EXHIBIT 3
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AGREEMENT AND PLAN OF MERGER
AMONG
SPS TECHNOLOGIES, INC.,
MTC ACQUISITION CORP.
and
MAGNETIC TECHNOLOGIES CORPORATION
DATED AS OF AUGUST 7, 1997
TABLE OF CONTENTS
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ARTICLE I - THE MERGER; EFFECTIVE TIME; CLOSING...................................................................1
1.1 THE MERGER......................................................................................1
1.2 EFFECTIVE TIME..................................................................................2
1.3 CLOSING.........................................................................................2
1.4 EFFECTS OF THE MERGER...........................................................................2
ARTICLE II - CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION.....................................................................2
2.1 CERTIFICATE OF INCORPORATION....................................................................2
2.2 BY-LAWS.........................................................................................2
ARTICLE III - DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION................................................................................3
3.1 DIRECTORS.......................................................................................3
3.2 OFFICERS........................................................................................3
ARTICLE IV - MERGER CONSIDERATION; CONVERSION
OR CANCELLATION OF SHARES IN THE MERGER; OPTIONS AND WARRANTS
........................................................................................................3
4.1 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER; OPTIONS AND
WARRANTS........................................................................................3
4.2 EXCHANGE PROCEDURES.............................................................................4
4.3 DISSENTING SHARES...............................................................................6
4.4 RELATED SHARE EXCHANGES.........................................................................7
ARTICLE V - REPRESENTATIONS AND WARRANTIES........................................................................7
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................7
5.2 REPRESENTATIONS AND WARRANTIES OF ACQUIROR.....................................................22
ARTICLE VI - ADDITIONAL COVENANTS AND AGREEMENTS.................................................................25
6.1 CONDUCT OF BUSINESS............................................................................25
6.2 NO SOLICITATION................................................................................28
6.3 MEETING OF STOCKHOLDERS........................................................................29
6.4 PROXY STATEMENT................................................................................30
6.5 ACCESS TO INFORMATION..........................................................................30
6.6 PUBLICITY......................................................................................31
6.7 INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................................31
6.8 TAXES..........................................................................................31
(i)
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6.9 MAINTENANCE OF INSURANCE.......................................................................32
6.10 REPRESENTATIONS AND WARRANTIES.................................................................32
6.11 REASONABLE BEST EFFORTS; OTHER ACTION..........................................................32
6.12 NOTIFICATION OF CERTAIN MATTERS................................................................33
ARTICLE VII - CONDITIONS.........................................................................................33
7.1 CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND MERGER SUB
..............................................................................................33
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY...................................................35
ARTICLE VIII - TERMINATION.......................................................................................36
8.1 TERMINATION BY MUTUAL CONSENT..................................................................36
8.2 TERMINATION BY EITHER ACQUIROR OR THE COMPANY..................................................36
8.3 TERMINATION BY ACQUIROR........................................................................37
8.4 TERMINATION BY THE COMPANY.....................................................................37
8.5 EFFECT OF TERMINATION AND ABANDONMENT..........................................................37
ARTICLE IX - MISCELLANEOUS AND GENERAL...........................................................................38
9.1 PAYMENT OF EXPENSES............................................................................38
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................38
9.3 MODIFICATION OR AMENDMENT......................................................................38
9.4 WAIVER OF CONDITIONS...........................................................................38
9.5 COUNTERPARTS...................................................................................38
9.6 GOVERNING LAW..................................................................................39
9.7 NOTICES........................................................................................39
9.8 ENTIRE AGREEMENT; ASSIGNMENT...................................................................40
9.9 PARTIES IN INTEREST............................................................................40
9.10 CERTAIN DEFINITIONS............................................................................40
9.11 SEVERABILITY...................................................................................41
9.12 SPECIFIC PERFORMANCE...........................................................................41
9.13 CAPTIONS.......................................................................................41
(ii)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August 7,
1997, among SPS Technologies, Inc., a Pennsylvania corporation ("Acquiror"), MTC
Acquisition Corp., a Delaware corporation and direct wholly owned subsidiary of
Acquiror ("Merger Sub"), and Magnetic Technologies Corporation, a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Acquiror, Merger Sub and the
Company have each determined that it is in the best interests of their
respective stockholders for the Company to merge with and into Merger Sub upon
the terms and subject to the conditions of this Agreement and the stockholder of
Merger Sub has approved this Agreement as required under the Delaware General
Corporation Law, as amended (the "DGCL");
WHEREAS, for federal income tax purposes, it is intended that the
Merger (as defined in Section 1.1) shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, certain holders (each, a "Stockholder" and, collectively, the
"Stockholders") of Shares (as defined in Section 4.1(a)) are entering or will
enter into Stock Purchase Agreements and/or Voting Agreements, forms of which
are attached as Exhibit A hereto (the "Stock Purchase Agreements") and Exhibit B
hereto (the "Voting Agreements"); and
WHEREAS, Acquiror, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, Acquiror, Merger Sub and
the Company hereby agree as follows:
ARTICLE I - THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2 below), the Company and Merger Sub shall consummate a
merger (the "Merger") in which (a) the Company shall be merged with and into
Merger Sub and the separate corporate existence of the Company shall thereupon
cease, and (b) Merger Sub shall continue as the surviving corporation in the
Merger (the "Surviving Corporation") and shall succeed to and assume all of the
rights, properties, liabilities and obligations of the Company.
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, as
promptly as practicable after all of the conditions set forth in Article VII
shall have been satisfied or, if permissible, waived by the party entitled to
the benefit of the same, Merger Sub and the Company shall cause the Merger to be
consummated by filing a Certificate of Merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with, the relevant provisions of the DGCL as soon as
practicable on or after the Closing Date (as defined in Section 1.3). The Merger
shall become effective upon such filing or at such time thereafter as is
provided in the Certificate of Merger (the "Effective Time").
1.3 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII, and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") shall take place at 10:00
a.m., Rochester time, on the date of the Stockholder Meeting (as hereinafter
defined) (or as soon as practicable thereafter following satisfaction or waiver
of the conditions set forth in Article VII (the "Closing Date"), in Rochester,
New York, unless another date, time or place is agreed to in writing by the
parties hereto.
1.4 EFFECTS OF THE MERGER. At the Effective Time, the Merger shall have
the effects set forth herein and in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
ARTICLE II - CERTIFICATE OF INCORPORATION AND
BY-LAWS OF THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time shall become the Certificate of Incorporation of the Surviving
Corporation, except that as of the Effective Time the name of the Surviving
Corporation shall be changed to Magnetic Technologies Corporation.
2.2 BY-LAWS. At the Effective Time, the By-Laws of Merger Sub as in
effect immediately prior to the Effective Time shall become the By-Laws of the
Surviving Corporation.
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ARTICLE III - DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
3.2 OFFICERS. The officers of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE IV - MERGER CONSIDERATION; CONVERSION
OR CANCELLATION OF SHARES IN THE MERGER; OPTIONS AND WARRANTS
4.1 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER; OPTIONS AND WARRANTS. The manner of converting shares of
the Company in the Merger and the treatment of Options and Warrants (each as
defined herein) shall be as follows:
(a) Subject to Section 4.4, at the Effective Time, each share
of common stock, $.15 par value ("Common Stock"), of the Company (the "Shares")
issued and outstanding as of the Effective Time (other than Shares owned by
Acquiror (including all Shares acquired by Acquiror pursuant to the Share
Exchanges contemplated by and defined in Section 4.4 hereof) or any direct or
indirect wholly owned subsidiary of Acquiror (collectively, "Acquiror
Companies") or by the Company and Shares subject to Section 4.3) at the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into the right to receive cash in the amount
of $5.00 per share (or a proportionate amount in the case of fractional shares)
(the "Merger Consideration"), upon surrender of the certificate representing
such shares of Common Stock in the manner provided in Section 4.2.
(b) Each Share that is directly owned by any of the Acquiror
Companies at the Effective Time (including, without limitation, those shares to
be exchanged immediately prior to the Closing pursuant to the Share Exchanges as
described in Section 4.4) and each Share that is directly owned by the Company
shall be canceled and retired and shall cease to exist and no consideration
shall be delivered or deliverable in exchange therefor.
(c) All Shares to be converted pursuant to this Section 4.1
shall, by virtue of the Merger and without any action on the part of the holders
thereof, cease to be outstanding, be canceled and retired and cease to exist,
and each holder of a certificate representing any such Shares (a "Company
Certificate") shall thereafter cease to have any rights with respect to such
Shares, except the right to receive for each of the Shares, upon the surrender
of such certificate
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(or such instruments as are contemplated by Section 4.2(h)) in accordance with
Section 4.2, the Merger Consideration.
(d) Prior to the Effective Time, the Company shall pay, or
cause to be paid, to each holder of then outstanding options to purchase Shares
(each, an "Option" and collectively, the "Options"), whether vested or unvested,
an amount of cash equal to the excess, if any, of $5.00 per share over the
applicable exercise price per share of Common Stock subject to such Option (such
difference to be computed separately for each Option outstanding immediately
prior to the Effective Time), subject in all cases to any required withholding
taxes (the "Option Consideration"). In return for the Option Consideration, each
such Option shall be settled and terminate at the Effective Time, in accordance
with (i) the terms thereof or (ii) an option termination agreement in form and
substance satisfactory to Acquiror. Said terminations shall be deemed a release
of any and all rights which such holders had or may have had in respect of such
Options. In connection with the Option terminations, the Company shall, when
applicable, obtain the consent of Option holders to the termination of their
Options by means of option termination agreements in form and substance
satisfactory to the Acquiror.
On or before August 8, 1997, the Company shall give notice of the
Merger to each holder of an outstanding warrant to purchase Common Stock (each,
a "Warrant" and collectively, the "Warrants") in accordance with the terms of
such Warrant and not later than October 7, 1997, all outstanding Warrants shall
terminate and be of no further force and effect in accordance with the terms
thereof.
As of and after the Effective Time, the Surviving Corporation shall not
be bound by any options, warrants, rights or agreements which would entitle any
person to own, purchase or receive any capital stock of the Company or the
Surviving Corporation, including without limitation the Options and Warrants,
all of which are listed in Section 4.1(d) of the Disclosure Schedule (as defined
in Section 5.1).
(e) At and after the Effective Time, the shares of capital
stock of Merger Sub shall remain outstanding.
4.2 EXCHANGE PROCEDURES.
(a) Prior to the Effective Time, Acquiror shall designate a
bank or trust company to act as agent for the holders of Shares(the "Exchange
Agent") to receive the funds to which holders of such Shares shall become
entitled pursuant to Section 4.1(a). At the Effective Time, Acquiror shall
transfer to the Exchange Agent by wire transfer to such account as the Exchange
Agent shall direct prior to the Effective Time the aggregate amount to be paid
to the holders of Shares pursuant to Section 4.1(a) (the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger
Consideration pursuant to Section 4.1 out of the Exchange Fund as provided
herein.
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(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of Shares
immediately prior to the Effective Time (excluding any Shares which will be
canceled pursuant to Section 4.1(b) or which are subject to Section 4.3) (i) a
letter of transmittal (the "Letter of Transmittal") (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of such Company Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Acquiror shall specify) and (ii) instructions for use in effecting the surrender
of the Company Certificates in exchange for the Merger Consideration with
respect to the Shares formerly represented thereby.
(c) Upon surrender of a Company Certificate for cancellation
to the Exchange Agent, together with the Letter of Transmittal, duly executed,
and such other documents as Acquiror or the Exchange Agent shall reasonably
request, the holder of such Company Certificate shall be entitled to receive the
Merger Consideration for each Share represented thereby in exchange therefor.
Until surrendered as contemplated by this Section 4.2, each Company Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive the Merger Consideration with respect to the Shares formerly
represented thereby. No interest will be paid or will accrue on any amount
payable in cash pursuant to Section 4.1(a). Upon surrender of a Company
Certificate, such Company Certificate shall forthwith be canceled.
(d) If payment in respect of Shares surrendered to the
Exchange Agent is to be made to a person other than the person in whose name a
surrendered certificate is registered, it shall be a condition to such payment
that the certificate so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment or shall have established to the satisfaction of the Surviving
Corporation or the Exchange Agent that such taxes either have been paid or are
not payable.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
of shares of Common Stock thereafter on the records of the Company. From and
after the Effective Time, the holders of certificates evidencing ownership of
shares of Common Stock outstanding immediately prior to the Merger shall cease
to have any rights as stockholders of the Company or otherwise with respect to
such shares, except as otherwise provided herein or by law. No dividends or
other distribution declared after the Effective Time with respect to any shares
of capital stock of the Company or the Surviving Corporation shall be paid to
the holder of any unsurrendered certificate or certificates formerly
representing shares of Common Stock.
(f) Notwithstanding anything to the contrary in this
Agreement, and subject to Section 4.2(g), none of the Exchange Agent, the
Surviving Corporation or any party hereto shall be liable to a holder of a
certificate or certificates formerly representing shares of Common Stock for any
amount properly paid to a public official pursuant to any applicable property,
escheat or similar law.
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(g) Promptly following the date of the first anniversary of
the Effective Time, the Exchange Agent shall return to the Surviving Corporation
all cash in its possession relating to the transactions described in this
Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a certificate formerly representing Shares may surrender such
certificates to the Surviving Corporation and (subject to applicable abandoned
property, escheat and similar law) receive in exchange therefor cash in
accordance with Section 4.1(a) hereof, without any interest thereon. If any
Company Certificates shall not have been surrendered prior to seven years after
the Effective Time (or, immediately prior to such earlier date on which any
Merger Consideration in respect of such Company Certificates would otherwise
escheat to or become the property of any governmental authority), any such
Merger Consideration in respect of the Shares represented by such Company
Certificates shall, to the extent permitted by applicable laws, become the
property of Acquiror.
(h) In the event that any Company Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Company Certificate to be lost, stolen or destroyed and, if
required by Acquiror, the posting by such Person of a bond in such reasonable
amount as Acquiror may direct and/or an indemnification agreement as indemnity
against any claim that may be made against it with respect to such Company
Certificate, the Exchange Agent (or Acquiror, as the case may be) will issue in
exchange for such lost, stolen or destroyed Company Certificate the Merger
Consideration deliverable in respect of the Shares represented thereby pursuant
to this Agreement.
(i) Acquiror shall be entitled to, or shall be entitled to
cause the Exchange Agent to, deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as are required to be deducted and withheld with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Acquiror or the Exchange
Agent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by Acquiror or the
Exchange Agent and such sums shall be remitted by Acquiror to the appropriate
taxing authorities.
4.3 DISSENTING SHARES. Notwithstanding any other provisions of this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and which are held by stockholders who shall have not voted in
favor of the Merger or consented thereto in writing and who shall have demanded
properly in writing appraisal for such shares in accordance with Section 262 of
the DGCL (collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
instead shall be entitled to receive payment of the appraised value of such
shares held by them in accordance with the provisions of Section 262 of the
DGCL, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such Shares under Section 262 of the DGCL shall thereupon be
deemed to have been converted into and to have become exchangeable, at the
Effective Time, for the right to receive, without any interest thereon, the
Merger Consideration upon surrender in the
6
manner provided in Section 4.1, of the Company Certificate or Certificates that,
at the Effective Time, evidenced such Shares. All payments with respect to
Dissenting Shares shall be paid by the Surviving Corporation with funds of the
Company and not with funds provided by any of the Acquiror Companies. The
Company shall give Acquiror (i) prompt notice of any written demands for
appraisal of any Shares, any withdrawals of such demands and any other
instruments served pursuant to the DGCL in connection therewith and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company shall not, except with the prior
written consent of Acquiror, voluntarily make any payment with respect to any
demands for appraisal of Common Stock or offer to settle or settle any such
demands.
4.4 RELATED SHARE EXCHANGES. Immediately prior to the Effective Time,
not greater than 10 (unless Acquiror has otherwise agreed) stockholders of the
Company shall have exchanged not less than 45% and not greater than 51% (unless
Acquiror has otherwise agreed) of the outstanding Shares for a number of shares
of Acquiror's Common Stock (the "Purchaser Shares"), equal to the quotient of
(a) the product of $5.00 times the number of Shares being exchanged, divided by
(b) the average of the daily last sales prices of Acquiror's Common Stock as
reported on the NYSE Composite Transactions reporting system (as reported in The
Wall Street Journal or, if not reported therein, in another mutually agreed upon
authoritative source) for the twenty consecutive full trading days in which such
shares are traded on the New York Stock Exchange ("NYSE") ending with the
closing of trading on the date which is one trading day prior to the date of the
Stockholder Meeting (as defined in Section 6.3), pursuant to Stock Purchase
Agreements substantially in the form attached hereto as Exhibit A. The closing
of such share exchanges (the "Share Exchanges") shall occur immediately prior to
and in conjunction with the Closing. All Shares exchanged in the Share Exchanges
shall not be deemed outstanding immediately prior to the Effective Time and,
accordingly, shall not be entitled to receive Merger Consideration.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Acquiror and Merger Sub that (except
to the extent set forth on the Disclosure Schedule previously delivered by the
Company to Acquiror (the "Disclosure Schedule"), which Disclosure Schedule
specifically references the lettered paragraph of this Section 5.1 to which any
exceptions stated therein relate):
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of the
Company and its subsidiary Magnetic Technologies Europe Limited (the
"Subsidiary") is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
qualified and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by it
requires such qualification, except where failure to so qualify or be in good
standing would not have a Material Adverse Effect (as defined in Section 9.10)
with respect to the Company and the
7
Subsidiary. Each of the Company and the Subsidiary has all requisite power and
authority (corporate or otherwise) to own its properties and to carry on its
business as it is now being conducted. Except for the Subsidiary, the Company
has no subsidiaries or interests in other entities of any kind. The Company has
heretofore made available to Acquiror complete and correct copies of its
Certificate of Incorporation and By-Laws as currently in effect. Neither the
Company nor the Subsidiary is in violation of any of the provisions of its
Certificate of Incorporation, By-Laws or other charter documents.
(b) CAPITALIZATION. The authorized capital stock of the
Company consists of 15,000,000 Shares, of which, as of August 1, 1997, 2,786,515
Shares were issued and outstanding and no Shares were held in treasury. All of
the outstanding shares of capital stock of the Company and the Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable.
The Company has no outstanding stock appreciation rights. Except as set forth in
Section 5.1(b) of the Disclosure Schedule, no Shares are owned by any subsidiary
of the Company. All outstanding shares of capital stock or other equity
interests of the Subsidiary are owned by the Company, free and clear of all
liens, charges, encumbrances, claims and options of any nature. Except for the
Options and the Warrants, true, complete and correct copies of which have been
delivered to Acquiror prior to the date hereof, and except as set forth in
Section 5.1(b) of the Disclosure Schedule, there are not as of the date hereof
and there will not be at the Effective Time any outstanding or authorized
options, warrants, calls, rights (including preemptive rights), commitments or
any other agreements of any character to which the Company or the Subsidiary is
a party, or by which it may be bound, requiring it to issue, transfer, sell,
purchase, redeem or acquire any shares of capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock of the Company or the Subsidiary. There are not
as of the date hereof and there will not be at the Effective Time any
shareholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or to which it is bound relating to the voting of
any shares of the capital stock of the Company (other than the Voting Agreements
between certain stockholders of the Company and Acquiror).
(c) APPROVALS; FAIRNESS OPINION.
(i) The Board of Directors of the Company at a
meeting duly called and held, has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are fair to and in the
best interests of the stockholders of the Company and has approved the same,
(ii) resolved to recommend that the holders of the Shares approve this Agreement
and the transactions contemplated hereby, including the Merger and (iii) taken
all action necessary with respect to the transactions contemplated hereby so as
to render inapplicable to such transactions, including, without limitation, the
agreements to purchase Shares pursuant to the Stock Purchase Agreements and the
purchase of such Shares, the restrictions on business combinations contained in
Section 203 of the DGCL.
(ii) The Board of Directors of the Company has
received an opinion from BlueStone Capital Partners ("BlueStone") to the effect
that the Merger Consideration to be
8
offered to the holders of Shares in the Merger is fair to such holders from a
financial point of view and that the value of cash consideration payable
hereunder and the stock consideration payable in connection with the Share
Exchanges is substantially equivalent.
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the transactions contemplated hereby
(subject to the approval of the Merger by the affirmative vote of the holders of
a majority of the votes entitled to be cast by the holders of Shares in
accordance with the DGCL and the Company's Certificate of Incorporation). This
Agreement and the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than the approval of the Merger by the affirmative
vote of the holders of a majority of the votes entitled to be cast by the
holders of Shares in accordance with the DGCL and the Company's Certificate of
Incorporation). This Agreement has been duly and validly executed and delivered
by the Company and, assuming this Agreement constitutes the valid and binding
agreement of Acquiror, constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, subject,
as to enforceability, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors, rights and to
general principles of equity.
(e) CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation (or other similar documents) or By-Laws (or other similar
documents) of the Company or the Subsidiary; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority or any other Person (including without limitation
pursuant to the Xxxx- Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder), except (A) in
connection with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder, (B) the filing of
the Certificate of Merger pursuant to the DGCL and appropriate documents with
the relevant authorities of other states in which the Company is authorized to
do business, (C) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, as set forth in Section 5.1(e) of
the Disclosure Schedule, (D) the consents, approvals, orders, authorizations,
registrations declarations and filings required under the laws of foreign
countries (which consents, if any, it shall be the obligation of Acquiror to
obtain), (E) the approval of the holders of a majority of the outstanding Shares
required by the DGCL and the Company's Certificate of Incorporation, (F) such
filings as may be required with the NASDAQ National Market or (G) where the
failure to obtain such consent, approval, authorization or permit, or to make
such filing or notification, would not in the aggregate have a Material Adverse
Effect with respect to the Company and the
9
Subsidiary or adversely affect the ability of the Company to consummate the
transactions contemplated hereby; (iii) except as set forth in Section 5.1(e) of
the Disclosure Schedule, result in a violation or breach of, or constitute (with
or without notice or lapse of time or both) a default (or give rise to any right
of termination, cancellation or acceleration or result in the creation of any
lien or other charge or encumbrance) under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or obligation to
which the Company or the Subsidiary or any of their assets may be bound, except
for such violations, breaches and defaults (or rights of termination,
cancellation or acceleration or creations of lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect with respect
to the Company or the Subsidiary or adversely affect the ability of the Company
to consummate the transactions contemplated hereby; or (iv) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 5.1(e) are duly and timely obtained or made and the
approval of the Merger and the approval of this Agreement by the Company's
stockholders has been obtained, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or the Subsidiary or to
any of their respective assets, except for violations which would not in the
aggregate have a Material Adverse Effect with respect to the Company and the
Subsidiary or adversely affect the ability of the Company to consummate the
transactions contemplated hereby. Except as set forth in Section 5.1(e) of the
Disclosure Schedule, the Company does not know of any pending or proposed
legislation, regulation or order (other than those affecting businesses such as
the Company's generally) applicable to the Company or the Subsidiary or to the
conduct of the business or operations of the Company or the Subsidiary which, if
enacted or adopted, could have a material Adverse Effect with respect to the
Company or the Subsidiary.
(f) LITIGATION; COMPLIANCE WITH LAWS. Except as disclosed in
the Company SEC Reports (as defined in Section 5.1(g)) filed and publicly
available prior to the date of this Agreement or as disclosed in Section 5.1(f)
of the Disclosure Schedule, there are no actions, suits, or proceedings pending
or, to the best knowledge of the Company, threatened against the Company or the
Subsidiary which could, individually or in the aggregate, if adversely
determined, reasonably be expected to have a Material Adverse Effect with
respect to the Company or the Subsidiary, nor is there any judgment, decree,
injunction, rule or order of any governmental or regulatory authority or
arbitrator outstanding against the Company or the Subsidiary, which could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company or the Subsidiary. Except as set
forth in Section 5.1(f) of the Disclosure Schedule, as of the date of this
Agreement, no investigation or review by any governmental or regulatory
authority with respect to the Company or the Subsidiary is pending or, to the
knowledge of the Company, threatened, nor has the Company received any notice
from any governmental or regulatory authority indicating an intention to conduct
the same. Neither the Company nor the Subsidiary has violated or failed to
comply with any statute, law, ordinance, regulation, rule, judgment, decree or
order of any governmental authority or regulatory agency applicable to its
business or operations, except for violations and failures to comply that could
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect with respect to the Company and the Subsidiary.
10
(g) SEC REPORTS; FINANCIAL STATEMENTS
(i) Since January 1, 1992, the Company has filed all
forms, reports and documents with the Securities and Exchange Commission (the
"SEC") required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all of which complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Exchange Act and the rules and
regulations promulgated thereunder (collectively, the "Company SEC Reports").
None of the Company SEC Reports, including, without limitation, any financial
statements or schedules included therein, at the time filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(ii) The consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows (including the related notes thereto) of the Company included in the
Company SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent with prior periods
(except as otherwise noted therein), and present fairly the consolidated
financial position of the Company and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and their
cash flows for the periods presented therein (subject, in the case of the
audited interim financial statements, to normal year-end adjustments). Except as
set forth in Section 5.1(g) of the Disclosure Schedule, since July 31, 1996,
there has not been any material change, or any application or request for any
material change, by the Company or the Subsidiary in accounting principles,
methods or policies for financial accounting purposes that have affected or will
affect the Company's consolidated financial statements included in the Company
SEC Reports or for tax purposes, except as required by concurrent changes in
GAAP.
(h) UNDISCLOSED LIABILITIES; ABSENCE OF CERTAIN CHANGES OR
EVENTS. Neither the Company nor the Subsidiary has any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or unasserted), and, to
the best knowledge of the Company, there is no basis for the assertion of any
claim or liability of any nature against the Company or the Subsidiary, which is
not fully reflected in, reserved against or otherwise described in the financial
statements included in the Company SEC Reports filed and publicly available
prior to the date of this Agreement. Except as disclosed in the Company SEC
Reports filed and publicly available prior to the date of this Agreement or in
Section 5.1(h) of the Disclosure Schedule, or as contemplated by this Agreement,
since July 31, 1996, the business of the Company and its subsidiaries has been
carried on only in the ordinary and usual course and there has not been (i) any
damage, destruction or loss, whether covered by insurance or not, which has, or
insofar as reasonably can be foreseen in the future is reasonably likely to
have, individually or in the aggregate, a material Adverse Effect with respect
to the Company or the Subsidiary; (ii) any declaration, setting aside or payment
of any dividend or other distribution
11
(whether in cash, stock or property) with respect to the Shares or any
redemption, purchase or other acquisition of the Shares; (iii) any change,
occurrence or circumstance in the business, results of operations, properties,
assets, liabilities, prospects or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) which,
individually or in the aggregate, has had or is reasonably likely to have, a
Material Adverse Effect with respect to the Company or the Subsidiary; (iv)
other than in the ordinary course of business consistent with past practice, any
increase in the benefits payable under or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including without limitation the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation or other amounts payable or to become payable to any directors,
officers, key employees, representatives, consultants or advisers of the Company
or the Subsidiary, (v) any amendment to the charter or By-Laws of the Company or
the Subsidiary, (vi) any issuance or sale of any shares of capital stock of the
Company or the Subsidiary, or securities convertible into, or options with
respect to, or warrants to purchase the rights to subscribe to, any such shares,
or any agreements obligating the Company or any Subsidiary to do any of the
foregoing, (vii) any labor dispute affecting the Company or the Subsidiary,
other than routine labor matters, (viii) any transaction between the Company or
the Subsidiary on the one hand, and any affiliate of the Company (other than the
Subsidiary), on the other hand, other than transactions in the ordinary course
of business consistent with past practice, (ix) any commitment or transaction
entered into by the Company or the Subsidiary other than in the ordinary course
of its business consistent with past practice, (x) any change by the Company or
the Subsidiary in accounting principles or methods, except insofar as may be
required by a change in GAAP, or (xi) any other event or condition which is
reasonably likely to have a Materially Adverse Effect with respect to the
Company and the Subsidiary.
(i) EMPLOYMENT AGREEMENTS. Except as set forth in Section
5.1(i) of the Disclosure Schedule, an Employment Agreement to be entered into
between the Company and Xxxxxx X. XxXxxx as of the Closing Date and a covenant
not to compete to be entered into by the Company and Xxxxxxx Xxxxxxx as of the
Closing Date, the Company is not a party to any employment, consulting,
non-competition, severance, golden parachute, indemnification agreement or any
other agreement providing for payments or benefits or the acceleration of
payments or benefits upon the change of control of the Company (including,
without limitation, any contract to which the Company is a party involving
employees of the Company).
(j) BROKERS AND FINDERS. Except for the fees and expenses
payable to BlueStone, which fees and expenses are reflected in its agreement
with the Company, a true and complete copy of which (including all amendments)
has been furnished to Acquiror, the Company has not employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
12
(k) PROXY STATEMENT. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement (as such term is defined in Section 6.4) will at the time of the
mailing of the Proxy Statement and at the time of the Stockholder Meeting (as
such term is defined in Section 6.3), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or the
Subsidiary should occur which is required to be described in a supplement to the
Proxy Statement, such event shall be so described, and such supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company. The Proxy Statement will (only with respect to the
Company) comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder.
(l) TAXES.
(i) The Company and the Subsidiary, and each
affiliated group (within the meaning of the Code) of which the Company or the
Subsidiary is or has ever been a member, has timely filed all federal income Tax
Returns (as defined below) and all other material Tax Returns and reports
required to be filed by it. All such Tax Returns are complete and correct in all
material respects. The Company and the Subsidiary have paid (or the Company has
paid on the Subsidiary's behalf) all Taxes (as defined below) shown due on such
Tax Returns. The most recent consolidated financial statements contained in the
SEC Reports reflect an adequate reserve for all Taxes payable by the Company and
the Subsidiary for all taxable periods and portions thereof through the date of
such financial statements.
(ii) Except as disclosed on Section 5.1(1) of the
Disclosure Schedule, no material deficiencies for any Taxes have been proposed,
asserted or assessed against the Company or the Subsidiary that have not been
fully paid or adequately provided for in the appropriate financial statements of
the Company and the Subsidiary, no requests for waivers of the time to assess
any Taxes are pending, and no power of attorney with respect to any Taxes has
been executed or filed with any taxing authority. No material issues relating to
Taxes have been raised in writing by the relevant taxing authority during any
presently pending audit or examination.
(iii) No material liens for Taxes exist with respect
to any assets or properties of the Company or the Subsidiary, except for
statutory liens for Taxes not yet due.
(iv) Except as disclosed on Section 5.1(1) of the
Disclosure Schedule and other than with respect to contractual tax indemnity
obligations of the Company and the Subsidiary involving claims for state and
local Taxes which are not material in amount, neither the Company nor the
Subsidiary is a party to or is bound by any tax sharing agreement, tax indemnity
obligation or similar agreement, arrangement or practice with respect to Taxes
13
(including any advance pricing agreement, closing agreement or other agreement
relating to Taxes with any taxing authority).
(v) Neither the Company nor the Subsidiary has taken
or agreed to take any action that would prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
(vi) The Company and the Subsidiary have complied in
all material respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes.
(vii) Except as disclosed in Section 5.1(1) of the
Disclosure Schedule, no Federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any federal income or material state, local or foreign Taxes or Tax
Returns of the Company or the Subsidiary and neither the Company nor the
Subsidiary has received a written notice of any pending audit or proceeding.
(viii) Neither the Company nor the Subsidiary has
agreed to or is required to make any adjustment under Section 481(a) of the
Code.
(ix) Neither the Company nor the Subsidiary has, with
regard to any assets or property held or acquired by any of them, filed a
consent to the application of Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 141(f)(4) of the Code) owned by the Company
or the Subsidiary.
(x) No property owned by the Company or the
Subsidiary (i) is property required to be treated as being owned by another
Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986; (ii) constitutes "tax exempt use property" within the
meaning of Section 168(h)(1) of the Code; or (iii) is tax exempt bond financed
property within the meaning of Section 168(g) of the Code. Neither the Company
nor the Subsidiary is currently, has been within the past five years, or
anticipates becoming a "United States real property holding corporation" within
the meaning of Section 897(c) of the Code.
(xi) For purpose of the Agreement (A) the terms "Tax"
or "Taxes" shall mean all taxes, charges, fees, imposts, levies, gaming or other
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes, any liability in
respect of Taxes imposed by contract, tax sharing agreement, tax indemnity
14
agreement or any similar agreement and (B) the term "Tax Return" shall mean any
report, return, document, declaration or any other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, information
returns, any document with respect to or accompanying payments or estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return document, declaration or other
information.
(m) EMPLOYEE BENEFITS. Section 5.1(m) of the Disclosure
Schedule contains an accurate and complete list of all Company Benefit Plans (as
defined below). None of the Company Benefit Plans is a multiemployer plan as
defined in Section 3(37) of the Employee Retirement Income Security Act, as
amended ("ERISA") or a multiple employer plan covered by Section 4063 or 4064 of
ERISA.
(i) Except as disclosed in Section 5.1(m) of the
Disclosure Schedule, each Company Benefit Plan intended to qualify under Section
401 of the Code does so qualify and the trust maintained pursuant thereto is
exempt from federal income taxation under Section 501 of the Code. Nothing has
occurred with respect to the operation of such plans which could cause the loss
of such qualification or exemption or the imposition of any liability, penalty,
or tax under ERISA or the Code.
(ii) True and correct copies of the following
documents with respect to each Company Benefit Plans have been made available or
delivered to Acquiror by the Company: (A) any plans, and amendments thereto, (B)
the most recent forms 5500 and any financial statements attached thereto, (C)
the last Internal Revenue Service determination letter (if any), (D) summary
plan descriptions, (E) the two most recent actuarial reports, including any such
reports for purposes of FASB 87, 106 and 112, and (F) written descriptions of
all materials, non-written agreements relating to the Company Benefit Plans.
(iii) The Company Benefit Plans have been maintained
in accordance with their terms and with all provisions of ERISA and other
applicable law. Neither the Company nor the Subsidiary has any liability with
respect to a non-exempt prohibited transaction within the meaning of Section
4975 of the Code or Section 406 of ERISA.
(iv) Neither the Company nor any ERISA Affiliate
maintains any Company Benefit Plan subject to Title IV of ERISA which has
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.
(v) Except as disclosed in Section 5.1(m) of the
Disclosure Schedule, neither the Company nor the Subsidiary maintains retiree
life insurance or retiree health plans which are "welfare benefit plans" within
the meaning of Section 3(l) of ERISA and which provide for continuing benefits
or coverage for any participant or any beneficiary of a participant after such
participant's termination of employment where such participant was an employee
of the Company or any subsidiary of the Company, other than as required by Part
6 of Title I of ERISA.
15
(vi) Except as disclosed in Section 5.1(m) of the
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (A) result in any
payment (including, without limitation, bonus or other compensation severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
employee of the Company under any Company Benefit Plan, any individual agreement
or otherwise, (B) increase any benefits otherwise payable under any Company
Benefit Plan or (C) result in the acceleration of the time of payment or vesting
of any such benefits.
(vii) (A) None of the employees of the Company or the
Subsidiary is represented in his or her capacity as an employee of such company
by any labor organization; (B) neither the Company nor the Subsidiary has
recognized any labor organization nor has any labor organization been elected as
the collective bargaining agent of any of their employees, nor has the Company
or the Subsidiary signed any collective bargaining agreement or union contract
recognizing any labor organization as the bargaining agent of any of their
employees; and (C) to the best knowledge of the Company, there is no active or
current union organization activity involving the employees of the Company or
any subsidiary of the Company, nor has there ever been union representation
involving employees of the Company and/or the Subsidiary.
(viii) For the purposes of this Agreement: (A) the
term "Company Benefit Plan" shall include all employee benefit plans (as defined
in Section 3(3) of ERISA) and all other employee benefit plans, arrangements or
payroll practices, including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, scholarship programs, deferred
compensation, incentive compensation, stock option or restricted stock plans
maintained by the Company or any ERISA Affiliate of the Company (whether formal
or informal, whether for the benefit of a single individual or for more than one
individual and whether for the benefit of current or former employees or their
beneficiaries) on behalf of the Company or any of the employees of the Company
or the Subsidiary or to which or under which or pursuant to which the Company or
any ERISA Affiliate of the Company has contributed or is obligated to make
contributions on behalf of the Company or any employees of the Company or the
Subsidiary; (B) the term "ERISA" shall refer to the Employee Retirement Income
Security Act of 1974, as amended; and (C) the term "ERISA Affiliate" shall refer
to any trade or business (whether or not incorporated) under common control or
treated as a single employer with the Company within the meaning of Section
414(b), (c), (m) or (o) of the Code.
(n) TITLE TO PROPERTIES; ASSETS OTHER THAN REAL PROPERTY
INTERESTS.
(i) The Company SEC Reports and Section 5.1(n) of the
Disclosure Schedule sets forth a complete list of all real property and
interests in real property owned or leased by the Company or the Subsidiary, and
indicates whether such property is owned or leased (each such owned property, an
"Owned Property" and each such leased property, a "Leased Property", and
collectively "Real Property"). Except as set forth in Section 5.1(n) of the
Disclosure Schedule or the Company SEC Reports, each of the Company or the
Subsidiary has good and marketable title to each Owned Property, or a valid
leasehold interest in each Leased
16
Property, in each case free and clear of all liens and except for easements,
restrictive covenants and similar encumbrances of record that, individually or
in the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted. Except as set forth in Section
5.1(n) of the Disclosure Schedule, each of the Company and the Subsidiary has
complied in all material respects with the terms of all material leases to which
it is a party, and all such leases are in full force and effect. Each of the
Company and the Subsidiary enjoys peaceful and undisturbed possession under all
such material leases.
(ii) Each of the Company or the Subsidiary has good
and valid title to all its properties and assets, in each case free and clear of
all liens, except (A) such as are set forth in section 5.1(n) of the Disclosure
Schedule, (B) mechanics', carriers', workmen's, repairmen's or other similar
liens arising or incurred in the ordinary course of business, (C) liens arising
under conditional sales contracts and equipment leases with third parties
entered into in the ordinary course of business, (D) liens for Taxes which are
not due and payable or which may thereafter be paid without penalty, (E) liens
which secure debt that is reflected as a liability on the most recent financial
statement included in the Company SEC Reports filed and publicly available prior
to the date of this Agreement and the existence of which is indicated in the
notes thereto and (F) other imperfections of title or encumbrances, if any,
which do not, individually or in the aggregate, materially impair the continued
use and operation of the assets to which they relate in the business of the
Company and the Subsidiary. This paragraph (ii) does not relate to Real Property
or interests in Real Property, such items being the subject of paragraph (i)
above.
(iii) The occupancies and uses of the Real Property,
as well as the development, construction, management, maintenance, servicing and
operation of the Real Property, comply in all material respects with all
applicable laws, ordinances, rules, regulations, orders and requirements of all
governmental authorities having jurisdiction and are not in material violation
of any thereof; the certificate(s) of occupancy and all other licenses and
permits required by law for the proper use and operation of the Real Property
are in full force and effect; all approvals, consents, permits, utility
installations and connections, curb cuts and street openings required for the
development, construction, maintenance, operation and servicing of the Real
Property have been granted, effected, or performed and completed (as the case
may be), and all fees and charges therefor have been fully paid; and the Company
has not received written notice of, and does not otherwise have knowledge of,
any material violations, suits, orders, decrees or judgments relating to zoning,
building use and occupancy, traffic, fire, health, sanitation, air pollution,
ecological, environmental or other laws or regulations, against, or with respect
to, the Real Property.
(iv) There is adequate access between each Owned
Property or Leased Property and public roads and there are no pending or
threatened proceedings that could have the effects of impairing or restricting
such access; there are sufficient parking spaces on material Owned Property or
Leased Property to comply with all applicable provisions of any agreements to
which such Real Property is subject to local zoning requirements and all other
applicable laws and governmental requirements; the material improvements upon
the Real Property contain no asbestos and there are no material defects in the
roof, foundation, sprinkler mains, structural,
17
mechanical and HVAC systems and masonry walls in any of the material
improvements upon the Real Property and no significant repairs thereof are
required, and all periodic maintenance has been done and is being done which is
consistent with first class maintenance standard for Real Property of similar
size and age in the vicinity of such Real Property.
(v) The assets and properties owned by the Company
and the Subsidiary are, in accordance with past practice, suitable and
sufficient for the conduct of their businesses as heretofore conducted and will
provide Acquiror with the capability to manufacture, use and sell the products
and conduct the businesses of the Company and the Subsidiary in substantially
the same manner as they have been conducted heretofore.
(o) INTANGIBLE PROPERTY.
(i) Section 5.1(o) of the Disclosure Statement sets
forth a list of each patent, trademark, trade name, service xxxx, brand xxxx,
brand name, industrial design and copyright owned or used in business by the
Company and the Subsidiary, as well as all registrations thereof and pending
applications therefor, and each license or other contract relating thereto
(collectively with any other intellectual property owned or used in the business
by the Company and the Subsidiary, and all of the goodwill associated therewith,
the "Intangible Property") and indicates, with respect to each item of
Intangible Property listed thereon, the owner thereof and if applicable, the
name of the licensor and licensee thereof and the terms of such license or other
contract relating thereto. Except as set forth in Section 5.1(n) or (o) of the
Disclosure Schedule or the Company SEC Reports, each of the foregoing is owned
free and clear of any and all liens, mortgages, pledges, security interests,
levies, charges, options or any other encumbrances, restrictions or limitations
of any kind whatsoever and neither the Company nor the Subsidiary has received
any notice to the effect that any other entity has any claim of ownership with
respect thereto. To the best knowledge of the Company, the use of the foregoing
by the Company and the Subsidiary does not conflict with, infringe upon, violate
or interfere with or constitute an appropriation of any right, title, interest
or goodwill, including, without limitation, any intellectual property right,
patent, trademark, trade name, service xxxx, brand xxxx, brand name, computer
program, industrial design, copyright or any pending application therefor of any
other entity. Except as set forth in Section 5.1(o) of the Disclosure Schedule,
no claims have been made, and neither the Company nor the Subsidiary has
received any notice that any of the foregoing is invalid, conflicts with the
asserted rights of other entities, or has not been used or enforced (or has
failed to be used or enforced) in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Intangible Property.
(ii) The Company and the Subsidiary possess all
Intangible Property, including, without limitation, all know-how, formulae and
other proprietary and trade rights necessary for the conduct of their businesses
as now conducted. Neither the Company nor the Subsidiary has taken or failed to
take any action that would result in the forfeiture or relinquishment of any
such Intangible Property used in the conduct of their respective businesses as
now conducted.
18
(p) CERTAIN CONTRACTS. Section 5.1(p) of the Disclosure
Schedule lists all of the following contracts to which the Company or the
Subsidiary is a party or by which either of them or any of their properties or
assets may be bound ("Listed Agreements"): (i) all employment or other contracts
with any employee, consultant, officer or director of the Company or the
Subsidiary (or any company which is controlled by any such individual) whose
total rate of annual remuneration is estimated to exceed $50,000 in the fiscal
year ended July 31, 1997; (ii) union, guild or collective bargaining contracts
relating to employees of the Company or the Subsidiary; (iii) instruments for
money borrowed (including, without limitation, any indentures, guarantees, loan
agreements, sale and leaseback agreements, or purchase money obligations
incurred in connection with the acquisition of property other than in the
ordinary course of business) in excess of $250,000; (iv) underwriting, purchase
or similar agreements entered into in connection with the Company's or the
Subsidiary's currently existing indebtedness; (v) agreements for acquisitions or
dispositions (by merger, purchase or sale of assets or stock or otherwise) of
material assets entered into within the last two years, as to which the
transactions contemplated have been consummated or are currently pending; (vi)
joint venture or partnership agreements entered into; (vii) material licensing,
merchandising and distribution contracts; (viii) contracts granting any person
or other entity registration rights; (ix) guarantees, suretyships,
indemnification and contribution agreements in excess of $250,000; and (x) other
contracts which materially affect the business, properties or assets of the
Company and the Subsidiary taken as a whole, and are not otherwise disclosed in
this Agreement or were entered into other than in the ordinary course of
business. A true and complete copy (including all amendments) of each Listed
Agreement has been made available to Acquiror. Neither the Company nor any
subsidiary (i) is in breach or default under any of the Listed Agreements or
(ii) has any knowledge of any other breach or default under any Listed Agreement
by any other party thereto or by any other person or entity bound thereby,
except in the case of (i) or (ii) breaches or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
the Company and the Subsidiary. At the Effective Time, no person will have the
right, by contract or otherwise, to become, nor does any entity have the right
to designate or cause the Company to appoint a person as, a director of the
Company.
(q) INSURANCE. The Company and the Subsidiary have obtained
and maintained in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and covering
such risks, including fire and other risks insured against by extended coverage,
as is usually carried by companies engaged in similar businesses and owning
similar properties similarly situated or otherwise required by law, and each has
maintained in full force and effect public liability insurance, insurance
against claims for personal injury or death or property damage occurring in
connection with any of the activities of the Company or the Subsidiary or any of
the properties owned, occupied or controlled by the Company or the Subsidiary,
in such amount as reasonably deemed necessary by the Company or the Subsidiary.
To the extent the Company self-insures against such risks or damages, the
liabilities reflected or reserved against in the Company's most recent financial
statements (or the notes thereto) included in the Company SEC Reports filed and
publicly available prior to the date of this Agreement are adequate to cover
against such risks and damages.
19
(r) WARRANTIES, ETC.
(i) All products manufactured or sold by the Company
or its subsidiaries have been manufactured and sold in substantial conformity
with the applicable contractual commitments and specifications.
(ii) There are no recalls of products produced by the
Company or any of its subsidiaries pending or threatened and, to the Company's
knowledge, there is no basis for any material recall of any such products.
(s) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. None of the Company,
any of its subsidiaries or, to the knowledge of the Company, any of their
respective directors, officers, employees or agents has, with respect to the
businesses of the Company and its subsidiaries, (i) used any funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee;
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any person or entity.
(t) LISTINGS. The Company's securities are not listed or
quoted for trading on any U.S. domestic or foreign securities exchange, except
the NASDAQ Small-Cap Issues Market.
(u) ENVIRONMENTAL MATTERS. Except as disclosed in Section
5.1(u) of the Disclosure Schedule or in the Company SEC Reports filed and
publicly available prior to the date of this Agreement, (i) the Company and the
Subsidiary and the operations thereof are in material compliance with all
Environmental Laws (as defined below); (ii) there are no judicial or
administrative actions, suits or proceedings pending or, to the knowledge of the
Company, threatened and, to the knowledge of the Company, there are no
investigations pending or threatened against the Company or any subsidiary or
former subsidiary of the Company alleging the violation of any Environmental Law
and neither the Company nor the Subsidiary has received notice from any
governmental body or person alleging any violation of or liability under any
Environmental Laws, in either case which could reasonably be expected to result
in material Environmental Costs and Liabilities; and (iii) to the knowledge of
the Company, there are no facts, circumstances or conditions relating to,
arising from, associated with or attributable to the Company or its subsidiaries
or former subsidiaries or any real property currently or previously owned,
operated or leased by the Company or any subsidiary or former subsidiary of the
Company that could reasonably be expected to result in material Environmental
Costs and Liabilities. For the purpose of this Section 5.1(u), the following
terms have the following definitions. (A) "Environmental Costs and Liabilities"
means any losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including, without limitation,
fees, disbursements anti expenses of legal counsel, experts, engineers and
consultants and the costs of investigation and feasibility studies, remedial or
removal actions and cleanup
20
activities) arising from or under any Environmental Law; (B) "Environmental
Laws" means any applicable federal, state, local, or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement
relating to the environment, natural resources, or public or employee health and
safety; (C) "Hazardous Material" means any substance, material or waste
regulated by federal, state or local government, including, without limitation,
any substance , material or waste which is defined as a "hazardous waste,
"hazardous material," "hazardous substance", "toxic waste" or "toxic substance
under any provision or Environmental Law and including but not limited to
petroleum and petroleum products.
(v) INVENTORIES; RECEIVABLES; PAYABLES.
(i) The inventories (after deducting the reserve
accounts as shown on the Company's financial statements) of the Company and the
Subsidiary are in good and marketable condition, and are saleable in the
ordinary course of business. Adequate reserves have been reflected on the most
recent balance sheet included in the Company SEC Documents and, after the date
of the most recent balance sheet included in the Company SEC Documents, will be
reflected on the books of the Company, for shorts, drops, off-cuts, obsolete or
otherwise unusable inventory, which reserves were calculated in accordance with
GAAP consistently applied.
(ii) All accounts receivable of the Company and the
Subsidiary have arisen from bona fide transactions in the ordinary course of
business. All accounts receivable of the Company and the Subsidiary reflected on
the most recent balance sheet included in the Company SEC Documents are good and
collectible at the aggregate recorded amounts thereof, net of any applicable
reserve for returns or doubtful accounts reflected thereon, which reserves are
adequate and were calculated in accordance with GAAP consistently applied. All
accounts receivable arising after the date of the most recent balance sheet
included in the Company SEC Documents are good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserve for returns or doubtful
accounts, which reserves are adequate and were calculated in accordance with
GAAP consistently applied.
(iii) All accounts payable of the Company and the
Subsidiary reflected on the most recent balance sheet included in the Company
SEC Documents or arising after the date thereof are the result of bona fide
transactions in the ordinary course of business and have been paid or are not
yet overdue within their agreed-upon payment terms.
(w) TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement and except to the extent disclosed in the Company
SEC Reports filed and publicly available prior to the date of this Agreement, or
as set forth in Section 5.1(w) of the Disclosure Schedule, since July 31, 1997,
there have been no transactions, agreements, arrangements or understandings
between the Company or the Subsidiary, on the one hand, and the Company's
Affiliates (other than wholly owned subsidiaries of the Company) or other
Persons, on the other hand, that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act.
21
(x) DISCLOSURE. No representation or warranty by the Company
in this Agreement and no statement contained in the Disclosure Schedules or any
certificate delivered by the Company to Acquiror pursuant to this Agreement,
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein not misleading when taken
together in light of the circumstances in which they were made, it being
understood that as used in this Section 5.1(x) "material" means material to the
Company and the Subsidiary taken as a whole.
5.2 REPRESENTATIONS AND WARRANTIES OF ACQUIROR. Acquiror and
Merger Sub jointly and severally represent and warrant to the Company that:
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of Acquiror
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
qualified and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by it
require such qualification, except where the failure to so qualify or be in such
good standing would not have a Material Adverse Effect with respect to Acquiror
and its subsidiaries. Each of Acquiror and Merger Sub has all requisite power
and authority (corporate or otherwise) to own its properties and to carry on its
business as it is now being conducted. Acquiror has heretofore made available to
the Company complete and correct copies of the Certificate of Incorporation and
By-Laws of Merger Sub, which are the Certificate of Incorporation and By-Laws of
Merger Sub which shall be in effect immediately prior to the Effective Time.
(b) CAPITALIZATION. All of the outstanding shares of capital
stock of Acquiror have been duly authorized and validly issued and are fully
paid and nonassessable. All outstanding shares of capital stock or other equity
interests of the subsidiaries of Acquiror are owned by Acquiror or a direct or
indirect wholly owned subsidiary of Acquiror, free and clear of all liens,
charges, encumbrances, claims and options of any nature. The authorized capital
stock of Merger Sub consists of 100 shares of common stock, par value $.01 per
share. All of the outstanding shares of capital stock of Merger Sub have been
duly authorized and validly issued and are fully paid and nonassessable and are
owned by Acquiror, free and clear of all liens, charges, encumbrances, claims
and options of any nature.
(c) AUTHORIZATION FOR ACQUIROR COMMON SHARES. Acquiror has
taken all necessary action to permit it to issue the number of Acquiror Common
Shares required to be issued in connection with the Share Exchanges as
contemplated by Section 4.4. The Acquiror Common Shares issued pursuant to
Article IV will, when issued, be validly issued, fully paid and nonassessable
and no person will have any preemptive right of subscription of purchase in
respect thereof. Such Acquiror Common Shares will, when issued, be registered
under the Exchange Act and the issuance thereof in the Share Exchanges will be
exempt from registration under the Securities Act, and any applicable state
securities laws and will, when issued, be listed on the NYSE, subject to
official notice of issuance.
22
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Acquiror and
Merger Sub has the requisite corporate power and authority to approve,
authorize, execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement and the consummation by Acquiror of the
transactions contemplated hereby have been duly and validly authorized by the
respective Boards of Directors of Acquiror and Merger Sub and by Acquiror as the
sole shareholder of Merger Sub, and no other corporate proceedings on the part
of Acquiror or Merger Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Acquiror and Merger Sub and,
assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes a valid and binding agreement of each of Acquiror and
Merger Sub, enforceable against each of Acquiror and Merger Sub in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(e) CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement by Acquiror and Merger Sub nor the
consummation by Acquiror and Merger Sub of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the charter
or the By-Laws of Acquiror or the Certificate of Incorporation or the By-Laws of
Merger Sub; (ii) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority or any
other Person, except (A) pursuant to the applicable requirements of the
Securities Act and the Exchange Act and regulations promulgated thereunder, (B)
the filing of the Certificate of Merger pursuant to the DGCL and appropriate
documents with the relevant authorities of other states in which the Company is
authorized to do business, (C) as may be required by any applicable state
securities or takeover laws, (D) such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (E) such filings, consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under the laws of any foreign country, (F) filings with, and
approval of, the NYSE, or (G) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not in the aggregate have a Material Adverse Effect with respect to Acquiror and
its subsidiaries or adversely affect the ability of Acquiror or Merger Sub to
consummate the transactions contemplated hereby; (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or result in the creation of any lien or other charge or encumbrance) under any
of the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which Acquiror or Merger Sub or any of their assets
may be bound, except for such violations, breaches and defaults (or rights of
termination, cancellation or acceleration or creations of lien or other charge
or encumbrance) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect with respect
to Acquiror and its subsidiaries or adversely affect the ability of Acquiror or
Merger Sub to consummate the transactions contemplated hereby; or (iv) assuming
the consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 5.2(e)
23
are duly and timely obtained or made, violate any order, writ, injunction
decree, statute, rule or regulation applicable to Acquiror or any of its
subsidiaries or to any of their respective assets, except for violations which
would not in the aggregate have a Material Adverse Effect with respect to
Acquiror and its subsidiaries or adversely affect ability of Acquiror or Merger
Sub to consummate the transactions contemplated hereby.
(f) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Since January 1, 1992, Acquiror has filed all
forms, reports and documents with the Securities and Exchange Commission ("SEC")
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act (the
"Acquiror SEC Reports"). None of the Acquiror SEC Reports, including, without
limitation, any financial statements or schedules included therein, at the time
filed contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(ii) The consolidated balance sheets and the related
statements of income, stockholders' equity and cash flow (including the related
notes thereto) of Acquiror included in the Acquiror SEC Reports comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with prior periods (except as otherwise noted
therein), and present fairly the consolidated financial position of Acquiror and
its consolidated subsidiaries as of their respective dates, and the results of
its operations and its cash flow for the periods presented therein (subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments).
(g) PROXY STATEMENT. None of the information to be supplied by
Acquiror or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement will, at the time of the mailing of the Proxy Statement, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
(h) OPERATIONS OF MERGER SUB. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated by this Agreement.
24
ARTICLE VI - ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS.
(a) The Company covenants and agrees that, during the period
from the date of this Agreement to the Effective Time (unless Acquiror shall
otherwise agree in writing, which agreement shall not be unreasonably withheld,
and except as otherwise contemplated by this Agreement), the Company will, and
will cause the Subsidiary to, conduct its operations according to its ordinary
and usual course of business consistent with past practice and, to the extent
consistent therewith, with no less diligence and effort than would be applied in
the absence of this Agreement, seek to preserve intact its current business
organizations, keep available the service of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise permitted in this Agreement or disclosed in
Section 6.1 of the Disclosure Schedule, prior to the Effective Time, neither the
Company nor the Subsidiary will, without the prior written consent of Acquiror,
which consent shall not be unreasonably withheld:
(i) (A) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its capital stock, other
than dividends and distributions by any direct or indirect wholly owned
subsidiary of the Company to its parent, (B) split, combine or reclassify any of
its capital stock or, except pursuant to the exercise of options, warrants,
conversion rights, exchange rights and other contractual rights existing on the
date hereof, issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or other
equity interests, (C) purchase, redeem or otherwise acquire or amend any shares
of capital stock or other equity interests of the Company or the Subsidiary or
any other securities thereof or any rights, warrants or options to acquire any
such shares, interests or other securities or (D) establish any new subsidiary;
(ii) issue, deliver, sell, pledge or otherwise
encumber or amend any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, interests, voting securities or convertible
securities, including pursuant to any option plans of the Company or the
Subsidiary, other than (A) the issuance of Shares upon the exercise of Options
outstanding on the date of this Agreement in accordance with their present terms
and (B) the issuance of Shares upon the exercise of the Warrants outstanding on
the date of this Agreement in accordance with their present terms;
(iii) amend its Certificate of Incorporation, By-Laws
or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business
25
or any corporation, partnership, joint venture, association or other business
organization or division thereof or (B) any asset requiring or involving an
expenditure or purchase price in excess of $100,000, except (x) mergers and
consolidations between or among one or more wholly owned subsidiaries of the
Company that will not create adverse tax consequences to the Company or the
Subsidiary, and (y) purchases of inventory in the ordinary course of business
consistent with past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any of its properties or
assets, except in the ordinary course of business consistent with past practice;
(vi) (A) other than incurrences of indebtedness
(which term shall be deemed not to include trade payables incurred in the
ordinary course of business or draw-downs of the Company's existing bank and
lease lines in the ordinary course of business) which, in the aggregate, do not
exceed $50,000, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company or the Subsidiary,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the foregoing
or (B) make any loans, advances or capital contributions to, or investments in,
any other person other than to the Company, or any direct or indirect wholly
owned subsidiary of the Company;
(vii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge, settlement or
satisfaction, in accordance with their terms of liabilities reflected or
reserved against in the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Company SEC Reports filed and
publicly available prior to the date of this Agreement or incurred in the
ordinary course of business consistent with past practice since the date of such
financial statements, or waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company or the Subsidiary is a party;
(viii) (A) adopt, enter into, terminate or amend any
Company Benefit Plan or other arrangement for the benefit or welfare of any
director, officer, current or former employee, representative, consultant or
adviser of the Company or the Subsidiary, (B) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any such director,
officer, employee, representative, consultant or adviser except for normal
increases or bonuses as contractually required pursuant to agreements disclosed
in the Company SEC Reports filed and publicly available prior to the date of
this Agreement or in the ordinary course of business consistent with past
practice to employees other than directors and executive officers of the Company
and that, in the aggregate, do not result in any material increase in benefits
or compensation expense to the Company and the Subsidiary relative to the level
in effect prior to such action (but in no event shall the aggregate amount of
the increases granted to any such
26
director, officer or employee exceed 5% of the aggregate annualized compensation
of such director, officer or employee and in no event shall the aggregate amount
of all such increases exceed 1% of the aggregate annualized compensation expense
of the Company and the Subsidiary reported in the most recent consolidated
financial statements of the Company included in the Company SEC Reports filed
and publicly available prior to the date of this Agreement) and except as
contractually required pursuant to agreements included as part of a Company SEC
Reports filed and publicly available prior to the date of this Agreement, (C)
pay any benefit not provided for under any Company Benefit Plan, (D) except for
payments or awards in cash permitted by clause (B), grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
Company Benefit Plan (including the grant of stock options, stock appreciation
rights, stock-based or stock-related awards, performance units or restricted
stock, or the removal of existing restrictions in any company Benefit Plans or
agreements or awards made thereunder) or (E) take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Company Benefit Plan;
(ix) make or agree to make any capital expenditure or
expenditures other than for maintenance purposes in excess of $25,000;
(x) modify, amend or terminate any contract or
agreement set forth in the Company SEC Reports or any real property lease to
which the Company or the Subsidiary is a party, or waive, release or assign any
material rights or claims thereunder;
(xi) take or agree to take any action that would
prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code;
(xii) conduct its business in a manner or take, or
cause to be taken, any other action that would or might reasonably be expected
to prevent or materially delay the Company, Merger Sub or Acquiror from
consummating the transactions contemplated hereby in accordance with the terms
of this Agreement (regardless of whether such action would otherwise be
permitted or not prohibited hereunder); or
(xiii) agree to take any of, the foregoing actions.
(b) Acquiror covenants and agrees that, during the period from
the date of this Agreement to the Effective Time, neither Acquiror or the
Subsidiary will, without the prior written consent of the Company, which consent
shall not be unreasonably withheld:
(i) take or agree to take any action that would
prevent the Merger from constituting a reorganization qualifying under the
provisions of Section 368(a) of the Code;
(ii) conduct its business in a manner or take, or
cause to be taken, any other action that would or might reasonably be expected
to prevent or materially delay Acquiror, Merger Sub or the Company from
consummating the transactions contemplated hereby in
27
accordance with the terms of this Agreement (regardless of whether such action
would otherwise be permitted or not prohibited hereunder); or
(iii) agree to take any of the foregoing actions.
(c) During the period of time from the date of this Agreement
to the Effective Time, Merger Sub shall not engage in any activities of any
nature, except as provided in or contemplated by this Agreement.
6.2 NO SOLICITATION.
(a) The Company, the Subsidiary and their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or the Subsidiary) (collectively, the "Company's Representatives") shall
immediately cease any discussions or negotiations with any party that may be
ongoing with respect to a Competing Transaction (as defined below). From and
after the date hereof until the termination of this Agreement, neither the
Company nor the Subsidiary will, nor will the Company authorize or permit the
Subsidiary or any of the Company Representatives to, directly or indirectly,
initiate, solicit or knowingly encourage (including by way of furnishing
non-public information), or take any other action to facilitate, any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction, or participate in any discussions or
negotiations regarding any Competing Transaction or agree to or endorse any
Competing Transaction, and the Company shall notify Acquiror orally (within one
business day) and in writing (as promptly as practicable) of all of the relevant
details relating to all inquiries and proposals which it or the Subsidiary or
any such Company Representative may receive relating to any such matters and, if
such inquiry or proposal is in writing, the Company shall deliver to Acquiror a
copy of such inquiry or proposal promptly; provided, however, that nothing
contained in this Section 6.2 shall prohibit the Company or its Board of
Directors from (i) taking and disclosing to its stockholders a position
contemplated by Exchange Act Rule 14e-2 or (ii) making any disclosure to its
stockholders that, in the good faith judgment of its Board of Directors, after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), is required
under applicable law; provided, further, that until September 7, 1997 nothing
contained in this Section 6.2 shall prohibit the Company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that after the date hereof and prior to September 7, 1997 states in an
unsolicited writing that it has a bona fide serious interest to make a Superior
Proposal (as defined below) if (1) (x) the Board of Directors of the Company,
after consultation with and based upon the advice of independent legal counsel
(who may be the Company's regularly engaged independent legal counsel)
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law and (y) after consultation with and based upon the advice
of an independent financial advisor (who may be the Company's regularly engaged
independent financial advisor) determines in good faith that such person or
entity is capable of making, financing and consummating a Superior Proposal and
(2)
28
prior to taking such action, the Company (x) provides at least two business
days' notice to Acquiror to the effect that it is taking such action and (y)
receives from such person or entity an executed confidentiality agreement on
terms no less restrictive than the Confidentiality Agreement (as defined below).
For purposes of this Agreement, "Competing Transaction" shall mean any of the
following (other than the transactions between the Company, Merger Sub and
Acquiror contemplated hereby) involving the Company: (i) any merger,
consolidation, share exchange, recapitalization, business combination, or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of all or a substantial portion of the assets of the
Company and the Subsidiary, taken as a whole, or of more than 25% of the equity
securities of the Company or the Subsidiary, in any case in a single transaction
or series of transactions; (iii) any tender offer or exchange offer for 25% or
more of the outstanding shares of capital stock of the Company or the filing of
a registration statement under the Securities Act in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(b) Except as permitted by this Section 6.2, the Board of
Directors of the Company shall not, on or prior to September 7, 1997, (i)
withdraw or modify, or propose to withdraw or modify in a manner adverse to
Acquiror, the approval or recommendation by such Board of Directors of this
Agreement or the merger, or (ii) approve or recommend, or cause the Company to
enter into any agreement with respect to, any Competing Transaction.
Notwithstanding the foregoing, if prior to September 7, 1997 the Board of
Directors of the Company, after consultation with and based upon the advice of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), determines in good faith that it is necessary to do
so in order to comply with its fiduciary duties to stockholders under applicable
law, the Board of Directors of the Company, prior to September 7, 1997, may
modify or withdraw its approval or recommendation of this Agreement and the
Merger, approve or recommend a Superior Proposal (as defined below) or cause the
Company to enter into an agreement with respect to a Superior Proposal, but in
each case only after providing at least two business days' written notice to
Acquiror (a "Notice of Superior Proposal") advising Acquiror that the Board of
Directors of the Company has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal. In addition, if the Company proposes to
enter into an agreement with respect to any Competing Transaction, it shall
concurrently with entering into such an agreement pay, or cause to be paid, to
the Acquiror the fee required by Section 8.5(b) hereof. For purposes of this
Agreement, a "Superior Proposal" means any bona fide proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
all or substantially all the Shares then outstanding or all or substantially all
the assets of the Company and otherwise on terms which the Board of Directors of
the Company determines in its good faith judgment (based on the advice of
BlueStone or another financial advisor of nationally recognized reputation) to
be more favorable to the Company's stockholders than the Merger and the related
Share Exchanges.
6.3 MEETING OF STOCKHOLDERS. The Company will take all action necessary
in accordance with applicable law and its Certificate of Incorporation and
By-Laws to convene a meeting of its stockholders (the "Stockholder Meeting") as
soon as practicable after the date
29
hereof and in any case not later than October 30, 1997 to consider and vote upon
the approval of this Agreement. Subject to the fiduciary duties of the Company's
Board of Directors under applicable law after consultation with and based upon
the advice of independent legal counsel, except as otherwise provided in Section
6.2, the Board of Directors of the Company shall recommend and declare advisable
such approval and the Company shall use its best efforts to solicit, and use its
best efforts to obtain, such approval.
6.4 PROXY STATEMENT. The Company will, as promptly as practicable,
prepare and file with the SEC a proxy statement and a form of proxy, in
connection with the vote of the Company's stockholders with respect to this
Agreement (such proxy statement, together with any amendments thereof or
supplements thereto, in each case in the form or forms mailed to the Company's
stockholders, is herein called the "Proxy Statement"). The Company will give
Acquiror and its counsel a reasonable opportunity to review and comment upon the
Proxy Statement prior to its being filed with the SEC and shall give Acquiror
and its counsel a reasonable opportunity to review all amendments and
supplements to the Proxy Statement and all responses to requests for additional
information and replies to comments prior to their being filed with, or sent to,
the SEC and, in the case of the Proxy Statement and any amendments or
supplements thereto, prior to its being disseminated to holders of shares of
Common Stock. The Company will cause the Proxy Statement to be mailed to
stockholders of the Company at the earliest practicable date and in any case not
later than September 20, 1997, subject to the approval of the same by the SEC or
the lapse of any waiting period under applicable SEC rules, and will coordinate
and cooperate with Acquiror with respect to the timing of the Stockholder
Meeting.
6.5 ACCESS TO INFORMATION. Upon reasonable notice, the Company shall
(and shall cause each of the Subsidiary to) afford to officers, employees,
counsel, accountants and other authorized representatives of Acquiror
("Acquiror's Representatives") reasonable access, during normal business hours
throughout the period prior to the Effective Time, to its properties, books,
records and customers (including, without limitation, Xerox Corporation) and,
during such period, shall (and shall cause each of the Subsidiary to) furnish
promptly to Acquiror's Representatives all information concerning the business,
properties and personnel of the Company and the Subsidiary as may reasonably be
requested, provided that no investigation pursuant to this Section 6.5 shall
affect or be deemed to modify any of the representations or warranties made by
the Company. Acquiror agrees that it will not, and will cause Acquiror's
Representatives not to, use any information obtained pursuant to this Section
6.5 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. In connection with the foregoing, the Company
agrees to cause the Company's independent accountants to provide their
workpapers to Acquiror upon the terms and subject to the conditions on which
such workpapers have previously been provided to Acquiror. The Non-Disclosure
Agreement, dated July 30, 1997 (the "Confidentiality Agreement"), between
Acquiror and the Company shall apply with respect to the information furnished
hereunder and survive any termination of this Agreement, subject to the terms
and conditions set forth in such Confidentiality Agreement.
30
6.6 PUBLICITY. The parties hereto agree that they will consult with
each other concerning any proposed press release or public announcement
pertaining to the Merger and the other transactions contemplated hereby in order
to seek to agree upon the text of any such press release or the making of such
public announcement.
6.7 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time and for a period of
seven years thereafter, Acquiror shall indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of the Company or
the Subsidiary (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys, fees and expenses), liabilities or
judgments or amounts that are paid in settlement of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director or officer of the Company or the Subsidiary, whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), including, without limitation, all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to this Agreement or the transactions contemplated hereby, in each
case to the fullest extent a corporation is permitted under applicable law to
indemnify its own directors or officers, as the case may be; provided, however,
that all right to indemnification in respect of any claim asserted or made
within such period shall continue until the disposition of such claim. In the
event of an Indemnified Liability, (i) Acquiror shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel shall
be reasonably satisfactory to Acquiror, promptly after statements therefor are
received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred, in either case to the
extent not prohibited by applicable law and upon receipt of any affirmation and
undertaking required by applicable law, (ii) Acquiror will cooperate in the
defense of any such matter and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under applicable law shall be made by independent counsel mutually
acceptable to Acquiror and the Indemnified Party; provided, however, that
Acquiror shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld) and that Acquiror
shall be liable for the fees and expenses of only one law firm for all
Indemnified Parties with respect to each related matter except to the extent
there is, in the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any significant issue between
positions of any two or more Indemnified Parties.
(b) This Section 6.7 is intended to benefit the Indemnified
Parties and shall be binding on all successors and assigns of Acquiror, the
Company and the Surviving Corporation.
6.8 TAXES. In respect of Tax Returns of the Company or any subsidiary
not required to be filed prior to the date hereof, the Company shall, to the
extent permitted by law
31
without any penalty, delay (or cause such subsidiary to delay) the filing of any
such Tax Returns until after the Effective Time; provided, however, that the
Company shall notify Acquiror of its intention to delay (or cause such
subsidiary to delay) any such filing and shall not so delay the filing of a Tax
Return if a penalty or interest would result therefrom or if Acquiror and the
Company agree that so delaying the filing of such Tax Return is not in the best
interests of either the Company or Acquiror. If any such Tax Return is required
to be filed on or prior to the Effective Time, the Company or the Subsidiary, as
the case may be, shall prepare and timely file such Tax Return in a manner
consistent with prior years and all applicable laws and regulations; provided,
however, that Acquiror shall be notified and given an opportunity to review and
to comment, prior to the filing thereof, on any such Tax Return.
6.9 MAINTENANCE OF INSURANCE. Between the date hereof and through the
Effective Time the Company will maintain in full force and effect all of its
presently existing policies of insurance or insurance comparable to the coverage
afforded by such policies.
6.10 REPRESENTATIONS AND WARRANTIES. None of the Company, Acquiror or
Merger Sub will take any action that would cause any of the representations and
warranties set forth in Section 5.1 or 5.2, as the case may be, not to be true
and correct (subject to the standard set forth in the provision of Section
7.1(a) or 7.2(a), respectively) at and as of the Effective Time.
6.11 REASONABLE BEST EFFORTS; OTHER ACTION.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and operate with the other parties in doing, all things necessary, proper
or advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from all applicable governmental and regulatory
authorities and the making of all necessary registrations and filings (including
filings with governmental and regulatory authorities, if any) and the taking of
all reasonable steps as may be necessary to obtain an approval or waiver from,
or to avoid an action or proceeding by, any governmental and regulatory
authority, (ii) the obtaining of all necessary consents, approvals or waivers
from all other Persons, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other governmental or regulatory authority vacated or reversed and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Each party hereto will notify the other party promptly of the receipt
of any comments from the SEC or its staff and of any other governmental
officials for amendments or supplements to the Proxy Statement or any other
filing described in or made pursuant this Section 6.11 and will supply the other
with copies of all correspondence between such party or any of its
representatives, on the
32
one hand, and the SEC, its staff or any other governmental officials, on the
other hand, with respect to the Proxy Statement or such other filings.
6.12 NOTIFICATION OF CERTAIN MATTERS. Each of the Company, Merger Sub
and Acquiror shall give prompt notice to one another of (a) any notice of, or
other communication relating to, a default or event which, with notice or lapse
of time or both, would become a default, received by it subsequent to the date
of this Agreement and prior to the Effective Time, under any contract material
to the financial condition, properties, businesses or results of operations of
it to which it is a party or is subject, (b) any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement, (c)
any material adverse change in its (together with its subsidiaries taken as a
whole) businesses, results of operations, properties, assets, liabilities,
prospects or condition (financial or otherwise), other than changes resulting
from general economic conditions, (d) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect (including in the case of representations or warranties by the Company
or Acquiror, as applicable, such party's receiving knowledge of any fact, event
or circumstance which may cause any representation qualified as to the knowledge
of such party to be or become untrue or inaccurate in any material respect) or
(e) the failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
ARTICLE VII - CONDITIONS
7.1 CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND MERGER
SUB. The obligations of Acquiror and Merger Sub to consummate the Merger are
subject to the fulfillment at or prior to the Effective Time of the following
conditions, any or all of which may be waived in whole or in part by Acquiror to
the extent permitted by applicable law.
(a) CERTIFICATE. The representations and warranties of the
Company set forth in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
the same had been made on and as of the Closing Date (except to the extent they
relate to a particular date), the Company shall have performed in all material
respects all of its material obligations under this Agreement theretofore to be
performed, and Acquiror and Merger Sub shall have received at the Closing Date a
certificate to that effect dated the Closing Date, and executed by the Chief
Executive Officer/President of the Company, provided, however, that no
representation or warranty of the Company contained in Section 5.1 hereof shall
be deemed untrue or incorrect as a consequence of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts circumstances or events inconsistent with
any paragraph of Section 5.1 has had or is expected to have a Material Adverse
Effect with respect to the Company and the Subsidiary.
33
(b) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have
been duly approved by the holders of a majority of the votes entitled to be cast
by the holders of Shares at the Stockholder Meeting, in accordance with
applicable law and the Certificate of Incorporation and By-Laws of the Company.
(c) NO LITIGATION. There shall not be pending or threatened by
any governmental authority or regulatory agency, any suit, action or proceeding
(A) challenging or seeking to restrain or prohibit the Merger or any of the
other transactions contemplated by this Agreement or seeking to obtain from
Acquiror or the Company or any of their respective subsidiaries in connection
with the Merger any material damages, (B) seeking to prohibit or limit the
ownership or operation by Acquiror or the Company or any of their respective
subsidiaries of any material portion of the business or assets of Acquiror or
the Company or any of their respective subsidiaries, or to compel Acquiror, the
Company or any of their respective subsidiaries to dispose of or hold separate
any material portion of the business or assets of Acquiror, the Company or any
of their respective subsidiaries in each case as a result of the Merger or any
of the other transactions contemplated by this Agreement, (C) seeking to impose
limitations on the ability of Acquiror to acquire or hold, or exercise full
rights of ownership of, the Shares, including the right to vote the Shares on
all matters properly presented to the stockholders of the Company, (D) seeking
to prohibit Acquiror or the Subsidiary from effectively controlling in any
material respect the business or operations of the Company or the Subsidiary or
(E) which otherwise is reasonably likely to have a Material Adverse Effect with
respect to the Company and the Subsidiary or Acquiror and its subsidiaries.
There shall be in effect no preliminary or permanent injunction or other order
of a court or governmental or regulatory agency of competent jurisdiction
directing that the transactions contemplated herein not be consummated.
(d) GOVERNMENTAL FILINGS AND CONSENTS. Subject in each case to
the provisions of Section 7.1(c), all governmental filings required to be made
prior to the Effective Time by the Company with, and all governmental consents
required to be obtained prior to the Effective Time from, governmental and
regulatory authorities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby shall
have been made or obtained, except where the failure to make such filing or
obtain such consent would not reasonably be expected to have a Material Adverse
Effect with respect to the Company and the Subsidiary taken as a whole (assuming
the Merger had taken place).
(e) THIRD-PARTY CONSENTS. All required authorizations,
consents and approvals of any Person (other than a governmental authority), the
failure to obtain which would have a Material Adverse Effect with respect to the
Company and the Subsidiary taken as a whole (assuming the Merger had taken
place), shall have been obtained.
(f) EMPLOYMENT AND NON-COMPETITION AGREEMENT. The Company and
Acquiror shall have entered into an Employment and Non-Competition Agreement
34
with Xx. Xxxxxx X. XxXxxx and a covenant not to compete with Xxxxxxx Xxxxxxx, in
each case on mutually satisfactory terms, and such agreements shall be in full
force and effect.
(g) SHARE EXCHANGES. The Share Exchanges shall have been
consummated concurrently with one another immediately prior to the Effective
Time.
(h) OPTIONS AND WARRANTS. All Options listed in Section 4.1(d)
of the Disclosure Schedule shall have been exercised or terminated either in
accordance with their terms or pursuant to option termination agreements in form
and substance satisfactory to Acquiror. All Warrants listed in Section 4.1(d) of
the Disclosure Schedule shall have been exercised or terminated in accordance
with their terms. No options, warrants or similar rights to subscribe for or to
purchase equity securities of the Company or the Surviving Corporation shall be
outstanding and the Company shall have delivered to Acquiror a certificate to
the foregoing effect.
(i) DUE DILIGENCE. Acquiror shall have completed its due
diligence review of the Company and its affairs and in connection therewith
shall not have (A) identified any matter or matters not identified on the
Disclosure Schedule that in its reasonable judgement is reasonably likely to
give rise to a Material Adverse Effect on the Company and the Subsidiary taken
as a whole or that materially affects its valuation of the Company and (B) given
notice thereof to the Company within 30 days after the date hereof. Acquiror
shall have had the opportunity to have discussions with Xerox Corporation and
following such discussions shall not have notified the Company, in writing,
within 30 days after the date hereof, of Acquiror's determination to terminate
this Agreement due to its failure to be reasonably satisfied as to the
continuation of the Company's relationship with Xerox Corporation, the
continuing technological viability of the Company's products or the absence of
any current plan or intention of Xerox Corporation to replace the Company or
materially diminish its role as a key supplier subsequent to the Effective Time.
(j) DISSENTING SHARES. As of the Effective Time, Dissenting
Shares shall aggregate no more than 1% of the then outstanding shares of Common
Stock.
(k) TAX OPINION. Acquiror shall have received a written
opinion, in form and substance satisfactory to Acquiror, to the effect that the
Merger will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code.
(l) OUTSTANDING SHARES. There shall be outstanding as of the
Effective Time less than 3,000,000 shares of the Company's Common Stock.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the Merger is subject to the fulfillment at or prior to
the Closing Date of the following conditions, any or all of which may be waived
in whole or in part by the Company to the extent permitted by applicable law.
35
(a) CERTIFICATES. The representations and warranties of
Acquiror and Merger Sub shall be true and correct in all material respects on
and as of the Closing Date with the same force and effect as though the same had
been made on and as of the Closing Date (except to the extent they relate to a
particular date), Acquiror and Merger Sub shall have performed in all material
respects all of their respective obligations under this Agreement theretofore to
be performed, and the Company shall have received at the Closing Date
certificates to that effect dated the Closing Date and executed by the Chief
Executive Officer or President of each of Acquiror and Merger Sub, provided,
however, that no representation or warranty of Acquiror contained in Section 5.2
hereof shall be deemed untrue or incorrect as a consequence of the existence of
any fact, circumstance or event unless such fact, circumstance or event,
individually or taken together with all other facts, circumstances or events
inconsistent. with any paragraph of Section 5.2 has had or is expected to have a
Material Adverse Effect with respect to Acquiror and its subsidiaries.
(b) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have
been duly approved by the holders of a majority of the votes entitled to be cast
by the holders of Shares at the Stockholder Meeting, in accordance with
applicable law and the Certificates of Incorporation and By-Laws of the Company.
(c) INJUNCTION. There shall be in effect no preliminary or
permanent injunction or other order of a court or governmental or regulatory
agency of competent jurisdiction directing that the Transactions contemplated
herein not be consummated; provided, however, that prior to invoking this
condition the Company shall use its best efforts to have such injunction or
order vacated.
ARTICLE VIII - TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, either by the mutual written consent of
Acquiror and the Company, or by mutual act of their respective Boards of
Directors.
8.2 TERMINATION BY EITHER ACQUIROR OR THE COMPANY. This Agreement may
be terminated and the Merger may be abandoned by action of the Board of
Directors of either Acquiror or the Company if (i) the Merger shall not have
been consummated by December 31, 1997 (provided that the right to terminate this
Agreement under this Section 8.2(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or (ii)
any court of competent jurisdiction in the United States or some other
governmental body or regulatory authority shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable.
36
8.3 TERMINATION BY ACQUIROR. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by holders of Shares, by action of the Board of Directors of
Acquiror, if (i) Acquiror so elects by September 7, 1997 pursuant to Section
7.1(i), (ii) the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in this Agreement to be
complied with or performed or fulfilled by the Company at or prior to such date
of termination, which failure to comply has not been cured within fifteen
business days following receipt by the Company of notice of such failure to
comply, (iii) any representation or warranty of the Company contained in the
Agreement shall not be true in all material respects when made (provided such
breach has not been cured within fifteen business days following receipt by the
Company of notice of the breach) or (except to the extent they relate to a
particular date) on and as of the Effective Time as if made on and as of the
Effective Time (in each case subject to the standard set forth in the proviso of
Section 7.1(a)), (iv) (A) the Board of Directors of the Company withdraws its
recommendation of this Agreement, fails to make such recommendation or modifies
or qualifies its recommendation in a manner adverse to Acquiror, (B) the Board
of Directors of the Company participates in (or authorizes participation in)
negotiations of the type described in Section 6.2 regarding the substantive
terms of a proposal for a Competing Transaction or approves or recommends a
competing transaction, (C) the Company shall have entered into any agreement
with respect to any Competing Transaction or (D) the Board of Directors of the
Company shall resolve to do any of the foregoing, or (v) the Merger shall have
been voted on by stockholders of the Company at a meeting duly convened therefor
and the vote shall not have been sufficient to satisfy the conditions set forth
in Sections 7.1(b) and 7.2(b).
8.4 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of Shares, by action of the Board of Directors of
the Company, if (i) Acquiror or Merger Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed or fulfilled by Acquiror or Merger
Sub at or prior to such date of termination, which failure to comply has not
been cured within fifteen business days following receipt by the breaching party
of notice of such failure to comply, (ii) any representation or warranty of
Acquiror or Merger Sub contained in this Agreement shall not be true in all
material respects when made (provided such breach has not been cured within
fifteen business days following receipt by the breaching party of notice of the
breach) or (except to the extent they relate to a particular date) on and as of
the Effective Time as if made on and as of the Effective Time (in each case
subject to the standard set forth in the proviso of Section 7.2(a)) or (iii) on
or prior to September 7, 1997, the Company enters into a definitive agreement
relating to a Superior Proposal in accordance with Section 6.2(b), provided it
has complied with all of the provisions thereof and has made payment of the fee
required by Section 8.5(b) hereof.
8.5 EFFECT OF TERMINATION AND ABANDONMENT.
(a) In the event of termination of this Agreement by either
the Company or Acquiror as provided in this Article VIII, this Agreement shall
forthwith become void and there
37
shall be no liability or obligation on the part of Acquiror, Merger Sub, the
Company or their respective affiliates, officers, directors or stockholders
except pursuant to this Section 8.5 and except to the extent that such
termination results from a willful breach by a party hereto or any of its
representations or warranties, or any of its covenants or agreements, in each
case, as set forth in this Agreement.
(b) In the event that this Agreement shall be terminated
pursuant to Section 8.3 (ii) or (iii) (each in the case of a willful breach),
Section 8.3(iv) or (v), or Section 8.4(iii), then the Company shall pay to
Acquiror an amount equal to $480,000.
(c) Any payment required to be made pursuant to this Section
8.5 shall be made as promptly as practicable but not later than two business
days after the occurrence of the event giving rise to such payment (or the date
required by Section 6.2(b), if applicable) and shall be made by wire transfer of
immediately available funds to an account designated by Acquiror.
ARTICLE IX - MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Whether or not the Merger shall be
consummated, except as otherwise provided in Section 8.5, each party hereto
shall pay its own expenses incident to preparing for, entering into and carrying
out this Agreement and the consummation of the transactions contemplated hereby.
9.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 9.2 shall not
limit any covenant or agreement of the parties hereto which by its terms
contemplates performance after the Effective Time.
9.3 MODIFICATION OR AMENDMENT. Subject to the applicable provisions of
the DGCL, at any time prior to the Effective Time, Acquiror, Merger Sub and the
Company may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of Acquiror, Merger Sub and the Company;
provided, however, that after approval of this Agreement by the stockholders of
the Company, no amendment shall be made which changes the consideration payable
in the Merger or adversely affects the rights of the Company's stockholders
hereunder without the approval of such stockholders.
9.4 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
38
9.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.
9.7 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:
(a) if to the Company, to
Magnetic Technologies Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. XxXxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx
Attorney at Law
0000 X. Xxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to Acquiror or Merger Sub, to
SPS Technologies, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxx, Esq.
Xxxxxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
39
with a copy to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. XxXxxxxx, P.C.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including the
Disclosure Schedule and Exhibits and the Confidentiality Agreement, (i)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect to the subject
matter hereof, and (ii) shall not be assigned by operation of law or otherwise,
except that Merger Sub may assign, in its sole discretion, any or all of its
rights, interests and obligations under this Agreement to any direct wholly
owned subsidiary of Acquiror, provided that such subsidiary makes the
representations and warranties made by Merger Sub hereunder and that no such
assignment shall relieve Merger Sub of any of its obligations hereunder.
9.9 PARTIES IN INTEREST. Subject to Section 9.8, this Agreement shall
be binding upon and inure solely to the benefit of each party hereto and their
respective successors and assigns. Nothing in this Agreement, express or
implied, other than the right to receive the consideration payable in the Merger
pursuant to Article IV hereof, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement; provided, however, that the provisions of Section 6.7
shall inure to the benefit of and be enforceable by the Indemnified Parties.
9.10 CERTAIN DEFINITIONS. As used herein:
(a) "Affiliate" shall mean, with respect to any Person, any
other Person directly or indirectly controlling, controlled by or under common
control with such other Person.
(b) "Material Adverse Effect" shall mean, with respect to any
person, any change or effect (or any development that, insofar as can reasonably
by foreseen, is likely to result in any change or effect) that is materially
adverse to the business, properties, assets, condition (financial or otherwise),
results of operations or prospects of such party and its subsidiaries taken as a
whole, other than changes or effects which result from the execution and
delivery of this Agreement or the consummation of any transactions contemplated
hereby; provided, however, that no single event or adjustment having a financial
effect of less than
40
$75,000 nor any combination of events and adjustments having a combined
financial effect of less than $150,000 shall be deemed to constitute a condition
which is "materially adverse."
(c) "Person" shall mean an individual corporation,
partnership, trust or unincorporated organization or a government or any agency
or political subdivision thereof.
9.11 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
9.12 SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies, including arbitration,
which any party may have under this Agreement or otherwise.
9.13 CAPTIONS. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
41
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto and shall be effective as
of the date first hereinabove written.
SPS TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
MTC ACQUISITION CORP.
By:
--------------------------------
Name:
Title:
MAGNETIC TECHNOLOGIES
CORPORATION
By:
--------------------------------
Name:
Title:
42
[EXHIBIT A AND EXHIBIT B]
Forms of Stock Purchase Agreement and Voting Agreement
43
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August
__, 1997, is between SPS Technologies, Inc., a Pennsylvania corporation
("Purchaser"), and __________________________ ("Stockholder").
RECITALS
--------
WHEREAS, Purchaser, MTC Acquisition Corp., a Delaware corporation
("Acquisition"), and Magnetic Technologies Corporation, a Delaware corporation
(the "Company") have entered into an Agreement and Plan of Merger (the "Merger
Agreement") dated as of August 7, 1997, pursuant to which Purchaser, Acquisition
and the Company have agreed to engage in a merger transaction (the "Merger");
and
WHEREAS, Stockholder is a stockholder of the Company holding the number
of shares (the "Stockholder Shares") of the Company's common stock, par value
$.15 per share ("Company Common Stock"), set forth on the signature page hereto;
and
WHEREAS, in connection with the Merger Agreement and the Merger,
Purchaser wishes to acquire and Stockholder wishes to sell to Purchaser,
Stockholder Shares on the terms and conditions set forth herein.
NOW, THEREFORE, Purchaser and Stockholder agree as follows:
1. Purchase and Sale of Stockholder Shares. On the Closing Date (as
hereinafter defined), (i) Stockholder shall transfer, assign and deliver to
Purchaser, and Purchaser shall purchase from Stockholder, the number of
Stockholder Shares set forth on the signature page hereof and (ii) in
consideration therefor, Purchaser shall issue or cause to be issued to
Stockholder that number of shares of Common Stock of Purchaser ("Purchaser
Shares") equal to the quotient of (a) the product of $5.00 times the number of
Stockholder Shares being exchanged pursuant hereto, divided by (b) the daily
last sales prices of Purchaser's Common Stock as reported on the New York Stock
Exchange ("NYSE") Composite Transactions reporting system (as reported in The
Wall Street Journal or, if not reported therein, in another mutually agreed upon
authoritative source) for the twenty consecutive full trading days in which such
shares are traded on the NYSE ending with the closing of trading on the date
which is one trading day prior to the date of the Stockholder Meeting (as
defined in the Merger Agreement).
2. Closing. Subject to the terms and conditions of this Agreement, the
closing of the purchase and sale of the Stockholder Shares (the "Closing") shall
take place (a) at the offices of the Company in Rochester, New York at 10:00
a.m., local time, immediately prior to the Effective Time (as defined in the
Merger Agreement) of the Merger, or (b) at such other time, date or place as the
parties hereto may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date." At the Closing, Stockholder shall deliver to
Purchaser (i) a certificate or certificates representing the Stockholder Shares
being purchased hereunder, duly endorsed for transfer or accompanied by stock
powers duly executed in blank and (ii) a certificate dated the Closing Date and
certifying that Stockholder has no plan or intention to sell, exchange or
otherwise dispose of the Purchaser Shares received in consideration for the
Stockholder Shares transferred to Purchaser hereunder, against delivery by
Purchaser to Stockholder of a certificate or certificates representing the
number of Purchaser Shares determined in accordance with Section 1.
3. Representation and Warranties of Purchaser. Purchaser hereby
represents and warrants to Stockholder that the Purchaser Shares will be validly
issued, fully paid, non-assessable, listed on the New York Stock Exchange,
registered under the Securities and Exchange Act of 1934, and exempt from
registration under the Securities Act of 1933, when issued to Stockholder.
1
4. Representations and Warranties of Stockholder. Stockholder hereby
represents and warrants to Purchaser as follows:
(a) Ownership of Shares. Stockholder owns of record and
beneficially the Stockholder Shares. Stockholder will not sell or transfer any
Stockholder Shares prior to the Closing. Upon transfer and delivery by
Stockholder to Purchaser of the Stockholder Shares owned by Stockholder provided
for herein, Purchaser shall acquire good and valid title to such shares, free
and clear of all claims, liens, charges, proxies (other than any agreement with
Purchaser), encumbrances and security interests (other than any created by
Purchaser).
(b) Power and Authorization. Stockholder has full legal right
to perform its obligations under this Agreement and the other agreements and
documents required to be delivered by it hereunder. This Agreement constitutes
the legal, valid and binding obligation of Stockholder, enforceable against him
or her in accordance with its terms, and the execution and performance of this
Agreement by Stockholder will not violate any of the terms, conditions or
provisions of any contract which Stockholder is a party.
(c) No Brokers. Stockholder has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of such entity or Purchaser to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or consummation of the transactions contemplated
hereby.
(d) Investment Representation. Stockholder represents that he
or she is an "accredited investor" within the meaning of Rule 501 promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), inasmuch as
Stockholder has an individual or joint (with spouse) net worth of $1 million, or
had an individual income of $200,000 in the last two years or joint income with
Stockholder's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year.
Stockholder has had an opportunity to ask questions and to receive all relevant
information in connection with his or her investment on the Purchaser Shares and
has such knowledge and experience in financial and business matters that he or
she is capable of evaluating the merits and risks of the investment in the
Purchaser Shares contemplated by this Agreement and making an informed
investment decision with respect thereto. Stockholder is purchasing the
Purchaser Shares for his or her own account, for investment only and not with a
view to, or any present intention of, effecting a distribution of such
securities or any part thereof except pursuant to a registration or an available
exemption under applicable law, including pursuant to Rule 144 under the
Securities Act. Stockholder acknowledges that the Purchaser Shares to be
acquired have not been registered under the Securities Act or the securities
laws of any state or other jurisdiction and cannot be disposed of unless they
are subsequently registered under the Securities Act and any applicable state
laws or exemption from such registration is available. Stockholder has no plan
or intention to sell, exchange or otherwise dispose of the Purchaser Shares
received in consideration for the Stockholder Shares transferred to Purchaser
hereunder.
5. Conditions Precedent to Obligations of Purchaser. The obligation of
Purchaser to enter into and consummate the transactions contemplated hereby is
subject to (a) the continuing effectiveness of the Merger Agreement and the
satisfaction or waiver by the parties to the Merger Agreement of the conditions
set forth in Article VII of the Merger Agreement (other than the conditions set
forth in Section 7.1(g) thereof), (b) consummation of concurrent Share
Exchanges, (as defined in the Merger Agreement) and (c) the continuing accuracy
of the representations and warranties of Stockholder contained in this Agreement
on and as of the date hereof and on and as of the Closing Date.
6. Certain Conditions Precedent to Obligations of Stockholder. The
obligation of Stockholder to enter into and complete the transactions
contemplated hereby is subject to the fulfillment (or waiver in writing by
Stockholder in its sole discretion) on or prior to the Closing Date of the
conditions that (a) the representations and warranties of Purchaser contained in
this Agreement shall be true and correct on and as of the date hereof and in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of the
2
Closing Date and (b) Stockholder shall have received a written opinion from
Purchaser to the effect that the Merger constitutes a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended.
7. Further Action. Stockholder and Purchaser shall, subject to the
fulfillment at or before the Closing Date of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the
transactions contemplated hereby.
8. Assignment. Neither party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto. Subject to the foregoing, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors, heirs, assigns, administrators, executors and
estates.
9. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered personally
or transmitted by telex, fax or telegram, to the respective parties at the
addresses following their names on the signature page hereof or to such other
address as any party may have furnished to the others in writing.
10. Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Delaware.
11. Survival. All representations, warranties, covenants and agreements
of the parties hereto shall survive indefinitely after the Closing and shall not
be merged therewith.
12. Termination.
(a) This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(i) by Purchaser if the Merger Agreement shall have
been terminated (other than due to the failure of Purchaser to perform
its obligations under the Merger Agreement or any other agreement
required to be performed at or prior to the Closing);
(ii) by mutual consent of Purchaser and Stockholder;
(iii) by Purchaser or Stockholder, in the event the
purchase of Stockholder Shares hereunder shall not have occurred by
December 31, 1997;
(iv) by Stockholder, if Purchaser has failed to
perform in any material respect any of its respective obligations
required to be performed by it under this Agreement and such failure
continues for more than 30 days after notice unless failure to so
perform has been caused by or results from a breach of this Agreement
by Stockholder; or
(v) by Purchaser, if Stockholder shall have failed to
perform in any material respect any of the obligations required to be
performed by Stockholder under this Agreement and such failure
continues for more than 30 days after notice unless failure to so
perform has been caused by or results from a breach of this Agreement
by Purchaser.
(b) A party terminating this Agreement pursuant to this
Section 12 shall give written notice thereof to each other party hereto,
whereupon this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned without further action by any party; provided,
however, that if such termination is by Purchaser pursuant to Section 12(a)(v)
or if such termination is by Stockholder pursuant to Section 12(a)(iv),
3
nothing herein shall affect the non-breaching party's or parties' right to
damages on account of such other party's or parties' breach.
(c) Stockholder acknowledges that the Stockholder Shares are
unique and that Purchaser will not have an adequate remedy at law if Stockholder
fails to perform any of its obligations hereunder, and Stockholder agrees that
Purchaser shall have the right, in addition to any other right it has, to
specific performance or equitable relief by way of injunction if Stockholder
fails to perform any of its obligations hereunder. Any requirements for the
securing or posting of any bond with respect to such remedy are hereby waived.
13. Expenses. Each of Purchaser and Stockholder shall pay the fees and
expenses it incurs in connection with this Agreement, other than as a result of
the breach hereof by the other party hereto.
14. Condition Subsequent. If for any reason the Merger does not become
effective within five business days after the Closing Date, the transactions
contemplated hereby shall be automatically rescinded, the parties shall return
any consideration they received to the parties who provided such consideration
(with duly executed stock powers, if appropriate).
4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written.
SPS TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
Address:
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
STOCKHOLDER
------------------------------------
Address:
----------------------------
----------------------------
Number of Stockholder Shares sold hereunder: __________
5
