EXHIBIT 99(c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
FERROTEC CORPORATION
(a Japanese corporation)
FERROTEC ACQUISITION, INC.
(a Massachusetts corporation)
and
FERROFLUIDICS CORPORATION
(a Massachusetts corporation)
October 20, 1999
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (collectively, this "Agreement"), dated as
of October 20, 1999, by and among FERROTEC CORPORATION, a Japanese corporation
("Ferrotec"), FERROTEC ACQUISITION, INC., a Massachusetts corporation (the
"Merger Sub"), and FERROFLUIDICS CORPORATION, a Massachusetts corporation (the
"Company").
WHEREAS, the Merger (as hereinafter defined) and this Agreement require
the affirmative vote of at least a majority of the issued and outstanding shares
of the Company's Common Stock, par value $.004 per share (the "Common Stock"),
for the approval thereof (the "Company Shareholder Approval");
WHEREAS, the respective Boards of Directors of the Merger Sub and the
Company have approved the merger of the Merger Sub with and into the Company, as
set forth below (the "Merger"), in accordance with the Massachusetts Business
Corporation Laws (the "MBCL"), and upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, it is proposed that the Merger Sub shall make a cash tender
offer (the "Offer") to acquire all of the issued and outstanding shares of
Common Stock of the Company for $6.50 per share of Common Stock (the "Per Share
Amount"), in accordance with the terms and subject to the conditions of this
Agreement;
WHEREAS, subsequent to the consummation of the Offer, the holders,
other than Merger Sub, of shares of Common Stock issued and outstanding
immediately prior to the Effective Time (as hereinafter defined) will be
entitled, subject to the terms hereof and other than as set forth herein, to
receive the Cash Consideration (as hereinafter defined) pursuant to the Merger;
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, subject to the terms and conditions set forth herein, (i) determined that
the Offer and the Merger is in the best interests of the Company and its
shareholders, and (ii) resolved to approve and adopt this Agreement and the
transactions contemplated hereby and to recommend that the shareholders of the
Company accept the Offer, tender their shares of Common Stock pursuant to and in
accordance with the terms of the Offer and approve and adopt this Agreement; and
WHEREAS, Ferrotec, the Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger, and also to set forth various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Ferrotec, the Merger Sub and the Company agree as follows:
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ARTICLE I
THE OFFER
Section 1.1 (a) Provided this Agreement shall not have been terminated
in accordance with the terms and conditions set forth herein, the Merger Sub
shall commence the Offer as promptly as reasonably practicable after the date
hereof, but in no event later than five business days after the initial public
announcement of the Merger Sub's intention to commence the Offer (treating the
business day on which such public announcement occurs as the first business
day). The obligation of the Merger Sub to accept for payment and pay for shares
of Common Stock (the "Shares") tendered pursuant to the Offer shall be subject
to the condition (the "Minimum Condition") that at least the number of Shares
that, when added to the Shares already owned by Ferrotec and Merger Sub, shall
constitute a majority of the then outstanding Shares on a fully diluted basis
(including, without limitation, all Shares issuable upon the conversion of any
convertible securities or upon the exercise of any outstanding options, warrants
or rights) shall have been validly tendered and not withdrawn prior to the
expiration of the Offer, which shall be 20 business days after the date the
Offer is commenced, unless so extended as provided for hereinafter (the
"Expiration Date"), and also shall be subject to the satisfaction of the other
conditions set forth in Annex A, attached hereto and incorporated herein by
reference. The Merger Sub expressly reserves the right to waive any such
condition, to increase the price per Share payable in the Offer, and to make any
other changes in the terms and conditions of the Offer; provided, however, that
without the prior written consent of the Company no change may be made which
decreases the price per Share payable in the Offer, which reduces the minimum
number of Shares to be purchased in the Offer, or which amends or imposes
conditions to the Offer in addition to those set forth in Annex A hereto. The
Per Share Amount shall, subject to applicable withholding of taxes, be net to
the seller in cash, upon the terms and subject to the conditions of the Offer.
Subject to the terms and conditions of the Offer (including, without limitation,
the Minimum Condition), the Merger Sub shall pay, as soon as practicable after
it is legally permitted to do so under applicable law after expiration of the
Offer, for all Shares validly tendered and not withdrawn. Notwithstanding the
foregoing, if on the initial Expiration Date (which shall be 20 business days
after the date the Offer is commenced) all conditions of the Offer shall have
been satisfied or waived other than the Minimum Condition, Merger Sub shall
extend the Expiration Date to the date that is ten (10) business days
immediately following such initial Expiration Date. In addition, and
notwithstanding the foregoing but subject to Section 8.1 hereof, if on such
initial Expiration Date or any other Expiration Date, the applicable waiting
period (and any extension thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") in respect to the Offer shall not have
expired or been terminated and all other conditions to the Offer shall have been
satisfied or waived, Merger Sub shall be required to extend the Expiration Date
until such waiting period shall have expired or been terminated.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Ferrotec and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with
all amendments and supplements thereto, the "Schedule 14D-1") with respect to
the Offer. The Schedule 14D-1 shall contain or shall incorporate by reference an
offer to purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule 14D-1, the Offer
to Purchase and such other documents, together with all supplements and
amendments thereto,
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being referred to herein collectively as the "Offer Documents"). Ferrotec, the
Merger Sub and the Company agree to correct promptly any information provided by
any of them for use in the Offer Documents which shall have become false or
misleading, and Ferrotec and Merger Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given the opportunity to
review the Schedule 14D-1 before it is filed with the SEC. In addition, Ferrotec
and Merger Sub will give the Company and its counsel a reasonable opportunity to
review and comment upon the Offer Documents and all amendments and supplements
thereto prior to the filing thereof, and will provide the Company and its
counsel in writing with any comments, whether written or oral, Ferrotec, the
Merger Sub or their counsel may receive from time to time from the SEC or its
staff with respect to the Offer Documents promptly after the receipt of such
comments.
Section 1.2 Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents that (i) the Company's Board, at a meeting duly called and held on
October 14, 1999, has unanimously (A) determined that this Agreement and the
transactions contemplated hereby, including each of the Offer and the Merger,
are fair to and in the best interests of the shareholders of the Company (the
"Shareholders"), (B) approved and adopted this Agreement and the transactions
contemplated hereby and (C) resolved to recommend that the Shareholders of the
Company accept the Offer and approve and adopt this Agreement and the
transactions contemplated hereby, subject to the Company's rights under Section
6.4 hereof; and (ii) Advest, Inc. has delivered to the Company's Board a written
opinion that the consideration to be received by the holders of Shares pursuant
to each of the Offer and the Merger is fair to the holders of Shares from a
financial point of view. The Company hereby consents to the inclusion in the
Offer Documents the recommendation of the Company's Board described above and
the opinion obtained by the Company's investment bankers, described above.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing the recommendation of the Company's
Board described in Section 1.2(a), subject to the Company's rights under Section
6.4 hereof, and shall disseminate the Schedule 14D-9 to the extent required by
Rule 14d-9, promulgated under the Securities Exchange Act of 1934 (the "Exchange
Act"), and any other applicable federal securities laws. The Company, Ferrotec,
and the Merger Sub agree to correct promptly any information provided by any of
them for use in the Schedule 14D-9 which shall have become false or misleading,
and the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Ferrotec, Merger Sub and their counsel shall be given the
opportunity to review and comment upon the Schedule 14D-9 before it is filed
with the SEC. In addition, the Company agrees to provide Ferrotec, the Merger
Sub and their counsel in writing with any comments, whether written or oral,
that the Company or its counsel may receive from time to time from the SEC or
its staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments or other communications.
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(c) The Company shall promptly furnish the Merger Sub with mailing
labels containing the names and addresses of all record holders of Shares and
with security position listings of Shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. In addition, the Company shall furnish the Merger
Sub with such additional information, including, without limitation, updated
listings and computer files of Shareholders, mailing labels and security
position listings, and such other assistance as the Merger Sub or its agents may
reasonably request.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the MBCL, at the Effective Time, the Merger Sub
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of the Merger Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation").
Section 2.2 Effective Time. On the Closing Date, as hereinafter
defined, the Company shall execute, in the manner required by the MBCL, and
shall deliver to the Secretary of State of the Commonwealth of Massachusetts
Articles of Merger duly executed and verified by the appropriate parties hereto,
and the parties shall take such other and further actions as may be required by
law to make the Merger effective. The Merger shall become effective at such time
as the Articles of Merger ("Articles of Merger"), accompanied by payment of the
filing fee (as provided in Chapter 156B, Section 114 of the MBCL), have been
examined by and received the endorsed approval of the Secretary of State of the
Commonwealth of Massachusetts (the "Effective Time").
Section 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the MBCL and as set forth herein.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, powers and franchises of
the Company and the Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation. Immediately
following the Effective Time, the purpose of the Surviving Corporation shall be
to perform scientific research and development and to engage in the inventing,
manufacturing and selling of useful equipment, devices, processes, machinery and
products, and in the rendering of related services, and to conduct such other
business as may be lawful under the laws of the Commonwealth of Massachusetts.
Section 2.4 Articles of Organization and By-Laws of the Surviving
Corporation.
(a) The Articles of Organization of the Merger Sub (the "Articles of
Organization"), as in effect immediately prior to the Effective Time, shall be
the Articles of Organization of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and hereof and applicable law,
or as otherwise contemplated hereby.
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(b) The By-Laws of the Merger Sub in effect at the Effective Time shall
be the By-Laws of the Surviving Corporation until thereafter amended, in
accordance with the provisions thereof, hereof and applicable law.
Section 2.5 Directors and Officers. Subject to applicable law, the
directors of the Merger Sub shall be the initial directors of the Surviving
Corporation and the officers of the Company shall be the initial officers of the
Surviving Corporation and each shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
Section 2.6 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or waiver of all of
the conditions set forth in Article VII (the "Closing Date"), at the offices of
Akerman, Senterfitt & ▇▇▇▇▇▇, P.A., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another date or place is agreed to in writing by
the parties hereto.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
Section 3.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock or any shares of capital stock of the Merger Sub:
(a) Common Stock of Merger Sub. All of the shares of
common stock, par value $.01 per share, of the Merger Sub (the "Merger Sub
Common Stock"), issued and outstanding immediately prior to the Effective Time
shall be converted into one-thousand shares of Common Stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock. Each share of Common
Stock that is owned by any affiliate of the Merger Sub, the Company or by any
wholly-owned subsidiary of the Company shall automatically be canceled and
retired and shall cease to exist, and no cash or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Retention or Exchange of Shares of Common Stock.
Except as otherwise provided herein and subject to Section 3.7 with respect to
shares of Common Stock as to which appraisal rights have been exercised, each
share of Common Stock issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into a non-transferrable right to receive $6.50 in
cash per share (the "Cash Consideration").
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Section 3.2 Options and Warrants; Stock Plans.
(a) Except as set forth on Section 3.2 (a) of the Company
Disclosure Letter, each option and warrant held by an employee, officer or
director of the Company and other persons to acquire shares of Common Stock
("Company Option" and "Company Warrant", respectively) that is outstanding
immediately prior to the Acceptance Date (as hereinafter defined), whether or
not then vested or exercisable, shall, simultaneously with the Acceptance Date,
be canceled in exchange for, and the Merger Sub shall pay to the holder thereof,
a single lump sum cash payment equal to the product of (1) the number of shares
of Common Stock subject to such Company Option or Company Warrant and (2) the
excess, if any, of the Cash Consideration over the exercise price per share of
such Company Option or Company Warrant, subject to any required withholding of
taxes, provided that with respect to Company Warrants, the parties hereto hereby
agree and acknowledge that such Company Warrants may only be cancelled with the
consent of the holders of such Warrants.
(b) Prior to the Acceptance Date, if necessary, and through
the Effective Time, if also necessary, the Company shall use all reasonable
efforts to (i) obtain consents from appropriate holders of Company Warrants and
(ii) make any amendments to the terms of such Company Options, Company Warrants
or the compensation plans or arrangements related thereto that are necessary to
give effect to the transactions contemplated by Section 3.2(a), provided,
however, that no consent shall be necessary with respect to all of the
outstanding Company Options which have been issued under stock option plans
maintained by the Company. Notwithstanding any other provision of this Section,
payment pursuant to this Section 3.2 may be withheld in respect of any Company
Warrant until necessary or appropriate consents are obtained.
Section 3.3 Exchange and Retention of Common Stock.
(a) Immediately following the Effective Time, Ferrotec and
the Merger Sub shall take all steps necessary to cause to be deposited on a
timely basis with the bank or trust company as shall be mutually acceptable to
the Merger Sub and the Company, acting as the exchange agent (the "Exchange
Agent") in an account (the "Exchange Fund") the aggregate Cash Consideration to
which holders of shares of Common Stock shall be entitled at the Effective Time
pursuant to Section 3.l(c).
(b) Promptly after the Effective Time, Merger Sub shall
cause the Exchange Agent to mail to each record holder of certificates (the
"Certificates") that immediately prior to the Effective Time represented shares
of Common Stock, a form of letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
instructions for use in surrendering such Certificates and receiving the Cash
Consideration in respect thereof.
(c) In effecting the payment of the Cash Consideration in
respect of shares of Common Stock represented by Certificates entitled to
payment of the Cash Consideration pursuant to Section 3.l(c), upon the surrender
of each such Certificate, the Exchange Agent at the time of such surrender shall
pay the holder of such Certificate the Cash Consideration multiplied by
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the number of shares of Common Stock represented by such Certificate, in
consideration therefor. Upon such payment, such Certificate shall forthwith be
canceled.
(d) Until surrendered in accordance with paragraph (c)
above, each Certificate (other than Certificates representing Dissenting Shares
(as hereinafter defined) or shares of Common Stock held by any affiliate of the
Merger Sub, in the treasury of the Company or by any wholly-owned subsidiary of
the Company) shall represent solely the right to receive the aggregate Cash
Consideration relating thereto. No interest shall be paid or accrued on the Cash
Consideration. If the Cash Consideration (or any portion thereof) is to be
delivered to any person other than the person in whose name the Certificate
formerly representing shares of Common Stock surrendered therefor is registered,
it shall be a condition to such right to receive such Cash Consideration that
the Certificate so surrendered shall be properly endorsed (with signatures
medallion guaranteed) or otherwise be in proper form for transfer and that the
person surrendering such shares of Common Stock shall pay to the Exchange Agent
any transfer or other taxes required by reason of the payment of the Cash
Consideration to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.
(e) Promptly following the date which is six months after
the Effective Time, the Exchange Agent shall deliver to the Surviving
Corporation all cash, plus accrued interest thereon, if any, and other documents
in its possession relating to the transactions described in this Agreement, and
the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a share of Common Stock entitled to the
payment of Cash Consideration may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in consideration therefor the applicable aggregate Cash
Consideration relating thereto, without any interest thereon.
(f) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any shares of Common
Stock which were outstanding immediately prior to the Effective Time and which
are entitled to the payment of Cash Consideration. In addition, after the
Effective Time, holders of Certificates shall not be entitled to any voting
rights or other rights attributable to the ownership of an equity interest in
the Company, except as otherwise specifically set forth herein.
Section 3.4 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to shares of Common Stock entitled
to the payment of Cash Consideration with a record date after the Effective Time
shall be paid to the holder of any such unsurrendered Certificate with respect
to the shares of Common Stock represented thereby. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of Common Stock
issued in exchange therefor, without interest, at the time of such surrender,
the Cash Consideration.
Section 3.5 No Liability. None of Ferrotec, the Merger Sub, the
Company, the Surviving Corporation, or the Exchange Agent shall be liable to any
person in respect of any Cash Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
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Effective Time (or immediately prior to such earlier date on which the Cash
Consideration would otherwise escheat to or become the property of any
Governmental Entity (as hereinafter defined)) any such distributions or cash in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any person previously entitled thereto.
Section 3.6 Lost Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Company and/or the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Company and/or the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent shall issue in exchange
for such lost, stolen or destroyed Certificate the amount to which such person
is entitled pursuant to this Agreement.
Section 3.7 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, any Shares ("Dissenting Shares") which are issued and
outstanding immediately prior to the Effective Time and which are held by
Shareholders of the Company who have filed with the Company, before the taking
of the vote of the Shareholders of the Company to approve the Merger, written
objections to such approval stating their intention to demand payment for such
Shares, and who have not voted such Shares in favor of the adoption of the
Merger will not be converted as described in Section 3.1(c) hereof, but will
thereafter constitute only the right to receive payment of the fair value of
such Shares in accordance with the applicable provisions of Chapter 156B of the
MBCL (the "Appraisal Rights Provisions"); provided, however, that all Shares
held by Shareholders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such Shares under the
Appraisal Rights Provisions shall thereupon be deemed to have been canceled and
retired and to have been converted, as of the Effective Time, into the right to
receive the Cash Consideration, without interest, in the manner provided in
Section 3.1(c). Persons who have perfected statutory rights with respect to
Dissenting Shares as aforesaid will not be paid by the Surviving Corporation as
provided in this Agreement and will have only such rights as are provided by the
Appraisal Rights Provisions with respect to such Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, if the Merger Sub
abandons or is finally enjoined or prevented from carrying out, or the
Shareholders rescind their adoption of, the Merger, the right of each holder of
Dissenting Shares to receive the fair value of such Dissenting Shares in
accordance with the Appraisal Rights Provisions will terminate, effective as of
the time of such abandonment, injunction, prevention or rescission.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Ferrotec and the Merger Sub in a
letter delivered to it at or prior to the execution of this Agreement (the
"Company Disclosure Letter"), the Company represents and warrants to Ferrotec
and the Merger Sub as follows:
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Section 4.1 Organization.
(a) Each of the Company and the Company Subsidiaries (as
hereafter defined) is a corporation or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where failure to be so existing and in good
standing or to have such power and authority would not have a material adverse
effect on the current business, results of operations or financial condition of
the Company and the Company Subsidiaries taken as a whole (a "Company Material
Adverse Effect"). Each of the Company and the Company Subsidiaries is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business conducted by
it makes such qualification or licensing necessary, except where the failure to
be so duly qualified, licensed and in good standing would not have a Company
Material Adverse Effect. The Company has heretofore delivered to Merger Sub a
complete and correct copy of each of its Articles of Organization and By-Laws,
as currently in effect.
(b) Section 4.1(b)(i) to the Company Disclosure Letter
lists all of the operational subsidiaries of the Company through which the
Company currently conducts its businesses or has conducted its businesses during
the two years preceding the date of this Agreement (individually, a "Company
Subsidiary,"and collectively, the "Company Subsidiaries"), and their states of
incorporation or country of incorporation or organization. Section 4.1(b)(ii) to
the Company Disclosure Letter lists all of the non-operational subsidiaries of
the Company which have not conducted any operations during the two years
preceding the date of this Agreement (the "Non-Operational Subsidiaries"), and
their states of incorporation or country of incorporation or organization.
Except as set forth in Section 4.1(b)(ii) to the Company Disclosure Letter, the
Company does not own an equity interest in or control, directly or indirectly,
any other corporation, association, partnership or business organization other
than the Company Subsidiaries and the Non-Operational Subsidiaries.
Section 4.2 Capitalization.
(a) As of the date hereof, the authorized capital stock of
the Company consists of 12,500,000 shares of Common Stock and 100,000 shares of
preferred stock, par value $.001 per share (the "Preferred Stock"), of which
100,000 shares have been designated as Series A Junior Participating Cumulative
Preferred Stock (the "Series A Preferred Stock"). Section 4.2(a) of the Company
Disclosure Letter sets forth a description of the Common Stock, the Preferred
Stock and the Series A Preferred Stock. As of October 1, 1999 (i) 6,226,280
shares of Common Stock were issued and outstanding, (ii) 652,498 shares of
Common Stock were issued and held in the treasury of the Company, and (iii) no
shares of Preferred Stock were issued and outstanding. Since such date, no
additional shares of capital stock have been issued except shares issued upon
the exercise of the Company Options pursuant to the Company's stock option
plans, pension plans and other similar employee benefit plans, all as described
in the Company Disclosure Letter (the "Company Stock Plans"). All the
outstanding shares of the Company's capital stock are duly authorized, validly
issued, fully paid and nonassessable. Except as provided herein or as disclosed
in Section 4.2(a) of the Company Disclosure Letter and, except for the Company
Stock Plans or the Company Rights Agreement (defined in Section 6.11 of this
Agreement), as of the date hereof, there
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are no existing (i) options, warrants, dividend entitlement rights, stock
appreciation rights, stock depreciation rights, calls, subscriptions or other
rights, convertible securities, agreements or commitments of any character
obligating the Company or any of the Company Subsidiaries to issue, transfer or
sell any shares of capital stock or other equity interest in, the Company or any
of the Company Subsidiaries or securities convertible into or exchangeable for
such shares or equity interests, (ii) contractual obligations of the Company or
any of the Company Subsidiaries to repurchase, redeem or otherwise acquire any
capital stock of the Company or any of the Company Subsidiaries, or (iii) voting
trusts or similar agreements to which the Company or a Company Subsidiary is a
party with respect to the voting of the capital stock of the Company and/or a
Company Subsidiary.
(b) Except as set forth in Section 4.2(b) of the Company
Disclosure Letter, all of the outstanding shares of capital stock (or equivalent
equity interests of entities other than corporations) of each of the Company
Subsidiaries are beneficially owned, directly or indirectly, by the Company,
free and clear of all liens, pledge, security interests, claims or other
encumbrances.
Section 4.3 Authorization; Validity of Agreement; Necessary Action. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and, subject to obtaining any necessary approval of its
Shareholders, to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement, and the consummation
by it of the transactions contemplated hereby, have been duly authorized by the
Company Board and, except for the approval of its Shareholders, no other
corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement and the consummation by
it of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, subject to approval and adoption of
the Merger by the Company's Shareholders (and assuming due and valid
authorization, execution and delivery hereof by Ferrotec and Merger Sub) is a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 4.4 Consents and Approvals; No Violations. Except as disclosed
in Section 4.4 of the Company Disclosure Letter and except (a) for filings
pursuant to HSR Act, applicable requirements under the Securities Act of 1933,
as amended ("Securities Act") and the Exchange Act, (b) for the filing of the
Articles of Merger, (c) for applicable requirements under corporation or "blue
sky" laws of various states or (d) as otherwise specifically provided for in
this Agreement, neither the execution, delivery or performance of this Agreement
by the Company nor the consummation by the Company of the transactions
contemplated hereby will (i) violate any provision of the Articles of
Organization, as amended, or By-Laws, as amended, of the Company or the Company
Subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement, Benefit Plan (as hereinafter defined, and with respect to
any Benefit Plan, no liability or increased expense will be incurred as a
consequence of the execution of this Agreement
10
or the consummation of the transactions contemplated herein), or other
instrument or obligation to which the Company or any of the Company Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (the "Company Agreements"), (iii) to the best knowledge of the Company,
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to the Company or any Company Subsidiary, any of the
Company Subsidiaries or any of their properties or assets, or (iv) require on
the part of the Company or any Company Subsidiary any filing or registration
with, notification to, or authorization, consent or approval of, any court,
legislative, executive or regulatory authority or agency (a "Governmental
Entity") or any third party; except in the case of clauses (ii), (iii) or (iv)
for such violations, breaches or defaults which, or filings, registrations,
notifications, authorizations, consents or approvals the failure of which to
obtain would not have, individually and/or in the aggregate, a Company Material
Adverse Effect or would have become applicable as a result of any acts or
omissions by, or the status of facts pertaining to, solely Ferrotec or the
Merger Sub.
Section 4.5 SEC Reports and Financial Statements. The Company has filed
all reports required to be filed by it with the SEC pursuant to the Exchange Act
and the Securities Act since June 30, 1997 (as such documents have been amended
since the date of their filing, collectively, the "Company SEC Documents"). The
Company SEC Documents, as of their respective filing dates, or if amended, as of
the date of the last such amendment, 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. Each of the consolidated balance
sheets (including the related notes) included in the Company SEC Documents
fairly presents in all material respects the financial position of the Company
and its consolidated subsidiaries as of the respective dates thereof, and the
other related statements (including the related notes) included therein fairly
present in all material respects the results of operations and cash flows of the
Company and its consolidated subsidiaries for the respective periods or as of
the respective dates set forth therein. Each of the financial statements
(including the related notes) included in the Company SEC Documents has been
prepared in all material respects in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved, except as otherwise noted therein and subject, in the case of
unaudited interim financial statements, to normal year-end adjustments. The
consolidated balance sheet of the Company and its consolidated subsidiaries at
July 3, 1999, together with the Notes thereto is herein sometimes referred to as
the "Company Balance Sheet." The Company's and Company Subsidiaries' accounts
receivables, as set forth in the Company Balance Sheet, have arisen from
bona-fide transactions in the ordinary course of business consistent with past
practice, and since July 3, 1999, have not been materially diminished in any
manner other than by cash collections, establishment of reserves and write-offs,
all in the ordinary course of business and consistent with past practice. The
Company's and Company Subsidiaries' inventory, as set forth on the Company
Balance Sheet, represents bona-fide inventory, and since July 3, 1999, has not
been materially diminished in any manner other than the sale in the ordinary
course of business consistent with past practice. Said inventory, as reflected
on the Company Balance Sheet, does not include any material amount of inventory
that is obsolete.
Section 4.6 No Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business since July 3, 1999, (b) for
liabilities disclosed in the Company Balance Sheet (c) for liabilities incurred
in connection with the Merger or otherwise as contemplated by this
11
Agreement and (d) as disclosed in Section 4.6 of the Company Disclosure Letter,
since July 3, 1999, neither the Company nor any of the Company Subsidiaries has
incurred any liabilities that would be required to be reflected or reserved
against in a consolidated balance sheet of the Company and its consolidated
subsidiaries prepared in accordance with GAAP as applied in preparing the
consolidated balance sheet of the Company and its consolidated subsidiaries as
of July 3, 1999, except for liabilities that would, individually and/or in the
aggregate, not have a Company Material Adverse Effect.
Section 4.7 Absence of Certain Changes. Except as (a) disclosed in
Section 4.7 of the Company Disclosure Letter or (b) contemplated by this
Agreement, between July 3, 1999 and the date of this Agreement nothing has
occurred hereunder which would be considered to constitute a Company Material
Adverse Effect.
Section 4.8 Disclosure Documents. Neither the Schedule 14D-9 nor any
information supplied by the Company for inclusion in the Offer Documents, in
each case except for information supplied by Ferrotec or Merger Sub for
inclusion therein, shall, at the respective times the Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are filed with the SEC or are
first published, sent or given to Shareholders of the Company, as the case may
be, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by the
Company for inclusion in the proxy statement relating to the meeting of the
Company's Shareholders (the "Special Meeting") to be held in connection with the
Merger, as the same may be amended or supplemented from time to time (the "Proxy
Statement"), if such Proxy Statement is required by law to be filed, will,
either at the time of mailing of the Proxy Statement to Shareholders of the
Company or at the time of the Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement, if
any, and Schedule 14D-9 will comply as to form in all material respects with the
provisions of the Exchange Act.
Section 4.9 Employee Benefit Plans; ERISA.
(a) Section 4.9(a) of the Company Disclosure Letter sets
forth a list of all employee benefit plans and all amendments thereto (including
but not limited to plans described in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") maintained by the Company or
the Company Subsidiaries or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with the Company and the
Company Subsidiaries would be deemed a "single employer" within the meaning of
Section 4001(b)(15) of ERISA other than benefit plans or arrangements mandated
by law ("Benefit Plans") and all material employment and severance agreements
with employees of the Company and the Company Subsidiaries ("Employee
Agreements"), including, without limitation, any supplemental employee
retirement plans (SERP's).
(b) With respect to each Benefit Plan, except as disclosed
in Section 4.9(b) of the Company Disclosure Letter: (i) if intended to qualify
under Section 401(a) of the Internal
12
Revenue Code of 1986, as amended (the "Code"), such plan has received a
determination letter from the Internal Revenue Service stating that it so
qualifies and that its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in all material respects in
accordance with its terms and applicable law; (iii) no breaches of fiduciary
duty have occurred which might reasonably be expected to give rise to material
liability on the part of the Company and/or the Company Subsidiaries; (iv) no
disputes are pending, or, to the knowledge of the Company, threatened that might
reasonably be expected to give rise to material liability on the part of the
Company and/or the Company Subsidiaries (other than routine claims for
benefits); (v) no prohibited transaction (within the meaning of Section 406 of
ERISA) has occurred that might reasonably be expected to give rise to material
liability on the part of the Company and/or the Company Subsidiaries; and (vi)
all contributions required to be made to such plan as of the date hereof (taking
into account any extensions for the making of such contributions) have been made
in full.
(c) No Benefit Plan is a "multiemployer pension plan,"as
defined in Section 3(37) of ERISA, nor is any Benefit Plan a plan described in
Section 4063(a) of ERISA.
(d) No liability under Title IV of ERISA has been incurred
by the Company or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to the Company or the Company
Subsidiaries or any ERISA Affiliate of incurring a material liability under such
Title.
(e) No Benefit Plan has incurred an accumulated funding
deficiency, as defined in Section 302 of ERISA or section 412 of the Code,
whether or not waived.
(f) With respect to each Benefit Plan that is a "welfare
plan" (as defined in Section 3(1) of ERISA), except as set forth in Section
4.9(f) of the Company Disclosure Letter, no such plan provides medical or death
benefits with respect to current or former employees of the Company or any of
the Company Subsidiaries beyond their termination of employment (other than to
the extent required by applicable law).
Section 4.10 Litigation. Except as disclosed in Section 4.10 of the
Company Disclosure Letter or as would otherwise not have a Company Material
Adverse Effect, as of the date hereof, there is no action, suit, proceeding
(other than any action, suit or proceeding resulting from or arising out of this
Agreement or the transactions contemplated hereby) or, to the best knowledge of
the Company, investigation pending or, to the best knowledge of the Company,
action, suit, proceeding, audit or investigation threatened, involving the
Company or any of the Company Subsidiaries, by or before any court, governmental
or regulatory authority or arbitrator, irrespective of whether such action or
proceeding is in the United States or abroad, or by any third party.
Section 4.11 Compliance with Applicable Laws. Neither the Company nor
any of the Company Subsidiaries is in default or violation of any term,
condition or provision of any statute, law, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to the Company or any of the Company
Subsidiaries, except for any such defaults or violations that would not have a
Company Material Adverse Effect.
13
Section 4.12 Taxes.
(a) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, the Company and each of the Company Subsidiaries have (i)
timely filed all material Tax Returns, as defined below, required to be filed by
any of them for tax years ended prior to the date of this Agreement or requests
for extensions have been timely filed and any such request shall have been
granted and not expired and all such returns are complete in all material
respects, (ii) paid or accrued all Taxes, as defined below, shown to be due and
payable on such returns other than such Taxes as are being contested in good
faith by the Company or the Company Subsidiaries, and (iii) to the knowledge of
the Company and except as set forth in the audited financial statements
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
July 3, 1999, properly accrued in all material respects all such Taxes for such
periods subsequent to the periods covered by such returns.
(b) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, the Company is not aware of any ongoing federal, state or
local audits or examinations of any Tax Return of the Company or the Company
Subsidiaries.
(c) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, there are no outstanding written requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any material Taxes or deficiencies against the Company or any
of the Company Subsidiaries, and to the Company's knowledge no power of attorney
granted by either the Company or any of the Company Subsidiaries with respect to
any Taxes is currently in force.
(d) Except as disclosed in Section 4.12 of the Company
Disclosure Letter, neither the Company nor any of the Company's Subsidiaries is
a party to any agreement providing for the allocation or sharing of material
Taxes.
(e) "Taxes" shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, service, service use, license, net worth, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States Internal Revenue Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest, penalties
or additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean
any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes.
Section 4.13 Real Property. Except as set forth in Section 4.13 of the
Company Disclosure Letter, the Company (including, as applicable, the Company
Subsidiaries) owns all of the real and personal property included in the Company
Balance Sheet (except assets recorded under capital lease obligations and such
property as has been disposed of during the ordinary course of the Company's
14
business since the date of the Company Balance Sheet), free and clear of any
liens, claims, charges, exceptions or encumbrances ("Encumbrances"), except, in
each case, for (a) Encumbrances reflected in the Company Balance Sheet, (b)
Encumbrances or imperfections of title which are not, individually or in the
aggregate, material in character, amount or extent and which do not materially
detract from the value or materially interfere with the present or presently
contemplated use of the assets subject thereto or affected thereby, and (c)
Encumbrances for current Taxes not yet due and payable. All the real property
owned and/or leased by the Company is set forth on Section 4.13 to the Company
Disclosure Letter. Section 4.13 of the Company Disclosure Letter sets forth a
Fixed Asset Listing for the Company, Ferrofluidics, GmbH and Ferrofluidics, Ltd.
Such Fixed Assets Listings are true and accurate in all material respects.
Section 4.14 Intellectual Property. Except as disclosed in Section 4.14
of the Company Disclosure Letter or as would not have a Company Material Adverse
Effect, as of the date hereof, there are no pending or threatened claims of
which the Company or the Company Subsidiaries have been given written notice, by
any person against their use of any material trademarks, trade names, service
marks, service names, ▇▇▇▇ registrations, logos, assumed names and copyright
registrations, patents and all applications therefore which are owned by the
Company or the Company Subsidiaries and used in their respective operations as
currently conducted (collectively, the "Company Intellectual Property"). The
Company and the Company Subsidiaries have such ownership of or such rights by
license, lease or other agreement to the Company Intellectual Property as are
necessary to permit them to conduct their respective operations as currently
conducted. In addition, a list of the patents, patents pending, and registered
trademarks of the Company is set forth on Section 4.14 to the Company Disclosure
Letter.
Section 4.15 Contracts. Except as set forth in Section 4.15 of the
Company Disclosure Letter, each agreement, contract, understanding and/or
commitment to which the Company and/or the Company Subsidiaries is a party which
is material to the Company's or the Company Subsidiaries' businesses (the
"Material Contracts"), as further defined below, is in full force and effect
and, to the knowledge of the Company, is valid and enforceable by the Company or
a Company Subsidiary, as the case may be, in accordance with its terms except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except as set forth in Section 4.15 of the
Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is in default in the observance or the performance of any term or
obligation to be performed by it under any such Material Contract. To the
knowledge of the Company, no other person is in material default in the
observance or the performance of any term or obligation to be performed by it
under any of the Material Contracts. For purposes of this Section 4.15, Material
Contracts shall mean all agreements, contracts, understandings and/or
commitments to which the Company or any Company Subsidiary is a party which
either provide for the payment or receipt of payment for goods and/or services
having a value equal to or in excess of $50,000 per annum, or which during the
term thereof provide for the payment or receipt of payment for goods and/or
services having a value in excess of $250,000. In addition, with respect to
agreements, contracts, understandings and/or commitments to which the Company or
the Company Subsidiaries is a party and which are not deemed Material Contracts
hereunder (the "Other
15
Contracts"), there is no breach or default by the Company and/or the Company
Subsidiaries under any of the Other Contracts that would have a Company Material
Adverse Effect; and the Other Contracts were entered into in the ordinary course
of business of the Company and/or the Company Subsidiaries.
Section 4.16 Environmental Laws and Regulations. Except as set forth in
Section 4.16 of the Company Disclosure Letter or as would otherwise not have a
Company Material Adverse Effect, (a) the Company and each of the Company
Subsidiaries is in material compliance with all applicable federal, state, local
and foreign laws and regulations relating to protection of the environment
(collectively, "Environmental Laws"), which compliance includes, but is not
limited to, the possession by the Company and the Company Subsidiaries of
material permits and other governmental authorizations required under applicable
Environmental Laws, and material compliance with the terms and conditions
thereof; (b) neither the Company nor any of the Company Subsidiaries has
received written notice of, or to the knowledge of the Company, is the subject
of, any actions, causes of action, claims, investigations, demands, notices, or
threats of any actions by any person and/or governmental and/or regulatory
agency or body alleging liability under or non-compliance with any Environmental
Law ("Environmental Claims"); and (c) the Company is not aware of and has not
received written notice of any event, condition, circumstance, activity,
practice, incident, action or plan which is reasonably likely to interfere with
or prevent continued compliance with or which is reasonably likely to give rise
to any statutory liability, or otherwise form the basis of any claim, action,
suit or proceeding under any Environmental Laws.
Section 4.17 Labor Matters. Except as set forth in Section 4.17 of the
Company Disclosure Letter, (a) neither the Company nor any of the Company
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, and (b) there is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the Company, threatened against the
Company or the Company Subsidiaries that would have a Company Material Adverse
Effect.
Section 4.18 Brokers or Finders. The Company represents, as to itself,
the Company Subsidiaries and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finder' s fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
Section 4.19 Opinion of Financial Advisors. The Company has received
the opinion of Advest, Inc. to the effect that, as of the date thereof, the Cash
Consideration is fair, from a financial point of view, to the Shareholders of
the Company, and such opinion has been supplied to Merger Sub.
Section 4.20 Board Recommendation. The Company Board, at a meeting duly
called and held, has (a) determined that this Agreement and the transactions
contemplated hereby, taken together, are advisable and in the best interests of
the Company and its Shareholders, and (b) subject to the other provisions
hereof, resolved to recommend that the holders of the shares of Common Stock
approve this Agreement and the transactions contemplated hereby, including the
Merger.
16
Section 4.21 Insurance. The Company and the Company Subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, as is customarily carried by reasonably prudent persons
conducting businesses or owning or leasing assets similar to those conducted,
owned or leased by the Company or any of the Company Subsidiaries. A list of all
insurance policies and insurance coverage maintained for and on behalf of the
Company and the Company Subsidiaries (other than Ferrofluidics, S.A.R.L. and
Ferrofluidics, S.A.) is set forth in Section 4.21 of the Company Disclosure
Letter.
Section 4.22 Permits. The Company and the Company Subsidiaries are in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any court, governmental or regulatory authority necessary for the Company and
the Company Subsidiaries to own, lease and operate its properties or to carry on
its business as it is now being conducted (the "Company Permits"), and, as of
the date hereof, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company threatened, except, in each case,
where the failure to possess any such Company Permits or the existence or threat
of any such cancellation would not have a Company Material Adverse Effect.
Section 4.23 Customer Relationships; Warranties. Except as set forth on
Section 4.23 of the Company Disclosure Letter, to the best of the Company's
knowledge, the Company's and the Company's Subsidiaries' relationships with its
customers, vendors, employees, licensees, and sublicensees are in all material
respects satisfactory. Section 4.23 of the Company Disclosure Letter sets forth
the approximate amount of warranty expense of the Company for each of the last
three fiscal years.
Section 4.24 Year 2000. Except as disclosed in Section 4.24 of the
Company Disclosure Letter and as otherwise would not have a Company Material
Adverse Effect, the Company has assessed, evaluated and reviewed all areas of
the Company's and the Company Subsidiaries' business and operations that could
be adversely affected in any material respect by date sensitive functions and
has taken or will have taken prior to January 1, 2000 such action as the Company
deemed or deems necessary to assess, evaluate and correct in all material
respects all of the hardware, software, embedded microchips and other processing
capabilities and capacities, directly or indirectly involving date sensitive
functions, to ensure that its business and operations, including those of the
Company Subsidiaries, will continue accurately and without material interruption
or ambiguity using date information before, during and after January 1, 2000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Except as otherwise disclosed to the Company in a letter delivered to
it at or prior to the execution of this Agreement (the "Merger Sub Disclosure
Letter"), Ferrotec and the Merger Sub represent and warrant to the Company as
follows:
17
Section 5.1 Organization. Ferrotec and the Merger Sub are corporations
duly organized, validly existing and in good standing under the laws of Japan
and the Commonwealth of Massachusetts, respectively, and each, respectively, has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not have a material adverse effect on the current business,
results of operations or financial condition of the Ferrotec and its
subsidiaries, taken as a whole (a "Ferrotec Material Adverse Effect"). Each of
Ferrotec and the Merger Sub is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a Ferrotec Material
Adverse Effect. Merger Sub has heretofore delivered to Company a complete and
correct copy of each of its Articles of Organization and By-Laws, as currently
in effect.
Section 5.2 Authorization: Validity of Agreement: Necessary Action.
Each of Ferrotec and the Merger Sub has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Ferrotec and the
Merger Sub of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by their respective Board of
Directors and no other corporate action on the part of Ferrotec or Merger Sub is
necessary to authorize the execution and delivery by Ferrotec or Merger Sub of
this Agreement and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Ferrotec and the
Merger Sub and, assuming due and valid authorization, execution and delivery
hereof by the Company, is a valid and binding obligation of each of Ferrotec and
the Merger Sub, enforceable against it in accordance with its terms, except that
(i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 5.3 Consents and Approvals: No Violations. Except as disclosed
in Section 5.3 of the Merger Sub Disclosure Letter and except for (a) filings
pursuant to the HSR Act, applicable requirements under the Securities Act and
the Exchange Act, (b) the filing of the Articles of Merger, (c) applicable
requirements under corporation or "blue sky" laws of various states or (d) as
contemplated by this Agreement, neither the execution, delivery or performance
of this Agreement by either Ferrotec or Merger Sub nor the consummation by
either Ferrotec or Merger Sub of the transactions contemplated hereby will (i)
violate any provision of the Articles of Organization or By-Laws of Merger Sub
or the equivalent organizational documents of Ferrotec, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which either Ferrotec or Merger Sub is a party or by
which it or any of its properties or assets may be bound (the "Ferrotec
Agreements"), (iii) to the best knowledge of either Ferrotec or Merger Sub,
violate any order, writ, judgment, injunction, decree, law, statute, rule or
regulation applicable to either Ferrotec or Merger Sub or any of their
respective properties or assets, or (iv) require on the part of either Ferrotec
or Merger Sub any filing or registration with,
18
notification to, or authorization, consent or approval of, any Governmental
Entity; except in the case of clauses (ii), (iii) or (iv) for such violations,
breaches or defaults which, or filings, registrations, notifications,
authorizations, consents or approvals the failure of which to obtain would not
have, individually and/or in the aggregate, a Ferrotec Material Adverse Effect
and would not materially adversely affect the ability of either Ferrotec or
Merger Sub to consummate the transactions contemplated by this Agreement or
would have become applicable as a result of any acts or omissions by, or the
status of facts pertaining to, solely the Company.
Section 5.4 Interim Operations of the Merger Sub. The Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
Section 5.5 Capitalization of the Merger Sub: Interests in the Company.
The authorized capital stock of the Merger Sub consists of 100,000 shares of
common stock, $.01 par value per share. As of the close of business on October
14, 1999, 1,000 shares of Merger Sub Common Stock were issued and outstanding,
all of which are entitled to vote, and no shares of Merger Sub Common Stock were
held in the Merger Sub's treasury. All the outstanding shares of the Merger
Sub's capital stock are duly authorized, validly issued, fully paid and
non-assessable. Except as set forth above, there will be, at the Effective Time,
(a) no other shares of capital stock or other voting securities of the Merger
Sub outstanding, (b) no securities of the Merger Sub convertible into or
exchangeable for shares of capital stock or voting securities of the Merger Sub
and (c) no outstanding options or other rights to acquire from the Merger Sub,
and no obligation of the Merger Sub to issue any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of the Merger Sub (the items referred to in clauses (a), (b)
and (c) being referred to collectively as the "Merger Sub Securities"). There
are no outstanding obligations of the Merger Sub to repurchase, redeem or
otherwise acquire any Merger Sub Securities. As of the date hereof, neither
Ferrotec nor the Merger Sub nor any of their respective affiliates or associates
(as those terms are defined in the Exchange Act), beneficially own any shares of
Common Stock of the Company, except as set forth in Section 5.5 of the Merger
Sub Disclosure Letter.
Section 5.6 Disclosure Documents. The Offer Documents will not, at the
time the Offer Documents are filed with the SEC or are first published, sent or
given to the Shareholders of the Company, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, Ferrotec and Merger Sub make no representation or
warranty with respect to any information supplied by the Company or any of its
representatives in writing, expressly for inclusion in the Offer Documents,
which is contained in any of the foregoing documents or the Offer Documents.
None of the information supplied or to be supplied by Ferrotec or Merger Sub for
inclusion in the Proxy Statement will, either at the time of mailing of the
Proxy Statement to Shareholders of the Company, or at the time of the Special
Meeting, contain any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
19
Section 5.7 Required Financing. Ferrotec and Merger Sub (i) have
commitments or credit facilities in place which, either alone or with cash
presently on hand, will provide sufficient funds to purchase and pay for the
Shares pursuant to the Offer and the Merger in accordance with the terms of this
Agreement and to consummate the transactions contemplated hereby and (ii) will
have on the Expiration Date, and at the Effective Time, sufficient funds to
purchase and pay for the Shares pursuant to the Offer and the Merger,
respectively, in accordance with the terms of this Agreement. Ferrotec's credit
facilities permit Ferrotec to borrow money under such facilities and use such
funds to purchase and pay for the Shares pursuant to the Offer and the Merger in
accordance with the terms of this Agreement and to consummate the transactions
contemplated hereby.
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Company. The Company covenants
and agrees that the Company shall use its reasonable best efforts to, and shall
cause each of the Company Subsidiaries to use its reasonable best efforts to,
conduct its operations in the ordinary and usual course of business consistent
with past practice and use its reasonable best efforts to preserve intact their
respective business organizations' goodwill, keep available the services of
their respective present officers and key employees, and preserve the goodwill
and business relationships with suppliers, distributors, customers and others
having business relationships with them. Without limiting the generality of the
foregoing, and except as otherwise permitted by this Agreement or as
specifically disclosed in the Company Disclosure Letter, or as required by
applicable law, rule or regulation prior to the Effective Time, without the
consent of Merger Sub, which consent shall not be unreasonably withheld, the
Company will not, and will cause each of the Company Subsidiaries not to:
(a) amend or propose to amend their respective charters or
bylaws; or split, combine or reclassify their outstanding capital stock or
declare, set aside or pay any dividend or distribution in respect of any capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
except for dividends and distributions paid by Company Subsidiaries to other
Company Subsidiaries or to the Company;
(b) (i) issue or authorize or propose the issuance of,
sell, pledge or dispose of, or agree to issue or authorize or propose the
issuance of, sell, pledge or dispose of, any additional shares of, or any
options, warrants, dividend entitlement rights, or rights of any kind to acquire
any shares of, their capital stock of any class, any debt or equity securities
convertible into or exchangeable for such capital stock or any other equity
related right (including any phantom stock or SAR rights), other than any such
issuance pursuant to options, warrants, rights or convertible securities
outstanding as of the date hereof, and which derivative securities are set forth
in the Company Disclosure Letter; (ii) acquire or agree 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 acquire or agree to acquire any assets in each
case which are material, individually or in the aggregate, to the Company and
the Company Subsidiaries taken as a whole; (iii) sell (including by
sale-leaseback), lease, pledge, dispose of or encumber any assets or interests
therein, which are material,
20
individually or in the aggregate, to the Company and the Company Subsidiaries
taken as a whole, other than in the ordinary course of business and consistent
with past practice; (iv) incur or become contingently liable with respect to any
material indebtedness for borrowed money or guarantee any such indebtedness or
issue any debt securities or otherwise incur any material obligation or
liability (absolute or contingent) other than short-term indebtedness in the
ordinary course of business and consistent with past practice or otherwise
pursuant to credit facilities set forth in Section 6.1(b) of the Company
Disclosure Letter; (v) redeem, purchase, acquire or offer to purchase or acquire
any (x) shares of its capital stock or (y) long term debt other than as required
by governing instruments relating thereto; or (vi) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(c) enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other arrangements
or agreements with any directors, officers or key employee except for (i) normal
salary increases and merit bonuses, (ii) arrangements in connection with
employee transfers or (iii) agreements with new employees, in each case, in the
ordinary course of business consistent with past practice; or agree or implement
an across the board increase in employee compensation except in the ordinary
course of business consistent with past practice;
(d) except as set forth in Section 6.1(d) of the Company
Disclosure Letter, adopt, enter into or amend any, or become obligated under any
new bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, healthcare, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any employee
or retiree, except as required to comply with changes in applicable law
occurring after the date hereof;
(e) except as may be required as a result of a change in
law or in GAAP, change any of the accounting principles or practices used by it;
(f) otherwise than pursuant to credit facilities set forth
in Section 6.1(b) of the Company Disclosure Letter, pay, discharge or satisfy
any material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in, or contemplated by, the financial statements (or the notes
thereto) of the Company incurred in the ordinary course of business consistent
with past practice;
(g) except as set forth in Section 6.1(g) of the Company
Disclosure Letter, authorize, commit to or make any equipment purchases or
capital expenditures other than in the ordinary course of business and
consistent with past practice (provided, that such purchases and/or expenditures
shall, individually, be no more than $50,000, and, in the aggregate, be no more
than $250,000); or
(h) except as otherwise permitted by the terms of this
Agreement, take or agree to take any of the foregoing actions or any action that
would, or is reasonably likely to, result
21
in any of its representations and warranties set forth in this Agreement
becoming untrue, or in any of the conditions to the Merger set forth in Article
VII not being satisfied.
Section 6.2 Access to Information. Upon reasonable notice, the Company
shall (and shall cause each of the Company Subsidiaries to) afford to Merger Sub
and its officers, employees, accountants, counsel, financing sources and other
representatives, access, during normal business hours during the period prior to
the earlier of the Effective Time or the date of termination of this Agreement,
to all its properties, books, contracts, commitments and records and, during
such period, the Company shall (and shall cause each of the Company Subsidiaries
to) furnish promptly to Merger Sub (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as Merger Sub may
reasonably request; provided, however, that nothing herein shall require the
Company or any of the Company Subsidiaries to disclose any information to Merger
Sub if such disclosure would be in violation of applicable laws or regulations
of any Governmental Entity or the provisions of any confidentiality agreement to
which the Company is a party. Notwithstanding the foregoing, (x) the Company may
withhold any information if the Company determines in its sole discretion that
the disclosure of such information would adversely effect the Company's
competitive position within the industries which it conducts its business and
(y) if information is not being disclosed to Merger Sub, then Company shall
inform Merger Sub that such information is not being disclosed, the reasons for
such non-disclosure, and a general description of the information not so
disclosed, to the extent such description does not violate or contravene any
law, regulation or confidentiality agreement. Unless otherwise required by law
and until the Effective Time, Ferrotec, Merger Sub and their representatives
will hold any such information which is non-public in confidence in accordance
with the provisions of the Confidentiality Agreement between the Company and
Ferrotec Corporation, dated as of August 16, 1999 (the "Confidentiality
Agreement").
Section 6.3 Employee Benefit Matters.
(a) After the Effective Time, Ferrotec shall cause the
Company to honor all obligations under (i) the existing terms of the employment
and severance agreements to which the Company or any Company Subsidiary is
presently a party, and which are set forth in the Company Disclosure Letter,
except as may otherwise be agreed to by the parties thereto and (ii) the
Company's and any Company Subsidiary's general severance policy as set forth in
Section 6.3 of the Company Disclosure Letter. For a period of one year following
the Effective Time (the "Transition Period"), the Company Employees, as defined
below, will continue to participate in the Benefit Plans (other than stock
option or stock purchase plans) on substantially similar terms to those in
effect on the date hereof. Following the Transition Period, the Company
Employees will be permitted to participate in the employee benefit plans of
Merger Sub or the Surviving Corporation as in effect on the date thereof on
terms substantially similar to those provided to employees of Merger Sub or the
Surviving Corporation.
(b) If any Company Employee becomes a participant in any
employee benefit plan, practice or policy of Merger Sub, any of its affiliates
or the Surviving Corporation, such Company Employee shall be given credit under
such plan for all service prior to the Effective Time with the Company and the
Company Subsidiaries and prior to the time such Company Employee
22
becomes such a participant, for purpose of eligibility (including, without
limitation, waiting periods) and vesting but not for any other purposes for
which such service is either taken into account or recognized (including,
without limitation, benefit accrual); provided, however, that such Company
Employees will be given credit for such service for purposes of any vacation
policy. In addition, if any Company Employees employed as of the Effective Time
become covered by a medical plan of Merger Sub or the Surviving Corporation,
such medical plan shall not impose any exclusion on coverage for preexisting
medical conditions with respect to these Company Employees, except as otherwise
required by the insurance carrier for such plans.
(c) All benefits described in Section 6.3(c) of the Company
Disclosure Letter shall be deemed fully vested as of the Effective Time.
(d) For purposes of this Section 6.3, the term "Company
Employees" shall mean all employees of the Company and the Company Subsidiaries
immediately prior to the Effective Time, including those on lay-off, disability
or leave of absence, paid or unpaid.
Section 6.4 No Solicitation.
(a) The Company will not, and will use its best efforts to
cause any officers, directors, employees and investment bankers, attorneys or
other agents retained by the Company or any of the Company Subsidiaries not to,
(i) initiate or solicit, directly or indirectly, any inquiries or the making of
any Acquisition Proposal (as hereinafter defined), or (ii) except as permitted
below, engage in negotiations or discussions with, or furnish any information or
data to any third party relating to an Acquisition Proposal (other than the
transactions contemplated hereby). Notwithstanding anything to the contrary
contained in this Section 6.4 or in any other provision of this Agreement, the
Company, and its officers, directors, investment bankers, attorneys or agents,
may:
(i) participate in discussions or negotiations
(including, as a part thereof, making any counterproposal) with or
furnish information or data to any third party making an unsolicited
Acquisition Proposal (a "Potential Acquiror") if either: (A) the
Company Board determines in good faith, after consultation with its
financial advisor, that such third party is reasonably likely to submit
an Acquisition Proposal which is a Superior Proposal (as hereinafter
defined), or (B) the Company Board determines in good faith, after
consultation with its outside legal counsel, that the failure to
participate in such discussions or negotiations or to furnish such
information or data may be inconsistent with the Company Board's
fiduciary duties under applicable law, or
(ii) following receipt of an Acquisition Proposal,
disclose to its Shareholders the Company's position contemplated by
Rules 14d-9 and 14e-2 under the Exchange Act or otherwise make any
other necessary or advisable disclosure to its shareholders related to
an Acquisition Proposal.
The Company agrees that any non-public information furnished to a
Potential Acquiror was or will be pursuant to a confidentiality agreement
substantially similar to the confidentiality provisions of the Confidentiality
Agreement.
23
(b) For purposes of this Agreement, "Acquisition Proposal"
shall mean any bona fide proposal made by a third party to acquire (i)
beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of a 51%
or greater equity interest in the Company pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock, tender offer or
exchange offer or similar transaction involving the Company including, without
limitation, any single or multi-step transaction or series of related
transactions which is structured in good faith to permit such third party to
acquire beneficial ownership of a 51 % or greater equity interest in the Company
or (ii) all or substantially all of the business or assets of the Company (other
than the transactions contemplated by this Agreement).
(c) The term "Superior Proposal" shall mean any Acquisition
Proposal which the Company Board by resolution duly adopted, determines, after
consultation with its financial advisor, to be more favorable to the Company and
its Shareholders than the transactions contemplated hereby.
(d) The Company shall immediately cease and cause to be
terminated any discussions or negotiations existing as of the date hereof with
any parties (other than Ferrotec and the Merger Sub) conducted heretofore with
respect to any of the foregoing. The Company agrees not to release any third
party from the confidentiality obligations of such third party under any
confidentiality agreement or the standstill obligations of such third party
under any standstill agreement to which the Company is a party, provided,
however, that the Company can release any third party from any such standstill
agreement if the Company Board determines in good faith, after consultation with
its outside legal counsel, that the failure to so release such party from said
standstill agreement may be inconsistent with the Company Board's fiduciary
duties under applicable law.
Section 6.5 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to
Ferrotec and its affiliates and the Company. Thereafter, so long as this
Agreement is in effect, neither the Company, Ferrotec nor any of their
respective affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the prior consultation of the other
party, except as may be required by law or by any securities exchange or
inter-quotation system.
Section 6.6 Directors' and Officers' Insurance and Indemnification.
(a) In the event of any threatened or actual claim,
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date hereof (except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇), or
any person who becomes prior to the Effective Time, a director, officer,
employee, fiduciary or agent of the Company or any of the Company Subsidiaries
(the "Indemnified Parties") is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was a director, officer, employee, fiduciary or agent of
the Company or any of the Company Subsidiaries, or is or was serving at the
request of the Company or any of the Company Subsidiaries, or is or was serving
at the request of the Company or any of the Company
24
Subsidiaries as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (ii) the
negotiation, execution or performance of this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
reasonable best efforts to defend against and respond thereto. It is understood
and agreed that the Company shall indemnify and hold harmless, and after the
Effective Time Surviving Corporation and Merger Sub shall indemnify and hold
harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorneys' fees and expenses), judgments, fines
and amounts paid in settlement ("Losses") in connection with any such threatened
or actual claim, action, suit, proceeding or investigation, and in the event of
any such threatened or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time), (A) the
Company, and the Surviving Corporation and Merger Sub after the Effective Time,
shall promptly pay expenses in advance of the final disposition of any claim,
suit, proceeding or investigation to each Indemnified Party to the full extent
permitted by law, (B) the Indemnified Parties shall retain ▇▇▇▇▇▇▇, Procter &
▇▇▇▇ LLP (provided that no policy for D&O Insurance, as defined below, requires
that counsel be chosen from an approved list, or if any such policy requires
counsel to be chosen from an approved list, ▇▇▇▇▇▇▇, Procter & ▇▇▇▇ LLP is so
named on the approved list) or other counsel to represent them in such matter,
provided that such choice of other counsel is consented to by Merger Sub or the
Surviving Corporation (and/or the applicable insurance carriers), and which
consent shall not be unreasonably withheld, and the Company, and the Surviving
Corporation and Merger Sub after the Effective Time, shall pay all reasonable
fees and expenses of such counsel within 30 days after statements therefor are
received, and (C) the Company, the Surviving Corporation and Merger Sub will use
their respective reasonable best efforts to assist in the vigorous defense of
any such matter; provided that none of the Company, the Surviving Corporation or
Merger Sub shall be liable for any settlement effected without its prior written
consent (which consent shall not be unreasonably withheld); and provided further
that the Surviving Corporation and Merger Sub shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
non-appealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim indemnification under this Section 6.6, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify the
Company and, after the Effective Time, the Surviving Corporation and Merger Sub,
thereof; provided that the failure to so notify shall not affect the obligations
of the Company, the Surviving Corporation and Merger Sub except (i) to the
extent such failure to notify materially prejudices such party, or (ii) in the
event such failure to notify results in any insurance coverage being denied, to
the extent such denial materially prejudices such party.
(b) Merger Sub agrees that all rights to indemnification
existing in favor of, and all limitations on the personal liability of, the
directors, officers, employees and agents of the Company and the Company
Subsidiaries provided for in this Agreement and provided for in the Articles of
Organization or By-Laws of the Company as in effect as of the date hereof with
respect to matters occurring prior to or at the Effective Time, including the
Offer, the Merger and the other transactions contemplated thereby, shall
continue in full force and effect for a period of six (6) years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any claims (each a "Claim") asserted or made within such period shall
continue until the final disposition
25
of such Claim. Prior to the Effective Time, the Company shall purchase an
extended reporting period endorsement under the Company's existing directors'
and officers' liability insurance coverage and/or coverage under new policies
from one or more other insurers (the "D & O Insurance") for the Company's
directors and officers in a form acceptable to the Company which shall provide
such directors and officers with coverage for six (6) years following the
Effective Time of not less than $20,000,000, and have other terms not materially
less favorable to, the insured persons than the directors' and officers'
liability insurance coverage presently maintained or currently contemplated by
the Company. To the extent the Company, Merger Sub and/or Ferrotec advances or
pays any expenses or damages related hereunder to a Claim in advance of any
reimbursement thereof by an insurance carrier, the Company, Merger Sub and/or
Ferrotec shall be entitled to any such reimbursement thereof by such insurance
carrier; and in the event of any claim against an insurance carrier hereunder
for reimbursement for or payment of any of said expenses or damages, Company,
Merger Sub and/or Ferrotec shall have the right to proceed against such carrier
on behalf of themselves and the Indemnified Parties hereunder. Notwithstanding
anything contained herein to the contrary, any payments for indemnification
provided hereunder shall be limited in the aggregate with all other payments for
indemnification (except as further limited below) to a maximum of $20,000,000.
Ferrotec agrees hereunder to pay and to be responsible only for the payment
obligations of the Surviving Corporation and the Merger Sub under this Section
6.6, provided that Ferrotec's obligation hereunder is subject to the limitations
set forth below. Notwithstanding anything contained herein to the contrary,
Ferrotec shall only pay and be responsible for the payment obligations of the
Surviving Corporation and the Merger Sub under this Section 6.6 with respect to
all Losses in connection with Claims arising within the two-year period
following the Effective Time (including any Losses arising after such two-year
period relating to such Claims and any Losses arising from Claims made after
such two-year period that (i) are joined in a judicial proceeding with any Claim
that arose within such two-year period, or (ii) arise from actions of an
Indemnified Party upon which actions a Claim that is filed within such two-year
period is based), up to an aggregate $10,000,000. With respect only to such
Claims described in the preceding sentence such responsibility of Ferrotec shall
continue until the final disposition of such Claims. In addition, if an
Indemnified Party shall seek indemnification for a specific amount of Losses
under this Section 6.6 with respect to a Claim, such Indemnified Party shall
give written notice thereof (an "Indemnification Notice") to the Company and to
any applicable insurance carrier (if prior to the Effective Time) and to
Ferrotec and the Surviving Corporation (if after the Effective Time) and to the
carriers of the D&O Insurance. In the event that after the Effective Time an
Indemnified Party does not receive payment for any such Losses from the
Surviving Corporation or the carrier(s) of the D&O Insurance within ninety (90)
days after the giving of an Indemnification Notice, Ferrotec shall be obligated
to pay to such Indemnified Party an amount or amounts equal to such Losses
(subject to the $10,000,000 limit described above for all Losses incurred by the
Indemnified Parties). In addition, pursuant to and in accordance with the
Article IV of the Company's By-Laws, Merger Sub and/or Ferrotec may require an
unsecured undertaking in form and content reasonably satisfactory to Merger Sub
and/or Ferrotec, from the Indemnified Parties, to reimburse any and all advance
payments to Merger Sub and/or Ferrotec made hereunder upon final disposition of
any action, suit or proceeding for which indemnification was sought, in the
event that upon such final disposition of such action, suit or proceeding such
Indemnified Party shall not be entitled to indemnification under this Section.
26
(c) This Section 6.6 is intended for the irrevocable
benefit of, and to grant third party rights to, the Indemnified Parties and
shall be binding on all successors and assigns of the Merger Sub, Ferrotec, the
Company and the Surviving Corporation. Each of the Indemnified Parties shall be
entitled to enforce the covenants contained in this Section 6.6.
(d) In the event that Ferrotec or the Surviving
Corporation or any of its successors or assigns (i) consolidates with or merges
into any other person or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any person or
entity, then, and in each such case, proper provision shall be made so that the
successors and assigns of Ferrotec or the Surviving Corporation, as the case may
be, assume its obligations set forth in this Section 6.6.
Section 6.7 Proxy Statement.
(a) The Company and Ferrotec shall prepare as soon as
practicable, following the consummation of the Offer (the "Acceptance Date"),
and shall file with the SEC the Proxy Statement. The respective parties will
cause the Proxy Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder.
(b) The Proxy Statement will be mailed to the Shareholders
of the Company as promptly as practicable after the Acceptance Date and
subsequent to the date on which the SEC has indicated that it has no comments or
no additional comments with respect to the Proxy Statement. The Company shall
include in the Proxy Statement the recommendation of the Company Board that its
Shareholders vote in favor of the approval of the Merger and the adoption of
this Agreement.
(c) The Company and Ferrotec agree that at the time that
the Proxy Statement is mailed to the Shareholders of the Company, the Proxy
Statement will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) No amendment or supplement to the Proxy Statement will
be made without the approval of each of the Company and Ferrotec, which approval
will not be unreasonably withheld or delayed.
Section 6.8 Shareholders' Meetings. As soon as practicable after the
consummation of the Offer, the Company, acting through the Company Board, shall,
in accordance with applicable law and its Articles of Organization, as amended,
and for the purpose of considering and taking action upon this Agreement and the
Merger contemplated hereby, duly call, give notice of, convene and hold a
Special Meeting of the Shareholders of the Company. Ferrotec and the Merger Sub
agree to vote or use their reasonable best efforts to cause all of the Shares
owned beneficially or of record by them and their affiliates as of the record
date for the Special Meeting in favor of the Merger at the Special Meeting.
27
Section 6.9 Approvals and Consents: Cooperation.
(a) The parties hereto shall use all reasonable best
efforts, and cooperate with each other, to obtain as promptly as practicable all
governmental and third party authorizations, approvals, consents or waivers
required in order to consummate the transactions contemplated by this Agreement,
including, without limitation, the Merger.
(b) The Company, Merger Sub and Ferrotec shall take all
actions necessary to file as soon as practicable all notifications, filings and
other documents required to obtain all governmental authorizations, approvals,
consents or waivers and to respond as promptly as practicable to any inquiries
and requests received from the Federal Trade Commission, the Antitrust Division
of the Department of Justice and any other Governmental Entity for additional
information or documentation in connection therewith.
(c) The Company, Merger Sub and Ferrotec shall keep the
other apprised of the status of matters relating to the completion of the
transactions contemplated hereby and work cooperatively in connection with
obtaining governmental consents, including, without limitation: (i) promptly
notifying the other of, and if in writing, furnishing the other with copies of
(or, in the case of material oral communication, advise the other orally of) any
communications from or with any Governmental Entity with respect to the Merger
or any of the other transactions contemplated by this Agreement, (ii) permitting
the other party to review and discuss in advance, and considering in good faith
the views of one another in connection with, any proposed written (or any
material proposed oral) communication with any Governmental Entity, (iii) not
participating in any meeting with any Governmental Entity unless it consults
with the other party in advance and to the extent permitted by such Governmental
Entity gives the other party the opportunity to attend and participate thereat,
(iv) furnishing the other party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance thereof) between it
and any Governmental Entity with respect to this Agreement and the Merger, and
(v) furnishing the other party with such necessary information and reasonable
assistance as such other party may reasonably request in connection with its
preparation of necessary filings or submissions of information to any
Governmental Entity. The Company and Ferrotec may, as each deems advisable and
necessary, reasonably designate any competitively sensitive material provided to
the other under this Section as "outside counsel only." Such materials and the
information contained therein shall be given only to the outside legal counsel
of the recipient and will not be disclosed by such outside counsel to employees,
officers, or directors of the recipient unless express permission is obtained in
advance from the source of the materials (the Company or Ferrotec, as the case
may be) or its legal counsel. Notwithstanding the foregoing, in the event such
outside counsel deems that any such material so disclosed to outside counsel has
caused or will cause the failure of the condition set forth in paragraph (e) of
Annex A hereto, such outside counsel shall so notify the disclosing party of
such material as to the foregoing and shall also notify the other parties
hereto, without disclosing the specific information concerning the material so
designated as to the foregoing.
(d) The Company shall give prompt notice to Ferrotec of the
forgoing occurrence of any Company Material Adverse Effect, and Ferrotec shall
give prompt notice to the Company of the occurrence of any Ferrotec Material
Adverse Effect. Each of the Company and Ferrotec shall give prompt notice to the
other of the occurrence or failure to occur of an event that
28
would, or, with the lapse of time would, cause any condition contained in
Article VII not to be satisfied.
Section 6.10 Further Assurances. Each of the parties hereto agrees to
use its 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, including, without limitation, the Offer and the
Merger, which efforts shall include, without limitation, (a) Company, the Merger
Sub and Ferrotec using their best efforts to prevent any preliminary or
permanent injunction or other order by a court of competent jurisdiction or
Governmental Entity relating to consummating the transactions contemplated by
this Agreement, including, without limitation, under the antitrust laws, and, if
issued, to appeal any such injunction or order through the appellate court or
body for the relevant jurisdiction and (b) Company and the Merger Sub and
Ferrotec using their best efforts to satisfy any objections of, and accept any
conditions imposed by, any Governmental Entity, except where such objection or
condition would have a Company Material Adverse Effect. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the parties hereto shall take or cause to be taken
all such necessary action, including, without limitation, the execution and
delivery of such further instruments and documents as may be reasonably
requested by the other party for such purposes or otherwise to consummate and
make effective the transactions contemplated hereby.
Section 6.11 Rights Agreement; Stock Options, Foreign Subsidiaries.
(a) The Company shall take all necessary action prior to
the Acceptance Date to cause the dilution provisions of the Rights Agreement,
dated August 3, 1994, between the Company and American Stock Transfer and Trust
Company (the "Company Rights Agreement") to be inapplicable to the transactions
contemplated by this Agreement, without any payment to holders of preferred
stock purchase rights ("Rights") issued pursuant to such Company Rights
Agreement.
(b) Subject to the provisions of Section 3.2 hereof, the
Company shall have taken all necessary actions to cause all outstanding Company
Options to be canceled as of the Acceptance Date, against payment therefor as
provided hereunder.
(c) The Company shall use its reasonable efforts to cause
all of its foreign subsidiaries as to which the Company does not own of record
all such entity's equity to have entered into agreements as of the Acceptance
Date to transfer such equity owned by any other person directly to a designee of
Merger Sub.
Section 6.12 Company Board Representation; Section 14(f).
(a) Promptly upon the purchase by the Merger Sub of Shares
pursuant to the Offer, and from time to time thereafter, the Merger Sub shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Company Board as shall give the Merger Sub representation
on the Company Board equal to the product of the total number of directors on
the Company Board (giving effect to the directors elected pursuant to this
sentence)
29
multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Merger Sub or any affiliate of the Merger Sub following such
purchase bears to the total number of Shares then outstanding, and the Company
shall, at such time, promptly take all actions necessary to cause the Merger
Sub's designees to be elected as directors of the Company, including increasing
the size of the Company Board or securing the resignations of incumbent
directors or both, provided that the number of directors constituting the
Company Board shall be no less than five. At such times, the Company shall use
its best efforts to cause persons designated by the Merger Sub to constitute the
same percentage as is on the Company's Board of (i) each committee of the
Company Board, (ii) each board of directors of each Company Subsidiary and (iii)
each committee of each such board, in each case only to the extent permitted by
applicable law. Notwithstanding the foregoing, in the event that Merger Sub's
designees are elected to the Company Board, until the Effective Time, the
Company Board shall have at least two directors who are directors on the date
hereof (the "Independent Directors"); provided that, in such events, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there be only one remaining) shall be entitled to designate persons to fill such
vacancies who shall be deemed to be Independent Directors for purposes of this
Agreement or, if no Independent Director then remains, the other directors shall
designate two persons to fill such vacancies who shall not be shareholders,
affiliates or associates of Merger Sub and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Notwithstanding anything
in this Agreement to the contrary, in the event that Merger Sub's designees are
elected to the Company Board, after the acceptance for payment of Shares
pursuant to the Offer and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors shall be required to (a) amend or
terminate this Agreement by the Company, (b) extend the time for performance of
Ferrotec's or Merger Sub's obligations hereunder, or (c) exercise or waive any
of the Company's rights, benefits or remedies hereunder.
(b) The Company shall promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under this Section 6.12 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-1 to
fulfill such obligations. Ferrotec and the Merger Sub shall supply to the
Company and be solely responsible for any information with respect to either of
them and their nominees, officers, directors and affiliates required by such
Section 14(f) and Rule 14f-1.
(c) The Company further agrees and acknowledges that the
current staggered Company Board and the agreement that the Company maintain such
Board under its charter documents, shall not prevent the Company from causing
the election to the Company's Board of the number of directors of Merger Sub
provided in this Section 6.12.
30
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction (or, if permissible, waiver by the party for whose benefit such
conditions exist) at or prior to the Effective Time of the following conditions:
(a) this Agreement and the Merger shall have been approved
and adopted by the requisite majority vote of the Shareholders of the Company in
accordance with applicable law and regulatory requirements and the Company's
Articles of Organization;
(b) the waiting period applicable under HSR shall have
expired or terminated;
(c) no order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement shall be in effect, and no statute, rule,
regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits, restricts or
makes illegal the consummation of the Merger, provided, however, that the
parties shall have used their best efforts to prevent any such rule, regulation,
injunction, decree or other order, and to appeal as promptly as possible any
injunction, decree or other order that may be entered;
(d) all authorizations, approvals or consents required to
permit the consummation of the Merger shall have been obtained and be in full
force and effect, except where the failure to have obtained any such
authorizations, approvals or consents would not, individually and/or in the
aggregate, have a Company Material Adverse Effect;
(e) The Merger Sub or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer
and the Minimum Condition to the Offer has been satisfied.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the Offer (if not then
already consummated) and/or the Merger contemplated herein may be abandoned at
any time (the "Termination Date") prior to the Effective Time, whether before or
after Shareholder approval thereof:
(a) By the mutual consent of the Company, Ferrotec and the
Merger Sub.
31
(b) By either of the Company, on the one hand, or Ferrotec
and the Merger Sub, on the other hand:
(i) if, without any material breach by the terminating
party of its obligations under this Agreement, Merger Sub shall not
have purchased Shares pursuant to the Offer on or prior to sixty (60)
days after the commencement of the Offer (the "Final Expiration Date"),
provided, however, that neither Merger Sub nor the Company shall
terminate this Agreement prior to February 29, 2000, if all conditions
to the Offer set forth in Annex A have been satisfied or, to the extent
permitted, waived, except that Shares shall not have been purchased by
Merger Sub by reason of any applicable waiting period (and any
extension thereof) under the HSR Act in respect to the Offer not having
expired or been terminated;
(ii) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action the parties hereto shall use their respective
reasonable best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall
have become final and non-appealable; provided, however, that the party
seeking termination shall have complied fully with its obligations
under Section 6.9;
(iii) if the Minimum Condition shall not have been
satisfied, in which case neither Ferrotec, Merger Sub nor any of their
affiliates shall be permitted to accept for payment or pay for any
Shares unless and until the Company shall have provided Merger Sub with
written notice stating that the Company is not exercising its right to
terminate this Agreement pursuant to this Section 8.1(b)(iii);
(c) By the Company:
(i) if the Company Board shall have (A) withdrawn, or
modified or changed in a manner adverse to Merger Sub its approval or
recommendation of this Agreement or the Merger and (B) either (x)
determined in good faith, after consultation with its financial
advisor, that a third party has submitted to the Company an Acquisition
Proposal which is a Superior Proposal, or (y) determined in good faith,
after consultation with its outside legal counsel, that the failure to
take such action as set forth in the preceding clause (A) may be
inconsistent with the Company Board's fiduciary duties under applicable
law; or
(ii) if Ferrotec or Merger Sub (x) breaches or fails in
any material respect to perform or comply with any of their material
covenants and agreements contained herein or (y) breaches their
representations and warranties in any material respect and such breach
would have a Ferrotec Material Adverse Effect, in each case in
connection with the termination of this Agreement only after the
Acceptance Date such that the conditions set forth in Section 7.1 would
not be satisfied; provided, however, that after the Acceptance Date if
any such breach is curable by the breaching party, the Company may
terminate this Agreement pursuant to this Section 8.l(c)(ii) only after
the passage of thirty (30) calendar
32
days from written notification to Ferrotec and Merger Sub by the
Company of such breach, and provided further that such breach has not
been so cured within said thirty-day period, provided however, that the
Termination Date shall be so delayed (if the Termination Date will have
occurred prior to the end of said thirty-day period) in order to give
such breaching party the opportunity to cure during said thirty-day
period.
(d) By Ferrotec and the Merger Sub:
(i) if the Company (x) breaches or fails in any
material respect to perform or comply with any of its material
covenants and agreements contained herein or (y) breaches its
representations and warranties and such breach would have a Company
Material Adverse Effect, in each case in connection with the
termination of this Agreement only after the Acceptance Date such that
the conditions set forth in Section 7.1 would not be satisfied;
provided, however, that after the Acceptance Date if any such breach is
curable by the Company, then Ferrotec or Merger Sub may terminate this
Agreement pursuant to this Section 8. l(d)(i) only after the passage of
thirty (30) calendar days from notification to the Company by Ferrotec
or Merger Sub of such breach and provided further that such breach has
not been so cured within said thirty-day period, provided, however,
that the Termination Date shall be so delayed (if the Termination Date
will have occurred prior to the end of said thirty-day period) in order
to give such breaching party the opportunity to cure during said
thirty-day period; or
(ii) if the Company Board shall have withdrawn,
modified or changed in any manner adverse to Merger Sub its approval or
recommendation of this Agreement or the Merger or shall have
recommended an Acquisition Proposal involving the Company or shall have
executed an agreement in principle or definitive agreement relating to
an Acquisition Proposal involving the Company or similar business
combination with a person or entity other than Merger Sub or its
affiliates (or the Company Board resolves to do any of the foregoing),
provided, however, that prior to terminating this Agreement as a result
of a third party Acquisition Proposal, the Company shall give the
Merger Sub telephonic notice of at least forty-eight hours in advance
of such termination, specifying the terms of such Acquisition Proposal
by a third party; or
(iii) if for any five consecutive trading days prior to
the Effective Time the Dow ▇▇▇▇▇ Industrial Average shall be less than
6,500 on each of such days; or
(iv) if due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in
Annex A hereto, the Merger Sub shall have failed to commence the Offer
on or prior to five days following the initial public announcement of
this Agreement.
Section 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement as
provided in Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying
33
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void, and there shall be no liability
on the part of Ferrotec, Merger Sub or the Company or their respective
directors, officers, employees, shareholders, representatives, agents or
advisors, other than, with respect to Ferrotec, Merger Sub and the Company, the
obligations pursuant to this Section 8.2, Article IX and the last sentence of
Section 6.2. Nothing contained in this Section 8.2 shall relieve Ferrotec,
Merger Sub or the Company from liability for fraud or willful breach of this
Agreement.
(b) If this Agreement is terminated:
(A) by the Company pursuant to Section 8. l(c)(i), or
(B) by Ferrotec and Merger Sub pursuant to Section
8.1(d)(ii),
then at the time of termination with respect to (A) or (B) above, the Company
shall pay the Merger Sub an amount equal to $3,000,000 in cash (the "Liquidated
Amount"). The parties hereto hereby agree that, in light of the difficulty of
accurately determining actual damages with respect to any termination of this
Agreement pursuant to Sections 8.1(c)(i) or 8.1(d)(ii), said Liquidated Amount
represents the parties reasonable estimate of said damages. Said Liquidated
Amount is not meant nor should it be deemed as a penalty, but rather as an
attempt by the parties to quantify the amount of damages sustained by Ferrotec
and Merger Sub if the transaction is not contemplated. Ferrotec and Merger Sub
hereto expressly acknowledges and agrees that, with respect to any termination
of this Agreement pursuant to Sections 8.1(c)(i) or 8.1(d)(ii) hereof, the
Liquidated Amount shall constitute the sole and exclusive remedy available to
Ferrotec and Merger Sub. Except for nonpayment of the Liquidated Amount,
Ferrotec, Merger Sub and the Company hereby agree that, upon any termination of
this Agreement pursuant to Sections 8.1(c)(i) or 8.1(d)(ii) hereof, in no event
shall Ferrotec or Merger Sub be entitled to seek or to obtain any recovery or
judgment against the Company or any of the Company Subsidiaries or any of their
respective assets, or against any of their respective directors, officers,
employees, partners, managers, members or shareholders, and in no event shall
Ferrotec or Merger Sub be entitled to seek or obtain any other damages of any
kind, including, without limitation, consequential, indirect or punitive
damages.
(c) The obligations of the Company, Ferrotec, and Merger
Sub under this Section 8.2 shall survive any termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the Shareholders of the Company contemplated
hereby, by written agreement of the parties hereto, by action taken by their
respective Boards of Directors, at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after the
approval of this
34
Agreement by the Shareholders of the Company, no such amendment, modification or
supplement shall reduce or change the Cash Consideration or adversely affect the
rights of the Company's Shareholders hereunder without the approval of such
shareholders.
Section 9.2 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time or the termination of this Agreement. This Section 9.2 shall not
limit any covenant or agreement contained in this Agreement which by its terms
contemplates performance after the Effective Time, including, without
limitation, those made in Sections 6.3, 6.6, 8.2, the last sentence of Section
6.2 and this Article IX.
Section 9.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or one business day after being sent by an
overnight courier service, such as Federal Express, for next day delivery, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Ferrotec, to:
Ferrotec Corporation
▇-▇▇-▇, ▇▇▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇
Telecopy No.: 011-81-33-845-1019
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
and Chief Executive Officer
with a copy to:
Akerman, Senterfitt & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
(b) if to Merger Sub, to:
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇-▇▇-▇, ▇▇▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇ 110-0015
Telephone No.: ▇▇▇-▇▇-▇▇-▇▇▇-▇▇▇▇
Telecopy No.: 011-81-33-845-1019
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
and Chief Executive Officer
35
with a copy to:
Akerman, Senterfitt & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
and
(c) if to the Company, to:
Ferrofluidics Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Cable, P.C.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Section 9.4 Interpretation. The words "hereof", "herein" and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified. The word "or" shall be construed to refer to
"and/or." Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation". The word describing the singular number shall include the plural
and vice versa, and words denoting any gender shall include all genders and
words denoting natural persons shall include corporations and partnerships and
vice versa. The phrase "to the knowledge of" or "to the best knowledge of" or
any similar phrase shall mean such facts and
36
other information which as of the date of this Agreement are actually known by
any officer of the referenced party who currently files Forms 4 pursuant to
Section 16(b) of the Exchange Act. The phrase "made available" in this Agreement
shall mean that the information referred to has been made available to the other
party. The phrases "the date of this Agreement", "the date hereof" and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to October 20, 1999. As used in this Agreement, the term "affiliate(s)"shall
have the meaning set forth in Rule 12b-2 of the Exchange Act. The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
Section 9.5 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.
Section 9.6 Entire Agreement: Third Party Beneficiaries. This
Agreement, the Annex and Exhibits hereto (including the Company Disclosure
Letter and the Merger Sub Disclosure Letter), and the Confidentiality Agreement
(including the documents and the instruments referred to herein and therein)
constitute the entire agreement and supersede all prior agreements and
understandings, including, without limitation, all representations and
warranties made by the parties in connection herewith, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended or shall confer upon
any other person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement, except that Sections 6.3 and 6.6 hereof are
intended to be for the benefit of those persons described therein and the
covenants and agreements contained therein may be enforced by such persons.
Section 9.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 9.8 Governing Law.
(a) This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof or of any other jurisdiction.
(b) Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of
Delaware or the Commonwealth of Massachusetts or any Delaware or Massachusetts
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court
37
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal or
state court sitting in the Commonwealth of Massachusetts or State of Delaware.
Section 9.9 Specific Performance. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(a) will waive, in any action for specific performance, the defense of adequacy
of a remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in a court of competent jurisdiction.
Section 9.10 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. 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 permitted successors and assigns.
Section 9.11 Expenses. Except as set forth in Section 8.2, all costs
and expenses incurred in connection with this Agreement and the consummation of
the transactions contemplated hereby shall be paid by the party incurring such
costs and expenses, whether or not any of the transactions contemplated hereby
is consummated.
Section 9.12 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
Section 9.13 Waivers. Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, covenant,
agreement or condition herein may be waived by the party or parties entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 9.14 No Agreement Until Executed. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding among the parties hereto unless and until (i) the Company Board
has approved, for purposes of Chapter 110F of the MBCL and any applicable
provision of the Articles of Organization, the terms of this Agreement, (ii) the
Board of Directors of Ferrotec has approved the terms of this Agreement, and
(iii) this Agreement is executed by the parties thereto.
38
IN WITNESS WHEREOF, Ferrotec, the Merger Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
FERROFLUIDICS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------------
Title: President and CEO
--------------------------------
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Title: Treasurer
--------------------------------
FERROTEC ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
--------------------------------
Title: President
--------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Title: Treasurer
--------------------------------
FERROTEC CORPORATION
By: /s/ Nozomu Yamamoto
--------------------------------------
Name: Nozomu Yamamoto
--------------------------------
Title: Executive Director
--------------------------------
39
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer and subject to Rule
14e-1(c) of the Exchange Act and Section 1.1 of the Agreement, the Merger Sub
shall not be required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may (A) postpone the acceptance for payment of and
payment for Shares tendered, if (i) the Minimum Condition shall not have been
satisfied as of the Expiration Date or Final Expiration Date, or (ii) any
applicable waiting period under HSR shall not have expired or been terminated
prior to the Expiration Date or Final Expiration Date, or (B) terminate or amend
the Offer or postpone the acceptance for payment of and payment for Shares
tendered if at any time on or after the date of this Agreement, and prior to the
Expiration Date or Final Expiration Date, any of the following conditions shall
exist which, in the sole judgment of the Merger Sub in any such case, and
regardless of the circumstances (including any action or inaction by Merger Sub
or any of its affiliates) giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment:
(a) there shall have been instituted or be pending any action or
proceeding before any court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) challenging or seeking to make
illegal, materially delaying or otherwise directly or indirectly restraining or
prohibiting the making of the Offer, the acceptance for payment of, or payment
for, any Shares by Ferrotec, the Merger Sub or any other affiliate of Ferrotec
or the Merger Sub or the consummation of any other transaction contemplated
hereby or thereby, or seeking to obtain material damages in connection with any
transaction contemplated hereby or thereby; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, Ferrotec, Merger Sub or
any of their subsidiaries of all or any material portion of the business or
assets of the Company, Ferrotec, Merger Sub or any of their subsidiaries, or to
compel the Company, Merger Sub or any of their subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Company, Ferrotec, Merger Sub or any of their subsidiaries, as a result of the
transactions contemplated hereby; (iii) seeking to impose or confirm limitations
on the ability of Ferrotec, the Merger Sub or any other affiliate of Merger Sub
to exercise effectively full rights of ownership of any Shares, including,
without limitation, the right to vote any Shares acquired by the Merger Sub
pursuant to the Offer or otherwise on all matters properly presented to the
Company's Shareholders, including, without limitation, the approval and adoption
of this Agreement and the transactions contemplated hereby; (iv) seeking to
require divestiture by the Ferrotec, Merger Sub or any other affiliate of Merger
Sub of any Shares; or (v) with respect to any such action or proceeding relating
to this Agreement, the Merger, the transactions contemplated by this Agreement
or the announcement thereof, which otherwise has a Company Material Adverse
Effect or Ferrotec Material Adverse Effect; or
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to (i)
Ferrotec, Merger Sub, the Company or any subsidiary or affiliate of the Merger
Sub or the Company or (ii) any transaction contemplated hereby, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of HSR to
40
the Offer or the Merger, which is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
(c) there shall have occurred after the date of the Agreement any
change, condition, event or development that has had a Company Material Adverse
Effect, provided, however, that (i) no event, change or effect that primarily
results from this Agreement, the Merger, the Offer and the transactions
contemplated thereby or the announcement thereof, (ii) no event, change or
effect generally affecting the industries in which the Company operates, or
(iii) no event, change or effect related to a general drop in stock prices in
the United States resulting from political or economic turmoil, shall be deemed
to cause either individually or in the aggregate a Company Material Adverse
Effect; or
(d) there shall have occurred after the date of the Agreement (i) any
general suspension of, trading in securities on NASDAQ for the Company for a
period in excess of 24 hours (excluding suspensions or limitations resulting
solely from physical damage or interference with such exchange not related to
market conditions), (ii) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, Japan, or Canada, (iii)
any limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on, or
other event that, in the reasonable judgment of the Merger Sub, is reasonably
likely to materially adversely affect the extension of credit by banks or other
lending institutions, (iv) a declaration of war or armed hostilities by either
the United States or Japan or (v) in the case of any of the foregoing existing
on the date hereof, a material acceleration or worsening thereof; or
(e) the Company (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements contained in
the Agreement or (y) breaches its representations and warranties and such breach
would have a Company Material Adverse Effect; or
(f) the Company Board shall have withdrawn, modified or changed in any
manner adverse to Ferrotec or Merger Sub its approval or recommendation of this
Agreement or the Merger or shall have recommended an Acquisition Proposal
involving the Company or shall have executed an agreement in principle or
definitive agreement relating to an Acquisition Proposal involving the Company
or similar business combination with a person or entity other than Ferrotec,
Merger Sub or its affiliates (or the Company Board resolves to do any of the
foregoing); or
(g) this Agreement shall have been terminated in accordance with its
terms; or
(h) Ferrotec, the Merger Sub and the Company shall have agreed in
writing that the Merger Sub shall terminate the Offer or postpone the acceptance
for payment of or payment for Shares thereunder.
Except as provided below, the foregoing conditions are for the sole
benefit of the Ferrotec and Merger Sub and may be asserted by Ferrotec and the
Merger Sub regardless of the circumstances giving rise to any such condition or
may be waived by Ferrotec and the Merger Sub in whole or in part at any time and
from time to time in its sole discretion. The failure by Ferrotec or Merger Sub
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right;
41
the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time. Notwithstanding anything to the
contrary provided in the Agreement or this Annex A, neither Ferrotec nor Merger
Sub shall be permitted to waive the Minimum Condition without the written
consent of the Company.
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