AGREEMENT AND PLAN OF MERGER
BETWEEN
ALRM ACQUISITION INC.
AND
FIRECOM, INC.
DATED APRIL 3, 2001
TABLE OF CONTENTS
PAGE
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ARTICLE 1 The Merger..........................................................1
1.1 The Merger...........................................................1
1.2 Effective Time.......................................................1
1.3 Effects of the Merger................................................2
1.4 Certificate of Incorporation and Bylaws; Directors and Officers......2
1.5 The Closing..........................................................2
ARTICLE 2 Effect of the Merger on Securities of the Company...................2
2.1 Purchaser Stock......................................................2
2.2 Conversion of Firecom Stock..........................................3
2.3 Exchange of Certificates.............................................4
2.4 Closing of Transfer Books............................................5
2.5 No Further Ownership Rights in Firecom Stock.........................5
ARTICLE 3 Representations and Warranties of the Company.......................5
3.1 Organization, Standing and Power.....................................5
3.2 Capital Structure....................................................6
3.3 Authority; Non-Contravention.........................................6
3.4 SEC Documents........................................................8
3.5 Absence of Certain Events............................................9
3.6 Litigation...........................................................9
3.7 Compliance with Applicable Law.......................................9
3.8 Taxes...............................................................10
3.9 Brokers.............................................................10
3.10 Opinion of Financial Advisor........................................10
ARTICLE 4 Representations and Warranties of the Purchaser....................11
4.1 Organization, Standing and Power....................................11
4.2 Authority; Non-Contravention........................................11
4.3 Brokers.............................................................12
4.4 Litigation..........................................................12
ARTICLE 5 Covenants..........................................................12
5.1 Alternative Proposals...............................................12
5.2 Interim Operations of the Company...................................13
5.3 Meeting of the Company's Shareholders...............................15
5.4 Filings, Other Action...............................................15
5.5 Inspection of Records...............................................16
5.6 Publicity...........................................................16
5.7 Proxy Statement.....................................................16
5.8 Further Action......................................................17
5.9 Expenses............................................................17
5.10 Indemnification.....................................................17
5.11 Takeover Statute....................................................18
5.12 Conduct of Business by Purchaser Pending the Merger.................19
5.13 Conveyance Taxes....................................................19
ARTICLE 6 Conditions to Merger...............................................19
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6.1 Conditions to Each Party's Obligation to Effect the Merger..........19
6.2 Conditions to Obligation of Company to Effect the Merger............20
6.3 Conditions to Obligation of Purchaser to Effect the Merger..........20
ARTICLE 7 Termination........................................................22
7.1 Termination by Mutual Consent.......................................22
7.2 Termination by Either Purchaser or Company..........................22
7.3 Termination by Company..............................................22
7.4 Termination by Purchaser............................................23
7.5 Effect of Termination and Abandonment...............................24
7.6 Extension, Waiver...................................................24
ARTICLE 8 General Provisions.................................................25
8.1 Nonsurvival of Representations, Warranties and Agreements...........25
8.2 Notices.............................................................25
8.3 Assignment; Binding Effect..........................................25
8.4 Entire Agreement....................................................26
8.5 Amendment...........................................................26
8.6 Governing Law.......................................................26
8.7 Counterparts........................................................26
8.8 Headings............................................................26
8.9 Interpretation......................................................26
8.10 Waivers.............................................................26
8.11 Incorporation of Exhibits and Schedules.............................27
8.12 Severability........................................................27
8.13 Confidentiality.....................................................27
8.14 Enforcement of Agreement............................................27
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DEFINITIONS
Agreement.....................................................................1
Alternative Proposal.........................................................12
Certificate of Merger.........................................................1
Certificates..................................................................3
Class A Common Stock..........................................................1
Closing.......................................................................2
Closing Date..................................................................2
Code.........................................................................10
Common Stock..................................................................1
Company.......................................................................1
Company Options...............................................................6
Company Permits...............................................................9
Company SEC Documents.........................................................8
Department of State...........................................................1
Dissenting Shares.............................................................3
Effective Time................................................................1
Evaluation Material..........................................................27
Exchange Act..................................................................8
Firecom Stock.................................................................1
Governmental Entity...........................................................7
Indemnified Parties..........................................................17
Instrument....................................................................7
Material Adverse Change.......................................................6
Material Adverse Effect.......................................................6
Meeting of Shareholders......................................................15
Merger........................................................................1
Merger Consideration..........................................................3
NYBCL.........................................................................1
Paying Agent..................................................................4
Preferred Stock...............................................................6
Proponents...................................................................20
Proxy Statement..............................................................16
Purchaser.....................................................................1
Purchaser Stock...............................................................1
Redemption Price..............................................................4
Retained Shares...............................................................1
Schedules.....................................................................5
SEC...........................................................................8
Securities Act................................................................8
Stock Plan....................................................................6
Surviving Corporation.........................................................1
Tax..........................................................................10
Tax Return...................................................................10
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated April 3, 2001,
between ALRM ACQUISITION INC., a New York corporation (the "Purchaser"), and
FIRECOM, INC., a New York corporation (and together with its subsidiaries, the
"Company").
RECITALS
--------
A. The Boards of Directors of the Purchaser and the Company have
approved, and deem it advisable and in the best interests of their respective
companies and shareholders to consummate a merger (the "Merger") of the
Purchaser, with and into the Company, wherein each issued and outstanding share
of Common Stock, par value $.01 per share, of the Company (the "Common Stock")
and each issued and outstanding share of Class A Common Stock, par value $.01
per share, of the Company (the "Class A Common Stock" and, together with the
Common Stock, the "Firecom Stock"), except shares of Firecom Stock held by
holders who comply with the provisions of New York law regarding the right of
shareholders to dissent from the Merger and require appraisal of their shares of
Firecom Stock and shares of Firecom Stock held by the Purchaser (the "Retained
Shares"), will be converted into the right to receive $0.80 per share, in cash,
without interest, and each issued and outstanding share of Common Stock, par
value $.01 per share, of the Purchaser (the "Purchaser Stock") shall be
converted into a share of common stock in the Surviving Corporation (as
hereinafter defined).
B. The Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, and
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in accordance with the Business Corporation Law of New York ("NYBCL"), the
Purchaser shall be merged with and into the Company at the Effective Time (as
hereinafter defined). Following the Merger, the separate corporate existence of
the Purchaser shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of the Purchaser in accordance with the NYBCL.
1.2 Effective Time. Subject to the provisions of this Agreement, the
--------------
Merger shall become effective when the Certificate of Merger (the "Certificate
of Merger"), executed in accordance with the relevant provisions of the NYBCL,
is filed with the Department of State of the State of New York (the "Department
of State"). When used in this Agreement, the term "Effective Time" shall mean
the later of the date and time at which the Certificate of Merger is filed with
the Department of State or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made as soon as
reasonably practicable (but not later than the first business day) after the
satisfaction or waiver of the conditions to the Merger set forth herein.
1.3 Effects of the Merger. The Merger shall have the effects set forth in
---------------------
the NYBCL.
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
---------------------------------------------------------------
(a) Subject to the terms of Section 5.10, the Certificate of
Incorporation and the Bylaws of the Company, as in effect immediately prior to
the Effective Time, shall be amended by the Certificate of Merger to make such
changes regarding the capitalization of the Surviving Corporation as the
Purchaser may request and, as so amended, the Certificate of Incorporation and
the Bylaws of the Company shall be the Certificate of Incorporation and the
Bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
(b) The directors of the Purchaser at the Effective Time shall, from
and after the Effective Time, be the initial 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 Bylaws.
(c) The officers of the Company at the Effective Time and such other
persons as designated by the Purchaser shall, from and after the Effective Time,
be the initial 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 Bylaws.
1.5 The Closing. Subject to the terms and conditions of this
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Agreement, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place (a) at the offices of Xxxxxx Xxxx & Priest LLP, 00
Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00 a.m., local time, on the first
business day following the day on which the last to be fulfilled or waived of
the conditions set forth in Article 6 shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as the Purchaser and the
Company may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
ARTICLE 2
EFFECT OF THE MERGER ON SECURITIES
OF THE COMPANY
2.1 Purchaser Stock. At the Effective Time, each share of Purchaser
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Stock outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock, par value $.01 per share, of the
Surviving Corporation, and each certificate theretofore representing any such
shares shall, without any action on the part of the holder thereof, be deemed to
represent the same number of shares of the Surviving Corporation.
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2.2 Conversion of Firecom Stock.
---------------------------
(a) Subject to Section 2.2(b), at the Effective Time each issued and
outstanding share of Firecom Stock (other than shares of Firecom Stock held by
the Purchaser) shall be converted into the right to receive $0.80, in cash,
without interest (the "Merger Consideration"). All such shares of Firecom Stock,
when so converted, shall cease to be outstanding, shall be canceled and retired
and shall cease to exist, and each holder of a certificate or certificates (the
"Certificates") representing any such shares of Firecom Stock shall thereafter
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration.
(b) Notwithstanding any provision of this Agreement to the contrary,
if required by the NYBCL but only to the extent required thereby, shares of
Firecom Stock which are issued and outstanding immediately prior to the
Effective Time and which are held by holders of such shares of Firecom Stock who
have properly exercised appraisal rights with respect thereto in accordance with
the NYBCL (the "Dissenting Shares") will not be exchangeable for the right to
receive the Merger Consideration, and holders of such shares of Firecom Stock
will be entitled to receive payment of the appraised value of such shares of
Firecom Stock in accordance with the provisions of the NYBCL unless and until
such holders shall fail to perfect or shall effectively withdraw or shall have
lost their rights to appraisal and payment under the NYBCL. If, after the
Effective Time, any such holder fails to perfect or effectively withdraws or
loses such right, such shares of Firecom Stock will thereupon be treated as if
they had been converted into and have become exchangeable for, at the Effective
Time, the right to receive the Merger Consideration, without any interest
thereon. The Company will give the Purchaser prompt notice of any demands
received by the Company for appraisals of shares of Firecom Stock. The Company
shall not, except with the prior written consent of the Purchaser, make any
payment with respect to any demands for appraisal or offer to settle or settle
any such demands.
(c) At or prior to the Effective Time, the Company shall have made
arrangements, the effect of which shall be that no shares of Common Stock, Class
A Common Stock or other capital stock of the Company or the Surviving
Corporation shall be issuable pursuant to options or warrants to purchase
shares, or securities convertible into shares, of Common Stock. The Company
shall (i) cause the Stock Plan (as defined in Section 3.2) to terminate as of
the Effective Time, (ii) grant no additional Company Options (as defined in
Section 3.2) after the date of this Agreement and (iii) accelerate the vesting
of all options issued under the Stock Plan at or prior to the Effective Time.
The Company shall take all such actions under the Stock Plan necessary so that
each Company Option shall be converted into the right to receive in exchange
therefor from the Surviving Corporation, to be paid an amount in cash per
Company Option equal to the Merger Consideration minus the per share exercise
price of such Company Option as of the date hereof (the result of any such
calculation being the "Redemption Price").
(d) Payment of the Redemption Price in accordance with Section 2.2(c)
above shall be contingent upon consummation of the Merger and shall be subject
to applicable withholding of income and other taxes. Payment of the Redemption
Price shall be made by the Surviving Corporation to the holders of the Company
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Options at or as promptly as practicable after the Effective Time, without
interest.
2.3 Exchange of Certificates.
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(a) Prior to the Effective Time, the Purchaser shall appoint a bank
or trust company to act as paying agent hereunder, which shall be American Stock
Transfer and Trust Company, or such other entity as the Purchaser and the
Company may mutually select (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of Certificates. All of the fees and expenses of
the Paying Agent shall be borne by the Surviving Corporation.
(b) The Purchaser shall take all steps necessary to enable and cause
the Surviving Corporation to provide the Paying Agent with cash in amounts
necessary to pay the Merger Consideration, when and as such amounts are needed
by the Paying Agent.
(c) As soon as reasonably practicable after the Effective Time but
within 20 days of such time, the Paying Agent shall mail to each holder of
record of Firecom Stock immediately prior to the Effective Time (excluding any
Dissenting Shares) (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of such Certificates to the Paying Agent and shall be
in such form and have such other provisions as the Purchaser shall reasonably
specify) and (ii) instructions for the use thereof in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by the Surviving Corporation, together with such
letter of transmittal, duly executed, and such other documents as may reasonably
be required by the Paying Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor a bank check in the amount of cash into
which the shares of Firecom Stock theretofore represented by such Certificate
shall have been converted pursuant to Section 2.2, and the Certificates so
surrendered shall forthwith be canceled. No interest will be paid or will accrue
on the cash payable upon the surrender of any Certificate. If payment is to be
made to a person other than the person in whose name the Certificate so
surrendered is registered, it shall be a condition of payment that such
Certificate shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the transfer of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable.
Until surrendered as contemplated by this Section 2.3, each Certificate
(other than Certificates representing Dissenting Shares) shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of Firecom
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 2.2.
(d) None of the Purchaser, the Company, the Surviving Corporation,
the Paying Agent or any other person shall be liable to any former holder of
shares of Firecom Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
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(e) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Purchaser, the posting by such person of a bond in such reasonable amount as the
Purchaser may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration, deliverable
in respect thereof pursuant to this Agreement.
2.4 Closing of Transfer Books. At or after the Effective Time, there
-------------------------
shall be no transfers on the stock transfer books of the Company of the shares
of Firecom Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the consideration
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article 2.
2.5 No Further Ownership Rights in Firecom Stock. From and after the
--------------------------------------------
Effective Time, the holders of shares of Firecom Stock which were outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Firecom Stock except as otherwise provided in this
Agreement or by applicable law. All cash paid upon the surrender of Certificates
in accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares of Firecom Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that, except as set
forth in schedules hereto specifically referring to the Sections hereof intended
to be so qualified (the "Schedules"):
3.1 Organization, Standing and Power. The Company is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. The Company is
duly qualified to do business, and is in good standing, in each jurisdiction
where the character of its properties owned or held under lease or the nature of
its activities makes such qualification necessary, except where the failure to
be so qualified and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. For purposes of this
Agreement, "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to the Purchaser or the Company, as the case may be, any
change or effect, either individually or in the aggregate, that is materially
adverse to the business, assets, financial condition or results of operations of
the Purchaser, or the Company, as the case may be.
3.2 Capital Structure. The authorized capital stock of the Company
-----------------
consists of 41,000,000 million shares, of which 30,000,000 shares are designated
as Common Stock, 10,000,000 of which are designated as Class A Common Stock and
1,000,000 million shares of which are designated as Preferred Stock, par value
$1.00 per share ("Preferred Stock").
5
At the date hereof (i) 5,789,685 shares of Common Stock were issued and
outstanding, and 4,957,713 shares of Class A Common Stock were issued and
outstanding, and (ii) 1,224,826 shares of Common Stock and 688,331 shares of
Class A Common Stock are held by the Company in its treasury. As of the date
hereof there are no shares of Preferred Stock outstanding. All outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable and not subject to preemptive rights.
At the date hereof there are (i) Company Options outstanding under the
Company's Incentive and Non-Qualified Stock Option Plan (the "Stock Plan" to
acquire 1,122,000 shares of the Company's Common Stock, all of which are vested
on the date hereof or shall vest prior to the Effective Time, and (ii) 31,068
Company Options outstanding under the Company Distributors Stock Option Plan,
all of which are vested on the date hereof (collectively, the "Company
Options").
Except for such Company Options, there are no options, warrants, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company. Schedule 3.2 sets forth
the name of each holder of a Company Option, the number of shares of Common
Stock for which such Company Option is exercisable and the exercise price per
share of Common Stock subject to such Company Option. Since October 22, 1999, no
shares of the Company's capital stock have been issued other than pursuant to
the exercise of Company Options already in existence on such date and the
Company has not granted any stock options for any capital stock or other voting
securities of the Company.
3.3 Authority; Non-Contravention.
----------------------------
(a) The Board of Directors of the Company has approved this Agreement
and determined that the Merger is fair and in the best interests of the Company
and its shareholders, and the Company has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of the Merger by
the shareholders of the Company, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to such approval of the Merger by the shareholders of the Company. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by the Purchaser)
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Other than as set forth on Schedule
3.3(a), the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation,
contractually require any offer to purchase or any prepayment of any debt,
contractually require the payment of (or result in the vesting of) any
severance, golden parachute, change of control or similar type of payment, or
give rise to the loss of a material benefit under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company under, any provision of:
6
(i) the Certificate of Incorporation or Bylaws of the Company,
(ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, concession, franchise or
license (any of the foregoing, an "Instrument") applicable to the Company (other
than Instruments involving aggregate payments by or to the Company of $100,000
or less), or
(iii) subject to the governmental filings and other matters
referred to in Section 3.3(b) and approval of this Agreement by the Company's
shareholders, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to, or Company Permit (as defined in Section 3.7) of or
relating to, the Company or any of its properties or assets, other than, in the
case of clauses (ii) or (iii), any such conflicts, violations, defaults, rights,
offers, prepayments, payments, losses or liens, that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
Schedule 3.3(b) lists the amounts payable or that will or may become payable to
directors, officers or employees or former directors, officers or employees of
the Company as a result of the execution and delivery by the Company of this
Agreement or the consummation of the transactions contemplated hereby. Copies of
all contracts, agreements, instruments or other documents referred to in
Schedule 3.3(a) and (b) have been furnished to the Purchaser.
(b) No filing or registration with, or authorization, consent or
approval of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory or administrative agency, authority or
tribunal (a "Governmental Entity") is required by or with respect to the Company
in connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
except for (i) in connection or in compliance with the provisions of the
Securities Exchange Act of 1934, as amended (including the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) the filing of the Certificate
of Merger with the Department of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (iii) such filings and approvals as may be required by any applicable
state securities or "blue sky" laws or state takeover laws, and (iv) such other
consents, orders, authorizations, registrations, approvals, declarations and
filings the failure of which to be obtained or made would not, individually or
in the aggregate, have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
3.4 SEC Documents.
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(a) Since May 1, 1998, the Company has filed all documents with the
Securities and Exchange Commission ("SEC") required to be filed under the
Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder) (the "Securities Act"), or the Exchange Act (such
documents filed with the SEC on or before the date of this Agreement being the
"Company SEC Documents"). As of their respective dates, (i) the Company SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) none of the
7
Company SEC Documents 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. The financial statements of the Company included
in the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements
contained in Quarterly Reports on Form 10-QSB of the Company, as permitted by
the Exchange Act) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly present
in all material respects the financial position of the Company as at the dates
thereof and the results of its operations and changes in shareholders' equity
and cash flow for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein).
(b) Except as set forth in the Company SEC Documents, the Company has
no liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a balance sheet, or in
the notes thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since January 31, 2001 which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
(c) To the extent there are such and to the extent permitted by
applicable law, the Company has heretofore made available to the Purchaser a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to agreements, documents or other instruments which
previously have been filed with the SEC pursuant to the Exchange Act.
3.5 Absence of Certain Events. Other than a reserve of approximately
-------------------------
$500,000 that the Company may incur in connection with certain warranty items,
since January 31, 2001, the Company has operated its business only in the
ordinary course consistent with past practice and, except as contemplated by
this Agreement or disclosed in the Company SEC Documents, there has not occurred
(i) any Material Adverse Change in the Company; (ii) any change by the Company
in its accounting methods, principles or practices; (iii) any amendments or
changes in the Certificate of Incorporation or Bylaws of the Company; (iv) any
revaluation by the Company of any of its assets, including, without limitation,
write-offs of accounts receivable or write-offs or write-downs of inventory,
other than in the ordinary course of the Company's business consistent with past
practices; (v) any damage, destruction or loss with respect to property or
assets of the Company having a book value, individually or in the aggregate, of
in excess of $100,000; (vi) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
the Company, or any repurchase, redemption or other acquisition by the Company
of any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company; (vii) any grant of any severance or
termination pay to any director, officer or key employee of the Company; (viii)
any entry into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director, officer or
key employee of the Company; (ix) any increase in benefits payable under any
existing severance or termination pay policies or employment agreements with any
8
director, officer or key employee of the Company except in the ordinary course
of business consistent with past practice; or (x) any increase in compensation,
bonus or other benefits payable to directors, officers or key employees of the
Company except in the ordinary course of business consistent with past practice.
3.6 Litigation. Except as set forth in the Company SEC Documents,
----------
there are no actions, suits, proceedings, investigations or reviews pending
against the Company or, to the knowledge of the Company, threatened against the
Company, at law or in equity, or before or by any federal or state commission,
board, bureau, agency, regulatory or administrative instrumentality or other
Governmental Entity or any arbitrator or arbitration tribunal.
3.7 Compliance with Applicable Law. The Company holds all permits,
------------------------------
licenses, variances, exceptions, orders and approvals of all Governmental
Entities necessary for the lawful conduct of its business (the "Company
Permits"), except where the failure to hold any Company Permit, individually or
in the aggregate, is not reasonably likely to result in a Material Adverse
Effect on the Company. The Company is conducting its business in compliance in
all material respects with the terms of the Company Permits. The business of the
Company is not being, and has not been, conducted in violation in any material
respect of any law, Company Permit, ordinance or regulation of any Governmental
Entity.
3.8 Taxes. (i) The Company has filed all material Tax Returns required
-----
to have been filed on or before the date hereof, which returns are true and
complete in all material respects and all Taxes shown due thereon have been
paid; (ii) no issues that have been raised by the relevant taxing authority in
connection with the examination of the Tax Returns referred to in clause (i) are
currently pending; (iii) all deficiencies asserted or assessments made as a
result of any examination of the Tax Returns referred to in clause (i) by a
taxing authority have been paid in full or are being contested in good faith by
the Company; and (iv) a reserve which the Company reasonably believes to be
adequate has been set up for the payment of all such Taxes anticipated to be
payable in respect of periods through the date hereof. The Company has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company is not a party to any Tax allocation or sharing agreement. The Company
does not have any liability for the Taxes of any person under Treas. Reg. (ss.)
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise. Neither the Company nor the
Surviving Corporation will be obligated to make a payment to an individual that
would be a "parachute payment" to a "disqualified individual," as those terms
are defined in Section 280G of the Code, without regard to whether such payment
is to be made in the future. For purposes of this Agreement, (a) "Tax" (and,
with correlative meaning, "Taxes" and "Taxable") means any federal, state, local
or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any governmental authority,
and (b) "Tax Return" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
9
3.9 Brokers. No broker, investment banker or other person is entitled
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to any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
3.10 Opinion of Financial Advisor. The Special Committee and the Board
----------------------------
of Directors of the Company have received the opinion of Xxxxxxx Securities Inc.
to the effect that, as of the date hereof, the Merger Consideration in cash to
be received by the holders of shares of Firecom Stock and the holders of Company
Options is fair to such holders from a financial point of view.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.1 Organization, Standing and Power. The Purchaser is a corporation
--------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted.
4.2 Authority; Non-Contravention.
----------------------------
(a) The Purchaser has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on its part. This Agreement has
been duly executed and delivered by the Purchaser and (assuming the valid
authorization, execution and delivery of this Agreement by the Company)
constitutes a valid and binding obligation of the Purchaser enforceable against
the Purchaser in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or give rise to the loss of a material benefit under, or result
in the creation of any lien upon any of the properties or assets of the
Purchaser under, any provision of:
(i) the Certificate of Incorporation or Bylaws of the Purchaser,
(ii) any Instrument applicable to the Purchaser, or
(iii) subject to the governmental filings and other matters
referred to in Section 4.2(b), any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Purchaser or any of its
properties or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights, offers, prepayments, payments, losses
or liens, that, individually or in the aggregate, would not have a Material
Adverse Effect on the Purchaser, materially impair the ability of the Purchaser
to perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
10
(b) No filing or registration with, or authorization, consent or
approval of, any Governmental Entity is required by or with respect to the
Purchaser in connection with the execution and delivery of this Agreement by the
Purchaser or the consummation by the Purchaser of the transactions contemplated
hereby, except for (i) in connection with or in compliance with the provisions
of the Exchange Act, (ii) the filing of the Certificate of Merger with the
Department of State and appropriate documents with the relevant authorities of
other states in which the Purchaser is qualified to do business, (iii) such
filings and approvals as may be required by any applicable state securities or
"blue sky" laws or state takeover laws, and (iv) such other consents, orders,
authorizations, registrations, approvals, declarations and filings the failure
of which to be obtained or made would not, individually or in the aggregate,
have a Material Adverse Effect on the Purchaser, materially impair the ability
of the Purchaser to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
4.3 Brokers. No broker, investment banker or other person is entitled
-------
to any broker's, finder's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Purchaser.
4.4 Litigation. There are no actions, suits, proceedings,
----------
investigations or reviews pending against the Purchaser or, to the knowledge of
the Purchaser, threatened against the Purchaser, at law or in equity, or before
or by any federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other Governmental Entity or any arbitrator or
arbitration tribunal.
ARTICLE 5
COVENANTS
5.1 Alternative Proposals. Prior to the Effective Time, the Company
---------------------
agrees:
(a) that it shall not, nor shall it permit its officers, directors,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it) to, initiate, solicit
or knowingly encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of any equity
securities of, the Company or all or any significant portion of the assets of
the Company (any such proposal or offer being hereinafter referred to as an
"Alternative Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person or
entity relating to an Alternative Proposal or otherwise take any action to
knowingly facilitate any effort or attempt to make or implement an Alternative
Proposal;
(b) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any person or entity
conducted heretofore with respect to any of the foregoing and will take the
necessary steps to inform any such person or entity of the Company's obligations
under this Section 5.1; and
11
(c) that it will notify the Purchaser immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, it; provided, however, that nothing contained in this Section 5.1 shall
prohibit the Board of Directors of the Company from (i) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited, bona fide Alternative Proposal that the Board of Directors
of the Company in good faith determines (in consultation with its financial
advisors) represents a financially superior transaction for the shareholders of
the Company as compared to the Merger, if, and only to the extent that, (A) the
Board of Directors of the Company, based upon the advice of outside counsel,
determines in good faith that such action is required for the Board of Directors
to comply with its fiduciary duties imposed by law and (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, the Company provides written notice to the Purchaser to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this Section 5.1 shall (A) permit the Company
to terminate this Agreement (except as specifically provided in Article 7
hereof), (B) permit the Company to enter into any agreement with respect to an
Alternative Proposal for as long as this Agreement remains in effect unless the
Company shall have given the Purchaser 5 days' prior written notice of its
intent to terminate the Agreement during which period the Purchaser will have
the opportunity to match the consideration offered by any such Alternative
Proposal (if the Purchaser offers to match such consideration, the Agreement
shall be amended to increase the consideration and, if necessary, to extend time
periods to permit proxy recirculation (it being agreed that for as long as this
Agreement remains in effect, the Company shall not enter into any agreement with
any person that provides for, or in any way facilitates, an Alternative
Proposal), or (C) affect any other obligation of the Company under this
Agreement.
5.2 Interim Operations of the Company.
---------------------------------
(a) From and after the date of this Agreement until the Effective
Time, except as contemplated by any other provision of this Agreement, unless
the Purchaser has consented in writing thereto, the Company:
(i) shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as heretofore conducted;
(ii) shall use its reasonable efforts to preserve intact its
business organization and goodwill, keep available the services of its officers
and employees and maintain satisfactory relationships with those persons having
business relationships with it;
(iii) shall not amend its Certificate of Incorporation or Bylaws
or comparable governing instruments;
(iv) shall promptly notify the Purchaser of any breach of any
representation or warranty contained herein or any Material Adverse Change with
respect to the Company;
12
(v) shall promptly deliver to the Purchaser true and correct
copies of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;
(vi) (A) shall not, except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split or otherwise change its capitalization as it
existed on the date hereof and (B) shall not (x) grant, confer or award any
option, warrant, conversion right or other right not existing on the date hereof
to acquire any shares of its capital stock or grant, confer or award any bonuses
or other forms of cash incentives to any officer, director or key employee, (y)
except in the ordinary course of business consistent with past practice,
increase any compensation with any present or future officers, directors or key
employees, grant any severance or termination pay to, or enter into any
employment or severance agreement with any officer, director or key employee or
amend any such existing agreement in any material respect (other than pursuant
to severance agreements previously delivered to the Purchaser), or (z) adopt any
new employee benefit plan (including any stock option, stock benefit or stock
purchase plan) or amend any existing employee benefit plan in any material
respect;
(vii) shall not (i) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of its capital
stock or other ownership interests or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or make any
commitment for any such action;
(viii) shall not sell, lease, abandon or otherwise dispose of any
of its assets or acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets, except in the
ordinary course of business consistent with past practice;
(ix) shall not incur or guarantee any indebtedness for borrowed
money or make any loans, advances or capital contributions to, or investments
in, any other person, or issue or sell any debt securities other than borrowings
under existing lines of credit and usual and customary advancement of expenses
in the ordinary course of business;
(x) shall not mortgage or otherwise encumber or subject to any
lien any of its properties or assets;
(xi) shall not make any change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles and except, in the case of tax
accounting methods, principles or practices, in the ordinary course of business
of the Company;
(xii) shall not make any commitment or enter into any contract or
agreement or make any capital expenditure except for (x) customer purchase
orders and purchases of raw materials used in the business of the Company agreed
to or made in the ordinary course of business consistent with past practice, (y)
any other commitment, contract and agreement involving aggregate payments to or
by the Company not in excess of $100,000, providing for termination without
13
notice by the Company on 90 or fewer days' notice, and made by the Company in
the ordinary course of business consistent with past practice or (z) capital
expenditures that individually or in the aggregate do not exceed $100,000;
(xiii) shall not revalue any of its assets, including, without
limitation, writing down the value of its inventory or writing off notes or
accounts receivable, other than in the ordinary course of business;
(xiv) shall not make any tax election except consistent with past
practice or settle or compromise any material income tax liability;
(xv) shall not settle or compromise any pending or threatened
suit, action or claim relating to the transactions contemplated hereby;
(xvi) shall not pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of the Company
or incurred in the ordinary course of business consistent with past practice; or
(xvii) shall not agree or otherwise commit to take any of the
foregoing actions or take, or agree to take, any action which would result in a
failure of the condition to Closing set forth in Section 6.3(a).
5.3 Meeting of the Company's Shareholders. The Company will take all
-------------------------------------
action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its shareholders (the "Meeting
of Shareholders") as promptly as practicable to consider and vote upon the
approval of this Agreement and the Merger. The Board of Directors of the Company
shall recommend such approval and the Purchaser and the Company shall each take
all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement (as defined in Section 5.7); provided,
however, that such recommendation or solicitation is subject to any action
(including any withdrawal or change of its recommendation) taken (but only in
compliance with the proviso in Section 5.1(c)) by, or upon authority of, the
Board of Directors of the Company in the exercise of its good faith judgment
based upon the advice of outside counsel as to its fiduciary duties imposed by
law.
5.4 Filings, Other Action. Subject to the terms and conditions herein
---------------------
provided, the Company and the Purchaser shall:
(a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; and
(b) use all reasonable efforts to take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
14
this Agreement. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purpose of this Agreement, the proper
officers and directors of the Purchaser and the Company shall take all such
necessary action.
5.5 Inspection of Records. From the date hereof to the Effective Time,
---------------------
the Company shall (i) allow all designated officers, attorneys, accountants and
other representatives of the Purchaser reasonable access at all reasonable times
upon reasonable notice to the offices, records and files, correspondence, audits
and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of the Company, (ii) furnish to the Purchaser's counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information as such persons may reasonably request,
(iii) instruct its employees, counsel and financial advisors to cooperate with
the Purchaser in the Purchaser's investigation of the business of the Company,
and (iv) make its management personnel available for discussions with
representatives of the Purchaser at mutually convenient times.
5.6 Publicity. The initial press release relating to this Agreement
---------
shall be a joint press release and thereafter the Company and the Purchaser
shall, subject to their respective legal obligations (including requirements of
stock exchanges and other similar regulatory bodies), consult with each other,
and use all reasonable efforts to agree upon the text of any press release,
before issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any Governmental Entity or with any national securities exchange (or other
similar regulatory body) with respect thereto.
5.7 Proxy Statement.
---------------
(a) The Company shall prepare and file with the SEC as soon as
practicable a preliminary form of the proxy statement (the "Proxy Statement") to
be mailed to the holders of Firecom Stock in connection with the Meeting of
Shareholders. The Company will cause the Proxy Statement to comply as to form in
all material respects with the applicable provisions of the Exchange Act. The
Company will use its reasonable best efforts to respond to any comments of the
SEC or its staff and to cause the Proxy Statement to be cleared by the SEC. The
Company will notify the Purchaser of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
the Purchaser with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement prior to its being filed with the SEC
and shall give the Purchaser and its counsel the 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. Each of the Company and the Purchaser agrees to use
its reasonable best efforts, after consultation with the other parties hereto,
to respond promptly to all such comments of and requests by the SEC. As promptly
as practicable after the Proxy Statement has been cleared by the SEC, the
Company shall mail the Proxy Statement to the shareholders of the Company. If at
any time prior to the approval of this Agreement by the Company's shareholders
15
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will prepare and mail to its
shareholders such an amendment or supplement.
(b) The Company agrees that the Proxy Statement and each amendment or
supplement thereto at the time of mailing thereof and at the time of the Meeting
of Shareholders will not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information concerning the Purchaser furnished to the Company by the
Purchaser specifically for use in the Proxy Statement. The Purchaser agrees that
the information concerning the Purchaser provided by it in writing for inclusion
in the Proxy Statement and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the Meeting of Shareholders will not include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
5.8 Further Action. Each party hereto shall, subject to the
--------------
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
5.9 Expenses. Whether or not the Merger is consummated, all costs and
--------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein.
5.10 Indemnification.
---------------
(a) From and after the Effective Time, the Purchaser agrees to, and
to cause the Surviving Corporation to, indemnify and hold harmless all past and
present officers and directors of the Company, including directors acting as
members of a committee of the Board of Directors (the "Indemnified Parties") to
the full extent such persons may be indemnified by the Company pursuant to the
Company's Certificate of Incorporation and Bylaws as in effect as of the date
hereof for acts and omissions occurring at or prior to the Effective Time and
shall advance reasonable litigation expenses incurred by such persons in
connection with defending any action arising out of such acts or omissions,
provided that such persons provide the requisite affirmations and undertakings,
as required by applicable law or set forth in the Company's Certificate of
Incorporation or Bylaws as in effect prior to the Effective Time.
(b) Any Indemnified Party will promptly notify the Purchaser and the
Surviving Corporation of any claim, action, suit, proceeding or investigation
for which such party may seek indemnification under this Section; provided,
however, that the failure to furnish any such notice shall not relieve the
Purchaser or the Surviving Corporation from any indemnification obligation under
this Section except to the extent the Purchaser or the Surviving Corporation is
prejudiced thereby. In the event of any such claim, action, suit, proceeding, or
investigation, (x) the Surviving Corporation will have the right to assume the
16
defense thereof by counsel reasonably acceptable to the Indemnified Parties, and
the Surviving Corporation will not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred
thereafter by such Indemnified Parties in connection with the defense thereof,
except that all Indemnified Parties (as a group) will have the right to retain
one separate counsel, reasonably acceptable to such Indemnified Parties and the
Purchaser, at the expense of the indemnifying party if the named parties to any
such proceeding include both the Indemnified Parties and the Surviving
Corporation and the representation of such parties by the same counsel would be
inappropriate due to a conflict of interest between them, (y) the Indemnified
Parties will cooperate in the defense of any such matter, and (z) the Surviving
Corporation will not be liable for any settlement effected without its prior
written consent.
(c) The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall contain provisions that are no less favorable to the past and
present officers and directors of the Company than those set forth as of the
date hereof in the Certificate of Incorporation of the Company and the Bylaws of
the Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who at or at any
time prior to the Effective Time were entitled to indemnification thereunder.
(d) The Surviving Corporation shall use reasonable commercial efforts
to maintain in effect for six years from the Effective Time directors' and
officers' "tail" liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy on
terms comparable to the existing coverage.
(e) This Section 5.10 is intended to benefit the Indemnified Parties
and shall be binding on all successors and assigns of the Purchaser, the Company
and the Surviving Corporation. The Purchaser hereby guarantees the performance
by the Surviving Corporation of the indemnified obligations pursuant to this
Section 5.10.
5.11 Takeover Statute. If any "fair price", "moratorium", "control share
----------------
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Company and the members
of the Board of Directors of the Company shall grant such approvals and take
such actions as are reasonably necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby.
5.12 Conduct of Business by Purchaser Pending the Merger. Prior to the
---------------------------------------------------
Effective Time and subject to any applicable regulatory approvals, the Purchaser
shall (a) perform its obligations under this Agreement in accordance with the
terms hereof and thereof and take all other actions necessary or appropriate for
the consummation of the transactions contemplated hereby and (b) not engage
directly or indirectly in any business or activities of any type or kind
whatsoever and not enter into any agreements or arrangements with any person or
entity, or be subject to or be bound by any obligation or undertaking which is
not contemplated by this Agreement.
17
5.13 Conveyance Taxes. The Company and the Purchaser shall cooperate in the
----------------
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
ARTICLE 6
CONDITIONS TO MERGER
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved, in the manner required by applicable law or by the
applicable regulations of any stock exchange or other regulatory body, as the
case may be, by the holders of the issued and outstanding shares of capital
stock of the Company.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this Agreement. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(c) All consents, authorizations, orders and approvals of (or filings
or registrations with) any Governmental Entity required in connection with the
execution, delivery and performance of this Agreement shall have been obtained
or made, except for filings in connection with the Merger and any other
documents required to be filed after the Effective Time and except where the
failure to have obtained or made any such consent, authorization, order,
approval, filing or registration would not have a Material Adverse Effect on the
Purchaser or the Company following the Effective Time.
6.2 Conditions to Obligation of Company to Effect the Merger. The
--------------------------------------------------------
obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The Purchaser shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date, and the representations and warranties of the Purchaser
contained in this Agreement and in any document delivered in connection herewith
shall be true and correct as of the Closing Date, except (i) for changes
specifically permitted by this Agreement or otherwise accepted in writing by the
Company, (ii) for non-performance or breaches which, separately or in the
aggregate, would not have a Material Adverse Effect on the Purchaser or on the
ability of the parties to consummate the transactions contemplated by this
Agreement and (iii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct, in all
material respects, as of such date.
18
(b) The Company shall have received a certificate of the President or
a Vice President of the Purchaser, dated the Closing Date, certifying to the
effect of the preceding clause (a).
(c) The Board of Directors of the Company shall have received a
certificate of the President and the Chief Financial Officer of the Company,
dated that Closing Date, certifying to the effect of clause (a) of Section 6.3
insofar as it relates to the representations and warranties of the Company
contained in this Agreement or in any document delivered in connection herewith.
(d) There shall not have been any action taken, or any statute, rule,
regulation, order, judgment or decree proposed, enacted, promulgated, entered,
issued, or enforced by any Governmental Entity, and there shall be no action,
suit or proceeding pending (with a reasonable likelihood of success), which (i)
makes this Agreement, the Merger, or any of the other transactions contemplated
by this Agreement illegal or imposes or may impose material damages or penalties
in connection therewith, or (ii) otherwise prohibits, restricts, or delays
consummation of the Merger or any of the other transactions contemplated by this
Agreement in any material respect.
(e) Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx
Xxxxxx, Xxxxx Xxxxx-Xxxx, Xxxxx Xxxxx-Xxxx, Xxxxxxx Xxxxx-Xxxx, Xxx Xxxxx-Xxxx,
and the Xxxxx-Xxxx Family Trust (collectively, the "Proponents") shall have
transferred their shares of Firecom Stock to the Purchaser.
6.3 Conditions to Obligation of Purchaser to Effect the Merger. The
----------------------------------------------------------
obligation of the Purchaser to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing Date, and the representations and warranties of the Company
contained in this Agreement and in any document delivered in connection herewith
shall be true and correct as of the Closing Date, except (i) for changes
specifically permitted by this Agreement or otherwise accepted in writing by the
Purchaser, (ii) for non-performance or breaches which, separately or in the
aggregate, would not have a Material Adverse Effect on the Company or the
Purchaser or on the ability of the parties to consummate the transactions
contemplated by this Agreement and (iii) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct, in all material respects, as of such date. The failure of the
Company to obtain the consent to any contract or agreement set forth on Schedule
3.3(a) shall not be a condition to the obligation of the Purchaser to effect the
Merger.
(b) The Purchaser shall have received a certificate of the President
or a Vice President of the Company, dated the Closing Date, certifying to the
effect of the preceding clause (a).
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any Material Adverse Change with respect to the Company.
19
(d) After the Effective Time, no person shall have any right under
any Stock Plan (or any Company Option granted thereunder) or other plan, program
or arrangement to acquire any equity securities of the Company.
(e) There shall not have been any action taken, or any statute, rule,
regulation, order, judgment or decree proposed, enacted, promulgated, entered,
issued, or enforced by any Governmental Entity, and there shall be no action,
suit or proceeding pending (with a reasonable likelihood of success), which (i)
makes this Agreement, the Merger, or any of the other transactions contemplated
by this Agreement illegal or imposes or may impose material damages or penalties
in connection therewith, (ii) requires the divestiture of a material portion of
the business of the Purchaser, or of the Company or of the Surviving Corporation
taken as a whole, (iii) imposes material limitations on the ability of the
Purchaser effectively to exercise full rights of ownership of shares of capital
stock of the Surviving Corporation (including the right to vote such shares on
all matters properly presented to the shareholders of the Surviving Corporation)
or makes the holding by the Purchaser of any such shares illegal or subject to
any materially burdensome requirement or condition, (iv) requires the Purchaser,
the Company, the Surviving Corporation or any of their respective material
affiliates to cease or refrain from engaging in any material business, or (v)
otherwise prohibits, restricts, or delays consummation of the Merger or any of
the other transactions contemplated by this Agreement in any material respect or
increases or may increase in any material respect the liabilities or obligations
of the Purchaser or the Surviving Corporation arising out of this Agreement, the
Merger, or any of the other transactions contemplated by this Agreement.
(f) The Proponents shall have transferred their shares of Firecom
Stock to the Purchaser.
(g) Not more than 10% of the outstanding shares of the Company
entitled to vote at the Meeting of Shareholders shall have perfected appraisal
rights in respect of the Merger.
ARTICLE 7
TERMINATION
7.1 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 of this Agreement by the shareholders of the Company, by
the mutual consent of the Purchaser and the Company.
7.2 Termination by Either Purchaser or Company. This Agreement may be
------------------------------------------
terminated and the Merger may be abandoned by action of the Board of Directors
of either the Purchaser or the Company if (a) the Merger shall not have been
consummated by August 15, 2001, (b) the approval of the Company's shareholders
required by Section 6.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment thereof or (c) a United States federal
or state court of competent jurisdiction or United States federal or state
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
20
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, that the party seeking to terminate this
Agreement pursuant to this clause (c) shall have used all reasonable efforts to
remove such injunction, order or decree; and provided, in the case of a
termination pursuant to clause (a) above, that the terminating party shall not
have breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to consummate
the Merger by August 15, 2001.
7.3 Termination by Company. This Agreement may be terminated and the
----------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the shareholders of the Company referred to in
Section 6.1(a), by action of the Board of Directors of the Company, if (a) there
is an Alternative Proposal that the Board of Directors of the Company in good
faith determines (in consultation with its financial advisors) represents a
financially superior transaction for the shareholders of the Company as compared
to the Merger and in the exercise of its good faith judgment as to its fiduciary
duties imposed by law, as advised by outside counsel, the Board of Directors of
the Company determines that such termination is required by reason of such being
made; provided that the Company shall (i) notify the Purchaser promptly of its
intention to terminate this Agreement or to enter into a definitive agreement
with respect to any such Alternative Proposal (which notice shall describe the
material terms of such definitive agreement), and (ii) give the Purchaser 5 days
to increase the consideration payable hereunder to that payable pursuant to the
Alternative Proposal (if so increased this Agreement may not be terminated) but
in no event shall such notice be given less than 48 hours prior to the public
announcement of the Company's proposed termination of this Agreement; and
provided further that the right to terminate this Agreement pursuant to this
clause shall not be available if there has been a non-performance or breach by
the Company which has or would reasonably be expected to have resulted in a
failure of condition under Section 6.3(a) hereof, or (b) there has been a
non-performance or breach by the Purchaser which has or would reasonably be
expected to have resulted in a failure of condition under Section 6.2, which
non-performance or breach is not curable or, if curable, is not cured within 30
days after written notice of such non-performance or breach is given by the
Company to the Purchaser. Notwithstanding the foregoing, the Company's ability
to terminate this Agreement pursuant to Section 7.2 or this Section 7.3 is
conditioned upon the payment by the Company of any amounts owed by it pursuant
to Section 7.5(a) to the extent owed thereunder.
7.4 Termination by Purchaser. 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 the shareholders of the Company referred to in Section 6.1(a),
by action of the Board of Directors of the Purchaser, if (i) the Board of
Directors of the Company shall have withdrawn or modified in a manner materially
adverse to the Purchaser its approval or recommendation of this Agreement or the
Merger or shall have recommended an Alternative Proposal to the Company's
shareholders, or (ii) there has been a non-performance or breach by the Company
which has or would reasonably be expected to have resulted in a failure of
condition under Section 6.3, which non-performance or breach is not curable or,
if curable, is not cured within 30 days after written notice of such
non-performance or breach is given by the Purchaser to the Company.
21
7.5 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event that any person shall have made an Alternative
Proposal for the Company and (i) thereafter this Agreement is terminated
pursuant to Section 7.3(a) or clause (i) of Section 7.4 or (ii) this Agreement
is terminated for any other reason (other than the breach of this Agreement by
the Purchaser) and, in the case of this clause (ii) only, a transaction
contemplated by such Alternative Proposal is consummated within one year after
such termination (either of the foregoing events being called a "Payment
Event"), then the Company shall reimburse to the Purchaser its reasonably and
appropriately documented costs and expenses incurred in connection with the
Merger which amount shall be payable by wire transfer of same day funds either
on the date contemplated in the last sentence of Section 7.3 if applicable or,
otherwise, within two business days after such amount becomes due. The Company
acknowledges that the agreements contained in this Section 7.5(a) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, the Purchaser would not enter into this Agreement;
accordingly, if the Company fails to promptly pay the amount due pursuant to
this Section 7.5(a), and, in order to obtain such payment, the Purchaser
commences a suit which results in a judgment against the Company for the fee set
forth in this Section 7.5(a), the Company shall pay to the Purchaser its costs
and expenses (including attorneys' fees) in connection with such suit, together
with interest on the original amount at the prime rate as reported in The Wall
Street Journal on the date of such judgment.
(b) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article 7, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
7.5 and except for the provisions of Sections 5.9, 8.3, 8.4, 8.6, 8.8, 8.9, 8.12
and 8.13. Moreover, in the event of termination of this Agreement pursuant to
Sections 7.2, 7.3 or 7.4, nothing herein shall prejudice the ability of the
non-breaching party from seeking damages from any other party for any willful
breach of any material provision of this Agreement, including without
limitation, attorneys' fees and the right to pursue any remedy at law or in
equity.
7.6 Extension, Waiver.
-----------------
At any time prior to the Effective Time, any party hereto, by action taken
by its Board of Directors, may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
22
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements. All
---------------------------------------------------------
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and shall not survive
the Merger, provided, however, that the agreements contained in Article 2 shall
survive the Merger.
8.2 Notices. Any notice required to be given hereunder shall be sufficient
-------
if in writing, and sent by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to the Purchaser: If to the Company:
Mr. Xxxx Xxxxxx Xx. Xxxxxxx X. Xxxxxx
ALRM Acquisition Inc. Chairman, Special Committee
c/o Firecom, Inc. Firecom, Inc.
00-00 00xx Xxxxxx 00-00 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000 Xxxxxxxx, Xxx Xxxx 00000
With copies to: With copies to:
Xxxxxx Xxxx & Priest LLP Squadron, Elenoff, Plesent & Xxxxxxxxx, LLP
00 Xxxx 00xx Xxxxxx 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxx, Esq. Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
personally delivered or mailed.
8.3 Assignment; Binding Effect. Neither this Agreement nor any of the
--------------------------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.10, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8.4 Entire Agreement. This Agreement, the Schedules, and any documents
----------------
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
23
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the parties hereto, by
---------
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
shareholders of the Company, but after any such shareholder approval, no
amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with the laws of New York applicable to contracts executed and to be
performed entirely within that State without regard to the conflicts of laws
principles thereof.
8.7 Counterparts. This Agreement may be executed by the parties hereto in
------------
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.8 Headings. Headings of the Articles and Sections of this Agreement are
--------
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context otherwise
--------------
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10 Waivers. Except as provided in this Agreement, no action taken
-------
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
---------------------------------------
attached hereto and referred to herein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this Agreement which is invalid
------------
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
24
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.13 Confidentiality. The Purchaser agrees to treat confidentially all
---------------
non-public confidential information, trade secrets and proprietary business
practices and concepts (the "Evaluation Material"), disclosed by the Company to
the Purchaser at any time prior to the Closing Date. The Purchaser agrees to
transmit the Evaluation Material only to its employees, agents, financing
sources or partners, and others who need to know such information and who shall
be advised by the Purchaser of this provision and agree to be bound by the terms
hereof. In the event that the Purchaser is required (by oral questions,
interrogatories, requests for information or document subpoena, civil
investigative demand or similar process) to disclose any of the Evaluation
Material, it will provide the Company with prompt notice of such request(s) so
that the Company may seek an appropriate protective order and/or waive the
Purchaser's compliance with these provisions. It is further agreed that if, in
the absence of a protective order or the receipt of a waiver hereunder, the
Purchaser is nonetheless, in the opinion of its counsel, compelled to disclose
any of the Evaluation Material to any tribunal or else stand liable for contempt
or suffer other censure or penalty, the Purchaser may disclose such Evaluation
Material to such tribunal without liability hereunder. In the event that the
Merger is not effected after the Purchaser has been furnished with Evaluation
Material, it will promptly upon the request of the Company deliver to the
Company the Evaluation Material, without retaining any copy thereof. The term
"Evaluation Material does not include information which (i) becomes or has been
generally available to the public other than as a result of a disclosure by the
Purchaser or its representatives, (ii) was available to the Purchaser on a
non-confidential basis prior to its disclosure to the Purchaser by the Company
or its representatives, or (iii) becomes available to the Purchaser on a
non-confidential basis from a source other than the Company or its
representatives, provided, however, that such source is not bound by a
confidentiality agreement with the Company or its representatives.
8.14 Enforcement of Agreement. The parties hereto agree that irreparable
------------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to obtain an injunction or
injunctions to prevent breaches of this Agreement, this being in addition to any
other remedy to which they are entitled at law or in equity. By each party's
execution and delivery hereof, such party hereby irrevocably submits to the
jurisdiction of any such court in connection with any such suit or proceeding,
irrevocably waives any objection, including any objection to the laying of venue
or based on the grounds of forum non conveniens, which it may now or hereafter
have to the bringing of any action or proceeding in such jurisdiction in respect
of this Agreement or any document related hereto and each waives personal
service of any summons, complaint or other process which may be made by any
other means permitted by New York law. The parties hereto irrevocably consent to
service of process in the manner described in Section 8.2 hereof, AND EACH PARTY
HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY SUIT OR PROCEEDING
BROUGHT TO ENFORCE OR INTERPRET THIS AGREEMENT.
25
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
FIRECOM, INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Xxxx Xxxxxx
President
ALRM ACQUISITION INC.
By: /s/ Xxxx Xxxxxx
--------------------------------
Xxxx Xxxxxx
President
26
