AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of May
9, 1997 and amended and restated on July 17, 1997, among CTS Corporation, an
Indiana corporation ("Parent"), CTS First Acquisition Corp., a New York
corporation and a wholly owned subsidiary of Parent ("Sub"), and Dynamics
Corporation of America, a New York corporation (the "Company").
RECITALS
A. The Boards of Directors of Parent and the Company have determined
that it is in the best interests of the shareholders of their respective
companies that Parent and the Company combine their respective businesses on the
terms and subject to the conditions set forth herein (the "Combination");
B. As a first step in the Combination, the Company and Parent each
desire that Parent cause Sub to commence an offer to purchase up to 49.9% of the
issued and outstanding shares of Common Stock of the Company, together with the
associated Company Rights (the "Shares"), on the terms and subject to the
conditions set forth in this Agreement and the Offer Documents (the "Offer") and
the Board of Directors of the Company (the "Company Board") has unanimously
approved the Offer and has determined to recommend that the Company's
shareholders accept the Offer and tender their Shares pursuant thereto;
C. To complete the Combination, the respective Boards of Directors
of the Parent, Sub and the Company have approved the merger of the Company with
and into Sub, wherein each issued and outstanding Share not owned directly or
indirectly by Parent, Sub or the Company will be converted into the right to
receive the Merger Consideration, on the terms and subject to the conditions of
this Agreement (the "Merger");
D. The parties desire to make certain representations, warranties
and covenants in connection with the Merger and the Offer and also to prescribe
various conditions to the Merger and the Offer;
E. For federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
F. Parent, Sub and two shareholders of the Company have entered into
a Shareholders Agreement, dated as of July 17, 1997 (the "Shareholders
Agreement"), pursuant to which, among other things, such shareholders have
agreed to vote the Shares Beneficially Owned by them in favor of the adoption of
the Merger Agreement.
NOW, THEREFORE, in consideration of the representations, warranties
and covenants contained in this Agreement, the parties agree as follows:
I. THE OFFER
1.01. The Offer. (a) As promptly as practicable (but in any event
not later than five business days after the public announcement of the execution
and delivery of this Agreement), Parent will cause Sub to commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), the Offer whereby Sub will offer to purchase up to 49.9% of
the Shares at a price of $55 per Share, net to the seller in cash (as paid
pursuant to the Offer, the "Offer Consideration"). The obligation of Parent to
cause Sub to commence the Offer, to consummate the Offer and to accept for
payment and to pay for Shares validly tendered in the Offer and not withdrawn in
accordance therewith will be subject to, and only to, those conditions set forth
in Annex A hereto.
(b) Without the prior written consent of the Company, Sub will not,
and Parent will cause Sub not to, (i) decrease or change the form of the Offer
Consideration, (ii) change the conditions to the Offer or impose additional
conditions to the Offer, (iii) increase the number of Shares to be purchased
pursuant to the Offer to more than 50.1% of the number of Shares (calculated on
a fully diluted basis), (iv) extend the expiration date of the Offer (the
"Expiration Date") except (A) as required by Law and (B) that, in the event that
any condition to the Offer is not satisfied or waived at the time that the
Expiration Date would otherwise occur, (1) Sub must extend the Expiration Date
for an aggregate of 20 additional business days (the "First Extension Date") to
the extent necessary to permit such condition to be satisfied and (2) Sub may,
in its sole discretion, extend the Expiration Date for up to 20 additional
business days after the First Extension Period, or (v) amend any term of the
Offer in any manner materially adverse to holders of Shares (including without
limitation to result in any extension which would be inconsistent with the
preceding provisions of this sentence), provided, however, that (1) subject to
applicable legal requirements, Parent may cause Sub to waive any condition to
the Offer, other than the Minimum Share Condition and the Tax Opinion Condition
(each as defined in Annex A), in Parent's sole discretion and (2) the Offer may
be extended in connection with an increase in the consideration to be paid
pursuant to the Offer so as to comply with applicable rules and regulations of
the
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Securities and Exchange Commission (the "SEC"). Assuming the prior satisfaction
or waiver of the conditions of the Offer, Parent will cause Sub to accept for
payment, and pay for, in accordance with the terms of the Offer, all Shares
validly tendered and not withdrawn pursuant to the Offer as soon as practicable
after the Expiration Date or any extension thereof.
1.02. Offer Documents. (a) As soon as practicable on the date of
commencement of the Offer, Parent and Sub will file or cause to be filed with
the SEC a tender offer statement on Schedule 14D-1 (the "Schedule 14D-1") which
will contain an offer to purchase and related letter of transmittal and other
ancillary Offer documents and instruments pursuant to which the Offer will be
made (collectively with any supplements or amendments thereto, the "Offer
Documents") and which Parent and Sub represent, warrant and covenant will comply
in all material respects with the Exchange Act and other applicable Laws and
will contain (or will be amended in a timely manner so as to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and other applicable Laws;
provided, however, that (i) no agreement or representation hereby is made or
will be made by Parent or Sub with respect to information supplied by the
Company in writing expressly for inclusion in, or information derived from the
Company's public SEC filings which is incorporated by reference in, the Offer
Documents and (ii) no representation, warranty or covenant is made or will be
made herein by the Company with respect to information contained in the Offer
Documents other than information supplied by the Company in writing expressly
for inclusion in or information derived from the Company Filed SEC Documents
which is incorporated by reference in, the Offer Documents.
(b) Parent, Sub and the Company will each promptly correct any
information provided by them for use in the Offer Documents if and to the extent
that it becomes false or misleading in any material respect and Parent and Sub
will jointly and severally take all lawful action necessary to cause the Offer
Documents as so corrected to be filed promptly with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable Law. In conducting the Offer, Parent and Sub will comply in all
material respects with the provisions of the Exchange Act and other applicable
Laws. Parent and Sub will endeavor to afford the Company and its counsel a
reasonable opportunity to review and comment on the Offer Documents and any
amendments thereto prior to the filing thereof with the SEC.
1.03. Company Actions. The Company hereby consents to the Offer and
represents that (a) the Company Board (at a meeting duly called and held) has
(i) determined that this Agreement, the Offer and the Merger are fair to and in
the best interests of the Company and its shareholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the
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Offer and the Merger, and such approval is sufficient to render Section 912 of
the New York Business Corporation Law (the "NYBCL") inapplicable to this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, (iii) amended the Company Rights Agreement as described in Section
4.01(n), and (iv) resolved to recommend acceptance of the Offer by those
Shareholders who wish to receive cash for their Shares and adoption of this
Agreement by the holders of Shares and (b) WP&Co. has delivered to the Company
Board the Fairness Opinion as described in Section 4.01(l). The Company hereby
consents to the inclusion in the Offer Documents of the recommendation referred
to in this Section 1.03; provided, however, that the Company Board may withdraw,
modify or change such recommendation to the extent, and only to the extent and
on the conditions, specified in Section 5.02. The Company will file with the SEC
simultaneously with the filing by Parent and Sub of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, "Schedule 14D-9") containing such
recommendations of the Company Board in favor of the Offer and the Merger. The
Company represents, warrants and covenants that Schedule 14D-9 will comply in
all material respects with the Exchange Act and any other applicable Laws and
will contain (or will be amended in a timely manner so as to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and other applicable Laws.
The Company will include in the Schedule 14D-9 information furnished by Parent
in writing concerning Parent's Designees as required by Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder and will use its reasonable best efforts
to have the Schedule 14D-9 available for inclusion to the initial mailing (and
any subsequent mailing) of the Offer Documents to Shareholders. Each of the
Company and Parent will promptly correct any information provided by them for
use in Schedule 14D-9 if and to the extent that it becomes false or misleading
in any material respect and the Company will further take all lawful action
necessary to cause Schedule 14D-9 as so corrected to be filed promptly with the
SEC and disseminated to the holders of Shares, in each case as and to the extent
required by applicable Law. Parent and its counsel will be given a reasonable
opportunity to review the Schedule 14D-9 and any amendments thereto prior to the
filing thereof with the SEC. In connection with the Offer, the Company will
promptly furnish Parent with mailing labels, security position listings and all
available listings or computer files containing the names and addresses of the
record holders of Shares as of the latest practicable date and will furnish
Parent such information and assistance (including updated lists of shareholders,
mailing labels and lists of security positions) as Parent or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of Shares. Subject to the requirements of applicable Law, and except for
such actions as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, Parent and Sub will,
and will instruct each of their respective
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affiliates, associates, partners, employees, agents and advisors to, hold in
confidence the information contained in such labels, lists and files, will use
such information only in connection with the Offer and the Merger, and, if this
Agreement is terminated in accordance with its terms, will deliver promptly to
the Company (or destroy and certify to the Company the destruction of) all
copies of such information (and any copies, compilations or extracts thereof or
based thereon) then in their possession or under their control.
1.04. Directors. (a) Promptly upon the purchase of Shares by Sub
pursuant to the Offer, and from time to time thereafter, (i) Parent will be
entitled to designate such number of directors ("Parent's Designees"), rounded
up to the next whole number as will give Parent, subject to compliance with
Section 14(f) of the Exchange Act, representation on the Company Board equal to
the product of (A) the number of directors on the Company Board (giving effect
to any increase in the number of directors pursuant to this Section 1.04) and
(B) the percentage that such number of Shares so purchased bears to the
aggregate number of Shares outstanding (such number being, the "Board
Percentage"), provided, however, that if the number of Shares purchased pursuant
to the Offer equals or exceeds 49.9% of the outstanding Shares, the Board
Percentage will in all events be at least a majority of the members of the
Company Board, and (ii) the Company will, upon request by Parent, promptly
satisfy the Board Percentage by (A) increasing the size of the Company Board or
(B) using reasonable efforts to secure the resignations of such number of
directors as is necessary to enable Parent's Designees to be elected to the
Company Board and will use its best efforts to cause Parent's Designees promptly
to be so elected, subject in all instances to compliance with Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder. At the request of
Parent, the Company will take all lawful action necessary to effect any such
election. Parent will supply to the Company in writing and be solely responsible
for any information with respect to itself, the Parent's Designees and Parent's
officers, directors and affiliates required by Section 14(f) of the Exchange and
Rule 14f-1 promulgated thereunder to be included in the Schedule 14D-9.
Notwithstanding the foregoing, at all times prior to the Effective Time, the
Company Board will include at least two Continuing Directors.
(b) Notwithstanding any other provision hereof, of the articles of
incorporation or bylaws of the Company or of applicable Law to the contrary,
following the election or appointment of Parent's Designees pursuant to this
Section 1.04 and prior to the Effective Time, any amendment or termination of
this Agreement by the Company, extension by the Company for the performance or
waiver of the obligations or other acts of Parent or Sub hereunder or waiver by
the Company of the Company's rights hereunder will require the concurrence of a
majority of directors of the Company then in office who are directors on the
date
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hereof and who voted to approve this Agreement (such directors, the "Continuing
Directors").
(c) Notwithstanding any other provision hereof, of the articles of
incorporation or bylaws of Parent and Sub or of applicable Law to the contrary,
on or after the date hereof, any amendment or termination of this Agreement by
Parent or Sub, extension by Parent or Sub for the performance or waiver of the
obligations or other acts of the Company hereunder or waiver by Parent or Sub of
the rights of Parent or Sub hereunder will be taken by a majority of the members
of the Board of Directors of Parent (the "Parent Board") who are not employed by
the Company or any Subsidiary of the Company on the date hereof (such directors
being on the date hereof Messrs. Xxxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xx.,
and Xxxxxx X. Xxxxxx) (the "Unaffiliated Directors") or any successor thereto
elected to the Parent Board with the prior approval of the Unaffiliated
Directors.
1.05. Offer Completion Date. If (a) the Minimum Share Condition is
not satisfied on the Expiration Date and (b) the Average Closing Price for the
ten trading days prior to the Expiration Date multiplied by the Exchange Ratio
is at least $55.00, Parent and Sub may elect, by written notice from Parent to
the Company not later than the first business day after the Expiration Date, to
proceed with the Merger, in which case the Company, Parent and Sub will be
obligated to effect the Merger subject only to the conditions specified in
Article VII other than the conditions set forth in Section 7.02(b) and 7.03(b).
As used herein, "Offer Completion Date" means the earlier to occur of (i) the
date on which Sub purchases Shares pursuant to the Offer and (ii) the Effective
Time.
II. THE MERGER
2.01. The Merger. On the terms and subject to the conditions set
forth in this Agreement, and in accordance with the NYBCL, the Company will be
merged with and into Sub at the Effective Time in the Merger. Following the
Effective Time, Sub will be the surviving corporation in the Merger (the
"Surviving Corporation") and will succeed to and assume all the rights and
obligations of the Company in accordance with the NYBCL.
2.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to satisfaction or waiver of the conditions set forth in
Article VII) will be no later than the second business day after satisfaction or
waiver of the conditions set forth in Article VII, unless another time or date
is agreed to by the parties hereto. The Closing will be held at the offices of
Xxxxx, Day, Xxxxxx & Xxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx unless
another date, time or place is agreed to in writing by the parties hereto.
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2.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties will file a
certificate of merger or other appropriate documents (the "Certificate of
Merger") executed in accordance with the relevant provisions of the NYBCL and
will make all other filings or recordings required under the NYBCL in order to
effect the Merger. The Merger will become effective at such time as the
Certificate of Merger for the Merger has been duly filed with the New York
Secretary of State or at such subsequent date or time as Parent and the Company
agree and specify in the Certificate of Merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
2.04. Effects of the Merger. The Merger will have the effects set
forth in Section 906 of the NYBCL.
2.05. Certificate of Incorporation and By-laws. (a) The certificate
of incorporation of Sub will be the certificate of incorporation of the
Surviving Corporation, amended to change the name of the Surviving Corporation
to "DCA Incorporated", until thereafter changed or amended as provided therein
or by Law.
(b) The by-laws of Sub will be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable Law.
2.06. Boards, Committees and Officers. The Board of Directors,
committees of the Board of Directors, composition of such committees (including
chairmen thereof) and officers of Sub as of the Effective Time will serve as
such as the directors and officers of the Surviving Corporation until the
earlier of the resignation or removal of any such individual or until their
respective successors are duly elected and qualified, as the case may be.
III. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATION; EXCHANGE OF CERTIFICATES
3.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any Shares:
(a) Conversion of Sub Shares. At the Effective Time, each share of
common stock, without par value, of Sub issued and outstanding immediately prior
to the Effective Time will remain outstanding unaffected by the Merger, with the
result that the Surviving Corporation will be a wholly owned Subsidiary of
Parent.
(b) Cancellation of Treasury Stock and Sub-Owned Stock. Each Share
that is owned by the Company or by any wholly
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owned Subsidiary of the Company or by Parent or any wholly owned Subsidiary of
Parent will automatically be cancelled and retired and will cease to exist, and
no consideration will be delivered in exchange therefor.
(c) Electing Shares. Subject to Sections 3.01(f) and (g) hereof,
each Share outstanding immediately prior to the Effective Time with respect to
which a Form of Election to receive cash has been properly made and not revoked
pursuant to Section 3.01(e) (other than Shares to be cancelled in accordance
with Section 3.01(b)) will, at the Effective Time, be converted into, and
holders thereof will be entitled to receive therefor, $58.00 in cash (the "Cash
Election Price") (such shares with respect to which an election to be converted
into cash is duly filed being hereinafter referred to as "Electing Shares").
(d) Non-Electing Shares. Each Share outstanding immediately prior to
the Effective Time (other than Electing Shares and Shares to be cancelled in
accordance with Section 3.01(b)) (each such share being hereinafter referred to
as "Non-Electing Shares") and any Electing Shares subject to proration pursuant
to Section 3.01(g) will, at the Effective Time, be converted into 0.88 (the
"Exchange Ratio") fully paid and non-assessable shares of Parent Common Stock,
(the "Stock Consideration" and, together with the Cash Election Price, the
"Merger Consideration") subject to adjustment as provided in Section 3.03.
(e) Form of Election. The Company will mail a form of election
("Form of Election") to holders of record of Shares as of the Record Date of the
Company Shareholder Meeting. In addition, the Company will use its best efforts
to make the Form of Election and Joint Proxy Statement available to all persons
who become shareholders of Company during the period between such record date
and such meeting. Any election to receive the Cash Election Price contemplated
by Section 3.01(c) hereof shall have been properly made only if the Exchange
Agent shall have received at its designated office or offices, by 5:00 p.m. New
York City time, on the last business day preceding the date of the Company
Shareholder Meeting, a Form of Election properly completed and accompanied by
Certificates for the shares to which such Form of Election relates, duly
endorsed in blank or otherwise acceptable for transfer on the books of the
Company, (or an appropriate guarantee of delivery), as set forth in such Form of
Election. An election to receive cash may be revoked only by written notice
received by the Exchange Agent prior to 5:00 p.m. New York City time, on the
last business day preceding the date of the Company Shareholder Meeting. In
addition, all elections to receive cash shall automatically be revoked if the
Exchange Agent is notified in writing by Parent and Company that the Merger has
been abandoned. If an election to receive cash is so revoked, the Certificate(s)
(or guarantee of delivery, as appropriate) for the Shares to which such election
to receive cash relates shall be
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promptly returned to the person submitting the same to the Exchange Agent.
(f) Limitations on Cash Payments. Anything in this Article III to
the contrary notwithstanding, Electing Shares shall not be entitled to, and
Parent will not be obligated in implementation of Section 3.01(c) hereof to pay,
the Cash Election Price in respect of the number of Shares that exceeds (i)
49.9% of the number of Shares outstanding at the Effective Time (including
Shares owned by Sub) minus (ii) the number of Shares owned by Parent, Sub and
any of their respective Subsidiaries as of the Effective Time. The maximum
number of Shares entitled to the Cash Election Price pursuant to this Section
3.01(f) is hereinafter referred to as the "Maximum Cash Shares".
(g) Proration of Electing Shares. In the event that the aggregate
number of Electing Shares exceeds the Maximum Cash Shares, all Electing Shares
will be converted into the right to receive Merger Consideration in the
following manner:
(i) The number of Electing Shares covered by each Form of
Election to be converted into the Cash Election Price shall be
determined by multiplying the number of Electing Shares covered by
such Form of Election by a fraction, the numerator of which is the
Maximum Cash Shares and the denominator of which is the total number
of Electing Shares, rounded down to the nearest whole number.
(ii) All Electing Shares not converted into the Cash Election
Price in accordance with Section 3.01(g)(i) shall be converted into
the Stock
Consideration.
(h) Cancellation of Shares. As of the Effective Time, all such
Shares will no longer be outstanding and will automatically be cancelled and
retired and will cease to exist and each holder of a certificate representing
any such Shares (a "Certificate") will cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any additional
cash in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such Certificate in accordance with
Section 3.02, without interest.
3.02. Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Parent will enter into an agreement with such bank or trust
company as may be designated by Parent (the "Exchange Agent"), which will
provide that Parent will deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of Shares, for exchange in accordance with
this Article III, through the Exchange Agent, certificates representing the
shares of common stock, without par value, of
9
Parent ("Parent Common Stock") (such shares of Parent Common Stock, together
with any dividends or distributions with respect thereto with a record date
after the Effective Time, any Excess Shares and any cash (including cash
proceeds from the sale of the Excess Shares) payable pursuant to Section 3.01(c)
or in lieu of any fractional shares of Parent Common Stock, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 3.01 in
exchange for outstanding Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each holder of record of a
Certificate which immediately prior to the Effective Time represented
outstanding Shares whose Shares were converted into the right to receive the
Merger Consideration pursuant to Section 3.01 (i) a letter of transmittal (which
will specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon delivery of the Certificates to the Exchange
Agent and will be in such form and have such other provisions as Parent may
specify consistent with this Agreement) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
will be entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock and cash, if any, which such
holder has the right to receive pursuant to the provisions of this Article III,
and the Certificate so surrendered will forthwith be cancelled. In the event of
a transfer of ownership of Shares which are not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Parent Common Stock may be issued to a Person other than the Person in whose
name the Certificate so surrendered is registered if such Certificate is
properly endorsed or otherwise in proper form for transfer and the Person
requesting such issuance pays any transfer or other taxes required by reason of
the issuance of shares of Parent Common Stock to a Person other than the
registered holder of such Certificate or establishes to the satisfaction of
Parent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 3.02, each Certificate will be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration and cash, if any, which the holder thereof
has the right to receive in respect of such Certificate pursuant to the
provisions of this Article III. No interest will be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article III.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Parent Common Stock with a record date
after the Effective Time will be paid to
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the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby, no cash payment in lieu of fractional shares
will be paid pursuant to Section 3.02(e) and all such dividends, other
distributions and cash in lieu of fractional shares of Parent Common Stock will
be paid by Parent to the Exchange Agent and will be included in the Exchange
Fund, in each case in accordance with this Article III. Subject to the effect of
applicable escheat or similar Laws, following surrender of any Certificate in
accordance herewith there will be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and, in the case of
Certificates formerly representing Shares, the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 3.02(e) and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Shares. All shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article III (including any cash paid pursuant
to this Article III) will be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the Shares theretofore represented by
such Certificates, and there will be no further registration of transfers on the
stock transfer books of the Surviving Corporation of previously outstanding
Shares. If, after the Effective Time, Certificates are presented to Parent, the
Surviving Corporation or the Exchange Agent for any reason, they will be
cancelled and exchanged as provided in this Article III.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Parent Common Stock will be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent will relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of Parent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent will determine the excess of (A) the number of whole shares of
Parent Common Stock delivered to the Exchange Agent by Parent pursuant to
Section 3.02(a) over (B) the aggregate number of whole shares of Parent Common
Stock to be distributed to holders of Shares pursuant to Section 3.02(b) (such
excess being herein called the "Excess Shares"). Following the Effective Time,
the Exchange Agent will sell the Excess Shares at then-prevailing prices on the
New York Stock Exchange,
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Inc. (the "NYSE"), all in the manner provided in Section 3.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and will be
executed in round lots to the extent practicable. The Exchange Agent will use
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the prior holders of Shares, the Exchange Agent will
hold such proceeds in trust for such holders entitled thereto (the "Common
Shares Trust"). The Surviving Corporation will pay out of the Common Shares
Trust all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent incurred in
connection with such sale of the Excess Shares. The Exchange Agent will
determine the portion of the Common Shares Trust to which each holder of Shares
is entitled, if any, by multiplying the amount of the aggregate net proceeds
comprising the Common Shares Trust by a fraction, the numerator of which is the
amount of the fractional share interest to which such holder of Shares is
entitled (after taking into account all Shares held at the Effective Time by
such holder) and the denominator of which is the aggregate amount of fractional
share interests to which all holders of Shares are entitled.
(iv) Notwithstanding the provisions of Section 3.02(e)(ii) and
(iii), Parent may elect at its option, exercised prior to the Effective Time, in
lieu of the issuance and sale of Excess Shares and the making of the payments
hereinabove contemplated, to pay each holder of Shares an amount in cash equal
to the product obtained by multiplying (A) the fractional share interest to
which such holder (after taking into account all Shares held at the Effective
Time by such holder) would otherwise be entitled by (B) the average closing
price for a share of Parent Common Stock as reported on the NYSE Composite
Combination Tape (as reported in the Wall Street Journal, or, if not reported
thereby, any other authoritative source) ("Average Closing Price") for the ten
trading days prior to the Closing Date and, in such case, all references herein
to the cash proceeds of the sale of the Excess Shares and similar references
will be deemed to mean and refer to the payments calculated as set forth in this
Section 3.02(e)(iv).
(v) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Shares with respect to any fractional
share interests, the Exchange Agent will make available such amounts to such
holders of Shares subject to and in accordance with the terms of Section
3.02(c).
12
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time will be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
III will thereafter look only to Parent for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent will be liable to any Person in respect of any shares of Parent Common
Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificate has not been
surrendered prior to one year after the Effective Time (or immediately prior to
such earlier date on which any Merger Consideration, any cash payable to the
holder of such Certificate representing Shares pursuant to this Article III or
any dividends or distributions payable to the holder of such Certificate would
otherwise escheat to or become the property of any Governmental Entity), any
such Merger Consideration or cash, dividends or distributions in respect of such
Certificate will become the property of the Surviving Corporation, free and
clear of all claims or interest of any Person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent will invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments will be paid to
Parent.
(i) Lost Certificates. If any Certificate is lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration and, if applicable, any cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Parent Common Stock or
deliverable in respect thereof, pursuant to this Agreement.
(j) Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, no Share, the holder of which has properly complied with the
provisions of Section 623 of the NYBCL as to appraisal rights (a "Dissenting
Share"), will be deemed to be converted into and to represent the right to
receive the Merger Consideration hereunder and the holders of Dissenting Shares,
if any, will be entitled to payment, solely from the Surviving Corporation, of
the appraised value of such Dissenting Shares to the extent permitted by and in
accordance with the
13
provisions of Section 623 of the NYBCL; provided, however, that (i) if any
holder of Dissenting Shares, under the circumstances permitted by the NYBCL,
subsequently delivers a written withdrawal of his or her demand for appraisal of
such Dissenting Shares, (ii) if any such holder fails to establish his or her
entitlement to rights to payment as provided in such Section 623, or (iii) if
neither any holder of Dissenting Shares nor the Surviving Corporation has
instituted a proceeding to determine the rights of holders of Dissenting Shares
and to fix the fair value of Dissenting Shares in any of the circumstances
described in subparagraph (h) of Section 623 within the time provided in such
Section 623, such holder will forfeit such right to payment for such Dissenting
Shares pursuant to such Section 623 and, as of the later of Effective Time or
the occurrence of such event, such holder's Certificate formerly representing
shares of Company Common Stock will automatically be converted into and
represent only the right to receive the Merger Consideration pursuant to Section
3.01 hereof, without any interest thereon, upon surrender of the Certificate or
Certificates formerly representing such shares of Company Common Stock. The
Company will give Parent (A) prompt notice of any written demands for appraisal
of any Dissenting Shares, attempted withdrawals of such demands and any other
instruments received by the Company relating to shareholders' rights of
appraisal, (B) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under the NYBCL, and (C) the
right to approve any settlement of any such demand in Parent's sole discretion.
(k) Exchange of Certificates for Cash. Without limiting the
generality or effect of any other provision hereof, the Exchange Agent will have
discretion to determine whether or not elections to receive cash have been
properly made or revoked pursuant to this Article III with respect to Shares and
when elections and revocations were received by it. If the Exchange Agent
determines that any election to receive cash was not properly made with respect
to Shares, such shares will be treated by the Exchange Agent as, and for all
purposes of this Agreement will be deemed to be, Non-Electing Shares at the
Effective Time, and such shares will be converted in the Merger into shares of
Parent Common Stock pursuant to Section 3.01(d). The Exchange Agent will also
make computations as to the allocation and proration contemplated by this
Article III and any such computation will be conclusive and binding on the
holders of Electing Shares pursuant to this Article III. The Exchange Agent may,
with the mutual agreement of Parent, make such equitable changes in the
procedures set forth herein for the implementation of the cash elections
provided for in this Article III as it determines to be necessary or desirable
to effect fully such elections.
3.03. Stock Split. In connection with its approval of this
Agreement, the Board of Directors of Parent approved a stock split in the form
of a dividend of one Parent Common Share
14
for each then outstanding Parent Common Share (the "Stock Split"), to be
effective, subject to certain conditions, immediately after the Effective Time.
If the Stock Split is so effective, without further action, the Exchange Ratio
will be adjusted so as to be 1.76 shares of Parent Common Stock for each Share.
IV. REPRESENTATIONS AND WARRANTIES
4.01. Representations and Warranties of the Company. Except as
disclosed in the Company Filed SEC Documents or as set forth on the Disclosure
Schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company and each
of its Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize such concept) under the Laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted. The Company and
each of its Significant Subsidiaries is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions in which the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
could not be reasonably expected to have a material adverse effect on the
business, financial condition or results of operations of the Company and each
of its Subsidiaries, taken as a whole, or on the ability of the Company to
perform any of its obligations under this Agreement (any such effect, a "Company
MAE"). The Company has delivered to Parent prior to the execution of this
Agreement complete and correct copies of its certificate of incorporation and
by-laws and has made available to Parent the certificate of incorporation and
by-laws (or comparable organizational documents) of each of its Subsidiaries, in
each case as amended to date.
(b) Subsidiaries. Exhibit 21 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996 includes all of the
Subsidiaries of the Company. All the outstanding shares of capital stock of, or
other equity interests in, each such Subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by the
Company, free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
15
(c) Capital Structure. The authorized capital stock of the Company
consists of 10,600,000 Shares and 894,000 shares of preferred stock of the
Company ("Company Preferred Shares"). At the close of business on the last
business day immediately preceding the date hereof (the "Measurement Date"), (i)
3,838,742 Shares were issued and outstanding, (ii) 3,336,419 Shares were held by
the Company in its treasury, (iii) 106,000 shares of Series A Participating
Preferred Stock, par value $1 per share (the "Participating Preferred"), were
reserved for issuance pursuant to the Company Rights Agreement, and (iv) other
than the Participating Preferred, no other Company Preferred Shares have been
designated or issued. Except as set forth above, at the close of business on the
Measurement Date, no shares of capital stock or other voting securities of the
Company or any Subsidiary were issued, reserved for issuance or outstanding. At
the close of business on the Measurement Date, there were no outstanding stock
options, stock appreciation rights or rights to receive Shares on a deferred
basis. All outstanding shares of capital stock of the Company are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. As of
the close of business on the Measurement Date, there were no bonds, debentures,
notes, other indebtedness or securities of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of the Company may vote. Except as set
forth above, as of the close of business on the Measurement Date, there were no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking. As of the close of business on the Measurement Date, there were
no outstanding contractual obligations of the Company or any of its Subsidiaries
to issue, repurchase, redeem, exchange or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries. As of the close of
business on the Measurement Date, there were no outstanding contractual
obligations of the Company to vote or to dispose of any shares of the capital
stock of any of its Subsidiaries. The Company has delivered to Parent a complete
and correct copy of the Rights Agreement, dated as of January 10, 1986 (the
"Company Rights Agreement"), as amended and supplemented to the date hereof
relating to rights ("Company Rights") to purchase Participating Preferred.
(d) Authority; Noncontravention. The Company has all requisite
corporate power and authority to enter into this
16
Agreement, and, subject to the Company Shareholder Approval, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to Company Shareholder Approval. This
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, breach or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of the Company or
any of its Significant Subsidiaries under, (i) the certificate of incorporation
or by-laws of the Company or the comparable organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its Subsidiaries or their
respective properties or assets, or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order or
decree ("Order"), or statute, law, ordinance, rule or regulation ("Law")
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not be reasonably expected to have a
Company MAE. No Order, consent, approval or authorization of, or registration,
declaration or filing with, any federal, state, local or foreign government or
any court, administrative or regulatory agency or commission or other
governmental authority, agency or instrumentality (a "Governmental Entity") is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby except
for (1) the filing of a premerger notification and report form by the Company
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (2) the filing with the SEC of (A) a proxy statement relating to the
Company Shareholders Meeting (such proxy statement, together with the proxy
statement relating to the Parent Shareholders Meeting, in each case as amended
or supplemented from time to time, the "Joint Proxy Statement"), (B) the
Schedule 14D-9, and (C) such reports under the Exchange Act as may be required
in connection with this Agreement and the transactions contemplated hereby; (3)
the filing of the Certificate of Merger with the New York Secretary of State and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to
17
do business and such filings with Governmental Entities to satisfy the
applicable requirements of state securities or "blue sky" laws; (4) such other
filings and consents as may be required under any environmental, health or
safety Law or regulation pertaining to any notification, disclosure or required
approval necessitated by the Offer, the Merger or the transactions contemplated
hereby; and (5) such consents, approvals, Orders or authorizations the failure
of which to be made or obtained could not reasonably be expected, individually
or in the aggregate, to have a Company MAE.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed
all required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1995 (the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Company SEC Documents, and none of
the Company SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any Company SEC Document has been revised or
superseded by a later Company Filed SEC Document, none of the Company SEC
Documents contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the Company
SEC Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except (i) as reflected in such
financial statements or in the notes thereto, (ii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby, and
(iii) for liabilities and obligations incurred since March 31, 1997 in the
ordinary course of business consistent with past practice, neither the Company
nor any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), including liabilities
arising
18
under any Laws relating to the protection of health, safety or the environment
("Environmental Laws"), required by generally accepted accounting principles to
be reflected in a consolidated balance sheet of the Company and its consolidated
Subsidiaries and which, individually or in the aggregate, could reasonably be
expected to have a Company MAE.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the Offer Documents, at the time such documents are first published, sent
or given to holders of Shares, and any time they are amended or supplemented,
(ii) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock in the Merger (the "Form
S-4"), at the time the Form S-4 is filed with the SEC or at the time it becomes
effective under the Securities Act, or (iii) the Joint Proxy Statement, at the
date it is first mailed to the Company's shareholders or at the time of the
Company Shareholders Meeting will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Joint Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder, including Rule 13e-3 (if applicable,
nothing herein being deemed to be an admission that Rule 13e-3 is so
applicable), except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Joint Proxy Statement or contained in any
Parent Filed SEC Documents incorporated by reference in the Offer Documents, the
Form S-4 or the Joint Proxy Statement.
(g) Absence of Certain Changes or Events. Except (i) as disclosed in
the Company SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Company Filed SEC
Documents"), (ii) for the transactions provided for herein or permitted by
Section 5.01(a), and (iii) for liabilities incurred in connection with or as a
result of this Agreement, since March 31, 1997, the Company has conducted its
business only in the ordinary course, and there has not been (1) any Company
MAE, (2) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of the
Company stock, other than regular semiannual cash dividends at the rate in
effect for the first half of 1997 ("Regular Company Semiannual Dividends"), (3)
any split, combination or reclassification of any of the Company's capital stock
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of the Company's capital
stock, (4) any granting by the Company or any of its Subsidiaries to any
director, executive
19
officer or other key employee of the Company of any increase in compensation,
other than as contemplated by Section 4.01(o), (5) any granting by the Company
or any of its Subsidiaries to any such director, executive officer or key
employee of any increase in severance or termination pay, except as was required
under any employment, severance or termination agreements in effect as of the
date of the most recent financial statements included in the Company Filed SEC
Documents or referred to in Section 4.01(o), (6) any entry by the Company or any
of its Subsidiaries into any employment, severance or termination agreement with
any such director, executive officer or key employee, other than as contemplated
by Section 4.01(o), or (7) except insofar as may be required by a change in
generally accepted accounting principles, any change in accounting methods,
principles or practices by the Company. For purposes of this Agreement, "key
employee" means any employee whose current salary and targeted bonus exceeds
$100,000 per annum. Section 4.01(g) of the Company Disclosure Schedule contains
a true and complete list of all agreements or plans providing for termination or
severance pay to any employee of the Company.
(h) Litigation. There are no suits, actions or proceedings pending
or, to the Knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries that individually or in the aggregate could
reasonably be expected to have a Company MAE, nor are there any Orders of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries having, or which could reasonably be expected to have, individually
or in the aggregate, a Company MAE.
(i) Voting Requirements. The affirmative vote of the holders of
two-thirds of the voting power of all outstanding Shares, voting as a single
class, at the Company Shareholders Meeting (the "Company Shareholder Approval")
to adopt this Agreement is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve and adopt this Agreement and
the transactions contemplated hereby.
(j) State Takeover Statutes. The Company Board has approved this
Agreement and the consummation of the Merger and the other transactions
contemplated by hereby. Such approval constitutes approval of the Merger and the
other transactions contemplated hereby by the Company Board under the provisions
of Section 912 of the NYBCL and Article XV of the Company's Certificate of
Incorporation.
(k) Brokers. No broker, investment banker, financial advisor or
other Person, other than Wasserstein, Perella & Co., Inc. ("WP&Co."), the fees
and expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company
20
has furnished to Parent true and complete copies of all agreements under which
any such fees or expenses are payable and all indemnification and other
agreements related to the engagement of the Persons to whom such fees are
payable.
(l) Opinion of Financial Advisor. The Company has received the
opinion of WP&Co. (the "Fairness Opinion") to the effect that, as of the date
thereof, the consideration in the form of shares of Parent Common Stock issuable
in the Merger and, in the event Shares are purchased in the Offer, the cash
price of such Shares, collectively, to be received by the Company's shareholders
pursuant to this Agreement is fair to the Company's shareholders from a
financial point of view, a signed copy of which opinion has been delivered to
Parent.
(m) Ownership of Parent Common Stock. Except as set forth in the
Company Disclosure Schedule, neither the Company nor, to its Knowledge, any of
its Affiliates, (i) beneficially owns (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of Parent.
(n) The Company Rights Agreement. The Company Rights Agreement has
been amended (the "Company Rights Plan Amendment") as set forth in the Company
Disclosure Schedule to, among other things, (i) render the Company Rights
Agreement inapplicable to the Offer, the Merger and the other transactions
contemplated hereby, including without limitation the Shareholders Agreement,
and (ii) ensure that (y) neither Parent nor any of its Subsidiaries nor any of
its permitted assignees or transferees is an Acquiring Person (as defined in the
Company Rights Agreement) pursuant to the Company Rights Agreement and (z) a
Stock Acquisition Date or Distribution Date (in each case as defined in the
Company Rights Agreement) does not occur by reason of the execution of this
Agreement, the commencement or completion of the Offer, the consummation of the
Merger or the other transactions contemplated hereby. Except as set forth in the
Company Disclosure Schedule, the Company Rights Agreement may not be further
amended by the Company without the prior consent of Parent in its sole
discretion.
(o) Employment Agreements. The Company, Parent and each of the three
executive officers of the Company identified in Section 6.05(a) of the Company
Disclosure Schedule (the "Executives") have entered into employment agreements
among the Company, Parent and the Executives (the "Company Employment
Agreements") in the form attached to the Company Disclosure Schedule. Without
limiting the generality or effect of any other provision hereof, none of the
Company Employment Agreements will be amended or modified, or any binding
interpretation thereof made, by the Company prior to the Effective Time without
the prior approval of the Parent Board.
21
4.02. Representations and Warranties of Parent and Sub. Except as
disclosed in the Parent Filed SEC Documents or as set forth on the Disclosure
Schedule delivered by Parent to the Company prior to the execution of this
Agreement (the "Parent Disclosure Schedule"), Parent and Sub jointly and
severally represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and
each of its Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing (with respect to jurisdictions
which recognize such concept) under the Laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted. The Parent and
each of its Significant Subsidiaries is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions in which the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
could not be reasonably expected to have a material adverse effect on the
business, financial condition or results of operations of Parent and each of its
Subsidiaries, taken as a whole, or on the ability of Parent and Sub to perform
their respective obligations under this Agreement (any such effect, a "Parent
MAE"). Parent has delivered to the Company prior to the execution of this
Agreement complete and correct copies of its articles of incorporation and
bylaws, in each case as amended to date and as proposed to be amended and
restated at the Parent Shareholders Meeting (as so amended and restated, the
"Amended Parent Constituent Documents") and has made available to the Company
the articles of incorporation and bylaws (or comparable organizational
documents) of each of its Subsidiaries, in each case as amended to date.
(b) Subsidiaries. Exhibit 21 to Parent's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 includes all of the Subsidiaries of
Parent. All the outstanding shares of capital stock of, or other equity
interests in, each such Subsidiary have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by Parent, free and clear
of all Liens.
(c) Capital Structure. The authorized capital stock of Parent
consists of 8,000,000 shares of Parent Common Stock. The authorized capital
stock of Sub consists of 1,000 shares of common stock, without par value, 100 of
which are issued and outstanding and are held beneficially and of record by
Parent. At the close of business on the Measurement Date, (i) 5,228,896 shares
of Parent Common Stock were issued and outstanding, (ii) 578,135 shares of
Parent Common Stock were held by Parent in its treasury, and (iii) 589,575
shares of Parent
22
Common Stock were reserved for issuance pursuant to the 1986 Stock Option Plan,
the 1996 Stock Option Plan, the 1988 Restricted Stock and Cash Bonus Plan and
the Stock Retirement Plan for Nonemployee Directors (such plans, collectively,
the "Parent Stock Plans"). Except as set forth above, at the close of business
on the Measurement Date, no shares of capital stock or other voting securities
of Parent were issued, reserved for issuance or outstanding. At the close of
business on the Measurement Date, there were no outstanding stock options, stock
appreciation rights or rights (other than employee stock options or other rights
("Parent Employee Stock Options") to purchase or receive Parent Common Stock
granted under the Parent Stock Plans) to receive shares of Parent Common Stock
on a deferred basis granted under the Parent Stock Plans or otherwise. The
Parent Disclosure Schedule sets forth a complete and correct list, as of the
Measurement Date, of the number of shares of Parent Common Stock subject to
Parent Employee Stock Options. All outstanding shares of capital stock of Parent
are, and all shares which may be issued, including shares to be issued pursuant
to this Agreement, will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. As of the close of
business on the Measurement Date, there were no bonds, debentures, notes or
other indebtedness or securities of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which shareholders of Parent may vote. Except as set forth above
or as contemplated by Schedule 6.05(b), as of the close of business on the
Measurement Date, there were no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which Parent or any of its Subsidiaries is a party or by which any of them is
bound obligating Parent or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of Parent or of any of its Subsidiaries or obligating
Parent or any of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. Except for agreements entered into with respect to the Parent Stock
Plans, as of the close of business on the Measurement Date, there were no
outstanding contractual obligations of Parent or any of its Subsidiaries to
issue, repurchase, redeem or otherwise acquire any shares of capital stock of
Parent or any of its Subsidiaries. As of the close of business on the
Measurement Date, there were no outstanding contractual obligations of Parent to
vote or to dispose of any shares of the capital stock of any of its
Subsidiaries.
(d) Authority; Noncontravention. Parent and Sub have all requisite
corporate power and authority to enter into this Agreement and, subject to the
Parent Shareholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Parent and Sub and
the consummation by Parent and Sub of the transactions
23
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Sub subject, in the case of the
adoption of this Agreement and the Amended Parent Constituent Documents, to
Parent Shareholder Approval. This Agreement has been duly executed and delivered
by Parent and Sub and constitutes valid and binding obligations of Parent and
Sub, enforceable against each of them in accordance with its terms. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated thereby and compliance with the provisions thereof
will not, conflict with, breach, or result in any violation of, or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its Significant Subsidiaries under, (i)
the articles of incorporation or bylaws of Parent or the comparable
organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or any
of its Significant Subsidiaries or their respective properties or assets, or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any Order or Law applicable to Parent or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate could not be
reasonably expected to have a Parent MAE. No consent, approval, Order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent and Sub
or the consummation by Parent and Sub of the transactions contemplated hereby,
except for (1) the filing of a premerger notification and report form by Parent
under the HSR Act; (2) the filing with the SEC of (A) the Joint Proxy Statement
relating to the Parent Shareholders Meeting, (B) the Schedule 14D-1, (C) the
Form S-4, and (D) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby; (3) the
filing of the Certificate of Merger with the New York Secretary of State and
appropriate documents with the relevant authorities of other states in which
Parent is qualified to do business and such filings with Governmental Entities
to satisfy the applicable requirements of state securities or "blue sky" laws;
(4) such filings with and approvals of the NYSE to permit the shares of Parent
Common Stock that are to be issued in the Merger to be listed for trading on the
NYSE; (5) such other filings and consents as may be required under any
Environmental Law pertaining to any notification, disclosure or required
approval necessitated by the Merger or the transactions contemplated by this
Agreement; and (6) such consents, approvals, Orders or authorizations the
failure of which to be made or obtained could
24
not reasonably be expected, individually or in the aggregate, to have a Parent
MAE.
(e) SEC Documents; Undisclosed Liabilities. Parent has filed all
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1995 (the "Parent SEC Documents"). As of their respective
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents when filed contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any Parent SEC
Document has been revised or superseded by a later Parent Filed SEC Document,
none of the Parent SEC Documents contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of Parent
included in the Parent SEC Documents comply as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position of Parent and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal recurring year-end audit adjustments).
Except (i) as reflected in such financial statements or in the notes thereto,
(ii) as contemplated hereunder, (iii) for liabilities incurred in connection
with this Agreement or the transactions contemplated hereby (including without
limitation financing relating to the transactions contemplated hereby), and (iv)
for liabilities and obligations incurred since March 31, 1997 in the ordinary
course of business consistent with past practice, neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise), including liabilities arising under any
Environmental Laws, required by generally accepted accounting principles to be
reflected in a consolidated balance sheet of Parent and its consolidated
Subsidiaries and which, individually or in the aggregate, could reasonably be
expected to have a Parent MAE.
(f) Information Supplied. None of the information supplied or to be
supplied by Parent specifically for inclusion
25
or incorporation by reference in (i) the Offer Documents, at the time the Offer
Documents are first published, sent or given to holders of Company Common Stock,
and any time they are amended or supplemented, (ii) the Form S-4, at the time
the Form S-4 is filed with the SEC or at the time it becomes effective under the
Securities Act, or (iii) the Joint Proxy Statement, at the date it is first
mailed to Parent's shareholders or at the time of the Parent Shareholders
Meeting will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Offer Documents, the Joint Proxy Statement and the Form S-4
will comply as to form in all material respects with the requirements of the
Exchange Act and the Securities Act, respectively, and the rules and regulations
thereunder, including Rule 13e-3 under the Exchange Act, if applicable, except
that no representation or warranty is made by Parent or Sub with respect to
statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Offer Documents, the Joint Proxy Statement or the Form S-4 or contained
in any Company Filed SEC Documents incorporated by reference in the Offer
Documents, the Joint Proxy Statement or the Form S-4.
(g) Absence of Certain Events. Except (i) as disclosed in the Parent
SEC Documents filed and publicly available prior to the date of this Agreement
(as amended to the date of this Agreement, the "Parent Filed SEC Documents"),
(ii) for the transactions provided for herein or permitted by Section 5.01(b),
and (iii) for liabilities incurred in connection with or as a result of this
Agreement, since March 31, 1997, Parent has conducted its business only in the
ordinary course, and there has not been (1) any Parent MAE, (2) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of Parent's capital stock, other than
regular quarterly cash dividends at the rate in effect for the first quarter of
1997 ("Regular Parent Quarterly Dividends"), (3) any split, combination or
reclassification of any of Parent's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of Parent's capital stock other than the Stock
Split, or (4) except insofar as may be required by a change in generally
accepted accounting principles, any change in accounting methods, principles or
practices by the Parent. Section 4.02(g) of the Parent Disclosure Schedule
contains a true and complete list of all agreements or plans providing for
termination or severance pay to any employee of Parent.
(h) Litigation. There are no suits, actions or proceedings pending
or, to the Knowledge of Parent, threatened against or affecting Parent or any of
its Subsidiaries that individually or in the aggregate could reasonably be
expected to have a Parent MAE, nor are there any Orders of any Governmental
26
Entity or arbitrator outstanding against Parent or any of its Subsidiaries
having, or which could reasonably be expected to have, individually or in the
aggregate, a Parent MAE.
(i) Voting Requirements. The consent actions executed by Parent as
sole shareholder of Sub on the date hereof (copies of which have been previously
furnished to the Company) and the affirmative vote of the holders of a majority
of the voting power of all outstanding shares of Parent Common Stock, voting as
a single class, at the Parent Shareholders Meeting (the "Parent Shareholder
Approval") to approve the Amended Charter Documents and the issuance of Parent
Common Stock in connection with the Merger are the only votes of the holders of
any class or series of Parent's or Sub's capital stock necessary to approve and
adopt this Agreement and the transactions contemplated hereby.
(j) Brokers. No broker, investment banker, financial advisor or
other Person, other than X.X. Xxxxxx & Co., the fees and expenses of which will
be paid by Parent or, if the Merger occurs, the Surviving Corporation, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent. Parent has furnished to
the Company true and complete copies of all agreements under which any such fees
or expenses are payable and all indemnification and other agreements related to
the engagement of the Persons to whom such fees are payable.
(k) Opinion of Financial Advisor. Parent has received the opinion of
X.X. Xxxxxx & Co. (the "Fairness Opinion") to the effect that, as of the date
hereof, terms of this Agreement are fair to Parent from a financial point of
view.
(l) Ownership of Company Common Stock. Except for Shares owned by
Benefit Plans maintained or contributed to by Parent to any of its Subsidiaries
(the "Parent Benefit Plans") or as set forth in the Parent Disclosure Schedule,
neither Parent nor, to its Knowledge, any of its Affiliates (excluding for
purposes hereof any director of Parent other than the Unaffiliated Directors),
(i) beneficially owns (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of Company.
(m) Tax Matters. Parent has no plan or intention to (a) liquidate
the Surviving Corporation, (b) merge the Surviving Corporation with and into
another corporation, (c) sell or otherwise dispose of the stock of the Surviving
Corporation, (d) cause the Surviving Corporation to (i) violate the "continuity
of business" requirements of Treasury Regulation ss. 1.368-1(d) by selling or
otherwise disposing of assets of the Company acquired in the Merger, or (ii)
sell or dispose of any shares of capital stock of Parent owned by the Company,
or (e) take any action that
27
would reasonably be expected to cause the Merger not to qualify as a
reorganization under Section 368(a) of the Code.
V. COVENANTS RELATING TO CONDUCT OF BUSINESS
5.01. Conduct of Business. (a) Conduct of Business by the Company.
Except as set forth in Section 5.01(a) of the Company Disclosure Schedule,
during the period from the date of this Agreement to the Effective Time, the
Company will, and will cause its Subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable Laws and, to the extent consistent therewith, use all reasonable
efforts to preserve intact their current business organizations, use reasonable
efforts to keep available the services of their current officers and other key
employees and preserve their relationships with those Persons having business
dealings with them to the end that their goodwill and ongoing businesses will be
unimpaired at the Effective Time. Except as set forth in Section 5.01(a) of the
Company Disclosure Schedule, without limiting the generality or effect of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company will not, and will not permit any of its Subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of the
Company to its parent, or by a Subsidiary that is partially owned by the
Company or any of its Subsidiaries, provided that the Company or any such
Subsidiary receives or is to receive its proportionate share thereof and
Regular Company Semiannual Dividends, (A) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its
capital stock, (B) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares
of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(iii) amend its certificate of incorporation, by-laws or other
comparable organizational documents;
28
(iv) acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business
or any corporation, limited liability company, partnership, joint venture,
association or other business organization or division thereof;
(v) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, other
than (x) in the ordinary course of business consistent with past practice
and (y) sales of assets which do not individually or in the aggregate
exceed $1.0 million;
(vi) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with
past practice, or (B) make any loans, advances or capital contributions
to, or investments in, any other Person, other than to the Company or any
Subsidiary of the Company or to officers and employees of the Company or
any of its Subsidiaries for travel, business or relocation expenses in the
ordinary course of business;
(vii) make or agree to make any capital expenditure or capital
expenditures other than capital expenditures set forth in the operating
budget of the Company previously furnished to Parent, the relevant
portions of which are set forth in Section 5.01(a)(vii) of the Company
Disclosure Schedule;
(viii) make any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(ix) except as required by Law or contemplated hereby, enter into,
adopt or amend in any material respect or terminate any Company Benefit
Plan or any other agreement, plan or policy involving the Company or any
of its Subsidiaries and one or more of their directors, officers or
employees including without limitation the Company Employment Agreements,
or materially change any actuarial or other assumption used to calculate
funding obligations with respect to any Company pension plans, or change
the manner in which contributions to any Company pension plans are made or
the basis on which such contributions are determined;
29
(x) increase the compensation of any director, executive officer or
other key employee of the Company or pay any benefit or amount not
required by a plan or arrangement as in effect on the date of this
Agreement to any such Person;
(xi) enter into any contract or agreement, written or oral, with any
affiliate, associate or relative of Parent, or make any payment to or for
the benefit of, directly or indirectly, any of the foregoing;
(xii) make any amendment to, or waive or enter into or give any
binding interpretation of, any term of the Agreement, dated October 9,
1990, among the Company and certain shareholders of the Company; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Conduct of Business by Parent. Except as set forth in Section
5.01(b) of the Parent Disclosure Schedule, during the period from the date of
this Agreement to the Effective Time, the Parent will, and will cause its
Subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and in
compliance in all material respects with all applicable Laws and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, use reasonable efforts to keep available the
services of their current officers and other key employees and preserve their
relationships with those Persons having business dealings with them to the end
that their goodwill and ongoing businesses will be unimpaired at the Effective
Time. Except as set forth in Section 5.01(b) of the Parent Disclosure Schedule,
without limiting the generality or effect of the foregoing, during the period
from the date of this Agreement to the Effective Time, Parent will not, and will
not permit any of its Subsidiaries to:
(i) other than (A)(1) dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned Subsidiary
of Parent to its parent, or by a Subsidiary that is partially owned by
Parent or any of its Subsidiaries, provided that Parent or any such
Subsidiary receives or is to receive its proportionate share thereof, and
(2) Regular Parent Quarterly Dividends, (B) the Stock Split, and (C) in
connection with rights that are authorized by action of a majority of the
Unaffiliated Directors which, by the terms thereof, become exercisable
only after the Effective Time or, if earlier, the termination of this
Agreement ("Rights"), (1) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock, (2)
split, combine or reclassify any of its capital stock or
30
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (3)
purchase, redeem or otherwise acquire any shares of capital stock of
Parent or any of its Subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities;
(ii) other than in connection with the Stock Split or Rights or the
issuance of Parent Common Stock upon the exercise of Parent Employee Stock
Options, issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities;
(iii) amend its articles of incorporation, bylaws or other
comparable organizational documents;
(iv) make any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles; or
(v) authorize, or commit or agree to take, any of the foregoing
actions.
(c) Other Actions. Except as required by Law, neither the Company,
on the one hand, nor Sub or Parent, on the other hand, will, and will not permit
any of their respective Subsidiaries to, voluntarily take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the conditions to the Merger set forth in
Article VIII not being satisfied.
(d) Advice of Changes. The Company and Parent will promptly advise
the other party orally and in writing of (i) any representation or warranty made
by it or, in the case of Parent, Sub contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it or, in the case of
Parent, Sub to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement, or (iii) any change or event having, or which, insofar
as can reasonably be foreseen, could reasonably be expected to have, a material
adverse effect on such party or on the truth of their respective representations
and warranties or the ability of the conditions set forth in Article VIII to be
31
satisfied; provided, however, that no such notification will affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(e) Coordination of Dividends. Each of Parent and the Company will
coordinate with the other regarding the declaration and payment of dividends in
respect of the Parent Common Stock and the Shares and the record dates and
payment dates relating thereto, it being the intention of Parent and the Company
that any holder of Shares will not receive two dividends, or fail to receive one
dividend, for any single calendar quarter with respect to its Shares and/or any
Parent Common Stock any such holder receives in exchange therefor pursuant to
the Merger.
(f) As used herein, "Parent's 1997 Annual Meeting" shall mean
Parent's 1997 annual meeting of shareholders.
5.02. No Solicitation by the Company. (a) The Company will not, nor
will it permit any of its Subsidiaries to, nor will it authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Company Takeover Proposal or (ii) participate in any
discussions or negotiations regarding any Company Takeover Proposal; provided,
however, that if, at any time prior to the Offer Completion Date, the Company
Board determines in good faith, after consultation with its financial advisor
and outside counsel, that failure to do so would create a reasonable possibility
of a breach of its fiduciary duties to the Company's shareholders under
applicable Law, the Company may, in response to a Company Takeover Proposal
which was not solicited by it or which did not otherwise result from a breach of
this Section 5.02(a), (A) furnish information with respect to the Company and
each of its Subsidiaries to any Person pursuant to a customary confidentiality
agreement (as determined by the Company after consultation with its outside
counsel) and (B) participate in negotiations regarding such Company Takeover
Proposal. For purposes of this Agreement, "Company Takeover Proposal" means any
inquiry, proposal or offer from any Person relating to any direct or indirect
acquisition or purchase of 20% or more of the assets of the Company and its
Subsidiaries or 20% or more of any class of equity securities of the Company or
any of its Subsidiaries, any tender offer or exchange offer that if consummated
would result in any Person beneficially owning 20% or more of any class of
equity securities of the Company or any of its Subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its Subsidiaries, other
than the transactions contemplated by this Agreement.
32
(b) Except as expressly permitted by this Section 5.02(b), neither
the Company Board nor any committee thereof may (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Parent or Sub,
the approval or recommendation by the Company Board or such committee of the
Offer, the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Company Takeover Proposal, or (iii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Company Takeover
Proposal (each, a "Company Acquisition Agreement"). Notwithstanding the
foregoing, in the event that prior to the Offer Completion Date, the Company
Board determines in good faith, after the Company has received a Company
Takeover Proposal and after consultation with its financial adviser and outside
counsel, that failure to do so would create a reasonable possibility of a breach
of its fiduciary duties to the Company's shareholders under applicable Law, the
Company Board may withdraw or modify its approval or recommendation of the
Offer, the Merger or this Agreement, approve or recommend a Company Takeover
Proposal or terminate this Agreement pursuant to Section 8.01(i) but only if (A)
prior to any such approval, recommendation or termination, the Company shall,
simultaneously with giving such notice, pay the Company Termination Fee, and (B)
prior to any such termination which is to be effective within two business days
of the date of the Parent's 1997 Annual Meeting and any adjournment or
rescheduling thereof, the Company shall have given Parent at least two business
days notice of the effectiveness of such termination.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.02, the Company will (i) immediately
advise Parent orally and in writing of any request for information or of any
Company Takeover Proposal, the material terms and conditions of such request or
Company Takeover Proposal and the identity of the Person making such request or
Company Takeover Proposal and (ii) keep Parent reasonably informed of the status
and details (including amendments or proposed amendments) of any such request or
Company Takeover Proposal, provided, however, that the Company will not be
required to provide to Parent any information if and to the extent that the
Company Board determines, following consultation with outside counsel, that so
doing would create a reasonable possibility of a breach of its fiduciary duties
to the Company's shareholders under applicable Law.
(d) Nothing contained in this Section 5.02 will prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Company Board,
after consultation with outside counsel, the failure so to disclose would be
inconsistent with its fiduciary duties to the Company's shareholders under
applicable Law;
33
provided, however, that neither the Company nor the Company Board nor any
committee thereof may, except as expressly permitted by Section 5.02(b),
withdraw or modify, or propose publicly to withdraw or modify, its position with
respect to the Offer, this Agreement or the Merger or approve or recommend, or
propose publicly to approve or recommend, a Company Takeover Proposal.
5.03. No Solicitation by Parent. (a) Parent will not, nor will it
permit any of its Subsidiaries to, nor will it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly through another Person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any Parent Takeover Proposal or (ii) participate in any
discussions or negotiations regarding any Parent Takeover Proposal; provided,
however, that if, at any time prior to the Effective Time, the Unaffiliated
Directors determine in good faith, after consultation with outside counsel, that
failure to do so would create a reasonable possibility of a breach of their
fiduciary duties to the Parent's shareholders under applicable Law, Parent may,
in response to a Parent Takeover Proposal which was not solicited by it or which
did not otherwise result from a breach of this Section 5.03(a), (A) furnish
information with respect to Parent and each of its Subsidiaries to any Person
pursuant to a customary confidentiality agreement (as determined by Parent after
consultation with its outside counsel) and (B) participate in negotiations
regarding such Parent Takeover Proposal. For purposes of this Agreement, "Parent
Takeover Proposal" means any inquiry, proposal or offer from any Person relating
to any direct or indirect acquisition or purchase of 20% or more of the assets
of Parent and its Subsidiaries or 20% or more of any class of equity securities
of Parent or any of its Subsidiaries, any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 20% or more of any
class of equity securities of the Parent or any of its Subsidiaries, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Parent or any of its Subsidiaries,
other than the transactions contemplated by this Agreement.
(b) Except as expressly permitted by this Section 5.03(b), neither
the Parent Board nor any committee thereof may (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to the Company, the
approval or recommendation by the Parent Board or such committee of the Merger
or this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Parent Takeover Proposal, or (iii) cause Parent to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Parent Takeover Proposal (each, a "Parent Acquisition
Agreement"). Notwithstanding the
34
foregoing, in the event that prior to the Offer Completion Date, the
Unaffiliated Directors determine in good faith, after Parent has received a
Parent Takeover Proposal and after consultation with its financial adviser and
outside counsel, that failure to do so would create a reasonable possibility of
a breach of their fiduciary duties to Parent's shareholders under applicable
Law, the Parent Board, by action of the Unaffiliated Directors, may withdraw or
modify its approval or recommendation of the Merger or this Agreement, approve
or recommend a Parent Takeover Proposal or terminate this Agreement pursuant to
Section 8.01(f) but only if, prior to any such approval, recommendation or
termination in respect of a Parent Takeover Proposal, Parent shall have paid the
Parent Termination Fee.
(c) In addition to the obligations of Parent set forth in paragraphs
(a) and (b) of this Section 5.03, Parent will (i) immediately advise the Company
orally and in writing of any request for information or of any Parent Takeover
Proposal, the material terms and conditions of such request or Parent Takeover
Proposal and the identity of the Person making such request or Parent Takeover
Proposal and (ii) keep the Company reasonably informed of the status and details
(including amendments or proposed amendments) of any such request or Parent
Takeover Proposal, provided, however, that the Parent will not be required to
provide to the Company any information if and to the extent that the
Unaffiliated Directors determine, following consultation with outside counsel,
that so doing would create a reasonable possibility of a breach of their
fiduciary duties to the Parent's shareholders under applicable Law.
(d) Nothing contained in this Section 5.03 will prohibit Parent from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Parent's shareholders if, in the good faith judgment of the Unaffiliated
Directors, after consultation with outside counsel, the failure so to disclose
would be inconsistent with their fiduciary duties to Parent's shareholders under
applicable Law; provided, however, that neither Parent nor the Parent Board nor
any committee thereof may, except as expressly permitted by Section 5.03(b),
withdraw or modify, or propose publicly to withdraw or modify, its position with
respect to this Agreement or the Merger or approve or recommend, or propose
publicly to approve or recommend, a Parent Takeover Proposal.
5.04. Proposed Parent Charter and Bylaws Amendments. Without
further approval or consent of the Company, Parent may take all such actions as
are necessary or appropriate to make amendments to its articles of incorporation
or bylaws having the terms and conditions described in Annex B (respectively,
the "Proposed Parent Charter Amendments" and the "Proposed Parent Bylaw
Amendments"), provided however, that such amendments shall not be effective
until the Effective Date. The Company will vote all shares of Parent Common
Stock beneficially owned by it or any
35
of its Subsidiaries in favor of the adoption of the Proposed Parent Charter
Amendments.
VI. ADDITIONAL COVENANTS
6.01. Preparation of the Form S-4 and the Joint Proxy Statement;
Shareholders Meetings. (a) As soon as practicable following the date of this
Agreement, the Company, Parent and Sub will prepare and file with the SEC the
Joint Proxy Statement and Parent will prepare and file with the SEC the Form
S-4, in which the Joint Proxy Statement will be included as a prospectus. Each
of the Company and Parent will use all reasonable efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. The Company will use all reasonable efforts to cause the Joint
Proxy Statement to be mailed to the Company's shareholders, and Parent will use
all reasonable efforts to cause the Joint Proxy Statement to be mailed to
Parent's shareholders, in each case as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Parent will also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or to file a general consent to service of process)
required to be taken under any applicable state securities Laws in connection
with the issuance of Parent Common Stock in the Merger and under the Company
Stock Plans and Parent Stock Plans and the Company will furnish all information
concerning the Company and the holders of Company Common Stock as may be
reasonably requested in connection with any such action.
(b) Subject to its rights to terminate this Agreement pursuant to
the applicable provisions of Section 8.01, the Company will as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its shareholders (the "Company Shareholders
Meeting") for the purpose of obtaining the Company Shareholder Approval and,
through the Company Board, subject to the provisions of Section 5.02(b),
recommend to Shareholders the approval and adoption of this Agreement, the
Merger and the other transactions contemplated hereby. Without limiting the
generality or effect of the foregoing but subject to its rights to terminate
this Agreement as aforesaid, the Company's obligations pursuant to the first
sentence of this Section 6.01(b) will not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Company Takeover Proposal.
(c) Subject to its rights to terminate this Agreement under the
applicable provision of Section 8.01, Parent will, as soon as practicable
following the date of this Agreement, duly call, give notice of, convene and
hold a meeting of its shareholders (the "Parent Shareholders Meeting") for the
purpose of obtaining the Parent Shareholder Approval and, through the Parent's
Board of Directors, subject to the provisions of Section 5.03(b), recommend that
its shareholders approve the issuance of
36
Parent Common Stock pursuant to the Merger. Without limiting the generality or
effect of the foregoing but subject to its rights to terminate this Agreement as
aforesaid, Parent's obligations pursuant to the first sentence of this Section
6.01(c) will not be affected by the commencement, public proposal, public
disclosure or communication to Parent of any Parent Takeover Proposal.
Notwithstanding any other provision hereof, (i) subject to future action by the
Unaffiliated Directors, the Proposed Parent Charter Amendments will be
considered at the Parent Shareholders Meeting, (ii) the Company will vote or
cause to be voted all Parent Common Stock having voting rights in respect
thereof in favor of adoption of the Proposed Parent Charter Amendments, and
(iii) neither the Offer or the Merger will be subject to a condition that the
Proposed Parent Charter Amendments be approved or become effective, provided,
however, that the authorization of an increase in capitalization sufficient to
permit the Merger Consideration to be paid will be a condition to the Merger as
herein provided.
(d) Parent and the Company will use reasonable efforts to hold the
Parent Shareholders Meeting and the Company Shareholders Meeting on the same
date and as soon as practicable after the date hereof.
6.02. Access to Information; Confidentiality. Each of the Company
and Parent will, and will cause each of its respective Subsidiaries to, afford
to the other party and to the officers, employees, accountants, counsel,
financial advisors and other representatives of such other party, reasonable
access during normal business hours during the period prior to the Effective
Time to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, each of the Company and Parent
will, and will cause each of its respective Subsidiaries to, furnish promptly to
the other party (a) a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements of
federal or state securities Laws and (b) all other information concerning its
business, financial condition, results of operations, properties and personnel
as such other party may reasonably request. Subject to the requirements of
applicable Law, and except for such actions as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer and
the Merger, the parties will, and will instruct each of their respective
Affiliates, associates, partners, employees, agents and advisors to, hold in
confidence all such information as is confidential or proprietary, will use such
information only in connection with the Offer and the Merger and, if this
Agreement is terminated in accordance with its terms, will deliver promptly to
the other (or destroy and certify to the other the destruction of) all copies of
such information (and any copies, compilations or extracts thereof or based
thereon) then in their possession or under their control.
37
6.03. Reasonable Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties will use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including without limitation, (i) obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and making of all necessary registrations and filings
(including filings with Governmental Entities) and taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) obtaining of all
necessary consents, approvals or waivers from third parties, (iii) defending of
any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any adverse Order entered by any court or
other Governmental Entity vacated or reversed, and (iv) execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. Nothing
set forth in this Section 6.03(a) will limit or affect actions permitted to be
taken pursuant to Section 5.02 or 5.03.
(b) In connection with and without limiting the foregoing, the
Company and Parent will, and Parent will cause Sub to, (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger or any of the other
transactions contemplated hereby, and (ii) if any state takeover statute or
similar statute or regulation becomes applicable thereto, take all action
necessary to ensure that the Offer and the Merger and such other transactions
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise to minimize the effect of such statute or regulation thereon.
(c) Notwithstanding any other provision hereof, in no event will
Parent be required to agree to any divestiture, hold-separate or other
requirement in connection with this Agreement or any of the transactions
contemplated thereby.
6.04. Employee Benefit Matters. (a) With respect to each Parent
"employee benefit plan," as defined in Section 3(3) of ERISA, including plans or
policies providing severance benefits and vacation entitlement ("Parent Plans"),
if the Effective Time occurs, service with the Company will be treated as
service with the Parent for purposes of determining eligibility to participate,
vesting and entitlement to benefits (other than the accrual of benefits under
any defined benefit pension plan); provided, however, that such service will not
be
38
recognized to the extent that such recognition would result in a duplication of
benefits. Such service also will apply for purposes of satisfying any waiting
periods, evidence of insurability requirements or the application of any
preexisting condition limitations under any Parent Plan. Employees of the
Company will be given credit under any Parent Plan in which they are eligible to
participate for amounts paid under a corresponding Company benefit plan during
the same period for purposes of applying deductibles, copayments and
out-of-pocket maximums as though such amounts had been paid in accordance with
the terms and conditions of the Parent Plans.
(b) Following the Effective Time, Parent will cause the Surviving
Corporation to honor in accordance with their terms all employment, severance
and other compensation agreements and arrangements, including but not limited to
severance benefit plans, the existence or terms of which do not involve any
material breach of any representation, warranty or covenant of the Company
hereunder.
6.05. Certain Employee Matters; Parent Board Composition; Etc. (a)
The Company will take the actions specified in Section 6.05(a) of the Company
Disclosure Schedules.
(b) Parent will take the actions specified in Section 6.05(b) of the
Parent Disclosure Schedule.
6.06. Fees and Expenses. (a) Except as set forth in this Section
6.06, all fees and expenses incurred in connection with the Offer, the Merger,
this Agreement and the transactions contemplated thereby will be paid by the
party incurring such fees or expenses, whether or not the Merger is consummated,
except that each of Parent and the Company will bear and pay one-half of the
costs and expenses incurred in connection with (i) the filing, printing and
mailing of the Joint Proxy Statement (including SEC filing fees) and (ii) the
filings of the premerger notification and report forms under the HSR Act
(including filing fees).
(b) In the event that (i) a Company Takeover Proposal (excluding for
purposes of this Section 6.06(b)(i) only the $45.00 per share cash tender offer
made by WHX Corporation prior to the date hereof (the "WHX $45.00 Bid")) is made
known to the Company or any of its Subsidiaries or has been made directly to
shareholders generally or any Person publicly announces an intention (whether or
not conditional) to make a Company Takeover Proposal (excluding the WHX $45.00
Bid) and thereafter this Agreement is terminated by either Parent or the Company
pursuant to Section 8.01(d)(i) or 8.01(d)(ii), or (ii) this Agreement is
terminated (x) by the Company pursuant to Section 8.01(i) or (y) by Parent
pursuant to Section 8.01(e), then the Company will promptly, but in no event
later than two days after the date of such termination, pay Parent a fee equal
to $3 million (the "Company Termination Fee"), payable by wire transfer of
same-day funds. The Company acknowledges that the agreements contained in
39
this Section 6.06(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent and Sub would not
enter into this Agreement; accordingly, if the Company fails promptly to pay the
amount due pursuant to this Section 6.06(b), and, in order to obtain such
payment, Parent or Sub commences a suit which results in a judgment against the
Company for the fee set forth in this Section 6.06(b), the Company will pay to
Parent and Sub their costs and expenses (including attorneys' fees and expenses)
in connection with such suit, together with interest on the amount of the fee at
the prime rate of Citibank N.A. in effect on the date such payment was required
to be made.
(c) In the event that (i) a Parent Takeover Proposal is made known
to Parent or any of its Subsidiaries or has been made directly to shareholders
generally or any Person publicly announces an intention (whether or not
conditional) to make a Parent Takeover Proposal and thereafter this Agreement is
terminated by either Parent or the Company pursuant to Section 8.01(d)(i) or
8.01(d)(iii), or (ii) this Agreement is terminated (x) by Parent pursuant to
Section 8.01(f) or (y) by the Company pursuant to Section 8.01(g), then Parent
shall promptly, but in no event later than two days after the date of such
termination, pay the Company a fee equal to $5 million (the "Parent Termination
Fee") payable by wire transfer of same-day funds. Parent acknowledges that the
agreements contained in this Section 6.06(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
the Company would not enter into this Agreement; accordingly, if Parent fails
promptly to pay the amount due pursuant to this Section 6.06(c), and, in order
to obtain such payment, the Company commences a suit which results in a judgment
against Parent or Sub for the fee set forth in this Section 6.06(c), Parent will
pay to the Company its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the amount of
the fee at the prime rate of Citibank N.A. in effect on the date such payment
was required to be made.
(d) Notwithstanding any other provision hereof, as an inducement to
Parent and Sub to enter into this Agreement and perform their respective
obligations hereunder, the Company has paid Parent a fee equal to $2 million
(the "Inducement Fee") simultaneously with the execution and delivery of this
Agreement by delivery of a check in such amount, which the Company hereby
irrevocably agrees to honor. The Inducement Fee is not subject to refund or
return for any reason whatever and may not be used as an offset against or
otherwise applied to any obligation of the Company, including without limitation
the obligation to pay the Company Termination Fee.
6.07. Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with,
40
any press release or other public statements with respect to the transactions
contemplated by this Agreement, and will not issue any such press release or
make any such public statement prior to such consultation, except as either
party may determine is required by applicable Law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement will be in the form
heretofore agreed to by the parties.
6.08. Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all Persons who are, at the time this
Agreement is submitted for adoption by to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company will use all reasonable efforts to cause each such Person to deliver
to Parent on or prior to the Closing Date a written agreement substantially in
the form attached as Schedule 6.09 hereto.
6.09. NYSE Listing. Parent will use reasonable efforts to cause the
shares of Parent Common Stock to be issued in the Merger and under the Company
Stock Plans to be approved for listing on the NYSE, subject to official notice
of issuance, prior to the Effective Time.
6.10. Shareholder Litigation. Each of the Company and Parent will
give the other the reasonable opportunity to participate in the defense of any
shareholder litigation against the Company, Parent or Sub, as applicable, or
their respective directors relating to the transactions contemplated by this
Agreement.
6.11. Tax Treatment. Each of Parent and the Company will use
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code.
6.12. The Company Rights Agreement. The Company Board will take all
further action (in addition to that referred to in Section 4.01(n)) reasonably
requested in writing by Parent (including redeeming the Company Rights
immediately prior to the Effective Time or amending the Company Rights
Agreement) in order to render the Company Rights inapplicable to the Offer and
the Merger and the other transactions contemplated hereby, including without
limitation, the Shareholders Agreement, to the extent provided herein and in the
Company Rights Plan Amendment. Except as provided above with respect to the
Offer, the Merger and the other transactions contemplated hereby or as set forth
in the Company Disclosure Schedule, the Company Board will not (a) amend the
Company Rights Agreement or (b) take any action with respect to, or make any
determination under, the Company Rights Agreement, including a redemption of the
Company Rights or any action to facilitate a Company Takeover Proposal.
41
6.13. Voting of Common Stock. The Company and the Parent agree that,
during the period from the date hereof until the Effective Time or the
termination of this Agreement in accordance with its terms (the "Restricted
Period"), (i) the Company and the Parent will not, and will cause each of their
respective Subsidiaries not to, sell, transfer, or pledge any Securities of the
other party or any interest therein directly or indirectly therein beneficially
owned (within the meaning of Rule 13d-3 under the Exchange Act) (such ownership,
"Beneficially Owned") by it or any of its Subsidiaries to any person, other than
a wholly owned Subsidiary of the Company (with respect to sales of Parent
Securities by the Company) or the Parent (with respect to sales of Company
Securities by Parent), and (ii) at any meeting (whether annual or special and
whether or not an adjourned or postponed meeting) of the holders of the other
party's Securities, however called, including without limitation Parent's 1997
Annual Meeting, or in connection with any written consent of the holders of the
other party's Securities (collectively, a "Meeting"), the Company (with respect
to any Parent Meeting) or Parent (with respect to any Company Meeting) will
appear at the meeting or otherwise cause the Securities of the other party
Beneficially Owned by the Company or Parent, as the case may be, to be counted
as present thereat for purposes of establishing a quorum and vote or consent (or
cause to be voted or consented) the Securities (A) in favor of the adoption of
this Agreement, the Proposed Parent Charter Amendments (with respect to any
Parent Meeting) and the approval of other actions contemplated by this Agreement
and any actions required in furtherance hereof, (B) against any action or
agreement that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of Parent or the
Company under this Agreement, and (C) except as otherwise agreed to in writing
in advance by the other party (in its sole discretion) or expressly contemplated
herein, against the following actions (other than the Merger and the
transactions contemplated by this Agreement): (1) except as provided in Section
1.04, any change in the composition of the board of directors of the issuer of
such Securities not approved by (x) a majority of the Company Board, in the case
of changes in the Company Board, or (y) the Unaffiliated Directors, in the case
of changes in the Parent Board, (2) except with respect to any changes
contemplated by this Agreement, any material change in the present
capitalization of the other party, including without limitation any proposal to
sell a substantial equity interest of the other party or any of their respective
Subsidiaries; (3) except with respect to any amendment included in the Joint
Proxy Statement or contemplated by this Agreement, any amendments of the other
party's articles of incorporation or bylaws; (4) except with respect to any
changes contemplated by this Agreement, any other change in the other party's
corporate structure or business; or (5) any other action which, in the case of
each of the matters referred to in clauses (1), (2), (3) or (4), is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone or
materially adversely affect
42
the Merger and the transactions contemplated by this Agreement. Without limiting
the generality or effect of the foregoing, (x) during the period from the date
hereof to the Offer Completion Date plus two calendar days (unless the second
calendar day is not a business day, in which case the period will include the
business day following the second calendar day) (the "Open Period"), at the
request of Parent, the Company will take all actions necessary, including
without limitation voting of Securities of Parent in furtherance of, the
adjournment or postponement of the Parent's 1997 Annual Meeting to such date
within the Open Period as may be so requested by Parent and (y) the parties will
in all events take all such actions as may be required to adjourn Parent's 1997
Annual Meeting to June 24, 1997. The Company and Parent may not enter into any
agreement or understanding with any person the effect of which would be
inconsistent with or violative of any provision contained in this Section 6.13.
For purposes of this Section 6.13, "Securities" mean (I) the shares of Parent
Common Stock or the Company Common Stock Beneficially Owned by the other party
as of the relevant date, including, without duplicative counting of the same
shares of Parent Common Stock or the Company Common Stock, shares of Parent
Common Stock or the Company Common Stock Beneficially Owned by all other persons
with whom Parent or the Company would constitute a "group" within the meaning of
Section 13(d) of the Exchange Act, and (II) any shares of Parent Common Stock,
Company Common Stock or other securities of the Parent or the Company acquired
by the other party in any capacity after the date hereof and prior to the
Effective Time, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities or by means of
purchase, dividend, distribution, split-up, recapitalization, combination,
exchange of shares or the like, transfer or as a successor in interest in any
capacity or otherwise.
6.14. Indemnification, Exculpation and Insurance. (a) All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time existing in favor of the current or former
directors or officers of the Company or each of its Subsidiaries as provided in
their respective certificates of incorporation or by-laws (or comparable
organizational documents) will be assumed by Parent and Parent will be directly
responsible for such indemnification, without further action, as of the
Effective Time and will continue in full force and effect in accordance with
their respective terms. In addition, from and after the Effective Time,
directors and officers of the Company who become or remain directors or officers
of Parent or Sub will be entitled to the same indemnity rights and protections
(including those provided by directors' and officers' liability insurance) as
are afforded to other directors and officers of Parent. Notwithstanding any
other provision hereof, the provisions of this Section 6.14 (i) are intended to
be for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to, and
43
not in substitution for, any other rights to indemnification or contribution
that any such person may have by contract or otherwise.
(b) Parent will, and will cause the Surviving Corporation to,
maintain in effect for not less than six years after the Effective Time policies
of directors' and officers' liability insurance equivalent in all material
respects to those maintained by or on behalf of the Company and its Subsidiaries
on the date hereof (and having at least the same coverage and containing terms
and conditions which are no less advantageous to the persons currently covered
by such policies as insured) with respect to matters existing or occurring at or
prior to the Effective Time; provided, however, that if the aggregate annual
premiums for such insurance at any time during such period exceed 200% of the
per annum rate of premium currently paid by the Company and its Subsidiaries for
such insurance on the date of this Agreement, then Parent will cause the
Surviving Corporation to, and the Surviving Corporation will, provide the
maximum coverage that shall then be available at an annual premium equal to 200%
of such rate.
6.15. Parent Board. If the Effective Time occurs, from the date
thereof until the date immediately following the date of the Parent's 1998
annual shareholders meeting or any adjournment or postponement thereof, the
Parent Board will not elect any additional member thereof who is not a member of
the Parent Board as of the Effective Time unless such person has been elected or
nominated therefor by the unanimous vote of a committee of the Parent Board
comprised of two Unaffiliated Directors and one member thereof who is not an
Unaffiliated Director (or any successors thereto approved by vote of not less
than two thirds of the members of the Parent Board, provided that, if Xxxxxx
Xxxxxxxx is unable to serve as a member of the committee, Xxxxxxx X. Xxxxx will
be his successor if Xx. Xxxxx is at that time a member of the Parent Board). The
initial members of such committee will be Xxxxxx X. Xxxxxxxx, Xx., Xxxxxx
Xxxxxxxx and Xxxxxx X. Xxxxxx.
VII. CONDITIONS PRECEDENT
7.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions (except to the extent otherwise provided in Section 1.05):
(a) Shareholder Approvals. Each of the Company Shareholder Approval
and the Parent Shareholder Approval shall have been obtained;
(b) No Injunctions or Restraints. No Order or Law enacted, entered,
promulgated, enforced or issued by any court of
44
competent jurisdiction or other Governmental Entity or other legal restraint or
prohibition (collectively, "Restraints") preventing the consummation of the
Merger shall be in effect; and
(c) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
7.02. Conditions to Obligations of Parent and Sub. The obligation
of Parent and Sub to effect the Merger is further subject to satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement on or before the earlier of (i) such time as Parent's
Designees constitute at least a majority of the Company Board pursuant to
Section 1.04 of this Agreement and (ii) the Closing Date; and Parent shall have
received a certificate signed on behalf of the Company by the chief executive
officer and the chief financial officer of the Company to such effect; and
(b) Completion of the Offer. Sub shall have accepted for payment and
paid for Shares pursuant to the Offer; provided, however, that Parent may not
invoke this condition if Sub shall have failed to purchase Shares so tendered
and not withdrawn in violation of the terms of this Agreement.
7.03. Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver on
or prior to the Closing Date of the following conditions:
(a) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer and the chief financial officer of Parent to such
effect; and
(b) Completion of the Offer. Sub shall have accepted for payment and
paid for at least 25% of the outstanding Shares pursuant to the Offer.
7.04. Tax Opinions. In the event that Parent and Sub elect to
proceed with the Merger under the circumstances described in Section 1.05, the
respective obligation of each of Parent, Sub and the Company to effect the
Merger will be subject to the satisfaction or waiver on or prior to the Closing
Date of the condition that either Xxxxx, Day, Xxxxxx & Xxxxx or Skadden, Arps,
Meagher, Slate and Xxxx LLP shall have delivered to Parent and the Company an
opinion, dated as of the Closing Date, to the
45
effect that, based upon certain representations, assumptions and conditions, the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that Parent, Sub and the
Company will each be a party to such reorganization within the meaning of
Section 368(b) of the Code.
7.05. Frustration of Closing Conditions. Neither Parent nor the
Company may rely on the failure of any condition set forth in Section 7.01,
7.02, 7.03 or 7.04, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to commence or complete
the Offer or consummate the Merger and the other transactions contemplated by
this Agreement, as required by and subject to Section 6.03.
VIII. TERMINATION, AMENDMENT AND WAIVER
8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after Company Shareholder
Approval or Parent Shareholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by the Company if Parent shall have failed to commence the Offer
within five business days following the date of the initial public announcement
of the Offer;
(c) by Parent, subject to Section 1.05, if the Offer shall have
expired or have been withdrawn or terminated in accordance with the terms
thereof without any Shares being purchased by Parent thereunder by reason of the
failure of any condition set forth in Annex A to be satisfied;
(d) by either Parent or the Company:
(i) if the Merger has not been consummated by October 31,
1997; provided, however, that the right to terminate this Agreement
pursuant to this Section 8.01(d)(i) will not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by
such time;
(ii) if the Company Shareholder Approval shall not have been
obtained at a Company Shareholders Meeting duly convened therefor or
at any adjournment or postponement thereof;
(iii) if the Parent Shareholder Approval shall not have been
obtained at a Parent Shareholders Meeting
46
duly convened therefor or at any adjournment or postponement
thereof; or
(iv) if any Governmental Entity shall have issued a Restraint
or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Offer, the Merger or
any of the other transactions contemplated by this Agreement and
such Restraint or other action shall have become final and
nonappealable;
(e) by Parent, if the Company Board or any committee thereof shall
have (i) withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Offer, the Merger or this Agreement or failed to reconfirm
its approval or recommendation within five business days after a written request
to do so, (ii) approved or recommended, or proposed publicly to approve or
recommend, any Company Takeover Proposal, (iii) caused the Company to enter into
a Company Acquisition Agreement, or (iv) resolved to take any of the foregoing
actions;
(f) by Parent in accordance with Section 5.03(b) at any time prior
to the Offer Completion Date; provided that it has complied with all provisions
thereof, including the notice provisions therein, and that it complies with
applicable requirements of Section 6.06;
(g) by the Company, if the Parent Board or any committee thereof
shall have (i) withdrawn or modified in a manner adverse to the Company its
approval or recommendation of the Offer, the Merger or this Agreement or failed
to reconfirm its approval or recommendation within five business days after a
written request to do so, (ii) approved or recommended, or proposed publicly to
approve or recommend, any Parent Takeover Proposal, (iii) caused Parent to enter
into a Parent Acquisition Agreement, or (iv) resolved to take any of the
foregoing actions;
(h) by the Company at or prior to the Offer Completion Date, if
Parent or Sub shall have breached or failed to perform in any material respect
any of its representations, warranties or covenants required to be performed by
them under this Agreement at or prior to the Offer Completion Date, which breach
or failure to perform cannot be or has not been cured within 30 days after the
giving of written notice to Parent and Sub of such breach (provided that the
Company is not then in material breach of any representation, warranty, covenant
or other agreement contained in this Agreement that cannot or has not been cured
within 30 days after giving notice to the Company of such breach); and
(i) by the Company in accordance with Section 5.02(b) at any time
prior to the Offer Completion Date; provided that it has complied with all
provisions thereof, including the notice provisions therein, and that it
complies with applicable requirements of Section 6.06.
47
8.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement, other than the provisions of Section 4.01(k), Section 4.02(j),
Section 6.02, Section 6.06, this Section 8.02 and Article IX, will forthwith
become void and have no effect, without any liability or obligation on the part
of Sub, Parent or the Company, except to the extent that such termination
results from the willful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
8.03. Amendment. Subject to Section 1.04, this Agreement may be
amended by the parties at any time before or after the Company Shareholder
Approval or the Parent Shareholder Approval; provided, however, that after any
such approval, there may not be made any amendment that by Law requires further
approval by the shareholders of the Company or Parent without the further
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
8.04. Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreements
or in any document delivered pursuant to this Agreement, or (c) subject to the
proviso of Section 8.03, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
will not constitute a waiver of such rights.
8.05. Procedure for Termination, Amendment, Extension or Waiver.
Subject to Section 1.04(b) and 1.04(c), a termination of this Agreement pursuant
to Section 8.01, an amendment of this Agreement pursuant to Section 8.03 or an
extension or waiver pursuant to Section 8.04 will, in order to be effective,
require, in the case of Parent or the Company, action by its Board of Directors
or, with respect to any amendment to this Agreement, the duly authorized
committee of its Board of Directors.
IX. GENERAL PROVISIONS
9.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement will survive the Effective Time. This Section 9.01
will not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
48
9.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
if delivered personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as specified by like notice):
(a) if to Parent or to Sub, to
CTS Corporation
000 Xxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx, Esq.
with a copy to:
Xxxxx, Day, Xxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
(b) if to the Company, to
Dynamics Corporation of America
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000-0000
Fax No.: (000) 000-0000
Attention: Xx. Xxxxxx Xxxxxxxx
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
9.03. Certain Definitions. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first Person;
(b) a "Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by
49
such first Person. A "Significant Subsidiary" means any subsidiary of the
Company or Parent, as the case may be, that would constitute a "significant
subsidiary" of such party within the meaning of Rule 1-02 of Regulation S-X of
the SEC and, in the case of Parent, includes Sub;
(c) "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(d) "Knowledge" of any Person which is not an individual means the
knowledge of any of such Person's executive officers after reasonable inquiry.
9.04. Interpretation. When a reference is made in this Agreement to
an Article, Section, Annex or Exhibit, such reference will be to an Article or
Section of, or an Annex or Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they will be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement. All terms used
herein with initial capital letters have the meanings ascribed to them herein
and all terms defined in this Agreement will have such defined meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
9.05. Counterparts. This Agreement may be executed in one or more
counterparts, a
ll of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein), and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and
50
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
III and Section 6.04 are not intended to confer upon any Person other than the
parties any rights or remedies.
9.07. Governing Law. This Agreement will be governed by, and
construed in accordance with, the Laws of the State of New York, regardless of
the Laws that might otherwise govern under applicable principles of conflict of
Laws thereof.
9.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned, in whole or in
part, by operation of Law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence will be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
9.09. Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
State of New York or in New York state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the personal jurisdiction
of any federal court located in the State of New York or any New York state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State of New
York or a New York state court.
51
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CTS CORPORATION
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman of the Board,
President and Chief
Executive Officer
CTS FIRST ACQUISITION CORP.
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
DYNAMICS CORPORATION OF AMERICA
By:
-----------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chairman of the Board
and President
52
ANNEX A
CONDITIONS TO COMPLETION OF THE OFFER
Notwithstanding any other provision of the Offer, Sub will not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e- 1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares promptly
after expiration or termination of the Offer), to pay for any Shares, and may
postpone the acceptance for payment or, subject to the restrictions referred to
above, payment for any Shares tendered, and, subject to the terms of the
Agreement, may amend or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for pursuant to the Offer) unless the
following conditions have been satisfied: (a) there have been validly tendered
and not withdrawn prior to the Expiration Date a number of Shares which
constitutes at least 25% of the Shares outstanding on the date of purchase (the
"Minimum Share Condition"); (b) any applicable waiting periods under the HSR Act
shall have expired or been terminated prior to the expiration of the Offer; (c)
either Xxxxx, Day, Xxxxxx & Xxxxx or Skadden, Arps, Meagher, Slate and Xxxx LLP
shall have delivered to Parent and the Company an opinion, dated as of the date
of purchase, to the effect that, based upon such representations, assumptions
and conditions as the firm delivering such opinion deems necessary or
appropriate, the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Parent, Sub and the Company will each be a party to such reorganization within
the meaning of Section 368(b) of the Code and (d) if at any time on or after the
date of the Merger Agreement and before acceptance for payment of, or payment
for, such Shares, none of the following events shall have occurred and be
continuing:
(i) any United States or foreign governmental entity or authority or
any United States or foreign court of competent jurisdiction in the United
States or any foreign country shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order which is in effect and which (a)
restricts, prevents or prohibits consummation of the transactions
contemplated by any of this Agreement, including the Offer or the Merger,
(b) prohibits, limits or otherwise adversely affects the ownership or
operation by Parent or any of its Subsidiaries of all or any portion of
the business or assets of the Company and its Subsidiaries or compels the
Company, Parent or any of their Subsidiaries to dispose of or hold
separate all or any portion of the business or assets of the Company and
its Subsidiaries, or (c) imposes limitations on the ability of Parent, Sub
or any other subsidiary of Parent to exercise effectively full rights of
ownership of any Shares, including without
1
limitation the right to vote any Shares acquired by Sub pursuant to the
Offer or otherwise on all matters properly presented to the Company's
shareholders, including without limitation the approval and adoption of
the Agreement and the transactions contemplated thereby;
(ii) there shall be instituted or pending any action or proceeding
before any United States or foreign court or governmental entity or
authority by any United States or foreign governmental entity or authority
seeking any order, decree or injunction having any effect set forth in (i)
above;
(iii) the representations and warranties of the Company contained in
the Merger Agreement (without giving effect to the materiality, material
adverse effect or knowledge limitations contained therein) shall not be
true and correct as of the expiration date of the Offer (as the same may
be extended from time to time) as though made anew on and as of such date
(except for representations and warranties made as of a specified date,
which shall not be true and correct as of the specified date), except for
any breach or breaches which, in the aggregate, could not be reasonably
expected to have a material adverse effect on the business, financial
condition or results of operations of the Company and its Subsidiaries,
taken as a whole, or on the ability of the Company to perform any of its
obligations under this Agreement;
(iv) the Company shall not have performed or complied in all
material respects with its covenants under any of this Agreement to which
it is a party and such failure continues until the later of (i) 15
calendar days after actual receipt by it of written notice from Parent
setting forth in detail the nature of such failure or (ii) the expiration
date of the Offer;
(v) there shall have occurred any material adverse change, or any
development that is reasonably likely to result in a material adverse
change, in the business, financial condition or results of operations of
the Company and its Subsidiaries, taken as a whole;
(vi) the Merger Agreement shall have been terminated in accordance
with its terms;
(vii) the Company Board shall have withdrawn or materially modified
or changed (including by amendment of Schedule 14D-9) in a manner adverse
to Sub or Parent its recommendation of the Offer, the Merger or any of
this Agreement;
(viii) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in
2
securities on the NYSE, (ii) a decline of at least 20% in either the Dow
Xxxxx Average of Industrial Stocks or the Standard & Poor's 500 Index from
the date of the Agreement, or (iii) the declaration of a banking
moratorium or any limitation or suspension of payments in respect of the
extension of credit by banks or other lending institutions in the United
States; or
(ix) it shall have been publicly disclosed or Parent shall have
otherwise learned that (a) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or any
group of which any of them is a member or any affiliate controlled by it
or which is referred to in clause (b) below, shall have acquired
beneficial ownership (determined pursuant to Rule 13d-3 promulgated under
the Exchange Act) of more than 20% of the outstanding Shares, (b) any such
person or group which has filed a Schedule 13D prior to the date of the
Merger Agreement disclosing beneficial ownership of 20% or more of the
outstanding Shares shall have acquired beneficial ownership of 25% or more
of the outstanding Shares, or (c) any person or group shall have entered
into a definitive agreement or agreement in principle with the Company
with respect to a merger, consolidation or other business combination with
the Company.
The foregoing conditions are for the sole benefit of Sub and its
affiliates and may be asserted by Sub, or Parent on behalf of Sub, regardless of
the circumstances (including without limitation any action or inaction by the
Sub or any of its affiliates other than a material breach by the Sub or Parent
of the Agreement) giving rise to any such condition or may be waived by the Sub,
in whole or in part, from time to time in its sole discretion, except as
otherwise provided in the Agreement. The failure by the Sub at any time to
exercise any of the foregoing rights will not be deemed a waiver of any such
right and each such right will be deemed an ongoing right and may be asserted at
any time and from time to time. Any good faith determination by the Sub
concerning any of the events described herein will be final and binding.
3
ANNEX B
Amended and Restated
ARTICLES OF INCORPORATION
OF
CTS CORPORATION
ARTICLE I.
Name
The name of the corporation is CTS Corporation (the "Corporation").
ARTICLE II.
Purposes
The purpose for which the Corporation is formed is to engage in any
lawful business or activity for which corporations may be organized under the
Indiana Business Corporation Law, as amended (the "IBCL").
ARTICLE III.
Term of Existence
The period during which the Corporation shall continue is perpetually.
ARTICLE IV.
Principal Office and Resident Agent
The post-office address of the principal office of the Corporation is 000
Xxxx Xxxx. Xxxxx, Xxxxxxx, Xxxxxxx; and the name and post-office address of its
Resident Agent in charge of such office is Xxxxxxxx X. Xxxxx, 0000 Xxxxxxx Xxxx,
Xxxxxxx, Xxxxxxx.
ARTICLE V.
Amount of Capital Stock
4
The Corporation is authorized to issue two classes of capital stock,
designated Common Stock and Preferred Stock. The total number of shares of
capital stock that the Corporation is authorized to issue is 100,000,000 shares,
consisting of 75,000,000 shares of Common Stock, without par value, and
25,000,000 shares of Preferred Stock, without par value.
ARTICLE VI.
Terms of Capital Stock
(a) Preferred Stock. The Preferred Stock may be issued in one or
more series. The Board of Directors of the Corporation is authorized to fix the
designations, powers, preferences, rights, qualifications, limitations or
restrictions of each such series by the adoption and filing in accordance with
the Indiana Business Corporation Law, before the issuance of any Preferred
Shares of such series, of an amendment or amendments to these Articles of
Incorporation determining the terms of such series (an "Article IV Amendment").
The authority of the Board of Directors with respect to each such series will
include, without limiting the generality of the foregoing, the determination of
any or all of the following:
(i) the number of shares of any series and the designation to
distinguish the shares of such series from the shares of all other
series;
(ii) the voting powers, if any, and whether such voting powers
are full or limited in such series;
(iii) the redemption provisions, if any, applicable to such
series, including the redemption price or prices to be paid;
(iv) whether dividends, if any, will be cumulative or
noncumulative, the dividend rate of such series and the dates and
preferences of dividends on such series;
(v) the rights of such series upon the voluntary or
involuntary dissolution of, or upon any distribution of the assets
of, the Corporation;
(vi) the provisions, if any, pursuant to which the shares of
such series are convertible into, or exchangeable for, shares of any
other class or classes or of any other series of the same or any
other class or classes of stock, or any other security, of the
Corporation or any other corporation or other entity and the rates
or other determinants of conversion or exchange applicable thereto;
5
(vii) the right, if any, to subscribe for or to purchase any
securities of the Corporation or any other corporation or other
entity;
(viii) the provisions, if any, of a sinking fund for such
series; and
(vix) any other relative, participating, optional or other
special powers, preferences or rights and qualifications,
limitations or restrictions thereof;
all as may be determined from time to time by the Board of Directors and
stated or expressed in the Article IV Amendment for such shares of
Preferred Stock (collectively, a "Preferred Stock Designation").
(b) Preemptive Rights. Except as may be specified in a
Preferred Stock Designation, no holder of any share or shares of any class
of stock of the Corporation shall have any preemptive right to subscribe
for any shares of stock of any class of the Corporation now or hereafter
authorized or for any securities, warrants or options convertible into or
carrying any rights to purchase any shares of stock of any class of the
Corporation now or hereafter authorized, provided, however, that no
provision of these Articles of Incorporation shall be deemed to deny to
the Board of Directors the right, in its discretion, to grant to the
holders of shares of any class of stock at the time outstanding the right
to purchase or subscribe for shares of stock of any class or any other
securities of the Corporation now or hereafter authorized, at such prices
and upon such other terms and conditions as the Board of Directors, in its
discretion, may fix.
ARTICLE VII.
Voting Rights of Capital Stock
Subject to the rights, if any, of the holders of any series of Preferred
Stock to vote under circumstances specified in a Preferred Stock designation,
the holders of the Common Stock, without par value, shall be entitled to vote at
all meetings of the shareholders and shall be entitled to cast one vote for each
share of stock held by them respectively and standing in their respective names
on the books of the Corporation.
ARTICLE VIII.
Data Respecting Directors
Section 1. Number. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional
6
directors of the Board of Directors under circumstances specified in a Preferred
Stock Designation, the number of the directors of the Corporation will not be
less than three nor more than fifteen and will be fixed from time to time in the
manner provided in the Bylaws of the Corporation.
Section 2. Qualifications. Directors need not be shareholders of the
Corporation. A majority of the Directors at any time shall be citizens of the
United States.
ARTICLE IX.
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
(a) Issuance of Shares. The Board of Directors is hereby authorized to
direct the issuance by the Corporation of shares of Common Stock and Preferred
Stock at such times, in such amounts, to such persons, for such consideration
and upon such terms and conditions as it may, from time to time, determine,
subject only to the restrictions, limitations, conditions and requirements
imposed by the Indiana Business Corporation Law, other applicable laws and these
Articles of Incorporation.
(b) The Corporation shall have power to carry on and conduct its said
business, or any part thereof, and to have one or more officers in the State of
Indiana, and in the various other states, territories, colonies and dependencies
of the United States, in the District of Columbia, and in all or any foreign
countries;
(c) The Corporation reserves the right to take advantage of the provisions
of any amendment to The Indiana Business Corporation Law, or of any new law
applicable or relating to corporations formed, organized under, or which have
accepted the provisions of, the law now in force, which may hereafter be
enacted, and all rights granted to, and conferred on, the shareholders of the
Corporation, are granted and conferred, subject to this reservation;
(d) Annual or special meetings of the shareholders of the Corporation may
be held at the place, either within or without the State of Indiana, which may
be stated in the notice of said meeting;
(e) These Amended and Restated Articles of Incorporation shall amend and
supersede and take the place of all heretofore existing Articles of
Incorporation or Articles of Acceptance (and amendments thereto) of the
Corporation.
ARTICLE X.
7
Liability
To the fullest extent permitted by applicable law as then in effect, no
director or officer shall be personally liable to the Corporation or any of its
shareholders for damages for breach of fiduciary duty as a director or officer,
except for liability (a) for breach of duty if such breach constitutes wilful
misconduct or recklessness or (b) for the payment of distributions to
shareholders in violation of Section 23-1-28-3 of the Indiana Business
Corporation Law. Any amendment or repeal of, or adoption of any provision
inconsistent with, this Article X will not adversely affect any right or
protection existing hereunder, or arising out of facts occurring, prior to such
amendment, repeal or adoption and no such amendment, repeal or adoption will
affect the legality, validity or enforceability of any contract entered into or
right granted prior to the effective date of such amendment, repeal or adoption.
ARTICLE XI.
Indemnification
Each person who was or is involved in any manner (including without
limitation as a party or a witness), or is threatened to be made so involved, in
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, by
reason of the fact that such person is or was a director or officer of the
Corporation, or who is or was serving at the request of the Board of Directors
as a director, officer, partner, trustee, employee or agent of another
corporation or a partnership, joint venture, trust, employee benefit plan or
other entity, whether for profit or not for profit, whether or not the basis of
such proceeding is alleged action in an official capacity while serving as a
director, officer, employee or agent, will be indemnified by the Corporation to
the fullest extent to which it is empowered to do so by the Indiana Business
Corporation Law, or any other applicable laws, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys' fees
and expenses, judgments, settlements, penalties, fines, and excise taxes
assessed with respect to employee benefit plans) actually and reasonably
incurred or suffered by such person in connection therewith. The right of
indemnification provided in this Article XI (a) will not be exclusive of any
other rights to which any person seeking indemnification may otherwise be
entitled, including without limitation pursuant to any contract approved by a
majority of the Board of Directors (whether or not the directors approving such
contract are or are to be parties to such contract or similar contracts), and
(b) will be applicable
8
to matters otherwise within its scope (with each reference in the first sentence
of this Article XI to "the Corporation" being deemed for purposes of this
sentence to include any domestic or foreign predecessor entity of the
Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction) whether or not such
matters arose or arise before or after the adoption of this Article XI. Without
limiting the generality or the effect of the foregoing, the Corporation may
adopt Bylaws, or enter into one or more agreements with any person, which
provide for indemnification greater or different than that provided in this
Article XI or the Indiana Business Corporation Law. Any amendment or repeal of,
or adoption of any provision inconsistent with, this Article XI will not
adversely affect any right or protection existing hereunder, or arising out of
facts occurring, prior to such amendment, repeal or adoption and no such
amendment, repeal or adoption will affect the legality, validity or
enforceability of any contract entered into or right granted prior to the
effective date of such amendment, repeal or adoption.
9
ANNEX B
(cont.)
CTS CORPORATION
BY LAWS
(As Amended and in Effect on ________________, 1997)
ARTICLE I.
Officers
The officers of CTS Corporation (the "Corporation") shall be a President,
one or more Vice Presidents, a Secretary, a Treasurer and a Controller. The
Board of Directors may also elect one or more Assistant Secretaries, Assistant
Treasurers and Assistant Controllers, and such other officers as may be
determined, from time to time, by the Board of Directors.
The President shall be a director of the Corporation. Any offices, other
than those of President and Secretary, may be held by the same person.
The officers of the Corporation shall be elected by the Board of Directors
at the annual meeting of the Board of Directors for the term of one year and
until their successors have been elected and qualified. Any vacancy occurring
among the above offices may be filled for the remainder of the term by the Board
of Directors at any regular or special meeting, and officers so elected shall
hold office until the next annual meeting of the Board of Directors and until
their successors have been elected and qualified.
ARTICLE II.
Board of Directors Organization
Section 1. The Board of Directors shall elect, from the members of the
Board of Directors who are not officers of the Corporation, an Audit Committee
consisting of not less than three members. The members of the Audit Committee
shall be elected at each annual meeting of the Board of Directors to serve,
while qualified, at the pleasure of the Board of Directors, or if longer, for
one year and until their successors have been elected and qualified.
10
The Audit Committee shall be responsible directly to the Board of
Directors and, in addition to such authority and duties specifically delegated
by the Board of Directors, shall have the authority to review the conduct and
the report of the independent financial audit of the Corporation and shall
report to the Board of Directors the findings, conclusions and recommendations
of the Audit Committee regarding the conduct and report of the independent
financial audit.
Unless the Board of Directors designates a Chairman, a majority of the
members of the Audit Committee may designate one member of the Audit Committee
as Chairman of the Audit Committee to preside at all meetings of the Audit
Committee.
Section 2. The Board of Directors shall elect from members of the Board of
Directors, who are not officers of the Corporation, a Compensation Committee
consisting of not less than three members. The members of the Compensation
Committee shall be elected at each annual meeting of the Board of Directors to
serve, while qualified, at the pleasure of the Board of Directors, or if longer,
for one year and until their successors have been elected and qualified.
The Compensation Committee shall be responsible directly to the Board of
Directors and, in addition to such authority and duties specifically delegated
by the Board of Directors, shall have authority to review, and make
recommendations to the Board of Directors regarding the compensation, including
fringe benefits and stock options, for the officers of the Corporation.
Unless the Board of Directors designates a Chairman, a majority of the
members of the Compensation Committee may designate one member of the
Compensation Committee as Chairman of the Compensation Committee to preside at
all meetings of the Compensation Committee.
Section 3. The Board of Directors shall designate from members of the
Board of Directors, a Chairman of the Board, who shall preside at meetings of
shareholders and of the Board of Directors unless the Chairman shall designate
an officer or other director of the Corporation to do so. The Chairman of the
Board shall have such additional authority as granted by the Board of Directors
and shall perform such other duties as are assigned from time to time by the
Board of Directors.
ARTICLE III.
Corporate Officers
Section 1. The President shall exercise specific authority and supervision
over, and shall be responsible for the direction of, the business and affairs of
the Corporation, subject to the direction of the Board of Directors. In
addition, the President
11
may be designated the Chief Executive Officer and, if so, shall have the
additional authority and duties and responsibilities specified in these Bylaws.
The President shall also perform such other duties as may be assigned from time
to time, by the Board of Directors. The President shall perform all the duties
of the Chairman of the Board in the absence or during any disability of the
Chairman.
Section 2. The Board of Directors shall designate the Chairman of the
Board or the President as the Chief Executive Officer of the Corporation. In
addition to other duties as an officer, the Chief Executive Officer shall
exercise general authority and supervision over, and shall be responsible for,
management of the business and affairs of the Corporation, subject to the
direction of the Board of Directors.
The Chief Executive Officer shall determine the organization of the
officers of the Corporation, shall designate to whom such officers shall report
and be responsible, and subject to the direction of the Board of Directors shall
determine their respective duties and responsibilities.
Section 3. Each Vice President shall perform such duties as may be
assigned from time to time by the President and shall report to and be
responsible to such officer as the President shall designate. Each Vice
President shall also have such additional authority and shall perform such other
duties assigned from time to time, by the Board of Directors.
The Board of Directors may designate a word or words to be placed before
or after the title of Vice President to indicate organizational or functional
authority or duty.
Section 4. The Secretary shall attend all meetings of the shareholders and
Board of Directors and all committees, and shall keep minutes of each meeting.
The Secretary shall give proper notice of all meetings of shareholders,
directors and committees, required in these Bylaws. The Secretary shall maintain
proper records of ownership and transfer of the stock of the Corporation. The
Secretary shall have the custody of, and affix, the seal of the Corporation and
perform such other duties as may be assigned from time to time by the Board of
Directors.
Section 5. The Vice President Finance/Chief Financial Officer, shall be
responsible for the financial affairs of the Corporation, shall submit to the
annual meeting of shareholders a statement of the financial condition of the
Corporation, and whenever required by the Board of Directors, shall give account
of all transactions and of the financial condition of the Corporation. The
Treasurer shall report to the Vice President Finance/Chief Financial Officer.
The Treasurer shall establish and maintain appropriate banking relations and
arrangements on behalf of the Corporation. The Treasurer shall receive and have
custody of, and shall disburse, all moneys of the Corporation,
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and in the name of the Corporation, shall deposit all moneys in, and disburse
all moneys from, such bank, or banks, as the Board of Directors shall designate,
from time to time, as the depositories of the Corporation. The Treasurer shall
perform such other duties and render such services for, and on behalf of, the
Corporation as may be assigned from time to time by the Vice President Finance,
Chief Financial Officer.
Section 6. The Controller shall be the accounting officer of the
Corporation and shall formulate accounting procedures to record expenses,
losses, gains, assets and liabilities of the Corporation, to report and
interpret results of operations of the Corporation and to assure protection of
the assets of the Corporation. The Controller shall prepare and submit to the
Board of Directors and the Chief Executive Officer such periodic balance sheets,
profit and loss statements and other financial statements as may be required to
keep such persons currently informed of the operations and the financial
condition of the Corporation. The Controller shall perform such other duties
assigned from time to time by the Chief Executive Officer.
Section 7. The Assistant Secretary or Secretaries, Assistant Treasurer or
Treasurer or Treasurers, and the Assistant Controller or Controllers shall
perform the duties of the Secretary, of the Treasurer, and of the Controller,
respectively, in the absence of those officers and shall have such further
authority and perform such other duties as may be assigned.
ARTICLE IV.
Duties of Officers Delegated
In the absence or disability of any officer of the Corporation, the Board
of Directors may delegate the powers and duties of any such officer to any other
officer or director of the Corporation for such period of time as said Board of
Directors may determine.
ARTICLE X.
Xxxxx
The Board of Directors or the Chief Executive Officer may require any
officer, agent, or employee of the Corporation to furnish the Corporation a bond
for the faithful performance of duties and for the accounting of all moneys,
securities, records, or other property of the Corporation coming into the hands
of such agent or employee.
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ARTICLE VI.
Meetings of Shareholders
Section 1. Meetings of the shareholders of the Corporation shall be held
at the place, either within or without the State of Indiana, stated in the
notice of said meeting.
Section 2. The annual meeting of shareholders of the Corporation shall be
held on the last Friday in April of each year or at such other time established
for such meeting by 80% of the directors.
Section 3. A complete list of the shareholders entitled to vote at any
shareholders' meeting, arranged in alphabetical order and containing the address
and number of shares of stock so held by each shareholder who is entitled to
vote at said meeting, shall be prepared by the Secretary and shall be subject to
the inspection by any shareholder at the time and place of an annual meeting and
at the principal office of the Corporation for five (5) days prior thereto.
Section 4. At all shareholders' meetings a quorum shall consist of a
majority of all of the shares of stock outstanding and entitled by the Articles
of Incorporation to vote on the business to be transacted at said meeting, but a
meeting composed of less than a quorum may adjourn the meeting from day to day
thereafter or until some future time.
Section 5. At the annual meeting of the shareholders, there shall be
elected, by plurality vote, a Board of Directors, who shall hold office until
the next annual meeting of shareholders and until their successors have been
elected and qualified.
Section 6. At all shareholders' meetings, each shareholder shall be
entitled to one (1) vote in person or by proxy for each share of common stock
registered in the shareholder's name on the books of the Corporation as of the
record date which shall be as fixed by the Board of Directors and entitled, by
the Articles of Incorporation, to vote on the business to be transacted at said
meeting.
Section 7. The shareholders may be represented at any meeting thereof by
their duly appointed Attorney-in-Fact provided the proxy so appointing said
Attorney-in-Fact shall be filed with the Secretary prior to the meeting.
Section 8. Special meetings of the shareholders of the Corporation may be
called by the Chairman of the Board, by the President, by the Board of
Directors, or by the shareholders holding not less than one-fourth of all of the
shares of stock outstanding and entitled, by the Articles of Incorporation, to
vote on the business to be transacted at said special meeting
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whenever in the opinion of such person or body such meeting is necessary.
Whenever a special meeting of the shareholders shall be called by the
shareholders, the call shall be delivered to the Secretary who shall issue the
notice of said special meeting which is required to be given.
Section 9. Written notice of each meeting of the shareholders shall be
given by the Secretary to each shareholder of record at least ten (10) days
prior to the time fixed for the holding of such meeting; said notice shall state
the place, day and hour and the purpose for which said meeting is called, and
said notice shall be addressed to the last known place of residence of each
shareholder as shown by the stock books of the Corporation. The ten (10) days
shall be computed from the date upon which said notice is deposited in the
mails.
Section 10. Notice of any shareholders' meeting may be waived in writing
by any shareholder if the waiver sets forth in reasonable detail the purpose or
purposes for which the meeting is called and the time and place thereof.
Section 11. No shares of stock shall be voted at any annual or special
meeting of shareholders upon which any installment is due and unpaid, which are
owned by the Corporation.
ARTICLE VII.
Directors
Section 1. The property and business affairs of the Corporation shall be
managed under the direction of the Board of Directors. Directors shall be
elected by a plurality vote at the annual meeting or a special meeting of the
shareholders and shall hold office for a term of one year or until their
successors are elected and qualified. In case of the failure to hold the annual
meeting on the date fixed herein for the same to be held, the directors shall
hold over until the next annual meeting, unless prior to said meeting a special
meeting of the shareholders for the purpose of electing directors has been held.
Subject to the rights, if any, of any series of Preferred Stock to elect
additional directors under circumstances specified in the Articles of
Incorporation and to the minimum and maximum number of authorized directors
provided in the Articles of Incorporation, the authorized number of directors
will be as determined from time to time by the Board of Directors. If no
determination of the number of directors has been made by the Board of
Directors, the number of directors shall be [seven].
Section 2. Any vacancy occurring in the Board of Directors caused by
resignation, death or other incapacity, shall be filled by majority vote of the
remaining members of the Board until the
15
next annual meeting of shareholders; provided, however, that if the vote of the
remaining members of the Board of Directors shall result in a tie, such vacancy
shall be filled by the shareholders at the next annual meeting of the
shareholders or at a special meeting of the shareholders called for that
purpose.
Section 3. Any vacancy occurring in the Board of Directors, caused by an
increase in the number of directors, shall be filled by a majority vote of the
members of the Board until the next annual meeting of shareholders; provided,
however, that if the vote of the members of the Board of Directors shall result
in a tie, such vacancy shall be filled by the shareholders at the next annual
meeting of the shareholders or at a special meeting of the shareholders called
for that purpose.
Section 4. A person shall not be nominated, stand for election or be
elected as a director of the Corporation who (I) at the time of his election
shall be seventy (70) years of age or older, (ii) has retired from employment by
the Corporation and is sixty-five (65) years of age or older or (iii) has
retired from active business and professional vocations.
Article VIII.
Meetings of Directors
Section 1. Following the annual meeting of shareholders, the annual
meeting of the Board of Directors shall be held without notice, each and every
year hereafter, at the time and place determined by the directors.
Section 2. Regular meetings of the Board of Directors shall be held
without notice at 9:00 A.M. on the last Friday of February, June, August,
October and December at the offices of the Corporation, unless another time and
place is designated.
Section 3. Special meetings of the Board of Directors may be called by the
Chairman of the Board, by the President, or by three (3) members of the Board of
Directors on three (3) days' notice by mail, or an twenty-four (24) hours'
notice by telegraph, telephone, facsimile or other similar medium of
communication to each director, which notice shall be addressed to the last
known place of business or residence of each director, and said meetings may be
held either at the office of the Corporation or at such other place as may be
designated in the notice of said meeting.
Whenever a special meeting of the Board of Directors shall be called, in
accordance with the provision of this section, by members of the Board of
Directors, the call shall be in writing, signed by said directors and delivered
to the secretary who shall thereupon issue the notice calling said meeting.
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Section 4. Not less than one-half at the whole Board of Directors, shall
constitute a quorum for the transaction of any business except the filling of
vacancies, but a smaller number may adjourn, from time to time, until a future
date or until a quorum is secured.
For the purpose only of filling a vacancy or vacancies in the Board of
Directors, a quorum shall consist of a majority of the whole Board of Directors,
less the vacancy or vacancies therein.
The act of a majority at the directors present at a duly called, at which
a quorum is present shall be the act of the Board of Directors.
ARTICLE IX.
Compensation of Directors and
Members of Committees
The members of the Board of Directors and members of committees of the
Corporation, who are not salaried employees of the Corporation, shall receive
such compensation for their services to be rendered as members of the Board of
Directors, or of committees, as may, from time to time, be fixed by the Board of
Directors and the compensation so fixed shall continue to be payable until the
Board of Directors shall have thereafter fixed a different compensation, which
it may do at any annual, regular or special meeting.
ARTICLE X.
Certificates of Stock
Section 1. Certificates of stock shall be issued to those legally entitled
thereto, as may be shown by the books of the Corporation, and shall be signed by
the President and attested by the Secretary.
Section 2. The Corporation may appoint one or more transfer agents and/or
registrars to issue, countersign, register, and transfer certificates
representing its capital stock and signatures of the Corporation's officers and
of the transfer agents on stock certificates may be facsimiles. Upon surrender
to the Corporation or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession, assignment
or authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction on its books.
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Section 3. The holder of any stock of the Corporation shall immediately
notify the Corporation of any loss, theft, destruction or mutilation of the
certificate for any such stock. A new certificate or certificates shall be
issued upon the surrender of the mutilated certificate or, in case of loss,
theft, or destruction, upon (I) delivery of an affidavit or affirmation, and
(ii) delivery of a bond in such sum and in such form and with such surety or
sureties as the Board of Directors (by general or specific resolutions) or the
President may approve, indemnifying the Corporation against any claim with
respect to the certificate or certificates alleged to have been lost, stolen or
destroyed. However, the Board may, in its discretion, refuse to issue new
certificate or certificates, save upon the order of some Court having
jurisdiction in such matters.
ARTICLE XI.
Transfer of Stock
Section 1. The stock transfer books of the Corporation may from time to
time be closed by order of the Board of Directors for any lawful purpose and for
such period consistent with law, but not exceeding thirty (30) days at any one
time, as the Board of Directors may deem advisable. In lieu of closing the stock
transfer books as aforesaid, the Board of Directors may, in its discretion, fix
in advance a date not exceeding fifty (50) days or less than ten (10) days next
preceding the date of any meeting of shareholders or the date for the payment of
any dividend or the date for the allotment of rights or the date when any change
or conversion or exchange of capital stock shall go into effect, as the record
date for the determination of the shareholders entitled to notice of and to vote
at any such meeting or entitled to receive any such dividend or to any such
allotment of rights or to exercise the rights of any such change, conversion or
exchange of capital stock; and, in such case, only such shareholders as shall be
shareholders of record at the close of business on the date so fixed shall be
entitled to notice of and to vote at such meeting or to receive such payment of
dividend or to receive such allotment of rights or to exercise such rights as
the case may be, notwithstanding any transfer of stock on the books of the
Corporation after such record date fixed as aforesaid. In the event the Board of
Directors fails to fix in advance the record date for the determination of the
shareholders entitled to notice of and to vote at any meeting, no share of stock
transferred on the books of the corporation within ten (10) days next preceding
the date of a meeting shall be voted at such meeting.
Section 2. The Corporation shall be entitled to treat the holder of record
of any share or shares of stock as the legal owner thereof and accordingly shall
not be bound to recognize any equitable claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
18
other notice thereof, save as expressly provided in the laws of the State of
Indiana.
Section 3. The assignment of any certificate of stock shall constitute an
assignment to the assignee of the shares so assigned and of all dividends on the
shares assigned which are declared payable as of a record date subsequent to the
date the assignment is recorded on the stock record books of the Corporation.
ARTICLE XII.
Fiscal Year
The fiscal year of the Corporation shall correspond to the calendar year.
ARTICLE XIII.
Checks for Money
All checks, drafts or other orders for the payment of funds of the
Corporation shall be signed by either the Chairman of the Board, the President,
or the Treasurer, or by such other individual or individuals as may hereafter,
from time to time, be designated by the Board of Directors. No check, draft or
other order for the payment of funds of the Corporation shall be signed in
blank, either as to the amount of the check, draft or other order, or as to the
name of the payee.
ARTICLE XIV.
Dividends
The Board of Directors may declare and pay dividends out of the unreserved
and unrestricted earned surplus of the Corporation. Dividends may be declared at
any annual, regular or special meeting of the Board of Directors. Dividends may
be paid in cash, in property or in the shares of the capital stock of the
Corporation, as provided by the Articles of Incorporation and the laws of the
State of Indiana.
ARTICLE XV.
Notices
Section 1. A notice required to be given under the provisions of these
Bylaws to any shareholder, director, officer and member of any committee shall
not be construed to mean personal notice but may be given in writing by
depositing the
19
same in a post office or letter box in a postpaid sealed wrapper addressed to
such shareholder, director, officer and member of any committee at such address
as appears upon the books of the Corporation, and such notice shall be deemed to
be given at the time when the same shall be thus mailed.
Section 2. Any shareholder, director, officer and member of any committee
may waive, in writing, any notice required to be given by these Bylaws, either
before or after the time said notice should have been issued.
ARTICLE XVI.
Compensation of Officers
The officers of the Corporation shall receive such compensation for their
services as may, from time to time, be fixed by the Board of Directors, and the
compensation so fixed shall continue to be payable until the Board of Directors
shall have fixed a different compensation, which it may do at any annual,
regular, or special meeting.
ARTICLE XVII.
Corporate Seal
The seal of the Corporation shall be a plain circular disk having engraved
thereon, near the outer edge thereof, at least the words, "CTS Corporation" and
in the center thereof the word, "Seal".
ARTICLE XVIII.
Indemnification
Section 1. General. Without limiting the generality or effect of Article
XI of the Articles of Incorporation, the Corporation shall, to the fullest
extent to which it is empowered to do so by the Indiana Business Corporation Law
(hereinafter the "IBCL"), or any other applicable laws, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), indemnify and hold harmless any person who was or is
involved in any manner (including without limitation as a party or a witness),
or is threatened to be made so involved, in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (hereinafter a "proceeding"), by
reason of the fact that such person is or was a director or officer of the
Corporation, or who is or was serving at
20
the request of the Board of Directors as a director, officer, partner or trustee
of another corporation or a partnership, joint venture, trust, employee benefit
plan or other entity, whether for profit or not for profit, (any such person
hereinafter an "indemnitee"), whether or not the basis of such proceeding is
alleged action in an official capacity while serving as a director, or officer,
against all expense, liability and loss (including attorneys' fees and expenses,
judgments, settlements, penalties, fines, and excise taxes assessed with respect
to employee benefit plans) actually and reasonably incurred or suffered by such
person in connection therewith; provided, however, that, except as provided in
Section 3 of this Article XVIII with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
Section 2. Right to Advancement of Expenses. The right to
indemnification conferred in Article XVIII shall include the right to be paid by
the Corporation the expenses (including, without limitation, attorneys' fees and
expenses) incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however, that,
if the IBCL so requires, an advancement of expenses incurred by an indemnitee in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 2 or otherwise.
The rights to indemnification and to the advancement of expenses
conferred in Article XVIII shall be contract rights and such rights shall
continue as to an indemnitee who has ceased to be a director or officer and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators. For purposes of Article XVIII, references to "the Corporation"
shall include any domestic or foreign predecessor entity of the Corporation in a
merger or other transaction in which the predecessor's existence ceased upon
consummation of the transaction.
Section 3. Right of Indemnitee to Bring Suit. If a claim under
Section 1 or Section 2 of this Article XVIII is not paid in full by the
Corporation within 60 calendar days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be 20 calendar days, the indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part
21
in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that, and
(ii) any suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the Corporation shall be entitled to
recover such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the IBCL. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel or shareholders) to have made a determination prior to the commencement
of such suit that indemnification of the indemnitee is proper in the
circumstances because the indemnitee has met the applicable standard of conduct
set forth in the IBCL, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel or shareholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article XVIII or
otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights. The rights to indemnification
and to the advancement of expenses conferred in this Article XVIII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Articles of Incorporation, Bylaws,
agreement, vote of shareholders or disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the IBCL.
Section 6. Vested Right to Indemnification. The right of any
individual to indemnification under this Article XVIII shall vest at the time of
occurrence or performance of any event, act or omission giving rise to any
Proceeding and once vested, shall not later be impaired as a result of any
amendment, repeal, alteration or other modification of any or all of these
Bylaws. Notwithstanding the foregoing, the indemnification afforded under this
Article XVIII shall be applicable to all alleged prior acts or
22
omissions of any individual seeking indemnification hereunder, regardless of the
fact that such alleged acts or omissions may have occurred prior to the adoption
of these Bylaws, and to the extent such prior acts or omissions cannot be deemed
to be covered by these Bylaws, the right of any individual to indemnification
shall be governed by the indemnification provisions in effect at the time of
such prior acts or omissions.
Section 7. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of this corporation, or to any individual
who is or was serving at the request of the Board of Directors as an employee or
agent of another corporation or a partnership, joint venture, trust, employee
benefit plan or other entity, whether for profit or not for profit, to the
fullest extent of the provisions of these Bylaws with respect to the
indemnification and advancement of expenses of directors and officers of this
corporation.
Section 8. Business Expense. Any payments made to any indemnified
party under these Bylaws or under any other right to indemnification shall be
deemed to be an ordinary and necessary business expense of the Corporation, and
payment thereof shall not subject any person responsible for the payment, or the
Board, to any action for corporate waste or to any similar action.
Section 9. Severability. If any provision or provisions of Article
XVIII is or are held to be invalid, illegal, or unenforceable for any reason
whatsoever: (i) the validity, legality, and enforceability of the remaining
provisions of such Article (including without limitation all portions of any
paragraph of such Article containing any such provision held to be invalid,
illegal, or unenforceable, that are not themselves invalid, illegal, or
unenforceable) will not in any way be affected or impaired thereby and (ii) to
the fullest extent possible, the provisions of such Article (including without
limitation all portions of any paragraph of such Article containing any such
provision held to be invalid, illegal, or unenforceable, that are not themselves
invalid, illegal, or unenforceable) will be construed so as to give effect to
the intent manifested by the provision held invalid, illegal, or illegal, or
unenforceable.
ARTICLE XIX.
Amendments
Section 1. These Bylaws may be amended, altered, repealed, or added to at
any annual or regular meeting of the directors, or at any special meeting
thereof.
Section 2. No amendment, alteration or addition to these Bylaws shall
become effective unless the same is adopted by the
23
affirmative vote of a majority of the members of the Board of Directors.
ARTICLE XX.
Control Share Acquisitions
As provided for in Section 5 thereof, Chapter 42 of the Indiana Business
Corporation Law, relating to control share acquisitions, shall not apply to
control share acquisitions of shares of the corporation made after March 3,
1987.
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