Exhibit 1
AGREEMENT AND PLAN OF MERGER
by and between
XXXXXX XXXXX XXXX
and
DETECTION SYSTEMS, INC.
dated as of
December 10, 2000
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 10, 2000, by and between
Xxxxxx Xxxxx XxxX, a limited liability company organized under the laws of
Germany ("Parent"), and DETECTION SYSTEMS, INC., a New York corporation (the
"Company"). Certain capitalized terms used in this Agreement have the meanings
ascribed to them in Article VIII.
WHEREAS, the Board of Directors of each of Parent and the Company have
approved, and deem it fair to, advisable and in the best interests of their
respective shareholders to consummate, the acquisition of the Company by Parent
and Purchaser upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that a wholly owned
Subsidiary of Parent to be organized under the laws of New York ("Purchaser")
make a cash tender offer to acquire all shares of the issued and outstanding
common stock, $.05 par value, of the Company (the "Shares") for $18 per share,
net to the seller in cash, upon the terms and subject to the conditions set
forth herein;
WHEREAS, also in furtherance of such acquisition, the Board of Directors of
each of Parent and the Company have approved this Agreement and the Merger (as
herein defined) following the Offer (as herein defined) pursuant to which
Purchaser shall merge with and into the Company and outstanding Shares shall be
converted into the right to receive the Offer Price (as herein defined) in cash,
without interest, all in accordance with the NYBCL (as herein defined) and upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has determined that the
consideration to be paid for each Share in the Offer and the Merger is fair to
the holders of such Shares and has resolved to recommend that the holders of
such Shares tender their Shares pursuant to the Offer and approve and adopt this
Agreement and the Merger upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the Company and Parent desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the
Merger;
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NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE OFFER
Section 1.1 The Offer.
(a) As promptly as practicable (but in no event later than 10 business
days after the public announcement of the execution hereof), Purchaser shall
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) a tender offer (the "Offer") for all of
the outstanding Shares at a price of $18 per Share, net to the seller in cash
(such price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"), subject to the conditions set forth in
Annex A hereto.
(b) The obligations of Purchaser to commence the Offer and to accept
for payment and to pay for any Shares validly tendered on or prior to the
expiration of the Offer and not withdrawn shall be subject only to the
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement and the conditions set forth in Annex A hereto.
(c) Purchaser expressly reserves the right to modify the terms of the
Offer; provided, that, without the Company's prior written consent, Purchaser
shall not decrease the Offer Price, change the form of consideration to be paid
in the Offer or decrease the number of Shares sought or amend any other
condition of the Offer in any manner adverse to the holders of the Shares (other
than with respect to insignificant changes or amendments and subject to the
penultimate sentence of this Section 1.1) or impose additional conditions
without the written consent of the Company; provided further, however, that, if
on the initial scheduled expiration date of the Offer, which shall be 20
business days after the date that the Offer is commenced, all conditions to the
Offer shall not have been satisfied or waived, Purchaser may, from time to time
until such time as all such conditions are satisfied or waived, in its sole
discretion, extend the expiration date. In addition, the Offer Price may be
increased and the Offer may be extended to the extent required by applicable Law
in connection with such increase, in each case without the consent of the
Company. Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the
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conditions of the Offer, accept for payment and pay for Shares validly tendered
as promptly as practicable; provided, however, that if, as of the initial
expiration date of the Offer, the Shares validly tendered and not withdrawn
pursuant to the Offer equal less than 90% of the outstanding Shares, Purchaser
may elect to provide a subsequent offering period pursuant to Rule 14d-11 under
the Exchange Act.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, has (i) determined that each of the Agreement, the Offer and the
Merger (as defined in Section 2.1) are fair to and in the best interests of the
shareholders of the Company, (ii) approved this Agreement, the Offer, the
acquisition of Shares pursuant to the Offer and the Merger for purposes of
Section 912 of the NYBCL (the "Section 912 Approval"), (iii) received the
written opinion of the Company's financial advisor, Fleet Securities, Inc., a
New York corporation ("Fleet"), to the effect that the Offer Price to be
received by holders of Shares pursuant to the Offer and the Merger Consideration
(as defined herein) pursuant to the Merger is fair to the shareholders of the
Company from a financial point of view, (iv) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger
(collectively, the "Transactions") and (v) resolved to recommend that the
shareholders of the Company accept the Offer, tender their Shares thereunder to
Purchaser and approve and adopt this Agreement and the Merger. The Company has
been advised by each of its directors and by each executive officer who as of
the date hereof is actually aware of the Transactions that each such Person
currently intends to tender pursuant to the Offer all Shares owned by such
Person.
(b) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to Purchaser mailing labels, security position listings
and any available listings or computer files containing the names and addresses
of all holders of record of the Shares as of a recent date, and shall furnish
Purchaser with such additional information (including, but not limited to,
updated lists of holders of the Shares and their addresses, mailing labels and
lists of security positions) and such assistance as Purchaser or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of the Shares. Subject to the requirements of applicable Law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Purchaser and its affiliates and
associates shall hold in confidence the information contained in any such
labels, listings and files and all other information delivered pursuant to this
Section 1.2(b), will use such information only in connection with the
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Offer and the Merger and, if this Agreement shall be terminated, will deliver to
the Company all copies, extracts or summaries of such information in their
possession or the possession of their agents.
Section 1.3 SEC Documents.
(a) On the date the Offer is commenced, Parent and Purchaser shall
file with the United States Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule TO in accordance with the Exchange Act with
respect to the Offer (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule TO"). The Schedule TO will
include, as exhibits, the Offer to Purchase and a form of letter of transmittal
(collectively, together with any amendments and supplements thereto, the "Offer
Documents"). The Company and its counsel shall be given a reasonable opportunity
to review and comment upon the Schedule TO and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to shareholders of
the Company. Concurrently with the filing of the Schedule TO by Parent and
Purchaser, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 in accordance with the Exchange Act (together with
all amendments and supplements thereto and including the exhibits thereto, the
"Schedule 14D-9"), which shall, except as otherwise provided herein, contain the
recommendation referred to in clause (v) of Section 1.2(a) hereof, and the
Company shall also file therewith the information required to be distributed to
the shareholders of the Company pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder as is necessary to enable Parent's
designees to be elected to the Com pany's Board of Directors pursuant to Section
1.4 hereof
(b) Parent and Purchaser will take all steps necessary to ensure that
the Offer Documents, and the Company will take all steps necessary to ensure
that the Schedule 14D-9 and the information required to be distributed to the
shareholders of the Company pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder as is necessary to enable Parent's designees
to be elected to the Company's Board of Directors pursuant to Section 1.4
hereof, will comply in all material respects with the provisions of applicable
federal and state securities Laws. Each of Parent and Purchaser will take all
steps necessary to cause the Offer Documents, and the Company will take all
steps necessary to cause the Schedule 14D-9 and the information required to be
distributed to the shareholders of the Company pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder as is necessary to enable
Parent's designees to be elected to the Company's Board of Directors pursuant to
Section 1.4 hereof, to be filed with the
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SEC and to be disseminated to holders of the Shares, in each case as and to the
extent required by applicable federal and state securities Laws and Parent or
Purchaser will supply the Company any information with respect to either of them
and their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1. Each of Parent and Purchaser, on the one hand, and the
Company, on the other hand, will promptly correct any information provided by it
for use in the Offer Documents and the Schedule 14D-9 if and to the extent that
it shall have become false and misleading in any material respect and Purchaser
will take all steps necessary to cause the Offer Documents, and the Company
will take all steps necessary to cause the Schedule 14D-9, as so corrected to be
filed with the SEC and to be disseminated to holders of the Shares, in each
case as and to the extent required by applicable federal and state securities
Laws. Parent and its counsel shall be given a reasonable opportunity to review
and comment upon the Schedule 14D-9 and all amendments and supplements thereto
and the information required to be distributed to the shareholders of the
Company pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder prior to their filing with the SEC or dissemination to shareholders
of the Company. The Company agrees to provide Parent and its counsel with copies
of any written comments that the Company or its counsel may receive from the SEC
or its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments and each of Parent and Purchaser agrees to provide the Company and
its counsel with copies of any written comments that Parent, Purchaser or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
Section 1.4 Directors.
(a) Promptly after the purchase of and payment for any Shares by
Purchaser or any of its affiliates as a result of which Purchaser and its
affiliates own beneficially at least a majority of then outstanding Shares,
Parent shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Company's Board of Directors as is equal to the
product of the total number of directors on such Board (giving effect to the
increase in the size of such Board pursuant to this Section 1.4) multiplied by
the percentage that the number of Shares beneficially owned by Purchaser
(including Shares so accepted for payment) bears to the total number of Shares
then outstanding. In furtherance thereof, the Company shall, upon request of
Parent, promptly either (at the election of the Company) increase the size of
its Board of Directors or use its best efforts to secure the resignations of
such number of its incumbent directors, or both, as is necessary to enable such
designees of Parent to be so elected or appointed to the Company's Board of
Directors, and the Company shall take all actions available to the Company to
cause
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such designees of Parent to be so elected or appointed. At such time, the
Company shall also take all action necessary to cause Persons designated by
Parent to constitute at least the same percentage (rounded up to the next whole
number) as is on the Company's Board of Directors of (i) each committee of the
Company's Board of Directors, (ii) each board of directors (or similar body) of
each Subsidiary of the Company and (iii) each committee (or similar body) of
each such board.
(b) Notwithstanding the provisions of this Section 1.4, the parties
hereto shall use their respective reasonable best efforts to ensure that at
least two of the members of the Board shall, at all times prior to the Effective
Time (as defined in Section 2.2 hereof) be, Continuing Directors. From and after
the time, if any, that Parent's designees constitute a majority of the Company's
Board of Directors, any amendment or modification of this Agreement, any
amendment to the Company's Certificate of Incorporation or By-Laws inconsistent
with this Agreement, any termination of this Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or
Purchaser hereunder (except as permitted under Section 1.1(c) hereof), any
waiver of any condition to the Company's obligations hereunder or any of the
Company's rights hereunder or other action by the Company hereunder may be
effected only by the action of a majority of the Continuing Directors of the
Company, which action shall be deemed to constitute the action of any committee
specifically designated by the Board of Directors of the Company to approve the
actions contemplated hereby and the Transactions and the full Board of Directors
of the Company. The provisions of this Section 1.4 are in addition to and shall
not limit any rights which Purchaser, Parent or any of their affiliates may have
as a holder or beneficial owner of Shares as a matter of applicable Law with
respect to the election of directors or otherwise.
ARTICLE II
THE MERGER
Section 2.1 The Merger. (a) Upon the terms and subject to the conditions of
this Agreement, and in accordance with the NYBCL, at the Effective Time (as
defined in Section 2.2 hereof), the Company and Purchaser shall consummate a
merger (the "Merger") pursuant to which (x) Purchaser shall be merged with and
into the Company and the separate corporate existence of Purchaser shall
thereupon cease and (y) the Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation") and
shall continue to be governed by the Laws of the State of New York.
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(b) Pursuant to the Merger, at the Effective Time, the Certificate of
Incorporation and By-Laws of the Purchaser, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation and by-laws of the
Surviving Corporation, each until thereafter changed or amended as provided
therein and by the NYBCL, except that the name shall be changed to "Detection
Systems, Inc.".
(c) The directors of Purchaser at the Effective Time shall be the
initial directors of the Surviving Corporation until their respective successors
are duly elected and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's certificate of
incorporation and by-laws. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation until their
respective successors are duly elected and qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
certificate of incorporation and by-laws.
(d) The Merger shall have the effects specified in the applicable
provisions of the NYBCL.
Section 2.2 Effective Time. Subject to the terms and conditions of this
Agreement, Parent, Purchaser and the Company will cause a certificate of merger
or, if applicable, a certificate of ownership and merger (as applicable, the
"Certificate of Merger"), to be executed and filed on the date of the Closing
(as defined in Section 2.3) (or on such other date as Parent and the Company may
agree) with the department of state of the State of New York (the "Department of
State") as provided in the NYBCL. The Merger shall become effective on the date
on which the Certificate of Merger has been duly filed with the Department of
State or such time as is agreed upon by the parties and specified in the
Certificate of Merger, and such time is hereinafter referred to as the
"Effective Time."
Section 2.3 Closing. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m., local time, on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or waiver of
all of the conditions set forth in Article VI hereof (the "Closing Date"), at
the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Xxxx Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, 00000, unless another date or place is agreed to in writing by
the parties hereto.
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Section 2.4 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of any
Shares or any shares of capital stock of Purchaser:
(a) Purchaser Capital Stock. Each issued and outstanding share of
common stock of Purchaser shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All
Shares that are owned by the Company or any Subsidiary of the Company and any
Shares owned by Parent, Purchaser or any Subsidiary of Parent or Purchaser shall
be cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) Exchange of Shares. Each issued and outstanding Share (other than
Shares to be cancelled in accordance with Section 2.4(b)) shall be converted
into the right to receive the Offer Price in cash, without interest (the "Merger
Consideration"). All such Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate in accordance with
Section 2.5, without interest.
Section 2.5 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate
a bank, trust company or other Person, reasonably acceptable to the Company, to
act as agent for the holders of the Shares in connection with the Merger (the
"Paying Agent") to receive the funds to which holders of the Shares shall become
entitled pursuant to Section 2.4(c). At the Closing, Parent shall deliver to the
Paying Agent funds in an amount necessary for the payment of the Merger
Consideration as provided herein. All interest earned on such funds shall be
paid to Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Paying Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates") whose Shares were
converted into the right to receive the Merger Consideration pursuant to Section
2.4, (i) a letter of
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transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form not inconsistent with
this Agreement as Parent may specify) and (ii) instructions for use in
surrendering the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, Parent shall cause
the Paying Agent to pay to the holder of such Certificate the Merger
Consideration, and the Certificate so surrendered shall forthwith be cancelled.
In the event of a surrender of a Certificate representing Shares which are not
registered in the transfer records of the Company under the name of the Person
surrendering such Certificate, payment may be made to a Person other than the
Person in whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or other
Taxes required by reason of payment to a Person other than the registered holder
of such Certificate or establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.5, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration which the holder thereof has the right to receive in
respect of such Certificate pursuant to the provisions of this Article II. No
interest shall be paid or will accrue on the Merger Consideration payable to
holders of Certificates pursuant to the provisions of this Article II.
(c) Transfer Books; No Further Ownership Rights in Shares. At the
Effective Time, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable Law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation and Parent
(subject to abandoned property, escheat or other similar Laws) only as general
creditors thereof with respect
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to the Merger Consideration payable upon due surrender of their Certificates,
without any interest thereon. Notwithstanding the foregoing, none of Parent, the
Surviving Corporation or the Paying Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law.
(e) Lost Certificates. If 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 Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent shall pay in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration pursuant to this Agreement.
Section 2.6 Withholding Taxes. Parent and Purchaser shall be entitled to
deduct and withhold, or cause the Paying Agent to deduct and withhold, from the
Offer Price or the Merger Consideration payable to a holder of Shares pursuant
to the Offer or the Merger any withholding and stock transfer Taxes and such
amounts as are required under the Code, or any applicable provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by Parent
or Purchaser, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent or Purchaser.
Section 2.7 Stock Options. (a) At or immediately prior to the Effective
Time, each then outstanding option and warrant to purchase any shares of capital
stock of the Company (in each case, an "Option") shall be cancelled by the
Company. In consideration of such cancellation of Options with an exercise price
of less than the Offer Price, the Company (or, at Parent's option, the
Purchaser) shall pay to such holders of Options an amount in respect thereof
equal to the product of (A) the excess, if any, of the Offer Price over the
exercise price of each such Option and (B) the number of Shares previously
subject to the Option immediately prior to its cancellation (such payment to be
net of withholding taxes and without interest).
(b) In connection with such cancellation, the Company shall use its
best efforts to obtain such consents from holders of Company Options as are
required pursuant to the plans (the "Option Plans") listed in Schedule 3.3(c) of
the disclosure schedule delivered by the Company to Parent at or prior to the
execution of this Agreement (the "Disclosure Schedule"). The Company shall take
all other
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actions necessary and appropriate so that all stock option, other equity based
plans or deferred compensation plans maintained with respect to the Shares,
including, without limitation, the Option Plans, shall terminate as of the
Effective Time (except for the payments to be made out of the cash assets
remaining in the deferred compensation plans (including interest thereon) to be
paid to the participants, at the option of the Company, either (i) in a lump sum
upon termination of the plans or (ii) one-third in each of January 2002, January
2003 and January 2004) and the provisions in any other Benefit Plan providing
for the issuance, transfer or grant of any capital stock of the Company or any
interest in respect of any capital stock of the Company shall be deleted as of
the Effective Time, and the Company shall use its best efforts to ensure that
following the Effective Time no holder of an Option or any participant in any
Option Plan or other Benefit Plan shall have any right thereunder to acquire any
capital stock of the Company, Parent, Purchaser or the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
Section 3.1 Organization, Standing and Corporate Power. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction in which it is organized and
has the requisite corporate power and authority to carry on its business as it
is now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign corporation or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) would not have a Material Adverse
Effect on the Company. The Company has made available to Parent complete and
correct copies of the Certificate of Incorporation and By-Laws of the Company,
in each case as amended to the date of this Agreement.
Section 3.2 Subsidiaries. (a) Schedule 3.2(a) of the Disclosure Schedule
includes the names, jurisdictions of incorporation and capitalization of all of
the Subsidiaries of the Company. All the outstanding shares of capital stock of,
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or other equity interests in, each Subsidiary of the Company have been validly
issued and are fully paid and nonassessable and are owned directly or indirectly
by the Company, free and clear of all Liens and free of any other restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests).
(b) The Company does not directly or indirectly beneficially own any
securities or other beneficial ownership interests in any other entity
(including through joint ventures or partnership arrangements) other than (i)
the Subsidiaries of the Company or (ii) as disclosed on Schedule 3.2(b) of the
Disclosure Schedule.
Section 3.3 Capital Structure. The authorized capital stock of the Company
consists of 24,000,000 Shares. As of the date hereof, (i) 6,726,615 Shares were
issued and outstanding, (ii) 502,685 Shares were reserved for issuance upon
exercise of outstanding Options, and (iii) 200,108 Shares were issued and are
held in the Company's treasury. Except as set forth above or on Schedule 3.3(a)
of the Disclosure Schedule, as of the date of this Agreement: (i) no shares of
capital stock or other voting securities of the Company are issued, reserved for
issuance or outstanding; (ii) there are no stock appreciation rights, phantom
stock units, restricted stock grants, contingent stock grants or Benefit Plans
which grant awards of any of the foregoing, and there are no other outstanding
contractual rights to which the Company is a party the value of which is based
on the value of Shares; (iii) all outstanding shares of capital stock of the
Company are, and all Shares which may be issued will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights; and (iv) there are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of the Company may vote. Except as set forth above or in Schedule
3.3(b) of the Disclosure Schedule, as of the date of this Agreement, there are
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
of its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or of any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking. There are no outstanding contractual obligations of the Company
or any of its Subsidiaries, to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries. Schedule
3.3(c) of the Disclosure Schedule accurately sets
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forth information regarding the current exercise price, date of grant and number
of outstanding Options for each holder of Options pursuant to any Company Option
Plan. Following the Effective Time, no holder of Options will have any right to
receive shares of common stock of the Surviving Corporation upon exercise of
Options.
Section 3.4 Authority; Noncontravention; Company Action. The Company has
the requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the holders of a majority of the
outstanding Shares, to consummate the Merger contemplated by this Agreement. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly authorized by all
necessary corporate action on the part of the Company, subject to approval of
this Agreement by the holders of a majority of the outstanding Shares. This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes the valid and binding obligation of Parent and Purchaser,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar Laws now or hereafter in effect relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. Except as set forth on Schedule 3.4 of the
Disclosure Schedule, the execution, delivery and performance of this Agreement
do not, and the consummation of the Transactions (including the changes in the
composition of the Board of Directors of the Company) and compliance with the
provisions of this Agreement 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 loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries under,
or result in the termination of, or require that any consent be obtained or any
notice be given with respect to, (i) the Certificate of Incorporation or By-Laws
of the Company or the comparable charter or organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or Permit applicable
to the Company or any of its Subsidiaries or their respective properties or
assets or (iii) any Law applicable to the Company or any of its Subsidiaries or
their respective properties or assets, other than, in the case of clauses (ii)
or (iii), any such conflicts, violations, defaults, rights, Liens, losses of a
material benefit, consents or notices that, individually or in
13
the aggregate, would not have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity or any
other Person, is required by the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the Transactions, except for (i) the filings,
permits, authorizations, consents and approvals set forth in Schedule 3.4 of the
Disclosure Schedule, or as may be required under, and other applicable
requirements of, the Securities Act, the Exchange Act, the HSR Act, any
applicable state securities or "blue sky" Laws and the NYBCL, and (ii) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to be obtained or made would not, individually
or in the aggregate, (x) impair, in any material respect, the ability of the
Company to perform its obligations under this Agreement, (y) prevent or
significantly delay the consummation of the Transactions or (z) have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole. The Board
of Directors of the Company has taken all appropriate action to approve pursuant
to Section 912(c)(1) of the NYBCL this Agreement and any other agreement
contemplated hereby and the consummation of the Transactions.
Section 3.5 SEC Documents; Financial Statements. The Company has filed all
SEC Documents required to be filed by it since April 1, 1999 (the "Company's SEC
Documents"). As of their respective dates, (i) the Company's SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such documents, and (ii) none of the
Company's SEC Documents contained at the time of their filing 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's SEC Documents, as of the
dates of such documents, were true and complete and complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") in the United
States applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).
14
Section 3.6 Schedule 14D-9; Offer Documents; Proxy Statement. Neither the
Schedule 14D-9, any other document required to be filed by the Company with the
SEC in connection with the Transactions, nor any information supplied by the
Company for inclusion in the Offer Documents shall, at the respective times the
Schedule 14D-9, any such other filings by the Company, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to shareholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will not, on the date the Proxy Statement
(including any amendment or supplement thereto) is first mailed to shareholders
of the Company, contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
are made, not misleading or shall, at the time of the Special Meeting (as
hereinafter defined) or at the Effective Time, omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Special Meeting which shall have become
false or misleading in any material respect. The Schedule 14D-9, any other
document required to be filed by the Company with the SEC in connection with the
Transactions and the Proxy Statement will, when filed by the Company with the
SEC, comply as to form in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
the statements made in any of the foregoing documents based on and in conformity
with information supplied by or on behalf of Parent or Purchaser in writing
specifically for inclusion therein.
Section 3.7 Absence of Certain Changes or Events. Except as set forth in
the Company's SEC Documents or on Schedule 3.7 of the Disclosure Schedule, since
April 1, 2000, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course, and (i) there has not been any Material
Adverse Change in the Company and its Subsidiaries, taken as a whole and (ii)
neither the Company nor any of its Subsidiaries has taken any of the actions
prohibited by Section 5.1 or otherwise acted in such a way as to impair, prevent
or impede the consummation of the Transactions.
Section 3.8 Litigation. Except as specifically set forth in the Company's
SEC Documents or on Schedule 3.8 of the Disclosure Schedule, there are (i) no
suits, actions or proceedings pending or, to the Knowledge of the Company,
15
threatened against the Company or any of its Subsidiaries, (ii) no complaints,
lawsuits, charges or other proceedings pending or, to the Knowledge of the
Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable Law governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship that, individually or in the aggregate, could have a
Material Adverse Effect on the Company, (iii) no judgments, decrees, injunctions
or orders of any Governmental Entity or arbitrator outstanding against the
Company or any of its Subsidiaries, and (iv) no orders, writs, judgments,
injunctions, decrees, determinations or awards applicable to the Trademarks or
the Other Intellectual Property.
Section 3.9 Absence of Changes in Benefit Plans; SEC Disclosure. Except as
disclosed on Schedule 3.9 of the Disclosure Schedule: (i) there has not been any
adoption or amendment by the Company or any of its Subsidiaries or any ERISA
Affiliate (as defined in Section 3.10 hereof) of any Benefit Plan (as defined in
Section 3.10 hereof) since April 1, 2000; and (ii) neither the Company nor any
of its Subsidiaries or any ERISA affiliate has any formal plan or commitment to
create any additional Benefit Plan or modify or change any existing Benefit Plan
that would affect any employee or terminated employee of the Company or any
Company Subsidiary. All employment, consulting, severance, termination, change
in control or indemnification agreements, arrangements or understandings between
the Company or any of its Subsidiaries and any current or former officer or
director of the Company or any of its Subsidiaries which are required to be
disclosed in the Company's SEC Documents have been disclosed therein.
Section 3.10 Employee Benefits; ERISA. (a) Schedule 3.10(a) of the
Disclosure Schedule contains a true and complete list of each bonus, deferred
compensation, incentive compensation, stock purchase, stock option, employment,
severance or termination pay, health insurance, supplemental unemployment
benefits, profit-sharing, pension, or retirement plan, program and domestic
agreement or arrangement, and each other employee benefit plan, program and
domestic agreement or arrangement, other than a non-material fringe benefit
plan, sponsored, maintained or contributed to or required to be contributed to
(at any time during the past six years) by the Company or any of its
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that is a member of a "controlled group" within the meaning of
section 4001 of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder ("ERISA") of which the
Company or a Subsidiary is a member or which is under "common control" within
the meaning of Section 4001 of ERISA, with the
16
Company or a Subsidiary, for the benefit of any employee or former employee of
the Company, its Subsidiaries or any ERISA Affiliate (or, with respect to
employment agreements and arrangements, any domestic employee thereof), whether
formal or informal (the "Benefit Plans").
(b) With respect to each Benefit Plan, the Company has made available
a true and complete copy thereof (including all amendments thereto), as well as
true and complete copies of the two most recent annual reports, if required
under ERISA, with respect thereto; the two most recent actuarial reports, if
required under ERISA, with respect thereto; the two most recent reports prepared
with respect thereto in accordance with Statement of Financial Accounting
Standards No. 87, Employer's Accounting for Pensions; the most recent Summary
Plan Description, together with each Summary of Material Modifications, if
required under ERISA with respect thereto; if the Benefit Plan is funded through
a trust or any third party funding vehicle, the trust or other funding agreement
(including all amendments thereto) and the latest financial statements thereof;
and the most recent determination letter received from the Internal Revenue
Service with respect to each Benefit Plan that is intended to be qualified under
section 401 of the Code.
(c) No liability to the Pension Benefit Guaranty Corporation ("PBGC")
under Title IV of ERISA has been incurred by the Company, its Subsidiaries or
any ERISA Affiliate since the effective date of ERISA that has not been
satisfied in full, and no condition exists that presents a material risk to the
Company, its Subsidiaries or any ERISA Affiliate of incurring a liability under
such Title, other than liability for premiums due the PBGC (which premiums have
been paid when due). Each Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law, including but
not limited to ERISA and the Code.
(d) The PBGC has not instituted proceedings to terminate any Benefit
Plan and no condition exists that presents a material risk that such proceedings
will be instituted.
(e) No Benefit Plan is subject to Section 302 or Title IV of ERISA.
(f) Neither the Company, nor any Subsidiary of the Company, nor any
trust created thereunder, nor, to the Knowledge of the Company, any trustee or
administrator thereof has engaged in a transaction in connection with which the
Company or any Subsidiary of the Company, any such trust, or any trustee or
17
administrator thereof, or any party dealing with any Benefit Plan or any such
trust could be subject to either a material civil penalty assessed pursuant to
section 409 or 502(i) of ERISA or a material tax imposed pursuant to section
4975 or 4976 of the Code.
(g) All employee Benefit Plans that are subject to the laws of any
jurisdiction outside the United States are in material compliance with such
applicable laws, including relevant tax laws, and the requirements of any trust
deed under which they are established, and all required contributions thereto
have been made or have been accrued in the Company's financial statements.
(h) Each Benefit Plan which is intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under section 501(a) of the Code and no
event has occurred to cause the loss of such qualified or exempt status.
(i) Except as set forth in Schedule 3.10(i) of the Disclosure
Schedule, no Benefit Plan provides health, death or medical benefits (whether or
not insured) with respect to current or former employees of the Company or its
Subsidiaries beyond their retirement or other termination of service (other than
(a) coverage mandated by applicable Law or (b) benefits the full cost of which
is borne by the current or former employee (or his beneficiary)).
(j) There are no pending, anticipated or, to the Knowledge of the
Company, threatened claims by or on behalf of any Benefit Plan, by any employee
or beneficiary covered under any such Benefit Plan, or otherwise involving any
such Benefit Plan (other than routine claims for benefits).
Section 3.11 Taxes.
(a) Each of the Company and each of its Subsidiaries has duly and
timely filed (or has had duly and timely filed on its behalf) all Tax Returns
required to be filed by it, and all such Tax Returns are to the Knowledge of the
Company true, complete and correct. Each of the Company and each of its
Subsidiaries has paid (or has had paid on its behalf) all Taxes due and owing by
them and the most recent financial statements contained in the Company's SEC
Documents reflect adequate reserves in accordance with generally accepted
accounting principles for all Taxes payable by the Company or its Subsidiaries
for all taxable periods and portions thereof through the date of such financial
statements.
18
(b) Each of the Company and each of its Subsidiaries has complied with
all applicable Laws relating to the payment and withholding of Taxes (including,
without limitation, the withholding of Taxes pursuant to Sections 1441 and 1442
of the Code or similar provisions under any applicable foreign Laws) and have,
within the time and in the manner prescribed by applicable Laws, withheld from
employee wages and paid over to the proper Governmental Entity all amounts
required to be so withheld and paid over under all applicable Laws.
(c) Except as set forth on Schedule 3.11(c) of the Disclosure
Schedule, (i) no deficiencies for any Taxes have been threatened, proposed,
asserted or assessed (either in writing or orally) against the Company or any of
its Subsidiaries, (ii) no Governmental Entity is conducting or proposing to
conduct an audit with respect to Taxes or any Tax Returns of the Company or any
of its Subsidiaries, (iii) no extension or waiver of the statute of limitations
with respect to Taxes or any Tax Return has been granted by the Company or any
of its Subsidiaries, which remains in effect, (iv) neither the Company nor any
of its Subsidiaries is a party to any agreement or arrangement to allocate,
share or indemnify another party for Taxes, (v) there are no Liens for Taxes
upon the assets of the Company or any of its Subsidiaries, except for Liens for
Taxes not yet due, (vi) all Tax deficiencies which have been claimed, proposed
or asserted against the Company or any of its Subsidiaries have been fully paid
or finally settled, and no issue has been raised in any examination by the
Taxing Authority, which by application of similar principles, could be expected
to result in the proposal or assertion of a Tax deficiency against the Company
or any of its Subsidiaries for another year not so examined, (vii) the Company
has filed, as a common parent corporation of an affiliated group (within the
meaning of Section 1504(a) of the Code) a consolidated return for federal income
tax purposes on behalf of such affiliated group and (viii) no power of attorney
has been granted by or with respect to the Company or any of its Subsidiaries
with respect to any matter relating to Taxes.
(d) Schedule 3.11(d) of the Disclosure Schedule sets forth the taxable
years of the Company or any of its Subsidiaries as to which the respective
statutes of limitations with respect to Taxes have not expired and, with respect
to such taxable years, those years for which examinations have been completed,
those years for which examinations are presently being conducted, those years
for which examinations have not been initiated and those years for which
required Returns have not yet been filed.
19
Section 3.12 Compliance with Applicable Laws.
Except as set forth on Schedule 3.12 of the Disclosure Schedule:
(a) The Company and each of its Subsidiaries have complied and are
presently complying in all material respects with all applicable Laws, and
neither the Company nor any of its Subsidiaries has received notification of any
asserted present or past failure to so comply, except such non-compliance that
(i) has not and will not prevent the Company from carrying on its business
substantially as now conducted, or (ii) would not be reasonably expected to (x)
result in a Material Adverse Effect on the Company or (y) materially impair the
ability of the parties hereto to consummate the Transactions.
(b) Each of the Company and its Subsidiaries has in effect, or has
timely filed applications for, all material Permits necessary for it to own,
lease or operate its properties and assets and to carry on its business
substantially as now conducted and there are no appeals nor any other actions
pending to revoke any such Permits, and there has occurred no material default
or violation under any such Permits.
(c) Each of the Company and its Subsidiaries is, and has been, and
each of the Company's former Subsidiaries, while a Subsidiary of the Company,
was in compliance in all material respects with all applicable Environmental
Laws, and there are no circumstances or conditions that would be reasonably
likely to prevent or interfere with compliance by the Company or its
Subsidiaries in the future with Environmental Laws (or Permits issued
thereunder).
(d) Neither the Company nor any Subsidiary of the Company has received
any written claim, demand, notice, complaint, court order, administrative order
or request for information from any Governmental Entity or private party,
alleging violation of, or asserting any noncompliance with or liability under or
potential liability under, any Environmental Laws, except for matters which are
no longer threatened or pending or for which the Company or its Subsidiaries are
not subject to further requirements pursuant to an administrative or court
order, judgment or settlement agreement.
(e) During the period of ownership or operation by the Company and its
Subsidiaries of any of their respective current or previously owned or leased
properties, there have been no Releases of Hazardous Material in, on, under or
affecting such properties and none of the Company or its Subsidiaries have
disposed of any Hazardous Material or any other substance either on said owned
or leased properties or at other properties, in a manner that has led, or could
reasonably be
20
anticipated to lead, to a Release. Prior to the period of ownership or operation
by the Company and its Subsidiaries of any of their respective current or
previously owned or leased properties, to the Knowledge of the Company, no
Hazardous Material was disposed of at such current or previously owned or leased
properties, and there were no Releases of Hazardous Material in, on, under or
affecting any such property.
(f) Neither the Company nor any of its Subsidiaries has entered into
any agreement that may require it to pay to, reimburse, guarantee, pledge,
defend, indemnify, or hold harmless any Person for or against any Environmental
Liabilities and Costs.
(g) The Company has made available to Parent true and correct copies
of all environmental studies and reports in its possession or in the possession
of its representatives, agents or consultants, prepared within the last five
years, relating to (i) the Company's and its Subsidiaries' compliance with
Environmental Laws; (ii) the environmental condition of the Company's and its
Subsidiaries' currently owned or leased properties, including, but not limited
to, the extent of any on-site contamination at any of such properties, results
of investigations at such properties, remedial action plans for such properties,
and asbestos surveys; and (iii) the environmental condition of any properties
formerly owned or operated by the Company or any of its Subsidiaries, or of any
other location at which the Company or any of its Subsidiaries is subject to an
environmental claim, including, but not limited to, the extent of any on-site
contamination at any such properties, results of investigations at such
properties and remedial action plans at such properties.
Section 3.13 Intellectual Property. The Company and its Subsidiaries own or
are validly licensed, or otherwise possess legally enforceable rights, to use
the Trademarks and Other Intellectual Property and the consummation of the
Transactions will not alter or impair such ability in any respect. The Company
and its Subsidiaries are the sole and exclusive owners of the Trademarks and
Other Intellectual Property, free and clear of all Liens and free of all
licenses except those set forth on Schedule 3.13(a) of the Disclosure Schedule.
There are no oppositions, cancellations, invalidity proceedings, interferences
or re-examination proceedings presently pending with respect to the Trademarks
and Other Intellectual Property. The conduct of the business of the Company and
its Subsidiaries and the Trademarks and Other Intellectual Property do not
infringe any rights of any Person, and, except as set forth on Schedule 3.13(b)
of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has
received any written notice from any other Person pertaining to or challenging
the right of the Company or any of its Subsidiaries to use any of the Trademarks
or Other Intellectual Property. To the Company's Knowledge,
21
no third party is infringing upon any of the Trademarks or Other Intellectual
Property. Neither the Company nor any of its Subsidiaries has made any claim of
a violation or infringement by others of its rights to or in connection with the
Trademarks and Other Intellectual Property which is still pending.
Section 3.14 Properties. Each of the Company and each of its Subsidiaries
has sufficiently good and valid title to, or an adequate leasehold interest in,
its material properties and assets (including the Real Property) in order to
allow it to conduct, and continue to conduct, its business as currently
conducted in all material respects. Except as set forth on Schedule 3.14 of the
Disclosure Schedule: (i) such material tangible properties and assets (including
the Real Property) are sufficiently free of Liens to allow the Company and each
of its Subsidiaries to conduct, and continue to conduct, its business as
currently conducted in all material respects and the consummation of the
Transactions will not alter or impair such ability in any material respect; and
(ii) the Company and/or its Subsidiaries have good, valid, marketable and fee
simple title to all the Fee Property, free and clear of all Liens.
Section 3.15 Contracts. (a) Except as set forth in the Company's SEC
Documents or Schedule 3.15(a) of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries is a party to or bound by (i) any "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC), (ii) any voting or other agreement governing how any Shares shall be
voted, (iii) any material agreement with any shareholders of the Company, (iv)
any acquisition, merger, asset purchase or sale agreement or (v) any contract or
other agreement which would prohibit or materially delay the consummation of the
Merger or any of the Transactions (all contracts of the type described in
clauses (i) - (v) being referred to herein as "Company Material Contracts").
Each Company Material Contract is valid and binding on the Company (or, to the
extent a Subsidiary of the Company is a party, such Subsidiary) and is in full
force and effect, and the Company and each Subsidiary of the Company have, in
all material respects, performed all obligations required to be performed by
them to date under each Company Material Contract, except where such
noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Neither the Company nor any Subsidiary of the
Company knows of, or has received notice of, any violation or default under
(nor, to the Knowledge of the Company, does there exist any condition which with
the passage of time or the giving of notice or both would result in such a
violation or default under) any Company Material Contract.
22
(b) Except as disclosed in the Company's SEC Documents or on Schedule
3.15(b) of the Disclosure Schedule or as provided for in this Agreement, neither
the Company nor any of its Subsidiaries is a party to any oral or written (i)
employment or consulting agreements not terminable on thirty (30) days' or less
notice, (ii) union or collective bargaining agreement, or (iii) agreement with
any executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its Subsidiaries of the nature contemplated by this Agreement.
Section 3.16 Labor Relations. Except to the extent set forth in the
Company's SEC Documents or Schedule 3.16 of the Disclosure Schedule, (i) the
Company and each of its Subsidiaries is in material compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, employment of aliens in the United States, wages,
hours of work and occupational safety and health, and is not engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable Law; (ii) there is no labor strike, slowdown, stoppage or lockout
actually pending, or, to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries.
Section 3.17 Voting Requirements. The affirmative vote of the holders of a
majority of all the Shares entitled to vote approving this Agreement is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the Transactions.
Section 3.18 Brokers. No broker, investment banker, financial advisor or
other Person, other than Fleet, the fees and expenses of which will be paid by
the Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Company or any of its Affiliates. The
Company has made available to Parent true and correct copies of all agreements
between the Company and Fleet, including, without limitations, any fee
arrangements.
Section 3.19 Opinion of Financial Advisor. The Company has received the
written opinion of Fleet, to the effect that, as of the date of this Agreement,
the consideration to be received in the Offer and the Merger by the Company's
shareholders is fair to the Company's shareholders from a financial point of
view, and a complete and correct signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to Parent. The Company has been
authorized by
23
Fleet to permit the inclusion of such opinion in its entirety in the Offer
Documents and the Schedule 14D-9 and the Proxy Statement, so long as such
inclusion is in form and substance reasonably satisfactory to Fleet.
Section 3.20 Sales in Germany. The Company and its Subsidiaries did not
derive revenues in excess of DM 3 million from sales in Germany during the
Company's fiscal year ended March 31, 2000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows,
provided that the representations and warranties by and with respect to
Purchaser shall apply only from and after the time Purchaser is formed pursuant
to Section 5.10 hereof:
Section 4.1 Organization, Standing and Corporate Power. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in good standing
under the Laws of the jurisdiction in which each is incorporated and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Parent and Purchaser is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect on Parent.
Section 4.2 Authority; Noncontravention. Parent and Purchaser have the
requisite corporate power and authority to enter into this Agreement and to
consummate the Transactions. The execution and delivery of this Agreement by
Parent and Purchaser and the consummation by Parent and Purchaser of the
Transactions have been duly authorized by all necessary corporate action on the
part of Parent and Purchaser, as applicable. This Agreement has been duly
executed and delivered by Parent and Purchaser and, assuming this Agreement
constitutes the valid and binding obligation of the Company, constitutes a valid
and binding obligation of each such party, enforceable against each such party
in accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency,
24
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
The execution and delivery of this Agreement do not, and the consummation of the
Transactions 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 to loss
of a material benefit under, or result in the creation of any lien upon any of
the properties or assets of Parent under, (i) the certificate of incorporation
or by-laws of Parent or Purchaser, (ii) any loan or credit agreement note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or Permit
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, or (iii) any Law applicable to Parent or Purchaser or
their respective properties or assets, other than, with respect to clauses (ii)
and (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) impair in any material respect
the ability of Parent and Purchaser to perform their respective obligations
under this Agreement or (y) prevent or impede the consummation of any of the
Transactions. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other Person is
required by Parent or Purchaser in connection with the execution and delivery of
this Agreement or the consummation by Parent or Purchaser, as the case may be,
of any of the Transactions, except for (i) the filings, permits, authorizations,
consents and approvals set forth in Schedule 4.2 of the disclosure schedule
delivered by Parent to the Company at or prior to the execution of this
Agreement, or as may be required under, and other applicable requirements of,
the Securities Act, the Exchange Act, the HSR Act, any applicable state
securities or "blue sky" Laws and the NYBCL, and (ii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, prevent the consummation of or materially impair the ability of
Parent or Purchaser to consummate the Transactions.
Section 4.3 Proxy Statement; Offer Documents. The Offer Documents and any
other documents to be filed by Parent with the SEC or any other Government
Entity in connection with the Merger and the other Transactions will (in the
case of the Offer Documents and any such other documents filed with the SEC
under the Securities Act or the Exchange Act) comply as to form in all material
respects with applicable provisions of the Exchange Act and the Securities Act,
respectively, and the rules and regulations thereunder. None of the Offer
Documents, any other documents required to be filed by Parent or Purchaser with
the SEC in
25
connection with the Transactions, nor any information supplied by Parent or
Purchaser for inclusion in the Schedule 14D-9 or in the information required to
be distributed to the shareholders of the Company pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder as is necessary to enable
Parent's designees to be elected to the Company's Board of Directors pursuant to
Section 1.4 hereof shall, at the respective times the Offer Documents or any
amendments and supplements thereto, any such other filings by Parent or
Purchaser are filed with SEC or are first published, sent or given to
shareholders of the Company, as the case may be, or, in the case of the Proxy
Statement, on the date the Proxy Statement is first mailed to shareholders of
the Company, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading or shall, at the time of the Special Meeting (as
defined in Section 5.3) or at the Effective Time, omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Special Meeting which shall have
become false or misleading in any material respect. Notwithstanding the
foregoing, neither Parent nor Purchaser makes any representation or warranty
with respect to the statements made in any of the foregoing documents based on
and in conformity with information supplied by or on behalf of the Company in
writing specifically for inclusion therein.
Section 4.4 Operations of Purchaser. Purchaser is a wholly owned Subsidiary
of Parent and was formed solely for the purpose of engaging in the Transactions
and has not engaged in any business activities or conducted any operations other
than in connection with the Transactions.
Section 4.5 Brokers. No broker, investment banker, financial advisor or
other Person, other than Xxxxxxx and X. Xxxxxxxxxxxx, Inc., the fees and
expenses of which will be paid by Parent or Purchaser, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent, Purchaser or any of their Affiliates.
Section 4.6 Sufficient Funds. Either Parent or Purchaser has available
sufficient funds to purchase all of the Shares outstanding on a fully diluted
basis at the Offer Price and to pay all fees and expenses related to the
Transactions.
26
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. After the date hereof and
prior to the time the designees of Parent have been elected or appointed to, and
shall constitute a majority of, the Board of Directors of the Company pursu ant
to Section 1.4 or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 7.1, and except (i) as expressly contemplated by
this Agreement, (ii) as set forth on Schedule 5.1 of the Disclosure Schedule or
(iii) as agreed in writing by Parent:
(a) the Company shall and shall cause its Subsidiaries to carry on
their respective businesses in the ordinary course;
(b) neither the Company nor any of its Subsidiaries shall, directly or
indirectly, amend its certificate of incorporation or by-laws or similar
organizational documents;
(c) Representatives of the Company and its Subsidiaries shall confer
at such times as Parent may reasonably request with one or more Representatives
of Parent to report material operational matters and the general status of
ongoing operations;
(d) neither the Company nor any of its Subsidiaries shall: (i)(A)
declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to the Company's capital stock or that of its
Subsidiaries, except that a wholly-owned Subsidiary of the Company may declare
and pay a dividend or make advances to its parent or the Company or (B) redeem,
purchase or otherwise acquire directly or indirectly any of the Company's
capital stock or that of its Subsidiaries; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any kind
to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than Shares issued upon the exercise of Options outstanding
on the date hereof in accordance with the Option Plans as in effect on the date
hereof; or (iii) split, combine or reclassify the outstanding capital stock of
the Company or of any of the Subsidiaries of the Company;
(e) except as permitted by this Agreement, neither the Company nor any
of its Subsidiaries shall acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by
27
any other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof (including
entities which are Subsidiaries of the Company or any of the Company's
Subsidiaries) or (B) any assets, including real estate, except purchases in the
ordinary course of business consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall, except in
the ordinary course of business and except as otherwise permitted by this
Agreement, amend or terminate any Company Material Contract where such amendment
or termination would have a Material Adverse Affect on the Company, or waive,
release or assign any material rights or claims;
(g) neither the Company nor any of its Subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, dispose of or encumber any property or
assets other than in the ordinary course of business and consistent with past
practice;
(h) neither the Company nor any of its Subsidiaries shall: (A) enter
into any employment or severance agreement with or grant any severance or
termination pay to any officer, director or key employee of the Company or any
its Subsidiaries; or (B) hire or agree to hire any new or additional executives
or senior officers;
(i) neither the Company nor any of its Subsidiaries shall, except in
the ordinary course of business and except as required to comply with applicable
Law or contracts disclosed in the Company's SEC Documents or otherwise disclosed
to Parent or expressly provided in this Agreement, (A) adopt, enter into,
terminate, amend or increase the amount or accelerate the payment or vesting of
any benefit or award or amount payable under any Benefit Plan or other
arrangement for the current or future benefit or welfare of any director,
officer or current or former employee, except to the extent necessary to
coordinate any such Benefit Plans with the terms of this Agreement, (B) increase
in any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee, (C) pay any benefit not provided for under any
Benefit Plan, (D) grant any awards under any bonus, incentive, performance or
other compensation plan or arrangement or Benefit Plan (including the grant of
stock options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Benefit Plans or agreements or awards made thereunder);
28
(j) neither the Company nor any of its Subsidiaries shall: (A) incur
or assume any long-term debt, or except in the ordinary course of business,
incur or assume any short-term indebtedness in amounts not consistent with past
practice; (B) materially increase its bank debt; (C) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, except in the ordinary
course of business and consistent with past practice; (D) make any loans,
advances or capital contributions to, or investments in, any other Person (other
than to wholly owned Subsidiaries of the Company or customary loans or advances
to employees in the ordinary course of business and consistent with past
practice); or (E) enter into any material commitment or transaction except in
the ordinary course of business consistent with past practice;
(k) neither the Company nor any of its Subsidiaries shall change any
of the accounting methods used by it unless required by GAAP;
(l) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, in the
ordinary course of business and consistent with past practice, of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries; or, except in the ordinary course of business
consistent with past practice, waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company or any of its Subsidiaries is a party;
(m) neither the Company nor any of its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing; and
(n) neither the Company nor any of its Subsidiaries shall take any
action that would result in (i) any of its representations and warranties set
forth in this Agreement that are qualified as to materiality becoming untrue,
(ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect or (iii) any of the conditions to the
Offer set forth in Annex A not being satisfied (subject to the Company's right
to take action specifically permitted by Section 5.5).
29
Section 5.2 Access; Confidentiality. The Company shall (and shall cause
each of its Subsidiaries to) afford to the Representatives of Parent reasonable
access on reasonable prior notice during normal business hours, throughout the
period prior to the earlier of the Effective Time or the termination of this
Agreement, to all of its properties, offices, employees, contracts, commitments,
books and records (including but not limited to Tax Returns) and any report,
schedule or other document filed or received by it pursuant to the requirements
of federal or state securities laws and shall (and shall cause each of its
Subsidiaries to) furnish promptly to Parent such additional financial and
operating data and other information as to its and its Subsidiaries' respective
businesses and properties as Parent may from time to time reasonably request.
Parent and Purchaser will make all reasonable efforts to minimize any disruption
to the businesses of the Company and its Subsidiaries which may result from the
requests for data and information hereunder and pursuant to Section 5.1(d)
hereof. Except as otherwise agreed to by the other party, Parent and the Company
will be bound by the terms of a letter agreement (the "Confidentiality
Agreement"), dated as of November 11, 2000 between Parent and the Company.
Section 5.3. Special Meeting, Proxy Statement.
(a) If required by applicable Law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable Law, its Certificate of Incorporation and By-Laws:
(i) as promptly as practicable following the acceptance for
payment and purchase of Shares by Purchaser pursuant to the Offer duly
call, give notice of, convene and hold a special meeting of its
shareholders (the "Special Meeting") for the purposes of considering
and taking action upon the approval of the Merger and the approval and
adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and
(x) obtain and furnish the information required to be included by the
SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, respond promptly to any comments made by the
SEC with respect to the preliminary proxy or information statement and
cause a definitive proxy or information statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed
to its shareholders at the earliest practicable date; provided that no
amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel
30
and (y) use its reasonable best efforts to obtain the necessary
approvals of the Merger and this Agreement by its shareholders; and
(iii) unless this Agreement has been terminated in
accordance with Article VII, subject to its rights pursuant to Section
5.5, include in the Proxy Statement the recommendation of its Board of
Directors that shareholders of the Company vote in favor of the
approval of the Merger and the approval and adoption of this
Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares then
owned by it, Purchaser or any of its other Subsidiaries in favor of the approval
and adoption of this Agreement.
(c) Notwithstanding anything else herein or in this Section 5.3, in
the event that Parent, Purchaser and any other Subsidiaries of Parent shall
acquire in the aggregate a number of the outstanding shares of each class of
capital stock of the Company, pursuant to the Offer or otherwise, sufficient to
enable Purchaser or the Company to cause the Merger to become effective under
applicable Law without a meeting of shareholders of the Company, the parties
hereto shall, subject to Article VI, take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
consummation of such acquisition, without a meeting of shareholders of the
Company, in accordance with Section 905 of the NYBCL.
Section 5.4 Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, including without
limitation Section 5.5 hereto, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Offer and the Merger, and the other
Transactions, including (i) the preparation and filing with the SEC of the Offer
Documents, the Schedule 14D-9, the information required to be distributed to the
shareholders of the Company pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder as is necessary to enable Parent's designees
to be elected to the Company's Board or Directors pursuant to Section 1.4
hereof, the preliminary Proxy Statement and the Proxy Statement and all
necessary amendments or supplements thereto; (ii) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from any Governmental
Entity and the making of all necessary registrations and filings (including
filings with any Governmental Entity, if any) and the taking of all reasonable
steps as may be
31
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of any of the Transactions,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and (v) the execution
and delivery of any additional instruments necessary to consummate the
Transactions and to fully carry out the purposes of this Agreement.
(b) Each of the Company, Parent and Purchaser shall give prompt notice
to the other of (i) any of their representations or warranties contained in this
Agreement becoming untrue or inaccurate in any respect (including receiving
Knowledge of any fact, event or circumstance which may cause any representation
qualified as to Knowledge to be or become untrue or inaccurate in any respect)
or (ii) the failure by them to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by them
under this Agreement; provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
Section 5.5 No Solicitation. (a) The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize (and shall use its best
efforts not to permit) any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or any of
its Subsidiaries to, (i) solicit or initiate, or encourage, directly or
indirectly, any inquiries or the submission of, any Takeover Proposal, (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information or data with respect to or access to the properties of,
or take any other action to knowingly facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(iii) enter into any agreement with respect to any Takeover Proposal or approve
or resolve to approve any Takeover Proposal; provided, that nothing contained in
this Section 5.5 or any other provision hereof shall prohibit the Company or the
Company's Board of Directors from (i) taking and disclosing to the Company's
shareholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or
(ii) making such disclosure to the Company's shareholders as, in the good faith
judgment of the Company's Board of Directors, after receiving advice from
Outside Legal Counsel, is required under applicable Law, provided that the
Company may not, except as permitted by Section 5.5(b), withdraw or modify, or
propose to
32
withdraw or modify, its position with respect to the Offer or the Merger or
approve or recommend, or propose to approve or recommend any Takeover Proposal,
or enter into any agreement with respect to any Takeover Proposal. Upon
execution of this Agreement, the Company will immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Notwithstanding the foregoing, prior to
the time of acceptance of Shares for payment pursuant to the Offer, the Company
may furnish information concerning its business, properties or assets to any
Person or group and may negotiate and participate in discussions and
negotiations with such Person or group concerning a Takeover Proposal if:
(x) such Person or group has submitted a Superior Proposal; and
(y) the Board of Directors of the Company determines in good faith
based on advice of Outside Legal Counsel that such action is necessary for the
Board of Directors of the Company to comply with its fiduciary duty under
applicable Law.
The Company will promptly (but in no case later than 24 hours) notify Parent of
the existence of any proposal, discussion, negotiation or inquiry received by
the Company regarding any Takeover Proposal, and the Company will immediately
communicate to Parent the terms of any proposal, discussion, negotiation or
inquiry which it may receive regarding any Takeover Proposal and the identity of
the party making such proposal or inquiry or engaging in such discussion or
negotiation, and shall provide Parent with a copy of such proposal or inquiry,
if available. The Company will promptly provide to Parent any non-public
information concerning the Company provided to any other Person in connection
with any Takeover Proposal which was not previously provided to Parent. The
Company will keep Parent informed of the status and details of any such Takeover
Proposal and of any amendments or proposed amendments to any Takeover Proposal
and will promptly (but in no case later than 24 hours) notify Parent of any
determination by the Company's Board of Directors that a Superior Proposal has
been made.
(b) Except as set forth in this Section 5.5(b), neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Purchaser,
the approval or recommendation by the Board of Directors of the Company or any
such committee of the Offer, this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (iii)
enter into any agreement with respect to any Takeover Proposal. Notwithstanding
the foregoing,
33
subject to compliance with the provisions of this Section 5.5, if, prior to the
time of acceptance for payment of Shares pursuant to the Offer, the Company's
Board of Directors determines in good faith, based upon the advice of Outside
Legal Counsel, that its failure to do so would constitute a breach of its
fiduciary duties under applicable Law, the Company's Board of Directors may
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case at any time after
the fifth business day following Parent's receipt of written notice (including
by facsimile) from the Company advising Parent that the Board of Directors of
the Company has received a Superior Proposal which it intends to accept,
specifying the material terms and conditions of such Superior Proposal and
identifying the Person making such Superior Proposal, but only if Parent has
not, within such five business days, made such adjustments to the terms and
conditions of this Agreement as would cause the Superior Proposal to no longer
qualify as such. The Company shall promptly deliver to Parent a copy of the
minutes of any meeting of its Board of Directors at which it determines that a
Takeover Proposal is a Superior Proposal.
Section 5.6 Publicity. Except as required by Law or as permitted by Section
5.5, so long as this Agreement is in effect, neither the Company, Parent nor any
of their respective affiliates shall issue or cause the publication of any press
release or other announcement with respect to the Merger, this Agreement or the
other Transactions without the prior consultation of the other party.
Section 5.7 State Takeover Laws. Notwithstanding any other provision in
this Agreement, in no event shall the Section 912 Approval be withdrawn, revoked
or modified by the Board of Directors of the Company. If any state takeover
statute other than Section 912 of the NYBCL becomes or is deemed to become
applicable to the Offer, the acquisition of Shares pursuant to the Offer or the
Merger, the Company shall take all action necessary to render such statute
inapplicable to all of the foregoing.
Section 5.8 Indemnification and Insurance.
(a) The Company shall, to the fullest extent permitted under
applicable New York Law, the terms of the Company's Certificate of Incorporation
or By-Laws and regardless of whether the Merger becomes effective, indemnify and
hold harmless, and, after the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted under applicable New York Law, the terms of the
Surviving Corporation's certificate of incorporation or by-laws, indemnify and
hold harmless,
34
each present and former director or officer of the Company and each other person
to whom indemnification is provided under the Company's By-Laws as in effect on
the date of this Agreement (collectively, the "Indemnified Parties") against any
costs or expenses (including reasonable attorneys' fees), judgments, losses,
claims, damages and liabilities incurred in connection with, and amounts paid in
settlement of, any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative and wherever asserted, brought
or filed, (x) arising out of or pertaining to the Transactions or (y) otherwise
with respect to any acts or omissions or alleged acts or omissions occurring at
or prior to the Effective Time, in each case for a period of six years after the
date hereof; provided, further, that the Surviving Corporation may not amend the
terms of its certificate of incorporation or by-laws to be less favorable with
respect to such indemnification than the Company's Certificate of Incorporation
or By-Laws on the date hereof. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) any counsel retained by the Indemnified Parties for any period after
the Effective Time must be reasonably satisfactory to the Surviving Corporation,
(ii) after the Effective Time, the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel, promptly after statements therefor
are received, and (iii) the Surviving Corporation will cooperate in the defense
of any such matter; provided, however, that the Surviving Corporation shall not
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed); and provided, further, that, in
the event that any claim or claims for indemnification are asserted or made
within such six year period, all rights to indemnification in respect of any
such claim or claims shall continue until the disposition of any and all such
claims. The Indemnified Parties as a group may retain only one law firm to
represent them with respect to any single action unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. The
indemnity agreements of the Surviving Corporation in this Section 5.8(a) shall
extend, on the same terms to, and shall inure to the benefit of and shall be
enforce able by, each Person or entity who controls, or in the past controlled,
any present or former director, officer or employee of the Company or any of its
Subsidiaries.
(b) For a period of three years after the Effective Time, Parent shall
cause the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those Persons who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been made available to Parent) on terms (including the amounts
of coverage and the amounts of deductibles, if any) that are no less favorable
to the terms now applicable to them under the Company's current policies;
provided, however, that in no event
35
shall Parent or the Surviving Corporation be required to expend in excess of
125% of the annual premium currently paid by the Company for such coverage; and
provided further, that, if the premium for such coverage exceeds such amount,
Parent or the Surviving Corporation shall purchase a policy with the greatest
coverage available for such 125% of the annual premium.
(c) This Section 5.8 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
Section 5.9 Employees; Employee Benefits. (a) Parent will, or will cause
the Surviving Corporation to, give all Persons who are employed by the Company
immediately prior to the Effective Time ("Affected Employees") full credit for
purposes of eligibility and vesting, under any tax-qualified employee benefit
plans or arrangements maintained by Parent or the Surviving Corporation for such
Affected Employees' service with Parent or the Surviving Corporation to the same
extent recognized by the Company immediately prior to the Effective Time.
(b) Parent will, or will cause the Surviving Corporation to, (i) waive
all limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Affected Employees immediately prior to the Effective Time, and (ii)
provide each Affected Employee with credit for any co-payments and deductibles
paid prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
(c) For a period of one year immediately following the Effective Time,
the coverage and benefits provided to Affected Employees pursuant to employee
benefit plans or arrangements maintained by Parent or Surviving Corporation and
generally applicable to a group or groups of employees (including bonus
arrangements through the end of the fiscal year ending March 31, 2001, after
which Parent will consider appropriate bonus arrangements going forward) shall
be, in the aggregate, not less favorable than those provided to such employees
immediately prior to the Effective Time.
36
(d) Parent and Purchaser shall cause the Surviving Corporation to
honor all obligations under each of the Company's employment, severance and
retirement contracts set forth on Schedule 5.9(d) of the Disclosure Schedule.
Section 5.10 Organization of Purchaser. Within five days after the date
hereof, Parent shall (a) cause Purchaser to be organized (b) cause Purchaser's
board of directors to approve this Agreement and the transactions contemplated
hereby as fair to, advisable and in the best interests of its shareholder and
(c) cause Purchaser to acknowledge its obligations hereunder by executing and
delivering a copy of this Agreement to the Company.
ARTICLE VI
CONDITIONS
Section 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
satisfaction on or prior to the Effective Time of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or Purchaser, as the case may be, to the extent permitted by
applicable Law:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the holders of Shares, if required by applicable Law and the
Certificate of Incorporation, in order to consummate the Merger;
(b) any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no statute, rule,
regulation, order, decree or injunction shall have been enacted, promulgated or
issued by any Governmental Entity precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(c) Parent, Purchaser or their affiliates shall have purchased Shares
pursuant to the Offer.
37
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the shareholders of the Company:
(a) By the mutual written consent of Parent and the Company; provided,
however, that if Parent shall have a majority of the directors pursuant to
Section 1.4, such consent of the Company may only be given if approved by the
Continuing Directors.
(b) By either of Parent or the Company if (i) a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting the
Transactions on the terms contemplated by this Agreement or (ii) any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree, ruling or other action the parties hereto
shall use their reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Transactions and such order,
decree, ruling or other action shall have become final and non-appealable.
(c) By either of Parent or the Company if the Effective Time shall not
have occurred on or before June 30, 2001; provided, that the party seeking to
terminate this Agreement pursuant to this Section 7.1(c) 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 on or
before such date.
(d) By the Company:
(i) if the Company has entered into an agreement with
respect to a Superior Proposal in accordance with Section 5.5(b),
provided the Company has complied with all provisions thereof,
including the notice provisions therein, and that it simultaneously
terminates this Agreement and makes simultaneous payment to the Parent
of the Expenses and the Termination Fee; or
(ii) if Parent or Purchaser shall have terminated the Offer
or the Offer expires without Parent or Purchaser, as the case may be,
purchasing any Shares pursuant thereto; provided that the Company may
not terminate this Agreement pursuant to this Section 7.1(d)(ii) if
the Company is in material breach of this Agreement;
38
(iii) if Parent, Purchaser or any of their affiliates shall
have failed to commence the Offer on or prior to ten business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate this Agreement pursuant
to this Section 7.1(d)(iii) if the Company is in material breach of
this Agreement; or
(iv) if there shall be a material breach by Parent or
Purchaser of any of their representations, warranties, covenants or
agreements contained in this Agreement.
(e) By Parent or Purchaser:
(i) (A) if prior to the purchase of the Shares pursuant to
the Offer, the Board of Directors of the Company shall have withdrawn,
or modified or changed in a manner adverse to Parent or Purchaser, its
approval or recommendation of the Offer, this Agreement or the Merger
or shall have recommended or approved a Takeover Proposal; or
(B) there shall have been a material breach of any provision
of Section 5.5; or
(ii) if Parent or Purchaser shall have terminated the Offer
without Parent or Purchaser purchasing any Shares thereunder, provided
that Parent or Purchaser may not terminate this Agreement pursuant to
this Section 7.1(e)(ii) if Parent or Purchaser is in material breach
of this Agreement; or
(iii) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, Purchaser or any
of their affiliates shall have failed to commence the Offer on or
prior to ten business days following the date of the initial public
announcement of the Offer; or
(iv) if there shall be a material breach by the Company of
any of its representations, warranties, covenants or agreements
contained in this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent or Purchaser as provided in Section
39
7.1, this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Purchaser or the Company, other
than the provisions of Sections 3.18, 4.5 and 5.2, this Section 7.2 and Article
VIII and except to the extent that such termination results from the breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as provided below, all fees and
expenses incurred in connection with the Offer, the Merger, this Agreement and
the Transactions shall be paid by the party incurring such fees or expenses,
whether or not the Offer or the Merger is consummated.
(b) If (x) Parent or Purchaser terminates this Agreement pursuant to
Section 7.1(e)(i) or (y) the Company terminates this Agreement pursuant to
Section 7.1(d)(i), then in each case, the Company shall pay, or cause to be paid
to Parent, at the time of termination, an amount equal to $3,000,000 (the
"Termination Fee").
(c) If (x) the fee referred to in Section 8.1(b) of this Agreement
becomes payable or (y) Parent or Purchaser terminates this Agreement pursuant to
Section 7.1(e)(iv), then in each case, the Company shall pay, or cause to be
paid to Parent, at the time of termination an amount equal to Parent's and
Purchaser's actual and reasonably documented out-of-pocket expenses incurred by
Parent or Purchaser in connection with the Offer, the Merger, this Agreement and
the consummation of the Transactions, including, without limitation, the fees
and expenses payable to all banks, investment banking firms, and other financial
institutions and Persons and their respective agents and counsel incurred in
connection with acting as Parent's or Purchaser's financial advisor with respect
to, or arranging or committing to provide or providing any financing for, the
Transactions up to $1,000,000 (the "Expenses").
(d) Any payments required to be made pursuant to this Section 8.1
shall be made by wire transfer of same day funds to an account designated by
Parent.
Section 8.2 Amendment and Modification. Subject to applicable Law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after any vote of the shareholders of the Company
40
contemplated hereby, by written agreement of the parties hereto (which in the
case of the Company shall include approvals as contemplated in Section 1.4(c)),
at any time prior to the Closing Date with respect to any of the terms contained
herein; provided, however, that after the approval of this Agreement by the
shareholders of the Company, no such amendment, modification or supplement shall
reduce the amount or change the form of the Merger Consideration or otherwise
adversely affect the rights of share holders.
Section 8.3 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Effective Time. This Section 8.3 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time.
Section 8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt, and shall be given to the
parties at the following addresses or telecopy numbers (or at such other address
or telecopy number for a party as shall be specified by like notice):
(a) if to Parent or Purchaser, to:
Xxxxxx Xxxxx XxxX
Xxxxxx Xxxxx Xxxxx 0
00000 Xxxxxxxxx
Xxxxxxx
Telephone No: 0000 000 000 0000
Telecopy No.: 0049 711 811 6760
Attention: Dr. Heiko Xxxxxx
with a copy to:
Coudert Brothers
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxx XxXxxxxxx
41
and if to the Company, to:
Detection Systems, Inc.
000 Xxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxx,
Chairman and Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Section 8.5 Interpretation. (a) The words "hereof," "herein" and "herewith"
and words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule references are
to the articles, sections, paragraphs, exhibits and schedules of this Agreement
unless otherwise specified. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." All terms defined in this Agreement shall have
the defined meanings contained herein when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements and
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and all attachments thereto and instruments
incorporated therein. References to a Person are also to its permitted
successors and assigns.
42
(b) The phrases "the date of this Agreement," "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date first written above. The phrase "made available" in this
Agreement shall mean that the information referred to has been actually
delivered to the party to whom such information is to be made available.
(c) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 8.6 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.7 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement and the Confidentiality Agreement: (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (b) except as provided in Section 5.8, are not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
Section 8.8 Severability. Any term or provision of this Agreement that is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction or other authority declares that any term or provision
hereof is invalid, void or unenforceable, the parties agree that the court
making such determination shall have the power to reduce the scope, duration,
area or applicability of the term or provision, to delete specific words or
phrases, or to replace any invalid, void or unenforceable term or provision with
a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
Section 8.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York without giving
43
effect to the principles of conflicts or choice of law thereof or of any
other jurisdiction.
Section 8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other parties, except that Purchaser may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 8.11 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any federal
court located in the State of New York in the event any dispute arises out of
this Agreement or any of the Transactions, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the Transactions in any court other than a
federal court sitting in the State of New York.
Section 8.12 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 8.2, waive compliance by the other parties with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
44
Section 8.13 Certain Undertakings of Parent. Parent shall perform, or cause
to be performed, any obligation of Purchaser under this Agreement which shall
have been breached by Purchaser.
Section 8.14 Definitions. For purposes of this Agreement:
"Affiliate" has the meaning set forth in Rule 12b-2 of the Exchange Act.
"Affected Employees" has the meaning assigned thereto in Section 5.9.
"Benefit Plans" has the meaning assigned thereto in Section 3.10.
"By-Laws" means the by-laws of the Company as in effect on the date of this
Agreement.
"Certificate of Incorporation" means the certificate of incorporation of
the Company as in effect on the date of this Agreement.
"Certificate of Merger" has the meaning assigned thereto in Section 2.2.
"Certificates" has the meaning assigned thereto in Section 2.5.
"Closing" has the meaning assigned thereto in Section 2.3.
"Closing Date" has the meaning assigned thereto in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Detection Systems, Inc., a New York corporation.
"Company Material Contract" has the meaning assigned thereto in Section
3.15.
"Company's SEC Documents" has the meaning assigned thereto in Section 3.5.
"Confidentiality Agreement" has the meaning assigned thereto in Section
5.2.
45
"Continuing Director" means (i) any member of the Board of Directors of the
Company as of the date hereof; (ii) from and after his election to the Company
Board of Directors, Xxxxxx X. Xxxxxxx; or (iii) any successor of a Continuing
Director who is (A) unaffiliated with, and not a designee or nominee of, Parent
or Purchaser, and (B) recommended to succeed a Continuing Director by a majority
of the Continuing Directors then on the Board of Directors of the Company.
"Department of State" has the meaning assigned thereto in Section 2.2.
"Disclosure Schedule" has the meaning assigned thereto in Section 2.7.
"Effective Time" has the meaning assigned thereto in Section 2.2.
"Environmental Laws" means all foreign, federal, state and local Laws
relating to pollution or protection of human health, safety or the environment,
including, without limitation, Laws relating to Releases or threatened Releases
of Hazardous Materials into the indoor or outdoor environment (including,
without limitation, ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport or handling of
Hazardous Materials, and all Laws and regulations with regard to record keeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials, and all Laws relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural resources.
"Environmental Liabilities and Costs" means all liabilities, obligations,
responsibilities, obligations to conduct cleanup, losses, damages, deficiencies,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all reasonable fees, disbursements and expenses
of counsel, expert and consulting fees and costs of investigations and
feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any Environmental
Law, or arising from environmental, health or safety conditions, or the Release
or threatened Release of Hazardous Materials into the environment.
"ERISA" has the meaning assigned thereto in Section 3.10.
"ERISA Affiliate" has the meaning assigned thereto in Section 3.10.
46
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" has the meaning assigned thereto in Section 8.1(b).
"Fee Properties" means all real property and interests in real property
owned in fee by the Company or one of its Subsidiaries.
"Fleet" has the meaning assigned thereto in Section1.2.
"GAAP" has the meaning assigned thereto in Section 3.5.
"Governmental Entity" means any (i) nation, state, county, city, town,
village, district or other jurisdiction of any nature; (ii) federal, state,
local, municipal, foreign or other government; (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official or entity and any court or other tribunal); or (iv)
body exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power of any
nature.
"Hazardous Materials" means all substances defined as hazardous substances
in the National Oil and Hazardous Substances Pollution Contingency Plan, 40
C.F.R. ss. 300.5, or substances defined as hazardous substances, hazardous
materials, toxic substances, hazardous wastes, pollutants or contaminants, under
any Environmental Law, or substances regulated under any Environmental Law,
including, but not limited to, petroleum (including crude oil or any fraction
thereof), asbestos and polychlorinated biphenyls.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Indemnified Parties" has the meaning assigned thereto in Section 5.9.
"Knowledge of the Company" means knowledge of: (a) any executive officer of
the Company, Xxxxxxx Xxxxxxx and Xxxxx Xxxxxx.
"Law" means any administrative order, constitution, law, ordinance,
principle of common law, rule, regulation, statute, treaty, judgment, decree,
license or permit enacted, promulgated, issued, enforced or entered by any
Governmental Entity.
47
"Leased Properties" means all real property and interests in real property
leased by the Company or one of its Subsidiaries.
"Licenses" has the meaning assigned thereto in Section 3.13(c) hereof.
"Lien" means any conditional sale agreement, default of title, easement,
encroachment, encumbrance, hypothecation, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or other security arrangement,
or any adverse right or interest, charge or claim of any nature whatsoever of,
on, or with respect to, any asset, property or property interest.
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the Company or Parent, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that is materially adverse to the business, properties, assets,
prospects, financial condition or results of operations of such party and its
Subsidiaries taken as a whole.
"Merger" has the meaning assigned thereto in Section 2.1.
"Merger Consideration" has the meaning assigned thereto in Section 2.4.
"Minimum Condition" has the meaning assigned thereto in Annex A.
"NYBCL" means the New York Business Corporation Law, as amended.
"Offer" has the meaning assigned thereto in Section 1.1.
"Offer Documents" has the meaning assigned thereto in Section 1.3.
"Offer Price" has the meaning assigned thereto in Section 1.1.
"Offer to Purchase" has the meaning assigned thereto in Section 1.1.
"Option Plans" has the meaning assigned thereto in Section 2.7.
"Option" has the meaning assigned thereto in Section 2.7.
"Other Intellectual Property" shall mean all intellectual property rights
used in the business of the Company or any of its Subsidiaries as currently
conducted, including but not limited to all patents and patent applications;
copyrights, copyright
48
registrations and applications (including copyrights in Computer Programs);
Computer Programs; technology, trade secrets, know-how, confidential
information, proprietary processes and formulae; "semiconductor chip product"
and "mask works" (as such terms are defined in 17 U.S.C. 901); and rights of
publicity and privacy relating to the use of the names, signatures, likenesses,
voices and biographical information of real persons; together with any and all
rights of renewal thereof and the right to xxx for past, present or future
infringements or misappropriations thereof.
"Outside Legal Counsel" means Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP or a
firm of comparable national standing.
"Paying Agent" has the meaning assigned thereto in Section 2.5(a).
"Parent" means Xxxxxx Xxxxx XxxX, a limited liability company organized
under the laws of Germany.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" means any federal, state, local and foreign governmental approval,
authorization, certificate, filing, franchise, license, notice, permit or right.
"Person" means an individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, labor union,
estate, trust, unincorporated organization or other entity, including any
Governmental Entity.
"Proxy Statement" has the meaning assigned thereto in Section 5.3.
"Purchaser" means the New York corporation to be organized by Parent
pursuant to Section 5.10 hereof.
"Real Property" means the Leased Properties and the Fee Properties.
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater, and surface or subsurface strata) or into or out of
any property of any Hazardous Material, including the movement of Hazardous
Materials through or in the air, soil, surface water, groundwater or property.
"Representative" means, with respect to any Person, such Person's officers,
directors, employees, agents and representatives (including any investment
banker,
49
financial advisor, accountant, legal counsel, agent, representative or expert
retained by or acting on behalf of such Person or its Subsidiaries).
"Schedule TO" has the meaning assigned thereto in Section 1.3.
"Schedule 14D-9" has the meaning assigned thereto in Section 1.3.
"SEC" means the United States Securities and Exchange Commission or any
successor agency.
"Section 912 Approval" has the meaning assigned thereto in Section 1.2.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning assigned thereto in the recitals.
"Special Meeting" has the meaning assigned thereto in Section 5.3.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture or other entity, whether incorporated or
unincorporated, of which such Person or any other Subsidiary of such Person (i)
owns, directly or indirectly, 50% or more of the outstanding voting securities
or equity interests, (ii) is entitled to elect at least a majority of the Board
of Directors or similar governing body or (iii) is a general partner (excluding
such partnerships where such Person or any Subsidiary of such Person do not have
a majority of the voting interests in such partnership).
"Superior Proposal" means an unsolicited bona fide written proposal by a
Third Party to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than a majority of the Shares then outstanding or
all or substantially all of the assets of the Company or to acquire, directly or
indirectly, the Company by merger or consolidation, and otherwise on terms which
the Board of Directors of the Company determines in good faith to be more
favorable to the Company's shareholders (taking into account the time period
reasonably believed necessary to consummate such transaction) than the Offer and
the Merger (after receipt of opinion of a nationally recognized independent
financial advisor that the value of the consideration provided for in such
proposal is superior to the value of the consideration provided for in the Offer
and the Merger, and after taking into account all legal, financial and
regulatory aspects of such proposal, the identity of the Third Party making such
proposal, and the benefits to be derived by the Company from the Transactions),
for which financing, to the extent required, is then committed and
50
which, in the good faith reasonable judgment of the Board of Directors of the
Company, is reasonably likely to be consummated.
"Surviving Corporation" has the meaning assigned thereto in Section 2.1.
"Takeover Proposal" means any bona fide proposal or offer, whether in
writing or otherwise, from any Person other than Parent, Purchaser or any
affiliates thereof (a "Third Party") to acquire beneficial ownership (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) of all or
a material portion of the assets of the Company or any of its Subsidiaries or
20% or more of any class of equity securities of the Company or any of its
Subsidiaries pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, tender offer, exchange offer or
similar transaction with respect to either the Company or any of its
Subsidiaries, including any single or multi-step transaction or series of
related transactions, which is structured to permit such Third Party to acquire
beneficial ownership of any material portion of the assets of or 20% or more of
the equity interest in either the Company or any of its Subsidiaries.
"Tax" or "Taxes" mean all taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state, local or foreign Taxing Authority
including but not limited to net income, gross income, receipts, windfall
profit, severance, property, production, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add-on minimum, ad valorem,
transfer, stamp or environmental 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, addition to tax or additional amount
imposed by any Governmental Entity.
"Taxing Authority" shall mean a governmental authority or any subdivision,
agency, commission or authority thereof, any judicial body, or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or imposition of any Tax (including, without
limitation, the Internal Revenue Service).
"Tax Returns" mean all returns, reports or statements required to be filed
with any Governmental Entity with respect to any Tax (including any attachments
thereto), including, without limitation, any consolidated, unitary or similar
return, information return, claim for refund, amended return or declaration of
estimated Tax.
"Termination Fee" has the meaning assigned thereto in Section 8.1(b).
51
"Third Party" has the meaning assigned thereto in this Section 8.14 in the
definition of "Takeover Proposal."
"Trademarks" shall mean all United States and foreign trademarks (including
service marks and trade names, whether registered or at common law),
registrations and applications therefor, owned or licensed by the Company or its
Subsidiaries, and the goodwill of the Company's and each of its Subsidiaries'
respective businesses associated therewith, together with any and all (i) rights
of renewal thereof and (ii) rights to xxx for past, present and future
infringements or misappropriation thereof.
"Transactions" has the meaning assigned thereto in Section 1.2(a).
52
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
XXXXXX XXXXX XxxX
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xx. Xxxxx Xxxxx
Title: Senior Vice President
By: /s/ Heiko Xxxxxx
--------------------------------
Name: Dr. Heiko Xxxxxx
Title: Director
DETECTION SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chairman and Chief Executive Officer
BOSCH SECURITY SYSTEMS CORPORATION
By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Name: Xxxx Xxxxxxxx
Title: President
53
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used but not defined herein shall have the meanings set
forth in the Agreement and Plan of Merger of which this Annex A is a part.
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may amend the Offer consistent with the terms of
the Merger Agreement or terminate the Offer and not accept for payment any
tendered Shares, if (i) there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer such number of Shares which, when
added to the Shares, if any, beneficially owned by Parent or Purchaser, would
constitute at least a majority of the Shares outstanding on a fully diluted
basis (the "Minimum Condition"), (ii) any applicable waiting period under the
HSR Act has not expired or been terminated, or (iii) at any time on or after the
date of the Merger Agreement and prior to the expiration of the Offer, any of
the following events shall occur:
(a) there shall be threatened by a Governmental Entity or pending any
suit, action or proceeding (i) seeking to prohibit or impose any material
limitations on Parent's or Purchaser's ownership or operation (or that of any of
their respective Subsidiaries or Affiliates) of all or a material portion of
their or the Company's businesses or assets, (ii) seeking to compel Parent or
Purchaser or their respective Subsidiaries and Affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (iii)
challenging the acquisition by Parent or Purchaser of any Shares pursuant to the
Offer, (iv) seeking to restrain or prohibit the making or consummation of the
Offer or the Merger or the performance of any of the other Transactions, (v)
seeking to impose material limitations on the ability of Purchaser, or rendering
Purchaser unable, to accept for payment, pay for or purchase some or all of the
Shares pursuant to the Offer and the Merger, or (vi) seeking to impose material
limitations on the ability of Purchaser or Parent effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to the
Company's shareholders; or
A-1
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any Governmental
Entity, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through
(vi) of paragraph (a) above; or
(c) there shall have occurred and be continuing (1) any general
suspension of trading in, or limitation on prices for, securities on the Nasdaq
National Market System, for a period in excess of three hours (excluding
suspensions or limitations resulting solely from physical damage or interference
with such exchanges not related to market conditions), (2) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (3) the commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, (4) any limitation or proposed limitation (whether
or not mandatory) by any United States governmental authority or agency that has
a material adverse effect generally on the extension of credit by banks or other
financial institutions, (5) any decline in the Dow Xxxxx Industrial Average, the
Standard & Poor's Index of 500 Industrial Companies or the Nasdaq Composite
Index by an amount in excess of 20% measured from the close of business on the
date of this Agreement or (6) in the case of any of the situations in clauses
(1) through (5) inclusive, existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof; or
(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and accurate as of the date of consummation
of the Offer as though made on or as of such date (except for those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need only be true and
accurate as of such date or with respect to such period) or the Company shall
have breached or failed to perform or comply with any obligation, agreement or
covenant required by the Merger Agreement to be performed or complied with by it
except, in each case where the failure of such representations and warranties to
be true and accurate (without giving effect to any limitation as to "knowledge,"
"materiality" or "material adverse effect" set forth therein), or the failure to
perform or comply with such obligations, agreements or covenants, do not,
individually or in the aggregate, have a Material Adverse Effect on the Company
or a materially adverse effect on the ability to consummate the Offer or the
Merger; or
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(e) the Company's Board of Directors (i) shall have withdrawn, or
modified or changed in a manner adverse to Parent or Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement, or the Merger, (ii) shall have recommended a Takeover Proposal, or
(iii) shall have adopted any resolution to effect any of the foregoing;
(f) the Merger Agreement shall have been terminated in accordance with
its terms; or
(g) there shall have occurred any event or any development of a state
of facts or circumstances that constitutes a Material Adverse Change or has a
Material Adverse Effect on the Company.
which, in the sole judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser) giving rise to such condition, makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment of or payments for Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be waived by Parent or Purchaser, in whole or in part, at any time and
from time to time, in the sole discretion of Parent or Purchaser. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
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