EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAC HOLDINGS CORP. ("PARENT"),
CUBE ACQUISITION CORP. ("MERGER SUB")
AND
PACKAGED ICE, INC. ("COMPANY")
Dated as of May 12, 2003
TABLE OF CONTENTS
ARTICLE I THE MERGER.....................................................................................1
1.1 The Merger....................................................................................1
1.2 Effective Time of the Merger..................................................................1
1.3 Articles of Incorporation.....................................................................2
1.4 Bylaws........................................................................................2
1.5 Directors and Officers........................................................................2
1.6 Conversion of Capital Stock...................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.....................................................7
2.1 Organization and Qualification................................................................7
2.2 Capitalization................................................................................7
2.3 Authority.....................................................................................8
2.4 Consents and Approvals; No Violation..........................................................9
2.5 Company SEC Reports..........................................................................10
2.6 Company Financial Statements.................................................................10
2.7 Absence of Undisclosed Liabilities...........................................................11
2.8 Absence of Certain Changes...................................................................11
2.9 Taxes........................................................................................12
2.10 Litigation...................................................................................13
2.11 Employee Benefit Plans; ERISA................................................................14
2.12 Environmental Liability......................................................................15
2.13 Compliance with Applicable Laws..............................................................16
2.14 Insurance....................................................................................17
2.15 Labor Matters; Employees.....................................................................17
2.16 Permits......................................................................................18
2.17 Required Shareholder Vote or Consent.........................................................18
2.18 Brokers......................................................................................18
2.19 Fairness Opinion.............................................................................18
2.20 Rights Agreement.............................................................................18
2.21 Information Supplied.........................................................................18
2.22 Intangible Property..........................................................................19
2.23 Affiliate Transactions.......................................................................19
2.24 Personal Property, Real Property and Leases..................................................20
2.25 Material Contracts...........................................................................20
2.26 Pending and Proposed Transactions............................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................................21
3.1 Organization and Qualification...............................................................21
3.2 Authority....................................................................................21
3.3 Consents and Approvals; No Violation.........................................................22
i
3.4 Required Shareholder Vote or Consent.........................................................22
3.5 Brokers......................................................................................22
3.6 Financing....................................................................................23
3.7 Merger Sub Purpose...........................................................................23
3.8 Information Supplied.........................................................................23
3.9 Lack of Ownership of Company Common Stock....................................................23
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER.......................................................24
4.1 Conduct of Business..........................................................................24
ARTICLE V ADDITIONAL AGREEMENTS.........................................................................27
5.1 Access and Information.......................................................................27
5.2 No Solicitation of Transactions..............................................................28
5.3 Directors' and Officers' Indemnification and Insurance.......................................30
5.4 Further Assurances...........................................................................31
5.5 Publicity....................................................................................31
5.6 Additional Actions...........................................................................31
5.7 Filings......................................................................................32
5.8 Employee Matters; Benefit Plans..............................................................32
5.9 Shareholders Meetings........................................................................33
5.10 Preparation of the Proxy Statement...........................................................33
5.11 Expenses.....................................................................................33
5.12 Preferred Stock Redemption...................................................................34
5.13 Matters Relating to the Commitment Letters...................................................34
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER.....................................................34
6.1 Conditions Precedent to Obligations of Parent and Merger Sub.................................34
6.2 Conditions Precedent to Obligations of the Company...........................................36
ARTICLE VII SURVIVAL....................................................................................36
7.1 Survival of Representations and Warranties...................................................36
7.2 Survival of Covenants and Agreements.........................................................37
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..........................................................37
8.1 Termination..................................................................................37
8.2 Effect of Termination........................................................................38
ARTICLE IX MISCELLANEOUS................................................................................39
9.1 Notices......................................................................................39
9.2 Separability.................................................................................40
9.3 Assignment...................................................................................40
9.4 Interpretation...............................................................................40
9.5 Counterparts.................................................................................40
9.6 Entire Agreement.............................................................................40
9.7 Governing Law; Venue.........................................................................40
9.8 Waiver of Jury Trial.........................................................................41
9.9 Attorneys' Fees..............................................................................41
9.10 No Third Party Beneficiaries.................................................................41
9.11 Disclosure Letters...........................................................................41
9.12 Amendments and Supplements...................................................................41
9.13 Extensions, Waivers, Etc.....................................................................42
9.14 Construction.................................................................................42
ii
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") dated as of May
12, 2003, by and among CAC Holdings Corp. ("PARENT"), a Delaware corporation,
Cube Acquisition Corp. ("MERGER SUB"), a
Texas corporation and a wholly-owned
subsidiary of Parent and Packaged Ice, Inc. ("COMPANY"), a
Texas corporation.
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each approved this Agreement and determined that it is
advisable and in the best interest of their respective shareholders that Parent
acquire the Company through the statutory merger of Merger Sub with and into the
Company (the "MERGER") and, in furtherance thereof, have approved the Merger;
WHEREAS, pursuant to the Merger all of the Company's issued and
outstanding shares of common stock, par value $0.01 per share (the "COMPANY
COMMON STOCK") will be converted into the right to receive cash; and
WHEREAS, the Parties desire to make certain representations, warranties
and covenants and other agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.2), Merger Sub shall merge with and
into Company and the separate corporate existence of Merger Sub shall cease and
Company shall be the surviving corporation in the Merger (sometimes referred to
herein as the "SURVIVING CORPORATION"). The Merger shall have the effects set
forth in Section 5.06 of the
Texas Business Corporation Act ("TBCA"), including
the Surviving Corporation's succession to and assumption of all rights and
obligations of Merger Sub.
1.2 Effective Time of the Merger. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI hereof (other
than those conditions that by their nature are to be satisfied at the Closing),
the parties hereto shall cause the Merger to be consummated by filing articles
of merger (the "ARTICLES OF MERGER") with the Secretary of State of
Texas and by
making all other filings or recordings required by the TBCA in connection with
the Merger, in such form as is required by, and executed in accordance with, the
relevant provisions of the TBCA. The Merger shall become effective (the
"EFFECTIVE TIME") upon the later of (i) the filing of a properly executed
Articles of Merger relating to the Merger with the Secretary of State of
Texas
in accordance with the TBCA, and (ii) at such later time as the parties shall
agree and set forth in such Articles of Merger. On the same day at which the
Effective Time occurs, a closing (the "CLOSING") of the Merger shall be held at
10:00 a.m. local time, at the New York, New York offices of Akin, Gump, Strauss,
Xxxxx & Xxxx, L.L.P. or at such other time and location as the parties hereto
shall otherwise agree.
1
1.3 Articles of Incorporation. The articles of incorporation of Merger
Sub in effect immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation at and after the Effective Time until
thereafter amended in accordance with the terms thereof and the TBCA.
1.4 Bylaws. The bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation at and after
the Effective Time until thereafter amended in accordance with the terms thereof
and as provided by the articles of incorporation of the Surviving Corporation
and the TBCA.
1.5 Directors and Officers. From and after the Effective Time, until
the earlier of their resignation or removal or until their respective successors
are duly elected or appointed and qualified in accordance with applicable Law,
(a) the directors of Merger Sub at the Effective Time shall be the directors of
the Surviving Corporation, and (b) the officers of the Company at the Effective
Time shall be the officers of the Surviving Corporation.
1.6 Conversion of Capital Stock.
(a) As of the Effective Time, by virtue of the Merger and without
any action on the part of the holders of any capital stock described below:
(i) All shares of the Company Common Stock owned by Parent or
Merger Sub or that are held in Company's treasury will be canceled and
no cash or other consideration shall be delivered in exchange therefor.
(ii) Subject to Section 1.6(e) each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock canceled pursuant to Section
1.6(a)(i), if any) shall be canceled and shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted
automatically into the right to receive the higher of (A) $3.50, or (B)
the sum of (1) $3.30 plus (2) any Per Common Share Preferred Discount
(as defined below), payable, without interest, to the holder of such
share of Company Common Stock, upon surrender of the certificate that
formerly evidenced such share of Company Common Stock in the manner
provided in Section 1.6(b) (the "MERGER CONSIDERATION"). For purposes
of this Agreement, the term "PER COMMON SHARE PREFERRED DISCOUNT" shall
mean an amount equal to the quotient of (x) the Optional Redemption
Price for all of the shares of 10% Exchangeable Preferred Stock, par
value $0.01 per share (the "COMPANY PREFERRED STOCK") at the Effective
Time less the amount actually paid by the Company to either redeem or
repurchase such Company Preferred Stock at the Effective Time, divided
by (y) the number of shares of Company Common Stock outstanding at the
Effective Time plus the number of shares of Company Common Stock
underlying Company Options and Warrants (as defined below) with
exercise prices less than or equal to the per share Merger
Consideration; provided, however, that if the resulting quotient is a
negative number, the Per Common Share Preferred Discount shall be zero.
2
(iii) Each share of common stock of Merger Sub, par value
$0.01 ("MERGER SUB COMMON STOCK"), issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for
one validly issued, fully paid and nonassessable share of the common
stock of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall from and after the
Effective Time evidence ownership of the same number of shares of
capital stock of the Surviving Corporation.
(iv) As of the Effective Time, all shares of Company Common
Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and from and after the
Effective Time there shall be no further registration of transfers
effected on the stock transfer books of the Surviving Corporation of
shares of Company Common Stock which were outstanding immediately prior
to the Effective Time. All Merger Consideration paid upon the surrender
of stock certificates which immediately prior to the Effective Time
represented any shares of Company Common Stock ("STOCK CERTIFICATES")
in accordance with the terms hereof shall be deemed to have been paid
in full satisfaction of all rights pertaining to such Stock
Certificates and shares of Company Common Stock formerly represented
thereby. Each holder of a Stock Certificate shall cease to have any
rights with respect thereto, except the right to receive, upon the
surrender of such Stock Certificate as provided in this Section 1.6,
the applicable per share Merger Consideration in cash, without interest
and subject to any required tax withholding.
(b) Surrender of the shares of Company Common Stock and payment
of the Merger Consideration shall be conducted as follows:
(i) Parent shall authorize one or more transfer agent(s)
reasonably acceptable to Company to act as payment agent hereunder (the
"EXCHANGE AGENT") with respect to the Merger. At or prior to the
Effective Time, Parent shall deposit the Merger Consideration with the
Exchange Agent for the benefit of the holders of shares of Company
Common Stock, for payment in accordance with this Section 1.6 through
the Exchange Agent (the "EXCHANGE FUND"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the applicable Merger
Consideration in exchange for surrendered Stock Certificates pursuant
to Section 1.6 out of the Exchange Fund. Except as contemplated by
Section 1.6, the Exchange Fund shall not be used for any other purpose.
(ii) Promptly after the Effective Time, but in any event not
later than five Business Days (as defined below) thereafter, Parent
will send, or will cause the Exchange Agent to send, to each holder of
a Stock Certificate that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock, a letter of
transmittal and instructions for use in effecting the exchange of such
Stock Certificate for the applicable Merger
3
Consideration. Provision also shall be made for holders of a Stock
Certificate to procure in person, immediately after the Effective Time,
a letter of transmittal and instructions and to deliver in person
immediately after the Effective Time such letter of transmittal and
Stock Certificates in exchange for the Merger Consideration. For
purposes of this Agreement, "BUSINESS DAY" means any date that is not a
Saturday or Sunday or other day on which banks are required or
authorized by Law to be closed in New York City.
(iii) After the Effective Time, Stock Certificates shall
represent the right, upon surrender thereof to the Exchange Agent,
together with a duly executed and properly completed letter of
transmittal relating thereto, to receive in exchange therefor the
Merger Consideration, subject to any required tax withholding, and the
Stock Certificates so surrendered shall be canceled. No interest will
be paid or will accrue on any cash amount payable upon the surrender of
any such Stock Certificates. Until so surrendered, each such Stock
Certificate shall, after the Effective Time, represent for all purposes
only the right to receive the Merger Consideration.
(iv) If cash is to be paid to a Person other than the
registered holder of the Stock Certificate or Certificates surrendered
in exchange therefor, it shall be a condition to such payment that the
Stock Certificate or Certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any
transfer or other taxes required as a result of such payment to a
Person other than the registered holder or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is
not applicable. For purposes of this Agreement, "PERSON" means an
individual, a corporation, a limited liability company, a partnership,
an association, a trust or any other entity or organization, including
a Governmental Authority.
(v) Any Merger Consideration in the Exchange Fund that remains
unclaimed by the holders of shares of Company Common Stock one year
after the Effective Time shall be returned to Parent, upon demand, and
any such holder who has not exchanged such holder's Stock Certificates
in accordance with this Section 1.6 prior to that time shall thereafter
look only to Parent, as a general creditor thereof, to exchange such
Stock Certificates for the Merger Consideration to which such holder is
entitled pursuant to Section 1.6. If outstanding Stock Certificates are
not surrendered prior to six years after the Effective Time (or, in any
particular case, prior to such earlier date on which any Merger
Consideration payable in respect of such Stock Certificates would
otherwise escheat to or become the property of any governmental unit or
agency), the Merger Consideration issuable or payable in respect of
such Stock Certificates shall, to the extent permitted by applicable
Law, become the property of Parent, free and clear of all claims or
interest of any Person previously entitled thereto. Notwithstanding the
foregoing, none of Parent, Company, the Surviving Corporation, the
Exchange Agent or any other Person shall be liable to any holder of
Stock Certificates for any amount paid, or Merger Consideration
delivered, to a public official pursuant to applicable abandoned
property, escheat or similar Laws.
4
(vi) If any Stock Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Stock 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 Parent may direct as indemnity
against any claim that may be made against it with respect to such
Stock Certificate, the Exchange Agent will pay in exchange for such
lost, stolen or destroyed Stock Certificate the Merger Consideration in
respect thereof pursuant to this Agreement.
(c) Outstanding options to purchase Company Common Stock shall be
dealt with as follows:
(i) The Company shall use commercially reasonable efforts to
cause (A) the Compensation Committee of the Company's Board of
Directors (the "BOARD") to exercise its authority under the Company's
2001 Stock Option Plan, as amended, the Company's 1998 Stock Option
Plan, as amended, the Company's 1994 Stock Option Plan, the Company's
2000 Employee Stock Purchase Plan, and the 2002 Senior Executive
Restricted Stock Plan (the "COMPANY EQUITY PLANS") to accelerate the
vesting of, and to cancel, all options and any other awards to acquire
shares of Company Common Stock granted under the Company Equity Plans
prior to the Effective Time (all outstanding options and any other
awards to acquire shares of Company Common Stock granted under the
Company Equity Plans being hereinafter referred to as the "COMPANY
OPTIONS").
In exchange for the cancellation of Company Options, each holder
thereof shall have the right to receive an amount in each case
determined by multiplying (A) the excess, if any, of the Merger
Consideration over the applicable exercise price per share of the
Company Option by (B) the number of shares of Company Common Stock such
holder could have purchased had such holder exercised such Company
Option in full immediately prior to the Effective Time (such amount,
the "OPTION CONSIDERATION"). Upon the Effective Time, each holder of
Company Options who has had his or her Company Options canceled in
connection with the Merger shall become entitled to the Option
Consideration, subject to any required tax withholding, and all rights
of such holder associated with the Company Options shall be terminated
and canceled. A Company Option with an exercise price greater than the
per share Merger Consideration will not be entitled to any
consideration upon exercise or cancellation of such Company Option as a
result of the Merger. The Company shall promptly pay or cause to be
paid any amounts withheld for applicable foreign, federal, state and
local taxes to the appropriate Governmental Authority on behalf of such
holders of Company Options. The Company shall use its commercially
reasonable efforts to take all action required under each of the
Company Equity Plans to cause, as of the Effective Time, the
termination of each such Company Equity Plan pursuant to the terms and
conditions of such Company Equity Plan.
5
As of the Effective Time, all Company Options issued under the
Company's Stock Option Plans that are not exchanged pursuant to this
Section 1.6(c) immediately prior to the consummation of the Merger
shall terminate and expire as of the Effective Time or otherwise remain
exercisable only to the extent that each holder of such Company Options
shall be entitled to the Option Consideration and such Company Options
shall thereafter be canceled following their exercise.
(ii) The Board, or an appropriate committee thereof, shall
take all action necessary so that the exemption from Section 16 under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"))
which is contemplated by Section 16b-3(e) is applicable to the
disposition of the shares of Company Common Stock and Company Options
in, or in connection with, the Merger as contemplated by this Agreement
by all persons who are directors and/or officers of the Company.
(d) At the Effective Time, each holder of a then-outstanding
Company warrant (a "WARRANT") will be entitled to receive in settlement of such
Warrant a cash payment from the Company equal to the product of (i) the total
number of shares of Company Common Stock then subject to such Warrant with an
exercise price per share of Company Common Stock less than the per share Merger
Consideration multiplied by (ii) the excess of the Merger Consideration over the
exercise price per share of Company Common Stock subject to such Warrant,
subject to any required withholding of taxes. A Warrant with an exercise price
greater than the per share Merger Consideration will not be entitled to any
consideration upon exercise or cancellation of such Warrant as a result of the
Merger. If necessary or appropriate under the terms of such Warrant, the Company
will, upon the request of Parent, use its commercially reasonable efforts to
obtain the written acknowledgment of each person holding a Warrant that the
payment of the amount of cash referred to above will satisfy in full the
Company's obligation to such person pursuant to such Warrant. As of the
Effective Time, all Warrants that are not exchanged pursuant to this Section
1.6(d) immediately prior to the consummation of the Merger shall terminate and
expire as of the Effective Time or otherwise remain exercisable only to the
extent that each holder of such Warrant shall be entitled to the cash payment
set forth in this Section 1.6(d) and such Warrants shall thereafter be canceled.
Prior to the Effective Time, the Company shall use commercially reasonable
efforts to make any amendments to the terms of the Warrants that are necessary
and give effect to the transactions contemplated by this Section 1.6(d).
(e) Any shares of Company Common Stock held by a shareholder of
the Company (a "COMPANY SHAREHOLDER") properly exercising its dissent rights
under the TBCA (a "DISSENTING SHAREHOLDER") will be converted into the right to
receive such consideration as may be determined to be due to such Dissenting
Shareholder under Article 5.12 of the TBCA; except that any such shares that a
Dissenting Shareholder holds for which, after the Effective Time, such
Dissenting Shareholder withdraws its demand for purchase or loses its purchase
right as provided in the TBCA, will be deemed to be converted, as of the
Effective Time, into the right to receive the Merger Consideration, without
interest. Company will give Parent (i) prompt notice of any written demands for
purchase, withdrawals of demands for purchase and any other instruments served
under the TBCA, and (ii) the opportunity to direct all negotiations and
6
proceedings with respect to demands for purchase under the TBCA. Company will
not voluntarily make any payment with respect to any purchase demands and will
not, except with Parent's prior written consent, settle or offer to settle any
such demands.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub as follows:
2.1 Organization and Qualification.
(a) Each of Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of its state of
organization, is duly qualified to do business as a foreign corporation and is
in good standing in the jurisdictions set forth in Section 2.1(a) of the
disclosure letter delivered to Parent contemporaneously with the execution
hereof (the "COMPANY DISCLOSURE LETTER"), which includes each jurisdiction in
which the character of the properties owned by it or the nature of its business
makes such qualification necessary. Each of Company and its Subsidiaries has all
requisite corporate power and authority to own, use or lease its properties and
to carry on its business as it is now being conducted. Each of Company and its
Subsidiaries has made available to Parent a complete and correct copy of its
certificate of incorporation and bylaws (or similar organizational documents),
each as amended to date, and such copies as so delivered are in full force and
effect.
(b) For purposes of this Agreement, (i) a "COMPANY MATERIAL
ADVERSE EFFECT" shall mean any change, effect, event, occurrence or state of
facts that is materially adverse to the condition (financial or otherwise),
business, properties or results of operations of Company and its Subsidiaries,
taken as a whole, or that could reasonably be expected to materially impair the
ability of Company to perform its obligations under this Agreement or to
consummate the Merger; provided that none of the following, alone or in
combination, shall constitute a Company Material Adverse Effect or be considered
in determining whether a Company Material Adverse Effect has occurred or will
occur: any change, effect, event, occurrence, state of facts or development
arising directly from (A) adverse changes in the economy in general or (B) the
transactions contemplated by this Agreement or the announcement thereof; and
(ii) "SUBSIDIARY" shall mean, with respect to any party, any corporation or
other organization whether incorporated or unincorporated, of which (1) at least
a majority of the securities or other interests having by their terms voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly beneficially owned or controlled by such party or by any one or more
of its subsidiaries, or by such party and one or more of its subsidiaries, or
(2) such party or any Subsidiary of such party is a general partner of a
partnership or a manager of a limited liability company.
2.2 Capitalization.
(a) The authorized capital stock of Company consists of
50,000,000 shares of Company Common Stock, and 5,000,000 shares of preferred
stock of Company, par value $.01 per share. As of May 1, 2003, (i) 20,157,304
shares of Company Common Stock were issued
7
and outstanding, (ii) 298,231 shares of Company Common Stock were held in
treasury, (iii) 423,175 shares of Company Preferred Stock were issued and
outstanding, with no shares of Company Preferred Stock having accrued pursuant
to the Amended and Restated Preferred Stock Designation for the Company's 10%
Exchangeable Preferred Stock, (the "10% PREFERRED DESIGNATION"), (iv) Warrants
to acquire an aggregate of 3,846,049 shares of Company Common Stock were
outstanding under all agreements of Company, with no Warrants to acquire shares
of Company Common Stock having accrued pursuant to the 10% Preferred
Designation, and (iv) stock options to acquire an aggregate of 1,915,607 shares
of Company Common Stock were outstanding under all stock option plans and
agreements of Company. All such outstanding shares have been validly issued and
are fully paid, nonassessable and free of preemptive rights. Except as set forth
above and in Section 2.2(a) of the Company Disclosure Letter, and other than in
this Agreement and in the 10% Preferred Designation, which provides for payment
of dividends in the form of additional Company Preferred Stock and Warrants
rather than cash, there are no outstanding subscriptions, options, rights,
warrants, convertible securities, stock appreciation rights, phantom equity, or
other agreements or commitments obligating Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock of any
class.
(b) the Company is, directly or indirectly, the record and
beneficial owner of all of the outstanding shares of capital stock of each
Company Subsidiary, there are no proxies with respect to any such shares, and no
equity securities of any Company Subsidiary are or may become required to be
issued because of any options, warrants, rights to subscribe to, calls or
commitments, understandings or other agreements of any character whatsoever
relating to, or securities or rights convertible into or exchangeable or
exercisable for, shares of any capital stock of any Company Subsidiary. Except
as set forth in Section 2.2(b) of the Company Disclosure Letter, all of such
shares so owned by Company are validly issued, fully paid and nonassessable and
are owned by it free and clear of all Liens (as defined herein).
2.3 Authority.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement, to perform its obligations hereunder and,
subject to obtaining any necessary Company shareholder approval (if required by
applicable Law) in connection with the Merger only, to consummate the Merger and
the other transactions contemplated by this Agreement. The execution, delivery
and performance by the Company of this Agreement, and the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate action (including, without
limitation, the unanimous approval of the non-employee members of the Board) and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement, the Merger or the other transactions contemplated by
this Agreement (other than, with respect to the Merger only, the approval and
adoption of this Agreement and the Merger by the affirmative vote of a majority
of the then outstanding shares of Company Common Stock, as required by the
TBCA). This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and other Laws relating to or
affecting the rights of creditors and of general principles of equity (the
"ENFORCEABILITY EXCEPTION").
8
(b) At a meeting duly called and held on May 12, 2003, the Board
(i) determined that this Agreement and the other transactions contemplated
hereby, including the Merger, are advisable and in the best interests of the
Company and the Company Shareholders, (ii) approved and adopted this Agreement
and the transactions contemplated hereby, including the Merger, and (iii)
resolved to recommend approval and adoption of this Agreement and the Merger by
the Company Shareholders. Such actions taken by the Board constitute approval by
the Board of the Merger, this Agreement and all other agreements and
transactions contemplated hereby in accordance with all applicable provisions of
the TBCA such that, assuming no change in the Board's recommendation, no further
actions or approvals are or will be required by the Board in order to consummate
the transactions contemplated hereby or thereby.
(c) Assuming that Parent and its Affiliates have not taken any
action, other than the execution and delivery of this Agreement, that would have
the effect of triggering the three-year moratorium on certain business
combinations provided under Section 13.03 of the TBCA, the Board has taken the
actions necessary so that Sections 13.01 to 13.08, inclusive, of the TBCA will
not apply so as to in any way prohibit, restrict, inhibit, delay or otherwise
adversely effect the ability of Parent and Merger Sub to consummate the Merger,
this Agreement, or any other agreements or transactions contemplated hereby or
thereby. Other than Sections 13.01 - 13.08 of the TBCA (as to which all
necessary Board approvals have been obtained), no state anti-takeover or similar
statute is applicable to Parent, Merger Sub, the Company or the Surviving
Corporation in connection with the Merger, this Agreement or any of the
transactions contemplated hereby.
2.4 Consents and Approvals; No Violation. The execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby and the
performance by Company of its obligations hereunder will not:
(a) subject to obtaining the Company Shareholders' Approval and
other approvals as expressly contemplated by Section 5.9, conflict with any
provision of Company's articles of incorporation or bylaws or the articles of
incorporation or bylaws (or other similar organizational documents) of any of
its Subsidiaries;
(b) subject to obtaining the Company Shareholders' Approval,
require any consent, waiver, approval, order, authorization or permit of, or
registration, filing with or notification to any governmental or regulatory
authority or agency (a "GOVERNMENTAL AUTHORITY"), except for (i) applicable
requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (ii) the filing of the Articles of Merger with the
Texas Secretary of State, (iii) the filing of the Proxy Statement (as
contemplated by Section 5.10 with the SEC in accordance with the Exchange Act,
and (iv) immaterial consents, approvals and registrations;
(c) except as set forth in Section 2.4(c) of the Company
Disclosure Letter, result in any material violation of or the material breach of
or constitute a material default (with notice or lapse of time or both) under,
or give rise to any right of termination, cancellation or
9
acceleration or guaranteed payments or a loss of a material benefit under, any
of the terms, conditions or provisions of any note, lease, mortgage, license,
agreement or other instrument or obligation to which Company or any of its
Subsidiaries is a party or by which Company or any of its Subsidiaries or any of
their respective properties or assets may be bound;
(d) violate the provisions of any order, writ, injunction,
judgment or decree, or violate in any material respect any statute, rule or
regulation applicable to Company or any Subsidiary of Company; or
(e) except as set forth in Section 2.4(e) of the Company
Disclosure Letter, result in the creation of any lien, mortgage, pledge,
security interest, encumbrance, claim or charge of any kind (collectively,
"LIENS") upon any material properties or assets or on any shares of capital
stock of Company or its Subsidiaries under any agreement or instrument to which
Company or any of its Subsidiaries is a party or by which Company or any of its
Subsidiaries or any of their properties or assets is bound.
2.5 Company SEC Reports. Company has filed with the SEC, and has
heretofore made available (provided that all documents filed by Company
electronically with the SEC and publicly available prior to the date hereof
shall be deemed available) to Parent true and complete copies of, each form,
registration statement, report, schedule, proxy or information statement and
other document (including exhibits and amendments thereto), including its Annual
Reports to Shareholders incorporated by reference in certain of such reports
(other than preliminary materials), required to be filed with the SEC since
January 1, 2001 under the Securities Act of 1933, as amended (the "SECURITIES
ACT") or the Exchange Act (collectively, the "COMPANY SEC REPORTS"). As of their
respective dates, such Company SEC Reports (a) complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and the applicable rules and regulations promulgated
thereunder, and (b) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
2.6 Company Financial Statements. Each of the audited consolidated
financial statements and unaudited consolidated interim financial statements of
Company (including any related notes and schedules) included (or incorporated by
reference) in the Company SEC Reports, have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated in the notes thereto and subject, in the case of
quarterly financial statements, to normal and recurring year-end adjustments)
and fairly present in all material respects, in conformity with GAAP applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Company and its Subsidiaries as of the date
thereof and the consolidated results of operations and cash flows (and changes
in financial position, if any) of Company and its Subsidiaries for the periods
presented therein (subject to normal year-end adjustments and the absence of
financial footnotes in the case of any unaudited interim financial statements).
The Company has not received any notice from its auditors that the financial
statements and the consents to their use would not be available for use in
connection with the transactions contemplated in connection with the Financing.
10
2.7 Absence of Undisclosed Liabilities. Except as disclosed in the
Company SEC Reports (including the financial statements and notes thereto
included therein) filed prior to the date of this Agreement, neither Company nor
any of its Subsidiaries has incurred any material liabilities or obligations of
any nature (whether accrued, absolute, contingent, incurred in the ordinary
course or otherwise) other than liabilities incurred in the ordinary course of
business after December 31, 2002 and liabilities under this Agreement. As of the
date hereof, there is no pending claim by any director or officer of the Company
or any of its Subsidiaries for indemnification by the Company or any of its
Subsidiaries, and no director or officer has given notice to the Company or any
of its Subsidiaries of his or her intention to assert any such claim.
2.8 Absence of Certain Changes. Except as set forth in Section 2.8 of
the Company Disclosure Letter and except as contemplated by this Agreement or as
disclosed in the Company SEC Reports filed prior to the date of this Agreement,
since December 31, 2002 (a) Company and its Subsidiaries have conducted their
business in all material respects in the ordinary course consistent with past
practices, (b) there has not been any material change or development, or
combination of material changes or developments that is adverse to the condition
(financial or otherwise), business, properties or results of operations of
Company and its Subsidiaries, taken as a whole, (c) there has not been any
declaration, setting aside or payment of any dividend or other distribution with
respect to any shares of capital stock of Company or any repurchase, redemption
or other acquisition by Company or any of its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in
Company or any of its Subsidiaries, except (i) for such declaration, setting
aside and payment of dividends as required by the 10% Preferred Designation and
(ii) any repurchase of debt securities consistent with the Company's past
practices and business plan, (d) there has not been any amendment of any term of
any outstanding security of Company or any of its Subsidiaries, (e) there has
not been any change in any method of accounting or accounting practice by
Company or any of its Subsidiaries, except for any such change required because
of a concurrent change in GAAP or to conform a Subsidiary's accounting policies
and practices to those of Company, (f) there has not been any granting by the
Company or any of its Subsidiaries to any director or executive officer of the
Company or any of its Subsidiaries of any increase in compensation, except in
the ordinary course of business consistent with past practice, (g) there has not
been any granting by the Company or any of its Subsidiaries to any director or
executive officer of the Company of any increase in severance or termination pay
or any agreement or commitment to increase severance or termination pay, except
in the ordinary course of business consistent with past practice, (h) there has
not been any entry by the Company or any of its Subsidiaries into any
employment, severance or termination agreement with any director or executive
officer of the Company, other than "at-will" employment agreements terminable by
the Company without penalty or cost at any time, with or without cause, on not
more than 30 days prior notice and providing for total annual compensation
(including salary and bonus) of less than $100,000, (i) there has not been any
material damage, destruction or loss, whether or not covered by insurance, (j)
there has not been any change in financial or Tax accounting methods,
principles, practices or election by the Company, except insofar as may have
been required by a change in GAAP, or by applicable Law, and (k) to the
knowledge of the Company, none of the Company's top ten customers for the year
ended December 31, 2002, as determined by revenue shall have advised the Company
that it intends to cease or materially curtail its purchases of products from
the Company.
11
2.9 Taxes. Except as otherwise disclosed in Section 2.9 of the Company
Disclosure Letter:
(a) Company and each of its Subsidiaries have timely filed all
material Tax Returns required by applicable Law to be filed by any of them. All
such Tax Returns are or will be true, complete and correct in all material
respects. Company and each of its Subsidiaries have paid all Taxes due and
payable by them through the date hereof (except for Taxes that are being
contested in good faith by appropriate proceedings) and have made adequate
provision for all Taxes attributable to any taxable period (or portion thereof)
ending on or prior to the date hereof that are not yet due and payable. Company
and each of its Subsidiaries have complied in all material respects with all
applicable Laws, rules and regulations relating to the payment and withholding
of Taxes.
(b) No Audit by a Tax Authority is ongoing or pending, or to the
knowledge of the Company threatened, with respect to any Tax Returns filed by,
or Taxes due from, Company or any of its Subsidiaries. No material deficiency or
adjustment for any Taxes has been proposed, asserted or assessed against Company
or any of its Subsidiaries. No issue previously raised in writing by any Taxing
Authority with respect to a completed Audit reasonably could be expected to
result in a proposed material deficiency or assessment for any prior or
subsequent period (including periods subsequent to the date hereof). There are
no material liens for Taxes upon the assets of Company or any of its
Subsidiaries, except liens for current Taxes not yet delinquent or being
contested in good faith.
(c) Neither Company nor any of its Subsidiaries has given any
waiver of statutes of limitations relating to the payment or collection of
Taxes, has executed any powers of attorney with respect to Tax matters, or has
agreed to any extension of time with respect to a Tax assessment or deficiency
or collection matters, which will be outstanding as of the Closing. Neither
Company nor any of its Subsidiaries is currently the beneficiary of any
extension of time within which to file any Tax Return.
(d) The Financial Statements of the Company reflect adequate
reserves established in accordance with GAAP (as of the date of such financial
statements) for all Taxes.
(e) As used in this Agreement, (i) "AUDIT" shall mean any audit,
assessment of Taxes, other examination or investigation by any Tax Authority,
administrative or judicial proceeding or appeal of such proceeding relating to
Taxes; (ii) "TAXES" shall mean (A) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, alternative minimum, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (B) all interest,
penalties, fines, additions to tax or other additional amounts imposed by any
Taxing Authority in connection with any item described in clause (A), and (C)
all transferee, successor, joint and several, contractual or other liability
(including, without limitation, liability pursuant to Treas. Reg. Section
1.1502-6 (or any similar state, local or foreign provision)) in respect of any
items described in clause (A) or (B); (iii) "TAX AUTHORITY" shall mean the
Internal Revenue Service and any other domestic or foreign Governmental
Authority
12
responsible for the administration of any Taxes; and (iv) "TAX RETURNS" shall
mean all original or amended returns, declarations, statements, reports,
schedules, exhibits, forms and information returns required to be filed in
respect of any Taxes.
(f) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Internal Revenue Code of 1986, as amended
including the rules and regulations promulgated thereunder (the "CODE") or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by Company or any of its Subsidiaries. None of the Assets of the Company
or any of its Subsidiaries is required to be treated as being owned by any other
Person pursuant to the "safe harbor" leasing provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954 as formerly in effect.
(g) Neither the Company nor any of its Subsidiaries (i) is a
party to, is bound by or has any obligation under any Tax sharing, allocation or
indemnification agreement or similar agreement or arrangement other than one
that is solely between the Company and one or more of its Subsidiaries or (ii)
has any liability for Taxes of any party (other than the Company or any of its
Subsidiaries) under Treasury Regulation Section 1.1502-6, by contract or
otherwise.
(h) Neither the Company nor any of its Subsidiaries has agreed to
make, or is required to make, any adjustment under Section 481(a) of the Code
(or any similar state, local or foreign provision) by reason of a change in
accounting method or otherwise, and, no Tax Authority has proposed any such
adjustment or change in accounting method.
(i) The Company is not a United States Real Property Holding
Corporation within the meaning of Section 897(c)(2) of the Code.
(j) Neither the Company nor any of its Subsidiaries is a party to
any "reportable transaction" within the meaning of Treasury Regulation Section
1.6011-4 and neither the Company nor any of its Subsidiaries have made a
disclosure on a federal income Tax Return pursuant to Section 6662 of the Code.
(k) Company has made available to Parent true and correct copies
of the United States federal income Tax Returns filed by the Company and its
Subsidiaries for each of the fiscal years ended 1999, 2000 and 2001.
2.10 Litigation. Except as disclosed in the Company SEC Reports or
Section 2.10 of the Company Disclosure Letter and except for immaterial claims
occurring in the Company's ordinary course of business which are routinely
processed by the Company's insurance providers, there is no material suit,
claim, action, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or directly affecting Company or any of its
Subsidiaries. Except as disclosed in the Company SEC Reports or Section 2.10 of
the Company Disclosure Letter, there is not in existence any material order,
judgment or decree of any court or other tribunal or other agency enjoining or
requiring Company or any of its Subsidiaries to take any action of a material
nature with respect to its business, assets or properties. Notwithstanding the
foregoing, no representation or warranty in this Section 2.10 is made with
respect to Environmental Laws, which are covered exclusively by the provisions
set forth in Section 2.12.
13
2.11 Employee Benefit Plans; ERISA. Except as otherwise disclosed in
Section 2.11 of the Company Disclosure Letter:
(a) Section 2.11(a) of the Company Disclosure Letter sets forth a
complete and accurate list of all employee benefit plans and arrangements
(written or oral) of any type (including plans described in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including severance pay, sick leave, vacation pay, salary continuation for
disability, compensation agreements, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase, restricted stock, stock
bonus, deferred share, hospitalization, medical insurance, life insurance and
scholarship programs sponsored, maintained, contributed to, or obligated to
contribute to by Company or any of its Subsidiaries (the "COMPANY EMPLOYEE
BENEFIT PLANS"). Except for the Company Employee Benefit Plans, neither Company
nor any of its Subsidiaries maintains or has any fixed or contingent material
liability with respect to, any employee benefit, pension or other plan that is
subject to ERISA.
(b) There is no material violation of ERISA, the Code or other
applicable Laws with respect to the filing of applicable reports, documents and
notices regarding any Company Employee Benefit Plan with any Governmental
Authority or the furnishing of such documents to the participants or
beneficiaries of the Company Employee Benefit Plans. With respect to the Company
Employee Benefit Plans, there exists no condition or set of circumstances in
connection with Company or any of its Subsidiaries that could be expected to
result in material liability under ERISA, the Code or any applicable Law. With
respect to the Company Employee Benefit Plans, individually and in the
aggregate, there are no material unfunded or underfunded benefit obligations
that have not been properly footnoted in accordance with GAAP, on the financial
statements of Company.
(c) The Company Employee Benefit Plans have been maintained, in
all material respects, in accordance with their terms and in accordance with all
applicable federal and state Laws, and neither the Company nor any Subsidiary,
nor to the knowledge of the Company, any "party in interest" (as defined in
Section 3(14) of ERISA) or "disqualified person" (as defined in Section
4975(e)(2) of the Code) with respect to the Company Employee Benefits Plans, has
engaged in any "prohibited transaction" within the meaning of Section 4975 of
the Code or Section 406 of ERISA.
(d) Except as otherwise set forth in Section 2.11 of the Company
Disclosure Letter, neither the execution and delivery of this Agreement nor the
transactions contemplated hereby will either alone or together with any other
event or condition, result in any material payment becoming due to any employee
or group of employees of either the Company or any Subsidiary. Neither the
execution and delivery of this Agreement nor the transactions contemplated
hereby will, either alone or together with any other event or condition, result
in or satisfy a condition to the payment of compensation (including accelerated
vesting or payment of compensation) that would, in combination with any other
payment, result in an "excess parachute payment" within the meaning of Section
280G of the Code.
(e) With respect to each of the Company Employee Benefit Plans,
true, correct and complete copies of the following documents have been made
available to Parent: (i) the plan document and any related trust agreement; (ii)
current summary plan descriptions; (iii) the most recent Forms 5500, if
applicable; (iv) the most recent IRS determination letter, if applicable; and
(v) the most recent actuarial valuation report, if any.
14
(f) Any Company Pension Benefit Plans intended to qualify under
Section 401 of the Code have been determined by the Internal Revenue Service
("IRS") to be so qualified and no event has occurred and no condition exists
with respect to the form or operation of such Company Pension Benefit Plans that
would cause the loss of such qualification or exemption. There are no
investigations pending by any Governmental Authority (including the PBGC) or
pending or threatened suits (other than routine claims for benefits) involving
the Company Employee Benefit Plans.
(g) None of the Company, any of its Subsidiaries, or any of their
ERISA Affiliates maintain or contribute to, nor have they within the past six
years maintained or made any material contributions to, any pension plan subject
to Title IV of ERISA or Sections 412 of the Code or 302 of ERISA. Neither the
Company nor any Subsidiary of the Company nor any entity that is or has been a
member of any group of persons described in Section 414(b), (c), (m), (o) or (t)
of the Code, including the Company or a Subsidiary ("ERISA AFFILIATE"), has
incurred, or is reasonably likely to incur, material liability under Title IV of
ERISA.
2.12 Environmental Liability. Except as set forth in Section 2.12 of
the Company Disclosure Letter, to the knowledge of the Company:
(a) The businesses operations and real property of Company and
its Subsidiaries are in material compliance with all applicable Laws, statutes,
ordinances, regulations, rules, decrees, judgments, orders, consent orders,
consent decrees and other binding requirements, and the common law, relating to
the regulation or protection of public health or the environment, the release or
threatened release of Hazardous Substances, natural resources or natural
resource damages, or occupational safety or health (together, "ENVIRONMENTAL
LAW"), and no Environmental Law could reasonably be expected to interfere in any
material respect with current or projected operations of Company or its
Subsidiaries.
(b) No material condition or circumstance exists, and neither
Company nor its Subsidiaries, nor any of their respective predecessors in
interest, has caused or taken any action in connection with the businesses,
operations or assets of Company or its Subsidiaries, that could reasonably be
expected to result in a material liability relating to (i) the past or current
use, handling, generation, transport, storage, disposal or treatment of any
reportable quantities of any material, substance, waste, constituent, compound,
pollutant, contaminant or chemical, or industrial, toxic or hazardous material
or waste regulated under or subject to Environmental Law and including, without
limitation, asbestos or asbestos-containing materials, polychlorinated
biphenyls, and petroleum, oil or petroleum or oil products, derivatives,
constituents or wastes (together, "HAZARDOUS SUBSTANCES") or (ii) the release or
threatened release of Hazardous Substances on, at, under or emanating from any
location.
(c) Neither Company nor any of its Subsidiaries has received any
written notice from any Governmental Authority or third party alleging or
concerning any material violation by Company or any of its Subsidiaries of, or
responsibility or liability of Company or any of its Subsidiaries under, any
Environmental Law which could reasonably be expected to
15
have a material liability. There are no pending or threatened, claims, suits,
actions, proceedings or investigations with respect to the businesses or
operations of Company or any of its Subsidiaries alleging or concerning any
material violation of or responsibility or liability under any Environmental Law
that, if adversely determined, could reasonably be expected to result in a
material liability.
(d) Company and its Subsidiaries are in possession of and in
material compliance with all material approvals, permits, licenses,
registrations and similar type authorizations from, all Governmental Authorities
under all Environmental Laws with respect to the operation of the businesses of
Company and its Subsidiaries.
(e) No employee of Company or any of its Subsidiaries or other
person has been exposed to or come into contact with Hazardous Substances used,
handled, generated, transported, disposed or otherwise released by Company or
its Subsidiaries at property owned or operated by Company or its Subsidiaries,
except as would not reasonably be expected to result in a material liability.
(f) The transaction contemplated under this Agreement will not
trigger any requirements relating to disclosure or notification, or to
investigation, remediation or other response action, under Environmental Law.
(g) Neither Company nor any of its Subsidiaries has or would
reasonably be expected to have any contingent material liability in connection
with the release of any Hazardous Substances (whether on-site or off-site).
(h) There is not on or in any property owned, operated or leased
by Company or its Subsidiaries any of the following that could reasonably be
expected to result in a material liability: (A) any underground storage tanks or
surface impoundments, containing Hazardous Substances; (B) any
asbestos-containing materials; or (C) any polychlorinated biphenyls.
(i) Company has made available to Parent copies of all
environmental investigations, studies, audits, tests, reviews and other analyses
(together, "REPORTS"), including soil and groundwater analysis, conducted by or
on behalf of, or that are in the possession, custody or control of Company or
any of its Subsidiaries, in relation to any site or facility owned, operated,
leased or used, at any time, by Company or any of its Subsidiaries or any of
their respective predecessors.
2.13 Compliance with Applicable Laws. Except as set forth in Section
2.13 of the Company Disclosure Letter, Company and each of its Subsidiaries hold
all material approvals, licenses, permits, registrations and similar type
authorizations necessary for the lawful conduct of their respective businesses
as now conducted, and such businesses are not being, and neither Company nor any
of its Subsidiaries has received any notice from any Person that any such
business has been or is being, conducted in violation of any Law which has not
been cured or settled, including the Xxxxxxxx-Xxxxx Act and any Law relating to
occupational health and safety, except for possible violations which either
individually or in the aggregate could not reasonably be expected to result in a
material liability; provided, however, notwithstanding the foregoing, no
representation or warranty in this Section 2.13 is made with respect to
16
Environmental Laws, which are covered exclusively by the provisions set forth in
Section 2.12, or labor matters, which are covered exclusively by the provisions
set forth in Section 2.15. For purposes of this Agreement, "LAW" shall mean any
United States federal, state, or local, or any quasi-governmental, statute, law,
rule, regulation, ordinance, code, order, judgment, decree or any other
requirement or rule of law.
2.14 Insurance. Company has made available to Parent a true, complete
and correct copy of each insurance policy or the binder therefor relating to
Company or its Subsidiaries that is currently in effect. As of the date of this
Agreement, each such policy is in full force and effect, and no premiums
currently due and payable thereon are delinquent. With respect to each insurance
policy or binder, neither the Company, nor any of its Subsidiaries nor any other
party to the policy is in material breach or default thereunder (including with
respect to the payment of premiums or the giving of notices), and Company does
not know of any occurrence or any event which (with notice or the lapse of time
or both) would constitute such a material breach or default or permit
termination, material modification or acceleration under any such policy. Except
as set forth in Section 2.14 of the Company Disclosure Letter, the Company has
not been advised of any defense to coverage or reservation of rights in
connection with any material claim to coverage asserted or noticed by the
Company under or in connection with any of its extant insurance policies.
2.15 Labor Matters; Employees. Except as set forth in Section 2.15 of
the Company Disclosure Letter, to the knowledge of the Company:
(a) No employees of Company or any of its Subsidiaries are
represented by any labor organization. No labor organization or group of
employees of Company or any of its Subsidiaries has made a demand for
recognition or certification as a union or other labor organization, and there
are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. There are no organizing activities involving
Company or any of its Subsidiaries pending with any labor organization or group
of employees of Company or any of its Subsidiaries.
(b) Each of Company and its Subsidiaries is in material
compliance with all laws, rules, regulations and orders relating to the
employment of labor, including all such laws, rules, regulations and orders
relating to wages, hours, collective bargaining, discrimination, civil rights,
safety and health, workers' compensation and the collection and payment of
withholding or social security taxes and similar taxes.
(c) There are no unfair labor practice charges, grievances or
complaints of a material nature, pending or threatened, in writing by or on
behalf of any employee or group of employees of the Company or any of its
Subsidiaries which individually or in the aggregate could reasonably be expected
to result in a material liability.
(d) There are no complaints, charges or claims against the
Company or any of its Subsidiaries pending or threatened in writing to be
brought or filed, with any Governmental Authority or arbitrator based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or any of its
Subsidiaries.
17
2.16 Permits. Immediately prior to the Effective Time and except for
Customary post-closing consents, Company and its Subsidiaries will hold all of
the material permits, licenses, certificates, consents, approvals, entitlements,
plans, surveys, relocation plans, environmental impact reports and other
authorizations of Governmental Authorities (collectively, "PERMITS") required or
necessary to construct, own, operate, use and/or maintain their respective
properties and conduct their operations as currently conducted; provided,
however, that notwithstanding the foregoing, no representation or warranty in
this Section 2.16 is made with respect to Permits issued pursuant to
Environmental Laws, which are covered exclusively by the provisions set forth in
Section 2.12.
2.17 Required Shareholder Vote or Consent. The only vote of the holders
of any class or series of Company's capital stock that will be necessary to
consummate the Merger and the other transactions contemplated by this Agreement
is the approval by the holders of a majority of the outstanding shares of
Company Common Stock, on the applicable record date (the "COMPANY SHAREHOLDERS'
APPROVAL").
2.18 Brokers. No broker, finder or investment banker (other than Credit
Suisse First Boston and US Bancorp Xxxxx Xxxxxxx, the fees and expenses of which
will be paid solely by Company) is entitled to any brokerage, finder's fee or
other fee or commission payable by Company or any of its Subsidiaries in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Company or any of its Subsidiaries.
2.19 Fairness Opinion. The Board has received a written opinion from
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx to the effect that, as of the date of such
opinion, the Merger Consideration to be received by the holders of outstanding
Company Common Stock pursuant to the Merger is fair, from a financial point of
view, to such holders. A signed, true and complete copy of such opinion has been
given to Parent and such opinion has not, as of the date hereof, been withdrawn
or modified.
2.20 Rights Agreement. The Company has taken all actions necessary to
render the rights (the "RIGHTS") issued pursuant to the terms of the rights
agreement adopted by the Company on October 29, 1999 (the "RIGHTS AGREEMENT")
inapplicable to the Merger, this Agreement and the other transactions
contemplated hereby.
2.21 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement in connection with the Merger and the transactions contemplated by
this Agreement will, at the time of mailing to the shareholders of the Company,
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading or, at the time of the Company Shareholders Meeting, if any, contain
an untrue statement of 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 false or
18
misleading or necessary to correct any statement in any earlier communication
with respect to any solicitation of proxies for the Company Shareholders Meeting
which shall have become false or misleading. The Proxy Statement will comply as
to form in all material respects with the requirements of the Exchange Act and
the Securities Act and the rules and regulations of the SEC thereunder.
2.22 Intangible Property.
(a) All software utilized by the Company and its Subsidiaries
that is not owned by the Company or any of its Subsidiaries (the "THIRD PARTY
SOFTWARE") is either (A) commercially available software or (B) software that
has been developed by the Company or such Subsidiaries for use by a customer of
such company and that is not otherwise utilized by the Company or any of its
Subsidiaries in its business. Each material trademark, trade name, patent,
service xxxx, brand xxxx, brand name, computer program, database, industrial
design and copyright owned, used or useful in connection with the operation of
the businesses of each of the Company and its Subsidiaries (collectively, the
"COMPANY INTANGIBLE PROPERTY") is owned by the Company or its Subsidiaries free
and clear of any and all liens, claims or encumbrances. The use of the Company
Intangible Property and the Third Party Software by the Company or its
Subsidiaries does not conflict with, infringe upon, violate or interfere with,
in any material respect, or constitute a material appropriation of any right,
title, interest or goodwill, including, without limitation, any intellectual
property right, trademark, trade name, patent, service xxxx, brand xxxx, brand
name, computer program, database, industrial design, copyright or any pending
application therefor of any other Person and there have been no claims made and
neither the Company nor any of its Subsidiaries has received notice of any claim
or otherwise knows that any of the Company Intangible Property is invalid or
conflicts with the asserted rights of any other Person or has not been used or
enforced or has failed to be used or enforced in a manner that would result in
the abandonment, cancellation or unenforceability of any of the Company
Intangible Property.
(b) Each of the Company and its Subsidiaries own or have a right
to use all Company Intangible Property and Third Party Software necessary for
the operation of its respective business and has not forfeited or otherwise
relinquished any Company Intangible Property or right to use Third Party
Software.
(c) Each of the material licenses or other contracts relating to
the Company Intangible Property and Third Party Software (collectively, the
"COMPANY INTANGIBLE PROPERTY LICENSES") is in full force and effect and is valid
and enforceable in accordance with its terms, and there is no material default
under any Company Tangible Property License either by the Company or any of its
Subsidiaries or, to the knowledge of the Company, by any other party thereto.
2.23 Affiliate Transactions. Except as disclosed in the Company SEC
Reports filed prior to the date of this Agreement, there are no material
contracts, commitments, agreements, arrangements or other transactions between
the Company or any of its Subsidiaries, on the one hand, and any (i) present or
former officer or director of the Company or any of its Subsidiaries or any of
their immediate family members (including their spouses), (ii) record or
beneficial owner of five percent or more of the voting securities of the Company
or (iii) Affiliate of any
19
such officer, director, family member, or beneficial owner, on the other hand.
For purposes of this Agreement, "AFFILIATE" shall have the same meaning as set
forth in Rule 12b-2 promulgated under the Exchange Act.
2.24 Personal Property, Real Property and Leases.
(a) The Company and its Subsidiaries have sufficient title to all
their tangible properties and assets to conduct their respective businesses as
currently conducted or as contemplated to be conducted. Each parcel of real
property owned or leased by the Company or any of its Subsidiaries is owned or
leased, free and clear of all Liens, other than (i) Liens for current taxes and
assessments not yet past due, (ii) mechanics' and materialmen's Liens for
construction in progress, (iii) workmen's, repairmen's, warehousemen's and
carriers' Liens, and (iv) all matters of record, Liens and other imperfections
of title.
(b) All leases, subleases or similar instruments relating to real
property to which the Company or any of its Subsidiaries is a party and all
amendments and modifications thereto are in full force and effect and have not
been further modified or amended, and there exists no material default under any
such lapse by the Company or any such Subsidiary, nor any event which with
notice or lapse of time or both would constitute a material default thereunder
by the Company or any such Subsidiary. The Company has made available to Parent
true and complete copies of all material leases, subleases or similar
instruments relating to real property to which the Company or any of its
Subsidiaries is a party.
2.25 Material Contracts. Set forth in Section 2.25 of the Company
Disclosure Letter is a list of (i) all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its Subsidiaries in an aggregate principal
amount in excess of $500,000 is outstanding or may be incurred, other than
pursuant to performance bonds, performance guarantees or letters of credit
securing performance granted in the ordinary course of business not exceeding an
aggregate principal amount of $500,000 indicating (A) with respect to any term
or fixed loans, the respective principal amounts outstanding thereunder as of
March 31, 2003 and (B) whether such indebtedness is prepayable and any
applicable prepayment or similar penalties, (ii) all agreements of the Company
or any of its Subsidiaries involving annual payments in excess of $3,000,000 or
aggregate payments in excess of $10,000,000, and (iii) contracts with the five
largest customers (measured by dollar purchase amount) of the Company and its
Subsidiaries in the United States for fiscal 2002. Since December 31, 2000, the
Company has filed as exhibits to its Company SEC Reports all agreements pursuant
to which the Company or its Subsidiaries has:
(a) acquired, or agreed to acquire, all or a substantial portion
of the assets of or equity interests in any corporation, partnership or other
entity (or any subsidiary, division, or business thereof);
(b) merged with or into, or agreed to merge with or into, any
other Person; or
(c) disposed of, or agreed to dispose of, any business or
Subsidiary or all or a substantial portion of the assets of any business or
Subsidiary; that it was required to file pursuant to the applicable rules and
regulations promulgated under the Exchange Act.
20
2.26 Pending and Proposed Transactions. Except as set forth in Section
2.26 of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries has entered into any agreement, whether oral or written, with
respect to, or is engaged in negotiations with respect to, the acquisition
(whether by purchase of assets or securities, or by merger or otherwise) or
disposition of all or a substantial portion of the business of any Subsidiary or
any business or division of the Company or any of its Subsidiaries.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to Company as follows:
3.1 Organization and Qualification.
(a) Each of Parent and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization, is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the properties
owned by it or the nature of its business makes such qualification necessary,
except in jurisdictions, if any, where the failure to be so qualified would not
result in a Parent Material Adverse Effect (as defined below). Each of Parent
and its Subsidiaries has all requisite corporate power and authority to own, use
or lease its properties and to carry on its business as it is now being
conducted. Each of Parent and its Subsidiaries has made available to Company a
complete and correct copy of its certificate of incorporation and bylaws (or
similar organizational documents), each as amended to date, and such copies as
so delivered are in full force and effect.
(b) For purposes of this Agreement, a "PARENT MATERIAL ADVERSE
EFFECT" shall mean any change, effect, event, occurrence or state of facts that
is materially adverse to the condition (financial or otherwise), business,
properties or results of operations of Parent and its Subsidiaries, taken as a
whole, or that could reasonably be expected to materially impair the ability of
Parent to perform its obligations under this Agreement or to consummate the
Merger; provided that none of the following, alone or in combination, shall
constitute a Parent Material Adverse Effect or be considered in determining
whether a Parent Material Adverse Effect has occurred or will occur: any change,
effect, event, occurrence, state of facts or development arising out of,
resulting from or relating to (x) the economy in general, (y) the commencement
or escalation of a war, material armed hostilities or other material
international or national calamity or act of terrorism directly or indirectly
involving the United States of America or (z) the transactions contemplated by
this Agreement or the announcement thereof.
3.2 Authority. Each of Parent and Merger Sub has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions
21
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the board of directors of Parent and the board of
directors and sole shareholder of Merger Sub, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been, or
upon execution will be, duly and validly executed and delivered by Parent and
Merger Sub and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto, constitute or upon execution will
constitute, valid and binding obligations of Parent and Merger Sub enforceable
against Parent and Merger Sub in accordance with their respective terms, except
for the Enforceability Exception.
3.3 Consents and Approvals; No Violation. The execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby and the
performance by Parent and Merger Sub of its obligations hereunder will not:
(a) conflict with any provision of the certificate of
incorporation or bylaws of Parent or Merger Sub or the certificates of
incorporation or bylaws (or other similar organizational documents) of any of
Parent's Subsidiaries;
(b) require any consent, waiver, approval, order, authorization
or permit of, or registration, filing with or notification to any Governmental
Authority, except for (i) applicable requirements of the HSR Act, (ii) the
filing of the Articles of Merger with the
Texas Secretary of State, (iii) such
consents, approvals, orders, authorizations and regulations, declarations and
filings as may be required under applicable state securities or blue sky laws,
and (iv) consents, approvals and registrations that, if not obtained or made,
would not be reasonably expected to have a Parent Material Adverse Effect;
(c) result in any violation of or the breach of or constitute a
default (with notice or lapse of time or both) under, or give rise to any right
of termination, cancellation or acceleration or guaranteed payments or a loss of
a material benefit under, any of the terms, conditions or provisions of any
note, lease, mortgage, license, agreement or other instrument or obligation to
which Parent or any of its Subsidiaries is a party or by which Parent or any of
its Subsidiaries or any of their respective properties or assets may be bound;
or
(d) violate the provisions of any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to Parent or any of its
Subsidiaries.
3.4 Required Shareholder Vote or Consent. No vote or consent of any
holders of Parent's capital stock is required to consummate the transactions
contemplated by this Agreement. Parent, as the sole shareholder of the Merger
Sub, has adopted the
Merger Agreement and consented to the Merger and this is
the only consent or vote by Merger Sub's shareholders necessary to approve the
Merger and the transactions contemplated by this Agreement.
3.5 Brokers. Other than providers of equity and debt financing which
may each receive fees contingent upon consummation of the Merger, no broker,
finder or investment banker is entitled to any brokerage, finder's fee or other
fee or commission payable by Parent or any of its Subsidiaries in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or any of its Subsidiaries.
22
3.6 Financing. Parent has on or prior to the date hereof entered into
one or more subscription agreements (the "SUBSCRIPTION AGREEMENTS") pursuant to
which the subscribers thereunder (the "EQUITY INVESTORS") have agreed, subject
to the terms and conditions contained in the Subscription Agreements, to provide
(together with the Financing set forth below) to Parent capital sufficient to
consummate the Merger and such amount shall not be less than an aggregate of
$192,400,000 (subject to adjustment as provided in the Subscription Agreement)
in cash for equity interests in Parent (the "EQUITY FUNDS"). Additionally,
Parent and Merger Sub have received and furnished to the Company true and
complete copies of (i) the senior secured credit facility and senior
subordinated facility commitment letter, dated May 12, 2003, among Canadian
Imperial Bank of Commerce, CIBC World Markets Corp., Bear, Xxxxxxx & Co. Inc.,
Parent and Merger Sub (the "COMMITMENT LETTER"") and (ii) the engagement letter,
dated May 12, 2003, among CIBC World Markets Corp., Bear, Xxxxxxx & Co. Inc.,
Parent and Merger Sub, relating to the financing (the "FINANCING") of the
Merger. The Commitment Letter is to the knowledge of Parent and Merger Sub in
full force and effect and, since its date, the Commitment Letter has not been
withdrawn, amended or terminated in any manner adverse to Parent. Parent and
Merger Sub have taken all corporate actions required to cause the Commitment
Letter to be effective.
3.7 Merger Sub Purpose. Merger Sub is a newly formed corporation,
specifically formed to consummate the Merger and the transactions contemplated
hereunder and has not operated or functioned for any other purpose.
3.8 Information Supplied. None of the information supplied or to be
supplied by the Parent or Merger Sub for inclusion or incorporation by reference
in the Proxy Statement in connection with the Merger and the transactions
contemplated by this Agreement will, at the time of mailing to the shareholders
of the Company, contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading or, at the time of the Company Shareholders Meeting, if any,
contain an untrue statement of 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 false or
misleading or necessary to correct any statement in any earlier communication
with respect to any solicitation of proxies for the Company Shareholders Meeting
which shall have become false or misleading.
3.9 Lack of Ownership of Company Common Stock. As of the date hereof,
Parent, its Subsidiaries and, to the knowledge of the Parent, its Affiliates, do
not own any shares of Company Common Stock or other securities convertible into
Shares.
23
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business. From the date hereof until the Effective Time,
unless Parent shall otherwise agree in writing, or except as set forth in
Section 4.1 of the Company Disclosure Letter or as otherwise contemplated by
this Agreement, Company shall conduct, and shall cause each of its Subsidiaries
to conduct, its business in the ordinary course consistent with past practice
and shall use, and shall cause each of its Subsidiaries to use, all reasonable
efforts to (i) preserve intact their business organizations and relationships
with third parties, (ii) keep available the services of its present officers and
key employees and (iii) preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect at the Effective Time,
subject to the terms of this Agreement. Except as set forth in Section 4.1 of
the Company Disclosure Letter or as otherwise provided in this Agreement, and
without limiting the generality of the foregoing, from the date hereof until the
Effective Time, without the written consent of Parent, which consent shall not
be unreasonably withheld:
(a) Neither Company nor its Subsidiaries will adopt changes to
its certificate of incorporation or bylaws, or amend its Rights Agreement or
redeem the Rights issued thereunder (or similar organizational documents);
(b) Company will not and will not permit any of its Subsidiaries
to (i) declare, set aside or pay any dividend or other distribution with respect
to any shares of capital stock of Company or its Subsidiaries (except for
intercompany dividends from direct or indirect wholly owned subsidiaries and
except as required under the 10% Preferred Designation, which provides for
payment of dividends in the form of either (A) additional Company Preferred
Stock and Warrants or (B) cash), (ii) 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
(iii) redeem purchase or otherwise acquire or propose to redeem, purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements in effect on the date hereof, providing for the repurchase of shares
in connection with any termination of service to such party or amend the terms
of any such agreement as in effect on the date hereof;
(c) Except as set forth in Section 4.1(c) of the Company
Disclosure Letter, Company will not, and will not permit any of its Subsidiaries
to, merge or consolidate with any other Person or acquire assets of, or an
equity interest in, any other Person for aggregate consideration in excess of
$1,000,000 or enter a new line of business or commence business outside of its
existing areas of operation;
(d) Except as set forth in Section 4.1(d) of the Company
Disclosure Letter, Company will not, and will not permit any of its Subsidiaries
to, sell, lease, license or otherwise voluntarily surrender, relinquish or
dispose of any assets or properties (other than among Company and its direct and
indirect wholly owned Subsidiaries) with an aggregate fair market value
exceeding $1,000,000;
24
(e) Company will not settle any material Audit, make, change or
revoke any material Tax election or file any material amended Tax Return;
(f) Except as otherwise permitted by this Agreement, Company will
not and will not permit any of its Subsidiaries to (i) issue any securities
(whether through the issuance or granting of options, warrants, rights or
otherwise), except (A) pursuant to existing obligations disclosed in the Company
SEC Reports or the Company Disclosure Letter (including the exercise of Warrants
and Company Options) or (B) as required under the 10% Preferred Designation
which provides for payment of dividends in the form of either (x) additional
Company Preferred Stock and Warrants or (y) cash, (ii) pledge or encumber any
security of the Company or any of its Subsidiaries, (iii) amend or reprice any
Company Options or Warrants or (iv) enter into any amendment of any term of any
outstanding security of Company or of any of its Subsidiaries;
(g) Company will not change any method of financial or Tax
accounting or accounting practice by Company or any of its Subsidiaries, except
for any such change required by GAAP;
(h) Except in the ordinary course of business, which shall
include, but not be limited to, cash sweeps and ordinary re-borrowings pursuant
to a credit facility, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of liabilities
reflected or reserved against, in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company and its subsidiaries;
(i) The Company shall not authorize, recommend, propose, adopt or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of the Company or any of its Subsidiaries;
(j) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) assume or incur any indebtedness for borrowed money (other
than pursuant to credit facilities existing on the date hereof in accordance
with their present terms) or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any debt securities of the
Company or any of its Subsidiaries or guarantee any debt securities of others or
enter into any lease (whether such lease is an operating or capital lease) or
create any mortgages, liens, security interests or other encumbrances on the
assets or property of the Company or any of its Subsidiaries in connection with
any indebtedness thereof (other than security interests arising pursuant to
mortgages or other security agreements in effect on the date hereof covering
credit facilities existing on the date hereof), or enter into any "keep well" or
other agreement or arrangement to maintain the financial condition of another
Person, or (ii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to the Company or any direct or
indirect wholly owned Subsidiary of the Company and other than loans or advances
to customers and employees in the ordinary course of business consistent with
past practice;
(k) The Company shall not make or authorize nor shall the Company
permit any of its Subsidiaries to make or authorize any capital expenditure in
excess of $200,000 individually or $1 million in the aggregate other than
capital expenditures set forth in Section 4.1(k) of the Company Disclosure
Letter;
25
(l) Neither Company nor any of its Subsidiaries shall (i) adopt,
amend (other than amendments that reduce the amounts payable by Company or any
Subsidiary, or amendments required by law) or assume an obligation to contribute
to any employee benefit plan or arrangement of any type or collective bargaining
agreement or enter into any employment, severance or similar contract with any
Person (including contracts with management of Company or any Subsidiaries that
might require that payments be made upon consummation of the transactions
contemplated hereby) or amend any such existing contracts to increase any
amounts payable thereunder or benefits provided thereunder, (ii) engage in any
transaction (either acting alone or in conjunction with any Company Benefit Plan
or trust created thereunder) in connection with which Company or any Subsidiary
could be subjected (directly or indirectly) to either a civil penalty assessed
pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code, (iii) terminate any Company
Benefit Plan in a manner, or take any other action with respect to any Company
Benefit Plan, that could result in the liability of Company or any Subsidiary to
any Person, (iv) take any action that could adversely affect the qualification
of any Company Benefit Plan or its compliance with the applicable requirements
of ERISA, (v) fail to make full payment when due of all amounts which, under the
provisions of any Company Benefit Plan, any agreement relating thereto or
applicable law, Company or any Subsidiary are required to pay as contributions
thereto or (vi) fail to file, on a timely basis, all reports and forms required
by federal regulations with respect to any Company Benefit Plan;
(m) Company will not, and will not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing;
(n) Except as provided by this Agreement, the Company will not
and will cause its Subsidiaries not to take or agree or commit to take any
action that is reasonably likely to result in any of the conditions to the
Merger not being satisfied; and
(o) The Company shall not, and shall not permit any of its
Subsidiaries to, enter into, modify, rescind, terminate, waive, release or
otherwise amend in any material respect any of the terms or provisions of any
contract, agreement, commitment, arrangement or right listed in Section 2.25 of
the Company Disclosure Letter or which, if such contract, agreement, arrangement
or right had existed as of the date of this Agreement, would have been required
to be listed on Section 2.25 of the Company Disclosure Letter; provided,
however, that the foregoing shall not limit the right of the Company or any of
its Subsidiaries to enter into any (i) customer, distributor, vendor and
supplier contracts in the ordinary course of business consistent with past
practice or (ii) contracts involving annual payments of not more than $250,000
individually or $1,000,000 in the aggregate.
26
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access and Information. The Company will allow and will cause each
of its Subsidiaries to allow Parent and Merger Sub and their financial advisors,
legal counsel, accountants, consultants, financing sources, and other authorized
representatives access during normal business hours throughout the period prior
to the Effective Time to all of its books, records, properties, contracts,
leases, plants and personnel and, during such period, each shall furnish
promptly to the other (a) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal or state
securities laws and pursuant to this Agreement, and (b) all other information as
such other party reasonably may request, provided that no investigation pursuant
to this Section 5.1 shall affect any representations or warranties made herein
or the conditions to the obligations of the respective parties to consummate the
Merger. Company shall have the right to have representatives present at all
times of any such inspections, interviews and communications conducted by Parent
or Merger Sub. Each party shall hold in confidence all nonpublic information
until such time as such information is otherwise publicly available and, if this
Agreement is terminated, each party will deliver to the other all documents,
work papers and other materials (including copies) obtained by such party or on
its behalf from the other party as a result of this Agreement or in connection
herewith, whether so obtained before or after the execution hereof.
Notwithstanding the foregoing, the Confidentiality Agreement shall survive the
execution and delivery of this Agreement. Notwithstanding the foregoing, the
Company shall not be obligated to provide access to nonpublic information if
doing so would result in the Company being deprived of its attorney-client
privilege.
The Company shall confer with Parent to the extent reasonably requested
by Parent, report on operational and financial matters and promptly advise
Parent orally and in writing of any change or event having, or which, insofar as
reasonably can be foreseen, could have, a Company Material Adverse Effect.
The Company shall promptly notify Parent and the Parent shall promptly
notify Company of:
(i) any notice or other communications from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened
against, relating to or involving or otherwise affecting the Company or
Parent or any of their respective Subsidiaries which, if pending on the
date of this Agreement, would have been required to have been disclosed
pursuant to this Agreement or which relate to the consummation of the
transactions contemplated by this Agreement.
27
5.2 No Solicitation of Transactions.
(a) Company agrees that (i) it and its officers, directors and
employees shall not, (ii) Company Subsidiaries and Company Subsidiaries'
officers, directors and employees shall not and (iii) it shall not authorize or
permit its and its Subsidiaries' agents and representatives to, (A) directly or
indirectly, initiate, solicit, participate in, or knowingly encourage or
facilitate any inquiries relating to or the making of any Acquisition Proposal
or (B) directly or indirectly, continue, enter into or engage in any
negotiations or discussions concerning any Acquisition Proposal with, or furnish
any information relating to Company or any Company Subsidiary or provide access
to the properties, books and records or any confidential information or data of
Company or any Company Subsidiary to, any Person relating to an Acquisition
Proposal. Notwithstanding the foregoing, nothing contained in this Agreement
shall prevent Company, the Board or any special committee of the Board that may
be formed (a "SPECIAL COMMITTEE") from, (i) taking and disclosing to its
shareholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated
under the Exchange Act, (ii) prior to the Company Shareholders' Approval being
obtained, providing access to properties, books and records and providing
information or data in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal if the Board or Special
Committee receives from the Person so requesting such information an executed
confidentiality agreement on terms substantially similar to those contained in
the Confidentiality Agreement (except for such changes specifically necessary in
order for Company to be able to comply with its obligations under this
Agreement) (provided that all such written information is also provided on a
prior or substantially concurrent basis to Parent), or (iii) prior to the
Company Shareholders' Approval being obtained, engaging in any negotiations or
discussions with any Person who has made an unsolicited bona fide written
Acquisition Proposal (including Persons with whom the Company has negotiated
with prior to the execution and delivery of this Agreement), if and only to the
extent that, in connection with the foregoing clauses (ii) and (iii), (A) the
Board or Special Committee (after consultation with its independent legal
counsel) determines in good faith that such action is necessary for the Board or
Special Committee to comply with its fiduciary duties to Company's Shareholders
under applicable law, (B) such Acquisition Proposal is not subject to any
financing contingencies or is, in the good faith judgment of the Board or
Special Committee (after consultation with its financial advisor), reasonably
capable of being financed by such other Person, and (C) the Board or Special
Committee determines in good faith after consultation with its independent legal
counsel and financial advisor (taking into account among other things the legal,
financial, regulatory and other aspects of the proposal, the Person making the
proposal, the likelihood of consummation and the time to complete such
transaction) that such Acquisition Proposal is reasonably capable of being
completed and, if consummated, would reasonably be expected to result in a
transaction more favorable to Company's Shareholders than the transaction
contemplated by this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as an "SUPERIOR PROPOSAL").
(b) Neither the Board nor any Special Committee thereof shall (i)
withdraw (or modify in a manner adverse to Parent) or propose publicly to
withdraw (or modify in a manner adverse to Parent) the recommendation or
declaration of advisability by the Board or any
28
such Special Committee of this Agreement or the Merger, or recommend, or propose
publicly to recommend, the approval or adoption of any Acquisition Proposal
(other than an Acquisition Proposal made by Parent), (ii) adopt or approve, or
propose publicly to adopt or approve, any Acquisition Proposal (other than an
Acquisition Proposal made by Parent), (iii) cause or permit Company to enter
into any letter of intent, memorandum of understanding, agreement in principle,
acquisition agreement,
merger agreement, option agreement, joint venture
agreement, partnership agreement or similar agreement which relates to or is
reasonably likely to lead to, any Acquisition Proposal (other than a
confidentiality agreement referred to in Section 5.2 (a)) or (iv) agree or
resolve to take any of the actions prohibited by clauses (i), (ii) or (iii) of
this sentence, unless the Board or Special Committee, after consultation with
its independent legal counsel, determines that such action is necessary for such
Board or Special Committee to comply with its fiduciary duty under applicable
Law. Notwithstanding anything in this Section 5.2 to the contrary, if, at any
time prior to Company Shareholders' Approval being obtained, the Board or
Special Committee determines in good faith, after consultation with its
financial advisors and independent legal counsel, in response to an Acquisition
Proposal that was unsolicited and that did not otherwise result from a breach of
Section 5.2, that such proposal is a Superior Proposal, Company or the Board or
Special Committee may terminate this Agreement pursuant to Section 8.1 (f)
provided, however, that the Company shall not terminate this Agreement or enter
into an agreement with respect to a Superior Proposal unless, in addition, the
Company (1) has provided Parent written notice that it intends to terminate this
Agreement, (2) within a period of two business days following the delivery of
the written notice referred to in this clause (1) above, if Parent proposes
adjustments in the terms and conditions of this Agreement, but the Board or
Special Committee determines, in its good faith judgment (after receiving the
advice of its financial advisor and after considering such proposed adjustments
and negotiations relating thereto), that the Agreement, as so proposed to be
adjusted, is not as favorable to the Company's shareholders as such Superior
Proposal and (3) at least two business days after the Company has provided the
written notice referred to in this clause (1) above, the Company delivers to
Parent a written notice of termination of this Agreement pursuant to this
Section 5.2 and Section 8.1.
(c) The Company shall notify Parent in writing of any Acquisition
Proposals (including the principal terms and conditions of any such proposal and
the identity of the person making it) within two business days of the receipt
thereof.
For purposes of this Agreement, "ACQUISITION PROPOSAL" means any
proposal or offer with respect to (i) any tender offer or exchange offer, (ii)
any merger, consolidation, share exchange, business combination, sale of
substantially all of the assets, reorganization, recapitalization, liquidation,
dissolution or other similar transaction involving Company or of any Company
Subsidiary or Company Subsidiaries whose assets, individually or in the
aggregate, constitute more than 50% of the consolidated assets or earning power
of Company, (iii) any acquisition or purchase, direct or indirect, of more than
50% of the consolidated assets of the Company, or (iv) any acquisition or
purchase, direct or indirect, that, if consummated, would result in any Person
beneficially owning securities constituting more than 50% of any class or series
of common stock of Company or of any Company Subsidiary or Company Subsidiaries
whose assets, individually or in the aggregate, constitute more than 50% of the
consolidated assets or earning power of Company (other than the transactions
contemplated by this Agreement).
29
5.3 Directors' and Officers' Indemnification and Insurance.
(a) For six (6) years after the Effective Time, Surviving
Corporation shall indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of Company or its Subsidiaries or an
employee of Company or any of its Subsidiaries who acts as a fiduciary under any
of the Company Benefit Plans (each an "INDEMNIFIED PARTY") against all losses,
claims, damages, liabilities, fees and expenses (including fees and
disbursements of counsel and experts and judgments, fines, losses, claims,
liabilities and amounts paid in settlement (provided that any such settlement is
effected with the prior written consent of Surviving Corporation, which will not
be unreasonably withheld)) arising in whole or in part out of actions or
omissions in their capacity as such occurring at or prior to the Effective Time
to the fullest extent permitted under
Texas law or the Surviving Corporation's
certificate of incorporation and bylaws and Company's written indemnification
agreements in effect on the date hereof, including provisions therein relating
to the advancement of expenses incurred in the defense of any action or suit;
provided, that if any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until disposition of any and all such claims; and provided,
further, that any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under
Texas
law, Surviving Corporation's certificate of incorporation or bylaws or such
agreements, as the case may be, shall be made by independent counsel mutually
acceptable to Surviving Corporation and the Indemnified Party; and provided,
further, that nothing herein shall impair any rights or obligations of any
Indemnified Party. If any claim or claims are brought against any Indemnified
Party (whether arising before or after the Effective Time), such Indemnified
Party may select counsel for the defense of such claim, which counsel shall be
reasonably acceptable to Company (if selected prior to the Effective Time) and
Parent (if selected after the Effective Time). Prior to the Effective Time,
Company shall have the right, subject to the consent of Parent, such consent not
to be unreasonably withheld, to approve and purchase such insurance policy(ies)
as may be necessary to insure the protection of the Indemnified Parties as
described herein.
(b) For a period of six years after the Effective Time, the
Surviving Corporation shall provide and maintain officers and directors'
liability insurance and fiduciary liability insurance for acts or omissions
occurring prior to the Effective Time ("D&O INSURANCE") covering the persons
described in Section 5.3(a) (whether or not they are entitled to indemnification
thereunder) who are currently covered by the Company's existing officers' and
directors' or fiduciary liability insurance policies on terms (particularly as
to coverage and amount) no less advantageous in the aggregate to such
indemnified parties than such existing insurance (a copy of which has been made
available to Parent and Merger Sub; provided, that the Surviving Corporation
will not be required to pay an annual premium therefor in excess of 200% of the
annual premium being paid as of the date hereof, which the Company represents
and warrants to be $262,000 (the "CURRENT PREMIUM"): and if the provision and
maintenance of D&O Insurance in accordance with this Section 5.3(b) exceeds 200%
of the Current Premium, the Surviving Corporation shall provide the greatest
amount of substantially equivalent D&O Insurance obtainable for 200% of the
Current Premium. In the event that any action, suit, proceeding or investigation
relating to the transactions contemplated hereby is commenced, whether before or
after the Effective Time, the parties hereto agree to cooperate in good faith
and use their reasonable best efforts to defend vigorously against and respond
thereto.
30
(c) This Section 5.3, which shall survive any termination of this
Agreement pursuant to Section 8.2(a) and the consummation of the Merger at the
Effective Time and shall continue without limit, is intended to benefit the
Company and any person or entity indemnified hereunder each of whom may enforce
the provisions of this Section 5.3 (whether or not parties to this Agreement)
and shall not be amended on or after the Effective Time without the consent of
all Indemnified Parties. The rights of this Section 5.3 shall be in addition to
any rights such Persons may have under the Company's Articles of Incorporation
or Bylaws or the articles or certificate of incorporation or bylaws of any
Company Subsidiary, or under
Texas Law or any other applicable laws or under any
agreement of any Indemnified Party with the Company or any Company Subsidiary.
(d) In the event the Parent or Company or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company assume
the obligations set forth in this Section 5.3.
5.4 Further Assurances. Each party hereto agrees to use all reasonable
efforts to obtain all consents and approvals and to do all other things
necessary for the consummation of the transactions contemplated by this
Agreement. The parties agree to take such further action to deliver or cause to
be delivered to each other at the Closing and at such other times thereafter as
shall be reasonably agreed by such additional agreements or instruments as any
of them may reasonably request for the purpose of carrying out the purpose of
this Agreement and the transactions contemplated hereby. After the Effective
Time, the parties shall afford each other access to all information, documents,
records and personnel who may be necessary for any party to comply with laws or
regulations (including the filing and payment of Taxes and handling Tax Audits),
to fulfill its obligations with respect to indemnification hereunder or to
defend itself against suits or claims of others. Parent and Company shall duly
preserve all files, records or any similar items of Parent or Company received
or obtained as a result of the Merger with the same care and for the same period
of time as it would preserve its own similar assets.
5.5 Publicity. Neither Company, Parent nor any of their respective
Affiliates, agents or representatives shall issue or cause the publication of
any press release or other announcement with respect to the Merger, this
Agreement or the other transactions contemplated hereby, without the prior
consultation of the other party, except as may be required by law or by any
listing agreement with a national securities exchange and will use reasonable
efforts to provide copies of such release or other announcement to the other
party hereto, and give due consideration to such comments as such other party
may have, prior to such release.
5.6 Additional Actions. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws and regulations, or
to remove any injunctions or other impediments or delays, to consummate
31
and make effective the Merger and the other transactions contemplated by this
Agreement, subject, however, to the appropriate vote of the Company
Shareholders. In connection with, and without limiting, the foregoing, the
Company shall (a) use its reasonable best efforts to ensure that no state
anti-takeover statute or similar statute or regulation is or becomes operative
with respect to this Agreement, the Merger or any other transactions
contemplated by this Agreement, (b) if any state anti-takeover statute or
similar statute or regulation is or becomes operative with respect to this
Agreement, the Merger or any other transaction contemplated by this Agreement or
use its reasonable best efforts to ensure that this Agreement, the Merger and
any other transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Merger and
the other transactions contemplated by this Agreement, and (c) use commercially
reasonable efforts (x) to cooperate with the Parent in connection with the
Financing, and (y) to obtain accountants' consents to the use of its auditor's
opinion on the Company financial statements in all transactions contemplated in
connection with the Financing as if such transactions were covered by a
registration statement filed with and declared effective by the SEC, and to
provide underwriters and initial purchasers with customary comfort letters in
connection with the Financing.
5.7 Filings. Each of the parties hereto promptly shall make their
respective filings and submissions and shall use its reasonable best efforts to
take all actions necessary, proper or advisable under applicable Laws and
regulations to obtain any required approval of any Governmental Authority with
jurisdiction over the transactions contemplated by this Agreement. Each of the
parties hereto shall furnish all information required for any application or
other filing to be made pursuant to the rules and regulations of any applicable
Law in connection with the transactions contemplated by this Agreement. In
connection with, and without limiting, the foregoing, each of the parties will
file (and each of the parties will cause their Affiliates to file, if necessary)
any Notification and Report Forms and related materials that may be required to
be filed with the Federal Trade Commission and the Antitrust Division of the
United States Justice Department under the HSR Act (and will use their
respective reasonable best efforts to obtain (and will cause their respective
Affiliates to use their reasonable best efforts to obtain, if necessary) an
early termination of the applicable waiting period, and will make (and will
cause their respective Affiliates to make, if necessary) any further filings
pursuant thereto that may be necessary, proper or advisable in connection
therewith.
5.8 Employee Matters; Benefit Plans. Parent will evaluate its personnel
needs and consider continuing the employment of certain employees of Company and
its Subsidiaries on a case-by-case basis. After the Effective Time, Parent will
cause to be provided to any employees of Company and its Subsidiaries who are
employed by the Company or its Subsidiaries as of the Effective Time (the
"RETAINED EMPLOYEES") base salary or wages and employee benefit plans or
arrangements which are comparable in the aggregate to those provided to such
employees prior to the Effective Time, subject to such changes as shall be
determined by Parent after the Effective Time. With respect to any employee
benefit plan maintained for Retained Employees (a "REPLACEMENT PLAN") that is a
group health plan (A) such plan shall credit such Retained Employees, for the
year during which participation in the Replacement Plan begins, with any
deductibles already incurred during such year under the terminated or
discontinued group health plan and (B) waive any preexisting condition
limitations applicable to the Retained Employees (and their eligible dependents)
under the Replacement Plan to the extent that a Retained
32
Employee's (or dependent's) condition would not have operated as a preexisting
condition under the terminated or discontinued group health plan. Parent shall
(A) cause each Replacement Plan that is an employee pension benefit plan (as
such term is defined in Section 3(2) of ERISA) intended to be qualified under
Section 401 of the Code to provide that the Retained Employees shall receive
credit for participation and vesting purposes under such plan for their period
of employment with Company, its Subsidiaries and their predecessors to the
extent such predecessor employment was recognized by Company and its
Subsidiaries and (B) credit the Retained Employees under each other Replacement
Plan that is not described in the preceding clause for their period of
employment with Company, its Subsidiaries and their predecessors to the extent
such predecessor employment was recognized by Company or its Subsidiaries for
purposes of vesting or participation (but not for benefit accrual purposes).
5.9 Shareholders Meetings. In order to consummate the Merger, the
Company shall, for the purpose of obtaining the approval of the Merger and this
Agreement, as promptly as practicable following the execution of this Agreement
(i) take all steps reasonably necessary to call, give notice of and hold either
an annual or special meeting for the Shareholders (the "COMPANY SHAREHOLDER
MEETING") for the purpose of securing the Company Shareholders' Approval, (ii)
distribute to its Shareholders the proxy statement (the "PROXY STATEMENT")
related thereto in accordance with applicable federal and state law and with its
articles of incorporation and bylaws, (iii) use all reasonable efforts to
solicit from its Shareholders proxies in favor of the approval and adoption of
this Agreement and the transactions contemplated hereby and to secure the
Company Shareholders' Approval, and (iv) cooperate and consult with Parent with
respect to each of the foregoing matters; provided, that nothing contained in
this Section 5.9 shall prohibit the Board from failing to make or from
withdrawing or modifying its recommendation to Company Shareholders hereunder if
the Board, after consultation with independent legal counsel, determines in good
faith that such action is necessary for such Board to comply with its fiduciary
duties to Company Shareholders under applicable Law.
5.10 Preparation of the Proxy Statement. As promptly as practicable
after the execution of this Agreement, Company shall prepare and file with the
SEC a preliminary version of the Proxy Statement and will use all reasonable
efforts to respond to the comments of the SEC in connection therewith. Parent
and Company shall furnish to each other all information required to prepare the
definitive Proxy Statement. Company shall cause the Proxy Statement to be mailed
to the Company Shareholders, and if necessary, after the definitive Proxy
Statement shall have been mailed, promptly circulate amended, supplemented or
supplemental proxy materials and, if required in connection therewith,
re-solicit proxies or written consents, as applicable. Company shall advise
Parent, promptly after it receives notice thereof, of any request by the SEC for
amendment of the Proxy Statement or comments thereon and responses thereto or
requests by the SEC for additional information.
5.11 Expenses. Except as provided in Section 8.2, all Expenses (as
defined below) incurred by the parties hereto shall be borne solely and entirely
by the party that has incurred such Expenses; provided that all Expenses
(including any fees and expenses of accountants, experts, and consultants, but
excluding the fees and expenses of legal counsel and investment bankers) related
to preparing, printing, filing and mailing the Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the Proxy Statement,
shall be borne solely and entirely by Company. "EXPENSES" as used in this
Agreement shall include all
33
reasonable out-of-pocket costs, fees and expenses (including, without
limitation, all reasonable fees and expenses of counsel, accountants, investment
bankers, financial advisors, experts and consultants to a party hereto and its
Affiliates) incurred by a party or on its behalf in connection with, arising out
of or related to this Agreement, the Merger or the consummation of all of the
transactions contemplated hereby (including, without limitation, the
preparation, printing, filing and mailing of the Proxy Statement, the
solicitation of shareholder approvals and requisite HSR filings).
5.12 Preferred Stock Redemption. At the Effective Time, Company shall
redeem all outstanding Company Preferred Stock in accordance with the terms and
conditions set forth in the 10% Preferred Designation, except for shares of
Company Preferred Stock that the Company otherwise has the right to purchase
from the holder thereof pursuant to the terms of a stock purchase agreement, and
shall retire and cancel all shares of Company Preferred Stock so redeemed or
otherwise purchased.
5.13 Matters Relating to the Commitment Letters.
(a) Parent and Merger Sub shall be primarily responsible for any
negotiations with respect to any definitive agreements regarding the financing
(the "DEFINITIVE FINANCING AGREEMENTS"); provided, however, that (i) the Company
shall have received prior notice of and shall be kept reasonably informed of the
ongoing status and details of, any such negotiations, (ii) the Company shall
take all such actions as are reasonably requested by Parent or Merger Sub, in
connection with any such negotiations, and (iii) Parent and Merger Sub shall
conduct any such negotiations reasonably and in good faith. Parent and Merger
Sub shall use their commercially reasonable efforts to close the financing on
terms consistent with those set forth in the Commitment Letter.
(b) Following receipt by either the Company or any of its
Affiliates, on the one hand, or Parent or any of its Affiliates, on the other
hand, of any written or oral communications to the effect that any financing
source under any of the Commitment Letters is contemplating not providing the
financing or is terminating or canceling or modifying in any material respect
the Commitment Letter, or that the financing is unlikely to be obtained, the
Company or Parent, as the case may be, shall communicate within two days such
event to the other party and provide such other party with a true and complete
copy of any of such written communication.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions Precedent to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of each condition precedent listed below, unless waived in writing
by the Parent and Merger Sub:
(a) Each of the representations and warranties of Company shall
be accurate and complete as of the Effective Time, as though made on and as of
the Effective Time, without giving effect to any materiality qualifications or
qualifications of similar import and without
34
giving effect to any supplements to the Company Disclosure Letter, except where
any inaccuracy or incompleteness of such representation or warranty,
individually or in the aggregate, would not result in a Company Material Adverse
Effect;
(b) Since the date of this Agreement, there shall not have
occurred any change, condition, event or development that, individually or in
the aggregate, has resulted in, or would reasonably be expected to result in, a
Company Material Adverse Effect;
(c) The Company must have performed and complied with all of its
covenants to be performed or complied with at or prior to the Effective Time
(singularly and in the aggregate) in all material respects;
(d) This Agreement and the Merger shall have been approved and
adopted by the requisite vote of the Company Shareholders, if and to the extent
required by the TBCA, the Company's articles of incorporation or the Company
bylaws;
(e) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect; provided, however, neither Parent nor Merger Sub may invoke this
condition unless both Parent and Merger Sub complied in all material respects
with their obligations under Section 5.6 and Section 5.7;
(f) The Company, Parent and Merger Sub shall have received all
consents, waivers, approvals, orders, authorizations or permits of Governmental
Authorities necessary to consummate the Merger, including, without limitation,
the HSR Act;
(g) holders of not more than 7.5% of the outstanding shares of
Company Common Stock shall not have perfected such holders' right to dissent in
accordance with the provisions of the TBCA or shall have withdrawn or lost such
rights;
(h) Parent and Merger Sub have received or have available the
proceeds of the Financing contemplated by the Commitment Letter or other
financing which is on terms substantially similar to or better than those set
forth in the Commitment Letter, including but not limited to funds sufficient,
in conjunction with the Equity Funds, to (i) purchase and pay the Common Stock
Merger Consideration; (ii) pay all fees and expenses in connection with the
Merger and the transactions contemplated hereby; (iii) redeem the Notes in
accordance with their terms; (iv) repay the outstanding principal amount and
accrued interest under the Second Amended and Restated Credit Agreement dated
December 27, 2001 of the Company and (v) repay the liquidation preference and
accrued dividends under the Company Preferred Stock;
(i) none of Xxxxxxx X. Brick, Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx
or Xxx X. Key (the "SENIOR MANAGERS") shall have failed to meet their funding
obligations for any reason under their Subscription Agreement, except in the
event that one and only one of the Senior Managers fail to meet their funding
obligations by reason of (i) their death or disability, (ii) a judicially
imposed prohibition or restraint, or (iii) an event caused by a willful or
intentional act by or on behalf of any Subscriber under the Subscription
Agreements other than the Senior Managers;
35
(j) the vesting of all options and any other awards under the
Company Equity Plans shall have been accelerated and all such options and awards
shall have either been cancelled or shall otherwise be exercisable only for the
Option Consideration and each of the Company Equity Plans shall have been
terminated pursuant to its terms prior to the Effective Time; and
(k) All obligations and liabilities of the Company under the
Second Amended and Restated Credit Agreement dated as of December 27, 2001
(other than unasserted indemnification claims) shall have been fully satisfied
and released.
6.2 Conditions Precedent to Obligations of the Company. The Company's
obligation to effect the Merger are subject to the satisfaction of each
condition precedent listed below, unless waived in writing by the Company:
(a) Each of the representations and warranties of Parent and
Merger Sub shall be accurate and complete as of the Effective Time, as though
made on and as of the Effective Time, without giving effect to any materiality
qualifications or qualifications of similar import, except where any inaccuracy
or incompleteness of such representation or warranty, individually or in the
aggregate, would not result in a Parent Material Adverse Effect;
(b) Parent and Merger Sub must have performed and complied with
all their covenants and obligations required by this Agreement to be performed
or complied with at or prior to the Effective Time (singularly and in the
aggregate) in all material respects;
(c) This Agreement and the Merger shall have been approved and
adopted by the requisite vote of the Company Shareholders, if and to the extent
required by the TBCA, the Company's articles of incorporation or the Company
bylaws;
(d) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect, provided, however, Company may not invoke this condition unless
Company has complied in all material respects with its obligations under Section
5.6 and Section 5.7;
(e) The Company, Parent and Merger Sub shall have received all
consents, waivers, approvals, orders, authorizations or permits of Governmental
Authorities necessary to consummate the Merger, including, without limitation,
the HSR Act; and
(f) All obligations and liabilities of the Company under the
Second Amended and Restated Credit Agreement dated as of December 27, 2001
(other than unasserted indemnification claims) shall have been fully satisfied
and released.
ARTICLE VII
SURVIVAL
7.1 Survival of Representations and Warranties. The representations and
warranties of the parties contained in this Agreement shall terminate at the
Effective Time.
36
7.2 Survival of Covenants and Agreements. The covenants and agreements
of the parties to be performed after the Effective Time contained in this
Agreement shall survive the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by the Company
Shareholders, only:
(a) By mutual written consent of duly authorized representatives
of Parent, Merger Sub and the Company;
(b) By any of Parent, Merger Sub or the Company if any court of
competent jurisdiction or other Governmental Authority shall have issued an
order, decree, ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and non-appealable; provided, however, that
the party terminating this Agreement pursuant to this Section 8.1(b) has
complied in all material respects with its obligations under Section 5.6 and
Section 5.7.
(c) By Parent or Merger Sub, if Board or Special Committee shall
have withdrawn or shall have modified in a manner adverse to Parent or Merger
Sub, its approval or recommendation of the Merger or this Agreement pursuant to
subpart (i) of the first sentence of Section 5.2(b);
(d) By Parent or Merger Sub, if the Company shall have breached
any of its representations, warranties, covenants or other obligations if, and
only if, such breach would give rise to any of the conditions to the Merger not
being satisfied and, within thirty (30) days after written notice of such breach
to the Company from Parent, such breach shall not have been cured in all
material respects or waived by Parent or Merger Sub; provided, however, that
Parent or Merger Sub shall not have the right to terminate this Agreement
pursuant to this Section 8.1(d) if more than thirty (30) days has elapsed since
the end of the thirty (30) day cure period set forth in the previous clause;
(e) By the Company, if Parent or Merger Sub shall breach in any
material respect any of their respective representations, warranties or
obligations hereunder if, and only if, such breach would give rise to any of the
conditions to the Merger not being satisfied and, within thirty (30) days after
written notice of such breach to Parent from the Company, such breach shall not
have been cured in all material respects or waived by the Company; provided,
however, that Company shall not have the right to terminate this Agreement
pursuant to this Section 8.1(e) if more than thirty (30) days has elapsed since
the end of the thirty (30) day cure period set forth in the previous clause;
(f) By the Parent, Merger Sub or the Company, if the Board or
Special Committee shall have determined to recommend a Superior Proposal;
37
(g) By any of Parent, Merger Sub or the Company, if Company
Shareholders' Approval shall not have been obtained by reason of the failure to
obtain the requisite vote upon a vote at a duly held meeting of Company
Shareholders or at any adjournment or postponement thereof; or
(h) By any of Parent, Merger Sub or the Company, if the Closing
has not occurred by November 15, 2003, provided that the party terminating this
Agreement pursuant to this Section 8.1(h) will not have caused such failure to
close.
8.2 Effect of Termination.
(a) In the event of termination of the Agreement pursuant to this
Article VIII, all obligations of the parties shall terminate, except the
obligations of the parties pursuant to this Section 8.2 and except for the
provisions of the last two sentences of the first paragraph of Section 5.1,
Sections 5.3, 5.5, 5.11, 7.1, 7.2, 9.1, 9.2, 9.6, 9.7, 9.8, 9.9 and 9.10
provided that nothing herein shall relieve any party from liability for any
breaches of its representations and warranties made in this Agreement or for any
willful breaches hereof.
(b) In the event that (i) Parent or Merger Sub terminate this
Agreement pursuant to Section 8.1(c), (ii) the Company, Parent or Merger Sub
terminate this Agreement pursuant to Section 8.1(f), or (iii) Parent or Merger
Sub terminate this Agreement pursuant to Section 8.1(d) and, in the case of this
clause (iii), a transaction is consummated within one year of such termination,
which transaction, if offered or proposed, would constitute an Acquisition
Proposal, then the Company shall pay to Parent a nonrefundable fee equal to
$5,000,000 (the "TERMINATION FEE") and an amount equal to the aggregate amount
of Parent's and Merger Sub's actual third party, out-of-pocket expenses
supported by reasonable documentation (including, without limitation, all
attorney's fees, accountant's fees, financial advisory fees and all filing fees)
that have been paid or that may become due and payable by or on behalf of Parent
or Merger Sub in connection with activities undertaken prior to the termination
of this Agreement, including the due diligence review of the Company by Parent,
Merger Sub and their respective representatives, the preparation and negotiation
of this Agreement and otherwise in connection with the Merger and any other
transactions contemplated hereby or thereby, not to exceed $2,500,000 (the
"TERMINATION EXPENSES"). Any payment of the Termination Fee or Termination
Expenses payable pursuant to clauses (i) and (ii) of this Section 8.2(b) shall
be paid within ten business days of the termination of this Agreement. Any
payment of the Termination Fee or Termination Expenses payable pursuant to
clause (iii) of this Section 8.2(b) shall be paid within ten business days of
the consummation of a transaction which, if offered or proposed, would
constitute an Acquisition Proposal. In the event that the Company, Parent or
Merger Sub terminates this Agreement pursuant to Section 8.1(g), then the
Company shall pay to Parent an amount equal to the Termination Expenses within
ten business days of the Termination of this Agreement. In the event that the
Company consummates a transaction within one year following the termination of
this Agreement pursuant to Section 8.1(g), which transaction, if offered or
proposed, would constitute an Acquisition Proposal, then, in addition to the
Termination Expenses, the Company shall pay to Parent the Termination Fee within
ten business days of the consummation of such transaction.
38
ARTICLE IX
MISCELLANEOUS
9.1 Notices. All notices or communications hereunder shall be in
writing (including facsimile or similar writing) addressed as follows:
To Parent or Merger Sub:
x/x Xxxxxxxx Xxxx Xxxxxxxxxx, X.X.X.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Flyer
Facsimile No.: (000) 000-0000
and
c/o Bear Xxxxxxx Merchant Fund Corp.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxx
Facsimile No.: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxx & Xxxxxxx LLP
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
and to:
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
To Company:
Packaged Ice, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Brick, Chief Executive Officer
Facsimile No.: (000) 000-0000
39
With a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xx., Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxxxx, Esq.
Fax: (000) 000-0000
Any such notice or communication shall be deemed given (i) when made, if made by
hand delivery, and upon confirmation of receipt, if made by facsimile, or (ii)
one Business Day after being deposited with a next-day courier, postage prepaid,
in each case addressed as above (or to such other address as such party may
designate in writing from time to time).
9.2 Separability. If any provision of this Agreement shall be declared
to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
9.3 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors, and assigns; provided, however, that neither this Agreement nor any
rights hereunder shall be assignable or otherwise subject to hypothecation
without the written consent of all the parties hereto and any assignment in
violation hereof shall be null and void.
9.4 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same Agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to each party.
9.6 Entire Agreement. This Agreement (including the Parent Disclosure
Letter and the Company Disclosure Letter), together with the Confidentiality
Agreement, represent the entire Agreement of the parties with respect to the
subject matter hereof and shall supersede any and all previous contracts,
arrangements or understandings between the parties hereto with respect to the
subject matter hereof.
9.7 Governing Law; Venue. This Agreement shall be construed,
interpreted, and governed in accordance with the laws of Texas, without
reference to rules relating to conflicts of law. Any suit, action or proceeding
by any party seeking to resolve any dispute arising out of or related to this
Agreement or the transactions contemplated hereby may be brought against any
other party only in the United States District Court for the District of Nevada
or any Nevada state court sitting in Las Vegas, Nevada and each of the parties
hereby consents to the exclusive jurisdiction of such court (and of the
appropriate appellate courts) in any such suit, action or proceeding and waives
any objection to venue or personal jurisdiction laid in such court. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing,
40
each party agrees that service of process on such party at the address referred
to in Section 9.1, together with notice of such service to such party, shall be
deemed effective service of process upon such party.
9.8 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES THAT ANY DISPUTE THAT
MAY ARISE OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE SUCH PARTY HEREBY EXPRESSLY WAIVES ITS RIGHT
TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM RELATING TO THE
TRANSACTIONS CONTEMPLATED HEREBY. THE SCOPE OF THIS WAIVER IS INTENDED TO
ENCOMPASS ANY AND ALL ACTIONS, SUITS AND PROCEEDINGS THAT RELATE TO THE SUBJECT
MATTER OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.
EACH PARTY REPRESENTS THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT
IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) SUCH PARTY UNDERSTANDS AND WITH THE ADVICE OF COUNSEL HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND REPRESENTATIONS IN THIS SECTION
9.8.
9.9 Attorneys' Fees. If any action at law or equity, including an
action for declaratory relief, is brought to enforce or interpret any provision
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and expenses from the other party, which fees and expenses shall
be in addition to any other relief which may be awarded.
9.10 No Third Party Beneficiaries. Except as provided in Section 5.3,
no Person other than the parties hereto is an intended beneficiary of this
Agreement or any portion hereof.
9.11 Disclosure Letters. The disclosures made on the Company Disclosure
Letter with respect to any particular representation or warranty shall be deemed
to be made with respect to any other representation or warranty requiring the
same or similar disclosure, but only to the extent that the relevance of such
disclosure to such other representations and warranties is evident on the face
of the disclosure letter. The inclusion of any matter on any disclosure letter
will not be deemed an admission by any party that such matter is material, or
that such matter has or would have a Company Material Adverse Effect or a Parent
Material Adverse Effect, as applicable.
9.12 Amendments and Supplements. At any time before or after approval
of the matters presented in connection with the Merger by the Shareholders of
Company and prior to the Effective Time, this Agreement may be amended or
supplemented in writing by Parent and Company with respect to any of the terms
contained in this Agreement, except as otherwise provided by law; provided,
however, that following approval and adoption of this Agreement by
41
the Company Shareholders there shall be no amendment or change to the provisions
without the further approval of the Company Shareholders unless permitted by the
TBCA.
9.13 Extensions, Waivers, Etc. At any time prior to the Effective Time,
either party may:
(a) extend the time for the performance of any of the obligations
or acts of the other party;
(b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered pursuant
hereto; or
(c) subject to the proviso of Section 9.12 waive compliance with
any of the agreements or conditions of the other party contained herein.
Notwithstanding the foregoing, no failure or delay by Parent or Company
in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
9.14 Construction. The parties to this Agreement have participated
jointly in the negotiation and drafting of this Agreement. If an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties hereto and no presumption or burden of proof
will arise favoring or disfavoring any party hereto because of the authorship of
any provision of this Agreement. Any reference to any federal, state or local
law will be deemed also to refer to the law as amended and all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
words "include," "includes" and "including" will be deemed to be followed by
"without limitation." Pronouns in masculine, feminine and neuter genders will be
construed to include any other gender, and words in the singular form will be
construed to include the plural and vice versa, unless the context otherwise
requires. The words "this Agreement," "herein," "hereof," "hereby," "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.
42
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CAC HOLDINGS CORP.
By: /s/ XXXXXX X. FLYER
------------------------------------------
Name: Xxxxxx X. Flyer
----------------------------------------
Title: President
---------------------------------------
By: /s/ XXXXX X. XXXX
------------------------------------------
Name: Xxxxx X. Xxxx
----------------------------------------
Title: Vice President & Secretary
---------------------------------------
CUBE ACQUISITION CORP.
By: /s/ XXXXXX X. FLYER
------------------------------------------
Name: Xxxxxx X. Flyer
----------------------------------------
Title: President
---------------------------------------
By: /s/ XXXXX X. XXXX
------------------------------------------
Name: Xxxxx X. Xxxx
----------------------------------------
Title: Vice President & Secretary
---------------------------------------
PACKAGED ICE, INC.
By: /s/ XXXXXXX X. BRICK
------------------------------------------
Name: Xxxxxxx X. Brick
----------------------------------------
Title: Chairman & Chief Executive Officer
---------------------------------------
43
GLOSSARY OF DEFINED TERMS
10% Preferred Designation 8 GAAP 11
Acquisition Proposal 31 Governmental Authority 10
Affiliate 21 Hazardous Substances 16
Agreement 1 HSR Act 10
Articles of Merger 1 Indemnified Party 31
Audit 13 Intangible Property 20
Board 5 IRS 15
Business Day 4 Law 17
Closing 2 Liens 10
Code 13 Merger 1
Commitment Letter 24 Merger Sub 1
Common Stock Merger Consideration 3 Merger Sub Common Stock 3
Company 1 Option Consideration 6
Company Common Stock 1 Parent 1
Company Disclosure Letter 7 Parent Material Adverse Effect 22
Company Employee Benefit Plans 14 Per Common Share Preferred Discount 3
Company Intangible Licenses 20 Permits 18
Company Material Adverse Effect 7 Person 4
Company Options 5 Proxy Statement 35
Company Preferred Stock 3 Replacement Plan 34
Company SEC Reports 11 Reports 17
Company Shareholder 7 Retained Employees 34
Company Shareholders' Approval 19 Rights 19
Company Stock Incentive Plans 5 Rights Agreement 19
Company Stockholder Meeting 35 Securities Act 11
Current Premium 32 Senior Managers 37
D&O Insurance 32 Special Committee 29
Definitive Financing Agreements 36 Stock Certificates 3
Dissenting Shareholder 7 Subscription Agreements 24
Effective Time 1 Subsidiary 8
Enforceability Exception 9 Superior Proposal 30
Environmental Laws 16 Surviving Corporation 1
Equity Funds 24 Tax Authority 13
Equity Investors 24 Tax Returns 13
ERISA 14 Taxes 13
ERISA Affiliate 16 TBCA 1
Exchange Act 6 Termination Expenses 40
Exchange Agent 3 Termination Fee 40
Exchange Fund 4 Third Party Software 20
Expenses 35 Warrant 6
Financing 24
44
