EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARROW ELECTRONICS, INC.,
▇▇▇▇ ACQUISITION CORP.
AND
▇▇▇▇▇▇ ELECTRONICS, INC.
DATED AS OF SEPTEMBER 30, 1998
TABLE OF CONTENTS
PAGE
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Article 1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Effective Time of the Merger . . . . . . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . 2
1.4 Directors and Officers of the Surviving Corporation. . . . 2
1.5 Further Assurances . . . . . . . . . . . . . . . . . . . . 2
Article 2 CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . 3
2.1 Conversion of Capital Stock. . . . . . . . . . . . . . . . 3
2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . 4
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . 5
3.1 Corporate Organization and Authority of the Company. . . . 5
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 7
3.3 No Violation; Consents and Approvals . . . . . . . . . . . 8
3.4 SEC Reports and Financial Statements of the Company. . . . 9
3.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . 10
3.6 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . 10
3.8 Title to Property. . . . . . . . . . . . . . . . . . . . . 11
3.9 Intellectual Property. . . . . . . . . . . . . . . . . . . 11
3.10 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Employee Matters . . . . . . . . . . . . . . . . . . . . . 14
3.12 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . 16
3.13 No Material Change . . . . . . . . . . . . . . . . . . . . 17
3.14 Absence of Change or Event . . . . . . . . . . . . . . . . 17
3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 19
3.16 Compliance With Law and Other Instruments. . . . . . . . . 19
3.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 23
3.18 Affiliate Interests. . . . . . . . . . . . . . . . . . . . 23
3.19 Customers and Suppliers. . . . . . . . . . . . . . . . . . 24
3.20 Absence of Questionable Payments . . . . . . . . . . . . . 24
3.21 Information Supplied . . . . . . . . . . . . . . . . . . . 24
3.22 Opinion of Financial Advisor . . . . . . . . . . . . . . . 25
3.23 Vote Required. . . . . . . . . . . . . . . . . . . . . . . 25
3.24 Company Not an Interested Shareholder or a 30% Shareholder 25
3.25 Section 203 of the DGCL Not Applicable . . . . . . . . . . 25
3.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 25
3.27 The Company's Knowledge. . . . . . . . . . . . . . . . . . 25
Article 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND Sub . . . . . . . 25
4.1 Organization and Authority . . . . . . . . . . . . . . . . 25
4.2 No Violation; Consents and Approvals . . . . . . . . . . . 26
4.3 SEC Reports and Financial Statements of Parent . . . . . . 27
4.4 Information Supplied . . . . . . . . . . . . . . . . . . . 27
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Parent's Knowledge . . . . . . . . . . . . . . . . . . . . 28
Article 5 CERTAIN COVENANTS AND AGREEMENTS OF THE COMPANY AND PARENT . . 28
5.1 Conduct of the Company's Business Prior to the Closing
Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Conduct of Business of Sub . . . . . . . . . . . . . . . . 30
5.3 Preparation of the Proxy Statement . . . . . . . . . . . . 30
5.4 Legal Conditions to Merger . . . . . . . . . . . . . . . . 30
5.5 Stockholder's Meeting. . . . . . . . . . . . . . . . . . . 31
5.6 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . 31
5.7 Broker's and Finder's Fees . . . . . . . . . . . . . . . . 33
5.8 Takeover Statutes. . . . . . . . . . . . . . . . . . . . . 33
5.9 Access to Information and Confidentiality. . . . . . . . . 33
5.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . 33
5.11 Additional Agreements; Best Efforts. . . . . . . . . . . . 34
5.12 No Solicitation. . . . . . . . . . . . . . . . . . . . . . 34
5.13 Advice of Changes; Government Filings. . . . . . . . . . . 35
5.14 Press Releases . . . . . . . . . . . . . . . . . . . . . . 35
5.15 Company Option Plans . . . . . . . . . . . . . . . . . . . 35
5.16 Notice and Cure. . . . . . . . . . . . . . . . . . . . . . 36
5.17 Canadian Subsidiary. . . . . . . . . . . . . . . . . . . . 37
5.18 Observance of Operations of the Business . . . . . . . . . 37
5.19 Certain Company Employees. . . . . . . . . . . . . . . . . 37
5.20 Company Bank Debt. . . . . . . . . . . . . . . . . . . . . 37
5.21 Employee Matters . . . . . . . . . . . . . . . . . . . . . 37
Article 6 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 38
6.1 Conditions to Each Party's Obligation to Effect the Merger 38
6.2 Conditions to Obligations of Parent and Sub. . . . . . . . 38
6.3 Conditions to Obligations of the Company . . . . . . . . . 40
Article 7 TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . . 40
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . 40
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . 41
7.3 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . 41
7.4 Amendment and Modification . . . . . . . . . . . . . . . . 41
Article 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 42
8.1 Nonsurvival of Representations, Warranties and Agreements. 42
8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 43
8.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . 43
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 43
8.6 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. . . . . . . . . . . . . . . . . . . . . . . . . 43
8.7 No Remedy in Certain Circumstances . . . . . . . . . . . . 44
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . 44
8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 44
8.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.11 Enforcement of Agreement . . . . . . . . . . . . . . . . . 44
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 30, 1998, by
and among ARROW ELECTRONICS, INC., a New York corporation ("Parent"), ▇▇▇▇
ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and ▇▇▇▇▇▇ ELECTRONICS, INC., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company deem it advisable and in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transaction provided for herein in which Sub would merge with and into the
Company and the Company would become a wholly owned subsidiary of Parent (the
"Merger");
WHEREAS, concurrently with the execution of this Agreement and as
an inducement to Parent and Sub to enter into this Agreement each of the
directors of the Company named on Exhibit A hereto has on the date hereof
granted to Parent an irrevocable proxy to vote the shares of the common stock,
par value $.001 per share, of the Company (the "Company Common Stock") owned by
such person to approve the Merger; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged by the Surviving Corporation (as
defined in Section 1.3) and thereafter delivered to the office of the
Secretary of State of the State of Delaware, for filing and thereafter
recorded, as provided in the Delaware General Corporation Law (the "DGCL"),
as soon as practicable on or after the Closing Date (as defined in Section
1.2). The Merger shall become effective upon the filing of the Certificate
of Merger with the office of the Secretary of State of the State of Delaware
or at such time thereafter as is provided in the Certificate of Merger (the
"Effective Time").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
at the offices of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, 1 ▇▇▇▇▇ Manhattan Plaza,
New York, New York, at
10:00 A.M. (local time) on a date to be specified by Parent and the Company,
which shall be no later than the third business day after satisfaction or
waiver of the latest to occur of the conditions set forth in Article 6 (other
than Sections 6.2(a)(i) and 6.3(a)(i) and the delivery of the officer's
certificates referred to in Sections 6.2(a) and 6.3(a)) (the "Closing Date")
or at such other place, time and date as may be agreed upon in writing by
Parent and the Company. At the Closing there shall be delivered to Parent,
Sub and the Company the certificates and other documents and instruments
required to be delivered hereunder.
1.3 EFFECTS OF THE MERGER. (a) At the Effective Time (i) the separate
existence of Sub shall cease and Sub shall be merged with and into the
Company (Sub and the Company are sometimes referred to herein as the
"Constituent Corporations" and the Company is sometimes referred to herein as
the "Surviving Corporation"), (ii) the Certificate of Incorporation of Sub as
in effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation, except that the name of the
Surviving Corporation as provided in such Certificate of Incorporation shall
be "▇▇▇▇▇▇ Electronics, Inc." and (iii) the By-laws of Sub as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation.
(b) The Merger shall have the effects set forth in this
Agreement, the Certificate of Merger and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, at and after the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, powers, immunities and franchises, of a public as well as of a
private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers, immunities and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due
to either of the Constituent Corporations on whatever account, including
subscriptions to shares and all other choses in action, and all and every
other interest of or belonging to or due to each of the Constituent
Corporations, shall be taken and deemed to be transferred to and vested in
the Surviving Corporation, and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of the
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, shall not revert or be
in any way impaired; but all rights of creditors and all liens upon any
property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may
be enforced against it to the same extent as if said debts and liabilities
had been incurred by it.
1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Sub immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation
and By-laws.
1.5 FURTHER ASSURANCES. Each party hereto will, either prior to or
after the Effective Time, execute such further documents, instruments, deeds,
bills of sale, assignments and assurances and take such further actions as
may be reasonably requested by one or more of the others to consummate the
Merger, to vest the Surviving Corporation with full title to all assets,
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properties, privileges, rights, approvals, immunities and franchises of
either of the Constituent Corporations or to effect the other purposes of
this Agreement.
ARTICLE 2
CONVERSION OF SECURITIES
2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any further action on the part of the holder of any
shares of Company Common Stock or capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation ("Surviving Corporation Common Stock"). Each
certificate representing outstanding shares of Sub Common Stock shall at the
Effective Time represent an equal number of shares of Surviving Corporation
Common Stock.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK.
All shares of the Company Common Stock that are owned by the Company as
treasury stock and any shares of the Company Common Stock owned by Parent,
Sub or any wholly owned Subsidiary of the Company or Parent shall be canceled
and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor. All shares of Common
Stock, par value $1.00 per share, of Parent (the "Parent Common Stock" ), if
any, owned by the Company shall remain unaffected by the Merger. As used in
this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(c) MERGER CONSIDERATION FOR THE COMPANY COMMON STOCK. Each
issued and outstanding share of the Company Common Stock (other than shares
to be canceled in accordance with Section 2.1(b) and other than Dissenting
Shares as defined in Section 2.1(e)) shall be converted into the right to
receive $10.50 in cash (the "Merger Consideration"). All such shares of the
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration.
(d) ▇▇▇▇▇▇▇▇ WARRANT. The Holder (as defined in the Warrant
to Purchase Common Stock of ▇▇▇▇▇▇ Electronics, Inc., dated June 13, 1997
(the "▇▇▇▇▇▇▇▇ Warrant"))
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shall be entitled to receive the aggregate Merger Consideration with respect
to the number of shares of Company Common Stock that the Holder shall be
deemed to have received pursuant to Article VI of the ▇▇▇▇▇▇▇▇ Warrant.
Promptly after surrender of the ▇▇▇▇▇▇▇▇ Warrant to Parent, the Holder shall
receive in exchange therefor a check in the amount equal to the Merger
Consideration which the Holder has the right to receive pursuant to this
Section 2.1(d). In no event shall the Holder be entitled to receive interest
on any such funds.
(e) DISSENTING SHARES. (i) Notwithstanding any provision of
this Agreement to the contrary, each outstanding share of Company Common
Stock the holder of which has not voted in favor of the Merger, has perfected
such holder's right to an appraisal of such holder's shares in accordance
with the applicable provisions of the DGCL and has not effectively withdrawn
or lost such right to appraisal (a "Dissenting Share"), shall not be
converted into or represent a right to receive the Merger Consideration
pursuant to Section 2.1(c), but the holder thereof shall be entitled only to
such rights as are granted by the applicable provisions of the DGCL;
provided, however, that any Dissenting Share held by a person at the
Effective Time who shall, after the Effective Time, withdraw the demand for
appraisal or lose the right of appraisal, in either case pursuant to the
DGCL, shall be deemed to be converted into, as of the Effective Time, the
right to receive the Merger Consideration pursuant to Section 2.1(c).
(ii) The Company shall give Parent (x) prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to the applicable provisions of the DGCL
relating to the appraisal process received by the Company and (y) the
opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company will not voluntarily make
any payment with respect to any demands for appraisal and will not, except
with the prior written consent of Parent, settle or offer to settle any such
demands.
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall make
available to the Surviving Corporation for deposit with a bank or trust
company designated by Parent (and reasonably acceptable to the Company) (the
"Exchange Agent"), for the benefit of the holders of shares of the Company
Common Stock, for exchange in accordance with this Article 2, through the
Exchange Agent, an amount of cash equal to the aggregate Merger Consideration
(such cash, together with earnings thereon, being hereinafter referred to as
the "Exchange Fund") in each case issuable pursuant to Section 2.1 in
exchange for outstanding shares of the Company Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock (the
"Certificates") whose shares were converted pursuant to Section 2.1 into the
right to receive the Merger Consideration (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
the Surviving Corporation may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon
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surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent and Sub, together with
such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor a check in the amount equal
to the Merger Consideration which such holder has the right to receive
pursuant to the provisions of this Article 2, and the Certificate so
surrendered shall forthwith be canceled. In no event shall the holder of any
Certificate be entitled to receive interest on any funds to be received in
the Merger. In the event of a transfer of ownership of the Company Common
Stock which is not registered in the transfer records of the Company, a check
for the appropriate amount of cash may be issued to a transferee if the
Certificate representing the Company Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration.
(c) NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON STOCK. The
Merger Consideration paid upon the surrender for exchange of shares of the
Company Common Stock in accordance with the terms hereof shall be deemed to
have been paid in full satisfaction of all rights pertaining to such shares
of the Company Common Stock, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of the Company Common Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund made available to the Exchange Agent which remains undistributed to the
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of the Company who
have not theretofore complied with this Article 2 shall thereafter look only
to Parent for payment of their claim for the Merger Consideration.
(e) NO LIABILITY. Neither Parent nor the Company shall be liable
to any holder of shares of the Company Common Stock for the Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
3.1 CORPORATE ORGANIZATION AND AUTHORITY OF THE COMPANY.
(a) Each of the Company and its Subsidiaries is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has full corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and, is duly licensed or qualified and in
good standing as a foreign corporation in each jurisdiction in which the
nature of the activities
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conducted by it or the character of the properties owned, leased or operated
by it requires it to be so licensed or so qualified, except where the failure
to be so licensed or so qualified would not be reasonably likely to result in
a Company Material Adverse Effect (as defined below). The Company's
Disclosure Memorandum furnished to Parent on the date hereof (the "Disclosure
Memorandum") with specific reference to this Section sets forth (A) the name
and jurisdiction of incorporation of each Subsidiary of the Company, (B) its
authorized capital stock, (C) the number of issued and outstanding shares of
capital stock and (D) the record owners of such shares. Except for interests
in the Subsidiaries of the Company and as disclosed in the Disclosure
Memorandum with specific reference to this Section, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity (other than (i) non-controlling investments in the
ordinary course of business, (ii) any such interest received in the ordinary
course of business as a settlement of indebtedness, (iii) corporate
partnering, development, cooperative marketing and similar undertakings and
arrangements entered into in the ordinary course of business and (iv) other
investments of less than $25,000). The Company has heretofore delivered to
Parent complete and correct copies of the certificate of incorporation and
bylaws of the Company and its Subsidiaries (or other comparable charter
documents), as currently in effect. For the purposes of this Agreement,
"Company Material Adverse Effect" shall mean a material adverse effect on the
financial condition, assets, liabilities (contingent or otherwise), results
of operation, business or business prospects of the Company and its
Subsidiaries, if any, taken as a whole. For purposes of this Agreement, a
Company Material Adverse Effect shall not include a material adverse effect
on the financial condition, assets, liabilities (contingent or otherwise),
results of operation, business or business prospects of the Company as a
result of (i) the transactions contemplated hereby or the public announcement
hereof, or (ii) changes in the conditions or prospects of the Company and its
Subsidiaries taken as a whole which are consistent with general economic
conditions or general changes affecting the electronic component distribution
or electronics assembly industries, or (iii) any matter disclosed in the
Company SEC Documents (as defined in Section 3.4) or in the Disclosure
Memorandum.
(b) The Company has full corporate power and authority to
enter into this Agreement and, subject to approval of this Agreement by the
stockholders of the Company in accordance with the applicable provisions of
the DGCL (the "Company Stockholders' Approval"), to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company, the Board of Directors of the Company has
recommended adoption of this Agreement by the stockholders of the Company and
directed that this Agreement be submitted to the stockholders of the Company
for their consideration, and no other corporate proceedings on the part of
the Company or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, other
than obtaining the Company Stockholders' Approval. This Agreement has been
duly executed and delivered by the Company, and (assuming due execution and
delivery by Parent and Sub) this Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific
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performance, is subject to the discretion of the court before which any
proceeding therefor may be brought, and except as indemnification may be
limited by public policy.
3.2 CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 30,000,000 shares of the Company Common
Stock and 10,000 shares of Preferred Stock, par value $0.001 per share
("Company Preferred Stock"). As of the date hereof, 9,146,113 shares of the
Company Common Stock are issued and outstanding, and 1,300,000 shares of the
Company Common Stock are reserved for issuance in the aggregate pursuant to
the Company's Amended and Restated 1992 Stock Option Plan (the "Company
Option Plan"), no more than 3,947,256 shares of the Company Common Stock are
reserved for issuance under the Indenture by and between the Company and
First Trust, of California, National Association, as Trustee dated February
15, 1996 (the "Indenture") and 200,000 shares of the Company Common Stock are
reserved for issuance pursuant to the ▇▇▇▇▇▇▇▇ Warrant. As of the date
hereof, no shares of Company Preferred Stock are issued and outstanding. All
such issued and outstanding shares of the Company Common Stock have been, and
any shares of the Company Common Stock which may be issued pursuant to the
Company Option Plans, the Indenture and the ▇▇▇▇▇▇▇▇ Warrant will be, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as disclosed in the Disclosure Memorandum with specific reference to
this Section, there are no (a) outstanding options obligating the Company or
any of its Subsidiaries to issue or sell any shares of capital stock of any
Subsidiary of the Company or to grant, extend or enter into any such option
or (b) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than the Company or
a Subsidiary wholly owned, directly or indirectly, by the Company with
respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of any Subsidiary of the Company. Except as
disclosed in the Disclosure Memorandum with specific reference to this
Section, and except for (i) the rights created pursuant to this Agreement,
(ii) the rights outstanding on the date hereof created pursuant to the
Company Option Plan, the Indenture or the ▇▇▇▇▇▇▇▇ Warrant and (iii) the
issued and outstanding shares of the Company Common Stock set forth herein,
as of the date hereof, there are no (x) outstanding shares of capital stock,
or any notes, bonds, debentures or other indebtedness having the right to
vote (or convertible into or exchangeable for securities having the right to
vote) ("Voting Debt"), of the Company, (y) outstanding options, warrants,
calls, subscriptions or other rights of any kind to acquire, or agreements or
commitments in effect to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound obligating the Company or any
Subsidiary to issue or sell, or cause to be issued or sold, any additional
shares of capital stock or any Voting Debt of the Company or any Subsidiary,
or granting any rights to obtain any benefit measured by the value of the
Company's capital stock (including without limitation, stock appreciation
rights granted under the Company's 1993 Stock Appreciation Rights Plan (the
"Company Stock Appreciation Rights Plan")) or (z) outstanding securities
convertible into or exchangeable for, or which otherwise confer on the holder
thereof any right to acquire, any such additional shares or Voting Debt.
Except pursuant to the preceding sentence, neither the Company nor any of its
Subsidiaries is committed to issue any such option, warrant, call,
subscription, right or security, and after the Effective Time, there will be
no such option, warrant, call, subscription, right, agreement, commitment or
security. There are no contracts, commitments or agreements relating to
voting, purchase or sale of the Company's or any of its Subsidiary's capital
stock or Voting Debt (including, without limitation, any redemption by the
Company thereof) (A) between or among the Company, any Subsidiary of the
Company and any of its stockholders and
7
(B) to the Company's knowledge, between or among any of the Company's
stockholders, except for the proxies set forth on Exhibit A.
3.3 NO VIOLATION; CONSENTS AND APPROVALS. Except as disclosed in
the Disclosure Memorandum with specific reference to this Section, neither
the Company nor its Subsidiaries or any of their respective properties or
assets are subject to or bound by any provision of:
(a) to the Company's knowledge, any law, statute, rule,
regulation, ordinance or judicial or administrative decision;
(b) any articles or certificate of incorporation,
bylaws, or similar organizational document;
(c) any (i) credit or loan agreement, mortgage, deed of
trust, note, bond, indenture, license, concession, franchise, permit, trust,
custodianship, other restriction, (ii) instrument, lease, obligation,
contract or agreement (including, without limitation, any plan, fund or
arrangement contemplated by Section 3.11(a)) or (iii) instruments,
obligations, contracts or agreements (including, without limitation, plans,
funds or arrangements contemplated by Section 3.11(a)), other than those
which do not involve the payment or receipt by the Company or its
Subsidiaries of an amount in excess of $250,000, individually or $500,000 in
the aggregate; or
(d) any judgment, order, writ, injunction or decree;
that would impair, prohibit or prevent, or would be violated or breached by,
or would result in the creation of any pledges, liens, charges, encumbrances,
easements, defects, security interests, claims, options and restrictions of
every kind ("Encumbrance") as a result of, or under which there would be a
material default (with or without notice or lapse of time, or both) or right
of termination, cancellation or acceleration of any material obligation or
the loss of a material benefit as a result of, the execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby, except where, (i) as of the date hereof
such event or occurrence is not reasonably likely to result in losses,
liabilities, costs or expenses (including but not limited to attorneys fees
and expenses), damage or decline in value to the business, condition or
properties of the Company and its Subsidiaries, taken as a whole, or to
Parent (collectively, "Losses") in excess of $250,000 individually or
$500,000 in the aggregate, or (ii) between the date hereof and the Closing
Date would not, individually or in the aggregate, reasonably be likely to
have a Company Material Adverse Effect. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the merger,
consolidation or amalgamation of the Surviving Corporation or any or all of
its Subsidiaries with or into Parent or its affiliates or, the transfer of
any or all of the assets of the Surviving Corporation or any of its
Subsidiaries to Parent or its affiliates will not, with or without the giving
of notice or the passage of time or both, conflict with, result in a default,
right to accelerate or loss of rights under, or result in the creation of any
Encumbrance, under any provision of any material mortgage, deed of trust,
lease, license, or agreement (including any debt instrument) to which the
Company, or any of its Subsidiaries is a party or by which any of them may be
bound or affected. Except as disclosed in the Disclosure Memorandum with
specific reference to this Section and other than (i) the filing of the
Certificate of Merger as provided in Section 1.1, (ii)
8
the filing with the Securities and Exchange Commission (the "SEC") and Nasdaq
of the Proxy Statement (as defined in Section 3.21), (iii) such consents,
orders, approvals, authorizations, registrations, declarations and filings as
may be required under the Investment Canada Act and the Competition Act
(Canada) and applicable state securities laws and the securities laws of any
foreign country, (iv) such filings as may be required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and (v) such local consents, orders, approvals, authorizations,
registrations, declarations and filings which, if not obtained or made, (x)
as of the date hereof would not reasonably be likely to result in Losses in
excess of $250,000 individually or $500,000 in the aggregate, or (y) between
the date hereof and the Closing Date would not, individually or in the
aggregate, reasonably be likely to have a Company Material Adverse Effect,
and that would not impair, prohibit or prevent the consummation of the
transactions contemplated hereby, no consent, order, approval or
authorization of, or declaration, notice, registration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity" ), individual, corporation,
partnership, trust or unincorporated organization (together with Governmental
Entities, each a "Person") is required by or with respect to the Company in
connection with the execution, delivery and performance by the Company of
this Agreement and the consummation of the transactions contemplated hereby.
3.4 SEC REPORTS AND FINANCIAL STATEMENTS OF THE COMPANY. The Company
and its Subsidiaries have filed with the SEC, and have made available to
Parent true and complete copies of, all forms, reports, schedules, statements
and other documents required to be filed by the Company and its Subsidiaries
since January 1, 1993 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or the Securities Act of 1933, as amended (the
"Securities Act") (as such documents have been amended since the time of
their filing, collectively, the "Company SEC Documents"). The Company has
heretofore provided to Parent true and complete copies of the interim
financial statements for the eight (8) months ending August 28, 1998 (the
"Management Accounts"). Except as disclosed in the Disclosure Memorandum
with specific reference to this Section, the Company SEC Documents, including
without limitation any financial statements and schedules included therein,
at the time filed or, if subsequently amended, as so amended, (i) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. Except as
disclosed in the Disclosure Memorandum with specific reference to this
Section, the audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if
any, thereto) of the Company included in the Company SEC Documents comply as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of the unaudited statements, to customary
year-end audit adjustments) 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 cash flows for the
respective periods then ended. Except as set forth in the Disclosure
9
Memorandum with specific reference to this Section, the Management Accounts
are the only Management Accounts of the Company prepared by the Company with
respect to the periods covered thereby and have been prepared in the ordinary
course of business from the books and records of the Company and its
Subsidiaries in accordance with GAAP, consistently applied and maintained
throughout the period indicated. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, each Subsidiary of the
Company is treated as a consolidated subsidiary of the Company in the
financial statements of the Company for all relevant periods covered thereby.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
set forth in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, or as disclosed in the Form 10-Q for the quarterly period
ended July 3, 1998, or as disclosed in the Disclosure Memorandum with
specific reference to this Section, as of July 3, 1998, neither the Company
nor its Subsidiaries had any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by
GAAP to be reflected on the consolidated balance sheet of the Company and its
consolidated subsidiaries (including the notes thereto) as of such date.
Since July 3, 1998, neither the Company nor any of its Subsidiaries have
incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, not in the ordinary course of business or
which, individually or in the aggregate, would be reasonably likely to result
in a Company Material Adverse Effect.
3.6 INVENTORY. Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the inventories of the Company disclosed
in the Company SEC Documents as of July 3, 1998 and in any subsequently filed
Company SEC Documents are stated consistently with the audited consolidated
financial statements of the Company and its consolidated subsidiaries, such
presentation appropriately reflects current Company practice which is
supported historically by cost reductions received from vendors and is
appropriate based upon the relationship with the Company's vendors, and due
provision was made to provide for all slow-moving, obsolete, or unusable
inventories to their estimated useful or scrap values and such inventory
reserves are adequate to provide for such slow-moving, obsolete or unusable
inventory and inventory shrinkage. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, since July 3, 1998, due
provision was made on the books of the Company and its Subsidiaries in the
ordinary course of business consistent with past Company practices to provide
for all slow-moving, obsolete, or unusable inventories to their estimated
useful or scrap values and such inventory reserves are adequate to provide
for such slow-moving, obsolete or unusable inventory and inventory shrinkage.
Except as set forth in the Disclosure Memorandum with specific reference to
this Section, to the extent that any items of inventory intended to be sold
to the military are, in order to meet military or similar specifications,
required to be accompanied by (or the seller thereof is required to maintain)
traceability, testing or other documentation, all such documentation has been
so maintained and is in the possession of the Company or its Subsidiaries at
one of their respective offices.
3.7 ACCOUNTS RECEIVABLE. The accounts receivable disclosed in the
Company SEC Documents as of July 3, 1998, and, with respect to accounts
receivable created since such date, disclosed in any subsequently filed
Company SEC Documents, or as accrued on the books of the Company in the
ordinary course of business consistent with past practices in accordance with
GAAP since the last filed Company SEC Documents, represent and will represent
bona fide
10
claims against debtors for sales and other charges, are not subject to
discount except for normal cash and immaterial trade discounts, and the
amount carried for doubtful accounts and allowances disclosed in each of such
Company SEC Documents or accrued on such books is sufficient to provide for
any losses which may be sustained on realization of the receivables.
3.8 TITLE TO PROPERTY.
(a) Except as disclosed in the Disclosure Memorandum
with specific reference to this Section, the Company and its Subsidiaries
have good and valid title to all of their respective properties, assets and
other rights that do not constitute real property, free and clear of all
Encumbrances, except for such Encumbrances securing indebtedness that is not,
in the aggregate, greater than $250,000. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the Company
and its Subsidiaries own, have leasehold interests in or contractual rights
to use, all of the assets, tangible and intangible, used by, or necessary for
the conduct of the business of, the Company and its Subsidiaries taken as a
whole.
(b) The machinery, tools, equipment and other tangible
physical assets of the Company and its Subsidiaries (other than items of
inventory) are in good working order, except for normal wear and tear, and
are in an operating condition sufficient to conduct the business of the
Company and its Subsidiaries taken as a whole as now being conducted.
(c) Neither the Company nor any of its Subsidiaries owns
any real estate. The Disclosure Memorandum sets forth with specific
reference to this Section each and every parcel of real property or interest
in real estate, held under a lease or used by, or necessary for the conduct
of the business of, the Company and its Subsidiaries taken as a whole (the
"Real Property").
(d) Except as disclosed in the Disclosure Memorandum
with specific reference to Section 3.8(d), the Company or a Subsidiary:
(i) is in peaceful and undisturbed possession of the Real Property
under each lease under which it is a tenant, and there are no
material defaults by it as tenant thereunder; and
(ii) has good and valid rights of ingress and egress to and from all
the Real Property from and to the public street systems for all
usual street, road and utility purposes.
(e) Except as disclosed in the Disclosure Memorandum
with specific reference to this Section, all of the buildings, structures,
improvements and fixtures used by or useful in the business of the Company,
owned or leased by the Company, are in a good state of repair, maintenance
and operating condition and, except as so disclosed and, except for normal
wear and tear, there are no defects with respect thereto which would
materially impair the day-to-day use of any such buildings, structures,
improvements or fixtures or which would subject the Company to material
liability under applicable law.
3.9 INTELLECTUAL PROPERTY. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, to the Company's
knowledge the Company or a Subsidiary
11
owns or has valid rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, service marks,
trade secrets, applications for trademarks and for service marks, know-how
and other proprietary rights and information used or held for use in
connection with the business of the Company and its Subsidiaries taken as a
whole as currently conducted or as contemplated to be conducted and to the
Company's knowledge there is no assertion or claim challenging the validity
of any of the foregoing which, individually or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect. Except as
disclosed in the Disclosure Memorandum with specific reference to this
Section, to the Company's knowledge, the conduct of the business of the
Company and its Subsidiaries as currently conducted does not conflict in any
way with any patent, patent right, license, trademark, trademark right, trade
name, trade name right, service ▇▇▇▇ or copyright of any third party that,
individually or in the aggregate, would be reasonably likely to result in a
Company Material Adverse Effect. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section and to the Company's
knowledge, there are no infringements of any proprietary rights owned by the
Company or a Subsidiary which, individually or in the aggregate, would be
reasonably likely to have a Company Material Adverse Effect.
3.10 TAX MATTERS. Except as set forth in the Disclosure Memorandum with
specific reference to this Section or as would not be reasonably likely to have
a Company Material Adverse Effect:
(a) The Company (or any predecessor) and any consolidated,
combined, unitary, affiliated or aggregate group for Tax purposes of which
the Company (or any predecessor) is or has been a member (a "Consolidated
Group") has timely filed all Tax Returns required to be filed by it, has paid
all Taxes shown to be due on any Tax Return and has provided adequate
reserves in its financial statements for any Taxes that are due and have not
been paid, whether or not shown as being due on any Tax Returns. All Taxes
owed by any of the Company and its Subsidiaries (whether or not shown on any
Tax Return) have been paid or accrued. None of the Company and its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in
a jurisdiction where any of the Company and its Subsidiaries does not file
Tax Returns that it is or may be subject to taxation by that jurisdiction.
There are no security interests on any of the assets of any of the Company
and its Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax. Except as disclosed to Parent in the event of
changes in circumstances between the date hereof and the Closing Date which
have occurred in the ordinary course of business and, individually or in the
aggregate, would not be reasonably likely to result in a Company Material
Adverse Effect (i) no material claim for unpaid Taxes that are due and
payable has become a lien against the property of the Company or is being
asserted against the Company, (ii) no audit of any Tax Return of the Company
is being conducted by a Tax authority, and (iii) no extension of the statute
of limitations on the assessment of any Taxes has been granted by the Company
and is currently in effect. As used herein, "Taxes" shall mean all taxes of
any kind, including, without limitation, those on or measured by or referred
to as income, gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, similar assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority,
12
domestic or foreign. As used herein, "Tax Return" shall mean any return,
report or statement required to be filed with any governmental authority with
respect to Taxes.
(b) To the Company's knowledge, each of the Company and its
Subsidiaries has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Taxes of any
of the Company and its Subsidiaries either (i) claimed or raised by any
authority in writing or (ii) as to which any of the Company directors and
officers (and employees responsible for Tax matters) of the Company and its
Subsidiaries has knowledge based upon personal contact with any agent of the
taxing authority. The Disclosure Memorandum with specific reference to this
Section lists, or other information provided to Parent within twenty (20)
days after the date hereof will list, all federal, state, local, and foreign
income Tax Returns filed with respect to any of the Company and its
Subsidiaries for taxable periods ended on or after December 31, 1990,
indicates, or will indicate, those Tax Returns that have been audited, and
indicates, or will indicate, those Tax Returns that currently are the subject
of audit. The Company has made available to Parent complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by any of the Company and its
Subsidiaries since January 1, 1991.
(d) None of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(e) None of the Company and its Subsidiaries has filed a
consent under Section 341(f) of the Internal Revenue Code of 1986, as amended
("Code") concerning collapsible corporations. None of the Company and its
Subsidiaries has made any payments, is obligated to make any payments, or is
a party to any agreement that by reason of the transactions contemplated
hereby obligate it to make any payments that will not be deductible under
Code Section 280G. None of the Company and its Subsidiaries has been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). Each of the Company and its Subsidiaries has disclosed on
its federal income tax returns all positions taken therein that could give
rise to a substantial under statement of federal income tax within the
meaning of Code Section 6662. None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the Company and its
Subsidiaries (i) has been a member of an Affiliated Group (as defined in Code
Section 1504) filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (ii) has any Losses for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(f) The information with respect to the Company and each of
its Subsidiaries that has been, or prior to Closing will be, provided to
Parent setting forth (i) the tax basis for the United States and Canadian
income tax purposes of the Company or any Subsidiary in its assets; (ii) the
basis of the stockholder(s) of the Subsidiary in its stock; (iii) the amount
of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to
the Company or Subsidiary; and (iv) the amount of any
13
deferred gain or loss allocable to the Company or any Subsidiary arising out
of any intercompany transaction is materially correct.
(g) The unpaid Taxes of the Company and its Subsidiaries (i)
did not, as of July 3, 1998, exceed the reserve for Taxes (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth in the July 3, 1998 balance sheet (rather than
in any notes thereto) and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of the Company and its Subsidiaries in filing their Tax Returns.
3.11 EMPLOYEE MATTERS. (a) With respect to each Benefit Plan, the
Company has made available to Parent a true and correct copy of (i) the most
recent annual report (Form 5500 and Schedules thereto) filed with the
Internal Revenue Service, (ii) such Benefit Plan, (iii) each trust agreement
and group annuity contract, if any, relating to such Benefit Plan and any
predecessor plans referred to therein, service provider agreements, insurance
contracts, and agreements with investment managers, including all amendments
thereto (iv) current summary plan descriptions of each Benefit Plan subject
to ERISA and any similar descriptions of all other Benefit Plans, (v) the
most recent determination of the IRS with respect to the qualified status of
each Benefit Plan that is intended to qualify under Section 401(a) of the
Code (a "Qualified Plan"), and (vi) the most recent accountings with respect
to any Benefit Plan funded through a trust.
(b) Neither the Company nor any of its Subsidiaries
maintains or is obligated to provide benefits under any life, medical or
health plan which provides benefits to retirees or other terminated employees
other than benefit continuation rights under the Consolidated Omnibus Budget
Reconciliation of 1985, as amended ("COBRA").
(c) Neither the Company, its Subsidiaries nor any ERISA
Affiliate has at any time contributed to any "multiemployer plan", as that
term is defined in Section 4001 of ERISA.
(d) Neither the Company nor any of its Subsidiaries or any
ERISA Affiliate or any predecessor thereof maintains, has maintained at any
time during the five-year period preceding the date of this Agreement, or is
obligated to provide benefits under any pension plan subject to Part 3 of
Title I of ERISA, Section 412 of the Code, or Title IV of ERISA.
(e) No rights have been granted to any person under the
Company Stock Appreciation Rights Plan.
(f) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, each Benefit Plan covers only employees
and directors who are employed by, or a director of, the Company or a
Subsidiary (or former employees, directors or beneficiaries with respect to
service with the Company or a Subsidiary), so that the transactions
contemplated by this Agreement will require no spin-off of assets and
liabilities or other division or transfer of rights with respect to any such
plan.
(g) Each of the Benefit Plans is, and its administration is
and has been since inception, in all material respects in compliance with,
and neither the Company nor any Subsidiary has received any claim or notice
that any such Benefit Plan is not in compliance with, all applicable laws,
regulations, orders, and prohibited transactions exemptions, including the
14
requirements of ERISA, the Code, the Age Discrimination in Employment Act,
the Equal Pay Act and Title VII of the Civil Rights Act of 1964. Each
Qualified Plan is qualified under Section 401(a) of the Code, and, if
applicable, complies with the requirements of Section 401(k) of the Code.
Each Benefit Plan which is intended to provide for the deferral of income,
the reduction of salary or other compensation or to afford other tax benefits
complies with the requirements of the applicable provisions of the Code or
other laws required in order to provide such tax benefits.
(h) No event has occurred, and, to the knowledge of the
Company, there exists no condition or set of circumstances in connection with
any Benefit Plan, under which the Company or any Subsidiary, directly or
indirectly (through any indemnification agreement or otherwise), could
reasonably be expected to be subject to any risk of material liability under
Section 409 of ERISA, Section 502(l) of ERISA, Title IV of ERISA or Section
4975 of the Code.
(i) No employer securities, employer real property or other
employer property is included in the assets of any Benefit Plan.
(j) With respect to the Benefit Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of the Company,
there exists no condition or set of circumstances, other than as disclosed in
the Disclosure Memorandum with specific reference to this Section, in
connection with which the Company or any of its Subsidiaries could be subject
to any liability that, (i) as of the date hereof is reasonably likely to
result in Losses in excess of $250,000 individually or $750,000 in the
aggregate, or (ii) between the date hereof and the Closing Date would,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect (except liability for benefits claims and funding
obligations payable in the ordinary course), under ERISA, the Code or any
other applicable law. Neither the Company nor any of its Subsidiaries has
scheduled or agreed upon future increases of benefit levels (or creations of
new benefits) with respect to any Benefit Plan, and no such increases or
creation of benefits have been proposed, made the subject of representations
to employees or requested or demanded by employees under circumstances which
make it reasonable to expect that such increases will be granted.
(k) Except as set forth in the Disclosure Memorandum with
specific reference to this Section, with respect to the Benefit Plans,
individually and in the aggregate, there are no funded benefit obligations
for which contributions have not been made or properly accrued in accordance
with GAAP and there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
GAAP, on the consolidated financial statements of the Company and its
consolidated subsidiaries, which obligations, (i) as of the date hereof could
result in Losses in excess of $250,000 individually or $750,000 in the
aggregate, or (ii) between the date hereof and the Closing Date would,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
(l) Except as set forth in the Disclosure Memorandum with
specific reference to this Section, and except as described in Sections 5.15
and 3.18 hereof, neither the Company nor any Subsidiary is a party to any
oral or written (i) consulting agreement not terminable on 60 days or less
notice, (ii) agreement with any director, executive officer or key employee
of the Company
15
or any Subsidiary the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Agreement, or agreement with
respect to any executive officer of the Company or any Subsidiary providing
any term of employment or compensation guarantee extending for a period
longer than one year, or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this 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.
(m) The following terms shall be defined as follows:
"Benefit Plan" means any of the following established by
the Company or any of its Subsidiaries, or any ERISA Affiliate of any of the
foregoing, existing at the Closing Date or prior thereto, to which the
Company or any of its Subsidiaries contributes or has contributed, or under
which any employee, former employee or director of the Company or any
Subsidiary or any beneficiary thereof is covered, is eligible for coverage or
has benefit rights: any employment, bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock appreciation
rights, stock purchase, stock option, phantom stock, retirement, vacation,
severance, layoff, change of control, disability, sick leave, death benefit,
hospitalization, day or dependent care, cafeteria, worker compensation or
other employee-related insurance or other plan, arrangement or understanding,
whether or not legally binding, whether written or oral, including, but not
limited to any "employee benefit plan" within the meaning of Section 3(3) of
ERISA.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means any person who is in the same
controlled group of corporations or who is under common control with the
Company or, before the Closing, the Company or any of its Subsidiaries within
the meaning of Section 414 of the Code.
3.12 LABOR MATTERS. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement with any labor union,
confederation or association and there are no discussions, negotiations,
demands or proposals that are pending or have been conducted or made with or
by any labor union, confederation or association. Except as disclosed in the
Company SEC Reports filed prior to the date of this Agreement or in the
Disclosure Memorandum with specific reference to this Section, there are no
material controversies pending or, to the knowledge of the Company,
threatened between the Company or any of its Subsidiaries and any
representatives of its employees and, to the knowledge of the Company, there
are no material organizational efforts presently being made involving
Subsidiaries. Since January 1, 1991, there has been no work stoppage, strike
or other concerted action by employees of the Company or any of its
Subsidiaries. During that period, the Company and its Subsidiaries have
complied in all material respects with all applicable laws relating to the
employment of labor, including, without limitation those relating to wages,
hours and collective bargaining. Except as set forth in the Disclosure
Memorandum with specific reference to this Section, there is no present or
former employee, manager or director of the Company or any of its
Subsidiaries who
16
has made any claim since January 1, 1998 against the Company or any of its
Subsidiaries (whether under law, any employment agreement or otherwise) on
account of or for: (i) overtime pay, other than overtime pay for the current
payroll period; (ii) wages or salaries, other than wages or salaries for the
current payroll period; (iii) vacations, sick leave, time off or pay in lieu
of vacation, sick leave or time off, other than vacation, sick leave or time
off (or pay in lieu thereof) earned in the twelve-month period immediately
preceding the date of this Agreement; or (iv) termination of employment, and
to the Company's knowledge, there is no basis for any such claim.
3.13 NO MATERIAL CHANGE. Except as set forth in the Disclosure
Memorandum with specific reference to this Section, since July 3, 1998, there
have been no events, changes or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
3.14 ABSENCE OF CHANGE OR EVENT. Except as contemplated by this
Agreement or as disclosed in the Disclosure Memorandum with specific
reference to this Section, since July 3, 1998, the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course and consistent with prior practice and have not:
(a) amended or proposed to amend their respective
certificates or articles of incorporation or bylaws (or other comparable
corporate charter documents);
(b) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except
liabilities or obligations incurred in the ordinary course of business and
consistent with prior practice;
(c) mortgaged, pledged or subjected to lien,
restriction or any other Encumbrance any of their respective properties,
businesses or assets, tangible or intangible, of the Company or its
Subsidiaries, except for liens arising in the ordinary course of business and
consistent with prior practice to secure debt incurred for the purpose of
financing all or part of the purchase price or the cost of construction or
improvement of the equipment or other property subject to such liens,
provided that (i) the principal amount of any debt secured by such lien does
not exceed 100% of such purchase price or cost, (ii) such lien does not
extend to or cover any other property other than such item of property and
any improvements on such item and (iii) the incurrence of such debt was in
the ordinary course of business and consistent with prior practice;
(d) except in the ordinary course of business and
consistent with prior practice, sold, transferred, leased or loaned to others
or otherwise disposed of any of their respective assets (or committed to do
any of the foregoing), including the payment of any loans owed to any
affiliate, except for inventory sold to customers or returned to vendors in
the ordinary course of business and consistent with prior practice, or
canceled, waived, released or otherwise compromised any debt or claim, or any
right of significant value;
(e) suffered any damage, destruction or loss (whether
or not covered by insurance) which, (i) as of the date hereof, is reasonably
likely to result in Losses in excess of $500,000 in the aggregate, or, (ii)
from the date hereof until the Closing Date, would,
17
individually or in the aggregate, be reasonably likely to result in a Company
Material Adverse Effect;
(f) made or committed to make any capital
expenditures or capital additions or betterments in excess of $1,000,000 in
the aggregate;
(g) encountered any labor union organizing activity,
had any actual or threatened employee strikes, or any work stoppages,
slow-downs or lock-outs related to any labor union organizing activity or any
actual or threatened employee strikes;
(h) instituted any litigation, action or proceeding
before any court, governmental body or arbitration tribunal relating to it or
its property, except for litigation, actions or proceedings instituted in the
ordinary course of business and consistent with prior practice;
(i) split, combined or reclassified any of their
respective capital stock, or declared or paid any dividend or made any other
payment or distribution in respect of their respective capital stock, or
directly or indirectly redeemed, purchased or otherwise acquired any of their
respective capital stock;
(j) acquired, or agreed to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, or otherwise acquired, or agreed to acquire, any assets
which are material, individually or in the aggregate, to the Company and its
Subsidiaries taken as a whole, except for purchases of inventory in the
ordinary course of business and consistent with prior practice;
(k) increased, or agreed or promised to increase, the
compensation of any officer, employee or agent of the Company or any
Subsidiary, directly or indirectly, including by means of any bonus, pension
plan, profit sharing, deferred compensation, savings, insurance, retirement,
or any other employee benefit plan, except in the ordinary course of business
and consistent with prior practice;
(l) except in the ordinary course of business and
consistent with prior practice, increased promotional or advertising
expenditures or otherwise changed their respective policies or practices with
respect thereto;
(m) except to the extent required by applicable law,
permitted any material change in (A) any pricing, marketing, purchasing,
investment, accounting, financial reporting, inventory, credit, allowance or
tax practice or policy or (B) any method of calculating any bad debt
contingency or other reserve for accounting, financial reporting or tax
purposes;
(n) made or changed any material election concerning
Taxes or Tax Returns, changed an annual accounting period or adopted or
changed any accounting method;
(o) except in the ordinary course of business and
consistent with prior practice, filed any amended Tax Return or extended the
applicable statute of limitations for any taxable period, entered into any
closing agreement with respect to Taxes, settled or compromised
18
any material Tax claim or assessment or surrendered any right to claim a
refund of Taxes or obtained or entered into any Tax ruling, agreement, or
contract, or, except to the extent promptly disclosed to Parent upon the
receipt thereof, received notification of an examination, audit or pending
assessment with respect to Taxes; or
(p) entered into a contract to do or engage in any of
the foregoing after the date hereof.
3.15 LITIGATION. Except as disclosed in the Disclosure Memorandum
with specific reference to this Section or in the Company SEC Documents filed
prior to the date hereof, there is no (i) outstanding consent, order,
judgment, writ, injunction, award or decree of any Governmental Entity or
arbitration tribunal against or involving the Company or any of its
Subsidiaries or any of their respective properties or assets, (ii) action,
suit, claim, counterclaim, litigation, arbitration, dispute or proceeding
pending or, to the Company's knowledge, threatened against or involving the
Company or any of its Subsidiaries or any of their respective properties or
assets or (iii) to the Company's knowledge, investigation or audit pending or
threatened against or relating to the Company or any of its Subsidiaries or
any of their respective properties or assets or any of its officers or
directors (in their capacities as such) (collectively, "Proceedings") which,
(x) as of the date hereof is reasonably likely to result in Losses in excess
of $500,000 in the aggregate, or (y) between the date hereof and the Closing
Date would, individually or in the aggregate, reasonably be likely to have a
Company Material Adverse Effect, or would impair, prohibit or prevent the
consummation of the transactions contemplated hereby. To the Company's
knowledge, there are no existing facts or circumstances which could form a
basis for any Proceeding which, if commenced, would be reasonably likely to
result in a Company Material Adverse Effect, or would impair, prohibit or
prevent the consummation of the transactions contemplated hereby.
3.16 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. (a) Except as
disclosed in the Disclosure Memorandum with specific reference to this
Section, the Company and its Subsidiaries and their respective properties,
assets, operations and activities, have complied and are in compliance in all
respects with all applicable federal, state and local laws, rules,
regulations, ordinances, orders, judgments and decrees including, without
limitation, health and safety statutes and regulations and all Environmental
Laws (as defined herein), including, without limitation, all restrictions,
conditions, standards, limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except,
with respect to laws, rules, regulations, ordinances, orders, judgments and
decrees other than those relating to Environmental Laws, the Foreign Corrupt
Practices Act and applicable criminal statutes, where the failure to have
complied or be in compliance is not, individually or in the aggregate,
reasonably likely to result in a Company Material Adverse Effect, or that
would impair, prohibit or prevent the consummation of the transactions
contemplated hereby. Neither the Company nor any Subsidiary is in violation
of or in default under any terms or provisions of (i) their respective
articles or certificates of incorporation, bylaws or similar organizational
documents, (ii) any credit or loan agreement, mortgage or security agreement,
deed of trust, note, bond or indenture, or (iii) any other instrument,
obligation, contract or agreement to which it is subject or by which it is
bound, except, in the case of clauses (ii) and (iii), for violations or
defaults which are not,
19
individually or in the aggregate, reasonably likely to result in a Company
Material Adverse Effect.
(b) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, (i) the Company and its Subsidiaries have
obtained all Permits that are (A) required under all federal, state and local
laws, rules, regulations, ordinances, orders, judgments and decrees,
including, without limitation, the Environmental Laws, for the ownership,
construction, use and operation of each property, facility or location owned,
operated or leased by the Company or any Subsidiary (the "Property") or (B)
otherwise necessary in the conduct of the business of the Company, except for
failures to obtain Permits (other than those that would result in the
imposition of criminal sanctions) which are not, individually or in the
aggregate, reasonably likely to result in a Company Material Adverse Effect
and (ii) all such Permits are in effect, no appeal nor any other action is
pending to revoke any such Permit, and the Company and its Subsidiaries are
in full compliance with all terms and conditions of all such Permits, except
for failures to be in compliance which are not, individually or in the
aggregate, reasonably likely to result in a Company Material Adverse Effect.
(c) The Company has heretofore delivered to Parent true and
complete copies of all environmental studies in the Company's possession
relating to the Property or any other property or facility previously owned,
operated or leased by the Company or any Subsidiary.
(d) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending relating to the
Company, any Subsidiary or the Property (or any other property or facility
formerly owned, operated or leased by the Company or any Subsidiary) or, to
the Company's knowledge, threatened relating to the Company, any Subsidiary
or the Property (or any other such property of facility) and relating in any
way to the Environmental Laws or any regulation, code, plan, Permits, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except for such actions, suits, demands,
claims, hearings, notices of violation, proceedings, notices or demand
letters which are not, individually or in the aggregate, reasonably likely to
result in a Company Material Adverse Effect.
(e) Neither the Company nor any Subsidiary or any other
Person has, Released (as defined herein), placed, stored, buried or dumped
any Hazardous Substances, Oils, Pollutants or Contaminants or any other
wastes produced by, or resulting from, any business, commercial, or
industrial activities, operations, or processes, on, beneath, or adjacent to
the Property (or any other property or facility formerly owned, operated or
leased by the Company or any Subsidiary) except for inventories of such
substances to be used, and wastes generated therefrom, in the ordinary course
of business of the Company and its Subsidiaries (which inventories and
wastes, if any, were and are stored or disposed of in accordance with
applicable laws and regulations and in a manner such that there has been no
Release of any such substances into the environment), except where such
Releases, placement, storage, burial or dumping of Hazardous Substances,
Oils, Pollutants or Contaminants are not, individually or in the aggregate,
reasonably likely to result in a Company Material Adverse Effect.
20
(f) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, no Release or Cleanup occurred at the
Property (or any other property or facility formerly owned, operated or
leased by the Company or any Subsidiary) which could result in the assertion
or creation of a lien on the Property by any Governmental Entity with respect
thereto, nor has any such assertion of a lien been made by any Governmental
Entity with respect thereto, except for such Releases, Cleanups or assertions
of liens which are not, individually or in the aggregate, reasonably likely
to result in a Company Material Adverse Effect.
(g) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, no employee of the Company or any
Subsidiary in the course of his or her employment with the Company or any
Subsidiary has been exposed to any Hazardous Substances, Oils, Pollutants or
Contaminants or any other substance, generated, produced or used by the
Company or any Subsidiary which could give rise to any claim against the
Company or any Subsidiary, except for such claims which are not, individually
or in the aggregate, reasonably likely to result in a Company Material
Adverse Effect.
(h) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, neither the Company nor any Subsidiary
has received any notice or order from any Governmental Entity or private or
public entity advising it that the Company or any Subsidiary is responsible
for or potentially responsible for Cleanup or paying for the cost of Cleanup
of any Hazardous Substances, Oils, Pollutants or Contaminants or any other
waste or substance, and neither the Company nor any Subsidiary has entered
into any agreements concerning such Cleanup, nor is the Company or any
Subsidiary aware of any facts which might reasonably give rise to such
notice, order or agreement, except for such notices, orders or agreements
which are not, individually or in the aggregate, reasonably likely to result
in a Company Material Adverse Effect.
(i) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, and except for such items which are not
reasonably likely to result in a Company Material Adverse Effect, the
Property does not contain any: (i) underground storage tanks; (ii) asbestos;
(iii) equipment using PCBs; (iv) underground injection ▇▇▇▇▇; or (v) septic
tanks in which process wastewater or any Hazardous Substances, Oils,
Pollutants or Contaminants have been disposed.
(j) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, with regard to the Company, its
Subsidiaries and the Property (or any other property or facility formerly
owned, operated or leased by the Company or any Subsidiary), and except where
the following are not reasonably likely to result in a Company Material
Adverse Effect, there are no past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent compliance or continued compliance with the
Environmental Laws as in effect on the date hereof or with any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder, or which may give rise
to any common law or legal liability under the Environmental Laws, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to
the manufacture, generation, processing, distribution, use, treatment,
storage, place of
21
disposal, transport or handling, or the Release or threatened Release into
the indoor or outdoor environment by the Company, any Subsidiary or a present
or former facility of the Company or any Subsidiary taken as a whole, of any
Hazardous Substances, Oils, Pollutants or Contaminants.
(k) Except as disclosed in the Disclosure Memorandum with
specific reference to this section, neither the Company nor any Subsidiary
has entered into any agreement that may require it to pay to, reimburse,
guaranty, pledge, defend, indemnify or hold harmless any person for or
against Environmental Liabilities and Costs.
(l) The following terms shall be defined as follows:
"Cleanup" means all actions required to: (1) cleanup, remove,
treat or remediate Hazardous Substances, Oils, Pollutants or Contaminants in
the indoor or outdoor environment; (2) prevent the Release of Hazardous
Substances, Oils, Pollutants or Contaminants so that they do not migrate,
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care; or (4) respond to any government requests
for information or documents in any way relating to cleanup, removal,
treatment or remediation or potential cleanup, removal, treatment or
remediation of Hazardous Substances, Oils, Pollutants or Contaminants in the
indoor or outdoor environment.
"Environmental Laws" means all foreign, federal, state and
local laws, regulations, rules and ordinances relating to pollution or
protection of the environment, including, without limitation, laws relating
to Releases or threatened Releases of Hazardous Substances, Oils, Pollutants
or Contaminants into the indoor or outdoor environment (including, without
limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Substances, Oils, Pollutants or Contaminants, and all laws and
regulations with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Substances, Oils, Pollutants or
Contaminants.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct Cleanup, losses,
damages, deficiencies, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, all fees,
disbursements and expenses of counsel, expert and consulting fees and costs
of investigations and feasibility studies and responding to government
requests for information or documents), fines, penalties, restitution and
monetary sanctions, interest, direct or indirect, known or unknown, absolute
or contingent, past, present or future, resulting from any claim or demand,
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, joint and several liability, criminal or civil statute,
including any Environmental Law, or arising from environmental, health or
safety conditions, involving the Release or threatened Release of Hazardous
Substances, Oils, Pollutants or Contaminants into the environment, as a
result of past or present ownership, leasing or operation of any properties,
owned, leased or operated by the Company or any Subsidiary, including,
without limitation, any of the foregoing incurred in connection with the
conduct of any Cleanup.
22
"Hazardous Substances, Oils, Pollutants or Contaminants" means
all substances defined as such in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. sec. 300.5, or defined as such by, or
regulated as such under, any Environmental Law.
"Release" means, when used as a noun, any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, surface water, groundwater or
property, and when used as a verb, the occurrence of any Release.
3.17 INSURANCE. Except as disclosed in the Disclosure Memorandum
with specific reference to this Section, the insurance policies in force with
respect to the business and properties of the Company and its Subsidiaries
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for material compliance with all
requirements of law and all agreements to which the Company or any Subsidiary
is a party; are valid, outstanding and enforceable policies; and provide
adequate insurance coverage for the assets and operations of the Company and
its Subsidiaries. Such insurance policies are placed with financially sound
and reputable insurers and, in light of the respective business, operations
and assets and properties of the Company and its Subsidiaries, are in amounts
and have coverages that are reasonable and customary for persons engaged in
such businesses and operations and having such assets and properties.
Neither the Company nor any Subsidiary or the Person to whom such policy has
been issued has received notice that any insurer under any policy referred to
in this Section is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause.
3.18 AFFILIATE INTERESTS. (a) Except as disclosed by the Company
SEC Documents and except for services provided by the directors and executive
officers of the Company and its Subsidiaries in their capacities as such and
the compensation paid therefor, the Disclosure Memorandum with specific
reference to this Section, sets forth all amounts paid (or deemed for
accounting purposes to have been paid) and services provided by the Company
and its Subsidiaries to, or received by the Company and its Subsidiaries
from, any affiliate of the Company or any Subsidiary since December 31, 1993
and all such amounts currently owed by the Company or any Subsidiary to, or
to the Company or any Subsidiary by, any affiliate of the Company or any
Subsidiary. For purposes of this Agreement, the term "affiliate" shall have
the meaning ascribed thereto in Rule 405 of the Securities Act.
(b) Each contract, agreement, plan or arrangement between
the Company or any Subsidiary on the one hand, and any affiliate of the
Company or any Subsidiary or affiliate thereof, on the other hand ("Affiliate
Arrangements") is disclosed in the Disclosure Memorandum with specific
reference to this Section or Section 3.18(a). Except as disclosed in the
Disclosure Memorandum with specific reference to this Section or Section
3.18(a), each of the transactions described in Section 3.18(a) and each of
the Affiliate Arrangement was entered into in the ordinary course of business
and on commercially reasonable terms and conditions.
23
3.19 CUSTOMERS AND SUPPLIERS. Except as set forth in the Disclosure
Memorandum with specific reference to this Section, as of the date hereof, no
customer which individually accounted for more than 1% of the gross revenues
of the Company and all its Subsidiaries during the 12 month period preceding
the date hereof, and no supplier of the Company and all its Subsidiaries, has
canceled or otherwise terminated, or made any written threat to the Company
or any Subsidiary to cancel or otherwise terminate, its relationship with the
Company or any Subsidiary, or has at any time on or after July 3, 1998
decreased materially its services or supplies to the Company and all its
Subsidiaries in the case of any such supplier, or its usage of the services
or products of the Company and all its Subsidiaries in the case of any such
customer, and to the knowledge of the Company no such supplier or customer
intends to cancel or otherwise terminate its relationship with the Company or
any Subsidiary or to decrease materially its services or supplies to the
Company and all its Subsidiaries or its usage of the services or products of
the Company and all its Subsidiaries, as the case may be. From and after the
date hereof, no customer which individually accounted for more than 5% of the
gross revenues of the Company and all its Subsidiaries during the 12 month
period preceding the Closing Date, has canceled or otherwise terminated, or
made any written threat to the Company to cancel or otherwise terminate, for
any reason, including without limitation the consummation of the transactions
contemplated hereby, its relationship with the Company and all Subsidiaries,
and no such customer intends to cancel or otherwise terminate its
relationship with the Company and all its Subsidiaries or to decrease
materially its usage of the services or products of the Company and all its
Subsidiaries. Neither the Company nor any Subsidiary has breached, so as to
provide a benefit to the Company or any Subsidiary that was not intended by
the parties, any agreement with, or engaged in any fraudulent conduct with
respect to, any customer or supplier of the Company or any Subsidiary. The
Disclosure Memorandum with specific reference to this Section, sets forth the
dates of each audit conducted since January 1, 1995 by each material supplier
of the Company and its Subsidiaries and summaries of the results of such
audits.
3.20 ABSENCE OF QUESTIONABLE PAYMENTS. To the Company's knowledge,
neither the Company nor any Subsidiary or any director, officer, agent,
employee or other Person acting on behalf of the Company or any Subsidiary
has used, or authorized the use of, any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others
or established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act. To the Company's knowledge, the directors,
employees and independent commission agents of the Company and its
Subsidiaries are in compliance with ethical standards and other trading
practices mandated by applicable laws and contractual arrangements and have
not made payments to any third parties other than in the ordinary course of
business pursuant to contracts.
3.21 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by or on behalf of the Company or any Subsidiary for inclusion or
incorporation by reference in (i) the proxy statement in definitive form
relating to the meeting of the Company's stockholders to be held in
connection with the Merger (the "Proxy Statement") will, at the date first
mailed to stockholders, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
light of circumstances under which they are made, not misleading and (ii) the
Proxy Statement or any amendment thereof or supplement thereto will, at the
time of the meeting of the Company's stockholders to be held in connection
with the Merger, contain any untrue statement of a material fact, or omit to
state any material fact
24
necessary to correct any statement in any earlier communication with respect
to the solicitation of any proxy for such meetings of stockholders. The Proxy
Statement will comply as to form in all material respects with the provisions
of the Exchange Act and the rules and regulations thereunder.
3.22 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of ▇▇▇▇▇▇▇▇▇ & Company, Inc., dated as of September 29, 1998, to the
effect that, as of such date, from a financial point of view, the Merger
Consideration to be offered to the stockholders of the Company in the Merger
is fair to such stockholders, a copy of which opinion has been delivered to
Parent.
3.23 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of the Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
3.24 COMPANY NOT AN INTERESTED SHAREHOLDER OR A 30% SHAREHOLDER. As
of the date hereof, neither the Company nor any Subsidiary or any of their
respective affiliates is an "interested shareholder" of Parent as such term
is defined in Section 912 of the New York Business Corporation Law or a "30%
Shareholder" of Parent as such term is defined in Article TENTH of Parents'
Restated Certificate of Incorporation.
3.25 SECTION 203 OF THE DGCL NOT APPLICABLE. The provisions of
Section 203 of the DGCL will not, prior to the termination of this Agreement,
apply to this Agreement, the Merger or the other transactions contemplated
hereby.
3.26 DISCLOSURE. No representation or warranty by the Company in
this Agreement, including the Disclosure Memorandum, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was
made, to make the statements herein or therein not misleading. There is no
fact known to the Company and its Subsidiaries taken as a whole which could
have a material adverse effect on the financial condition, results of
operations, prospects or business of the Company and its Subsidiaries taken
as a whole, which has not been set forth in the Company SEC Documents or in
this Agreement, including the Disclosure Memorandum.
3.27 THE COMPANY'S KNOWLEDGE. The term "the Company's knowledge" or
words of similar import shall mean the actual knowledge after due inquiry of
any of the Company's directors and officers.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.1 ORGANIZATION AND AUTHORITY. Each of Parent and Sub is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of
25
incorporation and has full corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and, is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction in which the nature of the activities
conducted by it or the character of the properties owned, leased or operated
by it requires it to be so licensed or so qualified, except where the failure
to be so licensed or so qualified would not have a material adverse effect on
Parent and its Subsidiaries taken as a whole (a "Parent Material Adverse
Effect"). Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
(b) Each of Parent and Sub has full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly and validly approved by its
Board of Directors and by Parent in its capacity as the sole stockholder of
Sub; and no other corporate proceedings on the part of the either Parent or
Sub or their stockholders are necessary to authorize the execution, delivery
and performance of this Agreement by Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Parent and Sub, and (assuming due
execution and delivery by the Company) this Agreement constitutes a valid and
binding obligation of each of Parent and Sub, enforceable in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally,
and except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought, and except as indemnification may be
limited by public policy.
4.2 NO VIOLATION; CONSENTS AND APPROVALS. Neither Parent, Sub nor
any of their respective properties or assets, is subject to or bound by any
provision of:
(a) to Parent's knowledge, any law, statute, rule,
regulation, ordinance or judicial or administrative decision;
(b) any articles or certificate of incorporation or
by-laws;
(c) any (i) credit or loan agreement, mortgage, deed
of trust, note, bond, indenture, license, concession, franchise, permit,
trust, custodianship, other restriction, or (ii) instrument, lease,
obligation, contract or agreement; or
(d) any judgment, order, writ, injunction or decree;
that would impair, prohibit or prevent, or would be violated or breached by,
or under which there would be a material default (with or without notice or
lapse of time, or both) as a result of, the execution, delivery and
performance by each of Parent and Sub of this Agreement and the consummation
of the transactions contemplated hereby, except where such event or
occurrence is not, individually or in the aggregate, reasonably likely to
have a Parent Material Adverse Effect. Other than (i) the filing of the
Certificate of Merger as provided in Section 1.1, (ii) the filing with the
SEC and Nasdaq of the Proxy Statement, (iii) such consents, orders,
approvals,
26
authorizations, registrations, declarations and filings as may be required
under the Investment Canada Act, the Competition Act (Canada), applicable
state securities laws and the securities laws of any foreign country, (iv)
such filings as may be required under the HSR Act and (v) such local
consents, orders, approvals, authorizations, registrations, declarations and
filings which, if not obtained or made, would not, individually or in the
aggregate, reasonably be likely to have a Parent Material Adverse Effect on
and that would not impair, prohibit or prevent the consummation of the
transactions contemplated hereby, no consent, order, approval or
authorization of, or declaration, notice, registration or filing with, any
Person is required by or with respect to the execution, delivery and
performance by Parent and Sub of this Agreement and the consummation of the
transactions contemplated hereby.
4.3 SEC REPORTS AND FINANCIAL STATEMENTS OF PARENT. Parent has filed
with the SEC, and has heretofore provided to the Company true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1993 under the Exchange Act or
the Securities Act (as such documents have been amended since the time of
their filing, collectively, the "Parent SEC Documents"). The Parent SEC
Documents, including without limitation any financial statements and
schedules included therein, at the time filed or, if subsequently amended, as
so amended, (i) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied in all material
respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations
of the SEC thereunder. The financial statements of Parent included in the
Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to customary year-end
audit adjustments) the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows.
4.4 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by or on behalf of Parent or Sub for inclusion or incorporation by
reference from documents filed by Parent or any of its Subsidiaries with the
SEC in (i) the Proxy Statement will, at the date first mailed to
stockholders, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
circumstances under which they are made, not misleading and (ii) the Proxy
Statement or any amendment thereof or supplement thereto will, at the time of
the meeting of the Company's stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for such meetings of
stockholders. All such documents filed by Parent or Sub with the SEC under
the Exchange Act will comply as to form in all material respect with the
requirements of the Exchange Act.
4.5 LITIGATION. There is no (i) outstanding consent, order, judgment,
writ, injunction, award or decree of any Governmental Entity or arbitration
tribunal against or involving Parent or
27
Sub or any of their respective properties or assets, (ii) action, suit,
claim, counterclaim, litigation, arbitration, dispute or proceeding pending
or, to Parent's knowledge, threatened against or involving Parent or Sub or
any of their respective properties or assets or (iii) to Parent's knowledge,
investigation or audit pending or threatened against or relating to Parent or
Sub or any of their respective properties or assets or any of their
respective officers or directors (in their capacities as such) (collectively,
"Parent Proceedings") which is, individually or in the aggregate, reasonably
likely to impair, prohibit or prevent the consummation of the transactions
contemplated hereby. To Parent's knowledge, there are no existing facts or
circumstances which could form a basis for any Parent Proceeding which, if
commenced, would be reasonably likely to impair, prohibit or prevent the
consummation of the transactions contemplated hereby.
4.6 PARENT'S KNOWLEDGE. The term "Parent's knowledge" or words of
similar import shall mean the actual knowledge after due inquiry of any of
Parent's directors and executive officers.
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF THE COMPANY AND PARENT
5.1 CONDUCT OF THE COMPANY'S BUSINESS PRIOR TO THE CLOSING DATE. The
Company agrees as to itself and its Subsidiaries that, between the date
hereof and the Closing Date:
(a) Except as contemplated by this Agreement, as
disclosed in the Disclosure Memorandum with specific reference to this
Section or Section 3.14 or as permitted by the prior written consent of
Parent, the Company and its Subsidiaries shall operate their respective
businesses only in the usual, regular and ordinary course consistent with
prior practice, and the Company and its Subsidiaries shall not:
(i) take any action of the nature referred to in Section 3.14, except
as expressly permitted therein;
(ii) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of their respective capital stock
(except pursuant to, and in accordance with the terms of, the
options outstanding on the date hereof created pursuant to the
Company Option Plan, the Indenture and the ▇▇▇▇▇▇▇▇ Warrant) or
any Voting Debt, or any securities convertible into or
exchangeable for, or any rights, warrants, calls, subscriptions
or options to acquire, any shares of their respective capital
stock or any Voting Debt;
(iii) increase, decrease or modify, or authorize or propose the
increase, decrease or modification of, the authorized capital of
the Company or the number of issued and outstanding shares of
Company Common Stock except such increases, decreases or
modifications as may occur upon the issuance of capital stock of
the Company pursuant to the exercise of options or warrants, or
the conversion of securities or instruments convertible into the
capital
28
stock of the Company, which options, warrants and convertible
securities or instruments are outstanding as of the date hereof;
(iv) modify or amend, or authorize or propose to modify or amend, the
Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or similar organizational documents;
(v) except as required by law, create or enter into an agreement or
benefit plan which, if existing as of the date hereof would
constitute a Benefit Plan, or modify an existing Benefit Plan;
(vi) maintain or provide, or agree to maintain or provide, benefits
under any life, medical or health plan for retirees or other
terminated employees of the Company other than benefit
continuation rights under COBRA;
(vii) take or permit any affiliate thereof to take any action that
would or is reasonably likely to result in any of the Company's
representations and warranties set forth in this Agreement not to
be true as of the date made (to the extent so limited) or in any
of the conditions to the Merger set forth in Article 6 not being
satisfied;
(viii) modify, change, increase or decrease the Company's equity
interest or investment in any of the Company's Subsidiaries other
than intercompany transfers in the ordinary course as part of the
Company's cash management arrangements;
(ix) except as required by law, negotiate or enter into any collective
bargaining agreement; or
(x) enter into any agreement or contract with any Affiliate of the
Company or any of its Subsidiaries or modify or amend, or
authorize or propose to modify or amend, any existing agreement
or contract with any Affiliate of the Company of its Subsidiaries.
(b) The Company shall preserve the business
organization of the Company and its Subsidiaries intact and shall use its
best efforts to keep available to Parent the services of the present officers
and employees of the Company and its Subsidiaries and to preserve for Parent
the good will of the Company's suppliers, customers, and others having
business relations with the Company; PROVIDED, THAT the Company shall not be
required to incur any additional expenses with regard to such officers and
employees, except for such expenses that are mutually agreed upon by the
parties. Except with the prior written consent of Parent (not to be
unreasonably withheld), the Company shall not terminate or cause to be
terminated any distribution agreement to which it is a party.
(c) The Company and its Subsidiaries shall maintain
in force the insurance policies referred to in Section 3.17 or insurance
policies providing the same or substantially similar coverage; provided,
however, that the Company will notify Parent prior to the expiration of any
of such insurance policies.
29
(d) The Company shall use its best efforts to pursue
its rights with respect to the matters listed in the Disclosure Memorandum
with respect to Section 3.14(h) and the Proceedings contemplated by Section
3.15.
(e) Except as contemplated by this Agreement or
permitted by the prior written consent of Parent, no plan, fund, or
arrangement referred to in Section 3.11, or any option or award agreement
thereunder, has been or will be:
(i) terminated by the Company or any Subsidiary;
(ii) amended (except as expressly required by law) in any manner which
would directly or indirectly increase the benefits accrued, or
which may be accrued, by any participant thereunder; or
(iii) amended in any manner which would materially increase the cost to
Parent of maintaining such plan, fund, or arrangement.
5.2 CONDUCT OF BUSINESS OF SUB. Prior to the Effective Time, except
as may be required by applicable law and subject to the other provisions of this
Agreement, Parent shall cause Sub to (a) perform its obligations under this
Agreement in accordance with its terms, (b) not incur directly or indirectly any
liabilities or obligations other than those incurred in connection with the
Merger, (c) not engage directly or indirectly in any business or activities of
any type or kind and not enter into any agreements or arrangements with any
person, or be subject to or bound by any obligation or undertaking, which is not
contemplated by this Agreement and (d) not create, grant or suffer to exist any
lien upon its properties or assets which would attach to any properties or
assets of the Surviving Corporation after the Effective Time.
5.3 PREPARATION OF THE PROXY STATEMENT. The Company shall promptly
prepare and file with the SEC the Proxy Statement and shall use its best
efforts to (i) have the Proxy Statement cleared by the SEC and (ii) cause the
Proxy Statement to be mailed to the stockholders of the Company at the
earliest practicable date. Parent, Sub and the Company shall cooperate with
each other in the preparation of the Proxy Statement, and the Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or
supplement thereto or for additional information, and shall provide to Parent
promptly copies of all correspondence between the Company or any
representative of the Company and the SEC with respect to the Proxy
Statement. The Company shall give Parent and its counsel the opportunity to
review the Proxy Statement and all responses to requests for additional
information by and replies to comments of the SEC before their being filed
with, or sent to, the SEC. Each of the Company, Parent and Sub agrees to use
its best efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement to be mailed to the holders of Company Common Stock
entitled to vote at the Company Stockholders' Meeting at the earliest
practicable time.
5.4 LEGAL CONDITIONS TO MERGER. Each of the Company, Parent and
Sub will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the Merger
(which actions shall include, without limitation,
30
furnishing all information required in connection with approvals of or filing
with any Governmental Entity) and will promptly cooperate with each other and
furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Merger. Each of the Company, Parent and Sub will, and will cause its
Subsidiaries to, take all reasonable actions necessary to (a) obtain (and
will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party, required to be obtained or made by Parent, the
Company or any of their respective Subsidiaries in connection with the Merger
or the taking of any action contemplated thereby or by this Agreement and (b)
provide such other information and communications to such Governmental
Entities or other public or private third parties as the other party or such
Governmental or Regulatory Authorities or other public or private third
parties may reasonably request in connection therewith. In addition to and
not in limitation of the foregoing, each of the parties will (x) take
promptly all actions necessary to make the filings required of Parent and the
Company or their affiliates under the HSR Act, (y) comply at the earliest
practicable date with any request for additional information received by such
party or its affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust Division")
pursuant to the HSR Act, and (z) cooperate with the other party in connection
with such party's filings under the HSR Act and in connection with resolving
any investigation or other inquiry concerning the Merger or the other matters
contemplated by this Agreement commenced by either the FTC or the Antitrust
Division or state attorneys general.
5.5 STOCKHOLDER'S MEETING. The Company shall call a meeting of its
stockholders to be held as promptly as practicable for the purpose of voting
upon the adoption of this Agreement. The Company will, through its Board of
Directors, unanimously recommend to its stockholders adoption of this
Agreement and will solicit proxies in favor of the adoption of this
Agreement, and shall take all other action reasonably necessary or advisable
to secure the vote or consent of stockholders required to effect the Merger;
provided, however, that the Board of Directors of the Company shall not be
obligated to recommend approval of this Agreement to its stockholders if such
Board of Directors, acting with the advice of its counsel and financial
advisors, determines that such recommendation would not be consistent with
its fiduciary obligations imposed by applicable law. In the event that the
Company Stockholders' Approval is not obtained on the date on which the
Company Stockholders' Meeting is initially convened, the Board of Directors
of the Company agrees to adjourn such Company Stockholders' Meeting at least
twice for the purpose of obtaining the Company Stockholders' Approval and to
use its best efforts during any such adjournments to obtain the Company
Stockholders' Approval.
5.6 FEES AND EXPENSES. (a) Except as set forth in Section 5.6(b),
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense, except that expenses incurred in
connection with printing the Proxy Statement, registration and filing fees
incurred in connection with the Proxy Statement, and fees, costs and expenses
associated with compliance with applicable state securities laws in
connection with the Merger shall be shared equally by Parent and the Company.
(b) In the event that (i) either Parent or the Company shall
terminate this Agreement pursuant to Section 7.1(e), (ii) either Parent or
the Company shall terminate this
31
Agreement pursuant to Section 7.1(f)(ii) and, prior to the time of the
meeting of the Company's stockholders, there shall have been (A) a Trigger
Event with respect to the Company or (B) a Takeover Proposal (as defined in
Section 5.12) with respect to the Company which at the time of the meeting of
the Company's stockholders shall not have been (x) rejected by the Company
and (y) withdrawn by the third party, or (iii) Parent shall terminate this
Agreement pursuant to Section 7.1(c), due in whole or in part to any failure
by the Company to use its best efforts to perform and comply with all
agreements and conditions required by this Agreement to be performed or
complied with by the Company prior to or on the Closing Date or any failure
by the Company's affiliates to take any actions required to be taken hereby,
and prior thereto there shall have been (A) a Trigger Event with respect to
the Company or (B) a Takeover Proposal with respect to the Company which
shall not have been (x) rejected by the Company and (y) withdrawn by the
third party, then in each case, the Company shall reimburse Parent for costs
and expenses incurred by Parent in the amount of $1,500,000, without any
requirement that Parent account for actual costs or expenses, and, in
addition, the Company shall promptly pay to Parent the sum of $5,500,000. In
the event that Parent or the Company shall terminate this Agreement pursuant
to Section 7.1(c) or (d), as applicable, due to a willful breach of this
Agreement by the non-terminating party, the non-terminating party shall
reimburse the terminating party for actual expenses incurred within a
reasonable time after presentment by the terminating party to the
non-terminating party of documentary evidence that such expenses were
incurred and paid; provided, however, that notwithstanding such
reimbursement, the terminating party may seek such additional remedies for
damages against the non-terminating party with respect to such willful breach
as are available at law or in equity. As used herein, a "Trigger Event"
shall occur if any Person (A) acquires securities representing 10% or more of
the voting power of the Company (PROVIDED that if any Person beneficially
owns 10% or more of the voting power of the Company on the date hereof, a
Trigger Event shall occur if such Person acquires additional securities
representing 1% or more of all voting power of the Company), or (B) commences
a tender or exchange offer following the successful consummation of which the
offeror and its affiliates would beneficially own securities representing 25%
or more of the voting power of the Company; PROVIDED, HOWEVER, that a Trigger
Event shall not be deemed to include the acquisition by any Person of
securities representing 10% or more (or 10% owner acquiring 1% or more) of
the Company if such Person has acquired such securities not with the purpose
nor with the effect of changing or influencing the control of the Company,
nor in connection with or as a participant in any transaction having such
purpose or effect, including without limitation not in connection with such
Person (i) making any public announcement with respect to the voting of such
shares at any meeting to consider any merger, consolidation, sale of
substantial assets or other business combination or extraordinary transaction
involving the Company, (ii) making, or in any way participating in, any
"solicitation" of "proxies" (as such terms are defined or used in Regulation
14A under the Exchange Act) to vote any voting securities of the Company
(including, without limitation, any such solicitation subject to Rule 14a-11
under the Exchange Act) or seeking to advise or influence any Person with
respect to the voting of any voting securities of the Company, (iii) forming,
joining or in any way participating in any "group" within the meaning of
Section 13(d)(3) of the Exchange Act with respect to any voting securities of
the Company or (iv) otherwise acting, alone or in concert with others, to
seek control of the Company or to seek to control or influence the management
or policies of the Company.
32
5.7 BROKER'S AND FINDER'S FEES. Each of Parent, Sub and the
Company represents, as to itself, its Subsidiaries, and its affiliates, that
no agent, broker, investment banker, financial advisor or other firm or
person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except Jefferies & Co., Inc., whose fees and
expenses will be paid by the Company in accordance with the Company's
agreement with such firm (copies of which have been delivered by the Company
to Parent on or prior to the date of this Agreement).
5.8 TAKEOVER STATUTES. If any "fair price", "moratorium", "control
share acquisition" or other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated hereby, the Company and
the members of the Board of Directors of the Company shall grant such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby and thereby.
5.9 ACCESS TO INFORMATION AND CONFIDENTIALITY. The Company agrees
that Parent and Sub may conduct such reasonable investigation with respect to
the business, business prospects, assets, liabilities (contingent or
otherwise), results of operations, employees and financial condition of the
Company as will permit Parent and Sub to evaluate their interest in the
transactions contemplated by this Agreement. Each parties' obligations under
that certain confidentiality agreement, dated as of April 29, 1998 (the
"Confidentiality Agreement"), which are hereby adopted, and incorporated by
reference herein, shall apply to all confidential information furnished to it
by the other party pursuant to this Agreement. No later than the Closing,
the Company will cause all books and records of the Company (including those
relating to Taxes) to be physically located at one of the offices of the
Company.
5.10 INDEMNIFICATION. (a) Each of the Constituent Corporations
shall, and from and after the Effective Time Parent and the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date hereof or who becomes prior to
the Effective Time, an officer or director of such Constituent Corporation
(the "Indemnified Parties") against (i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement
with the approval of the indemnifying party of or in connection with any
claim, action, suit, proceeding or investigation based on or arising out of
the fact that such person is or was a director or officer of such Constituent
Corporation, whether pertaining to any matter existing or occurring at or
prior to the Effective Time and whether reasserted or claimed prior to, or at
or after, the Effective Time ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based on, or arising out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent such corporation is permitted under the DGCL or the Business
Corporation Law of the State of New York, its Certificate of Incorporation or
Bylaws, in each case as in effect on the date hereof, to indemnify its own
directors and officers, as the case may be (and each of the Constituent
Corporations, Parent and the Surviving Corporation, as the case may be, will
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law;
PROVIDED that the person to whom expenses are advanced provides any
undertaking required by applicable law to repay such advance if it is
ultimately determined that such person is not entitled to indemnification).
Without limiting the foregoing, in the event
33
any such claim, action, suit, proceeding or investigation is brought against
any Indemnified Party (whether arising before or after the Effective Time),
(i) the Indemnified Parties may retain counsel satisfactory to them and such
Constituent Corporation (or them, Parent and the Surviving Corporation after
the Effective Time); (ii) such Constituent Corporation (or after the
Effective Time, Parent and the Surviving Corporation) shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) such Constituent
Corporation (or after the Effective Time, Parent and the Surviving
Corporation) will use all reasonable efforts to assist in the vigorous
defense of any such matter, provided that neither such Constituent
Corporation nor Parent or the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing
to claim indemnification under this Section 5.10, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify the
Constituent Corporation (or after the Effective Time, Parent or the Surviving
Corporation) (but the failure so to notify a party shall not relieve such
party from any liability which it may have under this Section 5.10 except to
the extent such failure prejudices such party). The Indemnified Parties as a
group may retain only one law firm to represent them with respect to each
such matter unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two
or more Indemnified Parties, in which case they may retain such number of law
firms as is necessary to address such conflict.
(b) For a period of six years after the Effective Time,
Parent shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company
(provided that Parent may substitute therefor policies of substantially the
same coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events that
occurred before the Effective Time.
(c) The provisions of this Section 5.10 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
5.11 ADDITIONAL AGREEMENTS; BEST EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use best
efforts to take, or cause to be taken, all action and, to do or cause to be
done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of the stockholders of the
Company described in Section 5.5, and to satisfy the conditions to Closing
set forth in Article VI including cooperation fully with the other party,
including by provision of information and making all necessary filings in
connection with, among other things, any approvals required from Governmental
Entities. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall take all
such necessary action.
5.12 NO SOLICITATION. The Company shall not, and shall not
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it to, (a) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal (as hereinafter
defined), or (b) agree to or endorse any Takeover Proposal.
34
Notwithstanding the immediately preceding sentence, if the Company shall not
have breached the covenant provided by clause (a) of the immediately
preceding sentence and a Takeover Proposal, or a written expression of
interest that can reasonably be expected to lead to a Takeover Proposal,
shall occur, then, upon the good faith determination of the Board of
Directors of the Company, acting upon the advice of its legal and financial
advisors, that the Takeover Proposal is a better offer than the transactions
contemplated by this Agreement and consistent with the fiduciary obligations
under applicable law of the Company's Board of Directors, the Company and its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish
in connection therewith information (including non-public information, but
only pursuant to a confidentiality agreement in customary form, including
customary standstill provisions) and take such other actions as are
consistent with the fiduciary obligations of the Company's Board of
Directors, and such actions shall not be considered a breach of this Section
5.12 or any other provision of this Agreement; provided, however, that the
Company shall not, and shall not permit any of its officers, directors,
employees or other representatives to, agree to or endorse any Takeover
Proposal unless the Company shall have terminated this Agreement pursuant to
Section 7.1(e) and paid to Parent all amounts payable to Parent pursuant to
Section 5.6(b). The Company shall promptly advise Parent orally and in
writing of any inquiries or Takeover Proposals and keep Parent informed of
the status and material information with respect to such inquiries or
Takeover Proposals. As used in this Agreement, "Takeover Proposal" shall
mean any tender or exchange offer, proposal for a merger, consolidation or
other business combination involving the Company or the Company Common Stock
and made by a Person other than Parent or any proposal or offer to acquire in
any manner a substantial equity interest in, or a substantial portion of the
assets of, the Company other than the transactions contemplated by this
Agreement.
5.13 ADVICE OF CHANGES; GOVERNMENT FILINGS. The Company shall
confer on a regular and frequent basis with Parent, report on operational
matters and promptly advise Parent of any change or event having, or which,
insofar as can reasonably be foreseen, could result in a Company Material
Adverse Effect. Each party shall promptly provide the other (or its counsel)
copies of all filings made by such party with any state or Federal
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby and thereby.
5.14 PRESS RELEASES. Prior to the Effective Time, the Company and
Parent shall consult with each other as to the form and substance of any
press release or other public disclosure related to this Agreement or any of
the transactions contemplated hereby; provided, however, that nothing in this
Section 5.14 or any other provision of this Agreement shall be deemed to
prohibit any party from making any disclosure which its legal counsel deems
necessary or advisable in order to satisfy such disclosure obligations under
applicable laws or regulations.
5.15 COMPANY OPTION PLANS. (a) At the Effective Time, each
unexpired and unexercised option to purchase shares of Company Common Stock
(each a "Company Option") under the Company Option Plan shall be deemed to be
automatically converted into an option to purchase the number of shares of
Parent Common Stock (a "Parent Option") equal to the number of shares of
Company Common Stock that could have been purchased under such Company Option
multiplied by a fraction, the numerator of which is $10.50 and the
denominator of which
35
is the average of the closing prices per share on the New York Stock Exchange
of Parent Common Stock for the ten trading days immediately preceding the
Closing Date (with the resulting number of shares rounded down to the nearest
whole share) (the "Option Conversion Ratio"), at a price per share of Parent
Common Stock equal to the exercise price of such Company Option divided by
the Option Conversion Ratio and the result thereof rounded up to the nearest
whole cent; PROVIDED, HOWEVER, that, in case any Company Option intended to
qualify as an incentive stock option under Section 422 of the Code (or a
predecessor thereto) is deemed converted into a Parent Option as provided
above, the option price, the number of shares of Parent common stock that may
be purchased pursuant to such Parent Option and the terms and conditions of
such Parent Option shall be determined in order to comply with Section 424(a)
of the Code. Such Parent Option shall otherwise be subject to the same terms
and conditions as the Company Option. The date of grant of the substituted
Parent Option shall be the date on which the corresponding Company Option was
granted. The Board of Directors of the Company shall take such actions as
are necessary or advisable to effect the transactions contemplated by this
Section 5.15.
(b) At the Effective Time, Parent shall (i) assume all of
the Company's obligations with respect to Company Options as contemplated by
Section 5.15(a) above, (ii) reserve for issuance the number of shares of
Parent Common Stock that will become subject to Parent Options pursuant to
this Section 5.15, (iii) from and after the Effective Time, upon exercise of
the Parent Options in accordance with the terms thereof, make available for
issuance all shares of Parent Common Stock covered thereby, and (iv) as soon
as practicable after the Effective Time, issue to each holder of an
outstanding Company Option a document evidencing the foregoing assumption by
Parent.
(c) The Company Stock Appreciation Rights Plan shall be
terminated effective as of the Effective Time and the Company shall not grant
any rights under said plan prior to its termination.
(d) As promptly as practicable after the Effective Time,
Parent shall file a registration statement covering the shares of Parent
Common Stock that may be issued upon the exercise of Company Options
(converted to Parent Options pursuant to this Section 5.15) and shall use its
best efforts to cause the offer and sale of such shares to be registered
under the Securities Act, and to maintain such registration in effect until
the exercise or termination of the Company Options. Parent shall also use
its best efforts to cause such shares of Parent Common Stock to be authorized
for listing on the NYSE and shall make all necessary blue sky law filings in
connection therewith.
5.16 NOTICE AND CURE. Each of Parent and the Company will notify
the other of, and will use all commercially reasonable efforts to cure before
the Closing, any event, transaction or circumstance, as soon as practicable
after it becomes known to such party, that causes or will cause any covenant
or agreement of Parent or the Company under this Agreement to be breached or
that renders or will render untrue any representation or warranty of Parent
or the Company contained in this Agreement. Each of Parent and the Company
also will notify the other in writing of, and will use all commercially
reasonable efforts to cure, before the Closing, any violation or breach, as
soon as practicable after it becomes known to such party, of any
representation, warranty, covenant or agreement made by Parent or the
Company. No notice
36
given pursuant to this Section shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes
of determining satisfaction of any condition contained herein.
5.17 CANADIAN SUBSIDIARY. Immediately prior to and conditioned upon
the Closing, the Company shall sell all of the issued and outstanding shares
of ▇▇▇▇▇▇ Electronics Limited, the Company's Canadian subsidiary, to Parent
or a Subsidiary of Parent designated by Parent for a purchase price of
US$730,001.
5.18 OBSERVANCE OF OPERATIONS OF THE BUSINESS. From the date hereof
until the Closing Date, Parent may, at its election, without unduly
interfering with the management or operations of the Company, have a
reasonable number of representatives at the facilities of the Company and its
Subsidiaries to observe and consult with representatives of the Company and
its Subsidiaries with respect to the management of the operations of the
Company. Notwithstanding anything in this Agreement to the contrary, all
rights of Parent or its representatives to access to or inspection of such
business operations of the Company or to obtain information with respect to
the Company pursuant to Sections 5.1, 5.9 and 5.18 shall be effected solely
through the representatives of the Company set forth on the Disclosure
Memorandum with specific reference to this Section and shall be subject to
the right of a representative of the Company to accompany Parent or its
representative in connection therewith.
5.19 CERTAIN COMPANY EMPLOYEES. The Company shall provide notice of
the non-renewal of the employment agreements listed on the Disclosure
Memorandum with specific reference to this Section in accordance with the
terms of such agreements, in each case prior to the date after which such
agreement will be extended or renewed in accordance with its terms.
5.20 COMPANY BANK DEBT. Parent agrees to cause the repayment at the
Closing of the outstanding indebtedness under the Loan Agreement, dated as of
December 20, 1995 among the Company, the banks named therein and First
Interstate Bank of California, as Agent, as amended.
5.21 EMPLOYEE MATTERS. Each employee benefit plan, program, policy
or arrangement provided as of the Closing by Parent to employees of the
Company who are employed by the Surviving Corporation (the "Continuing
Employees") shall give full credit, to the extent credited under a comparable
Benefit Plan, for each Continuing Employee's period of service (as recognized
by the Company as of the Closing) prior to the Closing Date for purposes of
determining eligibility and vesting of benefits (but not for benefit accrual
purposes). Each employee welfare benefit plan provided by Parent to the
Continuing Employees from and after the Closing Date shall (i) give full
credit for deductibles and out-of-pocket expenses under the Benefit Plans
with respect to the current plan year toward any deductibles for the
remainder of the plan year during which the Closing occurs, and (ii) shall
waive any pre-existing condition limitation for any such Continuing Employee
to the extent that such limitation would not apply to such Continuing
Employee under the applicable Benefit Plan; provided, however, that if a
Continuing Employee's pre-existing condition is a condition which is not
currently covered under Parent's group health plan, such exclusion of
condition shall not be waived and Parent shall have no obligation or
liability therefor except as required by law.
37
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
adopted by the affirmative vote of the holders of a majority of the
outstanding shares of the Company Common Stock entitled to vote on the
Merger.
(b) OTHER APPROVALS. All authorizations, consents, orders
or approvals of, or declarations or filings with, or expirations or
terminations of waiting periods imposed by, any Governmental Entity the
failure to obtain which would have a material adverse effect on the Surviving
Corporation, including, without limitation, such approvals, waivers and
consents as may be required under the Securities Act and the HSR Act, shall
have been filed, occurred or been obtained.
(c) NO INJUNCTIONS OR LEGAL RESTRAINTS. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition (an "Injunction"), and no law, statute, rule, regulation,
ordinance or judicial or administrative decision, preventing the consummation
of the Merger shall be in effect.
(d) NO GOVERNMENTAL ACTIONS. No investigation by any
Governmental Entity shall have been commenced, and no action, suit or
proceeding by any Governmental Entity shall have been threatened, against
Parent, Sub, the Company or any Subsidiary thereof or any of the principals,
officers or directors of any of them, seeking to restrain, prevent or change
the transactions contemplated hereby or questioning the legality or validity
of any such transactions or seeking damages in connection with any such
transactions.
(e) INDENTURE. The Surviving Corporation and Parent shall have
entered into such supplemental indentures as are required under the Indenture
as a result of the Merger.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions, unless waived by Parent and Sub:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
OBLIGATIONS. Except as otherwise contemplated or permitted by this
Agreement, (i) the representations and warranties of the Company contained in
this Agreement or in any certificate or document delivered to Parent pursuant
hereto shall as of the Closing Date, (x) to the extent qualified by Company
Material Adverse Effect, be true in all respects and (y) to the extent not
qualified by Company Material Adverse Effect, be true in all respects;
PROVIDED, HOWEVER, that for purposes of clause (y) of this paragraph, such
representations and warranties, with respect to the period of time between
the date of this Agreement and the Closing Date, shall be deemed to be true
in all respects for such period unless failure or failures of such
representations and warranties to be true in all respects,
38
either individually or in the aggregate, and without giving effect to any
qualification as to materiality set forth in such representations or
warranties, would have a Company Material Adverse Effect, except for those
representations and warranties contained in (1) Section 3.1(b) and (2) the
third sentence of Section 3.4 up to, but not including, clause (ii) of such
sentence, which representations and warranties shall be true in all respects,
and (ii) the Company shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by the Company prior to or on the Closing Date,
and Parent shall have been furnished with a certificate of an appropriate
officer of the Company, dated the Closing Date, certifying to the effect of
clauses (i) and (ii) hereof.
(b) NO ACTIONS. No action, suit or proceeding before any court or
governmental or regulatory authority shall be pending (other than those
referred to in Section 6.1(d)), against Parent, Sub, the Company, any
Subsidiary thereof or any of the principals, officers or directors of any of
them, seeking to restrain, prevent or change the transactions contemplated
hereby or questioning the legality or validity of any such transactions or
seeking damages in connection with any such transactions.
(c) CONSENTS UNDER AGREEMENTS. The Company shall have obtained
the consent or approval of each Person (other than the Governmental Entities
referred to in Section 6.1(b) and of the Company's suppliers under franchise
agreements) whose consent or approval shall be required in order to permit
the succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of the Company or the Company's Subsidiary
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except those disclosed in the Disclosure Memorandum
with specific reference to this Section and those for which failure to obtain
such consents and approvals would not, individually or in the aggregate, have
a Company Material Adverse Effect or impair, prohibit or prevent the
consummation of the transactions contemplated hereby.
(d) LENDING MORATORIUM. There shall be no moratorium or other
limitation on commercial bank lending declared by any Federal or New York
State regulatory authority or other circumstances or state of facts
constituting a disruption in the financial markets causing banks and other
financial institutions generally not to extend credit.
(e) MATERIAL ADVERSE CHANGE. Since the date hereof, there shall
not have been any events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) NO AMENDMENTS TO RESOLUTIONS. Neither the Board of Directors
of the Company nor any committee thereof shall have amended, modified,
rescinded or repealed the resolutions adopted by the Board of Directors on
September 29, 1998 (accurate and complete copies of which have been provided
to Parent) and shall not have adopted any other resolutions in connection
with this Agreement and the transactions contemplated hereby inconsistent
with such resolutions.
(g) DISSENTING SHARES. The aggregate number of Dissenting Shares
shall not exceed 10 % of the total number of shares of Company Common Stock
outstanding on the Closing Date.
39
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Merger is subject to satisfaction of the following
conditions, unless waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
Except as otherwise contemplated or permitted by this Agreement, (i) the
representations and warranties of Parent and Sub contained in this Agreement
or in any certificate or document delivered to the Company pursuant hereto
shall as of the Closing Date, (x) to the extent qualified by Parent Material
Adverse Effect, be true in all respects and (y) to the extent not qualified
by Parent Material Adverse Effect, be true in all respects; PROVIDED,
HOWEVER, that for purposes of clause (y) of this paragraph, such
representations and warranties, with respect to the period of time between
the date of this Agreement and the Closing Date, shall be deemed to be true
in all respects for such period unless failure or failures of such
representations and warranties to be true in all respects, either
individually or in the aggregate, and without giving effect to any
qualification as to materiality set forth in such representations or
warranties, would have a Parent Material Adverse Effect, and (ii) Parent and
Sub shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or
complied with by them prior to or on the Closing Date, and the Company shall
have been furnished a certificate of an appropriate officer of Parent, dated
the Closing Date, certifying to the effect of clauses (i) and (ii) hereof.
(b) CONSENTS UNDER AGREEMENTS. Parent shall have obtained the
consent or approval of each Person (other than the Governmental Entities
referred to in Section 6.1(c)) 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 those for which failure to obtain such consents and approvals would
not, prohibit or prevent the consummation of the transactions contemplated
hereby.
(c) NO AMENDMENTS TO RESOLUTIONS. Neither the Board of Directors
of Parent nor any committee thereof shall have amended, modified, rescinded
or repealed the resolutions adopted by the Board of Directors on September
27, 1998 (accurate and complete copies of which have been provided to the
Company) and shall not have adopted any other resolutions in connection with
this Agreement and the transactions contemplated hereby inconsistent with
such resolutions.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 TERMINATION. At any time prior to the Effective Time, whether before
or after approval of the matters presented in connection with the Merger by the
stockholders of the Company or Sub, this Agreement may be terminated:
(a) by mutual consent of Parent and the Company;
40
(b) by either Parent or the Company, if, without fault
of the terminating party, the Closing shall not have occurred on or before
February 15, 1999 (or such later date as may be agreed upon in writing by the
parties hereto);
(c) by Parent, if the Company shall breach any of its
representations, warranties or obligations hereunder and such breach shall
not have been cured or waived and the Company shall not have provided
reasonable assurance that such breach will be cured on or before the Closing
Date; PROVIDED, HOWEVER, that Parent shall not have the right to so terminate
this Agreement if such breach, if it existed as of the Closing Date, would
not result in the Company's failure to satisfy the conditions set forth in
Section 6.2(a);
(d) by the Company, if Parent or Sub shall breach any of
their respective representations, warranties or obligations hereunder and
such breach shall not have been cured or waived and Parent shall not have
provided reasonable assurance that such breach will be cured on or before the
Closing Date;
(e) by either Parent or the Company if a Takeover
Proposal shall have occurred and the Board of Directors of the Company in
connection therewith, after consultation with its legal counsel, withdraws or
modifies its approval and recommendation of this Agreement and the
transactions contemplated hereby after determining that to cause the Company
to proceed with the transactions contemplated hereby would not be consistent
with the Board of Directors' fiduciary duty to the stockholders of the
Company; or
(f) by either Parent or the Company (i) if any permanent
Injunction or other order of a court or other competent authority preventing
the consummation of the Merger shall have become final and nonappealable or
(ii) if any required approval of the stockholders of the Company shall not
have been obtained by reason of the failure to obtain the required vote upon
a vote held at a duly held meeting of stockholders or at any adjournment
thereof.
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 or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors except (i) with respect to Section 5.6, 5.7, and 5.9,
(ii) to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement except as provided in Section 8.7 and
(iii) this Section 7.2 shall survive such termination.
7.3 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action duly taken, may, to the extent legally allowed, (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. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
7.4 AMENDMENT AND MODIFICATION. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before
41
or after adoption of the Agreement by the stockholders of Parent or the
Company, but after any such adoption, no amendment shall be made which by law
requires further approval by such stockholders 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.
ARTICLE 8
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Section 2.1, 2.2, 5.10, 5.15 and
the last sentence of Section 7.4 and Article 8.
8.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given upon receipt of: hand
delivery, overnight courier, certified or registered mail, return receipt
requested, or facsimile transmission with confirmation of receipt:
(i) If to the Company, to:
▇▇▇▇▇▇ Electronics, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(with a copy to)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(ii) If to Parent, to:
Arrow Electronics, Inc.
▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
42
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(with a copy to)
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Such names and addresses may be changed by written notice to each person
listed above.
8.3 GOVERNING LAW. Except to the extent that the DGCL is mandatorily
applicable to the Merger and the rights of the stockholders of the
Constituent Corporations, this Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to a contract
executed and performed in such State, without giving effect to the conflicts
of law principles thereof.
8.4 INTERPRETATION. When a reference is made in this Agreement to
Sections, 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".
8.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
8.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. (a) This Agreement (including the documents and the instruments
referred to herein) (a) 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 other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement
in accordance with its terms, and (b) except as otherwise contemplated by
Sections 2.1, 2.2 and 5.10 (which covenants shall be enforceable by the
persons affected thereby following the Effective Time), is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder. The parties hereby acknowledge that, except as hereafter agreed to
in writing, no party shall have the right to acquire or shall be deemed to
have acquired shares of common stock of the other party pursuant to the
Merger until consummation thereof.
43
(b) The Company Disclosure Letter, the Parent Disclosure
Letter and any Exhibit attached to this Agreement and referred to herein are
hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
8.7 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement
or part hereof to be null, void or unenforceable, or order any party to take
any action inconsistent herewith or not to take any action required herein,
the other party shall not be entitled to specific performance of such
provision or part hereof or thereof or to any other remedy, including but not
limited to money damages, for breach hereof or thereof or of any other
provision of this Agreement or part hereof as a result of such holding or
order.
8.8 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so be broad as is enforceable.
8.9 ASSIGNMENT. 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, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
8.10 HEADINGS. The Headings used in this Agreement have been inserted
for convenience of reference only and do not define, modify or limit the
provisions hereof.
8.11 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or
was otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
44
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ARROW ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
▇▇▇▇ ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇ ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
EXHIBIT A
PROXIES
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. St. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇