AGREEMENT AND PLAN OF MERGER
AMONG
HEAT, INC.,
HEAT ACQUISITION, INC.
AND
THERMAL INDUSTRIES, INC.
January 6, 1997
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.01 The Merger . . . . . . . . . . . . . . . . .1
SECTION 1.02 Effective Time; Closing. . . . . . . . . . .2
SECTION 1.03 Effects of the Merger. . . . . . . . . . . .2
SECTION 1.04 Articles of Incorporation and By-Laws of the
Surviving Corporation. . . . . . . . . . . .2
SECTION 1.05 Directors. . . . . . . . . . . . . . . . . .2
SECTION 1.06 Officers . . . . . . . . . . . . . . . . . .2
SECTION 1.07 Conversion of Common Shares. . . . . . . . .2
SECTION 1.08 Conversion of the Merger Sub Common Stock. .3
SECTION 1.09 Company Option Plans . . . . . . . . . . . .3
SECTION 1.10 Stockholders' Meeting; Proxy Statement . . .3
ARTICLE II DISSENTING SHARES; PAYMENT FOR SHARES. . . . . . . .4
SECTION 2.01 Dissenting Shares. . . . . . . . . . . . . .4
SECTION 2.02 Payment for Common Shares. . . . . . . . . .4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . .6
SECTION 3.01 Organization and Qualification; Subsidiaries6
SECTION 3.02 Charter and By-Laws. . . . . . . . . . . . .6
SECTION 3.03 Capitalization . . . . . . . . . . . . . . .6
SECTION 3.04 Authority Relative to this Agreement . . . .7
SECTION 3.05 No Conflict; Required Filings and Consents .7
SECTION 3.06 SEC Reports and Financial Statements . . . .8
SECTION 3.07 Information. . . . . . . . . . . . . . . . .8
SECTION 3.08 [Intentionally Omitted]. . . . . . . . . . .9
SECTION 3.09 Brokers. . . . . . . . . . . . . . . . . . .9
SECTION 3.10 Material Adverse Effect. . . . . . . . . . .9
SECTION 3.11 Litigation . . . . . . . . . . . . . . . . .9
SECTION 3.12 Absence of Certain Changes or Events . . . .9
SECTION 3.13 Employee Benefit Plans . . . . . . . . . . 10
SECTION 3.14 Material Contracts and Other Agreements. . 12
SECTION 3.15 Real Estate Leases . . . . . . . . . . . . 13
SECTION 3.16 Real Property. . . . . . . . . . . . . . . 13
SECTION 3.17 Compliance with Laws . . . . . . . . . . . 14
SECTION 3.18 Proprietary Rights . . . . . . . . . . . . 14
SECTION 3.19 No Undisclosed Liabilities . . . . . . . . 14
SECTION 3.20 Title to Personal Property . . . . . . . . 15
SECTION 3.21 Labor Relations. . . . . . . . . . . . . . 15
SECTION 3.22 Taxes and Tax Returns. . . . . . . . . . . 15
SECTION 3.23 Environmental Matters. . . . . . . . . . . 16
(a) Compliance Generally. . . . . . . . . . . . . . 16
(b) Permits . . . . . . . . . . . . . . . . . . . . 16
(c) Claims. . . . . . . . . . . . . . . . . . . . . 16
(d) Storage Tanks, Asbestos, PCBs . . . . . . . . . 16
(e) Certain Environmental Liabilities . . . . . . . 16
(f) Operations. . . . . . . . . . . . . . . . . . . 17
(g) Transaction-Triggered Requirements. . . . . . . 17
(h) Liability for Others. . . . . . . . . . . . . . 17
(i) Environmental Liens . . . . . . . . . . . . . . 17
SECTION 3.24 Accounts Receivable. . . . . . . . . . . . 17
SECTION 3.25 Inventory. . . . . . . . . . . . . . . . . 18
SECTION 3.26 Product and Service Warranty . . . . . . . 18
SECTION 3.27 Effective Time . . . . . . . . . . . . . . 18
ARTICLE IV REPRESENTATIONS AND WARRANTIESOF PARENT AND THE MERGER SUB18
SECTION 4.01 Organization and Qualification . . . . . . 18
SECTION 4.02 Authority Relative to this Agreement . . . 19
SECTION 4.03 No Conflict; Required Filings and Consents 19
SECTION 4.04 Information. . . . . . . . . . . . . . . . 20
SECTION 4.05 Financing. . . . . . . . . . . . . . . . . 20
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.01 Conduct of Business of the Company . . . . 20
SECTION 5.02 Access to Information. . . . . . . . . . . 22
SECTION 5.03 Reasonable Best Efforts. . . . . . . . . . 22
SECTION 5.04 Consents . . . . . . . . . . . . . . . . . 23
SECTION 5.05 Public Announcements . . . . . . . . . . . 24
SECTION 5.06 Indemnification. . . . . . . . . . . . . . 24
SECTION 5.07 Notification of Certain Matters. . . . . . 25
SECTION 5.09 No Solicitation. . . . . . . . . . . . . . 25
SECTION 5.10 Break-Up Fee; Expense Reimbursement. . . . 26
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . 27
SECTION 6.01 Conditions to Parties' Obligations . . . . 27
SECTION 6.02 Conditions to Parent's and the Merger Sub's
Obligation to Effect the Merger. . . . . . 27
SECTION 6.03 Conditions to the Company's Obligation to
Effect the
Merger28 . . . . . . . . . . . . . . . . . .
SECTION 6.04 Satisfaction or Waiver of Conditions . . . 29
ARTICLE VII TERMINATION; AMENDMENTS; WAIVER . . . . . . . . . 29
SECTION 7.01 Termination. . . . . . . . . . . . . . . . 29
SECTION 7.02 Effect of Termination. . . . . . . . . . . 30
SECTION 7.03 Amendment. . . . . . . . . . . . . . . . . 30
SECTION 7.04 Extension; Waiver. . . . . . . . . . . . . 30
ARTICLE VIII DEFINITIONS. . . . . . . . . . . . . . . . . . . 31
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 34
SECTION 9.01 Non-Survival of Representations and Warranties34
SECTION 9.02 Entire Agreement; Assignment . . . . . . . 34
SECTION 9.03 Validity . . . . . . . . . . . . . . . . . 34
SECTION 9.04 Notices. . . . . . . . . . . . . . . . . . 34
SECTION 9.05 Governing Law. . . . . . . . . . . . . . . 35
SECTION 9.06 Descriptive Headings . . . . . . . . . . . 35
SECTION 9.07 Counterparts . . . . . . . . . . . . . . . 35
SECTION 9.08 Parties in Interest. . . . . . . . . . . . 35
SECTION 9.09 Certain Definitions. . . . . . . . . . . . 36
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as
of January 6, 1997, by and among Heat, Inc., a Delaware corporation
("Parent"), Heat Acquisition, Inc., a Delaware corporation and a
subsidiary of Parent (the "Merger Sub"), and Thermal Industries,
Inc. (the "Company"). Cross-references to the defined terms used
in this Agreement are set forth in Article VIII.
WHEREAS, Merger Sub is a corporation duly organized and
validly existing under the laws of the Commonwealth of Delaware
having authorized capital shares consisting of 100 shares of common
stock, $.01 par value per share ("Merger Sub Shares"), all of which
are of one class and all of which are entitled to vote, and all of
which are issued and outstanding and owned by Parent.
WHEREAS, the Company is a corporation duly organized and
validly existing under the laws of the Commonwealth of Pennsylvania
and having authorized capital shares consisting of 5,000,000 shares
of common stock, $.01 par value per share ("Common Shares"), all of
which are of one class and all of which are entitled to vote, and
of which 1,961,312 shares are issued and outstanding.
WHEREAS, Parent desires to purchase all outstanding
Common Shares through the merger of the Merger Sub with and into
the Company (the "Merger"), with the Company surviving the Merger
and the Merger Sub ceasing to exist (the Company and the Merger Sub
being hereinafter sometimes referred to as the "Constituent
Corporations" and the Company, following the effectiveness of the
Merger, being hereinafter sometimes referred to as the "Surviving
Corporation"), all upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, Parent, the Merger Sub and the Company agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance
with the applicable provisions of this Agreement and the
Pennsylvania Business Corporation Law (the "BCL") and the Delaware
General Corporation Law (the "DGCL"), at the Effective Time (as
defined in Section 1.02) the Merger Sub shall be merged with and
into the Company. Following the Merger, the separate corporate
existence of the Merger Sub shall cease and the Company shall con-
tinue as the Surviving Corporation.
SECTION 1.02 Effective Time; Closing. As soon as
practicable after the satisfaction or waiver of the conditions set
forth in Article VI, the Company and the Merger Sub shall execute
in the manner required by the BCL and deliver to the Department of
State of the Commonwealth of Pennsylvania a duly executed and
verified articles of merger and shall execute in the manner
required by the DGCL and deliver to the Delaware Secretary of State
duly executed and verified Certificate of Merger, and the parties
shall take such other and further actions as may be required by law
to make the Merger effective. The time the Merger becomes
effective in accordance with applicable law is referred to as the
"Effective Time."
SECTION 1.03 Effects of the Merger. The Merger shall have
the effects set forth in Section 1929 of the BCL and Section 252 of
the DGCL.
SECTION 1.04 Articles of Incorporation and By-Laws of the
Surviving Corporation.
(a) The Articles of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation, until
thereafter amended in accordance with the provisions thereof and
hereof and applicable law.
(b) Subject to the provisions of Section 5.06 of this
Agreement, the By-Laws of the Merger Sub in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation until
amended in accordance with the provisions thereof and applicable
law.
SECTION 1.05 Directors. Subject to applicable law, the
directors of the Merger Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation and
shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or
removal.
SECTION 1.06 Officers. To the extent permitted under
applicable law, the officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors
are duly elected and qualified, or their earlier death, resignation
or removal.
SECTION 1.07 Conversion of Common Shares. At the Effective
Time, by virtue of the Merger and without any action on the part of
the holders thereof, each Common Share issued and outstanding
immediately prior to the Effective Time (other than any Common
Shares held by Parent, the Merger Sub, any wholly-owned subsidiary
of Parent or the Merger Sub, in the treasury of the Company or by
any wholly-owned subsidiary of the Company, which Common Shares, by
virtue of the Merger and without any action on the part of the
holder thereof, shall be cancelled and retired and shall cease to
exist with no payment being made with respect thereto, and other
than Dissenting Shares (as defined in Section 2.01)) shall be
converted into the right to receive in cash an amount equal to the
Merger Price (as defined below), payable to the holder thereof,
without interest thereon, upon surrender of the certificate
formerly representing such Common Share. The "Merger Price" shall
be an amount per Common Share equal to the result of (i) $15.00
minus (ii) the quotient determined by dividing (A) the amount by
which the Closing Invoice Amount (as defined below) exceeds
$275,000 by (B) the number of Common Shares outstanding on a fully-diluted basis
as of Effective Time.
The term "Closing Invoice Amount" means the aggregate face amount
of all invoices payable in connection with fees of legal counsel or investment
bankers (including any representatives of legal counsel or investment bankers)
incurred in connection with this Agreement, the Indemnity and Fee Agreement
dated as of the date hereof between Parent and the Controlling Stockholders
(as defined in Section 5.10) (the "Indemnity and Fee Agreement") and the
consummation of the transactions contemplated hereby and thereby (collectively,
the "Transaction Expenses") incurred by (or on behalf of) the selling
stockholders (including the Controlling Stockholders)
and the Company; provided, that such invoices are marked final and
delivered to Parent no later than two days prior to the Effective
Time; provided, further, than the face amount of each such invoice
shall be deemed to be conclusive evidence of the amounts owing
thereunder.
SECTION 1.08 Conversion of the Merger Sub Common Stock. At
the Effective Time, each share of common stock, par value $.01 per
share, of the Merger Sub issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and
become one validly issued, fully paid and non-assessable share of
common stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 1.09 Company Option Plans. The Company shall cause
each outstanding option to purchase Common Shares (an "Option") to
be cancelled, as of the Effective Time, at which time the Company
will pay each holder of an Option (whether or not such Option is
then vested or exercisable) an amount determined by multiplying (i)
the excess, if any, of the Merger Price over the applicable
exercise price of such Option by (ii) the number of Common Shares
such holder could have purchased if such holder had exercised such
Option in full immediately prior to such time (without giving
effect to any antidilutive changes in the number of such Common
Shares arising from the Merger and assuming any unvested Options
have vested). Prior to the Effective Time, the Company shall
obtain all consents necessary to give effect to the transaction
described in the foregoing sentence.
SECTION 1.10 Stockholders' Meeting; Proxy Statement.
(a) If required by applicable law in order to consummate
the Merger, the Company, acting through the Board, shall, in
accordance with applicable law:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders (a "Stockholders'
Meeting") as soon as practicable following the date hereof for
the purpose of considering and taking action upon this
Agreement;
(ii) prepare and file with the Securities and
Exchange Commission (the "SEC") a preliminary proxy statement
relating to the Merger and this Agreement and use its best
efforts (x) to obtain and furnish the information required to
be included by the SEC in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, to respond
promptly to any comments made by the SEC with respect to the
preliminary proxy statement and cause a definitive proxy
statement (the "Proxy Statement") to be mailed to its
stockholders and (y) to obtain the necessary approvals of the
Merger and this Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommenda-
tion of the Board that stockholders of the Company vote in
favor of the approval of the Merger and the adoption of this
Agreement.
(b) Parent agrees that it will vote, or cause to be
voted, all of the Common Shares then owned by it, the Merger Sub or
any of its other subsidiaries in favor of the approval of the
Merger and the adoption of this Agreement.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 2.01 Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, Common Shares outstanding
immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such Common Shares in
accordance with Section 1930 of the BCL, if such Section 1930
provides for dissenters' rights for such Common Shares in the
Merger ("Dissenting Shares"), shall not be converted into the right
to receive the Merger Price as provided in Section 1.07, unless and
until such holder fails to perfect or withdraws or otherwise loses
his right to appraisal and payment under the BCL. If, after the
Effective Time, any such holder fails to perfect or withdraws or
loses his right to dissent, such Dissenting Shares shall thereupon
be treated as if they had been converted as of the Effective Time
into the right to receive the Merger Price, if any, to which such
holder is entitled, without interest or dividends thereon. The
Company shall give Parent prompt notice of any demands received by
the Company for appraisal of Common Shares and, prior to the
Effective Time, Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior
to the Effective Time, the Company shall not, except with the prior
written consent of Parent, make any payment with respect to, or
settle or offer to settle, any such demands.
SECTION 2.02 Payment for Common Shares.
(a) From and after the Effective Time, NationsCredit or
such other bank or trust company as shall be mutually acceptable to
Parent and the Company shall act as paying agent (the "Paying
Agent") in effecting the payment of the Merger Price in respect of
certificates (the "Certificates") that, prior to the Effective
Time, represented Common Shares entitled to payment of the Merger
Price pursuant to Section 1.07. At the Effective Time, Parent or
the Merger Sub shall deposit, or cause to be deposited, in trust
with the Paying Agent the aggregate Merger Price to which holders
of Common Shares shall be entitled at the Effective Time pursuant
to Section 1.07.
(b) Promptly after the Effective Time, the Paying Agent
shall mail to each record holder of Certificates that immediately
prior to the Effective Time represented Common Shares (other than
Certificates representing Dissenting Shares and Certificates
representing Common Shares held by Parent or the Merger Sub, any
wholly-owned subsidiary of Parent or the Merger Sub, in the
treasury of the Company or by any wholly-owned subsidiary of the
Company) a form of letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent and instructions for use in
surrendering such Certificates and receiving the Merger Price in
respect thereof. Upon the surrender of each such Certificate, the
Paying Agent shall pay the holder of such Certificate the Merger
Price multiplied by the number of Common Shares formerly rep-
resented by such Certificate, in consideration therefor, and such
Certificate shall forthwith be cancelled. Until so surrendered,
each such Certificate (other than Certificates representing
Dissenting Shares and Certificates representing Common Shares held
by Parent or the Merger Sub, any wholly owned subsidiary of Parent
or the Merger Sub, in the treasury of the Company or by any wholly-owned
subsidiary of the Company) shall represent solely the right
to receive the aggregate Merger Price relating thereto. No
interest or dividends shall be paid or accrued on the Merger Price.
If the Merger Price (or any portion thereof) is to be delivered to
any person other than the person in whose name the Certificate
formerly representing Common Shares surrendered therefor is
registered, it shall be a condition to such right to receive such
Merger Price that the Certificate so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the
person surrendering such Common Shares shall pay to the Paying
Agent any transfer or other taxes required by reason of the payment
of the Merger Price to a person other than the registered holder of
the Certificate surrendered, or shall establish to the satisfaction
of the Paying Agent that such tax has been paid or is not applica-
ble.
(c) Promptly following the date which is 180 days after
the Effective Time, the Paying Agent shall deliver to the Surviving
Corporation all cash, Certificates and other documents in its
possession relating to the transactions described in this
Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a
Common Share may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat
and similar laws) receive in consideration therefor the aggregate
Merger Price relating thereto, without any interest or dividends
thereon.
(d) After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation
of any Common Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates
formerly representing Common Shares are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Merger Price
relating thereto, as provided in this Article II, subject to
applicable law in the case of Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and the Merger
Sub that except as set forth in the Company Disclosure Statement
which it has delivered to Parent and the Merger Sub simultaneous
with its execution of this Agreement (the "Company Disclosure
Statement"):
SECTION 3.01 Organization and Qualification; Subsidiaries.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Pennsylvania. Each of the Company's subsidiaries (the
"Subsidiaries") is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation. The Company and each of the Subsidiaries has the
requisite corporate power and authority to own, operate or lease
its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is
in good standing, in each jurisdiction in which the nature of its
business or the properties owned, operated or leased by it makes
such qualification, licensing or good standing necessary.
SECTION 3.02 Charter and By-Laws. The Company has hereto-
fore made available to Parent and the Merger Sub a complete and
correct copy of the charter and the by-laws or comparable
organizational documents, each as amended to the date hereof, of
the Company and each of the Subsidiaries.
SECTION 3.03 Capitalization. The authorized capital stock
of the Company consists of 5,000,000 Common Shares. As of the
close of business on September 8, 1996, the Company had issued and
outstanding 1,958,512 Common Shares and 34,700 options to purchase
Common Shares. Since September 8, 1996, the Company has not issued
any shares of capital stock except pursuant to the exercise of
Options outstanding as of such date. All the outstanding Common
Shares are, and all Common Shares which may be issued pursuant to
the exercise of outstanding Options will be, when issued in
accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and nonassessable. There are no bonds,
debentures, notes or other indebtedness having general voting
rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth above and except for the
transactions contemplated by this Agreement, there are no existing
options, warrants, calls, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of the Company or any of
its Subsidiaries, obligating the Company or any of its Subsidiaries
to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity
interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity
interests, and neither the Company nor any of its Subsidiaries is
obligated to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or
commitment. Except as contemplated by this Agreement and except
for the Company's obligations in respect of the Options under the
Thermal Industries, Inc. Stock Option and Incentive Plan of 1996
(the "Option Plan"), there are no outstanding contractual
obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Common Shares or the
capital stock of the Company or any of its Subsidiaries. Each of
the outstanding shares of capital stock of each of the Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable,
and such shares of the Subsidiaries as are owned by the Company or
any of its Subsidiaries are owned in each case free and clear of
any lien, claim, option, charge, security interest, limitation,
encumbrance and restriction of any kind (any of the foregoing being
a "Lien").
SECTION 3.04 Authority Relative to this Agreement. The
Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly
authorized and approved by the Board and no other corporate
proceedings on the part of the Company are necessary to authorize
or approve this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the
approval and adoption of the Merger and this Agreement by the
affirmative vote of the holders of a majority of the Common Shares
then outstanding, to the extent required by applicable law). This
Agreement has been duly and validly executed and delivered by the
Company and, assuming the due and valid authorization, execution
and delivery of this Agreement by Parent and the Merger Sub,
constitutes a valid and binding obligation of the Company en-
forceable against the Company in accordance with its terms, except
that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is
subject to general principles of equity.
SECTION 3.05 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement
by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the
provisions hereof will (i) conflict with or violate the Certificate
of Incorporation or By-Laws of the Company or comparable
organizational documents of any of the Subsidiaries, (ii) conflict
with or violate any statute, ordinance, rule, regulation, order,
judgment or decree applicable to the Company or any of the
Subsidiaries, or by which any of them or any of their respective
properties or assets may be bound or affected, or (iii) result in
a violation or breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in any loss of any
material benefit, or the creation of any Lien on any of the
properties or assets of the Company or any of the Subsidiaries (any
of the foregoing referred to in clause (ii) or this clause (iii)
being a "Violation") pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the
Subsidiaries or any of their respective properties may be bound or
affected.
(b) None of the execution and delivery of this Agreement
by the Company, the consummation by the Company of the transactions
contemplated hereby or compliance by the Company with any of the
provisions hereof will require any consent, waiver, approval,
authorization or permit of, or registration or filing with or
notification to (any of the foregoing being a "Consent"), any
government or subdivision thereof, domestic, foreign or supra-
national or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign
or supranational (a "Governmental Entity"), except for (i) com-
pliance with any applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (ii) the filing of a
certificate of merger, or, if permitted, a certificate of ownership
and merger, pursuant to the BCL and the DGCL, (iii) certain state
takeover and environmental statutes, and (iv) compliance with the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and any requirements of any foreign or
supranational Antitrust Laws (as hereinafter defined).
SECTION 3.06 SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms,
reports, schedules, registration statements and definitive proxy
statements required to be filed by the Company with the SEC since
June 30, 1996 (the "SEC Reports"). As of their respective dates,
the SEC Reports complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act") and the rules and regulations of the
SEC promulgated thereunder applicable, as the case may be, to such
SEC Reports, and none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading.
(b) The consolidated balance sheets as of June 30, 1996,
1995 and 1994 and the related consolidated statements of income,
common stockholder's equity and cash flows for each of the five
years in the period ended June 30, 1996 (including the related
notes and schedules thereto) of the Company contained in the Form
10-Ks for the years ended June 30, 1996 (the "1996 Form 10-K"),
1995 and 1994 included in the SEC Reports present fairly the
consolidated financial position and the consolidated results of
operations and cash flows of the Company and its consolidated
subsidiaries as of the dates or for the periods presented therein
in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis during the
periods involved except as otherwise noted therein, including the
related notes.
(c) The consolidated balance sheets and the related
statements of income and cash flows (including in each case the
related notes thereto) of the Company contained in the Forms 10-Q
for the period ended September 30, 1996 included in the SEC Reports
(collectively, the "Quarterly Financial Statements") have been
prepared in accordance with the requirements for interim financial
statements contained in Regulation S-X, which do not require all
the information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. The
Quarterly Financial Statements reflect all adjustments, which
include only normal recurring adjustments, necessary to present
fairly the consolidated financial position, results of operations
and cash flows of the Company for all periods presented.
SECTION 3.07 Information. None of the information set forth
in the Company Disclosure Statement or supplied by the Company in
writing specifically for inclusion or incorporation by reference in
(i) the Proxy Statement or (ii) any other document to be filed with
the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement (the "Other Filings")
will, at the respective times filed with the SEC or other
Governmental Entity and, in addition, in the case of the Proxy
Statement, at the date it or any amendment or supplement is mailed
to stockholders, at the time of the Stockholders' Meeting and at
the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and
regulations thereunder, except that no representation is made by
the Company with respect to statements made therein based on
information supplied by Parent or the Merger Sub in writing
specifically for inclusion in the Proxy Statement.
SECTION 3.08 [Intentionally Omitted].
SECTION 3.09 Brokers. None of the Company, any of the
Subsidiaries, or any of their respective officers, directors or
employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement.
SECTION 3.10 Material Adverse Effect. There have been no
events, conditions, developments or states of fact which singly or
in the aggregate since June 30, 1996 have had or threaten to have
a Material Adverse Effect on the Company that were not disclosed in
the Company Disclosure Statement or in any of the reports filed
with the SEC as described in Section 3.06. Since June 30, 1996,
the Company has not taken any action or agreed to take any action
that the Company is prohibited from taking after the date hereof by
Section 5.01. The term "Material Adverse Effect on the Company", as used in
this Agreement, means any change in or effect on the business, assets,
operations, financial condition or results of operations of the Company or
any of the Subsidiaries that is materially adverse to the Company and the
Subsidiaries taken as a whole.
SECTION 3.11 Litigation. Except as may be disclosed in the
SEC Reports (as defined in Section 3.06(a) hereof), there are no
actions, proceedings or investigations pending or, to the best of
the Company's knowledge, threatened against the Company or the
Subsidiaries before any court or governmental or regulatory
authority or body. Neither the Company nor the Subsidiaries nor
any of their assets is subject to any order, judgment, injunction
or decree.
SECTION 3.12 Absence of Certain Changes or Events. Since
June 30, 1996 (a) there has been no event or occurrence which has
or could reasonably be expected to have a Material Adverse Effect
on the Company; (b) neither the Company nor any Subsidiary has
incurred any indebtedness for money borrowed; (c) neither the
Company nor any Subsidiary has assumed, guaranteed, endorsed or
otherwise became responsible for the obligations of any other
individual, firm or corporation, other than any obligation relating
to existing co-insurance programs and the endorsement of checks for
collection in the ordinary and usual course of business; (d) there
has been no creation or assumption by the Company or any Subsidiary
of any Lien on any asset; (e) there has been no loan, advance or
capital contribution to or investment in any person by the Company
or any Subsidiary; (f) neither the Company nor any Subsidiary has
entered into any contract, lease, commitment or transaction with
any officer, director or any affiliate (as defined in Rule 405 of
the SEC promulgated under the Securities Act) of the Company or any
Subsidiary (other than pursuant to consulting or employment
agreements or other employee benefit arrangements disclosed on the
Company Disclosure Statement); (g) there has been no transaction or
commitment made, or any contract or agreement entered into, by the
Company or any Subsidiary relating to its assets or business
(including the acquisition or disposition of any assets) or any
relinquishment by the Company or any Subsidiary of any contract or
other right, which in either case is material to the Company and
the Subsidiaries taken as a whole (other than transactions,
commitments and relinquishments contemplated by this Agreement and
other than sales of inventory in the ordinary and usual course of
business and other than investments of a capital nature in the
ordinary and usual course of business); (h) neither the Company nor
any Subsidiary has purchased or leased any real property; (i)
neither the Company nor any Subsidiary has leased any equipment or
property other than in the ordinary and usual course of business;
(j) there has been no change in any method of accounting or
accounting practice by the Company or the Subsidiaries; (k) there
has been no grant (whether or not in writing and whether formal or
informal) of any severance or termination pay to any current or
former officer or employee of the Company or any Subsidiary, any
employment, bonus, profit sharing, pension, retirement, deferred
compensation, fringe benefit, or other similar agreement with or
plan or program for (or, except as required by law, any amendment,
formal or informal, to any such existing agreement with or plan or
program for) any current or former officer, director, employee or
consultant of the Company or any Subsidiary, any increase in
benefits payable under any existing severance or termination pay
policies, employment agreements, or deferred compensation or fringe
benefit plan or program or any increase in compensation, bonus or
other benefits payable, or to become payable, to officers,
directors, employees or consultants of the Company or any
Subsidiary other than increases in benefits to non-officer
employees of the Company in the ordinary course of business in
accordance with past practices; (l) there has been no repurchase,
redemption or other acquisition by the Company or any Subsidiary of
any outstanding shares of capital stock or other ownership interest
of the Company or any Subsidiary; (m) there has been no declaration
or payment of any dividend on, or other distribution with respect
to, any capital stock of the Company or any Subsidiary; and (n)
neither the Company nor any Subsidiary has entered into any other
transaction other than in the ordinary course of business.
SECTION 3.13 Employee Benefit Plans.
(a) The Company Disclosure Statement sets forth a true
and complete list of all Plans (as defined below) maintained or
sponsored by the Company or any Subsidiary, contributed to by the
Company or any Subsidiary, to which the Company or any Subsidiary
is obligated to contribute or with respect to which the Company or
any Subsidiary has any liability or potential liability, whether
direct or indirect, including all Plans contributed to, maintained
or sponsored by any member of the controlled group of companies,
within the meaning of Sections 414(b) and 414(c) of the Internal
Revenue Code of 1986, as amended (the "Code"), of which the Company
and/or any Subsidiary is or ever was a member (the "Company
Controlled Group") (to the extent that the Company or any
Subsidiary has any liability or potential liability with respect to
such Plans). For purposes of this Agreement, the term "Plans"
shall mean: (i) employee benefit plans as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not funded and whether or not terminated,
(ii) employment agreements, and (iii) personnel policies or fringe
benefit plans, policies, programs and arrangements, whether or not
subject to ERISA, whether or not funded, whether or not terminated,
and whether or not covering employees residing in the United
States, including without limitation, stock bonus, stock option,
stock appreciation right, stock purchase, "phantom stock," deferred
compensation, pension, profit sharing, savings, severance, bonus,
vacation, incentive, travel, and health, disability and welfare
plans. Neither the Company nor any Subsidiary has any commitment,
whether formal or informal, to create any additional employee
benefit plans, or to modify any existing Plan except as may be
required to conform to changes in applicable law.
(b) Neither the Company nor any Subsidiary has within
the last five years participated in, contributed to or been
obligated to contribute to any "multiemployer plan", as such term
is defined in Section 3(37) of ERISA ("Multiemployer Plan"), nor
does the Company or any Subsidiary have any other liability or
potential liability with respect to any Multiemployer Plan or with
respect to any employee benefit plan of the type described in
Section 4063 and 4064 of ERISA or in Section 413(c) of the Code
(and regulations promulgated thereunder).
(c) Neither the Company nor any Subsidiary maintains,
contributes to, has any obligation to contribute to or has any
other liability or potential liability with respect to any Plan
that is a defined benefit pension plan or that is subject to the
funding requirements of Section 412 of the Code and Section 302 of
ERISA, whether or not such Plan has been terminated. There has
been no complete or partial termination of any Plan which could
result in any liability to the Company or any Subsidiary.
(d) Neither the Company nor any Subsidiary maintains or
has any obligation to contribute to (or has any other liability or
potential liability with respect to) any Plan which provides
health, life insurance, accident or other "welfare-type" benefits
to current or future retirees, current or future former employees,
current or future former independent contractors, or the spouses,
dependents or beneficiaries thereof, other than in accordance with
Section 4980B of the Code, Sections 601 et seq. of ERISA, and/or
other applicable continuation coverage law.
(e) None of the Plans obligates the Company or the
Subsidiaries to pay separation, severance, termination or similar-type benefits
solely as a result of any transaction contemplated by
this Agreement or solely as a result of a "change in control", as
such term is defined in Section 280G of the Code.
(f) With respect to each Plan, all required or
recommended (in accordance with historical practices) payments,
premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Effective Time shall have been made or
properly accrued. No Plan has any unfunded liabilities.
(g) Each Plan and all related trusts, insurance
contracts and funds have been maintained, funded, and administered
in compliance in all respects with all applicable laws and
regulations, including but not limited to ERISA and the Code.
Neither the Company nor any Subsidiary has incurred, or expects to
incur, any liability to the Internal Revenue Service ("IRS"), the
Department of Labor, any other governmental (whether of the United
States or otherwise) agency, or any person with respect to any Plan
currently or previously maintained by members of the Company
Controlled Group that has not been satisfied in full, and no
condition exists that presents a risk to the Company and/or the
Subsidiaries or any other member of the Company Controlled Group of
incurring such a liability (other than liability for routine
benefit claims). None of the Company, any Subsidiary, any trustee
or administrator of any Plan, or other person has engaged in any
transaction with respect to the Plans which could subject the
Company, any Subsidiary, or any trustee or administrator of the
Plans, or any party dealing with any Plan, to any tax or penalty
(civil or otherwise) imposed by ERISA, the Code or other applicable
law. No actions, investigations, suits or claims with respect to
the Plans (other than routine claims for benefits) or any fiduciary
or other person dealing with such Plans are pending or threatened
and the Company has no knowledge of any facts which could give rise
to or be expected to give rise to any such actions, investigations,
suits or claims.
(h) No prohibited transaction within the meaning of
Section 4975 of the Code or Section 406 of ERISA has occurred with
respect to any Plan.
(i) No Plan is intended to be qualified under Section
401(a) of the Code.
(j) No underfunded defined benefit plan has been, during
the five years preceding the Effective Time, transferred out of the
Company Controlled Group.
(k) With respect to each Plan, the Company has provided
Parent with true, complete and correct copies, to the extent
applicable, of all documents pursuant to which the Plans are
maintained, funded and administered.
SECTION 3.14 Material Contracts and Other Agreements. The
Company Disclosure Statement sets forth a complete and accurate
list of the following contracts and commitments to which the
Company or any Subsidiary is a party or by which any of their
respective properties are bound: (a) collective bargaining
agreements and contracts with any labor union; (b) employment or
consulting agreements or any agreements providing for severance,
termination or similar payments; (c) leases, whether as lessor or
lessee, involving personal property with annual rental payments in
excess of $25,000; (d) loan agreements, mortgages, indentures,
instruments or other evidence of indebtedness or commitments (other
than letters of credit issued in the ordinary course of business
pursuant to existing credit agreements in respect of inventory
purchases) in each case involving indebtedness (or available
credit) for borrowed money or money lent to others; (e) guaranty or
suretyship, performance bond, indemnification or contribution
agreements; (f) written contracts with customers or suppliers that
require aggregate payments to or from the Company or its
Subsidiaries of more than $50,000 in any one-year period, other
than contracts issued in the ordinary and usual course of business
or terminable with 30 days or less notice without premium or
penalty; (g) joint venture, partnership, or other agreements
evidencing an ownership interest or a participation in or sharing
of profits; (h) agreements, contracts or commitments limiting the
freedom of the Company or any of the Subsidiaries to engage in any
line of business or compete with any other corporation,
partnership, joint venture, company or individual, (i) contracts
that are terminable, or under which payments by the Company or any
Subsidiary may be accelerated, upon a change in control of the
Company, (j) written contracts with distributors of the Company's
or any of the Subsidiaries' products, and (k) any other agreements
material to the Company and its Subsidiaries taken as a whole. The
Company has furnished or made available accurate and complete
copies of the foregoing contracts and agreements to Parent. The
termination of any oral agreement or understanding to which the
Company or a Subsidiary is a party of the type described in
Sections 3.14(f) and 3.14(j) above would not, to the Company's
knowledge, have a Material Adverse Effect on the Company. Each
such oral agreement or understanding is terminable by the Company
or a Subsidiary, as the case may be, without premium or penalty.
As to each contract and commitment referred to above (i) there
exists no breach or default, and no event has occurred which with
notice or passage of time would constitute such a breach or default
or permit termination, notification or acceleration, on the part of
the Company or any Subsidiary or, to the best knowledge of the
Company, on the part of any third party and (ii) as of the
Effective Time, no third party consent, approval or authorization
shall be required for the consummation of the Transactions. This
Section 3.14 does not relate to real property, such items being the
subject of Section 3.15.
SECTION 3.15 Real Estate Leases. The Company Disclosure
Statement sets forth a list of (a) all leases and subleases under
which the Company or the Subsidiaries is lessor or lessee of any
real property together with all amendments, supplements,
nondisturbance agreements and other agreements pertaining thereto;
(b) all options held by the Company or the Subsidiaries or
contractual obligations on the part of the Company or the Subsid-
iaries to purchase or acquire any interest in real property; and
(c) all options granted by the Company or the Subsidiaries or
contractual obligations on the part of the Company or the Subsid-
iaries to sell or dispose of any interest in real property. Except
as set forth in the Company Disclosure Statement, as to such
leases, subleases and other agreements referred to above, (i) there
exists no breach or default, and no event has occurred which with
notice or passage of time would constitute such a breach or default
or permit termination, notification or acceleration, on the part of
the Company or any Subsidiary, or on the part of any other party
thereto, and (ii) as of the Effective Time, no material third party
consent, approval or authorization shall be required for the
consummation of the Merger. To the Company's knowledge, there are
no Liens on any of the leasehold interests set forth on the Company
Disclosure Statement hereof except for (i) Liens reflected in the
balance sheet included in the 1996 Form 10-K, (ii) Liens of record
consisting of zoning or planning restrictions, easements, permits
and other restrictions or limitations on the use of real property
which do not materially detract from the value of, or materially
impair the use of, such property by the Company or the Subsidiaries
in the operation of their respective businesses, (iii) Liens for
current Taxes (as defined in Section 3.22(a)), assessments or
governmental charges or levies on property not yet delinquent or
being contested in good faith and for which appropriate reserves
have been established in accordance with GAAP (which contested
levies are described on the Company Disclosure Statement), and
(iv) Liens imposed by law, such as materialman's, mechanic's,
carrier's, workers' and repairmen's Liens securing obligations not
yet delinquent or being contested in good faith and for which
appropriate reserves have been established in accordance with GAAP
or securing obligations not being paid in the ordinary course of
business in accordance with customary and commercially reasonable
practice. (collectively, "Permitted Liens").
SECTION 3.16 Real Property. The Company Disclosure
Statement lists all real property owned by the Company and the
Subsidiaries. Each of the Company and the Subsidiaries has good
and marketable title in fee simple to its respective real
properties set forth on the Company Disclosure Statement, in each
case, to the Company's knowledge, free and clear of all Liens,
except for Permitted Liens.
SECTION 3.17 Compliance with Laws. The Company and the
Subsidiaries have complied and, to the Company's knowledge, are in
compliance with applicable federal, state or local statutes, laws
and regulations including, without limitation, any applicable
building, zoning, health, sanitation, safety, labor relations or
other law, ordinance or regulation. Neither the Company nor any
Subsidiary has (a) failed to obtain any license, permit, franchise
or other governmental authorization which is necessary to the
operations of the business of the Company and the Subsidiaries,
taken as a whole, or (b) received any notice of any alleged
violation or breach of any law or regulation or of any license,
permit, franchise or authorization.
SECTION 3.18 Proprietary Rights. The Company Disclosure
Statement contains a complete and accurate list of all patents and
patent applications; all trademarks, service marks, trade dress,
trade names, internet domain names and corporate names; all
registered copyrights and all material unregistered copyrights; all
registrations, applications and renewals for any of the foregoing;
owned by the Company or the Subsidiaries or in which any of them
has any rights and all contracts, agreements and licenses relating to any of
the foregoing. All right, title and interest in and to each of the foregoing is
owned by the party identified on the Company Disclosure Schedule,
free and clear of any Liens or royalty obligations. The Company
and each Subsidiary owns all right, title and interest in and to,
or has a valid and enforceable license to use, free and clear of
all Liens, all patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to
practice), trademarks, trade names, service marks, internet domain
names, copyrights, mask works, and registrations, applications and
renewals for any of the foregoing, trade secrets and confidential
information (including, but not limited to know-how and formulas),
computer software and other intellectual property rights necessary
for the conduct of their respective businesses as now being
conducted (collectively, the "Proprietary Rights"). To the
Company's knowledge, neither the Company nor any Subsidiary has
infringed or is infringing on any Proprietary Rights belonging to
any other person, firm or corporation. Neither the Company nor any
of the Subsidiaries has granted any licenses with respect to any of
their respective Proprietary Rights. Neither the Company nor any
of the Subsidiaries has received any notice, nor does the Company
or any of the Subsidiaries have any knowledge of any infringement
or misappropriation by or misuse or conflict with respect to the
use of its corporate name or any of its Proprietary Rights or of
any facts which indicate a likelihood of any of the foregoing. The
validity of the Proprietary Rights and the Company's or any
Subsidiary's title thereto is not being questioned in any suit,
action, investigation, legal, administrative or other proceeding to
which the Company or any Subsidiary is a party or, to the Company's
knowledge, to which any other person is a party nor, to the
Company's knowledge, is any such suit, action, investigation,
legal, administrative or other proceeding threatened. The
consummation of the Merger will not adversely affect the Company's
or any Subsidiary's title and interest in and to the Proprietary
Rights.
SECTION 3.19 No Undisclosed Liabilities. There is no
liability or obligation of the Company or any Subsidiary of any
nature, whether absolute, accrued, contingent or otherwise other
than: (a) the liabilities and obligations reflected on the June
30, 1996 consolidated balance sheet contained in the Quarterly
Financial Statements (the "June Balance Sheet"); (b) all
liabilities and obligations of the Company and the Subsidiaries
incurred since June 30, 1996 in the ordinary and usual course of
business; and (c) any liabilities and obligations relating to
contracts not yet required to be performed.
SECTION 3.20 Title to Personal Property. Each of the
Company and the Subsidiaries has good title to or a valid and
enforceable leasehold interest in all personal property material to
the operation of its business, free and clear of all Liens other
than Permitted Liens.
SECTION 3.21 Labor Relations. There is (a) no unfair labor
practice complaint, grievance or arbitration pending or, to the
best knowledge of the Company, threatened against the Company or
any Subsidiary, (b) no strike, labor dispute, slowdown or stoppage
pending or, to the best knowledge of the Company, threatened
against the Company or any Subsidiary and (c) to the best knowledge
of the Company, no labor union organizing campaign in progress with
respect to any employees of the Company or the Subsidiaries or no
intention of any labor organization to initiate any such campaign.
SECTION 3.22 Taxes and Tax Returns.
(a) All United States federal and state income and other
Tax returns and reports required to be filed by the Company and the
Subsidiaries on or before the Effective Time (including extensions
to the due date for such returns) with respect to the business or
assets of the Company and the Subsidiaries have been or will be
duly filed and all federal, state, local and foreign taxes of any
kind ("Taxes") shown to be due on such returns and all other
returns filed by the Company and the Subsidiaries have been paid or
will be paid when due, except such Taxes as are being contested in
good faith by appropriate proceedings and for which adequate
reserves have been established;
(b) neither the Company nor the Subsidiaries has been
notified in writing by any taxing authority, or otherwise has any
knowledge, of any pending actions, suits, claims or assessments for
any tax deficiency for which the Company or the Subsidiaries might
have any liability for Taxes in excess of $25,000;
(c) all U.S. federal and state income tax returns
referred to in (a) above filed through the year ended June 30, 1993
have been examined and closed, or the periods during which any tax
due with respect to such returns may be assessed have expired
without extension or waiver;
(d) no consent has been or will be filed with respect to
the Company or the Subsidiaries relating to Section 341(f) of the
Internal Revenue Code;
(e) neither the Company nor the Subsidiaries is a party
to any Tax indemnity or Tax sharing agreement;
(f) there are no liens for Taxes (other than for Taxes
not yet due) on any assets of the Company or the Subsidiaries;
(g) neither the Company nor any of the Subsidiaries will
be required (i) as a result of a change in method of accounting or
a taxable period ending on or prior to the Effective Time, to
include any adjustment under Section 481(c) of the Code (or any
similar or corresponding provision of federal, state, local or
foreign income Tax law) in taxable income for any taxable period
ending after the Effective Time or (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law),
to include any item of income in or exclude any item of deduction
from any taxable period ending after the Effective Time;
(h) neither the Company nor any of the Subsidiaries has
been a member of an affiliated group (as defined in Section 1504 of
the Code) other than one of which the Company was the common
parent, or filed or been included in a combined, consolidated or
unitary income Tax Return, other than one filed by the Company; and
(i) neither the Company nor any of the Subsidiaries has
made any payments, or is or will become obligated (under any
contract entered into on or before the Effective Time) to make any
payments, that will be non-deductible under Section 280G of the
Code (or any corresponding provision of state, local or foreign
income Tax law).
SECTION 3.23 Environmental Matters.
(a) Compliance Generally. The Company and the
Subsidiaries have complied and are in compliance with all
Environmental and Safety Requirements (as defined in Section
3.23(j)).
(b) Permits. The Company and the Subsidiaries have
obtained and complied with, and are in compliance with, all
permits, licenses and other authorizations that are required
pursuant to Environmental and Safety Requirements for the
occupation of its facilities and the operation of their business,
and such permits, licenses and other authorizations may be relied
upon for continued lawful conduct of the business and operations of
the Company and its Subsidiaries immediately after the Effective
Time without transfer, reissuance, or other approval or action by
any governmental entity or other person.
(c) Claims. The Company and the Subsidiaries have not
received any claim, complaint, citation, report or other notice
regarding any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations,
arising under Environmental and Safety Requirements.
(d) Storage Tanks, Asbestos, PCBs. No above-ground or
underground storage tank, asbestos in any form or condition, or
polychlorinated biphenyls(PCBs) exists at any property owned,
used, leased or occupied or formerly owned, used, leased or
occupied in connection with the business or operation of the
Company and its Subsidiaries.
(e) Certain Environmental Liabilities. The Company and
the Subsidiaries have not stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any
substance, including without limitation any hazardous substance,
pollutant, contaminant or waste, or owned or operated any facility
or property, so as to give rise to liabilities of the Company and
its Subsidiaries pursuant to the Environmental and Safety
Requirements, including without limitation any liability for
response costs, corrective action, natural resources damages,
personal injury, property damage or attorneys fees.
(f) Operations. No facts, events or conditions relating
to the past or present facilities, properties or operations of the
Company and the Subsidiaries will prevent, hinder or limit
continued compliance with Environmental and Safety Requirements,
give rise to any investigatory, remedial or corrective obligations
pursuant to Environmental and Safety Requirements, or give rise to
any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including any Environmental and Safety Requirement
relating to onsite or offsite releases or threatened releases of
hazardous or otherwise regulated materials, substances or wastes,
personal injury, property damage or natural resources damage.
(g) Transaction-Triggered Requirements. Neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated herein imposes any obligations for
site investigation or cleanup, or notification to or consent of
governmental entity or any other person, pursuant to any
"transaction-triggered" Environmental and Safety Requirement.
(h) Liability for Others. The Company and the
Subsidiaries have not, either expressly or by operation of law,
assumed or undertaken any liability or corrective or remedial
obligation of any other person relating to Environmental and Safety
Requirements.
(i) Environmental Liens. No Environmental Lien (as
defined below) has attached to any property owned, leased or
operated by the Company and the Subsidiaries arising out of any
action or omission of the Company and the Subsidiaries or, to the
Company's knowledge, any other person.
(j) "Environmental and Safety Requirements" means all
legal requirements, and all obligations under any contract,
concerning public health and safety, worker health and safety, or
pollution or protection of the environment, including all those
relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release,
control, or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise
or radiation.
(k) "Environmental Lien" means any Lien, either recorded
or unrecorded, in favor of any governmental entity and relating to
any liability arising under Environmental and Safety Requirements.
SECTION 3.24 Accounts Receivable. All of the notes and
accounts receivable of the Company and the Subsidiaries reflected
on the face of the June Balance Sheet are, and all notes and
accounts receivable of the Company and the Subsidiaries as of the
Effective Time will be, good and valid receivables and, to the best
knowledge of the Company, collectible after the Effective Time at
the aggregate amount recorded therefor on the books and records of
the Company as of the Effective Time (net of allowance for doubtful
accounts in an amount not to exceed $100,000).
SECTION 3.25 Inventory. All inventory of the Company and the
Subsidiaries reflected on the face of the June Balance Sheet is,
and all inventory of the Company and the Subsidiaries as of the
Effective Time will be, in accordance with the Company's past
custom and practice, merchantable and fit for the purpose for which
it was procured or manufactured and is and as of the Effective Time
will be, to the best knowledge of the Company, useable for the
purpose for which such inventory was acquired or produced by the
Company.
SECTION 3.26 Product and Service Warranty. Each product
sold or delivered and each service rendered by the Company and the
Subsidiaries with respect to any such product has been in
conformity with all applicable contractual commitments and all
express and implied warranties of the Company and the Subsidiaries.
No product sold or delivered or service rendered by the Company or
the Subsidiaries with respect to any such product is subject to any
guaranty, warranty or other indemnity beyond the applicable
standard terms and conditions with respect thereto. Prior to the
date hereof, the Company and the Subsidiaries have delivered to
Parent copies of the standard terms and conditions of sale for
products delivered and services rendered by the Company and the
Subsidiaries with respect thereto (containing all applicable
guaranty, warranty and indemnity provisions).
SECTION 3.27 Effective Time. The representations and
warranties of the Company and the Subsidiaries contained in this
Article 3 and elsewhere in this Agreement and all information
contained in any exhibit, schedule, or attachment hereto or in any
certificate or other writing delivered by, or on behalf of the
Company to Parent shall be true and correct on the date of the
Closing as though then made, except as affected by the transactions
expressly disclosed in writing to Parent by the Company prior to
the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE MERGER SUB
Parent and the Merger Sub represent and warrant to the Company
as follows:
SECTION 4.01 Organization and Qualification. Parent is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware and each material subsidiary of Parent
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
The Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
Parent and each of its subsidiaries (including the Merger Sub) has
the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now
being conducted, and is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction in which the nature
of its business or the properties owned, operated or leased by it
makes such qualification, licensing or good standing necessary.
The term "Material Adverse Effect on Parent", as used in this
Agreement, means any change in or effect on the business, assets,
operations, financial condition or results of operations of Parent
or any of its subsidiaries that would be materially adverse to
Parent and its subsidiaries taken as a whole.
SECTION 4.02 Authority Relative to this Agreement. Each of
Parent and the Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and the Merger Sub and the consummation
by Parent and the Merger Sub of the transactions contemplated
hereby have been duly and validly authorized and approved by the
Boards of Directors of Parent and the Merger Sub and by Parent as
stockholder of the Merger Sub and no other corporate proceedings on
the part of Parent or the Merger Sub are necessary to authorize or
approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Merger Sub and, assuming the
due and valid authorization, execution and delivery by the Company,
constitutes a valid and binding obligation of each of Parent and
the Merger Sub enforceable against each of them in accordance with
its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to the enforcement of creditor's rights generally and
(ii) is subject to general principles of equity.
SECTION 4.03 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement
by Parent or the Merger Sub, the consummation by Parent or the
Merger Sub of the transactions contemplated hereby or compliance by
Parent or the Merger Sub with any of the provisions hereof will (i)
conflict with or violate the organizational documents of Parent or
the Merger Sub, (ii) conflict with or violate any statute,
ordinance, rule, regulation, order, judgment or decree applicable
to Parent or the Merger Sub, or any of their subsidiaries, or by
which any of them or any of their respective properties or assets
may be bound or affected, or (iii) result in a Violation pursuant
to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to
which Parent or the Merger Sub, or any of their subsidiaries, is a
party or by which any of their respective properties or assets may
be bound or affected, except in the case of the foregoing clauses
(ii) and (iii) for any such Violations which would not have a
Material Adverse Effect on Parent or materially adversely affect
the ability of Parent or the Merger Sub to consummate the
transactions contemplated hereby.
(b) None of the execution and delivery of this Agreement
by Parent and the Merger Sub, the consummation by Parent and the
Merger Sub of the transactions contemplated hereby or compliance by
Parent and the Merger Sub with any of the provisions hereof will
require any Consent of any Governmental Entity, except for (i) com-
pliance with any applicable requirements of the Exchange Act,
(ii) the filing of a certificate of merger, or, if permitted, a
certificate of ownership and merger, pursuant to the BCL and the
DGCL, (iii) notifications required by certain state takeover and
environmental statutes and (iv) Consents the failure of which to
obtain or make would not have a Material Adverse Effect on Parent
or materially adversely affect the ability of Parent or the Merger
Sub to consummate the transactions contemplated hereby.
SECTION 4.04 Information. None of the information supplied
or to be supplied by Parent and the Merger Sub in writing
specifically for inclusion in (i) the Proxy Statement or (ii) the
Other Filings will, at the respective times filed with the SEC or
such other Governmental Entity and, in addition, in the case of the
Proxy Statement, at the date it or any amendment or supplement is
mailed to stockholders, at the time of the Stockholders' Meeting
and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading.
SECTION 4.05 Financing. Parent is wholly-owned by H.I.G.
Investment Group, L.P. ("HIG"), a private equity fund which
currently has under management in excess of $150 million in equity
including sufficient funds to cause Parent to satisfy its payment
obligations in respect of the Merger Price in accordance with the
terms hereof. In connection with the transactions contemplated in
this Agreement, HIG and NationsCredit have issued commitment
letters to Parent to provide funds sufficient to pay the Merger
Price, true and correct copies of which have been delivered to the
Company simultaneous with execution of this Agreement. HIG has
contributed not less than $1,000,000 in immediately available funds
to Parent, which funds Parent shall hold and shall be available to
satisfy amounts (if any) which may be owed to the Company by Parent
or the Merger Sub pursuant to Section 7.02; it being understood
that, other than the $1,000,000 contribution to Parent made
pursuant to this Section 4.05, HIG and its affiliates (other than
Parent) shall have no liability in the event of any termination of
this Agreement pursuant to Section 7.01 and none of the Company nor
any of its affiliates, stockholders, directors or representatives
shall assert any claims, proceedings or action against HIG or any
of its affiliates (other than Parent) in connection with such
termination.
ARTICLE V
COVENANTS
SECTION 5.01 Conduct of Business of the Company. Except as
contemplated by this Agreement or with the prior written consent of
Parent, during the period from the date of this Agreement to the
Effective Time, the Company will, and will cause each of the
Subsidiaries to, conduct its operations only in the ordinary and
usual course of business consistent with past practice and will use
its reasonable efforts, and will cause each of the Subsidiaries to
use its reasonable efforts, to preserve intact the business
organization of the Company and each of the Subsidiaries, to keep
available the services of its and their present officers and key
employees, and to preserve the good will of those having business
relationships with it. Without limiting the generality of the
foregoing, and except as otherwise contemplated by this Agreement,
the Company will not, and will not permit any of the Subsidiaries
to, prior to the Effective Time, without the prior written consent
of Parent:
(a) adopt any amendment to its charter or By-Laws or
comparable organizational documents;
(b) except for issuances of capital stock of the
Subsidiaries to the Company or a wholly-owned Subsidiary, issue,
reissue, pledge or sell, or authorize the issuance, reissuance,
pledge or sale of (i) additional shares of capital stock of any
class, or securities convertible into capital stock of any class,
or any rights, warrants or options to acquire any convertible
securities or capital stock, other than the issuance of Common
Shares, in accordance with the terms of the instruments governing
such issuance on the date hereof, pursuant to the exercise of
options outstanding on the date hereof, or (ii) any other
securities in respect of, in lieu of, or in substitution for,
Common Shares outstanding on the date hereof;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any
combination thereof) in respect of any class or series of its
capital stock other than between any of the Company and any of its
wholly-owned Subsidiaries;
(d) split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, any shares of its capital stock, or any of its
other securities;
(e) except for increases in salary and wages granted to
officers and hourly employees of the Company or the Subsidiaries in
conjunction with promotions or other changes in job status or
normal compensation reviews in the ordinary course of business
consistent with past practice, increase the compensation or fringe
benefits payable or to become payable to its directors, officers or
employees (whether from the Company or any of the Subsidiaries), or
pay or award any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock
options, stock appreciation rights, shares of restricted stock or
performance units pursuant to the Option Plan or otherwise) or
grant any additional severance or termination pay to (other than as
required by existing agreements or policies described in the
Company Disclosure Statement), or enter into any employment or
severance agreement with, any director, officer or other employee
of the Company or any of the Subsidiaries or establish, adopt,
enter into, amend or waive any performance or vesting criteria
under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund,
policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees (any of the foregoing being
an "Employee Benefit Arrangement"), except in each case to the
extent required by applicable law or regulation; provided, however,
that nothing herein will be deemed to prohibit the payment of
benefits as they become payable;
(f) except as set forth in the Company Disclosure
Schedule, acquire, sell, lease or dispose of any assets or
securities which are material to the Company and the Subsidiaries,
or enter into any commitment to do any of the foregoing or enter
into any material commitment or transaction outside the ordinary
course of business consistent with past practice other than
transactions between a wholly owned Subsidiary and the Company or
another wholly owned Subsidiary;
(g) except as set forth in the Company Disclosure
Schedule (i) incur, assume or pre-pay any long-term debt or incur
or assume any short-term debt, except that the Company and the
Subsidiaries may incur or pre-pay debt in the ordinary course of
business in amounts and for purposes consistent with past practice
under existing lines of credit, (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person
except in the ordinary course of business consistent with past
practice, or (iii) make any loans, advances or capital
contributions to, or investments in, any other person except in the
ordinary course of business consistent with past practice and
except for loans, advances, capital contributions or investments
between any wholly owned subsidiary of the Company and the Company
or another wholly owned Subsidiary; or
(h) settle or compromise any suit or claim or threatened
suit or claim;
(i) other than in the ordinary course of business
consistent with past practice, (i) modify, amend or terminate any
contract, (ii) waive, release, relinquish or assign any contract
(or any of the Company's rights thereunder), right or claim, or
(iii) cancel or forgive any indebtedness owed to the Company or any
of the Subsidiaries; provided, however, that the Company may not
under any circumstance waive or release any of its rights under any
confidentiality agreement to which it is a party;
(j) make any Tax election not required by law or settle
or compromise any Tax liability, in either case that is material to
the Company and the Subsidiaries; or
(k) agree in writing or otherwise to take any of the
foregoing actions prohibited under Section 5.01 or any action which
would cause any representation or warranty in this Agreement to be
or become untrue or incorrect in any material respect.
SECTION 5.02 Access to Information. From the date of this
Agreement until the Effective Time, the Company will, and will
cause the Subsidiaries, and each of their respective officers,
directors, employees, counsel, advisors and representatives
(collectively, the "Company Representatives") to, give Parent and
the Merger Sub and their respective officers, employees, counsel,
advisors and representatives (collectively, the "Parent
Representatives") full access, during normal business hours, to the
offices and other facilities and to the books and records of the
Company and the Subsidiaries and will cause the Company
Representatives and the Subsidiaries to furnish Parent, the Merger
Sub and the Parent Representatives to the extent available with
such financial and operating data and such other information with
respect to the business and operations of the Company and the
Subsidiaries as Parent and the Merger Sub may from time to time -
request. In addition, Parent will comply with the terms of the
Confidentiality Agreement (as hereinafter defined).
SECTION 5.03 Reasonable Best Efforts. Subject to the terms
and conditions herein provided and to applicable legal
requirements, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, and to assist and cooperate with
the other parties hereto in doing, as promptly as practicable, all
things necessary, proper or advisable under applicable laws and
regulations to ensure that the conditions set forth in Article VI
are satisfied and to consummate and make effective the transactions
contemplated by this Agreement.
In addition, if at any time prior to the Effective Time
any event or circumstance relating to either the Company or Parent
or the Merger Sub or any of their respective subsidiaries, should
be discovered by the Company or Parent, as the case may be, the
discovering party will promptly inform the other party of such
event or circumstance. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes
of this Agreement, including the execution of additional
instruments, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
SECTION 5.04 Consents.
(a) Each of the parties will use its reasonable best
efforts to obtain as promptly as practicable all Consents of any
Governmental Entity or any other person required in connection
with, and waivers of any Violations that may be caused by, the
consummation of the transactions contemplated by this Agreement.
(b) In furtherance and not in limitation of the
foregoing, Parent shall use its best efforts to resolve such
objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement under any antitrust,
competition or trade regulatory laws, rules or regulations of any
domestic or foreign government or governmental authority
("Antitrust Laws"). If any suit is instituted challenging any of
the transactions contemplated by this Agreement as violative of any
Antitrust Law, Parent shall take such action (including, without
limitation, agreeing to hold separate or to divest any of the
businesses, product lines or assets of Parent or any of its
affiliates or of any of the Company, the Subsidiaries or
affiliates) as may be required (i) by the applicable government or
governmental (including, without limitation, the Antitrust Division
of the United States Department of Justice or the Federal Trade
Commission) in order to resolve such objections as such government
or authority may have to such transactions under such Antitrust
Law, or (ii) by any domestic or foreign court or similar tribunal,
in any suit brought by a private party or governmental or
multinational authority challenging the transactions contemplated
by this Agreement as violative of any Antitrust Law, in order to
avoid the entry of, or to effect the dissolution of, any in-
junction, temporary restraining order or other order that has the
effect of preventing the consummation of any of such transactions.
The entry by a court, in any suit brought by a private party or
governmental or multinational authority challenging the
transactions contemplated by this Agreement as violative of any
Antitrust Law, of an order or decree permitting the transactions
contemplated by this Agreement, but requiring that any of the
businesses, product lines or assets of any of Parent or its
affiliates, the Company or the Subsidiaries or affiliates be
divested or held separate by Parent, or that would otherwise limit
Parent's freedom of action with respect to, or its ability to
retain, the Company and the Subsidiaries or any portion thereof or
any of Parent's or its affiliates' other assets or businesses,
shall not be deemed a failure to satisfy the conditions specified
in Section 6.01(c) hereof.
(c) Any party hereto shall promptly inform the others of
any material communication from the United States Federal Trade
Commission, the Department of Justice or any other domestic or
foreign government or governmental or multinational authority re-
xxxxxxx any of the transactions contemplated by this Agreement. If
any party or any affiliate thereof receives a request for
additional information or documentary material from any such
government or authority with respect to the transactions
contemplated by this Agreement, then such party will endeavor in
good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an
appropriate response in compliance with such request. Parent will
advise the Company promptly in respect of any understandings,
undertakings or agreements (oral or written) which Parent proposes
to make or enter into with the Federal Trade Commission, the
Department of Justice or any other domestic or foreign government
or governmental or multinational authority in connection with the
transactions contemplated by this Agreement.
SECTION 5.05 Public Announcements. So long as this Agree-
ment is in effect, but only until the Effective Time, Parent, the
Merger Sub and the Company agree to use reasonable efforts to
consult with each other before issuing any press release or
otherwise making any public statement with respect to the
transactions contemplated by this Agreement.
SECTION 5.06 Indemnification.
(a) Parent agrees that all rights to indemnification now
existing in favor of any director or officer of the Company and the
Subsidiaries (the "Indemnified Parties"), as provided in their
respective charters or by-laws or, to the extent set forth in the
Company Disclosure Statement, as provided in an agreement between
an Indemnified Party and the Company or one of its Subsidiaries,
shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective
Time; provided that in the event any claim or claims are asserted
or made within such six-year period, all rights to indemnification
in respect of any such claim or claims shall continue until final
disposition of any and all such claims. Without limitation of the
foregoing, in the event any such Indemnified Party is or becomes
involved in any capacity in any action, proceeding or investigation
in connection with any matter, including, without limitation, the
transactions contemplated by this Agreement, occurring prior to,
and including, the Effective Time, Parent will pay as incurred such
Indemnified Party's legal and other expenses (including the cost of
any investigation and preparation) incurred in connection
therewith. Parent shall pay all expenses, including attorney's
fees, that may be incurred by any Indemnified Party in enforcing
the indemnity and other obligations provided for in this Section
5.06 subject to the limitations of the BCL.
(b) Parent agrees that the Company, and from and after
the Effective Time, the Surviving Corporation shall cause to be
maintained in effect for not less than three years from the
Effective Time the current policies of the director's and officer's
liability insurance maintained by the Company and during such
three-year period shall notify the directors in writing covered
thereby of payment by the Surviving Corporation of the premiums
associated with such liability insurance 10 business days prior to
the date such premium payments are due; provided that the Surviving
Corporation may substitute therefor other policies not materially
less advantageous to the beneficiaries of the current policies and
provided that such substitution shall not result in any gaps or
lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, further, that the Surviving
Corporation shall not be required to pay an annual premium in
excess of 120% of the last annual premium paid by the Company prior
to the date hereof and if the Surviving Corporation is unable to
obtain the insurance required by this Section 5.06(b) it shall
obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
SECTION 5.07 Notification of Certain Matters. Parent and
the Company shall promptly notify each other of (a) the occurrence
or non-occurrence of any fact or event which would be reasonably
likely (i) to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time or (ii) to
cause any material covenant, condition or agreement under this
Agreement not to be complied with or satisfied in all material
respects and (b) any failure of the Company or Parent, as the case
may be, to comply with or satisfy any covenant, condition or agree-
ment to be complied with or satisfied by it hereunder in any
material respect; provided, however, that no such notification
shall affect the representations or warranties of any party or the
conditions to the obligations of any party hereunder. Prior to the
Effective Time, Parent shall promptly notify the Company of (i) any
material developments which are likely to result in Parent not
having sufficient funds to pay the Merger Price and (ii) any
material changes agreed to by Parent to the commitment letters
described in Section 4.05.
SECTION 5.08 State Takeover Laws. The Company shall, upon the
request of Parent, take all reasonable steps to assist in any
challenge by Parent to the validity or applicability to the
transactions contemplated by this Agreement, including the Merger,
of any state takeover law.
SECTION 5.09 No Solicitation. (a) The Company agrees that,
prior to the Effective Time, it shall not, and shall not authorize
or permit any of the Subsidiaries or any of its or the
Subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate,
facilitate, encourage (including by way of furnishing or disclosing
non-public information) or permit (to the extent the Company has
such right) any inquiries or the making of any proposal with
respect to any merger, consolidation or other business combination
involving the Company or the Subsidiaries or acquisition of any
capital stock or any material portion of the assets (except for
acquisitions of assets in the ordinary course of business
consistent with past practice) of the Company or any of the
Subsidiaries (an "Acquisition Transaction") or negotiate, explore
or otherwise engage in substantive discussions with any person
(other than the Merger Sub, Parent or their respective directors,
officers, employees, agents and representatives) with respect to
any Acquisition Transaction or enter into any agreement,
arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transactions
contemplated by this Agreement; provided that the Company may, in
response to a Favorable Third Party Proposal (as defined below)
furnish information to, and negotiate or otherwise engage in
substantive discussions with, the party making such Favorable Third
Party Proposal if the Board or Directors of the Company determines
in good faith by a majority vote, based upon advice from its
outside legal counsel, that failing to take such action would
constitute a breach of the fiduciary duties of the Board.
For purposes of this Agreement a "Favorable Third Party
Proposal" shall mean a written proposal from a credible third party
regarding the acquisition of substantially all the capital stock of
the Company, a merger, consolidation or other business combination
with the Company or a sale of substantially all the assets of the
Company, which proposal (i) is not subject to any material
financing or regulatory uncertainty, (ii) is, in the written
opinion of a nationally recognized investment bank or
Xxxxxx/Hunter, Inc., more favorable to the Company or the Company's
constituents from a financial point of view than the transactions
contemplated hereby and (iii) was not solicited by or on behalf of
the Company in violation of this Section 5.09.
(b) The Company shall immediately advise Parent in
writing of the receipt, directly or indirectly, of any inquiries or
proposals relating to an Acquisition Transaction and any actions
taken pursuant to Section 5.09(a) and furnish to Parent either a
copy of any such proposal or a written summary of any such
proposal.
SECTION 5.10 Break-Up Fee; Expense Reimbursement.
(a) If (i) on or before May 30, 1997 (the "Termination
Date"), a third party or group of related third parties become the
beneficial owners of 50% or more of the outstanding voting
securities of the Company (by a tender offer, exchange offer, stock
issuance or otherwise), including any such transaction in which
either Xxxxx X. Xxxx and Xxxx Xxxxxx (each, a "Controlling
Stockholder") or their affiliates participate, or (ii) the Merger
is not consummated for any of the following reasons: (A) the
Company's Board of Directors authorizes or recommends, or the
Company enters into an agreement or agreement in principle or
closes, an Acquisition Transaction (other than the Merger) or the
Company's Board of Directors fails to recommend, or adversely
modifies or withdraws its recommendation, to the Company's
stockholders that they vote to approve the Merger as a result of
Section 7.01(d), or takes any action to abandon or terminate this
Agreement in accordance with Section 7.01(d), (B) a Controlling
Stockholder or the Company fails to call a Stockholders' Meeting,
or (C) the stockholders of the Company approve an Acquisition
Transaction (other than the Merger), then the Company will
promptly, but in no event later than three business days after the
first of such events to occur, pay $5,000,000 to Parent, plus an
amount not to exceed $500,000 for the reasonable out-of-pocket
Transaction Expenses incurred by the Merger Sub and Parent.
(b) If the Merger is not consummated due to the Common
Shares presently held or hereafter acquired by the Controlling
Stockholders not being voted in favor of the Merger at the
Stockholders Meeting and if the break-up fee and expense
reimbursement described in Section 5.10(a) is not owed by the
Company to the Parent, then the Company will promptly, but in no
event later than three business days after the date of the
Stockholders Meeting, pay to the Parent $1,000,000.
(c) The parties agree that the payment of the fees and
expenses required pursuant to and in the manner set forth in this
Section 5.10 is a material inducement to Parent and the Merger Sub
to enter into this Agreement and is intended to compensate Parent
and the Merger Sub for the opportunity costs and risks of entering
into this Agreement.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.01 Conditions to Parties' Obligations. The
respective obligations of each party to effect the Transactions
shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions:
(a) This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the holders of the
outstanding Common Shares of the Company entitled to vote thereon.
(b) Any waiting period applicable to the Merger under
the HSR Act shall have expired or been terminated.
(c) No (i) order issued by any United States federal or
state or foreign governmental or regulatory authority or body and
no statute, rule, regulation or executive order promulgated or
enacted by any United States federal or state or foreign government
or governmental authority shall be in effect which, or (ii) action,
suit, or proceeding shall be pending before any court or quasi
judicial or administrative agency of any federal, state, local, or
foreign jurisdiction wherein an unfavorable judgment, order,
decree, stipulation, injunction, or charge which, would (A) prevent
consummation of any of the Transactions or (B) cause any of the
Transactions to be rescinded following consummation (and no such
judgment, order, decree, stipulation, injunction, or charge shall
be in effect).
SECTION 6.02 Conditions to Parent's and the Merger Sub's
Obligation to Effect the Merger. The obligations of Parent and the
Merger Sub to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the following additional
conditions:
(a) The representations and warranties of the Company
set forth in this Agreement shall be true and correct in all
material respects as if made on and as of the Effective Time.
(b) The Company shall have performed in all material
respects each covenant and complied with each agreement to be
performed and complied with by them hereunder.
(c) The Company shall not have received appraisal
demands pursuant to Section 1930 of the BCL in respect of 10% or
more of the outstanding Common Shares.
(d) The Company shall have furnished to Parent a
certificate dated as of the Effective Time in which the Company
shall certify that an appropriate inquiry has been made of the
principal executive officers of the Company having principal
responsibilities for the matters as to which representations and
warranties have been made by the Company in this Agreement and for
the performance of the covenants of the Company set forth in this
Agreement, and after completion of such inquiry, the Company has no
reason to believe that the conditions set forth in Section 6.02(a)
and Section 6.02(b) have not been fulfilled. The parties hereto
acknowledge and agree that, absent fraud, the officer(s) of the
Company executing the certificate described above on behalf of the
Company shall have no personal liability in respect of such
certificate.
(e) Parent shall have received from the Company's
counsel, Xxxxxxxx Xxxxxxxxx Professional Corporation, an opinion,
addressed to Parent, dated as of the Effective Time, subject to
customary qualifications and exceptions, to the effect that (i)
this Agreement and all other agreements entered into by the Company
or Controlling Stockholders in connection with the Transactions
(other than the enforceability of Section 6 of the Indemnity and
Fee Agreement) have been duly authorized by the Board of Directors
of the Company (in case of the Company) and are valid, binding and
enforceable in accordance with their respective terms and (ii) the
Articles of Merger have been filed in accordance with applicable
law and upon filing of the Articles of Merger in Pennsylvania and
the filing of the Certificate of Merger in Delaware, the Merger has
been duly consummated and is effective under Pennsylvania law.
SECTION 6.03 Conditions to the Company's Obligation to
Effect the Merger. The obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following additional conditions:
(a) All representations and warranties of Parent and the
Merger Sub in this Agreement shall be true and correct in all
material respects as if made on and as of the Effective Time.
(b) Each of Parent and the Merger Sub shall have
performed in all material respects each covenant and complied with
each agreement to be performed and complied with by it hereunder
(including, without limitation, deposit of the aggregate Merger
Price with the Paying Agent).
(c) The Company will have received from Parent's
counsel, Xxxxxxxx & Xxxxx, an opinion, addressed to the Company,
dated as of the Effective Time, in form and substance reasonably
satisfactory to the Company.
(d) Each of Parent and the Merger Sub shall have
furnished to the Company a certificate dated as of the Effective
Time in which Parent or the Merger Sub, as the case may be, shall
certify that an appropriate inquiry has been made of its executive
officers having principal responsibilities for the matters as to
which representations and warranties have been made by Parent or
the Merger Sub, as the case may be, in this Agreement and for the
performance of the covenants of Parent or the Merger Sub, as the
case may be, set forth in this Agreement, and after completion of
such inquiry, Parent or the Merger Sub, as the case may be, has no
reason to believe that the conditions set forth in Section 6.03(a)
and Section 6.03(b) have not been fulfilled. The parties hereto
acknowledge and agree that, absent fraud, the officer(s) of Parent
or the Merger Sub, as the case may be, executing the certificate
described above on behalf of Parent or the Merger Sub, as the case
may be, shall have no personal liability in respect of such
certificate.
(e) Parent and Merger Sub (on behalf of the Surviving
Corporation) shall have entered into arrangements reasonably
satisfactory to the Company in the manner contemplated by and on
terms consistent with the terms set forth in the outline of the
Compensation Package for Xxxx Xxxxxx and the outline of the
Compensation Package for Xxxxx Xxxxxx, in each case dated as of the
date hereof and delivered simultaneously to the Company with the
execution of this Agreement (together, the "Compensation Term
Sheet").
(f) Parent and HIG shall have entered into a stockholder
agreement consistent with the terms set forth in the Compensation
Term Sheet.
SECTION 6.04 Satisfaction or Waiver of Conditions. The
conditions set forth in this Article VI shall be deemed to have
been satisfied for purposes of this Agreement if, as and when (a)
the conditions in Section 6.01 have been satisfied or waived by
Parent, the Merger Sub and the Company in writing; (b) the
conditions in Section 6.02 shall have been satisfied or waived by
Parent and the Merger Sub in writing; and (c) the conditions in
Section 6.03 shall have been satisfied or waived by the Company in
writing.
ARTICLE VII
TERMINATION; AMENDMENTS; WAIVER
SECTION 7.01 Termination. This Agreement may be terminated
and the Merger contemplated hereby may be abandoned at any time
prior to the Effective Time, notwithstanding approval thereof by
the stockholders of the Company (with any termination by Parent
also being an effective termination by the Merger Sub):
(a) by the mutual written consent of the Boards of
Directors (or duly authorized committees thereof) of Parent, the
Merger Sub and the Company;
(b) by any party if (i) the Company's stockholders fail
to approve this Agreement at the Stockholders' Meeting or (ii) the
Merger shall not have been consummated on or before the Termination
Date; provided that if any condition to this Agreement shall fail
to be satisfied by reason of the existence of an injunction or
order of any court or governmental or regulatory body, then at the
request of any party the deadline date referred to above shall be
extended for a reasonable period of time, not in excess of 30 days,
to permit the parties to have such injunction vacated or order
reversed;
(c) by the Company, in the event of a material breach by
Parent or the Merger Sub of any representation, warranty or
agreement of Parent or the Merger Sub contained in this Agreement,
in each case which has not been cured or is not curable by the
earlier of (i) the Termination Date or (ii) the thirtieth day after
notice of such breach was given to Parent or the Merger Sub (as the
case may be);
(d) by the Company, if the Company receives a firm
proposal with respect to an Acquisition Transaction which its
Board of Directors determines, in the exercise of its fiduciary
duties as advised by counsel, contains terms that are more
favorable to the Company and its constituents, taken as a whole,
than the Merger;
(e) by Parent, in the event of a material breach by the
Company of any representation, warranty or agreement of the Company
contained in this Agreement which has not been cured or is not
curable by the earlier of (i) the Termination Date or (ii) the
thirtieth day after notice of such breach was given to the Company;
or
(f) by Parent upon the occurrence of any event described
in 5.10(a)(i) or 5.10(a)(ii).
SECTION 7.02 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.01, this
Agreement shall forthwith become void and have no effect, without
any liability on the part of any party or its directors, officers
or stockholders, other than the provisions of Section 5.10 (other
than clause (i) of Section 5.10(a) in the event of a termination
pursuant to Section 7.01(c)) with respect to the payment of the
breakup fee and expense reimbursement as described therein, the
last sentence of Section 5.02, Section 4 of the Indemnity and Fee
Agreement with respect to the special indemnity fee described
therein, which in each case shall survive any such termination;
provided that, notwithstanding the foregoing, in the event of a
termination pursuant to Section 7.01(c) or Section 7.01(e), the
party in breach (except Company in the case where Company is in
breach and has paid the break-up fee in accordance with Section
5.10(b)) shall reimburse the nonbreaching party for all Transaction
Expenses incurred by the nonbreaching party up to an amount not to
exceed $500,000. Nothing contained in this Section 7.02 shall
relieve any party from liability for any breach of the
Confidentiality Agreement.
SECTION 7.03 Amendment. This Agreement may be amended by
the Company, Parent and the Merger Sub at any time before or after
any approval of this Agreement by the stockholders of the Company
but, after any such approval, no amendment shall be made which
decreases the Merger Price or which adversely affects the rights of
the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
SECTION 7.04 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other
party hereto, (ii) waive any inaccuracies in the representations
and warranties contained herein by any other party or in any
document, certificate or writing delivered pursuant hereto by any
other party or (iii) waive compliance with any of the agreements of
any other party or with any conditions to its own obligations. Any
agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed
on behalf of such party.
ARTICLE VIII
DEFINITIONS
"1996 Form 10-K" has the meaning set forth in Section 3.06(b)
"Acquisition Transaction" has the meaning set forth in Section 5.09.
"Affiliate" has the meaning set forth in Section 9.09(a).
"Agreement" has the meaning set forth in the preamble.
"Antitrust Laws" has the meaning set forth in Section 5.04(b).
"BCL" has the meaning set forth in Section 1.01.
"Certificates" has the meaning set forth in Section 2.02(a).
"Closing Invoice Amount" has the meaning set forth in Section 1.07.
"Code" has the meaning set forth in Section 3.13(a).
"Common Shares" has the meaning set forth in the preamble.
"Company" has the meaning set forth in the preamble.
"Company Controlled Group" has the meaning set forth in
Section 3.13(a).
"Company Disclosure Statement" has the meaning set forth
in Article III.
"Company Representatives" has the meaning set forth in
Section 5.02.
"Compensation Term Sheet" has the meaning set forth in
Section 6.03(e).
"Confidentiality Agreement" has the meaning set forth in
Section 9.02(a).
"Consent" has the meaning set forth in Section 3.05(b).
"Constituent Corporations" has the meaning set forth in
the preamble.
"Control" has the meaning set forth in Section 9.09(a).
"Controlling Stockholder" has the meaning set forth in
Section 5.10(a).
"DGCL" has the meaning set forth in Section 1.01.
"Dissenting Shares" has the meaning set forth in Section 2.01.
"Effective Time" has the meaning set forth in Section 1.02.
"Employee Benefit Arrangement" has the meaning set forth
in Section 5.01(e).
"Environment and Safety Requirements" has the meaning set
forth in Section 3.23(j).
"Environmental Lien" has the meaning set forth in Section 3.23(k).
"ERISA" has the meaning set forth in Section 3.13(a).
"Exchange Act" has the meaning set forth in Section 3.05(b).
"Favorable Third Party Proposal" has the meaning set
forth in Section 5.09(a).
"GAAP" has the meaning set forth in Section 3.06(b).
"Governmental Entity" has the meaning set forth in
Section 3.05(b).
"HIG" has the meaning set forth on Section 4.05.
"HSR" has the meaning set forth in Section 3.05(b).
"Indemnified Parties" has the meaning set forth in
Section 5.06(a).
"Indemnity and Fee Agreement" has the meaning set forth
in Section 1.07.
"IRS" has the meaning set forth in Section 3.13(g).
"June Balance Sheet" has the meaning set forth in Section 3.19.
"Lien" has the meaning set forth in Section 3.03.
"Material Adverse Effect on the Company" has the meaning
set forth in Section 3.10.
"Material Adverse Effect on Parent" has the meaning set
forth in Section 4.01.
"Merger" has the meaning set forth in the preamble.
"Merger Price" has the meaning set forth in Section 1.07.
"Merger Sub" has the meaning set forth in the preamble.
"Merger Sub Shares" has the meaning set forth in the preamble.
"Multiemployer Plan" has the meaning set forth in Section 3.13(b).
"Option" has the meaning set forth in Section 1.09.
"Option Plan" has the meaning set forth in Section 3.03.
"Other Filings" has the meaning set forth in Section 3.07.
"Parent" has the meaning set forth in the preamble.
"Parent Representatives" has the meaning set forth in Section 5.02.
"Paying Agent" has the meaning set forth in Section 2.02(a).
"Permitted Liens" has the meaning set forth in Section 3.15.
"Person" has the meaning set forth in Section 9.09(b).
"Plans" has the meaning set forth in Section 3.13(a).
"Proprietary Rights" has the meaning set forth in Section 3.18.
"Proxy Statement" has the meaning set forth in Section 1.10(a)(ii).
"Quarterly Financial Statements" has the meaning set
forth in Section 3.06(c).
"SEC" has the meaning set forth in Section 1.10(a)(ii).
"SEC Reports" has the meaning set forth in Section 3.06(a).
"Securities Act" has the meaning set forth in Section 3.06(a).
"Stockholders' Meeting" has the meaning set forth in
Section 1.10(a)(i).
"Subsidiaries" has the meaning set forth in Section 3.01.
"Surviving Corporation" has the meaning set forth in the preamble.
"Taxes" has the meaning set forth in Section 3.22(a).
"Termination Date" has the meaning set forth in Section 5.10(a).
"Transaction Expenses" has the meaning set forth in Section 1.07.
"Violation" has the meaning set forth in Section 3.05(a).
"Voting Debt" has the meaning set forth in Section 3.03.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties.
The representations and warranties made in this Agreement shall not
survive beyond the Effective Time. Notwithstanding the foregoing,
the agreements set forth in Section 2.02, the last sentence of
Section 5.03, Section 5.06 and the last sentence Section 5.02 shall
survive the Effective Time indefinitely (except to the extent a
shorter period of time is explicitly specified therein).
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the
instruments referred to herein) and the letter agreement dated
September 25, 1996 (the "Confidentiality Agreement"), constitute
the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party (except that Parent
may assign its rights and the Merger Sub may assign its rights,
interest and obligations to any affiliate or direct or indirect
subsidiary of Parent without the consent of the Company). Subject
to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
SECTION 9.03 Validity. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, each of
which shall remain in full force and effect.
SECTION 9.04 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered in person,
by overnight courier or facsimile to the respective parties as
follows:
If to Parent or the Merger Sub:
HIG Capital Management, Inc.
0000 X. Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
with a copy to:
Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Learner
If to the Company:
Thermal Industries, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: President
with a copy to:
Xxxxxxxx Ingersoll Professional Corporation
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Xx.
or to such other address as the person to whom notice is given may
have previously furnished to the other in writing in the manner set
forth above (provided that notice of any change of address shall be
effective only upon receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws
thereof.
SECTION 9.06 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation
of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same
agreement.
SECTION 9.08 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto,
and, except with respect to Sections 1.09, 5.06 and 5.07, nothing
in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.09 Certain Definitions. As used in this
Agreement:
(a) the term "affiliate", as applied to any person,
shall mean any other person directly or indirectly controlling,
controlled by, or under common control with, that person. For the
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person,
whether through the ownership of voting securities, by contract or
otherwise;
(b) the term "Person" shall include individuals,
corporations, partnerships, trusts, other entities and groups
(which term shall include a "group" as such term is defined in
Section 13(d)(3) of the Exchange Act); and
(c) the term "Subsidiary" or "subsidiaries" means, with
respect to Parent, the Company or any other person, any
corporation, partnership, joint venture or other legal entity of
which Parent, the Company or such other person, as the case may be
(either alone or through or together with any other subsidiary),
owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
* * * *
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its respective officer
thereunto duly authorized, all as of the day and year first above
written.
HEAT, INC.
By: /s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
Vice President
HEAT ACQUISITION, INC.
By: /s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
Vice President
THERMAL INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Chairman and Chief Executive Officer
By: /s/ Xxxx Xxxxxx
Xxxx Xxxxxx
Secretary-Treasurer
