Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
MIDNIGHT ACQUISITION HOLDINGS, INC.,
MIDNIGHT ACQUISITION CORP.
AND
ASAHI/AMERICA, INC.
DATED AS OF AUGUST 9, 1999
TABLE OF CONTENTS
Page
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ARTICLE I The Merger ...........................................................................2
SECTION 1.01. The Merger ....................................................................2
SECTION 1.02. Closing .......................................................................2
SECTION 1.03. Effective Time.................................................................2
SECTION 1.04. Effects of the Merger..........................................................3
SECTION 1.05. Articles of Organization and By-laws...........................................3
SECTION 1.06. Directors .....................................................................3
SECTION 1.07. Officers ......................................................................3
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates....................................3
SECTION 2.01. Effect on Capital Stock........................................................3
SECTION 2.02. Payment for Shares.............................................................5
SECTION 2.03. Options. ......................................................................6
ARTICLE III Representations and Warranties of the Company.......................................8
SECTION 3.01. Organization...................................................................8
SECTION 3.02. Subsidiaries...................................................................8
SECTION 3.03. Capitalization.................................................................9
SECTION 3.04. Authority ....................................................................10
SECTION 3.05. Consents and Approvals; No Violations.........................................10
SECTION 3.06. SEC Reports and Financial Statements..........................................11
SECTION 3.07. Absence of Certain Changes or Events..........................................12
SECTION 3.08. No Undisclosed Liabilities....................................................13
SECTION 3.09. Information Supplied..........................................................13
SECTION 3.10. Benefit Plans.................................................................13
SECTION 3.11. Other Compensation Arrangements...............................................15
SECTION 3.12. Litigation ...................................................................16
SECTION 3.13. Compliance with Applicable Law................................................16
SECTION 3.14. Tax Matters...................................................................17
SECTION 3.15. State Takeover Statutes.......................................................18
SECTION 3.16. Brokers; Fees and Expenses....................................................19
SECTION 3.17. Opinion of Financial Advisor..................................................19
SECTION 3.18. Intellectual Property.........................................................19
SECTION 3.19. Labor Relations and Employment................................................20
SECTION 3.20. Change of Control; Effect of the Disposition..................................21
SECTION 3.21. Environmental Matters.........................................................22
SECTION 3.22. Material Contracts............................................................24
SECTION 3.23. Property. ....................................................................27
SECTION 3.24. Insurance. ...................................................................27
ARTICLE IV Representations and Warranties of Parent and Sub....................................28
SECTION 4.01. Organization..................................................................28
SECTION 4.02. Authority ....................................................................28
SECTION 4.03. Consents and Approvals; No Violations.........................................29
SECTION 4.04. Information Supplied..........................................................29
SECTION 4.05. Interim Operations of Sub.....................................................29
ARTICLE V Covenants ...........................................................................29
SECTION 5.01. Conduct of Business of the Company............................................29
SECTION 5.02. No Solicitation...............................................................33
SECTION 5.03. Other Actions.................................................................35
SECTION 5.04. Notice of Certain Events......................................................35
ARTICLE VI Additional Agreements...............................................................36
SECTION 6.01. Stockholder Approval; Preparation of Proxy Statement..........................36
SECTION 6.02. Access to Information.........................................................37
SECTION 6.03. Reasonable Efforts............................................................37
SECTION 6.04. Fees and Expenses.............................................................38
SECTION 6.05. Indemnification; Insurance....................................................39
SECTION 6.06. Certain Litigation............................................................39
ARTICLE VII Conditions ........................................................................40
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger....................40
SECTION 7.02. Conditions to Obligations of Parent and Sub...................................41
SECTION 7.03. Conditions to Obligations of the Company......................................42
ARTICLE VIII Termination, Amendment and Waiver.................................................43
SECTION 8.01. Termination...................................................................43
SECTION 8.02. Effect of Termination.........................................................44
SECTION 8.03. Amendment ....................................................................45
SECTION 8.04. Extension; Waiver.............................................................45
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ARTICLE IX Miscellaneous ......................................................................45
SECTION 9.01. Nonsurvival of Representations and Warranties.................................45
SECTION 9.02. Notices ......................................................................45
SECTION 9.03. Interpretation................................................................46
SECTION 9.04. Counterparts..................................................................47
SECTION 9.05. Entire Agreement; Third Party Beneficiaries...................................47
SECTION 9.06. Governing Law.................................................................47
SECTION 9.07. Publicity ....................................................................47
SECTION 9.08. Assignment ...................................................................47
SECTION 9.09. Enforcement...................................................................48
Annexes
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Annex I - Definitions
Exhibits
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Exhibit A - Employment Agreement
Exhibit B - Disposition Agreement
Exhibit C - Stockholder Agreement
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as
of August 9, 1999, is among MIDNIGHT Acquisition Holdings, Inc., a Delaware
Corporation ("Parent"), MIDNIGHT ACQUISITION CORP., a Massachusetts corporation
and a subsidiary of Parent ("Sub"), and ASAHI/AMERICA, INC., a Massachusetts
corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company have each determined that it is advisable and in the best interests
of their respective stockholders for Sub to merge with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement;
WHEREAS, pursuant to the Merger, each outstanding share of
common stock, no par value, of the Company (the "Company Common Stock," all the
outstanding shares of the Company Common Stock being hereinafter collectively
referred to as the "Shares") shall be converted into the right to receive the
Merger Consideration (as defined below), upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Sub and the Company are hereby adopting a
plan of merger, providing for the merger of Sub with and into the Company, with
the Company being the surviving corporation. The Merger will be consummated in
accordance with this Agreement upon the filing by the Company and Sub of
articles of merger (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Massachusetts, such Merger to be consummated as of the Effective
Time (as defined below) of the Merger;
WHEREAS, upon consummation of the Merger, the separate
corporate existence of Sub shall cease and the Company, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the Business Corporation Law of the Commonwealth of
Massachusetts (the "MBCL") as provided in this Agreement;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, Parent and Sub have required, as a condition to their
willingness to enter into this Agreement, that Xxxxxx X. Xxxxx (the "Executive")
contemporaneously enter into the Employment Agreement (as defined herein)
concurrently with the execution and delivery of this Agreement; and
WHEREAS, the Board of Directors of the Company (the "Board")
has directed that this Agreement be submitted to a vote of the holders of the
Shares in accordance with the MBCL, and Parent, as sole shareholder of Sub, has
duly approved this Agreement in accordance with the MBCL.
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements herein contained,
and intending to be legally bound hereby, Parent, Sub and the Company hereby
agree as follows:
AGREEMENT
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the MBCL, Sub
shall be merged with and into the Company at the Effective Time (as defined in
Section 1.03), whereupon the separate corporate existence of Sub shall cease and
the Company shall continue as the Surviving Corporation and shall continue its
corporate existence as a subsidiary of Parent and shall continue to be governed
by the laws of the Commonwealth of Massachusetts. At the election of Parent, any
direct or indirect wholly owned subsidiary (as defined in Section 9.03) of
Parent may be substituted for Sub as a constituent corporation in the Merger. In
such event, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing.
SECTION 1.02. CLOSING. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. (New York City time) on a date to be
specified by Parent or Sub, which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Article VII (the
"Closing Date"), at the offices of Xxxxxxxxxx & Xxxxx LLP, 00 Xxxxxxxxxxx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the parties
shall file with the Secretary of State of the Commonwealth of Massachusetts (i)
the Articles of Merger executed in accordance with the relevant provisions of
the MBCL, and (ii) all other filings or recordings required under the MBCL and
the Massachusetts General Laws. The Merger shall become effective at such time
as Articles of Merger are duly filed with the Secretary of State of the
Commonwealth of Massachusetts, or at such other time not more than thirty days
after such filing as Sub and the Company shall agree should be
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specified in the Articles of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 80 of the MBCL. From and after the Effective Time,
the Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities and duties of
the Company and Sub, all as provided under Massachusetts law.
SECTION 1.05. ARTICLES OF ORGANIZATION AND BY-LAWS.
(a) The Articles of Organization of Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of
Organization of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The By-Laws of Sub as in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving
Corporation, until thereafter changed or amended as provided therein or
by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be, and the Company
shall procure, prior to and as a condition to the Closing, the resignation of
each of its directors effective as of the Closing.
SECTION 1.07. OFFICERS. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Shares or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding
share of capital stock of Sub shall be converted into and become 1
fully paid and
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nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND GRANDPARENT
AND PARENT OWNED STOCK. Each share of Company Common Stock that is
owned by the Company or by any subsidiary of the Company and each Share
that is owned by Asahi Organic Chemicals Industry Co., Ltd.
("Grandparent"), Parent, Sub or any other subsidiary of Parent shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to
Section 2.01(d), each Share issued and outstanding (other than Shares
to be canceled in accordance with Section 2.01(b)) shall be converted
into the right to receive from the Surviving Corporation in cash,
without interest, $8.25, plus an amount equal to the Net Quail Proceeds
divided by (i) the number of Shares issued and outstanding (other than
Shares to be canceled in accordance with Section 2.01(b)) plus (ii) all
Shares into which Options (as defined in Section 2.03(a)) are
exercisable at the Effective Time (the "Merger Consideration"). As of
the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such Shares shall
cease to have any rights with respect thereto, except the right to
receive the Merger Consideration, without interest. For the purposes
hereof, "Net Quail Proceeds" shall mean the aggregate amount of
consideration received by the Company in the Disposition (as defined in
Section 3.02), net of taxes paid or payable by the Company in respect
of the Disposition, after taking into account any tax deductions
received or receivable by the Company, and net of all expenses paid or
payable by the Company or by Quail Piping Products, Inc. ("Quail") on
account of any other party in connection with the Disposition or
pursuant to Section 8 of the agreement in the form attached hereto as
Exhibit B (the "Disposition Agreement").
(d) SHARES OF DISSENTING STOCKHOLDERS.
Notwithstanding anything in this Agreement to the contrary, any issued
and outstanding Shares held by a person (a "Dissenting Stockholder")
who complies with Sections 86 through 98, inclusive, of the MBCL
concerning the right of holders of Company Common Stock to dissent from
the Merger and require appraisal of their Shares ("Dissenting Shares")
shall not be converted as described in Section 2.01(c) but shall become
the right to receive such consideration as may be determined to be due
to such Dissenting Stockholder pursuant to the MBCL. If, after the
Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the MBCL, his Shares shall be deemed
to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i)
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prompt notice of any demands for appraisal of Shares received by the
Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, make
any payment with respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
(e) WITHHOLDING TAX. Parent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of shares of Common Stock outstanding
immediately prior to the Effective Time such amounts as may be required
to be deducted and withheld with respect to the making of such payment
under the Internal Revenue Code of 1986, as amended (the "Code"), or
any provision of state, local or foreign tax law. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the
shares of Common Stock outstanding immediately prior to the Effective
Time in respect of which such deduction and withholding was made.
SECTION 2.02. PAYMENT FOR SHARES.
(a) PAYING AGENT. Prior to the Effective Time, Parent
shall designate a bank or trust company located in the United States to
act as paying agent in the Merger (the "Paying Agent"), and, at the
Effective Time, Parent shall make available to the Paying Agent funds
in amounts necessary for the payment of the Merger Consideration,
excluding the Net Quail Proceeds, which shall be made available to the
Paying Agent by the Surviving Corporation in amounts and at the times
necessary, upon surrender of certificates representing Shares as part
of the Merger pursuant to Section 2.01 and upon cancellation of any
Option as part of the Merger pursuant to Section 2.03 (it being
understood that any and all interest earned on funds made available to
the Paying Agent pursuant to this Agreement shall be turned over to
Parent).
(b) EXCHANGE PROCEDURE. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail to
each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented Shares (the
"Certificates"), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in a form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent,
the holder of such Certificate
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shall be entitled to receive in exchange therefor the amount of cash
into which the Shares theretofore represented by such Certificate shall
have been converted pursuant to Section 2.01, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of
the Company, payment may be made to a person other than the person in
whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person
other than the registered holder of such Certificate or establish to
the satisfaction of the Surviving Corporation that such tax has been
paid or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted
pursuant to Section 2.01. No interest will be paid or will accrue on
the cash payable upon the surrender of any Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON
STOCK. All cash paid upon the surrender of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in
full satisfaction of all rights pertaining to the Shares theretofore
represented by such Certificates. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates
are presented to the Surviving Corporation or the Paying Agent for any
reason, they shall be canceled and exchanged as provided in this
Article II.
(d) TERMINATION OF FUND; NO LIABILITY. At any time
following six months after the Effective Time, the Surviving
Corporation shall be entitled to require the Paying Agent to deliver to
it any funds (including any interest received with respect thereto)
which had been made available to the Paying Agent and which have not
been disbursed to holders of Certificates, and thereafter such holders
shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon
due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor
the Paying Agent shall be liable to any holder of a Certificate for
Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.03. OPTIONS.
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(a) OPTION PLANS. Prior to the Effective Time, the Company
shall take all actions necessary, including without limitation, obtaining any
required consent of each holder of the following options, awards or other rights
(each an "Option" and collectively, the "Options"): (i) the Stock Option
Agreement dated March 4, 1998 issued to Xxxxxx X. Xxxxxx (the "TJH Option"),
(ii) all options, awards or rights under the Midnight Independent Directors'
Stock Option Plan (the "Directors Plan"), (iii) all options, awards or rights
under the Midnight Employee Stock Purchase Plan (the "Stock Purchase Plan") and
(iv) all options, awards or rights under the Midnight 1996 Equity Incentive Plan
(the "Equity Plan," and together with the Directors Plan and the Stock Purchase
Plan, the "Option Plans," and each an "Option Plan") to terminate each Option
Plan without liability to the Company and to cancel each Option as provided in
Section 2.03(b) below.
(b) CANCELLATION OF OPTIONS. The Company shall cause:
(i) all Options outstanding immediately prior to the
Effective Time under the Stock Purchase Plan, whether or not then
exercisable, to be canceled at the Effective Time and all payroll
deductions (the "Payroll Amount") plus accrued interest to be refunded
to each such Option holder after such cancellation, plus payment of an
amount in cash equal to that amount which is equal to the excess, if
any, of the Merger Consideration over the purchase price of the Company
Common Stock at the Effective Time (the "Option Price"), multiplied by
the amount obtained by dividing the aggregate Payroll Amount of such
Option holder at the Effective Time by the Option Price; and
(ii) the TJH Option and all Options outstanding
immediately prior to the Effective Time under the Equity Plan and
the Directors Plan, whether or not then exercisable, to immediately
vest and be canceled at the Effective Time, and each holder of an
Option under such plan or agreement will be entitled to receive,
after the Effective Time from the Surviving Corporation, for each
share of Common Stock subject to any such Option, an amount in cash
equal to the excess, if any, of the Merger Consideration over the
per share exercise price of such Option, without interest (the
"Delta Payment"); PROVIDED, that any Options held by Xxxxxx X. Xxxxx
will be canceled but no Delta Payment will be paid on such Options.
Parent shall cause the Paying Agent to mail to each holder of an
Option under such plan or agreement appropriate instructions and
documents to effect the cancellation of such Options and the cash
payment thereof. All amounts payable pursuant to this Section
2.03(b)(ii) shall be subject to all applicable withholding taxes and
shall be paid as soon as practicable following the Effective Time.
(iii) If and to the extent that the TJH Option has
not been exercised prior to its cancellation in connection with the
Merger, the Company will pay to Xxxxxx X. Xxxxxx the Delta Payment
plus the sum of $145,000, prorated to the extent of any prior
exercise, and any amount the Company has drawn under any letter of
credit described in the Amendment to Agreement between the Company
and Xx. Xxxxxx dated March 4, 1998, prorated to the extent of any
prior exercise, so as to avoid any duplicate payments to Xx. Xxxxxx.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the schedule attached to this Agreement
setting forth exceptions to the Company's representations and warranties set
forth herein (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as set forth below. The Company Disclosure Schedule
will be arranged in sections corresponding to sections of this Agreement to be
modified by such disclosure schedule.
SECTION 3.01. ORGANIZATION. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a material adverse
effect (as defined in Section 9.03) on the Company. The Company and each of its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Merger. The Company has made available to Parent complete and correct copies of
its Articles of Organization and By-laws and the certificates of incorporation
and by-laws (or similar organizational documents) of its subsidiaries.
SECTION 3.02. SUBSIDIARIES. Section 3.02 of the Company
Disclosure Schedule sets forth for each subsidiary of the Company: (i) its name
and jurisdiction of incorporation or organization; (ii) its authorized capital
stock or share capital; (iii) the number of issued and outstanding shares of
capital stock or share capital; and (iv) the holder or holders of such shares.
All the outstanding shares of capital stock of each such subsidiary, other than
director qualifying shares of foreign subsidiaries, are owned by the Company, by
another wholly owned subsidiary of the Company or by the Company and another
wholly owned subsidiary of the Company, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"), except for immaterial Liens on outstanding
shares of capital stock of foreign subsidiaries of the Company, and are duly
authorized, validly issued, fully paid and nonassessable. Except for the capital
stock of its subsidiaries, the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture, business, trust or other entity. Notwithstanding the foregoing, prior
to or concurrently with the Closing, the Disposition shall have occurred. The
Disposition has been authorized by all necessary corporate action on the
8
part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize or consummate the Disposition.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of
the Company consists of 10,000,000 shares of Company Common Stock and 1,000,000
shares of preferred stock, par value $10.00 per share ("Company Preferred
Shares"). At the close of business on July 26, 1999, (i) 3,427,217 shares of
Company Common Stock were issued and outstanding, (ii) no shares of Company
Common Stock were held by the Company in its treasury and (iii) 401,961 shares
of Company Common Stock were reserved for issuance upon exercise of outstanding
Options. There are no shares of Company Preferred Shares issued and outstanding.
Except as set forth above and except for Shares issued upon the exercise of
Options, as of the date of this Agreement, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares which may be issued will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the Company may vote.
Except as set forth above, and except for obligations to issue shares subject to
options outstanding on the date hereof, subject to the approval of the Board of
Directors of the Company, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking, including any securities pursuant to
which rights to acquire capital stock became exercisable only after a change of
control of the Company or any of its subsidiaries or upon the acquisition of a
specified amount of the Common Stock or voting powers of the Company or any of
its subsidiaries. There are no outstanding contractual obligations (i) of the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or (ii) of the Company to vote or to
dispose of any shares of the capital stock of any of its subsidiaries other than
as contemplated by this Agreement. Since July 26, 1999, no shares of the capital
stock of the Company or any of its subsidiaries have been issued other than
pursuant to the exercise of Company stock options and warrants already in
existence and outstanding on such date, and neither the Company nor any of its
subsidiaries has granted any stock options, warrants or other rights to acquire
any capital stock of the Company or any of its subsidiaries. There are no
securities issued by the Company or agreements, arrangements or other
understandings to which the Company is a party giving any person any right to
acquire equity securities of the Surviving Corporation at or following the
Effective Time and all securities, agreements,
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arrangements and understandings relating to the right to acquire equity
securities of the Company (whether pursuant to the exercise of options, warrants
or otherwise) provide that, at and following the Effective Time, such right
shall entitle the holder thereof to receive the consideration he would have
received in the Merger had he exercised his right immediately before the
Effective Time.
SECTION 3.04. AUTHORITY. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (other than, with respect to the
Merger, the approval and adoption of the terms of this Agreement by the holders
of a majority of the Shares (the "Company Stockholder Approval")). The only
votes of the holders of any class or series of Company capital stock necessary
to approve the Merger are the affirmative votes of the holders of a majority of
the outstanding shares of Common Stock. The execution, delivery and performance
of this Agreement and the consummation by the Company of the Merger and of the
other transactions contemplated hereby, including but not limited to the
delivery and performance of the Disposition Agreement and the Employment
Agreement and the acknowledgment and acceptance of the Executive's execution and
performance of the Stockholder Agreement, have been duly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated (in each case, other than,
with respect to the Merger, the Company Stockholder Approval). This Agreement
has been duly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding obligation of Parent and Sub, constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
SECTION 3.05. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Exchange Act of
1934, as amended (the "Exchange Act") (including the filing with the SEC of a
proxy statement relating to any required approval by the Company's stockholders
of this Agreement (the "Proxy Statement")), the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Chapters 110C, 110D, 110E,
and 110F of the Massachusetts General Laws and the laws of other states in which
the Company is qualified to do or is doing business, the MBCL (including the
filing of the Articles of Merger), state takeover laws and foreign laws, neither
the execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the Articles of
Organization or By-laws of the Company or of the similar organizational
documents of
10
any of its subsidiaries, (ii) require any filing with, or permit, authorization,
consent or approval of, any Federal, state or local government or any court,
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity") (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have a
material adverse effect on the Company or prevent or materially delay the
consummation of the Merger), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound; PROVIDED, HOWEVER, that
certain contracts and agreements set forth in Section 3.05 of the Company
Disclosure Schedule, (A) provide for their termination upon a change of control
of the Company or (B) contain provisions restricting their assignment pursuant
to a merger, or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company, any of its subsidiaries or any of their
properties or assets, except in the case of clauses (iii) or (iv) for
violations, breaches or defaults that would not have a material adverse effect
on the Company or prevent or materially delay the consummation of the Merger.
SECTION 3.06. SEC REPORTS AND FINANCIAL STATEMENTS. The
Company has filed with the SEC, and has heretofore made available to Parent true
and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since May 16, 1996, under the Exchange Act
or the Securities Act of 1933, as amended (the "Securities Act") (such forms,
reports, schedules, statements and other documents, including any financial
statements or schedules included therein, are referred to as the "Company SEC
Documents"). The Company SEC Documents, at the time filed, (a) 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 and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Except to the extent
revised or superseded by a subsequently filed Company SEC Document (a copy of
which has been made available to Parent on or prior to the date hereof), the
Company SEC Documents, considered as a whole as of their date, do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that the foregoing does not cover future
events resulting from public announcement of the Merger). The financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the
11
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Forms 10-Q and 8-K of the SEC) and fairly
present (subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
SECTION 3.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Other than
in respect of the Disposition, since December 31, 1998, the Company and its
subsidiaries have conducted their respective businesses only in the ordinary
course, and there has not been any material adverse change (as defined in
Section 9.03) with respect to the Company or its subsidiaries. Since December
31, 1998, there has not been (i) any declaration, setting aside or payment of
any dividend or other distribution with respect to its capital stock or any
redemption, purchase or other acquisition of any of its capital stock, (ii) any
split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, (iii) (v) any
granting by the Company or any of its subsidiaries to any officer or director of
the Company or any of its subsidiaries of any increase in compensation, (w) any
granting by the Company or any of its subsidiaries to any such officer or
director of any increase in severance or termination pay, (x) any granting by
the Company or any of its subsidiaries to any such officer, director or other
key employees of any loans or any increases to outstanding loans, (y) except
employment arrangements in the ordinary course of business consistent with past
practice with employees other than any executive officer of the Company, and
except for the Employment Agreement in the form attached hereto as Exhibit A
(the "Employment Agreement") any entry by the Company or any of its subsidiaries
into any employment, severance or termination agreement with any such employee
or executive officer or director or (z) any increase in or establishment of any
bonus, insurance, deferred compensation, pension, retirement, profit-sharing,
stock option (including the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards or the amendment of any
existing stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan or
agreement or arrangement, (iv) any damage, destruction or loss, whether or not
covered by insurance, that has or reasonably could be expected to have a
material adverse effect on the Company, (v) any material payment to an affiliate
of the Company or any of its subsidiaries other than in the ordinary course of
business consistent with past practice, (vi) any revaluation by the Company of
any of its material assets, (vii) any mortgage, lien, pledge, encumbrance,
charge, agreement, claim or restriction placed upon any of the material
properties or assets of the Company or any of its subsidiaries, (viii) any
material change in accounting methods, principles or practices by the Company,
(ix) (A) any licensing or other agreement with regard to the acquisition or
disposition of any material Intellectual Property Right (as defined in Section
3.18) or rights thereto other than
12
licenses or other agreements in the ordinary course of business consistent with
past practice or (B) any amendment or consent with respect to any licensing
agreement filed, or required to be filed, by the Company with the SEC or (x) any
capital contributions, loans or other payments to, or on account of, Quail.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as and to the
extent set forth in the 1998 financial statements of the Company, as of December
31, 1998 (the "1998 Financial Statements") as disclosed in Company SEC
Documents, neither the Company nor any of its subsidiaries had any Liabilities
(as defined below), that would be required by generally accepted accounting
principles to be reflected on a consolidated balance sheet of the Company and
its subsidiaries (including the notes thereto). Since December 31, 1998, except
as and to the extent set forth in the Company SEC Documents, neither the Company
nor any of its subsidiaries has incurred any liabilities of any nature, whether
or not accrued, contingent or otherwise, that would have a material adverse
effect on the Company. For purposes of this Agreement, "Liabilities" shall mean
debts, liabilities, obligations and commitments, whether known or unknown,
asserted or unasserted, fixed, absolute or contingent, matured or unmatured,
accrued or unaccrued, liquidated or unliquidated, due or to become due, whenever
or however arising (including, without limitation, whether arising out of any
contract, agreement or understanding, whether written or oral, or tort based on
negligence, strict liability or otherwise) and whether or not the same would be
required by generally accepted accounting principles to be reflected as a
liability in financial statements or disclosed in the notes thereto.
SECTION 3.09. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in the Proxy Statement, or related filings, will, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting (as defined in Section 6.01), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement, and related filings, will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
SECTION 3.10. BENEFIT PLANS.
(a) Each "employee pension benefit plan" (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (a "Pension Plan"), "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) (a "Welfare Plan") and each
other pension,
13
profit-sharing, savings, cash incentive, equity incentive
(including, but not limited, to stock options, stock purchases,
employee stock ownership, stock awards, restricted stock, phantom
stock and stock appreciation rights), severance, fringe benefits,
payroll practices and other current and deferred compensation and
employee benefit plans, arrangement and practices (whether written
or oral, direct or contingent), in each case maintained or
contributed to, or required to be maintained or contributed to, by
the Company or its subsidiaries for the benefit of any present or
former employee, consultant, officer or director (each of the
foregoing, including Pension Plans and Welfare Plans, a "Benefit
Plan") has been administered in all material respects in accordance
with its terms. The Company and its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable
provisions of ERISA, the Code and all other applicable laws.
(b) Section 3.10 to the Company Disclosure Schedule
attached hereto sets forth a complete list of each Benefit Plan as well
as each employment, consulting, termination, indemnity and severance
agreement and any and all other contracts, binding arrangements and
understandings (whether written or oral) with employees, consultants,
officers and directors of the Company and its subsidiaries.
(c) None of the Pension Plans is subject to Title IV
of ERISA or Section 412 of the Code and the Company nor any other
person or entity that, together with the Company, is treated as a
single employer under Section 414 (b), (c), (m) or (o) of the Code
(each, including the Company, a "Commonly Controlled Entity"): (i)
currently has an obligation to contribute to, or during any time during
the last six years had an obligation to contribute to, a Pension Plan
subject to Title IV of ERISA or Section 412 of the Code, or (ii) has
incurred any liability to the Pension Benefit Guaranty Corporation,
which liability has not been fully paid. All contributions and other
payments required to be made by the Company to any Pension Plan with
respect to any period ending before the Closing Date have been timely
made and reserves adequate for such contributions or other payments
that have accrued for the period before the Closing Date but which are
not required to be made before the Closing Date have been or will be
set aside therefor and have been or will be reflected in financial
statements.
(d) Neither the Company nor any Commonly Controlled
Entity is or has ever been required to contribute to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from
any multiemployer plan where such withdrawal has resulted or would
result in any "withdrawal liability" (within the meaning of Section
4201 of ERISA) or "mass withdrawal liability" within the meaning of
PBGC Regulation Section 4219.2 that has not been fully paid.
14
(e) Each Pension Plan (and its related trust) that is
intended to be qualified under Sections 401 and 501(a) of the Code has
been determined by the IRS to qualify under such sections and nothing
has occurred to cause the loss of such qualified status.
(f) Each Benefit Plan that is a Welfare Plan may be
amended or terminated, upon thirty (30) days notice, at any time after
the Effective Time without liability to the Company or its
subsidiaries.
(g) Except as required by law or under Section 4980B
of the Code, the Company does not have any obligation to provide
post-retirement health benefits.
(h) The Company has heretofore delivered to Parent
correct and complete copies of each of the following:
(1) all written, and descriptions of all oral,
employment, consulting, termination and severance agreements,
contracts, arrangements and understandings listed in Section
3.10 of the Company Disclosure Schedule (other than the
Employment Agreement);
(2) each Benefit Plan and all amendments thereto; the
trust instrument and/or insurance contracts, if any, forming a
part of such Benefit Plan and all amendments thereto;
(3) the three most recent IRS Form 5500 and all
schedules and attachments thereto for each Benefit Plan, if
required;
(4) the most recent determination letter issued by
the IRS regarding the qualified status for each Pension Plan;
(5) the most recent accountant's report for each
Pension Plan, if required; and
(6) the most recent summary plan description for each
Benefit Plan, if required.
SECTION 3.11. OTHER COMPENSATION ARRANGEMENTS. Except (i) as
disclosed in the Company SEC Documents, (ii) for the Employment Agreement and
(iii) with respect to Quail (not involving any officer or employee of the
Company or any other of its subsidiaries), as of the date of this Agreement,
neither the Company nor any of its subsidiaries is a party to any oral or
written (a) consulting agreement terminable on more than 60 calendar days notice
(except for third party agreements for the development of, and assignment to,
the Company of Intellectual Property in the ordinary course of
15
business) and involving the payment of more than $100,000 per annum, (b)
agreement with any executive officer or other key employee of the Company or any
of its subsidiaries (1) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Agreement or (2) providing any term
of employment or compensation guarantee extending for a period longer than two
years or the payment of more than $100,000 per annum or (c) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
SECTION 3.12. LITIGATION. There is no suit, claim, action,
proceeding or investigation pending before any Governmental Entity or, to the
best knowledge of the Company, threatened against the Company or any of its
subsidiaries that could reasonably be expected to have a material adverse effect
on the Company. Neither the Company nor any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree that could reasonably be
expected to have a material adverse effect on the Company.
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAW. The Company and
its subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals that would not
have a material adverse effect on the Company. The Company and its subsidiaries
are in compliance with the terms of the Company Permits, except where the
failure so to comply would not have a material adverse effect on the Company.
Except as disclosed in the Company SEC Documents, to the best knowledge of the
Company, the businesses of the Company and its subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations that would not have a material adverse
effect on the Company or prevent or materially delay the consummation of the
Merger. As of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the best knowledge of the Company, threatened, nor has any
Governmental Entity indicated an intention to conduct any such investigation or
review, other than, in each case, those the outcome of which would not be
reasonably expected to have a material adverse effect on the Company or prevent
or materially delay the consummation of the Merger.
16
SECTION 3.14. TAX MATTERS.
(a) The Company and each of its subsidiaries (and any
affiliated group of which the Company or any of its subsidiaries is now
or has ever been a member) has timely filed all Federal income tax
returns and all other material tax returns and reports required to be
filed by it. All such returns are complete and correct in all material
respects. Each of the Company and its subsidiaries (i) has paid (or the
Company has paid on its subsidiaries' behalf) to the appropriate
authorities all taxes required to be paid by it (without regard to
whether a tax return is required), except taxes for which an adequate
reserve has been established on the financial statements contained in
the Company SEC Documents or the 1998 Financial Statements, and (ii)
has withheld and paid to the appropriate authorities all material
withholding taxes required to be withheld by it. The most recent
financial statements contained in the Company SEC Documents reflect an
adequate reserve for all taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof through the
date of such financial statements.
(b) Except as disclosed in the Company SEC Documents,
no Federal income tax return or other material tax return of the
Company or any of its subsidiaries is under audit or examination by any
taxing authority, and no written or unwritten notice of such an audit
or examination has been received by the Company or any of its
subsidiaries. Each material deficiency resulting from any audit or
examination relating to taxes by any taxing authority has been paid,
except for deficiencies being contested in good faith. No material
issues relating to taxes were raised in writing by the relevant taxing
authority in any completed audit or examination that can reasonably be
expected to recur in a later taxable period. The Federal income tax
returns of the Company and each of its subsidiaries do not contain any
positions that could give rise to a material substantial understatement
penalty within the meaning of Section 6662 of the Code.
(c) There is no agreement or other document
extending, or having the effect of extending, the period of assessment
or collection of any taxes and no power of attorney with respect to any
taxes has been executed or filed with any taxing authority.
(d) No material liens for taxes exist with respect to
any assets or properties of the Company or any of its subsidiaries,
except for liens for taxes not yet due.
(e) None of the Company or any of its subsidiaries is
a party to or is bound by any tax sharing agreement, tax indemnity
obligation or similar
17
agreement, arrangement or practice with respect to taxes (including
any advance pricing agreement, closing agreement or other agreement
relating to taxes with any taxing authority).
(f) None of the Company or any of its subsidiaries
shall be required to include in a taxable period ending after the
Effective Time taxable income attributable to income that accrued in a
prior taxable period but was not recognized in any prior taxable period
as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of
accounting, the cash method of accounting or Section 481 of the Code or
comparable provisions of state, local or foreign tax law.
(g) Neither the Company nor any of its subsidiaries
(i) is a party to a safe harbor lease within the meaning of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect prior to amendment by the Tax Equity and Fiscal Responsibility
Act of 1982, (ii) is a "consenting corporation" under Section 341(f) of
the Code, (iii) has agreed or is obligated to make any payments for
services which would not be deductible pursuant to Sections 162(a)(1),
162(m) or 280G of the Code, (iv) has participated in an international
boycott as defined in Section 999 of the Code, (v) is required to make
any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise, (vi) owns any assets which directly
or indirectly secure any debt the interest on which is tax-exempt under
Section 103(a) of the Code, or (vii) owns any asset which is tax-exempt
use property within the meaning of Section 168(h) of the Code.
(h) None of the Company or any of its subsidiaries is
a party to any joint venture, partnership or other arrangement or
contract which is treated as a partnership for tax purposes, or has
elected to be treated as a branch or a partnership pursuant to Treasury
Regulation Section 301.7701-3.
(i) Each of the Company and its subsidiaries is a
United States person within the meaning of Section 7701(a)(30) of the
Code.
(j) As used in this Agreement, "Taxes" shall include
all Federal, state, local and foreign income, property, sales, excise,
withholding and other taxes, tariffs or governmental charges of any
nature whatsoever.
SECTION 3.15. STATE TAKEOVER STATUTES. The Board of Directors
of the Company has approved the Merger and this Agreement and such approval is
sufficient to render inapplicable to the Merger, this Agreement, the Stockholder
Agreement and the transactions contemplated by this Agreement and the
Stockholder Agreement, the provisions of Chapters 110C, 110D, 110E and 110F of
the Massachusetts General Laws.
18
To the actual knowledge of the Company without investigation, no other state
takeover statute or similar statute or regulation applies or purports to apply
to the Merger, this Agreement, or any of the transactions contemplated by this
Agreement.
SECTION 3.16. BROKERS; FEES AND EXPENSES. No broker,
investment banker, financial advisor, consultant or other person, other than ING
Barings LLC (the "Financial Adviser") and Xxxxxxx Xxxxxxxxx, the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The estimated fees and expenses incurred
and to be incurred by the Company in connection with this Agreement and the
transactions contemplated by this Agreement (including the fees of the Company's
legal counsel, legal counsel for the special committee and the legal counsel for
its financial advisor) are set forth in a letter dated July 26, 1999 from the
Company to Parent, all of which will have been paid in full immediately prior to
the Effective Time.
SECTION 3.17. OPINION OF FINANCIAL ADVISOR. The Special
Committee has received the opinion of the Financial Adviser, dated August 9,
1999, to the effect that, as of that date, (a) the consideration to be
received by the Company pursuant to the Disposition is fair to the Company
from a financial point of view and (b) the Merger Consideration to be
received by the holders of Shares pursuant to the Merger is fair to such
holders from a financial point of view (the "Fairness Opinion"), and a
complete and correct signed copy of such opinion will be included in the
Proxy Statement, and related filings.
SECTION 3.18. INTELLECTUAL PROPERTY. The Company and its
subsidiaries have, and after the Disposition, will have, rights to use, whether
through ownership, licensing or otherwise, all patents, trademarks, service
marks, trade names, copyrights, trade secrets, know-how, invention and other
proprietary rights and processes of which the Company is aware that are material
to its business as now conducted (collectively the "Company Intellectual
Property Rights"). Except for such matters as would not, individually or in the
aggregate, have a material adverse effect on the Company, (a) the Company and
its subsidiaries have not assigned, hypothecated or otherwise encumbered any of
the Company Intellectual Property Rights and (b) none of the licenses included
in the Company Intellectual Property Rights purports to grant sole or exclusive
licenses to another person, including, without limitation, sole or exclusive
licenses limited to specific fields of use. To the best of the Company's
knowledge, the patents owned by the Company and its subsidiaries are valid and
enforceable and any patent issuing from patent applications of the Company and
its subsidiaries will be valid and enforceable, except as such invalidity or
unenforceability would not, individually or in the aggregate, have a material
adverse effect on the Company. The Company has no knowledge of any infringement
by any other person of any of the Company Intellectual Property Rights, and the
Company and its subsidiaries have not, to the Company's knowledge, entered into
19
any agreement to indemnify any other party against any charge of infringement of
any of the Company Intellectual Property Rights, except for such matters as
would not, individually or in the aggregate, have a material adverse effect on
the Company. To the best of the Company's knowledge, the Company and its
subsidiaries have not and do not violate or infringe any intellectual property
right of any other person, and neither the Company nor any of its subsidiaries
have received any communication alleging that it violates or infringes the
intellectual property right of any other person, except for such matters as
would not, individually or in the aggregate, have a material adverse effect on
the Company. Except for such matters as would not, individually or in the
aggregate, have a material effect on the Company, the Company and its
subsidiaries have not been sued for infringing any intellectual property right
of another person. None of the Company Intellectual Property Rights or other
know-how relating to the business of the Company and its subsidiaries, the value
of which to Parent is contingent upon maintenance of the confidentiality
thereof, has been disclosed by the Company or any affiliate thereof to any
person other than those persons who are bound to hold such information in
confidence pursuant to confidentiality agreements or by operation of law.
SECTION 3.19. LABOR RELATIONS AND EMPLOYMENT.
(a) There is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries, and
during the past three years there has not been any such action; (ii) no
union claims to represent the employees of the Company or any of its
subsidiaries; (iii) neither the Company nor any of its subsidiaries is
a party to or bound by any collective bargaining or similar agreement
with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees
of the Company or any of its subsidiaries; (iv) none of the employees
of the Company or any of its subsidiaries is represented by any labor
organization and the Company does not have any knowledge of any current
union organizing activities among the employees of the Company or any
of its subsidiaries, nor are there representation or certification
proceedings or petitions seeking a representation proceeding presently
pending or threatened to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal; (v) the Company
and its subsidiaries are, and have at all times been, in compliance
with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vi) there is no unfair labor
practice charge or complaint against the Company or any of its
subsidiaries pending or, to the knowledge of the Company, threatened
before the National Labor Relations Board or any similar state or
foreign agency; (vii) there is no grievance with respect to or relating
to the Company or any of its
20
subsidiaries arising out of any collective bargaining agreement or
other grievance procedure; (viii) no charges with respect to or
relating to the Company or any of its subsidiaries are pending before
the Equal Employment Opportunity Commission or any other agency
responsible for the prevention of unlawful employment practices; (ix)
neither the Company nor any of its subsidiaries has received notice of
the intent of any federal, state, local or foreign agency responsible
for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
subsidiaries and no such investigation is in progress; and (x) there
are no complaints, lawsuits or other proceedings pending or to the
knowledge of the Company threatened in any forum by or on behalf of any
present or former employee of the Company or any of its subsidiaries
alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship.
(b) To the knowledge of the Company, since the
enactment of the Worker Adjustment and Retraining Notification ("WARN")
Act, there has not been (i) a "plant closing" (as defined in the WARN
Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the
Company or any of its subsidiaries; or (ii) a "mass layoff" (as defined
in the WARN Act) affecting any site of employment or facility of the
Company or any of its subsidiaries; nor has the Company or any of its
subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of
any similar state or local law. To the knowledge of the Company, none
of the employees of the Company or any of its subsidiaries has suffered
an "employment loss" (as defined in the WARN Act) since three months
prior to the date of this Agreement.
SECTION 3.20. CHANGE OF CONTROL; EFFECT OF THE DISPOSITION.
The transactions contemplated by this Agreement, including, without limitation,
the Disposition, will not constitute a "change of control" under, require the
consent from or the giving of notice to a third party pursuant to, permit a
third party to terminate or accelerate vesting, repayment or repurchase rights,
or create any other detriment under the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, lease, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound.
The Disposition will not result in the creation of any Liabilities of the
Company or any of its subsidiaries and will result in the release of all
outstanding Liabilities of the Company in relation to Quail.
21
SECTION 3.21. ENVIRONMENTAL MATTERS.
(a) To the best knowledge of the Company, after due
inquiry, the Company and its subsidiaries have been and are in
compliance with all applicable Environmental Laws (as this term and the
other terms in this section are defined below), except for such
violations and defaults as would not, individually or in the aggregate,
have a material adverse effect on the Company.
(b) To the best knowledge of the Company, after due
inquiry, the Company and its subsidiaries possess all required
Environmental Permits; all such Environmental Permits are in full force
and effect; there are no pending or threatened proceedings to revoke
such Environmental Permits and the Company and its subsidiaries are in
compliance with all terms and conditions thereof, except for such
failures to possess or comply with Environmental Permits as would not,
individually or in the aggregate, have a material adverse effect on the
Company.
(c) Except for matters which would not, individually
or in the aggregate, have a material adverse effect on the Company,
neither the Company nor any of its subsidiaries has received any
notification that the Company or any subsidiary as a result of any of
the current or past operations of the Business, or any property
currently or formerly owned or leased or used in connection with the
Business, is or may be adversely affected by any proceeding,
investigation, claim, lawsuit or order by any Governmental Entity or
other person relating to whether (i) any Remedial Action is or may be
needed to respond to a Release or threat of Release into the
environment of Hazardous Substances arising out of or caused by any
current or past operations of the Company or any of its subsidiaries,
(ii) any Environmental Liabilities and Costs imposed by, under or
pursuant to Environmental Laws as in effect on or prior to the date
hereof shall be sought, or proceeding commenced, arising from the
current or past operations of the Business or (iii) the Company or any
subsidiary is or may be a "potentially responsible party" for a
Remedial Action, pursuant to any Environmental Law for the costs of
investigating or remediating Releases or threatened Releases into the
environment of Hazardous Substances, whether or not such Release or
threatened Release has occurred or is occurring at properties currently
or formerly owned or operated by the Company and its subsidiaries;
(d) Except for Environmental Permits, none of the
Company or its subsidiaries has entered into any written agreement with
any entity or persons including any Governmental Entity by which the
Company or any of its subsidiaries has assumed the responsibility,
either directly or by acting as a guarantor or surety, to pay for the
remediation of any condition arising from or relating to a Release of
Hazardous Substances as defined under Environmental
22
Laws as in effect on or prior to the date hereof into the environment
in connection with the Business, including for cost recovery by third
parties with respect to such Releases or threatened Releases;
(e) Except for matters which would not, individually
or in the aggregate, have a material adverse effect on the Company, to
the best knowledge of the Company, after due inquiry, there has been no
Release of Hazardous Substances for which the Company is or may be
liable under any Environmental Laws on, under or from any real property
currently or previously owned or operated by the Company or in
connection with the Company's Business except for authorized discharges
complying with applicable Environmental Laws.
(f) For purposes hereof:
(i) "Business" means the current and former
businesses of the Company and its subsidiaries including, but
not limited to, businesses or subsidiaries that have been
previously sold by the Company, its subsidiaries or any
predecessors thereto.
(ii) "Environmental Laws" means all Laws
relating to the protection of human health or the environment,
or to any emission, discharge, generation, processing,
storage, holding, abatement, existence, Release, threatened
Release or transportation of any chemical or Hazardous
Substances, including, but not limited to, (i) CERCLA, the
Resource Conservation and Recovery Act, the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, property
transfer statutes or requirements and (ii) all other
requirements pertaining to reporting, licensing, permitting,
investigation or remediation of Hazardous Substances in the
air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, sale, treatment,
receipt, storage, disposal, transport or handling of Hazardous
Substances or relating to human health or safety from exposure
to Hazardous Substances.
(iii) "Environmental Liabilities and Costs"
means all damages, natural resource damages, claims, losses,
expenses, costs, obligations, and liabilities (collectively,
"Losses"), whether direct or indirect, known or unknown,
current or potential, past, present or future, imposed by,
under or pursuant to Environmental Laws, including, but not
limited to, all Losses related to Remedial Actions, and all
fees, capital costs, disbursements, penalties, fines and
expenses of counsel, experts, contractors, personnel and
consultants and the value of any services that might be
provided by the Company or any of its subsidiaries in lieu
thereof and expenditures necessary to cause any such property
or the
23
Company or any subsidiary to be in compliance with
requirements of Environmental Laws.
(iv) "Environmental Permits" means any
federal, state, provincial or local permit, license,
registration, consent, order, administrative consent order,
certificate, approval or other authorization necessary for the
conduct of the Business as currently conducted, and wherever
it is currently conducted, under any applicable Environmental
Law.
(v) "Governmental Entity" means any
government or subdivision thereof, domestic, foreign or
supranational or any administrative, governmental or
regulatory authority, agency, commission, tribunal or body,
domestic, foreign or supranational.
(vi) "Hazardous Substances" means any
substance that (a) is defined, listed or identified or
otherwise regulated under any Environmental Law (including,
without limitation, radioactive substances,
polycholorinated-biphenyls, petroleum and petroleum
derivatives and products) or (b) requires investigation,
removal or remediation under applicable Environmental Law.
(vii) "Laws" means all (A) constitutions,
treaties, statutes, laws (including, but not limited to, the
common law), rules, regulations, ordinances or codes of any
Governmental Entity, (B) Environmental Permits, and (C)
orders, decisions, injunctions, judgments, awards and decrees
of any Governmental Entity.
(viii) "Release" shall be as defined in
CERCLA.
(ix) "Remedial Action" means all actions
required by any Governmental Entity pursuant to Environmental
Law or otherwise taken as necessary to comply with
Environmental Law to (i) clean up, remove, treat or in any
other way remediate any Hazardous Substances; (ii) prevent the
release of Hazardous Substances so that they do not migrate or
endanger or threaten to endanger public health or welfare or
the environment; or (iii) perform studies, investigations or
monitoring in respect of any such matter.
SECTION 3.22. MATERIAL CONTRACTS. Neither the Company nor
any of its subsidiaries is a party to or bound by any:
(a) employment or consulting agreement or
contract that has an aggregate future liability in excess of
$100,000 annually and is
24
not terminable by the Company or a subsidiary by notice of not
more than 60 days for a cost of less than $100,000;
(b) employee collective bargaining agreement
or other contract with any labor union;
(c) covenant of the Company or a subsidiary
not to compete;
(d) agreement, contract or other arrangement
with any current or former officer, director, or any relative
thereof, of the Company or any subsidiary (other than
employment agreements covered by clause (i) above);
(e) lease, sublease or similar agreement
involving annual payments in excess of $100,000 with any
person (other than the Company or a subsidiary) under which
the Company or a subsidiary is a lessor or sublessor of, or
makes available for use to any person (other than the Company
or a subsidiary), (A) any Company Property (as hereinafter
defined) or (B) any portion of any premises otherwise occupied
by the Company or a subsidiary;
(f) lease or similar agreement with any
person (other than the Company or a subsidiary) under which
(A) the Company or a subsidiary is lessee of, or holds or
uses, any machinery, equipment, vehicle or other tangible
personal property owned by any person or (B) the Company or a
subsidiary is a lessor or sublessor of, or makes available for
use any person, any tangible personal property owned or leased
by the Company or a subsidiary, in any such case which has an
aggregate annual future liability or receivable, as the case
may be, in excess of $100,000 and is not terminable by the
Company or a subsidiary by notice of not more than 60 days for
a cost of less than $100,000;
(g) (A) continuing contract for the future
purchase of materials, supplies or equipment (other than
purchase contracts and orders for inventory in the ordinary
course of business consistent with past practice) in excess of
$100,000 annually, (B) management, service, consulting or
other similar type of contract or (C) advertising agreement or
arrangement, in any such case which has an aggregate future
liability to any person (other than the Company or a
subsidiary) in excess of $100,000 and is not terminable by the
Company or a subsidiary by notice of not more than 60 days for
a cost of less than $100,000;
25
(h) material license, option or other
agreement relating in whole or in part to intellectual
property (including any license or other agreement under which
the Company or a subsidiary is licensee or licensor of any
such intellectual property);
(i) agreement, contract or other instrument
under which the Company or a subsidiary has borrowed any money
from, or issued any note, bond, debenture or other evidence of
indebtedness to, any person (other than the Company or a
subsidiary) or any other note, bond, debenture or other
evidence of indebtedness issued to any person (other than the
Company or a subsidiary);
(j) agreement, contract or other instrument
(including so-called take-or-pay or keepwell agreements) under
which (A) any person (including the Company or a subsidiary)
has directly or indirectly guaranteed Liabilities of the
Company or a subsidiary or (B) the Company or a subsidiary has
directly or indirectly guaranteed Liabilities of any person
(in each case other than endorsements for the purpose of
collection in the ordinary course of business);
(k) agreement, contract or other instrument
under which the Company or a subsidiary has, directly or
indirectly, made any advance, loan, extension or credit or
capital contribution in excess of $50,000 to, or other
investment in any person;
(l) mortgage, pledge, security agreement,
deed of trust or other instrument granting a lien or other
encumbrance upon any Company Property;
(m) agreement or instrument providing for
indemnification of any person with respect to Liabilities
relating to any current or former business of the Company, a
subsidiary or any predecessor person exclusive of
indemnifications included in other documents listed in the
Company Disclosure Schedule or granted to sellers of real
property owned or leased by the Company or its affiliates; or
(n) any other material agreement, contract,
management contract, lease, license, commitment or instrument
to which the Company or any subsidiary is a party or by or to
which it or any of its assets or business is bound or subject,
not covered by any of the categories specified in clauses (i)
through (xiii) above.
26
All agreements, contracts, leases, licenses,
commitments or instruments of the Company or any subsidiary listed in
the Company Disclosure Schedule (collectively, the "Contracts") are
valid, binding and in full force and effect and are enforceable by the
Company or the relevant subsidiary in accordance with its terms. The
Company and the subsidiaries have performed all material obligations
required to be performed by them to date under the Contracts and they
are not (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder and, to
the knowledge of the Company and its subsidiaries, no other party to
any of the Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder.
SECTION 3.23. PROPERTY. Section 3.23 of the Company Disclosure
Schedule accurately identifies all real property, leases and other rights in
real property, structures and other buildings of the Company and, with the
exception of Quail, its subsidiaries (collectively, the "Company Properties").
All properties and assets of the Company and its subsidiaries, real and
personal, material to the conduct of their respective businesses are, except for
changes in the ordinary course of business since December 31, 1998, reflected in
the balance sheet of the Company dated December 31, 1998 (the "1998 Balance
Sheet"), the Company and its subsidiaries (other than Quail) have good and
marketable title to their respective real and personal property reflected on the
1998 Balance Sheet or acquired by them since the date of such balance sheet,
free and clear of all mortgages, liens, pledges, encumbrances, charges,
agreements, claims, restrictions and defects of title (collectively, "Title
Liens"), other than Permitted Title Liens (as defined below). All real property,
structures and other buildings and material equipment of each of the Company and
its subsidiaries (other than Quail) are currently used in the operation of the
business, are adequately maintained and are in satisfactory operating condition
and repair for the requirements of the business as presently conducted.
"Permitted Title Liens" means Title Liens for (i) taxes or other charges or
levies of a Governmental Entity which are not due and payable or which are being
contested in good faith by appropriate proceedings as described in Section 3.14
of the Company Disclosure Schedule and as to which adequate financial reserves
have been established and described in Section 3.14 of the Company Disclosure
Schedule; (ii) workmen's, repairmen's or other similar Title Liens (inchoate or
otherwise) arising or incurred in the ordinary course of business in respect of
obligations which are not overdue; (iii) minor title defects, easements or Title
Liens affecting real property, which defects, easements or Liens do not,
individually or in the aggregate, materially impair the continued use,
occupancy, value or marketability of title of the real property to which they
relate, assuming that the property is used on substantially the same basis as
such property is currently being used by the Company.
SECTION 3.24. INSURANCE. Section 3.24 of the Company
Disclosure Schedule accurately identifies each material insurance policy
(including policies
27
providing property, casualty, environmental liability, liability, malpractice
and workers compensation insurance) and all other material types of insurance
maintained by the Company and its subsidiaries, together with carriers and
liability limits for each such policy, other than those insurance policies that
are maintained separately by and/or for Quail. Each such policy is duly in force
and no notice has been received by the Company or any of its subsidiaries from
any insurance carrier purporting to cancel or reduce coverage under any such
policy. The Company and its subsidiaries (other than Quail) are current in all
premiums or other payments due thereunder and no notice has been received by the
Company or any of its subsidiaries (other than Quail) from any insurance carrier
purporting to increase any such premiums in any material respect. All insurance
coverage held for the benefit of the Company or its subsidiaries (other than
Quail) is adequate to cover risks customarily insured against by similar
companies in their industry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
SECTION 4.01. ORGANIZATION. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not be reasonably expected to prevent or materially delay
the consummation of the Merger.
SECTION 4.02. AUTHORITY. Parent and Sub have requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub and no other corporate proceedings on the part of
Parent and Sub are necessary to authorize this Agreement or to consummate such
transactions. No vote of Parent shareholders is required to approve this
Agreement or the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Sub, as the case may be, and, assuming this
Agreement constitutes a valid and binding obligation of the Company, constitutes
a valid and binding obligation of each of Parent and Sub enforceable against
them in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
28
SECTION 4.03. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act (including the
filing with the SEC of the Proxy Statement), the HSR Act, the MBCL, the
Massachusetts General Laws, the laws of other states in which Parent is
qualified to do or is doing business, state takeover laws and foreign laws,
neither the execution, delivery or performance of this Agreement by Parent and
Sub nor the consummation by Parent and Sub of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation, articles of organization or By-Laws of
Parent and Sub, (ii) require any filing with, or permit, authorization, consent
or approval of, any Governmental Entity (except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
be reasonably expected to prevent or materially delay the consummation of the
Merger), (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation to which Parent or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(iii) and (iv) for violations, breaches or defaults which would not,
individually or in the aggregate, be reasonably expected to prevent or
materially delay the consummation of the Merger.
SECTION 4.04. INFORMATION SUPPLIED. None of the information
supplied or to be supplied by Parent or Sub specifically for inclusion or
incorporation by reference in the Proxy Statement and related filings, will, at
the time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
SECTION 4.05. INTERIM OPERATIONS OF SUB. Sub was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
ARTICLE V
COVENANTS
SECTION 5.01. CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement, as expressly agreed to in writing by Parent or
in
29
connection with the Disposition, or as described in Section 5.01 of the
Company Disclosure Schedule, during the period from the date of this Agreement
until the Effective Time, the Company will, and will cause each of its
subsidiaries to, conduct its operations according to its ordinary and usual
course of business and consistent with past practice and use its and their
respective commercially reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers
and employees and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having business
dealings with them and to preserve goodwill. Without limiting the generality of
the foregoing, and except as (x) otherwise expressly provided in this Agreement,
(y) required by law, or (z) set forth in Section 5.01 of the Company Disclosure
Schedule, the Company will not, and will cause its subsidiaries not, without the
consent of Parent, to:
(a) (i) declare, set aside or pay any dividends on,
or make any other actual, constructive or deemed distributions in
respect of, any of its capital stock, or otherwise make any payments to
its stockholders in their capacity as such, other than dividends
declared prior to the date of this Agreement, (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) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or equity equivalent (other than
in connection with the exercise of options outstanding prior to the
date hereof in accordance with their current terms);
(c) amend its Articles of Organization or By-Laws;
(d) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of or equity in, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets
that in the aggregate have a value in excess of 1% of the Company's
assets;
(e) except for the Disposition and in the ordinary
course of business, sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets that in the
aggregate have an excess of 1% of the Company's assets;
30
(f) amend or otherwise modify, or terminate, any
material Contract, or enter into any joint venture, lease or management
agreement or other material agreement of the Company or any of its
subsidiaries (other than the Employment Agreement);
(g) except in the ordinary course of business under
the Company's existing line of credit (including letters of credit),
incur any additional indebtedness (including for this purpose any
indebtedness evidenced by notes, debentures, bonds, leases or other
similar instruments, or secured by any lien on any property,
conditional sale obligations, obligations under any title retention
agreement and obligations under letters of credit or similar credit
transaction) in a single transaction or a group of related
transactions, enter into a guaranty, or engage in any other financing
arrangements having a value in excess of 1% of the Company's assets, or
make any loans, advances or capital contributions to, or investments
in, any other person;
(h) alter through merger, liquidation,
reorganization, restructuring or in any other fashion its corporate
structure or ownership;
(i) except as may be required as a result of a change
in law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it;
(j) revalue any of its assets, including, without
limitation, writing down the value of its inventory or writing off
notes or accounts receivable other than in the ordinary course of
business;
(k) make any tax election, change any annual tax
accounting period, amend any tax return, settle or compromise any
income tax liability, enter into any closing agreement, settle any tax
claim or assessment, surrender any right to claim a tax refund or fail
to make the payments or consent to any extension or waiver of the
limitations period applicable to any tax claim or assessment;
(l) except in the ordinary course of business, settle
or compromise any pending or threatened suit, action or claim with a
cost of $100,000 or more;
(m) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise) other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved
against in, or contemplated by, the
31
financial statements (or the notes thereto) of the Company or incurred
in the ordinary course of business consistent with past practice;
(n) increase in any manner the compensation or fringe
benefits of any of its directors or officers or pay any pension or
retirement allowance not required by any existing plan or agreement to
any such employees, or become a party to, amend or commit itself to any
pension, retirement, profit-sharing savings, severance, incentive or
other or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee, other than increases in the
compensation of employees who are not officers or directors of the
Company or any of its subsidiaries made in the ordinary course of
business consistent with past practice, or, except to the extent
required by law, voluntarily accelerate the vesting of any compensation
or benefit, or grant any loans or increases to any outstanding loans to
any of the Company's or its subsidiaries, directors or officers;
(o) waive, amend or allow to lapse any term or
condition of any confidentiality, "standstill," consulting, advisory or
employment agreement to which the Company is a party;
(p) approve any annual operating budgets for the
Company and its subsidiaries;
(q) change the Company's dividend policy;
(r) enter into any transaction with affiliates;
(s) enter into any business other than the
business currently engaged in by the Company;
(t) pursuant to or within the meaning of any
bankruptcy law, (i) commence a voluntary case, (ii) consent to the
entry of an order for relief against it in an involuntary case, (iii)
consent to the appointment of a custodian of it or for all or
substantially all of its property or (iv) make a general assignment for
the benefit of its creditors;
(u) purchase or lease or enter into a binding
agreement to purchase or lease any real property;
(v) enter into or amend, modify or terminate any
employment, consulting or independent contractor agreement, arrangement
or understanding with any officer, director, or any relative thereof,
or employee;
32
(w) enter into any development agreement, option
relating to new development or any other obligation relating to new
development which in the aggregate would have a cost to the Company in
excess of 1% of the Company's assets;
(x) make any capital contributions, loans or
other payments to, or on account of Quail; or
(y) take, or agree in writing or otherwise to take,
any of the foregoing actions.
During the period from the date of this Agreement through the
Effective Time, (i) as reasonably requested by Parent so as not to interfere
with ongoing operations of the Company, the Company shall confer on a regular
basis with one or more representatives of Parent with respect to material
operational matters; (ii) the Company shall, within 30 days following each
fiscal month, deliver to Parent management prepared unaudited financial
statements as to the Company, including an income statement and balance sheet
for such month; and (iii) upon obtaining knowledge of any material adverse
change to the Company, any material litigation or material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach in any material respect of any
representation or warranty contained herein, the Company shall promptly notify
Parent thereof.
The Company shall have the right to update the Company
Disclosure Schedule between the date hereof and the Effective Time to reflect
actions taken by the Company and its subsidiaries which are permitted to be
taken pursuant to this Section 5.01.
SECTION 5.02. NO SOLICITATION.
(a) The Company and its officers, directors,
employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition or exchange of all
or any material portion of the assets of, or any equity interest in,
the Company or any of its subsidiaries or any business combination with
the Company or any of its subsidiaries (except as contemplated by this
Agreement or in connection with the Disposition). The Company agrees
that, prior to the Effective Time, it shall not, and shall not
authorize or permit any of its subsidiaries or any of its or its
subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information
in furtherance of, any inquiries or the making of any proposal with
respect to any Acquisition Proposal (as defined below), or negotiate,
explore or otherwise engage in discussions with
33
any person (other than Parent, its affiliates or their respective
directors, officers, employees, agents and representatives) with
respect to any Acquisition Proposal or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or fail
to consummate the Merger or any other transactions contemplated by this
Agreement; PROVIDED; HOWEVER, that the Company may furnish information,
pursuant to a customary confidentiality agreement with terms not more
favorable to such third party than the Confidentiality Agreement (as
defined in Section 6.02), to, and negotiate or otherwise engage in
discussions with, any party who delivers a bona fide written proposal
for an Acquisition Proposal for which all necessary financing is then
in the judgment of the Company's Independent Committee of the Board of
Directors reasonably obtainable, if the Company's Independent Committee
of the Board of Directors determines in good faith by a vote of a
majority of the members of the Independent Committee of the Board of
Directors that failing to take such action would create a reasonable
possibility of a breach of the fiduciary duties of the Company's Board
of Directors (after consultation with its outside legal counsel) and
such a proposal is, in the written opinion of the Company's financial
advisor, more favorable to the Company's stockholders from a financial
point of view than the transactions contemplated by this Agreement as
the same has been proposed to be amended by Parent pursuant to Section
5.02(b); PROVIDED, FURTHER, that nothing contained in this Section 5.02
shall prohibit the Company or its Board of Directors from making such
disclosure to the Company's stockholders which, in the judgment of the
Board of Directors of the Company (after consultation with its outside
legal counsel), may be required under applicable law.
(b) From and after the execution of this Agreement,
the Company shall promptly advise Parent in writing of the receipt,
directly or indirectly, of any inquiries, discussions, negotiations or
proposals relating to an Acquisition Proposal, identify the offeror and
furnish to the Parent a copy of any such proposal or inquiry, if it is
in writing, relating to an Acquisition Proposal. The Company shall
promptly advise Parent of any material development relating to such
proposal, including the results of any discussions or negotiations with
respect thereto. Notwithstanding anything in this Agreement to the
contrary, prior to the approval of an Acquisition Proposal by the
Company's Board of Directors Board in accordance with Section 8.01(d),
Company shall give Parent sufficient notice of the material terms and
conditions of any such Acquisition Proposal and negotiate in good faith
with Parent for a period of not less than five business days after
receipt of a written proposal or a written summary of any oral proposal
to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions
contemplated herein.
(c) For purposes hereof: "Acquisition Proposal" means
any inquiry, proposal or offer from any person relating to any direct
or indirect
34
acquisition or purchase of 15% or more of any class of equity
securities of the Company or any of its subsidiaries, any tender offer
or exchange offer that if consummated would result in any person
beneficially owning 15% or more of any class of equity securities of
the Company or any of its subsidiaries, any merger, consolidation,
business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the
transactions contemplated by this Agreement and the Disposition, or any
other transaction the consummation of which could reasonably be
expected to impede, interfere with, prevent or materially delay the
Merger or which would reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby.
SECTION 5.03. OTHER ACTIONS. The Company shall not, and shall not
permit any of its subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as
to materiality becoming untrue or (ii) any of such representations and
warranties that are not so qualified becoming untrue in any material respect
(subject to the Company's right to take actions specifically permitted by
Section 5.02).
SECTION 5.04. NOTICE OF CERTAIN EVENTS. The Company and Parent
shall promptly notify each other of:
(a) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Government
Entity in connection with the transactions contemplated by this Agreement;
(c) any action, suits, claims, investigations or proceedings
commenced or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting such
party or any of its subsidiaries;
(d) an administrative or other order or notification relating
to any material violation or claimed violation of law;
(e) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Closing Date; and
35
(f) any material failure of any party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 5.04
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. STOCKHOLDER APPROVAL; PREPARATION OF PROXY
STATEMENT.
(a) The Company shall call, give notice of, convene
and hold a meeting of its stockholders (the "Stockholders Meeting") for
the purpose of obtaining the Company Stockholder Approval as soon as
practicable following the execution of this Agreement. The Company
will, through its Board of Directors, recommend to its stockholders
that the Company Stockholder Approval be given. Without limiting the
generality of the foregoing, the Company agrees that its obligations
pursuant to the first sentence of this Section 6.01(a) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal or (ii) the
withdrawal or modification by the Board of Directors of the Company of
its approval or recommendation of this Agreement or the Merger, except
upon a termination of this Agreement pursuant to Section 8.01(d).
(b) The Company shall as soon as practicable
following the execution of this Agreement, prepare and file a
preliminary Proxy Statement with the SEC and will use its best efforts
to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable after responding to all such comments to the
satisfaction of the staff and will make any additional filings as may
be required by law. The Company will notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy
Statement, or any additional filings, or for additional information,
and will supply Parent with copies of all correspondence between the
Company or any of its representatives, on the one hand, and the SEC or
its staff, on the other hand, with respect to the Proxy Statement and
any additional filings, or the Merger. If at any time prior to the
Stockholders Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company
will promptly prepare and mail to its stockholders such an amendment or
supplement. The
36
Company will not mail or file any Proxy Statement, or make any
additional filings, or any amendment or supplement thereto, to which
Parent reasonably objects unless, upon consultation with counsel, the
Company determines such document is required as a matter of law.
(c) Grandparent and Parent agree to cause all Shares
owned by Grandparent, Parent or any subsidiary of Grandparent or Parent
to be voted in favor of the Company Stockholder Approval.
SECTION 6.02. ACCESS TO INFORMATION. From the date hereof
until the Effective Time, the Company shall give Parent and Sub, their counsel,
financial advisors, auditors and other authorized representatives full access to
the offices, properties, books and record of the Company and its subsidiaries
during normal business hours, will furnish to Parent and Sub, their counsel,
financial advisors, financial institutions auditors and other authorized
representatives such financial and operating data and other information as such
may be reasonably requested and will instruct the employees of the Company and
its subsidiaries, their counsel and financial advisors to cooperate with Parent
and Sub in their investigation of the Business; PROVIDED, that no investigation
pursuant to this Section 6.02 shall affect any representation or warranty given
by the Company to Parent and Sub hereunder; and PROVIDED, FURTHER, that any
information provided to Parent and/or Sub pursuant to this Section 6.02 shall be
subject to the confidentiality agreement, dated as of May 19, 1999 (the
"Confidentiality Agreement"), the terms of which shall continue to apply, except
as otherwise agreed by the Company, unless and until the Effective Time and
notwithstanding termination of this Agreement and provided further that any
requests shall not interfere with ongoing operations of the Company and its
subsidiaries.
SECTION 6.03. REASONABLE EFFORTS. Each of the Company, Parent
and Sub agree to use its reasonable efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements which may be
imposed on itself with respect to the Merger (which actions shall include
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Entity) and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their subsidiaries in connection
with the Merger. Each of the Company, Parent and Sub will, and will cause its
subsidiaries to, use its reasonable efforts to take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party required to be
obtained or made by Parent, Sub, the Company or any of their subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement, except that no party need waive any substantial rights or
agree to any substantial limitation on its operations or to dispose of any
assets.
37
SECTION 6.04. FEES AND EXPENSES.
(a) In addition to any other amounts which may be
payable or become payable pursuant to any other paragraph of this
Section 6.04, in the event that this Agreement is terminated (i) by
Parent (A) if there occurs a material breach by the Company of any
term, covenant, representation or warranty contained in this Agreement,
(B) pursuant to Section 8.01(e) or (C) pursuant to Section 8.01(g) or
(ii) by the Company pursuant to Section 8.01(d) of this Agreement, the
Company shall promptly reimburse the Parent or Sub, as the case may be,
for all out-of-pocket expenses and fees (including, without limitation,
fees and expenses payable to all Governmental Entities, banks,
investment banking firms and other financial institutions, and their
respective agents and counsel, and all fees and expenses of counsel,
accountants, financial printers, proxy solicitors, exchange agents,
experts and consultants to Parent and its affiliates), actually
incurred, whether incurred prior to, on or after the date hereof, in
connection with the Merger and the consummation of all transactions
contemplated by this Agreement (the "Fees") up to a maximum amount of
$300,000. Except as otherwise specifically provided for herein, whether
or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
(b) If this Agreement is terminated by the Company if
there occurs a material breach by Grandparent, Parent or Sub of any
term, condition, covenant, representation or warranty contained in this
Agreement, Parent shall promptly reimburse the Company for all Fees, up
to a maximum amount of $300,000.
(c) In the event that this Agreement is terminated
pursuant to Section 8.01(d) or (e), then, in addition to the amounts
paid pursuant to Section 6.04(b), the Company shall promptly pay Parent
a termination fee of $600,000 (the "Termination Fee").
(d) The prevailing party in any legal action
undertaken to enforce this Agreement or any provision hereof shall be
entitled to recover from the other party the costs and expenses
(including attorneys' and expert witness fees and expenses) incurred in
connection with such action.
(e) Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, applications or other
documents regarding any real property transfer, stamp, recording,
documentary or other taxes and any other fees and similar taxes which
become payable in connection with the Merger
38
(collectively, "TRANSFER TAXES"). The Company will pay all of the
Transfer Taxes, except that Parent will pay all fees related to the HSR
Act.
SECTION 6.05. INDEMNIFICATION; INSURANCE.
(a) Parent and Sub agree that all rights to
indemnification for acts or omissions occurring prior to and
concurrently with the Effective Time now existing in favor of the
current or former directors or officers (the "Indemnified Parties") of
the Company and its subsidiaries as provided in their respective
articles of organization or by-laws (or similar organizational
documents) or existing indemnification contracts (all of which have
been disclosed in Section 3.10 of the Company Disclosure Schedule)
shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and the Surviving Corporation's Articles
of Organization and By-laws shall reflect such protections.
(b) For six years from the Effective Time, Parent
shall cause the Surviving Corporation to maintain in effect the
Company's current directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been
heretofore delivered to Parent); PROVIDED, HOWEVER, that in no event
shall Parent be required to expend in any one year an amount in excess
of 150% of the annual premiums currently paid by the Company for such
insurance (which the Company represents is currently not more than
$50,000); and, PROVIDED, FURTHER, that if the annual premiums of such
insurance coverage exceed such amount, Parent shall be obligated only
to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) This Section 6.05 shall survive the consummation
of the Merger at the Effective Time, is intended to benefit the
Company, the Surviving Corporation and the Indemnified Parties, and
shall be binding on all successors and assigns of Parent and the
Surviving Corporation.
SECTION 6.06. CERTAIN LITIGATION. The Company agrees that it
will not settle any litigation commenced after the date hereof against the
Company or any of its officers or directors by any stockholder of the Company
relating to the Merger or this Agreement, without the prior written consent of
Parent. In addition, the Company will not voluntarily cooperate with any third
party which may hereafter seek to restrain or prohibit or otherwise oppose the
Merger and will cooperate with Parent and Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Merger, unless the Board of
Directors of the Company determines in good faith, after consultation with and
receipt of a written opinion to such effect from its outside counsel, that
failing so to cooperate with
39
such third party or cooperating with Parent or Sub, as the case may be, would
constitute a breach of the director's fiduciary duties under applicable law.
ARTICLE VII
CONDITIONS
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) COMPANY STOCKHOLDER APPROVAL. The Company
Stockholder Approval shall have been obtained.
(b) HSR ACT. Any waiting period applicable to this
Agreement and the transactions contemplated hereby under the HSR Act
shall have expired or early termination thereof shall have been
granted, without limitation, restriction or condition of any kind.
(c) NO INJUNCTIONS OR RESTRAINTS. No statute, rule,
regulation, executive order, decree, temporary restraining order,
preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger
shall be in effect; PROVIDED, HOWEVER, that each of the parties shall
have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered.
(d) DISPOSITION OF QUAIL. The Disposition of Quail
shall have occurred pursuant to the terms of an agreement in the form
attached hereto as Exhibit B hereto, with no waivers, amendments or
modifications of the terms thereof other than as consented to in
writing by Parent. All items stated therein to be to the agreement,
approval or satisfaction of the Company shall also be to the prior
written agreement, approval or satisfaction of Parent. The Company
shall have obtained a fairness opinion with respect to the
consideration being paid for the sale of Quail. Following the
Disposition, the Company shall have no Liabilities, other than as
specified in the Disposition Agreement, related to Quail or its
Disposition other than the payment of Taxes in connection with the
receipt of the purchase price therefor.
(e) REQUIRED CONSENTS. (i) All consents and approvals
required as set forth in Section 3.05 of the Company Disclosure
Schedule shall have been
40
made or obtained, without limitation, restriction or condition and (ii)
all other consents and approvals shall have been made or obtained,
without limitation, restriction or condition that has or would have a
material adverse effect on the Company (or any effect on Parent and
Sub), except for such authorizations the failure of which does not and
would not, individually or in the aggregate, have a material adverse
effect on the Company (or any material adverse effect on Parent and
Sub).
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The
respective obligations of Parent and Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in whole or part by Parent to the extent permitted by
applicable law:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this
Agreement, to the extent qualified by materiality or material adverse
effect, shall have been true and, to the extent not qualified by
materiality or material adverse effect, shall have been true in all
material respects, in each case when made and on and as of the
Effective Time as though made on and as of the Effective Time (except
for representations and warranties made as of a specified date, which
need be true, or true in all material respects, as the case may be,
only as of the specified date) and Parent and Sub shall have received a
certificate of the Company to that effect signed by a duly authorized
officer thereof.
(b) PERFORMANCE. The Company shall have performed or
complied with all agreements and conditions contained herein required
to be performed or complied with by it prior to or at the Effective
Time.
(c) OTHER AUTHORIZATIONS. All authorizations (other
than those specified in Section 7.01(b) and 7.01(e) hereof) required in
connection with the execution and delivery of this Agreement and the
performance of the obligations hereunder shall have been made or
obtained, without any limitation, restriction or condition that has or
would have a material adverse effect on the Company (or any effect on
Parent and Sub), except for such authorizations the failure of which to
have been made or obtained does not and would not, individually or in
the aggregate, have a material adverse effect on the Company (or any
material adverse effect on Parent and Sub).
(d) INTERCOMPANY ACCOUNTS. All intercompany accounts
between the Company and Quail shall have been settled as nearly as
possible as can be determined at the Closing Date on an accrual basis
in accordance with generally accepted accounting principles (except
that adjustments for the month in
41
which the Closing Date occurs shall be made on a cash basis) and an
accounting satisfactory to Parent, shall have been made thereof except
that $1 million worth in loans outstanding from the Company to Quail at
the Effective Time shall be converted into a loan with the following
terms, subject to documentation reasonably satisfactory to Parent (the
"Quail Loan"): (i) the repayment of the Quail Loan shall be guaranteed
by Executive and secured, with recourse solely to, the $1 million
payment to the Executive under Section 3 of the Employment Agreement,
(ii) the Quail Loan will be payable in 36 equal monthly installments of
principal, with simple annual interest thereon at the "prime rate," as
announced from time to time by Citibank, N.A., with the first such
installment of principal and interest payable on the last business day
of the first full month following the Effective Time and thereafter on
the last business day of each of the next 35 months following such
date, and (iii) the Quail Loan shall be subordinated to payment
obligations of Quail to its senior lenders providing financing for the
Disposition in form and substance satisfactory to Parent. Quail
shall have paid the Company as part of the above intercompany account
settlement $145,000 on account of the Xxxxxx X. Xxxxxx Option
payment referred to in Section 2.03(b)(iii).
(e) COMPANY DEBT. As at the Effective Time, the
Company and its subsidiaries (other than Quail) will have no
"indebtedness" other than (i) the loans outstanding under the financing
provided by the Massachusetts Industrial Finance Authority, (ii) trade
debt incurred and outstanding in the ordinary course of business, (iii)
any indebtedness to Citizens Bank for borrowing incurred to pay trade
debts in the ordinary course of business or expenses in connection with
the transactions contemplated herein, (iv) the Quail Loan and (v) any
capital leases existing as of the date hereof. For the purposes of this
paragraph "indebtedness" shall mean and include (1) all obligations of
such entity for borrowed money, (2) all obligations of such entity
evidenced by bonds, debentures, notes or other similar instruments, (3)
all obligations of such entity to pay the deferred purchase price of
property, except accounts payable arising in the ordinary course of
business, (4) all obligations of such entity as lessee under capital
leases, (5) all indebtedness of others secured by a lien on any asset
of such entity, whether or not such indebtedness is assumed by such
entity, and (6) all indebtedness of others guaranteed by such entity.
(f) EMPLOYMENT AGREEMENT. The Employment Agreement
entered into by the Company and Executive, as provided in Section 3.07,
shall not have been modified or amended in any manner since its
execution and shall be in full force and effect as of the Effective
Time.
SECTION 7.03. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the
42
following conditions, any or all of which may be waived in whole or
in part by the Company to the extent permitted by applicable law:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Parent and Merger Sub contained in
this Agreement, to the extent qualified by materiality shall be true
and, to the extent not qualified by materiality shall be true in all
material respects, in each case when made and on and as of the
Effective Time as though made on and as of the Effective Time (except
for representations and warranties made as of a specified date, which
need be true, or true in all material respects, as the case may be,
only as of the specified date) and the Company shall have received a
certificate of Parent and Sub to that effect signed by a duly
authorized officer thereof.
(b) PERFORMANCE. Parent and Sub shall have performed
or complied with all agreements and conditions contained herein
required to be performed or complied with by them prior to or at the
Effective Time.
(c) PURCHASE OF NICHIMEN SHARES. Parent shall have
purchased, and Nichimen Corporation ("NMC") and Nichimen America Inc.
("NAI") shall have sold to Parent, all Shares held by NMC, NAI or any
of their subsidiaries, and the Company shall have received a
certificate of Parent to that effect signed by a duly authorized
officer thereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of the
terms of this Agreement by the stockholders of the Company:
(a) by mutual written consent of Parent and the
Company, by action of their respective Boards of Directors;
(b) by Parent or the Company if the Merger shall not
have been consummated on or before December 31, 1999; PROVIDED,
HOWEVER, that neither Parent nor the Company may terminate this
Agreement pursuant to this Section 8.01(b) if such party shall have
materially breached this Agreement;
(c) by Parent or the Company if any court of
competent jurisdiction or other Governmental Entity has issued an
order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
43
nonappealable; PROVIDED, HOWEVER, that the party seeking to terminate
this Agreement shall have used its reasonable best efforts to remove or
lift such order, decree, ruling or other action;
(d) by the Company if, following compliance with the
Company of its obligations under Section 5.02, (i) the Company's Board
of Directors approves an Acquisition Proposal, for which all necessary
financing is then in the judgment of the Company Board reasonably
obtainable, on terms which a majority of the members of the Company's
Independent Committee of the Board of Directors has determined in good
faith after consultation with its outside legal counsel to the effect
that failing to take such action would create a reasonable possibility
of a breach of the fiduciary duties of the Company's Board of
Directors, and (ii) such Acquisition Proposal is, in the written
opinion of the Company's financial advisor, more favorable from a
financial point of view to the Company's stockholders than the
transactions contemplated by this Agreement (as the same may have been
proposed to be amended by Parent as provided in Section 5.02(b));
PROVIDED; HOWEVER; that the termination described in this Section
8.01(d) shall not be effective unless and until the Company shall have
paid to Parent all of the fees and expenses described in Section
6.04(b) including, without limitation, the Termination Fee;
(e) by Parent, if the Company Board shall have (i)
failed to recommend to the stockholders of the Company that they
approve and adopt this Agreement (the "Stockholder Acceptance"), (ii)
withdrawn or modified its approval or recommendation of this Agreement
or the Merger, (iii) approved or recommended an Acquisition Proposal or
(iv) resolved to effect any of the foregoing;
(f) by either Parent or the Company, if the Company
Stockholder Approval shall not have been obtained at a Stockholders
Meeting including any adjournments thereof; or
(g) by Parent if the Stockholder Agreement (the
"Stockholder Agreement") in the form attached hereto as Exhibit C,
shall not have been executed and delivered by Xxxxxx X. Xxxxx,
individually and as trustee of a certain voting trust described
therein, to Parent on August 9, 1999.
SECTION 8.02. EFFECT OF TERMINATION. In the event of a
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Parent, Sub or the Company or their respective officers or directors, except
with respect to the Confidentiality Agreement,
44
Section 6.04, this Section 8.02 and Article IX; PROVIDED, HOWEVER, that nothing
herein shall relieve any party for liability for any breach hereof.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after obtaining the Company Stockholder
Approval, but, after any such approval, no amendment shall be made which by law
requires further approval by such shareholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) waive compliance with any of the terms of this Agreement or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party hereto to assert any of
its rights hereunder or otherwise shall not constitute a waiver of those rights.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Agreement or in any instrument
delivered pursuant hereto shall terminate at the Effective Time.
SECTION 9.02. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
45
(a) if to Grandparent, Parent or Sub:
c/o Asahi Organic Chemicals Industry Co., Ltd.
00-0 Xxxxxxxxx 0-xxxxx,
Xxxxxxx-xx, Xxxxx 000-0000, Xxxxx
Attention: Xxxxxx Xxxxx
Telecopy No.:03-3254-3473
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
and
(b) if to the Company:
Asahi/America, Inc.
00 Xxxxx Xxxxxx,
Xxxxxx, XX 00000
Attention: President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx & Hannah LLP
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Telecopy No.: (000) 000-0000
SECTION 9.03. INTERPRETATION. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is to
be made available. As used in this Agreement, the term "subsidiary" of any
person means another person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
46
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person. As used in this Agreement,
"material adverse change" or "material adverse effect" means, when used in
connection with the Company, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any change or
effect) that, individually or in the aggregate with any such other changes or
effects, is materially adverse to the business, financial condition, prospects
or results of operations of the Company and its subsidiaries taken as a whole.
Notwithstanding the foregoing, a material adverse change or material adverse
effect shall not include any material adverse change or material adverse effect
caused by any change resulting from the announcement of the Merger.
SECTION 9.04. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 9.05. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.05, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
SECTION 9.06. GOVERNING LAW. This Agreement shall be
governed and construed in accordance with the laws of the Commonwealth of
Massachusetts without regard to any applicable conflicts of law.
SECTION 9.07. PUBLICITY. Except as otherwise required by law
or the rules of the Nasdaq National Market, for so long as this Agreement is in
effect, neither the Company nor Parent shall, or shall permit any of its
subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to any
direct or indirect subsidiary of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
47
SECTION 9.09. ENFORCEMENT. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the Commonwealth of Massachusetts or in a Massachusetts
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit to the personal jurisdiction of any Federal court located in
the Commonwealth of Massachusetts or any Massachusetts state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or any of the transactions contemplated hereby in any court other than
a Federal court sitting in the Commonwealth of Massachusetts or a Massachusetts
state court and (iv) waives any right to trial by jury with respect to any claim
or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
[Text continued on next page]
48
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
MIDNIGHT ACQUISITION HOLDINGS,
INC.
By: /s/ Xxxxxx Xxxxx
--------------------------
Name: Xxxxxx Xxxxx
Title: President
MIDNIGHT ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxx
--------------------------
Name: Xxxxxx Xxxxx
Title: President
ASAHI/AMERICA, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx X. Xxxxx
Title: President
The undersigned hereby consents to the provisions of Section
2.01(b) of the Agreement and agrees to the obligations of the undersigned stated
in Section 6.01 of the Agreement. The undersigned irrevocably, unconditionally
and absolutely guarantees to the Company primarily and not merely as a surety
that Parent and Sub will duly and punctually pay or perform, all of their
obligations and liabilities arising pursuant to the terms of this Agreement and
such other agreements as may be entered into by Parent or Sub in connection with
this Agreement. The undersigned hereby waives to the fullest extent permitted by
law all defenses based on the granting of any time or other indulgence, or the
variation, renewal or release of or neglect to enforce any right or remedy
against or with respect to Parent and Sub. The undersigned further agrees to be
bound by the terms of Sections 9.06, 9.08 and 9.09 of this Agreement in the same
manner as the parties to this Agreement.
ASAHI ORGANIC CHEMICALS
INDUSTRY CO., LTD.
By: /s/ Haruro Tabata
--------------------------
Name: Haruro Tabata
Title: Chairman & CEO
49
ANNEX I
DEFINITIONS
"1998 Balance Sheet", 27 "Environmental Liabilities and
"1998 Financial Statements", 13 Costs", 23
"Acquisition Proposal", 34 "Environmental Permits", 24
"Agreement", 1 "Equity Plan", 7
"Articles of Merger", 1 "ERISA", 14
"Benefit Plan", 14 "Exchange Act", 10
"Board", 1 "Executive", 1
"Business", 23 "Fairness Opinion", 19
"Certificates", 5 "Fees", 38
"Closing Date", 2 "Financial Adviser", 19
"Closing", 2 "Governmental Entity", 11, 24
"Code", 5 "Grandparent", 4
"Commonly Controlled Entity", "Hazardous Substances", 24
14 "HSR Act", 10
"Company Common Stock", 1 "Indemnified Parties", 39
"Company Disclosure Schedule", "Laws", 24
8 "Liabilities", 13
"Company Intellectual Property "Liens", 8
Rights", 19 "Losses", 23
"Company Permits", 16 "MBCL", 1
"Company Preferred Shares", 9 "Merger Consideration", 4
"Company Properties", 27 "Merger", 1
"Company SEC Documents", 11 "NAI", 43
"Company Stockholder "Net Quail Proceeds", 4
Approval", 10 "NMC", 43
"Company", 1 "Option Plan", 7
"Confidentiality Agreement", 37 "Option Plans", 7
"Contracts", 26 "Option", 7
"Directors Plan", 7 "Options", 7
"Disposition Agreement", 4 "Parent", 1
"Dissenting Shares", 4 "Paying Agent", 5
"Dissenting Stockholder", 4 "Pension Plan", 14
"Effective Time", 2 "Permitted Title Liens", 27
"Employment Agreement", 12 "Proxy Statement", 10
"Environmental Laws", 23 "Quail Loan", 42
"Quail", 4
"Release", 24
"Remedial Action",24
"Securities Act", 11
"Shares", 1
"Stock Purchase Plan", 7
"Stockholder Acceptance", 44
"Stockholder Agreement", 44
"Stockholders Meeting", 36
"Sub", 1
"Surviving Corporation", 1
"Taxes", 18
"Termination Fee", 38
"Title Liens", 27
"Transfer Taxes", 39
"WARN", 21
"Welfare Plan", 14
ii
Exhibit C to Merger Agreement
THIS STOCKHOLDER AGREEMENT (this "Agreement"), dated as of
August 9, 1999, is among Midnight Acquisition Holdings, Inc., a Delaware
corporation ("Parent"), and Xxxxxx X. Xxxxx, as trustee (the "Trustee") of the
voting trust (the "Voting Trust") created under that certain Voting Trust
Agreement dated as of January 11, 1993 (the "Voting Trust Agreement") and
individually (the "Stockholder").
RECITALS
WHEREAS, Parent, through a subsidiary ("Sub"), intends to
enter into a business combination (the "Merger") with Asahi/America, Inc. (the
"Company") pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated as of August 9, 1999; and
WHEREAS, the Stockholder and the Trustee have agreed to vote
all shares of Common Stock of the Company beneficially owned by them in favor of
the Merger and Parent, the Trustee and the Stockholder desire to memorialize
certain other agreements, all as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
AGREEMENT
1. CERTAIN DEFINITIONS. For purposes of this Agreement:
"Acquisition Proposal" shall mean any inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of the Company or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any Person beneficially owning 15% or more of any class of equity
securities of the Company or any of its subsidiaries, any merger, consolidation,
business combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its subsidiaries, other than the transactions contemplated by the Merger
Agreement, or any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Merger or
which would reasonably be expected to dilute materially the benefits to Parent
of the transactions contemplated hereby.
"Beneficially Own" or "Beneficial Ownership" with respect to
any securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), including pursuant to any agreement, arrangement or understanding,
whether or not in writing. Without duplicative counting of the same securities
by the same holder, securities Beneficially Owned by a Person shall include
securities Beneficially Owned by all other Persons with whom such Person would
constitute a "group" within the meaning of Section 13(d) of the Exchange Act.
"Closing Date" shall mean the date set forth in the Merger
Agreement as the closing date for the Merger.
"Common Stock" shall mean at any time the Common Stock, no par
value, of the Company.
"Existing Shares" shall mean the shares of Common Stock
Beneficially Owned by the Stockholder or the Trustee on the date hereof.
"Permitted Transfer" means a sale, transfer, assignment or
other disposition to a Permitted Transferee.
"Permitted Transferee" means any person who is (A) the spouse
or former spouse of, or any lineal descendent of, or any spouse of such lineal
descendant of, or the grandparent, parent, brother or sister of, or spouse of
such brother or sister of, either of the Stockholder or of a Permitted
Transferee; (B) upon the death of the Stockholder or any Permitted Transferee of
the Stockholder, the executors of the estate of the Stockholder or such
Permitted Transferee, and any of the Stockholder's or such Permitted
Transferee's heirs, testamentary trustees, devisees, or legatees; (C) any trust
for the benefit of the Stockholder or one or more Permitted Transferees; (D)
upon the disability of either of the Stockholder or any Permitted Transferee,
any guardian or conservator of the Stockholder or such Permitted Transferee;
PROVIDED, HOWEVER, that in each case such transferee assumes and agrees to
perform and becomes a party to this Agreement, agrees not to make an Acquisition
Proposal, and agrees not to dissent in the Merger, all on terms reasonably
acceptable to Parent. For purposes of this Agreement, when a Permitted
Transferee has acquired Shares in accordance herewith, such person shall be
deemed a "Stockholder" hereunder.
"Person" shall mean an individual, corporation, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity.
"Shares" shall mean the Existing Shares and any right to
acquire shares of Common Stock owned on the date hereof and any shares of Common
Stock or rights to acquire shares of Common Stock acquired by the Stockholder or
the Trustee in any capacity after the date hereof and prior to the termination
of this Agreement. "Shares" shall include (i) shares of Common Stock acquired
upon the exercise of options, warrants or other rights to acquire shares; (ii)
shares of Common Stock acquired upon the conversion or exchange of
4
convertible or exchangeable securities; (iii) shares of Common Stock acquired by
means of purchase, dividend, distribution, gift, bequest, inheritance or as a
successor in interest in any capacity or otherwise; and (iv) rights to acquire
shares of Common Stock, vested or not, presently exercisable or not, including,
but not limited to, options and warrants. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, reclassification, combination, exchange of shares or
the like, the term "Shares" shall be deemed to refer to and include the Shares
as well as all such stock dividends and distributions and any shares into which
or for which any or all of the Shares may be changed, reclassified or exchanged
and appropriate adjustments shall be made to the terms and provisions of this
Agreement. "Shares" shall also include voting trust certificates issued in
respect of any Shares.
2. VOTING AGREEMENT.
(a) The Stockholder and the Trustee, subject to the
terms of this Agreement, hereby irrevocably grant to, and appoint,
Parent and any other Person designated by Parent from time to time, the
Stockholder's and the Trustee's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of the
Stockholder, to vote the Stockholder's and the Trustee's Shares, or
grant a consent or approval in respect of such Shares, at any meeting
of stockholders of the Company or at any adjournment thereof or in any
other circumstances upon which their vote, consent or other approval is
sought, (i) in favor of (A) the Merger, (B) the Merger Agreement and
(C) the transactions contemplated by the Merger Agreement, including,
but not limited to, the sale of any subsidiary of the Company in
accordance therewith and the amendments to the Articles of Organization
of the Company contemplated thereby and (ii) against (A) any
extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its
subsidiaries (except as contemplated by the Merger Agreement); (B) any
sale, lease or transfer by the Company of a material amount of assets
(including stock) of the Company or any of its subsidiaries, or a
reorganization, restructuring, recapitalization, special dividend,
dissolution or liquidation of the Company or any of its subsidiaries
(except as contemplated by the Merger Agreement); and (C)(1) any change
in a majority of the persons who constitute the board of directors of
the Company or any of its subsidiaries; (2) any change in the present
capitalization of the Company or any of its subsidiaries including any
proposal to issue an equity interest (or rights thereto) in the Company
or any of its subsidiaries (except as contemplated by the Merger
Agreement); (3) any amendment of the Company or any of its
subsidiaries' charters or by-laws; (4) any other change in the Company
or any of its subsidiaries' corporate structure or business (except as
contemplated in the Merger Agreement); and (5) any other action which,
in the case of each of the matters referred to in clauses (C)(1), (2),
(3) or (4), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or adversely affect the
5
Merger and the transactions contemplated by this Agreement and the
Merger Agreement.
(b) The Stockholder and the Trustee represent that
any proxies previously given in respect of the Stockholder's or the
Trustee's Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) The Stockholder and the Trustee hereby affirm
that the irrevocable proxy set forth in this Section 2 is given to
secure the performance of the duties of the Stockholder and the Trustee
under this Agreement. The Stockholder and the Trustee hereby further
affirm that such irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, except in connection with the
termination of this Agreement pursuant to Section 7 hereof. The
Stockholder and the Trustee hereby ratify and confirm all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of Section 41 of Chapter 156B of the
Massachusetts General Laws.
(d) The Stockholder and the Trustee agree that
neither of them shall enter into any agreement or understanding with
any Person the effect of which would be inconsistent with or violative
of the provisions and agreements contained herein, including in this
Section 2. Further, the Stockholder and the Trustee agree that they
will, if the Board of Directors of the Company fails or refuses to
submit the Merger to the Company stockholders or if the Board of
Directors withdraws its approval of the Merger, vote all Shares held of
record or Beneficially Owned by them to (i) call or cause to be called
a special meeting of stockholders of the Company (or effect a written
consent) to remove the directors of the Company who have so failed or
refused or voted in favor of such withdrawal, or to increase the size
of the Board of Directors and elect a majority of new directors who
will submit the Merger to the stockholders of the Company for a vote or
reinstate such approval, and (ii) use their reasonable efforts to vote
such Shares to effect such removal and replacement, or increase and
election, and the submission of the Merger to the stockholders of the
Company; and (iii), at any time if so requested by Parent, vote such
Shares to approve all or any actions incident to the Merger or the
other matters referred to in this Section 2 by stockholder written
consent.
3. OTHER COVENANTS OF THE STOCKHOLDER AND THE TRUSTEE.
(a) RESTRICTION ON TRANSFER; PROXIES AND
NON-INTERFERENCE. From the date hereof through the Closing Date or the
earlier termination of this Agreement in accordance with its terms, and
except for (i) Permitted Transfers as expressly permitted herein and
(ii) enforcement of the pledge pursuant to the Consumer Pledge and
Security Agreement dated April 16, 1998, as amended to date, in favor
of
6
Boston Private Bank & Trust Company, the Stockholder and the Trustee
agree that they shall not directly or indirectly:
(i) offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter
into any contract, option or other arrangement or
understanding with respect to, or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment
or other disposition of (collectively, "transfer"), and shall,
to the extent permitted by law, take all steps necessary to
prevent the transfer of, any or all of the Shares or any
interest therein except in connection with the transactions
contemplated by the Merger Agreement except for the transfer
of certain voting trust certificates held by persons other
than the Stockholder and his immediate family;
(ii) grant any proxies or powers of attorney
with respect to the Shares, deposit the Shares into a voting
trust or enter into a voting agreement, arrangement or
understanding with respect to the Shares (except pursuant to
the Voting Trust Agreement); or
(iii) take any action (A) that would make
any representation or warranty of the Stockholder or the
Trustee contained herein untrue or incorrect or would result
in a breach by the Stockholder or the Trustee of their
obligations under this Agreement or (B) to terminate the
Voting Trust.
(b) NO SOLICITATION. Subject to Section 3(f), from
the date hereof until the Closing Date, or the earlier termination of
this Agreement in accordance with Section 7 hereof, the Stockholder and
the Trustee agree that they shall not, and shall not permit any of
their respective representatives, agents or affiliates (including,
without limitation, any investment banker, attorney or accountant
retained by the Stockholder or the Trustee), directly or indirectly, to
enter into, solicit, initiate or continue any discussions or
negotiations with, or provide any information to, or otherwise
cooperate in any other way with, any Person or group, other than Parent
and its affiliates, concerning any offer or proposal which constitutes
or is reasonably likely to lead to an Acquisition Proposal. The
Stockholder and the Trustee agree that they will immediately notify
Parent orally and in writing if any discussions or negotiations are
sought to be initiated, any inquiry or proposal is made, or any
information is requested with respect to any Acquisition Proposal or
which could lead to an Acquisition Proposal, and immediately notify
Parent of all material terms of any proposal which they may receive in
respect of any such Acquisition Proposal, including the identity of the
prospective purchaser or soliciting party if known, and thereafter
shall inform Parent on a timely, ongoing basis of the status and
content of any
7
discussions or negotiations with such a third party, including
immediately reporting any material changes to the terms and conditions
thereof.
(c) RELIANCE. The Stockholder and the Trustee
understand and acknowledge that Parent entered into the Merger
Agreement in reliance upon their execution and delivery of this
Agreement.
(d) FURTHER ASSURANCES. From time to time, at
Parent's request and without further consideration, the Stockholder and
the Trustee agree that they shall execute and deliver such additional
documents and take all such further reasonable and lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the purposes of this Agreement.
(e) STOCKHOLDER TERMINATION FEE. In the event that
any Acquisition Proposal is consummated, then Stockholder shall pay to
Parent as soon as practicable, but in no event later than two business
days after receipt of the consideration paid to the Stockholder in
connection with such Acquisition Proposal an amount (the "Stockholder
Termination Fee") equal to the product of (x) the number of Shares
Beneficially Owned by the Stockholder (for himself or for the benefit
of another Person), multiplied by (y) the excess of the per share value
of consideration paid or payable in consequence of consummation of the
Acquisition Proposal (with the value of any non-cash consideration
being determined by agreement of Parent and the Stockholder or, failing
such agreement within 10 business days of consummation of such
Acquisition Proposal, as provided below) over the Merger Consideration
(as defined in the Merger Agreement). In the case of options on Shares,
to the extent the same are canceled for a payment in cash (the "Option
Payment"), the amount due hereunder shall be the amount by which the
Option Payment exceeds the product of (a) the number of Shares
underlying such options and (b) the Merger Consideration (as defined in
the Merger Agreement). In the event that the consideration paid or
payable in consequence of consummation of the Acquisition Proposal: (i)
consists solely of cash, then the Stockholder Termination Fee shall be
payable solely in cash, or (ii) consists of cash and other non-cash
property, or solely non-cash property, then the Stockholder Termination
Fee shall be payable in cash and such non-cash property in the same
proportion as the cash bears to the value of the non-cash property
issued or issuable in consequence of consummation of the Acquisition
Proposal (as such value is determined herein).
If Parent and the Stockholder, as the case may be,
fail to agree promptly on the value of such non-cash consideration,
then the parties shall appoint an independent investment banking firm
reasonably acceptable to Parent and the Stockholder to act as
arbitrator (the "Arbitrator"). Upon the selection of the Arbitrator,
Parent on the one hand and the Stockholder, on the other hand, shall
8
deliver to the Arbitrator and to each other their last and final offer
concurrently in writing (the "Certified Offers"). The Certified Offers
shall list one amount which the submitting party asserts is the
appropriate valuation of such non-cash consideration as of the date of
submittal. The Arbitrator's sole role shall be to select which one of
the two Certified Offers most closely approximates the valuation the
Arbitrator would have determined for such non-cash consideration,
taking into account current market valuations of any publicly traded
securities which constitute such non-cash consideration. The Arbitrator
shall notify the parties of such determination. The determination of
the Arbitrator shall be binding on the parties. All costs and expenses
of the Arbitrator shall be borne by the parties whose Certified Offer
is not selected.
The Stockholder acknowledges that the agreements
contained in this Section 3(e) are an integral part of the transactions
contemplated by this Agreement and the Merger. Accordingly, if the
Stockholder shall fail to pay when due any amounts which shall become
due under Section 3(e) hereof, the Stockholder shall in addition hereto
pay to Parent all costs and expenses (including fees and disbursements
of counsel) incurred in collecting such overdue amounts, together with
interest on such overdue amounts from the date such payment was
required to be made until the date such payment is received at a rate
per annum equal to the Prime Rate as announced from time to time by
Citibank, N.A. as its "prime rate," "reference rate," "base rate" or
other similar rate. Any payment required to be made pursuant to this
Section 3(e) shall be made when due by wire transfer of immediately
available funds to an account designated by Parent.
The parties agree and acknowledge that in the event
that any Acquisition Proposal is consummated, it would be impracticable
and extremely difficult to ascertain with certainty the amount of
damages to Parent. Therefore, the parties agree that payment of the
Stockholder Termination Fee pursuant to this Section 3(e) shall
represent full liquidated damages hereunder in the event that any
Acquisition Proposal is consummated. The parties agree that no party
shall be liable for special, indirect, incidental or consequential
damages of any nature arising from this Agreement.
(f) FIDUCIARY DUTY OF DIRECTORS. Parent agrees and
acknowledges that the Stockholder is a director of the Company, and, in
such capacity, has fiduciary duties to the stockholders of Company.
Nothing in this Agreement (including, without limitation, Section 3(b))
shall be deemed to limit or affect the obligation of the Stockholder,
as a director of the Company, to take any and all action as may be
necessary in the exercise of his fiduciary duty to the stockholders of
the Company.
9
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND
THE TRUSTEE. The Stockholder and the Trustee, jointly and severally, hereby
represent and warrant to Parent as follows:
(a) OWNERSHIP OF SHARES. The Stockholder and the
Trustee are the record and/or Beneficial Owner of the Existing Shares
set forth besides their names on Exhibit A hereto. On the date hereof,
the Existing Shares as set forth on Exhibit A constitute all of the
Shares owned of record or Beneficially Owned by the Stockholder and the
Trustee, respectively. With respect to the number of shares set forth
opposite the Stockholder's and the Trustee's name on Exhibit A hereto,
and with the exceptions noted thereon, if any, the Stockholder or the
Trustee has sole voting power and sole power to issue instructions with
respect to the matters set forth in Sections 2 and 3 hereof and sole
power to agree to all of the matters set forth in this Agreement, in
each case with respect to all of the Existing Shares with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement, and in the
case of the Stockholder, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights with respect to all
of the Existing Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement. The Initial Beneficiary (as defined in the
Voting Trust Agreement) no longer has the power to direct voting of
Shares or to terminate the Voting Trust.
(b) DUE AUTHORIZATION. The Stockholder and the
Trustee have all requisite capacity, power and authority to execute and
deliver this Agreement and perform their respective obligations
hereunder. This Agreement has been duly and validly executed and
delivered by the Stockholder and the Trustee and constitutes a valid
and binding agreement enforceable against the Stockholder and the
Trustee in accordance with its terms except to the extent (i) such
enforcement may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(c) NO CONFLICTS. Except for filings, authorizations,
consents and approvals contemplated by the Merger Agreement and
necessary for the consummation of the transactions contemplated hereby
and thereby, (i) no filing with, and no permit, authorization, consent
or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by the Stockholder or the
Trustee and the consummation by the Stockholder and the Trustee of the
transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by the Stockholder or the Trustee, the
consummation by the Stockholder or the Trustee of the transactions
contemplated hereby or compliance by the Stockholder or the Trustee
with any of the provisions hereof shall
10
(A) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder or the Trustee is a
party or by which the Stockholder, the Trustee or any of their
respective properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder, the Trustee or any of their respective
properties or assets.
(d) NO ENCUMBRANCES. Except as set forth on Exhibit A
or as otherwise permitted herein, the Shares and the certificates
representing such Shares are now, and at all times during the term
hereof, will be, held by the Stockholder or the Trustee, or by a
nominee, custodian or trust for the benefit of the Stockholder or the
Trustee, as the case may be, free and clear of all liens, claims,
security interests, proxies, voting trusts (except for the Voting Trust
Agreement) or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such arising hereunder.
(e) FINDER'S FEES. No broker, investment banker,
financial advisor or other Person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder or the Trustee.
5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent
represents and warrants to the Stockholder and the Trustee as follows:
(a) ORGANIZATION. Parent is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite corporate power or other
power and authority to execute and deliver this Agreement and perform
its obligations hereunder. The execution and delivery by Parent of this
Agreement and the performance by Parent of its obligations hereunder
have been duly and validly authorized by its Board of Directors and,
except as contemplated in the Merger Agreement, no other corporate
proceedings on the part of Parent are necessary to authorize the
execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
(b) AGREEMENT. This Agreement has been duly and
validly executed and delivered by Parent and constitutes a valid and
binding agreement of Parent enforceable against Parent in accordance
with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii)
the
11
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be
brought.
(c) NO CONFLICTS. Except for filings, authorizations,
consents, and approvals contemplated by the Merger Agreement and
necessary for the consummation of the transactions contemplated hereby
and thereby, (i) no filing with, and no permit, authorization, consent
or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby, and
(ii) none of the execution and delivery of this Agreement by Parent,
the consummation by Parent of the transaction contemplated hereby or
compliance by Parent with any of the provisions hereof shall (A)
conflict with or result in any breach of the charter or bylaws of
Parent, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third-party right of termination, cancellation, material modifications
or acceleration) under any of the terms, conditions or provisions of
any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Parent is a party or by which Parent
of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation
applicable to Parent or its respective properties or assets.
6. LEGEND.
(a) The Stockholder and the Trustee agree with, and
covenant to, Parent that the Stockholder and the Trustee shall not
request that the Company register the transfer (by book-entry or
otherwise) of any certificate or uncertificated interest representing
any of the Shares, unless such transfer is in compliance with this
Agreement.
(b) The Stockholder and the Trustee agree that they
shall promptly after the date hereof surrender to Parent all
certificates representing the Shares held by the Stockholder or the
Trustee, and Parent shall place the following legend on such
certificates, which legend, except as otherwise expressly provided in
this Agreement, shall remain on such certificates until the termination
of this Agreement:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT, DATED AS OF AUGUST 9, 1999 AMONG CERTAIN STOCKHOLDERS AND
MIDNIGHT ACQUISITION HOLDINGS, INC. THE SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFER OR ENCUMBRANCE AND
12
VOTING. A COPY OF THE AGREEMENT IS AVAILABLE AT THE PRINCIPAL OFFICE OF
THE COMPANY."
7. TERMINATION. This Agreement shall terminate upon the
earlier to occur of (i) the Closing Date, (ii) March 31, 2000 or (iii) the date
the Merger Agreement is terminated if the Merger Agreement is terminated
pursuant to Section 8.01(a) or (c) of the Merger Agreement; PROVIDED, HOWEVER,
that if the Merger Agreement is terminated pursuant to Section 8.01(c) of the
Merger Agreement, such order, decree, ruling or other action shall not have
resulted from any action taken by the Stockholder. The parties hereto agree that
the provisions of Section 3(e) (but only to the extent an Acquisition Proposal
is made, proposed, communicated, disclosed or consummated prior to termination
hereunder) and Section 8 shall survive any termination of this Agreement, and no
such termination shall relieve any party of liability for a breach hereof prior
to termination.
8. CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS. The parties
recognize that successful consummation of the transactions contemplated by this
Agreement may be dependent upon confidentiality with respect to the matters
referred to herein. In this connection, pending public disclosure thereof, each
of the parties hereto severally and not jointly agrees not to disclose or
discuss such matters with anyone not a party to this Agreement (other than its
counsel, advisors, corporate parents and affiliates) without the prior written
consent of the other parties hereto, except for filings required pursuant to the
Exchange Act and the rules and regulations thereunder or disclosures its counsel
advises are necessary in order to fulfill its obligations imposed by law or the
requirements of any securities exchange. At all times during the term of this
Agreement, the parties hereto will consult with each other before issuing or
making any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby and will use good faith
efforts to agree on the text of public reports, statements or releases.
9. GENERAL PROVISIONS.
(a) EXPENSES. Whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, except as otherwise
specifically noted herein or in the Merger Agreement.
(b) NOTICES. All notices, requests, demands and other
communications which are required or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by
telecopy, electronic or digital transmission method; the day after it
is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g., Federal Express); and upon
receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:
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(i) if to Parent, to:
Midnight Acquisition Holdings, Inc.
c/o Asahi Organic Chemicals Industry Co., Ltd
00-0 Xxxxxxxxx 0-xxxxx
Xxxxxxx-xx, Xxxxx 000-0000
Xxxxx
Telephone: 00-0000-0000
Telecopy: 03-3254-3473
with copies to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(ii) if to the Stockholder or the
Trustee, to the respective addresses set forth on Exhibit A.
(c) INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the word
"include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". This
Agreement shall not be construed for or against either party by reason
of the authorship or alleged authorship of any provision hereof or by
reason of the status of the respective parties. All terms defined in
this Agreement in the singular shall have comparable meanings when used
in the plural, and vice versa, unless otherwise specified.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and is not intended
to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
(e) ASSIGNMENT. Except in connection with Permitted
Transfers, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned (whether by operation of law or
otherwise) by the Stockholder or the Trustee without the consent of
Parent. Subject to the preceding
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sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and
assigns.
(f) GOVERNING LAW. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with
the laws of the Commonwealth of Massachusetts (without reference to the
choice of law provisions), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which
is a party to or the subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives
its powers shall govern.
(g) SEVERABILITY. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement
or part hereof to be null, void or unenforceable, or order any party to
take any action inconsistent herewith or not to take an action
consistent herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations contained or
set forth herein shall not in any way be affected or impaired thereby.
Upon any such holding that any provision of this Agreement is null,
void or unenforceable, the parties will negotiate in good faith to
modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
the transactions contemplated by this Agreement are consummated to the
extent possible. Except as otherwise contemplated by this Agreement, to
the extent that a party hereto took an action inconsistent herewith or
failed to take action consistent herewith or required hereby pursuant
to an order or judgment of a court or other competent authority, such
party shall incur no liability or obligation unless such party did not
in good faith seek to resist or object to the imposition or entering of
such order or judgment.
(h) INJUNCTIVE RELIEF. Subject to the last paragraph
of Section 3(e), the parties acknowledge that it will be impossible to
measure in money the damages that would be suffered if the parties fail
to comply with any of the obligations herein imposed on them and that
in the event of any such failure, an aggrieved Person or entity will be
irreparably damaged and will not have an adequate remedy at law. Any
such Person or entity shall, therefore, be entitled to injunctive
relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the
provisions of this Agreement, none of the parties shall raise the
defense that there is an adequate remedy at law.
(i) ATTORNEYS' FEES. If any party to this Agreement
brings an action to enforce its rights under this Agreement, the
prevailing party shall be entitled to recover its costs and expenses,
including without limitation reasonable
15
attorneys' fees, incurred in connection with such action, including any
appeal of such action.
(j) CUMULATIVE REMEDIES. All rights and remedies of
either party hereto are cumulative of each other and of every other
right or remedy such party may otherwise have at law or in equity, and
the exercise of one or more rights or remedies shall not prejudice or
impair the concurrent or subsequent exercise of other rights or
remedies.
(k) COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the
same instrument and shall become effective when executed and delivered
by each of the parties.
(l) AMENDMENTS, WAIVERS, ETC. This Agreement may not
be amended, changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a written
agreement executed by the parties hereto.
(m) BINDING AGREEMENT. The Stockholder and the
Trustee agree that this Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any Person or entity to
which legal or Beneficial Ownership of such shares shall pass, whether
by operation of law or otherwise, including, without limitation, the
Stockholder's heirs, distributees, guardians, administrators,
executors, legal representatives, or successors or other transferees
(for value or otherwise) and any other successors in interest.
Notwithstanding any transfer of Shares the transferor shall remain
liable for the performance of all obligations under this Agreement of
the transferor.
(n) CAPACITY. For purposes of this Agreement and the
representations, covenants and promises contained herein, the
Stockholder is acting solely in his capacity as stockholder (of record
or beneficial) of, and not as a director, officer, employee,
representative or agent of, the Company and as trustee under the Voting
Trust Agreement.
(o) CONSENT AND JURISDICTION. Each party irrevocably
and unconditionally agrees and consents that any suit, action or other
legal proceeding arising out of or related to this Agreement shall be
brought and heard in the Commonwealth of Massachusetts and each party
irrevocably consents to personal jurisdiction in any and all tribunals
in said State.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
Midnight Acquisition Holdings, Inc.
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
Title: President
/s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx, individually
/s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx, Trustee
17
