EXHIBIT (d)(1)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February 15,
2000, by and among ▇▇▇▇▇▇▇ Corporation, a Delaware corporation ("Parent"), Alpha
Acquisition I Corp., a Delaware corporation and a subsidiary of Parent (the
"Purchaser"), and American Precision Industries Inc., a Delaware corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser and
the Company have approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, pursuant to this Agreement the Purchaser has agreed to commence a
tender offer (the "Offer") to purchase all of the Company's common stock, par
value $.66-2/3 per share (the "Common Shares") including the associated
preferred share purchase rights (the "Rights") issued pursuant to the Amended
and Restated Rights Agreement, dated as of January 29, 1999, between the Company
and American Securities Transfer & Trust, Inc., as Rights Agent (the "Rights
Agreement") (which Rights together with the Common Shares are hereinafter
referred to as the "Shares"), at a price per Share of $19.25 net to the seller
in cash (the "Offer Price");
WHEREAS, the Board of Directors of the Company (the "Company Board") has,
on the terms and subject to the conditions set forth herein, (i) approved the
Offer and (ii) adopted this Agreement and is recommending that the Company's
stockholders accept the Offer, tender their Shares to the Purchaser and approve
this Agreement;
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have approved the merger of the Purchaser with and into the Company with
the Company as the survivor, as set forth below (the "Merger"), in accordance
with the General Corporation Law of the State of Delaware (the "GCL") and upon
the terms and subject to the conditions set forth in this Agreement, whereby
each of the issued and outstanding Common Shares (including Common Shares issued
upon the conversion of the Series B Seven Percent (7%) Cumulative Convertible
Preferred Stock, par value $1.00 per share (the "Series B Preferred Stock")) not
owned directly or indirectly by Parent, the Purchaser or the Company will be
converted into the right to receive the Offer Price in cash;
WHEREAS, as a condition to and inducement to Parent's and the Purchaser's
willingness to enter into this Agreement, simultaneously with the execution of
this Agreement, certain shareholders of the Company are entering into support
agreements with Parent and the Purchaser (the "Support Agreements"); and
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company agree as follows:
ARTICLE ONE
THE OFFER
SECTION 1.1 The Offer.
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(a) Provided that this Agreement shall not have been terminated in
accordance with Article Eight hereof and none of the events set forth in Annex I
hereto (the "Tender Offer Conditions") shall have occurred, as promptly as
practicable, Parent shall cause the Purchaser to commence (within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended (including the
rules and regulations promulgated thereunder, the "Exchange Act")) an offer to
purchase all outstanding Shares at the Offer Price, shall, after affording the
Company a reasonable opportunity to review and comment thereon, file Schedule TO
and all other necessary documents with the Securities and Exchange Commission
(the "SEC") and make all deliveries, mailings and telephonic notices required by
Rule 14d-3 under the Exchange Act, in each case in connection with the Offer
(the "Offer Documents") and shall use reasonable efforts to consummate the
Offer, subject to the terms and conditions thereof. The obligation of the
Purchaser to accept for payment or pay for any Shares tendered pursuant to the
Offer will be subject only to the satisfaction of the conditions set forth in
Annex I hereto.
(b) Without the prior written consent of the Company, the Purchaser shall
not decrease the Offer Price or change the form of consideration payable in the
Offer, decrease the number of Shares sought to be purchased in the Offer, impose
additional conditions to the Offer or amend any other term of the Offer in any
manner adverse to the holders of Common Shares. The Offer shall remain open
until the date that is 20 business days (as such term is defined in Rule
14d-1(c)(6) under the Exchange Act) after the commencement of the Offer (the
"Expiration Date"), unless the Purchaser shall have extended the period of time
for which the Offer is open pursuant to, and in accordance with, the two
succeeding sentences or as may be required by applicable law, in which event the
term "Expiration Date" shall mean the latest time and date as the Offer, as so
extended, may expire; provided, however, that the Purchaser may provide a
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subsequent offering period after the Expiration Date, in accordance with Rule
14d-11 under the Exchange Act. If at any Expiration Date, any of the Tender
Offer Conditions are not satisfied or waived by the Purchaser, the Purchaser may
extend the Offer from time to time. Subject to the terms of the Offer and this
Agreement and the satisfaction of all the Tender Offer Conditions as of any
Expiration Date, the Purchaser will accept for payment and pay for all Shares
validly tendered and not validly withdrawn pursuant to the Offer as soon as
practicable after such expiration date of the Offer; provided that, if all of
the Tender Offer Conditions are satisfied and more than 70% but less than 90% of
the outstanding Common Shares on a fully diluted basis (excluding Options (as
defined herein) which are not exercisable for 30 days) have been validly
tendered and not withdrawn in the Offer, the Purchaser shall have the right, in
its sole discretion, to extend
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the Offer from time to time for up to a maximum of ten additional business days
in the aggregate for all such extensions. Without the prior written consent of
the Company, the Purchaser shall not accept for payment or pay for any Shares in
the Offer if, as a result, Purchaser would acquire less than the number of
Shares necessary to satisfy the Minimum Condition (as defined in Annex I
hereto).
(c) Parent and the Purchaser represent that the Offer Documents will comply
in all material respects with the provisions of applicable federal securities
laws and, on the date filed with the SEC and on the date first published, sent
or given to the Company's 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 made therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by Parent or the Purchaser with respect to information
supplied by the Company in writing for inclusion in the Offer Documents. Each of
Parent and the Purchaser, on the one hand, and the Company, on the other hand,
agrees promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and the Purchaser further agrees to take all steps
necessary to cause the Offer Documents as so corrected to be filed with the SEC
and to be disseminated to stockholders of the Company, in each case, as and to
the extent required by applicable federal securities laws.
(d) The Company acknowledges that the Offer may also include an offer for
the Series B Preferred Stock; in such event, the terms "Shares" and "Offer" will
also include, as the context requires, the Series B Preferred Stock.
SECTION 1.2 Company Actions.
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(a) The Company shall, after affording Parent a reasonable opportunity to
review and comment thereon, file with the SEC and mail to the holders of Common
Shares, as promptly as practicable on the date of the filing by Parent and the
Purchaser of the Offer Documents, a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") reflecting the recommendation of the Company Board that
holders of Shares tender their Shares pursuant to the Offer and shall
disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the
Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby
represents, that the Company Board, at a meeting duly called and held at which a
quorum was present throughout, has (i) determined by unanimous vote of all of
its directors in attendance that each of the transactions contemplated hereby,
including each of the Offer and the Merger, is fair to and in the best interests
of the Company and its stockholders, (ii) approved the Offer and adopted this
Agreement in accordance with the GCL, (iii) recommended acceptance of the Offer
and approval of this Agreement by the Company's stockholders (if such approval
is required by applicable law), and (iv) taken all other action necessary to
render Section 203 of the GCL and the Rights inapplicable to the Offer and the
Merger; provided, however, that such recommendation and approval may be
withdrawn, modified or amended to the extent that the Company Board determines
in good faith, after consultation with its outside legal counsel, that failure
to take such action would reasonably be expected to result in a breach of the
Company Board's fiduciary obligations under applicable law. The
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Company further represents that, prior to the execution hereof, McDonald
Investments Inc. Company ("McDonald"), has delivered to the Company Board its
written opinion that, as of February 15, 2000, the consideration to be received
by the holders of Common Shares (other than Parent or any of its affiliates)
pursuant to the Offer and the Merger is fair to the Company's stockholders from
a financial point of view. The Company hereby consents to the inclusion in the
Offer Documents of the recommendations of the Company Board described in this
Section 1.2(a).
(b) The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's 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 made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or the Purchaser in writing for inclusion in the Schedule 14D-9. Each of
the Company, on the one hand, and Parent and the Purchaser, on the other hand,
agree promptly to correct any information provided by either of them for use in
the Schedule 14D-9 if and to the extent that it shall have become false or
misleading, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to the holders of Shares, in each case, as and to the extent
required by applicable federal securities law.
(c) In connection with the Offer, the Company will promptly furnish the
Purchaser with mailing labels, security position listings, any available
non-objecting beneficial owner lists and any available listing or computer list
containing the names and addresses of the record holders of the Common Shares as
of the most recent practicable date and shall furnish the Purchaser with such
additional available information (including, but not limited to, updated lists
of holders of Common Shares and their addresses, mailing labels and lists of
security positions and non-objecting beneficial owner lists) and such other
assistance as the Purchaser or its agents may reasonably request in
communicating the Offer to the Company's record and beneficial stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, the Purchaser and their affiliates,
associates, agents and advisors, shall keep such information confidential and
use the information contained in any such labels, listings and files only in
connection with the Offer and the Merger and, should the Offer terminate or if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
SECTION 1.3 Directors.
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(a) Subject to compliance with applicable law, promptly upon the payment by
the Purchaser for Shares pursuant to the Offer representing at least such number
of Shares as shall satisfy the Minimum Condition, and from time to time
thereafter, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of the total number of directors on the Company Board (determined after
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giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Common Shares beneficially owned by
Parent or its affiliates bears to the total number of Common Shares then
outstanding, and the Company shall, upon request of Parent, promptly take all
actions necessary to cause Parent's designees to be so elected, including, if
necessary, seeking the resignations of one or more existing directors; provided,
however, that prior to the Effective Time (as defined in Section 2.2), the
Company Board shall always have at least two members who are neither officers,
directors or designees of the Purchaser or any of its affiliates ("Purchaser
Insiders"). If the number of directors who are not Purchaser Insiders is reduced
below two prior to the Effective Time, the remaining director who is not a
Purchaser Insider shall be entitled to designate a person to fill such vacancy
who is not a Purchaser Insider and who shall be a director not deemed to be a
Purchaser Insider for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder.
The Company shall promptly take all actions required pursuant to such Section
and Rule in order to fulfill its obligations under this Section 1.3 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under such Section and Rule in order
to fulfill its obligations under this Section 1.3. Parent will supply to the
Company any information with respect to itself and its officers, directors and
affiliates required by such Section and Rule.
(c) Following the election or appointment of Parent's designees pursuant to
this Section 1.3 and prior to the Effective Time, any amendment or termination
of this Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or the
Purchaser or waiver of any of the Company's rights hereunder, will require the
concurrence of a majority of the directors of the Company then in office who are
not Purchaser Insiders (or in the case where there are two or fewer directors
who are not Purchaser Insiders, the concurrence of one director who is not a
Purchaser Insider) if such amendment, termination, extension or waiver would be
reasonably likely to have an adverse effect on the minority stockholders of the
Company.
ARTICLE TWO
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the satisfaction or
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waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the GCL, at the Effective Time the Purchaser
shall be merged with and into the Company. Following the Merger, the separate
corporate existence of the Purchaser shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation").
SECTION 2.2 Effective Time. As soon as practicable after the satisfaction
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or waiver of the conditions set forth in Sections 7.1(a) and 7.1(b), but subject
to Sections 7.1(c) and 7.1(d), the Company shall execute, in the manner required
by the GCL, and deliver to the Secre-
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tary of State of the State of Delaware a duly executed and verified certificate
of merger, and the parties shall take such other and further actions as may be
required by law to make the Merger effective. The time the Merger becomes
effective in accordance with applicable law is referred to herein as the
"Effective Time."
SECTION 2.3 Effects of the Merger. The Merger shall have the effects set
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forth in the GCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and the Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and the
Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.4 Certificate of Incorporation and By-Laws of the Surviving
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Corporation.
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(a) The Certificate of Incorporation of the Purchaser, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and hereof and applicable law.
(b) The By-Laws of the Purchaser in effect at the Effective Time shall be
the By-Laws of the Surviving Corporation until amended, subject to the
provisions of Section 6.6 of this Agreement, in accordance with the provisions
thereof and applicable law.
SECTION 2.5 Directors. Subject to applicable law, the directors of the
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Purchaser immediately prior to the Effective Time shall be the initial directors
of the Surviving Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 2.6 Officers. The individuals specified by Parent prior to the
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Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
SECTION 2.7 Conversion of Common Shares. At the Effective Time, by virtue
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of the Merger and without any action on the part of the holders thereof, each
Common Share issued and outstanding immediately prior to the Effective Time
(other than (i) any Common Shares held by Parent, the Purchaser, any wholly
owned subsidiary of Parent or the Purchaser, in the treasury of the Company or
by any wholly owned subsidiary of the Company, which Common Shares, by virtue of
the Merger and without any action on the part of the holder thereof, shall be
cancelled and retired and shall cease to exist with no payment being made with
respect thereto and (ii) Dissenting Shares (as defined in Section 3.1)), shall
be cancelled and retired and shall be converted into the right to receive $19.25
in cash (the "Merger Price"), payable to the holder thereof, without interest
thereon, upon surrender of the certificate formerly representing such Common
Share.
SECTION 2.8 Conversion of Purchaser Common Stock. The Purchaser has
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outstanding 10 shares of common stock, par value $.01 per share, all of which
are entitled to vote
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with respect to approval of this Agreement. At the Effective Time, each share of
common stock of the Purchaser issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and become one validly issued, fully
paid and non-assessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
SECTION 2.9 Options; Stock Plans. Prior to the Effective Time, the Company
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Board (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options or similar rights (the "Options") heretofore granted under any stock
option or similar plan of the Company (the "Stock Plans") and the Warrants (as
defined below), without any payment therefor except as otherwise provided in
this Section 2.9. Immediately prior to the Effective Time, the Company shall
accelerate the vesting of all Options which are listed on Section 4.2 of the
Company Disclosure Schedule and each then vested Option and each Warrant shall
no longer be exercisable but shall entitle each holder thereof, in cancellation
and settlement therefor, to a payment in cash by the Company (subject to any
applicable withholding taxes), at the Effective Time, equal to the product of
(i) the total number of Common Shares subject to such vested Option or Warrant
and (ii) the excess, if any, of the Merger Price over the exercise price per
Common Share subject to such vested Option or Warrant (such amounts payable
hereunder being referred to as the "Cash Payment"). All other Stock Plans and
any other plan, program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the Company or any
subsidiary shall terminate as of the Effective Time. The Company will use its
reasonable best efforts to obtain all necessary consents to ensure that after
the Effective Time, holders of Options and Warrants will have no rights other
than the rights of the holders of vested Options and Warrants to receive the
Cash Payment in cancellation and settlement thereof.
SECTION 2.10 Stockholders' Meeting.
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(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with applicable
law:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as practicable following
the acceptance for payment of and payment for Common Shares by the
Purchaser pursuant to the Offer for the purpose of considering and taking
action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to this Agreement, and use its reasonable efforts (x) to obtain
and furnish the information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its stockholders and (y) to obtain the
necessary approvals of the Merger and this Agreement by its stockholders;
and
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(iii) subject to the fiduciary obligations of the Company Board under
applicable law as provided in Section 1.2(a), include in the Proxy
Statement the recommendation of the Company Board that stockholders of the
Company vote in favor of the approval of this Agreement.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Common Shares then owned by it, the Purchaser or any of its other subsidiaries
in favor of the approval of the Plan of Merger and of this Agreement.
SECTION 2.11 Merger Without Meeting of Stockholders. Notwithstanding
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Section 2.10, in the event that Parent, the Purchaser or any other subsidiary of
Parent shall acquire at least 90% of the outstanding Common Shares pursuant to
the Offer or otherwise, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Common Shares by
the Purchaser pursuant to the Offer without a meeting of stockholders of the
Company, in accordance with Section 253 of the GCL.
ARTICLE THREE
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.1 Dissenting Shares. Notwithstanding Section 2.7, Common Shares
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outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Common Shares in accordance with the GCL
("Dissenting Shares") shall not be converted into a right to receive the Merger
Price, unless such holder fails to perfect or withdraws or otherwise loses his
right to appraisal. If after the Effective Time such holder fails to perfect or
withdraws or loses his right to appraisal, such Common Shares shall be treated
as if they had been converted as of the Effective Time into a right to receive
the Merger Price. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Common Shares, and Parent shall have
the right to participate in and to control all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands.
SECTION 3.2 Payment for Common Shares.
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(a) From and after the Effective Time, such bank or trust company as shall
be designated by Parent and reasonably acceptable to the Company shall act as
paying agent (the "Paying Agent") in effecting the payment of the Merger Price
in respect of certificates (the "Certificates") that, prior to the Effective
Time, represented Common Shares entitled to payment of the Merger Price pursuant
to Section 2.7. Promptly following the Effective Time, Parent or the Purchaser
shall deposit, or cause to be deposited, with the Paying Agent the aggregate
Merger Price to which holders of Common Shares shall be entitled at the
Effective Time pursuant to Section 2.7.
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(b) Promptly after the Effective Time, Parent shall cause the Paying Agent
to mail to each record holder of Certificates that immediately prior to the
Effective Time represented Common Shares a form of letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent, and instructions for use in surrendering such Certificates and
receiving the Merger Price in respect thereof. Upon the surrender of each such
Certificate, the Paying Agent shall pay the holder of such Certificate the
Merger Price multiplied by the number of Common Shares formerly represented by
such Certificate, in consideration therefor, and such Certificate shall
forthwith be cancelled. Until so surrendered, each such Certificate (other than
Certificates representing Common Shares held by Parent or the Purchaser, any
wholly owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company or Dissenting Shares)
shall represent solely the right to receive the aggregate Merger Price relating
thereto. No interest or dividends shall be paid or accrued on the Merger Price.
If the Merger Price (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate formerly representing Common
Shares surrendered therefor is registered, it shall be a condition to such right
to receive such Merger Price that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Common Shares shall pay to the Paying Agent any
transfer or other similar taxes required by reason of the payment of the Merger
Price to a person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable.
(c) Promptly following the date which is 180 days after the Effective Time,
the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Common Share
may surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price relating thereto, without any
interest thereon.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Common Shares are presented to the
Surviving Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Merger Price relating
thereto, as provided in this Article Three.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser as follows:
SECTION 4.1 Organization and Qualification; Subsidiaries. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of
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Delaware. Each of the Company's subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Company and each of its subsidiaries has the requisite
corporate power and authority to own, operate or lease its properties and to
carry on its business as it is now being conducted, and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction in which
the nature of its business or the properties owned, operated or leased by it
makes such qualification, licensing or good standing necessary, except where the
failure to have such power or authority, or the failure to be so qualified,
licensed or in good standing, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company. The
term "Material Adverse Effect on the Company," as used in this Agreement, means
any change in or effect on the business, assets, liabilities, condition
(financial or otherwise), results of operations or prospects of the Company or
any of its subsidiaries that would reasonably be expected to be materially
adverse to the Company and its subsidiaries taken as a whole. The Company has
heretofore provided or made available to Parent and the Purchaser a complete and
correct copy of the certificate of incorporation and the by-laws or comparable
organizational documents, each as amended to the date hereof, of the Company and
each of its subsidiaries and has provided a complete and correct copy of the
Rights Agreement as amended to the date hereof.
SECTION 4.2 Capitalization; Subsidiaries. The authorized capital stock of
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the Company consists of 30,000,000 Common Shares and 1,270,000 shares of
preferred stock. The Company's preferred stock consists of (i) 20,000 preferred
shares having a par value of $50.00 per share (the "$50.00 par value Preferred
Stock") and (ii) 1,250,000 shares of Series B Preferred Stock (with the $50.00
par value Preferred Stock, the "Preferred Stock"). As of the close of business
on February 14, 2000, 6,889,322 Common Shares were issued and outstanding, all
of which are entitled to vote on this Agreement, and 1,001,562 Common Shares
were held in treasury. The Company has (i) no shares of $50.00 par value
Preferred Stock and (ii) 1,236,337 shares of Series B Preferred Stock issued and
outstanding. As of February 14, 2000, there were 1,725,817.9375 Common Shares
reserved for issuance pursuant to outstanding Options and rights granted under
the Stock Plans, 50,000 Common Shares reserved for issuance pursuant to a
warrant held by Patricof & Co. and 9,231 Common Shares reserved for issuance
under warrants held by Decision Processes International Inc. (collectively, the
"Warrants.") Section 4.2 of the Disclosure Schedule delivered to Parent by the
Company prior to the date hereof (the "Company Disclosure Schedule") sets forth
the holders of all outstanding Options and the Warrants and the number, exercise
prices and expiration dates of each grant to such holders. Since January 1,
1999, the Company has not issued any shares of capital stock except pursuant to
the exercise of Options outstanding as of such date. All the outstanding Common
Shares are, and all Common Shares which may be issued pursuant to the exercise
of outstanding Options and Warrants will be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
nonassessable and are not subject to, nor were they issued in violation of, any
preemptive rights. There are no bonds, debentures, notes or other indebtedness
having general voting rights (or convertible into securities having such rights)
("Voting Debt") of the Company or any of its subsidiaries issued and
outstanding. Except as set forth in this Section 4.2, and except for the Rights
and the Series B Preferred Stock, there are no existing options, warrants,
calls, subscriptions or other rights, agreements, arrangements or commitments of
any character to which the Company or any of its subsidiaries is a party or by
which any of them is bound, obli-
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gating 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. Except as contemplated by this Agreement or the
Rights Agreement and except for the Company's obligations in respect of the
Options under the Stock Plans and the Warrants, there are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Common Shares or the capital stock of the
Company or any of its subsidiaries. Each of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and, except as set forth in Section 4.2 of the
Company Disclosure Schedule, such shares of the Company's subsidiaries are owned
by the Company or by another subsidiary of the Company or by a Director as
qualifying shares (all of which are owned beneficially by the Company) in each
case free and clear of any lien, claim, option, charge, security interest,
limitation, encumbrance and restriction of any kind (any of the foregoing being
a "Lien"). Set forth in Section 4.2 of the Company Disclosure Schedule is a
complete and correct list of each subsidiary (direct or indirect) of the Company
and each entity in which the Company owns, directly or indirectly, less than a
50% equity interest.
SECTION 4.3 Authority Relative to this Agreement and Related Matters. The
--------------------------------------------------------
Company has all necessary corporate power and authority to execute and deliver
this Agreement and, except for any required approval by the Company's
stockholders in connection with consummation of the Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Company Board and no other corporate proceedings on the part of the Company are
necessary to authorize or approve this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of this Agreement by the affirmative vote of the holders of a majority
of the then outstanding Common Shares entitled to vote thereon, to the extent
required by applicable law). This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due and valid authorization,
execution and delivery of this Agreement by Parent and the Purchaser,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
SECTION 4.4 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming (i) the filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and any foreign or
supranational antitrust laws are made and the waiting periods thereunder have
been terminated or have expired, (ii) the requirements of the Exchange Act and
any applicable state securities, "blue sky" or takeover law are met, (iii) the
filing of the certificate of merger and other appropriate merger documents, if
any, as required by the GCL, is made and (iv) approval of this agreement by the
holders of a majority of the Common Shares, if required by the GCL, is received,
none of the execution and delivery of this Agreement by the Company, the
consummation by the Company of the transac-
-11-
tions contemplated hereby or compliance by the Company with any of the
provisions hereof will (i) conflict with or violate the Certificate of
Incorporation or By-Laws of the Company or the comparable organizational
documents of any of its subsidiaries, (ii) except as disclosed on Section 4.4(a)
of the Company Disclosure Schedule, result in a breach or violation of, a
default under or the triggering of any payment or other material obligations
pursuant to, any of the Company's existing Employee Benefit Arrangements (as
hereinafter defined) or any grant or award made under any of the foregoing,
(iii) except as disclosed on Section 4.4(a) of the Company Disclosure Schedule,
conflict with or violate in any material respect any statute, ordinance, rule,
regulation, order, judgment, decree, permit or license applicable to the Company
or any of its subsidiaries, or by which any of them or any of their respective
properties or assets may be bound or affected, or (iv) except as disclosed on
Section 4.4(a) of the Company Disclosure Schedule, result in a violation or
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in any loss
of any benefit, or the creation of any Lien on any of the properties or assets
of the Company or any of its subsidiaries (any of the foregoing referred to in
clause (ii), (iii) or this clause (iv) being a "Violation") pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
any of their respective properties may be bound or affected, other than, in the
case of clause (iii) or (iv) above, any such Violations that, individually or in
the aggregate, would not (A) reasonably be expected to have a Material Adverse
Effect on the Company, (B) impair the ability of the Company to perform its
obligations under this Agreement or (C) prevent or materially delay consummation
of any transactions contemplated by this Agreement.
(b) None of the execution and delivery of this Agreement by the Company,
the consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof will require any
consent, waiver, approval, authorization or permit of, or registration or filing
with or notification to (any of the foregoing being a "Consent"), any government
or subdivision thereof, domestic, foreign or supranational or any
administrative, governmental or regulatory authority, agency, commission,
tribunal or body, domestic, foreign or supranational (a "Governmental Entity"),
except for (i) compliance with any applicable requirements of the Exchange Act,
(ii) the filing of the certificate of merger pursuant to the GCL, (iii)
compliance with the HSR Act and any requirements of any foreign or supranational
antitrust laws, and (iv) such filings, authorizations, orders and approvals as
to which failure to obtain or make would not (x) reasonably be expected to have
a Material Adverse Effect on the Company or (y) prevent or materially delay the
consummation of any of the transactions contemplated by this Agreement.
SECTION 4.5 SEC Reports and Financial Statements.
------------------------------------
(a) The Company has filed with the SEC all forms, reports, schedules,
registration statements and definitive proxy statements required to be filed by
the Company with the SEC since January 1, 1997 (as they have been amended since
the time of their filing, and including any documents filed as exhibits thereto,
collectively, the "SEC Reports") and has hereto-
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fore made available to Parent complete and correct copies of all such forms,
reports, schedules, registration statements, and proxy statements. As of their
respective dates, the SEC Reports (including but not limited to any financial
statements or schedules included or incorporated by reference therein) complied
in all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the SEC promulgated thereunder applicable, as the case may be, to
such SEC Reports, and none of the SEC Reports contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(b) The consolidated balance sheets as of December 31, 1998 and 1997 and
the consolidated statements of income, common stockholders' equity and cash
flows for each of the three fiscal years in the period ended December 31, 1998
(including the related notes and schedules thereto) of the Company contained in
the Company's Form 10-K for the fiscal year ended December 31, 1998 (the "1998
Financial Statements") present fairly the consolidated financial position and
the consolidated results of operations and cash flows of the Company and its
consolidated subsidiaries as of the dates or for the periods presented therein
and were prepared in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved except as
otherwise noted therein, including the related notes.
(c) The consolidated balance sheet as of December 31, 1999 and the
consolidated statement of income, common stockholders' equity and cash flows for
the year then ended (including the related notes and schedules thereto) of the
Company (the "1999 Financial Statements"), will present fairly the consolidated
financial position and the consolidated results of operations and cash flows of
the Company and its consolidated subsidiaries as of December 31, 1999 and for
the year then ended, and will be prepared in accordance with GAAP consistently
applied with the financial statements of the Company included in the SEC
Reports. The 1999 Financial Statements will be consistent with the earnings
release of the Company for the year ended December 31, 1999, a copy of which has
been provided to Parent.
(d) Except as reflected, reserved against or otherwise disclosed in the
1998 Financial Statements or as set forth in Section 4.5(d) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries have any
liabilities or obligations (absolute, accrued, fixed, contingent or otherwise)
other than liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1998 which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(e) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications which have not yet been filed with the
SEC to agreements, documents or other instruments which previously had been
filed by the Company with the SEC pursuant to the Securities Act and the rules
and regulations promulgated thereunder or the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 4.6 Environmental Matters.
---------------------
-13-
Except as may be set forth in Section 4.6 of the Company Disclosure
Schedule:
(a) The business and operations of the Company and its subsidiaries comply
in all material respects with all applicable Environmental Laws. The Company and
its subsidiaries have obtained all material Governmental Permits relating to
Environmental Laws necessary for the operation of their businesses; all such
material Governmental Permits are in full force and effect and the Company and
its subsidiaries are in compliance in all material respects with such permits.
Neither the Company nor any of its subsidiaries has received notice of, or, to
the best knowledge of the Company, is subject to, any ongoing or currently
applicable investigation by, order from or claim by any person (including
without limitation any Governmental Entity or prior owner or operator of any of
the Company Property) respecting (i) any Environmental Law, (ii) any Remedial
Action or (iii) any claim arising from the Release or threatened Release of a
Contaminant into the environment. Neither the Company nor any of its
subsidiaries is subject to any pending judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a violation of or
liability under any Environmental Law.
(b) Neither the Company nor any of its subsidiaries has (i) reported a
Release of a hazardous substance pursuant to Section 103(a) of CERCLA, or any
state equivalent; (ii) filed a notice pursuant to Section 103(c) of CERCLA; or
(iii) filed any notice under any applicable Environmental Law reporting a
violation of any applicable Environmental Law. There is not now with respect to
the operations of the Company or any of its subsidiaries, nor to the best
knowledge of the Company has there ever been, on or in any Company Property: (A)
any Release, (B) any treatment, recycling, disposal or storage, other than short
term storage prior to removal by a licensed transporter for off-site disposal,
of any hazardous waste, as that term is defined under RCRA or any state
equivalent, or (C) any underground storage tank or surface impoundment or
landfill or waste pile, except for such events which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
(c) To the best knowledge of the Company, there is not now on or in any
Company Property any polychlorinated biphenyls (PCB) used in the Company's
operations in pigments, hydraulic oils, electrical transformers or other
equipment.
(d) To the best knowledge of the Company, any asbestos-containing material
or presumed asbestos-containing material which is on or part of any Company
Property presently owned, leased or operated by the Company or any of its
subsidiaries, as currently configured and operated, is in good repair according
to the current standards and practices governing such material, and its presence
or condition does not violate any currently applicable Environmental Law. None
of the products manufactured, distributed or sold by the Company or any of its
subsidiaries contained asbestos or asbestos-containing material.
(e) For purposes of this Section:
(i) "Company Property" means any real or personal property, plant,
building, facility, structure, underground storage tank, equipment or unit,
or other asset now or, to the Company's knowledge, previously owned, leased
or operated primarily by the Company or any of its present or, to the
Company's knowledge, past subsidiaries.
-14-
(ii) "CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and any regulations promulgated
thereunder.
(iii) "Contaminant" means any waste, pollutant, hazardous or toxic
substance or waste, petroleum, petroleum-based substance or waste, special
waste, hazardous material or any constituent of any such substance, waste
or material.
(iv) "Environmental Law" means all foreign, federal, state and local
laws or regulations relating to or addressing the environment, health or
safety, including but not limited to CERCLA, OSHA and RCRA and any foreign
or state equivalent thereof.
(v) "Governmental Permits" means any permits, licenses, certificates,
orders, consents, authorizations, franchises and other approvals from, or
required by, any Governmental Entity that are used by, or are necessary to
own and to operate, the business of the Company and its subsidiaries as
currently configured and operated, together with any applications for the
issuance, renewal, modification or extension thereof and all supporting
information and analyses.
(vi) "OSHA" means the Occupational Safety and Health Act, as amended,
and any regulations promulgated thereunder.
(vii) "RCRA" means the Resource Conservation and Recovery Act, as
amended, and any regulations promulgated thereunder.
(viii) "Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration
of a Contaminant into the environment or into or out of any Company
Property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater or Company Property.
SECTION 4.7 Compliance with Applicable Laws. Except with respect to
-------------------------------
Environmental Laws which are covered in Section 4.6, the Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities (the "Company Permits") material to the
Company and required for them to own their assets and conduct their business.
The Company and its subsidiaries are in compliance in all material respects with
the terms of the Company Permits. Except with respect to Environmental Laws
which are covered in Section 4.6, the business operations of the Company and its
subsidiaries have been conducted in compliance in all respects material to the
Company with all laws, ordinances and regulations of any Governmental Entity.
SECTION 4.8 Change of Control. Except as set forth on Section 4.4(a) or
-----------------
Section 4.8 of the Company Disclosure Schedules, the transactions contemplated
by this Agreement will not constitute a "change of control" under, require the
consent from or the giving of notice to a third party pursuant to, permit a
third party to terminate or accelerate vesting or repurchase rights or create
any other detriment under the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, lease, contract, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which any of them or any of their
-15-
properties or assets may be bound. Section 4.8 of the Company Disclosure
Schedule sets forth the Company's best estimates of the amounts payable to the
executives listed therein, as a result of the transactions contemplated by this
Agreement and/or any subsequent employment termination (including any cash-out
or acceleration of options and restricted stock and any "gross-up" payments with
respect to any of the foregoing), based on compensation data applicable as of
the date of such Schedule and the assumptions stated on that Schedule.
SECTION 4.9 Litigation. Except as set forth on Section 4.9 of the Company
----------
Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened, against
the Company or any of its subsidiaries, individually or in the aggregate, which
would reasonably be expected to have a Material Adverse Effect on the Company
and its subsidiaries or could prevent or materially delay the consummation of
the transactions contemplated by this Agreement. Except as disclosed in the SEC
Reports filed prior to the date of this Agreement, neither the Company nor any
of its subsidiaries is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on the Company or could prevent or materially
delay the consummation of the transactions contemplated hereby.
SECTION 4.10 Information. None of the information supplied by the Company
-----------
specifically for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Proxy Statement or (iii) any other document to be filed with
the SEC or any other Governmental Entity in connection with the transactions
contemplated by this Agreement (the "Other Filings") will, at the respective
times filed with the SEC or other Governmental Entity and, in addition, in the
case of the Proxy Statement, at the date it or any amendment or supplement is
mailed to stockholders, at the time of the Special Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with respect to
statements made therein based on information supplied by Parent or the Purchaser
in writing specifically for inclusion in the Proxy Statement.
SECTION 4.11 Certain Approvals. The Company Board has taken any and all
-----------------
necessary and appropriate action to render inapplicable to the Offer, the Merger
and the transactions contemplated by this Agreement the provisions of Section
203 of the GCL and such action is effective at the date of this Agreement. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Offer, the Merger or the transactions contemplated by
this Agreement.
SECTION 4.12 Employee Benefit Plans.
----------------------
(a) Section 4.12(a) of the Company Disclosure Schedule includes a complete
list of all employee benefit plans, programs, and other arrangements providing
incentive compensation or benefits to any employee or former employee or
beneficiary or dependent thereof, whether or not written, and whether covering
one person or more than one person, sponsored or
-16-
maintained by the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries contributes or is obligated to contribute ("Plans").
Without limiting the generality of the foregoing, the term "Plans" includes all
employee welfare benefit plans within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder ("ERISA") and all employee pension benefit plans within the meaning
of Section 3(2) of ERISA.
(b) With respect to each Plan, the Company has, except as set forth on
Section 4.12(b) of the Company Disclosure Schedule, delivered or made available
to Parent a true, correct and complete copy of: (i) each writing constituting a
part of such Plan, including without limitation all plan documents, benefit
schedules, trust agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; (v) the most recent actuarial report, if any;
and (vi) the most recent determination letter from the Internal Revenue Service
(the "IRS"), if any. Except as set forth on Section 4.12(b) of the Company
Disclosure Schedule, there are no amendments to any Plan that have been adopted
or approved nor has the Company or any of its subsidiaries undertaken to make
any such amendments.
(c) Section 4.12(c) of the Company Disclosure Schedule identifies each Plan
that is intended to be a "qualified plan" within the meaning of Section 401(a)
of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
thereunder (the "Code") ("Qualified Plans"). Except as set forth on Section
4.12(b) of the Company Disclosure Schedule, the IRS has issued a favorable
determination letter with respect to each Qualified Plan that has not been
revoked, and there are no existing circumstances nor any events that have
occurred that could reasonably be expected to adversely affect the qualified
status of any Qualified Plan or the related trust. Schedule 4.12(c) identifies
each Plan which is intended to meet the requirements of Code Section 501(c)(9),
and each such plan meets such requirements and provides no disqualified benefits
(as such term is defined in Code Section 4976(b)).
(d) All contributions required to be made to any Plan by applicable law or
regulation or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Plan, for
any period through the date hereof have been timely made or paid in full or, to
the extent not required to be made or paid on or before the date hereof, have
been fully reflected in the financial statements of the Company included in the
SEC Reports to the extent required under generally accepted accounting
principles.
(e) The Company and each of its subsidiaries has complied, and is now in
compliance, in all material respects with all provisions of ERISA, the Code and
all laws and regulations applicable to the Plans. There is not now, nor do any
circumstances exist that could give rise to, any requirement for the posting of
security with respect to a Plan or the imposition of any lien on the assets of
the Company or any of its subsidiaries under ERISA or the Code. No prohibited
transaction has occurred with respect to any Plan.
-17-
(f) With respect to each Plan that is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived; (ii) except as set forth on Section
4.12(f) of the Company Disclosure Schedule, the fair market value of the assets
of such Plan equals or exceeds the actuarial present value of all accrued
benefits under such Plan (whether or not vested), based upon the actuarial
assumptions used in the most recent actuarial report for such Plan; (iii) no
reportable event within the meaning of Section 4043(c) of ERISA for which the
30-day notice requirement has not been waived has occurred, and the consummation
of the transactions contemplated by this agreement will not result in the
occurrence of any such reportable event; (iv) all premiums to the Pension
Benefit Guaranty Corporation (the "PBGC") have been timely paid in full; (v) no
liability (other than for premiums to the PBGC) under Title IV of ERISA has been
or is expected to be incurred by the Company or any of its subsidiaries; and
(vi) the PBGC has not instituted proceedings to terminate any such Plan and, to
the Company's knowledge, no condition exists that presents a risk that such
proceedings will be instituted or which would constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any such Plan.
(g) Except as set forth on Section 4.12(g) of the Company Disclosure
Schedule, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA and which is subject to Title IV of ERISA
(a "Multiple Employer Plan"), nor has the Company or any of its subsidiaries, or
any of their respective ERISA Affiliates (as defined in the next sentence), at
any time since September 2, 1974, contributed to or been obligated to contribute
to any Multiemployer Plan or Multiple Employer Plan. An "ERISA Affiliate" means
any entity, trade or business that is a member of a group described in Section
414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes
the Company or any of its subsidiaries, or that is a member of the same
"controlled group" as the Company or any of its subsidiaries, pursuant to
Section 4001(a)(14) of ERISA. With respect to each Plan that is a Multiemployer
Plan: (i) if the Company or any of its subsidiaries or any of their respective
ERISA Affiliates were to experience a withdrawal or partial withdrawal from such
plan, no withdrawal liability under Title IV of ERISA would be incurred; and
(ii) none of the Company and its subsidiaries, nor any of their respective ERISA
Affiliates, has received any notification, nor has any reason to believe, that
any such Plan is in reorganization, has been terminated, is insolvent, or may
reasonably be expected to be in reorganization, to be insolvent, or to be
terminated.
(h) There does not now exist, nor do any circumstances exist that could
result in, any material liability under (i) Title IV of ERISA, (ii) Section 302
of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code, or (v) corresponding or similar provisions of foreign laws or regulations
known to the Company, other than a liability that arises solely out of, or
relate solely to, the Plans, that would be a liability of the Company or any of
its subsidiaries following the Closing. Without limiting the generality of the
foregoing, none of the Company, its subsidiaries nor any ERISA Affiliate of the
Company or any of its subsidiaries has engaged in any transaction described in
Section 4069 or Section 4204 or 4212 of ERISA.
-18-
(i) Except as set forth on Section 4.12(i) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has any liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof, except for health continuation coverage as
required by Section 4980B of the Code or Part 6 of Title I of ERISA and at no
expense to the Company and its subsidiaries.
(j) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), lawsuits or arbitrations which have been
asserted or instituted against the Plans, any fiduciaries thereof with respect
to their duties to the Plans or the assets of any of the trusts under any of the
Plans which could reasonably be expected to result in any material liability of
the Company or any of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of Labor or any
Multiemployer Plan.
(k) Except as set forth on Section 4.12(k) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting,
funding or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer or director of the Company or any of its
subsidiaries. Without limiting the generality of the foregoing, no amount paid
or payable (whether in cash, in property, or in the form of benefits) by the
Company or any of its subsidiaries in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Code, except as set forth on
Section 4.12(k) of the Company Disclosure Schedule.
(l) With respect to employee benefit plans, programs, and other
arrangements providing incentive compensation or other benefits to any employee
or former employee or dependent thereof, which plan, program or arrangement is
subject to the laws of any jurisdiction outside of the United States ("Foreign
Plans"): (i) the Foreign Plans have been maintained in all material respects in
accordance with all applicable requirements, (ii) if they are intended to
qualify for special tax treatment meet all requirements for such treatment, and
(iii) if they are intended to be funded and/or book-reserved are fully funded
and/or book reserved, as appropriate, based upon reasonable actuarial
assumptions.
SECTION 4.13 Intellectual Property.
---------------------
(a) Set forth on Section 4.13(a) of the Company Disclosure Schedule is a
list of all material patents, patent applications, patent disclosures, trademark
registrations and trademark applications, service ▇▇▇▇ registrations and service
▇▇▇▇ applications, certification ▇▇▇▇ registrations and certification ▇▇▇▇
applications, copyright registrations and copyright registration applications,
mask works registrations and mask works registration applications, both domestic
and foreign, which are owned by the Company or any of its subsidiaries. The
assets described on Section 4.13(a) of the Company Disclosure Schedule and all
other material computer software, trade secrets, trademarks, trade names,
service marks, certification marks, copyrights, know-how, methods, processes,
procedures, apparatus, equipment, industrial property, discoveries, inven-
-19-
tions, designs, drawings, plans, specifications, engineering data, manuals,
development projects, research and development work in progress, technology or
other proprietary rights or confidential information which are owned by or
material to the Company or any of its subsidiaries are referred to as the
"Intellectual Property." The Company and its subsidiaries own all right, title
and interest in and to the Intellectual Property validly and beneficially, free
and clear of all material Liens, with the sole and exclusive right to use the
same, subject to those licenses listed on Section 4.13(b) of the Company
Disclosure Schedule.
(b) Set forth on Section 4.13(b) of the Company Disclosure Schedule is a
list of (i) all material licenses, assignments and other transfers of
Intellectual Property granted to others by the Company or any of its
subsidiaries, and (ii) all material licenses, assignments and other transfers of
patents, trade names, trademarks, service marks, copyrights, mask works
registrations, software, trade secrets, know-how, technology or other
proprietary rights or information granted to the Company or any of its
subsidiaries by others. Except as set forth on Section 4.13(b) of the Company
Disclosure Schedule, none of the material licenses, assignments or other
transfers described above is subject to termination or cancellation or change in
its terms or provisions as a result of this Agreement or the transactions
provided for in this Agreement.
(c) Except as set forth on Section 4.13(c) of the Company Disclosure
Schedule to the best knowledge of the Company, there is no material unauthorized
use, infringement or misappropriation of any Intellectual Property.
(d) Except as set forth on Section 4.13(d) of the Company Disclosure
Schedule, no material claim with respect to the Intellectual Property has been
asserted or, to the best knowledge of the Company, is threatened by any person
nor does the Company know of any valid ground for any bona fide claims (i) to
the effect that the manufacture, sale or use of any product or process as used
(currently or in the past) or offered or proposed for use or sale by the Company
infringes on any copyright, trade secret, patent, tradename or other
intellectual property right of any person, (ii) against the Company relating to
the use of any Intellectual Property, or (iii) challenging the ownership,
validity or effectiveness of any Intellectual Property. All granted and issued
patents and all registered trademarks and service marks listed in Section
4.13(a) of the Company Disclosure Schedule and all copyrights held by the
Company are valid, enforceable and subsisting.
(e) No Intellectual Property is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting in any manner the licensing,
assignment or other transfer, use or enforceability thereof by the Company. The
Company has not entered into any agreement to indemnify any other person against
any charge of infringement of any Intellectual Property, except indemnities
agreed to in the ordinary course of business in connection with the sale,
delivery or transfer of Company products and services or included as part of the
Company's license agreements. The Company or its subsidiaries have the exclusive
right to file, prosecute and maintain all applications and registrations with
respect to Intellectual Property owned by the Company or its subsidiaries.
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SECTION 4.14 Taxes.
-----
(a) The Company and each of its subsidiaries has filed all federal, state,
local and foreign income Tax Returns (as hereinafter defined) required to be
filed by it, and all other Tax Returns required to be filed by it. All such Tax
Returns were correct in all material respects. The Company and each of its
subsidiaries has paid or caused to be paid all Taxes (as hereinafter defined)
shown as due and payable on such Tax Returns in respect of the periods covered
by such returns and has made adequate provision in the Company's financial
statements for payment of all Taxes anticipated to be payable in respect of all
taxable periods or portions thereof ending on or before the date hereof. Except
as set forth on Section 4.14(a) of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is currently the beneficiary of any
extension of time within which to file any Tax Return. There are no security
interests on any of the assets of Company or any of its subsidiaries that arose
in connection with any failure (or alleged failure) to pay any Tax. There is no
claim or dispute concerning any material Tax liability of the Company or its
subsidiaries either (i) claimed or raised by any authority in writing or (ii) as
to which any of the directors and officers (and employees responsible for Tax
matters) of the Company and its subsidiaries has knowledge based on personal
contact with any agent of such authority. No issue has been raised in any
examination by any authority with respect to the Company or any subsidiary
which, by application of similar principles, reasonably could be expected to
result in a proposed material deficiency or increase in Tax for any other period
not so examined. Section 4.14 of the Company Disclosure Schedule lists the
periods through which the Tax Returns required to be filed by the Company or any
of its subsidiaries have been examined by the IRS or other appropriate taxing
authority, or the period during which any assessments may be made by the IRS or
other appropriate taxing authority has expired. All material deficiencies and
assessments asserted as a result of such examinations or other audits by
federal, state, local or foreign taxing authorities have been paid, fully
settled or adequately provided for in the Company's financial statements, and no
issue or claim has been asserted in writing for Taxes by any taxing authority
for any prior period, other than those heretofore paid or provided for in the
Company's financial statements. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Return of the
Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has filed a consent pursuant to Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its subsidiaries. Neither the Company nor any of
its subsidiaries (i) has been a member of a group filing consolidated returns
for federal income Tax purposes (except for the group of which the Company is
the common parent), (ii) has any liability for the Taxes of any person (other
than the Company and its subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferor or successor, by contract or otherwise, or (iii) except as set forth
on Section 4.14(a) of the Company Disclosure Schedule, is a party to a Tax
sharing or Tax indemnity agreement or any other agreement of a similar nature
that remains in effect.
(b) For purposes of this Agreement, the term "Tax" or "Taxes" means all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, transfer, license,
payroll, withholding, capital stock and franchise taxes,
-21-
imposed by the United States or any state, local or foreign government or
subdivision or agency thereof, including any interest, penalties or additions
thereto. For purposes of this Agreement, the term "Tax Return" means any report,
return or other information or document required to be supplied to a taxing
authority in connection with Taxes.
SECTION 4.15 Absence of Certain Changes. Except as disclosed in the SEC
--------------------------
Reports filed prior to the date of this Agreement and except as set forth on
Section 4.15 of the Company Disclosure Schedule, since December 31, 1999 (i)
there has not been any Material Adverse Effect on the Company; (ii) the
businesses of the Company and each of its subsidiaries have been conducted only
in the ordinary course and in a manner consistent with past practice; (iii)
neither the Company nor any of its subsidiaries has incurred any material
liabilities (direct, contingent or otherwise) or engaged in any material
transaction or entered into any material agreement or commitments outside the
ordinary course of business; or (iv) neither the Company nor any of its
subsidiaries has taken any action referred to in Section 6.1 hereof except as
permitted thereby.
SECTION 4.16 Labor Matters. Except as set forth on Section 4.16 of the
-------------
Company Disclosure Schedule, no employees of the Company or of any of its
subsidiaries are represented by any labor union or any collective bargaining
organization. No labor organization or group of employees of the Company or any
of its subsidiaries has made a pending demand for recognition or certification,
and there are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or threatened to be
brought or filed, with the National Labor Relations Board or any other labor
relations tribunal or authority.
SECTION 4.17 Relationships with Customers, Suppliers, Distributors and
---------------------------------------------------------
Sales Representatives. The Company has not received written notice that any
---------------------
customer, supplier, distributor or sales representative intends to cancel,
terminate or otherwise modify its relationship with the Company or any
subsidiary which would reasonably be expected to have a Material Adverse Effect
on the Company.
SECTION 4.18 Contracts. Section 4.18 of the Company Disclosure Schedule
---------
lists all written or oral contracts, agreements, guarantees, leases (each a
"Contract") to which the Company or any of its subsidiaries is a party and which
fall within any of the following categories: (i) material Contracts not entered
into in the ordinary course of business, (ii) joint venture, partnership and
like agreements, (iii) Contracts containing covenants purporting to limit the
freedom of the Company or any of its affiliates to compete in any line of
business in any geographic area or to hire or solicit any individual or group of
individuals which are set forth in Section 4.18(iii) of the Company Disclosure
Schedule, (iv) Contracts which after the Effective Time would have the effect of
limiting the freedom of Parent or its subsidiaries (other than the Company and
its subsidiaries) to compete in any line of business in any geographic area or
to hire any individual or group of individuals which are set forth in Section
4.18 (iv) of the Company Disclosure Schedule, (v) Contracts which contain
minimum purchase conditions or requirements or other terms that restrict or
limit the purchasing relationships of the Company or any of its subsidiaries,
(vi) Contracts relating to any outstanding commitment for capital expenditures
in excess of $250,000, (vii) indentures, mortgages, promissory notes, loan
agreements, guarantees of
-22-
amounts in excess of $250,000, letters of credit or other agreements or
instruments of the Company or any of its subsidiaries or commitments for the
borrowing or the lending of amounts in excess of $250,000 by the Company or any
of its subsidiaries or providing for the creation of any charge, security
interest, encumbrance or lien upon any of the assets of the Company or any of
its subsidiaries and (viii) Contracts with or for the benefit of any affiliate
of the Company (other than subsidiaries of the Company). All of the Contracts
required to be disclosed by this Section 4.18 are valid and binding obligations
of the Company or a subsidiary of the Company and the valid and binding
obligation of each other party thereto. Neither the Company nor any of its
subsidiaries nor, to the knowledge of the Company, any other party thereto is in
violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) could
constitute a default under, any such Contract which, in any such case, would
reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 4.19 Rights Agreement. The Company and the Company Board have
----------------
authorized all necessary action to amend the Rights Agreement (without redeeming
the Rights) so that none of the execution or delivery of this Agreement, the
making of the Offer, the acquisition of Common Shares pursuant to the Offer or
the consummation of the Merger will (i) cause any Rights issued pursuant to the
Rights Agreement to become exercisable or to separate from the stock
certificates to which they are attached, (ii) cause Parent, the Purchaser or any
of their Affiliates or Associates to be an Acquiring Person (as each such term
is defined in the Rights Agreement) or (iii) trigger other provisions of the
Rights Agreement, including giving rise to a Distribution Date or a Triggering
Event (as each such term is defined in the Rights Agreement), and such amendment
shall be in full force and effect from and after the date hereof.
SECTION 4.20 Product Recalls. The Company is not aware of any pattern or
---------------
series of claims against the Company or any of its subsidiaries which reasonably
could be expected to result in a generalized product recall relating to products
sold by the Company or any of its subsidiaries, regardless of whether such
product recall is formal, informal, voluntary or involuntary.
SECTION 4.21 Brokers. Except for the engagement of McDonald, none of the
-------
Company, any of its subsidiaries, or any of their respective officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement. The Company has previously delivered to Parent a
copy of the Company's engagement letters with McDonald.
SECTION 4.22 Opinion of Financial Advisor. The Company has received the
----------------------------
written opinion of McDonald to the effect that, as of February 15, 2000, the
consideration to be received by the holders of Common Shares (other than Parent
or any of its affiliates) pursuant to the Offer and the Merger, is fair to the
Company's stockholders from a financial point of view. The Company has
previously delivered to Parent a draft copy of such opinion.
SECTION 4.23. Year 2000 Compliance. Except as could not reasonably be
--------------------
expected to have a Material Adverse Effect on the Company, to the knowledge of
the Company none of the assets or properties owned or utilized by the Company
has failed or will fail to per-
-23-
form because of the Year 2000 Problem. The term "Year 2000 Problem" means the
material inability of any hardware, software or process to recognize and
correctly calculate dates on and after January 1, 2000, or the failure of
computer systems, products or services to perform any of their intended
functions in a proper manner in connection with data containing any date on or
after January 1, 2000.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser represent and warrant to the Company as follows:
SECTION 5.1 Organization and Qualification. Parent is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of Delaware and
each material subsidiary of Parent is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. The Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Parent and each of
its material subsidiaries (including the Purchaser) has the requisite corporate
power and authority to own, operate or lease its properties and to carry on its
business as it is now being conducted, and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction in which the nature of
its business or the properties owned, operated or leased by it makes such
qualification, licensing or good standing necessary, except where the failure to
have such power or authority, or the failure to be so qualified, licensed or in
good standing, would not have a Material Adverse Effect on Parent. The term
"Material Adverse Effect on Parent", as used in this Agreement, means any change
in or effect on the business, assets, liabilities, condition (financial or
otherwise), prospects or results of operations of Parent or any of its
subsidiaries that would be materially adverse to Parent and its subsidiaries
taken as a whole.
SECTION 5.2 Authority Relative to this Agreement. Each of Parent and the
------------------------------------
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and the Purchaser and the
consummation by Parent and the Purchaser of the transactions contemplated hereby
have been duly and validly authorized and approved by the respective Boards of
Directors of Parent and the Purchaser and by Parent as sole stockholder of the
Purchaser and no other corporate proceedings on the part of Parent or the
Purchaser are necessary to authorize or approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Purchaser and, assuming the due and valid
authorization, execution and delivery by the Company, constitutes a valid and
binding obligation of each of Parent and the Purchaser enforceable against each
of them in accordance with its terms.
-24-
SECTION 5.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Assuming (i) the filings required under the HSR Act are made and the
waiting periods thereunder have terminated or have expired, (ii) the
requirements of the Exchange Act and any applicable state securities, "blue sky"
or takeover law are met and (iii) the filing of the certificate of merger and
other appropriate merger documents, if any, as required by the GCL, is made,
none of the execution and delivery of this Agreement by Parent or the Purchaser,
the consummation by Parent or the Purchaser of the transactions contemplated
hereby or compliance by Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or violate the organizational documents of Parent
or the Purchaser, (ii) conflict with or violate in any material respect any
statute, ordinance, rule, regulation, order, judgment, decree, permit or license
applicable to Parent or the Purchaser or any of their subsidiaries, or by which
any of them or any of their respective properties or assets may be bound or
affected, or (iii) result in a Violation pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or the Purchaser or any of their
subsidiaries is a party or by which Parent or the Purchaser or any of their
subsidiaries or any of their respective properties or assets may be bound or
affected, which would impair the ability of Parent or the Purchaser to perform
its obligations under this Agreement, or prevent or materially delay the
consummation of the transactions contemplated hereby.
(b) None of the execution and delivery of this Agreement by Parent and the
Purchaser, the consummation by Parent and the Purchaser of the transactions
contemplated hereby or compliance by Parent and the Purchaser with any of the
provisions hereof will require any Consent of any Governmental Entity, except
for (i) compliance with any applicable requirements of the Exchange Act and any
state securities "blue sky" or takeover law, (ii) the filing of a certificate of
merger pursuant to the GCL, and (iii) compliance with the HSR Act and any
requirements of any foreign or supranational antitrust laws.
SECTION 5.4 Information. None of the information supplied or to be supplied
-----------
by Parent and the Purchaser in writing specifically for inclusion in (i) the
Schedule 14D-9, (ii) the Proxy Statement or (iii) the Other Filings will, at the
respective times filed with the SEC or such other Governmental Entity and, in
addition, in the case of the Proxy Statement, at the date it or any amendment or
supplement is mailed to stockholders, at the time of the Special Meeting and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
SECTION 5.5 Financing. Parent has possession of, or has available to it
---------
under existing lines of credit, sufficient funds to consummate the transactions
contemplated by this Agreement, and will cause the Purchaser to have sufficient
funds available to consummate the Offer and the Merger and the transactions
contemplated hereby.
SECTION 5.6 Delaware Law. Neither Parent nor any of its subsidiaries was,
------------
immediately prior to the execution of this Agreement, an "interested
stockholder" within the meaning of Section 203 of the GCL.
-25-
ARTICLE SIX
COVENANTS
SECTION 6.1 Conduct of Business of the Company. Except as required by this
----------------------------------
Agreement or otherwise with the prior written consent of Parent, during the
period from the date of this Agreement to the Effective Time, the Company will,
and will cause each of its subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its reasonable best efforts, and will cause each of its subsidiaries to use its
reasonable best efforts, to preserve intact the business organization of the
Company and each of its subsidiaries, to keep available the services of its and
their present officers and key employees, and to preserve the good will of those
having business relationships with it, including, without limitation,
maintaining satisfactory relationships with suppliers, distributors, customers,
licensors and others having business relationships with the Company. Without
limiting the generality of the foregoing, and except as otherwise required by
this Agreement, the Company will not, and will not permit any of its
subsidiaries to, prior to the Effective Time, without the prior written consent
of Parent which will not be unreasonably withheld:
(a) adopt any amendment to its Certificate of Incorporation or By-Laws or
comparable organizational documents or the Rights Agreement (other than the
amendment contemplated by Section 4.19);
(b) sell, pledge or encumber any stock owned by it in any of its
subsidiaries;
(c) (i) issue, reissue or sell, or authorize the issuance, reissuance or
sale of (A) additional shares of capital stock of any class, or securities
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible securities or capital stock, other than the issuance
of Common Shares (and the related Rights), in accordance with the terms of the
instruments governing such issuance on the date hereof, pursuant to the exercise
of Options outstanding on the date hereof, Warrants outstanding on the date
hereof or the Series B Preferred Stock outstanding on the date hereof pursuant
to the terms of the governing instrument related to such Warrant or such Series
B Preferred Stock (or, if a Triggering Event (as defined in the Rights
Agreement) by a party other than Parent or the Purchaser shall occur, Rights) or
(B) any other securities in respect of, in lieu of, or in substitution for,
Common Shares outstanding on the date hereof, or (ii) make any other changes in
its capital structure;
(d) declare, set aside or pay any dividend or other distribution (whether
in cash, securities or property or any combination thereof) in respect of any
class or series of its capital stock other than between any of the Company and
any of its wholly owned subsidiaries; provided, however, the Company may declare
and pay the regular quarterly cash dividend on shares of Series B Preferred
Stock outstanding from time to time;
(e) split, combine, subdivide, reclassify or redeem, purchase or otherwise
acquire, or propose to redeem or purchase or otherwise acquire, any shares of
its capital stock, or any of its other securities;
-26-
(f) increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees (whether from the Company or any
of its subsidiaries), or pay or award any benefit not required by any existing
plan or arrangement to any officer, director or employee (including, without
limitation, the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units pursuant to the Stock Plans or otherwise),
or grant any severance or termination pay to any officer, director or other
employee of the Company or any of its subsidiaries (other than as required by
existing agreements or policies described in the Company Disclosure Schedule),
or enter into any employment or severance agreement with, any director, officer
or other employee of the Company or any of its subsidiaries or establish, adopt,
enter into, amend or waive any performance or vesting criteria or accelerate
vesting, exercisability or funding under any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, savings,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees of
the Company or its subsidiaries (any of the foregoing being an "Employee Benefit
Arrangement"), except, in each case, to the extent required by applicable law or
regulation or existing term of any such Employee Benefit Arrangement described
in the Company Disclosure Schedule;
(g) acquire, mortgage, encumber, sell, lease, license or dispose of any
significant assets (including Intellectual Property) or securities, except
pursuant to existing contracts or commitments or the sale or purchase of goods
in the ordinary course of business consistent with past practice, or enter into
any commitment or transaction outside the ordinary course of business consistent
with past practice other than transactions between a wholly owned subsidiary of
the Company and the Company or another wholly owned subsidiary of the Company;
(h) (i) incur, assume or pre-pay any long-term debt or incur or assume any
short-term debt, except that the Company and its subsidiaries may incur, assume
or pre-pay debt in the ordinary course of business in an amount not to exceed
$300,000 in the aggregate (provided, however, the Company may reborrow amounts
repaid under the existing facilities with HSBC Bank and Fleet National Bank in
an amount up to $1,000,000) and for purposes consistent with past practice under
existing lines of credit, (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person, (iii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent or otherwise), except
in the ordinary course of business consistent with past practice and in
accordance with their terms, (iv) make any loans, advances or capital
contributions to, or investments in, any other person, except for loans,
advances, capital contributions or investments between any wholly owned
subsidiary of the Company and the Company or another wholly owned subsidiary of
the Company, (v) authorize or make capital expenditures which are in excess of
$100,000 or $500,000 in the aggregate, (vi) accelerate or delay collection of
notes or accounts receivable in advance of or beyond their regular due dates or
the dates when the same would have been collected in the ordinary course of
business consistent with past practice, (vii) delay or accelerate payment of any
account payable beyond or in advance of its due date or the date such liability
would have been paid in the ordinary course of business consistent with past
practice, or (viii) vary the Company's inventory practices in any material
respect from the Company's past practices;
-27-
(i) settle or compromise any suit or claim or threatened suit or claim
where the amount involved is greater than $100,000;
(j) other than in the ordinary course of business consistent with past
practice, (i) modify, amend or terminate any contract (and, in any case, only if
the amount involved is less than $100,000, (ii) waive, release, relinquish or
assign any contract (or any of the Company's rights thereunder), right or claim,
or (iii) cancel or forgive any indebtedness owed to the Company or any of its
subsidiaries; provided, however, that the Company may not under any circumstance
waive or release any of its rights under any confidentiality agreement to which
it is a party;
(k) make any tax election not required by law or settle or compromise any
tax liability;
(l) permit any insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated without notice to the Purchaser,
except in the ordinary course of business consistent with past practice;
(m) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or, except in the ordinary course of business consistent with past practice, any
assets;
(n) enter into any contract or agreement other than in the ordinary course
of business consistent with past practice (and, in any case, only if the amount
involved is less than $250,000);
(o) except as may be required as a result of a change in law or in
generally accepted accounting principles, make any change in its methods of
accounting, including tax accounting policies and procedures; or
(p) agree in writing or otherwise to take any of the foregoing actions
prohibited under this Section 6.1 or any action which would cause any
representation or warranty in this Agreement to be or become untrue or
incorrect.
SECTION 6.2 Access to Information. From the date of this Agreement until
---------------------
the Effective Time, the Company will, and will cause its subsidiaries, and each
of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, give Parent
and the Purchaser and their respective officers, employees, counsel, advisors
and representatives (collectively, the "Parent Representatives") full access,
during normal business hours, to the offices and other facilities and to the
books and records of the Company and its subsidiaries and will cause the Company
Representatives and the Company's subsidiaries to furnish Parent, the Purchaser
and the Parent Representatives with such financial and operating data and such
other information with respect to the business and operations of the Company and
its subsidiaries as Parent and the Purchaser may from time to time reasonably
request. The Company shall furnish promptly to Parent and the Purchaser a copy
of each report, schedule, registration statement and other document filed by it
or its subsidiaries during
-28-
such period pursuant to the requirements of federal or state securities laws.
Parent and the Purchaser agree that any information furnished pursuant to this
Section 6.2 will be subject to the provisions of the letter agreement dated
September 20, 1999 between the Parent and the Company (the "Confidentiality
Agreement").
SECTION 6.3 Efforts.
-------
(a) Subject to the terms and conditions provided herein, each of the
Company, Parent and the Purchaser shall, and the Company shall cause each of its
subsidiaries to, cooperate and use reasonable efforts to make, or cause to be
made, all filings necessary or proper under applicable laws and regulations, and
to take all other actions necessary or advisable to consummate and make
effective the transactions contemplated by this Agreement, including but not
limited to cooperation in the preparation and filing of the Offer Documents, the
Schedule 14D-9 and any actions or filings related thereto, the Proxy Statement,
any required filings under the HSR Act, or other foreign filings and any
amendments to any thereof.
In addition, if at any time prior to the Effective Time any event or
circumstance relating to either the Company or Parent or the Purchaser or any of
their respective subsidiaries should be discovered by the Company or Parent, as
the case may be, which should be set forth in an amendment to the Offer
Documents or Schedule 14D-9, the discovering party will promptly inform the
other party of such event or circumstance. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
(b) Each of the parties will use its reasonable best efforts to obtain as
promptly as practicable all Consents of any Governmental Entity or any other
person required in connection with, and waivers of any Violations that may be
caused by, the consummation of the transactions contemplated by the Offer and
this Agreement.
SECTION 6.4 Public Announcements. The Company, on the one hand, and Parent
--------------------
and the Purchaser, on the other hand, agree to consult promptly with each other
prior to issuing any press release or otherwise making any public statement with
respect to the Offer, the Merger and the other transactions contemplated hereby,
agree to provide to the other party for review a copy of any such press release
or statement, and shall not issue any such press release or make any such public
statement prior to such consultation and review, unless required by applicable
law or any listing agreement with a securities exchange.
SECTION 6.5 Employee Benefit Arrangements.
-----------------------------
(a) Parent agrees that the Company will honor, and, from and after the
Effective Time, Parent will cause the Surviving Corporation to honor, in
accordance with their respective terms as in effect on the date hereof, the
employment, severance, bonus, supplemental retirement, and split dollar life
insurance agreements and arrangements to which the Company is a party which are
set forth on Section 6.5 of the Company Disclosure Schedule.
-29-
(b) Parent agrees that (i) for the period ending December 31, 2000, the
Surviving Corporation shall continue the compensation and employee benefit and
welfare plans and programs of the Company other than those providing
equity-based compensation to the extent practicable as in effect on the date
hereof, and (ii) thereafter the Surviving Corporation shall provide employees of
the Company and its subsidiaries as a whole (A) compensation (including bonus
and incentive awards) programs and plans and (B) employee benefit and welfare
plans, programs, contracts, agreements and policies (including insurance and
pension plans), fringe benefits and vacation policies which are substantially
the same as or not materially less favorable in the aggregate to such employees
than those generally in effect with respect to similarly situated employees of
Parent.
SECTION 6.6 Indemnification.
---------------
(a) The certificate of incorporation and the by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Certificate of
Incorporation and By-laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law. Parent shall guarantee the obligations of the Surviving
Corporation with respect to the indemnification provisions contained in the
Surviving Corporation's certificate of incorporation and by-laws.
(b) Parent shall not cancel the Company's existing directors' and officers'
liability insurance policy, a copy of which has been heretofore delivered to
Parent.
(c) In the event Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 6.6.
(d) This Section 6.6 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Parent and the Surviving
Corporation, and shall be binding on all successors and assigns of Parent and
the Surviving Corporation.
SECTION 6.7 Notification of Certain Matters. Parent and the Company shall
-------------------------------
promptly notify each other of (a) the occurrence or non-occurrence of any fact
or event which would be reasonably likely (i) to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or (ii) to cause
any covenant, condition or agreement under this Agreement not to be complied
with or satisfied and (b) any failure of the Company, Parent or Purchaser, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder. Each
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of the Company, Parent and the Purchaser shall give prompt notice to the other
parties hereof of any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement.
SECTION 6.8 Rights Agreement; Waiver of Right of First Refusal; Redemption
--------------------------------------------------------------
Notice.
------
(a) The Company covenants and agrees that it will not (i) redeem the
Rights, (ii) amend the Rights Agreement or (iii) take any action which would
allow any Person (as defined in the Rights Agreement) other than Parent or the
Purchaser to acquire beneficial ownership of 15% or more of the Common Shares
without causing a Distribution Date or a Triggering Event (as each such term is
defined in the Rights Agreement) to occur. The Board of Directors of the Company
shall not make a determination that Parent, the Purchaser or any of their
respective Affiliates or Associates is an "Adverse Person" for purposes of the
Rights Agreement.
(b) The Company covenants and agrees that it will waive its exclusive,
irrevocable right of first refusal to purchase the Series B Preferred Stock
owned by Inter Scan Holding Ltd., a Swiss corporation (which, with all of its
affiliates (which include all of its officers, directors, shareholders and ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇) is referred to herein as "Inter Scan"), granted pursuant to the
Shareholder Agreement, dated July 8, 1997, by and between the Company and Inter
Scan, solely for the purpose of allowing Inter Scan to (i) validly tender its
shares of Series B Preferred Stock pursuant to the Offer, or (ii) convert its
Series B Preferred Stock to Common Shares and, immediately thereafter, validly
tender all such Common Shares pursuant to the Offer.
(c) The Company shall exercise its voting rights with respect to the Series
B Preferred Stock under the Shareholder Agreement, dated as of July 8, 1997,
between the Company and Inter Scan, in favor of this Agreement and the
transactions contemplated hereby and against any Acquisition Transaction (as
defined below).
(d) At the request of Parent, the Company (i) shall promptly, but in no
event later than 3 business days following the date of such request, give notice
of redemption after 45 calendar days (the "Redemption Date") of all of the then
outstanding shares of Series B Preferred Stock to the holders thereof, and (ii)
shall immediately prior to the Redemption Date irrevocably deposit in trust, for
the account of such holders, funds sufficient to pay in full the redemption
price in respect of such shares of Series B Preferred Stock, in each case, in
the manner contemplated by and pursuant to the terms and procedures set forth in
the Certificate of Incorporation of the Company, as amended, as in effect on the
date hereof.
SECTION 6.9 State Takeover Laws. The Company shall, upon the request of the
-------------------
Purchaser, take all reasonable steps to assist in any challenge by the Purchaser
to the validity or applicability to the transactions contemplated by this
Agreement, including the Offer and the Merger, of any state takeover law.
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SECTION 6.10 No Solicitation.
---------------
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition or exchange of all or any material portion of the
assets of, or any equity interest in, the Company or any of its subsidiaries or
any business combination with the Company or any of its subsidiaries. The
Company agrees that, prior to the Effective Time, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or its subsidiaries'
directors, officers, employees, agents or representatives, directly or
indirectly, to solicit, initiate or encourage, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal with
respect to any merger, liquidation, recapitalization, consolidation or other
business combination involving the Company or its subsidiaries or acquisition of
any capital stock or any material portion of the assets (except for acquisition
of assets in the ordinary course of business consistent with past practice) of
the Company or its subsidiaries, or any combination of the foregoing (other than
the Offer and the Merger) (an "Acquisition Transaction"), or negotiate, explore
or otherwise engage in substantive discussions with any person (other than the
Purchaser, Parent or their respective directors, officers, employees, agents and
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions contemplated by this
Agreement; provided that the Company may furnish information to, and negotiate
or otherwise engage in substantive discussions with, any person who delivers a
written proposal for an Acquisition Transaction if the Company Board determines
in good faith by a majority vote, after consultation with its outside legal
counsel, that failing to take such action would reasonably be expected to result
in a breach of the fiduciary duties of the Company Board, and prior to
furnishing non-public information to any such party, the Company shall have
entered into a confidentiality agreement containing terms at least as favorable
to the Company as those of the Confidentiality Agreement.
(b) From and after the execution of this Agreement, the Company shall
immediately advise the Purchaser in writing of the receipt, directly or
indirectly, of any proposal for an Acquisition Transaction, and of any
discussions, negotiations or proposals relating to an Acquisition Transaction,
identify the offeror and furnish to the Purchaser a copy of any such proposal,
if it is in writing, or a written summary of any such proposal relating to an
Acquisition Transaction if it is not in writing. The Company shall promptly
advise Parent of any development relating to such proposal, including the
results of any discussions or negotiations with respect thereto.
SECTION 6.11 Parent Agreement Concerning Purchaser. Parent agrees to cause
-------------------------------------
the Purchaser to comply with its obligations under this Agreement.
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ARTICLE SEVEN
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1 Conditions. The respective obligations of Parent, the Purchaser
----------
and the Company to consummate the Merger are subject to the satisfaction, at or
before the Effective Time, of each of the following conditions:
(a) Stockholder Approval. The stockholders of the Company shall have duly
approved the transactions contemplated by this Agreement, if required by
applicable law.
(b) Purchase of Common Shares. The Purchaser shall have accepted for
payment and paid for Common Shares in an amount sufficient to meet the Minimum
Condition and otherwise pursuant to the Offer in accordance with the terms
hereof.
(c) Injunctions; Illegality. The consummation of the Merger shall not be
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity and there
shall not have been any statute, rule or regulation enacted, promulgated or
deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger or has the effect of making the purchase of Common
Shares illegal.
(d) HSR Act. Any waiting period (and any extension thereof) under the HSR
Act applicable to the Merger shall have expired or terminated.
ARTICLE EIGHT
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the Merger
-----------
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company (with any
termination by Parent also being an effective termination by the Purchaser):
(a) by the mutual written consent of Parent and the Company, by action of
their respective Boards of Directors;
(b) by the Company if (i) Parent or the Purchaser fails to commence the
Offer as provided in Section 1.1 hereof by March 10, 2000, or (ii) Parent or the
Purchaser shall not have accepted for payment and paid for Common Shares
pursuant to the Offer in accordance with the terms hereof and thereof on or
before May 30, 2000; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 8.1(b) if the Company shall have materially
breached this Agreement;
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(c) by Parent or the Company if (i) the Offer is terminated or withdrawn
pursuant to its terms without any Common Shares being purchased thereunder or
(ii) the Merger shall not have been consummated on or before August 31, 2000;
provided, however, that neither Parent nor the Company may terminate this
Agreement pursuant to this Section 8.1(c) if such party shall have materially
breached this Agreement;
(d) by Parent or the Company if any court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Common Shares pursuant to the Offer
or the Merger and such order, decree or ruling or other action shall have become
final and nonappealable, provided that the party seeking to terminate this
Agreement shall have used its reasonable efforts to remove or lift such order,
decree or ruling;
(e) by the Company if, prior to the acceptance for payment of Common Shares
pursuant to the Offer, the Company Board approves an Acquisition Transaction, on
terms which a majority of the members of the Company Board have determined in
good faith (i) after consultation with McDonald or another nationally recognized
investment banking firm, to be more favorable from a financial point of view to
the Company and its stockholders than the transactions contemplated by this
Agreement, and (ii) after receipt of advice from outside legal counsel, that
failure to approve such proposal and terminate this Agreement would reasonably
be expected to result in a breach of the fiduciary duties of the Company Board
under applicable law; provided that the termination described in this Section
8.1(e) shall not be permissible unless and until the Company shall have provided
the Purchaser and Parent prior written notice at least two business days prior
to such termination that the Company Board has authorized and intends to effect
the termination of this Agreement pursuant to this Section 8.1(e), including
copies of all proposed written agreements, arrangements, or understandings,
including the forms of any agreements supplied by third parties, with respect to
such Acquisition Transaction (and a description of all material oral agreements
with respect thereto), the Company shall otherwise be in compliance with its
obligations under this Agreement and on or prior to such termination shall have
paid to Parent the Termination Fee and the Expense Fee described in Section
8.3(b).
(f) by Parent prior to the purchase of Common Shares pursuant to the Offer,
if the Company Board (i) shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in any manner adverse to the Purchaser or
Parent its approval or recommendation of the Offer, this Agreement or the
Merger, (ii) shall have approved or recommended an Acquisition Transaction, or
(iii) shall have resolved to effect any of the foregoing, or if the Company
shall have breached Section 6.8(a); or
(g) by Parent prior to the purchase of Common Shares pursuant to the Offer
if the Minimum Condition (as defined in Annex I) shall not have been satisfied
by the Expiration Date of the Offer and on or prior to such Expiration Date an
Acquisition Transaction shall have been publicly announced or disclosed.
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SECTION 8.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 8.1, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party or its
directors, officers or stockholders, other than the provisions of the last
sentence of Section 6.2 and the provisions of this Section 8.2 and Section 8.3,
which shall survive any such termination. Nothing contained in this Section 8.2
shall relieve any party from liability for any breach of this Agreement.
SECTION 8.3 Fees and Expenses.
-----------------
(a) Whether or not the Merger is consummated, except as otherwise
specifically provided herein, all costs and expenses incurred in connection with
the Offer, this Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such costs and expenses.
(b) In the event that this Agreement is terminated pursuant to Section
8.1(e) or (f) hereof, or is terminated pursuant to Section 8.1(c)(i) hereof as a
result of the failure to satisfy any of the conditions set forth in paragraph
(d) or (g) (as such subsection (g) relates to the Company's obligations under
Section 6.8(a) or Section 6.10) of Annex I, then the Company shall promptly (and
in any event within one business day after such termination or, in the case of
any such termination by the Company, prior to such termination) pay Parent on
amount equal to (i) a termination fee of $7,000,000 (the "Termination Fee"),
provided that in no event shall more than one Termination Fee be payable by the
Company plus (ii) Parent's aggregate Expenses not exceeding $1,000,000 (the
"Expense Fee"). Parent's "Expenses" shall mean all documented out-of-pocket fees
and expenses incurred or paid by or on behalf of Parent in connection with or in
contemplation of the Merger or the consummation of any of the transactions
contemplated by this Agreement, including all fees and expenses of counsel,
investment banking firms, accountants, experts and consultants to Parent.
(c) In the event that this Agreement is terminated pursuant to Section
8.1(g) hereof and within 12 months of the date of termination of this Agreement
a transaction constituting an Acquisition Transaction is consummated, the
Company shall, prior to or simultaneously with the consummation of such
transaction, pay Parent the Termination Fee and the Expense Fee; provided,
however, that in no event shall the Company be obligated to pay more than one
such Termination Fee with respect to all such occurrences.
(d) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the costs and expenses (including attorneys' and expert witness fees)
incurred in connection with such action.
SECTION 8.4 Amendment. Subject to Section 1.3(c), this Agreement may be
---------
amended by the Company, Parent and the Purchaser at any time before or after any
approval of this Agreement by the stockholders of the Company but, after any
such approval, no amendment shall be made which decreases the Merger Price or
which adversely affects the rights of the Company's stockholders hereunder
without the approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of all the parties.
-35-
SECTION 8.5 Extension; Waiver. Subject to Section 1.3(c), at any time
-----------------
prior to the Effective Time, Parent and the Purchaser, on the one hand, and the
Company, on the other hand, may (i) extend the time for the performance of any
of the obligations or other acts of the other, (ii) waive any inaccuracies in
the representations and warranties contained herein of the other or in any
document, certificate or writing delivered pursuant hereto by the other or (iii)
waive compliance by the other with any of the agreements or conditions. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE NINE
MISCELLANEOUS
SECTION 9.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties made in this Agreement shall not survive beyond
the Effective Time. Notwithstanding the foregoing, the agreements set forth in
Section 3.2 and Section 6.6 shall survive the Effective Time indefinitely
(except to the extent a shorter period of time is explicitly specified therein).
SECTION 9.2 Entire Agreement; Assignment.
----------------------------
(a) This Agreement (including the documents and the instruments referred to
herein) constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder will be assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other party (except
that Parent may assign its rights and the Purchaser may assign its rights,
interest and obligations to any direct or indirect subsidiary of Parent without
the consent of the Company, provided that no such assignment shall relieve
Parent of any liability for any breach by such assignee). Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.3 Validity. The invalidity or unenforceability of any provision
--------
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and
effect.
SECTION 9.4 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
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If to Parent or the Purchaser:
▇▇▇▇▇▇▇ Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
American Precision Industries Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & Mugel, LLP
800 Fleet Bank Building
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
SECTION 9.5 Governing Law; Jurisdiction. This Agreement shall be governed
---------------------------
by and construed in accordance with the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises
-37-
out of this Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, and (c) agrees that it
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal or state court
sitting in the State of Delaware.
SECTION 9.6 Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 9.8 Parties in Interest. Except with respect to Section 6.6 (which
-------------------
is intended to be for the benefit of the persons identified therein, and may be
enforced by such persons), this Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
SECTION 9.9 Certain Definitions. As used in this Agreement:
-------------------
(a) the term "affiliate", as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Person" or "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act); and
(c) the term "Subsidiary" or "subsidiaries" means, with respect to Parent,
the Company or any other person, any corporation, partnership, joint venture or
other legal entity of which Parent, the Company or such other person, as the
case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, stock or other equity interests the holders of
which are generally entitled to more than 50% of the vote for the election of
the board of directors or other governing body of such corporation or other
legal entity.
SECTION 9.10 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
-38-
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
-39-
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President-Corporate
Development
ALPHA ACQUISITION I CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
AMERICAN PRECISION INDUSTRIES INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: President
-40-
ANNEX I
Conditions to the Offer. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or, subject to
any applicable rules and regulations of the Commission, including Rule 14e-1(c)
promulgated under the Exchange Act, pay for any tendered Common Shares and may
terminate or, subject to the terms of the Merger Agreement, amend the Offer, if
(i) there shall not be validly tendered and not properly withdrawn prior to the
Expiration Date for the Offer that number of Common Shares which represents at
least a majority of the total number of outstanding Common Shares on a fully
diluted basis on the date of purchase (not taking into account the Rights) and
all of the shares of Series B Preferred Stock (the "Minimum Condition"), (ii)
any applicable waiting period under the HSR Act or under any applicable foreign
statutes or regulations shall not have expired or been terminated prior to the
Expiration Date, or (iii) at any time on or after February 15, 2000 and prior to
the time of acceptance for payment or payment for any Common Shares, any of the
following events (each, an "Event") shall occur:
(a) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction enacted,
enforced, promulgated, amended, issued or deemed applicable to the Offer,
by any legislative body, court, government or governmental, administrative
or regulatory authority or agency, domestic or foreign, other than the
application of the waiting period provisions of the HSR Act to the Offer or
to the Merger, that, in the reasonable judgment of Parent, would be
expected to, directly or indirectly: (i) make illegal or otherwise prohibit
or materially delay consummation of the Offer or the Merger or seek to
obtain material damages or make materially more costly the making of the
Offer, (ii) prohibit or materially limit the ownership or operation by
Parent or the Purchaser of all or any material portion of the business or
assets of the Company or any of its subsidiaries taken as a whole or compel
Parent or the Purchaser to dispose of or hold separately all or any
material portion of the business or assets of Parent or the Purchaser or
the Company or any of its subsidiaries taken as a whole, or seek to impose
any material limitation on the ability of Parent or the Purchaser to
conduct its business or own such assets, (iii) impose material limitations
on the ability of Parent or the Purchaser effectively to acquire, hold or
exercise full rights of ownership of the Common Shares, including, without
limitation, the right to vote any Common Shares acquired or owned by the
Purchaser or Parent on all matters properly presented to the Company's
stockholders, (iv) require divestiture by Parent or the Purchaser of any
Common Shares, or (v) result in a Material Adverse Effect on the Company;
or
(b) there shall be instituted or pending any action or proceeding by any
Governmental Entity seeking, or that would reasonably be expected to result
in, any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above or by any third party for which there is a substantial
likelihood of resulting in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above; or
(c) any change shall have occurred (or any development shall have
occurred involving prospective changes) in the business, assets,
liabilities, condition (▇▇▇▇▇-
cial or otherwise), prospects or results of operations of the Company or
any of its subsidiaries that has, or could reasonably be expected to have,
a Material Adverse Effect on the Company; or
(d) (i) the Company Board or any committee thereof shall have
withdrawn, or shall have modified or amended in a manner adverse to Parent
or the Purchaser, the approval, adoption or recommendation, as the case may
be, of the Offer or the Merger Agreement, or shall have approved or
recommended any Acquisition Transaction, (ii) a Person shall have entered
into a definitive agreement or an agreement in principle with the Company
with respect to an Acquisition Transaction, or (iii) the Company Board or
any committee thereof shall have resolved to do or enter into any of the
foregoing; or
(e) the Company and the Purchaser and Parent shall have reached an
agreement that the Offer or the Merger Agreement be terminated, or the
Merger Agreement shall have been terminated in accordance with its terms;
or
(f) any of the representations and warranties of the Company set forth
in the Merger Agreement, when read without any exception or qualification
as to materiality or Material Adverse Effect on the Company, shall not be
true and correct, as if such representations and warranties were made at
the time of such determination (except as to any such representation or
warranty which speaks as of a specific date, which must be untrue or
incorrect as of such specific date) except where the failure to be so true
and correct would not, individually or in the aggregate, reasonably be
expected to (i) have a Material Adverse Effect on the Company, (ii) prevent
or materially delay the consummation of the Offer, (iii) materially
increase the cost of the Offer to the Purchaser or (iv) have a material
adverse effect on the benefits to Parent of the transactions contemplated
by this Agreement; or
(g) the Co mpany shall have failed to perform in any material respect or
to comply in any material respect with any of its material obligations,
covenants or agreements under the Merger Agreement; or
(h) there shall have occurred, and continued to exist, (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange or on the over-the-counter stock market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), (ii) any decline of at least 25% in either
the Dow ▇▇▇▇▇ Average of Industrial Stocks or the Standard & Poor's 500
Index from the close of business on the last trading day immediately
preceding the date of the Merger Agreement through the applicable
Expiration Date, (iii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, or (iv) a
commencement of a war, armed hostilities or other national or international
crisis involving the United States or a material limitation (whether or not
mandatory) by any Governmental Entity on the extension of credit by banks
or other lending institutions; or
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(i) those consents required upon a change-in-control, or otherwise as a
result of the closing of the Offer or the Merger, under any credit
agreement, letter of credit or reimbursement agreement with outstanding
indebtedness in excess of $5,000,000 shall not have been obtained.
The foregoing conditions (including those set forth in clauses (i) and (ii)
of the initial paragraph) are for the benefit of Parent and the Purchaser and
may be asserted by Parent or the Purchaser regardless of the circumstances
giving rise to any such conditions and may be waived by Parent or the Purchaser
in whole or in part at any time and from time to time in their reasonable
discretion, in each case, subject to the terms of the Merger Agreement. The
failure by Parent or the Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
appended.
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