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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
TARGETTI XXXXXX S.p.A.
FLORENCE ACQUISITION CORP.
AND
TIVOLI INDUSTRIES, INC.
DATED AS OF SEPTEMBER 17, 1999
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.............................................................................. 1
SECTION 1.1. THE MERGER......................................................................... 1
SECTION 1.2. EFFECT OF THE MERGER............................................................... 1
SECTION 1.3. CONSUMMATION OF THE MERGER......................................................... 2
SECTION 1.4. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.......................... 2
SECTION 1.6. COMPANY STOCK PLANS; WARRANTS...................................................... 3
SECTION 1.7. PAYMENT FOR SHARES................................................................. 3
SECTION 1.8. DISSENTING SHARES.................................................................. 5
SECTION 1.9. SUBSEQUENT ACTIONS................................................................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 5
SECTION 2.1. ORGANIZATION AND QUALIFICATION..................................................... 5
SECTION 2.2. CHARTER DOCUMENTS.................................................................. 6
SECTION 2.3. CAPITALIZATION..................................................................... 6
SECTION 2.4. AUTHORITY; BOARD APPROVAL.......................................................... 6
SECTION 2.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS......................................... 7
SECTION 2.6. COMPLIANCE; PERMITS................................................................ 8
SECTION 2.7. SEC REPORTS; FINANCIAL STATEMENTS.................................................. 8
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS............................................... 9
SECTION 2.9. NO UNDISCLOSED LIABILITIES......................................................... 9
SECTION 2.10. ABSENCE OF LITIGATION.............................................................. 9
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS...................................... 9
SECTION 2.12. EMPLOYMENT MATTERS................................................................. 11
SECTION 2.13. INFORMATION SUPPLIED............................................................... 11
SECTION 2.14. TITLE TO PROPERTY.................................................................. 11
SECTION 2.15. TAXES.............................................................................. 12
SECTION 2.16. ENVIRONMENTAL MATTERS.............................................................. 12
SECTION 2.17. BROKERS............................................................................ 13
SECTION 2.18. FULL DISCLOSURE.................................................................... 13
SECTION 2.19. OPINION OF FINANCIAL ADVISOR....................................................... 13
SECTION 2.20. INTELLECTUAL PROPERTY.............................................................. 13
SECTION 2.21. INTERESTED PARTY TRANSACTIONS...................................................... 14
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SECTION 2.22. INSURANCE.......................................................................... 14
SECTION 2.23. VOTE REQUIRED...................................................................... 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO...................................... 15
SECTION 3.1. ORGANIZATION AND QUALIFICATION..................................................... 15
SECTION 3.2. AUTHORITY.......................................................................... 15
SECTION 3.3. NON-CONTRAVENTION.................................................................. 15
SECTION 3.4. GOVERNMENTAL APPROVALS............................................................. 16
SECTION 3.5. BROKERS............................................................................ 16
SECTION 3.6. FINANCING.......................................................................... 16
SECTION 3.7. INFORMATION SUPPLIED............................................................... 16
ARTICLE IV CERTAIN COVENANTS....................................................................... 16
SECTION 4.1. CONDUCT OF THE COMPANY'S BUSINESS.................................................. 16
SECTION 4.2. ACCESS, DISCLOSURE, PUBLIC ANNOUNCEMENTS........................................... 18
SECTION 4.3. CONSENTS AND APPROVALS; FURTHER ASSURANCES......................................... 19
SECTION 4.4. INQUIRIES AND NEGOTIATIONS......................................................... 20
SECTION 4.5. NOTIFICATION OF CERTAIN MATTERS.................................................... 21
SECTION 4.6. FIRPTA CERTIFICATE................................................................. 21
SECTION 4.7. CERTAIN EMPLOYEE BENEFIT ARRANGEMENTS.............................................. 21
SECTION 4.8. EMPLOYMENT AGREEMENTS.............................................................. 22
ARTICLE V ADDITIONAL AGREEMENTS................................................................... 22
SECTION 5.3. CONSENTS; APPROVALS................................................................ 22
SECTION 5.4. INDEMNIFICATION.................................................................... 23
SECTION 5.5. TARGETTI (USA), LLC................................................................ 23
ARTICLE VI CONDITIONS TO THE MERGER................................................................ 24
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER......................... 24
SECTION 6.2. CONDITIONS TO PARENT'S AND NEWCO'S OBLIGATIONS TO EFFECT THE MERGER................ 24
SECTION 6.3. CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE MERGER........................ 25
ARTICLE VII TERMINATION AND ABANDONMENT............................................................. 25
SECTION 7.1. TERMINATION AND ABANDONMENT........................................................ 25
SECTION 7.2. EFFECT OF TERMINATION.............................................................. 26
ARTICLE VIII MISCELLANEOUS........................................................................... 26
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SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES...................................... 26
SECTION 8.2. EXPENSES, ETC...................................................................... 26
SECTION 8.3. PUBLICITY.......................................................................... 27
SECTION 8.4. EXECUTION IN COUNTERPARTS.......................................................... 27
SECTION 8.5. NOTICES............................................................................ 27
SECTION 8.6. WAIVERS............................................................................ 28
SECTION 8.7. ENTIRE AGREEMENT................................................................... 28
SECTION 8.8. APPLICABLE LAW..................................................................... 28
SECTION 8.9. SPECIFIC PERFORMANCE............................................................... 28
SECTION 8.10. BINDING EFFECT, BENEFITS........................................................... 28
SECTION 8.11. ASSIGNABILITY...................................................................... 29
SECTION 8.12. AMENDMENTS......................................................................... 29
SECTION 8.13. HEADINGS........................................................................... 29
ANNEX I DEFINED TERMS......................................................................................... 1
EXHIBIT A-1 to A-8 FORMS OF VOTING AGREEMENTS
EXHIBIT B FORM OF PRESS RELEASE
EXHIBIT C-1 EMPLOYMENT AGREEMENT OF XXXXXXXX X. XXXXX
EXHIBIT C-2 EMPLOYMENT AGREEMENT OF XXXXXXX XXXXXX
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
September 17, 1999, is entered into by and among Targetti Xxxxxx S.p.A., an
Italian corporation ("Parent"), Xxxxxxxx Acquisition Corp., a California
corporation and a wholly-owned subsidiary of Parent ("Newco"), and Tivoli
Industries, Inc., a California corporation (the "Company" and, collectively with
Parent and Newco, the "Parties"). The Company and Newco are hereinafter
sometimes referred to as the "Constituent Corporations." Certain capitalized
terms used herein are defined in Annex I hereto.
RECITALS:
WHEREAS, the Boards of Directors of Parent, Newco and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which Newco would merge with and
into the Company and the Company would become a wholly-owned subsidiary of
Parent (the "Merger"); and
WHEREAS, concurrently herewith Parent has entered into voting
agreements in the forms attached hereto as Exhibits A-1 through A-8
(collectively, the "Voting Agreements"), with each of Xxxxxxxx X. Xxxxx and
Xxxxxxx Xxxxx, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx, Intelite
International N.V., Xxxxx X. Xxxx, Xxxxxx X. Xxxxxxxxxx and Xxxxxx X. Xxxxxxxxxx
and Cherry X. Xxxxxxxxxx, as trustees for the benefit of the Xxxxxxxxxx Family
Intervivos Trust, pursuant to which such persons have agreed, subject to certain
conditions, to vote the shares of Company Common Stock owned by them in favor of
the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the Parties hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER.
Subject to the terms and conditions of this Agreement, at the Effective
Time, as defined below, in accordance with this Agreement and the California
General Corporation Law (the "CGCL"), Newco shall be merged with and into the
Company. Effective upon the Merger, the separate existence of Newco (except as
it may be continued by operation of law) shall cease, and the Company shall
continue as the surviving corporation (the "Surviving Corporation").
SECTION 1.2. EFFECT OF THE MERGER.
Upon the effectiveness of the Merger, the Surviving Corporation shall
succeed to and assume all the rights and obligations of the Company and Newco in
accordance with the CGCL, and the Merger shall otherwise have the effects set
forth in Section 1107 of the CGCL.
SECTION 1.3. CONSUMMATION OF THE MERGER.
The closing (the "Closing") of the Merger will take place as soon as
practicable after the satisfaction or waiver of the conditions to the
obligations of the parties to effect the Merger set forth
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herein, provided that this Agreement has not been terminated previously, at the
offices of Xxxxxx & Xxxxx LLP, 200 Park Avenue, New York, New York, or such
other location as the Parties may agree. On the date of the Closing (the
"Closing Date"), the Parties will cause the Merger to be consummated by filing
with the Secretary of State of the State of California a properly executed
agreement of merger in accordance with the CGCL which shall be effective upon
filing or on such later date as may be specified therein (the time of such
effectiveness being the "Effective Time").
SECTION 1.4. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
The Articles of Incorporation of Newco in effect at the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter amended in accordance with the provisions thereof and as provided by
the CGCL. The Bylaws of Newco in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation, until thereafter amended in accordance with
the provisions thereof and the Articles of Incorporation of the Surviving
Corporation and as provided by the CGCL. From and after the Effective Time and
until their respective successors are duly elected or appointed and qualified,
(a) the persons listed on Schedule 1.4(a) shall be the directors of the
Surviving Corporation and (b) the persons listed on Schedule 1.4(b) shall be the
officers of the Surviving Corporation.
SECTION 1.5. EFFECT ON SECURITIES.
At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof:
(a) Capital Stock of Newco. Each issued and outstanding share of common
stock, par value $0.001 per share, of Newco ("Newco Common Stock") shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $0.001 per share, of the Surviving Corporation ("Surviving
Corporation Common Stock"). Each certificate representing outstanding shares of
Newco Common Stock shall at the Effective Time represent an equal number of
shares of Surviving Corporation Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by Parent and
Subsidiaries. All shares of common stock, par value $0.001 per share, of the
Company ("Company Common Stock") that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by any Subsidiary of the Company,
Parent, Newco or any other wholly-owned Subsidiary of Parent shall be canceled
and retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock. Each issued and outstanding
share of Company Common Stock (other than shares to be canceled in accordance
with Section 1.5(b) and other than Dissenting Shares) shall be converted into
the right to receive Four Dollars and Fifty Cents ($4.50) in cash (the "Merger
Consideration"). All such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration, upon the surrender of such certificate in accordance with Section
1.7, without interest.
SECTION 1.6. COMPANY STOCK PLANS; WARRANTS.
(a) All outstanding Company Stock Options, whether or not then vested or
exercisable, shall be made fully vested and exercisable and canceled by the
Company immediately before the Effective Time, and thereafter, the holders' sole
right shall be to, and the holders thereof shall, receive from the
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Company, for each share of Company Common Stock subject to such Company Stock
Option, an amount, if any, in cash equal to the difference between the Merger
Consideration and the exercise price per share of such Company Stock Option,
which amount, shall be paid by the Company at the time such option is canceled.
The Company will use its reasonable commercial efforts to obtain any necessary
consents and make any amendments to the terms of the Option Plans to the extent
such consents or amendments are necessary to give effect to the foregoing. All
applicable withholding taxes attributable to the payments made hereunder shall
be deducted from the amounts payable under this Section 1.6(a).
(b) All outstanding warrants to purchase Company Common Stock shall,
following the Effective Time, be exercisable only for an amount of cash equal to
the Warrant Consideration and the holders of such warrants shall be entitled to
receive, upon surrender to the Paying Agent of the warrant certificates for
cancellation, cash in an amount, if any, equal to the Warrant Consideration. The
Company shall take all actions necessary to ensure that following the Effective
Time (i) the warrants shall represent only the right to receive the Warrant
Consideration in lieu of shares of Company Common Stock issuable upon exercise
thereof, (ii) all warrant agreements and warrant certificates shall be
terminated and cancelled, and (iii) no party to any warrant agreement or holder
of a warrant certificate shall have the right to acquire any capital stock of
the Company, Parent, the Surviving Corporation or any of their respective
Subsidiaries. As used herein "Warrant Consideration" means an amount, if any,
per warrant equal to the product of (i) the number of shares of Company Common
Stock issuable upon exercise of such warrant and (ii) the difference between the
Merger Consideration and the exercise price per share of Company Common Stock,
without interest, which amount shall be paid from and after the Effective Time.
SECTION 1.7. PAYMENT FOR SHARES.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as paying agent (the "Paying Agent") for the
purpose of exchanging certificates representing issued and outstanding shares of
Company Common Stock and warrants (each, a "Certificate") for the Merger
Consideration or the Warrant Consideration, as the case may be. Parent or Newco
shall, from time to time, make available or cause to be made available to the
Paying Agent funds in such amounts and at times necessary for the payment of the
Merger Consideration and the Warrant Consideration, in the manner provided
herein. The Paying Agent shall invest portions of the Merger Consideration and
the Warrant Consideration, as Parent directs (it being understood that any and
all interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be the property of, and shall be turned over to, Parent),
provided that such investments shall be in obligations of or guaranteed by the
United States of America or of any agency thereof and backed by the full faith
and credit of the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Xxxxx'x Investors Services, Inc. or Standard &
Poor's Corporation, respectively, or in deposit accounts, certificates of
deposit or banker's acceptances of, repurchase or reverse repurchase agreements
with, or Eurodollar time deposits purchased from, commercial banks with capital,
surplus and undivided profits aggregating in excess of US$100 million (based on
the most recent financial statements of such bank which are then publicly
available at the Securities and Exchange Commission (the "SEC") or otherwise).
(b) Letter of Transmittal. Promptly after the Effective Time, the Surviving
Corporation shall instruct the Paying Agent to mail to each holder of record of
one or more shares of Company Common Stock or warrant certificates, (i) a letter
of transmittal, which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent, and which shall have such other provisions as
Parent shall specify, and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration or the Warrant
Consideration, as the case may be.
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(c) Entitlement of Shares. Upon surrender of a Certificate for cancellation
to the Paying Agent, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration or the Warrant Consideration, as the case may be, payable in
respect of shares of Company Common Stock or warrants previously represented by
such Certificates, after giving effect to any withholding tax required by
Applicable Law, and the Certificates so surrendered shall forthwith be canceled.
Until surrendered as contemplated by this Section 1.7, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration or the Warrant Consideration, as the case may
be. No interest will be paid or accrued on the Merger Consideration or Warrant
Consideration.
(d) Payments to Other Persons. If Merger Consideration or Warrant
Consideration is to be paid to any person other than the person in whose name
the Certificates for shares of Company Common Stock or warrants surrendered for
conversion are registered, it shall be a condition of the payment that such
Certificates be properly endorsed and the signatures thereon properly guaranteed
and otherwise in proper form for transfer and that the person requesting such
payment shall have paid to the Paying Agent any transfer or other taxes required
by reason of the delivery of Merger Consideration or Warrant Consideration to a
person other than the registered holder of such Certificate, or shall have
established to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable.
(e) Termination. Any portion of the exchange funds held by the Paying Agent
for delivery pursuant to this Section 1.7 and unclaimed at the end of six months
after the Effective Time shall be paid or delivered to the Surviving
Corporation, upon demand, and any holders of Certificates who have not
theretofore complied with this Section 1.7 shall, subject to Applicable Law,
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration or the Warrant Consideration, as the case may be, in respect of
shares of Company Common Stock or warrants. Notwithstanding the foregoing, none
of Parent, the Surviving Corporation or the Paying Agent shall be liable to any
holder of shares of Company Common Stock or warrants for any amount paid to any
Governmental Authority pursuant to any applicable abandoned property, escheat or
similar law. Any amounts unclaimed by holders of shares of Company Common Stock
or warrants two years after the Effective Time (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to or become the
property of any Governmental Authority) shall, to the extent permitted by
Applicable Law, become the property of the Surviving Corporation free and clear
of any claims or interest of any person previously entitled thereto.
(f) Stock Transfer Books; No Further Ownership Rights. At and after the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registrations of transfers of shares of Company Common
Stock thereafter on the records of the Company. From and after the Effective
Time, the holders of Certificates evidencing ownership of shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares, except as otherwise
provided for herein or by Applicable Law. If, after the Effective Time,
Certificates representing shares of Company Common Stock are presented to the
Surviving Corporation, Parent or the Paying Agent for any reason, they shall be
canceled and exchanged for the Merger Consideration as provided in this Section
1.7.
SECTION 1.8. DISSENTING SHARES.
(a) Notwithstanding any provisions of this Agreement to the contrary, any
shares of Company Common Stock held by a holder who has exercised such holder's
dissenters' rights in accordance with the CGCL and who, as of the Effective
Time, has not effectively withdrawn or lost such dissenters' rights ("Dissenting
Shares"), shall not be converted into or represent a right to receive the
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Merger Consideration, but the holder of the Dissenting Shares shall only be
entitled to such rights as are granted by the CGCL.
(b) Notwithstanding the provisions of subsection (a) above, if any holder
of shares of Company Common Stock who demands dissenters' rights with respect to
such shares shall effectively withdraw or lose (through the failure to perfect
or otherwise) such holder's dissenters' rights under the CGCL, then, as of the
Effective Time or the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive the
Merger Consideration upon surrender of the applicable Certificate(s) as provided
herein.
(c) The Company shall give Parent (i) prompt written notice of any written
demands for payment with respect to any shares of Company Common Stock pursuant
to dissenters' rights, and any withdrawals of such demands or losses of such
rights, and any other instruments served pursuant to the CGCL, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for dissenters' rights. The Company shall not, except with the prior
written consent of Parent, voluntarily make any payment with respect to demands
for dissenters' rights or offer to settle or settle any such demands.
SECTION 1.9. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either of the Constituent Corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized to execute and deliver, in the name
and on behalf of each of the Constituent Corporations or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of the Constituent Corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Newco that, except as
set forth in the written Company Disclosure Schedule previously delivered by the
Company to Parent:
SECTION 2.1. ORGANIZATION AND QUALIFICATION.
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite corporate power and authority
to own, lease and operate the properties it purports to own and to carry on its
business as it is now being conducted. Each of the Company and its Subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing, individually or in the aggregate, is not reasonably expected to have a
Material Adverse Effect.
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SECTION 2.2. CHARTER DOCUMENTS.
The Company has heretofore furnished to Parent a complete and correct
copy of the Company's Articles of Incorporation and Bylaws documents as in
effect on the date hereof. Each such charter document is in full force and
effect. The Company is not in violation of its charter documents.
SECTION 2.3. CAPITALIZATION.
The authorized capital stock of the Company consists of 10,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock, par
value $0.001 per share ("Company Preferred Stock"). As of June 30, 1999, (i)
1,236,723 shares of Company Common Stock were issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable, (ii) no
shares of Company Common Stock were held in the Company's treasury or by any
Subsidiary, (iii) no shares of Company Preferred Stock were issued and
outstanding and (iv) 492,161 shares of Company Common Stock were reserved for
future issuance pursuant to outstanding warrants to purchase Company Common
Stock and Company Stock Options granted pursuant to the Option Plans. Except as
set forth in Section 2.3 of the Company Disclosure Schedule, no shares of
Company Common Stock or other securities of the Company have been issued between
June 30, 1999 and the date hereof. Except as set forth in Section 2.3 or Section
2.11 of the Company Disclosure Schedule, there are no Company Stock Options,
warrants or other rights, agreements, arrangements or commitments of any
character granted by the Company relating to unissued shares of the Company or
of any Subsidiary or obligating the Company or any Subsidiary to issue or sell
any shares of, or other equity interests in, the Company or any Subsidiary. All
shares of Company Common Stock subject to issuance under the Option Plans and
warrants to purchase Company Common Stock, as aforesaid, upon issuance on the
terms and conditions specified in the applicable warrant agreement or Option
Plans, shall be duly authorized, validly issued, fully paid and nonassessable.
There are no obligations, contingent or otherwise, of the Company or of any
Subsidiary to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or the shares of any Subsidiary or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity. None of the Company Stock Options, warrants,
rights, agreements, arrangements or commitments identified in Section 2.3 or
2.11 of the Company Disclosure Schedule provide that, absent action by the
Company's Board of Directors (the "Company Board") or a committee thereof, upon
exercise or conversion the holder thereof shall receive cash, and no such action
of the Company Board or a committee thereof has been taken. Except as set forth
in Section 2.3 of the Company Disclosure Schedule, all of the outstanding shares
of each Subsidiary (and all shares to be issued prior to the Effective Time) are
duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by the Company free and clear of all security interests, liens,
claims, pledges, agreements, limitations in the Company's voting rights, charges
or other encumbrances of any nature whatsoever (collectively, "Liens").
SECTION 2.4. AUTHORITY; BOARD APPROVAL.
(a) The Company has full corporate power and authority to enter into this
Agreement and, subject to obtaining the Company Stockholders' Approval, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, subject to the obtaining of the Company
Stockholders' Approval constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, or other similar laws, now or hereafter in effect, affecting the
enforcement of creditors' rights generally, and except that the availability of
equitable remedies, including specific performance, may be subject to the
discretion of the court before which any proceeding therefor may be brought.
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(b) The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly and validly approved by the Company Board (including
approval by a Committee of the Company Board (the "Committee") consisting of the
Company's independent directors), the Company Board and the Committee have
recommended adoption of this Agreement by the stockholders of the Company and
directed that this Agreement be submitted to the stockholders of the Company for
their consideration, and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby, other than obtaining the
Company Stockholders' Approval.
SECTION 2.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list of
all of the material agreements and instruments to which the Company currently is
party or by which the Company currently is bound that either (i) have been or
were required to be filed as an exhibit to the Company's periodic reports under
the Exchange Act as "material contracts" or "instruments defining the rights of
security holders," (ii) were entered into by the Company after the date of the
periodic report most recently filed by the Company under the Exchange Act or
(iii) relate to any joint ventures or joint development projects involving the
Company, non-competition agreements, distribution agreements or employment or
termination of employment of any executive officers of the Company
(collectively, the "Material Contracts"). The Company has made available to
Parent true, correct and complete copies in all material respects of each
Material Contract. There are no material agreements to which any Subsidiary is a
party or by which any Subsidiary is currently bound which has been or is
required to be filed as an exhibit to the Company's periodic reports under the
Exchange Act.
(b) Except as set forth in Section 2.5(b) of the Company Disclosure
Schedule, (i) the Company has not breached, is not in default under and has not
received written notice of any breach of or default under any Material Contract,
except for any such breach or default which is not reasonably expected to have a
Material Adverse Effect, (ii) to the best knowledge of the Company, no other
party to any of the Material Contracts has breached or is in default of any of
its obligations thereunder, except for any such breach or default which is not
reasonably expected to have a Material Adverse Effect and (iii) each of the
Material Contracts is in full force and effect.
(c) Except as set forth in Section 2.5(c) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, and the
consummation of the transactions contemplated hereby will not, (i) conflict with
or violate the Articles of Incorporation or Bylaws of the Company or any
Subsidiary, (ii) subject to the obtaining of the Company Stockholders' Approval,
conflict with or violate any Applicable Law relating to the Company or any
Subsidiary, or by which any of their properties are bound or affected,
including, without limitation, any anti-takeover or similar law, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any Material
Contract, or result in the creation of a lien or encumbrance on any of the
properties or assets of the Company or any Subsidiary.
(d) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require the
Company or any Subsidiary to obtain any consent, approval, authorization or
permit of, or to make any filing with or notification to, any governmental or
regulatory authority, domestic or foreign, except (i) for applicable
requirements, if any, of the Securities Act, the Exchange Act, the rules of the
National Association of Securities Dealers
12
("NASD"), and state securities laws ("Blue Sky Laws"), (ii) the rules and
regulations thereunder, and the filing and recordation of appropriate documents
relating to the Merger as required by the CGCL, (iii) for the filing of the
Proxy Statement with the SEC pursuant to the Exchange Act, (iv) the filing of
reports with the U.S. Department of Commerce regarding foreign direct investment
in the United States, and (v) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger, or otherwise prevent or
delay the Company from performing its obligations under this Agreement and is
not reasonably expected to have a Material Adverse Effect.
SECTION 2.6. COMPLIANCE; PERMITS.
(a) Except as set forth in Section 2.6 of the Company Disclosure Schedule,
the Company and each Subsidiary holds all permits, licenses, franchises,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business conducted by them as it is now being conducted, except where failure to
obtain any of the aforementioned is not reasonably expected to have a Material
Adverse Effect on such entity (collectively, the "Company Permits"). The Company
and each Subsidiary are in compliance with the terms of the Company Permits.
(b) Except as set forth in Section 2.6 of the Company Disclosure Schedule,
the Company and each Subsidiary are not in conflict with, or in default or
violation of any Applicable Law relating to the Company or any Subsidiary, or by
which their properties are bound or affected other than any such conflict,
default or violation which is not reasonably expected to have a Material Adverse
Effect on such entity.
SECTION 2.7. SEC REPORTS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required to be
filed with the SEC since its initial public offering on September 21, 1994 and
has made available to Parent (i) its quarterly reports on Form 10-QSB for the
periods ended June 30, 1999, March 31, 1999 and December 31, 1998 and its annual
report on Form 10-KSB for the fiscal years ended September 30, 1998, 1997 and
1996, respectively, (ii) all proxy statements relating to the Company's meetings
of shareholders (whether annual or special) held since its initial public
offering, (iii) all other reports or registration statements filed by the
Company with the SEC since its initial public offering, and (iv) all amendments
and supplements to all such reports and registration statements filed by the
Company with the SEC (collectively, the "SEC Reports"). The SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. No Subsidiary is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the SEC Reports was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto) and each fairly presented the consolidated financial position
of the Company and its Subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows and shareholder equity for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount.
13
SECTION 2.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since September 30, 1998, except as set forth in Section 2.8 of the
Company Disclosure Schedule or the SEC Reports, the Company and each Subsidiary
has conducted its business in the ordinary course and there has not occurred:
(a) any Material Adverse Effect; (b) any amendments or changes in the Articles
of Incorporation or Bylaws of the Company or any Subsidiary; (c) any damage to,
destruction or loss of any asset of the Company (whether or not covered by
insurance) or any Subsidiary which damages, destruction or loss is reasonably
expected to have a Material Adverse Effect; (d) any change by the Company or any
Subsidiary in its accounting methods, principles or practices; (e) any
evaluation of any of the Company's or any Subsidiary's assets, including,
without limitation, writing down the value of inventory or writing off notes or
accounts receivable; (f) any other action or event that would have required the
consent of Parent pursuant to Section 4.1 had such action or event occurred
after the date of this Agreement, other than the one-for-three reverse stock
split which became effective March 26, 1999 and the Company's stockholders
approval of a reincorporation in the State of Delaware; or (g) any sale, pledge,
disposition of or encumbrance upon a material amount of property of the Company
or any Subsidiary, except in the ordinary course of business and consistent with
past practice.
SECTION 2.9. NO UNDISCLOSED LIABILITIES.
Except as is disclosed in Section 2.9 of the Company Disclosure
Schedule or the SEC Reports, neither the Company nor any Subsidiary has any
liabilities (absolute, accrued, contingent or otherwise) which are, in the
aggregate, material to the business, operations or financial condition of the
Company and its Subsidiaries taken as a whole, except liabilities (a) adequately
provided for in the Company's audited balance sheet (including any related notes
thereto) for the fiscal year ended September 30, 1998 (the "1998 Company Balance
Sheet"); or (b) incurred in the ordinary course of business and not-required
under GAAP to be reflected on the 1998 Company Balance Sheet and liabilities
incurred in connection with this Agreement.
SECTION 2.10. ABSENCE OF LITIGATION.
Except as set forth in Section 2.10 of the Company Disclosure Schedule
or the SEC Reports, (a) there are no claims, actions, suits, proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company or any Subsidiary, or any properties or rights of the
Company or any Subsidiary, before any court, arbitrator or administrative,
governmental or regulatory authority or body, domestic or foreign, and (b) there
is no judgment, decree, injunction, rule or order of any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, outstanding against the Company or any Subsidiary.
SECTION 2.11. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.
(a) Section 2.11 of the Company Disclosure Schedule lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all employment, bonus, incentive
compensation, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, equity (or equity-based), leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, medical, accident,
disability, workmen's compensation or other insurance, severance, separation,
termination, change of control or other benefit plan, agreement (including any
collective bargaining agreement), practice, policy or arrangement of any kind,
whether written or oral, and whether or not subject to ERISA for the benefit of
or relating to any employee of the Company or any Subsidiary, any trade or
business (whether or not incorporated) which is a member of a controlled group
including the Company or which is under common control with the Company (a
"Company ERISA
14
Affiliate"), as well as each plan with respect to which the Company or a Company
ERISA Affiliate could incur liability under applicable law (if such plan has
been or were terminated) (together, the "Company Employee Plans"), excluding
agreements under which the Company has no remaining monetary obligations. A copy
of each such written Company Employee Plan has been made available to Parent.
(b) Except as set forth in Section 2.11(b) of the Company Disclosure
Schedule, (i) none of the Company Employee Plans promises or provides retiree,
medical, life or other retiree welfare or superannuated benefits to any person
other than benefit continuation rights under the Consolidated Omnibus
Reconciliation Act of 1985, as amended; (ii) there has been no "prohibited
transaction" (as such term is defined in Section 406 or 407 of ERISA and Section
4975 of the Code) with respect to any Company Employee Plan, which could result
in any material liability of the Company or of any subsidiary; (iii) all Company
Employee Plans have been administered, are in compliance in all material
respects with the requirements prescribed by ERISA, the Code and any and all
statutes, orders, or governmental rules and regulations currently in effect with
respect thereto (including all other applicable requirements for notification to
participants or the Department of Labor, Pension Benefit Guaranty Corporation,
U.S. Internal Revenue Service (the "IRS") or Secretary of the Treasury), and the
Company and each subsidiary have performed all material obligations required to
be performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any default or violation by any other
party of, any of the Company Employee Plans; (iv) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is the subject of a favorable
determination letter from the IRS, and nothing has occurred which may reasonably
be expected to impair such determination; (v) to the knowledge of the Company
and its Subsidiaries, there are no material pending, threatened or anticipated
claims involving any of the Company Employee Plans; (vi) there are no material
outstanding liabilities of any Company Employee Plan other than liabilities for
benefits to be paid to participants in such Company Employee Plan and their
beneficiaries in accordance with the terms of such Company Employee Plan; (vii)
full payment has been made of all amounts which the Company or any of its
Subsidiaries were required to have paid as a contribution to the Company
Employee Plans as of the last day of the most recent fiscal year of each of the
Company Employee Plans ended prior to the date of this Agreement, and none of
the Company Employee Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Company
Employee Plan ended prior to the date of this Agreement; (viii) neither the
Company nor any ERISA Affiliate has ever maintained, contributed to or had a
liability with respect to (A) any employee benefit plan subject to Section 412
of the Code, (B) Title IV of ERISA or (C) any "multiemployer plan" as defined in
Section 3(37) of ERISA; and (ix) neither the execution and delivery of this
Agreement nor the consummation of the transaction contemplated hereby
constitutes a change in control or has or will accelerate benefits under any
Company Employee Plan.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true
and complete list of each current or former employee, consultant, vendor,
customer, officer or director of the Company or of any Subsidiary who holds any
Company Stock Option as of the date hereof, together with the number of shares
of Company Common Stock subject to such option, the date of grant of such
option, the extent to which such option is vested (or will become vested within
six months from the date hereof, or as a result of, the Merger), the option
price of such option and the expiration date of such option. Section 2.11(c) of
the Company Disclosure Schedule also sets forth the total number of such
options.
(d) Except as set forth in Section 2.11(d) of the Company Disclosure
Schedule, the Company has made available to Parent (i) copies of all employment
agreements with officers of the Company or any Subsidiary; (ii) copies of all
agreements with consultants who are individuals obligating the Company or any
Subsidiary to make annual cash payments in an amount exceeding $50,000; (iii) a
schedule listing all officers and employees of the Company or any Subsidiary who
have executed a non-competition
15
agreement with the Company or any Subsidiary; (iv) copies (or descriptions) of
all severance agreements, programs and policies of the Company and each
Subsidiary with or relating to its employees, excluding programs and policies
required to be maintained by Applicable Law, and (v) copies of all plans,
programs, agreements and other arrangements of the Company and any Subsidiary
with or relating to its employees which contain change in control provisions.
SECTION 2.12. EMPLOYMENT MATTERS.
Except as set forth in Section 2.12 of the Company Disclosure Schedule,
(a) there are no controversies pending or, to the knowledge of the Company or
any Subsidiary, threatened, between the Company or any Subsidiary, on the one
hand, and any of its employees, on the other hand, which controversies are
reasonably expected to have a Material Adverse Effect; (b) neither the Company
nor any Subsidiary is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or any
Subsidiary nor does the Company know of any activities or proceedings of any
labor union to organize any such employees; and (c) the Company does not have
any knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of the Company or any Subsidiary.
SECTION 2.13. INFORMATION SUPPLIED.
Subject to the accuracy of the representations of Parent in Article
III, the information supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement will not, on the date the Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed to shareholders, at
the time of the Company Stockholders' Meeting, or at the Effective Time, contain
any statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact, or
shall omit to state any material fact necessary in order to make the statements
made therein not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Stockholders' Meeting which has
become false or misleading. If at anytime prior to the Effective Time any event
relating to the Company or any of its respective affiliates, officers or
directors should be discovered by the Company which should be set forth in an
amendment or supplement to the Proxy Statement, the Company shall promptly
inform Parent and Newco. The Proxy Statement shall comply in all material
respects as to form and substance with the requirements of the Securities Act,
the Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Parent or Newco which is contained in any of the
foregoing documents.
SECTION 2.14. TITLE TO PROPERTY.
The Company and each Subsidiary owns and leases only the real property
set forth on Section 2.14 of the Company Disclosure Schedule. Except as set
forth in Section 2.14 of the Company Disclosure Schedule, the Company and each
Subsidiary has good and marketable title to all of its properties and assets,
free and clear of all Liens except Liens for taxes not yet due and payable and
such Liens or other imperfections of title, if any, as do not detract from the
value of or interfere with the present use of the property affected thereby and
which, individually or in the aggregate, are not reasonably expected to have a
Material Adverse Effect; and, to the knowledge of the Company, all leases
pursuant to which the Company or any Subsidiary leases from others material
amounts of real or personal property, are in good standing, valid and effective
in accordance with their respective terms, and there is not, to the knowledge of
the Company, under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default and in respect of which the Company or any Subsidiary, as the
case may be, has not taken adequate steps to
16
prevent such a default from occurring) except where the lack of such validity
and effectiveness or the existence of such default or event of default is not
reasonably expected to have a Material Adverse Effect.
SECTION 2.15. TAXES.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes,
fees, levies, duties, tariffs, imposts and governmental impositions or charges
of any kind in the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without limitation) (i)
income, franchise, profits, gross receipts, ad valorem, net worth, goods and
services, fringe benefits, withholding, sales, use, service, real or personal
property, special assessments, license, payroll, withholding, employment, social
security, accident compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes and (ii) interest, penalties, additional taxes and additions to tax
imposed with respect thereto; and "Tax Returns" shall mean returns, reports and
information statements with respect to Taxes required to be filed with the IRS
or any other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns.
(b) The Company has furnished to Parent all Tax Returns filed by the
Company and its Subsidiaries for all periods ending on or after December 31,
1995. Except as disclosed in Section 2.15(b) of the Company Disclosure Schedule,
the Company and each Subsidiary has filed all United States federal income Tax
returns and all other material Tax Returns required to be filed by them, and
have duly paid or made adequate provision on their books for the payment of all
taxes which have been incurred or are due and payable. Except as disclosed in
Section 2.15(b) of the Company Disclosure Schedule (i) there are no pending
audits, examinations or proposed audits or examinations of any tax returns filed
by the Company or by any Subsidiary, (ii) there are no other Taxes that would be
due if asserted by a taxing authority, except with respect to which the Company
or a Subsidiary, as the case may be, is maintaining reserves to the extent
currently required and (iii) neither the Company nor any Subsidiary has given or
been requested to give waivers or extensions of any statute of limitations
relating to the payment of Taxes for which the Company or any Subsidiary may be
liable. Except as set forth on Section 2.15(b) of the Company Disclosure
Schedule, as of the date of this Agreement the consolidated Tax Returns of the
Company have not been audited by the IRS (or the appropriate statute of
limitations has expired) in the last five fiscal years.
(c) Neither the Company nor any Subsidiary is a party to any agreement
providing for the allocation, payment or sharing of taxes among the Company and
any Subsidiary, on the one hand, and any third parties, on the other hand.
Neither the Company nor any Subsidiary has an application pending with respect
to any Tax requesting permission for a change in accounting method.
SECTION 2.16. ENVIRONMENTAL MATTERS.
Except as set forth in Section 2.16 of the Company Disclosure Schedule,
the Company and each Subsidiary (a) obtained all applicable permits, licenses
and other authorizations which are required under federal, state, foreign or
local laws relating to pollution or protection of the environment, including
laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic materials or wastes into ambient
air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes ("Environmental Approvals"), (b) is in material compliance
with all terms and conditions of the Environmental Approvals, and also is in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder,
17
(c) as of the date hereof, is not aware of nor has it received notice of
any past or present violation relating to or any event, condition, circumstance,
activity, practice, incident, action or plan which is reasonably likely to
interfere with or prevent continued compliance with or which would give rise to
any common law or statutory liability, or otherwise form the basis of any claim,
action, suit or proceeding, based on or resulting from the Company's or any
Subsidiary's manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste and (d) taken all actions necessary under applicable requirements of
federal, state, foreign and local laws, rules or regulations to register any
products or materials required to be registered by the Company or any Subsidiary
thereunder.
SECTION 2.17. BROKERS.
Except as set forth in Section 2.17 of the Company Disclosure Schedule,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by or on behalf of the Company.
SECTION 2.18. FULL DISCLOSURE.
No statement contained in any certificate or schedule furnished or to
be furnished by the Company to Parent or Newco pursuant to the provisions of
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in the light of the
circumstances under which it was made, to make the statements herein or therein
not misleading.
SECTION 2.19. OPINION OF FINANCIAL ADVISOR.
The Company has received the opinion of its financial advisor, L.H.
Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc., to the effect that, as of September
17, 1999, the Merger Consideration to be received by holders of the Company
Common Stock is fair, from a financial point of view, to the Company's
shareholders, and the Company has delivered a written copy of such opinion to
the Parent. L.H. Friend, Weinress, Xxxxxxxx & Xxxxxxx, Inc. has consented to the
use of its name and its fairness opinion in the Proxy Statement.
SECTION 2.20. INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 2.20(a) of the Company Disclosure
Schedule, the Company and each Subsidiary, directly or indirectly, owns, or
licenses or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how and tangible or intangible proprietary
information or material that are used in any product or service of the Company
or any Subsidiary, previously sold or now being sold by the Company or any
Subsidiary, now in beta phase by the Company or any Subsidiary or otherwise in
or material to the business of the Company or any Subsidiary, as currently
conducted (the "Intellectual Property Rights").
(b) Section 2.20(b) of the Company Disclosure Schedule sets forth (i) each
patent owned by the Company and each Subsidiary and (ii) each license agreement
under which the Company or any Subsidiary licenses, either to or from a third
party, Intellectual Property Rights on an exclusive or non-exclusive basis.
Except as set forth in Section 2.20(b) of the Company Disclosure Schedule, the
Company or a Subsidiary, as the case may be, is the sole and exclusive owner of
the Intellectual Property Rights and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Intellectual Property Rights
are being used. Except as set forth in
18
Section 2.20(b) of the Company Disclosure Schedule, no claims with respect to
the Intellectual Property Rights have been asserted or, to the best knowledge of
the Company, are threatened by any Third Party: (i) to the effect that the
manufacture, sale, licensing, or use of any of the products or processes of the
Company or any Subsidiary infringes on any copyright, patent, trade xxxx,
service xxxx or trade secret of such person; (ii) against the use by the Company
or any Subsidiary of any Intellectual Property Rights; or (iii) challenging the
ownership by the Company or any Subsidiary or the validity of any of the
Intellectual Property Rights.
(c) Section 2.20(c) of the Company Disclosure Schedule sets forth all
registered trademarks, service marks and copyrights held by the Company or any
Subsidiary and each are valid and subsisting. To the knowledge of the Company,
there is no unauthorized use, infringement or misappropriation of any of the
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any Subsidiary. No Intellectual Property Right
or product or process of the Company or any Subsidiary is subject to any
outstanding decree, order, judgment, or stipulation restricting in any manner
the licensing thereof by the Company or any Subsidiary.
(d) Except as set forth in Section 2.20(d) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary is bound by any agreement which
restricts the Company or any Subsidiary from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographical
area, during any period of time or in any segment of the market.
SECTION 2.21. INTERESTED PARTY TRANSACTIONS.
Except as set forth in Section 2.21 of the Company Disclosure Schedule
or in the SEC Reports, since the date of the Company's most recent annual report
on Form 10-KSB for the fiscal year ended September 30, 1998, no event has
occurred that would be required to be reported as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
SECTION 2.22. INSURANCE.
The Company and each Subsidiary maintains fire and casualty, general
liability, business interruption, product liability and sprinkler and water
damage insurance with reputable insurance carriers that the Company believes to
be prudent for its business and are similar in character and amount to policies
carried by entities engaged in similar businesses. Except as set forth in
Section 2.22 of the Company Disclosure Schedule, there are no claims by the
Company or any Subsidiary under any such insurance as to which any insurance
company is denying liability or defending under a reservation of rights clause.
SECTION 2.23. VOTE REQUIRED.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Company Common Stock is the only vote of the holders of
Company Common Stock necessary to approve the Merger and the other transactions
contemplated hereby.
19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco, jointly and severally, represent and warrant to the
Company as follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION.
(a) Organization. Parent is a business entity duly organized, validly
existing and in good standing under the laws of the Republic of Italy. Newco is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California. Each of the Parent and Newco has all requisite
corporate power and authority and is in possession of all franchises, grants,
authorizations, licenses. permits, easements, consents, certificates, approvals
and orders necessary to own, or lease and operate its properties and assets and
to carry on its business as it is now being conducted. Each of Parent and Newco
is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction in which the character of the properties owned,
leased or operated by it, or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified is not
reasonably expected to have a material adverse effect on Parent's or Newco's
ability to perform its respective obligations hereunder.
(b) Newco Activities. Since the date of its incorporation, Newco has not
engaged in any activity other than in connection with or as contemplated by this
Agreement, the Offer and the Merger or in connection with arranging financing
required to consummate the transactions contemplated hereby.
SECTION 3.2. AUTHORITY.
Each of Parent and Newco has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Parent
and Newco and the consummation by Parent and Newco of the transactions
contemplated hereby have been duly authorized by Parent and Newco, and no other
corporate proceedings on the part of Parent or Newco (including, without
limitation, any action by their respective shareholders) are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and Newco and
constitutes a legal, valid and binding obligation of each of Parent and Newco,
enforceable against Parent and Newco in accordance with its terms, except as
such enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization, or other similar laws, now or hereafter in effect, affecting the
enforcement of creditors' rights generally, and except that the availability of
equitable remedies, including specific performance, may be subject to the
discretion of the court before which any proceeding therefor maybe brought.
SECTION 3.3. NON-CONTRAVENTION.
The execution and delivery of this Agreement by Parent and Newco and
the consummation by Parent and Newco of the transactions contemplated hereby
will not (i) conflict with any provision of their respective Articles of
Incorporation or Bylaws or equivalent organizational documents or (ii) result
(with the giving of notice or the lapse of time or both) in any violation of or
default or loss of a benefit under, or permit the acceleration of any obligation
under, any mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise or license or any Applicable Law applicable to
Parent or Newco or any of their respective properties, other than any such
violation, default, loss or acceleration that is not reasonably expected to
materially adversely affect the ability of Parent or Newco, as the case may be,
to perform its respective obligations hereunder.
20
SECTION 3.4. GOVERNMENTAL APPROVALS.
No filing, declaration or registration with, or permit, authorization,
consent or approval, of, any Governmental Authority is required to be made or
obtained by Parent or Newco in connection with the execution and delivery of
this Agreement by Parent or Newco or the consummation by Parent or Newco of the
transactions contemplated hereby, except for (i) the filing with the SEC of such
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (ii) the filing of the
applicable documents with the Secretary of State of the State of California, and
the filing of appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business, (iii) as may be
required by any applicable Blue Sky Laws, (iv) the filing of reports with the
U.S. Department of Commerce regarding foreign direct investment in the United
States, and (v) such other consents, approvals, orders, authorizations,
registrations, declaration, filings and notices the failure of which to be
obtained or made would not prevent or materially delay the consummation of the
transactions contemplated by this Agreement or the performance by Parent or
Newco of any of their respective material obligations hereunder or thereunder.
SECTION 3.5. BROKERS.
No person is entitled to any brokerage or finder's fee or commission in
connection with the transactions contemplated hereby as a result of any action
taken by or on behalf of Parent or Newco.
SECTION 3.6. FINANCING.
Parent has available to it cash, credit lines or other sources of
financing to provide the funds necessary for completion of the transactions
contemplated hereby.
SECTION 3.7. INFORMATION SUPPLIED.
None of the information supplied or to be supplied by Parent or Newco
for inclusion in the Proxy Statement will, at the time the Proxy Statement is
first mailed to the Company's shareholders or at the time of the Company
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
ARTICLE IV
CERTAIN COVENANTS
SECTION 4.1. CONDUCT OF THE COMPANY'S BUSINESS.
The Company covenants and agrees as to itself and its Subsidiaries
that, prior to the Effective Time, unless Parent shall otherwise consent in
writing or as otherwise expressly contemplated by this Agreement:
(a) the business of the Company and each Subsidiary shall be conducted only
in, and the Company shall not and shall cause each Subsidiary not to, take any
action except in, the ordinary course of business consistent with past practice;
(b) the Company shall not, directly or indirectly, and the Company shall
cause each Subsidiary not to do any of the following: (i) amend or propose to
amend its Articles of Incorporation or Bylaws or reincorporate in any
jurisdiction; (ii) split, combine or reclassify any issued and outstanding
21
shares of its capital stock, or declare, set aside or pay any dividend or other
distribution (payable in cash, stock, property or otherwise) with respect to
such shares;(iii) redeem, purchase, acquire or offer to acquire (or permit any
Subsidiary to redeem, purchase, acquire or offer to acquire) any shares of its
capital stock; or (iv) issue, sell, pledge, accelerate, modify the terms of or
dispose of, or agree to issue, sell, pledge, accelerate, modify the terms of or
dispose of, any additional shares of, or securities convertible or exchangeable
for, or any options, warrants, calls, commitments or rights of any kind to
acquire any shares of, its capital stock of any class or other property or
assets;
(c) the Company shall not, and the Company shall cause each Subsidiary not
to: (i) transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any material assets, except in the ordinary course of business consistent with
past practice; (ii) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any material assets; (iii) enter into or modify any Material
Contract, except in the ordinary course of business consistent with past
practice; (iv) terminate, modify, assign, waive, release or relinquish any
material rights or claims or amend any material rights or claims not in the
ordinary course of business consistent with past practice; (v) pay, discharge or
satisfy any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, in the
ordinary course of business, reflected or reserved against in, or contemplated
by, the consolidated financial statements of the Company included in the SEC
Reports; or (vi) settle or compromise any material claim, action, suit or
proceeding pending or threatened against the Company or any Subsidiary, or, if
the Company or any Subsidiary may be liable or obligated to provide
indemnification, against the Company's or any Subsidiary's directors or
officers, before any court, governmental agency or arbitrator;
(d) except as provided in this Agreement the Company shall not, and the
Company shall cause each Subsidiary not to: (i) incur or adversely modify any
material indebtedness or other liability; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (directly or indirectly, contingent or
otherwise) for the obligations of any other person; or (iii) make any loans,
advances or capital contributions to, or investments in, any other person (other
than loans from the Company to Subsidiaries or customary loans or advances to
employees in the ordinary course of business consistent with past practice);
(e) the Company shall not, and the Company shall cause each Subsidiary not
to, grant any increase in the salary or other compensation of its employees, or
grant any bonus to any employee or enter into any employment agreement or make
any loan to or enter into any material transaction of any other nature with any
employee of the Company or any Subsidiary, except in the ordinary course of
business consistent with past practices, or as contemplated by Section 1.6;
(f) the Company shall not, and the Company shall cause each Subsidiary not
to, except as contemplated by this Agreement or as may be required by Applicable
Law or, in the case of employees who are not executive officers of the Company,
in the ordinary course of business consistent with past practices: (i) adopt,
increase, accelerate the vesting of or payment of any amounts in respect of, or
otherwise amend, in any respect, any collective bargaining, bonus, profit
sharing, incentive or other compensation, stock option, stock purchase or
restricted stock, insurance, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund, plan or
arrangement for the benefit or welfare of any directors, officers or employees
(including, without limitation, any such plan or arrangement relating to
severance or termination pay); or (ii) enter into any employment or severance
agreement with or grant any severance or termination pay to any officer or
director of the Company or any Subsidiary;
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(g) the Company shall not, and the Company shall cause each Subsidiary not
to, take or knowingly permit any action that would make any representation or
warranty of the Company hereunder materially inaccurate at, or as of any time
prior to, the Effective Time, or omit to take any action reasonably necessary to
prevent any such representation or warranty from being materially inaccurate at
any such time;
(h) the Company shall not, and the Company shall cause each Subsidiary not
to, change any of the accounting methods used by it without providing advance
notice to Parent in writing;
(i) the Company shall not, and the Company shall cause each Subsidiary not
to, make any Tax election (other than in the ordinary course of preparing and
filing its Tax returns) or settle or compromise any Tax liability or
investigation;
(j) the Company shall not, and the Company shall cause each Subsidiary not
to, enter into any agreement, contract, commitment or arrangement to do, or to
authorize, recommend, propose or announce an intention to do, any of the actions
described in the above paragraphs of Section 4.1, other than paragraph (a); and
(k) the Company shall, and the Company shall cause each Subsidiary to, use
its reasonable commercial efforts, to the extent not prohibited by the foregoing
provisions of this Section 4.1, to maintain its relationships with its
suppliers, customers and employees, and, if and as requested by Parent or Newco,
(i) to the extent permitted by Applicable Law, the Company shall, and the
Company shall cause each Subsidiary to, use its reasonable commercial efforts to
make arrangements for representatives of Parent or Newco to meet with customers
and suppliers of the Company or any Subsidiary, and (ii) the Company shall
schedule, and the management of the Company shall participate to the extent
requested in, meetings of representatives of Parent or Newco with employees of
the Company or any Subsidiary.
SECTION 4.2. ACCESS, DISCLOSURE, PUBLIC ANNOUNCEMENTS.
(a) Access. Subject to any applicable limitations imposed by law, from the
date hereof to the Effective Time, the Company shall, and the Company shall
cause each Subsidiary to (and shall cause their respective officers, directors,
employees, representatives and agents to), afford the officers, employees,
counsel, representatives and agents of Parent reasonable access during regular
business hours to the Company's and each Subsidiary's officers, employees,
agents, properties, books, records and work papers, and shall promptly furnish
Parent all financial, operating and other information and data as Parent,
through its officers, employees or agents, may reasonably request, provided,
that in the event such access or the furnishing of such information is
prohibited or limited due to Applicable Law, the Company will so inform Parent
and will upon request use its reasonable commercial efforts to obtain any
necessary consent to allow such access or to provide such information. During
such period, the Company shall furnish promptly to Parent (i) a copy of each
report, schedule, registration statement or other document filed or received by
it during such period pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request. No investigation
pursuant to this Section 4.2 (a) shall affect, add to or subtract from any
representations or warranties of the parties hereto or the conditions to the
obligations of the parties hereto to consummate the Merger.
(b) Non-Disclosure. Parent, Newco and each of their respective
representatives agree that, from the date hereof to the Effective Time, (i) all
information regarding the Company and its Subsidiaries furnished to them,
whether prior to or after the date hereof, by the Company or any of its
representatives in connection with the Merger (such information, together with
notes, memoranda, summaries, analysis, compilations and other writings relating
thereto or based thereon prepared by the Company or its
23
representatives being referred to hereto as the "Materials") will be kept
strictly confidential, provided, however, that Materials may be disclosed to any
of Parent's representatives who need to know such information for the purpose of
assisting Parent in consummating the Merger (it being understood that such
representatives will be informed by Parent of the contents of this Agreement and
that, by receiving such information such representatives are agreeing to be
bound by this Agreement). The term "Materials" does not include information
which was or becomes available to Parent or Newco, or any of their respective
representatives on a non-confidential basis from a source other than the Company
or its representatives, provided that neither Parent, Newco nor any of their
respective representatives is aware that such source is under an obligations
(whether contractual, legal or fiduciary) to the Company to keep such
information confidential for purposes hereof.
(c) Press Releases. From the date hereof to the Effective Time, without the
prior written consent of the other, neither the Company, on the one hand, nor
Parent and Newco, on the other hand, will, and each of the Company, Parent and
Newco shall cause their respective representatives not to, make any release to
the press or other public disclosure, or make any statement to any employee
(other than those officers of the Company whose involvement is required in order
to consummate the Merger) competitor, customer, client or supplier of the
Company or any of its Subsidiaries to any other person, with respect to the
existence or contents of this Agreement, except for such public disclosure as
may be necessary, following consultation with legal counsel, for the party
proposing to make the disclosure not to be in violation of or default under any
Applicable Law, regulation or governmental order. If either party proposes to
make such disclosure, that party will discuss with the other party its rationale
for such disclosure and provide such party with the text of the proposed
disclosure, as far in advance of its disclosure as is practicable, and will in
good faith consult with and consider the suggestions of the other party
concerning the nature and scope of the information it proposes to disclose.
Attached as Exhibit B hereto is a form of the press release that the Parties
have agreed to issue upon the execution of this Agreement.
SECTION 4.3. CONSENTS AND APPROVALS; FURTHER ASSURANCES.
(a) Consents and Approvals. Each of the Company, Parent and Newco will take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to this Agreement and the transactions
contemplated hereby (which actions shall include, without limitation, furnishing
all information, making all filings and taking all other acts (i) required under
the Exchange Act, the Securities Act and all other federal or state securities
laws, (ii) required under any applicable foreign competition and antitrust
statutes and regulations, or (iii) required or requested by any bank, stock
exchange, or by any other Governmental Authority) and will cooperate promptly
with and furnish information to each other in connection with any such
requirements imposed on any of them or their respective subsidiaries in
connection with this Agreement and the transactions contemplated hereby. Each of
the Company, Parent and Newco will, and will cause their respective subsidiaries
to, take all commercially reasonable action to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, or to provide any required notice to, any Governmental
Authority or other public or private third party required to be obtained or made
by Parent, Newco or the Company or any of their respective subsidiaries in
connection with the Merger or the taking of any action contemplated in
connection with the Merger or otherwise by this Agreement.
(b) Antitrust and Competition Filings. Without limiting the generality of
sub-section (a) above, the Company and Parent shall, if required by Applicable
Law, take all reasonable actions necessary to file as soon as practicable
notifications under any applicable U.S. and foreign competition and antitrust
statutes and regulations, including, to respond in a commercially reasonable
manner to any inquiries received from any Governmental Authority for additional
information or documentation and to
24
respond in a commercially reasonable manner to all inquiries and requests
received from any Governmental Authority in connection with antitrust and
competition matters.
(c) Further Assurances. Subject to the terms and conditions herein
provided, each of the Parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated hereby, including, without
limitation, using all commercially reasonable efforts to obtain all necessary
waivers, consents and approvals.
(d) Shareholder Litigation. The Company shall give Parent the opportunity
to participate, at Parent's expense, in the defense and settlement of any
shareholder litigation against the Company or its directors or officers relating
to any of the transactions contemplated hereby and shall not enter into any such
settlement without Parent's consent, which consent shall not be unreasonably
withheld.
(e) Limits. Nothing in this Agreement shall require Parent or Newco to
agree to make, or to permit the Company to make, any divestiture of or grant any
rights to a significant asset in order to obtain any waiver, consent or
approval.
SECTION 4.4. INQUIRIES AND NEGOTIATIONS.
(a) Non-Solicitation. Neither the Company nor its Subsidiaries nor any of
their respective officers, directors or representatives, or any of their
respective affiliates shall initiate, solicit or encourage, directly or
indirectly, or take any action to facilitate inquiries or the making of any
proposal with respect to, or participate in negotiations concerning any proposal
with respect to, (i) any merger, consolidation, or business combination
involving the Company or any Subsidiary, (ii) any sale, dividend, split or other
disposition of Capital Stock or the equity interest of the Company or any
Subsidiary, or (iii) any sale, dividend or other disposition of all or
substantially all of the of the assets and properties of the Company or any
Subsidiary (an "Alternative Transaction"), except that the Company Board may
provide information to any third person making a bona fide, written and
unsolicited inquiry concerning an Alternative Transaction that would result in a
more favorable transaction to the Company's stockholders from a financial point
of view than the Merger (a "Superior Proposal"), provided that counsel to the
Company has advised the Company Board that its fiduciary duties require it to
consider the Superior Proposal.
(b) Notice. The Company shall immediately notify Parent if any proposal,
offer, inquiry or other contact is received by, any information is requested
from, or any discussions or negotiations are sought to be initiated or continued
with, the Company by or from any person, corporation, entity or "group" (as
defined in Section 13(d) of the Exchange Act) other than Parent and its
affiliates, representatives and agents (each, a "Third Party") in connection
with any Alternative Transaction, and shall, in any such notice to Parent,
indicate the identity of the Third Party and the terms and conditions of any
proposals or offers or the nature of any inquiries or contacts. If any such
Alternate Transaction would be a Superior Proposal, and the Company Board, in
accordance with Section 4.4(a), determines to provide the Third Party making
such Superior Proposal with information, the Company shall keep Parent informed,
on a current basis, of the status and terms of any such proposal and the status
of any such discussions or negotiations. Without limiting the generality of the
foregoing, the Company shall provide Parent with not less than two (2) Business
Days' notice prior to the execution by the Company of any definitive agreement
with respect to any Alternative Transaction or any public announcement relating
to any Alternative Transaction.
(c) Third Parties. Prior to furnishing any non-public information to, or
entering into negotiations or discussions with, any Third Party regarding a
Superior Proposal, the Company will obtain
25
an executed confidentiality agreement from such Third Party on terms
substantially the same as, or no less favorable to the Company in any material
respect than, those contained in Section 4.2. The Company shall not release any
Third Party from, or waive any provision of, any such confidentiality agreement
or any other confidentiality or standstill agreement to which the Company is a
party.
SECTION 4.5. NOTIFICATION OF CERTAIN MATTERS.
The Company shall give prompt notice to Parent and Newco, and Parent
and Newco shall give prompt notice to the Company, of (a) the occurrence, or
failure to occur, of any event that such Party believes would be likely to cause
any of its representations or warranties contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time and (b) any material failure of the Company, Parent or Newco,
as the case may be, or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any such
notice shall not limit or otherwise affect the remedies available hereunder to
the Party receiving such notice.
SECTION 4.6. FIRPTA CERTIFICATE.
Prior to the Effective Time, the Company shall deliver to Parent a
certification that shares of Company Common Stock do not constitute U.S. real
property interests within the meaning of Section 897 of the Code, in form
satisfactory to Parent.
SECTION 4.7. CERTAIN EMPLOYEE BENEFIT ARRANGEMENTS.
(a) Key Employee Retention Program. The employees listed on Section 4.7(a)
of the Company Disclosure Schedule shall be eligible to receive bonuses payable
on the dates and in the amounts set forth on Section 4.7(a) of the Company
Disclosure Schedule; provided, however, that each employee listed on Section
4.7(a) of the Company Disclosure Schedule will be entitled to receive such
payments only if such employee is a full-time employee of the Surviving
Corporation on the applicable payment date; provided, further, that if an
employee's employment is terminated during the 12-month period occurring prior
to the date on which the bonus is payable for a reason other than by the
Surviving Corporation for cause or voluntarily by the employee, then the
employee shall be entitled to receive the bonus payable on such date.
(b) Retirement Plan. As soon as practicable after Closing, Parent shall
cause the Surviving Corporation to establish a defined contribution retirement
plan which permits employees to make elective "401(k)" contributions, and which
on the effective date thereof, subject to U.S. Internal Revenue Code
requirements, shall contain the terms and conditions provided for on Section
4.7(b) Company Disclosure Schedule.
(c) Management Incentive Plan. Parent shall cause the Surviving Corporation
to maintain the Company's current management incentive plan in effect for the
fiscal year ending September 30, 1999. Parent shall cause the Surviving
Corporation to establish a plan containing terms and conditions that are, in
general, substantially similar to those in the management incentive plan in
effect on the date hereof, covering key employees of the Company with respect to
the fiscal years ending September 30, 2000 and 2001.
SECTION 4.8. EMPLOYMENT AGREEMENTS.
Parent shall cause the Surviving Corporation to enter into employment
agreements in the forms attached hereto as Exhibits C-1 and C-2 with each of
Xxxxxxxx X. Xxxxx and Xxxxxxx Xxxxxx.
26
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. PROXY STATEMENT.
The Company shall prepare and file with the SEC, as soon as practicable
after the date hereof, and in no event later than twenty (20) days after the
date hereof, a proxy statement (the "Proxy Statement") to be sent to
stockholders of the Company in connection with the Company Stockholders'
Meeting, and shall use its reasonable commercial efforts to have the Proxy
Statement cleared as promptly as practicable by the SEC. If at any time prior to
the Effective Time any event shall occur that should be set forth in an
amendment of or a supplement to the Proxy Statement, the Company shall prepare
and file with the SEC such amendment or supplement as soon thereafter as is
reasonably practicable. Parent, Newco and the Company shall cooperate with each
other in the preparation of the Proxy Statement, and prior to filing the Proxy
Statement with the SEC, Xxxxxx & Xxxxx, LLP, counsel to Parent, shall have
approved of the form and substance of the Proxy Statement. The Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information, and shall provide to Parent promptly
copies of all correspondence between the Company or any representative of the
Company and the SEC with respect to the Proxy Statement. The Company shall give
Parent and its counsel the opportunity to review the Proxy Statement and all
responses to requests for additional information by and replies to comments of
the SEC before their being filed with, or sent to, the SEC. Each of the Company,
Parent and Newco agrees to use its reasonable commercial efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement to be
mailed to the holders of Company Common Stock entitled to vote at the Company
Stockholders' Meeting at the earliest practicable time.
SECTION 5.2. COMPANY STOCKHOLDERS' MEETING
The Company shall, through the Company Board, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") for the purpose of voting on the adoption of this Agreement (the
"Company Stockholders' Approval") as soon as reasonably practicable after the
date hereof and, in any event, no later than November 18, 1999; provided,
however, that if on or before November 18, 1999, the SEC shall have commenced a
review of the Proxy Statement, the Company Stockholders' Meeting shall be held
as soon as reasonably practicable after the SEC has completed its review. The
Company shall, through the Company Board, include in the Proxy Statement the
recommendation of the Company Board that the stockholders of the Company adopt
this Agreement, and shall use its reasonable commercial efforts to obtain such
adoption; provided, however, that if the Company Board is advised by counsel
that its fiduciary duties require it to pursue a Superior Proposal, the Company
Board may modify or withdraw its recommendation of adoption of the Merger
(subject to the other terms and conditions hereof). At such meeting, Parent
shall, and shall cause its Subsidiaries to, cause all shares of Company Common
Stock then owned by Parent or any such Subsidiary to be voted in favor of the
adoption of this Agreement.
SECTION 5.3. CONSENTS; APPROVALS
The Company and Parent shall each use their reasonable efforts to
obtain all consents, waivers, approvals, authorizations or orders (including,
without limitation, all governmental and regulatory rulings and approvals), and
the Company and Parent shall make all filings (including, without limitation,
all filings with any Governmental Authority) required in connection with the
authorization, execution and delivery of this Agreement by the Company and
Parent and the consummation by them of the transactions
27
contemplated hereby. If required under Applicable Law, the Company and Parent
shall furnish all information required to be included in the Proxy Statement, or
for any application or other filing to be made pursuant to the rules and
regulations of any governmental body in connection with the transactions
contemplated hereby. Except where prohibited by applicable statutes and
regulations, each Party shall promptly provide the other (or its counsel) with
copies of all filings made by such party with any state or federal government
entity in connection with this Agreement or the transactions contemplated
hereby.
SECTION 5.4. INDEMNIFICATION.
For six years after the Effective Time, Parent shall indemnify, defend
and hold harmless each person who was an officer, director or employee of the
Company or one of its Subsidiaries immediately prior to the Effective Time (each
an "Indemnified Party") against all losses, claims, damages, liabilities, fees,
costs and expenses (including reasonable fees and disbursements of counsel
approved by Parent in advance of disposition of judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of Parent)) based in whole or in
part on the fact that such person is or was such a director, officer or employee
and arising out of actions or omissions occurring at or prior to the Effective
Time (including, without limitation, matters arising out of or pertaining to the
transactions contemplated hereby) to the full extent provided under the terms of
the Company's Articles of Incorporation, Bylaws and indemnification agreements,
all as in effect at the date hereof, including provisions relating to
advancement of expenses incurred in the defense of any action or suit, and
subject to applicable law; provided, that, in the event any claim or claims are
asserted or made within such six year period, all rights to indemnification or
advancement of expenses in respect of such claim or claims shall continue until
disposition of any and all such claims; and provided, further, that nothing
herein shall impair any existing rights or obligations of any present or former
directors or officers of the Company. In the event of any threatened or actual
claim, suit, proceeding or investigation as to which an Indemnified Party is
entitled to indemnification or advancement of expenses hereunder (whether
asserted before, at or after the Effective Time), the Indemnified Party may
retain counsel satisfactory to Parent, but in no event shall Parent be required
to reimburse the costs of such counsel hereunder unless Parent shall have
declined to assume the defense of such claim within ten Business Days of a
written request for indemnification given in accordance with Section 8.5. The
Surviving Corporation shall, until the sixth anniversary of the Effective Time,
cause to be maintained in effect, to the extent available, the policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries as of the date hereof (or policies of at least the same coverage
and amounts containing terms that are no less advantageous to the insured
parties) with respect to claims arising from facts or events that occurred on or
prior to the Effective Time.
SECTION 5.5. TARGETTI (USA), LLC
The Company shall take all actions necessary to permit Parent to
transfer its interest in Targetti (USA), LLC to Newco prior to the Effective
Time of the Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each Party to effect the Merger shall be
subject, at its option, to the fulfillment at or prior to the Effective Time of
the following conditions:
28
(a) Shareholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the shareholders of the Company in
accordance with applicable provisions of the Company's Articles of Incorporation
and the CGCL.
(b) No Illegality. No Applicable Law shall prohibit consummation of the
Merger.
(c) Governmental Approvals. All requirements of any applicable foreign
competition and antitrust statutes and regulations to the consummation of the
Merger shall have been satisfied.
SECTION 6.2. CONDITIONS TO PARENT'S AND NEWCO'S OBLIGATIONS TO EFFECT THE
MERGER.
The obligation of each of Parent and Newco to effect the Merger in
addition shall be subject, at its option, to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct in
all material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) as of the Closing Date, as though made on and as of
the Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
and the Company shall have delivered to Parent a certificate, dated the Closing
Date and executed on behalf of the Company by its Chairman of the Board,
President or any Executive or Senior Vice President, to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Company at
or prior to the Closing, and the Company shall have delivered to Parent a
certificate, dated the Closing Date and executed on behalf of the Company by its
Chairman of the Board, President or any Executive or Senior Vice President, to
such effect.
(c) No Governmental Actions. No preliminary or permanent injunction or
other order, decree or ruling issued by any court of competent jurisdiction nor
any statute, rule, regulation or order entered, promulgated or enacted by any
governmental, regulatory or administrative agency or authority shall be in
effect that would restrain the effective operation of the business of the
Company and the Subsidiaries from and after the Effective Time, and no
proceeding challenging this Agreement or seeking to prohibit, alter, prevent or
materially delay the Merger shall be pending before any Governmental Authority.
(d) Consents Obtained. The Company shall have obtained the following
consents: (i) the consent of Union Bank of California, NA pursuant to the
Amended and Restated Line of Credit Agreement, dated May 10, 1999 and the
Promissory Note issued by the Company to Union Bank of California, NA dated
April 13, 1999; and (ii) the consents of those employees of the Company
previously identified by Parent to the Company.
(e) Employment Agreements. Each of the existing employment agreements
between the Company and its executive officers shall have been terminated at no
cost to the Company.
SECTION 6.3. CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger in addition shall be
subject, at its option, to the fulfillment at or prior to the Effective Time of
the following conditions:
29
(a) Representations and Warranties. Each of the representations and
warranties made by Parent and Newco in this Agreement shall be true and correct
in all material respects (if not qualified by materiality) and in all respects
(if qualified by materiality) as of the Closing Date as though made on and as of
the Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
and each of Parent and Newco shall have delivered to the Company a certificate,
dated the Closing Date and executed on behalf of each of Parent and Newco by its
Chairman of the Board, President or any Executive or Senior Vice President, to
such effect.
(b) Performance of Obligations. Each of Parent and Newco shall have
performed and complied with in all material respects each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
Parent and Newco at or prior to the Closing, and each of Parent and Newco shall
have delivered to the Company a certificate, dated the Closing Date and executed
on behalf of each of Parent and Newco by its Chairman of the Board, President or
any Executive or Senior Vice President, to such effect.
ARTICLE VII
TERMINATION AND ABANDONMENT
SECTION 7.1. TERMINATION AND ABANDONMENT.
Any Party desiring to terminate this Agreement pursuant to this Section
7.1 shall give notice to the other party in accordance with Section 8.5. This
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time, whether before or after approval by the shareholders of the
Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if (i) prior to the Effective Time,
any Governmental Authority shall have issued an order, decree or ruling or taken
any other action, in each case permanently restraining, enjoining or otherwise
prohibiting all or any material part of the transactions contemplated hereby and
such order, decree, ruling or other action shall have become final and
non-appealable; or (ii) the Merger shall not have been completed by December 15,
1999, and such failure to consummate the Merger is not the result of a breach of
this Agreement by the party seeking termination;
(c) by Parent if: (i) the Company Board shall have resolved to enter into a
letter of intent, agreement in principle or similar agreement, whether or not
legally binding, or into any definitive written agreement with respect to an
Alternative Transaction (including a Superior Proposal) with a Third Party; (ii)
if the Company Board receives a written proposal with respect to an Alternative
Transaction (including a Superior Proposal) and takes a neutral position or
makes no recommendation with respect to such proposal after a reasonable amount
of time (and in no event more than ten Business Days following such receipt) has
elapsed for the Company Board to review and make a recommendation with respect
to such proposal; (iii) the Company Board shall have withdrawn, or modified or
amended in a manner adverse to Parent or Newco, its approval or recommendation
of the Merger, or approved, recommended or endorsed any proposal for an
Alternative Transaction (including a Superior Proposal); or (iv) the required
approval of the shareholders of the Company shall not have been obtained by
reason of a failure to obtain the required vote at a duly held meeting of
shareholders (including any adjournment thereof);
30
(d) by either Parent or Newco, on the one hand, or the Company, on the
other hand, if any representation of the non-terminating party set forth in this
Agreement shall prove to be untrue in any material respect when made or if there
has been a material breach of any warranty, covenant or agreement on the part of
the non-terminating party set forth in this Agreement, which breach has not been
cured within five (5) business days following receipt by the non-terminating
party of notice of such breach from the terminating party or assurance of such
cure reasonably satisfactory to the terminating party shall not have been given
by or on behalf of the non-terminating party within such five business day
period; or
(e) by Parent or Newco, if any Material Adverse Effect shall have occurred
with respect to the Company.
SECTION 7.2. EFFECT OF TERMINATION.
Except as provided in Section 4.2 and Section 8.2 hereof, in the event
of the termination of this Agreement and the abandonment of the Merger all
strictly pursuant to Section 7.1, this Agreement shall thereafter become void
and have no effect, and no Party shall have any liability to any other Party or
its shareholders or directors or officers in respect hereof, except that nothing
herein shall relieve any Party from liability for any willful breach hereof.
Notwithstanding anything to the contrary set forth herein, if Parent terminates
this Agreement pursuant to Sections 7.1(c)(i), 7.1(c)(ii) or 7.1(c)(iii), then
Company shall pay to Parent, on the second U.S. Business Day following any such
termination, an amount equal to Five Hundred Thousand Dollars ($500,000), plus
the reasonable costs and expenses (including, without limitation, legal,
accounting and other professional fees) incurred by Parent and Newco in
connection with the negotiation, execution and performance of this Agreement and
the transactions contemplated hereby.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant hereto shall survive the Effective Time, provided
that this Section 8.1 shall not limit any covenant or agreement of the Parties
that by its terms contemplates performance after the Effective Time.
SECTION 8.2. EXPENSES, ETC.
Except as contemplated by this Agreement, all costs and expenses
incurred in connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the Party incurring such costs
and expenses, except that Parent and the Company shall each pay one half of the
costs incurred in printing and distributing the Proxy Statement, if any.
SECTION 8.3. PUBLICITY.
The Company and Parent agree that they will not issue any press release
or make any other public announcement concerning this Agreement or the
transactions contemplated hereby without the prior consent of the other Party,
except that the Company or Parent may make such public disclosure that it
believes in good faith to be required by law (in which event such Party shall
consult with the other prior to making such disclosure).
31
SECTION 8.4. EXECUTION IN COUNTERPARTS.
For the convenience of the Parties, this Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 8.5. NOTICES.
All notices requests, claims, demands and other communications that are
required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed given on the day delivered personally or sent by
telecopy (with a confirmation copy by a means permitted hereunder), if delivered
or sent on a Business Day or on the first Business Day thereafter if not, and
one Business Day after consignment to an overnight courier (providing proof of
delivery), or mailed by registered or certified mail, postage prepaid, to the
respective parties at their addresses as follows:
If to Newco or Parent to:
Targetti Xxxxxx S.p.A.
Xxx Xxxxxxx, 000
00000 Xxxxxxx, Xxxxxx
Attention: Xx. Xxxxxxx Targetti
with a copy to:
Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: G. Xxxxx Xxxxxxx, Esq.
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxx LLP
City Tower
00 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX, Xxxxxxx
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telecopy: 00-000-000-0000
If to the Company, to:
0000 X. Xxxxx Xxxxxxxx Xxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
32
with a copy to:
Cooley Godward LLP
5 Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Telecopy: 000-000-0000
or such other address or addresses as any Party shall have designated by notice
in writing to the other parties hereto.
SECTION 8.6. WAIVERS.
The Company, on the one hand, and Parent and Newco, on the other hand,
may, by written notice to the other, at any time prior to the Effective Time (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement or in any
document delivered pursuant to this Agreement; (iii) waive compliance by the
other with any of the conditions contained in this Agreement; or (iv) waive
performance of any of the obligations of the other under this Agreement. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any Party, shall be deemed to constitute a waiver by the Party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any Party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
SECTION 8.7. ENTIRE AGREEMENT.
This Agreement and the documents executed at the Effective Time in
connection herewith, constitute the entire agreement among the Parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the Parties with respect to the subject
matter hereof. No representation, warranty, promise, inducement or statement of
intention has been made by any Party that is not embodied in this Agreement or
such other documents, and none of the Parties shall be bound by, or be liable
for, any alleged representation, warranty, promise, inducement or statement of
intention not embodied herein or therein.
SECTION 8.8. APPLICABLE LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
SECTION 8.9. SPECIFIC PERFORMANCE.
The Parties agree that irreparable damage would occur in the event any
provision of this Agreement were not performed in accordance with the terms
hereof and that the Parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
SECTION 8.10. BINDING EFFECT, BENEFITS.
This Agreement shall inure to the benefit of and be binding upon the
Parties and their respective permitted successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
33
Parties or their respective permitted successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement;
provided, however, that the provisions of Sections 5.4 hereof shall accrue to
the benefit of, and shall be enforceable by, each of the current and former
officers, directors, employees and agents of the Company and its Subsidiaries
and the provisions of Section 4.7 hereof shall accrue to the benefit of, and
shall be enforceable by each active employee of the Company and its Subsidiaries
as provided in Section 4.7 hereof.
SECTION 8.11. ASSIGNABILITY.
Neither this Agreement nor any of the Parties' rights hereunder shall
be assignable by any Party without the prior written consent of the other
Parties.
SECTION 8.12. AMENDMENTS.
This Agreement may be varied, amended or supplemented at any time
before or after the approval and adoption of this Agreement by the shareholders
of the Company, by action of the respective boards of directors of the Company
and Newco and by the proper officers of Parent, without action by the
shareholders thereof; provided that, after approval and adoption of this
Agreement by the Company's shareholders, no such variance, amendment or
supplement shall, without consent of such shareholders, reduce the amount or
alter the form of the consideration that the holders of the capital stock of the
Company shall be entitled to receive following the Effective Time pursuant to
Section 1.5 hereof. Without limiting the generality of the foregoing, this
Agreement may only be amended, varied or supplemented by an instrument in
writing, signed by the Parties.
SECTION 8.13. HEADINGS.
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
34
IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the date first above
written.
TARGETTI XXXXXX S.p.A.
By: /s/ Xxxxxxx Targetti
-----------------------------------
Name: Xxxxxxx Targetti
Title: Managing Director
FLORENCE ACQUISITION CORP.
By: /s/ Xxxxxxx Targetti
-----------------------------------
Name: Xxxxxxx Targetti
Title: President and Chief
Financial Officer
TIVOLI INDUSTRIES, INC.
By: /s/ Xxxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Chairman and Chief
Executive Officer
35
ANNEX I
DEFINED TERMS
"Agreement" shall mean the Agreement and Plan of Merger to which this Annex
I is attached. References in this Annex I to a "Section" shall mean a reference
to the specified Section of the Agreement.
"Alternative Transactions" shall have the meaning ascribed to it in Section
4.4(c).
"Applicable Law" shall mean any foreign or domestic, federal, state or
local, statute, law, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, permit, judgment, decree or other
requirement of any Governmental Authority.
"Blue Sky" shall have the meaning ascribed to it in Section 2.5.
"Business Day" shall mean a weekday other than a public holiday in the U.S.
or the Republic of Italy, as the case may be. The term "U.S. Business Day" shall
mean a business day for purposes of the Exchange Act.
"Certificate" shall have the meaning ascribed to it in Section 1.7(a).
"CGCL" shall have the meaning ascribed to it in Section 1.1.
"Closing" shall have the meaning ascribed to it in Section 1.3.
"Closing Date" shall have the meaning ascribed to it in Section 1.3.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall have the meaning ascribed to it in Section 2.4(b).
"Company" shall have the meaning ascribed to it in the Recitals to the
Agreement.
"Company Board" shall have the meaning ascribed to it in Section 2.3.
"1998 Company Balance Sheet" shall have the meaning ascribed to it in
Section 2.9.
"Company Common Stock" shall have the meaning ascribed to it in Section
1.5(b).
"Company Employee Plans" shall have the meaning ascribed to it in Section
2.11(a).
"Company ERISA Affiliate" shall have the meaning ascribed to it in Section
2.11(a).
"Company Permits" shall have the meaning ascribed to it in Section 2.6.
"Company Preferred Stock" shall have the meaning ascribed to it in Section
2.3.
"Company Stock Option" shall mean options to purchase Company Common Stock
held by current and former employees, consultants, vendors, customers, officers
and directors of the Company which were granted under the Option Plans.
II-1
36
"Company Stockholder Approval" shall have the meaning ascribed to it
in Section 5.2.
"Company Stockholders' Meeting" shall have the meaning ascribed to it
in Section 5.2.
"Constituent Corporations" shall have the meaning ascribed to it in
the Recitals to the Agreement.
"Dissenting Shares" shall have the meaning ascribed to it in Section
1.8.
"Effective Time" shall have the meaning ascribed to it in Section 1.3.
"Encumbrance" shall mean any pledge, security interest, lien, claim,
encumbrance, mortgage, charge, hypothecation, option, right of first
refusal or offer, preemptive right, voting agreement, voting trust, proxy,
power of attorney, escrow, option, forfeiture, penalty, action at law or in
equity, security agreement, shareholder agreement or other agreement,
arrangement, contract, commitment, understanding or obligation, or any
other restriction, qualification or limitation on the use, transfer, right
to vote, right to dissent and seek appraisal, receipt of income or other
exercise of any attribute of ownership.
"Environmental Approvals" shall have the meaning ascribed to it in
Section 2.16 hereof.
"ERISA" shall have the meaning ascribed to it in Section 2.11(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall have the meaning ascribed to it in Section 2.7(b).
"Governmental Authority" shall mean any: (a) nation, principality,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal,
foreign or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit,
body or Entity and any court or other tribunal); (d) multinational
organization or body; or (e) individual, Entity or body exercising, or
entitled to exercise, any executive, legislative, judicial, administrative,
regulatory, police, military or taxing authority or power of any nature.
"Indemnified Party" shall have the meaning ascribed to it in Section
5.4.
"Intellectual Property Rights" shall have the meaning ascribed to it
in Section 2.20(b).
"IRS" shall have the meaning ascribed to it in Section 2.11(b).
"Knowledge" or "best knowledge" of the Company shall mean the
knowledge of any of the executive officers of the Company (within the
meaning of Section 16 of the Exchange Act) which they have or would have
had if they had discharged their obligations as such officers in a
reasonably prudent and customary manner.
"Liens" shall have the meaning ascribed to it in Section 2.3.
"Material" means material to the value of the Company and its
Subsidiaries, taken as a whole.
"Materials" shall have the meaning ascribed to it in Section 4.2(b).
II-2
37
"Material Adverse Effect" shall mean an effect on the business, assets,
condition (financial or other), operating results or prospects of the Company
that is material and adverse to the value of the Company and its Subsidiaries,
taken as a whole, other than the direct effects of (A) the announcement of the
transactions contemplated hereby, (B) general economic conditions or (C)
conditions that are generally applicable to the business segments in which the
Company or its Subsidiaries conducts business. In addition, and without limiting
the generality of the foregoing sentence, the term "Material Adverse Effect"
shall not include the effect on the Company of general business declines or
reverses, such a slower than forecast revenues or bookings (whether as a result
of economic conditions, actions of competitors or business interruptions),
reductions in gross margins or technical problems with product development,
introduction or evaluation or increases in operating expenses attributable to
changes in product shipment volumes or changes in supplier pricing.
"Material Contracts" shall have the meaning ascribed to it in Section
2.5(a).
"Merger" shall have the meaning ascribed to it in the Recitals to the
Agreement.
"Merger Consideration" shall have the meaning ascribed to it in
Section 1.5(c).
"NASD" shall have the meaning ascribed to it in Section 2.5.
"Newco" shall have the meaning ascribed to it in the Recitals to the
Agreement.
"Newco Common Stock" shall have the meaning ascribed to it in 1.5(a).
"Option Plans" shall mean the 1994 Stock Option Plan, 1995 Stock
Option Plan, the 1995 Non-Employee Director Stock Option Plan and the 1997
Equity Incentive Plan.
"Parent" shall have the meaning ascribed to it in the Recitals to the
Agreement.
"Paying Agent" shall have the meaning ascribed to it in Section
1.7(a).
"Proxy Statement" shall have the meaning ascribed to it in Section
5.1.
"SEC" shall have the meaning ascribed to it in Section 1.7(a).
"SEC Reports" shall have the meaning ascribed to it in Section 2.7.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Purchase Agreement" shall have the meaning ascribed to it in
the Recitals.
"Subsidiary" shall mean any corporation, partnership, joint venture or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time owned by the Company and/or one or
more other direct or indirect Subsidiaries.
"Superior Proposal" shall have the meaning ascribed to it in Section
4.4(c).
"Surviving Corporation" shall have the meaning ascribed to it in
Section 1.2.
"Surviving Corporation Common Stock" shall have the meaning ascribed
to it in Section 1.5(a).
II-3
38
"Tax" and "Taxes" shall have the meanings ascribed to it in Section
2.15(a).
"Tax Returns" shall have the meaning ascribed to it in Section
2.15(a).
"Third Party" shall have the meaning ascribed to it in Section 4.4(a).
"Transaction Expenses" shall mean all legal and accounting fees and
expenses incurred by or on behalf of the Company in connection with the
transactions contemplated hereby and the preparation, execution and delivery of
this Agreement.
"Warrant Consideration" shall have the meaning ascribed to it in
Section 1.6(b).
II-4
39
SCHEDULE 1.4(a)
Paolo Targetti
Xxxxxx Andorlini
Xxxxxxx Targetti
Xxxxxxx Xxxxxx
Xxxxxxxx Xxxxx
SCHEDULE 1.4(b)
Xxxxxxx Targetti, Chairman of the Board
Xxxxxxxx Xxxxx, Chief Executive Officer and Vice Chairman of the Board
Xxxxxxx Xxxxxx, President and Chief Financial Officer
II-5
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SCHEDULE 4.7(a)
------------------------------------------------
CLOSING 1ST 2ND TOTAL
DATE OF ANNIVERSARY ANNIVERSARY
MERGER OF CLOSING OF CLOSING
$ $ $ $
Xxxxxxx Xxxxxx 0 100,000* 50,000 150,000
Xxxxx Paris 15,000 17,500 17,500 50,000
Xxxxx Xxxxxxx 2,500 2,500 2,500 7,500
Xxxxxxx Xxxx 2,500 2,500 2,500 7,500
Xxxx Xxxxx 5,000 6,250 6,250 17,500
Xxxxxxxxx Xxxxxxx 4,500 5,000 5,000 14,500
Xxx Xxxxxx 4,500 5,000 5,000 14,500
------ ------- ------ -------
34,000 138,750 88,750 261,500
====== ======= ====== =======
* Xxxxxxx Xxxxxx will be paid $50,000 on January 10, 2000 and $50,000 on the
second anniversary of the Closing Date.
SCHEDULE 4.7(b)
Employer matching contributions with respect to each participant's
account at least equal to 50% of the employee's contribution up to 6%
of the employee's base salary.
II-6
41
EXHIBIT B TO
MERGER AGREEMENT
FORM OF PRESS RELEASE
Santa Ana, California - September __, 1999 - In a joint announcement
Monday, Tivoli Industries Inc. (Nasdaq:TVLI) and Targetti Xxxxxx S.p.A., an
Italian Company ("Targetti" - Milan Exchange: TS) announced that they had
entered into a merger agreement, in which Tivoli will become a wholly owned
subsidiary of Targetti.
Each Tivoli stockholder will receive a cash payment of $4.50 per share
of common stock of Tivoli, representing total proceeds to the shareholders of
Tivoli of approximately $5.6 million.
Tivoli said that a proxy statement describing the merger and calling a
special meeting of its stockholders to approve the merger, is expected to be
mailed to the stockholders subsequent to the review of the proxy statement by
the Securities and Exchange Commission.
The special meeting of the stockholders is expected to be held
approximately 20 business days subsequent to the mailing of the proxy statement
and, if the merger is approved by the stockholders, it is expected to be closed
shortly after the special meeting.
Tivoli directors and officers who own approximately 36 percent of
Tivoli's outstanding common stock, have agreed to vote in favor of the merger.
Additionally, Tivoli has agreed, under certain circumstances, to pay a breakup
fee in the event that the Merger Agreement is terminated.
An independent committee of Tivoli's board of directors has recommended
that the stockholders vote in favor of the merger. L.H. Friend, Weinress,
Xxxxxxxx & Xxxxxxx LLC, Tivoli's independent financial adviser, has rendered its
opinion to the board of directors that the cash payment of $4.50 per share of
common stock is fair to the stockholders of Tivoli from a financial point of
view.
Completion of the merger is subject to certain conditions, including
the approval of the merger by at least 51 percent of the stockholders of Tivoli
and the receipt of all required regulatory approvals. The merger will be
financed by Targetti from its existing resources and available lines of credit.
In an announcement in Xxxxxxxx, Paolo Targetti, president of Targetti
Xxxxxx S.p.A., said: "Targetti is pleased abut this merger with Tivoli because
it emphasizes our strong commitment to continueD growth within the U.S. and
North America markets. Our relationship with Tivoli through our joint venture -
Targetti USA, has established a successfully framework and foundation upon which
to continue our marketing and sales efforts."
Targetti continued: "The two companies have complemented each other
from a product, market, cultural and organizational perspective. TIVOLI'S
reputation as a high-end specialty lighting supplier provides expanded
opportunities to increase exports from the U.S. to Europe, the Pacific Rim and
South America."
42
Targetti also announced that Xxxxxxxx X. Xxxxx, chairman and chief
executive officer of Tivoli Industries, will remain with the new firm as vice
chairman and CEO. Xxxxxxx X. Xxxxxx, currently Tivoli's president, will retain
this position in the new organization.
Commenting further on the retention of the key executives, Targetti
continued: "We are very happy to build upon the vision and teamwork that
Xxxxxxxx Xxxxx has established in the company. Both Xx. Xxxxx and Xx. Xxxxxx
will provide the leadership and continuity of our efforts to expand Targetti's
importance in the U.S. lighting market."
Concurrently, in Santa Xxx, Xxxxxxxx X. Xxxxx said: "On behalf of the
board of directors, employees and shareholders of Tivoli, I am pleased to
announce the merger with Targetti. We look upon this merger as an evolutionary
step for Tivoli, building upon a strong relationship with Targetti that began
over five years ago.
"The Tivoli team is very excited about our further expansion and
growth, based here in Santa Xxx. The combination of Tivoli's products and
markets with Targetti's global strengths and resources makes this a strong
strategic move that will enhance our products and services to our customers.
Both Xxxxx Xxxxxx and I are excited about joining Targetti's team."
Targetti was founded in 1928 and, together with its subsidiaries and
associated companies, is one of the principal manufacturers in the
technical/architectural lighting sectors in both Italy and Europe. In 1998,
Targetti successfully completed an initial public offering and is listed on the
Milan Exchange.
Targetti develops, manufactures and distributes interior, exterior and
decorative lighting products for both commercial and residential users. Targetti
has developed an extensive international support network that provides for an
operating and distribution structure with comprehensive support through its
principal markets worldwide.
This news release contains certain forward-looking statements that
involve risks and uncertainties, including statements regarding future operating
activities, integration issues and other matters. Actual results may vary
materially, including for the reasons and based upon the Risk Factors described
in Tivoli's filings and reports with the Securities and Exchange Commission.
None of the parties accepts any obligation to update any such forward-looking
statements.
43
EXHIBIT C-1 TO
MERGER AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of __________ __, 1999, by and between TIVOLI INDUSTRIES, INC., a California
corporation whose principal place of business is located in Xxxxx Xxx,
Xxxxxxxxxx 00000 (the "Company"), and XXXXXXXX X. XXXXX, an individual residing
in the State of California (the "Executive").
This Agreement is being executed simultaneously with the closing of the
merger (the "Merger") of Xxxxxxxx Acquisition Corp., a wholly owned subsidiary
of Targetti Xxxxxx S.p.A., an Italian corporation ("Parent"), with and into the
Company pursuant to that certain Agreement and Plan of Merger dated as of
September 17, 1999, among Newco, Parent and the Company. In connection
therewith, the Executive, who has been employed by the Company prior to the
Merger, has agreed to become an executive of the Company as the surviving
corporation in the Merger.
Accordingly, the parties agree as follows:
1. Term. This Agreement shall continue in full force and effect for a
period which shall commence as of the date hereof and shall continue until
December 1, 2001 (the "Term"), unless sooner terminated as hereinafter provided.
This Agreement shall be automatically renewed for additional one year terms
unless either party delivers notice of termination (the "Termination Notice") to
the other party not later than 150 days prior to the scheduled expiration of the
then current Term. At any time after a Termination Notice has been delivered in
accordance with the preceding sentence, the Company shall have the option of
immediately terminating the Executive's employment hereunder by paying the
Executive in cash an amount equal to (A) the Executive's Annual Salary (as
hereinafter defined), divided by (B) 365, multiplied by (C) the number of days
from the date of termination of the Executive's employment until the expiration
of the then current Term.
2. Employment. Executive shall serve as the Chief Executive Officer of
the Company and as Vice Chairman of the Board of Directors of the Company (the
"Board"), subject to the reasonable directions of the Board, and as such shall
have day-to-day responsibility for the management of all of the Company's
affairs and operations. In addition, the Executive shall serve as Vice Chairman
of the Board. Executive shall devote his full executive time, energies and
abilities to the proper and efficient performance of his duties provided herein.
Executive shall at all times perform his duties and obligations faithfully and
diligently and to the best of Executive's ability.
3. Compensation.
(a) The Company shall pay the Executive during the Term a
salary at the rate of One Hundred Fifty Five Thousand Dollars ($162,750) per
annum (the "Annual Salary"). The Annual Salary shall be payable in equal
semi-monthly installments, less such deductions as shall be required to be
withheld by applicable law and regulations. Executive's salary shall be reviewed
by the Board annually not later than November 1, of each year and Executive
shall receive such salary increases as the Board shall determine in its sole
discretion.
44
(b) Executive shall be eligible to receive a bonus as provided
in the Company's Management Incentive Plan for Fiscal Year Ending September 30,
1999 and in any future incentive bonus plan hereafter adopted by the Company in
its discretion.
(c) Contemporaneously with the execution of this Agreement,
the Company will issue shares of common stock of the Company, par value $0.001
per share, representing, as of the Closing of the Merger, a 7.5% ownership
interest in the Company to the Executive for services to be rendered hereunder,
with such shares to be held and disposed of in accordance with the terms of the
Shareholders Agreement (the "Shareholders Agreement") dated the date hereof, by
and among the Company, the Executive and Parent attached hereto as Exhibit A.
(d) In addition to the above, Executive shall be entitled to
receive an auto allowance of $1,250 per month, payable monthly.
4. Benefits and Vacations.
(a) Executive and his dependents shall be entitled to
participate in or receive benefits under the Company's health insurance plans or
arrangements as in effect on the date hereof for such period of time as such
plans and arrangements shall remain in effect. In addition, Executive shall be
entitled to participate in or receive benefits under any pension plan,
profit-sharing plan, life insurance, health-and-accident plan or arrangement
made available in the future by the Company to its executives and key management
executives, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements, for so long as such plans
and arrangements remain in effect. Nothing paid to Executive under any such plan
or arrangement presently in effect or made available in the future shall be
deemed to be in lieu of any compensation payable to Executive hereunder.
(b) Executive shall be entitled to the number of paid
vacations days in each calendar year and to compensation for earned but unused
vacation days, determined by the Board from time to time for its executives and
key management executives, but not less than four (4) weeks in each year of the
Term hereof. Executive shall also be entitled to all paid holidays given by the
Company to its executives and key management executives.
(c) Executive shall be entitled to receive reimbursement of
Health Club membership dues. Such membership dues are not to exceed $150 on a
monthly basis and should be fully supported by applicable receipts, documenting
the actual dues paid by the Executive.
5. Expenses. During the Term, Executive shall be entitled to receive
prompt reimbursement of all reasonable expenses incurred by Executive (in
accordance with the policies and procedures from time to time adopted by the
Board for its senior executive officers) in performing the services contemplated
hereunder, provided that Executive properly accounts therefore in accordance
with the Company's policy.
6. Termination.
(a) Executive's employment hereunder shall terminate
immediately upon death.
(b) In the Event that Executive shall be unable to perform the
services contemplated hereunder by reason of disability, illness or other
incapacity, such failure to so perform such duties shall not be grounds for
terminating the employment of Executive by the Company, provided, however, that
the Company may terminate Executive's employment
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hereunder should the period of such incapacity exceed six (6) consecutive
months. Any such termination shall not be considered to be for "Cause" as
defined in subparagraph (e) immediately below.
(c) Executive's employment hereunder may be terminated by the
Company prior to the expiration of the Term with or without "Cause" (as defined
in subparagraph 6(e) below), immediately upon delivery by the Company of a
written Notice of Termination.
(d) In the event that Executive is terminated without Cause,
the Company shall pay Executive's salary through the date of termination, after
deducting any amounts lawfully owing from Executive to the Company, plus an
amount (the "Severance Amount") equal to two times the Annual Salary as
determined in accordance with Section 3(a). The Company shall also pay, when
due, the Executive's C.O.B.R.A. health insurance expenses for the period
commencing on the date of termination and ending on the earlier of (i) the
Executive obtaining new employment which provides the Executive with health
insurance coverage or (ii) eighteen months after the date of the Executive's
termination hereunder. Upon payment of the foregoing amounts to the Executive,
the Company shall thereafter have no further obligation to Executive.
(e) For the purposes of this Agreement, "Cause" means (i) the
willful and continued failure by Executive to substantially perform Executive's
duties hereunder, other than any such failure resulting form Executive's
incapacity due to physical or mental illness, after a demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed such duties, (ii) the intentional engaging by Executive in conduct
materially and demonstrably injurious to the Company, or (iii) conviction of a
felony. For purposes of this subparagraph, no act, or failure to act, on the
part of the Executive shall be considered "intentional" merely because it was
the result of bad judgment or negligence; rather such act or failure or failure
to act must have been done or omitted to have been done, by Executive other than
in good faith and without reasonable belief that Executive's action or omission
was in the best interests of the Company. Notwithstanding the foregoing,
Executive's employment shall not be deemed to have been terminated for "Cause"
pursuant to clauses (i) or (ii) above unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of the Board at a meeting of the Board called and held for such purpose
(after reasonable notice to Executive and an opportunity for Executive, together
with Executive's counsel, to be heard before the Board), finding that in the
good faith opinion of the Board, Executive was guilty of conduct described above
in clauses (i) or (ii) of this subparagraph and specifying the particulars
thereof in detail. In the event that Executive is terminated for Cause, the
Company shall pay Executive's salary through date of termination after deducting
any amounts lawfully owing from Executive to the Company, and shall thereafter
have no further obligations to Executive except as may be provided in the
Shareholders Agreement with respect to the repurchase of the Shares.
(f) Executive shall be entitled to terminate his employment
with the Company hereunder for "Good Reason." If the Executive terminates his
employment hereunder for Good Reason, the Company shall pay Executive's salary
through the date of termination, after deducting any amounts lawfully owing from
Executive to the Company, plus the Severance Amount. Upon payment of such
amounts, the Company shall thereafter have no further obligation to Executive
except as may be provided in the Shareholders Agreement with respect to the
repurchase of the Shares. For purposes of this Agreement, any termination of
employment under any one or more of the following circumstances shall be for
"Good Reason":
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(i) Without Executive's express written consent, the
repeated assignment to Executive of any duties inconsistent with Executive's
positions, duties, responsibilities and status with the Company, or a reduction
in Executive's reporting responsibilities, titles or offices as in effect upon
the execution hereof, or any removal of Executive from or any failure to reelect
Executive to any such positions, except in connection with the termination of
Executive's employment for Cause, disability, retirement or as a result of
death;
(ii) If the Company or the Parent experiences a
change of control via merger, consolidation, sales of all or substantially all
the shares or the assets or other transaction (or series of related
transactions) following which the shareholders of the Company or the Parent
immediately prior to such transaction own less than 50% of the outstanding
voting shares of the Company or the Parent following such transaction;
(iii) The reduction by the Company in Executive's
base salary, as the same may be thereafter increased from time to time, or the
failure by the Company to otherwise pay Executive the base salary provided for
herein;
(iv) The failure by the Company to continue
Executive's participation in any benefit plan, pension plan, qualified
retirement plan, life insurance plan, vacation plan, holiday plan, car lease
plan, medical expense, health and accident plan or disability plan, or expense
reimbursement arrangement specified in paragraph 4 and 5 hereof (or a similar
plan or arrangement adopted by the Company for its executives), or the taking of
any action by the Company (prompt notice of which shall be provided to
Executive) which would materially adversely affect Executive's participation in
(including materially increasing Executive's costs of such participation), or
materially reduce Executive's benefits under, any of such plans, or which would
deprive Executive of any other material fringe or personal benefits under any of
such plans;
(v) Any action by the Company that would require
Executive to relocate his principal residence or office to a location more than
50 miles from the Company's current principal executive offices; and
(vi) Any action intended as its primary purpose to
reduce the amount of any payment due to the Executive under Sections 2.02(a) or
2.03(a) of the Shareholders Agreement;
in each case after the Executive has given the Company and the Parent written
notice of any action that the Executive believes constitutes Good Reason under
any of the clauses set forth above and the Company has failed within 60 days
after its receipt of such notice to correct or rescind such action. Any failure
by the Executive to give notice that the taking of any action by the Company
constitutes Good Reason within 60 days after the date of the occurrence of such
action shall be deemed to be a waiver and consent by the Executive to the taking
of such action by the Company and shall not thereafter give rise to Good Reason
hereunder.
(g) Any termination of Executive's employment by the Company,
or by Executive for Good Reason shall be communicated by Written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provisions in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
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termination of Executive's employment under the provision so indicated, and
shall set forth the date upon which such termination is to become effective.
7. Proprietary Information. Executive acknowledges that certain
technological and other information may from time to time be disclosed to
Executive by the Company during the continuance hereof. Executive hereby
acknowledges that all such information and technology, whether currently
existing or hereafter developed by the Company through or involving the services
and efforts of Executive hereunder, shall at all times consist of an be
preserved by Executive as valuable trade secrets and confidential information
which is proprietary to and owned exclusively by the Company, and that Executive
does not have, and shall not have or hereafter acquire, any rights in or to any
such information and technology, including without limitation any patents,
inventions, discoveries, know-how, trademarks or tradenames used or adopted by
the Company in connection with the design, development, manufacture, marketing,
sale or installation of any products which at any time during the continuation
hereof may be offered or sold or licensed by the Company. Executive further
warrants and agrees that he shall not at any time, whether during the
continuance of this Agreement or after its expiration or earlier termination,
whether by Executive or by the Company, in any manner or form, directly or
indirectly, use, disclose, duplicate, license, sell, reveal, divulge, publish or
communicate any portion of any such information concerning the Company, or any
customers or other products of the Company, to any person, firm or entity.
8. Agreement Not to Compete; Non-Solicitation.
(a) Executive acknowledges that, by virtue of this position
with the Company, Executive will develop considerable expertise in the business
operations of the Company and will have access to extensive confidential
information with respect to the Company. Executive also acknowledges that this
is a personal services contract wherein Executive's services are of a special,
unique, unusual, extraordinary and intellectual character. Executive further
acknowledges that his services will have peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law.
Executive acknowledges that the Company would be irreparably damaged, and its
substantial investment materially impaired, if Executive were to enter into an
activity competing with the Company's business in violation of the terms of this
Agreement or if Executive were to make unauthorized use or disclosure of any
confidential information concerning the business of the Company.
(b) In consideration of the terms and conditions of this
Agreement, including without limitation, this Section 8, Executive hereby agrees
that, during the period of his employment with the Company and for the longer of
(i) the remainder of the term of this Agreement had Executive not been
terminated, or (ii) a period of 24 months, he will not without the Company's
express written consent, (i) engage in any employment or business activity which
is competitive with, or would otherwise conflict with, the business of the
Company as is currently conducted or presently under development as of the date
of Executive's termination; or (ii) solicit or attempt to solicit, either
directly or through others, (A) any executive, consultant, or independent
contractor of the Company to terminate his or her relationship with any other
person or business entity; or (B) the business of any customer, vendor, or
distributor of the Company. Executive further agrees to notify the Company, in
writing, before Executive obtains employment with, performs work for, or engages
in any professional activity on behalf of any company, person or entity in the
lighting industry.
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(c) In the event that Executive engages in any such
competitive activity in breach of this Agreement, Executive hereby agrees that
the Company shall be entitled to equitable relief (e.g. injunctions) to prevent
any such competitive activity by Executive. The right and remedies hereof shall
be cumulative (and not alternative).
(d) Executive expressly acknowledges that he is voluntarily
entering into this Agreement, that the provisions in this Section 8 are a
material inducement to the Company in entering this Agreement, and that the
terms and conditions of this Agreement are fair and reasonable to Executive in
all respects.
9. General Provisions.
(a) Any notice, request, demand or other communication
required or permitted hereunder shall be deemed to be properly given when
personally served in writing, when deposited in the United States mail, postage
prepaid, or when communicated to a public telegraph company for transmittal,
addressed to the Company or Executive at their respective last known address.
Either party may change its address by written notice give in accordance with
this subparagraph.
(b) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective executors, administrators,
successors and assigns; provided, however, that Executive may not assign any or
all of Executive's rights or duties hereunder without the prior written consent
of the Company.
(c) This Agreement is made and entered into, is to be
performed primarily within, and shall be governed by and constructed in all
respects in accordance with the laws of the State of California.
(d) Captions and Paragraph headings used herein are for
convenience only and are not a part of this Agreement and shall be used in
construing it.
(e) Should any provision of this Agreement for any reason be
declared invalid, void or unenforceable by a court of competent jurisdiction,
the validity and binding effect of any remaining portions shall not be affected,
and the remaining provisions of this Agreement shall remain in full force as if
this Agreement had been executed with said provision eliminated.
(f) The Company shall indemnify Executive to the fullest
extent permitted by applicable law with respect to any claims arising from the
performance by Executive of his duties hereunder during the Term of this
Agreement.
(g) This Agreement contains the entire agreement of the
parties, and supercedes any and all other agreements, either oral or in writing,
between the parties hereto with respect to the employment of Executive by the
Company. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein or
therein, and that no other agreement, statement or promise not contained herein
or therein shall be relied upon or be valid or binding. This Agreement may not
be modified or amended by oral agreements, but only by an agreement in writing
signed by the Company on the one hand, and by Executive on the other hand.
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(h) In the event of any litigation between Executive and the
Company concerning the rights or obligations of any party under this Agreement,
the non-prevailing party shall pay the reasonable costs and expenses, including
attorneys' fees, of the prevailing party in connection therewith.
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50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
APPROVED:
"The Company"
TIVOLI INDUSTRIES, INC.
By:________________________
"Executive"
By:________________________
Xxxxxxxx X. Xxxxx
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EXHIBIT C-2 TO
MERGER AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of __________ __, 1999, by and between TIVOLI INDUSTRIES, INC., a California
corporation whose principal place of business is located in Xxxxx Xxx,
Xxxxxxxxxx 00000 (the "Company"), and XXXXXXX XXXXXX, an individual residing in
the State of California ("Executive").
This Agreement is being executed simultaneously with the closing of the
merger (the "Merger") of Xxxxxxxx Acquisition Corp., a wholly owned subsidiary
of Targetti Xxxxxx S.p.A., an Italian corporation ("Parent"), with and into the
Company pursuant to that certain Agreement and Plan of Merger dated as of
September 17, 1999, among Newco, Parent and the Company. In connection
therewith, the Executive, who has been employed by the Company prior to the
Merger, has agreed to become an executive of the Company as the surviving
corporation in the Merger.
Accordingly, the parties agree as follows:
1. Term. This Agreement shall continue in full force and effect for a
period which shall commence as of the date hereof and shall continue until
December 1, 2001 (the "Term"), unless sooner terminated as hereinafter provided.
This Agreement shall be automatically renewed for additional one year terms
unless either party delivers notice of termination (the "Termination Notice") to
the other party not later than 90 days prior to the scheduled expiration of the
then current Term. At any time after a Termination Notice has been delivered in
accordance with the preceding sentence, the Company shall have the option of
immediately terminating the Executive's employment hereunder by paying the
Executive in cash an amount equal to (A) the Executive's Annual Salary (as
hereinafter defined), divided by (B) 365, multiplied by (C) the number of days
from the date of termination of the Executive's employment until the expiration
of the then current Term.
2. Employment. Executive shall serve as the President and Chief
Financial Officer of the Company, subject to the reasonable directions of the
Board of Directors of the Company (the "Board"), and as such shall have
day-to-day responsibility for the management of all of the Company's affairs and
operations. Executive shall devote his full executive time, energies and
abilities to the proper and efficient performance of his duties provided herein.
Executive shall at all times perform his duties and obligations faithfully and
diligently and to the best of Executive's ability.
3. Compensation.
(a) The Company shall pay the Executive during the Term a
salary at the rate of One Hundred Twenty Seven Thousand Dollars ($133,350) per
annum (the "Annual Salary"). The Annual Salary shall be payable in equal
semi-monthly installments, less such deductions as shall be required to be
withheld by applicable law and regulations. Executive's salary shall be reviewed
by the Board annually not later than November 1, of each year and Executive
shall receive such salary increases as the Board shall determine in its sole
discretion.
52
(b) Executive also shall be eligible to receive a bonus as
provided by the Company's Key Executive Retention Program as set forth in
Section 4.7(a) of the above referenced Agreement and Plan of Merger.
(c) Executive also shall be eligible to receive a bonus as
provided in the Company's Management Incentive Plan for Fiscal Year Ending
September 30, 1999 and in any future incentive bonus plan hereafter adopted
instituted by the Company in its discretion.
(d) In addition to the above, Executive shall be entitled to
receive an auto allowance of $600 per month, payable monthly.
4. Benefits and Vacations.
(a) Executive and his dependents shall be entitled to
participate in or receive benefits under the Company's health insurance plans or
arrangements as in effect on the date hereof for such period of time as such
plans and arrangements shall remain in effect. In addition, Executive shall be
entitled to participate in or receive benefits under any pension plan,
profit-sharing plan, life insurance, health-and-accident plan or arrangement
made available in the future by the Company to its executives and key management
executives, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements, for so long as such plans
and arrangements remain in effect. Nothing paid to Executive under any such plan
or arrangement presently in effect or made available in the future shall be
deemed to be in lieu of any compensation payable to Executive hereunder.
(b) Executive shall be entitled to the number of paid
vacations days in each calendar year and to compensation for earned but unused
vacation days, determined by the Board from time to time for its executives and
key management executives, but not less than four (4) weeks in each year of the
Term hereof. Executive shall also be entitled to all paid holidays given by the
Company to its executives and key management executives.
5. Expenses. During the Term, Executive shall be entitled to receive
prompt reimbursement of all reasonable expenses incurred by Executive (in
accordance with the policies and procedures from time to time adopted by the
Board for its senior executive officers) in performing the services contemplated
hereunder, provided that Executive properly accounts therefore in accordance
with the Company's policy.
6. Termination.
(a) Executive's employment hereunder shall terminate
immediately upon death.
(b) In the Event that Executive shall be unable to perform the
services contemplated hereunder by reason of disability, illness or other
incapacity, such failure to so perform such duties shall not be grounds for
terminating the employment of Executive by the Company, provided, however, that
the Company may terminate Executive's employment hereunder should the period of
such incapacity exceed six (6) consecutive months. Any such termination shall
not be considered to be for "Cause" as defined in subparagraph (e) below.
(c) Executive's employment hereunder may be terminated by the
Company prior to the expiration of the Term with or without "Cause" (as defined
in subparagraph 6(e) below), immediately upon delivery by the Company of a
written Notice of Termination.,
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(d) In the event that Executive is terminated without Cause,
the Company shall pay Executive's salary through the date of termination, after
deducting any amounts lawfully owing from Executive to the Company, plus an
amount (the "Severance Amount") equal to two times the Annual Salary as
determined in accordance with Section 3(a). The Company shall also pay, when
due, the Executive's C.O.B.R.A. health insurance expenses for the period
commencing on the date of termination and ending on the earlier of (i) the
Executive obtaining new employment which provides the Executive with health
insurance coverage or (ii) eighteen months after the date of the Executive's
termination hereunder. Upon payment of the foregoing amounts to the Executive,
the Company shall thereafter have no further obligation to Executive.
(e) For the purposes of this Agreement, "Cause" means (i) the
willful and continued failure by Executive to substantially perform Executive's
duties hereunder, other than any such failure resulting form Executive's
incapacity due to physical or mental illness, after a demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed such duties, (ii) the intentional engaging by Executive in conduct
materially and demonstrably injurious to the Company, or (iii) conviction of a
felony. For purposes of this subparagraph, no act, or failure to act, on the
part of the Executive shall be considered "intentional" merely because it was
the result of bad judgment or negligence; rather such act or failure to act must
have been done or omitted to have been done, by Executive other than in good
faith and without reasonable belief that Executive's action or omission was in
the best interests of the Company. Notwithstanding the foregoing, Executive's
employment shall not be deemed to have been terminated for "Cause" pursuant to
clauses (i) and (ii) above unless and until there shall have been delivered to
Executive a copy of a resolution duly adopted by the affirmative vote of the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for Executive, together with
Executive's counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct described above in
clauses (i) or (ii) of this subparagraph and specifying the particulars thereof
in detail. In the event that Executive is terminated for Cause, the Company
shall pay Executive's salary through date of termination after deducting any
amounts lawfully owing from Executive to the Company, and shall thereafter have
no further obligations to Executive.
(f) Executive shall be entitled to terminate his employment
with the Company hereunder for "Good Reason." If the Executive terminates his
employment hereunder for Good Reason, the Company shall pay Executives salary
through the date of termination, after deducting any amounts lawfully owing from
the Executive to the Company, plus an amount equal the Severance Amount, and
shall thereafter have no further obligation to the Executive. For purposes of
this Agreement, any termination of employment under any one or more of the
following circumstances shall be for "Good Reason":
(i) Without Executive's express written consent, the
repeated assignment to Executive of any duties inconsistent with Executive's
positions, duties, responsibilities and status with the Company, or a reduction
in Executive's reporting responsibilities, titles or offices as in effect upon
the execution hereof, or any removal of Executive from or any failure to reelect
Executive to any such positions, except in connection with the termination of
Executive's employment for Cause, disability, retirement or as a result of
death;
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(ii) If the Company or the Parent experiences a
change of control via merger, consolidation, sales of all or substantially all
the shares or the assets or other transaction (or series of related
transactions) following which the shareholders of the Company or the Parent
immediately prior to such transaction own less than 50% of the outstanding
voting shares of the Company or the Parent following such transaction.
(iii) The reduction by the Company in Executive's
base salary, as the same may be thereafter increased from time to time, or the
failure by the Company to otherwise pay Executive the base salary provided for
herein;
(iv) The failure by the Company to continue
Executive's participation in any benefit plan, pension plan, qualified
retirement plan, life insurance plan, vacation plan, holiday plan, car lease
plan, medical expense, health and accident plan or disability plan, or expense
reimbursement arrangement specified in paragraph 4 and 5 hereof (or a similar
plan or arrangement adopted by the Company for its executives), or the taking of
any action by the Company (prompt notice of which shall be provided to
Executive) which would materially adversely affect Executive's participation in
(including materially increasing Executive's costs of such participation), or
materially reduce Executive's benefits under, any of such plans, or which would
deprive Executive of any other material fringe or personal benefits under any of
such plans; and
(v) Any action by the Company that would require
Executive to relocate his principal residence or office to a location more than
50 miles from the Company's current principal executive offices;
in each case after the Executive has given the Company and the Parent written
notice of any action that the Executive believes constitutes Good Reason under
any of the clauses set forth above and the Company has failed within 60 days
after its receipt of such notice to correct or rescind such action. Any failure
by the Executive to give notice that the taking of any action by the Company
constitutes Good Reason within 60 days after the date of the occurrence of such
action shall be deemed to be a waiver and consent by the Executive to the taking
of such action by the Company and shall not thereafter give rise to Good Reason
hereunder.
(g) Any termination of Executive's employment by the Company
for disability, retirement or Cause, or by Executive for Good Reason shall be
communicated by Written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provisions in this Agreement relied
upon, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated, and shall set forth the date upon which such termination is to
become effective.
7. Proprietary Information. Executive acknowledges that certain
technological and other information may from time to time be disclosed to
Executive by the Company during the continuance hereof. Executive hereby
acknowledges that all such information and technology, whether currently
existing or hereafter developed by the Company through or involving the services
and efforts of Executive hereunder, shall at all times consist of an be
preserved by Executive as valuable trade secrets and confidential information
which is proprietary to and owned exclusively by the Company, and that Executive
does not have, and shall not have or
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55
hereafter acquire, any rights in or to any such information and technology,
including without limitation any patents, inventions, discoveries, know-how,
trademarks or tradenames used or adopted by the Company in connection with the
design, development, manufacture, marketing, sale or installation of any
products which at any time during the continuation hereof may be offered or sold
or licensed by the Company. Executive further warrants and agrees that he shall
not at any time, whether during the continuance of this Agreement or after its
expiration or earlier termination, whether by Executive or by the Company, in
any manner or form, directly or indirectly, use, disclose, duplicate, license,
sell, reveal, divulge, publish or communicate any portion of any such
information concerning the Company, or any customers or other products of the
Company, to any person, firm or entity.
8. Agreement Not to Compete; Non-Solicitation
(a) Executive acknowledges that, by virtue of this position
with the Company, Executive will develop considerable expertise in the business
operations of the Company and will have access to extensive confidential
information with respect to the Company. Executive also acknowledges that this
is a personal services contract wherein Executive's services are of a special,
unique, unusual, extraordinary and intellectual character. Executive further
acknowledges that his services will have peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in an action at law.
Executive acknowledges that the Company would be irreparably damaged, and its
substantial investment materially impaired, if Executive were to enter into an
activity competing with the Company's business in violation of the terms of this
Agreement or if Executive were to make unauthorized use or disclosure of any
confidential information concerning the business of the Company.
(b) In consideration of the terms and conditions of this
Agreement, including without limitation, this Section 8 and payment of Severance
Amount, Executive hereby agrees that, during the period of his employment with
the Company and for the longer of (i) the remainder of the term of this
Agreement had Executive not been terminated, or (ii) a period of 24 months, he
will not without the Company's express written consent, (i) engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, the business of the Company as is currently conducted or
presently under development as of the date of Executive's termination; or (ii)
solicit or attempt to solicit, either directly or through others, (A) any
executive, consultant, or independent contractor of the Company to terminate his
or her relationship with any other person or business entity; or (B) the
business of any customer, vendor, or distributor of the Company. Executive
further agrees to notify the Company, in writing, before Executive obtains
employment with, performs work for, or engages in any professional activity on
behalf of any company, person or entity in the lighting industry.
(c) In the event that Executive engages in any such
competitive activity in breach of this Agreement, Executive hereby agrees that
he shall return to the Company the Severance Amount in full immediately
following such breach and that the Company shall be entitled to equitable relief
(e.g. injunctions) to prevent any such competitive activity by Executive. The
right and remedies hereof shall be cumulative (and not alternative).
(d) Executive expressly acknowledges that he is voluntarily
entering into this Agreement, that the provisions in this Section 8 are a
material inducement to the Company in
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entering this Agreement, and that the terms and conditions of this Agreement are
fair and reasonable to Executive in all respects.
9. General Provisions.
(a) Any notice, request, demand or other communication
required or permitted hereunder shall be deemed to be properly given when
personally served in writing, when deposited in the United States mail, postage
prepaid, or when communicated to a public telegraph company for transmittal,
addressed to the Company or Executive at their respective last known address.
Either party may change its address by written notice give in accordance with
this subparagraph.
(b) This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective executors, administrators,
successors and assigns; provided, however, that Executive may not assign any or
all of Executive's rights or duties hereunder without the prior written consent
of the Company.
(c) This Agreement is made and entered into, is to be
performed primarily within, and shall be governed by and constructed in all
respects in accordance with the laws of the State of California.
(d) Captions and Paragraph headings used herein are for
convenience only and are not a part of this Agreement and shall be used in
construing it.
(e) Should any provision of this Agreement for any reason be
declared invalid, void or unenforceable by a court of competent jurisdiction,
the validity and binding effect of any remaining portions shall not be affected,
and the remaining provisions of this Agreement shall remain in full force as if
this Agreement had been executed with said provision eliminated.
(f) The Company shall indemnify Executive to the fullest
extent permitted by applicable law with respect to any claims arising from the
performance by Executive of his duties hereunder during the Term of this
Agreement.
(g) This Agreement contains the entire agreement of the
parties, and supercedes any and all other agreements, either oral or in writing,
between the parties hereto with respect to the employment of Executive by the
Company. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
party, or anyone acting on behalf of any party, which are not embodied herein or
therein, and that no other agreement, statement or promise not contained herein
or therein shall be relied upon or be valid or binding. This Agreement may not
be modified or amended by oral agreements, but only by an agreement in writing
signed by the Company on the one hand, and by Executive on the other hand.
(h) In the event of any litigation between Executive and the
Company concerning the rights or obligations of any party under this Agreement,
the non-prevailing party shall pay the reasonable costs and expenses, including
attorneys' fees, of the prevailing party in connection therewith.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
APPROVED:
"The Company"
TIVOLI INDUSTRIES, INC.
By:________________________
"Executive"
By:________________________
Xxxxxxx Xxxxxx
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