1
EXHIBIT (c)(3)
__________________________________________________
AGREEMENT AND PLAN OF MERGER
by and among
▇▇▇▇▇▇ SERVICES CORP.,
AES ACQUISITION CORP.
and
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
dated as of
December 15, 1997
__________________________________________________
2
TABLE OF CONTENTS
ARTICLE I
THE OFFER AND MERGER 1
Section 1.1 The Offer 2
Section 1.2 Company Actions 2
Section 1.3 SEC Documents 4
Section 1.4 The Merger 5
Section 1.5 Effective Time 6
Section 1.6 Closing 6
Section 1.7 Stockholders' Meeting 7
Section 1.8 Merger Without Meeting of Stockholders 8
ARTICLE II
CONVERSION OF SECURITIES 8
Section 2.1 Conversion of Capital Stock 8
Section 2.2 Exchange of Certificates 9
Section 2.3 Dissenters' Rights 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
Section 3.1 Organization 11
Section 3.2 Capitalization 12
Section 3.3 Authorization; Validity of Agreement;
Company Action 14
Section 3.4 Consents and Approvals; No Violations 14
Section 3.5 SEC Reports and Financial Statements 15
Section 3.6 Absence of Certain Changes 16
Section 3.7 No Undisclosed Liabilities 18
Section 3.8 Litigation 18
Section 3.9 Information in Proxy Statement 18
Section 3.10 No Default; Compliance with
Applicable Laws 19
Section 3.11 Intellectual Property 20
Section 3.12 Taxes 20
Section 3.13 Opinion of Financial Adviser 23
Section 3.14 Title to Properties 23
Section 3.15 Employee Benefit Plan 23
Section 3.16 Insurance 24
Section 3.17 No Excess Parachute Payments 24
Section 3.18 Environmental Matters 25
Section 3.19 Labor Matters 27
Section 3.20 Finders and Investment Bankers 27
i
3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER 28
Section 4.1 Organization 28
Section 4.2 Authorization; Validity of Agreement;
Necessary Action 28
Section 4.3 Consents and Approvals; No Violations 29
Section 4.4 Information in Proxy Statement 29
ARTICLE V
COVENANTS 30
Section 5.1 Interim Operations of the Company 30
Section 5.2 Access; Confidentiality 34
Section 5.3 Additional Agreements 34
Section 5.4 Consents and Approvals 34
Section 5.5 No Solicitation 35
Section 5.6 Publicity 37
Section 5.7 Notification of Certain Matters 37
Section 5.8 Indemnification 37
ARTICLE VI
CONDITIONS 38
Section 6.1 Conditions to Each Party's Obligation
to Effect the Merger 38
ARTICLE VII
TERMINATION 39
Section 7.1 Termination 39
Section 7.2 Effect of Termination 41
ARTICLE VIII
MISCELLANEOUS 42
Section 8.1 Fees and Expenses 42
Section 8.2 Amendment and Modification 42
Section 8.3 Nonsurvival of Representations and
Warranties 42
Section 8.4 Notices 42
Section 8.5 Interpretation 43
Section 8.6 Counterparts 44
Section 8.7 Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership 44
Section 8.8 Severability 44
Section 8.9 Governing Law 44
Section 8.10 Assignment 45
Section 8.11 Transfer and Similar Taxes 45
ii
4
ANNEX A A-1
Certain Conditions of the Offer A-1
iii
5
Index of Defined Terms
----------------------
Defined Term Section No.
------------ -----------
Acquisition Proposal ....................... 5.5(a)
Balance Sheet .............................. 3.14
By-laws .................................... 1.4
Certificate of Incorporation ............... 1.4
Certificate of Merger ...................... 1.5
Certificates ............................... 2.2(b)
Closing .................................... 1.6
Closing Date ............................... 1.6
Company .................................... Recitals
Company Agreements ......................... 3.4
Company Benefit Plans ...................... 3.6(vii)
Company Option Plans ....................... 2.4
Company Options ............................ 2.4
Company SEC Documents ...................... 3.5
Current Company SEC Documents .............. 3.6
Dissenting Stockholders .................... 2.1(c)
Effective Time ............................. 1.5
Environmental Law .......................... 3.18(ii)
ERISA ...................................... 3.15
Exchange Act ............................... 1.1
Excess parachute payments .................. 8.11
Financial Advisor .......................... 1.2(a)
GAAP ....................................... 3.5
Governmental Entity ........................ 3.4
Hazardous Substance ........................ 3.18(iii)
Indemnified Party .......................... 5.8
Intellectual Property Rights ............... 3.1l
Liens ...................................... 3.2(b)
Merger ..................................... 1.4
Merger Consideration ....................... 2.1(c)
NYBCL ...................................... 1.2(a)
Offer ...................................... 1.1
Offer Documents ............................ 1.3(a)
Offer Price ................................ 1.1
Offer to Purchase .......................... 1.1
Parent ..................................... Recitals
Paying Agent ............................... 2.2(a)
Permits .................................... 3.10(b)
Plans ...................................... 3.15
Preferred Stock ............................ 3.2
Proxy Statement ............................ 1.7(a)(ii)
Purchaser .................................. Recitals
Rights ..................................... 3.2
Rights Agreement ........................... 3.2
Schedule 14D-1 ............................. 1.3(a)
i
6
Defined Term Section No.
------------ -----------
Schedule 14D-9 ............................. 1.3(a)
SEC ........................................ 1.3(a)
Secretary of State ......................... 1.5
Securities Act ............................. 3.5
Shares ..................................... 1.1
Special Meeting ............................ 1.8(a)(i)
Stockholder Agreements ..................... Recitals
Subsidiary ................................. 3.1
Superior Proposal .......................... 5.5(a)
Surviving Corporation ...................... 1.4
Taxes ...................................... 3.12(b)(i)(A)
Tax Return ................................. 3.12(b)(i)(B)
Termination Fee ............................ 8.1
Transactions ............................... 1.2(a)
Voting Debt ................................ 3.2
ii
7
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of December 15, 1997 (this
"Agreement"), by and among ▇▇▇▇▇▇ Services Corp., a corporation existing under
the laws of Ontario ("Parent"), AES Acquisition Corp., a New York corporation
and an indirect wholly owned subsidiary of Parent (the "Purchaser"), and
Advanced Environmental Systems, Inc., a New York corporation (the "Company").
WHEREAS, the Board of Directors of each of the Purchaser and the Company
has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by
Purchaser upon the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement, and as an
inducement to Parent and the Purchaser to enter into this Agreement, certain
stockholders of the Company have each entered into a Stockholder Agreement,
dated as of the date hereof (collectively, the "Stockholder Agreements"), among
Parent, the Purchaser and the stockholder named therein providing, among other
things, that each such stockholder will vote in favor of the Merger (as defined
in Section 1.5 hereof) and will grant a proxy to Parent for that purpose;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. As promptly as practicable (but in no event later
than five business days after the public announcement of the execution hereof),
the Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) a tender
offer (the "Offer") for any and all of the outstanding shares of Common Stock,
par value $0.0001 per share (the "Shares"), of the
8
Company at a price of U.S.$0.0059 per Share, net to the seller in cash (such
price, or such other price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price") and, subject to the conditions set
forth in Annex A hereto, shall consummate the Offer in accordance with its
terms.
The obligations of the Purchaser to commence the Offer and to accept for
payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not properly withdrawn shall be subject only to the
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement and the conditions set forth in Annex A hereto.
The Purchaser shall not decrease the Offer Price or decrease the number of
Shares sought or amend any other condition of the Offer in any manner adverse
to the holders of the Shares (other than with respect to insignificant changes
or amendments and subject to the penultimate sentence of this Section 1.1)
without the written consent of the Company (such consent to be authorized by
the Board of Directors of the Company (the "Company Board") or a duly
authorized committee thereof); provided, however, that if on the initial
scheduled expiration date of the Offer, which shall be 20 business days after
the date the Offer is commenced, all conditions to the Offer shall not have
been satisfied or waived, the Purchaser may, from time to time, in its sole
discretion, extend the expiration date. In addition, the Offer Price may be
increased, and the Offer may be extended to the extent required by law in
connection with such increase in each case without the consent of the Company.
The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and pay for Shares
validly tendered as soon as it is permitted to do so under applicable law.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Company Board, at a meeting duly called and held, has (i)
unanimously determined that each of this Agreement, the Offer
2
9
and the Merger (as defined in Section 1.5) are fair to and in the best
interests of the stockholders of the Company, (ii) received the opinion of
Neidiger\▇▇▇▇▇▇\▇▇▇▇▇▇, Inc. ("Financial Advisor"), financial advisor to the
Company, to the effect that the Offer and the Merger are fair to the
stockholders of the Company from a financial point of view, (iii) approved this
Agreement and the Stockholder Agreements and the transactions contemplated
hereby and thereby, including the Offer and the Merger (collectively, the
"Transactions"), and such approval constitutes approval of the Offer, this
Agreement, the Stockholder Agreements and the Transactions for purposes of
Section 912 of the New York Business Corporation Law, as amended (the "NYBCL"),
such that Section 912 of the NYBCL will not apply to the Transactions and (iv)
resolved to recommend that the stockholders of the Company accept the Offer,
tender their Shares thereunder to the Purchaser and, if necessary, approve and
adopt this Agreement and the Merger; provided, that such recommendation may be
withdrawn, modified or amended if, in the opinion of the Company Board, only
after receipt of written advice from independent legal counsel, failure to
withdraw, modify or amend such recommendation would result in the Company Board
violating its fiduciary duties to the Company's stockholders under applicable
law. The Company represents that the actions set forth in this Section 1.2(a)
and all other actions it has taken in connection herewith and therewith are
sufficient to render the relevant provisions of such Section 912 of the NYBCL
inapplicable to the Offer, the Merger and the Stockholders Agreements.
(b) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to the Purchaser mailing labels, security position
listings and any available listing or computer file containing the names and
addresses of all recordholders of the Shares as of a recent date, and shall
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of the Shares and their addresses, mailing
labels and lists of security positions) and assistance as the Purchaser or its
agents may reasonably request in communicating the Offer to the record and
beneficial holders of the Shares.
3
10
Section 1.3 SEC Documents.
(a) As soon as practicable on the date the Offer is commenced, Parent and
the Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-1") (the Schedule 14D-1,
together with all amendments and supplements thereto and including the exhibits
thereto, including the Offer to Purchase, being collectively the "Offer
Documents"). Concurrently with the 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 and including
schedules, annexes and the exhibits thereto, the "Schedule 14D-9"), which
shall, subject to the fiduciary duties of the Company Board under applicable
law and to the provisions of this Agreement, contain the recommendation
referred to in clause (iv) of Section 1.2(a) hereof.
(b) Parent and the Purchaser will take all steps necessary to ensure that
the Offer Documents, and the Company will take all steps necessary to ensure
that the Schedule 14D-9, will comply in all material respects with the
provisions of applicable federal securities laws and, on the date filed with
the SEC and on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that Parent and the Purchaser make no
representation with respect to information furnished by the Company for
inclusion in the Offer Documents and the Company makes no representation with
respect to information furnished by Parent or the Purchaser for inclusion in
the Schedule 14D-9. The Company agrees that the information supplied in
writing by the Company for inclusion in the Offer Documents will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent and the Purchaser agree that the information supplied in
writing by the
4
11
Parent or the Purchaser for inclusion in the Schedule 14D-9 will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of Parent and the Purchaser will take all steps necessary to
cause the Offer Documents, and the Company will take all steps necessary to
cause the Schedule 14D-9, to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and the Purchaser, on the one hand,
and the Company, on the other hand, will promptly correct any information
provided by it for use in the Offer Documents and the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material
respect and the Purchaser will take all steps necessary to cause the Offer
Documents, and the Company will take all steps necessary to cause the Schedule
14D-9, as so corrected to be filed with the SEC and to be disseminated to
holders of the Shares, in each case as and to the extent required by applicable
federal securities laws. The Company, on the one hand, and Parent and the
Purchaser on the other hand, and their respective counsel shall be given the
opportunity to review the Offer Documents and the Schedule 14D-9 before they
are filed with the SEC. In addition, each party hereto will provide the other
parties and their counsel in writing with any comments, whether written or
oral, which they may receive from time to time from the SEC or its staff with
respect to the Offer Documents or the Schedule 14D-9 promptly after the receipt
of such comments.
Section 1.4 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.5 hereof), the
Company and the Purchaser shall consummate a merger (the "Merger") pursuant to
which (i) the Purchaser shall be merged with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease, (ii) the
Company shall be the successor or surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of New York, and (iii) the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall
5
12
continue unaffected by the Merger, except as set forth in this Section 1.4.
Pursuant to the Merger, (x) the Certificate of Incorporation of the
Company (the "Certificate of Incorporation"), as in effect immediately prior to
the Effective Time, shall be the initial certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation, and (y) the Restated By-laws of the Company (the
"By-laws"), as in effect immediately prior to the Effective Time, shall be the
initial By-laws of the Surviving Corporation until thereafter amended as
provided by law, by the Certificate of Incorporation or by such By-laws. The
Merger shall have the effects specified in the NYBCL.
The directors and officers of the Purchaser at the Effective Time shall be
the initial directors and officers, respectively, of the Surviving Corporation
until their successors shall have been duly elected or appointed or qualified
or until their earlier death, resignation or removal in accordance with the
Certificate of Incorporation and the By-laws.
Section 1.5 Effective Time. Parent, the Purchaser and the Company will
cause a Certificate of Merger, or, if applicable, a Certificate of Ownership
and Merger (as applicable, the "Certificate of Merger"), to be executed and
filed on the date of the Closing (as defined in Section 1.6) (or on such other
date as Parent and the Company may agree) with the Secretary of State of the
State of New York (the "Secretary of State") as provided in the NYBCL. The
Merger shall become effective on the date on which the Certificate of Merger
has been duly filed with the Secretary of State or at such later time as is
agreed upon by the parties and specified in the Certificate of Merger, and such
effective time is hereinafter referred to as the "Effective Time."
Section 1.6 Closing. The closing of the Merger (the "Closing") shall
take place at 9:00 a.m., local time, 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 VI hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ unless another
6
13
date or place is agreed to in writing by the parties hereto.
Section 1.7 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Special Meeting"), as promptly as practicable
following the acceptance for payment and purchase of Shares by the
Purchaser pursuant to the Offer, for the purpose of considering and
taking action upon the approval of the Merger and the adoption of this
Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use
its best efforts (x) to obtain and furnish the information required to be
included by the SEC in the Proxy Statement(as hereinafter defined) and,
after consultation with Parent, to respond promptly to any comments made
by the SEC with respect to the preliminary proxy or information statement
and cause a definitive proxy or information statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed to
its stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without consultation with Parent
and its counsel and (y) to obtain the necessary approvals of the Merger
and this Agreement by its stockholders; and
(iii) subject to the fiduciary obligations of the Company Board
under applicable law as advised by independent counsel, include in the
Proxy Statement the recommendation of the Company Board that stockholders
of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares then owned
by it, the Purchaser
7
14
or any of its other subsidiaries and affiliates in favor of the approval of the
Merger and the adoption of this Agreement.
Section 1.8 Merger Without Meeting of Stockholders. Notwithstanding
Section 1.7 hereof, in the event that Parent, the Purchaser and any other
subsidiaries of Parent shall acquire or hold in the aggregate at least 90% of
the outstanding shares of each class of capital stock of the Company, pursuant
to the Offer or otherwise, the parties hereto shall, at the request of Parent
and subject to Article VI hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 905 of the NYBCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Shares or any shares of capital stock of the Purchaser:
(a) Purchaser Capital Stock. Each issued and outstanding share of
capital stock of the Purchaser shall be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All Shares
that are owned by the Company or any wholly-owned subsidiary of the Company and
any Shares owned by the Parent or any wholly-owned subsidiary of the Parent
shall be cancelled and retired and shall cease to exist and no consideration
shall be delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other than
Shares to be cancelled in accordance with Section 2.1(b) and any Shares which
are held by stockholders exercising appraisal rights pursuant to Section 910
the NYBCL ("Dissenting Stockholders")) shall be converted into the right to
receive the Offer
8
15
Price, payable to the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly representing such
Share in the manner provided in Section 2.2. All such Shares, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2.
Section 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as agent for the holders of the Shares in
connection with the Merger (the "Paying Agent") to receive in trust the funds
to which holders of the Shares shall become entitled pursuant to Section
2.1(c). Parent shall, from time to time, make available to the Paying Agent
funds in amounts and at times necessary for the payment of the Merger
Consideration as provided herein. All interest earned on such funds shall be
paid to Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates, which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates"), whose Shares were
converted pursuant to Section 2.1 into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Paying Agent and shall be in such
form and have such other provisions as Parent and the Company may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share
formerly represented by such Certificate and the Certificate so surrendered
shall
9
16
forthwith be cancelled. If payment of the Merger Consideration is to be made
to a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
The right of any stockholder to receive the Merger Consideration shall be
subject to and reduced by any applicable withholding obligation.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with respect to such
Shares, except as otherwise provided for herein or by applicable law. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article II.
(d) Termination of Fund; No Liability. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due
surrender of their Certificates, without any interest thereon. Notwithstanding
the foregoing, none of
10
17
Parent, the Surviving Corporation or the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
Section 2.3 Dissenters' Rights. If any Dissenting Stockholder shall be
entitled to be paid the "fair value" of such holder's Shares, as provided in
Section 623 of the NYBCL, the Company shall give the Parent notice thereof and
the Parent shall have the right to participate in all negotiations and
proceedings with respect to any such demands. Neither the Company nor the
Surviving Corporation shall, except with the prior written consent of the
Parent, voluntarily make any payment with respect to, or settle or offer to
settle, any such demand for payment. If any Dissenting Stockholder shall fail
to perfect or shall have effectively withdrawn or lost the right to dissent,
the Shares held by such Dissenting Stockholder shall thereupon be treated as
though such Shares had been converted into the Merger Consideration pursuant to
Section 2.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser that all
of the statements contained in this Article III are true and correct as of the
date of this Agreement (or, if made as of a specified date, as of such date),
and will be true and correct in all material respects as of the Closing Date as
though made on the Closing Date.
Section 3.1 Organization. Each of the Company and its subsidiaries is a
corporation 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 and all necessary governmental
approvals 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, authority, and governmental
approvals would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole. As used in this Agreement,
11
18
a "subsidiary" of any entity shall mean all corporations or other entities in
which such entity owns a majority of the issued and outstanding capital stock
or equity or similar interests. As used in this Agreement, any reference to
any event, change or effect being material or having a material adverse effect
on or with respect to any entity (or group of entities taken as a whole) means
such event, change or effect as is materially adverse to (i) the consolidated
financial condition, businesses, prospects or results of operations of such
entity (or, if used with respect thereto, of such group of entities taken as a
whole) or (ii) the ability of such entity (or group) to consummate the
Transactions. The Company and each of its subsidiaries 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
individually or in the aggregate have a material adverse effect on the Company
and its subsidiaries, taken as a whole. Except as set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, the
Company does not own (i) any equity interest in any corporation or other entity
or (ii) marketable securities where the Company's equity interest in any entity
exceeds five percent of the outstanding equity of such entity on the date
hereof.
Section 3.2 Capitalization. (a) The authorized capital stock of the
Company consists of 2,250,000,000 Shares and 750,000,000 shares of preferred
stock, par value $0.0001 per share (collectively, the Preferred Stock"). As of
November 21, 1997, (i) 531,667,515 Shares are issued and outstanding, (ii) no
Shares are issued and held in the treasury of the Company, (iii) all shares of
Preferred Stock are held of record by Industrial Services Technologies, Inc.,
and (iv) no Shares are issuable pursuant to options granted under any Company
stock option plans. All the outstanding shares of the Company's capital stock
are duly authorized, validly issued, fully paid and non-assessable. There are
no bonds, debentures, notes or other indebtedness having general voting rights
(or convertible into securities having such rights) ("Voting Debt") of the
Company or any of its subsidiaries issued and outstanding.
12
19
Except as set forth above, (i) there are no shares of capital stock of the
Company authorized, issued or outstanding and (ii) there are no existing
options, warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company or any of its subsidiaries,
obligating the Company or any of its subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests, or obligating the Company or any of its subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement, arrangement or commitment and (iii) there are no outstanding
contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Shares, or the capital stock of the
Company, or any subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any subsidiary or any other entity.
(b) The Company owns all of the capital stock of Advanced Energy
Corporation, a Delaware corporation, which in turn owns all of the capital
stock of International Catalyst, Inc. a Nevada corporation ("Incat"). Except
as described in the preceding sentence, the Company does not have any
subsidiaries. All of the outstanding shares of capital stock of each of the
Company's subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid and
nonassessable and are owned as indicated above, free and clear of all liens,
charges, claims or encumbrances ("Liens"), except that the capital stock of
Incat is pledged to FINOVA Capital Corporation as security for a loan.
(c) There are no voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries.
(d) None of the Company or its subsidiaries is required to redeem,
repurchase or otherwise acquire
13
20
shares of capital stock of the Company, or any of its subsidiaries.
Section 3.3 Authorization; Validity of Agreement; Company Action.
(a) The Company 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 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 obtaining the approval of its
stockholders as contemplated by Section 1.7 hereof, 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 the approval of its stockholders as contemplated by
Section 1.7 hereof, and assuming due and valid authorization, execution and
delivery hereof by Parent and the Purchaser, is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms
except as may be limited by (a) bankruptcy, insolvency, reorganization or other
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). The affirmative vote of the holders
66 2/3% of the outstanding Shares, voting together as a single class, are the
only votes of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
(b) The Company Board has duly and validly approved the transactions
contemplated hereby for the purposes of Section 912 of the NYBCL. Accordingly,
the provisions of Section 912 of the NYBCL will not apply to the transactions
contemplated by this Agreement. No other state takeover statute or similar
statute or regulation applies or purports to apply to the Offer, the Merger or
the other transactions contemplated hereby.
Section 3.4 Consents and Approvals; No Violations. No notice, filing or
consent is required under any environmental, health or safety law or
regulation, or under other federal or state laws, other than the filings,
14
21
permits, orders, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act and the NYBCL,
and neither the execution, delivery or performance of this Agreement by the
Company nor the consummation by the Company of the transactions contemplated
hereby nor compliance by the Company with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or the By-laws or similar organizational documents of the Company
or of any of its subsidiaries, (ii) require any notice to, filing with, or
permit, order, authorization, consent or approval of, any court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency (a "Governmental Entity"), (iii) 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, amendment,
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 the Company or any of its subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound (collectively, the "Company Agreements") or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its subsidiaries or any of their properties or assets, excluding from the
foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults
which would not, individually or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
Section 3.5 SEC Reports and Financial Statements. The Company has filed
with the SEC, and has heretofore made available to Parent, true and complete
copies of, all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 1995 under the Securities Act of
1933, as amended (the "Securities Act") or the Exchange Act (collectively, the
"Company SEC Documents"). As of their respective dates or, if amended, as of
the date of the last such amendment, the Company SEC Documents, including,
without limitation, any financial statements or schedules included therein (a)
did not contain any untrue statement of a material fact or omit to state a
material fact required
15
22
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. None of the Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC. The financial statements of the Company included in the Company SEC
Documents have been prepared from, and are in accordance with, the books and
records of the Company and its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
consolidated financial position and the consolidated results of operations and
cash flows (and changes in financial position, if any) of the Company and its
consolidated subsidiaries as of the respective dates and for the respective
periods indicated therein. None of the subsidiaries of the Company is subject
to the informational reporting requirements of Section 13 of the Exchange Act.
Section 3.6 Absence of Certain Changes. Except as disclosed in the
Company SEC Documents filed with the SEC since September 30, 1997 (the "Current
Company SEC Documents"), since September 30, 1997:
(i) the Company and its subsidiaries have conducted their
respective businesses only in the ordinary and usual course;
(ii) neither the Company nor any of its subsidiaries has taken any
of the actions contemplated by Section 5.1 hereof other than in the
ordinary course of business and consistent with past practice;
(iii) there has not been any event, change, effect or development
which, individually or in the aggregate, has had or is, so far as
reasonably can be foreseen, likely to have, a material adverse effect on
the Company and its subsidiaries, taken as a whole;
16
23
(iv) there has not been any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or
property) with respect to any shares of the Company's capital stock;
(v) there has not been any split, combination or reclassification
of any of the Company's capital stock or any issuance or the
authorization of any issuance of any other securities in exchange or in
substitution for shares of the Company's capital stock;
(vi) except as has been previously disclosed in writing to Parent,
there has not been (A) any granting by the Company or any of its
subsidiaries to any executive officer or other key employee of the
Company or any of its subsidiaries of any increase in compensation,
except in the ordinary course of business consistent with prior practice
or as required under employment agreements in effect as of December 31,
1996, (B) any granting by the Company or any of its subsidiaries to any
such executive officer of any increase in severance or termination pay,
except as was required under any employment, severance or termination
agreements in effect as of December 31, 1996 or (C) any entry by the
Company or any of its subsidiaries into any employment, severance or
termination agreement with any such executive officer or key employee;
(vii) there has not been any adoption or amendment in any material
respect by the Company or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any of
its subsidiaries (collectively, "Company Benefit Plans").
(viii) there has not been any change in accounting methods,
principles or practices by the
17
24
Company or any of its subsidiaries materially affecting its assets,
liabilities or business, except insofar as may have been required by a
change in GAAP.
Section 3.7 No Undisclosed Liabilities. Except (a) as disclosed in the
Current Company SEC Documents, including any exhibits to the Current Company
SEC Documents, and (b) for liabilities and obligations (x) incurred in the
ordinary course of business and consistent with past practice or (y) pursuant
to the terms of this Agreement, since January 1, 1997, neither the Company nor
any of its subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have had, or
would be reasonably likely to have, a material adverse effect on the Company
and its subsidiaries, taken as a whole, or would be required by GAAP to be
reflected on a consolidated balance sheet of the Company and its subsidiaries
(including the notes thereto).
Section 3.8 Litigation. Except as disclosed in the Current Company SEC
Documents, there is no suit, claim, action, proceeding, including, without
limitation, arbitration proceedings or alternative dispute resolution
proceedings, or investigation pending before any Governmental Entity or, to the
best knowledge of the Company, threatened against the Company or any of its
subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the Company and its subsidiaries,
taken as a whole. Except as disclosed in the Current Company SEC Documents,
neither the Company nor any of its subsidiaries is subject to any outstanding
order, judgment, writ, injunction, rule or decree of any Governmental Entity or
arbitrator that, individually or in the aggregate, could reasonably be expected
to have a material adverse effect on the Company and its subsidiaries, taken as
a whole.
Section 3.9 Information in Proxy Statement. The Proxy Statement, if
required by Section 1.7 hereof (or any amendment thereof or supplement
thereto), will, at the date mailed to Company stockholders and at the time of
the meeting of Company stockholders to be held in connection with stockholder
approval of the Merger, not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
18
25
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Parent or the Purchaser for inclusion in the
Proxy Statement. The Proxy Statement will comply in all material respects with
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder by the SEC.
Section 3.10 No Default; Compliance with Applicable Laws. (a) The
business of the Company and each of its subsidiaries is not being conducted in
default or violation of any term, condition or provision of (i) its respective
Certificate of Incorporation or By-laws, (ii) any Company Agreement or (iii)
any federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Company or any
of its subsidiaries, excluding from the foregoing clauses (ii) and (iii),
defaults or violations which would not, individually or in the aggregate, have
a material adverse effect on the Company and its subsidiaries, taken as a
whole. As of the date of this Agreement, no investigation or review by any
Governmental Entity or other entity with respect to the Company or any of its
subsidiaries is pending or, to the best knowledge of the Company, threatened,
nor has any Governmental Entity or other entity indicated an intention to
conduct the same.
(b) The Company and each of its subsidiaries possess all certificates,
franchises, licenses, permits, authorizations and approvals issued to or
granted by Governmental Entities (collectively, "Permits") necessary to conduct
their business as such business is currently conducted, except for such
Permits, the lack of possession of which would not reasonably be expected to
have a material adverse effect on the Company and its subsidiaries, taken as a
whole. (i) All such Permits are validly held by the Company or its
subsidiaries, and the Company and each of its subsidiaries have complied in all
respects with all terms and conditions thereof, except for such instances where
the failure to validly hold such Permits or the failure to have complied with
such Permits has not, and is not reasonably expected to have, a material
adverse effect on the Company and its subsidiaries,
19
26
taken as a whole, (ii) none of such Permits will be subject to suspension,
modification, revocation or nonrenewal as a result of the execution and
delivery of this Agreement or the consummation of the Transactions, other than
such Permits, the suspension, modification or nonrenewal of which, in the
aggregate, have not had and would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole and (iii)
neither the Company nor any of its subsidiaries has received any written
warning, notice, notice of violation or probable violation, survey report,
statement of deficiencies, notice of revocation, or other written communication
from or on behalf of any Governmental Entity that remains unresolved or which
has resulted in any restriction on the permissible operations of the Company or
any of its subsidiaries, alleging (A) any violation of any such Permit or of
any law, rule or regulation or (B) that the Company or any of its subsidiaries
requires any Permit required for its business, as such business is currently
conducted, that is not currently held by it, which violation or failure to hold
a Permit would have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
Section 3.11 Intellectual Property. Except as previously disclosed to
Parent in writing, the Company and its subsidiaries own, or are licensed or
otherwise have the rights to use, all patents, trademarks, trade names,
copyrights, technology, trade secrets, know-how and processes (collectively,
"Intellectual Property Rights") material to or necessary for the conduct of
their respective businesses, as presently conducted. Except as previously
disclosed to Parent in writing, no claims are pending by any person against the
Company or any of its subsidiaries as to the use of any Intellectual Property
Rights and, to the Company's best knowledge, the use by the Company or any of
its subsidiaries of all Intellectual Property Rights does not infringe on the
rights of any person. Except as previously disclosed to Parent in writing, to
the Company's best knowledge, no third person is infringing on the Intellectual
Property Rights of the Company or any of its subsidiaries.
Section 3.12 Taxes. (a) The Company and each of its subsidiaries have
timely filed (or have had timely filed on their behalf) all Tax Returns (as
hereinafter defined) required by applicable law to be filed by any of
20
27
them on or prior to or as of the Effective Time of the Merger. All such Tax
Returns are, or will be at the time of filing, true, complete and correct in
all material respects.
(b) The Company and each of its subsidiaries have paid (or have had paid
on their behalf) or, where payment is not yet due, have established in
accordance with GAAP (or have had established on their behalf and for their
sole benefit and recourse) an adequate accrual for the payment of all Taxes due
with respect to any period ending on or prior to the date hereof. The Company
and each of its subsidiaries have complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
and have, within the time and manner prescribed by law, withheld and paid over
to the proper governmental authorities all amounts required to be so withheld
and paid over under applicable laws.
(c) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries. There are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against the Company or any of its subsidiaries, and no power of attorney
granted by either the Company or any of its subsidiaries with respect to any
Taxes is currently in force.
(d) There are no Liens for Taxes upon the assets of the Company or any of
its subsidiaries except Liens for Taxes not yet due.
(e) There are no United States Federal, state, local or foreign audits or
other administrative proceedings or court proceedings presently pending with
regard to any Taxes or Tax Returns of the Company or any of its subsidiaries.
(f) Neither the Company nor any of its subsidiaries is a party to any
agreement or arrangement (written or oral) with third parties providing for the
allocation or sharing of Taxes.
(g) Neither the Company nor any of its subsidiaries has made any change in
accounting methods, received
21
28
a ruling from any taxing authority or signed an agreement with any taxing
authority likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(h) All transactions that could give rise to an understatement of the
Federal income tax liability of the Company or any of its subsidiaries within
the meaning of Section 6662(d) of the Code are adequately disclosed on Tax
Returns in accordance with Section 6662(d)(2)(B) of the Code if there is or was
no substantial authority for the treatment giving rise to such understatement.
(i) The Company is a corporation within the meaning of "7701(a)(3) of the
Code.
(j) For purposes of this Agreement, the following terms shall have the
following meanings:
(A) "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 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 shall include any
interest, fines, penalties or additional amounts attributable to,
or imposed upon, or with respect to, any such amounts.
(B) "Tax Returns" 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, including, without limitation, information
returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for
the extension of time
22
29
in which to file any such report, return, document, declaration or
other information.
Section 3.13 Opinion of Financial Adviser. The Company Board has
received the opinion of Financial Advisor, dated the date of this Agreement,
that, as of such date, the Offer Price and the Merger Consideration are fair
from a financial point of view to the Company's stockholders.
Section 3.14 Title to Properties. The Company and its subsidiaries have
good, valid and marketable title to the properties and assets reflected on the
most recent consolidated balance sheet included in the Current Company SEC
Documents (the "Balance Sheet") (other than properties and assets disposed of
in the ordinary course of business since the date of the Balance Sheet), and
all such properties and assets are free and clear of any Liens, except as
described in the Current Company SEC Documents and the financial statements
included therein and other than Liens for current taxes not yet due and other
Liens or title imperfections that do not have, and are not reasonably likely to
have, a material adverse effect on the Company and its subsidiaries, taken as a
whole.
Section 3.15 Employee Benefit Plan. (a) The Company and each of its
subsidiaries have complied, and currently are in compliance, in all material
respects with the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") the Code and all other applicable
laws with respect to each compensation or benefit plan, agreement, policy,
practice, program or arrangement (whether or not subject to ERISA) maintained
by the Company or any of its subsidiaries for the benefit of any employee,
former employee, independent contractor or director of the Company and its
subsidiaries (including, without limitation, any employment agreements or any
pension, savings, profit-sharing, bonus, medical, insurance, disability,
severance, equity-based or deferred compensation plans) (collectively, the
"Plans"). The Company has provided or made available a current, accurate and
complete copy of each Plan to Parent and, to the extent applicable to the
Plans, (A) copies of any funding instruments, (B) summary plan descriptions (C)
Forms 5500 for the last three years and (D) IRS determination letters.
23
30
(b) No reportable event (within the meaning of Section 4043 of ERISA) or
prohibited transaction (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) has occurred with respect to any Plan that could have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
(c) There are no pending or, to the knowledge of the Company, threatened
actions, claims or lawsuits by any individuals or entities with respect to any
Plan (other than for routine benefit claims) that could have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(d) No payments or benefits (nor acceleration of vesting or
exercisability of any benefits) under any Plan are triggered (in whole or in
part) as a result of the transactions contemplated by this Agreement.
(e) No Plan provides for any stock option that is exercisable into the
stock of any of the subsidiaries of the Company.
Section 3.16 Insurance. The Company maintains, and has maintained,
without interruption, during the past three years, policies or binders of
insurance covering such risks, and events, including personal injury, property
damage and general liability, in amounts the Company reasonably believes
adequate for its business and operations.
Section 3.17 No Excess Parachute Payments. Any amount that could be
received (whether in cash or property or the vesting of property) as a result
of any of the Transactions (whether alone or in combination with a qualifying
termination of employment) by any employee, officer or director of the Company
or any of its affiliates who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or Company
Benefit Plan currently in effect would not be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
24
31
Section 3.18 Environmental Matters. (i) Except as disclosed in the
Current Company SEC Documents or as previously disclosed in writing to Parent,
(A) the Company and each of its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (as hereinafter
defined) and are currently in compliance with all such laws, including, without
limitation, having all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (B) none of the properties currently or formerly owned or operated
by the Company or any of its subsidiaries contains any Hazardous Substance (as
hereinafter defined) in amounts exceeding the levels permitted by applicable
Environmental Laws, (C) neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information from any
Governmental Entity or third party indicating that the Company or any of its
subsidiaries may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of their businesses, including,
without limitation, liability relating to sites not owned or operated by the
Company or any of its subsidiaries, (D) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings, pending or threatened, against the Company or any of its
subsidiaries relating to any violation of or liability under, or alleged
violation of or liability under, any Environmental Law, (E) all reports that
are required to be filed by the Company or any of its subsidiaries concerning
the release of any Hazardous Substance or the threatened or actual violation of
any Environmental Law have been so filed, (F) no Hazardous Substance has been
disposed of, released or transported in violation of or under circumstances
that could create liability under any applicable Environmental Law from any
properties owned by the Company or any of its subsidiaries as a result of any
activity of the Company or any of its subsidiaries during the time such
properties were owned, leased or operated by the Company or any of its
subsidiaries, (G) neither the Company, any of its subsidiaries nor any of their
respective properties are subject to any material liabilities or expenditures
(fixed or contingent) relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or claim asserted or
arising under any Environmental Law, except for violations of the foregoing
clauses (A) through (G) that,
25
32
singly or in the aggregate, would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, and (H)
the Company has provided Parent with each environmental audit, test or analysis
performed within the last three years of any property currently or formerly
owned or operated by the Company or any of its subsidiaries (x) which involves
any condition of environmental impairment which would give rise to a material
adverse effect on the Company and its subsidiaries, taken as a whole and (y) of
which the Company has knowledge.
(ii) As used herein, "Environmental Law" means any United States Federal,
territorial, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any governmental
entity relating to (x) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (y)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances. The term "Environmental Law" includes, without
limitation, (i) the Federal Comprehensive Environmental Response Compensation
and Liability Act of 1980, the Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal Act and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, and the Federal
Occupational Safety and Health Act of 1970, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened
as a result of, the presence of, effects of or exposure to any Hazardous
Substance.
26
33
(iii) As used herein, "Hazardous Substance" means any substance presently
or hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by
any government authority or any Environmental Law including, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated byphenyls.
Section 3.19 Labor Matters. Neither the Company nor any of its
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. There is no unfair labor practice or labor arbitration
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries relating to its business, except for any
such proceeding which would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole. To the knowledge of the executive
officers of the Company, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of its subsidiaries.
Section 3.20 Finders and Investment Bankers. Neither the Company nor any
of its officers or directors has employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Financial Advisor (the
fees of which will be paid by the Company), or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the Transactions, except for
fees payable to Financial Advisor. The Company has provided Parent with a true
and correct copy of the fee letter between the Company and Financial Advisor.
27
34
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company that all of
the statements contained in this Article IV are true and correct as of the date
of this Agreement (or, if made as of a specified date, as of such date), and
will be true and correct in all material respects as of the Closing Date as
though made on the Closing Date.
Section 4.1 Organization. Each of Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of Ontario and New York, respectively, and has all requisite corporate or
other power and authority and all necessary governmental approvals 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, authority, and governmental approvals would not
have a material adverse effect on Parent and its subsidiaries, taken as a
whole. Parent and each of its subsidiaries 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, in the aggregate,
have a material adverse effect on Parent and its subsidiaries, taken as a
whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action. Each
of Parent and the Purchaser has full corporate power and authority to execute
and deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Parent and the Purchaser of this Agreement, and the
consummation of the Merger and of the Transactions, have been duly authorized
by all necessary corporate action. This Agreement has been duly executed and
delivered by each of the Parent and the Purchaser and, assuming due and valid
authorization, execution and delivery hereof by the Company, is a valid and
binding obligation of each of Parent and the Purchaser, as the case may be,
enforceable against each of them in accordance with its respective
28
35
terms except as may be limited by (a) bankruptcy, insolvency, reorganization or
other laws now or hereafter in effect relating to creditors' rights generally
and (b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, state securities or blue
sky laws and the NYBCL, neither the execution, delivery or performance of this
Agreement by Parent or the Purchaser nor the consummation by Parent or the
Purchaser of the Transactions nor compliance by Parent or the Purchaser with
any of the provisions hereof will (i) conflict with or result in any breach of
any provision of the articles of incorporation or by-laws of Parent or the
certificate of incorporation or by-laws of the Purchaser, (ii) require any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity with respect to the business carried on by Parent or its subsidiaries as
of the date hereof, (iii) 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 Parent,
or any of its subsidiaries or the Purchaser is a party or by which any of them
or any of their respective properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of its subsidiaries or any of their properties or assets, excluding
from the foregoing clauses (ii),(iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, have a material
adverse effect on Parent, its subsidiaries and the Purchaser taken as a whole.
Section 4.4 Information in Proxy Statement. None of the information
supplied by Parent or the Purchaser specifically for inclusion or incorporation
by reference in the Proxy Statement, if required by Section 1.7 hereof, will,
at the date mailed to Company stockholders and at the time of the meeting of
Company stockholders
29
36
to be held in connection with Company stockholder approval of the Merger,
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.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants and
agrees that, except (i) as expressly contemplated by this Agreement or (ii) as
agreed in writing by Parent, after the date hereof, and prior to the Effective
Time:
(a) the business of the Company and its subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent therewith,
each of the Company and its subsidiaries shall use its best efforts to preserve
its business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
(b) the Company shall not, directly or indirectly, amend or propose to
amend its Certificate of Incorporation or By-laws or similar organizational
documents;
(c) the Company shall not, and it shall not permit any of its
subsidiaries to: (i)(A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the Company's
capital stock or that of its subsidiaries, other than current or accrued
dividends on the Preferred Stock, or (B) redeem, purchase or otherwise acquire
directly or indirectly any shares of the capital stock of the Company or of its
subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities; (ii) authorize for issuance,
issue, sell, pledge, deliver or agree to commit to issue, sell, pledge or
deliver (whether through the issuance or granting of any options, warrants,
calls, subscriptions, stock appreciation rights or other rights or other
agreements) or otherwise encumber any shares of
30
37
capital stock of any class of the Company or of its subsidiaries or any
securities convertible into or exchangeable for shares of capital stock of any
class of the Company or of its subsidiaries other than Shares issued upon the
exercise of Company Options outstanding on the date hereof in accordance with
the Company Option Plans as in effect on the date hereof; or (iii) split,
combine or reclassify the outstanding capital stock of the Company or of any of
its subsidiaries or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares in the capital stock of the
Company or of any of its subsidiaries;
(d) the Company shall not, and it shall not permit any of its
subsidiaries to, acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, limited liability
company, joint venture, association or other business organization or division
thereof or (ii) any assets, outside of the ordinary course of business, that
individually is in excess of $25,000 or in the aggregate in excess of $50,000;
(e) the Company shall not, and it shall not permit any of its
subsidiaries to, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any assets of the Company or of its
subsidiaries other than (i) sales and dispositions of interests or rights with
respect to property having an aggregate fair market value on the date of this
Agreement of less than $50,000, in each case only if in the ordinary course of
business and consistent with past practice or (ii) encumbrances and Liens that
are incurred in the ordinary course of business and consistent with past
practice;
(f) neither the Company nor any of its subsidiaries shall: (i) grant any
increase in the compensation payable or to become payable by the Company or any
of its subsidiaries to any of its executive officers or key employees or
(ii)(A) adopt any new, or (B) amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing, bonus, incentive compensation, deferred compensation, severance,
profit sharing, stock option, stock purchase, insurance, pension, retirement or
other employee
31
38
benefit plan agreement or arrangement, including without limitation, the
Company Option Plans; or (iii) enter into any employment or severance agreement
with or, except in accordance with the existing written policies of the
Company, grant any severance or termination pay to any officer, director or
employee of the Company or any its subsidiaries;
(g) neither the Company nor any of its subsidiaries shall: (i) modify,
amend or terminate any of its or its subsidiaries' material contracts or waive,
release or assign any material rights or claims, except in the ordinary course
of business and consistent with past practice (ii) enter into any other
agreements, commitments or contracts that are material to the Company and its
subsidiaries taken as a whole, other than in the ordinary course of business
and consistent with past practice, or otherwise make any material change that
is adverse to the Company (including by way of termination) in (A) any existing
agreement, commitment or arrangement that is material to the Company and its
subsidiaries taken as a whole or (B) the conduct of the business or operations
of the Company and its subsidiaries;
(h) neither the Company nor any of its subsidiaries shall: (i) incur or
assume any long-term debt, or except in the ordinary course of business in
amounts consistent with past practice, incur or assume any short-term
indebtedness; (ii) incur or modify any material indebtedness or other
liability; (iii) issue or sell any debt securities or warrants or other rights
to acquire any debt securities of the Company or of any of its subsidiaries;
(iv) enter into any "keep well" or other arrangement to maintain any financial
condition of another person; (v) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, except in the ordinary course of business and
consistent with past practice; (vi) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company); or (vii) enter into any material commitment
or transaction (including, but not limited to, any material capital expenditure
or purchase or lease of assets or real estate other than the purchase of
products for inventory and supplies in the ordinary course of business);
32
39
(i) neither the Company nor any of its subsidiaries shall change any of
the accounting methods used by it unless required by GAAP;
(j) neither the Company nor any of its subsidiaries shall, without the
prior written consent of Parent, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction of
any such claims, liabilities or obligations, in the ordinary course of business
and consistent with past practice, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its consolidated
subsidiaries;
(k) neither the Company nor any of its subsidiaries will take, or agree
to commit to take, any action that would or is reasonably likely to result in
any of the conditions to the Offer set forth in Annex A or any of the
conditions to the Merger set forth in Article VI not being satisfied, or would
make any representation or warranty of the Company contained herein inaccurate
in any respect at, or as of any time prior to, the Effective Time, or that
would materially impair the ability of the Company to consummate the Offer or
the Merger in accordance with the terms hereof or materially delay such
consummation;
(l) neither the Company nor any of its subsidiaries shall make any Tax
election or settle or compromise any Tax liability or refund, except to the
extent already provided in the Current Company SEC Documents;
(m) neither the Company nor any of its subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business and consistent with past practice;
(n) neither the Company nor any of its subsidiaries will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the
33
40
Company or any of its subsidiaries (other than the Merger); and
(o) neither the Company nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Access; Confidentiality. Upon reasonable notice, the Company
shall (and shall cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel, financing sources and other representatives of
Parent, reasonable access, during normal business hours during the period prior
to the Effective Date, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each of its
subsidiaries to) furnish promptly to the Parent (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
Parent may reasonably request.
Section 5.3 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto shall use all reasonable 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, or
to remove any injunctions or other impediments or delays, legal or otherwise,
to consummate and make effective the Merger and the other transactions
contemplated by this Agreement. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of the Company and Parent shall
use all reasonable efforts to take, or cause to be taken, all such necessary
actions.
Section 5.4 Consents and Approvals. Each of the Company, Parent and the
Purchaser will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on it with respect to this
Agreement and the Transactions (which actions shall include, without
limitation, furnishing all information required in connection with approvals of
or filings with any other Governmental Entity) and will
34
41
promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their
subsidiaries in connection with this Agreement and the Transactions. Each of
the Company, Parent and the Purchaser will, and will cause its subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other public or private third party
required to be obtained or made by Parent, the Purchaser, the Company or any of
their subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
Section 5.5 No Solicitation. (a) Neither the Company nor any of its
subsidiaries or affiliates shall (and the Company shall use its best efforts to
cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) concerning any proposal or offer to
acquire all or a substantial part of the business and properties of the Company
or any of its subsidiaries or any capital stock of the Company or any of its
subsidiaries, whether by merger, tender offer, exchange offer, sale of assets,
sale of shares of capital stock or debt securities or similar transactions
involving the Company or any subsidiary, division or operating or principal
business unit of the Company (collectively, an "Acquisition Proposal").
Notwithstanding the foregoing, the Company may furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal (x) if such entity or group has on
an unsolicited basis submitted a bona fide written proposal to the Company
Board relating to any such transaction which the Company Board determines in
good faith represents a superior transaction to the Offer and the Merger and
which is not conditioned upon obtaining additional financing and (y) if, in
35
42
the opinion of the Company Board, only after receipt of advice from independent
legal counsel to the Company, the failure to provide such information or access
or to engage in such discussions or negotiations would cause the Company Board
to violate its fiduciary duties to the Company's stockholders under applicable
law (an Acquisition Proposal which satisfies clauses (x) and (y) being referred
to herein as a "Superior Proposal"). The Company will immediately communicate
to Parent the terms of any proposal, discussion, negotiation or inquiry (and
will disclose any written materials received by the Company in connection with
such proposal, discussion negotiation, or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(b) Except as set forth herein, neither the Company Board nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent or the Purchaser, the approval or
recommendation by the Company Board or any such committee of the Offer, this
Agreement or the Merger, (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal or (iii) enter into any agreement with
respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to
the time of acceptance for payment of Shares in the Offer, the Company Board
may (subject to the terms of this and the following sentence) withdraw or
modify its approval or recommendation of the Offer, this Agreement or the
Merger, approve or recommend a Superior Proposal, or enter into an agreement
with respect to a Superior Proposal, in each case at any time after the second
business day following Parent's receipt of written notice advising Parent that
the Company Board has received a Superior Proposal, specifying the material
terms and conditions of such Superior Proposal and identifying the person
making such Superior Proposal; provided that the Company Board shall have
determined, only after receipt of advice from outside legal counsel to the
Company, that the failure to take such action would cause the Company Board to
violate its fiduciary duties to the Company's stockholders under applicable
law; provided further that the Company shall not enter into an agreement with
respect to a Superior Proposal unless the Company shall have furnished Parent
with written notice not later than noon (New York time) one day in advance of
any date that it intends to enter into such agreement and
36
43
shall have caused its financial and legal advisors to negotiate with Parent to
make such adjustments in the terms and conditions of this Agreement as would
enable the Company to proceed with the transactions contemplated herein on such
adjusted terms. In addition, if the Company proposes to enter into an
agreement with respect to any Acquisition Proposal, it shall concurrently with
entering into such agreement pay, or cause to be paid, to Parent the
Termination Fee (as defined in Section 8.1) subject to the provisions of
Section 8.1.
Section 5.6 Publicity. The initial press release with respect to the
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, so long as this Agreement is in effect, neither
the Company, Parent 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 listing agreement with a national securities exchange or trading market.
Section 5.7 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at or prior
to the Effective Time and (ii) any material failure of the Company, Parent or
the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.8 Indemnification. For six years after the Effective Time,
Parent shall cause the Surviving Corporation (or any successor to the Surviving
Corporation) to indemnify, defend and hold harmless the present officers and
directors of the Company and its subsidiaries (each an "Indemnified Party")
against all losses, claims, damages, liabilities, fees and expenses (including
37
44
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of the Parent or the Surviving
Corporation)) arising out of actions or omissions occurring at or prior to the
Effective Time to the full extent permitted under New York law, subject to the
terms of the Company's Certificate of Incorporation, By-laws and
indemnification agreements, all as in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
action or suit; provided that, in the event any claim or claims are asserted or
made within such six year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims; provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under New York law, the Certificate of Incorporation, the By-Laws or
such agreements, as the case may be, shall be made by independent counsel
mutually acceptable to Parent and the Indemnified Party and; provided further,
that nothing herein shall impair any rights or obligations of any present or
former directors or officers of the Company.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or the Purchaser, as the case may be, to the extent permitted
by applicable law:
(a) Stockholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the stockholders of the Company, if required
by applicable law and the Certificate of Incorporation, in order to consummate
the Merger;
38
45
(b) Statutes; Consents. No law, statute, rule, order, decree or
regulation shall have been enacted or promulgated by any Governmental Entity of
competent jurisdiction which declares this Agreement invalid or unenforceable
in any material respect or which prohibits completion of the Offer or
consummation of the Merger, and all governmental consents, orders and approvals
required for the completion of the Offer or consummation of the Merger and the
other transactions contemplated hereby shall have been obtained and shall be in
effect at the Effective Time;
(c) Injunctions. There shall be no order or injunction of any
Governmental Entity in effect precluding, restraining, enjoining or prohibiting
completion of the Offer or consummation of the Merger; and
(d) Purchase of Shares in Offer. Parent, the Purchaser or their
affiliates shall have purchased Shares pursuant to the Offer.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual written consent of the Parent and the Company.
(b) By either of the Parent or the Company:
(i) if the Offer shall have expired without any Shares being
purchased therein; provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of Parent or the
Purchaser, as the case may be, to purchase the Shares pursuant
39
46
to the Offer on or prior to the date on which the Offer shall have
expired; or
(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 reasonable efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
Transactions and such order, decree, ruling or other action shall have
become final and non-appealable.
(c) By the Company:
(i) if, prior to the purchase of the Shares pursuant to the Offer,
Parent or the Purchaser breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or breaches its representations and warranties in any
material respect; or
(ii) in connection with entering into a definitive agreement in
accordance with Section 5.5(b), provided it has complied with all
provisions thereof, including the notice provisions therein, and that it
makes simultaneous payment of the Termination Fee; or
(iii) if Parent or the Purchaser shall have terminated the Offer
without Parent or the Purchaser, as the case may be, purchasing any
Shares pursuant thereto; provided that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the Company is in
material breach of this Agreement; or
(iv) if Parent, the Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to the fifth business day
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant to
this Section 7.1(c)(iv) if the Company is in material breach of this
Agreement.
40
47
(d) By the Parent or the Purchaser:
(i) if prior to the purchase of the Shares pursuant to the Offer,
the Company Board (A) shall have withdrawn, or modified or changed in a
manner adverse to Parent or the Purchaser, its approval or recommendation
of the Offer, this Agreement or the Merger, or (B) shall have approved or
recommended an Acquisition Proposal, or (C) shall have executed an
agreement in principle (or similar agreement) or definitive agreement
providing for a tender offer or exchange offer for any shares of capital
stock of the Company, or a merger, consolidation or other business
combination with a person or entity other than Parent, the Purchaser or
their affiliates (or the Company Board resolves to do any of the
foregoing); or
(ii) if Parent or the Purchaser shall have terminated the Offer
without Parent or the Purchaser purchasing any Shares thereunder, provided
that Parent or the Purchaser may not terminate this Agreement pursuant to
this Section 7.1(d)(ii) if Parent or the Purchaser has failed to purchase
the Shares in the Offer in violation of the material terms thereof; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, the Purchaser, or any of
their affiliates shall have failed to commence the Offer on or prior to the
fifth business day following the date of the initial public announcement of
the Offer.
Section 7.2 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 7.1, written notice thereof by the
terminating party shall forthwith be given to the other party or parties
specifying 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 Parent, the Company, their respective stockholders and
affiliates, or the respective officers and directors thereof; provided,
however, that nothing
41
48
herein shall relieve any party from liability for fraud or for any material
breach of this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the Transactions shall
be paid by the party incurring such expenses.
Section 8.2 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 stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, 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 Agreement by the
stockholders of the Company, no such amendment, modification or supplement
shall reduce the amount, or change the form, of the Merger Consideration.
Section 8.3 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.
Section 8.4 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such
as Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or the Purchaser, to:
▇▇▇▇▇▇ Services Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇, LCD #1
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
42
49
Attention: ▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
Suite 1820, North Tower
Box ▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Advanced Environmental Systems, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇,
Vice-President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Waldbaum, Corn, ▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.5 Interpretation. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including"
are used in this Agreement they shall be deemed to be followed by the words
"without limitation". As used in this Agreement, the term "affiliate(s)"
shall
43
50
have the meaning set forth in Rule l2b-2 promulgated under the Exchange Act.
Section 8.6 Counterparts. This Agreement may be executed in one or more
counterparts, each 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.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein and therein): (a) constitute
the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.8 hereof, is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 8.8 Severability. Any term or provision of this Agreement that
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term or provision.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflicts of law thereof.
44
51
Section 8.10 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, except that the Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
Section 8.11 Transfer and Similar Taxes. Notwithstanding any other
provision of this Agreement to the contrary, each of the Company's stockholders
shall be responsible for the payment of any sales, use, privilege, transfer,
documentary, gains, stamp, duties, recording and similar Taxes and fees
(including any penalties, interest and additions to such fees), incurred in
connection with such stockholder's sale of Shares to the Purchaser pursuant to
this Agreement and for the accurate filing of all necessary Tax Returns and
other documentation with respect to any transfer Tax.
45
52
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
▇▇▇▇▇▇ SERVICES CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Executive Vice President,
General Counsel and
Corporate Secretary
AES ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
46
53
ANNEX A
-------
Certain Conditions of the Offer. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer at any time in its sole discretion (subject to
the provisions of this Agreement), the Purchaser shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate or amend the Offer as to any Shares
not then paid for, if (i) the Company, the Parent and the Purchaser, as
required, have not obtained all necessary material consents, approvals, orders,
authorizations, registrations, declarations, permits or filings required to be
obtained by it in connection with this Agreement and the transactions
contemplated hereby or (ii) at any time on or after the date of the Merger
Agreement and before the time of payment for any such Shares, any of the
following events shall occur or shall be determined by the Purchaser to have
occurred:
(a) there shall be threatened or pending any suit, action or proceeding by
any Governmental Entity against the Purchaser, Parent, the Company or any
subsidiary of the Company (i) seeking to prohibit or impose any material
limitations on Parent's or the Purchaser's ownership or operation (or that of
any of their respective subsidiaries or affiliates) of all or a material
portion of their or the Company's businesses or assets, or to compel Parent or
the Purchaser or their respective subsidiaries and affiliates to dispose of or
hold separate any material portion of the business or assets of the Company or
Parent and their respective subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or the Purchaser of any Shares under the
Offer, the Merger or pursuant to the Stockholder Agreements, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other Transactions (including the voting
provisions thereunder), or seeking to obtain from the Company, Parent or the
Purchaser any damages that are material in relation to the Company and its
subsidiaries taken as a whole, (iii) seeking
A-1
54
to impose material limitations on the ability of the Purchaser, or render the
Purchaser unable, to accept for payment, pay for or purchase some or all of the
Shares pursuant to the Offer and the Merger, (iv) seeking to impose material
limitations on the ability of the Purchaser or Parent effectively to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by it on all matters properly presented to
the Company's stockholders, or (v) which otherwise is reasonably likely to have
a material adverse affect on the Company and its subsidiaries, taken as a
whole;
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (iv)
of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, The
Toronto Stock Exchange or in the Nasdaq Stock Market, for a period in excess of
24 hours (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges 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 or Canada (whether or not mandatory),
(iii) a commencement of a war directly or indirectly involving the United
States or Canada, (iv) any limitation (whether or not mandatory) by any United
States or Canadian governmental authority on the extension of credit generally
by banks or other financial institutions, (v) a change in general financial,
bank or capital market conditions which materially adversely affects the
ability of financial institutions in the United States or Canada to extend
credit or syndicate loans or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, a material acceleration or
worsening thereof;
(d) (i) the representations and warranties of the Company set forth in
this Agreement shall not be true and correct in any material respect as of the
date of this Agreement and as of consummation of the Offer as though made on or
A-2
55
as of such date, (ii) the Company shall have failed to comply with its
covenants and agreements under this Agreement in all material respects or (iii)
there shall have occurred any events or changes which have had or will have a
material adverse effect on the Company and its subsidiaries taken as a whole;
(e) (i) the Company Board shall have withdrawn, or modified or changed
in a manner adverse to Parent or the Purchaser (including by amendment of the
Schedule 14D-9) its approval or recommendation of the Offer, this Agreement, or
the Merger, or approved or recommended any Acquisition Proposal, (ii) the
Company shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 5.5(b) of this Agreement or (iii) the
Company Board, upon request of the Purchaser, shall fail to reaffirm its
recommendation of the Offer, this Agreement or the Merger;
(f) Parent shall not have acquired all of the outstanding capital stock,
on a fully diluted basis, of Industrial Services Technologies, Inc.; or
(g) this Agreement shall have terminated in accordance with its terms.
which in the sole judgment of Parent or the Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
the Purchaser) giving rise to such condition makes it inadvisable to proceed
with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
A-3