiaries, represents
at least two-thirds of the total number of outstanding Common Shares on a fully
diluted basis on the date of purchase (not taking into account the Rights) (the
"Minimum Condition"), (ii) any applicable waiting period or approval under the
HSR Act or under any applicable foreign statutes or regulations shall not have
expired or been terminated or obtained prior to the Expiration Date, (iii) all
consents from third parties shall have been obtained except for those the
failure of which to be obtained would not reasonably be expected to have a
Material Adverse Effect on the Company, or (iv) at any time on or after May 4,
2000 and prior to the time of acceptance for payment for any Common Shares, any
of the following events (each, an "Event") shall occur:
(a) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, enforced, promulgated, amended, issued or deemed applicable to
the Offer, by any legislative body, court, government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
other than the application of the waiting period provisions of the HSR
Act to the Offer or to the Merger, that would reasonably be expected to,
directly or indirectly: (i) make illegal or otherwise prohibit
consummation of the Offer or the Merger, (ii) prohibit or materially
limit the ownership or operation by Parent or the Purchaser of all or
any material portion of the business or assets of the Company or any of
its subsidiaries taken as a whole or compel Parent or the Purchaser to
dispose of or hold separately all or any material portion of the
business or assets of Parent or the Purchaser or the Company or any of
its subsidiaries taken as a whole, or seek to impose any material
limitation on the ability of Parent or the Purchaser to conduct its
business or own such assets, in any such case under this clause (ii),
which would reasonably be expected to have a Material Adverse Effect on
Parent or the Company, as the case may be, (iii) impose material
limitations on the ability of Parent or the Purchaser effectively to
acquire, hold or exercise full rights of ownership of the Common Shares,
including, without limitation, the right to vote any Common Shares
acquired by the Purchaser or Parent pursuant to the Offer on all matters
properly presented to the Company's shareholders, (iv) require
divestiture by Parent or the Purchaser of any Common Shares, or (v)
result in a Material Adverse Effect on the Company; or
(b) there shall be instituted or pending any action or
proceeding by any Governmental Entity that would reasonably be expected
to result in, any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above or by any third party for which there is a
substantial likelihood of resulting in any of the consequences referred
to in clauses (i) through (v) of paragraph (a) above; or
(c) since the date of the Merger Agreement, any change shall
have occurred and be continuing in the business, financial condition or
results of operations of the Company or any of its subsidiaries that
has, or could reasonably be expected to have, a Material Adverse Effect
on the Company; or
(d) (i) the Company Board or any committee thereof shall have
withdrawn or shall have modified or amended in a manner adverse to
Parent or the Purchaser, the approval, adoption or recommendation, as
the case may be, of the Offer or the Merger Agreement, or shall have
approved or recommended any Acquisition Transaction, (ii) a Person shall
have entered into a definitive agreement or an agreement in principle
with the Company with respect to an Acquisition Transaction, or (iii)
the Company Board or any committee thereof shall have resolved to do or
enter into any of the foregoing; or
(e) the Company and the Purchaser and Parent shall have reached
an agreement that the Offer or the Merger Agreement be terminated, or
the Merger Agreement shall have been terminated in accordance with its
terms; or
(f) any of the representations and warranties of the Company set
forth in the Merger Agreement, when read without any exception or
qualification as to materiality or Material Adverse Effect on the
Company, shall not be true and correct, as if such representations and
warranties were made at the time of such determination (except as to any
such representation or warranty which speaks as of a specific date,
which must be untrue or incorrect as of such specific date) except where
the failure to be so true and correct would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Company; or
(g) the Company shall have failed to perform in any material
respect or to comply in any material respect with any of its material
obligations, covenants or agreements under the Merger Agreement; or
(h) there shall have occurred, and continue to exist, (i) any
general suspension of, or limitation on prices for, trading in
securities on the New York Stock Exchange or on the over-the-counter
stock market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ"), (ii) any decline
of at least 25% in either the Dow ▇▇▇▇▇ Average of Industrial Stocks or
the Standard & Poor's 500 Index from the close of business on the last
trading day immediately preceding the date of the Merger Agreement
through the applicable Expiration Date, or (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States.
The foregoing conditions (including those set forth in clauses (i),
(ii) and (iii) of the initial paragraph) are for the benefit of Parent and the
Purchaser and may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to any such conditions and may be waived by Parent or
the Purchaser in whole or in part at any time and from time to time in their
reasonable discretion, in each case, subject to the terms of the Merger
Agreement. The failure by Parent or the Purchaser at any time to exercise any
of the foregoing rights shall not be
-2-
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
appended.
-3-