EXHIBIT 1
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CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
AMONG
GENERAL ELECTRIC COMPANY,
EMERALD MERGER CORP.
AND
MARQUETTE MEDICAL SYSTEMS, INC.
DATED AS OF SEPTEMBER 20, 1998
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF MERGER
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ARTICLE I
THE MERGER.......................................................................... 2
Section 1.1 The Merger............................................................. 2
Section 1.2 Effective Time......................................................... 2
Section 1.3 Effects of the Merger.................................................. 2
Section 1.4 Charter and Bylaws; Directors and Officers............................. 2
Section 1.5 Conversion of Securities............................................... 3
Section 1.6 Parent to Make Certificates Available.................................. 3
Section 1.7 Dividends; Transfer Taxes; Withholding................................. 4
Section 1.8 No Fractional Securities............................................... 5
Section 1.9 Return of Exchange Fund................................................ 5
Section 1.10 No Further Ownership Rights in Company Common Stock................... 5
Section 1.11 Closing of Company Transfer Books..................................... 6
Section 1.12 Lost Certificates..................................................... 6
Section 1.13 Further Assurances.................................................... 6
Section 1.14 Closing............................................................... 6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.................................... 7
Section 2.1 Organization, Standing and Power....................................... 7
Section 2.2 Authority.............................................................. 7
Section 2.3 Consents and Approvals; No Violation................................... 8
Section 2.4 Parent Common Stock to be Issued in the Merger......................... 9
Section 2.5 SEC Documents and Other Reports........................................ 9
Section 2.6 Registration Statement and Proxy Statement............................. 9
Section 2.7 Absence of Certain Changes or Events................................... 10
Section 2.8 Reorganization......................................................... 10
Section 2.9 Operations of Sub...................................................... 10
Section 2.10 Brokers............................................................... 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 10
Section 3.1 Organization, Standing and Power....................................... 10
Section 3.2 Capital Structure...................................................... 11
Section 3.3 Authority.............................................................. 12
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Section 3.4 Consents and Approvals; No Violation................................... 12
Section 3.5 SEC Documents and Other Reports........................................ 13
Section 3.6 Registration Statement and Proxy Statement............................. 14
Section 3.7 Absence of Certain Changes or Events................................... 14
Section 3.8 Permits and Compliance................................................. 15
Section 3.9 Tax Matters............................................................ 16
Section 3.10 Actions and Proceedings............................................... 17
Section 3.11 Certain Agreements.................................................... 18
Section 3.12 ERISA................................................................. 18
Section 3.13 Compliance with Worker Safety Laws.................................... 20
Section 3.14 Liabilities; Products................................................. 20
Section 3.15 Labor Matters......................................................... 21
Section 3.16 Intellectual Property; Year 2000...................................... 21
Section 3.17 Opinion of Financial Advisor.......................................... 23
Section 3.18 State Takeover Statutes............................................... 23
Section 3.19 Required Vote of Company Shareholders................................. 23
Section 3.20 Reorganization........................................................ 23
Section 3.21 Accounts Receivable................................................... 23
Section 3.22 Inventories........................................................... 24
Section 3.23 Environmental Matters................................................. 24
Section 3.24 Suppliers............................................................. 25
Section 3.25 Insurance............................................................. 25
Section 3.26 Accuracy of Information............................................... 26
Section 3.27 Transactions with Affiliates.......................................... 26
Section 3.29 Brokers............................................................... 27
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS........................................... 28
Section 4.1 Conduct of Business by the Company Pending the Merger.................. 28
Section 4.2 No Solicitation........................................................ 30
Section 4.3 Third Party Standstill Agreements...................................... 31
Section 4.4 Reorganization......................................................... 32
ARTICLE V
ADDITIONAL AGREEMENTS............................................................... 32
Section 5.1 Shareholder Meeting.................................................... 32
Section 5.2 Preparation of the Registration Statement and the Proxy Statement...... 32
Section 5.3 Access to Information.................................................. 33
Section 5.4 Compliance with the Securities Act..................................... 33
Section 5.5 Stock Exchange Listings................................................ 33
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Section 5.6 Fees and Expenses...................................................... 33
Section 5.7 Company Stock Options.................................................. 35
Section 5.8 Reasonable Best Efforts................................................ 37
Section 5.9 Public Announcements................................................... 37
Section 5.10 Real Estate Transfer and Gains Tax.................................... 37
Section 5.11 State Takeover Laws................................................... 38
Section 5.12 Indemnification; Directors and Officers Insurance..................... 38
Section 5.13 Notification of Certain Matters....................................... 38
Section 5.14 Consulting Agreement.................................................. 39
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER.................................................. 39
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger............. 39
Section 6.2 Conditions to Obligation of the Company to Effect the Merger........... 40
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger....... 41
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER................................................... 43
Section 7.1 Termination............................................................ 43
Section 7.2 Effect of Termination.................................................. 45
Section 7.3 Amendment.............................................................. 45
Section 7.4 Waiver................................................................. 45
ARTICLE VIII
GENERAL PROVISIONS.................................................................. 46
Section 8.1 Non-Survival of Representations and Warranties......................... 46
Section 8.2 Notices................................................................ 46
Section 8.3 Interpretation......................................................... 47
Section 8.4 Counterparts........................................................... 47
Section 8.5 Entire Agreement; No Third-Party Beneficiaries......................... 48
Section 8.6 Governing Law.......................................................... 48
Section 8.7 Assignment............................................................. 48
Section 8.8 Severability........................................................... 48
Section 8.9 Enforcement of this Agreement.......................................... 48
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of September 20, 1998 (this
"Agreement"), among General Electric Company, a New York corporation ("Parent"),
Emerald Merger Corp., a Wisconsin corporation and a wholly-owned subsidiary of
Parent ("Sub"), and Marquette Medical Systems, Inc., a Wisconsin corporation
(the "Company") (Sub and the Company being hereinafter collectively referred to
as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable the merger of Sub and the Company
(the "Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding Common Share, par value $.10 per share, of
the Company ("Company Common Stock") not owned directly or indirectly by Parent
or the Company will be converted into shares of Common Stock, par value $.16 per
share, of Parent ("Parent Common Stock"), and the respective Boards of Directors
of Sub and the Company have approved and adopted this Agreement;
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective shareholders;
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith (i) Parent and the Company are entering into
the Stock Option Agreement dated as of the date hereof (the "Stock Option
Agreement") in the form of the attached Exhibit A and (ii) Parent and one of the
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shareholders of the Company are entering into the Shareholder Agreement dated as
of the date hereof (the "Shareholder Agreement") in the form of the attached
Exhibit B; and
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WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
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hereof, and in accordance with the Wisconsin Business Corporation Law (the
"WBCL"), Sub shall be merged with and into the Company at the Effective Time (as
hereinafter defined). Following the Merger, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the WBCL. Notwithstanding anything to the
contrary herein, at the election of Parent, any direct wholly-owned Subsidiary
(as hereinafter defined) of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties agree to execute an
appropriate amendment to this Agreement, in form and substance reasonably
satisfactory to Parent and the Company, in order to reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective when
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articles of merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of the WBCL, are filed with the Secretary of State of the
State of Wisconsin; provided, however, that, upon mutual consent of the
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Constituent Corporations, the Articles of Merger may provide for a later date of
effectiveness of the Merger not more than 30 days after the date the Articles of
Merger are filed. When used in this Agreement, the term "Effective Time" shall
mean the date and time at which the Articles of Merger are accepted for record
or such later time established by the Articles of Merger. The filing of the
Articles of Merger shall be made on the date of the Closing (as defined in
Section 1.14).
Section 1.3 Effects of the Merger. (a) The Merger shall have the
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effects set forth in Section 1106 of the WBCL.
Section 1.4 Charter and Bylaws; Directors and Officers. (a) At the
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Effective Time, the Amended and Restated Articles of Incorporation, as amended,
of the Company (the "Company Charter") shall be the Articles of Incorporation of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law. At the Effective Time, the Amended and Restated
Bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter changed or
amended as provided therein or by the Articles of Incorporation.
(b) The directors of Sub at the Effective Time of the Merger shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be. The officers of the Company at the Effective
Time of the Merger shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
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Section 1.5 Conversion of Securities. As of the Effective Time, by
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virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01
per share, of Sub shall be converted into one validly issued, fully paid
and nonassessable Common Share of the Surviving Corporation.
(b) All shares of Company Common Stock that are held in the treasury
of the Company or by any wholly-owned Subsidiary of the Company and any
shares of Company Common Stock owned by Parent or by any wholly-owned
Subsidiary of Parent shall be cancelled and no capital stock of Parent or
other consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof, each
share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be cancelled in accordance with
Section 1.5(b)) shall be converted into the right to receive the number of
shares of Parent Common Stock determined by dividing $45.00 by the Average
Parent Share Price (as defined below) and rounding the result to the
nearest one thousandth of a share (the "Merger Consideration"); provided,
however, that if between the first day of the Valuation Period (as defined
below) and the Effective Time, the outstanding shares of Parent Common
Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, the Merger Consideration shall be correspondingly adjusted to the
extent appropriate to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. The "Average Parent Share Price" means the average of the last
sales prices per share of Parent Common Stock on the New York Stock
Exchange, Inc. (the "NYSE") Composite Tape for the 10 consecutive trading
days ending on the trading day which is five days prior to the Closing Date
(the "Valuation Period"). All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be
cancelled and retired and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive any dividends and other distributions in accordance with
Section 1.7, certificates representing the shares of Parent Common Stock
into which such shares are converted and any cash, without interest, in
lieu of fractional shares to be issued or paid in consideration therefor
upon the surrender of such certificate in accordance with Section 1.6.
Section 1.6 Parent to Make Certificates Available. (a) Exchange of
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Certificates. Parent shall authorize a bank or trust company (or such other
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person or persons as shall be reasonably acceptable to Parent and the Company)
to act as Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Parent shall deposit with the Exchange
Agent, in trust for the holders of shares of Company Common Stock converted in
the Merger, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 1.5(c) in exchange for outstanding shares of Company Common
Stock and cash, as required to make
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payments in lieu of any fractional shares pursuant to Section 1.8 (such cash and
shares of Parent Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall deliver the Parent Common Stock contemplated to be issued
pursuant to Section 1.5(c) out of the Exchange Fund. Except as contemplated by
Section 1.9, the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as practicable after the Effective
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Time, the Exchange Agent shall mail to each record holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock converted in the Merger (the
"Certificates") a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Exchange Agent, and shall
contain instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock and cash in
lieu of fractional shares). Upon surrender for cancellation to the Exchange
Agent of all Certificates held by any record holder of a Certificate, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock into which the shares
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article I, cash in lieu of any fractional share
in accordance with Section 1.8 and certain dividends and other distributions in
accordance with Section 1.7, and any Certificate so surrendered shall forthwith
be cancelled.
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or
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other distributions that are declared on or after the Effective Time on Parent
Common Stock, or are payable to the holders of record thereof on or after the
Effective Time, will be paid to any person entitled by reason of the Merger to
receive a certificate representing Parent Common Stock until such person
surrenders the related Certificate or Certificates, as provided in Section 1.6,
and no cash payment in lieu of fractional shares will be paid to any such person
pursuant to Section 1.8 until such person shall so surrender the related
Certificate or Certificates. Subject to the effect of applicable law, there
shall be paid to each record holder of a new certificate representing such
Parent Common Stock: (i) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of Parent Common Stock represented
by such new certificate and having a record date on or after the Effective Time
and a payment date prior to such surrender; (ii) at the appropriate payment date
or as promptly as practicable thereafter, the amount of any dividends or other
distributions payable with respect to such shares of Parent Common Stock and
having a record date on or after the Effective Time but prior to such surrender
and a payment date on or subsequent to such surrender; and (iii) at the time of
such surrender or as promptly as practicable thereafter, the amount of any cash
payable with respect to a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 1.8. In no event shall the person
entitled to receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions. If any cash or certificate
representing shares of Parent Common Stock is to be paid to or issued in a name
other than that in which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes
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required by reason of the issuance of certificates for such shares of Parent
Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Parent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement such amounts as Parent or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code or under any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the person in respect of which such deduction and withholding was
made by Parent or the Exchange Agent.
Section 1.8 No Fractional Securities. No certificates or scrip
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representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates pursuant to this Article I, and no Parent
dividend or other distribution or stock split shall relate to any fractional
share, and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of Parent. In lieu of any such fractional
share, each holder of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Parent Common Stock upon surrender of
Certificates for exchange pursuant to this Article I will be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(i) the Average Parent Share Price by (ii) the fractional interest to which such
holder would otherwise be entitled. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional
share interests, the Exchange Agent shall so notify the Parent, and the Parent
shall deposit such amount with the Exchange Agent and shall cause the Exchange
Agent to forward payments to such holders of fractional share interests subject
to and in accordance with the terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange
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Fund which remains undistributed to the former shareholders of the Company for
six months after the Effective Time shall be delivered to Parent, upon demand of
Parent, and any such former shareholders who have not theretofore complied with
this Article I shall thereafter look only to Parent for payment of their claim
for Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock and any dividends or distributions with respect to Parent Common Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of Company Common Stock for any such shares of Parent Common Stock, cash
and dividends and distributions held in the Exchange Fund which is delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.10 No Further Ownership Rights in Company Common Stock.
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All shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.11 Closing of Company Transfer Books. At the Effective
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Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock
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shall thereafter be made on the records of the Company. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, the Exchange
Agent or the Parent, such Certificates shall be cancelled and exchanged as
provided in this Article I.
Section 1.12 Lost Certificates. If any Certificate shall have been
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lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Exchange Agent, the posting by such person of a bond,
in such reasonable amount as Parent or the Exchange Agent may direct as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are
entitled pursuant to Section 1.8 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.7.
Section 1.13 Further Assurances. If at any time after the Effective
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Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.14 Closing. The closing of the transactions contemplated
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by this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Sidley & Austin, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., local time, no
later than the second business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived (if
permissible) or at such other time and place as Parent and the Company shall
agree.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
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Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub
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is a corporation duly organized, validly existing and in good standing under the
laws of its place of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent and
Sub are duly qualified to do business, and are in good standing, in each
jurisdiction where the character of their properties owned or held under lease
or the nature of their activities makes such qualification necessary, except
where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to Parent, any change or effect that is or could reasonably be
expected (as far as can be foreseen at the time) to be materially adverse to the
business, operations, properties, assets, liabilities, employee relationships,
customer or supplier relationships, earnings or results of operations, financial
projections or forecasts, or the business prospects and condition (financial or
otherwise), of Parent and its Subsidiaries, taken as a whole.
Section 2.2 Authority. On or prior to the date of this Agreement,
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the Boards of Directors of Parent and Sub have declared the Merger advisable and
the Board of Directors of Sub has approved and adopted this Agreement in
accordance with the WBCL. Each of Parent and Sub has all requisite corporate
power and authority to enter into this Agreement, Parent has all requisite
corporate power and authority to enter into the Stock Option Agreement and the
Shareholder Agreement, and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement by Parent and Sub,
the execution and delivery of the Stock Option Agreement and the Shareholder
Agreement by Parent and the consummation by Parent and Sub of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action (including all Board action) on the part of Parent and Sub,
subject to the filing of appropriate Articles of Merger as required by the WBCL.
This Agreement has been duly executed and delivered by Parent and Sub, the Stock
Option Agreement and the Shareholder Agreement has been duly executed and
delivered by Parent, and (assuming the valid authorization, execution and
delivery of this Agreement and the Stock Option Agreement by the Company, the
valid authorization, execution and delivery of the Shareholder Agreement by the
shareholder of the Company that is a party thereto and the validity and binding
effect hereof and thereof on the Company and such shareholder) this Agreement
constitutes the valid and binding obligation of Parent and Sub enforceable
against each of them in accordance with its terms and the Stock Option Agreement
and the Shareholder Agreement constitute the valid and binding obligation of
Parent enforceable against Parent in accordance with its terms. The filing of a
registration statement on Form S-4 with the Securities and Exchange Commission
(the "SEC") by Parent under the Securities Act of 1933, as amended (together
with the rules and regulations promulgated thereunder, the "Securities Act"),
for the purpose of registering the shares of Parent Common Stock to be issued in
the Merger (together with any amendments or supplements thereto, whether prior
to or after the
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effective date thereof, the "Registration Statement") has been duly authorized
by Parent's Board of Directors.
Section 2.3 Consents and Approvals; No Violation. Assuming that all
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consents, approvals, authorizations and other actions described in this Section
2.3 have been obtained and all filings and obligations described in this Section
2.3 have been made, and except as set forth in Section 2.3 of the letter dated
the date hereof and delivered on the date hereof by Parent to the Company, which
letter relates to this Agreement and is designated therein as the Parent Letter
(the "Parent Letter"), the execution and delivery of this Agreement, the Stock
Option Agreement and the Shareholder Agreement do not, and the consummation of
the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give to others a
right of termination, cancellation or acceleration of any obligation or result
in the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Parent or any of its Subsidiaries under, any provision of (i) the Certificate of
Incorporation or the By-Laws of Parent, each as amended to date, (ii) any
provision of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or (iv) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or under the Stock Option Agreement or the
Shareholder Agreement or prevent the consummation of any of the transactions
contemplated hereby or thereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to Parent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement, the Stock Option Agreement or the Shareholder
Agreement by Parent or Sub or is necessary for the consummation of the Merger
and the other transactions contemplated by this Agreement, the Stock Option
Agreement or the Shareholder Agreement, except for (i) in connection, or in
compliance, with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) the filing of the Articles of
Merger with the Secretary of State of the State of Wisconsin and appropriate
documents with the relevant authorities of other states in which the Company or
any of its Subsidiaries is qualified to do business, (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement,
the Stock Option Agreement or the Shareholder Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover laws
(the "State Takeover Approvals"), (v) such filings as may be required in
connection with the taxes described in Section 5.10, (vi) applicable
requirements, if any, of state securities or "blue sky" laws ("Blue Sky Laws")
and the NYSE, (vii) as may be required under foreign laws and (viii) such other
consents, orders, authorizations, registrations, declarations and
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filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform its obligations hereunder or under the
Stock Option Agreement or the Shareholder Agreement or prevent the consummation
of any of the transactions contemplated hereby or thereby.
Section 2.4 Parent Common Stock to be Issued in the Merger. All of
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the shares of Parent Common Stock issuable in exchange for Company Common Stock
at the Effective Time in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights created by statute, Parent's Certificate of Incorporation or
By-Laws or any agreement to which Parent is a party or by which Parent is bound
and will, when issued, be registered under the Securities Act and the Exchange
Act and registered or exempt from registration under applicable Blue Sky laws.
Section 2.5 SEC Documents and Other Reports. Parent has filed all
-------------------------------
required documents (including proxy statements) with the SEC since January 1,
1995 (the "Parent SEC Documents"). As of their respective dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Parent SEC Documents 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 therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of Parent
included in the Parent SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly presented in all material respects the
consolidated financial position of Parent and its consolidated Subsidiaries as
at the respective dates thereof and the consolidated results of their operations
and their consolidated cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments and to any
other adjustments described therein). Except as disclosed in the Parent SEC
Documents or as required by generally accepted accounting principles, Parent has
not, since December 31, 1997, made any change in the accounting practices or
policies applied in the preparation of financial statements.
Section 2.6 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the Shareholder Meeting (as defined in Section
5.1) will (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement, at
the time of the mailing of the Proxy Statement, at the time of the Shareholder
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 therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the
-9-
Effective Time any event with respect to Parent, its officers and directors or
any of its Subsidiaries shall occur which is required to be described in the
Proxy Statement or the Registration Statement, such event shall be so described,
and an appropriate amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the shareholders of the Company. The
Registration Statement will comply (with respect to Parent) as to form in all
material respects with the provisions of the Securities Act, and the Proxy
Statement will comply (with respect to Parent) as to form in all material
respects with the provisions of the Exchange Act.
Section 2.7 Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the Parent SEC Documents filed with the SEC prior to the date of
this Agreement, since December 31, 1997, there has been no event causing a
Material Adverse Effect on Parent, nor any development that would, individually
or in the aggregate, result in a Material Adverse Effect on Parent.
Section 2.8 Reorganization. To the actual knowledge of the Vice
--------------
President and Senior Counsel, Corporate Taxes of Parent, neither Parent nor any
of its Subsidiaries has taken any action or failed to take any action which
action or failure would jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
Section 2.9 Operations of Sub. Sub is a direct, wholly-owned
-----------------
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
Section 2.10 Brokers. No broker, investment banker or other person,
-------
is entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a
--------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Wisconsin and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the
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Company. For purposes of this Agreement, "Material Adverse Change" or "Material
Adverse Effect" means, when used with respect to the Company, any change or
effect that is or could reasonably be expected (as far as can be foreseen at the
time) to be materially adverse to the business, operations, properties, assets,
liabilities, employee relationships, customer or supplier relationships,
earnings or results of operations, financial projections or forecasts, or the
business prospects and condition (financial or otherwise), of the Company and
its Subsidiaries, taken as a whole.
Section 3.2 Capital Structure. As of the date hereof, the authorized
-----------------
capital stock of the Company consists of 30,000,000 shares of Company Common
Stock and 30,000,000 shares of preferred stock, no par value ("Company Preferred
Stock"). The Company has designated 200,000 shares of Company Preferred Stock
as "Series A Preferred Shares" and has reserved such shares for issuance upon
the exercise of preferred share purchase rights (the "Rights") under a Rights
Agreement dated as of December 18, 1996 (the "Company Rights Agreement"),
between the Company and Firstar Trust Company, as Rights Agent. The amendment
to the Company Rights Agreement in the form of Exhibit C has been duly approved
---------
by the Company's Board of Directors and duly executed and delivered by the
Company. At the close of business on September 18, 1998, (i) 18,306,862 shares
of Company Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable (except to the extent otherwise provided in
Section 180.0622(2)(b) of the WBCL) and free of preemptive rights, (ii) no
shares of Company Common Stock were held in the treasury of the Company or by
Subsidiaries of the Company and (iii) 886,178 shares of Company Common Stock
were reserved for future issuance pursuant to the Company's Amended and Restated
Stock Option Plan for Employees or the Company's Directors' (Non-employee) Stock
Option Plan, the E for M 1991 Stock Option Plan and the E for M 1991 Key
Employee Stock Option Plan or pursuant to any other plans assumed by the Company
in connection with any acquisition, business combination or similar transaction
(collectively, the "Company Stock Option Plans"). No shares of Company
Preferred Stock are outstanding. Section 3.2 of the letter dated the date
hereof and delivered on the date hereof by the Company to Parent, which relates
to this Agreement and is designated therein as the Company Letter (the "Company
Letter"), contains a correct and complete list as of the date of this Agreement
of each outstanding option to purchase shares of Company Common Stock issued
under the Company Stock Option Plans (collectively, the "Company Stock
Options"), including the holder, date of grant, exercise price and number of
shares of Company Common Stock subject thereto. Except for the Company Stock
Options, there are no options, warrants, calls, rights or agreements to which
the Company or any of its Subsidiaries is a party or by which any of them is
bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of the Company or any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement. Except as set forth in Section 3.2 of the Company
Letter, there are no outstanding contractual obligations of the Company or any
Subsidiary to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any capital stock of or any equity interests in any Subsidiary.
Each outstanding share of capital stock of each Subsidiary of the Company that
is a corporation is duly authorized, validly issued, fully paid and
nonassessable (except, with respect to any Subsidiary which is organized under
the laws of the State of Wisconsin, to the extent otherwise provided in Section
180.0622(2)(b) of the WBCL) and, except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, each
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such share is owned by the Company or another Subsidiary of the Company, free
and clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. The Company does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the shareholders of the Company on any matter. Exhibit 21 to
the Company's Annual Report on Form 10-K for the year ended April 30, 1998, as
filed with the SEC (the "Company Annual Report"), is a true, accurate and
correct statement in all material respects of all of the information required to
be set forth therein by the regulations of the SEC.
Section 3.3 Authority. On or prior to the date of this Agreement,
---------
the Board of Directors of the Company has unanimously declared the Merger
advisable and fair to and in the best interest of the Company and its
shareholders, approved and adopted this Agreement in accordance with the WBCL,
resolved to recommend the adoption of this Agreement by the Company's
shareholders and directed that this Agreement be submitted to the Company's
shareholders for adoption. The Company has all requisite corporate power and
authority to enter into this Agreement and the Stock Option Agreement, to
consummate the transactions contemplated by the Stock Option Agreement and,
subject to approval by the shareholders of the Company of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Stock Option Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action (including Board
action) on the part of the Company, subject, in the case of this Agreement, to
(x) approval and adoption of this Agreement by the shareholders of the Company
and (y) the filing of the Articles of Merger as required by the WBCL. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub and the Stock Option Agreement by Parent and
the validity and binding effect of the Agreement on Parent and Sub and the Stock
Option Agreement on Parent) constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. The
filing of the Proxy Statement with the SEC and the issuance of up to 3,643,066
shares of Company Common Stock pursuant to the Stock Option Agreement have been
duly authorized by the Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming that all
------------------------------------
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this Section
3.4 have been made, the execution and delivery of this Agreement and the Stock
Option Agreement do not, and the consummation of the transactions contemplated
hereby and thereby and compliance with the provisions hereof and thereof will
not, result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or result in the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Company Charter or the Amended and
Restated Bylaws of the Company, (ii) any provision of the comparable charter or
organization documents of any of the Company's Subsidiaries, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the Company
or any of its Subsidiaries or (iv)
-12-
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (ii), (iii) or (iv),
any such violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations hereunder or under the Stock Option Agreement or prevent
the consummation of any of the transactions contemplated hereby or thereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the Stock Option Agreement by the Company or is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement or the
Stock Option Agreement, except for (i) in connection, or in compliance, with the
provisions of the HSR Act, the Securities Act and the Exchange Act, (ii) the
filing of the Articles of Merger with the Secretary of State of the State of
Wisconsin and appropriate documents with the relevant authorities of other
states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement or the Stock Option Agreement, (iv)
such filings, authorizations, orders and approvals as may be required to obtain
the State Takeover Approvals, (v) such filings as may be required in connection
with the taxes described in Section 5.10, (vi) applicable requirements, if any,
of Blue Sky Laws or the Nasdaq National Market, (vii) as may be required under
foreign laws and (viii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform its
obligations hereunder or under the Stock Option Agreement or prevent the
consummation of any of the transactions contemplated hereby or thereby.
Section 3.5 SEC Documents and Other Reports. The Company has filed
-------------------------------
all required documents (including proxy statements) with the SEC since April 30,
1994 (the "Company SEC Documents"). As of their respective dates, the Company
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Company SEC Documents 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 therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of the Company
included in the Company SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
United States generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly presented in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as
disclosed in the Company SEC Documents or as required by generally
-13-
accepted accounting principles, the Company has not, since April 30, 1994, made
any change in the accounting practices or policies applied in the preparation of
financial statements.
Section 3.6 Registration Statement and Proxy Statement. None of the
------------------------------------------
information to be supplied by the Company for inclusion or incorporation by
reference in the Registration Statement or the Proxy Statement will (i) in the
case of the Registration Statement, at the time it becomes effective, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading or (ii) in the case of the Proxy Statement, at the time
of the mailing of the Proxy Statement, at the time of the Shareholder 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 therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or any of its
Subsidiaries shall occur which is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so described, and
an appropriate amendment or supplement shall be promptly filed with the SEC and,
as required by law, disseminated to the shareholders of the Company. The
Registration Statement will comply (with respect to the Company) as to form in
all material respects with the provisions of the Securities Act, and the Proxy
Statement will comply (with respect to the Company) as to form in all material
respects with the provisions of the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the Company SEC Documents filed with the SEC prior to the date of
this Agreement or as set forth in the Company Letter, since April 30, 1998, (A)
the Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would result in a Material Adverse Effect on the Company, (B)
the Company and its Subsidiaries have not sustained any loss or interference
with their business or properties from fire, flood, windstorm, accident or other
calamity (whether or not covered by insurance) that has had a Material Adverse
Effect on the Company, (C) there has been no change in the capital stock of the
Company except for the issuance of shares of the Company Common Stock pursuant
to Company Stock Options and no dividend or distribution of any kind declared,
paid or made by the Company on any class of its stock, (D) there has not been
(v) any adoption of a new Company Plan (as hereinafter defined), (w) any
amendment to a Company Plan materially increasing benefits thereunder, (x) any
granting by the Company or any of its Subsidiaries to any executive officer or
other key employee of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the date
of the most recent audited financial statements included in the Company SEC
Documents, (y) any granting by the Company or any of its Subsidiaries to any
such executive officer or other key employee of any increase in severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents or (z) any entry by
the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such executive officer or other key employee, (E)
there has not been any material changes in the amount or terms of the
indebtedness of the Company and its Subsidiaries from that described in the
Company Annual Report and (F) there has been no event causing a Material Adverse
Effect on the
-14-
Company, nor any development that would, individually or in the aggregate,
result in a Material Adverse Effect on the Company.
Section 3.8 Permits and Compliance. Each of the Company and its
----------------------
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, and no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company (as hereinafter defined), threatened, except where the suspension or
cancellation of any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the Company
nor any of its Subsidiaries is in violation of (A) its charter, by-laws or other
organizational documents, (B) any applicable law, ordinance, administrative, or
governmental rule or regulation, including any consumer protection, equal
opportunity, health, health care industry regulation and third-party
reimbursement laws including under any Federal Health Care Program (as defined
in Section 1128B(f) of the U.S. Federal Social Security Act (together with all
regulations promulgated thereunder, the "SSA")), or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or any
of its Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Without limiting the foregoing, the Company is in
compliance, in all material respects, with all current applicable statutes,
rules, regulations or orders administered or issued by the United States Food
and Drug Administration (the "FDA") or comparable foreign Governmental Entity;
the Company does not have knowledge of any facts which furnish any reasonable
basis for any warning letters from the FDA, Section 305 notices, or other
similar communications from the FDA or comparable foreign entity; and since
April 30, 1997, there have been no recalls, field notifications, alerts or
seizures requested or threatened relating to the Company's products, except set
forth in Section 3.8 of the Company Letter. The Company's products, where
required, are being marketed under valid 510(k) or Pre-Market Approval
Applications. To the Knowledge of the Company, there is no false information or
significant omission in any product application or product-related submission to
the FDA or comparable foreign Governmental Entity. The Company has obtained all
necessary regulatory approvals from any foreign regulatory agencies related to
the products distributed and sold by the Company. Neither the Company nor any
Subsidiary, nor the officers, directors, managing employees or agents (as those
terms are defined in 42 C.F.R. (S)1001.1001) of the Company or any Subsidiary:
(i) have engaged in any activities which are prohibited under, or are cause for
civil penalties or mandatory or permissive exclusion from, any Federal Health
Care Program under Sections 1128, 1128A, 1128B, or 1877 of SSA or related state
or local statutes, including knowingly and willfully offering, paying,
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind in
return for, or to induce, the purchase, lease, or order, or the arranging for or
recommending of the purchase, lease or order, of any item or service for which
payment may be made in whole or in part under any such program; (ii) have had a
civil monetary penalty assessed against them under Section 1128A of SSA; (iii)
have been excluded from participation under any Federal Health Care Program; or
(iv) have been convicted (as defined in 42 C.F.R. (S) 1001.2) of any of the
categories of offenses
-15-
described in Sections 1128(a) or 1128(b)(1), (b)(2), or (b)(3) of SSA. Except as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, there are no contracts or agreements of the Company or its
Subsidiaries having terms or conditions which would have a Material Adverse
Effect on the Company or having covenants not to compete that materially impair
the ability of the Company to conduct its cardiology diagnostic and patient
monitoring businesses as currently conducted or would reasonably be expected to
materially impair Parent's ability to conduct its medical systems businesses.
Except as set forth in the Company SEC Documents filed prior to the date of this
Agreement, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or, upon
the consummation by the Company of the transactions contemplated by this
Agreement or the Stock Option Agreement, will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or operations of
the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. "Knowledge of the Company" means the actual knowledge of the
directors and executive officers of the Company.
Section 3.9 Tax Matters. Except as otherwise set forth in Section
-----------
3.9 of the Company Letter, (i) the Company and each of its Subsidiaries have
filed all federal, and all material state, local, foreign and provincial, Tax
Returns (as hereinafter defined) required to have been filed, and such Tax
Returns are correct and complete, except to the extent that any failure to so
file or any failure to be correct and complete would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company; (ii) all Taxes (as hereinafter defined) shown to be due on such Tax
Returns have been timely paid or extensions for payment have been properly
obtained, or such Taxes are being timely and properly contested; (iii) the
Company and each of its Subsidiaries have complied with all rules and
regulations relating to the withholding of Taxes and the remittance of withheld
Taxes, except to the extent that any failure to comply with such rules and
regulations would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company; (iv) neither the Company nor
any of its Subsidiaries has waived any statute of limitations in respect of its
Taxes; (v) any Tax Returns required to have been filed by or with respect to the
Company and each of its Subsidiaries relating to federal and state income Taxes
have been examined by the Internal Revenue Service ("IRS") or the appropriate
state taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired; (vi) no issues
that have been raised by the relevant taxing authority in connection with the
examination of Tax Returns required to have been filed by or with respect to the
Company and each of its Subsidiaries are currently pending; (vii) all
deficiencies asserted or assessments made as a result of any examination of such
Tax Returns by any taxing authority have been paid in full; and (viii) no
withholding is required under Section 1445 of the Code in connection with the
Merger. To the Knowledge of the Company, the representations set forth in the
Company Tax Certificate attached to the Company Letter, if made on the date
hereof (assuming the Merger were consummated on the date hereof), would be true
and correct. For purposes of this Agreement: (i) "Taxes" means any federal,
state, local, foreign or provincial income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, withholding, alternative
or added
-16-
minimum, ad valorem, value-added, transfer or excise tax, or other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Entity, and (ii) "Tax Return" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any Tax,
including any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 3.10 Actions and Proceedings. Except as set forth in the
-----------------------
Company SEC Documents filed prior to the date of this Agreement, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its Subsidiaries,
or against or involving any of the present or former directors, officers,
employees, consultants, agents or shareholders of the Company or any of its
Subsidiaries, as such, any of its or their properties, assets or business or any
Company Plan (as hereinafter defined) that, individually or in the aggregate,
would have a Material Adverse Effect on the Company or materially impair the
ability of the Company to perform its obligations hereunder or under the Stock
Option Agreement. Except as set forth in Section 3.10 of the Company Letter,
there are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations (including claims for workers' compensation)
pending or, to the Knowledge of the Company, threatened against or involving the
Company or any of its Subsidiaries or any of its or their present or former
directors, officers, employees, consultants, agents or shareholders, as such, or
any of its or their properties, assets or business or any Company Plan that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company or materially impair the ability of the Company to perform its
obligations hereunder or under the Stock Option Agreement. There are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of its or their present or former officers, directors, employees,
consultants, agents or shareholders, as such, or any of its or their properties,
assets or business relating to the transactions contemplated by this Agreement
and the Stock Option Agreement.
Section 3.11 Certain Agreements. Except as set forth in Section 3.11
------------------
of the Company Letter, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan (collectively, the
"Compensation Agreements"), pension plan (as defined in Section 3(2) of ERISA)
or welfare plan (as defined in Section 3(1) of ERISA) any of the benefits of
which will be increased, or (except as contemplated by Section 5.7) the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the Stock Option Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or the Stock Option Agreement.
No holder of any option to purchase shares of Company Common Stock, or shares of
Company Common Stock granted in connection with the performance of services for
the Company or its Subsidiaries, is or will be entitled to receive cash from the
Company or any Subsidiary in lieu of or in exchange for such option or shares as
a result of the transactions contemplated by this Agreement or the Stock Option
Agreement. Section 3.11 of the Company Letter sets forth (i) for each officer,
director or employee who is a party to, or will receive benefits under, any
Compensation Agreement as a result of the transactions contemplated herein, the
total amount that each such person may receive, or is eligible
-17-
to receive, assuming that the transactions contemplated by this Agreement are
consummated on the date hereof, and (ii) the total amount of indebtedness owed
to the Company or its Subsidiaries from each officer, director or employee of
the Company and its Subsidiaries.
Section 3.12 ERISA. (a) Each Company Plan is listed in Section
-----
3.12(a) of the Company Letter. With respect to each Company Plan, the Company
has made available to Parent a true and correct copy of (i) the three most
recent annual reports (Form 5500) filed with the IRS, (ii) each such Company
Plan that has been reduced to writing and all amendments thereto, (iii) each
trust agreement, insurance contract or administration agreement relating to each
such Company Plan, (iv) a written summary of each unwritten Company Plan, (v)
the most recent summary plan description or other written explanation of each
Company Plan provided to participants, (vi) the three most recent actuarial
reports or valuations relating to a Company Plan subject to Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (vii) the
most recent determination letter and request therefore, if any, issued by the
IRS with respect to any Company Plan intended to be qualified under section
401(a) of the Code, (viii) any request for a determination currently pending
before the IRS and (ix) all correspondence with the IRS, the Department of
Labor, the SEC or Pension Benefit Guaranty Corporation relating to any
outstanding controversy. Except as would not have a Material Adverse Effect on
the Company, each Company Plan complies in all respects with ERISA, the Code and
all other applicable statutes and governmental rules and regulations. Except as
set forth in Section 3.12(a) of the Company Letter, no "reportable event"
(within the meaning of Section 4043 of ERISA) has occurred with respect to any
Company Plan for which the 30-day notice requirement has not been waived.
Neither the Company nor any of its Subsidiaries or ERISA Affiliates (as
hereinafter defined) has withdrawn from any Company Multiemployer Plan (as
hereinafter defined) and would not incur any withdrawal liability if it withdrew
from all Company Multiemployer Plans on the date of this Agreement. No action
has been taken, or is currently being considered, to terminate any Company Plan
subject to Title IV of ERISA. No Company Plan, nor any trust created thereunder,
has incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or not waived.
(b) Except as listed in Section 3.12(b) of the Company Letter, with
respect to the Company Plans, no event has occurred and, to the Knowledge of the
Company, there exists no condition or set of circumstances in connection with
which the Company or any Subsidiary or ERISA Affiliate or Company Plan fiduciary
could be subject to any liability under the terms of such Company Plans, ERISA,
the Code or any other applicable law which would have a Material Adverse Effect
on the Company. All Company Plans that are intended to be qualified under
Section 401(a) of the Code have been determined by the IRS to be so qualified,
or a timely application for such determination is now pending and the Company is
not aware of any reason why any such Company Plan is not so qualified in
operation. Neither the Company nor any of its Subsidiaries or ERISA Affiliates
has been notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of ERISA.
No event has occurred and, to the Knowledge of the Company, there exists no
condition or set of circumstances that would result in a material increase in
the contributions required to be made to any Company Multiemployer Plan by the
Company or any Subsidiary or ERISA Affiliate. Except as disclosed in Section
3.12(b) of the Company Letter,
-18-
neither the Company nor any of its Subsidiaries or ERISA Affiliates has any
liability or obligation under any welfare plan to provide benefits after
termination of employment to any employee or dependent other than as required by
Section 4980B of the Code.
(c) As used herein, (i) "Company Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)), a
"welfare plan" (as defined in Section 3(1) of ERISA), or any other written or
oral bonus, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, restricted stock, stock
appreciation right, holiday pay, vacation, severance, medical, dental, vision,
disability, death benefit, sick leave, fringe benefit, personnel policy,
insurance or other plan, arrangement or understanding, in each case established
or maintained by the Company or any of its Subsidiaries or ERISA Affiliates or
as to which the Company or any of its Subsidiaries or ERISA Affiliates has
contributed or otherwise may have any liability, (ii) "Company Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which the Company or any of its Subsidiaries or ERISA Affiliates is or has
been obligated to contribute or otherwise may have any liability, and (iii)
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which would be considered a single employer with the Company pursuant to Section
414(b), (c), (m) or (o) of the Code and the regulations promulgated under those
sections or pursuant to Section 4001(b) of ERISA and the regulations promulgated
thereunder.
(d) Section 3.12(d) of the Company Letter contains a list of all (i)
severance and employment agreements with employees of the Company and each
Subsidiary and ERISA Affiliate, (ii) severance programs and policies of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees and (iii) plans, programs, agreements and other arrangements of the
Company and each Subsidiary and ERISA Affiliate with or relating to its
employees containing change of control or similar provisions.
(e) Except as set forth in Section 3.12(e) of the Company Letter,
neither the Company nor any of its Subsidiaries is a party to any agreement,
contract or arrangement that could result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
(f) Except as set forth in Section 3.12(f) of the Company Letter,
with respect to each Company Plan not subject to United States law (a "Company
Foreign Benefit Plan"), except as would not have a Material Adverse Effect on
the Company, (i) the fair market value of the assets of each funded Company
Foreign Benefit Plan, the liability of each insurer for any Company Foreign
Benefit Plan funded through insurance or the reserve shown on the Company's
consolidated financial statements for any unfunded Company Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or provide for
the projected benefit obligations, as of the Effective Time, with respect to all
current and former participants in such plan according reasonable, country
specific actuarial assumptions and valuations and no transaction contemplated by
this Agreement shall cause such assets or insurance obligations or book reserve
to be less than such projected benefit obligations; and (ii) each Company
Foreign Benefit Plan required to be registered has been registered and has been
maintained in good standing with the appropriate regulatory authorities.
-19-
(g) The statements in the notes to the consolidated financial
statements of the Company included in the Company Annual Report concerning the
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ GmbH noncontributory defined pension plan are accurate in all
material respects.
Section 3.13 Compliance with Worker Safety Laws. The properties,
----------------------------------
assets and operations of the Company and its Subsidiaries are in compliance with
all applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "Worker Safety Laws"), except for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans of the Company or any of its Subsidiaries that may interfere
with or prevent compliance or continued compliance with applicable Worker Safety
Laws, other than any such interference or prevention as would not, individually
or in the aggregate with any such other interference or prevention, have a
Material Adverse Effect on the Company.
Section 3.14 Liabilities; Products. (a) Except as fully reflected or
---------------------
reserved against in the financial statements included in the Company Annual
Report, or disclosed in the footnotes thereto, the Company and its Subsidiaries
had no liabilities (including Tax liabilities) at the date of such financial
statements, absolute or contingent, other than liabilities that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company, and
had no liabilities (including Tax liabilities) that were not incurred in the
ordinary course of business. As of the date hereof, the indebtedness for
borrowed money of the Company and its Subsidiaries does not exceed $84 million.
(b) Except as set forth in Section 3.14(b) of the Company Letter,
since April 30, 1995, neither the Company nor any Subsidiary has received a
claim for or based upon breach of product warranty (other than warranty service
and repair claims in the ordinary course of business not material in amount or
significance), strict liability in tort, negligent manufacture of product,
negligent provision of services or any other allegation of liability, including
or resulting in product recalls, arising from the materials, design, testing,
manufacture, packaging, labeling (including instructions for use), or sale of
its products or from the provision of services; and, to the Knowledge of the
Company, there is no basis for any such claim which, if asserted, would likely
have a Material Adverse Effect on the Company.
(c) The Company has provided to Parent a schedule of products in
development and planned introductions, a copy of which is attached to the
Company Letter. The Company reasonably expects the goals set forth therein to
be achieved in all material respects, except for such deviations as would not
have a Material Adverse Effect on the Company or on the Company's diagnostic
cardiology or patient monitoring businesses. The product and service
engineering, development, manufacturing and quality control processes which have
been and are being followed by the Company are reasonably designed to produce
products and services which (i) are consistent with the
-20-
claims made about them in the Company's sales brochures and other statements
made about them by or on behalf of the Company, (ii) otherwise meet the
reasonable expectations of customers, (iii) comply with applicable regulatory
requirements and (iv) avoid claims of the type described in Section 3.14(b).
Section 3.15 Labor Matters. Except as set forth in Section 3.15 of
-------------
the Company Letter, neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or labor contract. Neither the Company
nor any of its Subsidiaries has engaged in any unfair labor practice with
respect to any persons employed by or otherwise performing services primarily
for the Company or any of its Subsidiaries (the "Company Business Personnel"),
and there is no unfair labor practice complaint or grievance against the Company
or any of its Subsidiaries by any person pursuant to the National Labor
Relations Act or any comparable state or foreign law pending or threatened in
writing with respect to the Company Business Personnel, except where such unfair
labor practice, complaint or grievance would not have a Material Adverse Effect
on the Company. There is no labor strike, dispute, slowdown or stoppage pending
or, to the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries which may interfere with the respective business
activities of the Company or any of its Subsidiaries, except where such dispute,
strike or work stoppage would not have a Material Adverse Effect on the Company.
Section 3.16 Intellectual Property; Year 2000. "Company Intellectual
--------------------------------
Property" means all trademarks, trademark registrations, trademark rights and
renewals thereof, trade names, trade name rights, patents, patent rights, patent
applications, industrial models, inventions, invention disclosures, designs,
utility models, inventor rights, software, copyrights, copyright registrations
and renewals thereof, servicemarks, servicemark registrations and renewals
thereof, servicemark rights, trade secrets, applications for trademark and
servicemark registrations, know-how, confidential information and other
proprietary rights, and any data and information of any nature or form used or
held for use in connection with the businesses of the Company and/or the
Subsidiaries as currently conducted or as currently contemplated by the Company,
together with all applications currently pending or in process for any of the
foregoing. Except as disclosed in the Company SEC Documents filed with the SEC
prior to the date hereof, the Company and the Subsidiaries own, or possess
adequate licenses or other valid rights to use (including the right to
sublicense to customers, suppliers or others as needed), all of the material
Company Intellectual Property that is necessary or appropriate for the conduct
or contemplated conduct of the Company's or Subsidiaries' businesses. Section
3.16 of the Company Letter lists each material license or other agreement
pursuant to which the Company or any Subsidiary has the right to use Company
Intellectual Property utilized in connection with any product of, or service
provided by, the Company and the Subsidiaries, the cancellation or expiration of
which would have a Material Adverse Effect on the Company (the "Company
Licenses"). There are no pending, and between the date hereof and the Effective
Time, there shall not be any pending, or to the Knowledge of the Company,
threatened interferences, re-examinations, oppositions or cancellation
proceedings involving any patents or patent rights, trademarks or trademark
rights, or applications therefor, of the Company or any Subsidiary, except such
as may be commenced by Parent or any Subsidiary of Parent and except such as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. There is no breach or violation by the Company or by any
Subsidiary under, and, to the Knowledge of the Company,
-21-
there is no breach or violation by any other party to, any Company License that
is reasonably likely to give rise to any termination or any loss of rights
thereunder. To the Knowledge of the Company, there has been no unauthorized
disclosure or use of confidential information, trade secret rights, processes
and formulas, research and development results and other know-how of the Company
or any Subsidiary, the value of which to the Company and its Subsidiaries is
dependent upon the maintenance of the confidentiality thereof. The conduct of
the business of the Company and the Subsidiaries as currently conducted or
contemplated does not and will not infringe upon or conflict with, in any way,
any license, trademark, trademark right, trade name, trade name right, patent,
patent right, industrial model, invention, service ▇▇▇▇, service ▇▇▇▇ right,
copyright, trade secret or any other intellectual property rights of any third
party that, individually or in the aggregate, would have a Material Adverse
Effect on the Company or on the Company's diagnostic cardiology or patient
monitoring businesses. Except as disclosed in the Company SEC Documents filed
with the SEC prior to the date hereof, there are no infringements of, or
conflicts with, any Company Intellectual Property which, individually or in the
aggregate, would have a Material Adverse Effect on the Company or on the
Company's diagnostic cardiology or patient monitoring businesses. Except as set
forth in Section 3.16 of the Company Letter, neither the Company nor any
Subsidiary has licensed or otherwise permitted the use by any third party of any
proprietary information or Company Intellectual Property on terms or in a manner
which, individually or in the aggregate, would have a Material Adverse Effect on
the Company. Except as set forth in Section 3.16 of the Company Letter, the
current and previously sold products of the Company and its Subsidiaries and
software, operations, systems and processes (including, to the Knowledge of the
Company, software, operations, systems and processes obtained from third
parties) used in the conduct of the business of the Company and its
Subsidiaries, are Year 2000 Compliant and the Company has delivered to Parent
true and correct copies of any consultant or other third-party reports prepared
on behalf of the Company with respect to such compliance. For purposes of this
Agreement, "Year 2000 Compliant" means the ability to process (including
calculate, compare, sequence, display or store), transmit or receive data or
data/time data from, into and between the twentieth and twenty-first centuries,
and the years 1999 and 2000, and leap year calculations without error or
malfunction.
Section 3.17 Opinion of Financial Advisor. The Company has received
----------------------------
the opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated to the effect that, as of the
date hereof, the Merger Consideration is fair to the Company's shareholders from
a financial point of view, a copy of which opinion will be delivered to Parent
promptly after the execution and delivery of this Agreement.
Section 3.18 State Takeover Statutes. The Board of Directors of the
-----------------------
Company has, to the extent such statutes are applicable, taken all action
(including appropriate approvals of the Board of Directors of the Company)
necessary to render the provisions of Section 180.1140 through Section 180.1144
of the WBCL inapplicable to the Merger, this Agreement, the Stock Option
Agreement, the Shareholder Agreement and the transactions contemplated hereby
and thereby. The Company has elected, pursuant to the Company Charter, not to
be governed by the provisions of Section 180.1131 of the WBCL. To the Knowledge
of the Company, no other state takeover statute or similar charter or bylaw
provisions are applicable to the Merger, this Agreement, the Stock Option
Agreement, the Shareholder Agreement and the transactions contemplated hereby
and thereby.
-22-
Section 3.19 Required Vote of Company Shareholders. The affirmative
-------------------------------------
vote of the holders of a majority of the outstanding shares of Company Common
Stock is required to adopt this Agreement. No other vote of the security
holders of the Company is required by law, the Company Charter or the Amended
and Restated Bylaws of the Company or otherwise in order for the Company to
consummate the Merger and the transactions contemplated hereby and in the Stock
Option Agreement.
Section 3.20 Reorganization. To the Knowledge of the Company,
--------------
neither it nor any of its Subsidiaries has taken any action or failed to take
any action which action or failure would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
Section 3.21 Accounts Receivable. All of the accounts and notes
-------------------
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company (net of the applicable reserves reflected on the books
and records of the Company and in the financial statements included in the
Company SEC Documents) (i) represent sales actually made or transactions
actually effected in the ordinary course of business for goods or services
delivered or rendered to unaffiliated customers in bona fide arm's length
transactions, (ii) constitute valid claims, and (iii) are good and collectible
at the aggregate recorded amounts thereof (net of such reserves) without right
of recourse, defense, deduction, return of goods, counterclaim, or offset and
have been or will be collected in the ordinary course of business and consistent
with past experience.
Section 3.22 Inventories. Except as set forth in Section 3.22 of the
-----------
Company Letter, all inventories of the Company and its Subsidiaries consist of
items of merchantable quality and quantity usable or salable in the ordinary
course of business, are salable at prevailing market prices that are not less
than the book value amounts thereof or the price customarily charged by the
Company or the applicable Subsidiary therefor, conform to the specifications
established therefor, and have been manufactured in accordance with applicable
regulatory requirements, except to the extent that the failure of such
inventories so to consist, be saleable, conform, or be manufactured would not
have a Material Adverse Effect on the Company. Except as set forth in Section
3.22 of the Company Letter, the quantities of all inventories, materials, and
supplies of the Company and each Subsidiary (net of the obsolescence reserves
therefor shown in the financial statements included in the Company SEC Documents
and determined in the ordinary course of business consistent with past practice)
are not obsolete, damaged, slow-moving, defective, or excessive, and are
reasonable and balanced in the circumstances of the Company and its
Subsidiaries, except to the extent that the failure of such inventories to be in
such conditions would not have a Material Adverse Effect on the Company.
Section 3.23 Environmental Matters.
---------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) any other
chemicals, materials or substances regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law; (ii)
"Environmental
-23-
Law" means any law, past, present or future and as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, or common law, relating to pollution or
protection of the environment, health or safety or natural resources, including
those relating to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Substances; and (iii) "Environmental
Permit" means any permit, approval, identification number, license or other
authorization required under any applicable Environmental Law.
(b) Except as disclosed in Section 3.23 of the Company Letter, the
Company and the Subsidiaries are and have been in compliance with all applicable
Environmental Laws, have obtained all Environmental Permits and are in
compliance with their requirements, and have resolved all past non-compliance
with Environmental Laws and Environmental Permits without any pending, on-going
or future obligation, cost or liability, except in each case for the notices set
forth in Section 3.23 of the Company Letter or where such non-compliance would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
(c) Except as disclosed in Section 3.23 of the Company Letter,
neither the Company nor any of the Subsidiaries has (i) placed, held, located,
released, transported or disposed of any Hazardous Substances on, under, from or
at any of the Company's or any of the Subsidiaries' properties or any other
properties, other than in a manner that would not, in all such cases taken
individually or in the aggregate, result in a Material Adverse Effect on the
Company, (ii) any Knowledge or reason to know of the presence of any Hazardous
Substances on, under, emanating from, or at any of the Company's or any of the
Subsidiaries' properties or any other property but arising from the Company's or
any of the Subsidiaries' current or former properties or operations, other than
in a manner that would not result in a Material Adverse Effect on the Company,
or (iii) any Knowledge or reason to know, nor has it received any written notice
(A) of any violation of or liability under any Environmental Laws, (B) of the
institution or pendency of any suit, action, claim, proceeding or investigation
by any Governmental Entity or any third party in connection with any such
violation or liability, (C) requiring the investigation of, response to or
remediation of Hazardous Substances at or arising from any of the Company's or
any of the Subsidiaries' current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company or any of the Subsidiaries
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of the Subsidiaries' current or former
properties or operations or any other properties, except in each case for the
notices set forth in Section 3.23 of the Company Letter.
(d) Except as disclosed in Section 3.23 of the Company Letter, no
Environmental Law imposes any obligation upon the Company or any of the
Subsidiaries arising out of or as a condition to any transaction contemplated by
this Agreement, including any requirement to modify or to transfer any permit or
license, any requirement to file any notice or other submission with any
Governmental Entity, the placement of any notice, acknowledgment or covenant in
any land records, or the modification of or provision of notice under any
agreement, consent order or consent decree.
-24-
(e) The Company and the Subsidiaries will provide Parent with copies
of any Environmental assessment or audit report or other similar studies or
analyses currently in the possession of or available to the Company or any of
the Subsidiaries relating to any real property currently or formerly owned,
leased or occupied by the Company or any of the Subsidiaries.
Section 3.24 Suppliers. Except as set forth in Section 3.24 of the
---------
Company Letter, neither the Company nor any Subsidiary has received any notice
or has any reason to believe that any significant supplier will not sell raw
materials, supplies, merchandise and other goods to the Company or any
Subsidiary at any time after the Effective Time on terms and conditions
substantially similar to those used in its current sales to the Company and the
Subsidiaries, subject only to general and customary price increases, unless
comparable raw materials, supplies, merchandise or other goods are readily
available from other sources on comparable terms and conditions.
Section 3.25 Insurance. All material fire and casualty, general
---------
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of the Company and the Subsidiaries
and their respective properties and assets, and are in character and amount at
least equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. The Company and each Subsidiary
have made any and all payments required to maintain such policies in full force
and effect. Except as set forth in Section 3.25 of the Company Letter, neither
the Company nor any Subsidiary has received notice of default under any such
policy, and has not received written notice or, to the Knowledge of the Company,
oral notice of any pending or threatened termination or cancellation, coverage
limitation or reduction or material premium increase with respect to such
policy.
Section 3.26 Accuracy of Information. Neither this Agreement nor any
-----------------------
other document provided by the Company or the Subsidiaries or any of their
respective employees or agents to Parent in connection with the transactions
contemplated herein contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein not
misleading.
Section 3.27 Transactions with Affiliates. (a) For purposes of this
----------------------------
Section 3.27, the term "Affiliated Person" means (i) any holder of 2% or more of
the Company Common Stock, (ii) any director, officer or senior executive of the
Company or any Subsidiary, (iii) any person, firm or corporation that directly
or indirectly controls, is controlled by, or is under common control with, any
of the Company or any Subsidiary or (iv) any member of the immediate family or
any of such persons.
(b) Except as set forth in Section 3.27 of the Company Letter or in
the Company SEC Reports filed with the SEC prior to the date hereof, since April
30, 1994, the Company and the Subsidiaries have not, in the ordinary course of
business or otherwise, (i) purchased, leased or
-25-
otherwise acquired any material property or assets or obtained any material
services from, (ii) sold, leased or otherwise disposed of any material property
or assets or provided any material services to (except with respect to
remuneration for services rendered in the ordinary course of business as
director, officer or employee of the Company or any Subsidiary), (iii) entered
into or modified in any manner any contract with, or (iv) borrowed any money
from, or made or forgiven any loan or other advance (other than expenses or
similar advances made in the ordinary course of business) to, any Affiliated
Person.
(c) Except as set forth in Section 3.27 of the Company Letter or in
the Company SEC Reports filed with the SEC prior to the date hereof, (i) the
contracts of the Company and the Subsidiaries do not include any material
obligation or commitment between the Company or any Subsidiary and any
Affiliated Person, (ii) the assets of the Company or any Subsidiary do not
include any receivable or other obligation or commitment from an Affiliated
Person to the Company or any Subsidiary and (iii) the liabilities of the Company
and the Subsidiaries do not include any payable or other obligation or
commitment from the Company or any Subsidiary to any Affiliated Person.
(d) To the Knowledge of the Company and except as set forth in
Section 3.27 of the Company Letter or in the Company SEC Reports filed with the
SEC prior to the date hereof, no Affiliated Person of any of the Company or any
Subsidiary is a party to any contract with any customer or supplier of the
Company or any Subsidiary that affects in any material manner the business,
financial condition or results of operation of the Company or any Subsidiary.
Section 3.28. Title to and Sufficiency of Assets. (a) As of the date
----------------------------------
hereof, the Company and the Subsidiaries own, and as of the Effective Time the
Company and the Subsidiaries will own, good and marketable title to all of their
assets constituting personal property which is material to their business
(excluding, for purposes of this sentence, assets held under leases), free and
clear of any and all mortgages, liens, encumbrances, charges, claims,
restrictions, pledges, security interests or impositions (collectively,
"Liens"), except as set forth in the Company SEC Documents filed with the SEC
prior to the date hereof, or Section 3.28 of the Company Letter. Such assets,
together with all assets held by the Company and the Subsidiaries under leases,
include all tangible and intangible personal property, contracts and rights
necessary or required for the operation of the businesses of the Company as
presently conducted.
(b) As of the date hereof, the Company and the Subsidiaries own, and
as of the Effective Time the Company and the Subsidiaries will own, good and
marketable title to all of their Real Estate which is material to such persons
(excluding, for purposes of this sentence, Real Estate leases), free and clear
of any and all Liens, except as set forth in the Company SEC Documents filed
with the SEC prior to the date hereof or in Section 3.28 of the Company Letter
or such other Liens on Real Estate which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Such Real Estate
assets, together with all Real Estate assets held by the Company and the
Subsidiaries under leases, are adequate for the operation of the businesses of
the Company as presently conducted. The leases to all Real Estate occupied by
the Company and the Subsidiaries which are material to the operation of the
businesses of the Company are in full force and effect and no event has occurred
which with the passage of time, the giving of notice, or both, would constitute
-26-
a default or event of default by the Company or any Subsidiary or, to the
Knowledge of the Company, any other person who is a party signatory thereto,
other than such defaults or events of default which, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. For
purposes of this Agreement, "Real Estate" means, with respect to the Company or
any Subsidiary, as applicable, all of the fee or leasehold ownership right,
title and interest of such person, in and to all real estate and improvement
owned or leased by any such person and which is used by any such person in
connection with the operation of its business.
Section 3.29 Brokers. No broker, investment banker or other person,
-------
other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated the fees and expenses of which
will be paid by the Company (as reflected in an agreement between ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ & Co. Incorporated and the Company, a copy of which has been furnished to
Parent), is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
and by the Stock Option Agreement based upon arrangements made by or on behalf
of the Company.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
Section 4.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Except as expressly permitted by clauses (i) through (xvii) of this Section 4.1,
during the period from the date of this Agreement through the Effective Time,
the Company shall, and shall cause each of its Subsidiaries to, in all material
respects carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement or as set forth in the
Company Letter (with specific reference to the applicable subsection below), the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent:
(i) (A) other than dividends paid by wholly-owned Subsidiaries,
declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its shareholders in their capacity
as such, (B) other than in the case of any Subsidiary, split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (C) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options (including options under the Company Stock Option
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Plans) to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than (A) the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options outstanding on the
date of this Agreement in accordance with their current terms and (B) the
issuance of shares of Company Common Stock pursuant to the Stock Option
Agreement;
(iii) amend its charter or by-laws or amend the Company Rights
Agreement, except that the Company shall cause the Rights Agent to execute
and deliver the amendment to the Company Rights Agreement in the form of
Exhibit C hereto;
---------
(iv) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, limited liability
company, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets;
(v) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than sales of inventory that
are in the ordinary course of business consistent with past practice;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) in the ordinary
course of business consistent with past practices and, in the case of
indebtedness and guarantees, in an amount not to exceed $10 million
(provided that Parent shall not unreasonably withhold its consent to
increases of not more than $30 million) in the aggregate and (B)
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its wholly-owned Subsidiaries or between any
of such wholly-owned Subsidiaries, in each case in the ordinary course of
business consistent with past practices;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or ownership
of the Company or any Subsidiary;
(viii) except as provided in Section 4.1(viii) of the Company Letter,
enter into or adopt any, or amend any existing, severance plan, agreement
or arrangement or enter into or amend any Company Plan or employment or
consulting agreement;
(ix) except as provided in Section 4.1(ix) of the Company Letter,
increase the compensation payable or to become payable to its directors,
officers or employees (except for increases in the ordinary course of
business consistent with past practice in salaries or wages of employees of
the Company or any of its Subsidiaries who are not officers of the Company
or any of its Subsidiaries) or grant any severance or termination pay to,
or enter into any employment or severance agreement with, any director or
officer of the Company or any of its Subsidiaries, or establish, adopt,
enter into, or, except as may be required to comply with applicable law,
amend in any material respect or take action to enhance in any material
respect or accelerate any rights or benefits under, any labor, collective
bargaining,
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bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee;
(x) knowingly violate or knowingly fail to perform any obligation
or duty imposed upon it or any Subsidiary by any applicable material
federal, state or local law, rule, regulation, guideline or ordinance;
(xi) make any change to accounting policies or procedures (other
than actions required to be taken by generally accepted accounting
principles);
(xii) prepare or file any Tax Return inconsistent with past practice
or, on any such Tax Return, take any position, make any election, or adopt
any method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar Tax Returns in prior periods;
(xiii) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(xiv) commence any litigation or proceedings or settle or compromise
any material claims or litigation;
(xv) enter into or amend any agreement or contract with any customer
or supplier (i) having a term in excess of 12 months and which is not
terminable by the Company or a Subsidiary without penalty or premium by
notice of 30 days or less or (ii) which involves or is expected to involve
payments of $10 million or more during the term thereof (provided that in
the case of agreements or contracts with any customer, the margins
anticipated from any such agreement or contract shall be consistent in all
material respects with historical margins); enter into or amend any other
agreement or contract material to the Company and its Subsidiaries, taken
as a whole; or purchase any real property, except as set forth in Section
4.1(xv) of the Company Letter, or make or agree to make any new capital
expenditure or expenditures (other than the purchase of real property)
which in the aggregate are in excess of $7 million;
(xvi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent financial statements (or the notes
thereto) of the Company included in the Company SEC Documents or incurred
in the ordinary course of business consistent with past practice; or
(xvii) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
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Section 4.2 No Solicitation. (a) The Company shall not, nor shall it
---------------
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any financial advisor, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, (i) solicit,
initiate or encourage the submission of, any Takeover Proposal (as hereafter
defined), (ii) enter into any agreement with respect to or approve or recommend
any Takeover Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to the Company
or any Subsidiary in connection with, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Takeover Proposal; provided, however, that nothing
-------- -------
contained in this Section 4.2(a) shall prohibit the Company or its directors
from (i) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to a tender or exchange offer or (ii) referring a third party to this
Section 4.2(a) or making a copy of this Section 4.2(a) available to any third
party; and provided, further, that prior to the Shareholder Meeting, if the
-------- -------
Board of Directors of the Company reasonably determines the Takeover Proposal
constitutes a Superior Proposal (as defined below), then, to the extent required
by the fiduciary obligations of the Board of Directors of the Company, as
determined in good faith by a majority thereof after consultation with
independent counsel (who may be the Company's regularly engaged independent
counsel), the Company may, in response to an unsolicited request therefor,
furnish information with respect to the Company and its Subsidiaries to any
person pursuant to a customary confidentiality statement (as determined by the
Company's independent counsel). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer or director of the Company or any of its Subsidiaries or
any financial advisor, attorney or other advisor or representative of the
Company or any of its Subsidiaries, whether or not such person is purporting to
act on behalf of the Company or any of its Subsidiaries or otherwise, shall be
deemed to be a breach of this Section 4.2(a) by the Company. For purposes of
this Agreement, "Takeover Proposal" means any proposal for a merger or other
business combination involving the Company or any of its Subsidiaries or any
proposal or offer to acquire in any manner, directly or indirectly, an equity
interest in, any voting securities of, or a substantial portion of the assets of
the Company or any of its Subsidiaries, other than the transactions contemplated
by this Agreement and the Stock Option Agreement, and "Superior Proposal" means
a bona fide proposal made by a third party to acquire the Company pursuant to a
tender or exchange offer, a merger, a sale of all or substantially all its
assets or otherwise on terms which a majority of the disinterested members of
the Board of Directors of the Company determines, at a duly constituted meeting
of the Board of Directors or by unanimous written consent, in its reasonable
good faith judgment to be more favorable to the Company's shareholders than the
Merger (based on the advice of the Company's independent financial advisor that
the value of the consideration provided for in such proposal exceeds the value
of the consideration provided for in the Merger) and for which financing, to the
extent required, is then committed or which, in the reasonable good faith
judgment of a majority of such disinterested members, as expressed in a
resolution adopted at a duly constituted meeting of such members (based on the
advice of the Company's independent financial advisor), is reasonably capable of
being obtained by such third party.
(b) The Company shall advise Parent orally and in writing of (i) any
Takeover Proposal or any inquiry with respect to or which could lead to any
Takeover Proposal received by any officer or director of the Company or, to the
Knowledge of the Company, any financial advisor,
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attorney or other advisor or representative of the Company, (ii) the material
terms of such Takeover Proposal (including a copy of any written proposal), and
(iii) the identity of the person making any such Takeover Proposal or inquiry no
later than 24 hours following receipt of such Takeover Proposal or inquiry. If
the Company intends to furnish any Person with any information with respect to
any Takeover Proposal in accordance with Section 4.2(a), the Company shall
advise Parent orally and in writing of such intention not less than five
business days in advance of providing such information. The Company will keep
Parent fully informed of the status and details of any such Takeover Proposal or
inquiry.
Section 4.3 Third Party Standstill Agreements. During the period
---------------------------------
from the date of this Agreement through the Effective Time, the Company shall
not terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent). During such period, the Company agrees to
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreements, including, but not limited to, obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.4 Reorganization. During the period from the date of this
--------------
Agreement through the Effective Time, unless the other party shall otherwise
agree in writing, none of Parent, the Company or any of their respective
Subsidiaries shall take or fail to take any action with the actual knowledge of
those taking or failing to take such action (or those directing such action or
failure to take action) that such action or failure would jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code or would cause any of the representations and warranties set
forth in the Company Tax Certificate attached to the Company Letter or the
Parent Tax Certificate attached to the Parent Letter to be untrue or incorrect.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
Section 5.1 Shareholder Meeting. The Company will, as soon as
-------------------
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of shareholders (the "Shareholder Meeting") for the
purpose of considering the approval and adoption of this Agreement and at such
meeting call for a vote and cause proxies to be voted in respect of the approval
and adoption of this Agreement. The Company will, through its Board of
Directors, recommend to its shareholders the adoption and approval of this
Agreement, and shall not withdraw or modify such recommendation. Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first sentence of this Section 5.1 shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of a Takeover Proposal.
Section 5.2 Preparation of the Registration Statement and the Proxy
-------------------------------------------------------
Statement. The Company and Parent shall promptly prepare and file with the SEC
---------
the Proxy Statement and Parent
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shall prepare and file with the SEC the Registration Statement, in which the
Proxy Statement will be included as a prospectus. Each of Parent and the Company
shall use its reasonable best efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing. As promptly as practicable after the Registration Statement shall
have become effective, the Company shall mail the Proxy Statement to its
shareholders. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of Parent Common Stock in the Merger and upon the exercise of the Substitute
Options (as defined in Section 5.7), and the Company shall furnish all
information concerning the Company and the holders of Company Common Stock as
may be reasonably requested in connection with any such action.
Section 5.3 Access to Information. Subject to currently existing
---------------------
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other representatives
of Parent reasonable access to, and permit them to make such inspections as they
may reasonably require of, during the period from the date of this Agreement
through the Effective Time, all of their respective properties, books,
contracts, commitments and records (including engineering records and Tax
Returns and the work papers of independent accountants, if available and subject
to the consent of such independent accountants) and, during such period, the
Company shall, and shall cause each of its Subsidiaries to (i) furnish promptly
to Parent a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities laws, (ii) furnish promptly to Parent all other information
concerning its business, properties and personnel as Parent may reasonably
request and (iii) promptly make available to Parent all personnel of the Company
and its Subsidiaries knowledgeable about matters relevant to such inspections.
No investigation pursuant to this Section 5.3 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Parent pursuant
to this Section 5.3 shall be kept confidential in accordance with the
Confidentiality Agreement, dated September 14, 1998 between Parent and the
Company (the "Confidentiality Agreement").
Section 5.4 Compliance with the Securities Act. The Company has
----------------------------------
informed Parent that the directors of the Company are all persons who, at the
time of the Shareholder Meeting, may be deemed to be "affiliates" of the Company
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Rule 145 Affiliates"). The Company shall use its reasonable best
efforts to cause each such person to deliver to Parent within 30 days of the
date hereof a written agreement in substantially the form of Exhibit D hereto,
---------
executed by each of such persons identified in the foregoing list.
Section 5.5 Stock Exchange Listings. Parent shall use its reasonable
-----------------------
best efforts to list on the NYSE, upon official notice of issuance, any shares
of Parent Common Stock to be issued in connection with the Merger which have not
been previously listed.
Section 5.6 Fees and Expenses. (a) Except as provided in this
-----------------
Section 5.6 and Section 5.10, whether or not the Merger is consummated, all
costs and expenses incurred in
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connection with this Agreement and the transactions contemplated hereby,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
provided that all printing expenses and all filing fees (including filing fees
under the Securities Act, the Exchange Act and the HSR Act) shall be divided
equally between Parent and the Company.
(b) Notwithstanding any provision in this Agreement to the contrary,
if this Agreement is terminated (A) by the Company pursuant to Section 7.1(d)(i)
after receipt of a Superior Proposal or (B) by Parent pursuant to Section
7.1(b), (c) or (f), (C) by Parent or the Company pursuant to Section 7.1(e)
(after receipt of a publicly disclosed Superior Proposal or after the occurrence
of any of the events described in clause (i), (ii) or (iii) of Section 7.1(f))
or (g), then, in each case, the Company shall (without prejudice to any other
rights of Parent against the Company) reimburse Parent upon demand for all out-
of-pocket fees and expenses incurred or paid by or on behalf of Parent or any
Affiliate (as hereinafter defined) of Parent in connection with this Agreement,
the Stock Option Agreement and the transactions contemplated herein or therein,
including all fees and expenses of counsel, investment banking firms,
accountants and consultants. As used herein, "Affiliate" shall have the meaning
set forth in Rule 405 under the Securities Act.
(c) Notwithstanding any provision in this Agreement to the contrary:
(i) if this Agreement is terminated:
(A) by the Company pursuant to Section 7.1(d)(i) after receipt
of a Superior Proposal, or
(B) by Parent pursuant to Section 7.1(b) or (f), or
(C) by Parent pursuant to Section 7.1(c) or by Parent or the
Company pursuant to Section 7.1(e) in either case after receipt of a
publicly disclosed Superior Proposal or after the occurrence of any of
the events described in clause (i), (ii) or (iii) of Section 7.1(f),
and, in the case of (A), (B) or (C), prior to, concurrently with or within
twelve months after such a termination a Third Party Acquisition Event (as
defined below) occurs, then the Company shall (in addition to any
obligation under Section 5.6(b) and without prejudice to any other rights
of Parent against the Company) pay to Parent the Termination Fee (as
defined below) in cash, such payment to be made promptly, but in no event
later than the second business day following, the later to occur of such
termination and such Third Party Acquisition Event; or
(ii) if this Agreement is terminated by Parent or the Company pursuant
to Section 7.1(g), then the Company shall (in addition to any obligation
under Section 5.6(b) and without prejudice to any other rights of Parent
against the Company) pay to Parent the Termination Fee in cash, such
payment to be made by the Company concurrently with such
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termination if the termination is by the Company, or no later than the
second business day following such termination if the termination is by
Parent.
"Termination Fee" means $35 million, provided, however, that such
-------- -------
amount shall be reduced to an amount not less than zero by subtracting from $35
million the amount realized or realizable (based on the facts as they exist on
the date such fee shall become due) by Parent under the Stock Option Agreement;
provided further that if such fee shall be so reduced by an amount realizable by
-------- -------
Parent and thereafter the Stock Option Agreement shall terminate without receipt
by Parent of such amount, then an additional payment shall be made to Parent in
such amount promptly following such termination.
A "Third Party Acquisition Event" means any of the following events:
(A) the Company redeems the Rights or amends or fails to resist a legal
challenge to the Company Rights Agreement and any Person (other than Parent or
its Affiliates and other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ so long as his beneficial
ownership does not exceed 25%) acquires or becomes the beneficial owner of 20%
or more of the outstanding shares of Company Common Stock; (B) the Company
redeems the Rights or amends or fails to resist a legal challenge to the Company
Rights Agreement and any group (other than a group which includes or may
reasonably be deemed to include Parent or any of its Affiliates) is formed
which, at the time of formation, beneficially owns 20% or more of the
outstanding shares of Company Common Stock; (C) the Company enters into, or
announces that it proposes to enter into, an agreement, including, an agreement
in principle, providing for a merger or other business combination involving the
Company or a "significant subsidiary" (as defined in Rule 1.02(v) of Regulation
S-X as promulgated by the SEC) of the Company or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of, the Company or a significant subsidiary (other than the
transactions contemplated by this Agreement); (D) any Person (other than Parent
or its Affiliates) is granted any option or right, conditional or otherwise, to
acquire or otherwise become the beneficial owner of shares of Company Common
Stock which, together with all shares of Company Common Stock beneficially owned
by such Person, results or would result in such Person being the beneficial
owner of 20% or more of the outstanding shares of Company Common Stock; or (E)
there is a public announcement with respect to a plan or intention by the
Company to effect any of the foregoing transactions. For purposes of this
Section 5.6(c), the terms "group" and "beneficial owner" shall be defined by
reference to Section 13(d) of the Exchange Act.
(d) Notwithstanding any provision in this Agreement to the contrary,
if this Agreement is terminated by the Company pursuant to Section 7.1(b) or
(c), then Parent shall (without prejudice to any other rights of the Company
against Parent) reimburse the Company upon demand for all out-of-pocket fees and
expenses incurred or paid by or on behalf of the Company or any Affiliate of the
Company in connection with this Agreement, the Stock Option Agreement and the
transactions contemplated herein or therein, including all fees and expenses of
counsel, investment banking firms, accountants and consultants.
Section 5.7 Company Stock Options. (a) At the Effective Time, each
---------------------
Company Stock Option which is outstanding immediately prior to the Effective
Time shall become and represent an option to purchase the number of shares of
Parent Common Stock (a "Substitute
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Option"), decreased to the nearest whole share, determined by multiplying the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time by the Conversion Number (as defined
below), at an exercise price per share of Parent Common Stock, increased to the
nearest whole cent, equal to the exercise price per share of Company Common
Stock subject to such Company Stock Option immediately prior to the Effective
Time divided by the Conversion Number. Parent shall pay cash to holders of
Substitute Options in lieu of issuing fractional shares of Parent Common Stock
upon the exercise thereof. The "Conversion Number" means the number of shares of
Parent Common Stock into which each share of Company Common Stock is converted
as of the Effective Time, determined in accordance with Section 1.5(c) hereof.
After the Effective Time, except as otherwise expressly provided in this Section
5.7, each Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Company Stock Option immediately
prior to the Effective Time. The Company shall take all action necessary to
implement the provisions of this Section 5.7, including amendment of the Company
Stock Option Plans, and to ensure that, after giving effect to the foregoing, no
Company Stock Option shall be exercisable for Company Common Stock following the
Effective Time. The Company shall take no action to accelerate or otherwise
affect the exercisability of any Company Stock Option, except as expressly
provided in Section 5.7(b), (c) or (d), or otherwise affect the exercise period
thereof. As soon as reasonably practicable, and in no event later than 20 days
after the Effective Time, Parent shall file a registration statement on Form S-8
(or any successor or other appropriate form) with respect to Parent Common Stock
subject to all Substitute Options.
(b) Following the execution of this Agreement, Parent shall request a
private letter ruling from the Internal Revenue Service or obtain an opinion of
a law firm selected by Parent, in either case to the effect that no income will
be recognized by any holder of a Substitute Option as a result of any action to
provide that each Substitute Option which is outstanding on the second
anniversary of the Effective Time and not then fully exercisable shall become
fully exercisable on such second anniversary of the Effective Time. If, prior
to the Effective Time, the Internal Revenue Service shall have issued such a
private letter ruling or Parent shall have obtained such an opinion, in either
case reasonably satisfactory to the Company and Parent, then, prior to the
Effective Time, the Company shall take such action satisfactory to Parent as
shall be necessary to provide that each Substitute Option, other than Substitute
Options held by persons who had been non-employee directors of the Company
immediately prior to the Effective Time, which is outstanding on the second
anniversary of the Effective Time and not then exercisable shall become fully
exercisable on such second anniversary of the Effective Time. If such ruling or
opinion is obtained by the Company after the Effective Time, Parent shall cause
the Company to take the action contemplated by the immediately preceding
sentence.
(c) Prior to the Effective Time, the Company shall take such action
satisfactory to Parent as shall be necessary to provide that upon the
termination of employment of a holder of a Substitute Option by the Company
without "Cause" (as defined below) or due to death or disability, each
Substitute Option then held by such holder which is not then exercisable shall
become fully exercisable on the date of such termination of employment. For
purposes of this Section 5.7(c), "Cause" shall mean conviction of a criminal
offense, theft, fraud, breach of trust or refusal to perform services properly
assigned following notice and an opportunity to cure.
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(d) Prior to the Effective Time, the Company shall take such action
satisfactory to Parent as shall be necessary to provide that upon the cessation
of service as a director of the Company by each person who is a non-employee
director of the Company immediately prior to the Effective Time, each Substitute
Option held by such person immediately following the Effective Time which is not
then exercisable in accordance with its original vesting schedule shall continue
to become exercisable in accordance with such original vesting schedule as if
the service of such director had not ceased.
Section 5.8 Reasonable Best Efforts. (a) Upon the terms and subject
-----------------------
to the conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including: (i) the obtaining of
all necessary actions or non-actions, waivers, consents and approvals from all
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity (including those in connection
with the HSR Act and State Takeover Approvals), (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, the Stock Option Agreement or the consummation of
the transactions contemplated hereby and thereby, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement. No party to this Agreement shall consent to any voluntary delay
of the consummation of the Merger at the behest of any Governmental Entity
without the consent of the other parties to this Agreement, which consent shall
not be unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in connection with any filing or submission required or action to be
taken by either Parent or the Company to effect the Merger and to consummate the
other transactions contemplated hereby, the Company shall not, without Parent's
prior written consent, commit to any divestiture transaction, and neither Parent
nor any of its Affiliates shall be required to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of the businesses,
product lines or assets of Parent or any of its Subsidiaries or that otherwise
would have a Material Adverse Effect on Parent.
Section 5.9 Public Announcements. Parent and the Company will not
--------------------
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other
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party, except as may be required by applicable law or by obligations pursuant to
any listing agreement with any national securities exchange.
Section 5.10 Real Estate Transfer and Gains Tax. Parent and the
----------------------------------
Company agree that either the Company or the Surviving Corporation will pay any
foreign, state or local tax which is attributable to the transfer of the
beneficial ownership of the Company's or its Subsidiaries' real property, if any
(collectively, the "Gains Taxes"), and any penalties or interest with respect to
the Gains Taxes, payable in connection with the consummation of the Merger. The
Company and Parent agree to cooperate with the other in the filing of any Tax
returns with respect to the Gains Taxes, including supplying in a timely manner
a complete list of all real property interests held by the Company and its
Subsidiaries and any information with respect to such property that is
reasonably necessary to complete such returns. The portion of the consideration
allocable to the real property of the Company and its Subsidiaries shall be
determined by Parent in its reasonable discretion.
Section 5.11 State Takeover Laws. If any "fair price," "business
-------------------
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby or in
the Stock Option Agreement, Parent and the Company and their respective Boards
of Directors shall use their best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby and
thereby may be consummated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to minimize the effects of any such statute
or regulation on the transactions contemplated hereby and thereby.
Section 5.12 Indemnification; Directors and Officers Insurance. (a)
-------------------------------------------------
From and after the Effective Time, Parent shall cause the Surviving Corporation
to indemnify and hold harmless all past and present officers and directors of
the Company and of its Subsidiaries to the same extent and in the same manner
such persons are indemnified as of the date of this Agreement by the Company
pursuant to the WBCL, the Company Charter, the Company's Amended and Restated
Bylaws or the indemnity agreements described in Section 5.12 of the Company
Letter for acts or omissions occurring at or prior to the Effective Time
(including indemnifying and holding harmless such persons for acts or omissions
occurring at or prior to the Effective Time in respect of the Merger and the
transactions contemplated thereby to the same extent and in the manner as such
persons are indemnified as of the date of this Agreement by the Company pursuant
to the WBCL, the Company Charter, the Company's Amended and Restated Bylaws or
such indemnity agreements).
(b) Parent shall cause the Surviving Corporation to provide, for an
aggregate period of not less than three years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O Insurance") that is substantially similar to the Company's existing policy
or, if substantially equivalent insurance coverage is unavailable, the best
available coverage; provided, however, that the Surviving Corporation shall not
-------- -------
be required to pay an annual premium for the D&O Insurance in excess of the last
annual premiums paid prior to the date hereof (which premiums the Company
represents and warrants to be approximately $195,000), but in such case shall
purchase as much coverage as possible for such amount.
-37-
(c) Parent hereby agrees that, effective at the Effective Time,
Parent will guarantee the obligations of the Surviving Corporation under Section
5.12(a) and (b).
Section 5.13 Notification of Certain Matters. Parent shall use its
-------------------------------
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement and made by it to
be untrue or inaccurate in any material respect or (y) any covenant, condition
or agreement contained in this Agreement and made by it not to be complied with
or satisfied in all material respects, (ii) any failure of Parent or the
Company, as the case may be, to comply in a timely manner with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or (iii) any change or event which would be reasonably likely to have
a Material Adverse Effect on Parent or the Company, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section 5.13
-------- -------
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.14 Consulting Agreement. Parent and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ have
--------------------
entered into a Consulting Agreement as of the date hereof in the form of Exhibit
-------
E hereto, which agreement shall become effective as of the Effective Time.
-
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
----------------------------------
Section 6.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
------
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been duly
--------------------
approved by the requisite vote of shareholders of the Company in accordance with
applicable law and the Company Charter and Amended and Restated Bylaws of the
Company.
(b) Stock Exchange Listings. The Parent Common Stock issuable in the
-----------------------
Merger and not previously listed shall have been authorized for listing on the
NYSE, subject to official notice of issuance.
(c) HSR and Other Approvals. (i) The waiting period (and any
-----------------------
extension thereof) applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
(ii) All authorizations, consents, orders, declarations or approvals
of, or filings with, or terminations or expirations of waiting periods imposed
by, any Governmental Entity, which the failure to obtain, make or occur would
have the effect of making the Merger or any of the
-38-
transactions contemplated hereby illegal or would have, individually or in the
aggregate, a Material Adverse Effect on Parent (assuming the Merger had taken
place), shall have been obtained, shall have been made or shall have occurred.
(d) Registration Statement. The Registration Statement shall have
----------------------
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the SEC.
All necessary state securities or blue sky authorizations (including State
Takeover Approvals) shall have been received.
(e) No Order. No court or other Governmental Entity having
--------
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger or any of the transactions contemplated hereby
illegal.
Section 6.2 Conditions to Obligation of the Company to Effect the
-----------------------------------------------------
Merger. The obligation of the Company to effect the Merger shall be subject to
------
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. Each
----------------------------------------------------------
of Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and the Company shall have received certificates
signed on behalf of each of Parent and Sub by one of its officers to such
effect.
(b) Tax Opinion. The Company shall have received an opinion of Sidley
-----------
& Austin, counsel to Parent, in form and substance reasonably satisfactory to
the Company and its counsel, dated the Effective Time, substantially to the
effect that on the basis of facts, representations and assumptions set forth in
such opinion which are consistent with the state of facts existing as of the
Effective Time, for federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code, and the Company, Sub and Parent will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code;
-39-
(ii) no gain or loss will be recognized by Parent, Sub or the Company
as a result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of the
Company upon the conversion of their shares of Company Common Stock solely
into shares of Parent Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares of Parent
Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received solely in exchange for shares of Company Common Stock pursuant to
the Merger (including a fractional share of Parent Common Stock for which
cash is paid) will be the same as the aggregate tax basis of such shares of
Company Common Stock exchanged therefor;
(v) the holding period for shares of Parent Common Stock received
solely in exchange for shares of Company Common Stock pursuant to the
Merger will include the shareholder's holding period for such shares of
Company Common Stock, provided such shares of Company Common Stock were
held as capital assets by the shareholder at the Effective Time; and
(vi) a shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's basis in the
fractional share (determined under clause (iv) above) and the amount of
cash received.
In rendering such opinion, Sidley & Austin may receive and rely upon
representations from Parent, the Company, and others, including representations
from Parent substantially similar to the representations in the Parent Tax
Certificate attached to the Parent Letter, representations from the Company
substantially similar to the representations in the Company Tax Certificate
attached to the Company Letter, and representations from the shareholder who is
entering into the Shareholder Agreement substantially similar to the
representations in the Shareholder Tax Certificate attached to the Shareholder
Agreement.
(c) Material Adverse Change. Since the date of this Agreement,
-----------------------
there shall have been no Material Adverse Change with respect to Parent. The
Company shall have received a certificate signed on behalf of Parent by an
officer of Parent to such effect.
(d) Company Stock Option Plans. Parent shall have taken all action
--------------------------
required to be taken by it to implement the provisions of Section 5.7.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
---------------------------------------------------------
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
------
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The
----------------------------------------------------------
Company shall have performed in all material respects each of its agreements
contained in this Agreement required
-40-
to be performed on or prior to the Effective Time, each of the representations
and warranties of the Company contained in this Agreement that is qualified by
materiality shall be true and correct on and as of the Effective Time as if made
on and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct as of such
certain date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of the
Effective Time as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and Parent shall have
received a certificate signed on behalf of the Company by its Chief Executive
Officer and its Chief Financial Officer to such effect.
(b) Tax Opinion. Parent shall have received an opinion of Sidley &
-----------
Austin, counsel to Parent, in form and substance reasonably satisfactory to
Parent, dated the Effective Time, substantially to the effect that on the basis
of facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for
federal income tax purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub and Parent will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code;
(ii) no gain or loss will be recognized by Parent, Sub or the
Company as a result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of the
Company upon the conversion of their shares of Company Common Stock solely
into shares of Parent Common Stock pursuant to the Merger, except with
respect to cash, if any, received in lieu of fractional shares of Parent
Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received solely in exchange for shares of Company Common Stock pursuant to
the Merger (including a fractional share of Parent Common Stock for which
cash is paid) will be the same as the aggregate tax basis of such shares of
Company Common Stock exchanged therefor;
(v) the holding period for shares of Parent Common Stock received
solely in exchange for shares of Company Common Stock pursuant to the
Merger will include the shareholder's holding period for such shares of
Company Common Stock, provided such shares of Company Common Stock were
held as capital assets by the shareholder at the Effective Time; and
(vi) a shareholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain or loss equal
to the difference, if any, between such shareholder's basis in the
fractional share (determined under clause (iv) above) and the amount of
cash received.
-41-
In rendering such opinion, Sidley & Austin may receive and rely upon
representations from Parent, the Company, and others, including representations
from Parent substantially similar to the representations in the Parent Tax
Certificate attached to the Parent Letter, representations from the Company
substantially similar to the representations in the Company Tax Certificate
attached to the Company Letter, and representations from the shareholder who is
entering into the Shareholder Agreement substantially similar to the
representations in the Shareholder Tax Certificate attached to the Shareholder
Agreement.
(c) Consents. (i) The Company shall have obtained the consent or
--------
approval of each person or Governmental Entity whose consent or approval shall
be required in connection with the transactions contemplated hereby under any
loan or credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except as to which the failure to obtain such consents and approvals
would not, in the reasonable opinion of Parent, individually or in the
aggregate, have a Material Adverse Effect on the Company or Parent or upon the
consummation of the transactions contemplated in this Agreement, the Stock
Option Agreement or the Shareholder Agreement.
(ii) In obtaining any approval or consent required to consummate any
of the transactions contemplated herein, in the Stock Option Agreement or the
Shareholder Agreement, no Governmental Entity shall have imposed or shall have
sought to impose any condition, penalty or requirement which, in the reasonable
opinion of Parent, individually or in aggregate would have a Material Adverse
Effect on the Company or Parent.
(d) Affiliate Agreements. Parent shall have received the written
--------------------
agreements from Rule 145 Affiliates of the Company described in Section 5.4.
(e) Material Adverse Change. Since the date of this Agreement, there
-----------------------
shall have been no Material Adverse Change with respect to the Company. Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(f) Company Stock Option Plans. The Company shall have taken all
--------------------------
action required to be taken by it to implement the provisions of Section 5.7.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
Section 7.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after any approval of the
matters presented in connection with the Merger by the shareholders of the
Company:
(a) by mutual written consent of Parent and the Company;
-42-
(b) except for a breach by the Company of Section 5.1, by either
Parent or the Company if the other party shall have failed to comply in all
material respects with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within five
business days following receipt by such other party of written notice of
such failure to comply;
(c) by either Parent or the Company if there has been (i) a breach by
the other party (in the case of Parent, including any material breach by
Sub) of any representation or warranty that is not qualified as to
materiality which has the effect of making such representation or warranty
not true and correct in all material respects or (ii) a breach by the other
party (in the case of Parent, including any material breach by Sub) of any
representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within five business days following
receipt by the breaching party of written notice of the breach;
(d) by Parent or the Company if: (i) the Merger has not been
effected on or prior to the close of business on April 30, 1999; provided,
--------
however, that the right to terminate this Agreement pursuant to this
-------
Section 7.1(d)(i) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the
cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable;
(e) by Parent or the Company if the shareholders of the Company do
not approve this Agreement at the Shareholder Meeting or at any adjournment
or postponement thereof;
(f) by Parent if (i) the Board of Directors of the Company, in breach
of Section 5.1, shall not have recommended, or shall have resolved not to
recommend, or shall have qualified, modified or withdrawn its
recommendation of the Merger or declaration that the Merger is advisable
and fair to and in the best interest of the Company and its shareholders,
or shall have resolved to do so, (ii) the Board of Directors of the
Company, in breach of Section 4.2, shall have recommended to the
shareholders of the Company any Takeover Proposal or shall have resolved to
do so or (iii) a tender offer or exchange offer for 20% or more of the
outstanding shares of capital stock of the Company is commenced, and the
Board of Directors of the Company fails to recommend against acceptance of
such tender offer or exchange offer by its shareholders (including by
taking no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders); or
(g) by Parent or the Company if the Company enters into a merger,
acquisition or other agreement (including an agreement in principle) to
effect a Superior Proposal or the Board of Directors of the Company
resolves to do so; provided, however, that the Company may not terminate
-------- -------
this Agreement pursuant to this Section 7.1(g) unless (i) the Company has
-43-
delivered to Parent a written notice of the Company's intent to enter into
such an agreement to effect the Superior Proposal, (ii) five business days
have elapsed following delivery to Parent of such written notice by the
Company and (iii) during such five business day period the Company has
fully cooperated with Parent, including informing Parent of the terms and
conditions of the Takeover Proposal and the identity of the Person making
the Takeover Proposal, with the intent of enabling Parent to agree to a
modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected; provided, further, that
-------- -------
the Company may not terminate this Agreement pursuant to this Section
7.1(g) unless at the end of such five business day period the Board of
Directors of the Company continues reasonably to believe that the Takeover
Proposal constitutes a Superior Proposal when compared to the Merger
(taking into account any such modification as may be proposed by Parent)
and concurrently with such termination the Company pays to Parent the
amounts specified under Sections 5.6(a), (b) and (c).
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of
---------------------
this Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.3 and the entirety of
Section 5.6, which shall survive the termination); provided, however, that
-------- -------
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
---------
hereto, by or pursuant to action taken by their respective Boards of Directors,
in the case of Sub or the Company, or a Senior Vice President of Parent, at any
time before or after approval of the matters presented in connection with the
Merger by the shareholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
------
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
-44-
ARTICLE VIII
GENERAL PROVISIONS
------------------
Section 8.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to:
General Electric Company
▇/▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇. ▇. ▇▇▇ ▇▇▇, ▇-▇▇▇
Milwaukee, Wisconsin 53201
Attention: General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
for overnight courier deliveries, to:
General Electric Company
c/o GE Medical Systems
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
with copies to:
General Electric Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Vice President and Senior
Counsel - Transactions
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
-45-
and
Sidley & Austin
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: 312-853-7036
(b) if to the Company, to:
Marquette Medical Systems, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Schoenberg, Fisher, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Section 8.3 Interpretation. (a) When a reference is made in this
--------------
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
(b) "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which Parent or the
Company, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other legal entity.
Section 8.4 Counterparts. This Agreement may be executed in
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
-46-
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement, except for the Stock Option Agreement and as provided in the last
sentence of Section 5.3, constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement, except for the
provisions of Section 5.12, is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. Except to the extent that the laws of the
-------------
State of Wisconsin are mandatorily applicable to the Merger, this Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
Section 8.7 Assignment. Subject to Section 1.1, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties.
Section 8.8 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. 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 wording or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof (but any
such proceeding shall be brought exclusively in either the U.S. District Court
for the District of Connecticut or the Eastern District of Wisconsin), such
remedy being in addition to any other remedy to which any party is entitled at
law or in equity. Each party hereto waives any right to a trial by jury in
connection with any such action, suit or proceeding and waives any objection
based on forum non conveniens or any other objection to venue thereof.
-47-
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
GENERAL ELECTRIC COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
EMERALD MERGER CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
MARQUETTE MEDICAL SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board